InterContinental Hotels Group PLC InterContinental Hotels Group PLC - - PowerPoint PPT Presentation

1

InterContinental Hotels Group PLC InterContinental Hotels Group PLC

Results for the 6 months to 31 March 2003 Results for the 6 months to 31 March 2003

2

Richard North Richard North

Chief Executive Officer Chief Executive Officer

3

Overview Overview

Extremely difficult trading environment Our brands are performing well Strong management actions will reposition the

company and protect profits

• organisation redesign
• right people in the right jobs
• reducing the cost base
• asset review and disposals
• capital expenditure reduction

4

Richard Solomons Richard Solomons

Finance Director Finance Director

5

Change in Year End Change in Year End

New 31 December year end

• better reflects annual corporate negotiations timing
• brings us in line with other quoted hotel groups

Quarterly reporting for calendar 2003 Supplementary information for calendar 2002

6

Results Results 6 months to 31 March 2003 6 months to 31 March 2003

Operating Profit £ £m m Hotels Hotels 79 79 Down Down 27.5% 27.5% Soft Drinks Soft Drinks 20 20 Up Up 25.0% 25.0%

7

Results Results 6 months to 31 March 2003 6 months to 31 March 2003

Pro forma Group Results Pro forma Group Results EBITDA EBITDA Down Down 6.7% 6.7% Profit Before Tax Profit Before Tax Down Down 31.3% 31.3% Earnings per share Earnings per share Down Down 32.6% 32.6%

8

Operating Profit Operating Profit 3 months to 31 December 2002 3 months to 31 December 2002

Americas

• Owned & Leased

4 3 33.3

• Managed & Upscale Franchised

9 11 (18.2)

• Midscale Franchised

42 40 5.0 Total Americas 55 54 1.9 EMEA

• Owned & Leased

22 33 (33.3)

• Managed & Franchised

9 8 12.5 Total EMEA 31 41 (24.4) Asia Pacific 17 9 88.9 FelCor & Other 4 5 (20.0) Central Overheads and Marketing (32) (19) (68.4) Goodwill Amortisation (3) (3)

• Total

72 87 (17.2)

3 3 mths mths to to 31 Dec 02 3 3 mths mths to to 31 Dec 01 31 Dec 02 31 Dec 01 % %

$m $m

9

Operating Profit Operating Profit 3 months to 31 March 2003 3 months to 31 March 2003

Americas

• Owned & Leased
• 1
• Managed & Upscale Franchised

7 9 (22.2)

• Midscale Franchised

45 43 4.7 Total Americas 52 53 (1.9) EMEA

• Owned & Leased

9 20 (55.0)

• Managed & Franchised

10 11 (9.1) Total EMEA 19 31 (38.7) Asia Pacific 8 11 (27.3) FelCor & Other 1 3 (66.7) Central Overheads and Marketing (24) (26) 7.7 Goodwill Amortisation (3) (3)

• Total

53 69 (23.2)

3 3 mths mths to to 31 Mar 03 3 3 mths mths to to 31 Mar 02 % %

$m $m

31 Mar 03 31 Mar 02

10

Operating Profit Operating Profit 6 months to 31 March 2003 6 months to 31 March 2003

Americas Americas

• Owned & Leased

Owned & Leased 4 4 4 4

• Managed & Upscale Franchised

Managed & Upscale Franchised 16 16 20 20 (20.0) (20.0)

• Midscale Franchised

Midscale Franchised 87 87 83 83 4.8 4.8 Total Americas Total Americas 107 107 107 107

• EMEA

EMEA

• Owned & Leased

Owned & Leased 31 31 53 53 (41.5) (41.5)

• Managed & Franchised

Managed & Franchised 19 19 19 19

• Total EMEA

Total EMEA 50 50 72 72 (30.6) (30.6) Asia Pacific Asia Pacific 25 25 20 20 25.0 25.0 FelCor FelCor & Other & Other 5 5 8 8 (37.5) (37.5) Central Overheads and Marketing Central Overheads and Marketing (56) (56) (45) (45) ( 24.4) ( 24.4) Amortisation Amortisation (6) (6) (6) (6)

• Total

Total 125 125 156 156 (19.9) (19.9) Total Total £ £m m 79 79 109 109 (27.5) (27.5) EBITDA EBITDA £ £m m 156 156 174 174 (10.3) (10.3)

6 6 mths mths to to 31 Mar 02 6 6 mths mths to to 31 Mar 03 % %

$m $m

31 Mar 02 31 Mar 03

11

Operating Profit Performance Operating Profit Performance

Hotels revenue up by 7.5% Hotels operating profit down $31m Key factors adversely affecting profit flowthrough:

• Occupancy driven RevPAR
• InterContinental marketing spend
• Depreciation
• InterContinental Le Grand Hotel Paris
• Insurance
• FelCor

12

Americas Owned & Leased Americas Owned & Leased RevPAR Outperformance RevPAR Outperformance

(10.0%) 10.0% 30.0% Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03

RevPar % growth

InterContinental O&L Upper Upscale Segment

Source; IHG and Smith Travel data

13

Americas Owned & Leased Americas Owned & Leased

3 3 mths mths to to 3 3 mths mths to to 6 6 mths mths to to 31 Dec 02 31 Dec 02 31 Mar 03 31 Mar 03 31 Mar 03 31 Mar 03

RevPAR Growth RevPAR Growth

• InterContinental

InterContinental 20.8% 20.8% 1.8% 1.8% 11.3% 11.3%

Operating profit flat at $4m Operating profit flat at $4m

14

Americas Managed & Upscale Americas Managed & Upscale Franchise Franchise

3 3 mths mths to to 3 3 mths mths to to 6 6 mths mths to to 31 Dec 02 31 Dec 02 31 Mar 03 31 Mar 03 31 Mar 03 31 Mar 03

RevPAR Growth RevPAR Growth

• InterContinental

InterContinental Managed Managed (11.5)% (11.5)% (24.1)% (24.1)% (18.1)% (18.1)%

• Crowne Plaza Managed

Crowne Plaza Managed 5.6% 5.6% (3.0)% (3.0)% 1.4% 1.4%

• Crowne Plaza Franchised

Crowne Plaza Franchised 4.3% 4.3% (1.3)% (1.3)% 1.3% 1.3%

Operating profit down 20% at $16m Operating profit down 20% at $16m

15

Americas Americas Midscale Midscale Franchise Franchise RevPAR Outperformance RevPAR Outperformance

(10.0%) 0.0% 10.0% Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03

RevPAR % growth

Express Brands Midscale without F&B Segment Source; IHG and Smith Travel data

16

Americas Americas Midscale Midscale Franchise Franchise RevPAR RevPAR Performance Performance

(10.0%) 0.0% 10.0% Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03

RevPAR % growth

Holiday Inn Brands Midscale with F&B Segment

Source; IHG and Smith Travel data

17

Americas Americas Midscale Midscale Franchise Franchise

3 3 mths mths to to 3 3 mths mths to to 6 6 mths mths to to 31 Dec 02 31 Dec 02 31 Mar 03 31 Mar 03 31 Mar 03 31 Mar 03

RevPAR Growth RevPAR Growth

• Holiday Inn

Holiday Inn 2.1% 2.1% (2.0)% (2.0)%

• Express

Express 3.3% 3.3% (0.6)% (0.6)% 1.3% 1.3%

Operating profit up 4.8% at $87m Operating profit up 4.8% at $87m

Holiday Inn Holiday Inn Express Express

Increase in royalty rate Increase in royalty rate 0.05% pts 0.05% pts 0.01% pts 0.01% pts Change in number of Change in number of (1.7)% (1.7)% 7.4% 7.4% rooms available rooms available

18

EMEA EMEA Operating Profit Operating Profit

6 6 mths mths to to 31 Mar 03 6 6 mths mths to to 31 Mar 02 % % 31 Mar 02

US Dollar Analysis US Dollar Analysis $m $m $m $m Total Operating Profit Total Operating Profit 50 50 72 72 (30.6) (30.6) Sterling Analysis Sterling Analysis £ £m m £ £m m Owned & Leased Owned & Leased 20 20 37 37 (45.9) (45.9) Managed & Franchised Managed & Franchised 12 12 13 13 (7.7) (7.7) Total Operating Profit Total Operating Profit 32 32 50 50 (36.0)

31 Mar 03

(36.0)

19

EMEA Owned & Leased EMEA Owned & Leased

3 3 mths mths to to 3 3 mths mths to to 6 6 mths mths to to 31 Dec 02 31 Dec 02 31 Mar 03 31 Mar 03 31 Mar 31 Mar 03 03

RevPAR Growth RevPAR Growth

• InterContinental

InterContinental 12.8% 12.8% (6.1)% (6.1)% 3.3% 3.3%

• Crowne

Crowne Plaza Plaza 2.0% 2.0% (1.6)% (1.6)% 0.3% 0.3%

• Holiday Inn

Holiday Inn 4.9% 4.9% (1.0)% (1.0)% 2.0% 2.0%

Operating profit down 45.9% at £20m Operating profit down 45.9% at £20m

20

EMEA Holiday Inn UK EMEA Holiday Inn UK RevPAR Outperformance RevPAR Outperformance

(20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03

% growth

Regions Hotel Benchmark Segment London Hotel Benchmark Segment Regions Holiday Inn London Holiday Inn Source; IHG and Smith Travel data

21

EMEA Managed & Franchised EMEA Managed & Franchised

3 3 mths mths to to 3 3 mths mths to to 6 6 mths mths to to 31 Dec 02 31 Dec 02 31 Mar 03 31 Mar 03 31 Mar 03 31 Mar 03

RevPAR Growth RevPAR Growth

• InterContinental Managed

InterContinental Managed 33.3% 33.3% (4.0)% (4.0)% 11.8% 11.8%

• Holiday Inn Franchised

Holiday Inn Franchised 6.7% 6.7% 1.1% 1.1% 4.0% 4.0%

• Express Franchised

Express Franchised 6.3% 6.3% (2.2)% (2.2)% 2.0% 2.0%

Operating profit down 7.7% to £12m Operating profit down 7.7% to £12m

22

Asia Pacific Asia Pacific

3 3 mths mths to to 3 3 mths mths to to 6 6 mths mths to to 31 Dec 02 31 Dec 02 31 Mar 03 31 Mar 03 31 Mar 03 31 Mar 03

RevPAR Growth RevPAR Growth

• IC Hong Kong

IC Hong Kong 59.6% 59.6% 2.7% 2.7% 30.0% 30.0%

• Managed

Managed 9.7% 9.7% 3.4% 3.4% 6.7% 6.7%

Operating profit up 25% to $25m Operating profit up 25% to $25m

23

Operating Profit Operating Profit 6 months to 31 March 2003 6 months to 31 March 2003

Americas Americas

• Owned & Leased

Owned & Leased 4 4 4 4

• Managed & Upscale Franchised

Managed & Upscale Franchised 16 16 20 20 (20.0) (20.0)

• Midscale Franchised

Midscale Franchised 87 87 83 83 4.8 4.8 Total Americas Total Americas 107 107 107 107

• EMEA

EMEA

• Owned & Leased

Owned & Leased 31 31 53 53 (41.5) (41.5)

• Managed & Franchised

Managed & Franchised 19 19 19 19

• Total EMEA

Total EMEA 50 50 72 72 (30.6) (30.6) Asia Pacific Asia Pacific 25 25 20 20 25.0 25.0 FelCor FelCor & Other & Other 5 5 8 8 (37.5) (37.5) Central Overheads & Marketing Central Overheads & Marketing (56) (56) (45) (45) ( 24.4) ( 24.4) Goodwill Amortisation Goodwill Amortisation (6) (6) (6) (6)

• Total

Total 125 125 156 156 (19.9) (19.9) Total Total £ £m m 79 79 109 109 (27.5) (27.5)

6 6 mths mths to to 31 Mar 02 31 Mar 02 $m $m 6 6 mths mths to to 31 Mar 03 31 Mar 03 $m $m % %

24

Britvic Britvic Soft Drinks Soft Drinks Results Results

• Volume up 3.6%

Volume up 3.6%

• Market share growth

Market share growth

• Turnover up 6.5% to

Turnover up 6.5% to £ £310m 310m

• Improved profit margins

Improved profit margins Operating profit up 25% to £20m Operating profit up 25% to £20m

25

Pro forma Profit & Loss Pro forma Profit & Loss Account Account

EBITDA EBITDA 196 196 210 210 (6.7) (6.7) Operating profit Operating profit 93 93 123 123 (24.4) (24.4) Interest Interest (25) (25) (24) (24) (4.2) (4.2) Profit before tax Profit before tax 68 68 99 99 (31.3) (31.3) Tax Tax (17) (17) (28) (28) 39.3 39.3 Minority interests Minority interests (7) (7) (6) (6) (16.7) (16.7) Retained Profit Retained Profit 44 44 65 65 (32.3) (32.3) Earnings per share (pence) Earnings per share (pence) 6.0 6.0 8.9 8.9 (32.6) (32.6)

6 6 mths mths to to 31 Mar 03 31 Mar 03 6 6 mths mths to to 31 Mar 02 31 Mar 02 Growth Growth % %

£m £m

26

Pro forma Cash Flow Pro forma Cash Flow

6 6 mths mths to to 31 Mar 03 6 6 mths mths to to 31 Mar 02

£m £m

31 Mar 03 31 Mar 02

Operating profit Operating profit 93 93 123 123 Depreciation / Amortisation Depreciation / Amortisation 103 103 87 87 Working capital / Other Working capital / Other 24 24 (86) (86) Capital expenditure (net) Capital expenditure (net) (172) (172) (176) (176) Operating cash flow Operating cash flow 48 48 (52) (52)

27

Pro forma Balance Sheet Pro forma Balance Sheet

£ £m m 31 31 Mar 03 Mar 03 31 Dec 02 31 Dec 02

Tangible assets Tangible assets 4,516 4,516 4,383 4,383 Intangible assets Intangible assets 160 160 157 157 Working capital Working capital (58) (58) (22) (22) Long Long-

• term liabilities

term liabilities (165) (165) (160) (160) Net operating assets Net operating assets 4,453 4,453 4,358 4,358

• Net debt at separation approximately

Net debt at separation approximately £ £1bn 1bn

• Net assets at separation approximately

Net assets at separation approximately £ £2.5bn 2.5bn

28

Dividends Dividends

• 6.6p paid by Six Continents PLC on 9 April for period

6.6p paid by Six Continents PLC on 9 April for period prior to separation prior to separation

• InterContinental Hotels Group PLC expects to declare

InterContinental Hotels Group PLC expects to declare dividends of 13.5p for 2003 dividends of 13.5p for 2003

• interim payable October 2003
• final payable June 2004
• Final dividend expected to account for 70%

Final dividend expected to account for 70%

• Targeting real increases in dividend

Targeting real increases in dividend

• Rebuild cover over time

Rebuild cover over time

29

Richard North

Chief Executive Officer

30

Driving Returns Driving Returns Driving revenue Driving revenue Improved Improved ROCE and ROCE and Free Cash Free Cash Flow Flow Reduced overhead costs Reduced overhead costs Lower capital intensity Lower capital intensity

31

Driving Revenue Driving Revenue In the 6 months to March 2003: In the 6 months to March 2003:

• RevPAR premium against competitive segments

RevPAR premium against competitive segments

• 1.7m new Priority Club members

1.7m new Priority Club members

• System delivery up from 25.7% to 27.3%

System delivery up from 25.7% to 27.3%

• New leadership in EMEA

New leadership in EMEA

32

Reduced Overhead Costs Reduced Overhead Costs Organisation Redesign Organisation Redesign

$m $m Labour related savings by Geographic Region Labour related savings by Geographic Region Americas Americas 29 29 EMEA EMEA 27 27 Asia Pacific Asia Pacific 5 5 Corporate Corporate 14 14 Facilities Facilities NAS NAS 9 9 Satellite Offices Satellite Offices 3 3 IT Efficiencies IT Efficiencies 8 8 Other Other 5 5 100 100

33

Reduced Overhead Costs Reduced Overhead Costs Organisation Redesign Organisation Redesign

Savings Savings $m $m IT IT 24 24 Finance Finance 14 14 HR HR 13 13 Facilities Facilities 12 12 Operations, sales and marketing Operations, sales and marketing 19 19 Development Development 8 8 Legal and other Legal and other 10 10 100 100

34

Reduced Overhead Costs Reduced Overhead Costs Organisation Redesign Organisation Redesign

• 381 positions eliminated to date

381 positions eliminated to date

• Annualised saving of $39m achieved

Annualised saving of $39m achieved

• Target of $75m annualised savings by year end

Target of $75m annualised savings by year end

• Next steps

Next steps

• EMEA consultation concludes end May
• London HQ to be closed by 30th September
• On-going phased reductions in regions thereafter

35

Reduced Overhead Costs Reduced Overhead Costs Organisation Redesign Organisation Redesign One-off costs to achieve at least $100m

• verhead savings

50 100 Facilities Facilities Severance Severance Other Other

$m $m

36

Lower Capital Intensity Lower Capital Intensity Capital Expenditure Capital Expenditure Hotels : Capital Expenditure

50 100 150 200 250 300 350 400 450 YE Sep 2003 Original YE Sep 2003 Revised YE Dec 2003

190 190 180 180 75 75 210 210 120 120 120 120 120 120 90 90 120 120 450 450 400 400 375 375

£m £m

Expansion Renovation Maintenance

37

Britvic Britvic Soft Drinks Soft Drinks

Strong portfolio brands GB bottler of Pepsi brands Strong cash generator Currently Pepsi barrier to sale for value

38

Current Trading Current Trading RevPAR RevPAR 2003 2003 vs vs 2002 2002

Jan Feb Mar Apr Mar/Apr

Americas Americas

InterContinental (Owned & Leased) 0.1% 1.4% 3.7% (1.0)% 1.2% Crowne Plaza (3.3)% (2.4)% (1.9)% (13.7)% (7.8)% Holiday Inn (0.6)% (3.2)% (2.4)% (8.1)% (5.2)% Holiday Inn Express (1.2)% (1.4)% (0.2)% (2.7)% (1.4)%

EMEA EMEA

InterContinental (Owned & Leased) InterContinental (Owned & Leased) (2.5)% (2.5)% (5.7)% (5.7)% (9.6)% (9.6)% (32.8)% (32.8)% (21.7)% (21.7)% Holiday Inn UK Regions Holiday Inn UK Regions 2.8% 2.8% (1.1)% (1.1)% (0.1)% (0.1)% (3.5)% (3.5)% (1.9)% (1.9)% Holiday Inn UK London Holiday Inn UK London 14.6% 14.6% (3.3)% (3.3)% (9.2)% (9.2)% (23.9)% (23.9)% (16.8)% (16.8)%

39

Summary Summary Cost reduction on target Cost reduction on target Asset review underway Asset review underway Revenue pressure Revenue pressure