Interim Results

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

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