ihg201208076k.htm
 
 
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington DC 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For 07 August 2012
 
 
InterContinental Hotels Group PLC
(Registrant's name)
 
 
Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F           Form 40-F
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
 
Yes           No
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable
 
 


 
 
 


InterContinental Hotels Group PLC
Half Year Results to 30 June 2012
Preferred brands continue to drive outperformance
 
 
Financial summaryº
2012
2011
 
% Change YoY
Actual
CER1
CER & ex. LDs2
Revenue
$878m
$850m
3%
5%
6%
Operating profit
$286m
$269m
6%
7%
11%
Total adjusted EPS
64.1¢
59.2¢
8%
   
Total basic EPS3
94.8¢
54.0¢
76%
   
Interim dividend per share
21.0¢
16.0¢
31%4
   
Net debt
$564m
$818m
     
 
 
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
"We have delivered good results in the first half with RevPAR growth from all regions through gains in both occupancy and rate.  Our brands continue to perform well and we have achieved solid underlying margin growth, resulting in increased profits and strong cash flows.
We are increasing the interim dividend by 31% reflecting these results, our previously stated intention to rebalance the interim and final dividend payments and our confidence in the future prospects of the business.
Consistent with our asset light strategy and our strong track record of returning funds to shareholders, we today announce a $1bn return of capital. This recognises the expected proceeds from the ongoing disposal of InterContinental New York Barclay and our commitment to maintaining an investment grade credit rating.
We continue to invest for growth, strengthening both our existing and our new brands, including EVEN Hotels and HUALUXE Hotels & Resorts.  While the global economic environment remains uncertain, IHG continues to trade well and we are confident that our strategy will deliver high quality growth into the future."
 
 
Driving Market Share
Total gross revenue5 from hotels in IHG's system of $10.3bn, up 7.3%
First half global RevPAR growth of 6.5% (rate up 3.5%) with second quarter up 6.1% (rate up 3.8%)
 
-
Americas first half RevPAR up 7.1% (US 7.2%); Europe 1.9%; AMEA 7.9%; Greater China 9.7%.
Total system size of 666,873 rooms (4,542 hotels), up 2% year on year
 
-
17,449 rooms (112 hotels) added to the system with 8,924 rooms (50 hotels) removed.
 
-
Pipeline of 167,485 rooms (1,060 hotels, 13% leading active global share). Over 40% under construction.
 
-
Signings of 22,104 rooms (152 hotels), ahead of H1 2011 including 14,073 Holiday Inn brand family rooms.
Building preferred brands
 
-
Holiday Inn continues to outperform, growing RevPAR premiums to the upper midscale segment in the US over the past 5 years by 6% pts for Holiday Inn and 5% pts for Holiday Inn Express.
 
-
For the second year running in 2012, Holiday Inn has been awarded the J.D Power and Associates Award for highest in guest satisfaction among midscale full-service hotel chains.
 
-
Crowne Plaza repositioning underway as planned, with expected completion by end of 2015.
 
-
Hotel Indigo has demonstrated strong growth in H1, with 8 hotel openings and 10 signings.
 
-
HUALUXE Hotels and Resorts first 4 pipeline signings in H1, with a further 4 in July, plus 19 letters of intent.
Growing Margins
Fee based margin5 growth of 2.3%pts to 42.9% reflects continuing benefits of scale and some favourable phasing of costs between the first and second half.
Uses of Cash
Return of funds to shareholders
 
-
$1bn will be returned to shareholders via a $500m special dividend with share consolidation6 to be paid in Q4
 2012 and a $500m share buyback programme6 which will commence in Q4 2012.
 
-
Reflects our commitment to return significant value to shareholders, maintains an efficient balance sheet and investment grade credit rating, and takes into account expected proceeds from the disposal of InterContinental New York Barclay.
 
-
Takes total funds returned to shareholders since demerger to $8.9bn, including $1.2bn of ordinary dividends
Sustainable growth in the ordinary dividend
 
-
31% increase in the interim dividend to 21¢ reflects confidence in IHG's future prospects, plus continued intention to rebalance the interim dividend towards one third of the total for the year.
Growth investment funded by recycling capital
 
-
Modest growth capital expenditure of $5m in H1 due to phasing.
 
-
Full year growth capital expenditure remains at $100m - $200m, plus c.$150m maintenance capex.
 
-
The disposal of InterContinental New York Barclay continues to progress.
 
-
InterContinental London Park Lane is likely to be the next major asset disposal, with a key milestone in the decision making process being the expected opening of InterContinental London Westminster by early 2013.
Current trading update
Provisional July RevPAR growth7 3.8%: Americas 5.0%, Europe (0.2)%, AMEA 1.7% and Greater China 7.1%, reflecting in part tougher comparatives and including the timing of US holidays.
º All figures are before exceptional items unless otherwise noted.  appendices for financial headlines
¹ CER = constant exchange rates
2 Excluding $10m of significant liquidated damages receipts in 2011
3 After exceptional items
 
4 Partly intended to rebalance interim and final dividend         5&7 See appendix 6 for definition      6 Subject to shareholder approval
 
Americas - Continued profit growth driven by franchise business
RevPAR increased 7.1%, with 4.4% rate growth and second quarter RevPAR increased 6.7% with 4.7% rate growth.  US RevPAR was up 7.2% in the first half, with 6.9% growth in the second quarter.  On a total basis including the benefit of new hotels, US RevPAR grew 8.0% in the half, in line with the industry.  On the same basis, Holiday Inn and Holiday Inn Express grew 8.5% and 8.6% respectively, significantly outperforming the upper midscale segment up 7.7%.
Revenue decreased 4% to $400m and operating profit increased 4% to $233m.  After adjusting for owned hotel disposals in 2011, the impact of a $10m liquidated damages receipt in 2011 and the results from managed lease hotels*, revenue was up 5% and operating profit up 9%.  This was driven by good RevPAR growth across the region, resulting in a 9% increase in franchise royalties, slightly offset by the impact of a refurbishment of one owned hotel in the Caribbean and a $3m decrease in fees associated with initial franchising, relicensing, and termination of hotels.
We signed 12,751 rooms (110 hotels) and opened 8,974 rooms (75 hotels) into the system in the half. The Holiday Inn brand family accounted for around three quarters of openings and signings in the region in the half, demonstrating the ongoing benefits from the relaunch. Openings included 9 hotels for our extended stay hotel brands, Candlewood Suites and Staybridge Suites and a second hotel for the InterContinental brand in Mexico City. Signings included 5 Hotel Indigo hotels and 19 for our extended stay brands. 
             
 
Europe -Solid performance in challenging markets
RevPAR increased 1.9%, with 1.0% rate growth. RevPAR was up 1.5% in the second quarter reflecting the continued uncertainty in macro economic conditions across Europe with rate up 0.9%. (Q2 RevPAR: UK 1.9%, Germany 7.1%, France 0.9%).
Revenue increased 11% (19% at CER) to $206m and operating profit increased 2% (8% at CER) to $52m, with an adverse impact on growth from the weakening Euro:Dollar exchange rate over the period.  At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels*, revenue increased 1% and operating profit increased 10%, driven in part by a decrease in regional overheads offset by higher costs in the owned and leased hotels.
We signed 2,964 rooms (17 hotels), including an InterContinental in St. Petersburg and 4 Hotel Indigo hotels. 3,225 rooms (22 hotels) were opened into the system, the most in a half year since 2008, including 4 Hotel Indigo hotels.
 
 
AMEA - Strong RevPAR growth
RevPAR increased 7.9%, with 2.2% rate growth and second quarter RevPAR increased 8.8% with 2.7% rate growth. Trading was strong across the region, with most markets showing good RevPAR growth, reflecting economic growth in Southeast Asia, continued recovery from the natural disasters last year, and stronger trading in some markets in the Middle East.
AMEA revenue increased 8% to $108m and operating profit increased 11% to $40m. After adjusting for the disposal in Q3 2011 of a hotel asset and partnership interest in Australia, which contributed $3m to profits in H1 2011, operating profit increased 21% at CER. This reflects strong RevPAR growth across the managed business.
We signed 1,395 rooms (6 hotels) in the half, including 2 InterContinental hotels (625 rooms). 1,868 rooms (7 hotels) were opened, mostly with the InterContinental and Crowne Plaza brands, including the 197 room InterContinental Danang Sun Peninsula Resort hotel in Vietnam, the first Crowne Plaza Resort for the region in Thailand and the first Holiday Inn Express hotel for Southeast Asia, in Bangkok.  
 
 
Greater China - Double digit system and pipeline growth
RevPAR increased 9.7%, with 3.8% rate growth and second quarter RevPAR increased 7.9% with 4.1% rate growth. Continuing strength in RevPAR growth in North and East China of 14.3% and 11.2% respectively was slightly offset by weaker RevPAR growth in South and West China of 3.6%.
Revenue increased 14% (13% CER) to $108m and operating profit increased 20% (23% CER) to $36m. This was driven by 7.6% RevPAR growth at the InterContinental Hong Kong; $3m growth in managed profits reflecting strong RevPAR growth and 13% room growth, partly offset by incremental investment within managed operations. Regional costs increased by $3m reflecting additional resources in the region to support continued growth.
We opened 3,382 rooms (8 hotels) in the first half, taking our open rooms in the region to 58,184, and strengthening our market leading position. Openings included 2 Crowne Plaza hotels and 5 Holiday Inn brand family hotels, including the largest Holiday Inn in the world in Macau with 1,224 rooms.
Signings of 4,994 rooms (19 hotels) took our pipeline to 49,801 rooms (156 hotels) giving us a continued leading 18% share of the active hotel pipeline in China. 30% of our total group pipeline is in Greater China, of which over 70% is under construction. Signings comprised 4 Crowne Plaza hotels, 10 Holiday Inn brand family hotels, 4 HUALUXE Hotels and Resorts hotels and one Hotel Indigo hotel, demonstrating the strength of our brands in Greater China.
*See appendix 6 for definition
 
 
Interest, tax, cash flow and exceptionals
The interest charge for the period was $25m (H1 2011: $32m) due to lower levels of net debt.
Based on the position at the end of the half, the tax charge has been calculated using an estimated annual tax rate of 29% (H1 2011: 28%).  The 2012 full year tax rate is expected to be in the high 20s, moving towards the low 30s in 2013. An exceptional tax credit of $79m relates to prior year matters settled in Q1 2012, together with associated deferred tax amounts.
A $23m exceptional credit relates to the reversal of a previously recorded impairment charge on a North American hotel.
Net debt was $564m at the end of the quarter (including the $210m finance lease on the InterContinental Boston).  This is down from $818m at 30 June 2011 but up $30m on the year end position due to seasonal working capital movements.
The provisional triennial actuarial valuation of the UK defined benefit plan as at 31 March 2012 indicates a deficit of £132m; the future funding related to this is under discussion with the Trustees.
 
 
Appendix 1: RevPAR Movement Summary
 
July 2012
Half Year 2012
Q2 2012
RevPAR*
RevPAR
Rate
Occ.
RevPAR
Rate
Occ.
Group
3.8%
6.5%
3.5%
1.8pts
6.1%
3.8%
1.5pts
Americas
5.0%
7.1%
4.4%
1.6pts
6.7%
4.7%
1.3pts
Europe
(0.2)%
1.9%
1.0%
0.6pts
1.5%
0.9%
0.5pts
AMEA
1.7%
7.9%
2.2%
3.6pts
8.8%
2.7%
3.9pts
G. China
7.1%
9.7%
3.8%
3.2pts
7.9%
4.1%
2.3pts
 
*See appendix  6 for definition
Appendix 2: First Half System & Pipeline Summary (rooms)
 
System
Pipeline
Openings
Removals
Net
Total
YoY%
Signings
Total
Group
17,449
(8,924)
8,525
666,873
1.6%
22,104
167,485
Americas
8,974
(4,289)
4,685
446,883
0.3%
12,751
76,721
Europe
3,225
(1,987)
1,238
101,123
2.4%
2,964
14,467
AMEA
1,868
(2,268)
(400)
60,683
(0.7)%
1,395
26,496
G. China
3,382
(380)
3,002
58,184
13.2%
4,994
49,801
 
 
Appendix 3: Quarter 2 financial headlines
 
3 months to 30 June 2012
Operating Profit $m
                                                 Total
Americas
Europe
AMEA
G. China
Central
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Franchised
146
140
123
118
18
19
3
3
2
0
-
-
Managed
53
54
12
15
11
11
19
17
11
11
-
-
Owned & leased
34
31
9
7
15
17
1
1
9
6
-
-
Regional overheads
(29)
(28)
(11)
(12)
(7)
(8)
(5)
(5)
(6)
(3)
-
-
Profit pre central overheads
204
197
133
128
37
39
18
16
16
14
-
-
Central overheads
(36)
(40)
-
-
-
-
-
-
-
-
(36)
(40)
Group Operating profit
168
157
133
128
37
39
18
16
16
14
(36)
(40)
   
Appendix 4: First Half financial headlines
 
6 months to 30 June 2012
Operating Profit $m
                                                 Total
Americas
Europe
AMEA
G. China
Central
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Franchised
263
248
224
209
31
33
6
5
2
1
-
-
Managed
103
103
24
33
15
12
42
39
22
19
-
-
Owned & leased
50
47
7
6
20
23
2
2
21
16
-
-
Regional overheads
(55)
(56)
(22)
(23)
(14)
(17)
(10)
(10)
(9)
(6)
-
-
Profit pre central overheads
361
342
233
225
52
51
40
36
36
30
-
-
Central overheads
(75)
(73)
-
-
-
-
-
-
-
-
(75)
(73)
Group Operating profit
286
269
233
225
52
51
40
36
36
30
(75)
(73)
 
Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items
 
                                      Total***
Americas
Europe
AMEA
G. China
 
Actual*
CER**
Actual*
CER**
Actual*
CER**
Actual*
CER**
Actual*
CER**
Q2 Growth/ (decline)
7%
8%
4%
4%
(5)%
0%
13%
13%
14%
21%
H1 Growth/ (decline)
6%
7%
4%
4%
2%
8%
11%
11%
20%
23%
Exchange rates:
H1 2012
Q2
   
 
GBP:USD
EUR:USD
GBP:USD
EUR:USD
* US dollar actual currency
 
2012
0.63
0.77
0.63
0.78
** Translated at constant 2011 exchange rates
 
2011
0.62
0.71
0.61
0.70
*** After central overheads
 
                               
 
 
Appendix 6: Definitions
Total gross revenue: total room revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, as it is derived mainly from hotels owned by third parties. The metric is highlighted as an indicator of the scale and reach of IHG's brands. 
Fee based margins: adjusted for owned and leased hotels, managed leases and individually significant liquidated damages payments. 
Managed lease hotels: properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts.
Provisional July RevPAR growth :  represents actuals other than for Americas and Group for which the last 3 days in July are estimated
 
 
Appendix 7: Investor Information for 2012 interim dividend
Ex-dividend date:
22 August 2012
Record date:
24 August 2012
Payment date:
28 September  2012
Dividend payment:
Ordinary shares = 13.5 pence  per share
ADRs = 21.0 cents per ADR
 
 
 
For further information, please contact:
Investor Relations (Catherine Dolton; Isabel Green):
+44 (0)1895 512176
 
Media Relations (Yasmin Diamond, Kari Kerr):
+44 (0)1895 512426
+44 (0) 7770 736849
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.
Webcast and conference call for Analysts and Shareholders:
A webcast with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer) will commence at 9.30am UK time on 7 August and can be accessed on www.ihgplc.com/interims12. There will also be a live dial-in facility to enable you to ask questions.  The presentation will conclude at approximately 10.30am UK time.
The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future. 
UK Toll
UK Toll Free
US Toll
US Toll Free
+44 (0)20 3003 2666
0808 109 0700
+1 212 999 6659
+1 866 966 5335
Passcode:
HOTEL
A replay of the 9.30am conference call will be available following the events - details are below:
UK Toll
+44 (0)20 8196 1998
Replay pin
8622026
US conference call and Q&A:
There will also be a conference call, primarily for US investors and analysts, at 9.00am Eastern Standard Time on 7 August with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer). There will be an opportunity to ask questions.
UK Toll
UK Toll Free
US Toll
US Toll Free
+44 (0)20 3003 2666
0808 109 0700
+1 212 999 6659
+1 866 966 5335
Passcode:
HOTEL
A replay of the 9.30am conference call will be available following the events - details are below:
UK Toll
+44 (0)20 8196 1998
Replay pin
5394360
Website:
The full release and supplementary data will be available on our website from 7.00 am (London time) on 7 August. The web address is www.ihgplc.com/interims12. To watch a video of Tom Singer reviewing our results visit our YouTube channel at www.youtube.com/ihgplc.
Notes to Editors:
IHG (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with nine hotel brands including InterContinental® Hotels & Resorts, Hotel Indigo®, Crowne Plaza® Hotels & Resorts, Holiday Inn® Hotels and Resorts, Holiday Inn Express®, Staybridge Suites®, Candlewood Suites®, as well as our two newest brands, EVEN™ Hotels and HUALUXE™ Hotels & Resorts. IHG also manages Priority Club® Rewards, the world's first and largest hotel loyalty programme with over 67 million members worldwide.  IHG franchises, leases, manages or owns over 4,500 hotels and more than 666,000 guest rooms in nearly 100 countries and territories. With more than 1,000 hotels in its development pipeline, IHG expects to recruit around 90,000 people into additional roles across its estate over the next few years.  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, www.facebook.com/ihg or www.youtube.com/ihgplc.
Cautionary note regarding forward-looking statements:
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.
       
 
 
 
 
INTERIM MANAGEMENT REPORT
 
This Interim Management Report discusses the performance of InterContinental Hotels Group PLC (the Company) together with its subsidiaries (the Group or IHG) for the six months ended 30 June 2012.
 
GROUP PERFORMANCE
 
 
 
3 months ended
6 months ended
 
30 June
2012
30 June
2011
 
%
30 June
2012
30 June
2011
 
%
Group Results
$m
$m
change
$m
$m
change
             
Revenue
           
 
Americas
219
222
(1.4)
400
416
(3.8)
 
Europe
116
109
6.4
206
185
11.4
 
AMEA
52
50
4.0
108
100
8.0
 
Greater China
54
46
17.4
108
95
13.7
 
Central
28
27
3.7
56
54
3.7
 
____
____
____
____
____
____
Total
469
454
3.3
878
850
3.3
 
____
____
____
____
____
____
Operating profit before exceptional items
           
 
Americas
133
128
3.9
233
225
3.6
 
Europe
37
39
(5.1)
52
51
2.0
 
AMEA
18
16
12.5
40
36
11.1
 
Greater China
16
14
14.3
36
30
20.0
 
Central
(36)
(40)
10.0
(75)
(73)
(2.7)
 
____
____
____
____
____
____
 
168
157
7.0
286
269
6.3
             
Exceptional operating items
23
(30)
176.7
23
(32)
171.9
 
____
____
____
____
____
____
 
191
127
50.4
309
237
30.4
Net financial expenses
(13)
(16)
18.8
(25)
(32)
21.9
 
____
____
____
____
____
____
Profit before tax
178
111
60.4
284
205
38.5
 
____
____
____
____
____
____
             
Total Earnings per ordinary share
           
 
Basic
41.6¢
30.0¢
38.7
94.8¢
54.0¢
75.6
 
Adjusted
38.1¢
35.2¢
8.2
64.1¢
59.2¢
8.3
 
Revenue increased by 3.3% to $878m, whilst operating profit before exceptional items increased by 6.3% to $286m during the six months ended 30 June 2012.  On a constant currency basis, revenue and operating profit before exceptional items increased by 4.8% and 7.1% respectively. 
 
Group RevPAR increased by 6.5% against the six months ended 30 June 2011, and by 6.1% in the second quarter against the same period in the prior year.  RevPAR growth was led by increases to daily room rates across all brands (3.5% for the Group).  System size increased by 1.6% compared to June 2011.
 
Fee based margin1 growth of 2.3%pts to 42.9% reflects continuing benefits of scale and some favourable phasing of costs.
 
Profit before tax increased by $79m from $205m to $284m.  Adjusted earnings per ordinary share increased by 8.3% to 64.1¢.
 
 
 
__________________
1 Underlying fee based margin is defined as operating profit margin adjusted for owned and leased hotels, managed leases and one individually significant liquidated damages receipt in 2011.
 
 
The IHG global system (the number of hotels which are franchised, managed, owned or leased) increased in the first half of 2012 by 62 hotels (8,525 rooms) to 4,542 hotels (666,873 rooms) with openings of 112 hotels (17,449 rooms) and removals of 50 hotels (8,924 rooms).  By way of comparison, 122 hotels (24,519 rooms) joined the system in the same period last year, including two InterContinental Alliance resorts (6,986 rooms).
 
At 30 June 2012, the IHG pipeline which represents hotels and rooms where a contract has been signed and the appropriate fees paid, totalled 1,060 hotels (167,485 rooms), a decline of 84 hotels (12,999 rooms) since the year end.  The movement included additions to the pipeline totalling 152 hotels (22,104 rooms), four more than in the same period in 2011.  Additions were offset by openings and pipeline terminations which occur for a number of reasons such as withdrawal of financing and changes in local market conditions.

 
THE AMERICAS
 
 
 
3 months ended
6 months ended
 
30 June
2012
30 June
2011
 
%
30 June
2012
30 June
2011
 
%
Americas Results
$m
$m
change
$m
$m
change
             
Revenue
           
 
Franchised
142
135
5.2
260
244
6.6
 
Managed
24
32
(25.0)
47
70
(32.9)
 
Owned and leased
53
55
(3.6)
93
102
(8.8)
 
____
____
____
____
____
____
Total
219
222
(1.4)
400
416
(3.8)
 
____
____
____
____
____
____
Operating profit before
 exceptional items
         
 
Franchised
123
118
4.2
224
209
7.2
 
Managed
12
15
(20.0)
24
33
(27.3)
 
Owned and leased
9
7
28.6
7
6
16.7
 
____
____
____
____
____
____
   
144
140
2.9
255
248
2.8
Regional overheads
(11)
(12)
8.3
(22)
(23)
4.3
 
____
____
____
____
____
____
Total
133
128
3.9
233
225
3.6
 
____
____
____
____
____
____
 
Revenue decreased by $16m to $400m (3.8%) and operating profit before exceptional items increased by $8.0m to $233m (3.6%) during the six months ended 30 June 2012. 
 
After adjusting for owned and leased disposals, results for managed lease hotels and excluding the impact in 2011 of an individually significant liquidated damages receipt of $10m, revenue and operating profit increased by $18m (5.0%) and $19m (8.9%) respectively.  RevPAR in the first half of the year increased by 7.1% and system size was broadly flat on the same period of 2011.
 
During the first half of 2012, franchised revenue and operating profit increased by $16m to $260m (6.6%) and $15m to $224m (7.2%) respectively, compared to the same period in 2011.  This increase was predominantly in relation to royalties, driven by growth in RevPAR on the prior year of 7.2%.  Fees associated with the termination of hotels and initial franchising and relicensing were $3m lower than the same period in 2011.
 
Managed revenue and operating profit decreased by $23m to $47m (32.9%) and $9m to $24m (27.3%).  Revenue and operating profit included $19m (2011: $36m) and $1m (2011: $2m) respectively from properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts.  Excluding properties operated under this arrangement, as well as the benefit of a $10m liquidated damages receipt in 2011, revenue grew by $4m (16.7%), whilst operating profit increased by $2m (9.5%).  These increases were driven by RevPAR growth across the Americas managed estate of 6.6% on the same period in the prior year, offset by a decrease of 8% in system size.  The decrease in system size mainly reflects the removal of 43 hotels (6,994 rooms) at the end of 2011, as part of the renegotiation of the management contract with Hospitality Properties Trust.
 
Owned and leased revenue, excluding the impact of current and prior year disposals, decreased by $2m (2.1%) and operating profit increased by $1m to $7m (16.7%).  The decrease in revenue reflected $5m lower revenue at one hotel in the Caribbean, which is undergoing refurbishment.  Operating profit includes a year on year $1m benefit from lower depreciation recorded for the InterContinental New York Barclay since the hotel was categorised as "held for sale" in the first quarter of 2011, subsequent to which no depreciation was charged.
 
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
Americas hotel and room count
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
53
1
17,711
113
 
Crowne Plaza
186
(2)
49,474
(528)
 
Holiday Inn
820
4
146,890
1,069
 
Holiday Inn Express
1,904
30
165,823
2,888
 
Staybridge Suites
178
4
19,241
421
 
Candlewood Suites
292
7
28,167
667
 
Hotel Indigo
35
2
4,028
55
 
Other
51
-
15,549
-
 
____
____
______
_____
Total
3,519
46
446,883
4,685
 
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3,315
49
404,077
5,397
 
Managed
199
(2)
40,621
(601)
 
Owned and leased
5
(1)
2,185
(111)
 
____
____
______
_____
Total
3,519
46
446,883
4,685
 
____
____
______
_____
 
The Americas system size increased in the first half of 2012 by 46 hotels (4,685 rooms), with 75 hotels (8,974 rooms) joining the system including Holiday Inn Club Vacation Las Vegas Desert Club Resort (658 rooms) and the Presidente InterContinental Santa Fe (111 rooms) in Mexico City.  Holiday Inn and Holiday Inn Express contributed 59 hotels (6,723 rooms) to the openings in the period with Staybridge Suites and Candlewood Suites contributing nine hotels (790 rooms).
 
29 hotels (4,289 rooms) left the system in the period, primarily across the Holiday Inn and Holiday Inn Express brands (26 hotels, 3,424 rooms), a reduction from 75 hotels (10,488 rooms) in 2011.
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
Americas pipeline
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
4
(1)
925
(415)
 
Crowne Plaza
18
(4)
4,231
(1,018)
 
Holiday Inn
154
(4)
20,704
(1,347)
 
Holiday Inn Express
351
(21)
32,570
(1,790)
 
Staybridge Suites
69
(17)
7,258
(1,637)
 
Candlewood Suites
83
(11)
7,079
(983)
 
Hotel Indigo
31
(7)
3,954
(539)
 
____
____
______
_____
Total
710
(65)
76,721
(7,729)
 
____
____
______
_____
Analysed by ownership type
       
 
Franchised
698
(67)
74,422
(7,865)
 
Managed
12
2
2,299
136
 
____
____
______
_____
Total
710
(65)
76,721
(7,729)
 
____
____
______
_____
 
 
The Americas pipeline at 30 June 2012 totalled 710 hotels (76,721 rooms) representing a decline of 65 hotels (7,729 rooms) over 31 December 2011. 
 
New signings in the period of 110 hotels (12,751 rooms) were ahead of the same period last year by eight hotels (1,137 rooms).  The majority of the signings were within the Holiday Inn and Holiday Inn Express brand (83 hotels, 9,432 rooms).  The extended stay hotel brands also contributed 19 hotel signings (1,899 rooms). Terminations from the pipeline of 11,506 rooms represented an increase on the prior year of 1,765 rooms.

 
EUROPE
 
 
 
3 months ended
6 months ended
 
30 June
2012
30 June
2011
 
%
30 June
2012
30 June
2011
 
%
Europe Results
$m
$m
change
$m
$m
change
             
Revenue
           
 
Franchised
23
23
-
42
42
-
 
Managed
39
28
39.3
71
45
57.8
 
Owned and leased
54
58
(6.9)
93
98
(5.1)
 
____
____
____
____
____
____
Total
116
109
6.4
206
185
11.4
 
____
____
____
____
____
____
Operating profit before
exceptional items
         
 
Franchised
18
19
(5.3)
31
33
(6.1)
 
Managed
11
11
-
15
12
25.0
 
Owned and leased
15
17
(11.8)
20
23
(13.0)
 
____
____
____
____
____
____
   
44
47
(6.4)
66
68
(2.9)
Regional overheads
(7)
(8)
12.5
(14)
(17)
17.6
 
____
____
____
____
____
____
Total
37
39
(5.1)
52
51
2.0
 
____
____
____
____
____
____
             
 
Revenue increased by $21m to $206m (11.4%) and operating profit before exceptional items increased by $1m to $52m (2.0%) during the six months ended 30 June 2012.  At constant exchange rates, and after adjusting for a leased hotel disposal and excluding results from managed lease hotels, revenue and operating profit before exceptional items increased by 0.6% and 10.2% respectively. 
 
RevPAR growth across the region was 1.9% in the six months to 30 June 2012 compared to the same period in the prior year, including a 1.5% increase in the second quarter compared to the same period in 2011.  System size across the region grew by 2,356 rooms (2.4%) compared to 30 June 2011. 
 
Franchised revenue was flat at $42m, whilst operating profit decreased by $2m to $31m (6.1%).  On a constant currency basis, revenue increased by $2m (4.8%) primarily driven by a RevPAR increase of 2.2%, together with system size growth of 3.1% on the same period in 2011. On the same basis, operating profit was flat.
 
Managed revenue and operating profit increased by $26m to $71m (57.8%) and by $3m to $15m (25.0%), respectively.  In the first half of 2011, two properties were converted from management contracts to an operating lease structure with the same characteristics as management contracts.  Revenues recorded under the operating lease structure were $38m ($42m on a constant currency basis) in the first half of 2012 (2011: $6m), with operating profit of $1m (2011: $1m).  Excluding the impact of properties under the operating lease structure and on a constant currency basis, revenue decreased by $4m (10.3%), whilst operating profit grew by $4m (36.4%).
 
Owned and leased revenue and operating profit decreased by $5m to $93m (5.1%) and by $3m to $20m (13.0%) respectively.  On a constant currency basis and after adjusting for a leased hotel disposal, revenue increased by $3m (3.1%) primarily driven by a RevPAR increase of 2.3%.  Operating profit decreased by $1m (4.5%) on the same basis driven by increased hotel costs.
 
Regional costs decreased from $17m to $14m (17.6%), mainly reflecting the reallocation of certain expenditure to central costs.
 
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
 Europe hotel and room count
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
29
(1)
9,128
(536)
 
Crowne Plaza
86
-
19,863
138
 
Holiday Inn
291
1
46,935
470
 
Holiday Inn Express
203
5
23,743
562
 
Staybridge Suites
4
1
605
162
 
Hotel Indigo
9
4
849
442
 
____
____
______
_____
Total
622
10
101,123
1,238
 
____
____
______
_____
Analysed by ownership type
       
 
Franchised
520
11
78,554
1,743
 
Managed
100
(1)
21,652
(505)
 
Owned and leased
2
-
917
-
 
____
____
______
_____
Total
622
10
101,123
1,238
 
____
____
______
_____
 
During the first half of 2012, the Europe system size increased by 10 hotels (1,238 rooms) to 622 hotels (101,123 rooms) with 22 hotel openings (3,225 rooms), the most in the first half of a year since 2008.  Holiday Inn and Holiday Inn Express contributed 16 hotels (2,337 rooms) to the openings in the period with Hotel Indigo contributing four hotels (442 rooms).  12 hotels (1,987 rooms) left the system in the period, primarily across the Holiday Inn and Holiday Inn Express brands (10 hotels, 1,305 rooms).
 
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
Europe pipeline
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
5
-
1,185
(125)
 
Crowne Plaza
11
(1)
2,727
(226)
 
Holiday Inn
14
(11)
3,271
(1,668)
 
Holiday Inn Express
39
(4)
5,853
(89)
 
Staybridge Suites
2
-
289
6
 
Hotel Indigo
11
-
1,142
(113)
 
____
____
______
_____
Total
82
(16)
14,467
(2,215)
 
____
____
______
_____
Analysed by ownership type
       
 
Franchised
70
(12)
10,655
(1,344)
 
Managed
12
(4)
3,812
(871)
 
____
____
______
_____
Total
82
(16)
14,467
(2,215)
 
____
____
______
_____
 
The Europe pipeline at 30 June 2012 totalled 82 hotels (14,467 rooms) representing a decrease of 16 hotels (2,215 rooms) over the pipeline at 31 December 2011.  A total of 17 hotels (2,964 rooms) were added to the region's pipeline during the first six months of 2012.  New signings were focussed on the Holiday Inn and Holiday Inn Express brands (10 hotels, 2,141 rooms), whilst Hotel Indigo is also gaining good traction with four signings (three in the UK and one in Israel).  The first half also saw the signing of the InterContinental St. Petersburg in Russia.  Terminations from the pipeline amounted to 11 hotels (1,954 rooms).
 

 
ASIA, MIDDLE EAST & AFRICA (AMEA)
 
 
 
3 months ended
6 months ended
 
30 June
2012
30 June
2011
 
%
30 June
2012
30 June
2011
 
%
AMEA Results
$m
$m
change
$m
$m
change
             
Revenue
           
 
Franchised
5
5
-
10
8
25.0
 
Managed
36
33
9.1
75
70
7.1
 
Owned and leased
11
12
(8.3)
23
22
4.5
 
____
____
____
____
____
____
Total
52
50
4.0
108
100
8.0
 
____
____
____
____
____
____
Operating profit before
exceptional items
         
 
Franchised
3
3
-
6
5
20.0
 
Managed
19
17
11.8
42
39
7.7
 
Owned and leased
1
1
-
2
2
-
 
____
____
____
____
____
____
   
23
21
9.5
50
46
8.7
Regional overheads
(5)
(5)
-
(10)
(10)
-
 
____
____
____
____
____
____
Total
18
16
12.5
40
36
11.1
 
____
____
____
____
____
____
             
 
Revenue increased by $8m to $108m (8.0%) and operating profit before exceptional items increased by $4m to $40m (11.1%).  On a constant currency basis and after adjusting for the disposal in the third quarter of 2011 of a hotel and asset partnership in Australia, which contributed $3m to operating profit in the first half of 2011, operating profit increased by $7m (21.2%).
 
RevPAR increased by 7.9% compared to the first half of 2011, including some benefit from the recovery from the natural disasters in Japan and New Zealand last year, as well as signs of some political stabilisation in the Middle East.  System size for the region decreased by 0.7% compared to that at 30 June 2011. 
 
Franchised revenue increased by $2m to $10m (25.0%) whilst operating profit increased by $1m to $6m (20.0%).
 
Managed revenue increased by $5m to $75m (7.1%) and managed operating profit increased by $3m to $42m (7.7%).  On a constant currency basis and after adjusting for the disposal of the hotel asset and partnership in Australia in 2011, operating profit increased by $6m (16.7%). RevPAR grew by 7.6% across the estate, whilst system size increased by 2.7% compared to 30 June 2011.
 
In the owned and leased estate, revenue increased by $1m to $23m (4.5%), whilst operating profit was flat at $2m.
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
AMEA hotel and room count
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
64
-
20,514
89
 
Crowne Plaza
64
3
17,625
704
 
Holiday Inn
75
(2)
17,322
(710)
 
Holiday Inn Express
9
1
2,153
296
 
Staybridge Suites
2
-
304
-
 
Other
13
(3)
2,765
(779)
 
____
____
______
_____
Total
227
(1)
60,683
(400)
 
____
____
______
_____
Analysed by ownership type:
       
 
Franchised
47
(7)
10,423
(2,194)
 
Managed
178
6
49,677
1,787
 
Owned and leased
2
-
583
7
 
____
____
______
_____
Total
227
(1)
60,683
(400)
 
____
____
______
_____
 
AMEA system size decreased by one hotel (400 rooms) to 227 hotels (60,683 rooms) in the first half of 2012.  Removals of eight hotels (2,268 rooms) were offset by openings of seven hotels (1,868 rooms).  Notable openings included Holiday Inn Express Bangkok Siam (300 rooms), the first hotel for the brand in South East Asia, the 197 room InterContinental Danang Sun Peninsula Resort hotel in Vietnam and the first Crowne Plaza resort in the region in Phuket, Thailand.
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
AMEA pipeline
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
16
(3)
4,153
(941)
 
Crowne Plaza
18
(3)
5,646
(1,083)
 
Holiday Inn
39
(4)
9,270
(1,110)
 
Holiday Inn Express
28
1
5,847
166
 
Staybridge Suites
6
(1)
728
(120)
 
Hotel Indigo
5
-
852
-
 
____
____
______
_____
Total
112
(10)
26,496
(3,088)
 
____
____
______
_____
Analysed by ownership type
       
 
Franchised
3
(1)
699
(153)
 
Managed
109
(9)
25,797
(2,935)
 
____
____
______
_____
Total
112
(10)
26,496
(3,088)
 
____
____
______
_____
 
The pipeline in AMEA decreased over the period by 10 hotels (3,088 rooms) to 112 hotels (26,496 rooms). This movement included signings of six hotels (1,395 rooms), including two hotels (625 rooms) in the InterContinental brand.  Terminations from the pipeline amounted to nine hotels (2,615 rooms).
 
 
 
GREATER CHINA
 
 
 
3 months ended
6 months ended
 
30 June
2012
30 June
2011
 
%
30 June
2012
30 June
2011
 
%
Greater China Results
$m
$m
change
$m
$m
change
             
Revenue
           
 
Franchised
1
-
-
1
1
-
 
Managed
22
18
22.2
40
33
21.2
 
Owned and leased
31
28
10.7
67
61
9.8
 
____
____
____
____
____
____
Total
54
46
17.4
108
95
13.7
 
____
____
____
____
____
____
Operating profit before
exceptional items
         
 
Franchised
2
-
-
2
1
100.0
 
Managed
11
11
-
22
19
15.8
 
Owned and leased
9
6
50.0
21
16
31.3
 
____
____
____
____
____
____
   
22
17
29.4
45
36
25.0
Regional overheads
(6)
(3)
(100.0)
(9)
(6)
(50.0)
 
____
____
____
____
____
____
Total
16
14
14.3
36
30
20.0
 
____
____
____
____
____
____
             
 
Revenue increased by $13m to $108m (13.7%) and operating profit before exceptional items increased by $6m to $36m (20.0%).  At constant exchange rates, revenue and operating profit before exceptional items increased by $12m (12.6%) and $7m (23.3%) respectively. 
 
RevPAR increased by 9.7% compared to the first half of 2011, including 7.9% in the second quarter, whilst system size for the region increased by 13.2% compared to that at 30 June 2011. 
 
Franchised revenue remained flat at $1m, whilst operating profit increased by $1m to $2m.
 
Managed revenue increased by $7m to $40m (21.2%) and managed operating profit increased by $3m to $22m (15.8%), the latter impacted by a year on year increase of $1m in bad debt levels, together with incremental investment to support managed operations.  On a constant currency basis, revenue grew by $7m (21.2%) driven by an increase in RevPAR of 10.6%, compared to the first half of 2011 and system size growth of 11.2% on that at 30 June 2011.  On the same basis, operating profit grew by $4m (21.1%).
 
In the owned and leased estate, revenue increased by $6m to $67m (9.8%) and by $5m (8.2%) on a constant currency basis, whilst operating profit increased by $5m to $21m (31.3%) on an actual and constant currency basis, reflecting a RevPAR increase of 7.6%, together with stronger food and beverage revenues, at the InterContinental Hong Kong.
 
Regional overheads increased by $3m (50.0%) to $9m, mainly reflecting additional resources to support growth in the region.
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
Greater China hotel and room count
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
23
-
9,909
(2)
 
Crowne Plaza
54
2
19,457
1,001
 
Holiday Inn
59
2
19,386
1,448
 
Holiday Inn Express
36
2
9,120
427
 
Hotel Indigo
2
1
312
128
 
____
____
______
_____
Total
174
7
58,184
3,002
 
____
____
______
_____
Analysed by ownership type:
       
 
Franchised
4
1
2,187
1,224
 
Managed
169
6
55,494
1,770
 
Owned and leased
1
-
503
8
 
____
____
______
_____
Total
174
7
58,184
3,002
 
____
____
______
_____
 
Greater China system size increased by seven hotels (3,002 rooms) to 174 hotels (58,184 rooms) in the first half of 2012. One hotel removal (380 rooms) was offset by openings of eight hotels (3,382 rooms).  Openings included the Holiday Inn Macau Cotai Central (1,224 rooms), the largest Holiday Inn in the world.
 
 
 
 
Hotels
Rooms
   
Change over
 
Change over
 
Greater China pipeline
2012
30 June
2011
31 December
2012
30 June
2011
31 December
Analysed by brand
       
 
InterContinental
22
-
9,748
(131)
 
Crowne Plaza
52
(1)
19.186
(526)
 
Holiday Inn
40
(1)
11,894
(1,486)
 
Holiday Inn Express
33
5
7,098
880
 
Hotel Indigo
5
-
525
(54)
 
HUALUXE
4
4
1,350
1,350
 
____
____
______
_____
Total
156
7
49,801
33
 
____
____
______
_____
Analysed by ownership type
       
 
Franchised
1
(1)
151
(1,224)
 
Managed
155
8
49,650
1,257
 
____
____
______
_____
Total
156
7
49,801
33
 
____
____
______
_____
 
The pipeline in Greater China increased in the first half of 2012 by seven hotels (33 rooms) to 156 hotels (49,801 rooms).  This movement included signings of 19 hotels (4,994 rooms), with seven of these hotels (1,310 rooms) in the Holiday Inn Express brand, as well as four (1,350 rooms) signings for the newly launched HUALUXE brand.  Terminations from the pipeline amounted to four hotels (1,579 rooms).

 
CENTRAL
 
Net central costs increased by $2m to $75m (2.7%) during the six months ended 30 June 2012 and by $4m (5.5%) on a constant currency basis.
 
SYSTEM FUNDS
 
In the six months ended 30 June 2012, System Fund income increased by $70m to $611m due to the growth in hotel room revenues and marketing programmes.
 
OTHER FINANCIAL INFORMATION
 
Exceptional Operating Items
 
Exceptional operating items of $23m in the six months ended 30 June 2012, related to the reversal of a previously recorded impairment charge on a North American hotel.
 
Net Financial Expenses
 
Net financial expenses decreased by $7m to $25m for the six months ended 30 June 2012 due to lower levels of net debt.
 
Taxation
 
The tax charge on profit before tax, excluding the impact of exceptional items, has been calculated using an estimated effective annual tax rate of 29%.  By also excluding the effect of prior year items, the equivalent effective tax rate would be approximately 31%.  This rate is higher than the average UK statutory rate for the year of 26.5% due mainly to certain overseas profits (particularly in the US) being subject to statutory rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
 
Taxation within exceptional items totalled a credit of $66m.  This represented, primarily, tax charges on exceptional operating items together with an exceptional tax credit representing the release of provisions which are exceptional by reason of their size or nature relating to tax matters which have been settled or in respect of which the relevant statutory limitation period has expired, together with the recognition of deferred tax assets as a result of the associated reduction in future uncertainty as to their recoverability.
 
Net tax paid in the six months ended 30 June 2012 totalled $40m.
 
Dividends
 
The Board has proposed an interim dividend per ordinary share of 21¢ (13.5p), representing growth of 31% on the 2011 interim dividend reflecting IHG's continued intention to rebalance the interim dividend towards one third of the total dividend for the year.
 
Capital Structure and Liquidity Management
 
During the six months ended 30 June 2012, $181m of cash was generated from operating activities and there was $45m capital expenditure.
 
Net debt at 30 June 2012 of $564m comprised cash and cash equivalents of $70m, loans and other borrowings of $609m and the exchange element of the fair value of currency swaps of $25m that fix the value of the Group's £250m 6% bonds at $415m.
 
On 7th August 2012, IHG announced a $1bn return to shareholders subject to shareholder approval, comprising a $500m special dividend with share consolidation to be paid in the fourth quarter of 2012 and a $500m share buyback programme to commence in the fourth quarter of 2012.
 
 
 
 
 
RISKS AND UNCERTAINTIES
 
The principal risks and uncertainties which could materially affect the Group's business for the remainder of the financial year remain those set out on pages 38 to 40 of the IHG Annual Report and Financial Statements 2011.
 
In summary, the Group is exposed to risks relating to:
 
·    
political and economic developments;
·    
events that adversely impact domestic or international travel;
·    
the hotel industry supply and demand cycle;
·    
identifying, securing and retaining franchise and management agreements;
·    
changing technology and systems;
·    
the reputation of its brands and the protection of intellectual property rights;
·    
requiring the right people, skills and capability to manage growth and change;
·    
the reliance upon its proprietary reservations system and is exposed to the risk of failures in the system and increased competition in reservations infrastructure;
·    
information security;
·    
its financial stability, ability to borrow and satisfy debt covenants;
·    
compliance with existing and changing regulations across numerous countries, territories and jurisdictions;
·    
litigation;
·    
corporate responsibility;
·    
funding in relation to the defined benefits under its pension plans; and
·    
difficulties insuring the business.
 
Our focus on high-quality growth through brand performance, talented people and best in class delivery drives real shareholder value, as seen by our continued outperformance and capital return.  While the global economic environment remains uncertain, IHG continues to trade well and we are confident in our strategy for the future.
We have delivered good performance in the first half with RevPAR growth from all regions through gains in both occupancy and rate.   
 
The economic outlook for the Eurozone remains uncertain, however the Group is not significantly exposed to this region.  Less than 10% of the Group's operating profit before central overheads is Euro denominated and the only significant asset in the region is the InterContinental Paris Le Grand which is partly hedged from a balance sheet perspective.  The Group is not dependent on Euro liquidity and none of the banks in the syndicated facility are based in the Eurozone.  The Group closely monitors working capital and cash to minimise any negative exposure to unexpected currency movements and is continually monitoring and reacting to trading conditions in the region.
 
The financing environment remains tough, however IHG continues to open and sign high quality hotels.  Building on the success of all our existing brands, we've launched two new hotel brands for our largest markets, EVEN Hotels for the United States and HUALUXE Hotels & Resorts for Greater China, both are attracting significant owner interest.
 
Our global scale, powerful brands, revenue delivery systems, resilient cash generative business model and focus on efficiency combined with an optimistic market outlook give us confidence in the future.  This is evidenced by today's announcement of a $1bn return of funds plus a 31% increase in the interim dividend.
 
A copy of the IHG Annual Report and Financial Statements 2011 is available at www.ihgplc.com.

 
GOING CONCERN
 
An overview of the business activities of IHG, including a review of the key business risks that the Group faces is given in this Interim Management Report. Information on the Group's treasury management policies can be found in note 21 to the Group financial statements in the IHG Annual Report and Financial Statements 2011.  The Group refinanced its bank facility in November 2011 and put in place a new five-year $1.07bn facility.  The £250m seven-year bond issued in December 2009 remains outstanding.  At the end of June 2012, the Group was trading significantly within its banking covenants and debt facilities.
 
The Group's fee-based model and wide geographic spread means that it is well placed to manage through uncertain times and our forecasts and sensitivity projections, based on a range of reasonably possible changes in trading performance and taking into account the risks and uncertainties outlined in this Report, show that the Group should be able to operate within the level of its current facilities.
 
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and, accordingly, they continue to adopt the going concern basis in preparing the financial statements.
 
 
DIRECTORS' RESPONSIBILITY STATEMENT
 
The Directors confirm that to the best of their knowledge:
 
 
·     The condensed set of financial statements has been prepared in accordance with IAS 34;
 
·     The interim management report includes a fair review of the important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR
       4.2.7R; and
 
·     The interim management report includes a fair review of related party transactions and changes therein, as required by DTR 4.2.8R.
 
On behalf of the Board
 
 
 
 
 
 
Richard Solomons                   Tom Singer
Chief Executive                         Chief Financial Officer
 
6 August 2012                           6 August 2012
 
 
 
 


INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the three months ended 30 June 2012
 
 
 
3 months ended 30 June 2012
3 months ended 30 June 2011
 
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
           
             
Revenue (note 3)
469
-
469
454
-
454
Cost of sales
(195)
-
(195)
(188)
-
(188)
Administrative expenses
(86)
-
(86)
(88)
(37)
(125)
Other operating income and expenses
3
-
3
4
9
13
 
_____
____
____
_____
____
____
 
191
-
191
182
(28)
154
             
Depreciation and amortisation
(23)
-
(23)
(25)
-
(25)
Impairment
-
23
23
-
(2)
(2)
 
_____
____
____
_____
____
____
             
Operating profit (note 3)
168
23
191
157
(30)
127
Financial income
1
-
1
1
-
1
Financial expenses
(14)
-
(14)
(17)
-
(17)
 
_____
____
____
_____
____
____
             
Profit before tax (note 3)
155
23
178
141
(30)
111
             
Tax (note 5)
(44)
(13)
(57)
(39)
15
(24)
 
_____
____
____
_____
____
____
Profit for the period from continuing operations attributable to the equity holders of the parent
 
 
111
 
 
10
 
 
121
 
 
102
 
 
(15)
 
 
87
 
====
====
====
====
====
====
             
Earnings per ordinary share
(note 6)
           
Continuing and total operations:
           
 
Basic
   
41.6¢
   
30.0¢
 
Diluted
   
40.9¢
   
29.5¢
 
Adjusted
38.1¢
   
35.2¢
   
 
Adjusted diluted
37.5¢
   
34.6¢
   
 
====
 
====
====
 
====

 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2012
 
 
 
6 months ended 30 June 2012
6 months ended 30 June 2011
 
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
           
             
Revenue (note 3)
878
-
878
850
-
850
Cost of sales
(377)
-
(377)
(369)
-
(369)
Administrative expenses
(173)
-
(173)
(169)
(59)
(228)
Other operating income and expenses
4
-
4
8
18
26
 
_____
____
____
_____
____
____
 
332
-
332
320
(41)
279
             
Depreciation and amortisation
(46)
-
(46)
(51)
-
(51)
Impairment
-
23
23
-
9
9
 
_____
____
____
_____
____
____
             
Operating profit (note 3)
286
23
309
269
(32)
237
Financial income
2
-
2
1
-
1
Financial expenses
(27)
-
(27)
(33)
-
(33)
 
_____
____
____
_____
____
____
             
Profit before tax (note 3)
261
23
284
237
(32)
205
             
Tax (note 5)
(75)
66
(9)
(66)
17
(49)
 
_____
____
____
_____
____
____
Profit for the period from continuing operations attributable to the equity holders of the parent
 
 
186
 
 
89
 
 
275
 
 
171
 
 
(15)
 
 
156
 
====
====
====
====
====
====
             
Earnings per ordinary share
(note 6)
           
Continuing and total operations:
           
 
Basic
   
94.8¢
   
54.0¢
 
Diluted
   
93.2¢
   
53.1¢
 
Adjusted
64.1¢
   
59.2¢
   
 
Adjusted diluted
63.1¢
   
58.2¢
   
 
====
 
====
====
 
====
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the three and six months ended 30 June 2012
 
 
 
 
2012
3 months ended
30 June
$m
2011
3 months ended
30 June
$m
2012
6 months ended
30 June
$m
2011
6 months ended
30 June
$m
         
Profit for the period
121
87
275
156
         
Other comprehensive income
       
Available-for-sale financial assets:
       
 
(Losses)/gains on valuation
(1)
12
(4)
12
 
Losses reclassified to income on impairment
-
3
-
3
Cash flow hedges:
       
 
Reclassified to financial expenses
-
1
-
3
Defined benefit pension plans:
       
 
Actuarial (losses)/gains, net of related tax credit: 2012 3 months $6m, 6 months $2m (2011 3 months $1m, 6 months $1m charge)
 
(17)
 
(10)
 
(3)
 
2
 
Change in asset restriction on plans in surplus and liability in respect of funding commitments, net of related tax of: 2012 3 months $nil, 6 months $13m credit (2011 3 months $nil; 6 months $2m charge)
 
2
 
1
 
12
 
(3)
Exchange differences on retranslation of foreign operations, net of related tax credit: 2012 3 months $1m, 6 months $1m (2011 3 months $2m charge, 6 months $2m charge)
 
(30)
 
2
 
(9)
 
14
Tax related to pension contributions
1
1
1
3
 
____
____
____
____
Other comprehensive (loss)/income for the period
(45)
10
(3)
34
 
____
____
____
____
Total comprehensive income for the period
76
97
272
190
 
===
====
===
====
         
Attributable to:
       
 
Equity holders of the parent
76
96
272
189
 
Non-controlling interest
-
1
-
1
 
_____
_____
_____
_____
 
76
97
272
190
 
=====
=====
=====
=====
 
 
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2012
 
 
 
6 months ended 30 June 2012
 
Equity
share
capital
 
Other
reserves*
 
Retained
earnings
Non-
controlling
interest
 
Total
equity
 
$m
$m
$m
$m
$m
           
At beginning of the period
162
(2,650)
3,035
8
555
           
Total comprehensive income for the period
-
(13)
285
-
272
Issue of ordinary shares
7
-
-
-
7
Movement in shares in employee share trusts
-
18
(63)
-
(45)
Equity-settled share-based cost
-
-
13
-
13
Tax related to share schemes
-
-
14
-
14
Equity dividends paid
-
-
(113)
-
(113)
Share of reserve in equity accounted investment
-
-
5
-
5
Exchange and other adjustments
1
(1)
-
-
-
 
____
____
____
____
____
At end of the period
170
(2,646)
3,176
8
708
 
====
====
====
====
====
 
 
 
6 months ended 30 June 2011
 
Equity
share
capital
 
Other
reserves*
 
Retained
earnings
Non-
controlling
interest

Total
equity
 
$m
$m
$m
$m
$m
           
At beginning of the period
155
(2,659)
2,788
7
291
           
Total comprehensive income for the period
-
31
158
1
190
Issue of ordinary shares
6
-
-
-
6
Movement in shares in employee share trusts
-
26
(80)
-
(54)
Equity-settled share-based cost
-
-
18
-
18
Tax related to share schemes
-
-
10
-
10
Equity dividends paid
-
-
(102)
-
(102)
Exchange and other adjustments
5
(5)
-
-
-
 
____
____
____
____
____
At end of the period
166
(2,607)
2,792
8
359
 
====
====
====
====
====
 
 
 
*
Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, unrealised gains and losses reserve and currency translation reserve.



 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
30 June 2012
 
 
2012
30 June
2011
30 June
2011
31 December
 
$m
$m
$m
ASSETS
     
Property, plant and equipment
1,336
1,401
1,362
Goodwill
92
96
92
Intangible assets
342
277
308
Investment in associates and joint ventures
90
80
87
Retirement benefit assets
26
6
21
Other financial assets
145
154
156
Non-current tax receivable
42
-
41
Deferred tax assets
145
116
106
 
_____
_____
_____
Total non-current assets
2,218
2,130
2,173
 
_____
_____
_____
Inventories
4
4
4
Trade and other receivables
465
427
369
Current tax receivable
4
4
20
Derivative financial instruments
-
-
3
Cash and cash equivalents
70
55
182
Other financial assets
5
-
-
 
_____
_____
_____
Total current assets
548
490
578
 
_____
_____
_____
Non-current assets classified as held for sale
218
258
217
 
______
______
______
Total assets (note 3)
2,984
2,878
2,968
 
=====
=====
=====
LIABILITIES
     
Loans and other borrowings
(21)
(54)
(21)
Derivative financial instruments
(1)
(3)
-
Trade and other payables
(671)
(645)
(707)
Provisions
(1)
(23)
(12)
Current tax payable
(76)
(120)
(120)
 
_____
_____
_____
Total current liabilities
(770)
(845)
(860)
 
_____
_____
_____
Loans and other borrowings
(588)
(804)
(670)
Derivative financial instruments
(37)
(34)
(39)
Retirement benefit obligations
(192)
(190)
(188)
Trade and other payables
(527)
(488)
(497)
Provisions
(1)
(3)
(2)
Deferred tax liabilities
(101)
(94)
(97)
 
_____
_____
_____
Total non-current liabilities
(1,446)
(1,613)
(1,493)
 
_____
_____
_____
Liabilities classified as held for sale
(60)
(61)
(60)
 
_____
_____
_____
Total liabilities
(2,276)
(2,519)
(2,413)
 
=====
=====
=====
Net assets
708
359
555
 
=====
=====
=====
EQUITY
     
Equity share capital
170
166
162
Capital redemption reserve
10
10
10
Shares held by employee share trusts
(9)
(10)
(27)
Other reserves
(2,894)
(2,898)
(2,893)
Unrealised gains and losses reserve
67
67
71
Currency translation reserve
180
224
189
Retained earnings
3,176
2,792
3,035
 
______
______
______
IHG shareholders' equity
700
351
547
Non-controlling interest
8
8
8
 
______
______
______
Total equity
708
359
555
 
=====
=====
=====



INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2012
 
 
 
 
2012
6 months ended
30 June
2011
6 months ended
30 June
 
$m
$m
     
Profit for the period
275
156
Adjustments for:
   
 
Net financial expenses
25
32
 
Income tax charge
9
49
 
Depreciation and amortisation
46
51
 
Exceptional operating items
(23)
32
 
Equity-settled share-based cost
11
15
 
Other non-cash movements
(2)
(1)
 
_____
_____
Operating cash flow before movements in working capital
341
334
Net change in loyalty programme liability and System Fund surplus
118
83
Other changes in net working capital
(208)
(190)
Utilisation of provisions
(12)
(7)
Retirement benefit contributions, net of cost
(8)
(11)
Cash flows relating to exceptional operating items
-
(29)
 
_____
_____
Cash flow from operations
231
180
Interest paid
(13)
(17)
Interest received
1
1
Tax paid on operating activities
(38)
(51)
 
_____
_____
Net cash from operating activities
181
113
 
_____
_____
Cash flow from investing activities
   
Purchases of property, plant and equipment
(12)
(18)
Purchase of intangible assets
(32)
(18)
Investment in other financial assets
-
(12)
Investment in associates and joint ventures
(1)
(34)
Disposal of assets, net of costs
-
71
Proceeds from other financial assets
3
5
Tax paid on disposals
(2)
-
 
_____
_____
Net cash from investing activities
(44)
(6)
 
_____
_____
Cash flow from financing activities
   
Proceeds from the issue of share capital
7
6
Purchase of own shares by employee share trusts
(45)
(57)
Dividends paid to shareholders
(113)
(102)
Decrease in borrowings
(99)
(3)
 
_____
_____
Net cash from financing activities
(250)
(156)
 
_____
_____
     
Net movement in cash and cash equivalents in the period
(113)
(49)
Cash and cash equivalents at beginning of the period
182
78
Exchange rate effects
1
(1)
 
_____
_____
Cash and cash equivalents at end of the period
70
28
 
=====
=====
Comprising:
   
 
Cash and cash equivalants
70
55
 
Overdrafts included within current loans and other borrowings
-
(27)
 
____
____
 
70
28
 
====
====
 


 
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
 
 
 
1.
Basis of preparation
 
 
These condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and IAS 34 'Interim Financial Reporting'. They have been prepared on a consistent basis using the accounting policies set out in the InterContinental Hotels Group PLC (the Group or IHG) Annual Report and Financial Statements for the year ended 31 December 2011.
 
These condensed interim financial statements are unaudited and do not constitute statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006. The auditors have carried out a review of the financial information in accordance with the guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board.
 
The financial information for the year ended 31 December 2011 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.
 
After making enquiries, the directors have concluded that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the condensed interim financial statements.
 
2.
Exchange rates
 
 
The results of operations have been translated into US dollars at the average rates of exchange for the period. In the case of sterling, the translation rate for the six months ended 30 June is $1= £0.63 (2012 3 months, $1 = £0.63; 2011 6 months, $1 = £0.62; 2011 3 months, $1=£0.61). In the case of the euro, the translation rate for the six months ended 30 June is $1 = €0.77 (2012 3 months, $1 = €0.78; 2011 6 months, $1 = €0.71; 2011 3 months, $1 = €0.70).
 
Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the period. In the case of sterling, the translation rate is $1=£0.64 (2011 31 December $1 = £0.65; 2011 30 June $1 = £0.62). In the case of the euro, the translation rate is $1 = €0.79 (2011 31 December $1 = €0.77; 2011 30 June $1 = €0.69).
 
 
 
3.
Segmental information
       
 
 
Revenue
       
   
2012
2011
2012
2011
   
3 months ended
30 June
3 months ended
30 June
6 months ended
30 June
6 months ended
30 June
   
$m
$m
$m
$m
           
 
Americas 
219
222
400
416
 
Europe
116
109
206
185
 
AMEA
52
50
108
100
 
Greater China
54
46
108
95
 
Central
28
27
56
54
   
____
____
____
____
 
Total revenue
469
454
878
850
   
====
====
====
====
           
 
All results relate to continuing operations.
 
 
Profit
2012
3 months ended
30 June
$m
2011
3 months ended
30 June
$m
2012
6 months ended
30 June
$m
2011
6 months ended
30 June
$m
           
 
Americas
133
128
233
225
 
Europe
37
39
52
51
 
AMEA
18
16
40
36
 
Greater China
16
14
36
30
 
Central
(36)
(40)
(75)
(73)
   
____
____
____
____
 
Reportable segments' operating profit
168
157
286
269
 
Exceptional operating items (note 4)
23
                         (30)
23
(32)
   
____
____
____
____
 
Operating profit
191
127
309
237
           
 
Financial income
1
1
2
1
 
Financial expenses
(14)
(17)
(27)
(33)
   
____
____
____
____
 
Profit before tax
178
111
284
205
   
====
===
====
====
           
 
All results relate to continuing operations.
 
 
 
Assets
2012
30 June
$m
2011
30 June
$m
2011
31 December
$m