Pro Forma Results 30 June 03
InterContinental Hotels Group PLC
12 September 2003
12th September, 2003
InterContinental Hotels Group PLC
Pro forma Results for the Six months to 30 June 2003
6 months to 6 months to %
30 June 2003* 30 June 2002* Change
£m £m
Hotels
- EBITDA 162 194 (16.5)
- Operating Profit 86 126 (31.7)
Soft Drinks
- EBITDA 61 57 7.0
- Operating Profit 39 34 14.7
Group
- EBITDA 213 249 (14.5)
- Operating Profit 114 157 (27.4)
Profit before Tax 92 133 (30.8)
Earnings per share 7.6p 11.2p (32.1)
* Pro forma numbers. Soft Drinks results to 5th July 2003 (6th July 2002).
• Total Hotels operating profit down 23.6% in dollar terms, down 31.7% in sterling terms.
- Americas operating profit flat at $134m with our owned and leased business continuing to gain
market share, and our managed and franchised business remaining robust.
- EMEA operating profit down £25m to £30m with the owned and leased business affected by the
reduction in US visitors to the region and the depressed euro zone economy.
- Asia Pacific down $15m to $5m as a consequence of the effect of the SARS virus during the
period with the InterContinental Hong Kong particularly affected.
• Soft Drinks recorded another excellent performance with volumes up 3.2%, turnover up 8.1%.
• Revenue generation initiatives delivering results.
• Cost savings on track, currently running at $61m annualised savings.
• Tight control of our costs, capital expenditure and working capital has resulted in £98m operating
cash inflow during the period and net debt below £1bn.
• £227m of asset disposal proceeds generated since June 2003.
Richard North, Chief Executive, InterContinental Hotels Group PLC, said:
"Trading conditions in the first six months of this year have been as bad as anyone in the global
hospitality industry can remember. Against this background we are focusing on the elements that we can
control, namely revenue generation, reducing overhead costs and lowering capital intensity. We are
beginning to deliver against these areas and are positioning ourselves for recovery when it comes.
When we reported last May we said that we saw no evidence of a sustained recovery in trading and so we
were cautious as to near term trading prospects. I have to say that little has changed since then to
alter our view.
More specifically, in the US we believe the improvement in RevPAR over the summer was leisure driven
and we are yet to be convinced that there has been an upturn in demand from the business traveller.
In the UK we have seen some improvement in RevPAR particularly in the Regions. Western Europe remains
uncertain and although Asia Pacific is continuing its recovery post SARS it has yet to regain all the
ground lost."
For further information, please contact:
Karen Whitworth, Investor Relations 020 7409 8231
Jo Guano, Investor Relations 020 7409 8134
Dee Cayhill/ Kathryn Holland, Corporate Affairs 020 7409 8101
Teleconference
A teleconference, including a webcast of the teleconference presentation slides,
will commence at 4.00 pm (London time) on 12th September. The conference call
will conclude at approximately 4.30 pm (London time).
To join us for this conference call please dial the relevant number below by
4.00 pm (London time).
International dial-in Tel: +44 (0) 1452 569 339
UK dial-in Tel: 0845 245 5300
USA dial-in Tel: 1866 629 0055
The webcast of the teleconference presentation slides will be available on the
following web address:
www.meetingcentre.net with the access code: 702133343.
Webcast
There will be a live audio webcast of the presentation of the results at 09.30
on the web address www.ihgplc.com/interimresults03. A video and audio webcast
of the presentation is expected to be on this website later on the day of the
results and will remain on this website for the foreseeable future.
INTERCONTINENTAL HOTELS GROUP
Following shareholder and regulatory approval, on 15 April 2003, Six Continents
PLC separated into two new groups, InterContinental Hotels Group PLC (IHG)
comprising the Hotels and Soft Drinks businesses, and Mitchells & Butlers plc
comprising the Retail and Standard Commercial Property Developments businesses,
(the "Separation").
This operating review summarises the performance of IHG in the six months ended
30 June 2003. These pro forma results provide information in line with our new
calendar year end reporting timetable. They do not represent our formal interim
accounts. The results for the period to 30 September 2003 will constitute our
second formal interim results as required under the UK Listing Rules for a
company extending its accounting period.
IHG PRO FORMA SUMMARY*
Three months to Six months to Six month
Group results March June June June %
2003 2003 2003 2002 change
£m £m £m £m
Turnover 505 538 1,043 1,080 (3.4)
EBITDA 87 126 213 249 (14.5)
Operating Profit 37 77 114 157 (27.4)
Profit before Tax 25 67 92 133 (30.8)
Earnings per share (pence) 2.2 5.4 7.6 11.2 (32.1)
* excludes all exceptional items
IHG's overall results on a pro forma basis have been affected by the problems
facing the global travel and tourism industry. In tough trading conditions IHG's
turnover decreased by 3.4% in sterling terms on the same period last year,
although Hotels turnover was up by 3.1% in US dollar terms.
As a result of the fundamental strength of the Hotels and Soft Drinks businesses
the fall in group EBITDA was held to 14.5%. This translated into a reduction in
operating profit of 27.4% while profit before tax and earnings per share fell by
30.8% and 32.1% respectively.
Total Hotels operating profit was down 23.6% on the prior year in dollar terms,
but due to the weakness of the dollar was down 31.7% in sterling terms, to £86m.
Soft Drinks has, however, had another very strong six months with profits up
14.7% to £39m.
HOTELS
Hotels results Three months to Six months to
March June June %
2003 2002 2003 2002 2003 2002 change
£m £m £m £m £m £m
Turnover:
Americas 130 138 142 158 272 296 (8.1)
EMEA 181 191 204 215 385 406 (5.2)
Asia Pacific 30 33 21 35 51 68 (25.0)
____ ____ ____ ____ ____ ____
Total turnover 341 362 367 408 708 770 (8.1)
==== ==== ==== ==== ==== ====
Operating profit:
Americas 33 38 50 55 83 93 (10.8)
EMEA 12 22 18 33 30 55 (45.5)
Asia Pacific 6 8 (2) 6 4 14 (71.4)
Other (18) (19) (13) (17) (31) (36) 13.9
____ ____ ____ ____ ____ ____
Total operating profit 33 49 53 77 86 126 (31.7)
==== ==== ==== ==== ==== ====
The table above shows operating results by quarter for Hotels. The diverse
nature of the regions and business models is demonstrated in our results.
The Americas region overall was relatively stable over the six month period with
operating profit up 0.8% in dollar terms although down 10.8% in sterling terms.
EMEA's owned and leased estate continued to be severely affected by the same
macro-economic factors as in the first quarter, namely the threat of and
subsequent war in Iraq and the depressed euro zone economy, which has impacted
both corporate profitability and leisure travel. Paris has been hit particularly
hard, as has the German market. In Asia Pacific, the outbreak of SARS at the end
of the first quarter severely impacted performance and profits in the region
were down £10m to £4m.
Overall, the Hotels results were significantly down on the same period last
year.
AMERICAS
Three months to Six months to
Americas results March June June June %
2003 2003 2003 2002 change
$m $m $m $m
Turnover 207 234 441 427 3.3
==== ==== ==== ====
Operating profit:
Owned & Leased - 13 13 13 -
Managed & Upscale Franchise 7 12 19 20 (5.0)
Midscale Franchised 45 57 102 100 2.0
____ ____ ____ ____
Total operating profit 52 82 134 133 0.8
==== ==== ==== ====
Americas - RevPAR movement on previous year
Three months to Six months to
March June June
2003 2003 2003
InterContinental Owned & Leased 1.8% 2.9% 2.2%
Holiday Inn Franchise (2.0)% (4.9)% (3.7)%
Holiday Inn Express Franchise (0.6)% (0.5)% (0.6)%
Our owned and leased estate in the Americas has shown relative stability over
the six month period compared with our owned and leased properties in the other
two regions, where trading has been more volatile. RevPAR for the total owned &
leased InterContinental estate was up 2.2% on last year, with occupancy 4.3
percentage points higher and average daily rates 4.4% lower. Although the
trading background remains challenging, our owned and leased InterContinental
hotels in the Americas continue to gain market share, reflecting the ongoing
benefits of our capital investment. Overall owned and leased operating profit
was $13m, flat compared with the prior year six months.
Holiday Inn Express continues to outperform its competitive set. However,
Holiday Inn, with its mix more heavily weighted towards the business market than
the mid-scale segment as a whole, suffered disproportionately during the period
of the Iraq war under-performing the market. This is reflected in the RevPAR
performance for the period, however, in July, Holiday Inn's performance was in
line with the competitive set on the back of our new marketing campaigns.
Express continues to drive its system size and therefore the net movement in the
period of our total midscale rooms available was an increase of 1.4%. These
factors combined led to a robust performance from our Americas midscale
franchise business with operating profit up $2 million to $102 million.
Operating profit for the managed and upscale franchise business was $19m
compared with $20m for the first half of 2002. Around 65% of the rooms available
in our Americas InterContinental managed business are in Latin America, where
the economy continues to be difficult, compared with the owned InterContinental
estate which is centred on the key gateway cities of North America. It is this
geographical factor that results in a relatively poor RevPAR performance in this
business compared with our owned and leased estate.
EUROPE, THE MIDDLE EAST AND AFRICA (EMEA)
Three months to Six months to
EMEA results March June June June %
2003 2003 2003 2002 change
£m £m £m £m
Turnover 181 204 385 406 (5.2)
==== ==== ==== ====
Operating profit:
Owned & Leased 6 13 19 41 (53.7)
Managed & Franchised 6 5 11 14 (21.4)
____ ____ ____ ____
Total operating profit 12 18 30 55 (45.5)
____ ____ ____ ____
EMEA continues to be adversely impacted by the reduction in US visitors to the
region as a result of the Iraq conflict, a reluctance to travel overseas, and
the depressed euro zone economy. As a result, EMEA total operating profit fell
by almost 46% in sterling terms compared with the six months to 30 June 2002.
EMEA - RevPAR movement on previous year
Three months to Six months to
March June June
2003 2003 2003
InterContinental O&L (6.1)% (15.5)% (11.5)%
Crowne Plaza O&L (1.6)% (5.4)% (3.7)%
Holiday Inn UK London 0.3% (15.7)% (8.5)%
Holiday Inn UK Regions 1.2% 1.6% 1.3%
The EMEA owned and leased upscale business continues to be adversely impacted by
the macro economic factors mentioned above. However, within Europe itself the
situation is mixed, with distinct differences in performance between countries.
While trading conditions remain challenging in France and Germany, there has
been some stability in the UK regions.
The Holiday Inn owned and leased estate in the UK regions saw RevPAR in the six
months to 30 June 2003 increase by 1.3%. Meanwhile RevPAR in London fell 8.5%
over the six month period due to the hotels bias towards the airport markets and
the aforementioned reduction in US visitors. However, in terms of RevPAR growth,
Holiday Inn UK continues to outperform its relative market in both London and
the Regions.
The macro economic factors combined with specific increases in fixed costs and
higher depreciation charges reflecting the refurbishment spend to date, resulted
in operating profit for the owned and leased hotels of £19m compared with £41m
for the same period last year.
The EMEA managed and franchised estate was more resilient than the owned and
leased estate with operating profit down only £3m on 2002 to £11m.
ASIA PACIFIC
Three months to Six months to
Asia Pacific results March June June June %
2003 2003 2003 2002 change
$m $m $m $m
Turnover 48 34 82 97 (15.5)
=== === === ===
Operating profit 8 (3) 5 20 (75.0)
=== === === ===
The sharply reduced operating profit performance was almost entirely due to the
effect of SARS during the period. At the InterContinental Hong Kong occupancy
dropped in the quarter to June to below 10% from nearly 60% in the previous
quarter, while rate was slightly down. SARS now appears to have been contained
and the World Health Organization has declared countries in the Asia region free
from the virus. China has virtually fully recovered and occupancy at the
InterContinental Hong Kong in August was nearly 50%, a strong improvement from
the levels of occupancy at the height of the epidemic.
Overall, Asia Pacific operating profit was $5m, compared with $20m for the six
months to June 2002.
Other
The Other segment, which includes central overheads, marketing costs and
goodwill amortisation less dividends received from FelCor and other income
items, was $49m compared with $50m in 2002. Dividends received from FelCor were
$1m compared to $3m in the prior year. Also, there were no significant
liquidated damages in the six months to 30 June 2003, against $2m in the same
period last year. A continuing focus on driving cost from the business has
resulted in central overheads and marketing spend down $5m on the same period
last year.
SOFT DRINKS
Three months to Six months to
Soft Drinks results March June June June %
2003 2003 2003 2002 change
£m £m £m £m
Turnover 164 171 335 310 8.1
=== === === ===
Operating profit 8 31 39 34 14.7
=== === === ===
The Soft Drinks business continues to produce excellent results. Both volumes
and profit were up on the same period last year. Sales volumes were 3.2% higher,
with significant contributions from Robinsons, Fruit Shoot and Britvic J20.
Overall, turnover rose 8.1% to £335m as a consequence of the volume increase and
a further growth in average realised price due to a higher mix of premium priced
products.
Costs were well controlled and operating margins grew, resulting in total
operating profit up 14.7% to £39m.
FINANCE
Operating cash inflows before major operating exceptionals for the six months to
30 June 2003 was £98m after net capital expenditure of £140m. In these
difficult times, IHG continues to focus on improving the operating cashflow of
the group, with rigorous control of working capital and capital expenditure. We
now expect Hotels capital expenditure for the calendar year 2003 to be £350m,
slightly lower than our previous guidance given in May.
IHG retains a robust balance sheet with over £4.4bn of tangible assets and net
debt of £942m. The disposal proceeds of the 16 Staybridge Suites, announced in
July, and of the InterContinental May Fair, announced in August of this year,
totalling £227m, are not included in the above results. Primarily as a result of
these disposals and tight cash management, we now expect our net debt at the
year end to be below £800m, lower than our previous guidance.
INVESTOR INFORMATION
As previously communicated, the Directors of IHG intend to recommend that an
interim dividend and a final dividend for IHG for 2003, together totalling 13.5
pence per Ordinary Share, be declared. The Directors therefore are declaring an
interim dividend today of 4.05 pence per share payable on 14th October 2003. It
is intended to pay the interim dividend to ADR holders on 23rd October 2003. The
proposed final dividend for the year totalling 9.45 pence per share is expected
to be paid in June 2004.
The Directors intend to establish a progressive dividend policy that is
appropriate to the strategies for the Group and will seek to grow dividends in
real terms from the base of 13.5 pence and build cover over time as the hotel
cycle improves.
NOTES TO PROFORMA FINANCIAL INFORMATION
Following shareholder and regulatory approval, on 15 April 2003, Six Continents PLC separated into two
new groups, InterContinental Hotels Group PLC comprising the Hotels and Soft Drinks businesses, and
Mitchells & Butlers plc comprising the Retail and Standard Commercial Property Developments
businesses. As a result of the Separation, Six Continents PLC, the company, became part of IHG.
The pro forma financial statements for the six months to 30 June comprises the results of those
companies that form IHG following the separation, as if IHG had been in existence since 1 October
2001. The information is provided as guidance only; it is not audited and, as pro forma information,
it does not give a full picture of the financial position of the Group. The key assumptions used in
the preparation of the information are as follows:
i The pro forma information has been prepared using accounting policies consistent with
those used in the historic Six Continents PLC interim and year end financial statements.
ii Pro forma interest has been calculated to reflect the post Separation capital structure
of the Group as if it had been in place at 1 October 2001, using interest rate differentials
applicable under the post separation borrowing agreements and excluding facility fee
amortisation. Dividend payments have been assumed at the expected ongoing level.
iii Pro forma tax is based on the estimated effective rate of tax for IHG applied to pro forma
profit before taxation.
iv Adjustments have been made, where appropriate, to exclude any arrangements with the demerged
Mitchells & Butlers Group.
v Pro forma earnings per share is based on pro forma profit available for shareholders divided by
734m shares, being the issued share capital of IHG on separation.
vi The pro forma Profit and Loss account excludes all exceptional items as being non-recurring.
vii Operating cash flow excludes cash flows relating to exceptional items.
INTERCONTINENTAL HOTELS GROUP PLC
UNAUDITED PROFORMA PROFIT AND LOSS ACCOUNT
For the six months ended 30 June 2003
2003 2002
6 months 6 months
Total Total
£m £m
Turnover (note 2) 1,043 1,080
Costs and overheads, less other income (929) (923)
_____ _____
Operating profit on ordinary activities 114 157
before interest (note 3)
Net interest payable & similar charges (22) (24)
_____ _____
Profit on ordinary activities before 92 133
taxation
Tax on profit on ordinary activities (23) (38)
_____ _____
Profit on ordinary activities after 69 95
taxation
Minority equity interests (13) (13)
_____ _____
Profit available for shareholders 56 82
==== ====
Pro Forma Earnings per ordinary share
(note 4): 7.6 11.2
==== ====
UNAUDITED PROFORMA CASH FLOW STATEMENT
For the six months ended 30 June 2003
2003
6 months
£m
Operating profit 114
Depreciation and amortisation 99
____
Earnings before interest, taxation, depreciation and amortisation 213
Decrease in stocks 1
Increase in debtors (16)
Increase in creditors 45
Provisions expended (5)
____
Operating activities 238
Net capital expenditure (140)
____
Operating cash flow 98
====
INTERCONTINENTAL HOTELS GROUP PLC
UNAUDITED GROUP BALANCE SHEET
30 June 2003
2003
30 June
£m
Intangible assets 157
Tangible assets 4,234
Investments 233
_____
Fixed assets 4,624
_____
Stocks 44
Debtors 484
Investments 33
Cash at bank and in hand 80
_____
Current assets 641
Creditors - amounts falling due within one year:
Overdrafts (16)
Other borrowings (25)
Other creditors (979)
_____
Net current liabilities (379)
_____
Total assets less current liabilities 4,245
Creditors - amounts falling due after one year:
Borrowings (1,014)
Other creditors (142)
Provisions for liabilities and charges:
Deferred taxation (313)
Other provisions (64)
Minority interests (163)
_____
Net assets (note 5) 2,549
=====
Capital and reserves
Equity share capital 735
Share premium account 2
Revaluation reserve 290
Merger reserve 1,164
Profit and loss account 358
_____
Equity shareholders' funds 2,549
=====
NOTES TO THE PRO FORMA INTERIM FINANCIAL STATEMENTS
1. 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 is £1=$1.60 (£1=$1.44
June 2002).
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=
$1.65.
2. Turnover 2003 2002
6 months* 6 months*
$m £m $m £m
Hotels**
Americas 441 272 427 296
EMEA 622 385 587 406
Asia Pacific 82 51 97 68
____ ____ ____ ____
1,145 708 1,111 770
____ ____
Soft Drinks 335 310
____ ____
1,043 1,080
==== ====
* Other than for Soft Drinks which reflect the 28 weeks ended 5 July 2003 (28 weeks ended 6 July 2002).
** The dollar amounts shown are translated at the weighted average rate of exchange (see note 1).
3. Operating profit 2003 2002
6 months* 6 months*
$m £m $m £m
Hotels**
Americas 134 83 133 93
EMEA 49 30 79 55
Asia Pacific 5 4 20 14
Other (49) (31) (50) (36)
____ ____ ____ ____
139 86 182 126
Soft Drinks 39 34
Other activities (11) (3)
____ ____
Operating profit 114 157
==== ====
* Other than for Soft Drinks which reflect the 28weeks ended 5 July 2003 (28 weeks ended 6 July
2002).
** The dollar amounts shown are translated at the weighted average rate of exchange (see note 1).
4. Pro forma Earnings per share
Pro forma basic earnings per ordinary share is calculated by dividing the profit available for
shareholders of £56m (£82m June 2002) by 734 million shares, being the issued share capital of IHG on
separation.
5. Net assets 2003
30 June
£m
Hotels 4,109
Soft Drinks 268
Other activities 49
____
4,426
____
Net debt (942)
Other net non-operating liabilities (935)
____
2,549
====
Ends
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