REG - Interco. Hotels Grp - Half-year Report
08/08/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230808:nRSH5709Ia&default-theme=true
RNS Number : 5709I InterContinental Hotels Group PLC 08 August 2023
InterContinental Hotels Group PLC
Half Year Results to 30 June 2023
8 August 2023
Reported Underlying(1)
2023 2022(2) % change % change
REPORTABLE SEGMENTS(1):
Revenue(1) $1,031m $840m +23% +27%
Revenue from fee business(1) $799m $659m +21% +24%
Operating profit(1) $479m $377m +27% +30%
Fee margin(1) 58.8% 55.5% +3.3%pts
Adjusted EPS(1) 182.7¢ 121.7¢ +50% KEY METRICS:
GROUP RESULTS: · $15.2bn total gross revenue(1)
Total revenue $2,226m $1,794m +24% +29% vs 2022, +12% vs 2019
Operating profit $584m $361m +62% · +24% global H1 RevPAR(1)
Basic EPS 265.3¢ 117.4¢ +126% vs 2022, +8.7% vs 2019
Interim dividend per share 48.3¢ 43.9¢ +10% · +17% global Q2 RevPAR(1)
Net debt(1) $2,270m $1,718m +32% vs 2022, +9.9% vs 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. ) Re-presented for the adoption of IFRS 17 'Insurance Contracts' (see
note 1 to the Financial Statements).
( )
● Strong trading: H1 RevPAR up +24% YOY; further sequential improvement vs 2019
with Q1 +6.8% and Q2 +9.9%
● Americas H1 RevPAR up +11% YOY, EMEAA +42% and Greater China +94%, reflecting
the differing levels of travel restrictions that were still in place in H1
2022
● Average daily rate up +7% vs 2022, +11% vs 2019; occupancy up +9%pts vs 2022,
just (1.3)%pts lower vs 2019
● Gross system growth +6.3% YOY; net system size growth of +4.8% YOY
● Opened 21.0k rooms (108 hotels) in H1, +40% more than H1 2022; global estate
now at 925k rooms (6,227 hotels)
● Signed 34.2k rooms (239 hotels) in H1, +11% more than H1 2022; global pipeline
now at 286k rooms (1,931 hotels), +2.9% YOY; 17.7k rooms (131 hotels) in Q2,
+7% ahead of Q1 and +25% more than Q2 2022
● Fee margin of 58.8%, up +3.3%pts vs 2022 on trading recovery in EMEAA and
Greater China
● Operating profit from reportable segments of $479m, +27% vs 2022; this
included $5m adverse currency impact
● Reported operating profit of $584m, including $87m of System Fund profit and
an $18m exceptional profit
● Net cash from operating activities of $315m (2022: $175m), with adjusted free
cash flow(1) of $277m (2022: $142m)
● Net debt increase of $419m since start of the year includes $372m share
buybacks, $166m dividends and a $112m net foreign exchange adverse impact
● Interim dividend 48.3¢, +10% vs 2022; dividend payments in 2023 will return
close to $250m to IHG's shareholders
● Trailing 12-month adjusted EBITDA(1) of $996m, +23% vs 2022; net debt:adjusted
EBITDA ratio of 2.3x
● Current $750m buyback programme 47% complete; share buybacks together with
ordinary dividends are on track to return approximately $1.0bn to shareholders
in 2023
● New midscale conversion brand launching, with strong interest from owners
already expressed
Elie Maalouf, Chief Executive Officer, IHG Hotels & Resorts, said:
"I am honoured to take over as IHG's group CEO and excited to look ahead with
our talented teams and owners all around the world to an important next
chapter of growth. Our teams have delivered strong results in the first half,
with financial performance, hotel openings and signings all significantly
above prior year comparisons. Travel demand is very healthy, with RevPAR
improving year-on-year across all our markets and exceeding 2019 pre-pandemic
peaks for four consecutive quarters. In the Americas and EMEAA regions,
leisure demand has remained buoyant and business and group travel continued to
strengthen, while in Greater China, demand has rebounded rapidly.
The investments we're making in our powerful enterprise platform are
delivering results for guests and owners - be it the breadth of attractive
brands we now have in place, the excellent impact of our new mobile app, or
the strength of our IHG One Rewards programme, which has seen enrolments jump
by +60% since launch a year ago. We opened 21 thousand rooms across 108
hotels in the half, keeping us on track for net system size growth
expectations, and we signed over 34 thousand rooms across 239 hotels, +11%
ahead of last year. More than a quarter of all signings were across our six
Luxury & Lifestyle brands, as we accelerate growth in this higher fee
income segment.
As we continue to grow our brand portfolio, we're excited to announce we will
soon launch a new brand targeted at midscale conversion opportunities. We're
proud of our industry-leading position in upper midscale with Holiday Inn and
Holiday Inn Express. Our aim is that this new conversion brand will become the
first choice for guests and owners in the midscale segment, accelerating our
growth in a space that is already worth $14bn in the US market alone.
Conversions represent a major growth opportunity for us, generating around 40%
of first half openings and signings globally, and we see an increasing desire
from owners to quickly realise the benefits of IHG's scale and strong
enterprise. We're delighted that more than 100 hotels have already expressed
definitive interest in the new brand.
The combination of RevPAR and system growth drove further expansion of our fee
margin, leading to a +27% increase in operating profit from reportable
segments. Our +50% growth in adjusted EPS includes the additional earnings
accretion from our ongoing return of surplus capital via share buybacks. The
combination of these drivers demonstrates how IHG creates value for our
shareholders, and as this industry continues to power forward, we are
confident in the strengths of our business model, scale and strategy to
capture sustainable, profitable growth."
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: Neil Maidment (+44 (0)7970 668 250); Mike Ward (+44 (0)7795 257 407
Presentation for analysts and institutional shareholders:
A conference call and webcast presented by Elie Maalouf, Chief Executive Officer, and Michael Glover, Chief Financial Officer, will commence at 9:30am (London time) on 8 August 2023 and can be accessed directly on
https://www.investis-live.com/ihg/6495503c67ddff0c00694bc4/jtla (https://www.investis-live.com/ihg/6495503c67ddff0c00694bc4/jtla)
or via
www.ihgplc.com/en/investors/results-and-presentations (https://www.ihgplc.com/en/investors/results-and-presentations)
.
Analysts and institutional shareholders wishing to ask questions should use the following dial-in details for a Q&A facility:
UK local: 0204 587 0498
US local: 646 787 9445
All other locations: +44 204 587 0498
Passcode: 82 20 77
An archived webcast of the presentation is expected to be available later on
the day of the results and will remain available for the foreseeable future,
accessed at www.ihgplc.com/en/investors/results-and-presentations
(http://www.ihgplc.com/en/investors/results-and-presentations) . An audio
replay will also be available for 7 days using the following details:
UK local: 0203 936 3001
US local: 845 709 8569
All other locations: +44 203 936 3001
Passcode: 73 52 70
Website:
The full release and supplementary data will be available on our website from
7:00am (London time) on 8 August. The web address is
www.ihgplc.com/en/investors/results-and-presentations
(https://www.ihgplc.com/en/investors/results-and-presentations) .
About IHG Hotels & Resorts:
IHG Hotels & Resorts (https://www.ihgplc.com) [LON:IHG, NYSE:IHG (ADRs)]
is a global hospitality company, with a purpose to provide True Hospitality
for Good.
With a family of 18 hotel brands and IHG One Rewards
(https://urldefense.com/v3/__http:/email.investis.com/ls/click?upn=T-2Fn3OVRavEvfp-2BcwHA4A99imKpoqIJxvmXwKaaQPh-2F0-3DygFb_ojq2lu66bX8JNKV7VmBiOZ2gLVi27eAYFqE40NVToEeeHiYKncxdBspif1mQlBK7ih-2B5rzYsrNnDqgQn1wszyhe5xRGUvld0NWW3KwpUnWtxiJsqB0ttFTF4eNwtEIP6Oq8lyDW5KoQFtyJe-2Bm18YjgiHAhr23RBEd1PKOwFYY8z7PScBuJSe1ztaC6p56jTzGST-2Fvc-2BetCMz1pPnnGDUjyivzqA2pH29Vmiz8T-2BmmunkBHoR5LSxI1VjgVEsv7cApWyuKiG8-2BGNJnO5ejYTcA-3D-3D__;!!EOxaMA!CjjXZ7KAZ7idANJdcoLB7daWoS810tckeGbds16Y8bqw50-1iPUaVwYwmb01-ewc$)
, one of the world's largest hotel loyalty programmes, IHG has over 6,000 open
hotels in more than 100 countries, and more than 1,900 in the development
pipeline.
- Luxury & Lifestyle: Six Senses Hotels Resorts Spas
(https://www.sixsenses.com/) , Regent Hotels & Resorts
(https://www.regenthotels.com/) , InterContinental Hotels & Resorts
(http://www.intercontinental.com/hotels/gb/en/reservation) , Vignette
Collection (https://www.vignettecollectionhotels.com/) , Kimpton Hotels &
Restaurants (https://www.ihg.com/kimptonhotels/hotels/gb/en/reservation) ,
Hotel Indigo (http://www.ihg.com/hotelindigo/hotels/gb/en/reservation)
- Premium: voco hotels
(https://www.ihg.com/voco/hotels/gb/en/reservation) , HUALUXE Hotels &
Resorts (https://www.ihg.com/hualuxe/hotels/gb/en/reservation) , Crowne Plaza
Hotels & Resorts (http://www.ihg.com/crowneplaza/hotels/gb/en/reservation)
, EVEN Hotels (http://www.ihg.com/evenhotels/hotels/us/en/reservation)
- Essentials: Holiday Inn Express
(http://www.ihg.com/holidayinnexpress/hotels/gb/en/reservation) , Holiday Inn
Hotels & Resorts (http://www.ihg.com/holidayinn/hotels/gb/en/reservation)
, avid hotels (https://www.ihg.com/avidhotels/hotels/us/en/reservation)
- Suites: Atwell Suites (https://www.atwellsuites.com/) , Staybridge
Suites (http://www.ihg.com/staybridge/hotels/gb/en/reservation) , Holiday Inn
Club Vacations
(https://www.ihg.com/holidayinnclubvacations/hotels/us/en/reservation) ,
Candlewood Suites (http://www.ihg.com/candlewood/hotels/us/en/reservation)
- Exclusive Partners: Iberostar Beachfront Resorts
(https://www.ihg.com/content/us/en/iberostar-beachfront-resorts)
InterContinental Hotels Group PLC is the Group's holding company and is
incorporated and registered in England and Wales. Approximately 345,000 people
work across IHG's hotels and corporate offices globally.
Visit us online for more about our hotels and reservations
(http://www.ihg.com) and IHG One Rewards
(https://urldefense.com/v3/__http:/email.investis.com/ls/click?upn=T-2Fn3OVRavEvfp-2BcwHA4A99imKpoqIJxvmXwKaaQPh-2F0-3DygFb_ojq2lu66bX8JNKV7VmBiOZ2gLVi27eAYFqE40NVToEeeHiYKncxdBspif1mQlBK7ih-2B5rzYsrNnDqgQn1wszyhe5xRGUvld0NWW3KwpUnWtxiJsqB0ttFTF4eNwtEIP6Oq8lyDW5KoQFtyJe-2Bm18YjgiHAhr23RBEd1PKOwFYY8z7PScBuJSe1ztaC6p56jTzGST-2Fvc-2BetCMz1pPnnGDUjyivzqA2pH29Vmiz8T-2BmmunkBHoR5LSxI1VjgVEsv7cApWyuKiG8-2BGNJnO5ejYTcA-3D-3D__;!!EOxaMA!CjjXZ7KAZ7idANJdcoLB7daWoS810tckeGbds16Y8bqw50-1iPUaVwYwmb01-ewc$)
. To download the new IHG One Rewards app, visit the Apple App
(https://apps.apple.com/us/app/ihg-hotel-deals-rewards/id368217298) or Google
Play (https://play.google.com/store/apps/details?id=com.ihg.apps.android)
stores.
For our latest news, visit our Newsroom
(https://www.ihgplc.com/en/news-and-media) and follow us on LinkedIn
(https://www.linkedin.com/company/ihghotels&resorts/) , Facebook
(http://www.facebook.com/ihgcorporate) and Twitter
(http://www.twitter.com/IHGCorporate) .
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.
Capital allocation: growing the ordinary dividend and returning surplus
capital through buybacks
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 platform.
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.
IHG's perspectives on the uses of cash generated by the business are
unchanged: ensuring the business is investing to optimise growth that will
drive 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 intends for the ordinary dividend to be covered 2-2.5x by Adjusted EPS (a
payout ratio of 40-50%). This is consistent with cover averaging 2.3x in the
2012-2019 period. The total dividend for 2022 was covered 2.0x by Adjusted
EPS.
Ordinary dividend payments in 2023 will return close to $250m to IHG's
shareholders. As announced in February, a $750m share buyback programme is
returning further surplus capital. This was expected to reset leverage into
our target range, and it follows on from last year's $500m programme which
already reduced the total number of voting rights in the Company by 5.0%. At
the 30 June 2023 balance sheet date, the current $750m programme was 47%
complete with $349.5m (£280.7m) spent repurchasing 5.2 million shares at an
average price of £54.44 per share; this reduced the total number of voting
rights in the Company by a further 2.9% to 170.2 million up to the balance
sheet date.
EPS is calculated using the weighted average number of shares (WANOS) in issue
for the period which reduces accordingly to take account of the timing of
shares repurchased. For the first half of 2023, the WANOS was 173.1 million
shares, a 6% lower share count than the comparable period.
IHG's business model is expected to continue its strong track record of
converting around 100% of adjusted earnings into free cash flow. Whilst
prioritising investing in the business to optimise growth, our asset-light
model is expected to provide the opportunity to routinely return additional
capital to shareholders such as through rolling share buybacks, which would
further enhance growth of earnings per share.
Key trends in recent trading
Increased demand for travel in all our markets
· RevPAR growth YOY reflects the differing levels of travel
restrictions that were still in place in the first half last year, leading to
Q2 group RevPAR +17% YOY, with Americas +6%, EMEAA +27% and Greater China
+110%.
· IHG's group RevPAR has exceeded 2019 levels each month since July
2022. For Q2 of 2023, group RevPAR was +9.9% ahead of 2019, with the Americas
+12.1% and EMEAA +15.0%, partially offset by Greater China down just (0.5)% as
it continues to recover with the more recent easing of travel constraints in
that region.
· Leisure travel saw the earliest recovery coming out of Covid,
followed by a return of business and then group travel.
· The US, our single largest country market, saw the following H1
revenue performances by stay occasion category:
o Leisure +24% ahead of 2019, reflecting +7% more room nights and rate +16%
ahead;
o Business +1% ahead of 2019, reflecting -4% fewer room nights and rate +6%
ahead; and
o Groups -14% behind 2019, reflecting -19% fewer room nights and rate +7%
ahead.
· As more Groups activity returns, bookings for these meetings and
events have now exceeded 2019 levels for six consecutive months. At the end of
June 2023, booked revenue globally was +36% higher than 2019.
Sustained volume and pricing improvements
· IHG's Q2 group RevPAR of +9.9% ahead of 2019 reflected occupancy
just (1.5)%pts behind and ADR up +12%; the Americas, driven by the early US
recovery, reached occupancy just (0.5)%pts below 2019 and ADR +13% ahead.
· There have been no broad signs of consumer price resistance or
cooling of leisure demand to date. Some specific US resort destinations that
had already experienced very strong demand-driven pricing last year have seen
rates ease, with this offset by increased leisure travel to other
destinations, including international trips to locations where IHG's global
distribution reach has captured strong demand.
· The expected recovery in business demand has continued, with
progress in the US indicating the potential elsewhere. Corporate rate
negotiations in 2022 have supported ADR increases in 2023.
· The overall industry has been experiencing both the opportunity and
the need for higher room rates, given the return of demand and inflationary
pressures; STR's forecasts for the US industry expect this will be sustained:
o RevPAR to be +13% ahead of 2019 levels in 2023 and +24% ahead by 2025;
o This assumes ADR in 2023 is +17% ahead in nominal terms, but only +1%
ahead in real terms, therefore indicating headroom for rates to increase
further; and
o occupancy to be restored to over 96% of 2019 levels in 2023, and to be
almost fully recovered by 2025.
Whilst the comparatives to 2022 get tougher in the second half of the year and
there are ongoing economic uncertainties, we expect RevPAR to remain positive
year-on-year in each region. Irrespective of any shorter-term macro pressures,
IHG has proven the resiliency of our business model and we remain confident
about the tailwinds for attractive long‑term growth in RevPAR which drives
our fee income. We also expect continued progress in growing our net system
size, leveraging the power of our enterprise platform, strong brand portfolio,
and the combination of driving growth through new build hotels, conversions
and the potential to add further exclusive partnerships.
System size and pipeline progress
Openings and signings progress in 2023 reflects IHG's strong portfolio of
brands and the overall enterprise platform that we provide to hotel owners,
together with the long-term attractiveness of the markets we operate in:
· Global system of 925k rooms (6,227 hotels) at 30 June 2023,
weighted 68% across midscale segments and 32% across upscale and luxury
· Gross growth +6.3% YOY, with 21.0k rooms (108 hotels) opened in H1,
+40% on prior year; Q2 openings of 12.6k (63 hotels), 51% ahead of both Q1 and
the prior year
· Removal of 7.3k rooms (45 hotels) in H1; removal rate of -1.5% over
last 12 months, in line with the historical underlying average rate
· Net system size growth +4.8% YOY; +3.0% excluding Iberostar
· Global pipeline of 286k rooms (1,931 hotels), representing 31% of
current system size; pipeline growth +2.9% YOY
· Signed 34.2k rooms (239 hotels) in H1, +11% on prior year; Q2
signings of 17.7k rooms (131 hotels), +7% ahead of Q1 and +25% more than prior
year
· Signings mix drives pipeline to be weighted 54% across midscale
segments and 46% across upscale and luxury, which over the coming years will
drive a more even-weighted system mix
· Conversions growing strongly, representing 36% of signings and 42%
of openings (excluding Iberostar)
· More than 40% of the global pipeline is under construction, broadly
in line with prior years
System and pipeline summary of movements in H1 2023 and total closing position
(rooms):
System Pipeline
Openings Removals Net Total YTD% YOY% Signings Total
Group 20,995 (7,302) 13,693 925,320 +1.5% +4.8% 34,167 286,228
Americas 4,173 (3,333) 840 516,336 +0.2% +3.0% 13,329 106,045
EMEAA 12,356 (2,777) 9,579 239,243 +4.2% +7.7% 9,956 77,161
Greater China 4,466 (1,192) 3,274 169,741 +2.0% +6.4% 10,882 103,022
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, and our growing
responsibility to care for and invest in our people, communities and planet.
1. Build loved and trusted brands
We continue to invest in our brands, evolving design, service and quality and
increasing their scale. We also take opportunities to add additional brands to
our portfolio to offer wider choice to guests and loyalty members and provide
more owners access to the power of IHG's enterprise platform.
New conversion brand launch
We're excited to announce we will soon be launching a new midscale conversion
brand. Conversions continue to rise in importance and present an increasing
number of system growth opportunities. Over the last six months, conversions
represented around 40% of our signings and openings. This reflects a desire
from more hotel owners to convert to an IHG brand in order to quickly benefit
from access to our enterprise platform, including our revenue-generating
systems, distribution channels and loyalty programme that support performance,
increase efficiencies and drive returns. Building on the successful
development of several new brands in recent years, our new midscale conversion
brand is aiming to be the leading choice for guests wanting great value stays
at high-quality properties, and for owners seeking higher returns in the
segment.
IHG already has the global leading position in the upper midscale segment, and
in the US alone we have 545 Holiday Inn and 2,283 Holiday Inn Express
properties. At price points beneath this, the midscale segment is a large
target market which IHG only currently addresses through our new-build avid
hotels brand and our Candlewood Suites extended stay brand. According to STR,
the existing supply in this segment - in just the US market - is around 9,500
hotels (705k rooms), representing $14bn in annual hotel revenue, and which is
expected to grow to $18bn by 2030. STR assess that current room supply in this
segment is 72% branded and 28% independent. IHG expects this new brand to
reach an estate of over 500 hotels over the next 10 years and 1,000 hotels
over the next 20 years.
Conversions to the new brand will require distinct brand hallmarks and
essential guest experience elements. IHG expects to target around a 25% lower
cost per key to convert to the new brand than that for Holiday Inn Express.
The brand will be flexible for owners of a broad range of midscale hotels,
whilst ensuring each hotel will deliver a consistent high-quality experience.
We are excited about attracting a new segment of guests into our portfolio and
to IHG One Rewards, and new owner groups who can grow further with us. More
than 100 hotels have already expressed definitive interest in the brand.
Other brand highlights in the first half of 2023 included:
Luxury & Lifestyle
We are successfully driving growth and market share in the higher fee per key
Luxury & Lifestyle segment. Our six brands in this category have grown to
represent 13% of IHG's system size (479 properties, 123k rooms) and 21% of our
pipeline (336 properties, 61k rooms), around twice the size from five years
earlier. Luxury & Lifestyle accounted for 26% of signings in the half (15%
for Americas, 53% for EMEAA and 16% for Greater China). InterContinental has
grown to 215 properties across more than 60 countries, with a pipeline of 93
more that is equivalent to 33% of current system size. Six Senses, Regent and
Kimpton each represent IHG's success at accelerating the growth and
internationalisation of these previously acquired brands: Six Senses now has
23 properties open, and eight signings in the half grew its pipeline to 39;
Regent has nine properties open, including most recently the Carlton Cannes,
one of the world's most iconic hotels; with two signings in the period for
further flagship properties in the US and Saudi Arabia taking its pipeline to
11; Kimpton signed a further nine properties, including its first in Saudi
Arabia, and its pipeline is now approaching 50 properties, on top of the 75
currently open. We continue to accelerate the expansion of Hotel Indigo, with
15 signings in the period, including five new countries for the brand; with
145 hotels open, its pipeline is set to double the existing system size.
Vignette Collection, our Luxury & Lifestyle conversion brand, signed and
opened its first hotel in the US, and now has 25 open and pipeline properties
globally.
Premium
Within our Premium category, the combined open and pipeline hotels now stands
at 733 (43 Hualuxe, 55 EVEN, 110 voco and 525 Crowne Plaza properties). This
category represents 15% of IHG's current system and 18% of our pipeline. Of
particular note in the period were two openings for EVEN in Greater China as
it builds its presence in that important market, whilst latest signings in the
US reflect the new formats of in-room fitness equipment. Our voco brand
continues to rapidly build, with seven openings and 16 signings in the period,
including a first resort signing in the Middle East & Africa region.
Crowne Plaza saw another strong period with 18 signings, with its pipeline
representing growth of almost 30% of its current system size.
Essentials
IHG's Essentials category includes the leading Holiday Inn Express and the
Holiday Inn Hotels & Resorts brands. Holiday Inn Express extended its
market-leading scale with the opening of 38 hotels and another 77 signed; now
reaching over 3,100 hotels open and a pipeline for a further 640, this
represents future system growth of 24%. Holiday Inn opened seven hotels in
the period and signed 19, with its pipeline equivalent to 20% of its current
system size; recent openings such as Holiday Inn Riyadh The Business District
showcase the latest design hallmarks and the brand's innovative Open Lobby
concept. Our avid hotels brand has reached 61 open properties; with a pipeline
of 146, this will more than triple today's existing system size and further
demonstrate the strong guest and owner proposition for this new-build midscale
brand.
Suites
In our Suites category, Candlewood Suites and Staybridge Suites opened 12
properties and signed 34 more; with nearly 700 open hotels and another 300 in
their pipelines, their growth outlook remains very strong. Our newest brand,
Atwell Suites, already has two properties open and signed eight more in the
half to take its pipeline to 35. The Holiday Inn Club Vacations timeshare
company signed a conversion portfolio of four beachfront resorts in Cancun,
Mexico to expand on its current 28 and marks the brand's first properties
outside of the US.
Exclusive Partners
The recent addition of our Exclusive Partners category further demonstrates
the strengths and attractiveness of IHG's enterprise platform, particularly in
regard to providing brands and hotels with access to our advanced technology
and our distribution channels. For IHG, these commercial agreements will drive
additional system growth and high-quality fee streams, while providing more
choice for our owners, guests and loyalty members. The integration of
Iberostar Beachfront Resorts as an Exclusive Partner brand is progressing
well. A further 10 properties were added to IHG's system in the first half of
2023, taking the total to date to 43. Of the up to 70 existing hotels, the
remaining 27 require additional approvals from third parties in order to join
IHG, which are targeted to occur over the course of the balance of this year
and next. Recent integration progress includes guests now earning IHG One
Rewards points and receiving on-property loyalty member benefits. Together
with progress on other important search and booking capabilities as we fully
incorporate these properties onto the IHG enterprise platform and ready our
technology systems (such as to fully enable all-inclusive booking
functionality), we are building IHG's capabilities for further potential
Exclusive Partner arrangements.
2. Customer centric in all we do
We are creating seamless and tailored guest experiences that generate
increased demand and build loyalty, whilst delivering high returns for our
owners. Highlights in the first half of 2023 included:
· Transformation of loyalty programme, IHG One Rewards, now one year
on. Our loyalty programme, which has more than 115 million members, is a
fundamental success factor of our business and future growth, with over half
of room nights driven by loyalty members. Following the launch of our new IHG
One Rewards programme a year ago, enrolments in the first half of 2023 are up
around 60% on last year. Reward Nights are also up by more than 40% compared
to 2019 levels, with these driving positive returns for owners particularly
through Reward Night dynamic pricing, which increases demand in lower
occupancy periods. More than 1.7 million Milestone Rewards have been chosen
since launch; and Food & Beverage (F&B) rewards can be redeemed at
more than 2,000 hotels globally.
· Relaunched US co-brand credit cards proving highly attractive to
customers. New accounts have increased more than 80% year-on-year in the first
half of 2023 and are more than double 2019 levels. There has also been strong
double-digit percentage growth in overall card spend, both on a year-on-year
basis and versus 2019. Customer satisfaction has been increasing with a strong
rise in Net Promoter Scores (NPS), and the share of Reward Nights consumed by
cardholders has also increased.
· Attribute up-sell now available in 5,000+ hotels. IHG's Guest
Reservation System (GRS) offers guests more options like bigger rooms and
better views, with our previous system investments both enhancing guest choice
and enabling IHG owners to generate maximum value from the unique attributes
of their inventory. Our direct digital booking channels that provide these
up-sell opportunities are seeing around a 1% revenue uplift. The value per
up‑sell booking is averaging $23 across the estate, reflecting $18 across
our Essentials and Suites brands and $44 for Luxury & Lifestyle. Further
attributes will continue to be tested and rolled out, as well as other
opportunities to capture up-sell, such as via the pre-stay email and app
reminders.
· Stay enhancements driving further guest choice and incremental
revenue for hotels. As well as up-sell of rooms, our GRS capabilities are also
enabling more effective cross-sell of non-room extras - such as F&B
credits, lounge access, additional in-room welcome amenities and parking - as
part of the redesigned booking flow. Results of testing so far are showing
cross-sell conversion of around 2% of eligible guests, with incremental
revenue per booking of $26 for Essentials brands and $81 for Luxury &
Lifestyle.
· Further improvements in brand resonance and overall guest
satisfaction. Our masterbrand campaigns have continued to resonate with key
target audiences and support driving more business for our hotel owners. In
all our key markets we've seen measures for each of awareness, favourability
and consideration of our brand rise year-on-year. Global 'Guest Love' scores
are also up further year-on-year in the latest quarter, and Guest Satisfaction
Index (GSI, which measures our outperformance against peers) has maintained
its improvements to be consistently trending at a four-year high.
3. Create digital advantage
Our digital-first approach drives a higher percentage of direct bookings to
our hotels, helps meet evolving guest expectations, creates cost efficiencies
and delivers data and insights to optimise revenue management decisions.
Developments in the first half of 2023 included:
· Strong IHG mobile app performance. Our new mobile app saw the
number of downloads, users, bookings and revenue all increase by 40-50% on
2022 levels during the half, building on the success of the many enhancements
as part of last year's relaunch of the app, which included streamlining the
booking process, allowing guests to check-in faster and providing IHG One
Rewards members with seamless access to managing all aspects of their loyalty
benefits. IHG's digital direct channels have grown to contribute around one
quarter of hotel revenue globally, and our mobile channels now account for
more than half of all digital bookings.
· Wi-Fi Auto Connect drives further app 'stickiness'. IHG One Rewards
loyalty members can now use a further industry-leading development within the
mobile app. Mobile devices are seamlessly and securely connected to the
hotel's Wi-Fi network automatically upon a loyalty member's arrival at an IHG
hotel. This reduces technology friction for millions of loyalty members and
drives further uptake and frequency of app usage. This is already rolled-out
across more than 5,000 hotels globally.
· Delivering bespoke channel developments in Greater China. Our
enhancements to the WeChat channel, including a redesigned user interface,
have driven a near 200% increase in revenue generated from this channel and a
32% increase in booking conversions year-over-year.
4. Care for our people, communities and planet
With hotels in thousands of communities all over the world, our business and
brands touch the lives of millions of people every day and are united by a
purpose of True Hospitality for Good. Our actions are shaped by a culture of
strong governance, clear policies and a series of ambitious commitments for
our people, communities and planet set out in our Journey to Tomorrow 2030
responsible business plan, which launched in 2021. We are making substantial
investments in systems and capabilities to help IHG and our hotel owners meet
these commitments. Recent developments included:
People
Creating a culture where everyone feels valued and able to thrive is a vital
part of our ability to continue attracting, developing and retaining a diverse
range of talent with different experiences and backgrounds.
In 2023 we launched IHG University, a new gateway for learning to build
skills, advance career development and champion best practice. The comprises
of four specialist schools:
o IHG School of Management, created for General Managers and hotel
department leaders to support personal development and build leadership
capabilities;
o IHG School of Hospitality, focused on delivering learning that empowers
frontline colleagues with the confidence to deliver True Hospitality for Good;
o IHG School of Business Performance, created for corporate colleagues
around the world to support professional growth, the expansion of our business
and to drive value for our stakeholders; and
o IHG Owner Learning Solutions, a space for owners looking at ways to
maximize their IHG hotel investment.
IHG University has contributed to a significant increase in engagement with
learning content across all three of our regions. 97% of all hotels globally
are engaging with learning modules and we continue to add new content and
expand our learning platform as a valuable resource for colleagues and owners.
Amongst many other initiatives that reflect IHG's ongoing commitment to
diversity in its workplaces, hotels and local communities, in 2023 we have
continued to sponsor Pride events through our 'Out & Open' LGBTQ+ Employee
Resource Group (ERG). This is just one of nearly 30 ERG chapters at IHG, which
are voluntary groups that provide platforms for its colleagues and promote
workplace diversity across areas including ethnic diversity, gender,
disability, wellbeing, veterans, family and early careers.
Communities
IHG is proud to be at the heart of thousands of communities around the world,
and as part of delivering our purpose of True Hospitality for Good we focus on
making a positive impact through three areas: skills building, disaster relief
and tackling food poverty.
· The IHG Skills Academy, our free virtual learning platform, is
growing its user base each week and currently has 15,000 participants
worldwide.
· Working closely with our long-term partners such as CARE
International and the International Federation of Red Cross and Red Crescent
Societies (IFRC), IHG has supported colleagues, communities and other charity
partners to aid relief efforts following earthquakes in Turkey and Syria, and
tropical cyclones in Vanuatu.
Planet
As part of our Journey to Tomorrow sustainability commitments, our 2030
science-based target is to reduce our absolute Scope 1 and 2 Greenhouse Gas
(GHG) emissions, and our Scope 3 GHG emissions covering both our Fuel and
Energy Related Activities (FERA) and franchise estate, by 46% from the 2019
baseline year. Developments in 2023 include:
· Introducing our next set of Energy Conservation Measures (ECMs)
into our Americas estate for Essentials and Suites brands. These include new
lighting controls, occupancy-sensing thermostats in guest rooms and PTAC heat
pumps.
· We have expanded the availability of an industry-leading renewable
energy solution for hotels in markets in the US. Our owners can reduce their
greenhouse gas emissions through community solar projects, lower their costs
through the credits they receive on their regular electricity bills, and
promote to guests that they are powered by clean energy through receiving
Renewable Energy Certificates (RECs). IHG has made this available to hotels
across Illinois, Maine and Maryland, with plans to expand to more states soon.
· As we work to develop new-build hotels that operate at very low or
zero-carbon, our recent signing of the new-build hotel voco Zeal Exeter
Science Park is set to become IHG's first lifecycle net zero carbon hotel in
the UK, aligned with the UK Green Building Council's framework definition of
net zero carbon buildings.
Summary of financial performance
INCOME STATEMENT SUMMARY
6 months ended 30 June
2023 2022 %
$m (re-presented)(a) $m change
Revenue
Americas 537 471 14.0
EMEAA 309 239 29.3
Greater China 74 36 105.6
Central 111 94 18.1
____ ____ ____
Revenue from reportable segments(b) 1,031 840 22.7
System Fund revenues 749 554 35.2
Reimbursement of costs 446 400 11.5
_____ _____ _____
Total revenue 2,226 1,794 24.1
Operating profit
Americas 394 351 12.3
EMEAA 89 59 50.8
Greater China 43 5 760.0
Central (47) (38) 23.7
_____ _____ _____
Operating profit from reportable segments(b) 479 377 27.1
Analysed as:
Fee Business excluding central 514 410 25.4
Owned, leased and managed lease 12 5 140.0
Insurance activities (3) 3 NM(c)
Central (44) (41) 7.3
System Fund result 87 3 NM(c)
____ ____ ____
Operating profit before exceptional items 566 380 48.9
Operating exceptional items 18 (19) NM(c)
____ ____ ____
Operating profit 584 361 61.8
Net financial expenses (16) (69) (76.8)
Analysed as:
Adjusted interest expense(b) (58) (64) (9.4)
System Fund interest 19 3 533.3
Foreign exchange gains/(losses) 23 (8) NM(c)
Fair value (losses)/gains on contingent purchase consideration (1) 7 NM(c)
____ ____ ____
Profit before tax 567 299 89.6
Tax (108) (83) 30.1
Analysed as;
Adjusted tax(b) (105) (89) 18.0
Tax attributable to System Fund (1) - NM(c)
Tax on foreign exchange (gains)/losses 2 1 NM(c)
Tax on exceptional items (4) 5 NM(c)
____ ____ ____
Profit for the period 459 216 112.5
Adjusted earnings(d) 316 224 41.1
Basic weighted average number of ordinary shares (millions) 173 184 (6.0)
____ ____ ____
Earnings per ordinary share
Basic 265.3¢ 117.4¢ 126.0
Adjusted(b) 182.7¢ 121.7¢ 50.0
Dividend per share 48.3¢ 43.9¢ 10.0
Average US dollar to sterling exchange rate $1: £0.81 $1: £0.77 5.2
(a. ) Re-presented for the adoption of IFRS 17 'Insurance Contracts'
(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.
(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.
(d. ) Adjusted earnings as used within adjusted earnings per share, a
non-GAAP measure.
Revenue
Trading improved significantly in the first quarter of 2023, as the
comparative period saw travel impacted by the Omicron variant of Covid-19. The
comparatives for the second quarter become subsequently tougher as
government-mandated travel restrictions eased across many markets. Leisure
demand in the Americas remained strong, supported by improving corporate and
group bookings. Trading in the EMEAA region also saw strong improvement and
Greater China rebounded significantly through the half following localised
travel restrictions lifting from December 2022.
Group comparable RevPAR(a) improved by 33.0% in the first quarter, then grew
17.1% in the second quarter and 24.1% in the half. When compared to the
pre-pandemic levels of 2019, Group comparable RevPAR(a) improved by 6.8% in
the first quarter, 9.9% in the second quarter and 8.7% in the half.
Our other key driver of revenue, net system size, increased by 4.8%
year-on-year to 925.3k rooms, including 16.2k Iberostar Beachfront Resorts
properties.
Total revenue increased by $432m (24.1%) to $2,226m, including a $46m increase
in cost reimbursement revenue. Revenue from reportable segments(a) increased
by $191m (22.7%) to $1,031m, driven by the improved trading conditions.
Underlying revenue(a) increased by $220m to $1,031m, with underlying fee
revenue(a) increasing by $153m. Owned, leased and managed lease revenue
increased by $46m.
Operating profit and margin
Operating profit improved by $223m from $361m to $584m, including a $37m net
change in operating exceptional items and an $84m increase in the System Fund
result from a $3m profit to a $87m profit.
Operating profit from reportable segments(a) increased by $102m (27.1%) to
$479m, driven by improved trading conditions. Underlying operating profit(a)
increased $110m to $479m.
Fee margin(a) (as re-presented for IFRS 17 'Insurance Contracts') increased by
3.3 percentage points to 58.8%, benefitting from the improvement in trading.
The impact of the movement in average USD exchange rates for the first half of
2022 compared to the first half of 2023 netted to a nil impact on operating
profit from reportable segments(a) when calculated as restating 2022 figures
at 2023 exchange rates, but negatively impacted operating profit from
reportable segments(a) by $5m when applying 2022 rates to 2023 figures. This
difference is due to high growth in non-US dollar markets in 2023, meaning
that 2023 operating profit from reportable segments(a) would be $5m higher if
foreign exchange rates had remained constant with 2022.
If the average exchange rate during July 2023 had existed throughout the first
half of 2023, the 2023 operating profit from reportable segments would have
been $2m lower.
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 surplus or
deficit for IHG over the longer term but is managed for the benefit of hotels
in the IHG System with the objective of driving revenues for the hotels in the
System.
The growth in the IHG One Rewards programme means that, although assessments
are received from hotels upfront when a member earns points, more revenue is
deferred each year than is recognised in the System Fund. This can lead to
accounting losses in the System Fund each year as the deferred revenue balance
grows which do not necessarily reflect the Fund's cash position and the
Group's capacity to invest.
In the six months to 30 June 2023, System Fund revenues increased $195m (35%)
to $749m, driven by the continued strength in travel demand combined with
strong performance of the IHG One Rewards programme since the relaunch in the
first half of last year.
The System Fund result for the six months to 30 June 2023 improved to an $87m
profit from a $3m profit, primarily due to the continued strength in travel
demand on revenues, partially offset by increased investments in media as well
as revenue-driving channels. The result is also impacted by seasonality of
spend.
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 IHG is the employer. As IHG record
cost reimbursements based upon costs incurred with no added mark up, this
revenue and related expenses have no impact on either operating profit or net
profit for the period. In the six months to 30 June 2023, reimbursable revenue
increased by $46m (11.5%) to $446m. The increase reflects the improvement in
US trading.
(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.
Operating exceptional items
Operating exceptional items of $18m relating to the Group's share of profits
of associates and joint ventures. Further information on exceptional items can
be found in note 5 to the Interim Financial Statements.
Net financial expenses
Net financial expenses decreased to $16m from $69m, including $31m in foreign
exchange gains/losses. Adjusted interest(a), which excludes exceptional
finance expenses and foreign exchange gains/losses and adds back interest
attributable to the System Fund, decreased by $6m to an expense of $58m. The
decrease in adjusted interest expense(a) was primarily driven by increased
interest income on deposits.
Financial expenses include $36m (2022: $43m) of total interest costs on public
bonds, which are fixed rate debt. Interest expense on lease liabilities was
$15m (2022: $15m).
Fair value gains on contingent purchase consideration
Contingent purchase consideration arose on the acquisition of Regent. The net
loss of $1m (2022: gain of $7m) relates to an adverse movement in the bond
rates used in the valuation. The total contingent purchase consideration
liability at 30 June 2023 is $66m (31 December 2022: $65m).
Taxation
Adjusted tax(a) has been calculated by applying a blended effective tax rate
of 25% (2022: 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 2023 to provide the best estimate for
the full financial year. It is higher than the blended 2023 UK Corporation
Tax rate of 23.5% due to higher taxed overseas profits (particularly in the
US) and other non-deductible expenses. Included within the tax expense is a
non-recurring deferred tax credit of $9m in respect of a law change in the
Middle East, which represents a 2% benefit to the effective tax rate for the
six months ended 30 June 2023. Taxation within exceptional items totalled a
charge of $4m (2022: credit of $5m) and relates to the tax impacts of the
operating exceptional items. Tax paid totalled $122m (2022: $124m).
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 265.3¢ (2022: 117.4¢)
benefitting from the reduced number of shares as a result of the buyback
programmes in 2022 and 2023. Adjusted earnings per ordinary share(a) increased
by 61.0¢ to 182.7¢.
Dividends and shareholder returns
With the improvement in profitability in the first half of 2023, our net
debt:adjusted EBITDA ratio reduced to 2.28x at 30 June 2023. The Board is
therefore declaring an interim dividend of 48.3¢, which represents growth of
10% on the 43.9¢ interim dividend paid in 2022.
The ex-dividend date is Thursday 31 August 2023 and the Record date is Friday
1 September 2023. The corresponding dividend amount in Pence Sterling per
ordinary share will be announced on Thursday 14 September 2023, calculated
based on the average of the market exchange rates for the three working days
commencing 11 September 2023. The dividend will be paid on Thursday 5 October,
resulting in a cash outflow of around $80m. This will result in total
dividends paid to shareholders in 2023 amounting to approximately $250m.
In August 2022 the Board approved a $500m share buyback programme that
commenced on 9 August 2022 and completed in January 2023. In February 2023
the Board approved a further $750m share buyback programme, to be completed
during 2023. In the six months to 30 June 2023, 5.4m shares were repurchased
for total consideration of $372m (including transaction costs) of which $38m
relates to the completion of the 2022 programme and $334m to the 2023
programme.
(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(a) reconciliation
6 months ended 30 June
2023 2022
$m $m
Cash flow from operations 453 336
Cash flows relating to exceptional items - 15
Impairment loss on financial assets (2) (5)
Other non-cash adjustments to operating profit (29) (34)
System Fund result (87) (3)
System Fund depreciation and amortisation (43) (42)
Other non-cash adjustments to System Fund result (10) (13)
Working capital and other adjustments 167 124
Capital expenditure: contract acquisition costs (key money), 64 35
net of repayments
________ ________
Adjusted EBITDA(a) 513 413
CASH FLOW SUMMARY 6 months ended 30 June
2023 2022 $m
$m $m change
Adjusted EBITDA(a) 513 413 100
Working capital and other adjustments (167) (124)
Impairment loss on financial assets 2 5
Other non-cash adjustments to operating profit 29 34
System Fund result 87 3
Non-cash adjustments to System Fund result 53 55
Capital expenditure: contract acquisition costs (key money), (64) (35)
net of repayments
Capital expenditure: maintenance (16) (15)
Cash flows relating to exceptional items - (15)
Net interest paid (16) (37)
Tax paid (122) (124)
Principal element of lease payments (15) (18)
Purchase of own shares by employee share trusts (7) -
____ ____ ____
Adjusted free cash flow(a) 277 142 135
Capital expenditure: gross recyclable investments (8) (1)
Capital expenditure: gross System Fund capital investments (19) (18)
Disposals and repayments, including other financial assets - 7
Repurchase of shares, including transaction costs (372) -
Dividends paid to shareholders (166) (154)
____ ____ ____
Net cash flow before other net debt movements (288) (24) (264)
Add back principal element of lease repayments 15 18
Exchange and other non-cash adjustments (146) 169
____ ____ ____
(Increase)/decrease in net debt(a) (419) 163 (582)
Net debt at beginning of the period (1,851) (1,881)
Net debt at end of the period (2,270) (1,718) (552)
______ ______ ____
(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.
Cash flow from operations
For the six months ended 30 June 2023, cash flow from operations was $453m, an
increase of $117m on the comparable period, primarily reflecting the increase
in operating profit.
Cash flow from operations is the principal source of cash used to fund
interest and tax payments, capital expenditure, ordinary dividend payments
and additional returns of capital of the Group.
Adjusted free cash flow(a)
Adjusted free cash flow(a) was an inflow of $277m, an increase of $135m on the
six months to June 2022. Adjusted EBITDA(a) increased by $100m, the System
Fund reported profit increased by $84m due to improved trading, and net
interest paid decreased by $21m primarily due to an increase in interest
received of $13m. These were partly offset by a $43m increase in working
capital and other adjustments cash outflow and an increase in contract
acquisition (key money) costs net of repayments of $29m. Working capital and
other adjustments includes $115m of cash inflow related to deferred revenue,
driven primarily by the loyalty programme.
Net and gross capital expenditure
Net capital expenditure(a) was $65m (2022: $22m) and gross capital
expenditure(a) was $113m (2022: $72m). Gross capital expenditure(a) comprised:
$86m maintenance capex and key money; $8m gross recyclable investments; and
$19m System Fund capital investments. Net capital expenditure(a) includes the
offset from $6m key money repayments and $42m System Fund depreciation and
amortisation.
Net debt(a)
At 30 June 2023, net debt(a) was $2,270m (31 December 2022: $1,851m),
including adverse net foreign exchange of $112m driven by translation of the
Group's sterling bond debt. There were $538m of payments related to ordinary
dividends and the share buyback programmes.
Sources of liquidity
As at 30 June 2023, the Group had total liquidity of $1,970m (31 December
2022: $2,224m), comprising $1,350m of undrawn bank facilities and $620m of
cash and cash equivalents (net of overdrafts and restricted cash). The
change in total liquidity from December 2022 is primarily due to the overall
net cash outflow before other net debt movements of $288m.
The Group currently has $2,443m of sterling and euro bonds outstanding. The
bonds mature in October 2024 (€500m), August 2025 (£300m), August 2026
(£350m), May 2027 (€500m) and October 2028 (£400m). There are currency
swaps in place on both the euro bonds, fixing the October 2024 bond at £454m
and the May 2027 bond at £436m. The Group currently has a senior unsecured
long-term credit rating of BBB from Standard and Poor's.
The Group is further financed by a $1.35bn syndicated bank revolving credit
facility (RCF). A one-year extension option was exercised during the period
and the facility now matures in 2028. There is a one-year extension option
remaining 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. At
30 June 2023 the leverage ratio was 2.30 and the interest cover ratio was
11.32. See note 10 to the Interim Financial Statements for further
information. The RCF was undrawn at 30 June 2023.
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.
It is management's opinion that the available facilities are sufficient for
the Group's present liquidity requirements.
(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.
Additional revenue, global system size and pipeline analysis
Disaggregation of total gross revenue in IHG's System
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 hotels and from 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
2023 2022 %
$bn $bn Change(b)
Analysed by brand
InterContinental 2.4 1.7 40.6
Kimpton 0.7 0.6 15.7
Hotel Indigo 0.4 0.3 34.0
Crowne Plaza 1.8 1.3 33.8
Holiday Inn Express 4.4 3.8 15.3
Holiday Inn 2.9 2.3 23.0
Staybridge Suites 0.6 0.6 9.2
Candlewood Suites 0.4 0.4 5.8
Other(c) 1.6 0.7 131.4
____ ____ ____
Total 15.2 11.7 29.0
____ ____ ____
Analysed by ownership type
Fee business(d) (revenue not attributable to IHG) 15.0 11.5 29.1
Owned, leased and managed lease (revenue recognised in Group income statement) 0.2 0.2 25.0
____ ____ ____
Total 15.2 11.7 29.0
____ ____ ____
Total gross revenue in IHG's system increased by 29.0% (31.0% increase at
constant currency) to $15.2bn, driven by the improvement in trading conditions
in many markets along with growth in the number of hotels in our system.
(a. ) Definitions for the key performance
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. ) Year-on-year percentage movement
calculated from source figures.
(c. ) Includes Holiday Inn Club
Vacations.
(d. ) Includes exclusive partner hotels.
RevPAR(a) movement summary at constant exchange rates (CER)
Half Year 2023 vs 2022 Half Year 2023 vs 2019
RevPAR ADR Occupancy RevPAR ADR Occupancy
Group 24.1% 7.4% 8.9%pts 8.7% 10.9% (1.3)%pts
Americas 11.2% 6.1% 3.1%pts 11.8% 11.6% 0.1%pts
EMEAA 41.6% 16.1% 12.2%pts 12.5% 19.4% (4.2)%pts
G. China 93.7% 21.7% 21.8%pts (3.8)% (3.8)% 0.0%pts
Q2 2023 vs 2022 Q2 2023 vs 2019
RevPAR ADR Occupancy RevPAR ADR Occupancy
Group 17.1% 5.4% 7.0%pts 9.9% 12.2% (1.5)%pts
Americas 5.8% 4.1% 1.2%pts 12.1% 12.8% (0.5)%pts
EMEAA 27.3% 14.5% 7.1%pts 15.0% 21.0% (3.7)%pts
G. China 109.5% 27.4% 24.8%pts (0.5)% (1.3)% 0.5%pts
RevPAR(a) movement at CER vs actual exchange rates (AER)
Half Year 2023 vs 2022 Half Year 2023 vs 2019
CER (as above) AER Difference CER (as above) AER Difference
Group 24.1% 22.6% (1.5)%pts 8.7% 6.2% (2.6)%pts
Americas 11.2% 11.2% 0.0%pts 11.8% 11.4% (0.4)%pts
EMEAA 41.6% 37.2% (4.4)%pts 12.5% 5.2% (7.3)%pts
G. China 93.7% 81.9% (11.8)%pts (3.8)% (5.4)% (1.6)%pts
Q2 2023 vs 2022 Q2 2023 vs 2019
CER (as above) AER Difference CER (as above) AER Difference
Group 17.1% 16.4% (0.7)%pts 9.9% 7.6% (2.3)%pts
Americas 5.8% 5.8% 0.0%pts 12.1% 11.8% (0.3)%pts
EMEAA 27.3% 25.8% (1.5)%pts 15.0% 8.2% (6.8)%pts
G. China 109.5% 99.1% (10.4)%pts (0.5)% (2.8)% (2.3)%pts
Monthly RevPAR(a) (CER)
2023 vs 2022 Jan Feb Mar Apr May Jun
Group 40.8% 33.5% 27.2% 21.7% 17.0% 13.3%
Americas 24.5% 18.3% 13.8% 5.9% 6.9% 4.7%
EMEAA 84.0% 71.9% 44.5% 36.7% 24.2% 22.7%
G. China 53.3% 54.2% 125.2% 171.4% 106.9% 68.4%
2023 vs 2019 Jan Feb Mar Apr May Jun
Group 4.2% 6.7% 9.2% 9.5% 9.3% 10.9%
Americas 8.8% 11.0% 13.1% 11.5% 11.8% 13.0%
EMEAA 8.2% 7.7% 13.0% 12.6% 15.6% 16.7%
G. China (16.6)% (3.8)% (6.6)% 5.0% (6.4)% (0.1)%
(a. ) RevPAR (revenue per available room), ADR (average daily rate) and
occupancy are on a comparable basis, based on comparability as at 30 June 2023
and includes hotels that have traded in all months in both the current and the
prior year. This same group of hotels is also used to compare RevPAR
performance for 2023 vs 2019. The principle exclusions in deriving these
measures are new openings, properties under major refurbishments and removals.
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 count Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 23 4 1,605 239
Regent 9 - 2,921 (107)
InterContinental 215 8 71,487 1,681
Vignette Collection 4 1 934 355
Kimpton 75 (1) 13,116 (192)
Hotel Indigo 145 2 18,916 462
voco 52 7 14,221 3,797
HUALUXE 20 (1) 5,604 (379)
Crowne Plaza 400 (3) 109,495 (924)
EVEN Hotels 24 2 3,535 355
Holiday Inn Express 3,115 24 330,095 3,193
Holiday Inn 1,193 (5) 214,491 (1,068)
avid hotels 61 2 5,535 182
Atwell Suites 2 - 186 -
Staybridge Suites 319 5 34,791 830
Holiday Inn Club Vacations 28 - 8,822 -
Candlewood Suites 371 3 33,066 313
Iberostar Beachfront Resorts 43 10 16,176 3,774
Other(a) 128 5 40,324 1,182
_____ _____ _____ _____
Total 6,227 63 925,320 13,693
_____ ____ _______ ______
Analysed by ownership type
Franchised(b) 5,245 43 664,342 7,911
Managed 965 19 256,746 5,769
Owned, leased and managed lease 17 1 4,232 13
_____ _____ _______ ______
Total 6,227 63 925,320 13,693
_____ ____ _______ ______
(a. ) Includes nine open hotels that will
be re-branded to voco and three open hotels that will be re-branded to
Vignette Collection.
(b. ) Includes exclusive partner hotels.
Hotels Rooms
Global Pipeline Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 39 1 2,835 204
Regent 11 1 2,340 30
InterContinental 93 3 23,328 747
Vignette Collection 18 11 2,149 1,549
Kimpton 47 6 9,250 807
Hotel Indigo 128 9 20,621 770
voco 49 10 8,768 (1,461)
HUALUXE 23 2 5,850 500
Crowne Plaza 125 14 32,200 3,250
EVEN Hotels 31 - 5,304 25
Holiday Inn Express 640 23 79,283 2,548
Holiday Inn 227 (2) 43,705 (385)
avid hotels 146 1 12,434 49
Atwell Suites 35 5 3,507 506
Staybridge Suites 162 - 17,792 (203)
Holiday Inn Club Vacations 4 3 1,536 1,384
Candlewood Suites 138 14 11,384 1,116
Iberostar Beachfront Resorts 5 (10) 2,240 (3,825)
Other 10 (19) 1,702 (2,851)
_____ ____ _______ _____
Total 1,931 72 286,228 4,760
_____ ____ _______ _____
Analysed by ownership type
Franchised(a) 1,373 60 167,810 4,499
Managed 557 12 118,263 261
Owned, leased and managed lease 1 - 155 -
_____ ____ _______ _____
Total 1,931 72 286,228 4,760
_____ ____ _______ _____
(a. ) Includes exclusive partner hotels.
Regional performance reviews, system size and pipeline analysis
AMERICAS
6 months ended 30 June
Americas Results
2023 2022 %
$m $m change
Revenue from the reportable segment(a)
Fee business 463 413 12.1
Owned, leased and managed lease 74 58 27.6
____ ____ ____
Total 537 471 14.0
____ ____ ____
Operating profit from the reportable segment(a)
Fee business 379 342 10.8
Owned, leased and managed lease 15 9 66.7
____ ____ ____
394 351 12.3
Operating exceptional items 18 - NM(b)
____ ____ ____
Operating profit 412 351 17.4
____ ____ ____
6 months ended
Americas Comparable RevPAR(a) movement on previous year 30 June 2023
Fee business
InterContinental 18.4%
Kimpton 15.8%
Hotel Indigo 9.3%
Crowne Plaza 14.9%
EVEN Hotels 13.2%
Holiday Inn Express 10.2%
Holiday Inn 11.8%
avid hotels 14.1%
Staybridge Suites 9.4%
Candlewood Suites 4.9%
All brands 11.1%
Owned, leased and managed lease
All brands 30.0%
H1 Comparable RevPAR(a) was up +11% vs 2022 (up +11.8% vs 2019). Trading in
the first quarter of 2022 saw travel volumes impacted as a result of the
Omicron variant of Covid-19, with comparatives becoming subsequently tougher.
Q2 RevPAR(a) was up +6% vs 2022 (up +12.1% vs 2019), with occupancy of 72% up
+1.2%pts and rate +4.1% higher. US Q2 RevPAR(a) was up +4.4%. Leisure demand
remained buoyant and there was further return of business and group travel.
Revenue from the reportable segment(a) increased by $66m (+14%) to $537m.
Operating profit increased by $61m to $412m, driven by the increase in
revenue, together with an exceptional income of $18m recorded in the first
half of 2023 (further information on exceptional items can be found in note 5
to the Interim Financial Statements). Operating profit from the reportable
segment(a) increased by $43m (+12%) to $394m (an increase of $50m or +15% vs
2019).
Fee business revenue(a) increased by $50m (+12%) to $463m, with comparable
RevPAR(a) up +11%. Fee business operating profit(a) increased by $37m (+11%)
to $379m, driven by the improvement in trading. Fee margin(a) was 81.9%,
compared to 82.8% in 2022 and 77.3% in 2019; the year-on-year reduction
reflects filling vacant roles, cost investment in growth initiatives and the
non-repeat of payroll tax credits that were received in 2022. There were $7m
of incentive management fees earned (2022: $7m; 2019: $7m).
Owned, leased and managed lease revenue increased by $16m to $74m, with
comparable RevPAR(a) up +30%, leading to an owned, leased and managed leased
operating profit of $15m compared to $9m in the comparable period.
(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.
Hotels Rooms
Americas hotel and room count Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 1 1 10 10
InterContinental 43 1 15,694 153
Vignette Collection 1 1 355 355
Kimpton 61 (1) 10,412 (192)
Hotel Indigo 73 - 9,732 (15)
voco 8 - 923 -
Crowne Plaza 108 (2) 27,590 (744)
EVEN Hotels 19 - 2,744 1
Holiday Inn Express 2,484 12 226,612 1,528
Holiday Inn 690 (6) 112,422 (945)
avid hotels 61 2 5,535 182
Atwell Suites 2 - 186 -
Staybridge Suites 299 3 31,347 318
Holiday Inn Club Vacations 28 - 8,822 -
Candlewood Suites 371 3 33,066 313
Iberostar Beachfront Resorts 23 - 9,027 -
Other(a) 102 4 21,859 (124)
_____ ____ _______ ______
Total 4,374 18 516,336 840
_____ ____ _______ ______
Analysed by ownership type
Franchised(b) 4,198 13 479,529 1,081
Managed 172 4 35,470 (251)
Owned, leased and managed lease 4 1 1,337 10
_____ ____ _______ ______
Total 4,374 18 516,336 840
_____ ____ _______ ______
(a. ) Includes five open hotels that will be re-branded to voco.
(b. ) Includes exclusive partner hotels.
Hotels Rooms
Americas Pipeline Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 6 - 364 41
Regent 1 1 180 180
InterContinental 11 1 2,414 11
Vignette Collection 2 - 175 -
Kimpton 26 2 4,709 126
Hotel Indigo 29 3 3,981 334
voco 9 5 1,178 431
Crowne Plaza 8 1 1,548 230
EVEN Hotels 11 1 1,326 155
Holiday Inn Express 356 16 34,017 1,125
Holiday Inn 66 1 8,033 63
avid hotels 146 1 12,434 49
Atwell Suites 35 5 3,507 506
Staybridge Suites 145 3 15,317 394
Holiday Inn Club Vacations 4 3 1,536 1,384
Candlewood Suites 138 14 11,384 1,116
Iberostar Beachfront Resorts 5 - 2,240 (151)
Other 10 (3) 1,702 (268)
____ ____ ______ ______
Total 1,008 54 106,045 5,726
____ ____ ______ ______
Analysed by ownership type
Franchised(a) 967 51 99,481 5,223
Managed 41 3 6,564 503
____ ____ ______ ______
Total 1,008 54 106,045 5,726
____ ____ ______ ______
(a. ) Includes exclusive partner hotels.
Gross system size growth was +4.1% year-on-year. We opened 4.2k rooms (43
hotels) during the first half. Openings included 20 hotels across the Holiday
Inn Brand Family, with a new dual-branded Holiday Inn and Staybridge Suites
property at O'Hare Airport, Chicago, and nine other properties across the
Staybridge Suites and Candlewood Suites brands. Two avid hotels opened,
including the 60(th) at Atlanta Conyers, Georgia, with a further 20 currently
under construction. Other notable openings across Luxury & Lifestyle
include the first Vignette Collection property for the region, Kimpton The
Forum in Charlottesville, InterContinental Dominica Cabrits Resort & Spa,
and Hotel Indigo Panama City, Florida. There were 3.3k rooms (25 hotels)
removed in the first half, taking the removal rate to 1.1% over the last 12
months.
Net system size grew +3.0% year-on-year. Excluding the Iberostar Beachfront
Resorts properties that have been added to the system, net growth would have
been +1.2%.
There were 13.3k rooms (126 hotels) signed during the first half, including
7.9k rooms (72 hotels) during Q2. During the half year there were 50 hotel
signings across Holiday Inn and Holiday Inn Express, and a conversion
portfolio of four beachfront resorts in Mexico added by Holiday Inn Club
Vacations which marks the first for the brand outside of the US. There were 41
signings across our other Suites brands, including eight for Atwell Suites.
Six signings for avid hotels included further examples of dual-branded
properties with Candlewood Suites. Across our Luxury & Lifestyle brands,
18 properties were signed, including the first destination in the Americas for
the Regent brand at Santa Monica Beach, an InterContinental in Ecuador and
three further Kimpton properties.
The pipeline stands at 106.0k rooms (1,008 hotels), which represents 21% of
the current system size in the region.
EMEAA
6 months ended 30 June
EMEAA results
2023 2022 %
$m $m change
Revenue from the reportable segment(a)
Fee business 161 121 33.1
Owned, leased and managed lease 148 118 25.4
____ ____ ____
Total 309 239 29.3
____ ____ ____
Operating profit/(loss) from the reportable segment(a)
Fee business 92 63 46.0
Owned, leased and managed lease (3) (4) (25.0)
____ ____ ____
89 59 50.8
Operating exceptional items - (19) NM(b)
____ ____ ____
Operating profit 89 40 122.5
____ ____ ____
6 months ended
EMEAA comparable RevPAR(a) movement on previous year 30 June 2023
Fee business
Six Senses 32.7%
Regent 18.2%
InterContinental 48.3%
Kimpton 87.4%
Hotel Indigo 44.6%
voco 29.7%
Crowne Plaza 38.1%
Holiday Inn Express 39.5%
Holiday Inn 39.6%
Staybridge Suites 17.8%
All brands 41.3%
Owned, leased and managed lease
All brands 53.1%
H1 Comparable RevPAR(a) was up +42% vs 2022 (up +12.5% vs 2019). Leisure and
business transient were strongest, with corporate bookings and group activity
picking up pace as the post Covid-19 recovery continued. Q2 RevPAR(a) was up
+27% vs 2022 (up +15.0% vs 2019), with occupancy of 71% up +7.1%pts and rate
+14.5% higher. The UK, which saw one of the earlier easing of restrictions,
was up +18% in Q2, with strong improvements in London leading to RevPAR(a) up
+22% while the provinces were up +16%. Elsewhere, the variances in performance
largely reflected the timing of recovery following the easing of travel
restrictions, with Q2 RevPAR(a) up +4% in Australia, +18% in the Middle East,
+27% in Continental Europe, +55% in South East Asia & Korea and +82% in
Japan.
Revenue from the reportable segment(a) increased by $70m (+29%) to $309m.
Operating profit increased by $49m to $89m, driven by the improved trading,
together with the non-recurrence of the $19m of operating exceptional charges
relating to ceasing all operations in Russia in the comparable period.
Operating profit from the reportable segment(a) increased by $30m (+51%) to
$89m (an increase of $1m vs 2019).
Fee business revenue(a) increased by $40m (+33%) to $161m, with comparable
RevPAR(a) up +41%. Fee business operating profit(a) increased by $29m (+46%)
to $92m, driven by the improvement in trading. Fee margin(a) was 57.1%,
compared to 49.1% in 2022 and 57.8% in 2019. There were $43m of incentive
management fees earned (2022: $25m; 2019: $41m).
Owned, leased and managed lease revenue increased by $30m to $148m. As the
trading challenges on this largely urban-centred portfolio have started to
ease, the operating loss has begun to decrease with a $3m loss recorded in the
latest period compared to a $4m loss in the first half of last year (or a $6m
loss in the comparable period when excluding the results of three UK portfolio
hotels and one InterContinental hotel that were disposed of during 2022).
(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.
Hotels Rooms
EMEAA hotel and room count Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 21 3 1,465 229
Regent 4 - 1,005 (108)
InterContinental 116 5 33,708 847
Vignette Collection 3 - 579 -
Kimpton 12 - 2,397 -
Hotel Indigo 52 1 6,033 300
voco 34 5 11,301 3,375
Crowne Plaza 177 (5) 42,810 (1,132)
Holiday Inn Express 344 3 50,459 584
Holiday Inn 374 - 67,583 (284)
Staybridge Suites 20 2 3,444 512
Iberostar Beachfront Resorts 20 10 7,149 3,774
Other(a) 18 2 11,310 1,482
_____ ____ _______ ______
Total 1,195 26 239,243 9,579
_____ ____ _______ ______
Analysed by ownership type
Franchised(b) 815 13 135,941 4,025
Managed 367 13 100,407 5,551
Owned, leased and managed lease 13 - 2,895 3
_____ ____ _______ ______
Total 1,195 26 239,243 9,579
_____ ____ _______ ______
(a. ) Includes three open hotels that will be re-branded to voco and
three open hotels that will be re-branded to Vignette Collection.
(b. ) Includes exclusive partner hotels.
Hotels Rooms
EMEAA Pipeline Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 29 1 2,238 163
Regent 6 - 1,218 (150)
InterContinental 51 - 12,009 213
Vignette Collection 15 10 1,702 1,277
Kimpton 11 3 1,932 398
Hotel Indigo 52 6 8,537 493
voco 36 4 6,627 (2,200)
Crowne Plaza 45 5 11,023 646
Holiday Inn Express 85 (3) 13,141 (58)
Holiday Inn 81 (3) 16,259 (177)
Staybridge Suites 17 (3) 2,475 (597)
Iberostar Beachfront Resorts - (10) - (3,674)
Other - (16) - (2,583)
____ ____ ______ _____
Total 428 (6) 77,161 (6,249)
____ ____ ______ _____
Analysed by ownership type
Franchised(a) 157 (7) 23,107 (3,581)
Managed 270 1 53,899 (2,668)
Owned, leased and managed lease 1 - 155 -
____ ____ ______ _____
Total 428 (6) 77,161 (6,249)
____ ____ ______ _____
(a. ) Includes exclusive partner hotels.
Gross system size growth was +9.8% year-on-year. We opened 12.4k rooms (40
hotels) during the first half. These included ten further Iberostar Beachfront
Resorts that were added as part of the long-term commercial agreement, and ten
openings across the Holiday Inn Brand Family. There were five voco properties,
and in a particularly strong period of openings for the InterContinental
brand, there were five that included the InterContinental Rome Ambasciatori
Palace in Rome, Italy. Six Senses Rome also opened in the period, as did Six
Senses Crans Montana, Switzerland. Our first hotel in Japan for the Vignette
Collection brand joined our system. There were 2.8k rooms (14 hotels) removed
in the first half, taking the removal rate to 2.1% over the last 12 months.
Net system size grew +7.7% year-on-year. Excluding the Iberostar Beachfront
Resorts properties that have been added to the system, net growth would have
been +4.5%.
There were 10.0k rooms (57 hotels) signed during the first half, including
4.8k rooms (31 hotels) during Q2. During the half there were 15 signings
across the Holiday Inn Brand Family. As we look to rapidly expand in Saudi
Arabia, the signing of Regent Jeddah Corniche will be an important first for
the brand in the Middle East region and follows the recent flagship opening
for the brand with the Regent Carlton Cannes, France. There were eight voco
and seven Vignette Collection signings, which along with those for other
brands saw conversions represent around 40% of signings for the period. In
addition to Regent and Vignette, a very strong period of signings for our
Luxury & Lifestyle brands included three Six Senses, four Kimpton, five
InterContinental and eight Hotel Indigo properties.
The pipeline stands at 77.2k rooms (428 hotels), which represents 32% of the
current system size in the region.
GREATER CHINA
6 months ended 30 June
Greater China results 2023 2022 %
$m $m change
Revenue from the reportable segment(a)
Fee business 74 36 105.6
____ ____ ____
Total 74 36 105.6
____ ____ ____
Operating profit from the reportable segment(a)
Fee business 43 5 760.0
____ ____ ____
Operating profit 43 5 760.0
____ ____ ____
6 months ended
Greater China comparable RevPAR(a) movement on previous year 30 June 2023
Fee business
Regent 140.5%
InterContinental 123.3%
Hotel Indigo 142.3%
HUALUXE 124.2%
Crowne Plaza 92.0%
Holiday Inn Express 70.7%
Holiday Inn 66.2%
All brands 93.7%
H1 Comparable RevPAR(a) was +94% vs 2022 (down (3.8)% vs 2019), reflecting an
excellent rebound in demand since the lifting of travel restrictions in
December 2022, with Q2 RevPAR(a) down just (0.5)% vs 2019. Q2 RevPAR(a) was up
+110% vs 2022, with occupancy of 63% up +25%pts and rate +27% higher
reflecting the sharp improvements in trading compared to the April to June
period last year. The Q2 RevPAR(a) being down marginally vs 2019 included Tier
1 cities still down (11)%, reflecting the delayed return of international
inbound demand, whilst Tier 2-4 cities, which are more weighted to domestic
and leisure demand, saw RevPAR(a) fully recover to be ahead of 2019 levels.
Revenue from the reportable segment(a) increased by $38m (+106%) to $74m.
Driven by the improvement in trading, operating profit also increased by $38m
to $43m (an increase of $7m vs 2019). Fee margin(a) was 58.1%, compared to
13.9% in 2022 and 54.5% in 2019. There were $23m of incentive management fees
earned (2022: $5m; 2019: $24m).
(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.
Hotels Rooms
Greater China hotel and room count Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 1 - 130 -
Regent 5 - 1,916 1
InterContinental 56 2 22,085 681
Kimpton 2 - 307 -
Hotel Indigo 20 1 3,151 177
voco 10 2 1,997 422
HUALUXE 20 (1) 5,604 (379)
Crowne Plaza 115 4 39,095 952
EVEN Hotels 5 2 791 354
Holiday Inn Express 287 9 53,024 1,081
Holiday Inn 129 1 34,486 161
Other(a) 8 (1) 7,155 (176)
____ ____ _______ _____
Total 658 19 169,741 3,274
____ ____ _______ _____
Analysed by ownership type
Franchised 232 17 48,872 2,805
Managed 426 2 120,869 469
____ ____ _______ _____
Total 658 19 169,741 3,274
____ ____ _______ _____
(a. ) Includes one open hotel that will be re-branded to voco.
Hotels Rooms
Greater China Pipeline Change over Change over
2023 2022 2023 2022
30 June 31 December 30 June 31 December
Analysed by brand
Six Senses 4 - 233 -
Regent 4 - 942 -
InterContinental 31 2 8,905 523
Vignette Collection 1 1 272 272
Kimpton 10 1 2,609 283
Hotel Indigo 47 - 8,103 (57)
voco 4 1 963 308
HUALUXE 23 2 5,850 500
Crowne Plaza 72 8 19,629 2,374
EVEN Hotels 20 (1) 3,978 (130)
Holiday Inn Express 199 10 32,125 1,481
Holiday Inn 80 - 19,413 (271)
Other - - - -
____ ____ ______ _____
Total 495 24 103,022 5,283
____ ____ ______ _____
Analysed by ownership type
Franchised 249 16 45,222 2,857
Managed 246 8 57,800 2,426
____ ____ ______ _____
Total 495 24 103,022 5,283
____ ____ ______ _____
Gross system size growth was +8.3% year-on-year. The Covid-19 related
restrictions in 2022 that also impacted the ability for new hotels to open
have now been lifted, which enabled an increase in the number of openings to
4.5k rooms (25 hotels) during the first half. There were 15 for the Holiday
Inn Brand Family, including the Holiday Inn Express Shanghai Pudong Airport,
and four Crowne Plaza properties taking the brand's total to 115 hotels. Two
openings for voco are further expanding the brand in the region, including
voco Guangzhou Shifu, a conversion that was both signed and opened in the
period, and two InterContinental openings, including InterContinental Shenzhen
World Exhibition & Convention Center. There were 1.2k rooms (six hotels)
removed in the first half, taking the removal rate to 1.9% over the last 12
months. Net system size growth was +6.4% year-on-year.
During the first half, 10.9k rooms (56 hotels) were signed, including 5.0k
rooms (28 hotels) during Q2. Signings in the half included 29 for Holiday Inn
Express and 12 for Crowne Plaza, growing their pipelines to 199 and 72,
respectively. Notable signings included Holiday Inn Express Shenzhen Futian
Center, a conversion deal for Crowne Plaza Hangzhou Linping, and a Holiday Inn
Resort property at Wuyi Mountain Water Village, part of the first national
parks and one of China's four UNESCO world cultural and natural heritage
sites. There were also three InterContinental signings, including Zhengzhou
Zhengdong and Haikou West Coast; our six Luxury & Lifestyle brands grew to
represent 20% of both the existing system size and the pipeline in the region.
The pipeline stands at 103.0k rooms (495 hotels), which represents 61% of the
current system size in the region.
Central
6 months ended 30 June
2023 2022 %
Central results $m $m change
Revenue 111 94 18.1
Gross costs (158) (132) 19.7
____ ____ ____
Operating loss (47) (38) 23.7
____ ____ ____
Central revenue, which is mainly comprised of technology fee income, increased
by $17m (+18%) to $111m, driven by IHG System size growth of +4.8%.
Gross costs increased by $26m (+20%) year-on-year, driven by integration costs
relating to Iberostar Beachfront Resorts properties as well as investment in
the business, including areas such as commercial and technology.
The resulting $47m operating loss was an increase of $9m (+24%).
Use of key performance measures and non-GAAP measures
In addition to performance measures directly observable in the Interim
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 each other. As
these measures exclude certain items (for example impairment and the costs of
individually significant legal cases or commercial disputes) they 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 Interim 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.
RevPAR and ADR are quoted at a constant US$ exchange rate, in order to allow a
better understanding of the comparable year-on-year trading performance
excluding distortions created by fluctuations in currency movements.
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 and exclusive partner hotels including food
and beverage, meetings and other revenues, reflecting the value driven by IHG
and the base upon which fees are typically earned; 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 revenue is not revenue attributable to IHG as these managed,
franchised and exclusive partner 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, franchise and exclusive partner agreements and
therefore is well understood by owners and other stakeholders.
Revenue and operating profit measures
Revenue and operating profit from (1) fee business, (2) owned, leased and
managed lease hotels, and (3) insurance activities are described as 'revenue
from reportable segments' and 'operating profit from reportable segments',
respectively, within note 3 to the Interim Financial Statements. Insurance
activities are not a core part of the Group's trading operations. These
measures are presented for each of the Group's regions. Management believes
revenue and operating profit from reportable segments are meaningful to
investors and other stakeholders as they exclude the following elements and
reflect how management monitors the business:
● System Fund - the Fund is not managed to generate a surplus or deficit for IHG
over the longer term; it 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 specific purposes such as use in marketing,
the Guest Reservation System 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 with consideration given to consistency of treatment with prior
years and between gains and losses. Exceptional items 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 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. The
Group's reported operating profit additionally excludes fair value changes in
contingent purchase consideration, which relates to financing of acquisitions.
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 from insurance activities, 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 revenue from reportable segments and operating profit from
reportable segments, as defined above, adjusted to exclude revenue and
operating profit from the Group's owned, leased and managed lease hotels as
well as from insurance activities and significant liquidated damages.
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.
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 below).
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.
Adjusted tax
Foreign exchange gains/losses vary year-on-year depending on the movement in
exchange rates, and fair value gains/losses on contingent consideration and
exceptional items also vary year-on-year. These can impact the current year's
tax charge. The System Fund (including interest) is not managed to a profit or
loss for IHG over the longer term and is, in general, not subject to tax.
Management believes removing these from both profit and tax 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 and tax
rate as recorded in the Group income statement, to adjusted tax and the
adjusted tax rate can be found in note 6 to the Interim Financial Statements.
The adjusted tax definition has been amended from 2023 to align to the
adjustments made to adjusted earnings per share and avoid potential confusion
between measures. Fair value gains/losses on contingent consideration and
interest attributable to the System Fund are therefore now excluded from the
calculation of adjusted tax. The measure has been restated for prior years to
show consistent presentation.
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, interest attributable 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 and exceptional tax.
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 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 targeting 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 are 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 2022 Annual Report and Accounts
The following definitions have been amended:
● The definition and calculation of Total Gross Revenue has been amended to
include revenue from exclusive partner hotels, as this revenue reflects the
value that IHG generates for its exclusive partner hotels. The value of Total
Gross Revenue is unchanged in comparative years.
● Revenue and operating profit measures have been amended to separate revenue
and related costs from insurance activities from fee business revenue and
costs. This is a required change due to the adoption of IFRS 17 'Insurance
Contracts', which requires insurance related revenue and costs to be disclosed
separately from fee revenues. Underlying fee revenue and operating profit
measures have also been amended. Comparative periods have been restated for
this change.
● The definition and reconciliation of fee margin has been amended to remove the
exclusion of insurance captive revenues and costs, as insurance related
revenues and costs are no longer included as part of fee business (see above).
Comparative periods have been restated for this change.
● The adjusted tax definition has been amended to align to the adjustments made
to adjusted earnings per share to avoid potential confusion between measures.
Fair value gains/losses on contingent consideration and System Fund interest
are therefore now excluded from the calculation of adjusted tax. The measure
has been restated for prior years to show consistent presentation.
Revenue and operating profit non-GAAP reconciliations
Highlights for the 6 months ended 30 June
Reportable segments Revenue Operating profit
2023 2022 % 2023 2022 %
Re-presented(b) Re-presented(b)
$m $m change $m $m change
Per Group income statement 2,226 1,794 24.1 584 361 61.8
System Fund (749) (554) 35.2 (87) (3) NM(a)
Reimbursement of costs (446) (400) 11.5 - - -
Operating exceptional items - - - (18) 19 NM(a)
_____ _____ _____ _____ _____ _____
Reportable segments 1,031 840 22.7 479 377 27.1
Reportable segments analysed as:
Fee business 799 659 21.2 470 369 27.4
Owned, leased and managed lease 222 176 26.1 12 5 140.0
Insurance activities 10 5 100.0 (3) 3 NM(a)
_____ _____ _____ _____ _____ _____
Reportable segments 1,031 840 22.7 479 377 27.1
(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. ) Re-presented for the adoption of IFRS 17 'Insurance Contracts'.
Underlying revenue and underlying operating profit
Revenue Operating profit
2023 2022 % 2023 2022 %
Re-presented(b) Re-presented(b)
$m $m change $m $m Change
Reportable segments (see above) 1,031 840 22.7 479 377 27.1
Significant liquidated damages(c) - (7) NM(a) - (7) NM(a)
Owned and leased asset disposals(d) - (12) NM(a) - (2) NM(a)
Currency impact - (10) NM(a) - 1 NM(a)
____ ____ _____ _____ _____ _____
Underlying revenue and underlying operating profit 1,031 811 27.1 479 369 29.8
(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. ) Re-presented for the adoption of IFRS 17 'Insurance Contracts'.
(c. ) $7m recognised in 2022 reflects the significant liquidated
damages related to one hotel in EMEAA.
(d. ) The results of three UK portfolio hotels and one InterContinental
Hotel have been removed in 2022 (being the year of disposal) to determine
underlying growth.
Underlying fee revenue and underlying fee operating profit
Revenue Operating profit
2023 2022 % 2023 2022 %
Re-presented(b) Re-presented(b)
$m $m change $m $m change
Reportable segments fee business (see above) 799 659 21.2 470 369 27.4
Significant liquidated damages(c) - (7) NM(a) - (7) NM(a)
Currency impact - (6) NM(a) - - NM(a)
_____ _____ _____ _____ _____ _____
Underlying fee revenue and underlying fee operating profit 799 646 23.7 470 362 29.8
(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. ) Re-presented for the adoption of IFRS 17 'Insurance Contracts'.
(c. ) $7m recognised in 2022 reflects the significant liquidated
damages related to one hotel in EMEAA.
Americas
Revenue Operating profit(a)
2023 2022 % 2023 2022 %
$m $m change $m $m change
Per Interim financial statements 537 471 14.0 394 351 12.3
Reportable segments analysed as:
Fee business 463 413 12.1 379 342 10.8
Owned, leased and managed lease 74 58 27.6 15 9 66.7
_____ _____ _____ _____ _____ _____
537 471 14.0 394 351 12.3
Reportable segments (see above) 537 471 14.0 394 351 12.3
_____ _____ _____ _____ _____ _____
Underlying revenue and underlying operating profit 537 471 14.0 394 351 12.3
Owned, leased and managed lease included in the above (74) (58) 27.6 (15) (9) 66.7
_____ _____ _____ _____ _____ _____
Underlying fee business 463 413 12.1 379 342 10.8
(a. ) Before exceptional items.
EMEAA
Revenue Operating profit(a)
2023 2022 % 2023 2022 %
$m $m change $m $m change
Per Interim financial statements 309 239 29.3 89 59 50.8
Reportable segments analysed as:
Fee business 161 121 33.1 92 63 46.0
Owned, leased and managed lease 148 118 25.4 (3) (4) (25.0)
_____ _____ _____ _____ _____ _____
309 239 29.3 89 59 50.8
Reportable segments (see above) 309 239 29.3 89 59 50.8
Significant liquidated damages(c) - (7) NM(b) - (7) NM(b)
Owned and leased asset disposals(d) - (12) NM(b) - (2) NM(b)
Currency impact - (7) NM(b) - 1 NM(b)
_____ _____ _____ _____ _____ _____
Underlying revenue and underlying operating profit 309 213 45.1 89 51 74.5
Owned, leased and managed lease included in the above (148) (102) 45.1 3 5 (40.0)
_____ _____ _____ _____ _____ _____
Underlying fee business 161 111 45.0 92 56 64.3
(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. ) $7m recognised in 2022 reflects the significant liquidated
damages related to one hotel in EMEAA.
(d. ) The results of three UK portfolio hotels and one InterContinental
Hotel have been removed in 2022 (being the year of disposal) to determine
underlying growth.
Greater China
Revenue Operating profit(a)
2023 2022 % 2023 2022 %
$m $m change $m $m change
Per Interim financial statements
Reportable segments analysed as: 74 36 105.6 43 5 760.0
____ _____ _____ _____ _____ _____
Fee business 74 36 105.6 43 5 760.0
Reportable segments (see above) 74 36 105.6 43 5 760.0
Currency impact - (2) NM(b) - (1) NM(b)
_____ _____ ____ _____ _____ _____
Underlying revenue and underlying operating profit 74 34 117.6 43 4 975.0
(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.
Fee margin reconciliation
6 months ended 30 June 2023
Americas EMEAA Greater China Central Total
Revenue $m
Reportable segments analysed as fee business (see above) 463 161 74 101 799
Significant liquidated damages - - - - -
_____ _____ _____ _____ _____
463 161 74 101 799
Operating profit $m
Reportable segments analysed as fee business (see above) 379 92 43 (44) 470
Significant liquidated damages - - - - -
_____ _____ _____ _____ _____
379 92 43 (44) 470
Fee margin % 81.9% 57.1% 58.1% (43.6)% 58.8%
6 months ended 30 June (Re-presented(a)) 2022
Americas EMEAA Greater China Central Total
Revenue $m
Reportable segments analysed as fee business (see above) 413 121 36 89 659
Significant liquidated damages - (7) - - (7)
_____ _____ _____ _____ _____
413 114 36 89 652
Operating profit $m
Reportable segments analysed as fee business (see above) 342 63 5 (41) 369
Significant liquidated damages - (7) - - (7)
_____ _____ _____ _____ _____
342 56 5 (41) 362
Fee margin % 82.8% 49.1% 13.9% (46.1)% 55.5%
(a. ) Re-presented to reflect the adoption of IFRS 17 'Insurance
Contracts'.
Net capital expenditure reconciliation
6 months ended
30 June
2023 2022
$m $m
Net cash from investing activities (43) (27)
Adjusted for:
Contract acquisition costs, net of repayments (64) (35)
System Fund depreciation and amortisation(a) 42 40
_____ _____
Net capital expenditure (65) (22)
_____ _____
Analysed as:
Capital expenditure: maintenance (including contract acquisition costs, net of (80) (50)
repayments, of $64m (2022: $35m))
Capital expenditure: recyclable investments (8) 6
Capital expenditure: System Fund capital investments 23 22
_____ _____
Net capital expenditure (65) (22)
_____ _____
(a. ) Excludes depreciation of right-of-use assets.
Gross capital expenditure reconciliation
6 months ended
30 June
2023 2022
$m $m
Net capital expenditure (65) (22)
Add back:
Disposal receipts - (7)
Repayments of contract acquisition costs (6) (3)
System Fund depreciation and amortisation(a) (42) (40)
_____ _____
Gross capital expenditure (113) (72)
_____ _____
Analysed as:
Capital expenditure: maintenance (including contract (86) (53)
acquisition costs of $70m (2022: $38m))
Capital expenditure: recyclable investments (8) (1)
Capital expenditure: System Fund capital investments (19) (18)
_____ _____
Gross capital expenditure (113) (72)
_____ _____
(a. ) Excludes depreciation of right-of-use assets.
Adjusted free cash flow reconciliation
6 months ended
30 June
2023 2022
$m $m
Net cash from operating activities 315 175
Adjusted for:
Principal element of lease payments (15) (18)
Purchase of shares by employee share trusts (7) -
Capital expenditure: maintenance (excluding contract acquisition costs) (16) (15)
_____ _____
Adjusted free cash flow 277 142
_____ _____
Adjusted interest reconciliation
6 months ended
30 June
2023 2022
$m $m
Net financial expenses
Financial income 18 5
Financial expenses (34) (74)
_____ _____
(16) (69)
Adjusted for:
Interest attributable to the System Fund (19) (3)
Foreign exchange (gains)/losses (23) 8
_____ _____
(42) 5
_____ _____
Adjusted interest (58) (64)
_____ _____
Adjusted earnings per ordinary share reconciliation
6 months ended
30 June
2023 2022
$m $m
Profit available for equity holders 459 216
Adjusting items:
System Fund revenues and expenses (87) (3)
Interest attributable to the System Fund (19) (3)
Operating exceptional items (18) 19
Fair value losses/(gains) on contingent purchase consideration 1 (7)
Foreign exchange (gains)/losses (23) 8
Tax attributable to the System Fund 1 -
Tax on foreign exchange (gains)/losses (2) (1)
Tax on exceptional items 4 (5)
_____ _____
Adjusted earnings 316 224
Basic weighted average number of ordinary shares (millions) 173 184
Adjusted earnings per ordinary share (cents) 182.7 121.7
Highlights for the 6 months ended 30 June 2023 vs 30 June 2019
Reportable segments Revenue Operating profit
2023 2019 % 2023 2019 %
$m $m change $m $m change
Per Group income statement 2,226 2,280 (2.4) 584 442 32.1
System Fund (749) (675) 11.0 (87) (47) 85.1
Reimbursement of costs (446) (593) (24.8) - - -
Operating exceptional items - - - (18) 15 NM(a)
_____ _____ _____ _____ _____ _____
Reportable segments 1,031 1,012 1.9 479 410 16.8
(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.
Americas
Revenue Operating profit(a)
2023 2019 % 2023 2019 %
$m $m change $m $m change
Per Interim financial statements 537 520 3.3 394 341 15.5
Reportable segments analysed as:
Fee business 463 418 10.8 379 323 17.3
Owned, leased and managed lease 74 102 (27.5) 15 21 (28.6)
_____ _____ _____ _____ _____ _____
537 520 3.3 394 344 14.5
(a. ) Before exceptional items.
EMEAA
Revenue Operating profit(a)
2023 2019 % 2023 2019 %
$m $m change $m $m change
Per Interim financial statements 309 338 (8.6) 89 88 1.1
Reportable segments analysed as:
Fee business 161 158 1.9 92 93 (1.1)
Owned, leased and managed lease 148 180 (17.8) (3) (5) (40.0)
_____ _____ _____ _____ _____ _____
309 338 (8.6) 89 88 1.1
(a. ) Before exceptional items.
Greater China
Revenue Operating profit(a)
2023 2019 % 2023 2019 %
$m $m change $m $m change
Per Interim financial statements 74 66 12.1 43 36 19.4
Reportable segments analysed as:
Fee business 74 66 12.1 43 36 19.4
(a. ) Before exceptional items.
Fee margin reconciliation
6 months ended 30 June 2019
Americas EMEAA Greater China
Revenue $m
Reportable segments analysed as fee business (see above) 418 158 66
Significant liquidated damages - (4) -
_____ _____ _____
418 154 66
Operating profit $m
Reportable segments analysed as fee business (see above) 323 93 36
Significant liquidated damages - (4) -
_____ _____ _____
323 89 36
Fee margin % 77.3% 57.8% 54.5%
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 44 to 51 of the 2022
Annual Report and Form 20-F (the 'Annual Report').
We have continued to face dynamic factors relating to the fragility of the
macro-economic, geo-political and regulatory environment. These factors create
various individual and accumulated uncertainties within the portfolio of
principal risks reported at year-end, for example relating to owner
preferences and ability to invest in our brands due to US commercial financing
constraints, how we approach the storage and transfer of data (including
between key geographies such as the US, EU and China), and how we continue to
monitor cyber security. As we pursue challenging growth targets, we remain
focused on risks associated with talent and labour in our hotels and corporate
operations. There may also be unknown risks or risks currently believed to be
inconsequential that emerge and become material.
Our Board and management continue regularly to review our risk profile and
risk trends arising externally or internally, and our risk management and
internal control arrangements.
The following summarises the key areas of risks and uncertainty in relation to
the achievement of our strategic priorities in 2023-25 as set out in the
Annual Report, and which continue to apply:
• Owner preferences for, or ability to invest in, our brands
• Data and information usage, storage and transfer
• Our ability to deliver technological or digital performance or
innovation (at scale, speed, etc.)
• Global and local supply chain efficiency and resiliency
• Guest preferences or loyalty for branded hotel experiences
• Talent and capability attraction or retention
• Operational resilience to incidents or disruption or control
breakdown (including safety and security, geopolitical, health-related and
fraud)
• Legal and regulatory complexity or litigation trends
• Ethical and social expectations
• The impact of climate change on hospitality (physical and
transition risks)
These principal and emerging risks and uncertainties are supported by a
broader description of risk factors set out on pages 240 to 245 of the Annual
Report.
RELATED PARTY TRANSACTIONS
There were no material related party transactions during the six months to 30
June 2023.
GOING CONCERN
As at 30 June 2023, the Group had total liquidity of $1,970m, comprising
$1,350m of undrawn bank facilities and $620m 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 2024. 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 and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority;
● 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
Elie Maalouf
Michael Glover
Chief Executive
Officer
Chief Financial Officer
7 August 2023
7 August 2023
InterContinental Hotels Group PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2023
2023 2022
6 months ended 6 months ended
30 June 30 June
Re-presented*
$m $m
Revenue from fee business 799 659
Revenue from owned, leased and managed lease hotels 222 176
Revenue from insurance activities 10 5
System Fund revenues 749 554
Reimbursement of costs 446 400
_____ _____
Total revenue (notes 3 and 4) 2,226 1,794
Cost of sales and administrative expenses (511) (448)
Insurance expenses (13) (2)
System Fund expenses (662) (551)
Reimbursed costs (446) (400)
Share of profits of associates and joint ventures 23 -
Other operating income 3 14
Depreciation and amortisation (34) (36)
Impairment loss on financial assets (2) (5)
Other impairment charges (note 5) - (5)
_____ _____
Operating profit (note 3) 584 361
Operating profit analysed as:
Operating profit before System Fund and exceptional items 479 377
System Fund 87 3
Operating exceptional items (note 5) 18 (19)
_____ _____
584 361
Financial income 18 5
Financial expenses (34) (74)
Fair value (losses)/gains on contingent purchase consideration (1) 7
_____ _____
Profit before tax 567 299
Tax (note 6) (108) (83)
_____ _____
Profit for the period from continuing operations 459 216
_____ _____
Attributable to:
Equity holders of the parent 459 216
_____ _____
Earnings per ordinary share (note 7)
Basic 265.3¢ 117.4¢
Diluted 263.8¢ 116.8¢
* Re-presented for the adoption of IFRS 17 'Insurance Contracts' (see note 1).
InterContinental Hotels Group PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
2023 2022
6 months ended 6 months ended
30 June 30 June
$m $m
Profit for the period 459 216
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
(Losses)/gains on cash flow hedges, including related tax charge of $8m (2022: (24)
$1m credit)
13
Costs of hedging 2 -
Hedging losses/(gains) reclassified to financial expenses 43 (17)
Exchange (losses)/gains on retranslation of foreign operations, including (124)
related tax charge of $2m (2022: $6m credit)
198
_____ _____
(103) 194
Items that will not be reclassified to profit or loss:
Gains on equity instruments classified as fair value through other (1)
comprehensive income, net of related tax charge of $1m (2022: $2m)
3
Re-measurement gains on defined benefit plans, net of related tax charge of -
$nil (2022: $5m)
15
_____ _____
(1) 18
_____ _____
Total other comprehensive (loss)/income for the period (104) 212
_____ _____
Total comprehensive income for the period 355 428
_____ _____
Attributable to:
Equity holders of the parent 356 429
Non-controlling interest (1) (1)
_____ _____
355 428
_____ _____
InterContinental Hotels Group PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
6 months ended 30 June 2023
Equity share capital Other reserves* Retained earnings Non-controlling interest Total equity
$m $m $m $m $m
At beginning of the period 137 (2,359) 607 7 (1,608)
Total comprehensive income for the period - (103) 459 (1) 355
Repurchase of own shares, including transaction costs (1) 1 (420) - (420)
Purchase of own shares by employee share trusts - (7) - - (7)
Release of own shares by employee share trusts - 31 (31) - -
Equity-settled share-based cost - - 28 - 28
Equity dividends paid - - (166) - (166)
Exchange adjustments 6 (6) - - -
_____ _____ _____ _____ _____
At end of the period 142 (2,443) 477 6 (1,818)
_____ _____ _____ _____ _____
6 months ended 30 June 2022
Equity share capital Other reserves* Retained earnings Non-controlling interest Total equity
$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)
_____ _____ _____ _____ _____
* 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 2023
2023 2022
30 June 31 December
Re-presented*
$m $m
ASSETS
Goodwill and other intangible assets 1,116 1,144
Property, plant and equipment 149 157
Right-of-use assets 279 280
Investment in associates 40 36
Retirement benefit assets 3 2
Other financial assets 163 156
Derivative financial instruments 5 7
Deferred compensation plan investments 237 216
Non-current other receivables 14 3
Deferred tax assets 131 126
Contract costs 79 75
Contract assets 387 336
______ ______
Total non-current assets 2,603 2,538
______ ______
Inventories 4 4
Trade and other receivables 776 646
Current tax receivable 18 16
Other financial assets 3 -
Cash and cash equivalents 710 976
Contract costs 5 5
Contract assets 33 31
______ ______
Total current assets 1,549 1,678
______ ______
Total assets 4,152 4,216
_____ _____
LIABILITIES
Loans and other borrowings (69) (55)
Lease liabilities (27) (26)
Trade and other payables (605) (697)
Deferred revenue (716) (681)
Provisions (41) (44)
Insurance liabilities (10) (9)
Current tax payable (21) (32)
______ ______
Total current liabilities (1,489) (1,544)
______ ______
Loans and other borrowings (2,443) (2,341)
Lease liabilities (401) (401)
Derivative financial instruments (18) (11)
Retirement benefit obligations (66) (66)
Deferred compensation plan liabilities (237) (216)
Trade and other payables (70) (81)
Deferred revenue (1,122) (1,043)
Provisions (18) (20)
Insurance liabilities (25) (23)
Deferred tax liabilities (81) (78)
______ ______
Total non-current liabilities (4,481) (4,280)
______ ______
Total liabilities (5,970) (5,824)
_____ _____
Net liabilities (1,818) (1,608)
_____ _____
EQUITY
IHG shareholders' equity (1,824) (1,615)
Non-controlling interest 6 7
______ ______
Total equity (1,818) (1,608)
_____ _____
* Re-presented for the adoption of IFRS 17 'Insurance Contracts' (see note 1).
InterContinental Hotels Group PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2023
2023 2022
6 months ended 6 months ended
30 June 30 June
$m $m
Profit for the period 459 216
Adjustments reconciling profit for the period to cash flow from operations (6) 120
(note 9)
_____ _____
Cash flow from operations 453 336
Interest paid (34) (42)
Interest received 18 5
Tax paid (note 6) (122) (124)
_____ _____
Net cash from operating activities 315 175
_____ _____
Cash flow from investing activities
Purchase of property, plant and equipment (11) (12)
Purchase of intangible assets (24) (21)
Investment in associates - (1)
Investment in other financial assets (8) -
Disposal of property, plant and equipment - 3
Repayments of other financial assets - 4
_____ _____
Net cash from investing activities (43) (27)
_____ _____
Cash flow from financing activities
Repurchase of shares, including transaction costs (372) -
Purchase of own shares by employee share trusts (7) -
Dividends paid to shareholders (note 8) (166) (154)
Principal element of lease payments (15) (18)
_____ _____
Net cash from financing activities (560) (172)
_____ _____
Net movement in cash and cash equivalents, net of overdrafts, in the period
(288) (24)
Cash and cash equivalents, net of overdrafts, at beginning of the period 921 1,391
Exchange rate effects 8 (70)
_____ _____
Cash and cash equivalents, net of overdrafts, at end of the period 641 1,297
_____ _____
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'. Other than the changes described within this note, 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 2022.
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.
Other than line items which have been re-presented for IFRS 17, financial
information for the year ended 31 December 2022 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 2022 Annual Report and Form 20-F.
IFRS 17
With effect from 1 January 2023, the Group has adopted IFRS 17 'Insurance
Contracts' which introduces a new measurement and disclosure model for
insurance contract arrangements. The Group is applying these changes
retrospectively.
The Group's insurance reserves relating to managed hotels (previously included
within provisions) are now included in the Group statement of financial
position as a new line item 'Insurance liabilities'. Insurance liabilities
include claims which are both incurred but not reported ('IBNR') and those
reported but not yet settled. Reserves are established using independent
actuarial assessments which reflect current expectations of the future
economic outlook and past claims experience.
Insurance revenue (previously presented within revenue from fee business) and
insurance expenses, (previously presented within cost of sales and
administrative expenses) are now presented separately within the Group income
statement. Insurance revenue comprises reinsurance premiums which are
recognised over the period of coverage; insurance expenses comprise the cost
of claims and associated expenses. The effect of discounting is immaterial.
There is no impact on reported profit, net assets or cash flows for any period
presented.
Under the transitional provisions of IFRS 17, the Group will no longer account
for issued financial guarantee contracts as insurance contracts and will
instead apply the requirements of IFRS 9 'Financial Instruments' to these
arrangements. The fair value of financial guarantee liabilities under IFRS 9
is immaterial for all periods presented.
Further information on the Group's insurance arrangements and adoption of IFRS
17 is contained in the 2022 Annual Report and Form 20-F.
Amendments to IAS 12: International Tax Reform - Pillar Two Model Rules
With effect from 1 January 2023, the Group has adopted the Amendments to IAS
12: International Tax Reform - Pillar Two Model Rules and applied the
exception to recognising and disclosing information about deferred tax assets
and liabilities related to Pillar Two income taxes.
Going concern
A period of 18 months has been used, from 1 July 2023 to 31 December 2024, 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 assumes continued growth in RevPAR in 2023 and 2024 boosted by strength
in the US and the elimination of Covid-19 related restrictions in China,
balanced against wider macro uncertainties. 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.
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 2023 starts to worsen and then RevPAR
decreases significantly by 17% in 2024.
A large number of the Group's principal risks would result in an impact on
RevPAR which is one of the sensitivities assessed against the headroom
available in the Base Case and Severe Downside Case scenarios. 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 Group's bank facilities include a key covenant of net debt:EBITDA of
4.0x. See note 10 for additional information. There is one bond maturity
for €500m in October 2024 in the period under consideration. In the Base
Case scenario it is assumed that this is refinanced in advance of maturity,
however alternative scenarios with no refinancing have also been considered.
Under the Base Case and Severe Downside Case, covenants are not breached.
Under the Severe Downside Case, there is limited headroom to the bank
covenants to absorb multiple additional risks and uncertainties. However, 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. If the €500m October 2024 bond
were not refinanced, the Group would still have substantial levels of
liquidity available after additional actions are taken (over $1bn at 31
December 2024 in both the Base Case and Severe Downside Case).
The Directors reviewed a reverse stress test scenario to determine what
decrease in RevPAR would create a breach of the covenants. The Directors
concluded that the outcome of this reverse stress test showed that it was very
unlikely a single risk or combination of the risks considered could create the
sustained RevPAR impact required except for a significant global event.
The leverage and interest cover covenant tests up to 31 December 2024 (the
last day of the assessment period), have been considered as part of the Base
Case and Severe Downside Case scenarios. Neither of these scenarios indicate a
covenant amendment would be required but, in the event that it was, 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 also has alternative options to manage this risk including raising
additional funding in the capital markets.
Having reviewed these scenarios, the Directors have a reasonable expectation
that the Group has sufficient resources to continue operating until at least
31 December 2024. Accordingly, they continue to adopt the going concern basis
in preparing these condensed interim financial statements.
2. Exchange rates
30 June 30 June 30 June 31 December 2022
2023 2023 2022
Average Closing Average Closing
$1 equivalent
Sterling £0.81 £0.79 £0.77 £0.83
Euro €0.93 €0.92 €0.92 €0.94
3. Segmental Information
Revenue 2023 2022
6 months ended 30 June 6 months ended
30 June
$m $m
Americas 537 471
EMEAA 309 239
Greater China 74 36
Central 111 94
_____ _____
Revenue from reportable segments 1,031 840
System Fund revenues 749 554
Reimbursement of costs 446 400
_____ _____
Total revenue 2,226 1,794
_____ _____
Profit 2023 2022
6 months ended 6 months ended
30 June 30 June
$m $m
Americas 394 351
EMEAA 89 59
Greater China 43 5
Central (47) (38)
_____ _____
Operating profit from reportable segments 479 377
System Fund 87 3
Operating exceptional items (note 5) 18 (19)
_____ _____
Operating profit 584 361
Net financial expenses (16) (69)
Fair value (losses)/gains on contingent purchase consideration (1) 7
_____ _____
Profit before tax 567 299
_____ _____
4. Revenue
Disaggregation of revenue
6 months ended 30 June 2023
Americas EMEAA Greater China Central Group
$m
$m $m $m $m
Franchise and base management fees 456 118 51 - 625
Incentive management fees 7 43 23 - 73
Central revenue - - - 101 101
_____ _____ _____ _____ _____
Revenue from fee business 463 161 74 101 799
Revenue from owned, leased and managed lease hotels 74 148 - - 222
Revenue from insurance activities - - - 10 10
_____ _____ _____ _____ _____
537 309 74 111 1,031
_____ _____ _____ _____
System Fund revenues 749
Reimbursement of costs 446
_____
Total revenue 2,226
_____
6 months ended 30 June 2022
Re-presented*
Americas EMEAA Greater China Central Group
$m
$m $m $m $m
Franchise and base management fees 406 96 31 - 533
Incentive management fees 7 25 5 - 37
Central revenue - - - 89 89
_____ _____ _____ _____ _____
Revenue from fee business 413 121 36 89 659
Revenue from owned, leased and managed lease hotels 58 118 - - 176
Revenue from insurance activities - - - 5 5
_____ _____ _____ _____ _____
471 239 36 94 840
_____ _____ _____ _____
System Fund revenues 554
Reimbursement of costs 400
_____
Total revenue 1,794
_____
* Re-presented for the adoption of IFRS 17 'Insurance Contracts' (see note 1).
At 30 June 2023, the maximum exposure remaining under performance guarantees
was $86m (31 December 2022: $75m).
5. Exceptional items
2023 2022
6 months ended 6 months ended
30 June 30 June
$m $m
Cost of sales and administrative expenses
Costs of ceasing operations in Russia - (14)
Share of profits of associates and joint ventures (note 12c) 18 -
Other impairment charges
Impairment of contract assets - (5)
_____ _____
- (5)
____ ____
Total operating exceptional items 18 (19)
_____ _____
Tax on exceptional items (note 6) (4) 5
_____ _____
Tax (note 6) (4) 5
_____ _____
Costs of ceasing operations in Russia
On 27 June 2022, the Group announced it was 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 were presented as exceptional due to the
nature of the war in Ukraine which drove the Group's response.
Impairment of contract assets
In 2022, related to key money pertaining to managed and franchised hotels in
Russia. The impairment was presented as exceptional for consistency with the
costs of ceasing operations described above.
6. Tax
2023 2022
6 months ended 6 months ended
30 June 30 June
Re-presented*
Profit/ Tax Tax Profit/ Tax Tax
(loss) rate (loss) rate
$m $m $m $m
Group income statement 567 (108) 19% 299 (83) 28%
Adjust for:
System Fund result (87) 1 (3) -
System Fund interest (19) - (3) -
Fair value loss/(gain) on contingent purchase consideration 1 - (7) -
Foreign exchange (gains)/losses (23) (2) 8 (1)
Exceptional items (note 5) (18) 4 19 (5)
_____ _____ _____ _____
Adjusted tax measures 421 (105) 25% 313 (89) 28%
_____ _____ _____ _____
Group income statement analysed as:
Current tax (118) (88)
Deferred tax 10 5
_____ _____
(108) (83)
_____ _____
Group income statement further analysed as:
UK tax (2) (3)
Overseas tax (106) (80)
_____ _____
(108) (83)
_____ _____
* The definition of Adjusted Tax measures has been amended in 2023, see the
'Use of key performance measures and non-GAAP measures' section in the interim
management report. Prior year adjusted measures have been re-presented
accordingly.
Adjusted tax has been calculated by applying a blended effective tax rate of
25% (2022: 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 2023 to provide the best estimate for
the full financial year. It is higher than the blended 2023 UK Corporation
Tax rate of 23.5% due to higher taxed overseas profits (particularly in the
US) and other non-deductible expenses. Included within the tax expense is a
non-recurring deferred tax credit of $9m in respect of a law change in the
Middle East, which represents a 2% benefit to the effective tax rate for the
six months ended 30 June 2023.
The deferred tax asset of $131m (31 December 2022: $126m) comprises $105m
(31 December 2022: $109m) in the UK and $26m (31 December 2022: $17m) 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 $122m in the period exceeds the current tax charge in the Group
income statement predominantly as a result of liabilities already accrued at 1
January 2023 being settled in the period and the phasing of the 2023 US state
tax payments.
7. Earnings per ordinary share
2023 2022
6 months ended 6 months ended
30 June 30 June
Basic earnings per ordinary share
Profit available for equity holders ($m) 459 216
Basic weighted average number of ordinary shares (millions) 173 184
Basic earnings per ordinary share (cents) 265.3 117.4
_____ _____
Diluted earnings per ordinary share
Profit available for equity holders ($m) 459 216
Diluted weighted average number of ordinary shares (millions) 174 185
Diluted earnings per ordinary share (cents) 263.8 116.8
_____ _____
The diluted weighted average number of ordinary shares is calculated as:
Basic weighted average number of ordinary shares (millions) 173 184
Dilutive potential ordinary shares (millions) 1 1
______ ______
174 185
_____ _____
8. Dividends and shareholder returns
2023 2022
6 months ended 6 months ended
30 June 30 June
cents per share $m cents per share $m
Paid during the period 94.5 166 85.9 154
______ ______ ______ ______
Declared for the interim period 48.3 81 43.9 81
______ ______ ______ ______
In August 2022 the Board approved a $500m share buyback programme that
commenced on 9 August 2022 and completed in January 2023. In February 2023
the Board approved a further $750m share buyback programme to be completed
during 2023. In the six months to 30 June 2023, 5.4m shares were repurchased
for total consideration of $372m (including transaction costs) of which $38m
relates to the completion of the 2022 programme and $334m to the 2023
programme. Total liabilities of $79m, reflecting the unavoidable contractual
cost of shares to be repurchased at 30 June 2023, is recognised within current
trade and other payables.
9. Reconciliation of profit for the period to cash flow from operations
2023 2022
6 months ended 6 months ended
30 June 30 June
$m $m
Profit for the period 459 216
Adjustments for:
Net financial expenses 16 69
Fair value losses/(gains) on contingent purchase consideration 1 (7)
Tax charge 108 83
Operating profit adjustments:
Impairment loss on financial assets 2 5
Other impairment charges - 5
Other operating exceptional items (18) 14
Depreciation and amortisation 34 36
_____ _____
18 60
Contract assets deduction in revenue 18 17
Share-based payments cost 16 17
Share of profits of associates and joint ventures* (5) -
_____ _____
29 34
System Fund adjustments:
Depreciation and amortisation 43 42
Impairment (reversal)/loss on financial assets (1) 4
Share-based payments cost 9 9
Share of losses of associates 2 -
_____ _____
53 55
Working capital and other adjustments:
Increase in deferred revenue 115 65
Changes in working capital (282) (189)
_____ _____
(167) (124)
Cash flows relating to exceptional items - (15)
Contract acquisition costs, net of repayments (64) (35)
_____ _____
Total adjustments (6) 120
_____ _____
Cash flow from operations 453 336
_____ _____
* Excludes exceptional items.
10. Net debt
2023 2022
30 June 31 December
$m $m
Cash and cash equivalents 710 976
Loans and other borrowings - current (69) (55)
Loans and other borrowings - non-current (2,443) (2,341)
Lease liabilities - current (27) (26)
Lease liabilities - non-current (401) (401)
Derivative financial instruments hedging debt values (40) (4)
_____ _____
Net debt* (2,270) (1,851)
_____ _____
* See the 'Use of key performance measures and non-GAAP measures' section in
the interim management report.
In the Group statement of cash flows, cash and cash equivalents is presented
net of $69m bank overdrafts (31 December 2022: $55m, 30 June 2022: $64m). Cash
and cash equivalents includes $21m (31 December 2022: $47m) with restrictions
on use.
Bank facilities
In April 2023, the maturity date of the Group's $1,350m revolving syndicated
bank facility ('RCF') was extended to April 2028. The RCF was undrawn at 30
June 2023.
The RCF contains two financial covenants: interest cover and a leverage ratio.
These are tested at half year and full year on a trailing 12-month basis. The
interest cover covenant requires a ratio of Covenant EBITDA: Covenant interest
payable above 3.5:1 and the leverage ratio requires Covenant net debt:
Covenant EBITDA below 4.0:1.
2023 2022
30 June 31 December
Covenant EBITDA ($m) 996 896
Covenant net debt ($m) 2,291 1,898
Covenant interest payable ($m) 88 109
Leverage 2.30 2.12
Interest cover 11.32 8.22
11. Movement in net debt
2023 2022
6 months ended 6 months ended
30 June 30 June
$m $m
Net decrease in cash and cash equivalents, net of overdrafts (288) (24)
Add back financing cash flows in respect of other components of net debt:
Principal element of lease payments 15 18
_____ _____
Increase in net debt arising from cash flows (273) (6)
Other movements:
Lease liabilities (14) (32)
Increase in accrued interest (18) (24)
Exchange and other adjustments (114) 225
_____ _____
(Increase)/decrease in net debt (419) 163
Net debt at beginning of the period (1,851) (1,881)
_____ _____
Net debt at end of the period (2,270) (1,718)
_____ _____
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 1 Level 2 Level 3 Total
$m $m $m $m
Financial assets
Equity securities* - - 110 110
Derivative financial instruments - 5 - 5
Money market funds** 263 - - 263
Deferred compensation plan investments 237 - - 237
Financial liabilities
Derivative financial instruments - (18) - (18)
Contingent purchase consideration*** - - (66) (66)
Deferred compensation plan liabilities (237) - - (237)
* 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 2023 are consistent with those disclosed within the 2022
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.
Equity securities
The significant unobservable inputs used to determine the fair value of
unquoted equity securities are RevPAR growth, pre-tax discount rate (which
ranged from 6.3% to 10.0%) and a non-marketability factor (which ranged from
20% to 30%).
Applying one-year slower/faster RevPAR growth would result in a $6m/$7m
decrease/increase in fair value respectively. A one percentage point
increase/decrease in the discount rate would result in a $8m 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. These assumptions are unchanged from those
set out in the 2022 Annual Report and Form 20-F. 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
Other financial assets Other payables Contingent purchase consideration
$m $m $m
At 1 January 2023 103 (18) (65)
Additions 6 - -
Unrealised changes in fair value - 18 (1)
Exchange and other adjustments 1 - -
_____ _____ _____
At 30 June 2023 110 - (66)
_____ _____ _____
Other financial assets measured at fair value comprise investments in common
and preferred equity securities. Common equity investments are classified as
fair value through other comprehensive income (FVOCI) with fair value changes
recognised in the Group statement of comprehensive income. Where preferred
equity securities do not meet the criteria to be measured at amortised cost,
they are measured at fair value through profit or loss (FVTPL) with fair value
changes recognised in the Group income statement.
Changes in the fair value of contingent purchase consideration are recognised
within fair value (losses)/gains on contingent purchase consideration in the
Group income statement.
Other payables
In 2022, a liability of $18m was recognised in relation to a special
allocation of expenses from the Barclay associate, which arose from the
settlement of a 2021 commercial dispute. The value of the liability (which
is measured at FVTPL) is linked to the value of the hotel; increases in the
property value are attributed first to the Group and are reflected as a
reduction of the liability until it is reduced to $nil. At 31 December 2022,
the fair value of the hotel was derived from a pricing opinion provided by a
professional external valuer. In 2023, the external valuation was updated to
reflect current hotel forecasts and discount factors. The discount rate and
terminal capitalisation rate were unchanged from 31 December 2022. The
measurement is categorised as a Level 3 fair value measurement.
The change in the fair value is recognised within share of profits from
associates and joint ventures in the Group income statement. It is presented
as an exceptional item by reason of its size and for consistency with the
treatment of the associated charges in 2022 and 2021.
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 $2,443m and a fair value of $2,197m.
The Group did not measure any financial assets or liabilities at fair value on
a non-recurring basis at 30 June 2023.
13. Commitments, contingencies and guarantees
At 30 June 2023, the amount contracted for but not provided for in the
financial statements for expenditure on property, plant and equipment and
intangible assets was $8m (31 December 2022: $6m).
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 July 2023, the $28m
provision for commercial litigation and disputes relating to the EMEAA region
was utilised following settlement of the disputed matters.
The Group is currently in discussions with its insurer concerning amounts that
may be recoverable under its business interruption policies for certain owned,
leased, managed lease and managed hotels due to Covid-19. It is not possible
at this time to estimate the amounts which will be recoverable, nor the
allocation to hotels owned by third parties.
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 2023, there were guarantees of up to $49m in place
(31 December 2022: $50m).
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 2023 (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 2023;
● 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 ('ISRE (UK) 2410'). 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 ISRE (UK) 2410. 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
7 August 2023
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://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 (https://www.lseg.com/privacy-and-cookie-policy)
. END IR KDLFBXVLEBBVRecent news on Intercontinental Hotels
See all newsREG - Interco. Hotels Grp - Transaction in Own Shares
AnnouncementREG - Interco. Hotels Grp - Dividend Declaration
AnnouncementREG - Interco. Hotels Grp - Transaction in Own Shares
AnnouncementREG - Interco. Hotels Grp - Transaction in Own Shares
AnnouncementREG - Interco. Hotels Grp - Transaction in Own Shares
Announcement