IHG Interim Results Presentation 22 nd August 2006
Agenda Interim Operating Overview Q & A Results Review 2
Overview Strong performance in H1 2006 • Business performing strongly: – Total gross revenue up 14% to £4.1bn – RevPAR outperformance in all key profit generators – 11.2% global RevPAR growth – Continuing revenue up 16%*: continuing EBIT up 30%* – Interim dividend increased by 11% to 5.1p per share 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. * Before other operating income and expenses 3
Overview Hotel industry remains buoyant • Low supply growth, high demand growth – US room night demand + 3.6% last 12 months – US room supply +0.5% last 12 months • 2007 and 2008 industry forecasts suggest continued growth in US – RevPAR +6% per annum. – Industry revenue + 8% per annum • Long term drivers remain favourable – 3.3% CAGR global GDP growth 2006-10 – Doubling of US travel and tourism spend forecast by 2015 – Increase in global internet users from 870m in 2005 to 1.4bn by 2010 – Growth in low cost airlines and new sources of travellers, including China Source: Smith Travel Research; GTN; Deloittes 4
Overview Strong performance in H1 2006 • Business performing strongly: – Total gross revenue up 14% – RevPAR outperformance in all key profit generators – 11.2% global RevPAR growth – Continuing revenue up 16%*: continuing EBIT up 30%* – Interim dividend increased by 11% to 5.1p per share • Further asset disposals: – Sales proceeds of £680m; £3.0bn of hotels now sold – 90% of hotels sold successfully converted to managed or franchised – Long term EBIT stream of over £30m per annum created • Progress on growth strategy: – Room count up 3,469 - up at least 10k by year end 2006 – 41k rooms signed; pipeline now 130k rooms, 1,028 hotels, up 20% 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. * Before other operating income and expenses 5
Agenda Interim Operating Overview Q & A Results Review 6
Interim Results Financial Highlights • Total gross revenue* up 14% to £4.1bn • Total EBIT** of £127m • Continuing EBIT** up 30% to £107m • Adjusted continuing earnings per share*** up 132% to 19.0p • Interim dividend increased 11% to 5.1p per share *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 ** Up 25% at constant exchange rate 7 *** Before other operating items and expenses
Interim Results Total Group results impacted by asset sales 6mths 6mths £m Change % to 30 Jun 06 to 30 Jun 05 Turnover 499 690 (28)% EBITDA* 160 193 (17)% Operating Profit* 127 153 (17)% Interest (1) (15) 93% Profit before tax* 126 138 (9)% Tax rate* 25% 29% Basic earnings per share* 51.5p 20.4p 152% Weighted average shares (m) 421 607 Interim dividend 5.1p 4.6p 11% *Before other operating items and expenses Excludes results of Britvic, disposed in December 2005. 8
Interim Results Excellent growth in the continuing business 6mths 6mths £m Change % to 30 Jun 06 to 30 Jun 05 Turnover 394 340 16% EBITDA* 137 107 28% Operating Profit* 107 82 30% Margin 27% 24% +3pts Interest (1) (15) 93% Profit before tax* 106 67 58% * Before other operating income and expenses 9
Interim Results Strong regional continuing operating profit growth 6mths 6mths Change CER** £m to 30 Jun 06 to 30 Jun 05 % Change % Americas 111 88 26% 21% EMEA 17 16 6% 9% Asia Pacific 16 10 60% 45% Central Overheads (37) (32) (16%) Continuing Operating Profit* 107 82 30% 25% Continuing EBITDA 137 107 28% * Before other operating income and expenses ** CER is constant exchange rate, translated at constant H1 2005 exchange rates 10
Interim Results Improving business mix • 88% of EBIT* now recurring fee Operating Profit Contribution income 100% • Geographic EBIT* 90% 80% – 70% from Americas 70% 60% % of EBIT – 11% from Asia 50% – 19% from EMEA 40% 30% 20% Owned and leased** 10% Franchised 0% Managed H1'04 H1'05 H1'06 * Pre regional and central overheads ** 2005 and 2006 owned and leased adjusted fro closure of InterContinental London Park Lane 11
Hotel franchising – Interim Results high margin fee growth continues Total gross revenue £bn* (rooms only) Drivers of gross revenue change , % 2.5 H1'06 H1’06 vs H1’05 17% 83% 2.2 H1’05 (1%) H1’05 vs H1’04 101% 2.0 H1'04 Avail. RevPAR Rooms Franchise fees £m Franchise EBIT £m (margin%) 135 H1'06 H1'06 117 (87%) 117** H1'05 H1'05 100 (85%)** 111 H1'04 H1'04 92 (83%) Note: based on constant USD:GBP translation rate of 1.80 *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 12 **Adjusted for one-off £7m liquidated damages receipt in the first half of 2005
Hotel management - Interim Results operating profit growth continues Total gross revenue £bn* (total hotel) Drivers of gross revenue change , % 1.4 H1'06 10% 24% 66% H1’06 vs H1’05 1.1 H1’05 (7%) 36% 14% 57% H1’05 vs H1’04 H1'04 1.0 Transfers Avail. from owned RevPAR F&B Rooms Managed EBIT £m (margin%) Management fees £m H1'06 39 (61%) H1'06 64 H1'05 H1'05 46 29 (63%) 41 H1'04 H1'04 23 (56%) * 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, as it is derived from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands Note 1: Total Gross Revenue based on constant USD:GBP translation rate of 1.80 13 Note 2: Hotel management fees and EBIT exclude the results of leased properties
Continuing owned and leased estate – Interim Results growing margins O&L revenues £m Drivers of revenue change , % 159 adjusted** H1'06 144 44% 36% 20% H1’06 vs H1’05 144 adjusted** H1'05 141 H1’05 vs H1’04 50% 13% 38% H1'04 121 Rate Occupancy F&B O&L EBITDA (pre overheads) £m O&L EBIT (pre overheads) £m (margin%) 37 adjusted** 22 adjusted** H1'06 H1'06 (14%) 31 20 (11%) 15 (11%) 29 adjusted** 14 adjusted**(10%) H1'05 H1'05 21 (12%) 25 10 (7%) H1'04 H1'04 20 6 (5%) 1 (1%) Note: based on constant USD:GBP translation rate of 1.80 ** Adjusted by substituting InterContinental London's H1 ’05 and H1’06 results for its H1’04 result , to reflect its closure for refurbishment in 2005 14
Interim Results Total Group operating cash flow 6mths 6mths £m to 30 Jun 06 to 30 Jun 05 Operating Profit* 127 153 Depreciation 23 31 - Hotel depreciation 10 9 - Non hotel depreciation Working capital (37) (43) Other 5 5 Cash flow from operations 128 155 Capital Expenditure (46) (63) Net Cash/(Debt) (320) (5) * Before other operating income and expenses and results of the Soft Drinks business, disposed in December 2005 15
Interim Results Significant free cash flow generated 6mths to 6mths to £m 30 Jun 06 30 Jun 05 Continuing hotels EBITDA* 137 107 Maintenance Capital Expenditure - Hotel capex 10 25 - Non hotel capex 12 8 Free Cash Flow 115 74 * Before other operating income and expenses 16
Interim Results Investment for future growth • Total capital expenditure in first half of £46m • Maintenance of retained assets and operating systems: – £22m spent in the first half • £4m continuing hotels, £6m sold hotels, £12m non hotel • Refurbishment of retained owned and leased assets: – £21m spent in the first half, £17m on InterContinental London Park Lane • Expectations for the full year remain unchanged – Maintenance and refurbishment £130m; growth investment £50m • 2007 will see lower maintenance capital expenditure and near elimination of refurbishment expenditure 17
Interim Results Asset disposal programme Disposals to date 175 hotels; 35,768 rooms Net book value of hotels sold to date £2.9bn Proceeds received to date £3.0bn Proportion kept under IHG's brands 90% (157 hotels; 32,334 rooms) Post fee EBITDA exit multiple 12x Estimated fee stream created In excess of £30m 18
Interim Results Returns to shareholders on target Returned to date Still to be returned £m £m Share repurchase: – First 250 0 – Second 250 0 – Third 76 174 Special dividend (Dec 04) 501 0 Capital return (July 05) 996 0 Special dividend (June 06) 497 0 Total 2,570 174 19
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