First Quarter Results to 31 March 2007
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First Quarter Results to 31 March 2007
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Category: Worldwide
This is a press release selected by our editorial committee and published online for free on 2007-05-10
Headlines
* Continuing revenue up 10% from £177m to £194m, up 20% at constant exchange rates.
* Continuing operating profit up 5% from £42m to £44m, up 19% at constant exchange rates.
* Total gross revenue* from all hotels in IHG’s system up 13% at constant exchange rates to $3.9bn.
* Global constant currency RevPAR growth of 7.6%; strongest growth in EMEA, up 13.0%, driven mainly by rate increases.
* Franchised operating profit of £55m, up 11% at constant exchange rates.
* Managed operating profit of £19m, up 5% at constant exchange rates.
* Adjusted continuing earnings per share (“EPS”) up 9% to 7.6p. Adjusted total EPS of 8.2p. Basic EPS of 13.3p.
* Room count up by 1,907 rooms to 558,153 (3,763 hotels).
* Signings up 25% to 22,631 rooms (161 hotels).
* Development pipeline of 169,699 rooms (1,321 hotels), equivalent to 30% of IHG existing hotel system.
Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
"The business had a good first quarter. The pace of signings of new hotels continued to be strong with almost 23,000 rooms signed in the quarter, 25% up over 2006. We now have over 1,300 hotels in our forward development pipeline. Trading is healthy around the world and once again we outperformed in our major markets in the quarter. Our outlook for 2007 remains positive."
Increase in development pipeline and rooms open
* 22,631 rooms were signed; 13,311 in the Americas, 2,968 in EMEA and 6,352 in Asia Pacific.
* 169,699 rooms are now in the pipeline, up 11,708 (+7%) since the start of the year, at 1,321 hotels.
* IHG’s development activity in Asia Pacific continues to be successful. In Greater China 15 hotels, 4,895 rooms, were signed in the quarter comprising 1 InterContinental, 6 Crowne Plazas, 3 Holiday Inns and 5 Holiday Inn Expresses.
* The strengthening of the InterContinental brand continued with 6 hotel signings in the quarter.
* The pipeline of Crowne Plaza hotels grew by 4,237 rooms (14 hotels) in the quarter, with 5,245 rooms (18 hotels) signed including 1,915 rooms (8 hotels) in North America and 3,044 rooms (9 hotels) in Asia Pacific.
* The pipeline of Holiday Inn and Holiday Inn Express hotels grew by 4,788 rooms (43 hotels) in the quarter, Candlewood Suites added 1,489 rooms (19 hotels) and Hotel Indigo added 373 rooms (3 hotels).
IHG maintains its focus on enhancing the quality of its portfolio, in conjunction with growth. In the quarter:
* 8,197 rooms opened; 6,296 in the Americas, 1,121 in EMEA and 780 in Asia Pacific.
* 6,290 rooms exited; 4,033 in the Americas, 1,911 in EMEA and 346 in Asia Pacific.
* The room count at the end of the period increased by 1,907 rooms to 558,153.
Americas: strong performance
Revenue performance
RevPAR increased 5.3% with rate generating all of the increase. InterContinental, Holiday Inn and Holiday Inn Express each outperformed their market segments, with RevPAR up 8.7%, 3.0%, and 7.8% respectively. US RevPAR growth was impacted by the prior year comparable including increased occupancy levels arising from Hurricane Katrina displacement.
Operating profit performance
Operating profit from continuing operations increased 7% from $85m to $91m. Continuing owned and leased hotel operating profit of $2m includes, as expected, a $2m loss from the InterContinental Boston as trading continues to ramp up post its November 2006 opening. The underlying improvement was primarily driven by increased occupancy and rate at InterContinental New York. Managed hotels profit was flat at $11m after increased investment in development. Franchised hotels profit increased 9% to $93m reflecting RevPAR growth of 5.4% and net room count growth of 5%.
EMEA: RevPAR growth accelerating
Revenue performance
RevPAR increased 13.0%, driven by increased occupancy and 9.5% rate growth. The Middle East continued to perform strongly, growing RevPAR by 14.4%. Continental Europe delivered a RevPAR increase of 10.0%, driven by France up 13.4% and Germany up 8.5%. In the UK, Holiday Inn and Express by Holiday Inn performed in-line with the market segment, recording RevPAR growth of 9.2%.
Operating profit performance
Operating profit from continuing operations more than doubled to £7m. Continuing owned and leased hotel operations reduced their losses by £3m to £2m. InterContinental Le Grand Paris continued to rebuild its business post refurbishment, delivering a 15.7% RevPAR increase. The refurbishment of InterContinental London Park Lane, which made a £3m loss in the quarter, is largely complete and the hotel is expected to be fully operational by early June 2007. Managed hotels profit was flat at £8m after increased investment in the InterContinental development team. Franchised hotels profit increased from £5m to £6m reflecting RevPAR growth of 14.3% and net room count growth of 15%.
Asia Pacific: strong growth from all brands
Revenue performance
RevPAR increased 12.5%, mainly driven by rate. All brands performed strongly, InterContinental RevPAR increased 17.8%, Crowne Plaza 11.6%, Holiday Inn 9.2% and Express 17.1%. Greater China RevPAR increased 8.3%, outperforming the market, driven by rate increases as strong demand for IHG’s brands continues.
Operating profit performance
Operating profit from continuing operations was $13m. Owned and leased hotel operating profit was flat at $8m. Managed hotels profit increased 13% to $9m, driven by the increasing number of hotels under IHG management. Thirteen of these additional hotels (4,937 rooms) relate to IHG’s agreement with ANA. As previously disclosed, these hotels are not expected to be earnings enhancing for IHG until their third year of operation, after marketing investments and integration costs.
Overheads and Tax
In the first quarter aggregated regional overheads were flat at £16m, up 6% in constant currency. Regional overheads in the Americas increased 7% to $15m and in Asia Pacific by $2m to $6m due to continued investment in infrastructure. Overheads in EMEA were flat.
Central overheads were flat at £17m. As previously disclosed, IHG expects that in 2007 central overheads will increase in line with inflation and will be weighted towards the second half of the year.
Based on the position at the end of the quarter, the tax charge on profit from continuing and discontinued operations, excluding the impact of exceptional items, has been calculated using an estimated effective annual tax rate of 28% (Q1 2006: 28%).
Disposals and returns of funds
IHG’s net debt at the period end was £192m, including the $195m (£99m) finance lease on the InterContinental Boston.
2.1m shares were repurchased under IHG’s buyback programme during the first quarter, at a cost of £25.2m, leaving £156m of the buyback programme to be completed.
£700m is proposed to be returned to shareholders on 15 June 2007 via a special dividend with a share consolidation. On completion of the buyback programme and special dividend, IHG will have returned £3.6bn to shareholders since March 2004.
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