InterContinental Hotels Group PLC
22 August 2006
22 August 2006
InterContinental Hotels Group PLC
First Half Results to 30 June 2006
Headlines
• Continuing revenue up 16% from £340m to £394m, up 12% at constant exchange rates.
• Continuing operating profit up 30% from £82m to £107m, up 25% at constant exchange rates.
• Total operating profit, including discontinued operations, of £127m.
• Franchised operating profit up 14% to £117m. Managed operating profit up 39% to £43m.
• Adjusted continuing earnings per share up 132% from 8.2p to 19.0p.
• Interim dividend up 11% from 4.6p to 5.1p.
• Total gross revenue* from all hotels in IHG's system up 14% to £4.1bn.
• Global constant currency RevPAR growth of 11.2%.
• Room count up by 3,469 rooms to 541,002. Full year 2006 forecast net room additions in the region of 10,000.
• Development pipeline up by 21,588 rooms to 130,100 (1,028 hotels). 80% expected to open by end 2008.
* Total gross revenue is defined as total room revenue (i.e. excluding food and beverage) from franchised hotels
and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG,
as it is derived mainly from hotels owned by third parties. The metric is highlighted as an indicator of the scale
and reach of IHG's brands.
All figures and movements unless otherwise noted are at actual exchange rates and before other operating income
and expenses..
See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4
Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
'This has been a good first half for IHG with excellent trading across each of our three operating regions, and RevPAR
outperformance in all our key profit generators. We have made good progress on our asset disposal programme and remain
fully focused on increasing the number of hotels that carry our brands. We continue to attract strong interest from
owners and partners, both new and existing, and for the first time we now have over 1,000 new hotels in the development
pipeline across the world. Current trading is healthy and our outlook for the rest of the year remains positive.'
Americas: strong performance across all brands
Revenue performance
RevPAR increased 11.5% with rate generating most of the increase. InterContinental, Crowne Plaza, Holiday Inn, Holiday
Inn Express and Candlewood each outperformed their market segments, with RevPAR up 11.1%, 15.1%, 9.9%, 12.3% and 11.2%
respectively. Staybridge Suites also showed continued good RevPAR growth, with a 9.4% increase.
Operating profit performance
Operating profit from continuing operations increased 21% from $164m to $199m. Continuing owned and leased operating
profit improved from $12m to $15m. This improvement was driven by increased occupancy and rate at the InterContinental
Atlanta, and increased rates at InterContinentals in New York, San Francisco and Montreal, but was impacted by $1.3m pre
opening costs at InterContinental Boston, scheduled to open in November. Managed profit was up 42% to $27m, benefiting
from improved trading in existing operations and retained management contracts on assets disposed. Franchised profit
increased 14% to $185m driven by increased total gross revenue. Including discontinued operations, total operating
profit increased from $181m to $202m.
EMEA: RevPAR growth accelerating
Revenue performance
RevPAR increased 11.5%, driven by increased occupancy and 8.5% rate growth. The Middle East continued to perform
strongly, growing RevPAR by 23.1%. Continental Europe delivered a RevPAR increase of 7.2%, benefiting from continued
improvement across the region, particularly in Germany, Holland and Spain. In the UK, Holiday Inn and Holiday Inn
Express outperformed their segment, growing RevPAR by 4.1%.
Operating profit performance
Operating profit from continuing operations increased 6% from £16m to £17m. Continuing owned and leased operations
generated a loss of £2m, a £1m improvement on the prior period, with the enhanced performance at InterContinental Le
Grand Paris, where occupancy increased by 12.1%, outweighing the impact of the closure of InterContinental London Park
Lane for refurbishment. The InterContinental London Park Lane is on track to reopen towards the end of 2006. Managed
profit was up 31% from £13m to £17m, as a result of improved trading and retained management contracts on assets
disposed. The current Middle East conflict may result in a slightly lower level of managed profitability in the second
half. Franchised profit decreased 25% from £16m to £12m with an underlying trading improvement outweighed by the non
recurrence of the £7m liquidated damages received in 2005. Including discontinued operations, total operating profit
reduced from £73m to £36m.
Asia Pacific: strong growth
Revenue performance
RevPAR increased 9.3%, mainly driven by rate. InterContinental, Crowne Plaza and Holiday Inn all performed strongly,
with RevPAR up 10.5%, 9.8% and 7.9% respectively. Greater China RevPAR increased 12.8%, driven by rate increases as
strong demand for IHG's brands continues.
Operating profit performance
Operating profit from continuing operations increased 42% from $19m to $27m. Owned and leased operating profit
increased 56% from $9m to $14m as a result of excellent trading at InterContinental Hong Kong, driven by a 19.1% average
rate increase. The final phase of refurbishment of the InterContinental Hong Kong will take place in the second half.
Managed hotels profit increased 19% to $19m, driven by improved trading and retained management contracts on asset
disposals.
Strengthening Operating System
IHG continues to demonstrate the strength of its revenue delivery to hotel owners through its reservation channels and
loyalty programme, Priority Club Rewards.
• $3.0bn of rooms revenue booked through IHG's reservation channels, 48% of total rooms revenue, up from 43% in H1
2005.
• $2.1bn of rooms revenue from Priority Club Rewards members, 34% of total rooms revenue, up from 32% in H1 2005.
• Internet revenues increased from 15% to 17% of total rooms revenue: 86% from IHG's own websites.
Overheads and Tax
As previously disclosed, IHG expects that in 2006 regional and central overheads will increase ahead of inflation at
constant exchange rates. In the first half, aggregated regional overheads were up £2m to £31m after continued
infrastructure investment in China. Central overheads increased by £5m to £37m. This included investment in new global
research designed to enable higher quality brand development and enhancing IHG's franchise capability going forward.
Further investment in these projects will be made in the second half of 2006.
Based on the first half, IHG's tax rate is now expected to be approximately 25% for 2006. IHG's tax rate is likely to be
volatile over the next few years but in the long term is expected, as previously indicated, to trend upwards.
Increase in development pipeline size and rooms open
IHG continues to increase its development pipeline, in pursuit of the target of 50,000-60,000 net organic room
additions in the period to the end of 2008 from a 30 June 2005 starting position of 537,675.
• 40,994 rooms were signed in the first half; 28,574 in the Americas, 2,535 in EMEA and 9,885 in Asia Pacific.
• 130,100 rooms are now in the pipeline, up 21,588 since the start of the year. This represents 1,028 hotels.
• IHG's development activity in China continues to be successful. 16 hotels, 8,240 rooms, were signed in the
first half, including four InterContinentals, one Crowne Plaza, seven Holiday Inns and four Holiday Inn
Expresses.
IHG maintains its focus on enhancing the quality of its portfolio, in tandem with growth.
• 17,371 rooms opened; 13,681 in the Americas, 2,131 in EMEA and 1,559 in Asia Pacific.
• 13,902 rooms exited;10,565 in the Americas, 2,405 in EMEA and 932 in Asia Pacific. The majority were at IHG's
instigation.
• The room count at the end of the period increased by 3,469 rooms to 541,002. 2006 year end room count
expected to have increased in the region of 10,000.
Disposals and returns of funds
The disposal of 24 hotels in Continental Europe was announced during the first half, with a 15 year franchise agreement,
for which £240m proceeds have been received. The sale of seven InterContinental branded hotels in Continental Europe
placed on the market during the first half was announced in July 2006 with management contracts of up to 50 years, with
£440m proceeds expected to be received during the third quarter of 2006. The sale of IHG's shares in FelCor Lodging
Trust Incorporated ('Felcor') was also completed in the first half for a total of $191m, generating a gain of $44m,
following the successful renegotiation of IHG's hotel management agreement with Felcor.
IHG's returns of funds to shareholders continued in the quarter, with the second £250m share buyback now completed, the
third £250m share buyback well underway, and £497m returned to shareholders on 22 June 2006 via a special dividend.
Upon completion of the third share buyback, IHG will have returned £2.74bn to its shareholders since Separation from Six
Continents in April 2003. £174m of share repurchases remained to be completed at the half year.
IHG's net debt at the period end was £320m. Disposal proceeds in excess of £400m will be received in the second half.
Further returns of funds will be made to shareholders in due course. An announcement on timing and quantum of further
returns will be made not later than IHG's preliminary results in February 2007.
Appendix 1: Asset disposal programme detail
Number of hotels Proceeds Net book value
Disposed to date 175 £3.0bn £2.9bn
Remaining hotels 22 £0.9bn
For a full list please visit www.ihgplc.com/Investors
Appendix 2: Return of funds programme as at 30 June 2006
Timing Total return Returned Still to be returned
£501m special dividend Paid December 2004 £501m £501m Nil
First £250m share Completed in 2004 £250m £250m Nil
buyback
£996m capital return Paid 8 July 2005 £996m £996m Nil
Second £250m share Completed in 2006 £250m £250m Nil
buyback
£497m special dividend Paid 22 June 2006 £497m £497m Nil
Third £250m share Underway £250m £76m £174m
buyback
Total £2.74bn £2.57bn £0.17bn
Appendix 3: Financial headlines
Six months to 30 June £m Total Americas EMEA Asia Pacific Central
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
Franchised operating profit 117 103 103 86 12 16 2 1
Managed operating profit 43 31 15 10 17 13 11 8
Continuing owned and leased 15 9 9 7 (2) (3) 8 5
operating profit
Regional overheads (31) (29) (16) (15) (10) (10) (5) (4)
Continuing operating profit pre 144 114 111 88 17 16 16 10
central overheads
Central overheads (37) (32) (37) (32)
Continuing operating profit 107 82 111 88 17 16 16 10 (37) (32)
Discontinued owned and leased 20 71 1 9 19 57 0 5
operating profit
Total operating profit 127 153 112 97 36 73 16 15 (37) (32)
Appendix 4: Constant currency continuing operating profits before other
operating income and expenses.
Americas EMEA Asia Pacific Total***
Actual Constant Actual Constant Actual Constant Actual Constant
currency* currency** currency* currency** currency* currency** currency* currency**
Growth 26% 21% 6% 9% 60% 45% 30% 25%
Exchange rates USD:GBP EUR:GBP
H1 2006 1.80 1.46
H1 2005 1.87 1.46
* Sterling actual currency
** Translated at constant H1 2005 exchange rates
*** After Central Overheads
Appendix 5: Investor information for 2006 interim dividend
Ex-dividend Date: 30 August 2006
Record Date: 01 September 2006
Payment Date: 05 October 2006
Dividend payment: Ordinary shares 5.1p per share: ADRs 9.6c per ADR
For further information, please contact:
Investor Relations (Paul Edgecliffe-Johnson): +44 (0) 1753 410 176
+44 (0) 7808 098 867
Media Affairs (Leslie McGibbon): +44 (0) 1753 410 425
+44 (0) 7808 094 471
High resolution images to accompany this announcement are available for the
media to download free of charge from www.vismedia.co.uk . This includes profile
shots of the key executives.
Presentation for Analysts and Shareholders
A presentation with Andrew Cosslett (Chief Executive) and Richard Solomons
(Finance Director) will commence at 9.30 am (London time) on 22 August at
JPMorgan Cazenove, 20 Moorgate, London, EC2R 6DA. There will be an opportunity
to ask questions. The presentation will conclude at approximately 10.30 am
(London time).
There will be a live audio webcast of the results presentation on the web
address www.ihgplc.com/interims06. The archived webcast of the presentation is
expected to be on this website later on the day of the results and will remain
on it for the foreseeable future. There will also be a live dial-in facility
International dial-in +44 (0)20 7138 0836
US Q&A conference call
There will also be a conference call, primarily for US investors and analysts,
at 10.00am (Eastern Standard Time) on 22 August with Andrew Cosslett (Chief
Executive) and Richard Solomons (Finance Director). There will be an
opportunity to ask questions.
International dial-in +44 (0)1452 562719
US Toll Free 1866 832 0717
Conference ID: 3607939
A recording of the conference will also be available for 7 days. To access this
please dial the relevant number below and use the access number 3607939#
International dial-in +44 (0)1452 550000
US Toll Free 1866 247 4222
Website
The full release and supplementary data will be available on our website from
7.00 am (London time) on Tuesday 22nd August. The web address is www.ihgplc.com/
interims06
Note to Editors:
InterContinental Hotels Group PLC of the United Kingdom (LON:IHG, NYSE:IHG
(ADRs)) is the world's largest hotel group by number of rooms. InterContinental
Hotels Group owns, manages, leases or franchises, through various subsidiaries,
over 3,650 hotels and 540,000 guest rooms in nearly 100 countries and
territories around the world. The Group owns a portfolio of well recognised and
respected hotel brands including InterContinental(R) Hotels & Resorts, Crowne
Plaza(R) Hotels & Resorts, Holiday Inn(R) Hotels and Resorts, Holiday Inn
Express(R), Staybridge Suites(R), Candlewood Suites(R) and Hotel IndigoTM, and
also manages the world's largest hotel loyalty programme, Priority Club(R)
Rewards.
InterContinental Hotels Group offers information and online reservations for all
its hotel brands at www.ichotelsgroup.com and information for the Priority Club
Rewards programme at www.priorityclub.com.
For the latest news from InterContinental Hotels Group, visit our online Press
Office at www.ihgplc.com/media
Cautionary note regarding forward-looking statements
This announcement contains certain forward-looking statements as defined under
US law (Section 21E of the Securities Exchange Act of 1934). These
forward-looking statements can be identified by the fact that they do not relate
to historical or current facts. Forward-looking statements often use words such
as ' target', 'expect', 'intend', 'believe' or other words of similar meaning.
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. Factors that could
affect the business and the financial results are described in 'Risk Factors' in
the InterContinental Hotels Group PLC Annual Report on Form 20-F filed with the
United States Securities and Exchange Commission.
Operating review
This operating review discusses the performance of the InterContinental Hotels
Group (IHG) for the six months ended 30 June 2006. These results, and the
results for the comparative period, the six months ended 30 June 2005, are
presented under International Financial Reporting Standards (IFRS).
Group Summary
Three months ended Six months ended
30 June 30 June 30 June 30 June
2006 2005 % 2006 2005 %
£m £m change £m £m change
Revenue:
Americas 118 103 14.6% 224 186 20.4%
EMEA 51 55 (7.3)% 92 95 (3.2)%
Asia Pacific 27 19 42.1% 54 39 38.5%
Central 12 10 20.0% 24 20 20.0%
____ ____ ______ ____ ____ ______
Continuing operations 208 187 11.2% 394 340 15.9%
Discontinued operations 52 340 (84.7)% 105 720 (85.4)%
____ ____ ______ ____ ____ ______
Total 260 527 (50.7)% 499 1,060 (52.9)%
____ ____ ______ ____ ____ ______
Operating profit:
Americas 62 51 21.6% 111 88 26.1%
EMEA 14 15 (6.7)% 17 16 6.3%
Asia Pacific 9 4 125.0% 16 10 60.0%
Central (20) (18) 11.1% (37) (32) 15.6%
____ ____ ______ ____ ____ ______
Continuing operations 65 52 25.0% 107 82 30.5%
Discontinued operations 16 64 (75.0)% 20 110 (81.8)%
____ ____ ______ ____ ____ ______
81 116 (30.2)% 127 192 (33.9)%
Other operating income
and expenses
- (8) - 25 (8) -
____ ____ ______ ____ ____ ______
81 108 (25.0)% 152 184 (17.4)%
Net financial expenses - (7) (1) (18) (94.4)%
____ ____ ______ ____ ____ ______
Profit before tax 81 101 (19.8)% 151 166 (9.0)%
____ ____ ______ ____ ____ ______
Adjusted earnings per
ordinary share:
Continuing operations 12.1p 6.0p 101.7% 19.0p 8.2p 131.7%
____ ____ ______ ____ ____ ______
Revenue from continuing operations increased by 15.9% to £394m and continuing
operating profit increased by 30.5% to £107m during the six months ended 30 June
2006.
Total operating profit before other operating income and expenses, decreased by
33.9% to £127m for the six months ended 30 June 2006. Profit before tax reduced
by 9.0% to £151m and adjusted earnings per ordinary share for continuing
operations increased by 131.7% to 19.0p.
Discontinued operations represent the results from hotels that have been sold or
are held for sale and where there is a co-ordinated plan to dispose of the
operations under IHG's asset disposal programme. Discontinued operations for
the six months ended 30 June 2006 and the comparative period in 2005 include 137
owned and leased hotels in the US, UK, Continental Europe and Asia Pacific that
have been sold or placed on the market over the last 18 months and the Britvic
Group, disposed of by way of an initial public offering in December 2005.
Management or franchise agreements have been retained on substantially all of
the hotels sold.
Americas
Three months ended Six months ended
30 June 30 June 30 June 30 June
2006 2005 % 2006 2005 %
$m $m change $m $m change
Revenue:
Owned and leased 64 59 8.5% 118 107 10.3%
Managed 37 32 15.6% 73 57 28.1%
Franchised 116 100 16.0% 212 185 14.6%
____ ____ ______ ____ ____ ______
Continuing operations 217 191 13.6% 403 349 15.5%
Discontinued operations
- Owned and leased
5 11 (54.5)% 11 72 (84.7)%
____ ____ ______ ____ ____ ______
Total $m 222 202 9.9% 414 421 (1.7)%
____ ____ ______ ____ ____ ______
Sterling equivalent £m 121 109 11.0% 230 224 2.7%
____ ____ ______ ____ ____ ______
Operating profit before
other operating income
and expenses:
Owned and leased 11 9 22.2% 15 12 25.0%
Managed 16 11 45.5% 27 19 42.1%
Franchised 100 88 13.6% 185 162 14.2%
____ ____ _____ ____ ____ ______
127 108 17.6% 227 193 17.6%
Regional overheads (14) (13) 7.7% (28) (29) (3.4)%
____ ____ _____ ____ ____ ______
Continuing operations 113 95 18.9% 199 164 21.3%
Discontinued operations
- Owned and leased
2 2 - 3 17 (82.4)%
____ ____ _____ ____ ____ ______
Total $m 115 97 18.6% 202 181 11.6%
____ ____ _____ ____ ____ ______
Sterling equivalent £m 62 53 17.0% 112 97 15.5%
____ ____ _____ ____ ____ ______
Revenue and operating profit from continuing operations increased by 15.5% to
$403m and 21.3% to $199m respectively during the six months ended 30 June 2006.
Buoyant economic conditions in the US led to revenue growth across all ownership
models, however softer trading conditions were experienced in the Caribbean
hotels.
Including discontinued operations, US dollar revenue decreased by 1.7% whilst
operating profit grew by 11.6%. However, the relative strength of sterling to
the US dollar (2006 six months to June $1.80:£1; 2005 six months to June $1.87:
£1) resulted in an increase in sterling reported profits of 15.5%.
Continuing owned and leased revenue grew by 10.3% to $118m driven by strong
RevPAR growth, with significant contribution from InterContinental hotels in
Atlanta, New York, San Francisco and Montreal. Across the portfolio, average
daily rates increased significantly, contributing to the 25.0% increase in
operating profit over the comparable period in 2005.
The 28.1% growth in managed revenues reflects contracts negotiated in 2005 as
part of the hotel disposal programme, the restructured management agreement with
FelCor Lodging Trust Inc. (FelCor) and Hospitality Properties Trust and the
impact of achieving incentive fee targets. Managed revenues include $42m (2005
$34m) from properties (including the InterContinental San Juan that was sold in
2005) that are structured, for legal reasons, as operating leases but with the
same characteristics as a management contract.
All brands in the franchised estate exhibited strong RevPAR growth. Holiday Inn
and Holiday Inn Express, which together account for more than 85% of the
franchise system size, reported rate-led RevPAR growth of 10.0% and 12.3%
respectively.
Hotels Rooms
Change over Change over
2006 2005 2006 2005
Americas Hotel and Room Count 30 June 31 December 30 June 31 December
Analysed by brand:
InterContinental 48 3 16,163 835
Crowne Plaza 144 11 40,152 3,078
Holiday Inn 1,002 (25) 189,154 (5,850)
Holiday Inn Express 1,461 36 119,449 3,639
Staybridge Suites 92 5 10,493 578
Candlewood Suites 120 8 13,299 616
Hotel indigo 4 1 628 131
Other brands 2 - 384 89
____ ____ ______ _____
Total 2,873 39 389,722 3,116
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 11 (1) 4,134 (117)
Managed 204 (4) 43,536 (1,784)
Franchised 2,658 44 342,052 5,017
____ ____ ______ _____
Total 2,873 39 389,722 3,116
____ ____ ______ _____
Hotels Rooms
Change over Change over
2006 2005 2006 2005
Americas Pipeline 30 June 31 December 30 June 31 December
Analysed by brand:
InterContinental 7 - 3,566 (139)
Crowne Plaza 20 (3) 4,642 30
Holiday Inn 182 29 22,871 3,830
Holiday Inn Express 441 52 37,707 4,744
Staybridge Suites 98 19 10,156 1,961
Candlewood Suites 103 20 9,262 1,795
Hotel indigo 17 9 1,979 1,097
____ ____ ______ _____
Total 868 126 90,183 13,318
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 1 (1) 424 (150)
Managed 16 3 4,204 263
Franchised 851 124 85,555 13,205
____ ____ ______ _____
Total 868 126 90,183 13,318
____ ____ ______ _____
The Americas system (the number of hotels/rooms owned, leased, managed or
franchised) increased in the first half of 2006 by a net 39 hotels (3,116
rooms), with 108 hotels (13,681 rooms) joining the system and 69 hotels (10,565
rooms) leaving the system. The Americas pipeline (deals signed but hotels yet
to enter the system) at 30 June 2006 included 868 hotels (90,183 rooms). This
represents growth of 126 hotels (13,318 rooms) and is a key component of IHG's
growth strategy.
EUROPE, MIDDLE EAST & AFRICA (EMEA)
Three months ended Six months ended
30 June 30 June 30 June 30 June
2006 2005 % 2006 2005 %
£m £m change £m £m change
Revenue:
Owned and leased 27 30 (10.0)% 47 54 (13.0)%
Managed 16 11 45.5% 30 21 42.9%
Franchised 8 14 (42.9)% 15 20 (25.0)%
____ ____ ______ ____ ____ ______
Continuing operations 51 55 (7.3)% 92 95 (3.2)%
Discontinued operations
- Owned and leased
49 136 (64.0)% 99 279 (64.5)%
____ ____ ______ ____ ____ ______
Total £m 100 191 (47.6)% 191 374 (48.9)%
____ ____ ______ ____ ____ ______
Dollar equivalent $m 186 353 (47.3)% 345 700 (50.7)%
____ ____ ______ ____ ____ ______
Operating profit before
other operating income
and expenses:
Owned and leased 3 1 200.0% (2) (3) (33.3)%
Managed 9 7 28.6% 17 13 30.8%
Franchised 7 12 (41.7)% 12 16 (25.0)%
____ ____ ______ ____ ____ ______
19 20 (5.0)% 27 26 3.8%
Regional overheads (5) (5) - (10) (10) -
____ ____ ______ ____ ____ ______
Continuing operations 14 15 (6.7)% 17 16 6.3%
Discontinued operations
- Owned and leased
16 32 (50.0)% 19 57 (66.7)%
____ ____ ______ ____ ____ ______
Total £m 30 47 (36.2)% 36 73 (50.7)%
____ ____ ______ ____ ____ ______
Dollar equivalent $m 54 89 (39.3)% 65 137 (52.6)%
____ ____ ______ ____ ____ ______
On a continuing basis, revenue decreased by 3.2% to £92m whilst continuing
operating profit increased by 6.3% to £17m for the six months ended 30 June
2006. Including discontinued operations, revenue and operating profit decreased
by 48.9% and 50.7% respectively, reflecting the impact of hotel disposals
completed over the last 18 months.
In the owned and leased estate, continuing revenues declined by £7m to £47m due
to the ongoing refurbishment at the InterContinental London Park Lane. The
hotel is undergoing a complete refurbishment and is expected to reopen during
the fourth quarter of this year. The impact of this refurbishment is partly
mitigated by enhanced performance at the InterContinental Le Grand Paris and
other European owned and leased hotels.
Managed revenue increased by 42.9% to £30m due to the impact of management
contracts negotiated as part of the disposal of 73 UK-based hotels in May 2005
and the continued strong growth in the Middle East. Underlying trading in the
EMEA managed estate was strong, with RevPAR growth across all brands,
particularly the InterContinental hotels in Germany and Eastern Europe.
Underlying trading in the EMEA franchised estate was strong; however, the 2005
results included £7m in liquidated damages from the early termination of
franchise agreements in South Africa. In Continental Europe, Crowne Plaza and
Holiday Inn performed well, achieving 9.8% and 5.4% increases in RevPAR.
Hotels Rooms
Change over Change over
2006 2005 2006 2005
EMEA Hotel and Room Count 30 June 31 December 30 June 31 December
Analysed by brand:
InterContinental 66 1 21,205 (268)
Crowne Plaza 66 2 16,290 259
Holiday Inn 315 (5) 50,177 (767)
Holiday Inn Express 166 5 17,473 502
____ ____ ______ _____
Total 613 3 105,145 (274)
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 17 (24) 5,643 (4,898)
Managed 164 (12) 36,798 (2,899)
Franchised 432 39 62,704 7,523
____ ____ ______ _____
Total 613 3 105,145 (274)
____ ____ ______ _____
Hotels Rooms
Change over Change over
2006 2005 2006 2005
EMEA Pipeline 30 June 31 December 30 June 31 December
Analysed by brand:
InterContinental 9 - 2,567 188
Crowne Plaza 11 (1) 2,726 (151)
Holiday Inn 29 1 4,630 (236)
Holiday Inn Express 37 - 4,345 189
Staybridge Suites 2 2 230 230
____ ____ ______ _____
Total 88 2 14,498 220
____ ____ ______ _____
Analysed by ownership type:
Managed 31 2 6,890 395
Franchised 57 - 7,608 (175)
____ ____ ______ _____
Total 88 2 14,498 220
____ ____ ______ _____
During the first half of 2006, hotel count in EMEA increased by three hotels
(decrease of 274 rooms) reflecting expansion of hotels within the franchised
operations offset by exits on a limited number of managed hotels, as agreed at
the time of the UK disposal. The EMEA pipeline at 30 June 2006 included 88
hotels (14,498 rooms), representing growth of two hotels (220 rooms).
Asia Pacific
Three months ended Six months ended
30 June 30 June 30 June 30 June
2006 2005 % 2006 2005 %
$m $m change $m $m change
Revenue:
Owned and leased 31 25 24.0% 63 52 21.2%
Managed 17 11 54.5% 30 21 42.9%
Franchised 2 2 - 4 3 33.3%
____ ____ ______ ____ ____ ______
Continuing operations 50 38 31.6% 97 76 27.6%
Discontinued operations
- Owned and leased
- 29 - - 59 -
____ ____ ______ ____ ____ ______
Total $m 50 67 (25.4)% 97 135 (28.1)%
____ ____ ______ ____ ____ ______
Sterling equivalent £m 27 36 (25.0)% 54 72 (25.0)%
____ ____ ______ ____ ____ ______
Operating profit before
other operating income
and expenses:
Owned and leased 6 3 100.0% 14 9 55.6%
Managed 11 8 37.5% 19 16 18.8%
Franchised 2 1 100.0% 3 2 50.0%
____ ____ ______ ____ ____ ______
19 12 58.3% 36 27 33.3%
Regional overheads (5) (4) 25.0% (9) (8) 12.5%
____ ____ ______ ____ ____ ______
Continuing operations 14 8 75.0% 27 19 42.1%
Discontinued operations
- Owned and leased
- 5 - - 10 -
____ ____ ______ ____ ____ ______
Total $m 14 13 7.7% 27 29 (6.9)%
____ ____ ______ ____ ____ ______
Sterling equivalent £m 9 6 50.0% 16 15 6.7%
____ ____ ______ ____ ____ ______
Revenue and operating profit from continuing operations grew by 27.6% to $97m
and 42.1% to $27m respectively during the first half of 2006. Including
discontinued operations, revenue and operating profit declined by 28.1% and 6.9%
respectively, reflecting the sale of 10 owned and leased hotels during the
second half of 2005.
Continuing owned and leased results were strong as the InterContinental Hong
Kong achieved rate-led RevPAR growth of 30.1%. The hotel also continued to
benefit from the prior year repositioning of its food and beverage operations.
The managed estate experienced revenue growth of 42.9% reflecting the retention
of management contracts on owned and leased hotels sold and positive trading
conditions across most regions, including Greater China where rate-led RevPAR
growth was 9.1%. Although the impact of continued infrastructure and
development costs in China reduced operating profit, growth of 18.8% was still
achieved.
Hotels Rooms
Change over Change over
2006 2005 2006 2005
Asia Pacific Hotel and Room Count 30 June 31 December 30 June 31 December
Analysed by brand:
InterContinental 28 1 9,595 134
Crowne Plaza 40 2 12,348 49
Holiday Inn 89 1 22,454 586
Holiday Inn Express 4 - 770 (3)
Other brands 4 (1) 968 (139)
____ ____ ______ _____
Total 165 3 46,135 627
____ ____ ______ _____
Analysed by ownership type:
Owned and leased 2 - 693 -
Managed 125 5 37,129 897
Franchised 38 (2) 8,313 (270)
____ ____ ______ _____
Total 165 3 46,135 627
____ ____ ______ _____
Hotels Rooms
Change over Change over
2006 2005 2006 2005
Asia Pacific Pipeline 30 June 31 December 30 June 31 December
Analysed by brand:
InterContinental 17 6 6,493 3,224
Crowne Plaza 20 1 5,991 (34)
Holiday Inn 28 5 9,932 2,804
Holiday Inn Express 7 4 3,003 2,056
____ ____ ______ _____
Total 72 16 25,419 8,050
____ ____ ______ _____
Analysed by ownership type:
Managed 72 16 25,419 8,050
____ ____ ______ _____
Total 72 16 25,419 8,050
____ ____ ______ _____
Asia Pacific hotel and room count grew in the first half of 2006 by a net three
hotels (627 rooms), with six hotels (1,559 rooms) joining the system and three
hotels (932 rooms) leaving the system. At 30 June 2006, the pipeline included
72 hotels (25,419 rooms), an increase of 16 hotels (8,050 rooms) driven by
signings in Greater China.
Central
Central revenues, which primarily include system-related fees, increased by £4m
to £24m during the first half of 2006, reflecting the combined impact of system
size growth and higher Holidex fees (IHG's proprietary reservations system).
Central overheads increased by £5m to £37m for the six months ended 30 June
2006. The increase includes the cost of a global research project aimed at
gaining more meaningful insight into guests' brand perceptions across the
lodging sector.
Other Operating Income and Expenses
Other operating income and expenses, a £25m credit in the six months ended 30
June 2006, represents the gain of $44m on the sale of the Group's investment in
FelCor.
Taxation
The tax charge on profit before tax, excluding the impact of special items (see
note 5 in the notes to the interim financial statements), has been calculated
using an effective annual rate of 25%. By also excluding the effect of prior
year items, the equivalent effective tax rate would be approximately 31%. Prior
year items relate wholly to continuing operations.
A special tax credit of £96m has arisen primarily as a result of agreements
reached with tax authorities or expiry of time limits in respect of prior years.
Treasury
The net movement in cash and cash equivalents in the six months ended 30 June
2006 was an outflow of £219m. This included a net cash inflow from operations
of £128m. Net debt at 30 June 2006 was £320m comprising cash and cash
equivalents of £113m and loans and other borrowings of £433m.
The net cash inflow from investing activities included £237m from hotel
disposals, $191m from the sale of FelCor shares and £46m of capital expenditure,
including the ongoing refurbishment at the InterContinental London Park Lane.
The net cash outflow from financing activities included £497m in respect of the
payment of a special dividend on 22 June 2006.
Asset Disposal Programme
During the first half of 2006, IHG completed the sale of 24 hotels in
Continental Europe to a subsidiary of Westbridge Hospitality Fund LP for £240m
before transaction costs. IHG has retained 15 year franchise contracts on each
of the hotels. The total gain on disposal of assets, net of related tax,
amounted to £9m for the six months ended 30 June 2006.
On 13 July 2006, IHG announced the agreement to sell seven European
InterContinental hotels to Morgan Stanley Real Estate Fund for £440m before
transaction costs, approximately £56m above net book value. Under the
agreement, IHG will retain 30 year management contracts on the hotels, with two
10 year renewals at IHG's discretion. The long-term contracts ensure the
representation of the InterContinental brand in these key European markets.
These transactions support IHG's continued strategy to grow its managed and
franchised business whilst reducing asset ownership. Since the separation from
Six Continents in April 2003, 175 hotels with a net book value in excess of
£2.9bn have been sold, generating aggregate proceeds of around £3.0bn.
Return of Funds
IHG's return of funds continued during the first half of the year, with the
second £250m share buyback completed, the third £250m share buyback underway and
the payment of a £497m special dividend on 22 June 2006. Upon completion of the
third share buyback, IHG will have returned £2.74bn to its shareholders since
April 2003, with £2.6bn paid as at 30 June 2006.
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the three months ended 30 June 2006
3 months ended 30 June 2006 3 months ended 30 June 2005
Continuing Discontinued Continuing Discontinued
operations operations operations operations
Total Total
£m £m £m £m £m £m
Revenue (note 3) 208 52 260 187 340 527
Cost of sales (86) (36) (122) (85) (238) (323)
Administrative expenses (42) - (42) (37) (20) (57)
____ ____ ____ ____ ____ ____
80 16 96 65 82 147
Depreciation and amortisation (15) - (15) (13) (18) (31)
Other operating income and - - - (8) - (8)
expenses (note 5)
____ ____ ____ ____ ____ ____
Operating profit (note 4) 65 16 81 44 64 108
Financial income 8 - 8 10 - 10
Financial expenses (8) - (8) (14) (3) (17)
____ ____ ____ ____ ____ ____
Profit before tax 65 16 81 40 61 101
____ ____ ____ ____ ____ ____
UK tax (1) - (1) 6 (14) (8)
Foreign tax (14) (5) (19) (18) (6) (24)
Special tax (note 5) 96 - 96 8 - 8
____ ____ ____ ____ ____ ____
Total tax (note 6) 81 (5) 76 (4) (20) (24)
____ ____ ____ ____ ____ ____
Profit after tax 146 11 157 36 41 77
Gain on disposal of assets, net - 7 7 - 5 5
of tax charge of £6m (2005 £21m)
____ ____ ____ ____ ____ ____
Profit for the period 146 18 164 36 46 82
==== ==== ==== ==== ==== ====
Attributable to:
Equity holders of the parent 146 18 164 36 37 73
Minority equity interest - - - - 9 9
____ ____ ____ ____ ____ ____
Profit for the period 146 18 164 36 46 82
==== ==== ==== ==== ==== ====
Earnings per ordinary share
(note 7):
Basic 35.4p 4.4p 39.8p 6.0p 6.2p 12.2p
Diluted 34.4p 4.3p 38.7p 5.9p 6.1p 12.0p
Adjusted 12.1p - - 6.0p - -
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2006
6 months ended 30 June 2006 6 months ended 30 June 2005
Continuing Discontinued Continuing Discontinued
operations operations operations operations
Total Total
£m £m £m £m £m £m
Revenue (note 3) 394 105 499 340 720 1,060
Cost of sales (176) (82) (258) (162) (533) (695)
Administrative expenses (81) - (81) (71) (37) (108)
____ ____ ____ ____ ____ ____
137 23 160 107 150 257
Depreciation and amortisation (30) (3) (33) (25) (40) (65)
Other operating income and 25 - 25 (8) - (8)
expenses (note 5)
____ ____ ____ ____ ____ ____
Operating profit (note 4) 132 20 152 74 110 184
Financial income 17 - 17 17 - 17
Financial expenses (18) - (18) (32) (3) (35)
____ ____ ____ ____ ____ ____
Profit before tax 131 20 151 59 107 166
____ ____ ____ ____ ____ ____
UK tax (3) - (3) 11 (25) (14)
Foreign tax (30) (6) (36) (28) (9) (37)
Special tax (note 5) 96 - 96 8 - 8
____ ____ ____ ____ ____ ____
Total tax (note 6) 63 (6) 57 (9) (34) (43)
____ ____ ____ ____ ____ ____
Profit after tax 194 14 208 50 73 123
Gain on disposal of assets, - 9 9 - 14 14
net of tax charge of £5m
(2005 £20m)
____ ____ ____ ____ ____ ____
Profit for the period 194 23 217 50 87 137
==== ==== ==== ==== ==== ====
Attributable to:
Equity holders of the 194 23 217 50 74 124
parent
Minority equity interest - - - - 13 13
____ ____ ____ ____ ____ ____
Profit for the period 194 23 217 50 87 137
==== ==== ==== ==== ==== ====
Earnings per ordinary share
(note 7):
Basic 46.1p 5.4p 51.5p 8.2p 12.2p 20.4p
Diluted 44.8p 5.3p 50.1p 8.1p 11.9p 20.0p
Adjusted 19.0p - - 8.2p - -
Dividends per ordinary share:
Final paid in the 10.70p 10.00p
period
Special interim paid 118.00p -
Interim proposed 5.10p 4.60p
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the six months ended 30 June 2006
2006 2005
6 months 6 months
ended 30 June ended 30 June
£m £m
Income and expense recognised directly in equity
Gains/(losses) on valuation of available-for-sale assets 2 (8)
Gains on cash flow hedges 2 -
Exchange differences on retranslation of foreign operations
(11) 13
Actuarial gains on defined benefit pension plans 9 -
_____ _____
2 5
Transfers to the income statement
On cash flow hedges (1) -
On disposal of foreign operations 1 -
On disposal of available-for-sale assets (15) -
Tax on items above taken directly to or transferred from equity 8 -
_____ _____
Net (expense)/income recognised directly in equity (5) 5
Profit for the period 217 137
_____ _____
Total recognised income and expense for the period 212 142
===== =====
Attributable to:
Equity holders of the parent 212 129
Minority equity interest - 13
_____ _____
212 142
===== =====
InterContinental Hotels Group PLC
GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2006
2006 2005
6 months 6 months
ended 30 June ended 30 June
£m £m
Profit for the period 217 137
Adjustments for:
Net financial expenses 1 18
Income tax (credit)/charge (57) 43
Gain on disposal of assets, net of tax (9) (14)
Other operating income and expenses (25) 8
Depreciation and amortisation 33 65
Equity settled share-based cost, net of payments 5 3
_____ _____
Operating cash flow before movements in working capital 165 260
Increase in inventories - (4)
Increase in receivables (30) (45)
Decrease in provisions and other payables (7) (44)
Decrease in employee benefit obligation - (27)
_____ _____
Cash flow from operations 128 140
Interest paid (18) (30)
Interest received 16 16
Tax paid (23) (35)
_____ _____
Net cash from operating activities 103 91
_____ _____
Cash flow from investing activities
Purchases of assets - Hotels (46) (63)
Disposal of assets, net of cash disposed of - Hotels 237 1,394
Proceeds from other financial assets - Hotels 115 7
Purchases of property, plant and equipment - Soft Drinks - (27)
_____ _____
Net cash from investing activities 306 1,311
_____ _____
Cash flow from financing activities
Proceeds from the issue of share capital 8 5
Purchase of own shares (111) (124)
Purchase of own shares by employee share trusts (29) (5)
Proceeds on release of own shares by employee share trusts 10 2
Dividends paid to shareholders (543) (61)
Dividends paid to minority interests (1) (117)
Increase/(decrease) in borrowings 38 (42)
_____ _____
Net cash from financing activities (628) (342)
_____ _____
Net movement in cash and cash equivalents in the period (219) 1,060
Cash and cash equivalents at beginning of the period 324 72
Exchange rate effects 8 (6)
_____ _____
Cash and cash equivalents at end of the period 113 1,126
===== =====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP BALANCE SHEET
As at 30 June 2006
2006 2005
30 June 31 December
£m £m
ASSETS
Property, plant and equipment 942 1,356
Goodwill 112 118
Intangible assets 121 120
Investment in associates 39 42
Other financial assets 108 113
_____ _____
Total non-current assets 1,322 1,749
_____ _____
Inventories 3 3
Trade and other receivables 239 252
Current tax receivable 17 22
Cash and cash equivalents 113 324
Other financial assets 5 106
_____ _____
Total current assets 377 707
Non-current assets classified as held for sale 405 279
______ ______
Total assets 2,104 2,735
===== =====
LIABILITIES
Loans and other borrowings (5) (2)
Trade and other payables (428) (468)
Current tax payable (231) (324)
_____ _____
Total current liabilities (664) (794)
_____ _____
Loans and other borrowings (428) (410)
Employee benefits (64) (76)
Provisions and other payables (103) (107)
Deferred tax payable (115) (210)
_____ _____
Total non-current liabilities (710) (803)
Liabilities classified as held for sale (86) (34)
_____ ______
Total liabilities (1,460) (1,631)
===== =====
Net assets (note 10) 644 1,104
===== =====
EQUITY
IHG shareholders' equity 631 1,084
Minority equity interest 13 20
______ ______
Total equity 644 1,104
===== =====
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These interim financial statements have been prepared in accordance with International Accounting Standard
34 'Interim Financial Reporting' using, on a consistent basis, the accounting policies set out in the 2005
InterContinental Hotels Group PLC (IHG) Annual Report and Financial Statements.
These interim financial statements are unaudited and do not constitute statutory accounts of the Group
within the meaning of Section 240 of the Companies Act 1985. The auditors have carried out a review of
the financial information in accordance with the guidance contained in Bulletin 1999/4 'Review of interim
financial information' issued by the Auditing Practices Board and their report is set out on page 13.
The financial information for the year ended 31 December 2005 has been extracted from the Group's
published financial statements for that year which contain an unqualified audit report and which have been
filed with the Registrar of Companies.
In respect of the three months ended 30 June 2005, a reclassification within continuing operations has
increased administrative expenses by £6m and reduced cost of sales by the same amount. There is no impact
on the cumulative six months cost.
2. Exchange rates
The results of overseas operations have been translated into sterling at the weighted average rates of
exchange for the period. In the case of the US dollar, the translation rate for the six months ended 30
June is £1= $1.80 (2006 3 months, £1 = $1.85; 2005 6 months, £1 = $1.87; 2005 3 months, £1 = $1.85). In
the case of the euro, the translation rate for the six months ended 30 June is £1 = €1.46 (2006 3 months,
£1 = €1.45; 2005 6 months, £1 = €1.46; 2005 3 months, £1 = €1.47).
Foreign currency denominated assets and liabilities have been translated into sterling at the rates of
exchange on the last day of the period. In the case of the US dollar, the translation rate is £1=$1.84
(2005 31 December £1 = $1.73). In the case of the euro, the translation rate is £1 = €1.44 (2005 31
December £1= €1.46).
Revenue
3.
2006 2005 2006 2005
3 months 3 months* 6 months 6 months**
ended 30 June ended 30 June ended 30 June ended 30 June
£m £m £m £m
Continuing operations
Hotels
Americas 118 103 224 186
EMEA 51 55 92 95
Asia Pacific 27 19 54 39
Central 12 10 24 20
____ ____ ____ ____
208 187 394 340
____ ____ ____ ____
Discontinued operations
Hotels 52 159 105 350
Soft Drinks - 181 - 370
____ ____ ____ ____
52 340 105 720
____ ____ ____ ____
260 527 499 1,060
==== ==== ==== ====
* Other than for Soft Drinks which reflects 12 weeks ended 10 July 2005.
** Other than for Soft Drinks which reflects 28 weeks ended 10 July 2005.
Operating profit
4.
2006 2005 2006 2005
3 months 3 months* 6 months 6 months**
ended 30 June ended 30 June ended 30 June ended 30 June
£m £m £m £m
Continuing operations
Hotels
Americas 62 51 111 88
EMEA 14 15 17 16
Asia Pacific 9 4 16 10
Central (20) (18) (37) (32)
____ ____ ____ ____
65 52 107 82
____ ____ ____ ____
Discontinued operations
Hotels 16 36 20 71
Soft Drinks - 28 - 39
____ ____ ____ ____
16 64 20 110
____ ____ ____ _____
81 116 127 192
Other operating income and
expenses (note 5)
- (8) 25 (8)
____ ____ ____ ____
Operating profit 81 108 152 184
==== ==== ==== ====
* Other than for Soft Drinks which reflects 12 weeks ended 10 July 2005.
** Other than for Soft Drinks which reflects 28 weeks ended 10 July 2005.
5. Special items
2006 2005 2006 2005
3 months 3 months 6 months 6 months
ended 30 June ended 30 June ended 30 June ended 30 June
£m £m £m £m
Other operating income and expenses
*
Gain on sale of investment (note a) - - 25 -
Restructuring costs (note b) - (8) - (8)
____ ____ ____ ____
- (8) 25 (8)
==== ==== ==== ====
Taxation*
Tax on other operating income and
expenses
- - (7) -
Special tax credit (note c) 96 8 96 8
____ ____ ____ ____
96 8 89 8
==== ==== ==== ====
Gain on disposal of assets
Gain on disposal of assets 13 26 14 34
Tax charge (6) (21) (5) (20)
____ ____ ____ ____
7 5 9 14
==== ==== ==== ====
* Relates to continuing operations.
a. Gain on the sale of the Group's investment in FelCor Lodging Trust, Inc.
b. Restructuring costs relate to the delivery of the further restructuring of the Hotels business.
c. Represents the release of provisions which are special by reason of their size or incidence relating to tax
matters which have been settled or in respect of which the relevant statutory limitation period has expired
together with, in 2006, a credit in respect of previously unrecognised losses.
6. Tax
The tax charge on profit before tax, excluding the impact of special items (note 5), has been calculated
using an estimated effective annual tax rate of 25% (2005 29%).
By also excluding the effect of prior year items, the equivalent effective tax rate would be approximately
31%. Prior year items relate wholly to continuing operations.
7. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit for the period available for IHG
equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in
issue during the period.
Diluted earnings per ordinary share is calculated by adjusting basic earnings per ordinary share to
reflect the notional exercise of the weighted average number of dilutive ordinary share options
outstanding during the period.
On 1 June 2006, shareholders approved a share capital consolidation on the basis of 7 new ordinary shares
for every 8 existing ordinary shares, together with a special dividend of 118 pence per existing ordinary
share. The overall effect of the transaction was that of a share repurchase at fair value, therefore no
adjustment has been made to comparative data.
2006 2006 2005 2005
Continuing Continuing
3 months ended 30 June operations Total operations Total
Basic earnings per share
Profit available for equity holders (£m) 146 164 36 73
Basic weighted average number of ordinary shares
(millions)
412 412 597 597
Basic earnings per share (pence) 35.4 39.8 6.0 12.2
==== ===== ==== =====
Diluted earnings per share
Profit available for equity holders (£m) 146 164 36 73
Diluted weighted average number of ordinary shares
(millions) (see next page)
424 424 608 608
Diluted earnings per share (pence) 34.4 38.7 5.9 12.0
==== ===== ==== =====
2006 2006 2005 2005
Continuing Continuing
6 months ended 30 June operations Total operations Total
Basic earnings per share
Profit available for equity holders (£m) 194 217 50 124
Basic weighted average number of ordinary shares
(millions)
421 421 607 607
Basic earnings per share (pence) 46.1 51.5 8.2 20.4
==== ===== ==== =====
Diluted earnings per share
Profit available for equity holders (£m) 194 217 50 124
Diluted weighted average number of ordinary shares
(millions) (see next page)
433 433 619 619
Diluted earnings per share (pence) 44.8 50.1 8.1 20.0
==== ===== ==== =====
7. Earnings per ordinary share (continued)
The diluted weighted average number of ordinary shares is calculated as:
2006 2005 2006 2005
3 months 3 months 6 months 6 months
ended ended ended ended
30 June 30 June 30 June 30 June
millions millions millions millions
Basic weighted average number of ordinary shares 412 597 421 607
Dilutive potential ordinary shares - employee
share options
12 11 12 12
____ _____ _____ _____
424 608 433 619
==== ===== ==== =====
2006 2005 2006 2005
3 months 3 months 6 months 6 months
ended ended ended ended
30 June 30 June 30 June 30 June
Adjusted earnings per share £m £m £m £m
Continuing operations
Profit available for equity holders 146 36 194 50
Less adjusting items (note 5):
Other operating income and expenses - 8 (25) 8
Tax on other operating income and expenses - - 7 -
Special tax credit (96) (8) (96) (8)
____ ____ ____ ____
Adjusted earnings 50 36 80 50
Basic weighted average number of ordinary shares
(millions)
412 597 421 607
Adjusted earnings per share (pence) 12.1 6.0 19.0 8.2
==== ==== ==== ====
Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by special
items, to give a more meaningful comparison of the Group's performance.
8. Cash flows from discontinued operations
2006 2005
6 months 6 months
ended 30 June ended 30 June
£m £m
Hotels
Operating profit before interest, depreciation
and amortisation
23 86
Investing activities (7) (22)
Financing activities (25) (14)
____ ____
(9) 50
==== ====
Soft Drinks
Operating profit before interest, depreciation
and amortisation
- 64
Investing activities - (27)
Financing activities - 151
____ ____
- 188
==== ====
9. Net debt
2006 2005
30 June 31 December
£m £m
Cash and cash equivalents 113 324
Loans and other borrowings (433) (412)
____ ____
(320) (88)
==== ====
10. Net assets
2006 2005
30 June 31 December
£m £m
Hotels
Americas 267 369
EMEA 664 951
Asia Pacific 279 296
Central 83 88
____ ____
1,293 1,704
Net debt (320) (88)
Unallocated assets and liabilities (329) (512)
____ ____
644 1,104
==== ====
11. Movement in IHG shareholders' equity
2006 2005
6 months 6 months
ended 30 June ended 30 June
£m £m
At 1 January 1,084 1,817
Total recognised income and expense for the period 212 129
Equity dividends paid (543) (61)
Issue of ordinary shares 8 5
Purchase of own shares (116) (124)
Cash element of capital reorganisation - (996)
Movement in shares in employee share trusts and share
schemes
(14) 9
____ ____
At 30 June 631 779
==== ====
12. Capital commitments and contingencies
At 30 June 2006, amounts contracted for but not provided in the financial statements for expenditure on
property, plant and equipment was £34m (2005 31 December £76m).
At 30 June 2006, the Group had contingent liabilities of £20m (2005 31 December £20m), mainly comprising
guarantees given in the ordinary course of business.
In limited cases, the Group may provide performance guarantees to third-party owners to secure management
contracts. The maximum exposure under such guarantees is £133m (2005 31 December £134m). It is the view
of the Directors that, other than to the extent that liabilities have been provided for in these financial
statements, such guarantees are not expected to result in financial loss to the Group.
The Group has given warranties in respect of the disposal of certain of its former subsidiaries. It is
the view of the Directors that, other than to the extent that liabilities have been provided for in these
financial statements, such warranties are not expected to result in financial loss to the Group.
13. Post balance sheet event
On 13 July 2006, IHG announced the agreement to sell seven European InterContinental hotels to Morgan
Stanley Real Estate Fund for £440m before transaction costs. IHG will enter into management contracts on
all seven hotels. The transaction is expected to complete in the third quarter.
INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC
Introduction
We have been instructed by the Company to review the financial information for the three months and six
months ended 30 June 2006 which comprises the Group Income Statement, Group Statement of Recognised Income
and Expense, Group Cash Flow Statement, Group Balance Sheet and the related notes 1 to 13. We have read
the other information contained in the Interim Report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained in Bulletin 1999/4 'Review
of interim financial information' issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is the responsibility of, and
has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in
accordance with the Listing Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent with those applied in
preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim
financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether the accounting policies
and presentation have been consistently applied, unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with International Standards on Auditing
(UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the
financial information as presented for the three months and six months ended 30 June 2006.
Ernst & Young LLP
London
21 August 2006
This information is provided by RNS
The company news service from the London Stock Exchange
