6-K 1 ihg201205096k.htm 1ST QUARTER RESULTS ihg201205096k.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 09 May 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
First Quarter Results to 31 March 2012
 
Continuing strong RevPAR performance drives 16% underlying profit growth
 
 
Financial summaryº
2012
2011
                                                     % Change YoY
Actual
CER²
CER² & excluding LDs³
Revenue
$409m
$396m
3%
4%
6%
Operating profit
$118m
$112m
5%
5%
16%
Total adjusted EPS¹
26.0¢
24.0¢
8%
   
Total basic EPS
53.3¢
24.0¢
122%
   
Net debt
$577m
$846m
     
 
 
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
"We have delivered strong performance in the quarter with global revenue per available room (RevPAR) up 7% and continued outperformance in the US and Greater China. The strength of our brands and systems, together with our scale and the close working relationships we have with our hotel owners, continue to underpin our success.
In the quarter we launched EVEN Hotels in the US and HUALUXE Hotels and Resorts in Greater China, reflecting our ability to create distinctive and innovative new brands. These will further develop our already strong position in our two largest markets over the long term, and together with our ongoing work to strengthen our existing brands, will enable us to deliver market share gains into the future.
The global economic backdrop, particularly in Europe, is still challenging, but the considerable strengths of our business including our resilient model and strong balance sheet give us confidence that we will continue to drive high quality growth."
 
 
Driving Market Share
First quarter global RevPAR growth of 7.0%
 
-
Global rate growth of 3.3% and occupancy growth of 2.1%pts.
 
-
Americas RevPAR up 7.7% (US 7.6%); Europe 2.6%; AMEA 6.9%; Greater China 11.9%.
Total system size of 661,159 rooms (4,506 hotels), up 1% year on year
 
-
7,101 rooms (48 hotels) added to the system.  Our brands continue to gain traction in new markets, with the first hotels opening for Holiday Inn Express in Thailand and Hotel Indigo in Germany in the quarter.  4,290 rooms (22 hotels) removed.
 
-
Total pipeline of 174,554 rooms (1,098 hotels), of which over 40% is under construction. 
 
-
Signings of 9,331 rooms (59 hotels), ahead of Q1 2011 and includes 5,271 Holiday Inn brand family rooms.
 
-
Greater China system and pipeline at record levels with 55,871 rooms (170 hotels) open and a further 51,742 rooms (155 hotels) expected to open over the next 3 - 5 years (30% of our global pipeline).
Building preferred brands
 
-
EVEN Hotels was launched in February as the first mainstream US hotel brand focused on wellness. W
e will invest up to $150m over the next 3 years to help establish the brand in key US cities. We expect to open the first hotel in H1 2013.
 
-
HUALUXE Hotels and Resorts was launched in March as the first upscale, international hotel brand designed for the Chinese consumer.  Interest for the brand among owners is high with over 20 letters of intent signed to date. We expect to open the first hotel by early 2014.
 
-
Hotel Indigo has recently been recognised as a J.D. Power 2012 Customer Service Champion.  This follows on from the 2011 J.D. Power and Associates awards for both Holiday Inn and Hotel Indigo for highest in guest satisfaction among mid-scale and upscale full service hotels respectively.
 
-
Holiday Inn and Holiday Inn Express continue to outperform in the US, delivering Q1 total RevPAR growth of 8.6% and 9.6% respectively compared to industry RevPAR growth for the upper midscale segment of 8.0%.
 
Investing in growth
Gross capital expenditure in the quarter was $21m, against full year guidance of c$150m of maintenance and $100m-$200m of growth capital expenditure.
The disposal process of InterContinental New York Barclay is progressing.
 
 
Current trading update
April global RevPAR up 6.1%, including rate up 4.2%. 
 
-
Americas 5.6%; Europe 5.2%, AMEA 9.1%, Greater China 7.1%.
º All figures are before exceptional items unless otherwise noted   See appendix 3 for analysis of financial headlines
¹ Before exceptional items
² CER = constant exchange rates
³Excluding $10m of significant liquidated damages receipts in 2011
         

 
 
 
Americas - Strong growth in franchise royalties
RevPAR increased 7.7%, including rate growth of 4.2%.  US RevPAR was up 7.6%, including rate growth of 4.1%. On a total basis including the benefit of new hotels, US RevPAR grew 8.4%, outperforming the industry up 7.9%.
Revenue decreased 7% to $181m and operating profit increased 3% to $100m. After adjusting for (i) owned hotel disposals in 2011 (ii) the impact of a $10m liquidated damages receipt in the managed business in 2011 and (iii) the impact of managed lease* hotels, revenue increased 6% and operating profit increased 16%. This was driven by strong RevPAR growth across the region, slightly offset by the impact of the partial closure of an owned hotel in the Caribbean.
We signed 5,097 rooms (43 hotels) in the first quarter and opened 4,244 rooms (33 hotels).  Signings included Hotel Indigo hotels in Philadelphia and Wilmington and our six signings outside the US including three Staybridge Suites hotels.  In line with our strategy to grow the presence of Holiday Inn in the leisure market, openings in the quarter included three resort hotels for the brand in the US and our eighth Holiday Inn Club Vacation hotel which is located in Las Vegas. This strong activity for the Holiday Inn brand family in the quarter demonstrates the ongoing benefits from the Holiday Inn relaunch.
 
 
Europe - Robust performance in challenging markets
RevPAR increased 2.6%, including rate growth of 1.2%. Despite continued macro economic uncertainty, RevPAR in our key markets remained resilient, with the UK up 2.2%, France up 2.6% and Germany up 3.3%.
Revenue increased 18% (22% at CER) to $90m and operating profit increased 25% (33% at CER) to $15m. After adjusting for the leased hotel disposal in 2011 and the impact of managed lease* hotels, revenue was broadly in line with Q1 2011 and operating profit increased 25%.
We signed 915 rooms (5 hotels) in the quarter, including an InterContinental hotel in St Petersburg, which will be our second for the brand in Russia.  We opened 968 rooms (8 hotels) including Hotel Indigo hotels in Edinburgh and also in Berlin, the first for the brand in Continental Europe.
 
 
 
AMEA - Good RevPAR growth in most markets
RevPAR increased 6.9%, including rate growth of 1.7%.  Most markets continue to show strong growth including Saudi Arabia up 9.5%, UAE up 7.4%, South East Asia up 8.9% and Japan up 4.0%.  Egypt and Bahrain continue to be impacted by political unrest with RevPAR down 13.6% and 13.9% respectively.
Revenue increased 12% (10% at CER) to $56m and operating profit increased 10% to $22m and by 16% after adjusting for the disposal in Q3 2011 of a hotel asset and partnership interest in Australia.
We signed 603 rooms (2 hotels) in the quarter, and opened 1,175 rooms (4 hotels). Openings included Holiday Inn Express Bangkok Siam, the first hotel for the brand in South East Asia; InterContinental hotels in Thailand and Doha; and the first Crowne Plaza hotel in Central Java.
 
 
 
Greater China - Increase in rooms and RevPAR drives strong growth
Greater China continues to be our strongest market with RevPAR growth of 11.9%, including rate growth of 3.3%.
Revenue increased 10% to $54m and operating profit increased 25% to $20m.  This was driven by a combination of strong RevPAR growth and the contribution from a 13% increase in net system size.
We signed 2,716 rooms (9 hotels) in the quarter, including five Crowne Plaza hotels, taking the pipeline for the brand in the region to 21,671 rooms (58 hotels). We opened 714 rooms (3 hotels) in the quarter, including Hotel Indigo Xiaman Harbour, our second hotel for the brand in Greater China. In April we opened a further 3 hotels (2,232 rooms), including the Holiday Inn Macau
Cotai Central (1,224 rooms), the largest Holiday Inn in the world.
Our strong and profitable platform and leading position in Greater China result from our growing scale, expertise of our team and the quality of our relationship with owners, which we have developed over the three decades we have been operating in the region.
 
Interest, tax and cash flow and exceptional items
The interest charge for the period was $12m (Q1 2011: $16m) due to lower levels of net debt and a small non recurring cash interest receipt.
Based on the position at the end of the quarter, the tax charge has been calculated using an estimated annual tax rate of 29% (Q1 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 the period, together with associated deferred tax amounts.
Net debt was $577m at the end of the quarter (including the $210m finance lease on the InterContinental Boston).  This is down from $846m at 31 March 2011 but up $39m on the year end position due to seasonal working capital movements.
* See appendix 5 for definition
 
 
 
Appendix 1: RevPAR Movement Summary
 
April 2012
Q1 2012
RevPAR
Rate
Occ.
RevPAR
Rate
Occ.
Group
6.1%
4.2%
1.2%pts
7.0%
3.3%
2.1%pts
Americas
5.6%
4.8%
0.5%pts
7.7%
4.2%
2.0%pts
Europe
5.2%
2.5%
1.8%pts
2.6%
1.2%
0.8%pts
AMEA
9.1%
2.1%
4.5%pts
6.9%
1.7%
3.4%pts
G. China
7.1%
2.9%
2.5%pts
11.9%
3.3%
4.3%pts
 
 
Appendix 2: Q1 2012 System & Pipeline Summary (rooms)
 
System
Pipeline
Openings
Removals
Net
Total
YoY%
Signings
Total
Group
7,101
(4,290)
2,811
661,159
1%
9,311
174,554
Americas
4,244
(2,385)
1,859
444,057
0%
5,097
80,314
Europe
968
(548)
420
100,305
3%
915
16,244
AMEA
1,175
(1,332)
(157)
60,926
(1)%
603
26,254
G. China
714
(25)
689
55,871
13%
2,716
51,742
 
 
Appendix 3: First quarter financial headlines
Operating Profit $m
                                                 Total
Americas
Europe
AMEA
G.China
Central
2012
2011
2012
2011
2012
2011
       2012          2011
          2012           2011
       2012                                           2011
Franchised
117
108
101
91
13
14
3
2
0
1
-
-
Managed
50
49
12
18
4
1
23
22
11
8
-
-
Owned & leased
16
16
(2)
(1)
5
6
1
1
12
10
-
-
Regional overheads
(26)
(28)
(11)
(11)
(7)
(9)
(5)
(5)
(3)
(3)
-
-
Profit pre central overheads
157
145
100
97
15
12
22
20
20
16
-
-
Central overheads
(39)
(33)
-
-
-
-
-
-
-
-
(39)
(33)
Group Operating profit
118
112
100
97
15
12
22
20
20
16
(39)
(33)
 
 
Appendix 4: Constant exchange rate (CER) operating profit movement before exceptional items
Growth/
(decline)
Total***
Americas
Europe
AMEA
G. China
Actual *
CER**
Actual *
CER**
Actual *
CER**
Actual *
CER**
Actual *
CER**
5%
5%
3%
        3%
25%
33%
10%
10%
25%
25%
Exchange rates:
   
 
GBP:USD
EUR:USD
 
* US dollar actual currency
2012
0.64
 
0.76
 
** Translated at constant 2011 exchange rates
2011
0.62
 
0.73
 
*** After central overheads
                                 
 
 
Appendix 5: Definitions
Managed lease hotels: properties that are structured for legal reasons as operating leases but with the same characteristics as management contracts.
 
 
 

 
 
 
For further information, please contact:
 
Investor Relations (Catherine Dolton, Isabel Green)
+44 (0)1895 512176
   
Media Affairs (Yasmin Diamond, Kari Kerr):
+44 (0)1895 512425
+44 (0) 7770 736 849
 
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.
 
Conference call and Q&A:
A conference call with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer) will commence at 8.00am (London time) on Wednesday 9 May.  There will be an opportunity to ask questions. 
 
International dial-in: +44 (0)20 7108 6370
   
UK Toll Free 0808 238 6029
   
Passcode: HOTEL
   
US conference call and Q&A:
There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 9 May with Richard Solomons (Chief Executive Officer) and Tom Singer (Chief Financial Officer).  There will be an opportunity to ask questions.
 
International dial-in: +44 (0)20 7108 6370
   
Standard US dial-in:+1 517 345 9004
   
US Toll Free: 866 692 5726
   
Passcode: HOTEL
   
A recording of the conference call will also be available for 7 days.  To access this dial the relevant number below.
 
UK Replay
International dial-in: +44 (0)20 7108 6293
US Replay
International Dial in : +44 (0) 20 7108 6288
 
UK Toll Free: 0808 376 9042
Passcode : 1478
US Toll Free: 866 851 2606
Passcode: 1480
 
2012 Interim results: 7 August 2012
We will be announcing our half year results for the six months to 30 June on 7 August 2012. We will host a conference call with slide cast for analysts and investors on the day of the results. There will also be a conference call later the same day, primarily for US analysts and investors. There will be an opportunity to ask questions on both calls.
Website:
The full release and supplementary data will be available on our website from 7.00 am (London time) on 9 May. The web address is www.ihgplc.com/Q112. 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 65 million members worldwide.
IHG franchises, leases, manages or owns over 4,500 hotels and more than 661,000 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.
 
         
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the three months ended 31 March 2012
 
 
 
3 months ended 31 March 2012
3 months ended 31 March 2011
 
Before
exceptional
items
Exceptional
items
(note 8)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 8)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
           
             
Revenue (note 3)
409
-
409
396
-
396
Cost of sales
(182)
-
(182)
(181)
-
(181)
Administrative expenses
(87)
-
(87)
(81)
(22)
(103)
Other operating income and expenses
1
-
1
4
9
13
 
_____
____
____
_____
____
____
 
141
-
141
138
(13)
125
             
Depreciation and amortisation
(23)
-
(23)
(26)
-
(26)
Impairment
-
-
-
-
11
11
 
_____
____
____
_____
____
____
             
Operating profit (note 3)
118
-
118
112
(2)
110
Financial income
1
-
1
-
-
-
Financial expenses
(13)
-
(13)
(16)
-
(16)
 
_____
____
____
_____
____
____
             
Profit before tax (note 3)
106
-
106
96
(2)
94
             
Tax (note 9)
(31)
79
48
(27)
2
(25)
 
_____
____
____
_____
____
____
Profit for the period from continuing operations attributable to the equity holders of the parent
 
75
 
79
 
154
 
69
 
-
 
69
 
====
====
====
====
====
====
             
Earnings per ordinary share
(note 10)
           
Continuing and total operations:
           
 
Basic
   
53.3¢
   
24.0¢
 
Diluted
   
52.4¢
   
23.5¢
 
Adjusted
26.0¢
   
24.0¢
   
 
Adjusted diluted
25.5¢
   
23.5¢
   
 
====
 
====
====
 
====
 
 
 

 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the three months ended 31 March 2012
 
 
 
 
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
     
Profit for the period
154
69
     
Other comprehensive income
   
Available-for-sale financial assets:
   
 
Losses on valuation
(3)
-
Cash flow hedges:
   
 
Reclassified to financial expenses
-
2
Defined benefit pension plans:
   
 
Actuarial gains, net of related tax charge of $4m (2011 $2m)
14
12
 
Change in asset restriction on plans in surplus and liability in respect of funding commitments, net of related tax credit of $13m (2011 charge of $2m)
 
10
 
(4)
Exchange differences on retranslation of foreign operations, including related tax charge of $nil (2011 $nil)
21
12
Tax related to pension contributions
-
2
 
____
____
Other comprehensive income for the period
42
24
 
____
____
Total comprehensive income for the period attributable to equity holders of the parent
196
93
 
====
====
     
 
 
 
 
 

 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the three months ended 31 March 2012
 
 
 
3 months ended 31 March 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
-
18
178
-
196
Issue of ordinary shares
5
-
-
-
5
Movement in shares in employee share trusts
-
18
(63)
-
(45)
Equity-settled share-based cost
-
-
7
-
7
Tax related to share schemes
-
-
10
-
10
Share of reserve in equity accounted investment
-
-
5
-
5
Exchange adjustments
6
(6)
-
-
-
 
____
____
____
____
____
At end of the period
173
(2,620)
3,172
8
733
 
====
====
====
====
====
 
 
 
3 months ended 31 March 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
-
14
79
-
93
Issue of ordinary shares
4
-
-
-
4
Movement in shares in employee share trusts
-
23
(76)
-
(53)
Equity-settled share-based cost
-
-
7
-
7
Tax related to share schemes
-
-
5
-
5
Exchange adjustments
6
(6)
-
-
-
 
____
____
____
____
____
At end of the period
165
(2,628)
2,803
7
347
 
====
====
====
====
====
 
 
 
*
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
31 March 2012
 
 
 
2012
31 March
2011
31 March
2011
31 December
 
$m
$m
$m
ASSETS
     
Property, plant and equipment
1,376
1,456
1,362
Goodwill
94
93
92
Intangible assets
313
271
308
Investment in associates and joint ventures
91
46
87
Retirement benefit assets
30
6
21
Other financial assets
146
140
156
Non-current tax receivable
41
-
41
Deferred tax assets
153
133
106
 
_____
_____
_____
Total non-current assets
2,244
2,145
2,173
 
_____
_____
_____
Inventories
4
4
4
Trade and other receivables
444
416
369
Current tax receivable
4
5
20
Derivative financial instruments
2
-
3
Cash and cash equivalents
150
59
182
Other financial assets
5
-
-
 
_____
_____
_____
Total current assets
609
484
578
 
_____
_____
_____
Non-current assets classified as held for sale
217
269
217
 
______
______
______
Total assets (note 3)
3,070
2,898
2,968
 
=====
=====
=====
LIABILITIES
     
Loans and other borrowings
(21)
(17)
(21)
Derivative financial instruments
-
(3)
-
Trade and other payables
(670)
(651)
(707)
Provisions
(1)
(23)
(12)
Current tax payable
(73)
(141)
(120)
 
_____
_____
_____
Total current liabilities
(765)
(835)
(860)
 
_____
_____
_____
Loans and other borrowings
(691)
(875)
(670)
Derivative financial instruments
(26)
(27)
(39)
Retirement benefit obligations
(178)
(184)
(188)
Trade and other payables
(514)
(475)
(497)
Provisions
(2)
(3)
(2)
Deferred tax liabilities
(101)
(91)
(97)
 
_____
_____
_____
Total non-current liabilities
(1,512)
(1,655)
(1,493)
 
_____
_____
_____
Liabilities classified as held for sale
(60)
(61)
(60)
 
_____
_____
_____
Total liabilities
(2,337)
(2,551)
(2,413)
 
=====
=====
=====
Net assets
733
347
555
 
=====
=====
=====
EQUITY
     
Equity share capital
173
165
162
Capital redemption reserve
10
10
10
Shares held by employee share trusts
(9)
(13)
(27)
Other reserves
(2,899)
(2,899)
(2,893)
Unrealised gains and losses reserve
68
51
71
Currency translation reserve
210
223
189
Retained earnings
3,172
2,803
3,035
 
______
______
______
IHG shareholders' equity
725
340
547
Non-controlling interest
8
7
8
 
______
______
______
Total equity
733
347
555
 
=====
=====
=====

 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the three months ended 31 March 2012
 
 
 
 
2012
3 months ended
31 March
2011
3 months ended
31 March
 
$m
$m
     
Profit for the period
154
69
Adjustments for:
   
 
Net financial expenses
12
16
 
Income tax (credit)/charge
(48)
25
 
Depreciation and amortisation
23
26
 
Exceptional operating items
-
2
 
Equity-settled share-based cost
6
6
 
_____
_____
Operating cash flow before movements in working capital
147
144
Net change in loyalty programme liability and System Fund surplus
70
45
Other changes in net working capital
(166)
(135)
Utilisation of provisions
(11)
(7)
Retirement benefit contributions, net of cost
(5)
(8)
Cash flows relating to exceptional operating items
-
(3)
 
_____
_____
Cash flow from operations
35
36
Interest paid
(7)
(8)
Interest received
1
-
Tax paid on operating activities
(9)
(31)
 
_____
_____
Net cash from operating activities
                                                              20
                                                                  (3)
 
_____
_____
Cash flow from investing activities
   
Purchases of property, plant and equipment
(9)
(8)
Purchase of intangible assets
(11)
(9)
Investment in other financial assets
-
(12)
Investment in associates and joint ventures
(1)
(2)
Disposal of assets, net of costs
-
(1)
Proceeds from other financial assets
2
4
Tax paid on disposals
(1)
-
 
_____
_____
Net cash from investing activities
(20)
(28)
 
_____
_____
Cash flow from financing activities
   
Proceeds from the issue of share capital
5
4
Purchase of own shares by employee share trusts
(39)
(57)
Increase in borrowings
-
70
 
_____
_____
Net cash from financing activities
(34)
17
 
_____
_____
     
Net movement in cash and cash equivalents in the period
(34)
(14)
Cash and cash equivalents at beginning of the period
182
78
Exchange rate effects
2
(5)
 
_____
_____
Cash and cash equivalents at end of the period
150
59
 
=====
=====
 

 
 
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.
 
 
 
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 three months ended 31 March is $1= £0.64 (2011 $1=£0.62).  In the case of the euro, the translation rate for the three months ended 31 March is $1 = €0.76 (2011 $1 = €0.73).
 
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=£0.62 (2011 31 December $1 = £0.65, 31 March $1 = £0.62).  In the case of the euro, the translation rate is $1 = €0.75 (2011 31 December $1 = €0.77, 31 March $1 = €0.70).
 

 
 
 
3.
Segmental information
   
 
 
Revenue
   
   
2012
2011
   
3 months ended
31 March
3 months ended
31 March
   
$m
$m
       
 
Americas  (note 4)
181
194
 
Europe  (note 5)
90
76
 
AMEA (note 6)
56
50
 
Greater China (note 7)
54
49
 
Central
28
27
   
____
____
 
Total revenue
409
396
   
====
====
       
 
All results relate to continuing operations.
   
       
         
 
 
 
Profit
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
       
 
Americas (note 4)
100
97
 
Europe  (note 5)
15
12
 
AMEA (note 6)
22
20
 
Greater China (note 7)
20
16
 
Central
(39)
(33)
   
____
____
 
Reportable segments' operating profit
118
112
 
Exceptional operating items (note 8)
-
(2)
   
____
____
 
Operating profit
118
110
       
 
Financial income
1
-
 
Financial expenses
(13)
(16)
   
____
____
 
Profit before tax
106
94
   
====
====
       
 
All results relate to continuing operations.
   
       
 
 
 
Assets
2012
31 March
$m
2011
31 March
$m
2011
31 December
$m
         
 
Americas
960
930
908
 
Europe
853
888
816
 
AMEA
285
311
276
 
Greater China
389
374
388
 
Central
233
198
228
   
____
____
____
 
Segment assets
2,720
2,701
2,616
         
 
Unallocated assets:
     
 
Non-current tax receivable
41
-
41
 
Deferred tax assets
153
133
106
 
Current tax receivable
4
5
20
 
Derivative financial instruments
2
-
3
 
Cash and cash equivalents
150
59
182
   
____
____
____
 
Total assets
3,070
2,898
2,968
   
====
====
====

 
 
 
4.
Americas
   
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
 
Revenue
   
   
Franchised
118
109
   
Managed
23
38
   
Owned and leased
40
47
   
____
____
 
Total
181
194
   
====
====
 
Operating profit
   
   
Franchised
101
91
   
Managed
12
18
   
Owned and leased
(2)
(1)
   
Regional overheads
(11)
(11)
   
____
____
 
Total
                                                                100
97
   
====
====
 
 
 
All results relate to continuing operations.
 
 
 
5.
Europe
   
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
 
Revenue
   
   
Franchised
19
19
   
Managed
32
17
   
Owned and leased
39
40
   
____
____
 
Total
90
76
   
====
====
       
 
Operating profit
   
   
Franchised
13
14
   
Managed
4
1
   
Owned and leased
5
6
   
Regional overheads
(7)
(9)
   
____
____
 
Total
15
12
   
====
====
 
 
 
All results relate to continuing operations.
 

 
 
 
6.
AMEA
   
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
 
Revenue
   
   
Franchised
5
3
   
Managed
39
37
   
Owned and leased
12
10
   
____
____
 
Total
56
50
   
====
====
 
Operating profit
   
   
Franchised
3
2
   
Managed
23
22
   
Owned and leased
1
1
   
Regional overheads
(5)
(5)
   
____
____
 
Total
22
20
   
====
====
 
 
 
All results relate to continuing operations.
 

 
7.
Greater China
   
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
 
Revenue
   
   
Franchised
-
1
   
Managed
18
15
   
Owned and leased
36
33
   
____
____
 
Total
54
49
   
====
====
 
Operating profit
   
   
Franchised
-
1
   
Managed
11
8
   
Owned and leased
12
10
   
Regional overheads
(3)
(3)
   
____
____
 
Total
20
16
   
====
====
 
 
 
All results relate to continuing operations.

 
 
 
8.
Exceptional items
   
2012
3 months ended
31 March
$m
2011
3 months ended
31 March
$m
 
Continuing operations:
   
       
 
Exceptional operating items
   
   
Administrative expenses:
   
   
Litigation provision (a)
-
(22)
     
____
____
     
-
(22)
   
Other operating income:
   
   
VAT refund (b)
-
9
         
   
Impairment:
   
   
Reversal of previously recorded impairment (c)
-
11
     
____
____
   
-
(2)
   
====
====
 
Tax
   
 
Tax on exceptional operating items
-
2
 
Exceptional tax credit (d)
79
-
     
____
____
     
79
2
   
====
====
           
 
 
 
These items are treated as exceptional by reason of their size or nature.
 
a)
Related to a lawsuit filed against the Group in the Americas region, for which the final balance was paid in March 2012.
 
b)
Arose in the UK relating to periods prior to 1996. 
 
c)
Related to the partial reversal of an impairment charge recorded on a North American hotel that was sold in June 2011.
 
d)
Represents 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.
 
 
 
 
9.
Tax
 
 
The tax charge on profit from continuing operations, excluding the impact of exceptional items (note 8), has been calculated using an estimated effective annual tax rate of 29% (2011 28%) analysed as follows.
 
 
 
   
2012
2012
2012
2011
2011
2011
 
3 months ended 31 March
Profit
$m
Tax
$m
Tax
rate
Profit
$m
Tax
$m
Tax
rate
               
 
Before exceptional items
106
(31)
29%
96
(27)
28%
 
Exceptional items
-
79
 
(2)
2
 
   
____
____
 
____
____
 
   
106
48
 
94
(25)
 
   
====
====
 
====
====
 
 
Analysed as:
           
   
UK tax
 
37
   
(7)
 
   
Foreign tax
 
11
   
(18)
 
     
____
   
____
 
     
48
   
(25)
 
     
====
   
====
 
 
 
 
 
 
 
 
10.
Earnings per ordinary share
 
 
Basic earnings per ordinary share is calculated by dividing the profit for the period available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period.
 
Diluted earnings per ordinary share is calculated by adjusting basic earnings per ordinary share to reflect the notional exercise of the weighted average number of dilutive ordinary share options outstanding during the period.
 
Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by exceptional items, to give a more meaningful comparison of the Group's performance.
 
 
   
Continuing and total operations
   
2012
2011
   
3 months ended
31 March
3 months ended
31 March
 
Basic earnings per ordinary share
   
 
Profit available for equity holders ($m)
154
69
 
Basic weighted average number of ordinary shares (millions)
289
288
 
Basic earnings per ordinary share (cents)
53.3
24.0
   
====
====
 
Diluted earnings per ordinary share
   
 
Profit available for equity holders ($m)
154
69
 
Diluted weighted average number of ordinary shares (millions)
294
294
 
Diluted earnings per ordinary share (cents)
52.4
23.5
   
====
====
 
Adjusted earnings per ordinary share
   
 
Profit available for equity holders ($m)
154
69
 
Adjusting items (note 8):
   
   
Exceptional operating items ($m)
-
2
   
Tax on exceptional operating items ($m)
-
(2)
   
Exceptional tax credit ($m)
(79)
-
   
____
____
 
Adjusted earnings ($m)
75
69
 
Basic weighted average number of ordinary shares (millions)
289
288
 
Adjusted earnings per ordinary share (cents)
26.0
24.0
   
====
====
 
Diluted weighted average number of ordinary shares (millions)
294
294
 
Adjusted diluted earnings per ordinary share (cents)
25.5
23.5
   
====
====
 
 
 
 
 
The diluted weighted average number of ordinary shares is calculated as:
   
2012
3 months ended
31 March
millions
 
2011
3 months ended
31 March
millions
 
Basic weighted average number of ordinary shares
289
288
 
Dilutive potential ordinary shares - employee share options
5
6
   
____
____
   
294
294
   
====
====

 
 
 
 
11.
Net debt
   
2012
31 March
2011
31 March
2011
31 December
   
$m
$m
$m
         
 
Cash and cash equivalents
150
59
182
 
Loans and other borrowings - current
(21)
(17)
(21)
 
Loans and other borrowings - non-current
(691)
(875)
(670)
 
Derivatives hedging debt values*
(15)
(13)
(29)
   
____
____
____
 
Net debt
(577)
(846)
(538)
   
====
====
====
 
Finance lease liability included above
(210)
(207)
(209)
   
====
====
====
 
 
 
*
Net debt includes the exchange element of the fair value of currency swaps that fix the value of the Group's £250m 6% bonds at $415m.  An equal and opposite exchange adjustment on the retranslation of the £250m 6% bonds is included in non-current loans and other borrowings. 
 
 
 
12.
Movement in net debt
   
2012
3 months ended
31 March
2011
3  months ended
31 March
2011
12 months ended
31 December
   
$m
$m
$m
         
 
Net (decrease)/increase in cash and cash equivalents
(34)
(14)
107
 
Add back cash flows in respect of other components of net debt:
     
 
(Increase)/decrease in borrowings
-
(70)
119
   
____
____
____
 
(Increase)/decrease in net debt arising from cash flows
(34)
(84)
226
         
 
Non-cash movements:
     
 
Finance lease obligations
(1)
(1)
(3)
 
Exchange and other adjustments
(4)
(18)
(18)
   
____
____
____
 
(Increase)/decrease in net debt
(39)
(103)
205
         
 
Net debt at beginning of the period
(538)
(743)
(743)
   
____
____
____
 
Net debt at end of the period
(577)
(846)
(538)
   
====
=====
====
 

 
13.
Dividends
 
 
The proposed final dividend of 39.0 cents per share for the year ended 31 December 2011 is not recognised in these accounts as it remains subject to approval at the Annual General Meeting to be held on 25 May 2012. If approved, the dividend will be paid on 1 June 2012 to shareholders who were registered on 23 March 2012 at an expected total cost of $113m.
 

 
 
 
14.
Capital commitments and contingencies
 
 
At 31 March 2012, the amount contracted for but not provided for in the financial statements for expenditure on property, plant and equipment and intangible assets was $16m (2011 31 December $14m, 31 March $18m).  The Group has also committed to invest up to $60m in two investments accounted for under the equity method of which $37m had been spent at 31 March 2012.
 
At 31 March 2012, the Group had contingent liabilities of $7m (2011 31 December $8m, 31 March $1m).
 
In limited cases, the Group may provide performance guarantees to third-party owners to secure management contracts.  The maximum unprovided exposure under such guarantees is $42m (2011 31 December $42m, 31 March $76m). 
 
From time to time, the Group is subject to legal proceedings the ultimate outcome of each being always subject to many uncertainties inherent in litigation.  The Group has also given warranties in respect of the disposal of certain of its former subsidiaries.  It is the view of the Directors that, other than to the extent that liabilities have been provided for in these financial statements, such legal proceedings and warranties are not expected to result in material financial loss to the Group.
 
 

 
 
 
 
INDEPENDENT REVIEW REPORT TO
INTERCONTINENTAL HOTELS GROUP PLC
 
 
Introduction
 
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the three months ended 31 March 2012 which comprises the Group income statement, Group statement of comprehensive income, Group statement of changes in equity, Group statement of financial position, Group statement of cash flows and the related notes 1 to 14.  We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
 
This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.
 
Directors' Responsibilities
 
The interim financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
 
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
 
Our Responsibility
 
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
 
Scope of Review
 
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly we do not express an audit opinion.
 
Conclusion
 
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three months ended 31 March 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency  Rules of the United Kingdom's Financial Services Authority.
 
 
Ernst & Young LLP
London
8 May 2012
 
 
 
 
 

 


 
 
 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
   
InterContinental Hotels Group PLC
   
(Registrant)
     
 
By:
/s/ C. Cox
 
Name:
C. COX
 
Title:
COMPANY SECRETARIAL OFFICER
     
 
Date:
09 May 2012