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RNS

Final Results

Released 07:00 21-Feb-2017

RNS Number : 3743X
InterContinental Hotels Group PLC
21 February 2017
 

InterContinental Hotels Group PLC

Preliminary Results for the year to 31 December 2016

Financial summary1

Reported

Underlying2


2016

2015

% Change

2016

2015

% Change

Revenue

$1,715m

$1,803m

-4.9%

$1,582m

$1,513m

4.6%

Fee Revenue3

$1,380m

$1,349m

2.3%

$1,409m

$1,349m

4.4%

Operating profit

$707m

$680m

4.0%

$702m

$641m

9.5%

Adjusted EPS

203.3¢

174.9¢

16.2%

203.1¢

165.0¢

23.1%

Basic EPS4

195.3¢

520.0¢

(62.4%)




Total dividend per share

94.0¢

85.0¢

11%




Net debt

$1,506m

$529m





1All figures before exceptional items unless otherwise noted.  2Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY15 exchange rates (CER).  Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates.  3Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages.  4After exceptional items.

 

Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:

"Our results clearly demonstrate our strong operational performance and the success of IHG's long-term strategy, which have delivered a 9.5% increase in underlying profit and a 23% increase in underlying EPS.  Our cash generative business model underpins our decision to announce a $400 million special dividend and to propose an 11% increase in the total dividend for the year.

We continued our focus on enhancing the long-term sustainability of our competitive advantage by evolving our brand portfolio and by driving innovation in our digital and loyalty offer.  We rolled out new formats across our Holiday Inn Brand Family which deliver significant uplifts in guest satisfaction and improved returns for owners, built momentum for our HUALUXE and EVEN Hotels brands, and took Kimpton Hotels & Restaurants and Hotel Indigo into new markets. We also strengthened our loyalty proposition through initiatives including 'Your Rate' helping to drive a 16% increase in member enrolments.

The fundamentals for the hospitality industry remain compelling. Despite the uncertain environment in some markets, we remain confident in the outlook for the year ahead, as well as our ability to deliver sustainable growth into the future."

Financial Highlights

·      Strong underlying revenue growth driven by both RevPAR and rooms

-     Global comparable RevPAR up 1.8% (Q4: 1.7%), led by rate up 1.2%, and record occupancy levels.

-     Net room growth of 3.1%, including 8.8% in Greater China. 40k room openings, ~90% in our priority markets.

-     $24.5bn total gross revenue from hotels in IHG's system (up 2% year-on-year; 4% CER).

·      High quality business model, continuing margin growth and low capital intensity drives operating cash flows

-     > 95% profit from the fee business; ~85% of fee revenue linked directly to hotel revenues.

-     Group fee margin of 48.8%, up 3.3%pts (2.5%pts CER); strong progression through efficiency improvements.

-     Net capital expenditure of $185m (gross $241m). Focused investments in brands and new Guest Reservation System, in which we will invest a further ~$90m in 2017 within existing capex guidance of up to $350m gross.

·      Commitment to efficient balance sheet and driving shareholder returns

-     $400m will be returned to shareholders via a special dividend with share consolidation, to be paid in Q2 2017.

-     Total returns since 2003 of $12.8bn, nearly $5bn of which is from underlying operations.

-     Year-end net debt:EBITDA of 1.9x, or 2.4x on a proforma basis assuming payment of the special dividend.

-     Proposed 11% increase in total dividend to 94.0¢ reflects confidence in our long-term sustainable future growth.

Strategic progress to enhance our long term competitive advantage

·      Strengthening our preferred brands

-     Expanded our luxury footprint and InterContinental Hotels & Resorts' position as the largest luxury hotel brand with eight openings globally, including five in Greater China, and our highest room signings since 2008.

-     Strengthened our boutique portfolio, with six Kimpton openings including our first outside the US in Grand Cayman, three EVEN Hotels openings including two in New York and our first franchise, and opened our 75th Hotel Indigo.

-     Progressed the next phase of the Crowne Plaza refresh, announced in June, to accelerate growth in the Americas supported by $200m investment over 3 years (~$100m system funded, ~$100m within existing capex guidance).

-     Continued to roll out leading edge guest experiences for Holiday Inn Brand Family hotels; new public space designs now in 225 Holiday Inn Express hotels across US and Europe. New room designs driving guest satisfaction uplifts.

-     Signed 20 Holiday Inn Express hotels in Greater China in 8 months, under our new tailored franchising model, taking the total signed for the brand in the region to 47 hotels.

·      Growing through targeted hotel distribution

-     Signed 76k rooms into the pipeline, representing over 500 new hotels, the highest number of deals signed since 2008, demonstrating owner confidence in our brands.

-     230k pipeline rooms, up 8%; ~ 45% under construction and ~90% in our ten priority markets.

·      Driving revenue delivery through technology and loyalty

-    Industry-leading cloud-based Guest Reservation System remains on track to begin roll-out in 2017.

-    Digital revenue of $4.3bn, up ~$0.3bn year-on-year, with mobile delivering over 50% of digital traffic and $1.6bn of gross revenues globally, and ~60% of direct bookings in Greater China.

-    Enhanced IHG Rewards Club with the launch of Your Rate, our preferential member pricing initiative, which has helped to increase loyalty contribution by 2%pts and driven enrolments up 16% year-on-year.

 

 

Americas - Rate led US RevPAR increase driving strong profit growth

Comparable RevPAR increased 2.1% (Q4: up 1.5%), driven by 2.0% rate growth. US RevPAR was up 1.8%, led by Holiday Inn up 2.5% and Kimpton up 2.9%. Fourth quarter US RevPAR growth of 1.3% continued to be impacted by our concentration in oil producing markets, where RevPAR was down 6.1%; the remainder of the estate grew 2.2%.

Reported revenue increased 4% (up 5% at CER) and profit increased 6% (up 7% at CER).

On an underlying1 basis, revenue was up almost 6% and operating profit up almost 8%.  Franchise profit increased 5%, driven by RevPAR up 1.9% and rooms growth of 2.0%, which more than funded additional investment in development resources. Managed profit includes an unusually high number of small liquidated damages receipts ($4m total in H2). This was offset by $8m related to our 20% interest in InterContinental New York Barclay and the ongoing impact of new supply on RevPAR growth in New York. We expect a high level of new supply to continue to impact trading in New York in 2017, and that we will continue to incur costs relating to the joint venture as the hotel ramps up post repositioning, although these will largely be offset by related management fees.  Regional overheads declined by $11m on an underlying basis due to a $10m year-on-year decrease in US healthcare costs. 

Opened 24k rooms (188 hotels), our highest level of openings in 5 years, with more than half driven by our Holiday Inn Brand Family.  Our continued focus on maintaining a high-quality estate meant that we removed 15k rooms (103 hotels).  We signed 37k rooms (332 hotels), including 9k rooms (93 hotels) for our extended stay brands, and 2k rooms (19 hotels) across our boutique brands, including a Kimpton in Grenada, our first entry into the country.

 

Europe - Market outperformance in priority markets and highest rooms signings for 9 years

Comparable RevPAR increased 1.7% (Q4: up 3.1%), driven by rate up 1.4%. UK RevPAR increased 2.6%, led by a robust fourth quarter (up 4.6%) which was boosted by a strong end to the year for tourist arrivals and leisure travel generally. In Germany, RevPAR growth of 6.8% benefitted from a favourable trade fair calendar.  Across the rest of Europe, RevPAR declined by 0.5%, impacted by challenging trading conditions in France, Turkey and Belgium.

Reported revenue declined 14% (10% at CER) and reported operating profit was down 4% (flat at CER), both impacted by the sale of InterContinental Paris - Le Grand in 2015.

On an underlying1 basis, revenue was up 1% and operating profit was flat.  Franchise profit grew 8%, driven by RevPAR up 2.0% and rooms growth of 2.8%.  Managed profit declined by 22% due to difficult trading conditions for our hotels in Paris and the impact of three hotels in key cities as reported in our interim results.

Opened 4k rooms (24 hotels) including the 706 room Holiday Inn Kensington London.  We signed almost 10k rooms (60 hotels) into our system, our highest rooms signings since 2007.  This included a record 17 properties in Germany, a third consecutive record year for the country, where we now have more than 100 properties open or in the pipeline.

 

AMEA - Solid trading offset by oil markets

Comparable RevPAR decreased 0.2% (Q4: flat), with rate declines offset by occupancy gains.  Performance outside the Middle East continued to be strong with 3.7% RevPAR growth overall. We continued to outperform the market in India, delivering RevPAR growth of 14.1%, driven by strong corporate business and inbound tourism.  South East Asia (+2.0%), Australia (+2.9%), and Japan (+3.6%) saw good trading, the last against tough comparables.  The Middle East continued to be impacted by declining oil prices, ending the year down 7.0%. 

Total RevPAR was down 2.0% for the year (Q4: down 2.1%) impacted by the proportion of hotel openings in developing markets (2016: ~60%) where RevPARs are significantly lower than developed markets.  We expect the proportion of hotels in developing markets to continue to grow (~65% pipeline vs ~45% system) as we execute our strategy to grow rapidly in markets where the long term demand drivers are favourable and where we see the largest opportunities for growth.  This, combined with a number of other individually small items, means we expect managed profit in 2017 to be broadly in line with 2016.  

Reported revenues declined 2% (down 3% at CER) with profit down 5% on both an actual and constant currency basis.

On an underlying1 basis, revenue was down 4% and operating profit decreased 4%.  Managed profit increased 8%, excluding the $7m reduction flagged at the half year results relating to three long-standing contracts being renewed onto standard market terms and one equity stake disposal.

We opened 4k rooms (17 hotels) including two hotels in Singapore, our first Hotel Indigo and a 451-room Holiday Inn Express, our largest for the brand in the region.  Openings also included our first Holiday Inn Express in Australia, the first of a larger portfolio development across Australasia.  We signed 11k rooms (42 hotels), and entered into an agreement to develop a portfolio of EVEN Hotels in Australia and New Zealand.

 

__________________________

1 Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY15 exchange rates (CER).

   

 

Greater China - Market outperformance and rooms growth drive strong fee revenue increase

Comparable RevPAR increased by 2.2%, with growth of 3.9% in mainland China offset by declines in Hong Kong and Macau. Fourth quarter RevPAR grew by 3.2% benefitting from 2.8% growth in Hong Kong, the first positive quarter there since late 2014. Full year growth was particularly strong in mainland tier 1 cities, up 6.3%, driven by strong corporate demand, with the rest of the mainland up 2.2%. As we continued to increase our penetration in less developed cities, full year total RevPAR declined 3.1%.

Reported revenue and operating profit declined by 43% (41% at CER) and 36% (33% at CER) respectively, both affected by the disposal of InterContinental Hong Kong in 2015.

Underlying1 revenue was up 13% driven by trading outperformance in key cities and nearly 9% net system growth. Underlying1 operating profit increased 15%, with ongoing investment in growth initiatives more than offset by scale efficiencies and strategic cost management.   

Opened 8k rooms (29 hotels). We opened five InterContinental Hotels & Resorts properties including our third in Beijing and our fifth in Shanghai, now the most in any city globally. We also opened our fourth HUALUXE hotel. Signed 19k rooms (82 hotels), including 20 franchised Holiday Inn Express hotels since launching the new China franchise model in May.

Highly cash generative business with disciplined approach to cost control and capital allocation 

·      Fee margin growth through strategic cost management

-     Continued focus on strategic cost management. Reported central overheads declined $23m, or $12m on a constant currency basis, benefitting from a $9m increase in central revenues and efficiency improvements.   

-     Group fee margin of 48.8%, increased 3.3%pts (2.5%pts CER).  In 2017, we will leverage scale and control costs to drive fee margin progression, but at a slower rate than 2016 after 560pts of margin expansion in the last 3 years.

·      Strong free cash flow generation fuelling investment

-     Free cash flow of $646m, up 39% year on year (2015: $466m), including a $95m cash receipt on behalf of the system fund from the renegotiation of long term partnership agreements.

-     $241m gross capital expenditure in 2016 (2015: $264m) comprised of: $96m maintenance capex and key money; $40m recyclable investments; and $105m system funded capital investments, offset by $25m proceeds from asset recycling and $31m system fund depreciation received via working capital, resulting in $185m of net capex.

-     Gross capex guidance unchanged at up to $350m per annum into the medium term.  

·      Efficient balance sheet provides flexibility

-     Financial position remains robust, with an on-going commitment to an investment grade credit rating by maintaining our net debt:EBITDA ratio at 2.0x to 2.5x.

-     Issued a £350m, 10-year bond in August 2016, at a 2.125% coupon rate, the lowest funding rate IHG has achieved in the Sterling bond market.

-     Year-end net debt of $1,506m (including $227m finance lease on InterContinental Boston), up $977m on 2015 due to the $1.5bn special dividend paid in May 2016.  Closing net debt is $205m lower due to the impact of exchange rates.

·      Shareholder returns demonstrating confidence in future growth prospects

-     Proposed 11% increase in the final dividend to 64.0¢, taking the total dividend for the year up 11% to 94.0¢, reflecting our confident outlook on our ability to continue delivering sustainable growth into the future.

-     Proposed $400m special dividend with share consolidation, equating to 202.5¢ per share.

Foreign exchange - volatile currency markets impact reported revenues and profit

Cost benefits from the devaluation of sterling against the dollar were broadly offset by revenue impacts of the strong dollar against a number of currencies, reducing reported profit by $1m.

If the closing December 2016 exchange rates had existed through the first half of 2016, reported operating profit for that period would have reduced by $1m.

A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.

Interest, tax and exceptional items

Interest: Net financial expenses remained flat at $87m principally due to the devaluation of sterling against the dollar offsetting interest related to the £350m bond raised in August 2016. Annualised bond interest costs will reduce in 2017 following the expiry of the £250m, 6.0% coupon rate bond in December 2016.

Tax: Effective rate for 2016 was 30% (2015: 30%).  2017 tax rate expected to be low 30s.

Exceptional operating items:  Exceptional operating items of $29m include $13m related to the Kimpton integration and $16m of impairment charges related to the Barclay associate which owns InterContinental New York Barclay. 

 

_____________

1 Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY15 exchange rates (CER).

 

Appendix 1: RevPAR Movement Summary

 

 

Full Year 2016

Q4 2016

RevPAR

Rate

Occ.

RevPAR

Rate

Occ.

Group

1.8%

1.2%

0.4pts

1.7%

1.0%

0.5pts

Americas

2.1%

2.0%

0.1pts

1.5%

1.6%

(0.1)pts

Europe

1.7%

1.4%

0.2pts

3.1%

1.1%

1.4pts

AMEA

(0.2)%

(0.8)%

0.5pts

0.0%

(0.4)%

0.3pts

G. China

2.2%

(2.2)%

2.7pts

3.2%

(0.7)%

2.5pts



Appendix 2: Comparable RevPAR movement at constant exchange rates (CER) vs. actual exchange rates (AER)

 

 

 

Full Year 2016

Q4 2016

CER

AER

Difference

CER

AER

Difference

Group

1.8%

0.0%

1.8pts

1.7%

(0.6)%

2.3pts

Americas

2.1%

1.4%

0.7pts

1.5%

0.9%

0.6pts

Europe

1.7%

(4.4)%

6.1pts

3.1%

(6.6)%

9.7pts

AMEA

(0.2)%

0.0%

(0.2)pts

0.0%

0.6%

(0.6)pts

G. China

2.2%

(2.4)%

4.6pts

3.2%

(2.1)%

5.3pts



 

Appendix 3: Full Year System & Pipeline Summary (rooms)

 


System

Pipeline

Openings

Removals

Net

Total

YoY%

Signings

Total

Group

40,134

(17,367)

22,767

767,135

3.1%

75,812

230,076

Americas

23,535

(15,117)

8,418

487,993

1.8%

37,038

102,451

Europe

4,188

(830)

3,358

110,069

3.1%

9,554

23,954

AMEA

4,473

(995)

3,478

76,051

4.8%

10,551

39,643

G. China

7,938

(425)

7,513

93,022

8.8%

18,669

64,028



Appendix 4: Full Year financial headlines

 

Operating Profit $m

Total

Americas

Europe

AMEA

G. China

Central

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

Franchised

693

669

600

575

78

77

12

12

3

5

-

-

Managed

239

241

64

64

22

28

89

90

64

59

-

-

Owned & leased

26

57

24

24

-

1

2

3

-

29

-

-

Regional overheads

(123)

(136)

(55)

(66)

(25)

(28)

(21)

(19)

(22)

(23)

-

-

Profit pre central overheads

835

831

633

597

75

78

82

86

45

70

-

-

Central overheads

(128)

(151)

-

-

-

-

-

-

-

-

(128)

(151)

Operating profit before exceptional items

707

680

633

597

75

78

82

86

45

70

(128)

(151)

Exceptional items

(29)

819

(29)

(41)

-

175

-

(2)

-

698

-

(11)

Total operating profit

678

1,499

604

556

75

253

82

84

45

768

(128)

(162)

 

 

  Appendix 5: Reported operating profit movement before exceptional items at actual and constant exchange rates


Total***

Americas

Europe

AMEA

G. China

Reported

Actual*

CER**

Actual*

CER**

Actual*

CER**

Actual*

CER**

Actual*

CER**

Growth/ (decline)

4%

4%

6%

7%

(4)%

0%

(5)%

(5)%

(36)%

(33)%

  

  Appendix 6: Underlying operating profit movement before exceptional items

Underlying****

Total***

Americas

Europe

AMEA

G. China

Growth/ (decline)

10%

8%

0%

(4)%

15%

 

 

Exchange rates:

GBP:USD

EUR:USD

* US dollar actual currency

2016

0.74

0.90

** Translated at constant 2015 exchange rates

2015

0.65

0.90

*** After central overheads




**** At CER and excluding: owned asset disposals, results from managed lease hotels and significant liquidated damages (see below for definitions)

 

 

 

Appendix 7: Definitions

CER: constant exchange rates with 2015 exchange rates applied to 2016.

Comparable RevPAR: Revenue per available room for hotels that have traded for all of 2015 and 2016, reported at CER.

Fee revenue: Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages.

Fee margin: adjusted for owned and leased hotels, managed leases, and significant liquidated damages.

Managed lease hotels: properties structured for legal reasons as operating leases but with the same characteristics as management contracts

Americas: Revenue 2016 $34m; 2015 $38m; EBIT 2016 $nil, 2015 $nil. Europe:  Revenue 2016 $77m; 2015 $75m; EBIT 2016 $2m, 2015 $1m. AMEA: Revenue 2016 $51m; 2015 $46m; EBIT 2016 $5m, 2015 $5m.

Owned asset disposals: InterContinental Hong Kong was sold on 30 September 2015 (2016: $nil revenue and $nil EBIT, 2015: $98m revenue and $29m EBIT), InterContinental Paris - Le Grand was sold on 20 May 2015 (2016: $nil revenue and $nil EBIT, 2015: $30m revenue and $1m EBIT).

Significant liquidated damages: $nil in 2016, $3m in 2015 ($3m Americas managed in Q2).

Total gross revenue: total rooms revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. Other than owned and leased hotels, it is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties.

Total RevPAR: Revenue per available room including hotels that have opened or exited in either 2015 or 2016, reported at CER.



Appendix 8: Investor information for proposed 2016 final dividend

Ex-dividend date:

4 May 2017

Record date:

5 May 2017 

Payment date:

22 May 2017

Dividend payment:

ADRs: 64.0 cents per ADR; The corresponding amount in Pence Sterling per ordinary share will be announced on 11 May 2017, calculated based on the average of the market exchange rates for the three days commencing 8 May 2017.



Appendix 9: Investor information for proposed special dividend

Ex-dividend date:

8 May 2017

Record date:

5 May 2017

Payment date:

22 May 2017

Dividend payment:

ADRs:202.5 cents per ADR.  The corresponding amount in Pence Sterling per ordinary share will be announced on 11 May 2017, calculated based on the average of the market exchange rates for the three days commencing 8 May 2017.

 

For further information, please contact:

Investor Relations (Heather Wood; Adam Smith; Neeral Morzaria):

+44 (0)1895 512 176

+44 (0)7808 098 724

Media Relations (Yasmin Diamond; Zoë Bird):

+44 (0)1895 512 008

+44 (0)7736 746 167




Presentation for Analysts and Shareholders:

A presentation with Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence at 9:30am London time on 21 February at Goldman Sachs, Rivercourt, 120 Fleet Street, London, EC4A 2BE.  There will be an opportunity to ask questions.  The presentation will conclude at approximately 10:30am.

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

UK toll:

UK toll free:

US toll:

Passcode:

+44 (0)20 7108 6248

0800 279 3953

+1 210 795 1098

IHG Investor

A replay of the conference call will also be available following the event - details are below. 

Replay:

Pin:

+1 866 358 4517

2021

 

US conference call and Q&A:

There will also be a conference call, primarily for US investors and analysts, at 9:00am New York Time on 21 February with Richard Solomons, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer. There will be an opportunity to ask questions.

UK toll:

US toll:

US toll free:

Passcode:

+44 (0)20 7108 6248

+1 210 795 1098

+1 866 803 2143

IHG Investor

A replay of the conference call will also be available following the event - details are below. 

Replay:

Pin:

+1 800 839 1335

0228

 

Website:

The full release and supplementary data will be available on our website from 7:00am (London time) on 21 February. The web address is www.ihgplc.com/prelims17.

 

 

 

Notes to Editors:

 

IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including InterContinental® Hotels & Resorts, Kimpton® Hotels & Restaurants, Hotel Indigo®, EVEN® Hotels, HUALUXE® Hotels and Resorts, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels & Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®.

 

IHG franchises, leases, manages or owns nearly 5,200 hotels and 770,000 guest rooms in almost 100 countries, with nearly 1,500 hotels in its development pipeline. IHG also manages IHG® Rewards Club, the world's first and largest hotel loyalty programme, with more than 100 million enrolled members worldwide. 

 

InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales. More than 350,000 people work across IHG's hotels and corporate offices globally.

 

Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: www.ihgplc.com/media and follow us on social media at: www.twitter.com/ihg, www.facebook.com/ihg and www.youtube.com/ihgplc.

 

 

Cautionary note regarding forward-looking statements:

This announcement contains certain forward-looking statements as defined under United States law (Section 21E of the Securities Exchange Act of 1934) and otherwise.  These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts.  Forward-looking statements often use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe' or other words of similar meaning.  These statements are based on assumptions and assessments made by InterContinental Hotels Group PLC's management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.  By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty.  There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forward-looking statements.  The main factors that could affect the business and the financial results are described in the 'Risk Factors' section in the current InterContinental Hotels Group PLC's Annual report and Form 20-F filed with the United States Securities and Exchange Commission.

 

 

 

 

 

 

This Business Review provides a commentary on the performance of InterContinental Hotels Group PLC

(the Group or IHG) for the financial year ended 31 December 2016.

 

Group Performance


12 months ended 31 December

Group results

2016

2015

%


$m

$m

change

Revenue




Americas

993

955

4.0

Europe

227

265

(14.3)

AMEA

237

241

(1.7)

Greater China

117

207

(43.5)

Central

141

135

4.4


____

____

___


1,715

1,803

(4.9)


____

____

___

Operating profit before exceptional items




Americas

633

597

6.0

Europe

75

78

(3.8)

AMEA

82

86

(4.7)

Greater China

45

70

(35.7)

Central

(128)

(151)

15.2


____

____

___


707

680

4.0

Exceptional operating items

(29)

819

(103.5)


___

___

___

Operating profit

678

1,499

(54.8)

Net financial expenses

(87)

(87)

-


___

___

___

Profit before tax

591

1,412

(58.1)


___

___

___

Earnings per ordinary share




Basic

195.3¢

520.0¢

(62.4)

Adjusted

203.3¢

174.9¢

16.2





Average US dollar to sterling exchange rate

$1 : £0.74

$1 : £0.65

13.8

 

During the year ended 31 December 2016, revenue decreased by $88m (4.9%) to $1,715m primarily as a result of the sale of InterContinental Paris - Le Grand and InterContinental Hong Kong. Operating profit and profit before tax both decreased by $821m to $678m and $591m, primarily due to the gain on sale of InterContinental Paris - Le Grand and InterContinental Hong Kong during the year ended 31 December 2015. Operating profit before exceptional items increased by $27m (4.0%) to $707m.

 

Underlyinga Group revenue and underlyinga Group operating profit increased by $69m (4.6%) and $61m (9.5%) respectively.

 

Comparable Group RevPAR increased by 1.8% (including an increase in average daily rate of 1.2%). IHG System size increased by 3.1% to 767,135 rooms, whilst underlying Group fee revenueb increased by 2.3% (4.4% at constant currency).

 

At constant currency, the net central operating loss before exceptional items decreased by $12m (7.9%) to $139m compared to 2015 (but at actual currency decreased by $23m (15.2%) to $128m).

 

Group fee margin was 48.8%, up 3.3 percentage points (up 2.5 percentage points at constant currency) on 2015, after adjusting for owned and leased hotels, managed leases, and significant liquidated damages. Group fee margin benefited from efficiency improvements and by leveraging our global scale.

 

Basic earnings per ordinary share decreased by 62.4% to 195.3¢, whilst adjusted earnings per ordinary share increased by 16.2% to 203.3¢, reflecting the increase in operating profit before exceptional items and the impact of the share consolidation in May 2016.

 

a Underlying excludes the impact of owned asset disposals, significant liquidated damages and the results from managed-lease hotels, translated at constant currency by applying prior-year exchange rates. Underlying operating profit growth also excludes the impact of exceptional items.
b Underlying fee revenue is defined as Group revenue excluding revenue from owned and leased hotels, managed leases and significant liquidated damages.

 

 

 

 

   

12 months ended 31 December


2016

2015

%

Global total gross revenue

$bn

$bn

change





InterContinental

4.6

4.5

2.2

Kimpton

1.1

1.1

-

Crowne Plaza

4.1

4.2

(2.4)

Hotel Indigo

0.4

0.3

33.3

Holiday Inn

6.2

6.2

-

Holiday Inn Express

6.3

6.1

3.3

Staybridge Suites

0.8

0.8

-

Candlewood Suites

0.7

0.7

-

Other brands

0.3

0.1

200.0


____

____

____

Total

24.5

24.0

2.1


____

____

____

 

 

 


Hotels

Rooms

Global hotel and room count

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

187

3

 63,650

1,610


Kimpton

61

-

 11,238

262


HUALUXE

4

1

 1,096

298


Crowne Plaza

408

2

 113,803

519


Hotel Indigo

75

10

 8,905

1,241


EVEN Hotels

6

3

 1,010

564


Holiday Inn1

1,241

15

231,756

3,656


Holiday Inn Express

2,497

72

 247,009

10,603


Staybridge Suites

236

16

 25,610

1,646


Candlewood Suites

362

21

 34,192

1,864


Other

97

(1)

28,866

504



____

____

______

_____

Total

5,174

142

767,135

22,767



____

____

______

_____

Analysed by ownership type






Franchised

4,321

102

 542,650

11,902


Managed

845

39

 222,073

10,670


Owned and leased

8

1

 2,412

195



____

____

______

_____

Total

5,174

142

767,135

22,767



____

____

______

_____

 

1Includes 46 Holiday Inn Resort properties (11,652 rooms) and 26 Holiday Inn Club Vacations properties

(7,601 rooms) (2015: 47 Holiday Inn Resort properties (11,518 rooms) and 16 Holiday Inn Club Vacations properties (5,231 rooms)).

 

 


Hotels

Rooms

Global pipeline

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

62

10

 17,480

1,804


Kimpton

18

-

 3,098

(268)


HUALUXE

22

1

 6,956

324


Crowne Plaza

90

6

 24,536

1,355


Hotel Indigo

75

12

 10,593

1,385


EVEN Hotels

6

(2)

 780

(482)


Holiday Inn1

261

5

52,678

474


Holiday Inn Express

676

74

 83,882

8,277


Staybridge Suites

140

26

 15,321

2,680


Candlewood Suites

108

10

 9,604

884


Other

12

(2)

5,148

(273)



____

____

______

_____

Total

1,470

140

230,076

16,160



____

____

______

_____

Analysed by ownership type






Franchised

1,039

134

 117,694

15,525


Managed

431

 7

 112,382

 837


Owned and Leased

-

(1)

 -  

(202)



____

____

______

_____

Total

1,470

140

230,076

16,160



____

____

______

_____

 

1 Includes 14 Holiday Inn Resort properties (3,531 rooms) (2015: 14 Holiday Inn Resort properties (3,548 rooms)).

 

 

THE AMERICAS


12 months ended 31 December


2016

2015

%

Americas results

$m

$m

change





Revenue




Franchised

685

661

3.6

Managed

172

166

3.6

Owned and leased

136

128

6.3


____

____

____

Total


993

955

4.0


____

____

____

Operating profit before exceptional items




Franchised

600

575

4.3

Managed

64

64

-

Owned and leased

24

24

-


____

____

____


688

663

3.8

Regional overheads

(55)

(66)

16.7


____

____

____


633

597

6.0

Exceptional items

(29)

(41)

29.3


____

____

____

Operating profit


604

556

8.6


____

____

____

 

 

 

 

Americas Comparable RevPAR movement on previous year

12 months ended

31 December

2016



Franchised


Crowne Plaza

1.5%

Holiday Inn

2.6%

Holiday Inn Express

1.7%

All brands

1.9%

Managed


InterContinental

2.7%

Kimpton

2.9%

Crowne Plaza

5.7%

Holiday Inn

4.9%

Staybridge Suites

5.3%

Candlewood Suites

1.2%

All brands

3.2%

Owned and leased


EVEN Hotels

15.5%

All brands

4.0%

 

Americas results

 

Franchised revenue and operating profit increased by $24m (3.6%) to $685m and by $25m (4.3%) to $600m respectively. Royaltiesa growth of 2.4% was driven by comparable RevPAR growth of 1.9%, including 2.6% for Holiday Inn and 1.7% for Holiday Inn Express, together with 2.0% rooms growth. On a constant currency basis, revenue and operating profit increased by $29m (4.4%) to $690m and by $30m (5.2%) to $605m respectively.

 

Managed revenue increased by $6m (3.6%) to $172m, whilst operating profit stayed flat at $64m due to costs relating to our 20% interest in InterContinental New York Barclay and the ongoing impact of new supply on RevPAR growth in New York. Revenue and operating profit included $34m (2015: $38m) and $nil (2015: $nil) respectively from one managed-lease property. Excluding results from this managed-lease hotel, the benefit of significant liquidated damages receipts (2016: $nil; 2015: $3m) and on a constant currency basis, revenue increased by $16m (12.8%) and operating profit increased by $5m (8.2%) respectively.

 

Owned and leased revenue increased by $8m (6.3%) to $136m, whilst operating profit stayed flat at $24m.

 

Regional overheads decreased by $11m (16.7%) to $55m due to a $10m year-on-year decrease in US healthcare costs.

 

a Royalties are fees, based on rooms revenue, that a franchisee pays to the brand owner for use of the brand name.

 

 

 


Hotels

Rooms

Americas hotel and room count

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

48

(2)

 16,408

(701)


Kimpton

61

-

 11,238

262


Crowne Plaza

164

(8)

 44,116

(2,200)


Hotel Indigo

46

6

 5,932

861


EVEN Hotels

6

3

 1,010

564


Holiday Inn1

774

2

136,744

749


Holiday Inn Express

2,154

48

 192,371

5,399


Staybridge Suites

226

15

 24,185

1,523


Candlewood Suites

362

21

 34,192

1,864


Other

84

-

21,797

97



____

____

______

_____

Total

3,925

85

487,993

8,418



____

____

______

_____

Analysed by ownership type






Franchised

3,633

85

 430,866

8,636


Managed

286

(1)

 55,302

(413)


Owned and leased

6

1

 1,825

195



____

____

______

_____

Total

3,925

85

487,993

8,418



____

____

______

_____

 

1 Includes 25 Holiday Inn Resort properties (6,791 rooms) and 26 Holiday Inn Club Vacations properties

(7,601 rooms) (2015: 23 Holiday Inn Resort properties (5,902 rooms) and 16 Holiday Inn Club Vacations properties (5,231 rooms)).

 

 


Hotels

Rooms

Americas pipeline

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

7

3

 2,532

987


Kimpton

17

(1)

 2,949

(417)


Crowne Plaza

17

2

 3,286

796


Hotel Indigo

32

2

 3,965

(59)


EVEN Hotels

6

(2)

 780

(482)


Holiday Inn1

128

3

17,304

(899)


Holiday Inn Express

488

39

 46,796

2,851


Staybridge Suites

131

26

 13,896

2,666


Candlewood Suites

108

10

 9,604

884


Other

11

(2)

1,339

(260)



____

____

______

_____

Total

945

80

102,451

6,067



____

____

______

_____

Analysed by ownership type






Franchised

897

88

 93,295

7,432


Managed

48

(7)

 9,156

(1,163)


Owned and leased

-

(1)

 -  

(202)



____

____

______

_____

Total                

945

80

102,451

6,067



____

____

______

_____

 

1 Includes three Holiday Inn Resort properties (455 rooms) (2015: seven Holiday Inn Resort properties (1,657 rooms)).

 



 

EUROPE


12 months ended 31 December

 


2016

2015

%

 

Europe results

$m

$m

change

 





 

Revenue




 


Franchised

102

104

(1.9)

 


Managed

125

131

(4.6)

 


Owned and leased

-

30

(100.0)

 


____

____

____

 

Total


227

265

(14.3)

 


____

____

____

 

Operating profit before exceptional items




 


Franchised

78

77

1.3

 


Managed

22

28

(21.4)

 


Owned and leased

-

1

(100.0)

 



____

____

____

 


100

106

(5.7)

 

Regional overheads

(25)

(28)

10.7

 


____

____

____

 


75

78

(3.8)

 

Exceptional items

-

175

(100.0)

 


____

____

____

 

Operating profit


75

253

(70.4)

 


____

____

____

 

 

 

Europe comparable RevPAR movement on previous year

 

 

12 months ended

31 December

2016



Franchised



All brands

2.0%




Managed



All brands

(0.3)%




Europe results

 

Franchised revenue decreased by $2m (1.9%) to $102m, whilst operating profit increased by $1m (1.3%) to $78m. On a constant currency basis, revenue and operating profit increased by $6m (5.8%) and $6m (7.8%) respectively.

 

Managed revenue decreased by $6m (4.6%) and operating profit decreased by $6m (21.4%). Revenue and operating profit included $77m (2015: $75m) and $2m (2015: $1m) respectively from managed leases. Excluding properties operated under this arrangement, and on a constant currency basis, revenue decreased by $5m (8.9%) and operating profit decreased by $6m (22.2%). Performance was impacted by difficult trading conditions for our hotels in Paris, and a revenue reduction in relation to three managed hotels; two of which have exited the system and one of which is undergoing a major refurbishment.

 

The last remaining hotel in the owned and leased estate, InterContinental Paris - Le Grand, was sold in 2015. Following this, revenue and operating profit in the estate decreased to nil.

 

 

 


Hotels

Rooms

Europe hotel and room count

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

31

(1)

 9,724

(162)


Crowne Plaza

92

4

 20,887

618


Hotel Indigo

21

2

 1,910

120


Holiday Inn1

291

6

 47,829

1,679


Holiday Inn Express

234

6

 28,578

1,053


Staybridge Suites

7

1

 1,000

123


Other

1

(1)

 141

(73)



____

____

______

_____

Total

677

17

110,069

3,358



____

____

______

_____

Analysed by ownership type






Franchised

629

14

 97,030

2,620


Managed

48

3

 13,039

738



____

____

______

_____

Total

677

17

110,069

3,358



____

____

______

_____

 

1 Includes one Holiday Inn Resort property (88 rooms) (2015: two Holiday Inn Resort properties (212 rooms)).

 

 


Hotels

Rooms

Europe pipeline

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

6

1

 813

(69)


Kimpton

1

1

149

149


Crowne Plaza

14

3

 3,185

512


Hotel Indigo

18

7

 2,264

861


Holiday Inn

35

(2)

 7,511

(323)


Holiday Inn Express

58

13

 9,395

2,197


Staybridge Suites

5

1

 637

126


Other

-

-

 -  

(31)



____

____

______

_____

Total

137

24

23,954

3,422



____

____

______

_____

Analysed by ownership type






Franchised

111

23

 17,908

3,781


Managed

26

1

 6,046

(359)



____

____

______

_____

Total

137

24

23,954

3,422



____

____

______

_____



 

ASIA, MIDDLE EAST AND AFRICA (AMEA)


12 months ended 31 December

 


2016

2015

%

 

AMEA results

$m

$m

change

 





 

Revenue




 


Franchised

16

16

-

 


Managed

184

189

(2.6)

 


Owned and leased

37

36

2.8

 



____

____

____

 

Total


237

241

(1.7)

 


____

____

____

 

Operating profit before exceptional items




 


Franchised

12

12

-

 


Managed

89

90

(1.1)

 


Owned and leased

2

3

(33.3)

 



____

____

____

 


103

105

(1.9)

 

Regional overheads

(21)

(19)

(10.5)

 


____

____

____

 


82

86

(4.7)

 

Exceptional items

-

(2)

100.0

 


____

____

____

 

Operating profit

82

84

(2.4)

 


____

____

____

 

 

 

AMEA comparable RevPAR movement on previous year

 

 

12 months ended

31 December

2016



Franchised



All brands

(0.1)%

 

Managed



All brands

(0.2)%

 

AMEA results

 

On an actual and constant currency basis, franchised revenue and operating profit remained flat at $16m and $12m respectively.

 

Managed revenue and operating profit decreased by $5m (2.6%) to $184m and $1m (1.1%) to $89m respectively. Revenue and operating profit included $51m (2015: $46m) and $5m (2015: $5m) respectively from one managed-lease property. Excluding results from this hotel and on a constant currency basis, revenue decreased by $9m (6.3%) to $134m, whilst operating profit remained flat at $85m. Good underlying growth in our managed business was offset by a $7m revenue reduction in relation to four hotels; three long standing contracts being renewed onto standard market terms and one equity stake disposal.

 

In the owned and leased estate, on an actual and constant currency basis, revenue increased by $1m (2.8%) to $37m and operating profit decreased by $1m (33.3%) to $2m.



 


Hotels

Rooms

AMEA hotel and room count

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

69

1

 21,203

(35)


Crowne Plaza

73

2

 20,749

738


Hotel Indigo

2

1

 323

131


Holiday Inn1

93

2

 21,312

328


Holiday Inn Express

34

7

 7,583

1,697


Staybridge Suites

3

-

 425

-


Other

6

-

 4,456

619



____

____

______

_____

Total

280

13

76,051

3,478



____

____

______

_____

Analysed by ownership type






Franchised

55

3

 12,570

646


Managed

223

10

 62,894

2,832


Owned and leased

2

-

 587

-



____

____

______

_____

Total

280

13

76,051

3,478



____

____

______

_____

 

1 Includes 14 Holiday Inn Resort properties (2,953 rooms) (2015: 15 Holiday Inn Resort properties (3,169 rooms)).

 

 


Hotels

Rooms

AMEA pipeline

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

27

5

 6,681

1,332


Crowne Plaza

21

2

 5,554

253


Hotel Indigo

14

1

 2,582

301


Holiday Inn1

48

3

 13,022

1,493


Holiday Inn Express

35

(8)

 7,486

(1,858)


Staybridge Suites

4

(1)

 788

(112)


Other

-

-

 3,530

18



____

____

______

_____

Total

149

2

39,643

1,427



____

____

______

_____

Analysed by ownership type






Franchised

 11

3

 2,406

227


Managed

 138

(1)

 37,237

1,200



____

____

______

_____

Total

149

2

39,643

1,427



____

____

______

_____

 

1 Includes five Holiday Inn Resort properties (1,256 rooms) (2015: four Holiday Inn Resort properties (1,071 rooms)).

 



 

GREATER CHINA


12 months ended 31 December


2016

2015

%

Greater China results

$m

$m

Change





Revenue





Franchised

3

4

(25.0)


Managed

114

105

8.6


Owned and leased

-

98

(100.0)



____

____

____

Total


117

207

(43.5)


____

____

____

Operating profit before exceptional items





Franchised

3

5

(40.0)


Managed

64

59

8.5


Owned and leased

-

29

(100.0)



____

____

____


67

93

(28.0)

Regional overheads

(22)

(23)

4.3


____

____

____


45

70

(35.7)

Exceptional items

-

698

(100.0)


____

____

____

Operating profit

45

768

(94.1)


____

____

____

 

 

Greater China comparable RevPAR movement on previous year

12 months ended

31 December

2016



Managed



All brands

 

3.0%






 

Greater China results

 

On an actual and constant currency basis, franchised revenue and operating profit decreased by $1m (25.0%) and by $2m (40.0%) respectively.

 

Managed revenue and operating profit increased by $9m (8.6%) to $114m and by $5m (8.5%) to $64m respectively. Comparable RevPAR increased by 3.0%, whilst the Greater China System size grew by 9.0%, driving a 7.0% increase in total gross revenue derived from rooms business. Total gross revenue derived from non-rooms business increased by 6.8%, primarily due to increased food and beverage revenue. On a constant currency basis, revenue and operating profit increased by $15m (14.3%) to $120m and by $8m (13.6%) to $67m respectively, with ongoing investment in growth initiatives more than offset by scale efficiencies and strategic cost management.   

 

The last remaining hotel in the owned and leased estate, InterContinental Hong Kong, was sold in 2015. Following this, revenue and operating profit in the estate decreased to nil.



 


Hotels

Rooms

Greater China hotel and room count

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

39

5

 16,315

2,508


HUALUXE

4

1

 1,096

298


Crowne Plaza

79

4

 28,051

1,363


Hotel Indigo

6

1

 740

129


Holiday Inn1

83

5

 25,871

900


Holiday Inn Express

75

11

 18,477

2,454


Other

6

-

 2,472

(139)



____

____

______

_____

Total

292

27

93,022

7,513



____

____

______

_____

Analysed by ownership type






Franchised

4

-

 2,184

-


Managed

288

27

 90,838

7,513



____

____

______

_____

Total

292

27

93,022

7,513



____

____

______

_____

 

1 Includes six Holiday Inn Resort properties (1,820 rooms) (2015: seven Holiday Inn Resort properties (2,235 rooms)).

 

 


Hotels

Rooms

Greater China pipeline

at 31 December

 

2016

Change

over 2015

 

2016

Change

over 2015






Analysed by brand






InterContinental

 22

1

 7,454

(446)


HUALUXE

 22

1

 6,956

324


Crowne Plaza

 38

(1)

 12,511

(206)


Hotel Indigo

 11

2

 1,782

282


Holiday Inn1

 50

1

 14,841

203


Holiday Inn Express

 95

30

 20,205

5,087


Other

 1

-

 279

-



____

____

______

_____

Total

239

34

64,028

5,244



____

____

______

_____

Analysed by ownership type






Franchised

20

20

 4,085

4,085


Managed

219

14

 59,943

1,159



____

____

______

_____

Total

239

34

64,028

5,244



____

____

______

_____

 

1 Includes six Holiday Inn Resort properties (1,820 rooms) (2015: three Holiday Inn Resort properties (820 rooms)).

 

 

 

Central


12 months ended 31 December


2016

2015

%

Central results

$m

$m

change





Revenue

141

135

4.4

Gross costs

(269)

(286)

5.9


____

____

____

Operating loss before exceptional items

(128)

(151)

15.2

Exceptional items


-

(11)

100.0


____

____

____

Operating loss

(128)

(162)

21.0


____

____

____

 

Central results

The net operating loss decreased by $34m (21.0%) compared to 2015. Central revenue, which mainly comprises technology fee income, increased by $6m (4.4%) to $141m (an increase of $9m (6.7%) at constant currency), driven by increases in both comparable RevPAR (1.8%) and IHG System size (3.1%). At constant currency, gross costs decreased by $3m (1.0%) compared to 2015 (a $17m or 5.9% decrease at actual currency) driven by a continued focus on strategic cost management. Net operating loss before exceptional items decreased by $23m (15.2%) to $128m (a $12m or 7.9% decrease to $139m at constant currency).

 

SYSTEM FUND


12 months ended 31 December

 


2016

2015

%

 

System Fund assessments

$m

$m

change

 





 

Assessment fees and contributions received from hotels

1,439

1,351

6.5

 

Proceeds from sale of IHG Rewards Club points

283

222

27.5

 


____

____

____

 

Total


1,722

1,573

9.5

 


____

____

____

 



System Fund assessments

In addition to franchise or management fees, hotels within the IHG System pay assessments and contributions (other than for Kimpton and InterContinental) which are collected by IHG for specific use within the System Fund. The System Fund also receives proceeds from the sale of IHG Rewards Club points. The System Fund is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.

 

The System Fund is used to pay for marketing, the IHG Rewards Club loyalty programme and the guest reservation system. The operation of the System Fund does not result in a profit or loss for the Group and consequently the revenues and expenses of the System Fund are not included in the Group Income Statement.

 

In the year to 31 December 2016, System Fund income increased by 9.5% to $1,722m primarily as a result of a 6.5% increase in assessment fees and contributions from hotels resulting from increased hotel room revenues, reflecting increases in RevPAR and IHG System size. Continued strong performance in co-branded credit card schemes drove the 27.5% increase in proceeds from the sale of IHG Rewards Club points.

OTHER FINANCIAL INFORMATION

 

Exceptional items

Exceptional items totalled a loss of $29m which included $13m relating to the cost of integrating Kimpton into the operations of the Group and a $16m impairment charge relating to the Barclay associate which owns InterContinental New York Barclay, a hotel managed by the Group. The impairment charge reflects the currently depressed trading outlook for the New York market and the high cost of renovation of the hotel.

 

Exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share in order to provide a more meaningful comparison of performance.

 

Net financial expenses

Net financial expenses were flat at $87m, reflecting the issue of £350m 2.125% public bonds in August 2016, and a full year of interest on the £300m 3.75% bonds issued in August 2015, offset by the impact of a weaker pound on translation of sterling interest expense.

 

Financing costs included $3m (2015: $2m) of interest costs associated with IHG Rewards Club where interest is charged on the accumulated balance of cash received in advance of the redemption of points awarded. Financing costs in 2016 also included $20m (2015: $20m) in respect of the InterContinental Boston finance lease.

 

Taxation

The effective rate of tax on operating profit excluding the impact of exceptional items was 30% (2015: 30%). Excluding the impact of prior-year items, the equivalent tax rate would be 31% (2015: 36%). This rate is higher than the average UK statutory rate of 20% (2015: 20.25%), due mainly to certain overseas profits (particularly in the US) being subject to statutory tax rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.

 

Taxation within exceptional items totalled a credit of $12m (2015: charge of $8m). In 2016, the credit included a $6m deferred tax credit in respect of the impairment charge relating to the Barclay associate and a $5m deferred tax credit representing future tax relief on $13m of Kimpton integration costs. In 2015, the charge comprised $56m relating to the disposal of InterContinental Hong Kong and InterContinental Paris - Le Grand, a credit of $21m in respect of the 2014 disposal of an 80% interest in InterContinental New York Barclay reflecting the judgement that state tax law changes would now apply to the deferred gain and credits of $27m for current and deferred tax relief on other operating exceptional items of current and prior years.

 

Net tax paid in 2016 totalled $130m (2015: $110m, including $1m in respect of disposals). Tax paid represents an effective rate of 22% (2015: 8%) on total profits and is lower than the effective income statement tax rate of 30% (2015: 30%), primarily due to the timing of US tax payments and the impact of deferred taxes.

 

Dividends

The Board has proposed a final dividend per ordinary share of 64.0¢. With the interim dividend per ordinary share of 30.0¢, the full-year dividend per ordinary share for 2016 will total 94.0¢, an increase of 11% over 2015.

 

In February 2017, the Board proposed a $400m return of funds to shareholders by way of a special dividend and share consolidation.

 

IHG pays its dividends in pounds sterling and US dollars. The sterling amount of the final and special dividend will be announced on 11 May 2017 using the average of the daily exchange rates from 8 May 2017 to 10 May 2017 inclusive.

 

Earnings per ordinary share

Basic earnings per ordinary share decreased by 62.4% to 195.3¢ from 520.0¢ in 2015. Adjusted earnings per ordinary share increased by 16.2% to 203.3¢ from 174.9¢ in 2015.

 

Share price and market capitalisation

The IHG share price closed at £36.38 on 31 December 2016, up from £26.58 on 31 December 2015. The market capitalisation of the Group at the year end was £7.2bn.

 

Capital structure and liquidity management

In August 2016, the Group issued a £350m, 10-year bond at a 2.125% coupon rate, the lowest funding rate the Group has achieved in the sterling bond market. The bonds are repayable in 2026, extending the maturity

profile of the Group's debt.

 

This is in addition to £400m of public bonds which are repayable on 28 November 2022 and £300m of public bonds which are repayable on 14 August 2025. On 9 December 2016, the Group repaid £250m of maturing public bonds which were issued in 2009.

 

The Group is further financed by a $1.275bn revolving syndicated bank facility (the Syndicated Facility) and a $75m revolving bilateral facility (the Bilateral facility) which mature in March 2021, with a one-year extension option exercisable in 2017. $110m was drawn under the Syndicated Facility at the year end.

 

The Syndicated and Bilateral facilities contain the same terms and two financial covenants; interest cover; and net debt divided by earnings before interest, tax, depreciation and amortisation (EBITDA). The Group is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding in the near future.

 

Additional funding is provided by the 99-year finance lease (of which 89 years remain) on InterContinental Boston and other uncommitted bank facilities. In the Group's opinion, the available facilities are sufficient for the Group's present liquidity requirements.

 

Net debt of $1,506m (2015: $529m) is analysed by currency as follows:


2016

2015


$m

$m




Borrowings



Sterling

1,289

1,405

US dollar

418

253

Euros

2

4

Other

3

4

Cash and cash equivalents



Sterling

(27)

(619)

US dollar

(127)

(460)

Euros

(12)

(15)

Canadian dollar

(8)

(8)

Chinese renminbi

(7)

(4)

Other

(25)

(31)


____

____

Net debt

1,506

529


____

____




Average debt levels

1,235

1,420


____

____

 

 

 

 

 

InterContinental Hotels Group PLC

GROUP INCOME STATEMENT

For the year ended 31 December 2016

 


Year ended 31 December 2016

Year ended 31 December 2015

 


Before

exceptional

items

Exceptional

items

(note 4)

 

 

Total

Before

exceptional

items

Exceptional

items

(note 4)

 

 

Total


$m

$m

$m

$m

$m

$m








Revenue (note 3)

1,715

-

1,715

1,803

-

1,803

Cost of sales

(580)

-

     (580)

(640)

-

(640)

Administrative expenses

(339)

(13)

(352)

(395)

(25)

(420)

Share of losses of associates and joint ventures

 

(2)

 

-

 

(2)

 

(3)

 

-

 

(3)

Other operating income and expenses

 

9

 

-

 

9

 

11

 

880

 

891


_____

_____

_____

_____

_____

_____


803

(13)

790

776

855

1,631








Depreciation and amortisation

(96)

-

(96)

(96)

-

(96)

Impairment charges

-

(16)

(16)

-

(36)

(36)


_____

_____

_____

_____

_____

_____








Operating profit (note 3)

707

(29)

678

680

819

1,499

Financial income

6

-

6

5

-

5

Financial expenses

(93)

-

(93)

(92)

-

(92)


_____

_____

_____

_____

_____

_____








Profit before tax

620

(29)

591

593

819

1,412








Tax (note 5)

(186)

12

(174)

(180)

(8)

(188)


_____

_____

_____

_____

_____

_____

Profit for the year from continuing operations

 

434

 

(17)

 

417


413


811


1,224


 ____

_____

_____

 ____

_____

_____








Attributable to:








Equity holders of the parent

431

(17)

414

411

811

1,222


Non-controlling interest

3

-

3

2

-

2



____

_____

____

____

_____

____



434

(17)

417

413

811

1,224


____

_-____

_____

____

__-___--_

_____








Earnings per ordinary share

(note 6)







Continuing and total operations:








Basic



195.3¢



520.0¢


Diluted



193.5¢



513.4¢


Adjusted

203.3¢



174.9¢




Adjusted diluted

201.4¢



172.7¢




_____


_____

_____


_____








 

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2016

 

 


2016

Year ended

31 December

$m

2015

Year ended

31 December

$m




Profit for the year

417

1,224




Other comprehensive income






Items that may be subsequently reclassified to profit or loss:



Gains on valuation of available-for-sale financial assets, net of related tax charge of $nil (2015 $nil)

 

5

 

2

Exchange gains/(losses) on retranslation of foreign operations, net of related tax charge of $3m (2015 $1m)

 

182

 

(2)

Fair value gain reclassified to profit on disposal of available-for-sale financial asset

 

(7)

 

-

Exchange losses reclassified to profit on hotel disposal

-

2


_____

_____


180

2

Items that will not be reclassified to profit or loss:



Re-measurement (losses)/gains on defined benefit plans, net of related tax credit of $4m (2015 charge of $4m)

 

-

 

9

Tax related to pension contributions

-

7


_____

_____


-

16





_____

_____

Total other comprehensive income for the year

180

18


_____

_____

Total comprehensive income for the year

597

1,242


_____

_____




Attributable to:




Equity holders of the parent

594

1,240


Non-controlling interest

3

2


_____

_____


597

1,242


_____

_____

 

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2016

 


Year ended 31 December 2016


Equity share capital

 

Other reserves*

 

Retained earnings

Non-controlling interest

 

Total equity


$m

$m

$m

$m

$m







At beginning of the year

169

(2,513)

2,653

10

319







Total comprehensive income for the year

 

-

 

180

 

414

 

3

 

597

Transfer of treasury shares to employee share trusts

 

-

 

(24)

 

24

 

-

 

-

Purchase of own shares by employee share trusts

 

-

 

(10)

 

-

 

-

 

(10)

Release of own shares by employee share trusts

 

-

 

39

 

(39)

 

-

 

-

Equity-settled share-based cost

-

-

23

-

23

Tax related to share schemes

-

-

11

-

11

Equity dividends paid

-

-

(1,693)

(5)

(1,698)

Transaction costs relating to shareholder returns

 

-

 

-

 

(1)

 

-

 

(1)

Exchange adjustments

(28)

28

-

-

-


_____

_____

_____

_____

_____

At end of the year

141

(2,300)

1,392

8

(759)


_____

_____

_____

_____

_____

 

 


Year ended 31 December 2015


Equity share capital

 

Other reserves*

 

Retained earnings

Non-controlling interest

 

Total equity


$m

$m

$m

$m

$m







At beginning of the year

178

(2,539)

1,636

8

(717)







Total comprehensive income for the year

 

-

 

2

 

1,238

 

2

 

1,242

Purchase of own shares by employee share trusts

 

-

 

(47)

 

-

 

-

 

(47)

Release of own shares by employee share trusts

 

-

 

62

 

(62)

 

-

 

-

Equity-settled share-based cost

-

-

         24

-

24

Tax related to share schemes

-

-

           5

-

5

Equity dividends paid

-

-

(188)

-

(188)

Exchange adjustments

(9)

9

           -

-

-


_____

_____

____

____

____

At end of the year

169

(2,513)

2,653

10

319


_____

_____

_____

_____

_____

 

*

Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, unrealised gains and losses reserve and currency translation reserve.

 

 

 

All items above are shown net of tax.



InterContinental Hotels Group PLC

GROUP STATEMENT OF FINANCIAL POSITION

31 December 2016


2016

31 December

2015

31 December


$m

$m

ASSETS



Property, plant and equipment

419

428

Goodwill and other intangible assets

1,292

1,226

Investment in associates and joint ventures

111

136

Trade and other receivables

8

3

Other financial assets

248

284

Non-current tax receivable

23

37

Deferred tax assets

48

49


_____

_____

Total non-current assets

2,149

2,163


_____

_____

Inventories

3

3

Trade and other receivables

472

462

Current tax receivable

77

4

Other financial assets

20

-

Cash and cash equivalents

206

1,137


_____

_____

Total current assets

778

1,606


_____

_____

Total assets (note 3)

2,927

3,769


_____

_____

LIABILITIES



Loans and other borrowings

(106)

(427)

Derivative financial instruments

(3)

(3)

Loyalty programme liability

(291)

(223)

Trade and other payables

(681)

(616)

Provisions

(3)

(15)

Current tax payable

(50)

(85)


_____

_____

Total current liabilities

(1,134)

(1,369)


_____

_____

Loans and other borrowings

(1,606)

(1,239)

Retirement benefit obligations

(96)

(129)

Loyalty programme liability

(394)

(426)

Trade and other payables

(200)

(152)

Provisions

(5)

-

Deferred tax liabilities

(251)

(135)


_____

_____

Total non-current liabilities

(2,552)

(2,081)


_____

_____

Total liabilities

(3,686)

(3,450)


_____

_____

Net (liabilities)/assets

(759)

319


_____

_____

EQUITY



Equity share capital

141

169

Capital redemption reserve

9

11

Shares held by employee share trusts

(11)

(18)

Other reserves

(2,860)

(2,888)

Unrealised gains and losses reserve

111

113

Currency translation reserve

451

269

Retained earnings

1,392

2,653


_____

_____

IHG shareholders' equity

(767)

309

Non-controlling interest

8

10


_____

_____

Total equity

(759)

319


_____

_____



InterContinental Hotels Group PLC

GROUP STATEMENT OF CASH FLOWS

For the year ended 31 December 2016

 


2016

Year ended

31 December

2015

Year ended

31 December


$m

$m




Profit for the year

417

1,224

Adjustments reconciling profit for the year to cash flow from operations (note 8)

536

(414)


_____

_____

Cash flow from operations

953

810

Interest paid

(75)

(75)

Interest received

4

2

Tax paid on operating activities

(130)

(109)


_____

_____

Net cash from operating activities

752

628


_____

_____

Cash flow from investing activities



Purchase of property, plant and equipment

(32)

(42)

Purchase of intangible assets

(175)

(157)

Investment in associates and joint ventures

(14)

(30)

Loan advances to associates and joint ventures

(2)

(25)

Investment in other financial assets

(13)

(28)

Acquisition of business, net of cash acquired

-

(438)

Capitalised interest paid

(5)

(4)

Disposal of hotel assets, net of costs and cash disposed

(5)

1,277

Repayments related to intangible assets

3

-

Loan repayments by associates and joint ventures

-

22

Proceeds from associates and joint ventures

2

9

Repayments of other financial assets

25

6

Tax paid on disposals

-

(1)


_____

_____

Net cash from investing activities

(216)

589


_____

_____

Cash flow from financing activities



Purchase of own shares by employee share trusts

(10)

(47)

Dividends paid to shareholders

(1,693)

(188)

Dividend paid to non-controlling interest

(5)

-

Transaction costs relating to shareholder returns

(1)

-

Issue of long-term bonds

459

458

Other new borrowings

-

400

Long-term bonds repaid

(315)

-

New borrowings repaid

-

(400)

Increase/(decrease) in other borrowings

109

(355)

Proceeds from foreign exchange swaps

-

22


_____

_____

Net cash from financing activities

(1,456)

(110)


_____

_____

 

Net movement in cash and cash equivalents, net of overdrafts, in the year

(920)

1,107

Cash and cash equivalents, net of overdrafts, at beginning of the year

1,098

55

Exchange rate effects

(61)

(64)


_____

_____

Cash and cash equivalents, net of overdrafts, at end of the year

117

1,098


_____

_____

 



 

InterContinental Hotels Group plc

NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS

 

 

1.

Basis of preparation

 


The audited consolidated financial statements of InterContinental Hotels Group PLC (the Group or IHG) for the year ended 31 December 2016 have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.   Other than the change set out below, they have been prepared on a consistent basis using the accounting policies set out in the InterContinental Hotels Group PLC Annual Report and Financial Statements for the year ended 31 December 2015.

 


With effect from 1 January 2016, the Group has adopted Amendments to IAS 1 'Disclosure Initiative' which has resulted in the presentation of the loyalty programme liability separately on the Group statement of financial position.

 

 

 

2.

Exchange rates

 


The results of operations have been translated into US dollars at the average rates of exchange for the year. In the case of sterling, the translation rate is $1= £0.74 (2015 $1=£0.65). In the case of the euro, the translation rate is $1 = €0.90 (2015 $1 = €0.90).

 

Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the year. In the case of sterling, the translation rate is $1=£0.81 (2015 $1 = £0.68). In the case of the euro, the translation rate is $1 = €0.95 (2015 $1 = €0.92).

 

 

 

Segmental information






Revenue




2016

2015


$m

$m




Americas 

993

955

Europe 

227

265

AMEA

237

241

Greater China

117

207

Central

141

135


_____

_____

Total revenue

1,715

1,803


_____

_____




All results relate to continuing operations.

 

Profit

2016

$m

2015

$m




Americas 

633

597

Europe 

75

78

AMEA

82

86

Greater China

45

70

Central

(128)

(151)


_____

_____

Reportable segments' operating profit

707

680

Exceptional items (note 4)

(29)

819


_____

_____

Operating profit

678

1,499




Net finance costs

(87)

(87)


_____

_____

Profit before tax

591

1,412


_____

_____




All results relate to continuing operations.


 

Assets

2016

$m

2015

$m




Americas

1,417

1,355

Europe

321

383

AMEA

249

260

Greater China

147

148

Central

439

396


_____

_____

Segment assets

2,573

2,542




Unallocated assets:



Non-current tax receivable

23

37

Deferred tax assets

48

49

Current tax receivable

77

4

Cash and cash equivalents

206

1,137


_____

_____

Total assets

2,927

3,769


_____

_____



 

Exceptional items

 

 

2016

$m

2015

$m

Exceptional items before tax




Administrative expenses:




Kimpton integration costs (a)

(13)

(10)


Venezuelan currency losses (b)

-

(4)


Reorganisation costs (c)

-

(6)


Corporate development costs (d)

-

(5)



_______

_______



(13)

(25)


Other operating income and expenses:




Gain on disposal of hotels (e)

-

871


Gain on disposal of investment in associate (f)

-

9



_____

_____


-

880

    Impairment charges:




Associates (g)

(16)

(9)


Property, plant and equipment (h)

-

(27)


_____

____


(16)

(36)


_____

____


(29)

819


_____

_____

Tax




Tax on exceptional items (i)

12

(8)



_____

_____





 

All items above relate to continuing operations. These items are treated as exceptional by reason of their size or nature.

 

a)

Relates to the cost of integrating Kimpton Hotel and Restaurant Group, LLC ('Kimpton') into the operations of the Group.  Kimpton was acquired on 16 January 2015.   The integration programme remains in progress and will be substantially completed in 2017.

b)

Arose from changes to the Venezuelan exchange rate mechanisms.

c)

Related to the implementation of more efficient processes and procedures in the Group's Global Technology infrastructure to help mitigate future cost increases.

d)

Primarily legal costs related to development opportunities.

e)

Arose from the sale of InterContinental Paris - Le Grand on 20 May 2015 and InterContinental Hong Kong on 30 September 2015.

f)

Related to the disposal of an associate investment in the AMEA region.

g)

In 2016, relates to an associate investment in The Americas region and, in 2015, related to an associate investment in the AMEA region, following re-assessments of their recoverable amounts.

h)

Related to two hotels in North America following a re-assessment of their recoverable amounts.

i)

In 2016, comprises a $6m deferred tax credit in respect of the associate investment impairment, a $5m deferred tax credit representing future tax relief on Kimpton integration costs and $1m credit in respect of other items.  In 2015, comprised a charge of $56m relating to disposal of hotels, a credit of $21m in respect of the 2014 disposal of an 80.1% interest in InterContinental New York Barclay reflecting the judgment that state tax law changes would now apply to the deferred gain, and credits of $27m for current and deferred tax relief on other operating exceptional items of current and prior periods. 

 

 

Tax

 

The tax charge on profit from continuing operations, excluding the impact of exceptional items (note 4), has been calculated using a tax rate of 30% (2015 30%) analysed as follows:

 


Year ended 31 December

2016

2016

2016

2015

2015

2015



Profit

$m

Tax

$m

Tax

rate

Profit

$m

Tax

$m

Tax

rate










Before exceptional items

620

(186)

30%

593

(180)

 30%


Exceptional items

(29)

12


819

(8)




____

____


____

____




591

(174)


1,412

(188)




_____

_____


_____

_____



Analysed as:









UK tax


20



(2)




Foreign tax


(194)



(186)





____



____





(174)



(188)





_____



_____


 

6.

Earnings per ordinary share

 


Basic earnings per ordinary share is calculated by dividing the profit for the year available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the year.

 

Diluted earnings per ordinary share is calculated by adjusting basic earnings per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share awards outstanding during the year.

 

Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by exceptional items, to give a more meaningful comparison of the Group's performance.

 


Continuing and total operations

2016

2015






Basic earnings per ordinary share




Profit available for equity holders ($m)

414

1,222


Basic weighted average number of ordinary shares (millions)

212

235


Basic earnings per ordinary share (cents)

195.3

520.0



_____

_____


Diluted earnings per ordinary share




Profit available for equity holders ($m)

414

1,222


Diluted weighted average number of ordinary shares (millions)

214

238


Diluted earnings per ordinary share (cents)

193.5

513.4



_____

_____


Adjusted earnings per ordinary share




Profit available for equity holders ($m)

414

1,222


Adjusting items (note 4):





Exceptional items before tax ($m)

29

(819)



Tax on exceptional items ($m)

(12)

8



____

____


Adjusted earnings ($m)

431

411


Basic weighted average number of ordinary shares (millions)

212

235


Adjusted earnings per ordinary share (cents)

203.3

174.9



_____

_____


Adjusted diluted earnings per ordinary share




Diluted weighted average number of ordinary shares (millions)

214

238


Adjusted diluted earnings per ordinary share (cents)

201.4

172.7



_____

_____

 

 


The diluted weighted average number of ordinary shares is calculated as:



2016

millions

2015

millions

 

 


Basic weighted average number of ordinary shares

212

235

 


Dilutive potential ordinary shares

2

3

 



____

____

 



214

238

 



_____

_____

 

 

7.

Dividends and shareholder returns

 



2016

cents per share

2015

cents per share

2016

$m

2015

$m

 


Paid during the year:





 



Final (declared for previous year)

57.5

52.0

137

125

 



Interim

30.0

27.5

56

63

 



Special

632.9

-

1,500

-

 



_____

_____

_____

_____

 



720.4

79.5

1,693

188

 



_____

_____

_____

_____

 







 


Proposed for approval at the Annual General
Meeting (not recognised as a liability at
31 December):

 

 



Final

64.0

57.5

126

135

 



_____

_____

_____

_____

 



On 23 February 2016, the Group announced a $1.5bn return of funds to shareholders by way of a special dividend and share consolidation.  On 6 May 2016, shareholders approved the share consolidation on the basis of 5 new ordinary shares of 18 318/329p per share for every 6 existing ordinary shares of 15 265/329p, which became effective on 9 May 2016 and resulted in the reduction of 42m shares in issue.  The special dividend was paid to shareholders on 23 May 2016.  The dividend and share consolidation had the same economic effect as a share repurchase at fair value, therefore previously reported earnings per share has not been restated.

 

In February 2017, the Board proposed a $400m return of funds to shareholders by way of a special dividend with a share consolidation.

 

The total number of shares held as treasury shares at 31 December 2016 was 8.9m.

 

8.

Reconciliation of profit for the year to cash flow from operations



2016

2015



$m

$m






Profit for the year

417

1,224


Adjustments for:




Net financial expenses

87

87


Income tax charge

174

188


Depreciation and amortisation

96

96


Impairment

16

36


Other exceptional items

13

(855)


Equity-settled share-based cost

17

19


Dividends from associates and joint ventures

5

5


Net change in loyalty programme liability and System Fund surplus

65

42


System Fund depreciation and amortisation

31

21


Other changes in net working capital

78

(10)


Utilisation of provisions, net of insurance recovery

(4)

-


Retirement benefit contributions, net of costs

(32)

(4)


Cash flows relating to exceptional items

(19)

(45)


Other items

9

6



_____

______


Total adjustments

536

(414)



_____

_____


Cash flow from operations

953

810



_____

_____

 

9.

Net debt



2016

2015



$m

$m






Cash and cash equivalents

206

1,137


Loans and other borrowings - current

(106)

(427)


Loans and other borrowings - non-current

(1,606)

(1,239)



_____

_____


Net debt

(1,506)

(529)



_____

_____


Finance lease obligation included above

(227)

(224)



_____

_____

 

10.

Movement in net debt



2016

2015

 



$m

$m

 





 


Net (decrease)/increase in cash and cash equivalents, net of overdrafts

(920)

1,107

 


Add back cash flows in respect of other components of net debt:



 


Issue of long-term bonds

(459)

(458)

 


Other new borrowings

-

(400)

 


Long-term bonds repaid

315

-

 


New borrowings repaid

-

400

 


(Increase)/decrease in other borrowings

(109)

355

 



_____

_____

 


(Increase)/decrease in net debt arising from cash flows

(1,173)

1,004

 





 


Non-cash movements:



 



Finance lease obligations

(4)

(6)

 



Increase in accrued interest

(6)

(7)

 



Exchange and other adjustments

206

13

 



_____

_____

 


(Increase)/decrease in net debt

(977)

1,004

 





 


Net debt at beginning of the year

(529)

(1,533)

 



_____

_____

 


Net debt at end of the year

(1,506)

(529)

 



_____

_____

 

 

 

Commitments and contingencies

 

At 31 December 2016, the amount contracted for but not provided for in the financial statements for expenditure on property, plant and equipment and intangible assets was $97m (2015 $76m).  The Group has also committed to invest in a number of its associates, with an estimated outstanding commitment of $36m at 31 December 2016 (2015 $45m) based on current forecasts.

 

In limited cases, the Group may provide performance guarantees to third-party hotel owners to secure management contracts.  At 31 December 2016, the amount provided in the financial statements was $5m (2015 $1m) and the maximum unprovided exposure under such guarantees was $14m (2015 $13m). 

 

The Group may guarantee loans made to facilitate third-party ownership of hotels in which the Group has an equity interest.  At 31 December 2016, there were guarantees of $33m in place (2015 $30m).   In connection with an associate investment, the Group has provided an indemnity to its joint venture partner for 100% of the obligations related to a $43m supplemental bank loan made to the associate on 31 December 2015. 

 

During the first half of 2016, the Group was notified of a security incident at a number of Kimpton hotels that resulted in unauthorised access to guest payment card data (the "Kimpton Security Incident"). Based on the estimated number of cards affected and opinion of external advisers, an amount of $5m has been provided in the financial statements to cover the estimated cost of reimbursing the impacted payment card networks for counterfeit fraud losses and related expenses.  This estimate involves significant judgement based on currently available information and is subject to change as actual claims are made and new information becomes available.

 

In December 2016, the Group was notified of a security incident at a number of hotels in The Americas region (the "Americas Security Incident").  The Group issued a Substitute Notice on 3 February 2017 notifying guests that malware was installed on servers that processed payment cards used at restaurants and bars of 12 IHG managed properties. An investigation of other properties in The Americas region is ongoing. It is not practicable to make a reliable estimate of the possible financial effect of any claims concerning the Americas Security Incident at this time.

 

The Group may be exposed to investigations regarding compliance with applicable State and Federal data security standards, although no claims have been received to date.  In addition, the Group is exposed to legal action from individuals and organisations impacted by the security incidents.  A class action has been filed in the courts in relation to the Kimpton Security Incident, although alleged damages have not been specified. It is not practicable to make a reliable estimate of the possible financial effect of any claims on the Group at this time.

 

In respect of the $5m provided in the financial statements, it is expected that a proportion will be recoverable under the Group's insurance programmes although this, together with any potential recoveries in respect of the contingent liabilities detailed above, will be subject to specific agreement with the relevant insurance providers.

 

From time to time, the Group is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation.  The Group has also given warranties in respect of the disposal of certain of its former subsidiaries.  It is the view of the Directors that, other than to the extent that liabilities have been provided for in these financial statements, it is not possible to quantify any loss to which these proceedings or claims under these warranties may give rise, however, as at the date of reporting, the Group does not believe that the outcome of these matters will have a material effect on the Group's financial position.

 

Group financial statements

 

The preliminary statement of results was approved by the Board on 20 February 2017. The preliminary statement of results does not represent the full Group financial statements of InterContinental Hotels Group PLC and its subsidiaries which will be delivered to the Registrar of Companies in due course. The financial information for the year ended 31 December 2015 has been extracted from the IHG Annual Report and Financial Statements for that year as filed with the Registrar of Companies.

 

Auditor's review

 

The auditors, Ernst & Young LLP, have given an unqualified report under Chapter 3 of Part 16 of the Companies Act 2006 in respect of the full Group financial statements.

 


 

This information is provided by RNS
The company news service from the London Stock Exchange
 
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Final Results - RNS