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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