November 08, 2011 // Franchising.com // Continued outperformance by IHG's brands delivers 33% operating profit growth
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1All figures are before exceptional items unless otherwise noted. See appendix 4 and 5 for analysis of financial headlines
2CER = constant exchange rates
3excluding $6m of significant liquidated damages receipts in 2011
4After exceptional items
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
"In the third quarter we delivered a strong set of results, with global revenue per available room (RevPAR) up 6.4%, including 2.8% rate growth. This was led by 10.8% RevPAR growth in Greater China and 8.0% in the US where we continued to outperform the industry driven by sustained results from the Holiday Inn relaunch. We are now rolling out a multi-year programme to reposition and drive stronger performance from our Crowne Plaza brand.
"We are focused on supporting our owners by driving demand to their hotels through the most profitable channels. Our innovations in this area continue to lead the industry and we recently introduced our Best Price Guarantee, designed to drive more guests to book through our direct websites.
"We have established firm foundations for high quality growth which we will deliver through driving market share, growing margins and investing behind the growth of our brands and our people. The economic environment continues to be uncertain, but we remain confident in our future due to our resilient business model, robust balance sheet and powerful brand portfolio, combined with low medium term supply growth in many markets."
RevPAR increased 7.6%, including rate growth of 3.2%. US RevPAR was up 8.0%, including rate growth of 3.4%. On a total basis including the benefit of new hotels, US RevPAR grew 9.5%, outperforming the industry up 7.9%.
Revenue increased 3% to $222m and operating profit increased 20% to $126m. After adjusting for owned hotel disposals and excluding the impact of a $4m benefit year on year from the conclusion of a specific guarantee negotiation relating to one hotel, revenue was up 5% and operating profit up 16%. This was driven by 9.7% owned hotel RevPAR growth and a 7% increase in franchise royalty fees.
We signed 11,200 rooms (73 hotels) in the quarter and opened 8,003 rooms (54 hotels) into the system, both of which include 4,796 rooms (25 hotels) managed on US army bases. Two additional Holiday Inn Club Vacations hotels (694 rooms) were signed up, which will take the total number of properties operating under the timeshare alliance brand to eight (3,586 rooms). Openings include two Holiday Inn hotels in Colombia, marking a strong entry for the brand into that country.
RevPAR increased 3.6%, including rate growth of 2.8%. RevPAR grew 4.5% excluding Egypt (10 hotels) and Bahrain (2 hotels) where the political unrest continued to result in significant declines. RevPAR grew in other Middle East markets, including 10.9% in Saudi Arabia and 9.7% in the United Arab Emirates.
Revenue increased 22% (17% at CER) to $128m and operating profit was in line with the prior year at $35m (down 3% at CER). After adjusting for properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts, revenue increased 9% and operating profit was flat. This was driven by strong growth in the owned business where RevPAR was up 10.0% and a $2m increase in franchise royalties as a result of 3.8% RevPAR growth and a 4% increase in year on year room count. Managed profits were adversely impacted by $1.5m as a result of the unrest in the Middle East.
We signed 1,601 rooms (11 hotels) in the quarter, including the first Hotel Indigo for Russia, in St Petersburg. 1,072 rooms (10 hotels) were opened into the system, including the InterContinental Porto, the first for the brand in Portugal.
RevPAR increased 5.7%, including rate growth of 2.0%. Excluding Japan (32 hotels) where the earthquake and resultant events negatively impacted growth, RevPAR grew 8.6%. Greater China continues to be our strongest market with RevPAR up 10.8%, including rate growth of 4.9%.
Revenue increased 19% (12% at CER) to $88m and operating profit increased 55% (45% at CER) to $31m. After adjusting for a $6m liquidated damages receipt, revenue increased 11% (4% at CER) and operating profit increased 25% (15% at CER). This was driven by strong RevPAR growth and an 8% increase in year on year room count, led by Greater China, up 14%. Excluding the $6m liquidated damages receipt, managed operating profit grew 20% (10% at CER). The natural disasters in Japan and New Zealand had a $0.5m negative impact in the quarter.
We signed 5,927 rooms (18 hotels) in the quarter including a 1,224 room Holiday Inn in Macau, and the fourth hotel development for the Holiday Inn Express brand in Thailand, located along Patong Beach in Phuket. 3,870 rooms (11 hotels) were opened into the system, including a second Holiday Inn resort in Phuket. IHG now has 11 hotels open in Thailand with a further 10 in the development pipeline.
The interest charge for the period was $15m (Q3 2010: $16m). The tax charge has been calculated using an estimated annual tax rate of 26% (Q3 2010: 26%). A $17m net exceptional tax credit relates to a reduction in the estimated tax impact of a prior year corporate restructuring, partially offset by current year items.
Exceptional operating credits comprise (i) $28m relating to the closure of the UK defined benefit pension scheme with effect from 1 July 2013 and (ii) $28m gain on sale of a hotel and related investment in Australia.
Net debt was $644m (including the $208m finance lease on the InterContinental Boston), down $157m on Q3 2010 and down $99m on the position at year end.
The Group refinanced its bank debt after the quarter end, putting in place a 5 year $1.07 billion facility providing certainty of funding until November 2016.
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* US dollar actual currency
** Translated at constant 2010 exchange rates
*** After central overheads
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High resolution images to accompany this announcement are available for the media to download free of charge from www.vismedia.co.uk This includes profile shots of the key executives. UK conference call and Q&A:
A conference call with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer) will commence at 9:30am (London time) on Tuesday 8 November. There will be an opportunity to ask questions
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There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 8th November with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer). There will be an opportunity to ask questions.
A recording of the conference calls will also be available for 7 days. To access this please dial the relevant number below
UK Replay
International dial-in: +44 (0)20 7108 6271
UK Toll Free: 0808 376 9017
Passcode : 5161
US Replay
International Dial in : +44 (0) 20 7108 6272
US Toll Free: 866 850 9261
Passcode: 516
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The full release and supplementary data will be available on our website from 7.00 am (London time) on 8 November. The web address is www.ihg.com/Q311. To watch a video of Richard Solomons reviewing our results visit our YouTube channel at www.youtube.com/ihgplc.
IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation operating seven hotel brands including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites® and Candlewood Suites®. IHG also manages Priority Club® Rewards, the world's first and largest hotel loyalty programme with over 61 million members worldwide.
IHG is the world's largest hotel group by number of rooms and franchises, leases, manages or owns over 4,500 hotels and more than 666,000 guest rooms in 100 countries and territories, and has more than 1,100 hotels in its development pipeline.
IHG is committed to gender balance throughout its business. We aspire to continue retaining a minimum of 25% female representation on the Board.
InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales.
Visit www.ihg.com for hotel information and reservations and www.priorityclub.com for more on Priority Club Rewards. For our latest news, visit www.ihg.com/media, www.twitter.com/ihgplc or www.youtube.com/ihgplc.
This announcement contains certain forward-looking statements as defined under US law (Section 21E of the Securities Exchange Act of 1934). These forward-looking statements can be identified by the fact that they do not relate to historical or current facts. Forward-looking statements often use words such as '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. Factors that could affect the business and the financial results are described in 'Risk Factors' in the InterContinental Hotels Group PLC Annual Report on Form 20-F filed with the United States Securities and Exchange Commission.
InterContinental Hotels Group (IHG) is a multinational company which operates several hotel brands.