6-K 1 a7162v.htm HALF-YEAR REPORT a7162v
 
 
 
 
 
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 11 August 2020
 
 
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 dated 11 August 2020
 
 
 
 
 
 
 
Exhibit No: 99.1
 
 
 
 
 
 
 
IHG PLC – Half Year Results to 30 June 2020
 
 
Reported
 
Underlying5
 
2020
2019
% Change
 
% Change
 
REPORTABLE SEGMENTS1
 
 
 
 
 
 
Revenue2
$488m
$1,012m
(52)%
 
(51)%
 
Revenue from fee business
$375m
$730m
(49)%
 
(48)%
 
Operating profit2
$74m
$410m
(82)%
 
(83)%
 
Fee margin3
26.1%
54.1%
(28.0)%pts
 
 
 
Adjusted EPS4
14.3¢
148.6¢
(90)%
 
KEY METRICS
 
 
 
 
 
 
 
GROUP RESULTS
 
 
 
 
● $6.6bn total gross revenue (down (52)%; (51)% at CER)
Total revenue
$1,248m
$2,280m
(45)%
 
Operating (loss)/profit
$(233)m
$442m
(153)%
 
● (51.7)% global H1 RevPAR
Basic EPS
(115.4)¢
167.2¢
(169)%
 
Total dividend per share
0¢
39.9¢
(100)%
 
● (74.7)% global Q2 RevPAR
Net debt
$2,515m
$2,847m
(12)%
 
 
1 Excludes System Fund results, hotel cost reimbursements and exceptional items. 2 Comprises the Group’s fee business and owned, leased and managed lease hotels.
 
3 Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group’s captive insurance company, with 2019 restated accordingly. 4 Calculated using results from Reportable Segments and Adjusted Interest, and excluding changes in fair value of contingent consideration. 5 Reportable segment results excluding significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER).
 
 
●
H1 Comparable RevPAR: Global (52)%. Q2: Global (75)%; Americas (71)%; EMEAA (88)%; Greater China (59)%.
 
●
Net system size growth of 3.2% YoY. In H1, 12k room additions and 12k removals, including 2k relating to a previously flagged portfolio of hotels in Germany. Global estate now 883k rooms, over 5,900 hotels.
 
●
First half signings of 26k rooms (181 hotels). Total pipeline now stands at 288k rooms (1,932 hotels).
 
●
Operating profit from reportable segments down 82% to $74m before System Fund result of $(52)m and operating exceptional items of $(255)m predominantly comprising non-cash impairments to owned and leased hotels and acquired management agreements, together with impairments of trade deposits and receivables.
 
●
On track to reduce Fee Business costs by ~$150m in 2020; targeting around half this level to be sustainable into 2021.
 
●
Q2 free cash flow broadly neutral, resulting from strong cash management; H1 outflow of $66m.
 
●
Total available liquidity of $2.0bn at end of June and end of July.
 
●
July comparable RevPAR expected to be ~(58)%; occupancy levels in comparable open hotels improved to ~45%. 317 hotels or 5% of the estate closed as at end of July; 3% of Americas, 16% of EMEAA and <1% of Greater China.
 
 
Keith Barr, Chief Executive Officer, IHG, said:
 
 
“Throughout the crisis we have continued to act responsibly, doing all we can to support our hotel colleagues and owners, and create a clean, safe stay experience that we know guests can trust. The teamwork, dedication and care that our colleagues and owners have shown to adapt our approach is central to meeting the evolving needs and expectations of guests, as well as the communities in which we operate. I would like to sincerely thank everyone for ensuring that our purpose of providing True Hospitality shines through, even in the toughest of times.
 
The impact of Covid-19 on our business has been substantial. Global RevPAR declined by 52% in the first half and was down 75% in the second quarter, when occupancy at comparable hotels fell to 25%. Despite this challenging environment, we delivered an operating profit of $74m. Small but steady improvements in occupancy and RevPAR through the second quarter continued into July, with an expected RevPAR decline of 58%, and occupancy rising to around 45%.
 
The support we have offered owners, such as fee relief and increased payment flexibility, was well received. Together with other measures we’ve taken to preserve cash, we have maintained substantial liquidity of around $2bn. Our ongoing actions to reduce costs include plans to make around half of the $150m of savings we will achieve this year sustainable into 2021, alongside continued investment in our growth initiatives. However, with limited visibility of the pace and scale of market recovery, we are not proposing an interim dividend.
 
As has been the case in previous downturns, domestic mainstream travel is proving to be the most resilient. Our weighting in this segment, led by our industry-leading Holiday Inn Brand Family, positions us well as demand returns in our key markets. In the US, our mainstream estate of almost 3,500 hotels is seeing lower levels of RevPAR decline than the industry, and is operating at occupancy levels of over 50%.
 
Reflecting our long-term growth prospects, and the strength of our brands and owner relationships, we opened more than 90 hotels in the half and strengthened our pipeline with an average of one new signing a day, including almost 100 for our Holiday Inn Brand Family. We have also taken voco, our upscale conversion brand, outside of EMEAA, with initial signings in the US and Greater China.
 
The impact of this crisis on our industry cannot be underestimated, but we are seeing some very early signs of improvement as restrictions ease and traveller confidence returns. Whilst the near-term outlook remains uncertain and the time period for market recovery is unknown, we are well positioned with preferred brands in the largest markets and segments, a leading loyalty platform and one of the most resilient business models in the industry. This gives us confidence in our ability to meet the needs of our guests and owners, and to emerge strongly when markets recover.”
 
Our response to Covid-19
 
IHG has undertaken a rapid and comprehensive response in the immediacy of the Covid-19 crisis. We have taken decisive actions to protect the business and our stakeholders through the worst period of demand in the industry’s history, balanced with ensuring we are positioning IHG to outperform through the recovery, whilst remaining true to our purpose and values. Our response has also benefited from experience and learnings across the breadth of our geographies.
 
 
 
Supporting our stakeholders as a responsible business
 
 
 
Colleagues
● Provided updates to operating procedures, new equipment and training programmes to protect our frontline hotel colleagues and enable them in turn to deliver clean and safe hotels for all our guests.
● Collaborated cross-industry to help colleagues find employment whilst hotels were temporarily closed.
● Launched new internal communications and Staying In Touch forums.
● Supported colleagues with tools and resources to aid flexible and remote working.
● Extended our Employee Assistance Programme to cover mental health and wellbeing, and financial advice.
● Provided a range of additional advice and assistance for those colleagues who have been unfortunately impacted by the need to be furloughed or work reduced hours, or by consultation and reorganisation processes.
 
 
 
Communities
● Worked with governments and organisations around the world, including #FirstRespondersFirst in the US, to provide accommodation to frontline workers, military personnel and vulnerable members of society, with around 430 of our hotels being repurposed at various times during the crisis for these and other essential activities.
● Supported our longstanding True Hospitality for Good charitable partners, including the British Red Cross through its Disaster Relief Alliance membership, CARE International to provide PPE in developing markets, and the China Red Cross.
● Extended our True Hospitality for Good programme to help support foodbanks and food provision charities in more than 70 countries.
● Enabled IHG Rewards Club members to donate loyalty points to be converted into cash donations to our charity partners, including the International Federation of Red Cross and Red Crescent Societies (IFRC).
 
 
 
Guests
● New Covid-19 health and safety operating procedures launched globally in our hotels to create a safer environment for all travellers as well as our frontline hotel colleagues as they deliver True Hospitality each and every day.
● Waived cancellation fees from the onset of the crisis and provided flexible rebooking options.
● Protected the membership status for our IHG Rewards Club loyalty programme members.
● Enhanced and extended our Book Now, Pay Later policies, to further increase guest confidence.
● Invited 1,500 corporate customers globally to Webex briefings to update them on our Covid-19 response.
● Launched our Meet with Confidence offer to provide corporate bookers the greater flexibility they need, together with our enhanced approach to health and safety.
● Guest Satisfaction Index has been net positive through the half, outperforming competitors, with sequential improvement each month.
 
 
 
Owners
● Offered advice and support to help our owners keep their hotels open, including how to flex operations and reduce costs, or how to temporarily close and re-open most efficiently and effectively.
● Coordinated Covid-related demand, such as government repurposing of hotels, with enhancements made to demand driver mapping, rate loading and centralised booking to manage urgent and bespoke needs.
● Rapidly devised new standard operating procedures including IHG’s Way of Clean to enable safe operation.
● Moved quickly to collaborate with governments and secure support for the hospitality industry on our owners’ behalf, and advised on how to access the various government support schemes subsequently made available.
● Our work with governments and collaboration with industry associations is ongoing to advocate for ways to safely encourage a resumption in travel domestically and internationally, and to secure further tax breaks, reliefs, reforms and other travel and hospitality-related incentives.
● Delayed the requirement of owners to undertake renovations, and relaxed brand standards to conserve owner funds.
● Provided fee relief and increased payment flexibility, supporting owners’ ability to continue making payments.
● Offered temporary discounts on our technology fees, as well as significantly reducing payments due into the System Fund to match reductions in marketing and reservations activity undertaken on behalf of owners.
● Our procurement teams, having supported owners initially with sourcing PPE and other emergency supplies, continue to support supplier negotiations to leverage IHG’s scale.
● We continue to assist our owners to develop more efficient operating models, in particular to provide ongoing support to new cleanliness and safety standards, whilst reducing costs in other areas.
 
 
 
 
Protected our financial position
 
 
 
Cost actions and cash preservation
● Immediate measures taken to reduce costs to protect profitability through reducing salary and incentives, including substantial decreases for Board and Executive committee members, and challenging all areas of discretionary spend.
● More than $50m of Fee Business cost reductions achieved in the half; on track to achieve ~$150m in the full year.
● Similar actions taken across the System Fund, in response to expected lower assessment fee receipts, particularly through reducing marketing spend.
● Cost containment action also taken across our owned, leased and managed lease hotels, contributing to the $130m of overall cost reduction in the half for this estate.
● Gross capital expenditure reduced to ~$85m in the half (H1 2019: $101m); continue to expect ~$150m for 2020, a saving of ~$100m versus 2019.
● Proactive management of working capital, including measures resulting in continued payments being received from our owners, contributing to an overall reduced level of working capital outflow in the half.
● The Board withdrew its recommendation of a final dividend in respect of 2019 of 85.9¢, preserving ~$150m of cash; an interim dividend in respect of 2020 will also not be paid, with the Board continuing to defer consideration of further dividends until visibility of the pace and scale of market recovery has improved.
● These cost and cash preservation actions resulted in broadly neutral free cash flow in Q2, and limited the first half free cash outflow to $66m (H1 2019: inflow of $141m).
● Cost and cash control measures remain in place. Looking ahead to 2021, plans are in place to make around half of the cost savings sustainable through ongoing control of discretionary spend and a re-balancing of resources to meet expected demand, alongside continued investment in growth initiatives.
 
 
 
Liquidity
● Rapid action taken to strengthen the liquidity position, building on our conservative balance sheet approach and the measures taken to reduce costs and preserve cash.
● Secured covenant waivers to 31 December 2021 for our $1.35bn syndicated and bilateral revolving credit facilities (RCF), which are currently undrawn; the maturity of these was also extended by 18 months to September 2023.
● The waivers introduce a minimum liquidity covenant of $400m, tested at half year and full year.
● Increased total available liquidity through the issue of £600m (~$740m) of commercial paper under the UK Government’s Covid Corporate Financing Facility (CCFF).
● Total available liquidity of $2.0bn at 30 June 2020, similarly maintained at the end of July, provides substantial headroom.
 
 
 
Positioning to outperform during the recovery
 
 
 
Cleanliness, health and safety
● Rapidly moving to prepare for the return of guests, and reflecting the longer-term shift in guest need for reassurance of cleanliness, we launched globally the IHG Clean Promise, using new science-led protocols and redefined service procedures, in partnership with industry-leading experts.
● Our IHG Way of Clean programme has been enhanced to include new training and equipment, increased guest communication and verification procedures to ensure our standards are adhered to.
● Since the launch of the IHG Clean Promise in May, we have seen an over 30% uplift in the number of positive third-party social review comments on cleanliness from guests.
 
 
 
Technology and loyalty developments
● Leveraging our prior investment in the cloud-based Concerto GRS platform which has been implemented across the entire global estate, we have been able to deploy remotely and rapidly further technological developments to support a safe and secure guest experience and reduce unnecessary contact.
● Mobile check-in & check-out has begun to be rolled-out across the entire estate, with over 2,000 hotels configured to date.
● Other mobile-enabled improvements include pilots for in-room dining orders and real-time Pay-With-Points.
● Real-time scorecard metrics, such as analysis of Guest Love measures, RevPAR, financial and operational performance, are now presented live on our Owner Engagement Portals, which will continually evolve to provide our global owner community with specific recommendations for action.
● Optimised our Revenue Management for Hire (RMH) services using machine learning technology, which offers enhanced capabilities to help owners protect pricing and returns during periods of volatile demand.
● IHG Rewards Club participation accounts for around half of guest stays, with enhancements to our loyalty marketing also supporting our most loyal members who showed higher resilience of demand through the second quarter.
● Dynamic pricing for Reward Nights is rolling out globally, with rates now set daily, enabling more than 80% of hotels globally to reduce their points pricing to deliver around 25% more value for guests outside of peak times and leading to increased penetration since launch.
 
 
 
 
 
Delivering system growth and leveraging the scale of our brands
 
IHG in recent years has focused on optimising our portfolio of brands for owners and guests. Our distinct and preferred brands serve what are typically the highest growth segments in the largest markets. In the current environment, where occupancy is recovering slowly and visibility is low, we anticipate that large global players with strong brands, such as IHG, will be positioned to outperform the rest of the market.
 
Our business is weighted to the Mainstream segment, representing more than 70% of our open rooms. The Upper Midscale segment within Mainstream, which accounts for ~65% of our rooms in the US, has historically recovered faster than other segments in previous economic downturns. Our business is also weighted towards non-urban markets that are less reliant on international inbound travel (~95% of our US business is domestic driven) and less reliant on large group meetings and events. These weightings, and our asset-light model, should provide resilience relative to the wider industry.
 
The large branded operators have also typically gained share during downturns, due to scale efficiencies and the ability to continue investing in their brands, technology and loyalty programmes. This also includes the potential for increased conversion activity, as well as sustaining a level of development activity, reflecting lenders’ recognition of the strength and value of our brands and system. In addition, we anticipate that the current environment for travellers, with the increased importance of trust in areas such as booking flexibility and cleanliness standards, should favour the leading brands such as IHG.
 
 
 
Whilst Covid-19 has had an understandable impact on development activity in the period and a level of impact may well also continue for some time to come, the longer term trends and IHG’s strong positioning in the market have supported continued opening and signing activity through the first half of the year:
 
● With 11,882 rooms (91 hotels) opened across the Group in the period, and a continued focus on a high-quality estate leading to planned removals of 12,081 rooms (76 hotels) including 2.1k relating to a previously flagged portfolio of hotels in Germany, net system size growth was broadly flat over the six-month period, and up 3.2% year-on-year.
● Ground breaks continued in every month in each region, and currently around 40% of our global pipeline is under construction which is a similar proportion to a year earlier.
● Signings during the half totalled 26,236 rooms (181 hotels), with 20-40 hotels signed in each month, leading to a closing pipeline of 287,525 rooms (1,932 hotels).
● Of the openings in the period, ~20% were conversions with the balance being new builds. Of the signings, ~25% are conversions.
 
Mainstream – 5,022 hotels, 639k rooms; ~73% of IHG system
-  Holiday Inn: grew by 12 to 1,246 hotels, with a record performance for first half hotel signings in Greater China.
-  Holiday Inn Express: 2,888 hotels, with 44 openings and 74 signings in the half; the strength of our franchise model in China is also leading to an encouraging number of conversion opportunities.
-  Staybridge Suites & Candlewood Suites: with 12 signings and 18 openings, our extended stay portfolio grew to 726 hotels and saw relative strength and resilience of demand with ~50% occupancy in Q2.
-  avid hotels: since launch in 2017, there have been 222 signings and 14 openings; there were 15 signings and 7 openings in the first half of this year, including the first avid in Mexico, built in just 10 months. The lower cost to build, lean staffing model and attractive operating economics are expected to increasingly appeal to owners in a more constrained economic environment, and equally to guests who look for the basics done exceptionally well at a fair price.
-  Atwell Suites: our new all-suites upper midscale brand is also growing at pace with 19 signings to date since first offered in September 2019, seven of which were in the first half.
 
Upscale – 587 hotels, 144k rooms; ~16% of IHG system
-  Crowne Plaza: four openings in the half, including two properties in Greater China, taking the total estate to 428.
-  Hotel Indigo: after a record level of signings in 2019, good momentum for the brand has continued, now reaching 121 properties with another 102 in the pipeline to open in the next 3-5 years. Openings included a conversion property in Italy and the brand’s first presence in Japan and Cyprus.
-  voco: has grown to 12 hotels in two years, with the brand’s pipeline of a further 28 hotels taking it to 17 countries in EMEAA. We have now signed the first voco hotels in the Greater China and Americas regions. The voco brand remains ideally positioned for conversion opportunities that may increasingly emerge in a post-Covid environment.
-  HUALUXE: has increased to 11 hotels, with developments in the period including the rebranding to HUALUXE Shanghai Twelve at Hengshan, the opening of the historic HUALUXE Xi’an Tanghua and the signing conversion of Shanghai Changfeng Park.
-  EVEN: the first EVEN Hotel outside of the Americas opened in Greater China at Nanjing Yangtze River, marking the 15th to market of our wellness-focused offering, with almost 30 in the pipeline globally.
 
Luxury – 309 hotels, 100k rooms; ~11% of IHG system
-  Six Senses Hotels Resorts Spas: two new signings in Italy and Japan, increasing the global pipeline to 27.
-  Regent Hotels & Resorts: four signings since acquisition taking the pipeline to five properties. Recent opening and conversion of the Regent Shanghai Pudong completed in just 45 days, showcasing new brand hallmarks that position Regent in the top tier of luxury. Renovation is underway to rebrand the InterContinental Hong Kong back to Regent.
-  InterContinental Hotels & Resorts: reinforced its position as the largest global luxury hotel brand with eight signings. There are now 210 hotels in 64 countries, and a pipeline of 70 properties. The InterContinental Rome conversion signing marks the return of the brand to Italy, with two other key conversion signings being the prestigious Imperial Mae Ping Hotel in Chiang Mai and one of the most famous hotels in the Pacific, Fiji’s Grand Pacific Hotel in Suva.
-  Kimpton Hotels & Restaurants: increased Kimpton representation by nine, taking the estate to 72, with a global pipeline of 34. The signing of Kimpton Shanghai New Bund is a key step to developing the brand in Greater China. Kimpton Miami Palomar South Beach opened in the period, while other major openings anticipated in the second half of the year include Bangkok and Tokyo.
 
 
Continuing our commitments to responsible business
 
 
 
As part of our long-standing commitment to doing business responsibly, we remain focused on ensuring our business recovers in a way that protects the environment and supports communities. This approach is also shaping our long-term Responsible Business strategy and commitments which we will publish in early 2021. Recent actions include:
● Initiated work to reduce our greenhouse gas emissions in line with our Science Based Target; and to implement the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
● Joined the ‘Footprint Responsible Business Recovery Forum’, a community of UK operators, brands and suppliers, to lead on responsible recovery through peer learning and collaboration.
● Joined the Council for Sustainable Business COP26 Business Leaders Meeting with our FTSE 100 peers, which encourages the business community to build a more green and resilient economy.
● Signed a joint letter with other business leaders, encouraging the UK government to align its Covid-19 response to the 2030 UN Sustainable Development Goals (SDGs), to drive responsible, sustainable change that tackles future global risks.
● Strengthened our focus on inclusion with the launch of commitments for Black colleagues and communities. Includes doubling the representation of ethnically diverse colleagues in Americas-based corporate leadership roles over next four years; roll-out of mandatory unconscious bias training in the US; developing an inclusion index to track perception of culture and behaviours; and supporting education, employability and empowerment in the community through enhanced partnerships.
 
 
 
 
Regional performance
 
 
 
 
Americas
Comparable RevPAR decreased 47.6% (Q2: down 71.2%), driven by occupancy reducing to 41% (Q2: 28%). US RevPAR was down 46.8% for the half, down 69.3% in Q2, with our performance ahead of the industry in the second quarter. The decline in the US second quarter saw the franchised estate, which benefits from a weighting towards domestic demand-driven mainstream hotels, with a lower reliance on large group business and higher distribution in non-urban markets, decline by 66%. This compares to an 86% decline for the US managed estate, which is weighted to luxury and upscale hotels in urban markets. On a segment basis, the RevPAR decline in Q2 was most acute in luxury (down 93%) and upscale (down 83%), whereas the decline in mainstream, which represents 84% of our rooms in the US, declined by 64%.
 
Reported revenue1 of $262m was down 50% against the comparable period (decreased 49% at CER and underlying2) and reported operating profit1 of $153m decreased 56% (down 55% at CER and underlying2).
 
Underlying fee business revenue declined by 46% to $226m, whilst underlying fee business operating profit declined by 49% to $163m. The adverse mix impact from a higher proportion of temporary closures in the US managed estate than in the franchised estate, which also led to $5m lower recognition of incentive management fees, was partially offset by progress made towards reducing fee business costs, as well as the benefit of a $4m litigation settlement at one hotel, and the recognition of a $4m payroll tax credit, with a further ~$7m expected to be recognised in H2 2020.
 
Reported owned, leased and managed lease revenue was down 65% to $36m, with a reported operating loss of $10m compared to $21m profit in the comparable period. The mitigation of renovation-related losses by business interruption insurance at one hotel was more than offset by extended periods of closure and low occupancy across the entire estate, reflecting the greater dependency on international travellers to urban and resort locations.
 
For July, the comparable RevPAR decline in the Americas region is expected to be ~54%, representing an ~8%pt improvement on the 62% decline for June. Occupancy levels in comparable open hotels improved to ~45%. Given further re-opening progress during the month, the number of hotels that remained closed at the end of July reduced to 133, or ~3% of the Americas estate.
 
 
 
EMEAA
Comparable RevPAR decreased 58.9% (Q2: down 87.6%), driven by occupancy reducing to 34% (Q2: 14%). In the UK, RevPAR was down 59% for the half, with the second quarter decline of 90% particularly impacted by government-mandated hotel closures.
 
Continental Europe RevPAR was down 67%, with the closures and travel restrictions particularly impacting the second quarter, which was down 96%. Elsewhere, the Middle East was down 46% in the first half, with Australia and Japan down 48% and 64% respectively.
 
Reported revenue1 of $134m decreased 60% (down 60% at CER) and the reported operating loss1 was $16m, a reduction of $104m on the comparable period. Results include a previously disclosed $1m (H1 2019: $4m) benefit from an individually significant liquidated damages payment.
 
On an underlying2 basis, revenue decreased 59% to $131m and the operating loss was $20m compared to $81m profit in the comparable period. Underlying fee business revenue was down 63% to $56m, with an operating loss of $4m compared to a $87m profit in the comparable period. The adverse impact from hotel closures and subdued demand across the estate resulted in lower recognition of incentive management fees (down $35m versus the comparable period), which were partially offset by cost reduction measures.
 
Reported owned, leased and managed lease revenue was down 57% to $77m, whilst the operating loss reported in H1 2019 of $5m increased to a loss of $13m. This portfolio consists of 12 properties in the UK and a further six elsewhere in the region, most of which are only expected to gradually reopen through the third quarter, and once open we expect to experience low occupancies and lower than usual non-room revenues. The operating loss for the period includes the significant cost reduction measures undertaken across the estate, together with rent reductions received; there was also the benefit of a $3m gain from the sale of the lease on Holiday Inn Melbourne Airport for proceeds of $2m.
 
For July, the comparable RevPAR decline in the EMEAA region is expected to be ~74%, representing an ~11%pt improvement on the 85% decline for June. Occupancy levels in comparable open hotels improved to over 30%. Given further re-opening progress during the month, the number of hotels that remained closed at the end of July reduced to 180, or ~16% of the EMEAA estate.
 
 
Greater China
Comparable RevPAR decreased 61.7% (Q2: down 59.2%), in-line with the industry in the second quarter, with occupancy in comparable hotels of 27% (Q2: 32%). In Mainland China, RevPAR was down 59%. Tier 1 cities were down 67% (Q2: down 66%), impacted by their weighting toward international and group events and meetings demand. Tier 2-4 cities which are weighted more towards domestic and mainstream demand performed relatively better with a decline of 55% (Q2: down 50%).
 
RevPAR in Hong Kong SAR was down 86% for the half, and down 90% in Q2, impacted by the reliance on inbound travel and the uncertainty posed by the political disputes, whilst Macau SAR RevPAR was down 72% for the half.
 
Reported revenue1 of $18m decreased by 73% (decreased 72% at CER) and the reported operating loss was $5m compared to $36m profit in the comparable period.
 
On an underlying2 basis, revenue decreased by 72% to $18m, with an operating loss of $5m compared to an operating profit of $35m in the comparable period. The adverse impact from the current trading environment, including lower recognition of incentive management fees (down $23m versus the comparable period), were in part offset by cost reductions across the region.
 
For July, the comparable RevPAR decline in the Greater China region is expected to be ~36%, representing a ~13%pt improvement on the 49% decline for June. Occupancy levels in comparable open hotels improved to over 50%. Given further re-opening progress during the month, the number of hotels that remained closed at the end of July reduced to just four, or less than 1% of the Greater China estate.
 
 
 
 
 
Cash generation and capital allocation
 
 
 
 
Cash flow
IHG has taken actions to preserve cash as part of protecting our financial position, such that:
● Free cash flow3 was an outflow of $66m, down $207m year-on-year, driven by the adverse impact from hotel closures and subdued demand on trading, partially offset by lower levels of working capital outflow. Free cash flow was broadly neutral in Q2.
● Net capital expenditure3 of $39m (H1 2019: $73m) with $85m gross (H1 2019: $101m). This comprised: $58m maintenance capex and key money; $2m gross recyclable investments; and $25m System Fund capital investments; offset by $18m net disposal proceeds and distributions from associates and joint ventures (up $13m against the comparable period) and $28m System Fund depreciation and amortisation. On track to reduce capex by ~$100m in FY 2020.
● Exceptional cash costs of $30m during the half.
● Net debt of $2,515m, down $150m on the 2019 close, predominantly due to exchange rate movements and the derecognition of lease liabilities from the balance sheet.
 
Liquidity and financing
IHG has taken steps to strengthen liquidity as part of maintaining a conservative balance sheet and leverage approach, including:
● Amended our existing $1.35bn syndicated and bilateral revolving credit facilities (RCF) to include a waiver of existing covenants until 31 December 20216. The interest cover and leverage ratio covenants have been replaced by a $400m minimum liquidity covenant (defined as unrestricted cash and undrawn facilities with a remaining term of 6 months) which was tested at 30 June 2020, and will be tested again at 31 December 2020 and 30 June 2021.
● Extended the maturity of the RCF for 18 months to September 20237.
● Issued £600m (~$740m) of commercial paper under the UK Government’s Covid Corporate Financing Facility (CCFF), maturing on 16 March 2021.
These steps, together with our cost actions and cash preservation, have maintained our total available liquidity at 30 June 2020 at $2.0bn, comprising $611m of net cash balances8 and the undrawn RCF of $1,350m. At the end of July, total available liquidity was broadly unchanged at $2.0bn. In the Group’s opinion, the available facilities are sufficient for the Group’s present liquidity requirements. However, the Group continues to assess its liquidity position, financing options and covenant position, and will take further actions as necessary.
 
 
IHG has a staggered bond maturity profile, with the first maturity not due for repayment until November 20229.
 
Shareholder returns
On 20 March 2020, IHG’s Board withdrew its recommendation of a final dividend in respect of 2019 of 85.9¢ per share, a payment of which would have resulted in a cash outflow of ~$150m in the first half of 2020.
 
 
An interim dividend in respect of 2020 will not be paid. The Board will continue to defer consideration of further dividends until visibility of the pace and scale of market recovery has improved.
 
 
 
 
 
 
Other financial measures
 
 
 
 
Fee margin
● H1 2020 fee margin10 of 26.1%, a reduction from 54.1% in the comparable period, impacted by the adverse trading conditions which were partially offset by cost reduction measures.
● Net central operating loss of $58m before exceptional items was flat year-on-year (increased $1m CER); a $14m decrease in central revenues, driven by temporary technology fee discounts, was offset by lower central overheads from our previously announced measures to reduce our Fee Business costs.
 
System Fund
System Fund revenues and costs are recognised on a gross basis with the in-year surplus or deficit recorded in the Group income statement, but excluded from results from reportable segments, underlying results and adjusted EPS, as the Fund is operated for the benefit of the hotels in the IHG System such that the Group does not make a gain or loss from operating the Fund over the longer term.
 
 
In H1 2020 we recorded a System Fund income statement deficit of $52m, largely due to lower assessment fees reflecting the level of reduction in hotel revenues and fee reliefs given, partly offset by actions targeted to lower costs such as through a reduction in marketing spend. System Fund expenses included $22m of expected credit losses, of which $16m are considered to be attributable to Covid-19.
 
Interest
Net financial expenses were $58m. Adjusted3 interest expense of $62m, which adds back interest relating to the System Fund, was $4m lower than in H1 2019 mainly due to lower interest rates in 2020 on interest payable to the System Fund.
 
 
Tax
Effective rate5 for H1 2020 was (127)% (H1 2019: 21%), reflecting the recognition of a tax credit of $19m on one-off items, predominantly in connection with adjustments to deferred taxes following an internal group restructuring, UK law change and prior year items. Excluding these one-off items, the effective tax rate would be 45% due to the distortive impact of unrelieved foreign taxes and other non-tax deductible expenses against the low profit base. When considering H2 expected movements, approximately 45% is our best current estimate for the full year 2020 effective tax rate, although forecasting in this area remains challenging given the uncertainties in the near-term outlook.
 
Exceptional items
Exceptional items predominantly comprise impairment charges, with Covid-19 considered as a trigger for impairment testing for substantially all non-current assets. Cash flow projections used for impairment testing were based on the latest financial forecasts for 2020 and assume that RevPAR recovers to 2019 levels over a five-year period from 2021.
 
 
Operating exceptionals total a net charge of $255m, driven by the following items:
● impairment of financial assets, comprising trade deposits and loans ($41m) which are now not expected to be recoverable, together with a related impairment of contract assets ($37m), and trade and other receivables ($22m) to reflect the expected increase in credit losses;
● non-cash impairment of other non-current assets, including property, plant and equipment of owned and leased hotels ($85m), the recoverable amounts of acquired management agreements ($47m) and the net impact on our investment in associates ($21m); these impairments reflect forecasts for individual hotels, with no impairments to goodwill or the value of indefinite-life brands;
● a $22m gain arising from the net effect of the derecognition of right-of-use assets ($49m) and lease liabilities ($71m), resulting from a change in accounting estimate in relation to the UK leased portfolio and two German leases whereby the leases will now be accounted for as fully variable, together with an associated provision for onerous contractual expenditure ($10m).
 
 
In addition, a $21m exceptional fair value gain on contingent purchase consideration has been recognised, arising from a reduction in expected future rents payable on the UK leased portfolio.
 
 
Foreign exchange
The impact of the movement in average USD exchange rates for H1 2020 against a number of currencies (particularly Sterling, Euro and Renminbi) netted to a $4m negative impact on reported profit4. If the 30 June 2020 spot rate had existed throughout H2 2019, H2 2019 reported profit would have been $3m lower.
 
A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.
 
 
 
 
 
 
 
 
 
1 Comprises the Group’s fee business and owned, leased and managed lease hotels from reportable segments. This excludes exceptional items, System Fund results and hotel cost reimbursements.
2 Results from reportable segments excluding significant liquidated damages and current year acquisitions and disposals at constant H1 2020 exchange rates (CER). Definitions for Non-GAAP revenue and operating profit measures can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the Interim Management Report contains reconciliations of these measures to the most directly comparable line items within the Group Financial Statements.
3 Definitions for Non-GAAP measures including free cash flow, net capital expenditure and adjusted interest can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the Interim Management Report contains reconciliations of these measures to the most directly comparable line items within the Group Financial Statements.
4 Based on monthly average exchange rates each year.
5 Excludes exceptional items and System Fund results.
6 The RCF has customary covenants in respect of interest cover and leverage ratio, tested at half year and full year on a trailing twelve-month basis. Three tests of these covenants were waived, with the next test occurring on 31 December 2021. The interest cover covenant requires a ratio of EBITDA to net interest payable above 3.5:1 and the leverage ratio requires Net Debt:EBITDA of below 3.5:1 on a “frozen GAAP” basis pre-IFRS 16.
7 The term of the $1.35bn syndicated and bilateral revolving credit facilities (RCF) has been extended to September 2023. The interest margin payable on borrowings under the facility is linked to IHG’s Net Debt:EBITDA ratio. The margin can now vary between LIBOR + 0.90% and LIBOR + 2.75%.
8 Cash and cash equivalents, net of overdrafts and restricted cash.
9 The Group currently has $1,870m of sterling and euro bonds outstanding. The first bond matures in November 2022 (£400m) and subsequent bonds mature in August 2025 (£300m), August 2026 (£350m) and May 2027(€500m). The Group currently has a senior unsecured long-term credit rating of BBB- from Standard and Poor’s. In the event this rating was downgraded below BBB- there would be an additional step up coupon of 125bps payable on the bonds which would result in an additional interest cost of approximately $24m per year.
10 Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group’s captive insurance company.
 
 
 
 
Appendix 1: RevPAR Movement Summary
 
 
 
Half Year 2020
 
Q2 2020
 
Monthly RevPAR
 
RevPAR
 
Rate
 
Occ.
 
RevPAR
 
Rate
 
Occ.
 
April
 
May
 
June
 
Group
 
(51.7)%
(12.1)%
(30.6)%pts
(74.7)%
(27.5)%
(47.0)%pts
(81.9)%
(75.6)%
(67.4)%
Americas
 
(47.6)%
(12.5)%
(27.6)%pts
(71.2)%
(25.9)%
(44.7)%pts
(80.1)%
(72.5)%
(62.0)%
EMEAA
 
(58.9)%
(13.1)%
(37.6)%pts
(87.6)%
(31.8)%
(61.0)%pts
(89.3)%
(88.5)%
(85.3)%
G. China
 
(61.7)%
(17.1)%
(31.3)%pts
(59.2)%
(20.6)%
(30.5)%pts
(71.2)%
(57.1)%
(48.6)%
Appendix 2: Comparable RevPAR movement at constant exchange rates (CER) vs. actual exchange rates (AER)
 
 
Half Year 2020
 
Q2 2020
 
CER
 
AER
 
Difference
 
CER
 
AER
 
Difference
 
Group
 
(51.7)%
(52.1)%
(0.4)%pts
(74.7)%
(74.9)%
(0.2)%pts
Americas
 
(47.6)%
(47.8)%
(0.2)%pts
(71.2)%
(71.3)%
(0.1)%pts
EMEAA
 
(58.9)%
(59.5)%
(0.6)%pts
(87.6)%
(87.9)%
(0.3)%pts
G. China
 
(61.7)%
(62.8)%
(1.1)%pts
(59.2)%
(60.6)%
(1.3)%pts
Appendix 3: Half Year System & Pipeline Summary (rooms)
 
 
System
 
Pipeline
 
Openings
 
Removals
 
Net
 
Total
 
YoY%
 
Signings
 
Total
 
Group
 
11,882
 
(12,081)
 
(199)
 
883,364
 
3.2%
 
26,236
 
287,525
 
Americas
 
4,990
 
(6,139)
 
(1,149)
 
523,498
 
1.7%
 
9,148
 
115,940
 
EMEAA
 
2,530
 
(4,708)
 
(2,178)
 
221,192
 
2.9%
 
4,372
 
79,998
 
G. China
 
4,362
 
(1,234)
 
3,128
 
138,674
 
9.9%
 
12,716
 
91,587
 
Appendix 4: Half Year financial headlines
 
 
GROUP
 
REPORTABLE SEGMENTS
 
 
 
Total
 
Americas
 
EMEAA
 
G. China
 
Central
 
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
 
Revenue ($m)
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from reportable segments
 
488
1,012
262
520
134
338
18
66
74
 
88
 
 
System Fund
 
385
675
-
-
-
-
-
-
-
 
-
 
 
Hotel Cost Reimbursements
 
375
593
-
-
-
-
-
-
-
 
-
 
 
Group Revenue
 
1,248
2,280
262
520
134
338
18
66
74
 
88
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit ($m)
 
 
 
 
 
 
 
 
 
 
 
 
Fee Business excluding central overheads
 
155
452
163
323
(3)
93
(5)
36
-
 
-
 
 
Owned, leased & managed lease
 
(23)
16
(10)
21
(13)
(5)
-
-
-
 
-
 
 
Central
 
(58)
(58)
-
-
-
-
-
-
(58)
 
(58)
 
 
Operating (loss)/profit from reportable segments
 
74
410
153
344
(16)
88
(5)
36
(58)
 
(58)
 
 
System Fund result
 
(52)
47
-
-
-
-
-
-
-
 
-
 
 
Operating (loss)/profit before exceptionals
 
22
457
153
344
(16)
88
(5)
36
(58)
 
(58)
 
 
Operating exceptional items
 
(255)
(15)
(148)
(2)
(99)
(2)
(7)
-
(1)
 
(11)
 
 
Operating (loss)/profit after exceptionals
 
(233)
442
5
342
(115)
86
(12)
36
(59)
 
(69)
 
 
 
Appendix 5: Reported operating profit before exceptional items from reportable segments at actual & constant exchange rates
 
Total***
 
Americas
 
EMEAA
 
G. China
 
Reported
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Growth / (decline)
 
(82)%
 
(82)%
 
(56)%
 
(55)%
 
(118)%
 
(119)%
 
(114)%
 
(114)%
 
 
Appendix 6: Underlying**** operating profit movement before exceptional items
 
Total***
 
Americas
 
EMEAA
 
G. China
 
Growth / (decline)
 
(83)%
 
(55)%
 
(125)%
 
(114)%
 
 
Exchange rates:
USD:GBP
USD:EUR
* US dollar actual currency
H1 2020
0.79
0.91
** Translated at constant H1 2020 exchange rates
H1 2019
0.77
0.89
*** After central overheads
 
 
 
**** At CER and excluding: significant liquidated damages, current year disposals, System Fund results and hotel cost reimbursements
 
 
 
 
Appendix 7: Definitions
 
CER: constant exchange rates with H1 2020 exchange rates applied to H1 2019.
Comparable RevPAR: revenue per available room for hotels that have traded for all of 2019 and 2020, reported at CER. Comparable RevPAR includes the adverse impact of hotels temporarily closed as a result of Covid-19.
Fee revenue: group revenue from reportable segments excluding owned, leased and managed lease hotels, and significant liquidated damages.
Fee margin: adjusted to exclude owned, leased and managed lease hotels, significant liquidated damages, and the results of the Group’s captive insurance company.
Guest Satisfaction Index (GSI): is an IHG metric that uses third party aggregated social review data to benchmark IHG guest satisfaction performance against that of our competitors.
Reportable segments: group results excluding System Fund results, hotel cost reimbursements and exceptional items.
Significant liquidated damages: $1m in H1 2020 ($1m in EMEAA fee business); $4m in H1 2019 ($4m in EMEAA fee business).
Total gross revenue: total rooms revenue from franchised hotels and total hotel revenue from managed, owned, leased and managed lease hotels. Other than owned, leased and managed lease 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 2019 or 2020, reported at CER.
Adjusted Interest: adds back interest relating to the System Fund.
 
 
 
For further information, please contact:
 
Investor Relations (Stuart Ford, Matthew Kay, Rakesh Patel):
+44 (0)1895 512 176
+44 (0)7527 419 431
Media Relations (Yasmin Diamond; Mark Debenham):
+44 (0)1895 512 097
+44 (0)7527 424 046
 
 
 
Presentation 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 11 August 2020 on the web address:
 
https://www.investis-live.com/ihg/5f17013527577e10000ac663/jefs
 
For those wishing to ask questions, please use the dial-in details below which will have a Q&A facility:
UK Local:                                       0203 936 2999
UK:                                                 0800 640 6441
US:                                                 +1 646 664 1960
                                                       +1 855 9796 654
International dial-in:                      +44 20 3936 2999
Passcode:                                       84 25 69

The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future: www.ihgplc.com/en/investors/results-and-presentations

A replay will also be available following the event using the following details:
UK:                                                0203 936 3001
US:                                               +1 845 709 8569
International dial-in:                    +44 (0) 203 936 3001
Passcode:                                     72 23 89

Website:
The full release and supplementary data will be available on our website from 7:00am (London time) on 11 August. The web address is www.ihgplc.com/en/investors/results-and-presentations.
 
 
Notes to Editors:
IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including Six Senses Hotels Resorts Spas, Regent Hotels & Resorts, InterContinental® Hotels & Resorts, Kimpton® Hotels & Restaurants, Hotel Indigo®, EVEN® Hotels, HUALUXE® Hotels and Resorts, Crowne Plaza® Hotels & Resorts, voco™, Holiday Inn® Hotels & Resorts , Holiday Inn Express®, Holiday Inn Club Vacations®, avid™ hotels, Staybridge Suites®, Atwell Suites™, and Candlewood Suites®.
 
IHG franchises, leases, manages or owns more than 5,900 hotels and approximately 883,000 guest rooms in more than 100 countries, with over 1,900 hotels in its development pipeline. IHG also manages IHG® 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. Approximately 400,000 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: https://www.ihgplc.com/en/news-and-media and follow us on social media at: https://twitter.com/ihgcorporate, www.facebook.com/ihgcorporate and www.linkedin.com/company/intercontinental-hotels-group.
 
 
 
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 provides a commentary on the performance of InterContinental Hotels Group PLC
(the Group or IHG) for the six months ended 30 June 2020.
 
GROUP PERFORMANCE
 
            6 months ended 30 June
Group results
 
 
 
 
2020
2019
%
 
$m
$m
change
Revenuea
 
 
 
Americas
262
520
(49.6)
EMEAA
134
                338
(60.4)
Greater China
18
66
(72.7)
Central
74
88
(15.9)
 
____
____
____
Revenue from reportable segments
488
1,012
(51.8)
 
 
 
 
System Fund revenues
385
675
(43.0)
Reimbursement of costs
375
593
(36.8)
 
____
____
____
Total revenue
1,248
2,280
(45.3)
 
____
____
____
Operating profita
 
 
 
Americas
153
344
(55.5)
EMEAA
(16)
88
(118.2)
Greater China
(5)
36
(113.9)
Central
(58)
(58)
-
 
____
____
____
Operating profit from reportable segments
74
410
(82.0)
System Fund result
(52)
47
(210.6)
 
____
____
____
Operating profit before exceptional items
22
457
(95.2)
Operating exceptional items
(255)
(15)
1,600.0
 
____
____
____
Operating (loss)/profit
(233)
442
(152.7)
Net financial expenses
(58)
(57)
1.8
Fair value gains/(losses) on contingent purchase consideration
16
(10)
(260.0)
 
____
____
____
(Loss)/profit before tax
(275)
375
(173.3)
 
____
____
____
(Loss)/earnings per ordinary share
 
 
 
 
Basic
(115.4)¢
167.2¢
(169.0)
 
Adjustedb
14.3¢
148.6¢
(90.4)
 
 
 
 
 
Average US dollar to sterling exchange rate
$1: £0.79
$1: £0.77
 
 
 
 
 
Group results
 
Covid-19 significantly impacted IHG’s financial performance in the first half of 2020, resulting in significant RevPAR declines in China from February, followed by large declines across EMEAA and then the Americas from March, as governments across the globe imposed significant and wide-reaching restrictions on mobility between and within countries. The peak impact was witnessed in the month of April as ‘lockdowns’ or ‘shelter-in-place’ orders were in place throughout much of the US and Europe, across which 79% of IHG’s hotels are located, resulting in closure of ~15% of the global estate by the end of April. Performance steadily improved through the second quarter, driven by increases in domestic travel demand in countries that have lifted restrictions, including the US, where our performance has been ahead of the industry through the initial stages of the recovery.
 
At the end of June, the number of hotels remaining temporarily closed had reduced to ~10% of our global estate. Overall, Group comparable RevPARc declined 25% in the first quarter, 75% in the second quarter, and 52% in the first half, all compared to the prior year.
 
During the six months ended 30 June 2020, total revenue decreased by $1,032m (45.3%) to $1,248m, whilst revenue from reportable segmentsa decreased by $524m (51.8%) to $488m, due to the impacts of Covid-19 on both fee revenue and revenues from owned, leased and managed lease hotels, only partially offset by growth in IHG’s System size which increased year-on-year by 3.2%.
 
Operating profit decreased by $675m (152.7%) to a loss of $(233)m and profit before tax decreased by $650m (173.3%) to a loss of $(275)m, driven predominantly by materially lower fee revenues, as well as losses in the owned, leased and managed lease estate, coupled with a $99m movement in System Fund contribution to a $(52)m deficit and a $240m net increase in operating exceptional charges. These reductions in revenue and increase in charges were partially offset by rapid and decisive action by management to mitigate against the scale and speed of trading disruption through limiting discretionary spend, reducing salaries and incentives, and other targeted cost reductions. The $255m operating exceptional charge was driven principally by $195m of non-cash impairment charges including $47m in relation to acquired management agreements and $85m recognised in relation to property, plant and equipment of owned and leased hotel assets. Additionally, a $63m impairment was recognised in relation to trade deposits and receivables, see Other Financial Information for further detail.
 
Operating profit from reportable segmentsa decreased by $336m (82.0%) to $74m.
 
Underlyingd revenue and underlyingd operating profit decreased by $505m (51.0%) and $331m (82.5%), respectively.
 
Basic earnings per ordinary share decreased by 169.0% to a loss per ordinary share of (115.4)¢, whilst adjusted earnings per ordinary shareb decreased by 90.4% to 14.3¢.
 
In the six months ended 30 June 2020, IHG opened 11,882 rooms (91 hotels) and a continued focus on a high-quality estate led to planned removals of 12,081 rooms (76 hotels), including 2.1k relating to a previously flagged portfolio of hotels in Germany, resulting in a closing global estate of 883,364 rooms (5,918 hotels).
 
In the six months ended 30 June 2020, IHG signed 26,236 rooms (181 hotels), leading to a closing pipeline of 287,525 rooms (1,932 hotels).
 
 
a Americas and EMEAA include revenue and operating profit before exceptional items from both fee business and owned, leased and managed lease hotels. Greater China includes revenue and
  operating profit before exceptional items from fee business.
b Adjusted earnings per ordinary share for 2019 has been restated for consistency with the 2019 Annual Report and Form 20-F to exclude the change in fair value of contingent purchase consideration.
c Comparable RevPAR includes the adverse impact of hotels temporarily closed as a result of Covid-19.
d Definitions for Non-GAAP revenue and operating profit measures can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the
  Interim Management Report contains reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
 
 
Hotels
 
Rooms
 
Global hotel and room count
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
               15
               (3)
 
          1,083
            (365)
Regent
                 7
                 1
 
          2,190
             187
 
InterContinental
             210
               (2)
 
        70,812
            (169)
 
Kimpton
               72
                 6
 
        13,303
             257
 
HUALUXE
               11
                 2
 
          3,263
             553
 
Crowne Plaza
             428
               (3)
 
      119,672
            (910)
Hotel Indigo
             121
                 3
 
        14,781
             207
 
EVEN Hotels
               15
                 2
 
          2,208
             259
 
voco
               12
               -
 
          4,293
               -
 
Holiday Inn1
          1,274
              (10)
 
      237,361
         (2,533)
 
Holiday Inn Express
          2,888
               13
 
      300,846
          1,612
avid hotels
               14
                 7
 
          1,259
             624
 
Staybridge Suites
             311
               11
 
        33,992
          1,359
 
Candlewood Suites
             415
                 5
 
        38,710
             378
 
Other
             125
              (17)
 
        39,591
         (1,658)
 
 
 ____
 ____
 
 ______
 _____
Total
          5,918
               15
 
      883,364
            (199)
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
          4,887
               17
 
      614,478
            (496)
 
Managed
          1,006
               (1)
 
      262,762
             509
 
Owned, leased and managed lease
               25
               (1)
 
          6,124
               (212)
 
 
 ____
 ____
 
 ______
 _____
Total
          5,918
               15
 
      883,364
            (199)
 
 
 ____
 ____
 
 ______
 _____
 
 
 
1 Includes 47 Holiday Inn Resort properties (11,721 rooms) and 28 Holiday Inn Club Vacations properties (8,592 rooms). (2019: 46 Holiday Inn Resort properties (11,502 rooms) and 28 Holiday Inn Club Vacations properties (8,592 rooms)).
 
 
 
Hotels
 
Rooms
 
Global Pipeline
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
               27
                 2
 
          1,922
             152
Regent
                 5
               -
 
          1,141
             197
 
InterContinental
               70
                 5
 
        18,425
          1,407
 
Kimpton
               34
                 1
 
          6,839
             636
 
HUALUXE
               23
                 1
 
          6,487
             307
 
Crowne Plaza
               91
                 3
 
        25,091
             585
Hotel Indigo
             102
                 1
 
        15,449
             301
 
EVEN Hotels
               29
                 3
 
          4,681
             339
 
voco1
               21
                 4
 
          6,752
             532
 
Holiday Inn2
             278
                 3
 
        53,758
             849
 
Holiday Inn Express
             755
                 1
 
        95,941
               67
avid hotels
             208
                 1
 
        19,097
               29
 
Staybridge Suites
             168
              (14)
 
        19,050
         (1,684)
 
Candlewood Suites
               83
               (8)
 
          7,471
            (715)
 
Atwell Suites
               17
                 7
 
          1,667
             667
 
Other
               21
                 4
 
          3,754
             813
 
 
 ____
 ____
 
 ______
 _____
Total
          1,932
               14
 
      287,525
          4,482
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
          1,420
                 9
 
      169,874
          3,233
 
Managed
             511
                 5
 
      117,496
          1,249
Owned, leased and managed lease
                 1
               -
 
             155
               -
 
 
 ____
 ____
 
 ______
 _____
Total
          1,932
               14
 
      287,525
          4,482
 
 
 ____
 ____
 
 ______
 _____
 
 
1 Does not include three open and one pipeline hotel that will be re-branded to voco.
2 Includes 29 Holiday Inn Resort properties (6,273 rooms) and 1 Holiday Inn Club Vacations properties (105 rooms). (2019: 29 Holiday Inn Resort properties (6,335 rooms) and 1 Holiday Inn Club Vacations properties (110 rooms)).
 
 
 
 
 
AMERICAS
 
 
 
    6 months ended 30 June
Americas Results
 
 
 
 
2020
2019
%
 
$m
$m
change
Revenue from the reportable segmenta
 
 
 
 
Fee business
226
418
(45.9)
 
Owned, leased and managed lease
36
102
(64.7)
 
____
____
____
Total
 
262
520
(49.6)
 
____
____
____
Operating profit from the reportable segmenta
 
 
 
 
Fee business
163
323
(49.5)
 
Owned, leased and managed lease
(10)
21
(147.6)
 
____
____
____
 
 
153
344
(55.5)
Operating exceptional items
 
(148)
(2)
7300.0
 
____
____
____
Operating profit
5
342
(98.5)
 
____
____
____
 
 
 
 
 
 
 
Americas Comparable RevPARb movement on previous year
6 months ended
30 June 2020
Fee business
 
 
 
InterContinental
 
(60)%
 
Kimpton
 
(63)%
 
Crowne Plaza
 
(56)%
 
Hotel Indigo
 
(56)%
 
EVEN Hotels
 
(62)%
 
Holiday Inn
 
(51)%
 
Holiday Inn Express
 
(44)%
 
Staybridge Suites
 
(38)%
 
Candlewood Suites
 
(28)%
 
All brands
 
(48)%
 
 
 
 
Owned, leased and managed lease
 
 
 
EVEN Hotels
 
(55)%
 
Holiday Inn
 
(51)%
 
All brands
 
(52)%
 
Americas results
 
Following solid trading in the first two months of 2020, Covid-19 rapidly impacted the Americas region from March leading to sharp declines in RevPAR across the region. Occupancy levels dropped to historic lows in April, as social distancing measures and travel restrictions came into effect across the region, with ~10% of hotels closed by the end of April. In the US where 66% of the Group’s hotels are located, occupancyb was ~20% at the lowest point with ~10% of hotels temporarily closed.
 
By the end of June, the majority of hotels had reopened with just ~3% of US hotels closed. The recovery has been led by the US franchised estate, which benefits from a weighting towards domestic demand-driven mainstream hotels, with a lower reliance on large group business and higher distribution in non-urban markets. Comparable RevPARb in the Americas declined 48% in the first half of 2020, declining 19% in the first quarter and 71% in the second quarter. In the US the RevPAR decline has reduced steadily through the second quarter and by June occupancyb was ~42%.
 
Revenue from the reportable segmenta decreased by $258m (49.6%) to $262m, due to the impacts of Covid-19, only very partially offset by 1.7% net rooms growth. Operating profit decreased by $337m (98.5%) to $5m, driven by the reduction in revenue and a $146m net increase in operating exceptional charges, partially offset by cost savings introduced through the second quarter. Operating profit from the reportable segmenta decreased by $191m (55.5%) to $153m. On an underlyingc basis, revenue decreased by $256m (49.4%), whilst underlyingc operating profit decreased by $189m (55.3%).
 
 
 
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
 
Fee business revenuec decreased by $192m (45.9%) to $226m, driven by the significant impact of Covid-19 from March onwards on RevPAR and consequently fee revenues, and was also partly impacted by adverse foreign exchanged ($2m), whilst fee business operating profit decreased by $160m (49.5%) to $163m, also partly impacted by adverse foreign exchanged ($2m). Planned cost savings commenced in the second quarter which partially offset the decline in fee income. Fee business operating profit also benefited from a $4m litigation settlement relating to one hotel, and the recognition of a $4m payroll tax credit.
 
Owned, leased and managed lease revenuec decreased by $66m (64.7%) to $36m, as the majority of hotels were closed during much of the second quarter, whilst owned, leased and managed lease operating profitc decreased by $31m (147.6%) to a loss of $(10)m, driven by the impact of lower occupancy and closures, partially offset by the implementation of cost savings and the benefit of $4m business interruption insurance at one hotel. There was no material impact of foreign exchanged on either revenue or operating profit.
 
a Americas reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenues and expenses and reimbursement of costs, for both fee business and
  owned, leased and managed lease hotels.
b Comparable RevPAR and occupancy include the adverse impact of hotels temporarily closed as a result of Covid-19.
c Definitions for Non-GAAP revenue and operating profit measures can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the
  Interim Management Report contains reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
d The impact of movements between the previous year’s actual exchange rates and average rates in 2020.
 
 
           Hotels
 
          Rooms
 
Americas hotel and room count
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
InterContinental
               50
               (1)
 
        17,769
            (127)
 
Kimpton
               65
                 4
 
        11,858
            (139)
 
Crowne Plaza
             147
               (2)
 
        39,350
            (525)
Hotel Indigo
               64
               -
 
          8,274
                 7
 
EVEN Hotels
               14
                 1
 
          2,036
               87
 
Holiday Inn1
             774
               (9)
 
      133,458
         (1,828)
 
Holiday Inn Express
          2,379
               11
 
      216,154
          1,161
avid hotels
               14
                 7
 
          1,259
             624
 
Staybridge Suites
             294
               11
 
        31,416
          1,172
 
Candlewood Suites
             415
                 5
 
        38,710
             378
 
Other
             101
               (17)
 
        23,214
         (1,959)
 
 
 ____
 ____
 
 ______
 _____
Total
          4,317
               10
 
      523,498
         (1,149)
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
          4,025
               17
 
      465,249
              (16)
 
Managed
             285
               (7)
 
        56,032
         (1,128)
Owned, leased and managed lease
                 7
               -
 
          2,217
               (5)
 
 
 ____
 ____
 
 ______
 _____
Total
          4,317
               10
 
      523,498
         (1,149)
 
 
 ____
 ____
 
 ______
 _____
 
 
1 Includes 22 Holiday Inn Resort properties (6,003 rooms) and 28 Holiday Inn Club Vacations properties (8,592 rooms). (2019: 22 Holiday Inn Resort properties (6,003 rooms) and 28 Holiday Inn Club Vacations properties (8,592 rooms)).
 
 
            Hotels
 
             Rooms
 
Americas Pipeline
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
                 5
               -
 
             422
               -
 
InterContinental
                 8
                 1
 
          1,895
             346
 
Kimpton
               21
               -
 
          3,593
             134
 
Crowne Plaza
                 6
                 1
 
          1,250
             157
Hotel Indigo
               36
               (1)
 
          4,923
            (249)
 
EVEN Hotels
               17
                 2
 
          2,096
             230
 
voco
                 1
                 1
 
               50
               50
 
Holiday Inn1
               97
               (1)
 
        12,585
               79
 
Holiday Inn Express
             441
               (7)
 
        42,615
            (488)
avid hotels
             207
                 1
 
        18,882
               29
 
Staybridge Suites
             149
              (13)
 
        15,512
         (1,362)
 
Candlewood Suites
               83
               (8)
 
          7,471
            (715)
 
Atwell Suites
               17
                 7
 
          1,667
             667
 
Other
               18
               2
 
          2,979
             200
 
 
 ____
 ____
 
 ______
 _____
Total
          1,106
              (15)
 
      115,940
            (922)
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
          1,061
              (16)
 
      108,799
         (1,187)
 
Managed
               45
                 1
 
          7,141
             265
 
 
 ____
 ____
 
______
 _____
Total
          1,106
              (15)
 
      115,940
            (922)
 
 
 ____
 ____
 
 ______
 _____
 
 
1 Includes three Holiday Inn Resort properties (490 rooms) and one Holiday Inn Club Vacations property (105 rooms). (2019: three Holiday Inn Resort properties (490 rooms) and one Holiday Inn Club Vacations property (110 rooms)).
 
 
 
 
 
EMEAA
 
 
 
         6 months ended 30 June
EMEAA results
 
 
 
 
2020
2019
%
 
$m
$m
change
Revenue from the reportable segmenta
 
 
 
 
Fee business
57
158
(63.9)
 
Owned, leased and managed lease
77
180
(57.2)
 
____
____
____
Total
 
134
338
(60.4)
 
____
____
____
Operating (loss)/profit from the reportable segmenta
 
 
 
 
Fee business
(3)
93
(103.2)
 
Owned, leased and managed lease
(13)
(5)
160.0
 
____
____
____
 
 
(16)
88
(118.2)
Operating exceptional items
 
(99)
(2)
4,850.0
 
 
____
____
____
Operating (loss)/profit
(115)
86
(233.7)
 
____
____
____
 
 
 
 
 
 
EMEAA comparable RevPARb movement on previous year
6 months ended
30 June 2020
Fee business
 
 
InterContinental
 
(59)%
 
Crowne Plaza
 
(59)%
 
Hotel Indigo
 
(65)%
 
Holiday Inn
 
(58)%
 
Holiday Inn Express
 
(60)%
 
Staybridge Suites
 
(46)%
 
All brands
 
(59)%
 
 
 
 
Owned, leased and managed leases
 
 
 
InterContinental
 
(59)%
 
All brands
(64)%
 
 
EMEAA results
 
Covid-19 impacted EMEAA from the second half of February onwards as government mandated international and domestic travel restrictions progressed across the region, culminating in ~50% of IHG’s hotels in the region being closed by April, with occupancyb dropping to ~11% in the month. Comparable RevPARb declined 26% in the first quarter, 88% in the second quarter, and 59% overall in the first half. By the end of June ~70% of hotels were open, with returning business driven largely by domestic travel.
 
Revenue from the reportable segmenta decreased by $204m (60.4%) to $134m as Covid-19 resulted in a significant reduction in fees as well as temporary closure of many owned, leased and managed lease hotels, only partially offset by 2.9% net rooms growth. Operating profit decreased by $201m (233.7%) to an operating loss of $115m, driven by the reduction in revenue and a $97m net increase in operating exceptional charges, partially offset by planned cost savings introduced through the second quarter. Operating profit from the reportable segmenta decreased by $104m (118.2%) to a loss of $(16)m. On an underlyingc basis, revenue decreased by $190m (59.2%) and underlyingc operating profit decreased by $101m (124.7%).
 
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
 
Fee business revenuec decreased by $101m (63.9%) to $57m, driven by the significant impact of Covid-19 on RevPAR and consequently fee revenues, and was also partly impacted by adverse foreign exchanged ($3m). Fee business operating profitc decreased by $96m (103.2%) to a loss of $(3)m, driven by lower fee revenue including incentive management fees, partially offset by cost savings commencing in the second quarter, and partly impacted by adverse foreign exchanged ($2m).
 
Owned, leased and managed lease revenuec decreased by $103m (57.2%) to $77m, as occupancy dropped rapidly through March and the majority of hotels were closed during the second quarter, including all of the UK managed lease estate. Foreign exchanged also had an adverse impact on revenues ($4m). Owned, leased and managed lease operating lossc increased by $8m (160.0%) to a loss of $(13)m, (foreign exchanged impact $nil), driven by the impact of lower occupancy and closures, partially offset by the implementation of cost reduction measures undertaken across the estate, together with rent reductions received; there was also the benefit of a $3m gain from the sale of the Holiday Inn Melbourne Airport.
 
a EMEAA reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenues and expenses and reimbursement of costs, for both fee business and
  owned, leased and managed lease hotels.
b Comparable RevPAR and occupancy include the adverse impact of hotels temporarily closed as a result of Covid-19.
c Definitions for Non-GAAP revenue and operating profit measures can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the
  Interim Management Report contains reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
d The impact of movements between the previous year’s actual exchange rates and average rates in 2020.
 
 
 
           Hotels
 
          Rooms
 
EMEAA hotel and room count
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
               14
               (3)
 
             961
            (365)
Regent
                 3
               -
 
             771
               -
 
InterContinental
             111
               (2)
 
        33,030
            (485)
 
Kimpton
                 6
                 2
 
          1,316
             396
 
Crowne Plaza
             184
               (2)
 
        45,851
            (560)
Hotel Indigo
               44
                 3
 
          4,639
             200
 
voco
               12
               -
 
          4,293
               -
 
Holiday Inn1
             393
               (1)
 
        73,552
             120
 
Holiday Inn Express
             315
               (9)
 
        45,053
         (1,401)
 
Staybridge Suites
               17
               -
 
          2,576
             187
 
Other
               14
               (1)
 
          9,150
            (270)
 
 
 ____
 ____
 
 ______
 _____
Total
          1,113
              (13)
 
      221,192
         (2,178)
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
             762
              (11)
 
      124,258
         (2,197)
 
Managed
             333
               (1)
 
        93,027
              226
Owned, leased and managed lease
               18
               (1)
 
          3,907
               (207)
 
 
 ____
 ____
 
 ______
 _____
Total
          1,113
              (13)
 
      221,192
         (2,178)
 
 
 ____
 ____
 
 ______
 _____
 
1 Includes 17 Holiday Inn Resort properties (3,604 rooms). (2019: 17 Holiday Inn Resort properties (3,604 rooms)).
 
 
 
         Hotels
 
           Rooms
 
EMEAA Pipeline
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
               19
                 2
 
          1,331
             152
Regent
                 4
               -
 
             861
             197
 
InterContinental
               33
                 2
 
          8,166
             659
 
Kimpton
                 7
               -
 
          1,592
             345
 
Crowne Plaza
               34
               (1)
 
          9,102
            (313)
Hotel Indigo
               38
               (2)
 
          5,596
              (56)
 
voco1
               18
                 1
 
          6,257
               37
 
Holiday Inn2
             114
               (5)
 
        24,929
         (1,007)
 
Holiday Inn Express
             105
               (7)
 
        17,636
         (1,413)
avid hotels
                 1
               -
 
             215
               -
 
Staybridge Suites
               19
               (1)
 
          3,538
            (322)
 
Other
                 3
                 2
 
             775
             613
 
 
 ____
 ____
 
 ______
 _____
Total
             395
               (9)
 
        79,998
         (1,108)
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
             159
               (6)
 
        26,624
            (707)
 
Managed
             235
               (3)
 
        53,219
            (401)
Owned, leased and managed lease
                 1
               -
 
             155
               -
 
 
 ____
 ____
 
 ______
 ____
Total
             395
               (9)
 
        79,998
         (1,108)
 
 
 ____
 ____
 
 ______
 _____
 
 
 
1 Does not include three open and one pipeline hotel that will be re-branded to voco.
2 Includes 16 Holiday Inn Resort properties (3,218 rooms). (2019: 18 Holiday Inn Resort properties (3,662 rooms)).
 
 
GREATER CHINA
 
 
 
       6 months ended 30 June
 
 
 
 
Greater China results
2020
2019
%
 
$m
$m
Change
 
 
 
 
Revenue from the reportable segmenta
 
 
 
 
Fee business
18
66
(72.7)
 
 
____
____
____
Total
 
18
66
(72.7)
 
____
____
____
Operating (loss)/profit from the reportable segmenta
 
 
 
 
Fee business
(5)
36
(113.9)
 
____
____
____
 
 
(5)
36
(113.9)
Operating exceptional items
 
(7)
-
-
 
 
____
____
____
Operating (loss)/profit
 
(12)
36
(133.3)
 
 
        ____
         ____
____
 
 
 
 
 
 
 
Greater China comparable RevPARb movement on previous year
6 months ended
30 June 2020
Fee business
 
 
 
InterContinental
 
(61)%
 
HUALUXE
 
(45)%
 
Crowne Plaza
 
(61)%
 
Hotel Indigo
 
(65)%
 
Holiday Inn
 
(65)%
 
Holiday Inn Express
 
(60)%
 
All brands
 
(62)%
 
Greater China results
 
Covid-19 impacted Greater China earliest as government measures were introduced rapidly from the end of January to contain the spread of the virus. At the lockdown period trough, 40% of the region’s hotels were temporarily closed whilst occupancyb dropped to single digits. Comparable RevPARb declined by 89% in February at the lowest point, 64% in the first quarter, 59% in the second quarter and by 62% over the first half of 2020 as travel restrictions slowly began to ease. June comparable RevPARb declined by 49%, and by the end of June only 1% of hotels remained closed, with demand recovery being driven predominantly by domestic business. Hong Kong SAR continued to be impacted by uncertainty posed by political disputes, as well as by Covid-19.
 
Revenue from the reportable segmenta decreased by $48m (72.7%) to $18m, driven by the impact of Covid-19 on fee revenues, partially offset by 9.9% net rooms growth. Operating profit decreased by $48m (133.3%) to an operating loss of $(12)m as revenue reductions, including lower incentive management fees, and a $7m net increase in operating exceptional charges were partially offset by planned cost savings. Operating profit from the reportable segmenta decreased by $41m (113.9%) to a loss of $(5)m. Underlyingc revenue decreased by $46m (71.9%) and underlyingc operating profit decreased by $40m (114.3%) to a loss of $(5)m.
 
 
a Greater China reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenue and expenses and reimbursement of costs, for both fee business
  and owned, leased and managed lease hotels.
b Comparable RevPAR and occupancy include the adverse impact of hotels temporarily closed as a result of Covid-19.
c Definitions for Non-GAAP revenue and operating profit measures can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the
  Interim Management Report contains reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
 
 
             Hotels
 
            Rooms
 
Greater China hotel and room count
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
                 1
               -
 
             122
               -
Regent
                 4
                 1
 
          1,419
             187
 
InterContinental
               49
                 1
 
        20,013
             443
 
Kimpton
                 1
               -
 
             129
               -
 
HUALUXE
               11
                 2
 
          3,263
             553
 
Crowne Plaza
               97
                 1
 
        34,471
             175
Hotel Indigo
               13
               -
 
          1,868
               -
 
EVEN Hotels
                 1
                 1
 
             172
             172
 
Holiday Inn1
             107
               -
 
        30,351
            (825)
 
Holiday Inn Express
             194
               11
 
        39,639
          1,852
 
Other
               10
                 1
 
          7,227
             571
 
 
 ____
 ____
 
 ______
 _____
Total
             488
               18
 
      138,674
          3,128
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
             100
               11
 
        24,971
          1,717
 
Managed
             388
                 7
 
      113,703
          1,411
 
 
 ____
 ____
 
 ______
 _____
Total
             488
               18
 
      138,674
          3,128
 
 
 ____
 ____
 
 ______
 _____
 
 
 
1 Includes eight Holiday Inn Resort properties (2,114 rooms)). (2019: seven Holiday Inn Resort properties (1,895 rooms)).
 
              Hotels
 
             Rooms
 
Greater China Pipeline
 
Change over
 
 
Change over
 
2020
2019
 
2020
2019
 
        30 June
31 December
 
30 June
31 December
Analysed by brand
 
 
 
 
 
 
Six Senses
                 3
               -
 
             169
               -
Regent
                 1
               -
 
             280
               -
 
InterContinental
               29
                 2
 
          8,364
             402
 
Kimpton
                 6
                 1
 
          1,654
             157
 
HUALUXE
               23
                 1
 
          6,487
             307
 
Crowne Plaza
               51
                 3
 
        14,739
             741
Hotel Indigo
               28
                 4
 
          4,930
             606
 
EVEN Hotels
               12
                 1
 
          2,585
             109
 
voco
                 2
                 2
 
             445
             445
 
Holiday Inn1
               67
                 9
 
        16,244
          1,777
 
Holiday Inn Express
             209
               15
 
        35,690
          1,968
 
 
 ____
 ____
 
 ______
 _____
Total
             431
               38
 
        91,587
          6,512
 
 
 ____
 ____
 
 ______
 _____
Analysed by ownership type
 
 
 
 
 
 
Franchised
             200
               31
 
        34,451
          5,127
 
Managed
             231
                 7
 
        57,136
          1,385
 
 
 ____
 ____
 
 ______
 _____
Total
             431
               38
 
        91,587
          6,512
 
 
 ____
 ____
 
 ______
 _____
 
1 Includes 10 Holiday Inn Resort properties (2,565 rooms). (2019: eight Holiday Inn Resort properties (2,183 rooms)).
 
 
 
 
CENTRAL
 
6 months ended 30 June
 
 
 
 
 
 
2020
2019
%
Central results
$m
$m
change
 
 
 
 
Revenue
74
88
(15.9)
Gross costs
(132)
(146)
(9.6)
 
____
____
____
 
 
(58)
(58)
-
Operating exceptional items
 
(1)
(11)
(90.9)
 
____
____
____
Operating loss
(59)
(69)
(14.5)
 
____
____
____
 
Central results
The net operating loss decreased by $10m (14.5%), driven by a $10m (90.9%) net decrease in operating exceptional charges. Central revenue, which mainly comprises technology fee income, decreased by $14m (15.9%) to $74m, driven by the impacts of Covid-19 and temporary fee discounts on technology fees, along with adverse impacts on other revenues such as training fees, due to social distancing measures impacting normal levels of activity. Revenue was also partly impacted by adverse foreign exchangea ($1m).
 
Gross costs decreased by $14m (9.6%), driven by planned cost savings introduced through the second quarter. Gross costs also partly benefited from the impact of foreign exchangea ($2m).
 
The net operating loss before exceptional items remained flat at $58m, partly benefiting from the impact of foreign exchangea ($1m).
 
a The impact of movements between the previous year’s actual exchange rates and average rates in 2020.
 
 
 
OTHER FINANCIAL INFORMATION
 
System Fund
The Group operates a System Fund to collect and administer cash assessments from hotel owners for the specific purpose of use in marketing, the Guest Reservation Systems, and hotel loyalty programme, IHG Rewards Club. The Fund also receives proceeds from the sale of loyalty points under third-party co-branding arrangements. The Fund is not managed to generate a profit or loss for IHG over the longer term, although an in-year surplus or deficit can arise, but is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.
 
In the six months ended 30 June 2020, System Fund revenue decreased by $290m (43.0%) to $385m, largely due to lower assessment fees reflecting the level of reduction in hotel revenues resulting from Covid-19, as well as fee reliefs given, and lower loyalty revenue due to lower redemption activity. A System Fund income statement deficit of $52m was recorded over the same period, resulting from lower revenues, partly offset by actions targeted to lower costs including a reduction in marketing spend. System Fund expenses included $22m of expected credit losses on trade and other receivables, of which $16m are considered to be attributable to Covid-19.
 
Reimbursement of costs
In the six months ended 30 June 2020, reimbursable revenue decreased by $218m (36.8%) to $375m. The reduction reflects the significant impact from Covid-19 on our hotels including hotel closures and staff furloughs, meaning the overall scale of reimbursements fell.
 
Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed and franchised properties and relates, predominantly, to payroll costs at managed properties where we are the employer. As we record cost reimbursements based upon costs incurred with no added mark up, this revenue and related expenses has no impact on either our operating profit or net income.
 
Exceptional items
Pre-tax exceptional items are treated as exceptional by reason of their size, nature or incidence and are excluded from the calculation of adjusted earnings per ordinary share as well as other Non-GAAP measures (see Use of Non-GAAP measures) in order to provide a more meaningful comparison of performance and can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, and restructuring costs.
 
Pre-tax exceptional items totalled a net charge of $234m (2019: $15m charge) and includes:
 
-
$22m net gain relating to derecognition of lease assets and liabilities;
-
$10m provision for onerous contractual expenditure relating to the UK portfolio;
-
$4m reorganisation costs (2019: $10m);
-
$3m acquisition and integration costs primarily due to the Six Senses acquisition (2019: $5m);
-
$2m provision for guarantees of third-party debt;
-
$63m impairment of financial assets;
-
$195m impairment charges of non-current assets; and
-
$21m fair value gain on contingent purchase consideration relating to the UK portfolio.
 
Derecognition of lease assets and liabilities
Relates to the UK portfolio lease and two German hotel leases. The estimate of the fixed element of the leases has been reassessed as there is no floor to the rent reductions applicable under these leases, and the circumstances in which no rent would be payable are no longer considered to be remote. The lease liabilities and right-of-use assets associated with these leases have therefore been derecognised, as they are now considered to be fully variable.
 
Provision for onerous contractual expenditure
Under the terms of the UK portfolio leases, the Group is committed to certain items of contractual expenditure. A provision has been recognised to the extent the costs of the remaining contractual expenditure exceed the future economic benefits expected to be received under the leases.
 
Reorganisation costs
In 2020, relates to reorganisation costs in respect of the UK portfolio. In 2019, the $10m charge related to a comprehensive efficiency programme to fund a series of new strategic initiatives to drive an acceleration in IHG’s future growth. The programme was completed in 2019 and no further restructuring costs related to this programme were incurred in 2020. An additional $13m was charged to the System Fund in 2019.
 
Impairment
Impairment of financial assets comprises $22m in relation to trade and other receivables and $41m in relation to trade deposits and loans.
 
Impairment of trade deposits and loans primarily relates to a deposit of $66m made to a hotel owner in connection with a portfolio of management agreements. The deposit, which was held at a discounted value of $33m, is no longer expected to be recoverable and was impaired in full. The difference between the deposit value and discounted value ($33m) is recorded as a contract asset which was also fully impaired.
 
Other impairment charges of $195m include $85m relating to property, plant and equipment (of which $50m relates to the UK portfolio and $35m to owned properties in the Americas region), $47m relating to management agreements, $37m relating to contract assets (including $33m relating to the portfolio deposit – see above), $21m relating to investments in associates (net of a $13m fair value gain on a put option relating to the Barclay associate) and $5m relating to right-of-use assets.
 
The impact of the impairment arising on the UK portfolio is partially offset by the fair value gain of $21m on contingent purchase consideration. See note 9 to the financial statements for a summary of exceptional items relating to the UK portfolio.
 
 
Net financial expenses
Net financial expenses increased by $1m to $58m and adjusted interest (see Use of Non-GAAP measures) decreased by $4m to $62m. The decrease in adjusted interest is primarily due to the impact of lower interest rates in 2020 on interest payable to the System Fund.
 
Financial expenses included $31m (2019: $32m) of interest costs on the public bonds, which are fixed rate debt. Interest expense on lease liabilities was $19m (2019: $20m).
 
Fair value gains / losses on contingent purchase consideration
Contingent purchase consideration arose on the acquisitions of Regent, the UK portfolio and Six Senses. The net gain of $16m (2019: loss of $10m) comprises an exceptional gain of $21m in respect of the UK portfolio (see Impairment above), offset by a loss of $5m in respect of Regent driven by a reduction in US corporate bond rates. The total contingent purchase consideration liability at 30 June 2020 is $76m.
 
Taxation
The interim effective rate of tax, excluding the impact of exceptional items and System Fund, has been calculated at -127%. Within H1, the Group recognised a tax credit of $19m on one-off items, predominantly in connection with adjustments to deferred taxes following an internal group restructuring, UK law change and prior year items.  Excluding these one-off items, the effective tax rate would be 45%. This adjusted rate is higher than the UK statutory corporation tax rate of 19% due to higher taxed overseas profits (particularly in the US) and a distortive impact of unrelieved foreign taxes and other non-tax deductible expenses due to the low profit base.
 
Taxation within exceptional items totalled a credit of $51m representing deferred tax impacts on the accounting exceptional items.
 
Net tax paid in the six months ended 30 June 2020 totalled $3m, consisting of payments of $27m and refunds in respect of prior year periods of $24m.  As a result of the Covid-19 pandemic, many jurisdictions have enacted temporary legislation that has deferred the due date of corporate income taxes.  Absent this legislation, additional taxes of $10m would have been due for payment in H1, all of which are now due in H2 2020.
 
Dividends
On 20 March 2020, the Board withdrew its recommendation of a final dividend in respect of 2019 of 85.9¢ per share (~$150m). An interim dividend in respect of 2020 will not be paid. The Board will continue to defer consideration of further dividends until visibility of the pace and scale of market recovery has improved.
 
Sources of liquidity
During the six months ended 30 June 2020, there was a net cash outflow of $14m from operating activities (2019: $194m inflow). Net cash outflows from investing activities totalled $41m (2019: $378m including $295m relating to acquisitions). Net cash generated from financing activities totalled $593m, which included $738m relating to the issuance of commercial paper under the Bank of England’s Corporate Covid Financing Facility (CCFF) (2019: outflow $299m including $649m of dividends).
 
Free cash flowa during the six months ended 30 June 2020 was a $66m outflow (2019: $141m inflow). Gross capital expenditurea was $85m (2019: $101m) and net capital expenditurea was $39m (2019: $73m).
 
Net debt at 30 June 2020 was $2,515m ($2,665m at 31 December 2019) and included $568m in respect of lease liabilities ($680m at 31 December 2019). Net debt decreased by $150m, of which $112m was due to a decrease in lease liabilities.
 
The Group currently has $1,870m of sterling and euro bonds outstanding. The first bond matures in November 2022 (£400m) and subsequent bonds mature in August 2025 (£300m), August 2026 (£350m) and May 2027 (€500m).
 
The Group is further financed by a $1.275bn revolving syndicated bank facility (the Syndicated Facility) and a $75m revolving bilateral facility (the Bilateral Facility), both of which mature in September 2023. The facilities were undrawn at 30 June 2020 (31 December 2019: $125m drawn). The Syndicated and Bilateral Facilities contain the same terms and two financial covenants; interest cover; and net debt divided by operating profit before exceptional items, depreciation and amortisation and System Fund revenue and expenses. In April 2020 the Group amended these facilities to include a waiver of existing covenants until December 2021. The amendment introduced a minimum liquidity covenant of $400m, tested at 30 June 2020, 31 December 2020 and 30 June 2021.
 
In April 2020, the Group issued £600m of commercial paper under the CCFF. The issuance matures on 16 March 2021.
 
As at 30 June 2020 the Group had total liquidity of $1,961m, comprising $1,350m of undrawn bank facilities and $611m of cash and cash equivalents (net of overdrafts and restricted cash).
 
In the Group’s opinion, the available facilities are sufficient for the Group’s present liquidity requirements. However, the Group continues to assess its liquidity position, financing options and covenant position and will take further actions as necessary.
 
The Group had net liabilities of $1,604m at 30 June 2020 ($1,465m at 31 December 2019) reflecting that its internally generated brands are not recorded on the balance sheet, in accordance with accounting standards.
 
a Free cash flow, gross capital expenditure and net capital expenditure are Non-GAAP measures. Definitions for Non-GAAP measures can be found on pages 55-59 of the IHG Annual Report and
  Form 20-F 2019. The ‘Use of Non-GAAP measures’ section later in the Interim Management Report contains reconciliations of these measures to the most directly comparable line items with the
  Group Financial Statements.
 
 
 
USE OF NON-GAAP MEASURES
 
In addition to performance measures directly observable in the Interim Management Review (IFRS measures), certain financial measures are used when discussing the Group’s performance which are not measures of financial performance or liquidity under International Financial Reporting Standards (IFRS). In management’s view these measures provide investors and other users with an enhanced understanding of IHG’s operating performance, profitability, financial strength and funding requirements. These measures do not have standardised meanings under IFRS, and companies do not necessarily calculate these in the same way.
 
Non-GAAP measures used to discuss the Group’s performance include:
 
●
Global revenue per available room (RevPAR) growth;
●
Total gross revenue in IHG’s System;
●
Revenue from reportable segments;
●
Operating profit from reportable segments;
●
Underlying revenue;
●
Underlying operating profit;
●
Underlying fee revenue;
●
Fee margin;
●
Adjusted interest;
●
Tax excluding the impact of exceptional items and System Fund;
●
Adjusted earnings per ordinary share;
●
Net debt;
●
Gross capital expenditure;
●
Net capital expenditure; and
●
Free cash flow.
 
Further information on these measures including full definitions can be found on pages 55-59 of the IHG Annual Report and Form 20-F 2019 (which is available at www.ihgplc.com).
 
 
Underlying revenue and underlying operating profit Non-GAAP reconciliations
 
 
 
Reportable segments
6 months ended 30 June
 
6 months ended 30 June
 
Revenue
 
Operating profit
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
2019
%
 
2020
2019
%
 
$m
$m
change
 
$m
$m
change
 
 
 
 
 
 
 
 
Per Group income statement
1,248
2,280
(45.3)
 
(233)
442
(152.7)
System Fund
(385)
(675)
(43.0)
 
52
(47)
(210.6)
Reimbursement of costs
(375)
(593)
(36.8)
 
-
-
-
Operating exceptional items
-
-
-
 
255
15
1,600.0
 
_____
_____
_____
 
_____
_____
_____
Reportable segments
488
1,012
(51.8)
 
74
410
(82.0)
 
_____
_____
_____
 
_____
_____
_____
Reportable segments analysed as:
 
 
 
 
 
 
 
Fee business
375
730
(48.6)
 
97
394
(75.4)
Owned, leased and managed lease
113
282
(59.9)
 
(23)
16
(243.8)
 
_____
_____
_____
 
_____
_____
_____
 
488
1,012
(51.8)
 
74
410
(82.0)
 
 
 
 
Underlying revenue and underlying operating profit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            6 months ended 30 June
 
                                                      6 months ended 30 June
 
 
 
Revenue
 
                                                    Operating profit
 
 
 
 
 
 
 
 
 
 
2020
2019c
%
 
2020
2019c
%
 
 
 
 
$m
$m
change
 
$m
$m
change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reportable segments (see above)
488
1,012
(51.8)
 
74
410
(82.0)
 
 
 
Significant liquidated damagesa
(1)
(4)
(75.0)
 
(1)
(4)
(75.0)
 
 
 
Owned asset disposalb
(2)
(6)
(66.7)
 
(3)
(1)
200.0
 
 
 
Currency impact
-
(12)
-
 
-
(4)
-
 
 
 
 
____
_____
_____
 
_____
_____
_____
 
 
 
Underlying revenue and underlying
operating profit
485
990
(51.0)
 
70
401
(82.5)
 
 
 
 
 
a $1m recognised in 2020 ($4m in 2019) reflects the continued recognition of the significant liquidated damages related to the previously disclosed exit of a portfolio of 2.1k hotels in Germany.
b Revenue and operating profit relating to owned, leased and managed leased hotels that have been disposed is excluded from the year of disposal and the prior year.
c Revenue and operating profit relating to acquisitions made in 2019 are not excluded when comparing 2020 and 2019 results as the results of acquisitions are only excluded in the year of acquisition
  when comparing to the prior year.
 
 
Underlying fee revenue
6 months ended 30 June
 
Revenue
 
 
 
 
 
 
 
2020
2019
%
 
$m
$m
change
 
 
 
 
Reportable segments fee business
(see above)
375
730
(48.6)
Significant liquidated damages
(1)
(4)
(75.0)
Currency impact
-
(8)
-
 
_____
_____
_____
Underlying fee revenue
374
718
(47.9)
 
 
Highlights by regions
 
 
Americas
6 months ended 30 June
 
6 months ended 30 June
 
Revenue
 
Operating profitd
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
2019
%
 
2020
2019
%
 
$m
$m
change
 
$m
$m
change
 
 
 
 
 
 
 
 
Per Group financial statements, note 4
262
520
(49.6)
 
153
344
(55.5)
 
 
 
 
 
 
 
 
Reportable segments analysed as:
 
 
 
 
 
 
 
Fee business
226
418
(45.9)
 
163
323
(49.5)
Owned, leased and managed lease
36
102
(64.7)
 
(10)
21
(147.6)
 
_____
_____
_____
 
_____
_____
_____
 
262
520
(49.6)
 
153
344
(55.5)
 
 
 
 
 
 
 
 
Reportable segments (see above)
262
520
(49.6)
 
153
344
(55.5)
Currency impact
-
(2)
-
 
-
(2)
-
 
_____
_____
_____
 
_____
_____
_____
Underlying revenue and underlying
operating profit
262
518
(49.4)
 
153
342
(55.3)
 
 
 
 
 
 
 
 
Owned, leased and managed lease
included in the above
(36)
(102)
(64.7)
 
10
(21)
(147.6)
 
_____
_____
_____
 
_____
_____
_____
Underlying revenue and underlying operating profit related to the fee business
226
416
(45.7)
 
163
321
(49.2)
 
EMEAA
 
 
 
 
 
 
 
 
6 months ended 30 June
 
6 months ended 30 June
 
Revenue
 
Operating (loss)/profitd
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
2019c
%
 
2020
2019c
%
 
$m
$m
change
 
$m
$m
change
 
 
 
 
 
 
 
 
Per Group financial statements, note 4
134
338
(60.4)
 
(16)
88
(118.2)
 
 
 
 
 
 
 
 
Reportable segments analysed as:
 
 
 
 
 
 
 
Fee business
57
158
(63.9)
 
(3)
93
(103.2)
Owned, leased and managed lease
77
180
(57.2)
 
(13)
(5)
160.0
 
_____
_____
_____
 
_____
_____
_____
 
134
338
(60.4)
 
(16)
88
(118.2)
 
 
 
 
 
 
 
 
Reportable segments (see above)
134
338
(60.4)
 
(16)
88
(118.2)
Significant liquidated damagesa
(1)
(4)
(75.0)
 
(1)
(4)
(75.0)
Owned asset disposalb
(2)
(6)
(66.7)
 
(3)
(1)
200.0
Currency impact
-
(7)
-
 
-
(2)
-
 
_____
_____
_____
 
_____
_____
_____
Underlying revenue and underlying
operating (loss)/profit
131
321
(59.2)
 
(20)
81
(124.7)
 
 
 
 
 
 
 
 
Owned, leased and managed lease
included in the above
(75)
(170)
(55.9)
 
16
6
166.7
 
_____
_____
_____
 
_____
_____
_____
Underlying revenue and underlying operating (loss)/profit related to the fee business
56
151
(62.9)
 
(4)
87
(104.6)
 
 
 
Greater China
 
 
 
 
 
 
 
 
6 months ended 30 June
 
6 months ended 30 June
 
Revenue
 
Operating (loss)/profitd
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2020
2019
%
 
2020
2019
%
 
$m
$m
change
 
$m
$m
change
 
 
 
 
 
 
 
 
Per Group financial statements, note 4
18
66
(72.7)
 
(5)
36
(113.9)
 
 
 
 
 
 
 
 
Reportable segments analysed as:
 
 
 
 
 
 
 
 
_____
_____
_____
 
____
_____
_____
Fee business
18
66
(72.7)
 
(5)
36
(113.9)
 
 
 
 
 
 
 
 
Reportable segments (see above)
18
66
(72.7)
 
(5)
36
(113.9)
Currency impact
-
(2)
-
 
-
(1)
-
 
_____
_____
_____
 
____
_____
_____
Underlying revenue and underlying
operating (loss)/profit
18
64
(71.9)
 
(5)
35
(114.3)
 
 
a $1m recognised in 2020 ($4m in 2019) reflects the continued recognition of the significant liquidated damages related to the previously disclosed exit of a portfolio of 2.1k hotels in Germany.
b Revenue and operating profit relating to owned, leased and managed leased hotels that have been disposed is excluded from the year of disposal and the prior year.
c Revenue and operating profit relating to acquisitions made in 2019 are not excluded when comparing 2020 and 2019 results as the results of acquisitions are only excluded in the year of acquisition
  when comparing to the prior year.
d Before exceptional items.
 

 
Fee margin reconciliation
  6 months ended 30 June
 
 
2020
2019
Restatedb
 
$m
$m
 
 
 
Revenue
 
 
Reportable segments analysed as fee business (see above)
375
730
Significant liquidated damagesa
(1)
(4)
Captive insurance company
(10)
(7)
 
_____
_____
 
364
719
 
 
 
Operating profit
 
 
Reportable segments analysed as fee business (see above)
97
394
Significant liquidated damages
(1)
(4)
Captive insurance company
(1)
(1)