3rd Quarter Results

InterContinental Hotels Group PLC 06 November 2007 6 November 2007 InterContinental Hotels Group PLC Third Quarter Results to 30 September 2007 Headlines • Continuing revenue up 14% from £197m to £224m, up 20% at constant exchange rates. • Continuing operating profit up 22% from £54m to £66m, up 31% at constant exchange rates. • Total gross revenue* from all hotels in IHG's system up 13% at constant exchange rates to $4.6bn. • Global constant currency RevPAR growth of 6.1%; strongest growth in Asia Pacific, up 8.6%, driven by rate increases. • Franchised operating profit up 8% to £68m, up 16% at constant exchange rates. • Managed operating profit up 5% to £21m, up 15% at constant exchange rates. • Adjusted continuing earnings per share ("EPS") up 15% to 13.5p. Adjusted total EPS of 14.1p. Basic total EPS of 21.2p. • Room count up by 7,395 rooms to 571,071 (3,863 hotels). Signings of 29,379 rooms (225 hotels), 18% higher than last year. • Development pipeline of 201,776 rooms (1,533 hotels), equivalent to 35% of IHG's existing hotel room count. *Total gross revenue is 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. All figures and movements unless otherwise noted are at actual exchange rates and before exceptional items. See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4. Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said: "IHG has had a good third quarter, with strong performances across all our brands and the continuation of a record signings pace, which is seeing us sign two new hotels a day and keeping us on track to beat our net room additions target. Last month's announcement of the global relaunch of Holiday Inn has been well received by our hotel owners and we look forward to opening our first rebranded hotel in spring next year. Our outlook for the rest of the year remains positive." Increase in development pipeline • 29,379 rooms were signed; 22,769 in the Americas, 2,097 in EMEA and 4,513 in Asia Pacific. • 201,776 rooms are now in the pipeline, up 43,785 (+28%) since the start of the year, at 1,533 hotels. • IHG's development activity in Asia Pacific continues to be successful. In Greater China 12 hotels, 3,653 rooms, were signed in the quarter comprising five Crowne Plazas, five Holiday Inns and two Holiday Inn Expresses. • Five new hotels were signed into the InterContinental pipeline, which now stands at a record 53 hotels. • The pipeline of Crowne Plaza hotels grew by 3,144 rooms (11 hotels) in the quarter, with 5,837 rooms (18 hotels) signed. • The pipeline of Holiday Inn and Holiday Inn Express hotels grew by 6,573 rooms (62 hotels) in the quarter. Candlewood Suites and Staybridge Suites added 3,219 rooms (32 hotels) to their pipeline and Hotel Indigo added 1,238 rooms (11 hotels) Strong growth in net room count IHG maintains its focus on enhancing the quality of its portfolio, in conjunction with growth. In the quarter: • 14,035 rooms (87 hotels) opened; 8,791 (71) in the Americas, 2,549 (12) in EMEA and 2,695 (4) in Asia Pacific. • 6,640 rooms exited; 5,563 in the Americas and 1,209 in EMEA. There were no removals in Asia Pacific. • The room count at the end of the period increased by 7,395 rooms to 571,071. Since the June 2005 starting position, 33,396 net rooms have been added towards the target of 50,000-60,000 additions by the end of 2008. Americas: solid performance Revenue performance RevPAR increased 5.6% with rate generating all of the increase. InterContinental and Crowne Plaza outperformed their market segments. Holiday Inn and Holiday Inn Express grew rate faster than their segments and delivered RevPAR premiums to their segments of 15% and 13% respectively. Operating profit performance Operating profit from continuing operations increased 11% to $120m. Continuing owned and leased hotel operating profit of $9m includes a $2m profit from the InterContinental Boston where trading continues to improve post its November 2006 opening. The underlying improvement was primarily driven by growth in RevPAR and operating margin at the InterContinental New York. Managed hotels performed well with RevPAR up 7% in the quarter, however profit was down from $13m to $9m after increased revenue investment to support growth in contract signings, the impact of fewer hotels under management following the restructure of the FelCor contract last year, and the non-recurrence of income from a minority interest now sold and business interruption insurance. Franchised hotels profit increased 12% to $119m reflecting RevPAR growth of 5% and net room count growth of 4%. EMEA: strong performance in the Middle East Revenue performance RevPAR increased 6.7%, driven by 6.0% rate growth. The Middle East continued to perform strongly, growing RevPAR by 18.0%. Continental Europe delivered a RevPAR increase of 6.4%, comprising a 10.5% increase in France but also a 3.1% fall in Germany, where RevPAR was boosted this time last year by the football world cup. Year to date in the UK, Holiday Inn and Express by Holiday Inn both outperformed their market segment recording RevPAR growth of 6.6%. Operating profit performance Operating profit from continuing operations increased 82% from £11m to £20m. Continuing owned and leased hotel operating profit increased from £0m to £7m, £5m of which was from the InterContinental London Park Lane following the completion of its refurbishment. InterContinental Le Grand Paris delivered a 7.5% RevPAR increase and a £1m profit increase. Managed hotels profit increased 22% from £9m to £11m reflecting a full period contribution from assets disposed in September 2006 and strong fee growth in the UK and Middle East managed portfolios. Franchised hotels profit increased from £6m to £8m reflecting RevPAR growth of 4.9% and net room count growth of 6%. Asia Pacific: further growth across all brands Revenue performance RevPAR increased 8.6%, mainly driven by rate. All brands performed strongly, InterContinental RevPAR increased 12.0%, Crowne Plaza 4.5%, Holiday Inn 8.6% and Express 12.2%. Greater China RevPAR increased 5.1% driven by rate increases, year to date RevPAR growth of 5.9% is significantly ahead of the market as strong demand for IHG brands continues. Operating profit performance Operating profit from continuing operations increased from $8m to $14m. Owned and leased hotel operating profit increased by $2m to $6m due to RevPAR and operating margin growth at the InterContinental Hong Kong. Managed hotels profit increased 44% to $13m, driven by the increasing number of hotels under IHG management. Overheads and Tax In the third quarter aggregated regional overheads increased £2m to £17m. Regional overheads in the Americas increased $2m to $17m and in EMEA by £2m to £6m due to the non-recurrence of a rate rebate received in the same period last year. Overheads in Asia Pacific were flat. Central overheads increased £2m to £21m. As previously disclosed, IHG expects that in 2007 central overheads will increase in line with inflation. 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 22% (Q3 2006: 24%). IHG's tax rate may be more volatile in the immediate future due to changes in tax legislation, tax case law developments and possible settlements of prior year issues but in the longer term is expected, as previously indicated, to show an upward trend. After the period end, IHG announced its intention to make a non-recurring revenue investment of up to £30m to accelerate implementation of the global relaunch of Holiday Inn and Holiday Inn Express brands. This cost is anticipated to be taken as an exceptional item. IHG expects to generate a strong return on this investment through RevPAR increases across the Holiday Inn brand family following completion of the relaunch. Disposals and returns of funds IHG's net debt at the period end was £811m, including the $200m (£98m) finance lease on the InterContinental Boston. During the quarter IHG's 74.11% interest in the InterContinental Montreal was sold for £17m, and 15% investment in the InterContinental Miami was sold for £5m. The profit on disposal of these properties is included in exceptional items. 2.4m shares were repurchased under IHG's buyback programme during the third quarter, at a cost of £23m, leaving £127m of the current buyback programme to be completed. Appendix 1: Asset disposal programme detail Number of hotels Proceeds Net book value Disposed since April 2003 179 £3.0bn £2.9bn Remaining hotels 20 £0.9bn For a full list please visit www.ihg.com/Investors Appendix 2: Return of funds programme as at 30 September 2007 Timing Total return Returned Still to be returned £501m special dividend Paid December 2004 £501m £501m Nil First share buyback - Completed in 2004 £250m £250m Nil £250m £996m capital return Paid 8 July 2005 £996m £996m Nil Second share buyback - Completed in 2006 £250m £250m Nil £250m £497m special dividend Paid 22 June 2006 £497m £497m Nil Third share buyback - Completed in 2007 £250m £250m Nil £250m £709m special dividend Paid 15 June 2007 £709m £709m Nil Fourth share buyback - Underway £150m £23m £127m £150m Total £3.60bn £3.47bn £0.13bn Appendix 3: Financial headlines Three months to 30 Sep £m Total Americas EMEA Asia Pacific Central 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Franchised operating profit 68 63 59 57 8 6 1 0 - - Managed operating profit 21 20 4 7 11 9 6 4 - - Continuing owned and leased 15 5 5 3 7 - 3 2 - - operating profit Regional overheads (17) (15) (8) (8) (6) (4) (3) (3) - - Continuing operating profit pre 87 73 60 59 20 11 7 3 - - central overheads Central overheads (21) (19) - - - - - - (21) (19) Continuing operating profit 66 54 60 59 20 11 7 3 (21) (19) Discontinued owned and leased 2 8 1 1 1 7 - - - - operating profit Total operating profit 68 62 61 60 21 18 7 3 (21) (19) Appendix 4: Constant currency continuing operating profits before exceptional items Americas EMEA Asia Pacific Total*** Actual Constant Actual Constant Actual Constant Actual Constant currency* currency** currency* currency** currency* currency** currency* currency** Growth 2% 10% 82% 82% 133% 166% 22% 31% Exchange rates USD:GBP EUR:GBP Q3 2007 2.03 1.47 Q3 2006 1.87 1.47 * Sterling actual currency. ** Translated at constant 2006 exchange rates. *** After Central Overheads. For further information, please contact: Investor Relations (Paul Edgecliffe-Johnson; Heather Wood): +44 (0) 1753 410 176 Media Affairs (Leslie McGibbon; Claire Williams): +44 (0) 1753 410 425 +44 (0) 7808 094 471 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. UK Q&A Conference Call A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director) will commence at 9.30 am (London time) on 6 November. There will be an opportunity to ask questions. International dial-in +44 (0)1452 586513 UK Free Call 0800 694 1503 Conference ID: 20966629 A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 20966629# International dial-in +44 (0)1452 550000 UK Free Call 0800 953 1533 US Q&A conference call There will also be a conference call, primarily for US investors and analysts, at 10.00am (Eastern Standard Time) on 6 November with Andrew Cosslett (Chief Executive) and Richard Solomons (Finance Director). There will be an opportunity to ask questions. International dial-in +44 (0)1452 586513 US Toll Free 1866 223 0615 Conference ID: 20969532 A recording of the conference call will also be available for 7 days. To access this please dial the relevant number below and use the access number 20969532# International dial-in +44 (0)1452 550000 US Toll Free 1866 247 4222 Website The full release and supplementary data will be available on our website from 7.00 am (London time) on Tuesday 6 November. The web address is www.ihg.com/Q3 Notes to Editors: InterContinental Hotels Group PLC (IHG) of the United Kingdom (LON:IHG, NYSE:IHG (ADRs)) is one of the world's largest hotel groups by number of rooms. IHG owns, manages, leases or franchises, through various subsidiaries, over 3,800 hotels and more than 571,000 guest rooms in nearly 100 countries and territories around the world. IHG owns a portfolio of well recognised and respected hotel brands including InterContinental(R) Hotels & Resorts, Crowne Plaza(R) Hotels & Resorts, Holiday Inn(R) Hotels and Resorts, Holiday Inn Express(R), Staybridge Suites(R), Candlewood Suites(R) and Hotel Indigo(R), and also manages the world's largest hotel loyalty programme, Priority Club(R) Rewards with over 33 million members worldwide. The company pioneered the travel industry's first collaborative response to environmental issues as founder of the International Hotels and Environment Initiative (IHEI). The IHEI formed the foundations of the Tourism Partnership launched by the International Business Leaders Forum in 2004, of which IHG is still a member today. The environment and local communities remain at the heart of IHG's global corporate responsibility focus. IHG offers information and online reservations for all its hotel brands at www.ihg.com and information for the Priority Club Rewards programme at www.priorityclub.com. For the latest news from IHG, visit our online Press Office at www.ihg.com/media 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 30 September 2007 3 months ended 30 September 2007 3 months ended 30 September 2006 Before Exceptional Before Exceptional exceptional items exceptional items items (note 8) Total items (note 8) Total £m £m £m £m £m £m Continuing operations Revenue (note 3) 224 - 224 197 - 197 Cost of sales (96) - (96) (86) - (86) Administrative expenses (48) - (48) (44) - (44) _____ ____ ____ ____ ____ ____ 80 - 80 67 - 67 Depreciation and amortisation (14) - (14) (13) - (13) Other operating income and expenses (note 8) - 6 6 - - - _____ ____ ____ ____ ____ ____ Operating profit (note 4) 66 6 72 54 - 54 Financial income 2 - 2 5 - 5 Financial expenses (18) - (18) (9) - (9) _____ ____ ____ ____ ____ ____ Profit before tax 50 6 56 50 - 50 Tax (note 9) (10) 9 (1) (8) - (8) _____ ____ ____ ____ ____ ____ Profit for the period from continuing operations 40 15 55 42 - 42 Profit for the period from discontinued operations (note 10) 2 6 8 5 115 120 _____ ____ ____ ____ ____ ____ Profit for the period 42 21 63 47 115 162 ==== ==== ==== ==== ==== ==== Attributable to: Equity holders of the parent 42 21 63 47 115 162 Minority equity interest - - - - - - _____ ____ ____ ____ ____ ____ Profit for the period 42 21 63 47 115 162 ==== ==== ==== ==== ==== ==== Earnings per ordinary share (note 11) Continuing operations: Basic 18.5p 11.7p Adjusted 13.5p 11.7p Diluted 18.2p 11.3p Total operations: Basic 21.2p 45.1p Adjusted 14.1p 13.1p Diluted 20.8p 43.7p INTERCONTINENTAL HOTELS GROUP PLC GROUP INCOME STATEMENT For the nine months ended 30 September 2007 9 months ended 30 September 2007 9 months ended 30 September 2006 Before Exceptional Before Exceptional exceptional items exceptional items items (note 8) Total items (note 8) Total £m £m £m £m £m £m Continuing operations Revenue (note 3) 646 - 646 574 - 574 Cost of sales (292) - (292) (249) - (249) Administrative expenses (134) - (134) (125) - (125) _____ ____ ____ ____ ____ ____ 220 - 220 200 - 200 Depreciation and amortisation (43) - (43) (40) - (40) Other operating income and expenses (note 8) - 32 32 - 25 25 _____ ____ ____ ____ ____ ____ Operating profit (note 4) 177 32 209 160 25 185 Financial income 8 - 8 22 - 22 Financial expenses (36) - (36) (27) - (27) _____ ____ ____ ____ ____ ____ Profit before tax 149 32 181 155 25 180 Tax (note 9) (32) 11 (21) (32) 89 57 _____ ____ ____ ____ ____ ____ Profit for the period from continuing operations 117 43 160 123 114 237 Profit for the period from discontinued operations (note 10) 5 9 14 18 124 142 _____ ____ ____ ____ ____ ____ Profit for the period 122 52 174 141 238 379 ==== ==== ==== ==== ==== ==== Attributable to: Equity holders of the parent 122 52 174 141 238 379 Minority equity interest - - - - - - _____ ____ ____ ____ ____ ____ Profit for the period 122 52 174 141 238 379 ==== ==== ==== ==== ==== ==== Earnings per ordinary share (note 11) Continuing operations: Basic 48.6p 59.2p Adjusted 35.6p 30.7p Diluted 47.8p 57.5p Total operations: Basic 52.9p 94.7p Adjusted 37.1p 35.2p Diluted 51.9p 92.0p Dividends per ordinary share: Final paid in the period 13.3p 10.7p Special interim paid in the period 200.0p 118.0p Interim paid in October 5.7p 5.1p INTERCONTINENTAL HOTELS GROUP PLC GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE For the nine months ended 30 September 2007 2007 2006 9 months 9 months ended 30 September ended 30 September £m £m Income and expense recognised directly in equity Gains on valuation of available-for-sale assets 7 1 Losses on cash flow hedges (1) - Exchange differences on retranslation of foreign operations 6 (27) Actuarial (losses)/gains on defined benefit pension plans (15) 6 ____ ____ (3) (20) ____ ____ Transfers to the income statement On disposal of foreign operations - 3 On disposal of available-for-sale assets (9) (14) ____ ____ (9) (11) ____ ____ Tax Tax on items above taken directly to or transferred from equity 4 4 Tax related to share schemes recognised directly in equity (5) 5 ____ ____ (1) 9 ____ ____ Net expense recognised directly in equity (13) (22) Profit for the period 174 379 ____ ____ Total recognised income and expense for the period 161 357 ==== ==== Attributable to: Equity holders of the parent 161 357 Minority equity interest - - ____ ____ 161 357 ==== ==== INTERCONTINENTAL HOTELS GROUP PLC GROUP CASH FLOW STATEMENT For the nine months ended 30 September 2007 2007 2006 9 months 9 months ended 30 September ended 30 September £m £m Profit for the period 174 379 Adjustments for: Net financial expenses 28 5 Income tax charge/(credit) 23 (46) Gain on disposal of assets, net of tax (9) (124) Other operating income and expenses (32) (25) Depreciation and amortisation 44 47 Equity settled share-based cost, net of payments 12 9 ____ ____ Operating cash flow before movements in working capital 240 245 Increase in trade and other receivables (12) (21) Increase/(decrease) in trade and other payables 4 (6) Retirement benefit contributions, net of charge (32) - ____ ____ Cash flow from operations 200 218 Interest paid (26) (25) Interest received 9 22 Tax paid (36) (35) ____ ____ Net cash from operating activities 147 180 ____ ____ Cash flow from investing activities Purchases of property, plant and equipment (46) (60) Purchases of intangible assets (12) (11) Purchases of associates and other financial assets (15) (4) Disposal of assets, net of costs and cash disposed of 37 630 Proceeds from associates and other financial assets 49 118 ____ ____ Net cash from investing activities 13 673 ____ ____ Cash flow from financing activities Proceeds from the issue of share capital 15 13 Purchase of own shares (52) (240) Purchase of own shares by employee share trusts (59) (39) Proceeds on release of own shares by employee share trusts 10 12 Dividends paid to shareholders (756) (543) Dividends paid to minority interests - (1) Increase/(decrease) in borrowings 577 (67) ____ ____ Net cash from financing activities (265) (865) ____ ____ Net movement in cash and cash equivalents in the period (105) (12) Cash and cash equivalents at beginning of the period 179 324 Exchange rate effects 3 (3) ____ ____ Cash and cash equivalents at end of the period 77 309 ==== ==== INTERCONTINENTAL HOTELS GROUP PLC GROUP BALANCE SHEET As at 30 September 2007 2007 2006 2006 30 September 30 September 31 December £m £m £m ASSETS Property, plant and equipment 944 1,011 997 Goodwill 109 109 109 Intangible assets 161 143 154 Investment in associates 32 32 32 Other financial assets 97 107 96 ____ ____ ____ Total non-current assets 1,343 1,402 1,388 ____ ____ ____ Inventories 3 3 3 Trade and other receivables 230 212 237 Current tax receivable 18 16 23 Cash and cash equivalents 77 309 179 Other financial assets 8 1 13 ____ ____ ____ Total current assets 336 541 455 Non-current assets classified as held for sale 64 52 50 ____ ____ ____ Total assets 1,743 1,995 1,893 ==== ==== ==== LIABILITIES Loans and other borrowings (8) (5) (10) Trade and other payables (386) (400) (402) Current tax payable (230) (214) (231) ____ ____ ____ Total current liabilities (624) (619) (643) ____ ____ ____ Loans and other borrowings (880) (420) (303) Retirement benefit obligations (52) (66) (71) Trade and other payables (113) (102) (109) Deferred tax payable (60) (129) (79) ____ ____ ____ Total non-current liabilities (1,105) (717) (562) Liabilities classified as held for sale (3) (2) (2) ____ ____ ____ Total liabilities (1,732) (1,338) (1,207) ==== ==== ==== Net assets (note 14) 11 657 686 ==== ==== ==== EQUITY Equity share capital 80 59 66 Capital redemption reserve 5 4 4 Shares held by employee share trusts (31) (25) (17) Other reserves (1,528) (1,528) (1,528) Unrealised gains and losses reserve 24 14 27 Currency translation reserve 3 (2) (3) Retained earnings 1,455 2,129 2,129 ____ ____ ____ IHG shareholders' equity (note 15) 8 651 678 Minority equity interest 3 6 8 ____ ____ ____ Total equity 11 657 686 ==== ==== ==== INTERCONTINENTAL HOTELS GROUP PLC NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Basis of preparation These interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' using, on a consistent basis, the accounting policies set out in the 2006 InterContinental Hotels Group PLC (the Group or IHG) Annual Report and Financial Statements. In the current year, the Group will adopt International Financial Reporting Standard 7 'Financial instruments: Disclosures' (IFRS 7) for the first time. As IFRS 7 is a disclosure standard only, there is no impact from the adoption of this standard on these interim financial statements. These interim financial statements are unaudited and do not constitute statutory accounts of the Group within the meaning of Section 240 of the Companies Act 1985. 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 2006 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. Amounts that have previously been disclosed as special items have now been called exceptional items in accordance with market practice. There has been no change to the Group's accounting policy for identifying these items. 2. Exchange rates The results of overseas operations have been translated into sterling at the weighted average rates of exchange for the period. In the case of the US dollar, the translation rate for the nine months ended 30 September 2007 is £1 = $1.99 (2007 3 months, £1=$2.03; 2006 9 months, £1=$1.82; 2006 3 months, £1=$1.87). In the case of the euro, the translation rate for the nine months ended 30 September 2007 is £1=€1.48 (2007 3 months, £1=€1.47; 2006 9 months, £1=€1.46; 2006 3 months, £1=€1.47). Foreign currency denominated assets and liabilities have been translated into sterling at the rates of exchange on the last day of the period. In the case of the US dollar, the translation rate is £1=$2.03 (2006 31 December £1=$1.96; 30 September £1=$1.87). In the case of the euro, the translation rate is £1=€ 1.43 (2006 31 December £1=€1.49; 30 September £1=€1.48). 3. Revenue 2007 2006 2007 2006 3 months ended 3 months ended 9 months ended 9 months ended 30 September 30 September 30 September 30 September £m £m £m £m Continuing operations: Americas (note 5) 116 108 340 318 EMEA (note 6) 63 51 173 140 Asia Pacific (note 7) 29 24 90 78 Central 16 14 43 38 ____ ____ ____ ____ 224 197 646 574 Discontinued operations (note 9 40 32 162 10) ____ ____ ____ ____ 233 237 678 736 ==== ==== ==== ==== 4. Operating profit 2007 2006 2007 2006 3 months ended 3 months ended 9 months ended 9 months ended 30 September 30 September 30 September 30 September £m £m £m £m Continuing operations: Americas (note 5) 60 59 171 168 EMEA (note 6) 20 11 44 29 Asia Pacific (note 7) 7 3 21 19 Central (21) (19) (59) (56) ____ ____ ____ ____ 66 54 177 160 Other operating income and expenses (note 8) 6 - 32 25 ____ ____ ____ ____ 72 54 209 185 Discontinued operations (note 2 8 7 29 10) ____ ____ ____ ____ 74 62 216 214 ==== ==== ==== ==== 5. Americas 2007 2006 2007 2006 3 months ended 3 months ended 9 months ended 9 months ended 30 September 30 September 30 September 30 September $m $m $m $m Revenue Owned & leased 63 45 185 138 Managed 37 34 117 107 Franchised 134 123 374 335 ____ ____ ____ ____ Continuing operations 234 202 676 580 Discontinued operations - Owned & leased 12 18 50 54 ____ ____ ____ ____ Total $m 246 220 726 634 ==== ==== ==== ==== Sterling equivalent £m Continuing operations 116 108 340 318 Discontinued operations 6 10 25 30 ____ ____ ____ ____ 122 118 365 348 ==== ==== ==== ==== Operating profit Owned & leased 9 4 25 17 Managed 9 13 34 40 Franchised 119 106 328 291 Regional overheads (17) (15) (47) (43) ____ ____ ____ ____ Continuing operations 120 108 340 305 Discontinued operations - Owned & leased 4 3 13 8 ____ ____ ____ ____ Total $m 124 111 353 313 ==== ==== ==== ==== Sterling equivalent £m Continuing operations 60 59 171 168 Discontinued operations 1 1 6 4 ____ ____ ____ ____ 61 60 177 172 ==== ==== ==== ==== 6. EMEA 2007 2006 2007 2006 3 months ended 3 months ended 9 months ended 9 months ended 30 September 30 September 30 September 30 September £m £m £m £m Revenue Owned & leased 32 22 86 66 Managed 20 18 58 48 Franchised 11 11 29 26 ____ ____ ____ ____ Continuing operations 63 51 173 140 Discontinued operations - Owned & leased 3 30 7 132 ____ ___ ___ ___ Total 66 81 180 272 ==== ==== ==== ==== Operating profit Owned & leased 7 - 8 (1) Managed 11 9 30 26 Franchised 8 6 22 18 Regional overheads (6) (4) (16) (14) ____ ____ ____ ____ Continuing operations 20 11 44 29 Discontinued operations - Owned & leased 1 7 1 25 ____ ___ ___ ___ Total 21 18 45 54 ==== ==== ==== ==== 7. Asia Pacific 2007 2006 2007 2006 3 months ended 3 months ended 9 months ended 9 months ended 30 September 30 September 30 September 30 September $m $m $m $m Revenue Owned & leased 31 27 98 90 Managed 26 16 70 46 Franchised 3 2 11 6 ____ ___ ___ ___ Total $m 60 45 179 142 ==== ==== ==== ==== Sterling equivalent £m 29 24 90 78 ==== ==== ==== ==== Operating profit Owned & leased 6 4 21 18 Managed 13 9 32 28 Franchised 1 1 5 4 Regional overheads (6) (6) (17) (15) ____ ____ ____ ____ Total $m 14 8 41 35 ==== ==== ==== ==== Sterling equivalent £m 7 3 21 19 ==== ==== ==== ==== All results relate to continuing operations. 8. Exceptional items 2007 2006 2007 2006 3 months ended 3 months ended 9 months ended 9 months ended 30 September 30 September 30 September 30 September £m £m £m £m Other operating income and expenses* Gain on sale of associate investments - - 11 - Gain on sale of investment in FelCor Lodging Trust, Inc. - - - 25 Gain on sale of other financial assets 2 - 17 - Office reorganisations (a) 4 - 4 - ____ ____ ____ ____ 6 - 32 25 ==== ==== ==== ==== Taxation* Tax on other operating income and expenses (3) - (1) (7) Exceptional tax credit (b) 12 - 12 96 ____ ____ ____ ____ 9 - 11 89 ==== ==== ==== ==== Gain on disposal of assets Gain on disposal of assets 7 119 11 133 Tax charge (1) (4) (2) (9) ____ ____ ____ ____ 6 115 9 124 ==== ==== ==== ==== * Relates to continuing operations. a. Profit on sale and leaseback of new head office less costs incurred to date. Costs will continue to be incurred until completion of the office move in 2008 and also in relation to the closure of the Aylesbury offices which was announced on 1 October 2007. b. The exceptional tax credit relates to the release of provisions which are exceptional by reason of their size or incidence relating to tax matters which have been settled or in respect of which the relevant statutory limitation period has expired, together with, in 2006, a credit in respect of previously unrecognised losses. 9. Tax The tax charge on the combined profit from continuing and discontinued operations, excluding the impact of exceptional items (note 8), has been calculated using an estimated effective annual tax rate of 22% (2006 24%). By also excluding the effect of prior year items, the equivalent effective tax rate would be approximately 35% (2006 31%). Prior year items, arising from settlement of tax liabilities and other changes in estimates, have been treated as relating wholly to continuing operations. 2007 2007 2007 2006 2006 2006 3 months ended 30 September Profit Tax Tax Profit Tax Tax £m £m rate £m £m rate Before exceptional items Continuing operations 50 (10) 50 (8) Discontinued operations 2 - 8 (3) ____ ____ ____ ____ 52 (10) 19% 58 (11) 20% Exceptional items Continuing operations 6 9 - - Discontinued operations 7 (1) 119 (4) ____ ____ ____ ____ 65 (2) 177 (15) ==== ==== ==== ==== Analysed as: UK tax 6 2 Foreign tax (8) (17) ____ _____ (2) (15) ==== ==== 2007 2007 2007 2006 2006 2006 9 months ended 30 September Profit Tax Tax Profit Tax Tax £m £m rate £m £m rate Before exceptional items Continuing operations 149 (32) 155 (32) Discontinued operations 7 (2) 29 (11) ____ ____ ____ ____ 156 (34) 22% 184 (43) 24% Exceptional items Continuing operations 32 11 25 89 Discontinued operations 11 (2) 133 (9) ____ ____ ____ ____ 199 (25) 342 37 ==== ==== ==== ==== Analysed as: UK tax (5) 7 Foreign tax (20) 30 ____ _____ (25) 37 ==== ==== 10. Discontinued operations Discontinued operations are those relating to hotels sold or those classified as held for sale as part of the asset disposal programme that commenced in 2003. These disposals underpin IHG's strategy of growing its managed and franchised business whilst reducing asset ownership. The results of discontinued operations which have been included in the consolidated income statement are as follows: 2007 2006 2007 2006 3 months 3 months 9 months 9 months ended ended ended ended 30 September 30 September 30 September 30 September £m £m £m £m Revenue 9 40 32 162 Cost of sales (7) (31) (24) (126) ____ ____ ____ ____ 2 9 8 36 Depreciation and amortisation - (1) (1) (7) ____ ____ ____ ____ Operating profit 2 8 7 29 Tax - (3) (2) (11) ____ ____ ____ ____ Profit after tax 2 5 5 18 Gain on disposal of assets, net of tax (note 8) 6 115 9 124 ____ ____ ____ ____ Profit for the period from discontinued operations 8 120 14 142 ==== ==== ==== ==== 2007 2006 2007 2006 3 months 3 months 9 months 9 months ended ended ended ended 30 September 30 September 30 September 30 September £m £m £m £m Cash flows attributable to discontinued operations Operating profit before interest, depreciation and amortisation 2 9 8 36 Investing activities - (1) - (8) Financing activities - - - (25) ____ ____ ____ ____ 2 8 8 3 ==== ==== ==== ==== The effect of discontinued operations on segment results is shown in notes 5, 6 and 7. 11. 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. On 1 June 2007, shareholders approved a share capital consolidation on the basis of 47 new ordinary shares for every 56 existing ordinary shares, together with a special dividend of 200 pence per existing ordinary share. The overall effect of the transaction was that of a share repurchase at fair value, therefore no adjustment has been made to comparative data. 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. 2007 2007 2006 2006 Continuing Continuing 3 months ended 30 September operations Total operations Total Basic earnings per share Profit available for equity holders (£m) 55 63 42 162 Basic weighted average number of ordinary shares (millions) 297 297 359 359 Basic earnings per share (pence) 18.5 21.2 11.7 45.1 ==== ==== ==== ==== Diluted earnings per share Profit available for equity holders (£m) 55 63 42 162 Diluted weighted average number of ordinary shares (millions) 303 303 371 371 Diluted earnings per share (pence) 18.2 20.8 11.3 43.7 ==== ==== ==== ==== Adjusted earnings per share Profit available for equity holders (£m) 55 63 42 162 Less adjusting items (note 8): Other operating income and expenses (£m) (6) (6) - - Tax (£m) (9) (9) - - Gain on disposal of assets (£m) - (6) - (115) ____ ____ ____ ____ Adjusted earnings (£m) 40 42 42 47 Basic weighted average number of ordinary shares (millions) 297 297 359 359 Adjusted earnings per share (pence) 13.5 14.1 11.7 13.1 ==== ==== ==== ==== 11. Earnings per ordinary share (continued) 2007 2007 2006 2006 Continuing Continuing 9 months ended 30 September operations Total operations Total Basic earnings per share Profit available for equity holders (£m) 160 174 237 379 Basic weighted average number of ordinary shares (millions) 329 329 400 400 Basic earnings per share (pence) 48.6 52.9 59.2 94.7 ==== ==== ==== ==== Diluted earnings per share Profit available for equity holders (£m) 160 174 237 379 Diluted weighted average number of ordinary shares (millions) 335 335 412 412 Diluted earnings per share (pence) 47.8 51.9 57.5 92.0 ==== ==== ==== ==== Adjusted earnings per share Profit available for equity holders (£m) 160 174 237 379 Less adjusting items (note 8): Other operating income and expenses (£m) (32) (32) (25) (25) Tax (£m) (11) (11) (89) (89) Gain on disposal of assets (£m) - (9) - (124) ____ ____ ____ ____ Adjusted earnings (£m) 117 122 123 141 Basic weighted average number of ordinary shares (millions) 329 329 400 400 Adjusted earnings per share (pence) 35.6 37.1 30.7 35.2 ==== ==== ==== ==== The diluted weighted average number of ordinary shares is calculated as: 2007 2006 2007 2006 3 months 3 months 9 months 9 months ended ended ended ended 30 September 30 September 30 September 30 September millions millions millions millions Basic weighted average number of ordinary shares 297 359 329 400 Dilutive potential ordinary shares - employee share options 6 12 6 12 ____ ____ ____ ____ 303 371 335 412 ==== ==== ==== ==== 12. Net debt 2007 2006 2006 30 September 30 September 31 December £m £m £m Cash and cash equivalents 77 309 179 Loans and other borrowings - current (8) (5) (10) Loans and other borrowings - non-current (880) (420) (303) ____ ____ ____ Net debt (811) (116) (134) ==== ==== ==== Finance lease liability included above (98) (99) (97) ==== ==== ==== 13. Movement in net debt 2007 2006 2006 9 months ended 9 months ended 12 months 30 September 30 September ended £m £m 31 December £m Net decrease in cash and cash equivalents (105) (12) (152) Add back cash flows in respect of other components of net debt: (Increase)/decrease in borrowings (577) 67 172 ____ ____ ____ (Increase)/decrease in net debt arising from cash (682) 55 20 flows Non-cash movements: Finance lease liability (6) (102) (103) Exchange and other adjustments 11 19 37 ____ ____ ____ Increase in net debt (677) (28) (46) Net debt at beginning of the period (134) (88) (88) ____ ____ ____ Net debt at end of the period (811) (116) (134) ==== ==== ==== 14. Net assets 2007 2006 2006 30 September 30 September 31 December £m £m £m Americas 385 365 390 EMEA 359 377 359 Asia Pacific 277 283 285 Central 73 75 73 ____ ____ ____ 1,094 1,100 1,107 Net debt (811) (116) (134) Unallocated assets and liabilities (272) (327) (287) ____ ____ ____ 11 657 686 ==== ==== ==== 15. Movement in IHG shareholders' equity 2007 2006 2006 9 months ended 9 months 12 months 30 September ended ended £m 30 September 31 December £m £m At beginning of the period 678 1,084 1,084 Total recognised income and expense for the period 161 357 409 Equity dividends paid (756) (543) (561) Issue of ordinary shares 15 13 20 Purchase of own shares (53) (242) (260) Movement in shares in employee share trusts (49) (27) (32) Equity settled share-based cost, net of payments 12 9 18 ____ ____ ____ At end of the period 8 651 678 ==== ==== ==== 16. Capital commitments and contingencies At 30 September 2007, the amount contracted for but not provided for in the financial statements for expenditure on property, plant and equipment was £16m (2006 31 December £24m; 30 September £47m). At 30 September 2007, the Group had contingent liabilities of £5m (2006 31 December £11m; 30 September £15m), mainly comprising guarantees given in the ordinary course of business. In limited cases, the Group may provide performance guarantees to third-party owners to secure management contracts. The maximum exposure under such guarantees is £117m (2006 31 December £142m; 30 September £147m). It is the view of the Directors that, other than to the extent that liabilities have been provided for in these financial statements, such guarantees are not expected to result in financial loss to the Group. The Group has 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 warranties are not expected to result in financial loss to the Group. 17. Other commitments In March and June 2007, the Company made the first two payments of £10m under the agreement to make special pension contributions of £40m to the UK pension plan. A further payment of £10m will be paid in both 2008 and 2009. On 24 October 2007, the Group announced a worldwide relaunch of its Holiday Inn brand family. In support of this relaunch, IHG will make a non recurring revenue investment of up to £30m which it is anticipated will be charged to the income statement as an exceptional item. 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 and nine months ended 30 September 2007 which comprises the Group income statement, Group statement of recognised income and expense, Group cash flow statement, Group balance sheet and the related notes 1 to 17. 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 ISRE 2410 (UK and Ireland) '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. 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 and nine months ended 30 September 2007 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 5 November 2007 This information is provided by RNS The company news service from the London Stock Exchange

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