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RNS

Half-year Report - Replacement

Released 11:15 08-Aug-2017

RNS Number : 3934N
InterContinental Hotels Group PLC
08 August 2017
 



 

InterContinental Hotels Group PLC

 

The following amendment has been made to the 'Half-year Report' announcement released on 8 August 2017 at 7.00am under RNS No 3190N

 

Ex-dividend date: 31 August 2017

 

All other details remain unchanged.

 

The full amended text is shown below.

 

Half Year Results to 30 June 2017

Financial summary1

Reported

Underlying2


2017

2016 

% Change

2017

2016 

% Change

Revenue

$857m

$838m

2%

$788m

$756m

4%

Fee Revenue3

$686m

$673m

2%

$697m

$673m

4%

Operating profit

$370m

$344m

8%

$365m

$340m

7%

Adjusted EPS

113.3¢

89.0¢

27%

111.7¢

87.7¢

27%

Basic EPS4

111.7¢

87.7¢

27%




Interim dividend per share

33.0¢

30.0¢

10%




Net debt

$2,056m

$1,829m





 

1All figures before exceptional items unless otherwise noted.  2Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 2016 exchange rates (CER).  Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates53Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages.  4After exceptional items.

 

Keith Barr, Chief Executive of InterContinental Hotels Group PLC, said:

"We have had a good first half. RevPAR growth of 2.1% and net system size growth of 3.7% delivered a 7% increase in underlying operating profit and a 27% increase in underlying EPS, underpinning the Board's decision to increase the interim dividend by 10%.

We continue to make good progress in executing our well-established strategy to deliver high quality sustainable growth, and during the half we passed the landmark of over 1 million open or pipeline rooms.  In June, we announced a new, midscale brand to address a $20 billion underserved segment in the US. We believe this will become another brand of scale for IHG that will deliver superior returns to our owners. Other highlights include the continued roll-out of new design formats across our Holiday Inn Brand Family and the ongoing repositioning of Crowne Plaza. Leveraging our technological capabilities, we are on track to begin roll out of our next generation cloud-based Guest Reservation System in late 2017.

I feel privileged to be the new CEO of IHG and to have the opportunity to build on the strong performance we have delivered. My focus is on driving an acceleration in our growth rate, by increasing the resources dedicated behind the highest opportunity markets and segments, strengthening our brand portfolio, building on our leading loyalty proposition, and enhancing our competitive advantage through prioritising digital and technological innovation. We will continue to focus on enhancing our cost efficiency to generate funds for reinvestment.  This, combined with our cash-generative business model and disciplined approach to capital allocation, will drive superior returns to shareholders.

While we will always face macro-economic and geopolitical uncertainties, we remain confident in the outlook for 2017."

Financial Highlights

·     

-     Global comparable H1 RevPAR growth of 2.1%, led by occupancy up 0.9%pts. Q2 RevPAR up 1.5%, including a decline of -0.4% in the US, adversely impacted by the timing of Easter.

-    

·     

-    

-     Focused investment and asset recycling led to net capital expenditure5 of $162m (gross: $186m).

-     $0.4bn returned to shareholders in May via a $2.025 per share special dividend with 45 for 47 share consolidation.

-     10% increase in interim dividend to 33.0¢ reflects confidence in our long-term sustainable growth.

Strategic Progress

·     

-     6

-     Continued to roll out innovative guest room and public area enhancements for the Holiday Inn Brand Family; new designs now in more than 400 hotels across US and Europe, driving mid-single digit increases in guest satisfaction.

-     Positive response to Crowne Plaza US Accelerate programme, with owner capital commitments of ~$190m in the last year in hotel purchases and major refurbishment in addition to ~30 hotels committing to renovating guest rooms.   

-     Growing our boutique footprint, with the opening of our second Kimpton outside the US, in Amsterdam, and six more US openings planned this year; and our Hotel Indigo open and pipeline hotels reaching over 150 globally, with openings in Bali and Los Angeles and signings in Beijing and London's Leicester Square.

·     

-     Signed 32k rooms into the pipeline, taking it to 230k rooms. ~45% of the pipeline is under construction.

·     

5For definition of non-GAAP measures and reconciliation to GAAP measures refer to the Interim Management Report. 6 Mainstream includes STR midscale and upper midscale segments.

 

Americas - RevPAR growth slows in second quarter as Easter benefit reverses

Comparable RevPAR increased 1.1% (Q2: 0.1%), driven by 1.1% rate growth.  

US RevPAR grew 0.7%, with a decline of -0.4% in Q2, adversely impacted by the shift in timing of Easter.  Holiday Inn and Holiday Inn Express RevPAR grew 1.1% (Q2: 0.2%) and 0.6% (Q2: -0.1%) respectively.  Combined these brands delivered a 6% absolute RevPAR premium to the upper midscale segment. 

Outside of the US, RevPAR grew 4.6%. Canada's 150th anniversary celebrations generated solid demand in urban markets with RevPAR growth of 4.3%, whilst growth in the Mexican economy, buoyed by a relatively weak Peso, contributed to RevPAR growth of 9.1%.

Reported revenue increased 2% (2% CER) and reported operating profit pre-exceptional items increased 3% (3% CER), whilst on an underlying1 basis both revenue and operating profit increased 3%.

On an underlying1 basis, franchised operating profit grew 1% as incremental royalties from RevPAR and net rooms growth were partly offset by lower revenues from hotel signings and the annualisation of our $7m investment in the Americas development team, $4m of which was incurred in H2 2016.

Underlying1 managed operating profit increased 7% benefitting from the continued ramp up of the InterContinental New York Barclay, following its refurbishment and lower costs associated with our 20% interest in the hotel.

Underlying1 owned revenue and operating profit increased 12% and 25% respectively as the Holiday Inn Aruba benefitted from increased North American inbound business.

We opened 11k rooms (95 hotels), including the 900 room InterContinental Los Angeles Downtown. 9k rooms (63 hotels) were removed primarily across the Holiday Inn, Holiday Inn Express and Crowne Plaza brands as we continue to focus on high quality brand representation.

We signed 16k rooms, including the first Kimpton in Mexico and more than 11k rooms (112 hotels) for the Holiday Inn Brand Family.

Europe - Strong trading drives double digit profit growth

Comparable RevPAR increased 6.2% (Q2: 5.5%), driven equally by rate and occupancy. UK RevPAR increased by 6.7%, with strong trading in both London (9.0%) and the provinces (5.4%). In Germany, RevPAR growth for the half was 2.3%, Q2 RevPAR declined -3.6% as the estate lapped very strong comparables relating to trade show activity in 2016 in Dusseldorf and Munich. Trading in Paris continues to recover with RevPAR up 11.6% in H1 driven by occupancy gains (8.0%pts).

Reported revenue increased 4% (8% CER) and reported operating profit was up 12% (12% CER). 

On an underlying1 basis revenue increased 11% and operating profit increased 12%. 

We opened 1k rooms (8 hotels) including the Kimpton De Witt in Amsterdam, our first Kimpton hotel in Europe, and signed 3k rooms (20 hotels) including a Hotel Indigo in London's Leicester Square.

In Germany, we signed 10 hotels and opened three, taking the total open and pipeline hotels to 112.  

AMEA - Solid trading in key markets offset by weakness in the Middle East

Comparable RevPAR increased 1.4% (Q2: 2.7%). Performance outside the Middle East continued to be strong, with 4.2% RevPAR growth. India was up 14.3%, whilst Japan, Australasia and South-East Asia were up low to mid-single digits.

In the Middle East, RevPAR declined -3.7% due to the ongoing impact of low oil prices and industry wide supply growth. RevPAR growth was flat in Q2, due to the favourable timing of Ramadan as well as improved royal business in Saudi Arabia. We expect trading conditions for the rest of the year to remain challenging.

The increasing mix of new rooms opening in developing markets meant that total RevPAR declined -1.9% in the half (Q2: -1.0%).

Reported revenue was flat (2% CER) and operating profit was up 5% (10% CER).

On an underlying1 basis, revenue was up 1% and operating profit increased 11% benefitting from the favourable phasing of costs. We still expect managed profit in 2017 to be broadly in line with 2016.

We opened 7k rooms (9 hotels) in the half, including the first Hotel Indigo resort, in Bali, the first Staybridge Suites in Saudi Arabia and 3.5k rooms in Makkah, Saudi Arabia. The rooms in Makkah relate to the remaining portion of the 5k room signing that we announced in 2015 and, on an annualised basis, are expected to generate ~$1m in fees.

We signed 3k rooms (15 hotels) including three deals in Australia and 1.3k rooms for the Holiday Inn Brand Family.  

1Excluding owned asset disposals, managed leases, significant liquidated damages at constant H1 16 exchange rates (CER).  See the Interim Management Report for definition of non-GAAP measures and reconciliation to GAAP measures.

 

 

Greater China - Strong mainland trading and 9% rooms growth drive 15% profit growth

Comparable RevPAR increased 4.1% (Q2: 4.4%), with growth of 5.1% in mainland China. RevPAR growth in Hong Kong was flat whilst Macau increased 2.1%.  Mainland tier 1 cities continued to trade well, with RevPAR up 5.4% in the half driven by strong meeting and corporate demand, particularly in Shanghai.  Tier 2-4 cities also benefitted from solid meeting demand, leisure groups and the benefit of hotels still ramping up, with occupancy gains driving RevPAR growth of 5.2%.

Our strategy to maximise our long-term growth potential by using our mainstream brands to penetrate less developed cities impacted total RevPAR, which declined -0.3% for the region.

Reported revenue and operating profit increased by 6% (11% CER) and 15% (15% CER) respectively.

Underlying1 revenue increased 11% and underlying operating profit grew 15%, driven by strong trading in mainland China, 9% rooms growth and increased revenues from signing and opening hotels.

We opened 4k rooms (16 hotels) in the half, including our 300th hotel (the 340 room HUALUXE Zhangjiakou), our 40th InterContinental in the region (the 370 room InterContinental Jinan City Centre), and the first two Holiday Inn Express Franchise Plus properties.

Signings for the half totalled 10k rooms, or 46 hotels, the highest number on record. This included the 420 room InterContinental Guangzhou Downtown and the 255 room InterContinental Zhengzhou, and 34 Holiday Inn Express hotels, including 24 on Franchise Plus contracts.

Highly cash generative business with disciplined approach to capital allocation 

·     

-    Reported central overheads declined $9m, or $4m on a constant currency basis, benefiting from a $4m increase in central revenues and efficiency improvements.

-   

·     

-    Free cash flow2 of $204m compares to $241m in H1 2016 (excluding the $95m benefit from renegotiation of

·     

-     $186m gross capital expenditure in first half: $44m maintenance capex22

-    

·     

-     10% increase in the interim dividend to 33.0¢.

-     $0.4bn returned to shareholders in May via a $2.025 per share special dividend, in conjunction with a 45 for 47 share consolidation.

·     

-   Robust financial position, with on-going commitment to an efficient balance sheet and investment grade credit rating.  

-   Net debt2

Foreign exchange - minimal impact on reported profit

Revenue impacts of the strong dollar against a number of currencies were offset by cost benefits from the devaluation of sterling against the dollar compared to H1 2016, increasing reported profit by $1m.  If the closing June 2017 exchange rates had existed through H2 2016, there would have been no impact on reported operating profit for that period.  

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

Interest, tax, and exceptional items

Interest: Net financial expenses reduced by $1m to $40m due to a reduction in the cost of debt following the bond refinancing in 2016 and the favourable impact of a weaker pound on translation of sterling interest expense, offset by higher average net debt levels following the payment of the 2016 $1.5bn special dividend.  

Tax: Based on the position at the end of the half, the tax charge has been calculated using an interim effective tax rate of 33% (H1 2016: 33%).  We continue to expect the full year 2017 tax rate to be in the low 30s (%).

Exceptional operating items:  $4m exceptional operating charge (2016: $5m charge) relating to the Kimpton integration.

1Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 16 exchange rates (CER).

2 For definition of non-GAAP measures and reconciliation to GAAP measures see the Interim Management Report.

 

 

Appendix 1: Comparable RevPAR Movement Summary

 

 

Half Year 2017

Q2 2017

RevPAR

Rate

Occ.

RevPAR

Rate

Occ.

Group

2.1%

0.8%

0.9%pts

 1.5%

0.9%

0.4%pts

Americas

1.1%

1.1%

0.0%pts

0.1%

0.9%

(0.6)%pts

Europe

6.2%

3.2%

2.0%pts

5.5%

3.3%

1.6%pts

AMEA

1.4%

(1.2)%

1.9%pts

2.7%

0.2%

1.7%pts

G. China

4.1%

(1.1)%

3.2%pts

4.4%

(0.8)%

3.4%pts



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

 

 

 

Half Year 2017

Q2 2017

CER

AER

Difference

CER

AER

Difference

Group

2.1%

0.6%

1.5%pts

1.5%

0.0%

1.5%pts

Americas

1.1%

0.9%

0.2%pts

0.1%

(0.2)%

0.3%pts

Europe

6.2%

(0.4)%

6.6%pts

5.5%

(0.1)%

5.6%pts

AMEA

1.4%

0.4%

1.0%pts

2.7%

1.0%

1.7%pts

G. China

4.1%

0.0%

4.1%pts

4.4%

0.3%

4.1%pts



 

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

 


System

Pipeline

Openings

Removals

Net

Total

YoY%*

Signings

Total

Group

22,857

(12,317)

10,540

777,675

3.7%

31,773

229,526

Americas

10,618

(8,662)

1,956

489,949

1.6%

15,814

102,578

Europe

1,443

(1,150)

293

110,362

3.6%

3,128

23,974

AMEA

6,910

(1,029)

5,881

81,932

11.6%

3,003

34,807

G. China

3,886

(1,476)

2,410

95,432

9.3%

9,828

68,167


* compared to H1 2016

 

Appendix 4: Half Year financial headlines

 

Operating Profit $m

Total

Americas

Europe

AMEA

G. China

Central

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

2017

2016

Franchised

343

340

298

295

37

37

7

6

1

2

-

-

Managed

120

113

33

32

12

10

43

42

32

29

-

-

Owned & leased

16

13

15

12

0

0

1

1

0

0

-

-

Regional overheads

(56)

(60)

(25)

(26)

(11)

(13)

(10)

(10)

(10)

(11)

-

-

Profit pre central overheads

423

406

321

313

38

34

41

39

23

20

-

-

Central overheads

(53)

(62)

-

-

-

-

-

-

-

-

(53)

(62)

Group Operating profit ex. Exceptional items

370

344

321

313

38

34

41

39

23

20

(53)

(62)

Exceptional Items

(4)

(5)

(4)

(5)

-

-

-

-

-

-

-

-

Group Operating profit

366

339

317

308

38

34

41

39

23

20

(53)

(62)

 

 

Appendix 5: Constant exchange rate (CER) and underlying operating profit movement before exceptional items


Total***

Americas

Europe

AMEA

G. China

 

Reported

Actual*

CER**

Actual*

CER**

Actual*

CER**

Actual*

CER**

Actual*

CER**

 

Growth / (decline)

8%

7%

3%

3%

12%

12%

5%

10%

15%

15%

 







 

Underlying****

Growth / (decline)

Total***

Americas

Europe

AMEA

G. China

 

7%

3%

12%

11%

15%

 

Exchange rates:

GBP:USD

EUR:USD

* US dollar actual currency

 

H1 2017

0.79

0.92

** Translated at constant H1 2016 exchange rates1

 

H1 2016

0.70

0.90

*** After central overheads

 

 

 

 



**** At CER and excluding: owned asset disposals, results from managed lease hotels and significant liquidated damages (see below for definitions) 1

1 For definition of non-GAAP measures and reconciliation to GAAP measures see the Interim Management Report.

 

 

 

 

 

 

 

 

Appendix 6: Definitions

CER: constant exchange rates with H1 2016 exchange rates applied to H1 2017.

Comparable RevPAR: Revenue per available room for hotels that have traded for all of 2016 and 2017, reported at CER.

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

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

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

Americas: Revenue H1 2017 $18m; H1 2016 $20m; EBIT H1 2017 $1m, H1 2016 $1m. Europe: Revenue H1 2017 $38m; H1 2016 $38m; EBIT H1 2017 $1m, H1 2016 $1m. AMEA: Revenue H1 2017 $24m; H1 2016 $24m; EBIT H1 2017 $2m, H1 2016 $2m.

Significant liquidated damages: $nil in H1 2017; $nil in H1 2016.

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

Total RevPAR: Revenue per available room including hotels that have opened or exited in either 2016 or 2017, reported at CER.



Appendix 7: Investor information for 2017 interim dividend

Ex-dividend date:

31 August 2017

Record date:

1 September 2017 

Payment date:

6 October 2017

Dividend payment:

ADRs: 33.0 cents per ADR; The corresponding amount in Pence Sterling per ordinary share will be announced on 20th September 2017, calculated based on the average of the market exchange rates for the three working days commencing 15th September.



 

For further information, please contact:

Investor Relations (Heather Wood; Neeral Morzaria; Tom Yates):

+44 (0)1895 512 176

+44 (0)7808 098 724

Media Relations (Yasmin Diamond; Mark Debenham):

+44 (0)1895 512 097

+44 (0)7527 424 046




Webcast for Analysts and Shareholders:

A conference call and webcast presented by Keith Barr, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence at 9:30am London time on 8th August on the web address www.ihgplc.com/interims17.  For those wishing to ask questions please use the dial in details below which will have a Q&A facility. 

The webcast replay will be available on the website later on the day of the results and will remain on it for the foreseeable future. 

International dial-in:

US dial-in:

Passcode:

+44 (0)203 059 8125

+1 724 928 9460

IHG Investor

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

Replay:

Pin:

+44 (0)121 260 4861

6653618#

 

US conference call and Q&A:

An additional conference call, primarily for US investors and analysts, at 9:00am New York Time on 8th August. There will be an opportunity to ask questions.

International dial-in:

US dial-in:

Passcode:

+44 (0)203 059 8125

+1 724 928 9460

IHG Investor

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

Replay:

Pin:

+44 (0)121 260 4861

6654548#

 

Website:

The full release and supplementary data will be available on our website from 7:00am (London time) on 8th August.  The web address is www.ihgplc.com/interims17

 

 

 

 

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®, Holiday Inn Express®, Holiday Inn Club Vacations®, Holiday Inn Resort®, Staybridge Suites® and Candlewood Suites®.

 

IHG franchises, leases, manages or owns more than 5,200 hotels and nearly 780,000 guest rooms in almost 100 countries, with more than 1,500 hotels in its development pipeline. IHG also manages IHG® Rewards Club, our global loyalty programme, which has more than 100 million enrolled members.  

 

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

 

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

 

Cautionary note regarding forward-looking statements:

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

 

 

 

 

 

 

 

 

INTERIM MANAGEMENT REPORT

 

This Interim Management Report discusses the performance of InterContinental Hotels Group PLC

(the Group or IHG) for the six months ended 30 June 2017.

 

Group


6 months ended 30 June

Group results

2017

2016

%


$m

$m

change

Revenue





Americas

499

490

1.8


Europe

113

109

3.7


AMEA

115

115

-


Greater China

58

55

5.5


Central

72

69

4.3



____

____

____

Total

857

838

2.3


____

____

____

Operating profit before exceptional items





Americas

321

313

2.6


Europe

38

34

11.8


AMEA

41

39

5.1


Greater China

23

20

15.0


Central

(53)

(62)

14.5



____

____

____


370

344

7.6

Exceptional operating items

(4)

(5)

20.0


____

____

____

Operating profit

366

339

8.0

Net financial expenses

(40)

(41)

2.4


____

____

____

Profit before tax

326

298

9.4


____

____

____

Earnings per ordinary share





Basic

111.7¢

87.7¢

27.4


Adjusted

113.3¢

89.0¢

27.3






Average US dollar to sterling exchange rate

$1 : £0.79

$1 : £0.70

12.9

 

 

During the six months ended 30 June 2017, revenue increased by $19m (2.3%) to $857m and operating profit increased by $27m (8.0%) to $366m.

 

Underlying1 Group revenue and underlying1 Group operating profit increased by $32m (4.2%) and $25m (7.4%) respectively.

 

The net central operating loss before exceptional items decreased by $9m (14.5%) to $53m compared to 2016 and by $4m (6.5%) to $58m at constant currency.

 

Profit before tax increased by $28m to $326m. Basic earnings per ordinary share increased by 27.4% to 111.7¢, whilst adjusted earnings per ordinary share increased by 27.3% to 113.3¢.

 

1 Underlying excludes significant liquidated damages and the results from managed-lease hotels, translated at constant currency by applying

prior-year exchange rates (see the Use of Non-GAAP measures section later in this Interim Management Report).

 

 

 


Hotels

Rooms

Global hotel and room count


Change over


Change over

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

 188

1

 64,572

922


Kimpton

 60

(1)

 11,374

136


HUALUXE

 5

1

 1,436

340


Crowne Plaza

 410

2

 114,027

224


Hotel Indigo

 79

4

 9,515

610


EVEN Hotels

 6

-

 1,010

-


Holiday Inn1

1,217

(24)

226,941

(4,815)


Holiday Inn Express

2,542

45

253,904

6,895


Staybridge Suites

245

9

26,612

1,002


Candlewood Suites

374

12

35,251

1,059


Other

95

(2)

33,033

4,167



____

____

______

_____

Total

5,221

47

777,675

10,540



____

____

______

_____

Analysed by ownership type






Franchised

4,352

31

543,049

399


Managed

861

16

232,268

10,195


Owned and leased

8

-

2,358

(54)



____

____

______

_____

Total

5,221

47

777,675

10,540



____

____

______

_____

 

1Includes 46 Holiday Inn Resort properties (11,653 rooms) and 26 Holiday Inn Club Vacations properties (7,676 rooms)

  (2016: 46 Holiday Inn Resort properties (11,652 rooms) and 26 Holiday Inn Club Vacations properties (7,601 rooms)).

 

 


Hotels

Rooms

Global pipeline


Change over


Change over



2017

30 June

             2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

 63

1

 17,044

(436)


Kimpton

 17

(1)

 2,863

(235)


HUALUXE

 21

(1)

 6,556

(400)


Crowne Plaza

 85

(5)

 23,748

(788)


Hotel Indigo

 76

1

 10,486

(107)


EVEN Hotels

 7

1

 1,065

285


Holiday Inn1

270

9

53,501

823


Holiday Inn Express

 702

26

 86,451

2,569


Staybridge Suites

 151

11

 16,454

1,133


Candlewood Suites

 107

(1)

 9,608

4


Other

14

2

1,750

(3,398)



____

____

______

_____

Total

1,513

43

229,526

(550)



____

____

______

_____

Analysed by ownership type






Franchised

1,097

58

124,944

7,250


Managed

416

(15)

104,582

(7,800)



____

____

______

_____

Total

1,513

43

229,526

(550)



____

____

______

_____

 

1Includes 14 Holiday Inn Resort properties (3,601 rooms) (2016: 14 Holiday Inn Resort properties (3,531 rooms)).

 

 

 

 

THE AMERICAS


6 months ended 30 June

Americas Results

2017

2016

%


$m

$m

change

Revenue





Franchised

343

338

1.5


Managed

82

86

(4.7)


Owned and leased

74

66

12.1


____

____

____

Total


499

490

1.8


____

____

____

Operating profit before exceptional items





Franchised

298

295

1.0


Managed

33

32

3.1


Owned and leased

15

12

25.0


Regional overheads

(25)

(26)

3.8


____

____

____



321

313

2.6

Exceptional items


(4)

(5)

20.0


____

____

____

Operating profit

317

308

2.9


____

____

____





                                                                                               

Americas Comparable RevPAR movement on previous year

 

6 months ended

30 June 2017

Franchised



Crowne Plaza

0.2%


Holiday Inn

1.8%


Holiday Inn Express

0.8%


All brands

1.1%

Managed



InterContinental

(2.0)%


Kimpton

2.1%


Crowne Plaza

1.4%


Holiday Inn

(1.1)%


Staybridge Suites

(1.3)%


Candlewood Suites

(0.4)%


All brands

0.5%

Owned and leased



All brands

7.6%

 

 

Franchised revenue increased by $5m (1.5%) to $343m and operating profit increased by $3m (1.0%) to $298m. On a constant currency basis, revenue increased by $5m (1.5%) to $343m and operating profit increased by $4m (1.4%) to $299m. Royalties1 growth of 2.1% was driven by 1.6% rooms growth year-on-year and comparable RevPAR growth of 1.1%.

 

Managed revenue decreased by $4m (4.7%) to $82m, and operating profit increased by $1m (3.1%) to $33m. Revenue and operating profit included $18m (2016: $20m) and $1m (2016: $1m) respectively from one managed lease property2. Excluding results from this managed lease hotel, and on a constant currency basis, revenue remained flat and operating profit increased by $2m (6.5%).

 

Owned and leased revenue increased by $8m (12.1%) to $74m, and operating profit increased by $3m (25.0%) to $15m. On a constant currency basis, owned and leased revenue increased by $8m (12.1%), and operating profit increased by $3m (25.0%), as one hotel benefited from increased North Americas inbound business.

 

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

2 A property that is structured for legal reasons as an operating lease but has the same characteristics as a management contract.

 

 

 

 


Hotels

Rooms

Americas hotel and room count


Change over


Change over

 

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

49

1

 17,302

894


Kimpton

59

(2)

 11,100

(138)


Crowne Plaza

161

(3)

 42,748

(1,368)


Hotel Indigo

48

2

 6,418

486


EVEN Hotels

6

-

 1,010

-


Holiday Inn1

762

(12)

134,283

(2,461)


Holiday Inn Express

2,183

29

196,033

3,662


Staybridge Suites

234

8

25,110

925


Candlewood Suites

374

12

35,251

1,059


Other

81

(3)

20,694

(1,103)


____

____

______

_____

Total

3,957

32

489,949

1,956


____

____

______

_____

Analysed by ownership type






Franchised

3,665

32

 431,648

782


Managed

286

-

 56,476

1,174


Owned and leased

6

-

 1,825

-


____

____

______

_____

Total

3,957

32

489,949

1,956


____

____

______

_____

 

1Includes 25 Holiday Inn Resort properties (6,787 rooms) and 26 Holiday Inn Club Vacations (7,676 rooms)

  (2016: 25 Holiday Inn Resort properties (6,791 rooms) and 26 Holiday Inn Club Vacations (7,601 rooms)).

 

 


Hotels

Rooms

Americas pipeline


Change over


Change over

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

6

(1)

 1,642

(890)


Kimpton

16

(1)

 2,714

(235)


Crowne Plaza

15

(2)

 3,256

(30)


Hotel Indigo

31

(1)

 3,580

(385)


EVEN Hotels

6

-

 775

(5)


Holiday Inn1

137

9

17,892

588


Holiday Inn Express

496

8

 46,930

134


Staybridge Suites

141

10

 14,798

902


Candlewood Suites

107

(1)

 9,608

4


Other

12

1

1,383

44


____

____

______

_____

Total

967

22

102,578

127


____

____

______

_____

Analysed by ownership type






Franchised

925

28

95,802

2,507


Managed

42

(6)

6,776

(2,380)


____

____

______

_____

Total

967

22

102,578

127


____

____

______

_____

 

1Includes three Holiday Inn Resort properties (455 rooms) (2016: three Holiday Inn Resort properties (455 rooms)).

 

 

 

EUROPE


6 months ended 30 June

Europe results

2017

2016

%


$m

$m

change

Revenue





Franchised

50

49

2.0


Managed

63

60

5.0


____

____

____

Total


113

109

3.7


____

____

____

Operating profit before exceptional items





Franchised

37

37

-


Managed

12

10

20.0


Regional overheads

(11)

(13)

15.4


____

____

____

Operating profit


38

34

11.8


____

____

____

 

 

 

 

Europe comparable RevPAR movement on previous year

6 months ended

30 June

2017



Franchised



All brands

5.8%




Managed



All brands

7.5%

 

 

Franchised revenue increased by $1m (2.0%) to $50m and operating profit remained flat at $37m. On a constant currency basis, revenue increased by $4m (8.2%) to $53m and operating profit increased by $2m (5.4%) to $39m.

 

Managed revenue increased by $3m (5.0%) to $63m and operating profit increased by $2m (20.0%) to $12m. Revenue included $38m (2016: $38m), and operating profit included $1m (2016: $1m) from managed leases1. Excluding properties operated under this arrangement, and on a constant currency basis, revenue increased by $4m (18.2%) and operating profit increased by $2m (22.2%).

 

 

1 Properties that are structured for legal reasons as an operating lease but have the same characteristics as a management contract.

 

 

 


 

Hotels

 

Rooms

Europe hotel and room count


Change over


Change over

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

31

-

 9,724

-


Kimpton

1

1

 274

274


Crowne Plaza

94

2

 21,633

746


Hotel Indigo

22

1

 1,970

60


Holiday Inn1

282

(9)

 46,112

(1,717)


Holiday Inn Express

239

5

 29,508

930


Staybridge Suites

7

-

 1,000

-


Other

1

-

 141

-


____

____

______

_____

Total

677

-

110,362

293


____

____

______

_____

Analysed by ownership type






Franchised

624

(5)

95,788

(1,242)


Managed

53

5

14,574

1,535


____

____

______

_____

Total

677

-

110,362

293


____

____

______

_____

 

1Includes one Holiday Inn Resort property (88 rooms) (2016: one Holiday Inn Resort properties (88 rooms)).

 

 

 


Hotels

Rooms

Europe pipeline


Change over


Change over

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

 6

-

 813

-


Kimpton

 1

-

 149

-


Crowne Plaza

 13

(1)

 3,003

(182)


Hotel Indigo

 18

-

 2,211

(53)


Holiday Inn

 35

1

 7,528

259


Holiday Inn Express

 60

2

 9,444

49


Staybridge Suites

 6

1

 826

189


____

____

______

_____

Total

139

3

23,974

262


____

____

______

_____

Analysed by ownership type






Franchised

118

7

18,784

876


Managed

21

(4)

5,190

(614)


____

____

______

_____

Total

139

3

23,974

262


____

____

______

_____

 

 

 

ASIA, MIDDLE EAST AND AFRICA (AMEA)


6 months ended 30 June

AMEA results

2017

2016

%


$m

$m

change

Revenue





Franchised

8

8

-


Managed

90

90

-


Owned and leased

17

17

-



____

____

____

Total


115

115

-


____

____

____

Operating profit before exceptional items





Franchised

7

6

16.7


Managed

43

42

2.4


Owned and leased

1

1

-


Regional overheads

(10)

(10)

-


____

____

____

Operating profit


41

39

5.1


____

____

____

 

 

 

AMEA comparable RevPAR movement on previous year

6 months ended

30 June

2017



Franchised



All brands

(1.9)%

 

Managed



All brands

2.0%

 

 

On an actual and constant currency basis, franchised revenue remained flat at $8m whilst operating profit increased by $1m (16.7%) to $7m.

 

Managed revenue remained flat at $90m and operating profit increased by $1m (2.4%) to $43m. Comparable RevPAR increased by 2.0%. Revenue and operating profit included $24m (2016: $24m) and $2m (2016: $2m) respectively from one managed lease property1. Excluding results from this hotel and on a constant currency basis, revenue increased by $1m (1.5%) and operating profit increased by $3m (7.5%) benefiting from the favourable phasing of costs.

 

In the owned and leased estate, on an actual and constant currency basis, revenue and operating profit remained flat at $17m and $1m respectively.

 

1 A property that is structured for legal reasons as an operating lease but has the same characteristics as a management contract.

 

 

 

 


Hotels

Rooms

AMEA hotel and room count


Change over


Change over

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

 68

(1)

 20,890

(313)


Crowne Plaza

 75

2

 21,296

547


Hotel Indigo

 3

1

 382

59


Holiday Inn1

 92

(1)

 21,175

(137)


Holiday Inn Express

 34

-

 7,693

110


Staybridge Suites

 4

1

 502

77


Other

8

2

9,994

5,538


____

____

______

 _____

Total

284

4

81,932

5,881


____

____

______

_____

Analysed by ownership type






Franchised

57

2

13,023

453


Managed

225

2

68,376

5,482


Owned and leased

2

-

533

(54)


____

____

______

_____

Total

284

4

81,932

5,881


____

____

______

_____

 

1Includes 14 Holiday Inn Resort properties (2,958 rooms) (2016: 14 Holiday Inn Resort properties (2,953 rooms))

 

 


Hotels

Rooms

AMEA pipeline


Change over


Change over

 

 

2017

30 June

2016

31 December

2017

30 June

2016

31 December

Analysed by brand






InterContinental

 26

(1)

 6,245

(436)


Crowne Plaza

 20

(1)

 5,239

(315)


Hotel Indigo

 15

1

 2,715

133


Holiday Inn1

 48

(1)

 13,003

(261)


Holiday Inn Express

 31

(4)

 6,687

(799)


Staybridge Suites

 4

-

 830

42


Other

1

1

 88

(3,442)


____

____

______

_____

Total

145

(5)

34,807

(5,078)


____

____

______

_____

Analysed by ownership type






Franchised

12

1

2,605

199


Managed

133

(6)

32,202

(5,277)


____

____

______

_____

Total

145

(5)

34,807

(5,078)


____

____

______

_____

 

1Includes five Holiday Inn Resort properties (1,151 rooms) (2016: five Holiday Inn Resort properties (1,256 rooms))

 

 

 

GREATER CHINA


6 months ended 30 June

Greater China results

2017

2016

%


$m

$m

change

Revenue





Franchised

2

2

-


Managed

56

53

5.7



____

____

____

Total


58

55

5.5


____

____

____

Operating profit before exceptional items





Franchised

1

2

(50.0)


Managed

32

29

10.3


Regional overheads

(10)

(11)

9.1


____

____

____

Operating profit


23

20

15.0


____

____

____

 

 

 

 

Greater China comparable RevPAR movement on previous year

6 months ended

30 June

2017



Managed



All brands

4.6%

 

 

On an actual and constant currency basis, franchised revenue remained flat at $2m whilst operating profit decreased by $1m (50.0%) to $1m.

 

Managed revenue increased by $3m (5.7%) to $56m and operating profit increased by $3m (10.3%) to $32m. Comparable RevPAR increased by 4.6% and System size grew by 9.0% year-on-year. On a constant currency basis, revenue increased by $6m (11.3%) to $59m, whilst operating profit increased by $4m (13.8%) to $33m primarily due to strong trading in mainland China.

 

 

 


Hotels

Rooms

 

Greater China hotel and room count

 

 

2017

Change

over 2016

 

2017

Change

over 2016


30 June

31 December

30 June

31 December

Analysed by brand






InterContinental

 40

1

 16,656

341


HUALUXE

 5

1

 1,436

340


Crowne Plaza

 80

1

 28,350

299


Hotel Indigo

 6

-

 745

5


Holiday Inn1

 81

(2)

 25,371

(500)


Holiday Inn Express

 86

11

 20,670

2,193


Other

 5

(1)

 2,204

(268)



____

____

______

_____

Total

303

11

95,432

2,410



____

____

______

_____

Analysed by ownership type






Franchised

6

2

2,590

406


Managed

297

9

92,842

2,004



____

____

______

_____

Total

303

11

95,432

2,410



____

____

______

_____

 

1Includes six Holiday Inn Resort properties (1,820 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms))

 

 


Hotels

Rooms

 

Greater China pipeline

 

 

2017

Change

over 2016

 

2017

Change

over 2016


30 June

31 December

30 June

31 December

Analysed by brand






InterContinental

 25

3

 8,344

890


HUALUXE

 21

(1)

 6,556

(400)


Crowne Plaza

 37

(1)

 12,250

(261)


Hotel Indigo

 12

1

 1,980

198


EVEN Hotels

1

1

290

290


Holiday Inn1

 50

-

 15,078

237


Holiday Inn Express

 115

20

 23,390

3,185


Other

 1

-

 279

-



____

____

______

_____

Total

262

23

68,167

4,139



____

____

______

_____

Analysed by ownership type






Franchised

42

22

7,753

3,668


Managed

220

1

60,414

471



____

____

______

_____

Total

262

23

68,167

4,139



____

____

______

_____

 

1Includes six Holiday Inn Resort properties (1,995 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms))

 

 

 

Central


6 months ended 30 June


2017

2016

%

Central results

$m

$m

change





Revenue

72

69

4.3

Gross costs

(125)

(131)

4.6


____

____

____

Operating loss


(53)

(62)

14.5


____

____

____

 

Central results

The net operating loss decreased by $9m (14.5%) compared to 2016 (a $4m or 6.5% decrease to $58m at constant currency). Central revenue, which mainly comprises technology fee income, increased by $3m (4.3%) to $72m, driven by increases in both comparable RevPAR and IHG System size in the first half of 2017. At constant currency, gross costs remained flat compared to 2016 (a $6m or 4.6% decrease at actual currency).

 

OTHER FINANCIAL INFORMATION

 

Exceptional operating items

The $4m exceptional operating charge, (2016 $5m charge), both relate to the costs of integrating Kimpton into the operations of the Group.

 

Net financial expenses

Net financial expenses decreased by $1m to $40m for the six months ended 30 June 2017. This decrease reflects a reduction in the cost of debt resulting from the refinancing of the £250m 6% bond which matured in December 2016, and the favourable impact of a weaker pound on translation of sterling interest expense, offset by higher average net debt levels following the payment of the $1.5bn special dividend in 2016.

 

Taxation

The tax charge on profit before tax, excluding the impact of exceptional items, has been calculated using an interim effective tax rate of 33%. Excluding the effect of prior-year items, the equivalent effective tax rate would be approximately 34%. This rate is higher than the average UK statutory rate for the year of 19.25% due mainly to certain overseas profits (particularly in the US) being subject to statutory rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.

 

Taxation within exceptional items totalled a credit of $1m representing tax relief on the Kimpton integration costs.

 

Net tax paid in the six months ended 30 June 2017 totalled $50m.

 

Dividends

The Board has proposed an interim dividend per ordinary share of 33.0¢, representing growth of 10% on the 2016 interim dividend.

 

On 21 February 2017, the Group announced a $0.4bn return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (202.5¢ per ordinary share) was paid on 22 May 2017.

 

Capital structure and liquidity management

During the six months ended 30 June 2017, $251m of cash was generated from operating activities. Net cash outflows from investing activities totalled $179m and net cash used in financing activities totalled $142m. Net debt at 30 June 2017 was $2,056m and included $228m in respect of the finance lease obligations for the InterContinental Boston.

 

The Group had net liabilities of $1,097m at 30 June 2017 reflecting that its internally generated brands are not recorded on the balance sheet, in accordance with accounting standards.  The change in net liabilities (from $759m at 31 December 2016) was primarily due to the payment of the $404m special dividend on 22 May 2017.

 

 

 

USE OF NON-GAAP MEASURES

 

In addition to performance measures directly observable in the Interim Financial Statements (IFRS measures), additional measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures and include:

·     Total gross revenue;

·     Underlying revenue, underlying operating profit growth, underlying fee revenue, fee margin growth;

·     Total operating profit before exceptional items and tax, adjusted earnings per ordinary share;

Net debt;

Net capital expenditure;

·     Free cash flow; and

·     Underlying earnings per share.

Further information can be found on page 26 of the IHG Annual Report and Form 20-F 2016 (which is available at www.ihgplc.com). 

 

Underlying revenue and underlying operating profit Non-GAAP reconciliations

The following tables:

·     show underlying revenue and underlying operating profit on both an actual and constant currency basisa;

·     reconcile segmental underlying revenue and underlying operating profit to Group underlying revenue and operating profit;

·     show underlying Group fee revenue and Group fee margin on both an actual and constant currency basisa; and

·     reconcile Group underlying revenue and underlying operating profit to the GAAP measures included in the Interim Financial Statements.

a IHG’s method for calculating the constant currency amounts of entities reporting in currencies other than US dollars is to translate the current period results into US dollars using the prior period’s exchange rate. For example, if a UK entity generated revenue of £100m in 2017 and 2016, the Interim Financial Statements would report revenue of $127m in 2017 and $143m in 2016, using the respective average exchange rates for the year of $1=£0.79 and $1=£0.70. For constant currency reporting, 2017 revenue would be translated at $1=£0.70 giving a US dollar value of $143m, thereby showing that underlying revenue was flat year-on-year.

 

Highlights for the six months ended 30 June 2017

 

 

 

Revenue

 

Operating profit

 


2017

2016

%

2017

2016

%


$m

$m

change

$m

$m

change








Per Group income statement

857

838

2.3

366

339

8.0

 

Exceptional items

-

-

-

4

5

(20.0)

 

Managed leases

(80)

(82)

2.4

(4)

(4)

-

 


_____

_____

_____

_____

_____

_____

 

Underlying at actual exchange

777

756

2.8

366

340

7.6

 

rates

_____

_____

_____

_____

_____

_____

 








 


 

At actual exchange rates

 

At constant currency


2017

2016

%

2017

2016

%


$m

$m

change

$m

$m

change

Underlying revenue







Americas

481

470

2.3

483

470

2.8

Europe

75

71

5.6

79

71

11.3

AMEA

91

91

-

92

91

1.1

Greater China

58

55

5.5

61

55

10.9

Central

72

69

4.3

73

69

5.8


_____

_____

_____

_____

_____

_____

Underlying Group revenue

777

756

2.8

788

756

4.2

Owned and leased revenue







included above

(91)

(83)

(9.6)

(91)

(83)

(9.6)


_____

_____

_____

_____

_____

_____

Underlying Group fee revenue

686

673

1.9

697

673

3.6


_____

_____

_____

_____

_____

_____

 

 


At actual exchange rates

At constant currency


2017

2016

%

2017

2016

%


$m

$m

change

$m

$m

change








Underlying operating profit







Americas

320

312

2.6

322

312

3.2

Europe

37

33

12.1

37

33

12.1

AMEA

39

37

5.4

41

37

10.8

Greater China

23

20

15.0

23

20

15.0

Central

(53)

(62)

14.5

(58)

(62)

6.5


_____

_____

_____

_____

_____

_____

Underlying Group operating profit

366

340

7.6

365

340

7.4

Owned and leased operating







profit included above

(16)

(13)

(23.1)

(16)

(13)

(23.1)


_____

_____

_____

_____

_____

_____

Underlying Group fee profit

350

327

7.0

349

327

6.7


_____

_____

_____

_____

_____

_____

Group fee margin

51.0%

48.6%

2.4ppts

50.1%

48.6%

1.5ppts


_____

_____

_____

_____

_____

_____




Net capital expenditure

 

Net capital expenditure is defined as cash flow from investing activities, less System Fund depreciation (recovery of previous System Fund capital expenditure).  For internal management reporting, capital expenditure is reported as either maintenance, recyclable, or System Fund.  The disaggregation of net capital expenditure provides useful information as it enables users to distinguish between System Fund capital investments and recyclable investments (such as investments in associates and joint ventures), which are intended to be recoverable in the medium term, compared with maintenance capital expenditure (including key money paid), which represents a permanent cash outflow.

 

The reconciliation of cash flow from investing activities to net capital expenditure is as follows:

 


6 months ended 30 June


2017

2016


$m

$m




Net cash from investing activities

(179)

(97)

 

Analysed as:



    Capital expenditure: maintenance and key money

(44)

(36)

    Capital expenditure: recyclable investments

(80)

(25)

    Capital expenditure: System Fund investments

(62)

(47)


_____

_____

Gross capital expenditure

(186)

(108)

    Disposal proceeds

7

11


_____

_____


(179)

(97)

    System Fund depreciation

17

14


_____

_____

Net capital expenditure

(162)

(83)


_____

_____

 

 

 

Free cash flow

 

Free cash flow is defined as cash flow from operating activities (after interest and tax paid), less purchase of shares by employee share trusts and maintenance capital expenditure, including key money paid.  In 2016, free cash flow also excludes the $95m cash receipt from renegotiation of long-term partnership agreements.  Free cash flow is a useful measure for investors, as it represents the cash available to invest back into the business to drive growth, pay the ordinary dividend, with any surplus being available for additional returns to shareholders.

 

The reconciliation of cash flow from operating activities to free cash flow is as follows:

 


6 months ended 30 June


2017

2016


$m

$m




Net cash from operating activities

251

382

Less:



    Purchase of shares by employee share trusts

(3)

(10)

    Capital expenditure: maintenance and key money

(44)

(36)

    Cash receipt from renegotiation of long-term partnership agreements

-

(95)


_____

_____

Free cash flow

204

241


_____

_____

 

Underlying earnings per share

 

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

 

Underlying earnings per share provides a per share measure based on comparable year-on-year trading and reflects underlying trends in the Group's financial performance.  

 

Basic earnings per share can be reconciled to underlying earnings per share as follows:

 


6 months ended 30 June


2017

2016


$m

$m




Basic earnings per ordinary share



Profit available for equity holders

219

200

Basic weighted average number of ordinary shares (millions)

196

228




Basic earnings per ordinary share (cents)

111.7

87.7


_____

_____




Underlying earnings per ordinary share



Profit available for equity holders

219

200

Adjusted for:



    Exceptional items before tax

4

5

    Tax on exceptional items

(1)

(2)

    Managed leases

(4)

(4)

    Tax on managed leases

1

1

    Currency effects and other

-

-


_____

_____

Underlying profit available for equity holders

219

200


_____

_____




Underlying earnings per ordinary share (cents)

111.7

87.7


_____

_____

 

 

 

Risks and Uncertainties

 

On pages 164 to 167 of the IHG Annual Report and Form 20-F 2016 we set out our assessment of the principal risk issues that would face the business through 2017 under the headings:

 

·     political and economic developments;

·     events that adversely impact domestic or international travel;

·     hotel industry supply and demand cycle; competitive and changing industry;

·     executing and realising the benefits from strategic acquisitions;

·     dependency on external stakeholders and business partners;

·     increasing competition from online travel agents and intermediaries;

·     identifying, securing and retaining franchise and management agreements;

·     changing technology and systems; brand reputation;

·     resilience of our reservation systems and other key technology platforms;

·     variety of risks relating to safety, security and crisis management; requirement for the right people, skills and capability to manage growth; financial stability and ability to borrow and satisfy debt covenants;

·     litigation;

·     information security and data privacy;

·     compliance with existing and changing regulations and societal expectations across numerous countries, territories and jurisdictions; and

·     difficulties insuring our business.

 

In our view, the nature and potential impact of such risks remain essentially unchanged as regards our performance over the second half of 2017.

 

 

 

GOING CONCERN

 

An overview of the business activities of IHG, including a review of the key business risks that the Group faces, is given in this Interim Management Report. Information on the Group's treasury management policies can be found in note 22 to the Group Financial Statements in the IHG Annual Report and Form 20-F 2016.

 

In March 2017, the Group extended the maturity of its $1.275bn facility to March 2022. The Group now has no significant debt maturities before 2022.

 

At the end of June 2017, the Group was trading significantly within its banking covenants and debt facilities.

 

The Group's fee-based model and wide geographic spread means that it is well placed to manage through uncertain times, and our forecasts and sensitivity projections, based on a range of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.

 

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, the financial statements continue to be prepared on going concern basis.

 

 

Directors' Responsibility Statement

 

The Directors confirm that to the best of their knowledge:

 

·      The condensed set of Financial Statements has been prepared in accordance with IAS 34;

·      The Interim Management Report includes a fair review of the important events during the first six months, and their impact on the financial statements and a description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and

·      The Interim Management Report includes a fair review of related party transactions and changes therein, as required by DTR 4.2.8R.

 

On behalf of the Board

 

 

 

 

 

 

Keith Barr

Paul Edgecliffe-Johnson

Chief Executive Officer

Chief Financial Officer



7 August 2017

7 August 2017

 

 

 

InterContinental Hotels Group PLC

GROUP INCOME STATEMENT

For the six months ended 30 June 2017

 


6 months ended 30 June 2017

6 months ended 30 June 2016

 


Before

exceptional

items

 Exceptional

items

(note 4)

 

 

Total

Before

exceptional

items

Exceptional

items

(note 4)

 

 

Total


$m

$m

$m

$m

$m

$m

Continuing operations














Revenue (note 3)

857

-

857

838

-

838

Cost of sales

(291)

-

(291)

(270)

-

(270)

Administrative expenses

(156)

(4)

(160)

(177)

(5)

(182)

Share of losses of associates and joint ventures

 

-

 

-

 

-

 

(2)

 

-

 

(2)

Other operating income and expenses

 

7

 

-

 

7

 

3

 

-

 

3


_____

____

____

_____

____

____


417

(4)

413

392

(5)

387








Depreciation and amortisation

(47)

 -

(47)

(48)

-

(48)


_____

_____

_____

_____

_____

_____








Operating profit (note 3)

370

(4)

366

344

(5)

339

Financial income

2

-

2

4

-

4

Financial expenses

(42)

-

(42)

(45)

-

(45)


_____

_____

_____

_____

_____

_____








Profit before tax

330

(4)

326

303

(5)

298








Tax (note 5)

(108)

1

(107)

(99)

2

(97)


_____

_____

_____

_____

_____

_____

Profit for the period from continuing operations

 

222

 

(3)

 

219

 

204

 

(3)

 

201


_____

_____

_____

_____

_____

_____








Attributable to:








Equity holders of the parent

222

(3)

219

203

 

(3)

  200

 


Non-controlling interest

-

-

-

1

-

1



_____

_____

_____

_____

_____

_____



222

(3)

219

204

(3)

201


_____

_____

_____

_____

_____

_____








Earnings per ordinary share

(note 6)







Continuing and total operations:








Basic



111.7¢



87.7¢


Diluted



110.6¢



87.3¢


Adjusted

113.3¢



89.0¢




Adjusted diluted

112.1¢



88.6¢




_____


_____

_____


_____








 

 



 

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2017

 


2017

6 months ended

30 June

$m

2016

6 months ended

30 June

$m




Profit for the period

219

201




Other comprehensive income






Items that may be subsequently reclassified to profit or loss:




Losses on valuation of available-for-sale financial assets, net of related tax charge of $nil (2016 $nil)

 

(2)

 

(3)


Exchange (losses)/gains on retranslation of foreign operations, net of related tax credit of $1m (2016 charge of $2m)

 

(35)

 

98


_____

_____


(37)

95

Items that will not be reclassified to profit or loss:




Re-measurement gains/(losses) on defined benefit plans, net of related tax charge of $1m (2016 credit of $3m)

 

-

 

(11)


_____

_____

Total other comprehensive (loss)/income for the period

(37)

84


_____

_____

Total comprehensive income for the period

182

285


_____

_____

Attributable to:




Equity holders of the parent

181

282


Non-controlling interest

1

3


_____

_____


182

285


_____

_____

 

 



 

 

 

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2017

 


6 months ended 30 June 2017

 


Equity share capital

Other reserves*

Retained earnings

Non-controlling interest

 

Total equity


$m

$m

$m

$m

$m







At beginning of the period

141

(2,300)

1,392

8

(759)







Total comprehensive income for the period

-

(38)

219

1

182

Transfer of treasury shares to employee share trusts

 

-

 

(20)

 

20

 

-

 

-

Purchase of own shares by employee share trusts

 

-

 

(3)

 

-

 

-

 

(3)

Release of own shares by employee share trusts

 

-

 

29

 

(29)

 

-

 

-

Equity-settled share-based cost

-

-

12

-

12

Tax related to share schemes

-

-

5

-

5

Equity dividends paid

-

-

(531)

(3)

(534)

Exchange adjustments

7

(7)

-

-

-


_____

______

_____

_____

_____

At end of the period

148

(2,339)

1,088

6

(1,097)


_____

_____

_____

_____

_____

 


 

6 months ended 30 June 2016

 


Equity share capital

Other reserves*

Retained earnings

Non-controlling interest

 

Total equity


$m

$m

$m

$m

$m







At beginning of the period

169

(2,513)

2,653

10

319







Total comprehensive income for the period

-

93

189

3

285

Transfer of treasury shares to employee share trusts

 

-

 

(24)

 

24

 

-

 

-

Purchase of own shares by employee share trusts

 

-

 

(10)

 

-

 

-

 

(10)

Release of own shares by employee share trusts

 

-

 

39

 

(39)

 

-

 

-

Equity-settled share-based cost

-

-

15

-

15

Tax related to share schemes

-

-

2

-

2

Equity dividends paid

-

-

(1,637)

(5)

(1,642)

Transaction costs relating to shareholder returns

 

-

 

-

 

(1)

 

-

 

(1)

Exchange adjustments

(15)

15

-

-

-


_____

______

_____

_____

_____

At end of the period

154

(2,400)

1,206

8

(1,032)


_____

_____

_____

_____

_____

 

*

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

All items above are shown net of tax.

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF FINANCIAL POSITION

30 June 2017


2017

30 June

2016

31 December


$m

$m

ASSETS



Property, plant and equipment

422

419

Goodwill and other intangible assets

1,373

1,292

Investment in associates and joint ventures

157

111

Trade and other receivables

-

8

Retirement benefit assets

4

-

Other financial assets

264

248

Non-current tax receivable

23

23

Deferred tax assets

52

48


_____

_____

Total non-current assets

2,295

2,149


_____

_____

Inventories

3

3

Trade and other receivables

595

472

Current tax receivable

49

77

Other financial assets

15

20

Cash and cash equivalents

166

206


_____

_____

Total current assets

828

778


_____

_____

Total assets (note 3)

3,123

2,927


_____

_____

LIABILITIES



Loans and other borrowings

(116)

(106)

Derivative financial instruments

-

(3)

Loyalty programme liability

(326)

(291)

Trade and other payables

(641)

(681)

Provisions

(3)

(3)

Current tax payable

(53)

(50)


_____

_____

Total current liabilities

(1,139)

(1,134)


_____

_____

Loans and other borrowings

(2,106)

(1,606)

Retirement benefit obligations

(100)

(96)

Loyalty programme liability

(417)

(394)

Trade and other payables

(177)

(200)

Provisions

(5)

(5)

Deferred tax liabilities

(276)

(251)


_____

_____

Total non-current liabilities

(3,081)

(2,552)


_____

_____

Total liabilities

(4,220)

(3,686)


_____

_____

Net liabilities

(1,097)

(759)


_____

_____

EQUITY



Equity share capital

148

141

Capital redemption reserve

10

9

Shares held by employee share trusts

(5)

(11)

Other reserves

(2,868)

(2,860)

Unrealised gains and losses reserve

109

111

Currency translation reserve

415

451

Retained earnings

1,088

1,392


_____

_____

IHG shareholders' equity

(1,103)

(767)

Non-controlling interest

6

8


_____

_____

Total equity

(1,097)

(759)


_____

_____

 

 

InterContinental Hotels Group PLC

GROUP STATEMENT OF CASH FLOWS

For the six months ended 30 June 2017

 


2017

6 months ended

30 June

2016

6 months ended

30 June


$m

$m




Profit for the period

219

201

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

 

94

 

221


_____

_____

Cash flow from operations

313

422

Interest paid

(13)

(12)

Interest received

1

4

Tax paid on operating activities

(50)

(32)


_____

_____

Net cash from operating activities

251

382


_____

_____

Cash flow from investing activities



Purchase of property, plant and equipment

(22)

(18)

Purchase of intangible assets

(94)

(69)

Investment in associates and joint ventures

(47)

(7)

Loan advances to associates and joint ventures

-

(1)

Investment in other financial assets

(27)

(10)

Capitalised interest paid

(3)

(3)

Landlord contributions to property, plant and equipment

7

-

Disposal of hotel assets, net of costs and cash disposed

-

(4)

Proceeds from associates and joint ventures

-

2

Repayments of other financial assets

7

13


_____

_____

Net cash from investing activities

(179)

(97)


_____

_____

Cash flow from financing activities



Purchase of own shares by employee share trusts

(3)

(10)

Dividends paid to shareholders

(531)

(1,637)

Dividends paid to non-controlling interests

(3)

(5)

Transaction costs relating to shareholder returns

-

(1)

Increase in other borrowings

395

395


_____

_____

Net cash from financing activities

(142)

(1,258)


_____

_____

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

 

(70)

 

(973)




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

117

1,098

Exchange rate effects

20

(30)


_____

_____

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

67

95


_____

_____



 

 

 

InterContinental Hotels Group plc

NOTES TO THE INTERIM FINANCIAL STATEMENTS

 

 

1.

Basis of preparation

 


These condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and IAS 34 'Interim Financial Reporting' and have been prepared on a consistent basis using the same accounting policies and methods of computation set out in the InterContinental Hotels Group PLC (the Group or IHG) Annual Report and Form 20-F for the year ended 31 December 2016.

 

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, the condensed interim financial statements continue to be prepared on a going concern basis.

 

These condensed interim financial statements are unaudited and do not constitute statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006. The auditors have carried out a review of the financial information in accordance with the guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board.

 

The financial information for the year ended 31 December 2016 has been extracted from the Group's published financial statements for that year which were prepared in accordance with IFRSs as adopted by the European Union and which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified with no reference to matters to which the auditor drew attention by way of emphasis and no statement under s498(2) or s498(3) of the Companies Act 2006.

 

The Group continues to prepare for the implementation of IFRS 15 'Revenue from Contracts with Customers' in 2018.  In terms of the impacts and their financial quantification, the guidance provided in the Annual Report and Form 20-F 2016 remains valid; significantly reported higher revenues (of at least $1.6bn) and an immaterial reduction in operating profit.  Conclusions on loyalty programme accounting remain outstanding and could result in the reporting of additional revenues but are not expected to have any further impact on operating profit.

 

 

 

2.

 


The results of operations have been translated into US dollars at the average rates of exchange for the period. In the case of sterling, the translation rate is $1 = £0.79 (2016 $1 = £0.70). In the case of the euro, the translation rate is $1 = €0.92 (2016 $1 = €0.90).

 

Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the period. In the case of sterling, the translation rate is $1 = £0.77 (2016 30 June $1 = £0.74; 31 December $1 = £0.81). In the case of the euro, the translation rate is $1 = €0.88 (2016 30 June $1 = €0.90; 31 December $1 = €0.95).

 

 

 

3.

Segmental information








Revenue

2017

6 months ended

30 June

2016

6 months ended

30 June



$m

$m






Americas 

499

490


Europe 

113

109


AMEA

115

115


Greater China

58

55


Central

72

69



_____

_____


Total revenue

857

838



_____

_____


All results relate to continuing operations.

 


Profit

2017

6 months ended

30 June

$m

2016

6 months ended

30 June

$m

 





 


Americas 

321

313

 


Europe 

38

34

 


AMEA

41

39

 


Greater China

23

20

 


Central

(53)

(62)

 



_____

_____

 


Reportable segments' operating profit

370

344

 


Exceptional items (note 4)

(4)

(5)

 



_____

_____

 


Operating profit

366

339

 





 


Net finance costs

(40)

(41)

 



_____

_____

 


Profit before tax

326

298

 



_____

_____

 


All results relate to continuing operations.

 




 


Assets

2017

30 June

$m

2016

31 December

$m






Americas

1,585

1,417


Europe

358

321


AMEA

268

249


Greater China

146

147


Central

476

439



_____

_____


Segment assets

2,833

2,573






Unallocated assets:




Non-current tax receivable

23

23


Deferred tax assets

52

48


Current tax receivable

49

77


Cash and cash equivalents

166

206



_____

_____


Total assets

3,123

2,927



_____

_____

 

 

4.

Exceptional items


 

 

2017

6 months ended

30 June

$m

2016

6 months ended

30 June

$m


Exceptional items before tax





Administrative expenses:





Kimpton integration costs (a)

(4)

(5)



_____

_____


Tax





Tax on exceptional items (b)

1

2



_____

_____

 


 

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


a)

Relates to the costs of integrating Kimpton into the operations of the Group.  Kimpton was acquired on 16 January 2015.  The integration programme remains in progress and will be substantially completed in 2017.


b)

Relates to tax relief on the Kimpton integration costs.










 

5.

Tax

 


The tax charge on profit for the period from continuing operations, excluding the impact of exceptional items (note 4), has been calculated using an interim effective tax rate of 33% (2016 33%) analysed as follows:

 



2017

2017

2017

2016

2016

2016

 


6 months ended 30 June

Profit

$m

Tax

$m

Tax

rate

Profit

$m

Tax

$m

Tax

rate

 









 


Before exceptional items

330

(108)

33%

303

(99)

33%

 









 


Exceptional items

(4)

1


(5)

2


 



_____

_____


_____

_____


 



326

(107)


298

(97)


 



_____

_____


_____

_____


 


Analysed as:







 



UK tax


(6)



1


 



Foreign tax


(101)



(98)


 




_____



_____


 




(107)



(97)


 




_____



_____


 




 

 

 

6.

Earnings per ordinary share

 


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

 

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

 

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

 


Continuing and total operations

2017

6 months ended

 30 June

2016

6 months

ended

30 June






Basic earnings per ordinary share




Profit available for equity holders ($m)

219

200


Basic weighted average number of ordinary shares (millions)

196

228


Basic earnings per ordinary share (cents)

111.7

87.7



_____

_____


Diluted earnings per ordinary share




Profit available for equity holders ($m)

219

200


Diluted weighted average number of ordinary shares (millions)

198

229


Diluted earnings per ordinary share (cents)

110.6

87.3



_____

_____


Adjusted earnings per ordinary share




Profit available for equity holders ($m)

219

200


Adjusting items (note 4):





Exceptional items before tax ($m)

4

5



Tax on exceptional items ($m)

(1)

(2)



_____

_____


Adjusted earnings ($m)

222

203


Basic weighted average number of ordinary shares (millions)

196

228


Adjusted earnings per ordinary share (cents)

113.3

89.0



_____

_____


Diluted weighted average number of ordinary shares (millions)

198

229


Adjusted diluted earnings per ordinary share (cents)

112.1

88.6



_____

_____

 


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



2017

millions

2016

millions

 


Basic weighted average number of ordinary shares

196

228


Dilutive potential ordinary shares

2

1



_____

_____



198

229



_____

_____

 

        * See the Use of Non-GAAP measures section in the Interim Management Report.

 

 

7.

Dividends and shareholder returns



2017

cents per share

2016

cents per share

2017

$m

2016

$m


Paid during the period:







Final (declared for previous year)

64.0

57.5

127

137



Special

202.5

632.9

404

1,500




_____

_____

_____

_____




266.5

690.4

531

1,637




_____

_____

_____

_____


Proposed for the period:







Interim

33.0

30.0

63

56*



_____

_____

_____

_____


*Amount paid






In February 2017, the Group announced a $400m return of funds to shareholders by way of a special dividend and share consolidation.  On 5 May 2017, shareholders approved the share consolidation on the basis of 45 new ordinary shares of 19 17/21p per share for every 47 existing ordinary shares of 18 318/329p, which became effective on 8 May 2017 and resulted in the consolidation of 9m shares.  The dividend was paid on 22 May 2017.

 

The dividend and share consolidation had the same economic effect as a share repurchase at fair value, therefore previously reported earnings per share has not been restated.

 

The total number of shares held as treasury shares at 30 June 2017 was 7.6m.

 

 

 

 

8.       Reconciliation of profit for the period to cash flow from operations


2017

6 months

ended

30 June

2016

6 months ended

30 June


$m

$m




Profit for the period

219

201

Adjustments for:




Net financial expenses

40

41


Income tax charge

107

97


Depreciation and amortisation

47

48


Exceptional items

4

5


Equity-settled share-based cost

9

11


Dividends from associates and joint ventures

2

2


Net change in loyalty programme liability and System Fund surplus

66

110


System Fund depreciation and amortisation

17

14


Other changes in net working capital

(194)

(96)


Utilisation of provisions, net of insurance recovery

-

(4)


Cash flows relating to exceptional items

(4)

(10)


Other items

-

3



_____

--_____

Total adjustments

94

221


_____

_____

Cash flow from operations

313

422


_____

_____

 

 

 

9.

Net debt



2017

30 June

2016

31 December

 



$m

$m

 





 


Cash and cash equivalents

166

206

 


Loans and other borrowings - current

(116)

(106)

 


Loans and other borrowings - non-current

(2,106)

(1,606)

 



_____

_____

 


Net debt*

(2,056)

(1,506)

 



_____

_____

 


Finance lease obligation included above

(229)

(227)

 



_____

_____

 



* See the Use of Non-GAAP measures section in the Interim Management Report.

 

10.

Movement in net debt

 



2017

6 months ended

30 June

2016

6 months

ended

30 June

 



$m

$m

 





 


Net decrease in cash and cash equivalents, net of overdrafts

(70)

(973)

 


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



 



Increase in other borrowings

(395)

(395)

 



_____

_____

 


Increase in net debt arising from cash flows

(465)

(1,368)

 





 


Non-cash movements:



 



Finance lease obligations

(2)

(2)

 



Increase in accrued interest

(21)

(30)

 



Exchange and other adjustments

(62)

100

 



_____

_____

 


Increase in net debt

(550)

(1,300)

 





 


Net debt at beginning of the period

(1,506)

(529)

 



_____

_____

 


Net debt at end of the period

(2,056)

(1,829)

 



_____

_____

 

 

 

11.

Fair values

 

 

 

The table below compares carrying amounts and fair values of the Group's financial assets and liabilities at 30 June 2017:



2017

 30 June

Carrying value

$m

2017

30 June

Fair value


$m

2016

31 December

Carrying value

$m

2016

31 December

Fair value


$m


Financial assets:






Equity securities available-for-sale

156

156

156

156


Loans and receivables

123

123

112

112



_____

_____

_____

_____



279

279

268

268



_____

_____

_____

_____


Financial liabilities:






£400m 3.875% bonds 2022

(526)

(569)

(489)

(541)


£300m 3.75% bonds 2025

(398)

(431)

(370)

(408)


£350m 2.125% bonds 2026

(458)

(440)

(430)

(411)


Finance lease obligations

(229)

(308)

(227)

(297)


Unsecured bank loans

(512)

(512)

(107)

(107)



_____

_____

_____

_____



(2,123)

(2,260)

 (1,623)

(1,764)



_____

_____

_____

_____

 

 

Cash and cash equivalents, trade and other receivables, bank overdrafts, trade and other payables and provisions are excluded from the above tables as their fair value approximates book value. The fair value of loans and receivables approximates book value based on prevailing market rates. The fair value of the £400m, £300m and £350m bonds is based on their quoted market price. The fair value of finance lease obligations is calculated by discounting future cash flows at prevailing interest rates. The fair value of unsecured bank loans approximates book value as interest rates reset to market rates on a frequent basis.

Equity securities available-for-sale and derivatives are held in the Group statement of financial position at fair value as set out in the following table.

 



30 June 2017

 

Level 1

$m

Level 2

$m

Level 3

$m

Total

$m


Assets






Equity securities available-for-sale:






Quoted equity shares

16

-

-

16


Unquoted equity shares

-

-

140

140


 

31 December 2016

 

 

Level 1

$m

 

Level 2

$m

 

Level 3

$m

 

Total

$m


Assets






Equity securities available-for-sale:






Quoted equity shares

14

-

-

14


Unquoted equity shares

-

-

142

142








Liabilities






     Derivatives

-

(3)

-

(3)








Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

 


The Level 2 derivatives consisted of foreign exchange swaps which were valued using data from observable swap curves, adjusted to take account of the Group's own credit risk.

 

The Level 3 equity securities relate to investments in unlisted shares which are valued either by applying an average price-earnings (P/E) ratio for a competitor group to the earnings generated by the investment, or by reference to share of net assets if the investment is currently loss-making or a recent property valuation is available.  The average P/E ratio for the period was 26.3 (2016 31 December 24.5) and a non-marketability factor of 30% (2016 31 December 30%) was applied. 

 

A 10% increase in the average P/E ratio would result in a $2m increase (2016 31 December $2m) in the fair value of the investments and a 10% decrease in the average P/E ratio would result in a $2m decrease (2016 31 December $2m) in the fair value of the investments. A 10% increase in net assets would result in a $7m increase (2016 31 December $7m) in the fair value of investments and a 10% decrease in net assets would result in a $7m decrease (2016 31 December $7m) in the fair value of the investments.

 

There were no transfers between Level 1 and Level 2 fair value measurements during the period and no transfers into and out of Level 3.

 

The following table reconciles movements in instruments classified as Level 3 during the period:



 

$m





At 1 January 2017

142


Additions

2


Valuation losses recognised in other comprehensive income

(4)



____


At 30 June 2017

 140



_____

 

 

 

 

12.

Commitments and guarantees

 


At 30 June 2017, the amount contracted for but not provided for in the financial statements for expenditure on property, plant and equipment and intangible assets was $123m (2016 31 December $97m). The Group has also committed to invest in a number of its associates, with an estimated outstanding commitment of $31m at 30 June 2017 based on current forecasts (2016 31 December $36m).

 

In limited cases, the Group may provide performance guarantees to third-party hotel owners to secure management contracts. At 30 June 2017, the amount provided in the financial statements was $3m (2016 31 December $5m) and the maximum unprovided exposure under such guarantees was $23m (2016 31 December $14m). 

 

The Group may guarantee loans made to facilitate third-party ownership of hotels in which the Group has an equity interest.  At 30 June 2017, there were guarantees of $43m in place (2016 31 December $33m).

 

On 29 March 2017, the Group invested $43m in the Barclay associate in conjunction with its joint venture partner's refinancing of the hotel, which was used to repay the $43m supplemental loan for which the Group had provided an indemnity to its joint venture partner for 100% of the related obligations.  As a consequence, the indemnity has been extinguished.

 

13.

Contingencies

 

Security incidents

 


In respect of the security incidents notified in 2016 and 2017 (see page 141 of the IHG Annual Report and Form 20-F 2016), $5m remains the best estimate of the cost of reimbursing the impacted card networks for counterfeit fraud losses and related expenses.  This estimate, which now includes the 12 IHG managed properties, involves significant judgement based on currently available information and remains subject to change as actual claims are made and new information comes to light.

 

The Group may be exposed to investigations regarding compliance with applicable State and Federal data security standards, and legal action from individuals and organisations impacted by the security incidents.  Due to the general nature of the regulatory enquires received and class action filings to date, it is not practicable to make a reliable estimate of the possible financial effects of any such claims on the Group at this time.  To date, three lawsuits have been filed against IHG entities relating to the security incidents, all of which are in the early stages of litigation.

 

In respect of the $5m provided in the Financial Statements in 2016, it is expected that a proportion will be recoverable under the Group's insurance programmes although this, together with any potential recoveries in respect of the contingent liabilities detailed above, will be subject to specific agreement with the relevant insurance providers.

 

Other

 

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

 

At 30 June 2017, the Group had no other contingent liabilities (2016 31 December $nil).

 

 

 

 

 

INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC

 

 

Introduction

 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the Group income statement, Group statement of comprehensive income, Group statement of changes in equity, Group statement of financial position, Group statement of cash flows and the related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

 

Directors' Responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

 

Our Responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

Ernst & Young LLP

London

7 August 2017

 

 

 

 

 

 

 


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