2012 global RevPAR growth of 5.2%, with rate up 3.2% and occupancy up 1.2%pts
Preliminary Results for the year to 31 December 2012
Strong growth and scale efficiencies drive double-digit increase in profits
|Financial summary1||2012||2011||% Change YoY|
|Actual||CER3||CER & ex. LDs4|
|Adjsted basic EPS||141.5¢||130.4¢||9%|
|Total dividend per share||64.0¢||55.0¢||16%|
|Fee revenue5 growth||6.8%||5.7%|
|Net Rooms growth||2.7%||1.7%|
Richard Solomons, Chief Executive of InterContinental Hotels Group PLC, said:
“2012 was another year of significant progress for IHG with our preferred brands driving RevPAR up 5.2%, led by the US up 6.3%. Together with 2.7% net rooms growth, which is fuelled increasingly by our expansion in developing markets, this drove up fee revenues by an impressive 6.8%. This growing scale allowed us to reinvest in the business while achieving better than anticipated margin progression.
The financing environment remained tough through 2012 in many of our key markets, but we still signed on average one hotel a day into our pipeline. This reflects the excellent relationship we enjoy with our owners and further strengthens our foundation for high quality growth. We extended our portfolio of preferred brands, launching in the first quarter of 2012 the innovative HUALUXE Hotels & Resorts and EVEN Hotels.
The $1bn return of capital, announced in August, underlines the benefit of our asset light strategy in delivering strong free cash flow, and our commitment to return value to shareholders.
IHG’s proven strategy and resilient business model position us for further good performance in 2013, despite the challenging economic environment. The 16% increase in our dividend demonstrates the confidence we have in our ability to deliver sustained high quality growth, as we prepare to celebrate our 10th anniversary as a standalone business.”
Driving High Quality Growth
Current Trading Update
1 All figures are before exceptional items unless otherwise noted. See appendices 3 & 4 for financial headlines
2 After exceptional items
3 CER = constant exchange rates
4 Excluding significant liquidated damages: $16m 2011, $3m 2012.
5 See appendix 6 for definition
Americas – Double-digit adjusted profit growth driven by RevPAR outperformance
RevPAR increased 6.1%, with 4.1% rate growth, and fourth quarter RevPAR increased 5.7%. US RevPAR was up 6.3% in 2012, with 6.2% growth in the fourth quarter, despite uncertainty regarding the presidential election and "fiscal cliff". On a total basis, including the benefit of new hotels, US RevPAR grew 7.0% in the year, outperforming the industry6, which was up 6.8%.
Revenue increased 1% to $837m and operating profit increased 8% to $486m. After adjusting for owned hotel disposals, liquidated damages receipts in the managed business of $3m in 2012 and $10m in 2011 and results from managed lease hotels5, revenue was up 6% and operating profit up 10%. This was predominantly driven by the franchise business, where royalties were up 9% due to 6.0% RevPAR growth and 2.3% net system size growth. Owned profits increased 41%, driven by double digit RevPAR growth at our InterContinental hotels in Boston and San Francisco and 4% RevPAR growth at InterContinental New York Barclay.
We opened 17k rooms, up 8% on 2011 on an underlying5 basis, including 6 Hotel Indigo hotels, and IHG's second InterContinental hotel in Mexico City. We signed 26k rooms, with the first EVEN hotel, a flagship property in Manhattan, New York City, signed in October. The Holiday Inn brand family accounted for c.70% of hotel openings and signings in the year, demonstrating the ongoing benefits of the re-launch.
Europe – Robust performance and strong pace of openings
RevPAR increased 1.7%, with 1.2% rate growth and fourth quarter RevPAR increased 1.2%. Despite challenging economic conditions across Europe, RevPAR during the year grew by 2.5% in the UK and by 5.4% in Germany, where the industry benefited from a busy trade fair schedule.
Revenue increased 8% (13% at CER) to $436m and operating profit increased 11% (16% at CER) to $115m. At CER and after adjusting for a leased hotel disposal and excluding results from managed lease hotels5, revenue increased 5% and operating profit increased 16%. This was driven by a 2.1% increase in net system size and solid RevPAR growth, including 8.0% at InterContinental London Park Lane and 2.5% at InterContinental Le Grand Paris, plus a $4m decrease in regional overheads.
We signed 7k rooms (48 hotels), up 22% on 2011, including the first 2 Holiday Inn Express hotels in Russia, 6 Holiday Inn brand family hotels in Germany and 7 Hotel Indigo hotels, with firsts for this brand in France, Israel and Spain. 5k rooms (39 hotels) were opened into the system, the highest number of hotel openings in the region in the last 4 years. Openings included InterContinental London Westminster, our second for the brand in London, and 5 Hotel Indigo hotels, doubling the system size in Europe for the brand.
AMEA – RevPAR growth and cost control drive good profit growth
RevPAR increased 4.9%, with 1.8% growth in the fourth quarter. Strong trading in South East Asia and Japan was offset by slowing economic growth in some other markets in 2012. In the Middle East, political tensions continue to impact trading in some countries such as Lebanon, but markets such as Saudi Arabia and the UAE have performed well, with RevPAR up 8.0% and 5.5% in the year, respectively.
AMEA revenue increased 1% (0% CER) to $218m and operating profit increased 5% (4% CER) to $88m. At CER and after adjusting for a $6m liquidated damages receipt and the related disposal in 2011 of a hotel and partnership interest in Australia, revenue increased 3% and operating profit increased 16%, benefiting from robust trading in the managed business and careful cost control.
We signed 8k rooms (36 hotels) in the region, of which 4k were Holiday Inn brand family rooms signed in India and Indonesia. We also signed 6 InterContinental hotels, including 2 resort locations in Australia and Thailand. We opened 4k rooms (16 hotels) in the year, including 4 Crowne Plaza hotels, 2 Crowne Plaza Resorts and the first Holiday Inn Express in India, in Ahmedabad. This hotel was opened by IHG and Duet India Hotels Group, and was awarded '2012 World's Leading New Mid-Market Hotel' by World Travel Awards.
Greater China – Increasing scale drives another year of double-digit profit growth
RevPAR increased 5.4% with rate growth of 3.1%. RevPAR was down 0.3% in the fourth quarter reflecting the ongoing industry-wide impact of the China-Japan territorial island dispute, the political leadership change and the broader economic slowdown across the region.
Revenue increased 12% (12% CER) to $230m, with fee growth5 of 16%, and operating profit was up 21% (22% CER) to $81m. This was driven by 19% profit growth in the managed business where RevPAR was up 5.6% and net rooms up 10% (following 14% rooms growth in 2011). InterContinental Hong Kong also had a strong year with 6.7% RevPAR growth and good cost control, driving owned operating profit up 22%.
We opened 8k rooms in the year, taking our system size in the region up 12% to 62k, our 7th consecutive year of double digit room growth. Openings included 8 Crowne Plaza hotels, 2 Hotel Indigo hotels and Holiday Inn Macau Cotai Central, which at 1,224 rooms is the largest Holiday Inn in the world. Signings of 13k rooms were up 11% on 2011, taking our pipeline to 51k rooms and affirming our market leading position. Signings included 15 HUALUXE hotels.
5See appendix 6 for definition
6 Source: Smith Travel Research
Uses of Cash
Interest, debt, tax and exceptional items
Change from Quarterly to Half Yearly Reporting
Appendix 1: RevPAR Movement Summary
|January 2013||Full Year 2012||Q4 2012|
Appendix 2: Full Year System & Pipeline Summary (rooms)
Appendix 3: Quarter 4 financial headlines
|Operating Profit $m||Total||Americas||Europe||AMEA||G.China||Central|
|Owned & leased||40||32||8||4||13||11||2||1||17||16||-||-|
|Profit pre central overheads||199||172||115||100||28||24||28||23||28||25||-||-|
|Group Operating profit||161||137||115||100||28||24||28||23||28||25||(38)||(35)|
Appendix 4: Full year financial headlines
|Operating Profit $m||Total||Americas||Europe||AMEA||G. China||Central|
|Owned & leased||125||108||24||17||50||49||6||5||45||37||-||-|
|Profit pre central overheads||770||706||486||451||115||104||88||84||81||67||-||-|
|Group Operating profit||614||559||486||451||115||104||88||84||81||67||(156)||(147)|
Appendix 5: Constant exchange rate (CER) operating profit movement before exceptional items
|GBP:USD||EUR:USD||* US dollar actual currency|
|2012||0.63||0.78||** Translated at constant 2011 exchange rates|
|2011||0.62||0.72||*** 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 revenue: Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages. Growth stated at CER.
Fee based margins: adjusted for owned and leased hotels, managed leases and individually significant liquidated damages payments.
Managed lease hotels: properties structured for legal reasons as operating leases but with the same characteristics as management contracts.
Underlying openings & signings: openings growth adjusted to exclude 5k US Army base rooms and 7k InterContinental Alliance rooms opened in 2011. Signings growth adjusted to exclude 5k US Army base rooms also signed in 2011.