Pro forma Six Months Results

InterContinental Hotels Group PLC 22 May 2003 22nd May 2003 InterContinental Hotels Group PLC Pro forma Results for the Six Months to 31 March 2003 • Strong management action mitigates impact of tough industry conditions - cost reduction programme on track - new management team in place - asset review well underway - capital expenditure reduction • Group EBITDA down only 6.7% to £196m demonstrating the underlying trading strengths in both the Hotels and Soft Drinks businesses. • Total hotel operating profits down 19.9% in dollar terms but down 27.5% in sterling terms as a result of the weakness in the dollar. • Americas operating profit flat at $107m reflecting the strength and resilience of our midscale franchise business and its strong presence in the 'drive to' market in the US. • EMEA down 30.6% to $50m with the upscale owned & leased hotels adversely affected by the fall in international travel, particularly from the US. • Asia Pacific up 25% to $25m driven primarily by an excellent performance from the InterContinental Hong Kong where RevPAR was up 30% over last year. SARS, however, severely reduced occupancy in key cities, particularly Hong Kong, in the last two weeks of the period. • Soft Drinks operating profit at a record £20m up 25% against the prior year, another exceptional year for the business. 6 months to 6 months to % 31 March 2003 31 March 2002 £m £m Hotels - EBITDA 156 174 (10.3) - Operating Profit 79 109 (27.5) Soft Drinks - EBITDA 46 38 21.1 - Operating Profit 20 16 25.0 Group - EBITDA 196 210 (6.7) - PBT 68 99 (31.3) Earnings per share 6.0p 8.9p (32.6) Richard North, Chief Executive, InterContinental Hotels Group PLC, said: "It is difficult to imagine a worse trading environment moreover visibility is still poor and we remain cautious. We have not been passive. We have redesigned our organisation, substantially strengthened the senior management team and are taking out significant levels of cost. At the same time we are cutting back on capital expenditure and are progressing the sale of a number of assets. All this will stand us in good stead now and leaves us well placed to benefit from recovery." For further information, please contact: Jo Guano, Investor Relations 020 7409 8134 Dee Cayhill, Corporate Affairs 020 7409 8101 Fiona Antcliffe, Brunswick 020 7404 5959 Teleconference If you are unable to join us at the presentation, a teleconference, including a webcast of the teleconference presentation slides, will commence at 4.00 pm (London time) on 22 May. 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 560068 UK dial-in Tel: 0800 953 0810 The webcast of the teleconference presentation slides will be available on the following web address: www.presentonline.com/international as the 'participant', with the access code: 21593. Webcast There will be a live audio webcast of the presentation of the results on the web address www.ihgplc.com. 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 This operating review discusses the performance in the six months ended 31 March 2003 of the elements of Six Continents PLC that form the ongoing business of InterContinental Hotels Group PLC (IHG) following completion of the separation on 15 April 2003. GROUP SUMMARY IHG Group turnover increased by 0.4% on the same period in the prior year, with Hotels turnover increasing by 7.5% in US dollar terms but declining by 2.0% to £724m in sterling terms. Total Hotels operating profit of £79m was 27.5% down on last year. Within Soft Drinks, sales volumes and profit were both ahead of the prior year, a year in which the business saw record results. HOTELS Hotels results Three months to Six months to December March March % 2002 2001 2003 2002 2003 2002 change £m £m £m £m £m £m Turnover: Americas 142 142 130 138 272 280 (2.9)% EMEA 206 201 181 191 387 392 (1.3)% Asia Pacific 35 34 30 33 65 67 (3.0)% ____ ____ ____ ____ ____ ____ Total turnover 383 377 341 362 724 739 (2.0)% ==== ==== ==== ==== ==== ==== Operating profit: Americas 35 37 33 38 68 75 (9.3)% EMEA 20 28 12 22 32 50 (36.0)% Asia Pacific 10 6 6 8 16 14 14.3% Other (19) (11) (18) (19) (37) (30) (23.3)% ____ ____ ____ ____ ____ ____ Total operating profit 46 60 33 49 79 109 (27.5)% ==== ==== ==== ==== ==== ==== The table above shows operating results by quarter for Hotels. In summary, encouraging trends in the first quarter (three months October to December 2002) were subsequently eroded in the second quarter (three months January to March 2003). The benefits of refurbishment programmes and the decision to increase investment in sales, marketing and technology were particularly evident in the first quarter but planned cost increases and the loss of trading profit from hotels in renovation reduced profits. In the second quarter, profits were also down on last year as the global downturn in travel took effect, particularly impacting Europe, the Middle East and Africa (EMEA) and Asia Pacific. The operating mix of the business did provide some resilience to the difficult trading conditions, with the franchise and management contract income streams being less affected than the owned and leased (O&L) business. Americas Three months to Six months to Americas results December March March March % 2002 2003 2003 2002 change $m $m $m $m Turnover 221 207 428 401 6.7% ==== ==== ==== ==== Operating profit: Owned & Leased 4 - 4 4 - Managed & Upscale Franchised 9 7 16 20 (20.0)% Midscale Franchised 42 45 87 83 4.8% ____ ____ ____ ____ Total operating profit 55 52 107 107 - ==== ==== ==== ==== The table shows operating profit by quarter for the Americas region. Despite all the negative influences on the hotel industry, total operating profit at $107m for the six month period was the same as last year. Americas - RevPAR growth on previous year Three months to Six months to December March March 2002 2003 2003 InterContinental O&L 20.8% 1.8% 11.3% Holiday Inn Franchise 2.1% (2.0)% - Holiday Inn Express Franchise 3.3% (0.6)% 1.3% The Americas O&L estate is heavily weighted towards upscale properties in key markets disproportionately affected by the events of September 11 2001, hence the initial revenue per available room (RevPAR) recovery of 20.8% in the first quarter. In particular, the results from the InterContinental hotels in New York, Chicago, San Francisco and Miami reflected the investment in renovations at these properties, with RevPAR growth at these properties being ahead of their relative markets. RevPAR for the total O&L InterContinental estate was up 11.3% on last year, with occupancy 6.3 percentage points higher and average daily rates 0.4% higher. Overall O&L operating profit was $4m, the same as in 2002, primarily because RevPAR growth was occupancy driven. Operating profit for the Americas midscale franchise estate at $87m was 4.8% better than 2002. RevPAR was level with last year for Holiday Inn and 1.3% up for Holiday Inn Express. This good performance is a demonstration of the strength, scale and resilience of our midscale franchise business and its strong presence in the 'drive to' market in the US, which is not reliant on international travel. Express continues to outperform the market and Holiday Inn performance is in line with the market. Operating profit for the managed and upscale franchise business was $16m compared with $20m for the first half of 2002, reflecting in particular the difficult economic environment in Latin America. Europe, the Middle East and Africa (EMEA) Three months to Six months to EMEA results December March March March % 2002 2003 2003 2002 change £m £m £m £m Turnover 206 181 387 392 (1.3)% ==== ==== ==== ==== Operating profit: Owned & Leased 14 6 20 37 (45.9)% Managed & Franchised 6 6 12 13 (7.7)% ____ ____ ____ ____ Total operating profit 20 12 32 50 (36.0)% ____ ____ ____ ____ EMEA has been impacted significantly by the fall in international travel as a consequence of the sustained weakness of the global economy and the threat of, and subsequent war in, Iraq. All of these factors have particularly affected key gateway cities and in which EMEA's upscale properties are concentrated. Overall, EMEA operating profit for the six months was £32m, substantially lower than last year. EMEA - RevPAR growth on previous year Three months to Six months to December March March 2002 2003 2003 InterContinental O&L 12.8% (6.1)% 3.3% Crowne Plaza O&L 2.0% (1.6)% 0.3% Holiday Inn UK London 12.8% 0.3% 6.8% Holiday Inn UK Regions 3.5% 1.2% 3.7% In the O&L estate, InterContinental hotels in London, Paris, Frankfurt and Rome were all adversely impacted by the reduction in international airline travel, particularly in-bound from the United States. InterContinental RevPAR (excluding the InterContinental Le Grand Hotel Paris) for the first quarter was up by 12.8% on last year but the second quarter to March 2003 saw RevPAR decline by 6.1% against the same period in 2002. The InterContinental Le Grand Hotel Paris closed as planned in December 2001 for its major refurbishment and 234 rooms were re-opened by the end of April 2003. The hotel will be fully functional from late August 2003 with all 478 rooms open. The midscale Holiday Inn O&L estate in the UK saw RevPAR in the six months to March 2003 increase by 3.6% driven most significantly by performance in London. More encouragingly, Holiday Inn UK RevPAR growth outperformed its relative market in both London and the regions reflecting the benefits of increased revenue investment which has taken place over the last year. Whilst the region's O&L hotels saw overall RevPAR increases for the six month period, these were primarily occupancy, rather than room rate, driven. This factor, combined with the impact of specific revenue investment, which has yet to benefit operating margins, and increased fixed costs and depreciation, meant that operating profit for the O&L hotels was £20m compared with £37m for the same period last year. The EMEA managed and franchised estate was more resilient than O&L with operating profit down £1m on 2002. Asia Pacific Three months to Six months to Asia Pacific results December March March March % 2002 2003 2003 2002 change $m $m $m $m Turnover 55 48 103 96 7.3% === === === === Operating profit 17 8 25 20 25.0% === === === === The region had a strong first quarter, particularly driven by the excellent performance of the InterContinental Hong Kong, which saw RevPAR growth of nearly 60% in the first quarter. This period also included $4m of one-off income. The onset of the SARS virus, however, severely impacted key markets towards the end of the second quarter. The region is taking stringent measures to reduce the impact of SARS by implementing cost containment programmes, particularly in key properties. Trading in Australia and New Zealand has also been affected by SARS late in the period, with reduced inbound international travel, however IHG hotels have continued to outperform the market. Overall, Asia Pacific operating profit was $25m, compared with $20m for the six months to March 2002. Other The Other segment, which includes central overheads, marketing costs and goodwill amortisation less dividends received from FelCor and other income items, was $57m compared with $43m in 2002. Dividends received from FelCor were $3m compared to $6m in 2002. The first six months of 2003 saw planned investment in marketing and IT including the InterContinental 'ICONS' brand positioning, particularly in the October to December 2002 quarter. In the second quarter, central overheads and marketing were slightly below last year due to the weighting of the additional spend to the first quarter, and tight control of costs. SOFT DRINKS Three months to Six months to December March March March % 2002 2003 2003 2002 change £m £m £m £m Turnover 146 164 310 291 6.5% === === === === Operating profit 12 8 20 16 25.0% === === === === In the Soft Drinks business, both volumes and profit were ahead of the same period last year. Sales volumes were 3.6% ahead, driven primarily by the performance of Pepsi, Robinsons, Fruit Shoot and J20. Key brands performed well with Pepsi's market share growing by around one percentage point on volume growth of 3.4%, whilst Robinbsons also increased its share of the dilutable market by around one percentage point on volume growth of 1.9%. The performance of the more recently launched brands was very strong, with both Fruit Shoot and J20 showing volume growth in excess of 65% over last year. Overall, the Soft Drinks business grew its turnover by 6.5%, whilst continuing strong control over costs contributed to the growth in operating profit of 25.0%. MAJOR EXCEPTIONAL COSTS Major exceptional items before tax for Six Continents PLC for the six months to 31 March 2003 total £300m. These include the exceptional costs incurred on the demerger and bid defence (£97m), the premiums paid on the repayment of the Group's £250m 10 3/8 per cent debenture and EMTN loans (£136m) and the costs relating to the delivery of the Hotels cost reduction programme £67m ($100m). The total cost of the separation and defence costs for Six Continents PLC is approximately £129m. Of this figure £4m was charged in 2002 and approximately £28m relates to facility fees that will be amortised to profit over the facility periods. IHG's share of the non facility fee element of costs is £56m, and of the facility fees is approximately £13m. At separation, approximately £132m relating to the major exceptional items was accrued in the IHG balance sheet. ORGANISATION REVIEW IHG is proceeding with the implementation of a fundamental reorganisation in Hotels, aimed at achieving significant cost reductions and more efficient processes. As a result of this, at least $100m of annual ongoing overhead savings against the budgeted cost base for the fiscal year to 30 September 2003 will be delivered by December 2004. The reorganisation includes significant redundancies which will provide approximately 75% of the savings, the closure and consolidation of facilities (approximately 10% of the savings) with the remainder to be achieved through streamlined processes, outsourcing, and general cost control. In total, approximately 800 positions are expected to be eliminated as part of the reorganisation. TREASURY Operating cash flow for the companies in the Six Continents PLC Group that now comprise IHG in the six months to March 2003 was an inflow of £54m after net capital expenditure of £172m. This reflects tighter working capital management and capital review procedures. Capital expenditure in the period included the continuing investment in the Holiday Inn UK estate, the refurbishment of the InterContinental Le Grand Paris and spend on the construction of Holiday Inn Paris Disney. On separation, IHG net debt was approximately £1bn and this is expected to be around £1.2bn by 31 December 2003. The credit rating of IHG was confirmed at investment grade with a Standard and Poor's rating of BBB and Moody's, Baa2. IHG has confirmed ongoing banking facilities of $2.4bn, a reduction of approximately $200m from that anticipated in the Listing Particulars for IHG following a detailed review of ongoing requirements. Approximately $900m of the total falls to be refinanced within 12 months, the remainder over periods up to 5 years. With the current credit ratings, interest on the syndicated loan facility is payable at 80 basis points over LIBOR. PRO FORMA INFORMATION IHG will report to 31 December to be in line with the majority of other quoted Hotel groups and to better reflect annual contract negotiation timings. The first set of audited published results for IHG will therefore be for the 15 months ended 31 December 2003. These results will include pro forma results for the 12 months to 31 December 2003. The pro forma information set out below 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 retained profit divided by 734 million shares being the issued share capital of IHG PLC on separation. vi The pro forma Profit and Loss account and Balance Sheet exclude all exceptional items as being non-recurring. Pro forma Profit and Loss Account IHG Three months to Six months to Six months to Twelve months to March 2003 March 2003 March 2002 December 2002 £m £m £m £m Turnover 505 1,034 1,030 2,149 ____ ____ ____ ____ Operating profit: Hotels: Americas 33 68 75 176 EMEA 12 32 50 117 Asia Pacific 6 16 14 28 Other (18) (37) (30) (73) ____ ____ ____ ____ Total Hotels 33 79 109 248 Soft Drinks 8 20 16 68 Other (4) (6) (2) (9) ____ ____ ____ ____ Total operating profit 37 93 123 307 Net interest charge (12) (25) (24) (49) ____ ____ ____ ____ Profit before taxation 25 68 99 258 Tax charge (6) (17) (28) (71) Minority equity interests (3) (7) (6) (26) ____ ____ ____ ____ Retained profit for the period 16 44 65 161 ____ ____ ____ ____ Earnings per share (pence) 2.2p 6.0p 8.9p 21.9p ==== ==== ==== ==== EBITDA 87 196 210 499 ==== ==== ==== ==== Pro forma Balance Sheet IHG pro forma net operating assets can be summarised as follows: 31 March 2003 31 December 2002 £m £m Tangible assets 4,516 4,383 Intangible assets 160 157 Working capital (58) (22) Long-term liabilities (165) (160) _____ ______ Net operating assets* 4,453 4,358 _____ ______ * Net operating assets exclude net debt, tax, dividends, minority interests and reorganisation and separation provisions. Pro forma net assets at separation were approximately £2.5bn and net debt was approximately £1bn. SIX CONTINENTS PLC INTERIM FINANCIAL STATEMENTS SIX CONTINENTS PLC GROUP PROFIT AND LOSS ACCOUNT For the six months ended 31 March 2003 2003 2002 2002 6 months 6 months 12 months Before Before Before major major major exceptional exceptional exceptional items Total items Total items Total £m £m £m £m £m £m Turnover (note 3) 1,827 1,827 1,816 1,816 3,615 3,615 Costs and overheads, less other income (1,589) (1,589) (1,541) (1,541) (2,997) (3,074) _____ _____ _____ _____ _____ _____ Operating profit (note 4) 238 238 275 275 618 541 Non-operating exceptional items (note 5) - (164) (1) (1) - 53 _____ _____ _____ _____ _____ _____ Profit on ordinary activities before interest 238 74 274 274 618 594 Net interest (note 6) (22) (22) (32) (32) (60) (60) Premium on early settlement of debt (note 5) - (136) - - - - _____ _____ _____ _____ _____ _____ Profit/(loss) on ordinary activities before taxation 216 (84) 242 242 558 534 Tax on profit/(loss) on ordinary activities (note 7) (63) (3) (75) 39 (167) (52) _____ _____ _____ _____ _____ _____ Profit/(loss) on ordinary activities after taxation 153 (87) 167 281 391 482 Minority equity interests (7) (7) (6) (6) (25) (25) _____ _____ _____ _____ _____ _____ Profit/(loss) available for shareholders 146 (94) 161 275 366 457 Dividends on equity shares (56) (56) (92) (92) (305) (305) _____ _____ _____ _____ _____ _____ Retained profit/(loss) for the period 90 (150) 69 183 61 152 ==== ==== ==== ==== ==== ==== Earnings/(loss) per ordinary share (note 8): Basic - (10.9)p - 31.9p - 53.0p Diluted - (10.8)p - 31.7p - 52.7p Adjusted 16.9p - 18.7p - 42.4p - ==== ==== ==== ==== ==== ==== Dividend per ordinary share - 6.6p - 10.7p - 35.3p ==== ==== ==== ==== ==== ==== SIX CONTINENTS PLC STATEMENT OF TOTAL RECOGNISED GROUP GAINS AND LOSSES For the 6 months ended 31 March 2003 2003 2002 2002 6 months 6 months 12 months £m £m £m (Loss)/profit available for shareholders (94) 275 457 Reversal of previous revaluation gains due to impairment - - (36) Exchange differences on foreign currency denominated net assets*, borrowings and currency swaps 60 26 (36) _____ _____ _____ Other recognised gains and losses 60 26 (72) _____ _____ _____ Total recognised gains and losses for the period (34) 301 385 ==== ===== ===== SIX CONTINENTS PLC RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS For the 6 months ended 31 March 2003 2003 2002 2002 6 months 6 months 12 months £m £m £m (Loss)/profit available for shareholders (94) 275 457 Dividends (56) (92) (305) _____ _____ _____ (150) 183 152 Other recognised gains and losses 60 26 (72) Issue of ordinary shares - 3 3 Movement in goodwill* (30) (50) 98 ____ ____ ____ Net movement in shareholders' funds (120) 162 181 ==== ==== ==== Opening shareholders' funds 5,366 5,185 5,185 ____ ____ ____ Closing shareholders' funds 5,246 5,347 5,366 ==== ==== ==== * Including exchange differences on goodwill purchased prior to 30 September 1998 and eliminated against Group reserves. SIX CONTINENTS PLC GROUP CASH FLOW STATEMENT For the 6 months ended 31 March 2003 2003 2002 2002 6 months 6 months 12 months £m £m £m Operating activities (note 9) 439 318 720 _____ _____ _____ Interest paid (73) (88) (186) Costs associated with new facilities (14) - - Premium on early settlement of debt (136) - - Dividends paid to minority shareholders (14) - (13) Interest received 60 71 124 _____ _____ _____ Returns on investments and servicing of finance (177) (17) (75) _____ _____ _____ UK corporation tax paid (34) (40) (96) Overseas corporate tax paid (7) (22) (27) _____ _____ _____ Taxation (41) (62) (123) _____ _____ _____ Paid: Tangible fixed assets (249) (337) (648) Fixed asset investments (6) (8) (14) Received: Tangible fixed assets 21 43 134 Fixed asset investments 1 1 15 _____ _____ _____ Capital expenditure and financial investment (233) (301) (513) _____ _____ _____ Acquisitions - - (24) Disposals - - 9 Separation costs (20) - - _____ _____ _____ Acquisitions and disposals (20) - (15) _____ _____ _____ Equity dividends (212) (206) (299) _____ _____ _____ Net cash flow (note 9) (244) (268) (305) Management of liquid resources and financing 351 356 295 _____ _____ _____ Movement in cash and overdrafts 107 88 (10) ===== ===== ===== SIX CONTINENTS PLC GROUP BALANCE SHEET 31 March 2003 2003 2002 2002 31 March 31 March 30 Sept £m £m £m Intangible assets 172 178 173 Tangible assets 7,801 7,773 7,641 Investments 245 278 249 _____ _____ _____ Fixed assets 8,218 8,229 8,063 _____ _____ _____ Stocks 91 89 91 Debtors 593 586 623 Investments 29 163 218 Cash at bank and in hand 137 128 84 _____ _____ _____ Current assets 850 966 1,016 Creditors - amounts falling due within one year: Overdrafts (17) (53) (66) Other borrowings (37) (614) (782) Other creditors (1,281) (1,332) (1,425) _____ _____ _____ Net current liabilities (485) (1,033) (1,257) _____ _____ _____ Total assets less current liabilities 7,733 7,196 6,806 Creditors - amounts falling due after one year: Borrowings (1,608) (959) (631) Other creditors (147) (166) (133) Provisions for liabilities and charges: Deferred taxation (493) (506) (495) Other provisions (86) (87) (32) Minority interests (153) (131) (149) _____ _____ _____ Net assets (note 13) 5,246 5,347 5,366 ==== ==== ===== Capital and reserves Equity share capital 243 242 243 Share premium account 802 802 802 Revaluation reserve 1,032 1,022 1,020 Capital redemption reserve 853 853 853 Profit and loss account 2,316 2,428 2,448 _____ _____ _____ Equity shareholders' funds 5,246 5,347 5,366 ===== ===== ===== NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Basis of preparation The interim financial statements, which are unaudited, comply with relevant accounting standards under UK GAAP and should be read in conjunction with the Annual Report and Financial Statements 2002. They have been prepared using the accounting policies set out in that report on a consistent basis with that applied in 2002. The financial information for the year ended 30 September 2002 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. The interim financial statements are for the Six Continents PLC Group for the period ended 31 March 2003. 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 (MAB) comprising the Retail and Standard Commercial Property Developments (SCPD) businesses. As a result of the separation, Six Continents PLC, the company, became part of IHG and consequently, in these financial statements, the results of MAB are shown as discontinued operations. The periods ended 31 March 2003 and 31 March 2002 are regarded as distinct financial periods for accounting purposes; income and costs are recognised in the profit and loss account as they arise; tax is charged on the basis of the expected effective tax rate for the full year for IHG and the actual tax charge of MAB for the period up to 12 April 2003. 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 is £1= $1.58 (2002 6 months, £1=$1.44; 12 months, £1=$1.48). In the case of the euro, the translation rate is £1 = € 1.53 (2002 6 months, £1 = € 1.62; 12 months, £1 = € 1.60). 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=$1.58 (2002 31 March, £1=$1.42; 30 September, £1=$1.56). In the case of the euro, the translation rate is £1 = € 1.45 (2002 31 March, £1 = € 1.63; 30 September, £1 = € 1.59). 3. Turnover 2003 2002 2002 6 months* 6 months* 12 months* $m £m $m £m $m £m Hotels** Americas 428 272 401 280 862 584 EMEA 609 387 563 392 1,209 819 Asia Pacific 103 65 96 67 191 129 ____ ____ ____ ____ ____ ____ 1,140 724 1,060 739 2,262 1,532 ____ ____ ____ Soft Drinks 310 291 602 ____ ____ ____ InterContinental Hotels Group PLC*** 1,034 1,030 2,134 ____ ____ ____ Retail Pubs & Bars 466 465 866 Restaurants 323 321 609 ____ ____ ____ 789 786 1,475 SCPD 4 - 6 ____ ____ ____ Mitchells & Butlers plc*** 793 786 1,481 ____ ____ ____ 1,827 1,816 3,615 ==== ==== ==== * Other than for the Retail and Soft Drinks divisions which reflect the 28 weeks ended 12 April (2002 13 April) or the 52 weeks ended 28 September, as appropriate. ** The dollar amounts shown are translated at the weighted average rate of exchange (see note 2). *** InterContinental Hotels Group PLC relates to continuing operations. Mitchells & Butlers plc relates to discontinued operations. 4. Operating profit 2003 2002 2002 6 months* 6 months* 12 months* $m £m $m £m $m £m Hotels** Americas 107 68 107 75 264 178 EMEA 50 32 72 50 184 125 Asia Pacific 25 16 20 14 36 24 Other (57) (37) (43) (30) (97) (65) ____ ____ ____ ____ ____ ____ 125 79 156 109 387 262 ____ ____ ____ Soft Drinks 20 16 63 Other activities 2 4 4 ____ ____ ____ InterContinental Hotels Group PLC*** 101 129 329 ____ ____ ____ Retail Pubs & Bars 91 101 190 Restaurants 45 45 98 ____ ____ ____ 136 146 288 SCPD 1 - 1 ____ ____ ____ Mitchells & Butlers plc*** 137 146 289 ____ ____ ____ Operating profit before operating exceptional items 238 275 618 Hotels operating exceptional items (note 5) - - (77) ____ ____ ____ Operating profit 238 275 541 ==== ==== ==== * Other than for the Retail and Soft Drinks divisions which reflect the 28 weeks ended 12 April (2002 13 April) or the 52 weeks ended 28 September, as appropriate. ** The dollar amounts shown are translated at the weighted average rate of exchange (see note 2). *** InterContinental Hotels Group PLC relates to continuing operations. Mitchells & Butlers plc relates to discontinued operations. 5. Exceptional items 2003 2002 2002 6 months 6 months 12 months £m £m £m Operating exceptional item: Continuing operations - Hotels impairment charge - - (77) * (note a) Non-operating exceptional items: Continuing operations: Cost of fundamental reorganisation* (note b) (67) - - Separation costs* (note c) (56) - (4) (Loss)/profit on disposal of fixed assets - (1) 2 ____ ____ ____ (123) (1) (2) Discontinued operations:*** Separation costs* (note c) (41) - - Loss on disposal of fixed assets - - (2) Profit on disposal of Bass Brewers* (note d) - - 57 ____ ____ ____ (41) - 55 ____ ____ ____ Total non-operating exceptional items (164) (1) 53 ____ ____ ____ Total exceptional items before interest and (164) (1) (24) taxation Premium on early settlement of debt* (note e) (136) - - Tax credit/(charge) on above items** 60 - (9) Exceptional tax credit* (note f) - 114 114 ____ ____ ____ Total exceptional items after interest and (240) 113 81 taxation ==== ==== ==== a. Tangible fixed assets were written down in 2002 by £113m following an impairment review of the hotel estate. £77m was charged above as an operating exceptional item and £36m reversed previous revaluation gains. b. Relates to a fundamental reorganisation of the Hotels business. The cost includes redundancy entitlements, property exit costs and other implementation costs. c. On 15 April 2003, the separation of the Six Continents Group was completed. Costs of the separation and bid defence total £101m. £4m of costs were incurred in the year to 30 September 2002, the remainder in the six months to 31 March 2003. d. Bass Brewers was disposed of in 2000. The profit in 2002 comprised £9m received in respect of the finalisation of completion account adjustments, together with the release of disposal provisions no longer required of £48m. e. Relates to the premiums paid on the repayment of the Group's £250m 10 3/8 per cent debenture and EMTN loans. f. Represents the release of over provisions for tax in respect of prior years. * Major exceptional items for the purpose of calculating adjusted earnings per ordinary share (see note 8). ** Major exceptional items, except for tax charges of £10m in September 2002, for the purpose of calculating adjusted earnings per ordinary share (see note 8). *** Discontinued operations relate to Mitchells & Butlers plc and Bass Brewers, the latter having been sold in August 2000. 6. Net interest 2003 2002 2002 6 months 6 months 12 months £m £m £m Interest receivable 53 61 116 Interest payable and similar charges (75) (93) (176) ____ ____ ____ (22) (32) (60) ==== ==== ==== 7. Tax on profit/(loss) on ordinary activities 2003 2003 2002 2002 6 months 6 months 6 months 12 months Before major exceptional items Total £m £m £m £m Current tax: UK corporation tax 34 6 (81) (23) Foreign tax 8 5 26 64 ____ ____ ____ ____ 42 11 (55) 41 Deferred tax 21 (8) 16 11 ____ ____ ____ ____ 63 3 (39) 52 ==== ==== ==== ==== Tax has been calculated using an estimated annual effective rate of 25% in respect of the InterContinental Hotels Group PLC together with the actual tax charge of Mitchells & Butlers plc for the period up to 12 April 2003 resulting in a combined effective rate of 29% (2002 6 months, 31%; 12 months, 30%) on profit on ordinary activities before taxation and major exceptional items. Tax relating to non-operating exceptional items (see note 5) is a credit of £60m, all of which relates to major items. In respect of 2002, tax relating to the non-operating exceptional items (see note 5) was a charge of £nil and £9m for the periods to 31 March and 30 September respectively, of which £nil and £1m credit, respectively, related to major items. The major operating exceptional item (see note 5) attracted no tax charge. The exceptional tax credit of £114m (see note 5) was included in UK corporation tax. 8. Earnings per share Basic earnings/(loss) per ordinary share are calculated by dividing the earnings/(loss) available for shareholders of £94m loss (2002 6 months, £275m profit; 12 months, £457m profit), by 863m (2002 6 months, 862m; 12 months, 863m), being the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period. Diluted earnings/(loss) per ordinary share are calculated by adjusting basic earnings/(loss) per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the period. The resulting weighted average number of ordinary shares is 867m (2002 6 months, 868m; 12 months, 867m). Adjusted earnings per ordinary share are calculated as follows: 2003 2002 2002 6 months 6 months 12 months pence per pence per pence per ordinary ordinary share ordinary share share Basic (loss)/earnings (10.9) 31.9 53.0 Major exceptional items and tax thereon (notes 5, 7) 27.8 (13.2) (10.6) ____ ____ ____ Adjusted earnings 16.9 18.7 42.4 ==== ==== ==== Adjusted earnings per ordinary share are disclosed in order to show performance undistorted by abnormal items. 9. Net cash flow 2003 2002 2002 6 months 6 months 12 months £m £m £m Operating profit before major exceptional items 238 275 618 Depreciation and amortisation 156 134 271 Other non-cash items - 3 (4) ____ ____ ____ Earnings before interest, taxation, depreciation and amortisation and major exceptional items 394 412 885 Decrease/(increase) in stocks - 2 (1) Decrease/(increase) in debtors 35 (37) (92) Increase/(decrease) in creditors 16 (29) (37) Provisions expended (3) (19) (18) ____ ____ ____ Operating activities before expenditure relating to major exceptional items 442 329 737 Cost of fundamental reorganisation (3) - - Major operating exceptional expenditure - (11) (17) ____ ____ ____ Operating activities 439 318 720 Net capital expenditure (note 10) (233) (301) (513) ____ ____ ____ Operating cash flow (note 11) 206 17 207 Net interest paid (13) (17) (62) Dividends paid (226) (206) (312) Tax paid (41) (62) (123) ____ ____ ____ Normal cash flow (74) (268) (290) Acquisitions - - (24) Disposals - - 9 Premium on early settlement of debt (136) - - Separation costs (20) - - Costs associated with new facilities (14) - - ____ ____ ____ Net cash flow (244) (268) (305) ==== ==== ==== 10. Net capital expenditure 2003 2002 2002 6 months 6 months 12 months £m £m £m Hotels 147 161 259 Soft Drinks 25 15 31 Other activities - - (3) _____ _____ ____ InterContinental Hotels Group PLC* 172 176 287 _____ _____ ____ Retail 61 127 227 SCPD - (2) (1) ____ ____ ____ Mitchells & Butlers plc* 61 125 226 ____ ____ ____ 233 301 513 ==== ==== ==== * InterContinental Hotels Group PLC relates to continuing operations. Mitchells & Butlers plc relates to discontinued operations. 11. Operating cash flow 2003 2002 2002 6 months 6 months 12 months £m £m £m Hotels 8 (61) 60 Soft Drinks 6 8 77 Other activities 40 (2) (75) ____ ____ ____ InterContinental Hotels Group PLC* 54 (55) 62 ____ ____ ____ Retail 148 74 144 SCPD 4 (2) 1 ____ ____ ____ Mitchells and Butlers plc* 152 72 145 ____ ____ ____ 206 17 207 ==== ==== ==== * InterContinental Hotels Group PLC relates to continuing operations. Mitchells & Butlers plc relates to discontinued operations. 12. Net debt 2003 2002 2002 6 months 6 months 12 months £m £m £m Opening net debt (1,177) (1,001) (1,001) Net cash flow (note 9) (244) (268) (305) Ordinary shares issued - 3 3 Exchange and other adjustments (75) (69) 126 ____ ____ _____ Closing net debt (1,496) (1,335) (1,177) ==== ==== ===== Comprising: Cash at bank and in hand 137 128 84 Overdrafts (17) (53) (66) Current asset investments 29 163 218 Other borrowings: Due within one year (37) (614) (782) Due after one year (1,608) (959) (631) ____ ____ ____ (1,496) (1,335) (1,177) ==== ==== ==== 13. Net assets 2003 2002 2002 31 March 31 March 30 Sept £m £m £m Hotels 4,154 4,155 3,990 Soft Drinks 259 259 246 Other activities 40 10 125 ____ ____ ____ InterContinental Hotels Group PLC* 4,453 4,424 4,361 ____ ____ ____ Retail 3,453 3,399 3,467 SCPD 20 24 26 ____ ____ ____ Mitchells & Butlers plc* 3,473 3,423 3,493 ____ ____ ____ 7,926 7,847 7,854 Net debt (1,496) (1,335) (1,177) Other net non-operating liabilities (1,184) (1,165) (1,311) ____ ____ ____ 5,246 5,347 5,366 ==== ==== ==== * InterContinental Hotels Group PLC relates to continuing operations. Mitchells & Butlers plc relates to discontinued operations. 14. Contingent liabilities At 31 March 2003, the Group had contingent liabilities of £13m (2002 31 March, £64m; 30 September, £16m), mainly comprising guarantees given in the ordinary course of business. 15. US GAAP information Generally accepted accounting practice in the United States (US GAAP) differs in certain respects from its counterpart in the United Kingdom (UK GAAP). Details of the significant differences as they apply to the Group are set out in the Annual Report and Financial Statements 2002 and Form 20-F 2002. The Group has applied FAS 142 'Goodwill and other Intangible Assets' from 1 October 2002. The non-amortisation of goodwill has increased net income by £39m. The impairment review is currently underway. If any impairment arises from this review it will be reflected as a change in the US GAAP opening balance sheet. FAS 146 'Accounting for Costs Associated with Exit or Disposal Activities' was applied in the period with a consequent increase of £13m on net income under US GAAP at 31 March 2003. Under US GAAP, the Group's net income per American Depositary Share and shareholders' equity, in dollars translated at the rates of exchange shown in note 2, would be: 2003 2002 2002 6 months 6 months* 12 months $m $m $m Net (loss)/income (248) 266 670 ==== ==== ==== Net (loss)/income per American Depositary Share $ $ $ Basic (0.29) 0.31 0.78 Diluted (0.29) 0.31 0.77 ==== ==== ==== Each American Depositary Share represents one ordinary share. 2003 2002 2002 31 March 31 March* 30 Sept $m $m $m Shareholders' equity 9,038 9,008 9,413 ==== ==== ==== * Restated to revise the calculations of the US GAAP adjustments for tangible fixed assets and the change in fair value of derivatives. 16. Auditors' review The auditors, Ernst & Young LLP, have reported to the directors on their review of these financial statements in accordance with the guidance issued by the Auditing Practices Board. Their unqualified report will be included in the Interim Financial Statements 2003 which will be sent to shareholders. ____________________ This announcement of the interim results for the 6 months ended 31 March 2003 contains certain forward-looking statements as defined under US legislation (Section 21E of the Securities Exchange Act of 1934). Such statements include, but are not limited to, statements made in the Financial Highlights and the Chief Executive's Operating Review. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe', or other words of similar meaning. 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, including, but not limited to: events that impact domestic or international travel; levels of consumer and business spending in major economies where Six Continents does business; changes in consumer tastes and preferences; levels of marketing and promotional expenditure by Six Continents and its competitors; significant fluctuations in exchange, interest and tax rates; the effects of future business combinations, acquisitions or dispositions; legal and regulatory developments, including European Union employment legislation and regulation in the leisure retailing industry in countries in which Six Continents operates; the impact of the European Economic and Monetary Union; the ability of Six Continents to maintain appropriate levels of insurance; and changes in the cost and availability of raw materials, key personnel and changes in supplier dynamics. Other factors that could affect the business and the financial results are described in Item 3 Key Information - Risk Factors in the Six Continents Form 20-F for the financial year ended 30 September 2002 filed with the United States Securities and Exchange Commission. INVESTOR INFORMATION Dividends The Directors of InterContinental Hotels Group PLC intend to recommend that an interim dividend and a final dividend for 2003, together totalling 13.5 pence per share, be declared. The interim dividend is expected to be payable in October 2003 and the final dividend in June 2004. The final dividend is expected to account for around 70 per cent of the total annual dividend per share. It is intended that the interim dividend to ADR holders will also be paid in October 2003 and the final dividend in June 2004. The Company will announce further details regarding payment of the interim dividend in due course. 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 to build cover over time. This information is provided by RNS The company news service from the London Stock Exchange

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