TIDMIHG
RNS Number : 3300V
InterContinental Hotels Group PLC
09 August 2022
InterContinental Hotels Group PLC
Half Year Results to 30 June 2022
9 August 2022
Reported Underlying(1)
-------------------------------
2022 2021 % change(2) % change
------------------------------- ------- ------- ----------- -------------------------------------
REPORTABLE SEGMENTS(1)
:
------------------------------- ------- ------- -----------
Revenue(1) $840m $565m +49% +53%
Revenue from fee business(1) $664m $505m +31% +33%
Operating profit(1) $377m $188m +101% +91%
-------------------------------------
Fee margin 1 55.9% 44.1% +11.8%pts
Adjusted EPS(1) 121.7c 40.4c +201% KEY METRICS:
------- ------- -----------
GROUP RESULTS:
* $11.7bn total gross revenue(1)
------------------------------- ------- ------- -----------
+48% vs 2021, (14)%
Total revenue $1,794m $1,179m +52% vs 2019
Operating profit $361m $138m +162% * +51% global H1 RevPAR(1)
vs 2021, (10.5)% vs
Basic EPS 117.4c 26.2c +348% 2019
Interim dividend per 43.9c - c NM
share * +44% global Q2 RevPAR(1)
vs 2021, (4.5)% vs
Net debt(1) $1,718m $2,458m (30)% 2019
------- ------- ----------- ---------------------------------------
(1) Definitions for non-GAAP measures can be found in the 'Use
of key performance measures and non-GAAP measures' section, along
with reconciliations of these measures to the most directly
comparable line items within the Financial Statements.
(2) Percentage change shown unless not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
-- Further significant improvement in trading: Americas Q2 RevPAR vs
2019 +3.5%, strong sequential improvement also in EMEAA to (10.3)%;
Greater China (48.9)% due to localised travel restrictions
-- H1 average daily rate +24% vs 2021, up +4% vs 2019; occupancy +10%pts
vs 2021, (10)%pts vs 2019
-- Gross system growth +4.8% YOY, net +3.0% YOY (adjusted for Holiday
Inn and Crowne Plaza removals in H2 2021, and the impact of exiting
Russia in H1 2022)
-- Opened 14.9k rooms (96 hotels) in H1; global estate now at 883k rooms
(6,028 hotels)
-- Signed 30.7k rooms (210 hotels) in H1; global pipeline now at 278k
rooms (1,858 hotels)
-- Luxury & Lifestyle portfolio now 445 hotels, 12% of system size; a
further 287 hotels represent 19% of group pipeline
-- IHG One Rewards transforms our loyalty programme; further developments
to enhance our digital advantage
-- Operating profit from reportable segments of $377m, +101% vs 2021,
(down (8)% vs 2019); reported operating profit of $361m, after System
Fund result of $3m and operating exceptionals of $(19)m
-- Net cash from operating activities of $175m (2021: $173m), with adjusted
free cash flow(1) of $142m (2021: $147m); net debt reduction of $163m
since start of the year includes $227m of net foreign exchange benefit
-- Trailing 12-month adjusted EBITDA(1) of $812m, +78% on a year earlier;
net debt:adjusted EBITDA reduced to 2.1x
-- Resumption of interim dividend at 43.9c, +10% on prior interim payment
in 2019
-- Additional $500m of surplus capital to be returned via new share buyback
programme
Keith Barr, Chief Executive Officer, IHG Hotels & Resorts,
said:
"We saw continued strong trading in the first half of 2022 with
increased demand for travel in most of our markets. This brought
group RevPAR very close to pre-pandemic levels in the second
quarter. Alongside leisure stays, the return of business and group
travel demand continued to build over the period, and our hotels
are seeing increased pricing power due to the strength of IHG's
brands, loyalty programme and technology platform.
The recovery in demand and pricing led to group profit more than
doubling versus 2021, with profitability in the Americas now ahead
of 2019. The EMEAA region also saw excellent improvement in
performance. Whilst Greater China had a tough period as
Covid-related travel restrictions were tightened, we have since
seen a strong recovery in the most recent months, although risk of
further volatility in trading in the region still remains.
Our overall performance reflects a continued focus to build a
stronger business for our guests and owners. We have significantly
enhanced and expanded our brand portfolio in recent years, and
invested in our enterprise platform to drive performance and
accelerate our growth. The investments we have made to innovate our
technology and distribution channels continue to drive improvements
in both the guest experience and owner returns. Some of the biggest
achievements this year include the critical step of transforming
our loyalty programme, IHG One Rewards, and the redesign of our
mobile app and digital channels to deliver a faster, simpler
booking experience.
We opened almost 100 hotels in the half, passing the 6,000
milestone globally, and signed more than 200 properties to take our
pipeline to 1,858, representing over 30% of today's system size. We
continue to see growing interest in conversion opportunities which
represented more than a quarter of openings in the period. This
illustrates the increasing appeal to hotel owners of accessing
IHG's brands and the significant scale and demand delivery
capability of our enterprise platform.
IHG's clear strategy over the last five years has seen us emerge
from the pandemic a stronger and more resilient company, delivering
on key priorities and progressing our ambitious 2030 Journey to
Tomorrow responsible business commitments. Whilst the economic
outlook faces uncertainties as central banks and governments take
action to manage inflation, we remain confident in our business
model and the attractive industry fundamentals that will drive
long-term sustainable growth. Having reinstated a final dividend in
respect of 2021 six months ago, the strong performance seen in 2022
to date, together with the confidence we have in continued
progress, has led us to reintroduce an interim dividend at a level
10% higher than when last paid and launch an initial $500m share
buyback."
For further information, please contact:
Investor Relations: Stuart Ford (+44 (0)7823 828 739);
Aleksandar Milenkovic (+44 (0)7469 905 720);
Joe Simpson (+44 (0)7976 862 072)
Media Relations: Amy Shields (+44 (0)7881 035 550); Claire Scicluna (+44 (0)7776 778 808)
Presentation for analysts and institutional shareholders:
A conference call and webcast presented by Keith Barr, Chief
Executive Officer, and Paul Edgecliffe-Johnson, Chief Financial
Officer and Group Head of Strategy, will commence at 9:30am (London
time) on 9 August 2022 and can be accessed at
www.ihgplc.com/en/investors/results-and-presentations or directly
on
https://www.investis-live.com/ihg/62cea1f8d9438014007fbae3/ihgq2
Analysts and institutional shareholders wishing to ask questions
should use the following dial-in details for a Q&A
facility:
UK: 0800 640 6441
UK local: 0203 936 2999
US: +1 855 979 6654
US local: +1 646 664 1960
All other locations: +44 203 936 2999
Passcode: 91 98 94
An archived webcast of the presentation is expected to be
available later on the day of the results and will remain on it for
the foreseeable future, accessed at
www.ihgplc.com/en/investors/results-and-presentations . An audio
replay will also be available for 7 days using the following
details:
UK: 0203 936 3001
US: +1 845 709 8569
All other locations: +44 203 936 3001
Passcode: 07 07 21
Website:
The full release and supplementary data will be available on our
website from 7:00am (London time) on 9 August. The web address is
www.ihgplc.com/en/investors/results-and-presentations .
About IHG Hotels & Resorts:
IHG Hotels & Resorts [LON:IHG, NYSE:IHG (ADRs)] is a global
hospitality company, with a purpose to provide True Hospitality for
Good.
With a family of 17 hotel brands and IHG One Rewards , one of
the world's largest hotel loyalty programmes, IHG has over 6,000
open hotels in more than 100 countries, and more than 1,800 in the
development pipeline.
- Luxury & Lifestyle: Six Senses Hotels Resorts Spas ,
Regent Hotels & Resorts , InterContinental Hotels & Resorts
, Vignette Collection , Kimpton Hotels & Restaurants , Hotel
Indigo
- Premium: voco hotels , HUALUXE Hotels & Resorts , Crowne Plaza Hotels & Resorts , EVEN Hotels
- Essentials: Holiday Inn Hotels & Resorts , Holiday Inn Express , avid hotels
- Suites: Atwell Suites , Staybridge Suites , Holiday Inn Club Vacations , Candlewood Suites
InterContinental Hotels Group PLC is the Group's holding company
and is incorporated and registered in England and Wales.
Approximately 325,000 people work across IHG's hotels and corporate
offices globally.
Visit us online for more about our hotels and reservations and
IHG One Rewards . To download the new IHG One Rewards app, visit
the Apple App or Google Play stores.
For our latest news, visit our Newsroom and follow us on
LinkedIn , Facebook and Twitter .
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.
System size and pipeline progress
The long-term attractiveness of IHG's brands and the markets we
operate in have supported continued openings and signings activity
in the first half of 2022:
-- Global system of 883k rooms (6,028 hotels) at 30 June 2022, weighted
68% across midscale segments and 32% across upscale and luxury
-- Gross growth of +4.8% YOY, with 14.9k rooms (96 hotels) opened in
H1, of which 8.3k (51 hotels) in Q2
-- Removal of 12.4k rooms (59 hotels) in H1; this includes the impact
of ceasing all operations in Russia, resulting in the removal of 6.5k
rooms (28 hotels), equivalent to 0.7% of IHG's global system
-- Underlying removal rate of 1.8% YOY; the removals in H1 2022 equate
to an annualised underlying rate of 1.4%, broadly in line with historical
average underlying rate of 1.5%
-- Net system size growth of +3.0% YOY (adjusted for Holiday Inn and
Crowne Plaza removals in H2 2021, and for Russia operations in H1
2022); unadjusted YOY growth of (0.2)%
-- Global pipeline of 278k rooms (1,858 hotels), which represents over
30% of current system size; pipeline growth YTD of +2.7% (+3.5% excluding
2.2k rooms impact from 7 pipeline hotels in Russia)
-- Signed 30.7k rooms (210 hotels) in H1, of which 14.1k (90 hotels)
in Q2
-- Signings mix drives pipeline to be weighted 56% across midscale segments
and 44% across upscale and luxury
-- More than 40% of the global pipeline is under construction, broadly
in line with prior years
System and pipeline summary of movements in H1 2022 and total
closing position (rooms):
System Pipeline
Openings Removals Net Total YTD% YOY% Adjusted Signings Total
YOY%(a)
--------- --------- -------- -------- ------- ------- --------- --------- --------
Group 14,949 (12,379) 2,570 882,897 +0.3% (0.2)% +3.0% 30,732 278,275
Americas 4,287 (2,188) 2,099 501,188 +0.4% (1.8)% +0.6% 11,504 100,401
EMEAA 6,828 (8,844) (2,016) 222,184 (0.9)% (0.6)% +5.2% 8,111 80,079
G. China 3,834 (1,347) 2,487 159,525 +1.6% +5.9% +8.2% 11,117 97,795
--------- --------- -------- -------- ------- ------- --------- --------- --------
(a) Adjusted for: 1) the removal of Holiday Inn and Crowne Plaza
rooms that occurred in H2 2021, driven by the review that was
completed that year with 34.3k (151 hotels) exiting IHG's system
for these two brands for the year as a whole, of which 13.3k (57
hotels) exited in H1 2021 and 21.1k (94 hotels) exited in the H2
2021; 2) the removal of 6.5k rooms (28 hotels) in Russia, following
IHG's announcements regarding ceasing all operations in that
country.
The regional performance reviews provide further detail of the
system and pipeline by region, and further analysis by brand and by
ownership type.
Updates on our strategic priorities
Our four strategic priorities put the expanded brand portfolio
we have built in recent years at the heart of our business, and our
owners and guests at the heart of our thinking. Our priorities
recognise the crucial role of a sophisticated, well-invested
digital approach, ensure we meet our growing responsibility to care
for and invest in our people, and make a positive difference to our
communities and planet.
We have increased our level of investment spending to meet these
priorities, including on developing our brand portfolio and hotel
formats further, the critical step of transforming our loyalty
programme, and rolling out more digital solutions. We have also
invested in the resiliency and flexibility of our core
revenue-generating technology platforms to support future growth,
alongside enhancing the capabilities of our core HR systems and in
developments that help IHG and our hotel owners meet our Journey to
Tomorrow responsible business commitments.
We will continue to be agile and thoughtful on how we focus and
shift our own cost resources, together with those of the System
Fund, as part of building out competencies and capturing the
significant opportunities for growth of IHG's enterprise system. In
2021, fee business cost savings of $75m were achieved and are
sustainable into this and future years. As intended, the additional
temporary reductions in the 2021 cost base of $25m have been
redeployed this year. Whilst there is some pressure to the
underlying level of cost inflation in our overheads base, IHG is
adept at driving incremental efficiencies and scale advantage to
help offset these, and delivering productivity gains to further
support our hotel owners.
1. Build loved and trusted brands
We continue to invest in all our brands, helping achieve scale
and focusing on design, service and quality. Recent highlights
included:
Continued growth of our most established brands.
-- The InterContinental brand opened three hotels in the period; growing
to 205 across more than 60 countries. Its pipeline of 83 hotels and
resorts represents growth equivalent to 30% of current system size.
-- Having reached 3,000 hotels in its 30th year last year, Holiday Inn
Express is now in 50 countries, and has a pipeline for a further 26%
growth. Holiday Inn Express achieved more than 60 signings in the
period, with our Candlewood Suites and Staybridge Suites extended
stay brands together adding over 40 more.
Strengthening Holiday Inn and Crowne Plaza. Our review in 2021
addressed the consistency and quality of the estates for these two
brands, resulting in the removal of 151 hotels or 10% of their
combined estate, and owners committing to improvements in 83
hotels.
-- Both brands have pipelines equivalent to over 20% of their current
system size.
-- Two-thirds of the Americas Holiday Inn estate and three-quarters of
the Crowne Plaza estate will have been recently updated. As part of
this, 28 Crowne Plaza hotels are being renovated in 2022, equivalent
to the combined number renovated over the previous four years. Recently
renovated hotels are showing strong performance metrics across occupancy,
room rate, revenue market share and guest satisfaction scores.
Driving more conversion to our brands . Conversions have grown
to represent around a quarter of signings and openings thanks to
growing demand for access to our revenue-generating systems,
marketing and loyalty programmes to support performance, increase
efficiencies and drive returns for owners.
-- Vignette Collection, our Luxury & Lifestyle conversion brand that
launched last August, has secured its first eight properties, with
further strong progress expected over the remainder of 2022.
-- Our upscale conversion brand, voco, has reached 80 open and pipeline
hotels. With nine openings in the period, these included the first
all-suites format in Doha, a flagship property for the brand in Melbourne,
and a presence in four new country markets. The brand was recognised
as the World's Leading Premium Hotel Brand at the World Travel Awards,
and is achieving top guest satisfaction scores versus equivalent competing
brands.
-- Portfolio opportunities are also increasing, due to the broader suite
of brands and the overall enterprise system we can offer owners to
support their growth; three portfolio deals in EMEAA in H1 added 10
hotels across six brands.
Excellent progress in growing our Luxury & Lifestyle
presence. We have grown this category to 12% of IHG's system size,
and the proportion of our pipeline is bigger still at 19%, up from
13% five years ago.
-- A number of brand halo properties opened in the period, including
an all-suites-and-villas Regent property in Phu Quoc (Vietnam) and
Australia's first Kimpton (Sydney).
-- There were six further Kimpton signings in the period and more resort
destinations for the brand including Kimpton Aysla Mallorca will be
opening soon.
-- Signings for Six Senses increased its pipeline to 35 hotels, on top
of 21 currently open.
-- Hotel Indigo is set for a record year of openings; it has reached
134 properties across more than 20 countries, which is set to nearly
double with a pipeline of 120 hotels. There were 16 signings for the
brand in the half, including new resort properties in Barbados and
Grand Cayman.
First Atwell Suites openings and the rapid scale of avid.
-- The first two Atwell Suites properties to open have been the prototype
new-build at Denver Airport and an adaptive re-use at Miami Brickell,
with 23 further hotels in the pipeline.
-- Five new avid hotels opened in the half, taking the brand's presence
to 53 locations, with the first opening in Canada later this year.
The avid pipeline totals 157 properties and the brand is outperforming
peers in guest satisfaction.
2. Customer centric in all we do
Delivering True Hospitality for Good means creating seamless and
tailored guest experiences that generate increased demand, whilst
delivering high returns for our owners.
IHG's Guest Satisfaction Index (GSI) has continued to maintain a
global score of over 100, which reflects outperformance against
peers. The score on a rolling 12-month basis to June 2022 was
higher than the equivalent 2019 pre-Covid benchmark.
Transforming loyalty
Our loyalty programme is critical to our business and future
growth. Our more than 100 million loyalty members are responsible
for around half of all room nights globally each year, they stay in
our hotels more often, and spend 20% more than non-members. They
are also 9x more likely to book direct, which is our most
profitable channel for owners.
This year we launched our transformed loyalty programme, IHG One
Rewards, to offer industry-leading value, richer benefits and
greater choice for members to enhance their stays. It also aims to
attract more next-generation travellers. The enhanced rewards
include free breakfast for Diamond Elite members and the ability
for guests to choose the rewards that matter to them most through
the introduction of Milestone Rewards. To date:
-- 14% more points have been redeemed year-to-date compared to 2019,
with an 18% increase in reward nights booked.
-- Enrolments in Q2 2022 were more than 30% higher than the comparable
period last year, and year-on-year 11 million more loyalty members
have been added.
-- Within a month of launching Milestone Rewards, engagement has exceeded
our expectations and over 800,000 rewards have been earned.
-- We also launched our largest marketing campaign in more than a decade
to help raise awareness and drive more revenue to our hotels for our
owners.
Lowering costs and driving efficiencies for our owners
With increasing supply costs and supply chain issues, together
with labour shortages, our owners around the world rely heavily on
IHG to help them run an efficient business. We have continued to
expand the benefits for owners of being part of the IHG system,
whilst also improving guest experience.
-- We have further expanded the scale and reach of our procurement solutions
for operating supplies and equipment. More than 2,900 hotels in the
Americas are now participating in our F&B purchasing programme. These
programmes support menu optimisation, help owners mitigate inflationary
pressures and achieve absolute savings. Smaller owner groups recently
onboarded in the UK have seen typical savings of 7-15% on food costs
and 10--15% on beverage costs.
-- We are also helping owners lower construction and refurbishment costs
in our latest format upgrades and helping reduce other costs associated
with operating and maintaining their building infrastructure.
-- IHG Voice Cloud, our enhanced intelligent call services solution,
will be supporting several hundred hotels by the end of the year.
This typically saves an owner around 50 hours a month of on-premises
call handling, whilst also driving better guest experiences, boosting
loyalty enrolment and delivering revenue up-sell.
-- We are piloting renewable energy sourcing on behalf of our owners
and developing a power purchase agreement in a very competitive market.
Owners have also been able to lock-in substantial savings though our
fixed negotiated rates on other energy costs.
-- The rollout of our IHG NextGen Payments system during 2022 and 2023
adds more guest payment options including e-wallet, and lowers transaction
and support fees for our owners.
3. Create digital advantage
Our digital-first approach drives a higher percentage of direct
bookings, creates cost efficiencies, and delivers data and insights
to optimise revenue management decisions. Developments to date in
2022 included:
-- Booking flow improvements. Newly designed webpages that combine rooms
and rates choices have contributed to increases in booking conversion
of up to one percentage point and revenue uplift of 2 to 3%. This
new web experience has also driven a 10 percentage point increase
in enrolments to our IHG One Rewards programme.
-- Stay enhancements and attribute pricing. Pilots progressing well
to drive cross-sell of non-room extras and for room up-sell which
enable owners to generate maximum value from the unique attributes
of their room inventory.
-- Next generation IHG mobile app released. The IHG mobile app is our
fastest-growing revenue channel. Amongst many enhancements, the new
app offers streamlined booking and allows guests to check-in faster,
and it powers IHG One Rewards to provide members with seamless access
to their loyalty benefits, including the ability to choose and redeem
Milestone Rewards. Enhancements are expected to further increase direct
bookings and loyalty engagement, and drive incremental spend during
stays. Since its relaunch, revenue driven by our mobile app for the
Americas and EMEAA regions has been at 30% higher levels than 2019.
4. Care for our people, communities and planet
Central to our priority to care for our people, communities and
planet, and our purpose of True Hospitality for Good, is our 2030
Journey to Tomorrow plan, which launched in 2021 with a series of
ambitious commitments.
People
Creating a culture where everyone feels valued and able to
thrive is a vital part of our ability to attract, develop and
retain a more diverse range of talent with different experiences
and backgrounds . We are making investments in multiple areas to
achieve this:
-- Over the next three years we are investing significantly to enhance
the capabilities of our core HR platforms and technology, to deliver
a more seamless user experience and the right data and insights needed
to drive performance. A new flagship learning and development offering
is also being developed across the business to support talent.
-- We continue to make progress on our commitment to increase ethnic
minority leadership representation at a corporate level, notably US
ethnic minority leadership where we have committed to doubling representation
between 2020 and 2025 (was 13%, now 20%, with a goal of 26% in 2025).
Conscious inclusion training is being extended to frontline hotel
employees and we are also piloting new inclusive hiring practices
in different markets.
-- As one of many programmes to diversify representation in leadership
roles, more than 100 colleagues have so far graduated from our RISE
programme to increase the number of women in General Manager and other
senior positions in our managed hotels.
Communities
IHG is proud to be at the heart of thousands of communities
around the world, as we strive to make a difference every day by
delivering our purpose of True Hospitality for Good.
-- The IHG Skills Academy, a free virtual learning platform, is being
translated into more languages to broaden the global reach of our
IHG Academy programme and continue to break down barriers to education
and training.
-- In response to the war in Ukraine and the humanitarian crisis it has
caused, IHG made significant donations to our humanitarian charity
partners, and has committed to work with our hotel owners in other
countries to shelter and recruit refugees. We have a dedicated Refugees
Careers Site at careers.ihg.com/Ukraine-support .
Planet
As part of our Journey to Tomorrow commitments, our 2030
science-based target is to reduce scope 1, 2 and 3 greenhouse gas
emissions by 46%.
-- New training has been rolled out for our Hotel Energy Reduction Opportunities
(HERO) tool, which gives owners bespoke sustainability recommendations,
costs and savings based upon their hotel's individual data and characteristics.
-- We continue to roll-out automated data collection across our business
to make it easier for our hotels to understand and measure their environmental
impacts, identify areas for reduction and track progress.
-- An energy metric has been introduced for all hotels as part of our
strategy to decarbonise the existing estate, as well as adding further
measures to our brand standards to conserve energy and water.
-- As part of our commitments to tackle waste, we recently announced
a global collaboration with Unilever to replace bathroom miniatures
with bulk amenities for 4,000 more hotels. The initiative is expected
to save at least 850 tonnes of plastic annually in the Americas region
alone and provide hotels with savings of 10-30% versus current costs.
Capital allocation: resumption of interim dividend at 10%
increased level and $500m share buyback
IHG's asset-light business model is highly cash generative
through the cycle and enables us to invest in our brands and
strengthen our enterprise. We have a disciplined approach to
capital allocation which ensures that the business is appropriately
invested in, whilst looking to maintain an efficient and
conservative balance sheet.
The Board's perspectives on the uses of cash generated by the
business are unchanged: ensuring the business is appropriately
invested in to optimise growth that drives long-term shareholder
value creation, funding a sustainably growing dividend, and then
returning surplus capital to shareholders, whilst targeting our
leverage ratio within a range of 2.5-3.0x net debt:adjusted EBITDA
to maintain an investment grade credit rating. IHG's capital
allocation approach delivered a strong track record of returning
$13.6bn to shareholders since demerger in 2003 through to 2019,
$2.4bn through ordinary dividends and $11.2bn via additional
returns.
In February, we announced the results for 2021 showing that
trading had improved significantly, leading to profitability
rebounding, accompanied by strong cash flow and a reduction in net
debt. This resulted in our net debt:adjusted EBITDA ratio returning
to 3.0x at 31 December 2021. As a consequence, a final dividend of
85.9c in respect of 2021 was proposed by the Board and subsequently
paid in May 2022, resulting in a cash outflow of $154m. This
dividend was equivalent to the final payment in respect of 2019
that was withdrawn in 2020 in response to the onset of Covid.
With the further improvement in profitability and reduction in
net debt in the first half of 2022, our net debt:adjusted EBITDA
ratio reduced to 2.1x at 30 June 2022. The Board is therefore
recommending an interim dividend of 43.9c, which represents growth
of 10% on the 39.9c interim dividend paid in 2019 (no interim
dividend was paid in respect of 2020 or 2021). The ex-dividend date
is Thursday 1 September 2022 and the Record date is Friday 2
September 2022. The dividend will be paid on Thursday 6 October
2022, resulting in a cash outflow of around $80m. This will result
in total dividends paid to shareholders in 2022 amounting to
approximately $235m.
Furthermore, the Board has reviewed the opportunity to return
surplus capital to shareholders. As a result, an additional $500m
is expected to be returned through a share buyback programme that
will commence immediately and end no later than 31 January 2023.
This initial additional return is considered appropriate in the
current environment, maintaining our disciplined approach to
investing in the business to drive future growth, which in 2022
includes significant increases in capital expenditure as well as
substantial operating cost investment to deliver our strategic
priorities.
It is expected that substantial additional capacity will be
generated in the coming years to enable continued investment to
drive growth, the funding of a sustainably growing ordinary
dividend, and further surplus capital to be returned to
shareholders. The Board will continue to actively assess these
opportunities as the trading environment further evolves.
Summary of financial performance
INCOME STATEMENT SUMMARY
6 months ended 30 June
2022 2021 %
$m $m change
Revenue
Americas 471 325 44.9
EMEAA 239 84 184.5
Greater China 36 59 (39.0)
Central 94 97 (3.1)
____ ____ ____
Revenue from reportable segments(a) 840 565 48.7
System Fund revenues 554 378 46.6
Reimbursement of costs 400 236 69.5
_____ _____ _____
Total revenue 1,794 1,179 52.2
_____ _____ _____
Operating profit
Americas 351 224 56.7
EMEAA 59 (27) NM(b)
Greater China 5 31 (83.9)
Central (38) (40) (5.0)
_____ ____ _____
Operating profit from reportable segments(a) 377 188 100.5
Analysed as:
Fee Business excluding central 410 264 55.3
Owned, leased and managed lease 5 (36) NM(b)
Central (38) (40) (5.0)
System Fund result 3 (46) NM(b)
____ ____ ____
Operating profit before exceptional
items 380 142 167.6
Operating exceptional items (19) (4) 375.0
____ ____ ____
Operating profit 361 138 161.6
Net financial expenses (69) (72) (4.2)
Analysed as:
Adjusted interest expense(a) (64) (72) (11.1)
System Fund interest 3 - NM(b)
Foreign exchange losses (8) - NM(b)
Fair value gains on contingent purchase
consideration 7 1 600.0
____ ____ ____
Profit before tax 299 67 346.3
Tax (83) (19) 336.8
Analysed as;
Tax before exceptional items and System
Fund(a) (88) (42) 109.5
Tax on exceptional items and exceptional
tax 5 23 (78.3)
____ ____ ____
Profit for the period 216 48 350.0
Adjusted earnings(c) 224 74 202.7
Basic weighted average number of ordinary
shares (millions) 184 183 0.5
____ ____ ____
Earnings per ordinary share
Basic 117.4 c 26.2c 348.1
Adjusted(a) 121.7 c 40.4c 201.2
Dividend per share 43.9 c - NM(b)
Average US dollar to sterling exchange
rate $1: GBP0.77 $1: GBP0.72 6.9
(a) Definitions for non-GAAP measures can be found in the Use of
key performance measures and non-GAAP measures section along with
reconciliations of these measures to the most directly comparable
line items within the Interim Financial Statements.
(b) Percentage change considered not meaningful, such as where a
positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
(c) Adjusted earnings as used within adjusted earnings per share, a non-GAAP measure.
Revenue
Trading improved significantly over the first half of 2022, with
Group comparable RevPAR(a) at the end of the first half reaching
near pre-pandemic levels. Through the first half, trading
conditions improved as government-mandated restrictions eased
across many markets. Strong trading in Americas was predominantly
driven by leisure demand in the US, supported by improving
corporate and group bookings. Trading in the EMEAA region also saw
strong sequential improvement whilst Greater China was impacted by
localised travel restrictions for much of the first half.
Group comparable RevPAR(a) improved 60.8% in the first quarter,
then grew 43.9% in the second quarter and 50.7% in the half. When
compared to the pre-pandemic levels of 2019, Group comparable
RevPAR(a) declined 17.7% in the first quarter, 4.5% in the second
quarter and 10.5% in the half.
Our other key driver of revenue, net system size, decreased by
0.2% year-on-year to 882.9k rooms, impacted by 21.1k Holiday Inn
and Crowne Plaza removals in H2 2021 related to last year's review
of the estates of these two brands and by 6.5k of removals relating
to Russia in H1 2022. Adjusting for these, net system size
increased 3.0%.
During the six months ended 30 June 2022, total revenue
increased by $615m (52%) to $1,794m, including a $164m increase in
cost reimbursement revenue. Revenue from reportable segments(b)
increased by $275m (49%) to $840m, driven by the improved trading
conditions. Underlying revenue(b) increased by $287m to $833m, with
underlying fee revenue(b) increasing by $162m. Owned, leased and
managed lease revenue increased by $116m.
Operating profit and margin
Operating profit improved by $223m from $138m to $361m,
including a $15m increase in charges from operating exceptional
items and a $49m improvement in the System Fund result, from a $46m
deficit to a $3m surplus.
Operating profit from reportable segments(b) increased by $189m
(101%) to $377m, driven by improvement in trading conditions.
Underlying operating profit(b) increased $175m to $368m.
Fee margin(b) increased by 11.8 percentage points to 55.9%,
benefitting from the improvement in trading and focussed cost
management.
The impact of the movement in average USD exchange rates for the
first half of 2021 compared to the first half of 2022 netted to a
$3m gain on operating profit from reportable segments(b) .
If the average exchange rate during July 2022 had existed
throughout the first half of 2022, the 2022 operating profit from
reportable segments would have been $4m higher.
System Fund
The Group operates a System Fund to collect and administer cash
assessments from hotel owners for the specific purpose of use in
marketing, reservations, and the Group's loyalty programme, IHG One
Rewards. The System Fund also benefits from proceeds from the sale
of loyalty points under third-party co-branding arrangements. The
Fund is not managed to generate a profit or loss for IHG over the
longer term, although an in-year surplus or deficit can arise, but
is managed for the benefit of hotels in the IHG System with the
objective of driving revenues for the hotels.
In the six months to 30 June 2022, System Fund revenues
increased $176m (46%) to $554m, primarily driven by the recovery in
travel demand yielding higher assessment revenues.
The System Fund result improved from a $46m deficit to a $3m
surplus, primarily due to the rebound in travel demand and
associated assessment income, partially offset by increased
investments in consumer marketing, loyalty and direct channels.
Reimbursement of costs
Cost reimbursement revenue represents reimbursements of expenses
incurred on behalf of managed and franchised properties and
relates, predominantly, to payroll costs at managed properties
where we are the employer. As we record cost reimbursements based
upon costs incurred with no added mark up, this revenue and related
expenses have no impact on either our operating profit or net
profit for the year.
In the six months to 30 June 2022, reimbursable revenue
increased by $164m (70%) to $400m. The increase reflects the
overall recovery in US trading conditions.
(a) Comparable RevPAR includes the impact of hotels temporarily closed as a result of Covid-19.
(b) Definitions for non-GAAP measures can be found in the Use of
key performance measures and non-GAAP measures section along with
reconciliations of these measures to the most directly comparable
line items within the Interim Financial Statements.
Operating exceptional items
Operating exceptional items totalled $19m and comprises the
costs of ceasing operations in Russia and the impairment of
contract assets relating to managed and franchised hotels in
Russia. Further information on exceptional items can be found in
note 5 to the Interim Financial Statements.
Net financial expenses
Net financial expenses decreased by $3m to $69m. Adjusted
interest(a) , which excludes exceptional finance expenses, and adds
back interest relating to the System Fund, reduced by $8m compared
to 2021, driven by favourable translation of sterling bond interest
expense.
Fair value gains on contingent purchase consideration
Contingent purchase consideration arose on the acquisition of
Regent. The net gain of $7m (2021: $1m) relates to a favourable
movement in the bond rates used in the valuation. The total
contingent purchase consideration liability at 30 June 2022 is $66m
(31 December 2021: $73m).
Taxation
The interim effective rate of tax on profit, before exceptional
items and System Fund, was 28% (2021: 36%). This lower effective
tax rate ('ETR') is a result of the continued recovery of the
business, in particular, changes to the Group's profit mix and a
lesser impact of fixed items of tax within the ETR (due to the
higher profit base). Taxation within exceptional items totalled a
credit of $5m (2021: $23m) and predominantly relates to the tax
reliefs on the costs of ceasing business in Russia. Further
information on tax within exceptional items can be found in note 5
to the Interim Financial Statements. Net tax paid totalled $124m
(2021: $47m). Further information on tax can be found in note 6 to
the Interim Financial Statements.
Earnings per share
The Group's basic earnings per ordinary share is 117.4c (2021:
26.2c). Adjusted earnings per ordinary share(a) increased by 81.3c
to 121.7c.
Dividends and shareholder returns
With the further improvement in profitability and reduction in
net debt in the first half of 2022, our net debt:adjusted EBITDA
ratio reduced to 2.1x at 30 June 2022. The Board is therefore
recommending an interim dividend of 43.9c, which represents growth
of 10% on the 39.9c interim dividend paid in 2019 (no interim
dividend was paid in respect of 2020 or 2021).
The ex-dividend date is Thursday 1 September 2022 and the Record
date is Friday 2 September 2022. The corresponding dividend amount
in Pence Sterling per ordinary share will be announced on 15
September 2022, calculated based on the average of the market
exchange rates for the three working days commencing 12 September
2022. The dividend will be paid on Thursday 6 October, resulting in
a cash outflow of around $80m. This will result in total dividends
paid to shareholders in 2022 amounting to approximately $235m.
In addition to the interim dividend, in line with its strategy
to return surplus capital to shareholders, in August 2022 the Board
also approved a $500m share buyback programme that will commence on
9 August and end no later than 31 January 2023.
(a) Definitions for non-GAAP measures can be found in the Use of
key performance measures and non-GAAP measures section along with
reconciliations of these measures to the most directly comparable
line items within the Interim Financial Statements.
Summary of cash flow, working capital, net debt and
liquidity
Adjusted EBITDA reconciliation
6 months ended 30 June
2022 2021
$m $m
Restated(a)
Cash flow from operations 336 259
Cash flows relating to exceptional items 15 12
Impairment loss on financial assets (5) (8)
Other non-cash adjustments to operating profit/loss (34) (35)
System Fund result (3) 46
System Fund depreciation and amortisation (42) (41)
Other non-cash adjustments to System Fund
result (13) (10)
Working capital and other adjustments 124 (6)
Capital expenditure: contract acquisition
costs (key money) 35 16
________ ________
Adjusted EBITDA 413 233
____ ____
CASH FLOW SUMMARY 6 months ended 30 June
2022 2021 $m
$m $m change
Adjusted EBITDA(b) 413 233 180
Working capital and other adjustments (124) 6
Impairment loss on financial assets 5 8
Other non-cash adjustments to operating profit/loss 34 35
System Fund result 3 (46)
Non-cash adjustments to System Fund result 55 51
Capital expenditure: contract acquisition
costs (key money) net of repayments (35) (16)
Capital expenditure: maintenance (15) (9)
Cash flows relating to exceptional items (15) (12)
Net interest paid (37) (39)
Tax paid (124) (47)
Principal element of lease payments (18) (17)
____ ____ ____
Adjusted free cash flow(b) 142 147 (5)
Capital expenditure: gross recyclable investments (1) (9)
Capital expenditure: gross System Fund capital
investments (18) (7)
Deferred purchase consideration paid - (13)
Disposals and repayments, including other
financial assets 7 1
Dividends paid to shareholders (154) -
____ ____ ____
Net cash flow before other net debt movements (24) 119 (143)
Add back principal element of lease repayments
within adjusted free cash flow 18 17
Exchange and other non-cash adjustments 169 (65)
____ ____ ____
Decrease in net debt(b) 163 71 92
Net debt at beginning of the period (1,881) (2,529)
______ ______ ____
Net debt at end of the period (1,718) (2,458) 740
______ ______ ____
(a) The definition and reconciliation of Adjusted EBITDA has
been amended to reconcile to the nearest GAAP measure, cash flow
from operations, reflecting the fact Adjusted EBITDA is primarily
used by the Group as a liquidity measure. The value of Adjusted
EBITDA is unchanged from 2021.
(b) Definitions for non-GAAP measures can be found in the 'Use
of key performance measures and non-GAAP measures' section along
with reconciliations of these measures to the most directly
comparable line items within the Interim Financial Statements.
Cash flow from operations
Cash flow from operations was $336m for the six months ended 30
June 2022, an increase of $77m on the previous year, primarily
reflecting the increase in operating profit, offset by negative
working capital movements (see below).
Cash flow from operations is the principal source of cash used
to fund the ongoing operating expenses, interest payments,
maintenance capital expenditure and normal dividend payments of the
Group.
Cash from investing activities
Net cash outflows from investing activities decreased by $10m to
$27m, largely due to the non-recurrence of deferred consideration
paid in H1 2021 of $13m in relation to the acquisition of the
Regent brand. There was an overall increase in purchases of
property, plant and equipment and intangible assets of $17m,
partially offset by reduced investment in other financial assets of
$9m. The Group had committed contractual capital expenditure of
$26m at 30 June 2022 (31 December 2021: $17m).
Cash used in financing activities
Net cash outflows from financing activities totalled $172m
(2021: $845m) primarily comprising payment of ordinary dividends of
$154m. There were no debt repayments in H1 2022 (H1 2021: repayment
of the GBP600m commercial paper under the UK Covid Corporate
Financing Facility (CCFF)).
Adjusted free cash flow
Adjusted free cash flow(a) was an inflow of $142m, a reduction
of $5m on the six months to June 2021, reflecting an improvement in
operating profit from reportable segments(a) and system fund
result, offset by related tax payments and net working capital
outflows. Exceptional cash costs of $15m increased by $3m and
include the cost of ceasing operations in Russia.
Working capital
Trade and other receivables increased by $117m, from $574m at 31
December 2021 to $691m, primarily due to the significant increase
in RevPAR in the second quarter of 2022 compared to the fourth
quarter of 2021. Trade and other payables reduced by $66m primarily
driven by payment of the 2021 bonus. The cash inflow related to
deferred revenue was $65m driven by an increase in the future
redeemable points balance related to the loyalty programme.
Net and gross capital expenditure
Net capital expenditure (a) was $22m (2021: $1m) and gross
capital expenditure was $72m (2021: $42m). Gross capital
expenditure comprised: $53m maintenance capex and key money; $1m
gross recyclable investments; and $18m System Fund capital
investments. Net capital expenditure includes the offset from $4m
proceeds from other financial assets, $3m net disposal proceeds,
$3m key money repayments and $40m System Fund depreciation and
amortisation (b) .
Net debt
At 30 June 2022, net debt(a) was $1,718m (31 December 2021:
$1,881m), after favourable foreign exchange of $227m driven by
translation of the Group's sterling bond debt, offset by $58m of
other non-cash adjustments.
Sources of liquidity
As at 30 June 2022, the Group had total liquidity of $2,613m (31
December 2021: $2,655m), comprising $1,350m of undrawn bank
facilities and $1,263m of cash and cash equivalents (net of
overdrafts and restricted cash). The change in total liquidity from
December 2021 is due to the decrease in cash and cash equivalents,
net of overdrafts, of $24m and unfavourable foreign exchange
movement on cash of $70m, offset by the change in restricted cash
balances of $52m(c) .
The Group currently has $2,550m of sterling and euro bonds
outstanding. The current bonds mature in November 2022 (GBP173m),
October 2024 (EUR500m), August 2025 (GBP300m), August 2026
(GBP350m), May 2027 (EUR500m) and October 2028 (GBP400m). There are
currency swaps in place on both the euro bonds, fixing the October
2024 bond at GBP454m and the May 2027 bond at GBP436m.
The Group currently has a senior unsecured long-term credit
rating of BBB- from Standard and Poor's.
(a.) Definitions for non-GAAP measures can be found in the Use
of key performance measures and non-GAAP measures section along
with reconciliations of these measures to the most directly
comparable line items within the Interim Financial Statements.
(b.) Excluding $2m depreciation of right-of-use assets.
(c.) See note 10 within the Interim Financial Statements for
further details.
In April, IHG entered into a new $1.35bn syndicated bank
revolving credit facility (RCF). The previous $1.275bn syndicated
facility and $75m bilateral facility have been cancelled. The
covenant amendments to the previous facilities announced in
December 2020, which included a relaxation of covenants for June
2022 and December 2022 and the $400m minimum liquidity covenant,
are no longer in effect. The new five-year RCF matures in April
2027. Two one-year extension options are at the lenders'
discretion. There are two financial covenants: interest cover and
leverage ratio. Covenants are tested at half year and full year on
a trailing 12-month basis. The interest cover covenant requires a
ratio of Covenant EBITDA to Covenant interest payable above 3.5:1
and the leverage ratio requires Covenant net debt to Covenant
EBITDA below 4.0:1. These covenants now include the impact of IFRS
16, Leases, which was previously excluded due to 'frozen GAAP'
treatment in the previous agreement. The new facility uses
alternative reference rates instead of LIBOR.
At 30 June 2022 the leverage ratio was 2.16x and the interest
cover ratio was 6.11x. See note 10 in the Interim Financial
Statements for further information. The facility was undrawn at 30
June 2022.
The Group is in compliance with all of the applicable financial
covenants in its loan documents, none of which are expected to
present a material restriction on funding in the near future.
In the Group's opinion, the available facilities are sufficient
for the Group's present liquidity requirements. However, the Group
continues to assess its liquidity position and financing options
and will take further actions as necessary.
The Group had net liabilities of $1,175m at 30 June 2022
($1,474m at 31 December 2021).
Additional revenue, global system size and pipeline analysis
Total gross revenue
Total gross revenue(a) provides a measure of the overall
strength of the Group's brands. It comprises total rooms revenue
from franchised hotels and total hotel revenue from managed, owned,
leased and managed lease hotels and excludes revenue from the
System Fund and reimbursement of costs. Other than owned, leased
and managed lease hotels, total gross revenue is not revenue
attributable to IHG as it is derived from hotels owned by third
parties.
6 months ended 30 June
2022 2021 %
$bn $bn change(b)
Analysed by brand
InterContinental 1.7 1.0 65.6
Kimpton 0.6 0.3 116.9
Hotel Indigo 0.3 0.2 92.8
Crowne Plaza 1.3 1.0 35.8
Holiday Inn 2.4 1.6 46.7
Holiday Inn Express 3.8 2.7 40.4
Staybridge Suites 0.6 0.4 35.7
Candlewood Suites 0.4 0.3 20.3
Other 0.6 0.4 50.0
____ ____ ____
Total 11.7 7.9 48.0
____ ____ ____
Analysed by ownership type
Fee business 11.5 7.8 46.9
Owned, leased and managed
lease 0.2 0.1 189.1
____ ____ ____
Total 11.7 7.9 48.0
____ ____ ____
Total gross revenue in IHG's system increased by 48% (50%
increase at constant currency) to $11.7bn, driven by the
improvement in trading conditions in many markets.
(a.) Definitions for the key performance measures can be found
in the Use of key performance measures and non-GAAP measures
section.
(b.) Year-on-year percentage movement calculated from source
figures.
RevPAR(a) movement summary
Half Year 2022 vs 2021 Half Year 2022 vs 2019
RevPAR ADR Occupancy RevPAR ADR Occupancy
---------- -------- ------- ----------- -------- -------- -----------
Group 50.7% 24.4% 10.1%pts (10.5)% 3.9% (9.5)%pts
Americas 45.2% 22.1% 10.2%pts (1.6)% 5.6% (4.7)%pts
EMEAA 138.4% 35.3% 24.2%pts (20.9)% 1.0% (15.7)%pts
G. China (27.2)% (4.3)% (11.9)%pts (45.9)% (17.9)% (20.1)%pts
-------- ------- ----------- -------- -------- -----------
Q2 2022 vs 2021 Q2 2022 vs 2019
RevPAR ADR Occupancy RevPAR ADR Occupancy
---------- -------- ------- ----------- -------- -------- -----------
Group 43.9% 23.5% 9.0%pts (4.5)% 7.4% (8.1)%pts
Americas 37.0% 20.2% 8.5%pts 3.5% 9.0% (3.7)%pts
EMEAA 146.8% 35.8% 28.8%pts (10.3)% 4.0% (10.4)%pts
G. China (39.5)% (8.9)% (19.8)%pts (48.9)% (18.7)% (23.5)%pts
-------- ------- ----------- -------- -------- -----------
RevPAR(a) movement at constant exchange rates (CER) vs. actual
exchange rates (AER)
Half Year 2022 vs 2021 Half Year 2022 vs 2019
CER AER Difference CER AER Difference
---------- -------- -------- ----------- -------- -------- -----------
Group 50.7% 48.6% 2.1%pts (10.5)% (11.2)% 0.7%pts
Americas 45.2% 45.1% 0.1%pts (1.6)% (1.9)% 0.3%pts
EMEAA 138.4% 121.7% 16.7%pts (20.9)% (23.7)% 2.9%pts
G. China (27.2)% (27.4)% 0.2%pts (45.9)% (43.6)% (2.3)%pts
-------- -------- ----------- -------- -------- -----------
Q2 2022 vs 2021 Q2 2022 vs 2019
CER AER Difference CER AER Difference
---------- -------- -------- ----------- -------- -------- -----------
Group 43.9% 41.0% 2.9%pts (4.5)% (5.6)% 1.1%pts
Americas 37.0% 36.8% 0.2%pts 3.5% 3.2% 0.3%pts
EMEAA 146.8% 124.9% 21.9%pts (10.3)% (14.9)% 4.6%pts
G. China (39.5)% (40.9)% 1.4%pts (48.9)% (47.4)% (1.5)%pts
-------- -------- ----------- -------- -------- -----------
Monthly RevPAR(a) (CER)
2022 Jan Feb Mar Apr May Jun
vs 2021
----- ------ ------- ------- -------
Group 54.8% 72.3% 56.9% 50.1% 43.8% 39.2%
Americas 53.7% 65.1% 55.7% 48.1% 37.6% 28.0%
EMEAA 92.7% 122.7% 146.1% 165.1% 156.3% 126.0%
G. China 5.6% 36.9% (39.8)% (51.5)% (45.6)% (17.7)%
--------- ----- ------ ------- ------- ------- -------
2022 vs Jan Feb Mar Apr May Jun
2019
------- ------- ------- ------- -------
Group (24.4)% (18.1)% (12.1)% (7.9)% (5.4)% (0.6)%
Americas (14.2)% (8.2)% (2.6)% 2.9% 2.0% 5.5%
EMEAA (41.9)% (36.6)% (22.5)% (17.2)% (8.3)% (6.0)%
G. China (38.4)% (31.7)% (53.1)% (58.6)% (51.6)% (35.5)%
--------- ------- ------- ------- ------- ------- -------
2021 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
vs 2019
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Group (52.5)% (53.8)% (46.6)% (41.4)% (37.1)% (31.0)% (18.4)% (23.0)% (21.5)% (19.2)% (19.1)% (12.1)%
Americas (45.1)% (45.4)% (39.4)% (32.3)% (27.8)% (19.7)% (7.3)% (12.1)% (10.6)% (10.5)% (7.4)% 0.4%
EMEAA (71.1)% (72.7)% (70.6)% (70.1)% (65.8)% (59.4)% (48.2)% (38.2)% (42.8)% (36.3)% (33.2)% (30.2)%
G. China (41.5)% (51.1)% (23.2)% (14.9)% (12.0)% (21.5)% (6.4)% (55.2)% (25.9)% (24.6)% (46.3)% (28.1)%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
vs 2019
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Group (1.5)% (10.8)% (55.1)% (81.9)% (75.6)% (67.4)% (58.1)% (51.0)% (50.9)% (51.9)% (55.3)% (52.4)%
Americas 0.2% (0.9)% (49.0)% (80.1)% (72.5)% (62.0)% (54.0)% (48.6)% (46.4)% (48.0)% (51.4)% (49.5)%
EMEAA 2.1% (11.3)% (62.7)% (89.3)% (88.5)% (85.3)% (74.7)% (66.3)% (69.9)% (70.5)% (72.4)% (68.6)%
G. China (24.6)% (89.3)% (81.4)% (71.2)% (57.1)% (48.6)% (35.9)% (20.2)% (11.0)% (16.9)% (22.5)% (15.1)%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(a.) RevPAR is presented on a comparable basis, comprising
groupings of hotels that have traded in all months in both years
being compared. Comparable hotel groupings will be different for
comparisons between 2022 vs 2021, 2022 vs 2019, 2021 vs 2019 and
2020 vs 2019. See Use of key performance measures and non-GAAP
measures section for further information on the definition of
RevPAR.
Hotels Rooms
Global hotel and room Change over Change over
count
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 21 - 1,439 27
Regent 8 1 2,532 342
InterContinental 205 1 69,525 123
Vignette Collection 2 1 539 393
Kimpton 75 - 13,304 21
Hotel Indigo 134 4 17,056 713
voco 40 9 9,447 2,002
HUALUXE 18 2 5,147 544
Crowne Plaza 402 (2) 110,317 (861)
EVEN Hotels 22 1 3,180 186
Holiday Inn(a) 1,206 (12) 220,860 (3,824)
Holiday Inn Express 3,044 28 320,970 3,641
avid hotels 53 5 4,771 491
Atwell Suites 2 2 186 186
Staybridge Suites 314 (1) 33,924 (382)
Candlewood Suites 363 2 32,222 197
Other(b) 119 (4) 37,478 (1,229)
_____ ____ _______ ______
Total 6,028 37 882,897 2,570
_____ ____ _______ ______
Analysed by ownership
type
Franchised 5,078 45 630,895 4,780
Managed 931 (8) 247,381 (2,210)
Owned, leased and
managed
lease 19 - 4,621 -
_____ ____ _______ ______
Total 6,028 37 882,897 2,570
_____ ____ _______ ______
(a.) Includes 28 Holiday Inn Club Vacations properties (8,822
rooms) (2021: 28 Holiday Inn Club Vacations properties (8,679
rooms)).
(b.) Includes three open hotels that will be re-branded to voco.
Hotels Rooms
Global Pipeline Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 35 2 2,532 108
Regent 8 - 1,806 (132)
InterContinental 83 4 20,859 1,180
Vignette Collection 1 1 40 40
Kimpton 40 5 7,952 1,100
Hotel Indigo 120 6 19,403 951
voco 34 (4) 9,360 (730)
HUALUXE 21 (2) 5,506 (539)
Crowne Plaza 114 18 29,448 4,187
EVEN Hotels 28 (1) 4,776 (131)
Holiday Inn 245 1 47,234 (844)
Holiday Inn Express 650 5 82,079 (947)
avid hotels 157 (7) 13,601 (894)
Atwell Suites 23 - 2,268 (7)
Staybridge Suites 164 8 18,140 1,297
Candlewood Suites 111 18 9,213 1,448
Other(a) 24 7 4,058 1,228
_____ ____ _______ _____
Total 1,858 61 278,275 7,315
_____ ____ _______ _____
Analysed by ownership
type
Franchised 1,328 38 162,276 4,444
Managed 529 23 115,844 2,871
Owned, leased and
managed
lease 1 - 155 -
_____ ____ _______ _____
Total 1,858 61 278,275 7,315
_____ ____ _______ _____
(a.) Includes three voco pipeline hotels and five Vignette
Collection pipeline hotels.
Regional performance reviews, system size and pipeline
analysis
AMERICAS
6 months ended 30 June
Americas Results
2022 2021 %
$m $m change
Revenue from the reportable segment(a)
Fee business 413 296 39.5
Owned, leased and managed
lease 58 29 100.0
____ ____ ____
Total 471 325 44.9
____ ____ ____
Operating profit from the reportable
segment(a)
Fee business 342 236 44.9
Owned, leased and managed
lease 9 (12) NM(c)
____ ____ ____
351 224 56.7
Operating exceptional - (4) NM(c)
items
____ ____ ____
Operating profit 351 220 59.5
____ _____ _______
6 months ended
Americas Comparable RevPAR(b) movement 30 June 2022
on previous year
Fee business
InterContinental 162.3%
Kimpton 101.0%
Hotel Indigo 62.8%
Crowne Plaza 83.2%
EVEN Hotels 108.9%
Holiday Inn 50.0%
Holiday Inn Express 34.2%
Staybridge Suites 29.1%
Candlewood Suites 20.1%
All brands 44.9%
Owned, leased and managed lease
All brands 119.5%
H1 Comparable RevPAR(b) was up +45% vs 2021 (down (1.6)% vs
2019). Trading in January was challenging given the initial impacts
on travel volumes as a result of the Omicron variant of Covid-19;
sequential improvements in RevPAR(b) resumed in February. Leisure
demand continued to be strongest, with business demand
strengthening as the period went on with more corporate bookings
and group activity and events returning. Q2 RevPAR(b) was up +37%
vs 2021 (up +3.5% vs 2019) with occupancy of 70%; occupancy was
four percentage points lower than 2019, which was more than offset
by rate 9% higher than 2019 levels. US Q2 RevPAR(b) was up +3.9% vs
2019 with occupancy four percentage points lower and rate 9% higher
than 2019 levels. As the recovery has broadened, the range of
performance has narrowed. Across our US franchised estate, which is
weighted to domestic demand in upper midscale hotels, Q2 RevPAR(b)
increased by +5% vs 2019. The US managed estate, weighted to
upscale and luxury hotels in urban locations, declined by (2)% vs
2019.
Revenue from the reportable segment(a) in H1 increased by $146m
(+45%) to $471m (a decrease of $49m or 9% vs 2019). Operating
profit increased by $131m to $351m, driven by the increase in
revenue. Operating profit from the reportable segment(a) increased
by $127m (+57%) to $351m (an increase of $7m or 2% vs 2019). There
were $7m of incentive management fees recorded for the period
(2021: $4m; 2019: $7m).
Fee business revenue(a) increased by $117m (+40%) to $413m. Fee
business operating profit(a) increased by $106m (+45%) to $342m,
driven by the improvement in trading. Also benefiting from the
prior delivery of sustainable fee business cost savings, H1 fee
margin(a) increased to 82.8%, compared to 79.7% in 2021 and 77.3%
in 2019. Operating profit from the reportable segment included $2m
of ongoing support received in the form of tax credits which relate
to the Group's corporate office presence in certain locations, down
from $5m benefit in the comparable period.
Owned, leased and managed lease revenue increased by $29m to
$58m, with comparable RevPAR(b) up 120% (down 23% vs 2019) leading
to an owned, leased and managed leased operating profit of $9m
compared to a $12m loss in the comparable period. Excluding the
results of three owned EVEN hotels which were disposed and retained
under franchise contracts in November 2021, revenue increased by
$34m and operating profit improved by $17m.
(a.) Definitions for non-GAAP measures can be found in the Use
of key performance measures and non-GAAP measures section along
with reconciliations of these measures to the most directly
comparable line items within the Interim Financial Statements.
(b.) Comparable RevPAR and occupancy include the impact of
hotels temporarily closed as a result of Covid-19.
(c.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
Hotels Rooms
Americas hotel and room count Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 1 - 20 -
InterContinental 43 - 15,652 1
Kimpton 63 (1) 10,857 (151)
Hotel Indigo 70 4 9,282 537
voco 5 - 469 -
Crowne Plaza 112 - 28,035 105
EVEN Hotels 19 - 2,743 -
Holiday Inn(a) 716 - 120,911 61
Holiday Inn Express 2,451 15 222,944 1,217
avid hotels 53 5 4,771 491
Atwell Suites 2 2 186 186
Staybridge Suites 296 - 30,992 (105)
Candlewood Suites 363 2 32,222 197
Other(b) 99 (2) 22,104 (440)
_____ ____ _______ ______
Total 4,293 25 501,188 2,099
_____ ____ _______ ______
Analysed by ownership type
Franchised 4,118 31 463,430 3,173
Managed 172 (6) 36,431 (1,074)
Owned, leased and managed lease 3 - 1,327 -
_____ ____ _______ ______
Total 4,293 25 501,188 2,099
_____ ____ _______ ______
(a.) Includes 28 Holiday Inn Club Vacations properties (8,822
rooms) (2021: 28 Holiday Inn Club Vacations properties (8,679
rooms)).
(b.) Includes two open hotels that will be re-branded to
voco.
Hotels Rooms
Americas Pipeline Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 5 (1) 338 (133)
InterContinental 9 - 2.252 -
Kimpton 23 4 4,300 869
Hotel Indigo 28 (1) 4.009 (61)
voco 4 (1) 920 (125)
Crowne Plaza 8 - 1,644 1
EVEN Hotels 10 - 1,161 (5)
Holiday Inn 73 (1) 9,444 (24)
Holiday Inn Express 352 14 34,336 1,635
avid hotels 157 (7) 13,601 (894)
Atwell Suites 23 - 2,268 (7)
Staybridge Suites 143 6 14,910 860
Candlewood Suites 111 18 9,213 1,448
Other(a) 13 2 2,005 234
____ ____ ______ ______
Total 959 33 100,401 3,798
____ ____ ______ ______
Analysed by ownership type
Franchised 922 33 94,367 3,635
Managed 37 - 6,034 163
____ ____ ______ ______
Total 959 33 100,401 3,798
____ ____ ______ ______
(a.) Includes one pipeline hotel that will be re-branded to
voco.
Gross system size growth was +2.3% year-on-year. We opened 4.3k
rooms (42 hotels) during the first half, including 25 hotels across
the Holiday Inn Brand Family. There were five avid hotels opened,
including Fort Lauderdale Airport, and four Hotel Indigo
properties. The first two Atwell Suites properties opened in Miami
and Denver. There were 2.2k rooms (17 hotels) removed in the first
half.
Net system size declined (1.8)% year-on-year; on an adjusted
basis (for the Holiday Inn and Crowne Plaza removals that occurred
in the second half of 2021, driven by last year's review of the
estates of these two brands), net system size growth was +0.6%.
There were 11.5k rooms (108 hotels) signed during the first half
(including 3.7k (35 hotels) during Q2). There were 45 hotel
signings across the Holiday Inn Brand Family and 38 across
Staybridge Suites and Candlewood Suites. Other notable signings
included a strong period for Kimpton with four signings, nine
further avid hotels and four further Atwell Suites.
The pipeline stands at 100.4k rooms (959 hotels), which
represents 20% of the current system size in the region.
EMEAA
6 months ended 30 June
EMEAA results
2022 2021 %
$m $m change
Revenue from the reportable segment(a)
Fee business 121 53 128.3
Owned, leased and managed lease 118 31 280.6
____ ____ ____
Total 239 84 184.5
____ ____ ____
Operating profit/(loss) from the
reportable segment(a)
Fee business 63 (3) NM(c)
Owned, leased and managed lease (4) (24) (83.3)
____ ____ ____
59 (27) NM(c)
Operating exceptional -
items (19) NM(c)
____ ____ _____
Operating profit/(loss) 40 (27) NM(c)
____ ____ _____
6 months ended
30 June 2022
EMEAA comparable RevPAR(b) movement on previous
year
Fee business
Six Senses 161.6%
Regent 39.9%
InterContinental 115.8%
Kimpton 334.5%
Hotel Indigo 375.6%
voco 95.4%
Crowne Plaza 120.7%
Holiday Inn 143.5%
Holiday Inn Express 157.6%
Staybridge Suites 53.9%
All brands 135.1%
Owned, leased and managed lease
All brands 422.6%
H1 Comparable RevPAR(b) was up +138% vs 2021 (down (20.9)% vs
2019). The industry faced some renewed challenges to travel volumes
at the start of the year from the Omicron variant of Covid-19.
However, from February and over subsequent months, easing of
previous restrictions on international travel contributed to strong
sequential improvements in RevPAR. Leisure stays and transient
business were the strongest categories, with corporate bookings and
group activity picking up in their pace of recovery as the period
went on. Q2 RevPAR(b) was up +147% vs 2021 (down (10.3)% vs 2019)
with occupancy of 64%; occupancy was 10 percentage points lower
relative to 2019, partially offset by rate 4% higher than 2019
levels. Variance in performance within the region continued to
predominantly reflect the timing of the lifting of restrictions.
The UK, which saw one of the earlier easing of restrictions, saw
RevPAR(b) down (8)% in H1 vs 2019 and down (2)% in Q2 vs 2019.
Strong improvements in London trading saw Q2 RevPAR(b) down (10)%
vs 2019, rapidly closing the performance gap with the provinces
which saw RevPAR(b) up +1% vs 2019. Elsewhere, Q2 RevPAR(b)
vs 2019 was down (3)% in Australia, (6)% in Continental Europe,
(8)% in the Middle East, (34)% in South East Asia & Korea and
(50)% in Japan.
Revenue from the reportable segment(a) in H1 increased by $155m
(+185%) to $239m (a decrease of $99m or 29% vs 2019). Operating
profit increased by $67m to a $40m profit, driven by the increase
in revenue, partially offset by $19m of operating exceptional
charges relating to ceasing all operations in Russia. Operating
profit from the reportable segment(a) increased by $86m to a $59m
profit (a decrease of $29m vs 2019). There were $25m of incentive
management fees recorded for the period (2021: $11m; 2019: $41m).
Revenue and operating profit from the reportable segment(a) also
included the benefit of a $7m individually significant liquidated
damages settlement.
Fee business revenue(a) increased by $68m (+128%) to $121m. Fee
business operating profit(a) increased to a $63m profit from a $3m
loss in the comparable period, driven by the improvement in
trading. Together with the prior delivery of sustainable fee
business cost savings, H1 fee margin(a) was 49.1%, compared to
-5.7% in 2021 and 57.8% in 2019.
Owned, leased and managed lease revenue sharply increased by
$87m to $118m, with comparable RevPAR(b) up 423% (down 36% vs 2019)
leading to an owned, leased and managed leased operating loss that
decreased to $4m compared to a $24m loss in the comparable period.
The lifting of travel restrictions, predominantly in the UK, began
to ease the trading challenges on this largely urban-centred
portfolio. Excluding the result of one InterContinental hotel which
was disposed of in January 2022, revenue increased by $91m and
operating loss decreased to $6m.
(a.) Definitions for non-GAAP measures can be found in the Use
of key performance measures and non-GAAP measures section along
with reconciliations of these measures to the most directly
comparable line items within the Interim Financial Statements.
(b.) Comparable RevPAR and occupancy include the impact of
hotels temporarily closed as a result of Covid-19.
(c.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
Hotels Rooms
EMEAA hotel and room count Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 19 - 1,289 19
Regent 4 1 1,113 342
InterContinental 109 1 32,667 106
Vignette Collection 2 1 539 393
Kimpton 11 1 2,318 172
Hotel Indigo 49 1 5,488 305
voco 29 8 7,758 1,876
Crowne Plaza 179 (3) 43,671 (1,157)
Holiday Inn 370 (10) 67,389 (3,435)
Holiday Inn Express 335 2 48,977 429
Staybridge Suites 18 (1) 2,932 (277)
Other 11 (2) 8,043 (789)
_____ ____ _______ ______
Total 1,136 (1) 222,184 (2,016)
_____ ____ _______ ______
Analysed by ownership type
Franchised 772 5 125,560 (147)
Managed 348 (6) 93,330 (1,869)
Owned, leased and managed
lease 16 - 3,294 -
_____ ____ _______ ______
Total 1,136 (1) 222,184 (2,016)
_____ ____ _______ ______
Hotels Rooms
EMEAA Pipeline Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 26 3 1,961 241
Regent 5 (1) 999 (342)
InterContinental 47 4 10,709 1,189
Vignette Collection 1 1 40 40
Kimpton 9 - 1,626 (48)
Hotel Indigo 45 1 7,068 64
voco 26 (5) 7,695 (1,058)
Crowne Plaza 44 4 11,040 579
Holiday Inn 94 (4) 18,803 (2,211)
Holiday Inn Express 96 (3) 14,855 (738)
Staybridge Suites 21 2 3,230 437
Other(a) 11 5 2,053 994
____ ____ ______ _____
Total 425 7 80,079 (853)
____ ____ ______ _____
Analysed by ownership type
Franchised 167 (8) 24,957 (2,088)
Managed 257 15 54,967 1,235
Owned, leased and managed
lease 1 - 155 -
____ ____ ______ _____
Total 425 7 80,079 (853)
____ ____ ______ _____
(a.) Includes two voco pipeline hotels and five Vignette
Collection pipeline hotels.
Gross system size growth was +7.3% year-on-year. We opened 6.8k
rooms (35 hotels) during the first half. There were 16 openings
across the Holiday Inn Brand Family, including resort locations
such as Holiday Inn Resort Ho Tram Beach (Vietnam) and Holiday Inn
& Suites Sydney Bondi Junction, and urban locations such as
Holiday Inn Express Auckland City Centre and at Cambridge West in
the UK. There were eight voco properties opened, including Doha
West Bay, Johannesburg and a flagship new-build at Melbourne
Central. Other notable openings included InterContinental
properties in Bali, Ras Al Khaimah and Appi Kogen Resort, Japan,
and the first Vignette Collection hotel to open in Asia at Sindhorn
Midtown Hotel Bangkok. There were 8.8k rooms (36 hotels) removed in
the first half, of which 6.5k (28 hotels) related to our ceasing of
operations in Russia.
Net system size declined (0.6)% year-on-year; on an adjusted
basis (for the Holiday Inn and Crowne Plaza removals that occurred
in the second half of 2021, driven by last year's review of the
estates of these two brands, and also adjusting for the removal of
hotels in Russia following IHG's announcement regarding ceasing all
operations in that country), net system size growth was +5.2%.
There were 8.1k rooms (49 hotels) signed during the first half
(including 5.8k (34 hotels) during Q2). This included 14 across the
Holiday Inn Brand Family and a particularly strong period for the
InterContinental brand with seven signings. Other notable signings
included the fourth Kimpton in Thailand with Kimpton Hua Hin
Resort, voco Osaka Central (the first for the brand in Japan) and a
three-brand portfolio signing in Vietnam, bringing the Hotel
Indigo, Crowne Plaza and Holiday Inn Express brands to Hoi An and
its UNESCO world heritage site.
The pipeline stands at 80.1k rooms (425 hotels), which
represents 36% of the current system size in the region.
GREATER CHINA
6 months ended 30 June
Greater China results 2022 2021 %
$m $m change
Revenue from the reportable segment(a)
Fee business 36 59 (39.0)
____ ____ _____
Total 36 59 (39.0)
____ ____ _____
Operating profit from the reportable
segment(a)
Fee business 5 31 (83.9)
____ ____ ____
Operating profit 5 31 (83.9)
____ ____ ____
6 months ended
Greater China comparable RevPAR(b) movement 30 June 2022
on previous year
Fee business
Regent (20.0)%
InterContinental (40.3)%
Hotel Indigo (23.8)%
HUALUXE (28.5)%
Crowne Plaza (23.9)%
Holiday Inn (18.5)%
Holiday Inn Express (21.8)%
All brands (27.2)%
H1 Comparable RevPAR(b) was down (27.2)% vs 2021 (down (45.9)%
vs 2019). Localised travel restrictions were reimplemented
following increased Covid-19 cases, which saw the industry
substantially impacted. At the peak of these restrictions, around
40% of IHG's estate was repurposed for quarantine hotels or
temporarily closed. The monthly RevPAR(b) performance bottomed in
April at down (59)% vs 2019 levels, and saw sequential improvements
resume in May; by June, overall RevPAR was down (36)% vs 2019. Tier
1 cities were the most severely impacted by the latest
restrictions, declining (56)% in H1 vs 2019. Tier 2-4 cities, which
are more weighted to domestic and leisure demand, performed better
with a decline of (39)%; these cities were still significantly
impacted given the larger Tier 1 cities represent much of the
source markets for travellers into these locations. As many of the
restrictions have now been lifted or reduced, a rapid recovery has
begun. However, future intermittent lockdowns would continue to
cause further trading volatility.
Revenue from the reportable segment(a) in H1 decreased by $23m
(39%) to $36m (a decrease of $30m or 45% vs 2019). Operating profit
decreased by $26m to $5m driven by the reduction in revenue.
Operating profit from the reportable segment(a) decreased by $26m
(84%) to $5m (a decrease of $31m vs 2019). The impact on trading of
the Covid-related restrictions at our managed hotels led to $5m
recognition of incentive management fees compared to $15m in 2021
(2019: $24m). H1 fee margin(a) reduced to 13.9%, compared to 47.2%
in 2021 and 54.5% in 2019.
(a.) Definitions for non-GAAP measures can be found in the Use
of key performance measures and non-GAAP measures section along
with reconciliations of these measures to the most directly
comparable line items within the Interim Financial Statements.
(b.) Comparable RevPAR and occupancy include the impact of
hotels temporarily closed as a result of Covid-19.
Hotels Rooms
Greater China hotel and room count Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 1 - 130 8
Regent 4 - 1,419 -
InterContinental 53 - 21,206 16
Kimpton 1 - 129 -
Hotel Indigo 15 (1) 2,286 (129)
voco 6 1 1,220 126
HUALUXE 18 2 5,147 544
Crowne Plaza 111 1 38,611 191
EVEN Hotels 3 1 437 186
Holiday Inn 120 (2) 32,560 (450)
Holiday Inn Express 258 11 49,049 1,995
Other(a) 9 - 7,331 -
____ ____ _______ _____
Total 599 13 159,525 2,487
____ ____ _______ _____
Analysed by ownership type
Franchised 188 9 41,905 1,754
Managed 411 4 117,620 733
____ ____ _______ _____
Total 599 13 159,525 2,487
____ ____ _______ _____
(a.) Includes one open hotel that will be re-branded to
voco.
Hotels Rooms
Greater China Pipeline Change over Change over
2022 2021 2022 2021
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 4 - 233 -
Regent 3 1 807 210
InterContinental 27 - 7,898 (9)
Kimpton 8 1 2.026 279
Hotel Indigo 47 6 8,326 948
voco 4 2 745 453
HUALUXE 21 (2) 5,506 (539)
Crowne Plaza 62 14 16,764 3,607
EVEN Hotels 18 (1) 3,615 (126)
Holiday Inn 78 6 18,987 1,391
Holiday Inn Express 202 (6) 32,888 (1,844)
Other - - - -
____ ____ ______ _____
Total 474 21 97,795 4,370
____ ____ ______ _____
Analysed by ownership type
Franchised 239 13 42,952 2,897
Managed 235 8 54,843 1,473
____ ____ ______ _____
Total 474 21 97,795 4,370
____ ____ ______ _____
Gross system size growth was +10.1% year-on-year. The
Covid-related restrictions in the latest period have however
significantly impacted the ability for new hotels to open. There
were 3.8k rooms (19 hotels) added to our system during the first
half, a sharp reduction from the 7.0k rooms (36 hotels) in the
comparable period. Those that were able to open included Holiday
Inn & Suites Sanya Yalong Bay, Hualuxe Qingdao Licang, voco
Nanjing Garden Expo and EVEN Hotel Chengdu Jinniu. There were 1.3k
rooms (6 hotels) removed in the first half.
Net system size growth was +5.9% year-on-year; on an adjusted
basis (for the Holiday Inn and Crowne Plaza removals that occurred
in the second half of 2021, driven by last year's review of the
estates of these two brands), net system size growth was +8.2%.
There were 11.1k rooms (53 hotels) signed during the first half
(including 4.5k (21 hotels) during Q2). Of 30 franchise contracts
signed during the first half, 13 were for Holiday Inn Express. This
was a particularly strong period for Crowne Plaza, with a total of
16 signings growing its pipeline to 62 hotels. Other notable
signings included: Regent Shenzhen Bay, a key market given the
city's leading economic importance; our second Kimpton property in
Suzhou; Hotel Indigo and the accompanying Holiday Inn Resort at
Kanas Hemu, a rapidly growing ski resort; and Hotel Indigo Shanghai
Harbour City, the first example of an online signing ceremony.
The pipeline stands at 97.8k rooms (474 hotels), which
represents 61% of the current system size in the region.
Central
6 months ended 30 June
2022 2021 %
Central results $m $m change
Revenue 94 97 (3.1)
Gross costs (132) (137) (3.6)
____ ____ ____
Operating loss (38) (40) (5.0)
____ ____ ____
Central revenue, which is mainly comprised of technology fee
income, decreased by $3m (3%) to $94m, driven by the impact of
localised travel restrictions for much of the first half in Greater
China.
Gross costs decreased by $5m (3.6%) year-on-year, due to timing
of spend.
The operating loss decreased by $2m.
Use of key performance measures and non-GAAP measures
In addition to performance measures directly observable in the
Financial Statements (IFRS measures), the Business Review presents
certain financial measures when discussing the Group's performance
which are not measures of financial performance or liquidity under
International Financial Reporting Standards (IFRS). In management's
view these measures provide investors and other stakeholders with
an enhanced understanding of IHG's operating performance,
profitability, financial strength and funding requirements. These
measures do not have standardised meanings under IFRS, and
companies do not necessarily calculate these in the same way. As
these measures exclude certain items (for example impairment and
the costs of individually significant legal cases or commercial
disputes) these financial measures may be materially different to
the measures prescribed by IFRS and may result in a more favourable
view of performance. Accordingly, they should be viewed as
complementary to, and not as a substitute for, the measures
prescribed by IFRS and as included in the Group Financial
Statements.
Global revenue per available room (RevPAR) growth
RevPAR is the primary metric used by management to track hotel
performance across regions and brands. RevPAR is also a commonly
used performance measure in the hotel industry.
RevPAR comprises IHG's System rooms revenue divided by the
number of room nights available and can be derived from occupancy
rate multiplied by average daily rate (ADR). ADR is rooms revenue
divided by the number of room nights sold.
References to RevPAR, occupancy and ADR are presented on a
comparable basis, comprising groupings of hotels that have traded
in all months in both the current and comparable year. The
principal exclusions in deriving this measure are new hotels
(including those acquired), hotels closed for major refurbishment
and hotels sold in either of the comparable years. These measures
include the impact of hotels temporarily closed as a result of
Covid-19.
RevPAR and ADR are quoted at a constant US$ conversion rate, in
order to allow a better understanding of the comparable
year-on-year trading performance excluding distortions created by
fluctuations in exchange rates.
Total gross revenue from hotels in IHG's System
Total gross revenue is revenue not wholly attributable to IHG,
however, management believes this measure is meaningful to
investors and other stakeholders as it provides a measure of System
performance, giving an indication of the strength of IHG's brands
and the combined impact of IHG's growth strategy and RevPAR
performance.
Total gross revenue refers to revenue which IHG has a role in
driving and from which IHG derives an income stream.
Total gross revenue comprises:
-- total rooms revenue from franchised hotels;
-- total hotel revenue from managed hotels (includes food and
beverage, meetings and other revenues and reflects the value
IHG drives to managed hotel owners by optimising the performance
of their hotels); and
-- total hotel revenue from owned, leased and managed lease hotels.
Other than total hotel revenue from owned, leased and managed
lease hotels, total gross hotel revenue is not revenue attributable
to IHG as managed and franchised hotels are owned by third
parties.
Total gross revenue is used to describe this measure as it
aligns with terms used in the Group's management and franchise
agreements and therefore is well understood by owners and other
stakeholders.
Revenue and operating profit measures
Revenue and operating profit from (1) fee business and (2)
owned, leased and managed lease hotels, are described as 'revenue
from reportable segments' and 'operating profit from reportable
segments', respectively. These measures are presented for each of
the Group's regions. Management believes revenue and operating
profit from reportable segments is meaningful to investors and
other stakeholders as it excludes the following elements and
reflects how management monitors the business:
-- System Fund - the Fund is not managed to generate a profit
or loss for IHG over the longer term, but is managed for the
benefit of the hotels within the IHG System. The System Fund
is operated to collect and administer cash assessments from
hotel owners for the specific purpose of use in marketing,
the Guest Reservation Systems and loyalty programme.
-- Revenues related to the reimbursement of costs - there is a
cost equal to these revenues so there is no profit impact.
Cost reimbursements are not applicable to all hotels, and growth
in these revenues is not reflective of growth in the performance
of the Group. As such, management does not include these revenues
in their analysis of results.
-- Exceptional items - these are identified by virtue of their
size, nature, or incidence and can include, but are not restricted
to, gains and losses on the disposal of assets, impairment
charges and reversals, the costs of individually significant
legal cases or commercial disputes, and reorganisation costs.
As each item is different in nature and scope, there will be
little continuity in the detailed composition and size of the
reported amounts which affect performance in successive periods.
Separate disclosure of these amounts facilitates the understanding
of performance including and excluding such items. Further
detail of amounts presented as exceptional is included in note
5 to the interim Group Financial Statements.
In further discussing the Group's performance in respect of
revenue and operating profit, additional non-IFRS measures are used
and explained further below:
-- Underlying revenue;
-- Underlying operating profit;
-- Underlying fee revenue; and
-- Fee margin.
Operating profit measures are, by their nature, before interest
and tax. Management believes such measures are useful for investors
and other stakeholders when comparing performance across different
companies as interest and tax can vary widely across different
industries or among companies within the same industry. For
example, interest expense can be highly dependent on a company's
capital structure, debt levels and credit ratings. In addition, the
tax positions of companies can vary because of their differing
abilities to take advantage of tax benefits and because of the tax
policies of the various jurisdictions in which they operate.
Although management believes these measures are useful to
investors and other stakeholders in assessing the Group's ongoing
financial performance and provide improved comparability between
periods, there are limitations in their use as compared to measures
of financial performance under IFRS. As such, they should not be
considered in isolation or viewed as a substitute for IFRS
measures. In addition, these measures may not necessarily be
comparable to other similarly titled measures of other companies
due to potential inconsistencies in the methods of calculation.
Underlying revenue and underlying operating profit
These measures adjust revenue from reportable segments and
operating profit from reportable segments, respectively, to exclude
revenue and operating profit generated by owned, leased and managed
lease hotels which have been disposed, and significant liquidated
damages, which are not comparable year-on-year and are not
indicative of the Group's ongoing profitability. The revenue and
operating profit of current year acquisitions are also excluded as
these obscure underlying business results and trends when comparing
to the prior year. In addition, in order to remove the impact of
fluctuations in foreign exchange, which would distort the
comparability of the Group's operating performance, prior year
measures are restated at constant currency using current year
exchange rates.
Management believes these are meaningful to investors and other
stakeholders to better understand comparable year-on-year trading
and enable assessment of the underlying trends in the Group's
financial performance.
Underlying fee revenue growth
Underlying fee revenue is used to calculate underlying fee
revenue growth. Underlying fee revenue is calculated on the same
basis as underlying revenue as described above but for the fee
business only.
Management believes underlying fee revenue is meaningful to
investors and other stakeholders as an indicator of IHG's ability
to grow the core fee-based business, aligned to IHG's asset-light
strategy.
Fee margin
Fee margin is presented at actual exchange rates and is a
measure of the profit arising from fee revenue. Fee margin is
calculated by dividing 'fee operating profit' by 'fee revenue'. Fee
revenue and fee operating profit are calculated from the revenue
from reportable segments and operating profit from reportable
segments, as defined above, adjusted to exclude the revenue and
operating profit from the Group's owned, leased and managed lease
hotels and significant liquidated damages.
In addition, fee margin is adjusted for the results of the
Group's captive insurance company, where premiums are intended to
match the expected claims over the longer term, and as such these
amounts are adjusted from the fee margin to better depict the
profitability of the fee business.
Management believes fee margin is meaningful to investors and
other stakeholders as an indicator of the sustainable long-term
growth in the profitability of IHG's core fee-based business, as
the scale of IHG's operations increases with growth in IHG's System
size.
Adjusted interest
Adjusted interest is presented before exceptional items and
excludes foreign exchange gains / losses primarily related to the
Group's internal funding structure and the following items of
interest which are recorded within the System Fund:
-- Interest income is recorded in the System Fund on the outstanding
cash balance relating to the IHG loyalty programme. These interest
payments are recognised as interest expense for IHG.
-- Other components of System Fund interest income and expense,
including capitalised interest, lease interest expense and
interest income on overdue receivables.
As the Fund is included on the Group Income Statement, these
amounts are included in the reported net Group financial expenses,
reducing the Group's effective interest cost. Given results related
to the System Fund are excluded from
adjusted measures used by management, these are excluded from
adjusted interest and adjusted earnings per ordinary share (see
page 28).
The exclusion of foreign exchange gains / losses provides
greater comparability with covenant interest as calculated under
the terms of the Group's revolving credit facility.
Management believes adjusted interest is a meaningful measure
for investors and other stakeholders as it provides an indication
of the comparable year-on-year expense associated with financing
the business including the interest on any balance held on behalf
of the System Fund.
Tax excluding the impact of exceptional items and System
Fund
As outlined above, exceptional items can vary year-on-year and,
where subject to tax at a different rate than the Group as a whole,
they can impact the current year's tax charge. The System Fund is
not managed to a profit or loss for IHG over the longer term and
is, in general, not subject to tax either.
Management believes removing these provides a better view of the
Group's underlying tax rate on ordinary operations and aids
comparability year-on-year, thus providing a more meaningful
understanding of the Group's ongoing tax charge. A reconciliation
of the tax charge as recorded in the Group income statement, to tax
excluding the impact of exceptional items and System Fund, can be
found in note 6 to the Interim Financial Statements.
Adjusted earnings per ordinary share
Adjusted earnings per ordinary share adjusts the profit
available for equity holders used in the calculation of basic
earnings per share to remove System Fund revenue and expenses, the
items of interest related to the System Fund and foreign exchange
gains / losses as excluded in adjusted interest (above), change in
fair value of contingent purchase consideration, exceptional items,
and the related tax impacts of such adjustments.
Management believes that adjusted earnings per share is a
meaningful measure for investors and other stakeholders as it
provides a more comparable earnings per share measure aligned with
how management monitors the business.
Net debt
Net debt is used in the monitoring of the Group's liquidity and
capital structure and is used by management in the calculation of
the key ratios attached to the Group's bank covenants and with the
objective of maintaining an investment grade credit rating. Net
debt is used by investors and other stakeholders to evaluate the
financial strength of the business.
Net debt comprises loans and other borrowings, lease
liabilities, the exchange element of the fair value of derivatives
hedging debt values, less cash and cash equivalents. A summary of
the composition of net debt is included in note 10 to the interim
Group Financial Statements.
Adjusted EBITDA
One of the key measures used by the Group in monitoring its debt
and capital structure is the net debt:adjusted EBITDA ratio, which
is managed with the objective of maintaining an investment grade
credit rating. The Group has a stated aim of maintaining this ratio
at 2.5-3.0x. Adjusted EBITDA is defined as cash flow from
operations, excluding cash flows relating to exceptional items,
cash flows arising from the System Fund result, other non-cash
adjustments to operating profit or loss, working capital and other
adjustments, and contract acquisition costs (key money).
Adjusted EBITDA is useful to investors as an approximation of
operational cash flow generation and is also relevant to the
Group's banking covenants, which use Covenant EBITDA in calculating
the leverage ratio. Details of covenant levels and performance
against these is provided in note 10 to the Interim Financial
Statements.
Gross capital expenditure, net capital expenditure, adjusted
free cash flow
These measures have limitations as they omit certain components
of the overall cash flow statement. They are not intended to
represent IHG's residual cash flow available for discretionary
expenditures, nor do they reflect the Group's future capital
commitments. These measures are used by many companies, but there
can be differences in how each company defines the terms, limiting
their usefulness as a comparative measure. Therefore, it is
important to view these measures only as a complement to the Group
statement of cash flows.
Gross capital expenditure
Gross capital expenditure represents the consolidated capital
expenditure of IHG inclusive of System Fund capital investments.
Gross capital expenditure is defined as net cash from investing
activities, adjusted to include contract acquisition costs (key
money). In order to demonstrate the capital outflow of the Group,
cash flows arising from any disposals or distributions from
associates and joint ventures are excluded. The measure also
excludes any material investments made in acquiring businesses,
including any subsequent payments of deferred or contingent
purchase consideration included within investing activities, which
represent ongoing payments for acquisitions.
Gross capital expenditure is reported as either maintenance,
recyclable, or System Fund. This disaggregation provides useful
information as it enables users to distinguish between:
-- System Fund capital investments which are strategic investments
to drive growth at hotel level;
-- Recyclable investments (such as investments in associates and
joint ventures), which are intended to be recoverable in the
medium term and are to drive the growth of the Group's brands
and expansion in priority markets; and
-- Maintenance capital expenditure (including contract acquisition
costs), which represents a permanent cash outflow.
Management believes gross capital expenditure is a useful
measure as it illustrates how the Group continues to invest in the
business to drive growth. It also allows for comparison
year-on-year.
Net capital expenditure
Net capital expenditure provides an indicator of the capital
intensity of IHG's business model. Net capital expenditure is
derived from net cash from investing activities, adjusted to
include contract acquisition costs (net of repayments) and to
exclude any material investments made in acquiring businesses,
including any subsequent payments of deferred or contingent
purchase consideration included within investing activities which
are typically non-recurring in nature. Net capital expenditure
includes the inflows arising from any disposal receipts, or
distributions from associates and joint ventures.
In addition, System Fund depreciation and amortisation relating
to property, plant and equipment and intangible assets,
respectively, is added back, reducing the overall cash outflow.
This reflects the way in which System Funded capital investments
are recovered from the System Fund, over the life of the asset.
Management believes net capital expenditure is a useful measure
as it illustrates the net capital investment by IHG, after taking
into account capital recycling through asset disposal and the
funding of strategic investments by the System Fund. It provides
investors and other stakeholders with visibility of the cash flows
which are allocated to long-term investments to drive the Group's
strategy.
Adjusted free cash flow
Adjusted free cash flow is net cash from operating activities
adjusted for: (1) the inclusion of the cash outflow arising from
the purchase of shares by employee share trusts reflecting the
requirement to satisfy incentive schemes which are linked to
operating performance; (2) the inclusion of maintenance capital
expenditure (excluding contract acquisition costs); (3) the
inclusion of the principal element of lease payments; and (4) the
exclusion of payments of deferred or contingent purchase
consideration included within net cash from operating
activities.
Management believes adjusted free cash flow is a useful measure
for investors and other stakeholders, as it represents the cash
available to invest back into the business to drive future growth
and pay the ordinary dividend, with any surplus being available for
additional returns to shareholders.
Changes in definitions to the 2021 Annual Report and
Accounts
The following definitions have been amended:
-- Adjusted interest and adjusted earnings per ordinary share
have been amended to exclude foreign exchange gains / losses
recorded within financial expenses. Since the gains / losses
are principally as a result of the Group's internal funding
structure they are not reflective of the performance of the
Group, excluding these amounts provides a more comparable year-on-year
measure for investors and other users, aligned to how management
monitor the business. Comparatives have not been restated as
the impact of these changes are not material in 2021.
-- The definition and reconciliation of Adjusted EBITDA has been
amended to reconcile to the nearest GAAP measure, cash flow
from operations, reflecting the fact Adjusted EBITDA is primarily
used by the Group as a liquidity measure. The value of Adjusted
EBITDA is unchanged from 2021.
Revenue and operating profit non-GAAP reconciliations
Highlights for the 6 months ended 30 June
Reportable segments Revenue Operating profit
2022 2021 % 2022 2021 %
$m $m change $m $m change
Per Group income statement 1,794 1,179 52.2 361 138 161.6
System Fund (554) (378) 46.6 (3) 46 NM(a)
Reimbursement of costs (400) (236) 69.5 - - -
Operating exceptional
items - - - 19 4 375.0
_____ _____ _____ _____ _____ _____
Reportable segments 840 565 48.7 377 188 100.5
_____ _____ _____ _____ _____ _____
Reportable segments analysed
as:
Fee business 664 505 31.5 372 224 66.1
Owned, leased and managed
lease 176 60 193.3 5 (36) NM(a)
_____ _____ _____ _____ _____ _____
Reportable segments 840 565 48.7 377 188 100.5
(a.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
Underlying revenue and underlying operating profit
Revenue Operating profit
2022 2021 % 2022 2021 %
$m $m change $m $m Change
Reportable segments (see
above) 840 565 48.7 377 188 100.5
Significant liquidated
damages(b) (7) (6) 16.7 (7) (6) 16.7
Owned and leased asset
disposals(c) - (6) NM(a) (2) 8 NM(a)
Currency impact - (7) NM(a) - 3 NM(a)
____ _____ _____ _____ _____ _____
Underlying revenue and
underlying operating profit 833 546 52.6 368 193 90.7
(a.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
(b.) $7m recongnised in 2022 reflects the significant liquidated
damages related to one hotel in EMEAA and $6m recognised in 2021
reflects the significant liquidated damages related to one hotel in
Greater China.
(c.) The results of one InterContinental Hotel have been removed
in 2022 (being the year of disposal) and the prior year to
determine underlying growth. The results of the hotels removed in
2021 (being the year of disposal of these hotels) have also been
removed to determine underlying growth.
Underlying fee revenue and underlying fee operating profit
Revenue Operating profit
2022 2021 % 2022 2021 %
$m $m change $m $m change
Reportable segments fee
business (see above) 664 505 31.5 372 224 66.1
Significant liquidated
damages(b) (7) (6) 16.7 (7) (6) 16.7
Currency impact - (4) NM(a) - 1 NM(a)
_____ _____ _____ _____ _____ _____
Underlying fee revenue
and underlying fee operating
profit 657 495 32.7 365 219 66.7
(a.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
(b.) $7m recognised in 2022 reflects the significant liquidated
damages related to one hotel in EMEAA and $6m recognised in 2021
reflects the significant liquidated damages related to one hotel in
Greater China.
Americas
Revenue Operating profit(a)
2022 2021 % 2022 2021 %
$m $m change $m $m change
Per Interim financial statements 471 325 44.9 351 224 56.7
Reportable segments analysed
as:
Fee business 413 296 39.5 342 236 44.9
Owned, leased and managed
lease 58 29 100.0 9 (12) NM(b)
_____ _____ _____ _____ _____ _____
471 325 44.9 351 224 56.7
Reportable segments (see
above) 471 325 44.9 351 224 56.7
Owned and leased asset disposals(c) - (5) NM(b) - 4 (100.0)
Currency impact - (1) NM(b) - (1) NM(b)
_____ _____ _____ _____ _____ _____
Underlying revenue and underlying
operating profit 471 319 47.6 351 227 54.6
Owned, leased and managed
lease included in the above (58) (24) 141.7 (9) 8 NM(b)
_____ _____ _____ _____ _____ _____
Underlying fee business 413 295 40.0 342 235 45.5
(a.) Before exceptional items.
(b.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
(c.) The results of the hotels removed in 2021 (being the year
of disposal of these hotels) have been removed to determine
underlying growth.
EMEAA
Revenue Operating profit(a)
2022 2021 % 2022 2021 %
$m $m change $m $m change
Per Interim financial statements 239 84 184.5 59 (27) NM(b)
Reportable segments analysed
as:
Fee business 121 53 128.3 63 (3) NM(b)
Owned, leased and managed
lease 118 31 280.6 (4) (24) 83.3
_____ _____ _____ _____ _____ _____
239 84 184.5 59 (27) NM(b)
Reportable segments (see
above) 239 84 184.5 59 (27) NM(b)
Significant liquidated
damages (7) - NM(b) (7) - NM(b)
Owned and leased asset
disposals(c) - (1) NM(b) (2) 4 NM(b)
Currency impact - (5) NM(b) - 2 NM(b)
_____ _____ _____ _____ _____ _____
Underlying revenue and
underlying operating profit 232 78 197.4 50 (21) NM(b)
Owned, leased and managed
lease included in the above (118) (27) 337.0 6 18 (66.7)
_____ _____ _____ _____ _____ _____
Underlying fee business 114 51 123.5 56 (3) NM(b)
(a.) Before exceptional items.
(b.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
(c.) The results of one InterContinental Hotel have been removed
in 2022 (being the year of disposal) and the prior year to
determine underlying growth.
Greater China
Revenue Operating profit(a)
2022 2021 % 2022 2021 %
$m $m change $m $m change
Per Interim financial statements
Reportable segments analysed
as: 36 59 (39.0) 5 31 (83.9)
_____ _____ _____ _____ _____ _____
Fee business 36 59 (39.0) 5 31 (83.9)
Reportable segments (see
above) 36 59 (39.0) 5 31 (83.9)
Significant liquidated damages(c) - (6) NM(b) - (6) NM(b)
_____ _____ _____ _____ _____ _____
Underlying revenue and underlying
operating profit 36 53 (32.1) 5 25 (80.0)
(a.) Before exceptional items.
(b.) Percentage change considered not meaningful, such as where
a positive balance in the latest period is comparable to a negative
or zero balance in the prior period.
(c.) $6m recognised in 2021 reflects the significant liquidated
damages related to one property.
Fee margin reconciliation
6 months ended 30 June
2022
Americas EMEAA Greater Central Total
China
Revenue $m
Reportable segments analysed as fee
business (see above) 413 121 36 94 664
Significant liquidated damages - (7) - - (7)
Captive insurance company - - - (8) (8)
_____ _____ _____ _____ _____
413 114 36 86 649
Operating profit $m
Reportable segments analysed as fee
business (see above) 342 63 5 (38) 372
Significant liquidated damages - (7) - - (7)
Captive insurance company - - - (2) (2)
_____ _____ _____ _____ _____
342 56 5 (40) 363
Fee margin % 82.8% 49.1% 13.9% (46.5%) 55.9%
6 months ended 30 June
2021
Americas EMEAA Greater Central Total
China
Revenue $m
Reportable segments analysed as
fee business (see above) 296 53 59 97 505
Significant liquidated damages - - (6) - (6)
Captive insurance company - - - (9) (9)
_____ _____ _____ _____ _____
296 53 53 88 490
Operating profit $m
Reportable segments analysed as
fee business (see above) 236 (3) 31 (40) 224
Significant liquidated damages - - (6) - (6)
Captive insurance company - - - (2) (2)
_____ _____ _____ _____ _____
236 (3) 25 (42) 216
Fee margin % 79.7% (5.7%) 47.2% (47.7%) 44.1%
Net capital expenditure reconciliation
6 months ended
30 June
2022 2021
$m $m
Net cash from investing activities (27) (37)
Adjusted for:
Contract acquisition costs, net of repayments (35) (16)
System Fund depreciation and amortisation(a) 40 39
Deferred purchase consideration paid - 13
_____ _____
Net capital expenditure (22) (1)
_____ _____
Analysed as:
Capital expenditure: maintenance (including
contract acquisition costs, net of repayments
of $35m (2021: $16m)) (50) (25)
Capital expenditure: recyclable investments 6 (8)
Capital expenditure: System Fund capital
investments 22 32
_____ _____
Net capital expenditure (22) (1)
_____ _____
(a.) Excludes depreciation of right-of-use assets.
Gross capital expenditure reconciliation
6 months ended
30 June
2022 2021
$m $m
Net capital expenditure (22) (1)
Add back:
Disposal receipts (7) (1)
Repayments of contract acquisition costs (3) (1)
System Fund depreciation and amortisation(a) (40) (39)
_____ _____
Gross capital expenditure (72) (42)
_____ _____
Analysed as:
Capital expenditure: maintenance (including
contract (53) (26)
acquisition costs of $38m (2021: $17m))
Capital expenditure: recyclable investments (1) (9)
Capital expenditure: System Fund capital
investments (18) (7)
_____ _____
Gross capital expenditure (72) (42)
_____ _____
(a.) Excludes depreciation of right-of-use assets.
Adjusted free cash flow reconciliation
6 months ended
30 June
2022 2021
$m $m
Net cash from operating activities 175 173
Adjusted for:
Principal element of lease payments (18) (17)
Capital expenditure: maintenance (excluding
contract acquisition costs) (15) (9)
_____ _____
Adjusted free cash flow 142 147
_____ _____
Adjusted interest reconciliation
The following table reconciles net financial expenses to
adjusted interest.
6 months ended
30 June
2022 2021
$m $m
Net financial expenses
Financial income 5 1
Financial expenses (74) (73)
_____ _____
(69) (72)
Adjusted for:
Interest attributable to the System Fund (3) -
Foreign exchange losses* 8 n/a
_____ _____
5 -
Adjusted interest (64) (72)
* The definition of adjusted interest has been updated. The
impact to the prior year is not material, and as such has not been
restated.
Adjusted earnings per ordinary share reconciliation
6 months ended
30 June
2022 2021
$m $m
Profit available for equity holders 216 48
Adjusting items:
System Fund revenues and expenses (3) 46
Interest attributable to the System Fund (3) -
Operating exceptional items 19 4
Fair value gain on contingent purchase consideration (7) (1)
Foreign exchange losses* 8 n/a
Tax on foreign exchange losses* (1) n/a
Tax on exceptional items (5) (1)
Exceptional tax - (22)
_____ _____
Adjusted earnings 224 74
Basic weighted average number of ordinary
shares (millions) 184 183
Adjusted earnings per ordinary share (cents) 121.7 40.4
* The definition of adjusted earnings per share has been
updated. The impact to the prior year is not material, and as such
has not been restated.
Highlights for the 6 months ended 30 June vs 2019
Reportable segments Revenue Operating profit
2022 2019 % 2022 2019 %
$m $m change $m $m change
Per Group income statement 1,794 2,280 (21.3) 361 442 (18.3)
System Fund (554) (675) (17.9) (3) (47) (93.6)
Reimbursement of costs (400) (593) (32.5) - - -
Operating exceptional
items - - - 19 15 26.7
_____ _____ _____ _____ _____ _____
Reportable segments 840 1,012 (17.0) 377 410 (8.0)
_____ _____ _____ _____ _____ _____
Reportable segments analysed
as:
Fee business 664 730 (9.0) 372 394 (5.6)
Owned, leased and managed
lease 176 282 (37.6) 5 16 (68.8)
_____ _____ _____ _____ _____ _____
Reportable segments 840 1,012 (17.0) 377 410 (8.0)
Americas
Revenue Operating profit(a)
2022 2019 % 2022 2019 %
$m $m change $m $m change
Per Interim financial statements 471 520 (9.4) 351 341 2.9
Reportable segments analysed
as:
Fee business 413 418 (1.2) 342 323 5.9
Owned, leased and managed
lease 58 102 (43.1) 9 21 (57.1)
_____ _____ _____ _____ _____ _____
471 520 (9.4) 351 344 2.0
a. Before exceptional items.
EMEAA
Revenue Operating profit(a)
2022 2019 % 2022 2019 %
$m $m change $m $m change
Per Interim financial statements 239 338 (29.3) 59 88 (33.0)
Reportable segments analysed
as:
Fee business 121 158 (23.4) 63 93 (32.3)
Owned, leased and managed
lease 118 180 (34.4) (4) (5) (20.0)
_____ _____ _____ _____ _____ _____
239 338 (29.3) 59 88 (33.0)
a. Before exceptional items.
Greater China
Revenue Operating profit(a)
2022 2019 % 2022 2019 %
$m $m change $m $m change
Per Interim financial statements
Reportable segments analysed
as: 36 66 (45.5) 5 36 (86.1)
_____ _____ _____ _____ _____ _____
Fee business 36 66 (45.5) 5 36 (86.1)
a. Before exceptional items.
Fee Margin Reconciliation
6 months ended 30th June
2019
Americas EMEAA Greater Central Total
China
Revenue $m
Reportable segments analysed as
fee business (see above) 418 158 66 88 730
Significant liquidated damages - (4) - - (4)
Captive insurance company - - - (7) (7)
_____ _____ _____ _____ _____
418 154 66 81 719
Operating profit $m
Reportable segments analysed as
fee business (see above) 323 93 36 (58) 394
Significant liquidated damages - (4) - - (4)
Captive insurance company - - - (1) (1)
_____ _____ _____ _____ _____
323 89 36 (59) 389
Fee margin % 77.3% 57.8% 54.5% (72.8%) 54.1%
PRINCIPAL RISKS AND UNCERTAINTIES
The principal and emerging risks and uncertainties that could
substantially affect IHG's business and results are set out on
pages 40 to 47 of the IHG Annual Report and Form 20-F 2021 (the
"Annual Report").
We have continued to face dynamic risks relating to
macro-economic and geo-political factors, including those related
to our Greater China operations, the war in Ukraine and as central
banks and governments take action to manage inflation. These
factors also create wider accumulated uncertainties across our
principal risk portfolio, for example relating to global supply
chains, inflationary cost pressures and cyber security, which we
will continue to monitor closely over the remainder of the year.
There may also be unknown risks or risks currently believed to be
inconsequential that emerge and could become material.
Our Board and management continue regularly to review our risk
profile and risk trends arising externally or internally, and risk
management and internal control arrangements.
As an example of active senior executive and Board evaluation of
risks and considering the interests of our stakeholders, local and
global management teams have closely monitored and reported on the
developing situation in Ukraine, reviewing both local operational
matters and triggers of potential impact on IHG outside of the
immediate area which may require a more active response. This has
included monitoring of potential risk factors relating to national
/ international sanctions; payment systems; cybersecurity and
technology threats; and procurement and supply chain arrangements
for key geographies and commodities.
Following the outbreak of the war, we announced the suspension
of future investments, development activity and new hotel openings
in Russia and that we did not intend to resume any investment or
development activity in the foreseeable future. We also closed our
corporate office in Moscow. These steps followed significant
donations to our humanitarian charity partners and a commitment to
work with hotel owners in other countries to shelter refugees.
Subsequently, we announced that we were in discussions with our
owners in Russia regarding the complex, long-term management and
franchise contracts under which these hotels operate. We are
ceasing all operations in Russia, consistent with evolving UK, US
and EU sanction regimes and the ongoing and increasing challenges
of operating there.
The following summarises the risks and uncertainties set out in
the 2021 Annual Report, which continue to apply:
-- Macro external factors, such as political and economic disruption,
or the emerging risk of infectious diseases, could have an
impact on IHG's ability to perform and grow; commercial performance,
financial loss and undermine stakeholder confidence;
-- Failure to deliver IHG's preferred brands and loyalty programme
could impact IHG's competitive positioning, IHG's growth ambitions
and reputation with guests and owners;
-- Failure to effectively attract, develop and retain talent in
key areas could impact IHG's ability to achieve its growth
ambitions and execute effectively;
-- Threats to cybersecurity and information governance could lead
to the disruption or loss of IHG's critical systems and sensitive
data and could impact IHG financially, reputationally or operationally;
-- Failure to capitalise on innovation in booking technology,
and maintain and enhance IHG's functionality and resilience
of its channel management and technology platforms could impact
IHG's revenues and growth ambitions;
-- Failure to manage risks associated with delivering investment
effectiveness and efficiency may impact commercial performance,
lead to financial loss, and undermine stakeholder confidence;
-- Failure to ensure contractual, legal, regulatory and ethical
compliance would impact IHG operationally and reputationally;
-- Failure to effectively safeguard the safety and security of
colleagues and guests and respond appropriately to operational
risk could result in reputational and / or financial damage,
and undermine stakeholder confidence;
-- A material breakdown in financial management and control systems
could lead to increased public scrutiny, regulatory investigation
and litigation; and
-- Environment and social mega-trends have the potential to impact
performance and growth in key markets.
These principal and emerging risks and uncertainties are
supported by a broader description of risk factors set out on pages
231 to 236 of the Annual Report
RELATED PARTY TRANSACTIONS
There were no material related party transactions during the six
months to 30 June 2022.
GOING CONCERN
As at 30 June 2022 the Group had total liquidity of $2,613m,
comprising $1,350m of undrawn bank facilities and $1,263m of cash
and cash equivalents (net of overdrafts and restricted cash).
There remains a wide range of possible planning scenarios over
the going concern period. The scenarios considered and assessment
made by the Directors in adopting the going concern basis for
preparing these financial statements are included in note 1 to the
Interim Financial Statements.
Based on the assessment completed, the Directors have a
reasonable expectation that the Group has sufficient resources to
continue operating until at least 31 December 2023. Accordingly,
they continue to adopt the going concern basis in preparing the
interim financial statements.
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 UK-adopted 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
8 August 2022 8 August 2022
InterContinental Hotels Group PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2022
2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Revenue from fee business 664 505
Revenue from owned, leased and managed lease
hotels 176 60
System Fund revenues 554 378
Reimbursement of costs 400 236
_____ _____
Total revenue (notes 3 and 4) 1,794 1,179
Cost of sales and administrative expenses (450) (321)
System Fund expenses (551) (424)
Reimbursed costs (400) (236)
Share of losses of associates - (5)
Other operating income 14 2
Depreciation and amortisation (36) (45)
Impairment loss on financial assets (5) (8)
Other impairment charges (note 5) (5) (4)
_____ _____
Operating profit (note 3) 361 138
Operating profit analysed as:
Operating profit before System Fund and
exceptional items 377 188
System Fund 3 (46)
Operating exceptional items (note 5) (19) (4)
_____ _____
361 138
--------------------------------------------------- ------------------------ -----------------
Financial income 5 1
Financial expenses (74) (73)
Fair value gains on contingent purchase
consideration 7 1
_____ _____
Profit before tax 299 67
Tax (note 6) (83) (19)
_____ _____
Profit for the period from continuing operations 216 48
_____ _____
Attributable to:
Equity holders of the parent 216 48
_____ _____
Earnings per ordinary share (note 7)
Basic 117.4c 26.2c
Diluted 116.8c 26.1c
InterContinental Hotels Group PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
2022 2021
6 months ended 6 months ended
30 June 30 June
$m $m
Profit for the period 216 48
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss:
Gains/(losses) on cash flow hedges, including
related tax credit of $1m (2021: $3m charge) 13 (54)
Costs of hedging - 2
Hedging (gains)/losses reclassified to
financial expenses (17) 66
Exchange gains/(losses) on retranslation
of foreign operations, including related
tax credit of $6m (2021: $nil) 198 (38)
_____ _____
194 (24)
Items that will not be reclassified to
profit or loss:
Gains on equity instruments classified
as fair value through other comprehensive
income, net of related tax charge of $2m
(2021: $1m) 3 9
Re-measurement gains on defined benefit
plans, net of related tax charge of $5m
(2021: tax credit of $1m) 15 5
Tax related to pension contributions - 2
_____ _____
18 16
_____ _____
Total other comprehensive income/(loss)
for the period 212 (8)
_____ _____
Total comprehensive income for the period 428 40
_____ _____
Attributable to:
Equity holders of the parent 429 40
Non-controlling interest (1) -
_____ _____
428 40
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022
6 months ended 30 June 2022
Equity Other Retained Non-controlling Total
share reserves* earnings interest equity
capital
$m $m $m $m $m
At beginning of the period 154 (2,539) 904 7 (1,474)
Total comprehensive income
for the period - 198 231 (1) 428
Release of own shares by employee
share trusts - 17 (17) - -
Equity-settled share-based
cost - - 25 - 25
Equity dividends paid - - (154) - (154)
Exchange adjustments (16) 16 - - -
_____ _____ _____ _____ _____
At end of the period 138 (2,308) 989 6 (1,175)
_____ _____ _____ _____ _____
6 months ended 30 June 2021
Equity Other Retained Non-controlling Total
share reserves* earnings interest equity
capital
$m $m $m $m $m
At beginning of the period 156 (2,581) 568 8 (1,849)
Total comprehensive income
for the period - (15) 55 - 40
Transfer of treasury shares
to employee share trusts - (14) 14 - -
Release of own shares by employee
share trusts - 13 (13) - -
Equity-settled share-based
cost - - 19 - 19
Tax related to share schemes - - 1 - 1
Exchange adjustments 3 (3) - - -
_____ _____ _____ _____ _____
At end of the period 159 (2,600) 644 8 (1,789)
_____ _____ _____ _____ _____
* Other reserves comprise the capital redemption reserve, shares
held by employee share trusts, other reserves, fair value reserve,
cash flow hedge reserves and currency translation reserve.
Total comprehensive income is shown net of tax.
InterContinental Hotels Group PLC
GROUP STATEMENT OF FINANCIAL POSITION
30 June 2022
2022 2021
30 June 31 December
$m $m
ASSETS
Goodwill and other intangible assets 1,160 1,195
Property, plant and equipment 126 137
Right-of-use assets 282 274
Investment in associates 76 77
Retirement benefit assets 2 2
Other financial assets 169 173
Deferred compensation plan investments 213 256
Non-current tax receivable - 1
Deferred tax assets 130 147
Contract costs 73 72
Contract assets 328 316
______ ______
Total non-current assets 2,559 2,650
______ ______
Inventories 4 4
Trade and other receivables 691 574
Current tax receivable 11 1
Other financial assets - 2
Cash and cash equivalents 1,361 1,450
Contract costs 5 5
Contract assets 30 30
______ ______
Total current assets 2,102 2,066
______ ______
Total assets 4,661 4,716
_____ _____
LIABILITIES
Loans and other borrowings (278) (292)
Lease liabilities (25) (35)
Trade and other payables (518) (579)
Deferred revenue (658) (617)
Provisions (51) (49)
Current tax payable (26) (52)
______ ______
Total current liabilities (1,556) (1,624)
______ ______
Loans and other borrowings (2,336) (2,553)
Lease liabilities (402) (384)
Derivative financial instruments (37) (62)
Retirement benefit obligations (69) (92)
Deferred compensation plan liabilities (213) (256)
Trade and other payables (84) (89)
Deferred revenue (1,016) (996)
Provisions (36) (41)
Deferred tax liabilities (87) (93)
______ ______
Total non-current liabilities (4,280) (4,566)
______ ______
Total liabilities (5,836) (6,190)
_____ _____
Net liabilities (1,175) (1,474)
_____ _____
EQUITY
IHG shareholders' equity (1,181) (1,481)
Non-controlling interest 6 7
______ ______
Total equity (1,175) (1,474)
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2022
2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Profit for the period 216 48
Adjustments reconciling profit for the period
to cash flow from operations (note 9) 120 211
_____ _____
Cash flow from operations 336 259
Interest paid (42) (40)
Interest received 5 1
Tax paid (note 6) (124) (47)
_____ _____
Net cash from operating activities 175 173
_____ _____
Cash flow from investing activities
Purchase of property, plant and equipment (12) (3)
Purchase of intangible assets (21) (13)
Investment in associates (1) -
Investment in other financial assets - (9)
Deferred purchase consideration paid - (13)
Disposal of property, plant and equipment 3 -
Repayments of other financial assets 4 1
_____ _____
Net cash from investing activities (27) (37)
_____ _____
Cash flow from financing activities
Dividends paid to shareholders (note 8) (154) -
Principal element of lease payments (18) (17)
Repayment of commercial paper - (828)
_____ _____
Net cash from financing activities (172) (845)
_____ _____
Net movement in cash and cash equivalents,
net of overdrafts, in the period (24) (709)
Cash and cash equivalents, net of overdrafts,
at beginning of the period 1,391 1,624
Exchange rate effects (70) 20
_____ _____
Cash and cash equivalents, net of overdrafts,
at end of the period 1,297 935
_____ _____
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 Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority and UK-adopted
IAS 34 'Interim Financial Reporting'. They have been prepared
on a consistent basis using the same accounting policies and methods
of computation set out in the InterContinental Hotels Group PLC
('the Group' or 'IHG') Annual Report and Form 20-F for the year
ended 31 December 2021.
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 (UK) 2410 'Review of Interim Financial
Information performed by the Independent Auditor of the Entity'
issued by the Financial Reporting Council.
Financial information for the year ended 31 December 2021 has
been extracted from the Group's published financial statements
for that year which were prepared in accordance with UK-adopted
international accounting standards and with applicable law and
regulations and which have been filed with the Registrar of Companies.
The report of the auditor 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.
There are no changes in the Group's critical judgements, estimates
and assumptions from those disclosed in the 2021 Annual Report
and Form 20-F. An updated sensitivity related to expected credit
losses is included in note 12(e).
Going concern
Trading in the first half of 2022 continued to recover with ongoing
relaxation of travel restrictions supporting an increasing return
of travel demand, resulting in Global RevPAR recovering to approximately
90% of 2019 levels. Continued focus on cash conversion led to
reported net cash from operating activities in the first half
of $175m and net debt reducing to $1,718m.
The Group's bank facilities were refinanced in April 2022 with
a new revolving credit facility of $1,350m maturing in 2027, with
options to extend for a further two years. Previously negotiated
covenant relaxations and the $400m liquidity covenant, which were
applicable at 30 June and 31 December 2022 test dates, will no
longer apply. The leverage covenant has been adjusted to incorporate
the effects of IFRS 16 'Leases' and has been reset at 4.0x covenant
net debt:covenant EBITDA (see note 10).
A period of 18 months has been used, from 1 July 2022 to 31 December
2023, to complete the going concern assessment. In adopting the
going concern basis for preparing these condensed interim financial
statements, the Directors have considered a 'Base Case' scenario
which is based on continued improvement in demand as travel restrictions
are reduced, with RevPAR continuing to recover towards pre-pandemic
levels in 2023. The only debt maturity in the period under consideration
is the GBP173m 3.875% November 2022 bond which is assumed to be
repaid with cash on maturity. The assumptions applied in the Base
Case scenario are consistent with those used for Group planning
purposes, for impairment testing and for assessing recoverability
of deferred tax assets. Under the Base Case scenario, the bank
facilities remain undrawn.
The principal risks and uncertainties which could be applicable
have been considered and are able to be absorbed within the covenant
requirements of the new bank facility. A large number of the Group's
principal risks, for example macro external factors or preferred
brands and loyalty, would result in an impact on RevPAR which
is one of the sensitivities assessed against the headroom available
in the Base Case. Climate risks are not considered to have a significant
impact over the 18-month period of assessment. Other principal
risks that could result in a large one-off incident that has a
material impact on cash flow have also been considered, for example
a cybersecurity event.
The Directors have also reviewed a 'Downside Case' based on a
recession scenario which assumes performance during the second
half of 2022 starts to worsen and then RevPAR decreases by 5%
in 2023. The Directors have also reviewed a 'Severe Downside Case'
which is based on a severe but plausible scenario equivalent to
the market conditions experienced through the 2008/2009 global
financial crisis. This assumes that the performance during the
second half of 2022 starts to worsen and then RevPAR decreases
significantly by 17% in 2023. It is assumed that the additional
shareholder return of $500m announced on 9 August 2022 is completed
in full in all scenarios before additional actions are taken.
Under the Downside Case and Severe Downside case, the bank facilities
remain undrawn.
Under the Severe Downside scenario, there is limited headroom
to the bank covenants at 31 December 2023 to absorb additional
risks. However, based on experience in 2020, the Directors reviewed
a number of actions to reduce discretionary spend, creating substantial
additional headroom. After these actions are taken, there is significant
headroom to the bank covenants to absorb the principal risks and
uncertainties which could be applicable.
In the Severe Downside Case, the Group has substantial levels
of existing cash reserves available after additional actions are
taken (over $850m at 31 December 2023) and is not expected to
draw on the bank facilities.
The Directors reviewed a reverse stress test scenario to determine
what decrease in RevPAR would create a breach of the covenants,
and the cash reserves that would be available to the Group at
that time. The Directors concluded that the outcome of this reverse
stress test showed that it was very unlikely the bank facilities
would need to be drawn.
The leverage and interest cover covenant tests up to 31 December
2023 (the last day of the assessment period), have been considered
as part of the Base Case, Downside Case and Severe Downside Case
scenarios. However, as the bank facilities are unlikely to be
drawn even in a scenario significantly worse than the Severe Downside
scenario, the Group does not need to rely on the additional liquidity
provided by the bank facilities to remain a going concern. In
the event that a covenant amendment was required, the Directors
believe it is reasonable to expect that such an amendment could
be obtained based on prior experience in negotiating the 2020
amendments, however the going concern conclusion is not dependent
on this expectation.
The Group's fee based model and wide geographic spread have been
proven to leave it well-placed to manage through uncertain times.
Having reviewed these scenarios, the Directors have a reasonable
expectation that the Group has sufficient resources to continue
operating until at least 31 December 2023. Accordingly, they continue
to adopt the going concern basis in preparing these condensed
interim financial statements.
2. Exchange rates
The results of operations have been translated into US dollars
at the average rates of exchange for the period. In the case of
sterling, the translation rate is $1 = GBP0.77 (2021: $1 = GBP0.72).
In the case of the euro, the translation rate is $1 = EUR0.92
(2021: $1 = EUR0.83).
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 = GBP0.83 (31 December
2021: $1 = GBP0.74; 30 June 2021: $1 = GBP0.72). In the case of
the euro, the translation rate is $1 = EUR0.96 (31 December 2021:
$1 = EUR0.88; 30 June 2021: $1 = EUR0.84).
3. Segmental Information
Revenue 2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Americas 471 325
EMEAA 239 84
Greater China 36 59
Central 94 97
_____ _____
Revenue from reportable segments 840 565
System Fund revenues 554 378
Reimbursement of costs 400 236
_____ _____
Total revenue 1,794 1,179
_____ _____
Profit 2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Americas 351 224
EMEAA 59 (27)
Greater China 5 31
Central (38) (40)
_____ _____
Operating profit from reportable segments 377 188
System Fund 3 (46)
Operating exceptional items (note 5) (19) (4)
_____ _____
Operating profit 361 138
Net financial expenses (69) (72)
Fair value gains on contingent purchase
consideration 7 1
_____ _____
Profit before tax 299 67
_____ _____
4. Revenue
Disaggregation of revenue
6 months ended 30 June 2022
Americas EMEAA Greater Central Group
China
$m $m $m $m $m
Franchise and base management
fees 406 96 31 - 533
Incentive management fees 7 25 5 - 37
Central revenue - - - 94 94
_____ _____ _____ _____ _____
Revenue from fee business 413 121 36 94 664
Revenue from owned, leased and
managed lease hotels 58 118 - - 176
_____ _____ _____ _____ _____
471 239 36 94 840
_____ _____ _____ _____
System Fund revenues 554
Reimbursement of costs 400
_____
Total revenue 1,794
_____
6 months ended 30 June 2021
Americas EMEAA Greater Central Group
China
$m $m $m $m $m
Franchise and base management
fees 292 42 44 - 378
Incentive management fees 4 11 15 - 30
Central revenue - - - 97 97
_____ _____ _____ _____ _____
Revenue from fee business 296 53 59 97 505
Revenue from owned, leased and
managed lease hotels 29 31 - - 60
_____ _____ _____ _____ _____
325 84 59 97 565
_____ _____ _____ _____
System Fund revenues 378
Reimbursement of costs 236
_____
Total revenue 1,179
_____
At 30 June 2022, the maximum exposure remaining under performance
guarantees was $80m (31 December 2021: $85m).
5. Exceptional items
2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Cost of sales and administrative expenses
Costs of ceasing operations in Russia (14) -
Other impairment charges
Impairment of contract assets (5) -
Impairment of associates - (4)
_____ _____
(5) (4)
____ ____
Total operating exceptional items (19) (4)
_____ _____
Tax on exceptional items 5 1
Exceptional tax - 22
_____ _____
Tax (note 6) 5 23
_____ _____
Costs of ceasing operations in Russia
On 27 June 2022, the Group announced it is in the process of ceasing
all operations in Russia consistent with evolving UK, US and EU
sanction regimes and the ongoing and increasing challenges of
operating there. The costs associated with the cessation of corporate
operations in Moscow and long-term management and franchise contracts
are treated as exceptional due to the nature of the war in Ukraine
which has driven the Group's response.
Impairment of contract assets
Relates to key money relating to managed and franchised hotels
in Russia. The impairment is treated as exceptional for consistency
with the costs of ceasing operations described above.
6. Tax
2022 2021
6 months ended 6 months ended
30 June 30 June
Profit/(loss) Tax Tax Profit/(loss) Tax Tax
$m $m rate $m $m rate
Before exceptional
items and System
Fund 315 (88) 28% 117 (42) 36%
System Fund 3 - (46) -
Exceptional items
(note 5) (19) 5 (4) 23
_____ _____ _____ _____
299 (83) 67 (19)
_____ _____ _____ _____
Analysed as:
Current tax (88) (43)
Deferred tax 5 24
_____ _____
(83) (19)
_____ _____
Further analysed
as:
UK tax (3) 23
Foreign tax (80) (42)
_____ _____
(83) (19)
_____ _____
Tax before exceptional items and System Fund has been calculated
by applying a blended effective tax rate of 28%. This blended
effective rate represents the weighting of the annual tax rates
of the Group's key territories using corporate income tax rates
substantively enacted at 30 June 2022 to provide the best estimate
for the full financial year. It is higher than the 2022 UK Corporation
Tax rate of 19% due to higher taxed overseas profits (particularly
in the US) and the impact of unrelieved foreign taxes and other
non-tax deductible expenses.
The deferred tax asset comprises $109m (31 December 2021: $127m)
in the UK and $21m (31 December 2021: $20m) in respect of other
territories. The deferred tax asset has been recognised based
upon forecasts consistent with those used in the going concern
assessment.
Tax paid of $124m in the period exceeds the current tax charge
in the Group income statement predominantly as a result of liabilities
already accrued at 1 January 2022 being settled in the period
and the phasing of the 2022 US instalment payments.
7. Earnings per ordinary share
2022 2021
6 months 6 months
ended ended
30 June 30 June
Basic earnings per ordinary share
Profit available for equity holders ($m) 216 48
Basic weighted average number of ordinary
shares (millions) 184 183
Basic earnings per ordinary share (cents) 117.4 26.2
_____ _____
Diluted earnings per ordinary share
Profit available for equity holders ($m) 216 48
Diluted weighted average number of ordinary
shares (millions) 185 184
Diluted earnings per ordinary share (cents) 116.8 26.1
_____ _____
The diluted weighted average number of ordinary shares is calculated
as:
Basic weighted average number of ordinary
shares (millions) 184 183
Dilutive potential ordinary shares (millions) 1 1
______ ______
185 184
_____ _____
8. Dividends
2022 2021
6 months ended 6 months ended
30 June 30 June
cents per $m cents per $m
share share
Paid during the period 85.9 154 - -
______ ______ ______ ______
Proposed for the interim
period 43.9 81 - -
______ ______ ______ ______
In addition to the interim dividend of 43.9 cents per share, in
August 2022 the Board also approved a $500m share buyback programme
that will commence on 9 August and end no later than 31 January
2023.
9. Reconciliation of profit for the period to cash flow from operations
2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Profit for the period 216 48
Adjustments for:
Net financial expenses 69 72
Fair value gains on contingent purchase
consideration (7) (1)
Income tax charge 83 19
Operating profit adjustments:
Impairment loss on financial assets 5 8
Other impairment charges 5 4
Other operating exceptional items 14 -
Depreciation and amortisation 36 45
_____ _____
60 57
Contract assets deduction in revenue 17 16
Share-based payments cost 17 14
Share of losses of associates - 5
_____ _____
34 35
System Fund adjustments:
Depreciation and amortisation 42 41
Impairment loss on financial assets 4 3
Share-based payments cost 9 6
Share of losses of associates - 1
_____ _____
55 51
Working capital and other adjustments:
Increase in deferred revenue 65 35
Changes in working capital (189) (29)
_____ _____
(124) 6
Cash flows relating to exceptional items (15) (12)
Contract acquisition costs, net of repayments (35) (16)
_____ _____
Total adjustments 120 211
_____ _____
Cash flow from operations 336 259
_____ _____
10. Net debt
2022 2021
30 June 31 December
$m $m
Cash and cash equivalents* 1,361 1,450
Loans and other borrowings - current (278) (292)
Loans and other borrowings - non-current (2,336) (2,553)
Lease liabilities - current (25) (35)
Lease liabilities - non-current (402) (384)
Derivative financial instruments hedging
debt values (38) (67)
_____ _____
Net debt** (1,718) (1,881)
_____ _____
* Of which $152m (31 December 2021: $124m) is cash at bank and
in hand.
** See the Use of Non-GAAP measures section in the Interim Management
Report.
In the Group statement of cash flows, cash and cash equivalents
is presented net of $64m bank overdrafts (31 December 2021: $59m).
Cash and cash equivalents includes $8m (31 December 2021: $9m)
restricted for use on capital expenditure under hotel lease agreements
and therefore not available for wider use by the Group. An additional
$26m (31 December 2021: $77m) is held within countries from which
funds are not currently able to be repatriated to the Group's
central treasury company.
Bank facilities
In April 2022, the Group's $1,275m revolving syndicated bank facility
and $75m revolving bilateral facility were refinanced with a $1,350m
revolving syndicated bank facility. The facility was undrawn at
30 June 2022.
The new facility contains two financial covenants: interest cover
and a leverage ratio. These are tested at half year and full year
on a trailing 12-month basis, with 30 June 2022 being the first
test date.
The interest cover covenant requires a ratio of Covenant EBITDA:
Covenant interest payable above 3.5:1 and the leverage ratio requires
Covenant net debt: Covenant EBITDA below 4.0:1.
The previous covenants, as set out in the 2021 Annual Report and
Form 20-F, were waived until 31 December 2021 and had been relaxed
for test dates in 2022. The temporary $400m liquidity covenant,
which was previously applicable at 30 June and 31 December 2022
test dates, will no longer apply.
2022 2021
30 June 31 December*
Covenant EBITDA ($m) 812 601
Covenant net debt ($m) 1,752 1,801
Covenant interest payable ($m) 133 133
Leverage 2.16 3.00
Interest cover 6.11 4.52
Liquidity ($m) n/a 2,655
* In 2021, covenant measures were reported on a frozen GAAP basis
excluding the effect of IFRS 16, an adjustment which is eliminated
under the new facility agreement.
11. Movement in net debt
2022 2021
6 months 6 months ended
ended
30 June 30 June
$m $m
Net decrease in cash and cash equivalents,
net of overdrafts (24) (709)
Add back financing cash flows in respect
of other components of net debt:
Principal element of lease payments 18 17
Repayment of commercial paper - 828
_____ _____
(Increase)/decrease in net debt arising
from cash flows (6) 136
Other movements:
Lease liabilities (32) (3)
Increase in accrued interest (24) (25)
Exchange and other adjustments 225 (37)
_____ _____
Decrease in net debt 163 71
Net debt at beginning of the period (1,881) (2,529)
_____ _____
Net debt at end of the period (1,718) (2,458)
_____ _____
12. Financial instruments
a) Fair value hierarchy
The following table provides the carrying value (which is equal
to the fair value) and position in the fair value measurement
hierarchy of the Group's financial assets and liabilities measured
and recognised at fair value on a recurring basis.
Value
----------------------------------
Level Level Level Total
1 2 3
$m $m $m $m
Financial assets
Equity securities* - - 109 109
Money market funds** 882 - - 882
Deferred compensation plan investments 213 - - 213
Financial liabilities
Derivative financial instruments - (37) - (37)
Contingent purchase consideration*** - - (66) (66)
Deferred compensation plan liabilities (213) - - (213)
* Included in 'other financial assets'.
** Included in 'other financial assets' and 'cash and cash equivalents'.
*** Included in 'trade and other payables'.
There were no transfers between Level 1 and Level 2 fair value
measurements during the period and no transfers into or out of
Level 3.
b) Valuation techniques
The valuation techniques and types of input applied by the Group
for the six months ended 30 June 2022 are consistent with those
disclosed within the 2021 Annual Report and Form 20-F. Changes
in reported amounts are primarily caused by payments made and
received, changes in market inputs, such as discount rates, and
the impact of the time value of money.
Within Level 2 financial instruments, derivative financial liabilities
have fallen to $37m, primarily driven by movements in sterling:euro
exchange rates which impact the valuation of currency swaps.
Equity securities
The significant unobservable inputs used to determine the fair
value of the unquoted equity securities are RevPAR growth, pre-tax
discount rate (which ranged from 6.3% to 9.3%) and a non-marketability
factor (which ranged from 20% to 30%).
Applying a one-year slower/faster RevPAR recovery period would
result in a $8m/$7m (decrease)/increase in fair value respectively.
A one percentage point increase/decrease in the discount rate
would result in a $10m (decrease)/increase in fair value respectively.
A five percentage point increase/decrease in the non-marketability
factor would result in a $6m (decrease)/increase in fair value.
Contingent purchase consideration
Principally comprises the present value of the expected amounts
payable on exercise of put and call options to acquire the remaining
49% shareholding in Regent.
The significant unobservable inputs are the projected trailing
revenues and the date of exercising the options. If the annual
trailing revenues were to exceed the floor by 10%, the amount
of the contingent purchase consideration recognised would increase
by $7m. If the date for exercising the options is assumed to be
2033, the amount of the undiscounted contingent purchase consideration
would be $86m.
c) Reconciliation of financial instruments classified as Level 3
Contingent
Equity purchase consideration
securities $m
$m
At 1 January 2022 106 (73)
Unrealised changes in fair
value 5 7
Exchange and other adjustments (2) -
_____ _____
At 30 June 2022 109 (66)
_____ _____
Changes in the fair value of equity securities are recognised
within 'Gains on equity instruments classified as fair value through
other comprehensive income' in the Group statement of comprehensive
income.
Changes in the fair value of contingent purchase consideration
are recognised within 'Fair value gains on contingent purchase
consideration' in the Group income statement.
d) Fair value of other financial instruments
The Group also holds a number of financial instruments which are
not measured at fair value in the Group statement of financial
position. With the exception of the Group's bonds, their fair
values are not materially different to their carrying amounts,
since the interest receivable or payable is either close to current
market rates or the instruments are short-term in nature. The
Group's bonds, which are classified as Level 1 fair value measurements,
have a carrying value of $2,550m and a fair value of $2,378m.
The Group did not measure any financial assets or liabilities
at fair value on a non-recurring basis as at 30 June 2022.
e) Estimation uncertainty related to financial instruments
Consistent with 31 December 2021, the calculation of expected
credit losses on trade receivables is a significant estimate.
Although the collection of trade receivables has improved compared
to the prior year, there remains a significant amount of older
debt which has not yet been collected. There also remains a risk
of reduced owner liquidity. If historical evidence was applied
to all owner groups (rather than by reference to other sources
of data), the provision would reduce by approximately $11m; alternatively
a 10% collection rate of amounts over 270 days would reduce the
provision by approximately $9m.
13. Commitments, contingencies and guarantees
At 30 June 2022, the amount contracted for but not provided for
in the financial statements for expenditure on property, plant
and equipment and intangible assets was $26m (31 December 2021:
$17m).
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. These legal claims and proceedings are
in various stages and include disputes related to specific hotels
where the potential materiality is not yet known; such proceedings,
either individually or in the aggregate, have not in the recent
past and are not likely to have a significant effect on the Group's
financial position or profitability. In the EMEAA region, one
such dispute is expected to be resolved in the second half of
the year and, in the six months ended 30 June 2022, a further
dispute has been found in the Group's favour, subject to appeal,
with no liability arising.
In limited cases, the Group may guarantee bank loans made to facilitate
third-party ownership of hotels under IHG management or franchise
agreements. At 30 June 2022, there were guarantees of up to $67m
in place (31 December 2021: $69m).
Subsequent to 30 June 2022, the Group has agreed to restructure
the UK portfolio leases with substantially lower rental payments.
The revised portfolio will comprise nine IHG-branded hotels, with
the leases of three unbranded hotels terminating in the second
half of 2022. This is a non-adjusting event since commitments
were made after 30 June 2022. Documentation is expected to be
signed in the second half of 2022, subject to obtaining consent
from superior landlords.
The structure of the revised leases is similar to the current
leases which contain guarantees that the Group will fund any shortfalls
in lease payments up to an annual and cumulative cap. These caps
limit the Group's exposure to trading losses, meaning that rental
payments are reduced if insufficient cash flows are generated
by the hotels. In the event that rent reductions are not applicable,
annual base rental payments stabilise at GBP34m over the remaining
lease term of 21 years. Additional performance-based rental payments
are calculated using hotel revenues and net cash flows.
The revised terms are expected to result in an immaterial reversal
of previous impairment of property, plant and equipment and related
adjustments to deferred tax. Existing provisions for onerous contractual
expenditure will be utilised on termination of the three leases.
INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC
REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Our conclusion
We have reviewed InterContinental Hotels Group PLC's condensed
consolidated interim financial statements (the 'interim financial
statements') in the Half Year Results of InterContinental Hotels
Group PLC for the six month period ended 30 June 2022 (the 'period').
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not prepared,
in all material respects, in accordance with UK-adopted International
Accounting Standard 34 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
The interim financial statements comprise:
* the Group statement of financial position at 30 June
2022;
* the Group income statement and Group statement of
comprehensive income for the period then ended;
* the Group statement of cash flows for the period then
ended;
* the Group statement of changes in equity for the
period then ended; and
* the explanatory notes to the interim financial
statements.
The interim financial statements included in the Half Year Results
of InterContinental Hotels Group PLC have been prepared in accordance
with UK-adopted International Accounting Standard 34 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard
on Review Engagements (UK) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by
the Financial Reporting Council 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,
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.
We have read the other information contained in the Half Year
Results and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the basis for conclusion
section of this report, nothing has come to our attention to suggest
that the Directors have inappropriately adopted the going concern
basis of accounting or that the Directors have identified material
uncertainties relating to going concern that are not appropriately
disclosed. This conclusion is based on the review procedures performed
in accordance with this ISRE. However, future events or conditions
may cause the Group to cease to continue as a going concern.
RESPONSIBILITIES FOR THE INTERIM FINANCIAL STATEMENTS AND THE
REVIEW
Our responsibilities and those of the Directors
The Half Year Results, including the interim financial statements,
are the responsibility of, and have been approved by, the Directors.
The Directors are responsible for preparing the Half Year Results
in accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
In preparing the Half Year Results, including the interim financial
statements, the Directors are responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate
the Group or to cease operations or have no realistic alternative
but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our conclusions relating to going concern, is based
on procedures that are less extensive than audit procedures as
described in the basis for conclusion paragraph of this report.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority and for no other purpose. We do not,
in giving this conclusion, accept or assume responsibility for
any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
8 August 2022
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FVLLBLVLZBBX
(END) Dow Jones Newswires
August 09, 2022 02:00 ET (06:00 GMT)
Intercontinental Hotels (LSE:IHG)
Historical Stock Chart
From Apr 2024 to May 2024
Intercontinental Hotels (LSE:IHG)
Historical Stock Chart
From May 2023 to May 2024
