Full Year Results to 31 December 2006

21 Feb 2007 [06:59h]     Bookmark and Share

Increase in development pipeline and rooms open
IHG continues to increase its development pipeline, and now expects to exceed its 50,000-60,000 net organic room additions target by the end of 2008 from the 30 June 2005 starting position of 537,675.

  • Continuing revenue up 13% from £713m to £805m, up 13% at constant exchange rates.
  • Continuing operating profit up 16% from £173m to £201m, up 17% at constant exchange rates.
  • Operating profit of £258m, including other operating income and expenses of £27m.
  • Global constant currency RevPAR growth of 9.8%. Total gross revenue* from all hotels in IHG’s system up 9% to £8.3bn.
  • Franchised operating profit up 10% to £235m. Managed operating profit up 27% to £85m.
  • Adjusted continuing earnings per share up 67% from 22.5p to 37.5p. Basic earnings per share of 104.1p.
  • Further £850m return of funds announced, taking total returns to £3.6bn since March 2004.
  • Final dividend up 24% to 13.3p. Total dividend up 20% to 18.4p.
  • Room count up by 18,713 rooms to 556,246. Now expect to exceed 50,000-60,000 net rooms growth target.
  • Signings up 47% to 102,774 rooms. Development pipeline up by 49,479 rooms to 157,991 (1,241 hotels).
  • 102,774 rooms were signed in the year; 61,673 in the Americas, 13,321 in EMEA and 27,780 in Asia Pacific.
  • 157,991 rooms are now in the pipeline, up 49,479 (46%) since the start of the year, at 1,241 hotels.
  • IHG’s development activity in Asia Pacific continues to be successful. In Greater China 39 hotels, 16,445 rooms, were signed in the year, including 8 InterContinentals, 5 Crowne Plazas, 13 Holiday Inns and 13 Holiday Inn Expresses. The 125th hotel in China has now been signed in pursuit of IHG’s target of having 125 hotels in China open by the end of 2008. IHG also entered into a joint venture with ANA during 2006; 13 ANA owned hotels, 4,937 rooms, entered the IHG system during December, making IHG the largest international hotel operator in Japan.

IHG maintains its focus on enhancing the quality of its portfolio, in tandem with growth. In 2006:

  • 42,841 rooms opened; 26,613 in the Americas, 4,823 in EMEA and 11,405 in Asia Pacific.
  • 24,128 rooms exited; 18,310 in the Americas, 3,642 in EMEA and 2,176 in Asia Pacific.
  • The room count at the end of the year increased by 18,713 rooms to 556,246.

Disposals and returns of funds

In the year, the sale of 31 Continental European hotels was completed for £680m before transaction costs and $191m was received from the sale of Felcor shares. 28.4m shares were repurchased under IHG’s ongoing buyback programme at a cost of £258m. There were 356m shares outstanding at the end of the year, 366m on a fully diluted basis. IHG’s net debt at the period end was £134m including the $186m (£97m) finance lease on the InterContinental Boston. £850m further return of funds was announced today. £700m will be returned via a special dividend with share consolidation and £150m via a further share buyback programme.

IHG continues to own 25 hotels with a book value of £1bn. The InterContinental brand repositioning introduced in 2006 has accelerated the pace of signings and improved guest preference, and recent research confirms its strong growth potential. IHG will consider the need for continued ownership of each of its owned InterContinental hotels once additional brand representation has been identified in its market and financial results are at the right level to maximise value.

Americas: strong performance across all brands

Revenue performance
RevPAR increased 9.2% with rate generating most of the increase. InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express and Candlewood each outperformed their market segments, with RevPAR up 10.4%, 10.4%, 7.4%, 10.7% and 7.4% respectively. Staybridge Suites also showed continued growth, with a 7.1% increase. Holiday Inn’s fourth quarter RevPAR growth was lower, in line with the industry, due to the prior year comparable having benefited from Hurricane Katrina displacement.

[GADS_NEWS]EMEA: RevPAR growth accelerating

Revenue performance
RevPAR increased 12.1%, driven by increased occupancy and 8.5% rate growth. The Middle East continued to perform strongly, growing RevPAR by 19.0%. Continental Europe delivered a RevPAR increase of 9.0%, benefiting from continued improvement across the region, particularly in Germany and France. In the UK, Holiday Inn and Express by Holiday Inn performed in-line with the market segment, recording RevPAR growth of 6.3%.

Asia Pacific: strong growth

Revenue performance
IHG’s market leading positions in the region have led to further strong growth. RevPAR increased 10.2%, mainly driven by rate. InterContinental, Crowne Plaza and Holiday Inn all performed strongly, with RevPAR up 11.5%, 10.3% and 8.5% respectively. Greater China RevPAR increased 12.1%, driven by rate increases.

Operating profit performance
Operating profit from continuing operations increased 33% from $39m to $52m. Owned and leased hotel operating profit increased 55% to $31m as a result of excellent trading at InterContinental Hong Kong, driven by a 31.8% RevPAR increase. Managed hotels profit increased 34% to $39m, driven by good trading and retained management contracts on asset disposals.

Strengthening Operating System

IHG continues to demonstrate the strength of its revenue delivery to hotel owners through its reservation channels and loyalty programme, Priority Club Rewards:

  • $5.7bn of rooms revenue booked through IHG’s reservation channels, 44% of total rooms revenue, up from 41% in 2005.
  • $4.4bn of rooms revenue from Priority Club Rewards members, 34% of total rooms revenue, up from 32% in 2005.
  • Internet revenues increased from 14% to 16% of total rooms revenue, 86% of which was from IHG’s own websites.

Overheads and Tax

Asia Pacific regional overheads increased by £4m to £12m after continued infrastructure investment in China. This was balanced by reductions in the Americas and EMEA which left the aggregated regional overheads up £1m at £64m. As previously indicated, central overheads in the fourth quarter were higher than previous periods at £25m, bringing the total for the full year to £81m, an increase of £16m. This included investment in new global research designed to enable higher quality brand development and enhance IHG’s franchising capability going forward. Central overheads in 2007 are expected to increase in line with inflation.

Appendix 1: Asset disposal programme detail

  Number of hotels Proceeds Net book
Disposed since April 2003 174 £3.0bn £2.9bn
Remaining hotels 25   £1.0bn

Appendix 2: Return of funds programme as at 31 December 2006

  Timing Total return Returned Still to
be returned
£501m special dividend Paid December 2004 £501m £501m Nil
First £250m share buyback Completed in 2004 £250m £250m Nil
£996m capital return Paid 8 July 2005 £996m £996m Nil
Second £250m share buyback Completed in 2006 £250m £250m Nil
£497m special dividend Paid 22 June 2006 £497m £497m Nil
Third £250m share buyback Underway £250m £219m £31m
£700m special dividend Quarter 2, 2007 £700m Nil £700m
£150m share buyback Yet to commence £150m Nil £150m
Total   £3.59bn £2.71bn £0.88bn

 Appendix 3:  Financial headlines

Twelve months to 31 Dec £m Total Americas EMEA Asia Pacific Central
  2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
Franchised operating profit 235 214 208 186 24 26 3 2    
Managed operating profit 85 67 27 20 37 31 21 16    
Continuing owned and leased operating profit 26 20 14 14 (5) (5) 17 11    
Regional overheads (64) (63) (32) (34) (20) (21) (12) (8)    
Continuing operating profit pre central overheads 282 238 217 186 36 31 29 21    
Central overheads (81) (65) (81) (65)
Continuing operating profit 201 173 217 186 36 31 29 21 (81) (65)
Discontinued owned and leased operating profit 30 96 4 12 26 73 11
Total operating profit 231 269 221 198 62 104 29 32 (81) (65)

Appendix 4: Constant currency continuing operating profits before other operating income and expenses.

  Americas EMEA Asia Pacific Total***
  Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant currency** Actual currency* Constant currency**
Growth 17% 17% 16% 15% 38% 38% 16% 17%

Exchange rates USD:GBP EUR:GBP
2006 1.84 1.47
2005 1.83 1.46
* Sterling actual currency
** Translated at constant 2005 exchange rates
*** After Central Overheads

Appendix 5: Investor information for 2006 final dividend

Ex-dividend Date: 21 March 2007
Record Date:  23 March 2007
Payment Date: 8 June 2007
Dividend payment: Ordinary shares 13.3p per share: ADRs 25.9c per ADR

 For further information, please contact:

Investor Relations (Paul Edgecliffe-Johnson; Heather Ward): +44 (0) 1753 410 176
Media Affairs (Leslie McGibbon): +44 (0) 1753 410 425
  +44 (0) 7808 094 471

High resolution images to accompany this announcement are available for the media to download free of charge from www.vismedia.co.uk. This includes profile shots of the key executives.

Presentation for Analysts and Shareholders

A presentation with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 9.30am (London time) on 20 February at InterContinental London Park Lane, One Hamilton Place, Park Lane W1J 7QY. There will be an opportunity to ask questions. The presentation will conclude at approximately 10.30am (London time).

There will be a live audio webcast of the results presentation on the web address www.ihgplc.com/prelims07. The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future. There will also be a live dial-in facility.

International dial-in  +44 (0)20 7863 6164

US Q&A conference call

There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 20 February with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director). There will be an opportunity to ask questions.

International dial-in   +44 (0)1452 562716
US Toll Free 1866 832 0717
Conference ID: 7492790

A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 7492790#.

International dial-in   +44 (0)1452 550000
US Toll Free 1866 247 4222


The full release and supplementary data will be available on our website from 7.00 am (London time) on Tuesday 20 February. The web address is www.ihgplc.com/prelims07

For further information, please contact:
Investor Relations (Paul Edgecliffe-Johnson; Heather Ward):
+44 (0) 1753 410 176
Media Affairs (Leslie McGibbon):
+44 (0) 1753 410 425
+44 (0) 7808 094 471

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