IHG Full Year Results Presentation 2 nd March 2006 Andrew Cosslett - PowerPoint PPT Presentation

IHG Full Year Results Presentation 2 nd March 2006

Andrew Cosslett Chief Executive

Agenda Full Year Operating Headlines Q & A Results Review 3

Headlines Headlines • Business performing strongly: – Total gross revenue up 9% to $14bn; EBIT up 42%; margin + 4pts – 2006 has started well with continued RevPAR growth • IHG transformation – £2.8bn of hotels sold or on market: – Conversion of O&L hotels to M&F – 144 sold/under contract to date – Full exit from Britvic, with total proceeds of £371m* – Return of funds continues – further £500m committed • Strategy execution: – Room count up 3,300; 35,000 rooms opened – Pipeline 108,500 rooms, up 31% – IHG system delivers $4.8bn (41% of total system room revenue), up 19% – Actions to drive future growth Note: Total gross revenue is defined as total room revenue from franchise hotels and total revenue from managed, owned and leased hotels. It is NOT revenue attributable to IHG, deriving as it does from hotels owned by 3rd parties. We highlight the metric as an indication of the scale and reach of our brands. 4 * Including additional dividends and IPO proceeds

Agenda Full Year Operating Headlines Q & A Results Review 5

Richard Solomons Finance Director

2005 results and business update

Full Year Results Financial Highlights • Total gross revenues* up 9% to £8bn ($14bn) • Adjusted earnings per share** up 13% to 38.2p • Final dividend up 7% to 10.7p per share; full year dividend 15.3p • Further £500m dividend with share consolidation *Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, derived as it is from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands ** Before special items 8

Full Year Results Total Group results impacted by asset sales £m 12mths 12mths to 31 Dec 05 to 31 Dec 04 Change % Turnover 1,910 2,204 (13%) EBITDA* 469 519 (10%) 339 346 (2%) Operating profit* 269 269 0% Hotels 70 77 (9%) Soft drinks Interest* (33) (22) 50% Profit before tax* 306 324 (6%) Tax rate* 29% 17% - Adjusted earnings per share* 38.2p 33.9p 13% Weighted average shares (m) 521 710 - Final dividend 10.7p 10.0p 7% * Excludes special items 9

Full Year Results Strong growth in continuing business £m 12mths 12mths Change % to 31 Dec 05 to 31 Dec 04 Turnover 852 731 17% EBITDA* 260 193 35% Operating Profit* 190 134 42% Margin 22% 18% Interest* (24) (22) 6% Profit before tax* 166 112 48% * Excludes special items Note: continuing business excludes IHG’s predominantly midscale European portfolio as a decision to sell was made pre-year end 10

Full Year Results Strong regional continuing operating profit growth £m 12mths 12mths Change % to 31 Dec 05 to 31 Dec 04 Americas 187 150 25 EMEA 47 24 96 Asia Pacific 21 17 24 Central Overheads (65) (57) 14 Continuing Operating Profit* 190 134 42 Continuing EBITDA 260 193 35 * Excludes special income and expenses 11

Full Year Results RevPAR growth across all key business areas 2005 RevPAR change, IHG estate v segment 14% 12% 10% 8% 6% 4% 2% 0% US upscale US midscale US extended UK China stay IHG Segment Note: blended segment Significant US upscale and midscale RevPAR premium maintained 12

Full Year Results Cost control driving profit margin increases • Continuing revenues up 17% • Inflation adjusted direct, regional and central overheads held flat: – Regional overheads up £5m after investments in China infrastructure, US development and technology – Central overheads up £8m, £4m of which due to IFRS treatment of share scheme costs • Continuing operating profit margin up over 4% pts to 22% • System funds (marketing, reservations and Priority Club Rewards) up 17% to nearly $600m 13

Full Year Results Improving business mix Business mix* • 88% of continuing EBIT now 100% high quality fee income 80% • Geographic EBIT: 60% % of EBIT 40% – 78% from the Americas 20% – Asia now up to 8% 0% 2003 2004 2005 Owned and leased** Franchised Managed * Pre regional and central overheads ** 2005 O&L continuing only Note: based on constant USD:GBP translation rate of 1.83 14

Hotel franchising – Full Year Results high margin fee growth continues Total gross revenues £bn* (rooms only) Drivers of gross revenue change , % (3%) 4.4 2005 103% 2005 vs 2004 4.0 2004 2004 vs 2003 18% 77% 5% 3.6 2003 Avail. RevPAR Other Rooms Franchise fees £m Franchise EBIT £m (margin%) 251 214 (85%) 2005 2005 225 189 (84%) 2004 2004 202 170 (85%) 2003 2003 Note: based on constant USD:GBP translation rate of 1.83 *Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, 15 derived as it is from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands .

Hotel management - Full Year Results growth and margin enhancement Total gross revenue £bn* (total hotel) Drivers of gross revenue change, % (1%) 2.4 2005 21% 9% 71% 2005 vs 2004 1.9 2004 2004 vs 2003 27% 37% 30% 6% 1.5 2003 Transfers Avail. from owned RevPAR F&B Rooms Management fees £m Managed EBIT £m (margin%) 106 62 (58%) 2005 2005 79 43 (54%) 2004 2004 64 31 (48%) 2003 2003 Note: based on constant USD:GBP translation rate of 1.83 Note 2: Hotel management fees and EBIT exclude the results of leased properties * Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, 16 derived as it is from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands

Retained* owned and leased estate – Full Year Results growing margins O&L revenues £m Drivers of revenue change , % 195 adjusted** 2005 182 40% 24% 36% 2005 vs 2004 2004 161 2004 vs 2003 11% 54% 44% 2003 116 Rate Occupancy F&B O&L EBITDA (pre overheads) £m O&L EBIT (pre overheads) £m (margin%) 54 adjusted** 33 adjusted** (17%) 2005 2005 41 20 (11%) 2004 2004 40 21 (12%) 2003 2003 15 1 (1%) Note: based on constant USD:GBP translation rate of 1.83 * Retained estate comprises the £1bn of real estate IHG intends to maintain ownership of ** Adjusted by substituting InterContinental London's 2005 results for its 2004 result , to reflect its closure for refurbishment in 2005 17

Full Year Results Total Group operating cash flow £m 12mths 12mths to 31 Dec 05 to 31 Dec 04 Operating Profit* 339 346 Depreciation / Amortisation 130 173 Working capital (32) 38 Pension obligation (26) (58) Other 12 16 Cash flow from operations 423 515 Hotels 359 372 Soft Drinks 64 143 Net Cash/(Debt) (88) (1,116) * Excludes other operating income and expenses 18

Full Year Results Significant free cash flow generated 12mths to 12mths to £m 31 Dec 05 31 Dec 04 Continuing hotels EBITDA* 260 193 Maintenance Capital Expenditure (56) (68) Free Cash Flow 204 125 * Excludes special income and expenses 19

Full Year Results Business transformation programme - hotels Disposals to date 144 hotels; 28,300 rooms Net book value of hotels sold to date or to £2.8bn be sold Proceeds received to date £2.3bn Proportion kept under IHG's brands 88% (126 hotels; 24,900 rooms) Post fee EBITDA exit multiple 13x Estimated fee stream In excess of £20m Net asset value of hotels to be sold Circa £600m European portfolio Retained hotels Circa £1bn, currently including InterContinentals in London, Hong Kong, New York, Paris, Atlanta and Boston 20

Full Year Results Business transformation programme - Britvic • Full exit from investment in Britvic via IPO • Proceeds to the group: £m Additional dividends 136 Sale of shares 235 Total 371 • Net debt deconsolidated* £209m *Note: net debt deconsolidated as at last reported balance sheet 30/09/05 21

Full Year Results Further return to shareholders announced today Returned to date Still to be returned £m £m Share repurchase: – First 250 0 – Second 211 39 – Third 0 250 Special dividend (Dec 04) 501 0 Capital return (July 05) 996 0 Special dividend (Q2 06) 0 500 Total 1,958 789 £2.75bn of returns announced to date 22

Full Year Results Investment in the future • Maintenance of retained assets and operating systems: – c. £70m in 2006 – Majority is for the central systems that support managing and franchising • Refurbishment of retained owned and leased assets: – c.£60m forecast for 2006, including InterContinental London and InterContinental Boston fit out • Growth investment: – Inducements, loans and joint venture stakes – c.£50m forecast for 2006 23