3rd Quarter Results
InterContinental Hotels Group PLC
14 November 2006
14 November 2006
InterContinental Hotels Group PLC
Third Quarter Results to 30 September 2006
Third Quarter Headlines
• Continuing revenue up 10% from £183m to £202m, up 14% at constant exchange rates.
• Continuing operating profit up 13% from £47m to £53m, up 21% at constant exchange rates.
• Total operating profit, including discontinued operations, of £62m.
• Franchised operating profit up 3% to £63m, up 7% at constant exchange rates. Managed operating profit up 18%
to £20m, up 18% at constant exchange rates.
• Adjusted earnings per share up 100% from 5.7p to 11.4p.
• Total gross revenue from all hotels in IHG's system up 9% to $4.1bn.*
• Global constant currency RevPAR growth of 8.6%. Strongest growth in EMEA, up 11.6%, mainly driven by rate
increases.
• Room count increased by 2,773 rooms to 543,775 rooms. Pipeline now 143,606 rooms, up 13,506.
* Total gross revenue is defined as total room revenue (i.e. excluding food and beverage) 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 other operating income
and expenses.
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:
"Trading in the quarter remained strong with all brands performing well around the world. We have now added over 6,000
net rooms since January and we are on track to end the year in the region of 10,000 net rooms up. Our new hotels
pipeline continues to grow well and the quality of our new signings is high. Our recent deal with All Nippon Airlines
makes IHG the largest international hotel operator in Japan and strengthens our strategic position in Asia. The outlook
for the Group remains positive."
Americas: strong performance across all brands
Revenue performance
RevPAR increased 7.5%, driven by rate. All brands performed strongly, with InterContinental up 9.4%, Crowne Plaza up
7.9%, Holiday Inn up 5.9%, Holiday Inn Express up 9.3%, Staybridge Suites up 6.0% and Candlewood Suites up 6.5%. All
brands except Staybridge Suites have outperformed the market so far this year.
Operating profit performance
Operating profit from continuing operations increased 17% from $92m to $108m. Continuing owned and leased profit was
flat at $4m, impacted by $1.1m pre opening costs at InterContinental Boston, which opened on 6 November 2006. Managed
profit was up 86% to $13m, benefiting from retained management contracts on assets disposed. Franchised profit
increased 8% to $106m. Including discontinued operations, total operating profit increased from $96m to $111m.
EMEA: RevPAR growth accelerating
Revenue performance
RevPAR increased 11.6%, with all major countries performing well. Middle East RevPAR increased 30.0%, despite the recent
conflict in Lebanon. UK Holiday Inn estate RevPAR increased 9.4%, outperforming the market, against 2005 comparables
impacted by the London bombings.
Operating profit performance
Operating profit from continuing operations increased 22% from £9m to £11m, after a £1m reduction in regional overheads.
Continuing owned and leased operations broke even in the quarter. The InterContinental Le Grand Paris continues to
rebuild its business post refurbishment, delivering a 27.3% RevPAR increase. The InterContinental London Park Lane
reopened on 6 November 2006. As some bedrooms will not be available until March 2007, the expected profitability from
the hotel for 2006 has reduced by £3m, in total £18m lower than the 2004 level. Managed profit was flat at £9m.
Franchised profit was flat at £6m, impacted by the loss of income from the South African master franchise IHG cancelled
in 2005. Including discontinued operations, total operating profit reduced from £20m to £18m.
Asia Pacific: strong growth
Revenue performance
RevPAR increased 10.5%, mainly driven by rate. InterContinental RevPAR increased 11.2%, Crowne Plaza 9.8%, and Holiday
Inn 9.2%. Greater China RevPAR increased 14.3%, outperforming the market, driven by rate increases as strong demand for
IHG's brands continues.
Operating profit performance
Operating profit from continuing operations increased 60% from $5m to $8m. Owned and leased operating profit increased
100% from $2m to $4m as a result of fewer rooms being under refurbishment this year at the InterContinental Hong Kong.
Managed hotels profit increased by 50% from $6m to $9m as a result of retained management contracts on assets disposed
and the increasing number of hotels under IHG management in China.
Overheads and Tax
As previously disclosed, IHG expects that in 2006 regional and central overheads will increase ahead of inflation at
constant exchange rates. In the quarter, aggregate regional overheads reduced £2m to £15m due to timing of costs.
Central overheads increased by £3m to £19m. This included further planned investment in global research designed to
strengthen brand development and to enhance IHG's growth capability.
Based on the first nine months, IHG's 2006 full year tax rate estimate, adjusted for special items, has reduced by 1% to
24%. IHG's tax rate is likely to be volatile over the next few years but in the long term is expected, as previously
indicated, to trend upwards.
Room count and development pipeline size
IHG's pipeline of new hotels continues to expand.
• 24,999 rooms were signed in the quarter; 16,776 in the Americas, 2,742 in EMEA and 5,481 in Asia Pacific.
• Pipeline now stands at 143,606 rooms, up 13,506 in the quarter and 35,069 since the beginning of the year.
• IHG's development activity in China continues to be successful. 12 hotels, 4,908 rooms, were signed in the
third quarter, with 28 hotels and 13,148 rooms signed since the beginning of the year.
IHG maintains its focus on expanding the distribution of its brands, while enhancing hotel quality.
• 8,044 rooms opened; 5,314 in the Americas, 1,091 in EMEA and 1,639 in Asia Pacific. 25,415 rooms opened year
to date.
• 5,271 rooms exited; 3,635 in the Americas, 530 in EMEA and 1,106 in Asia Pacific. 19,173 rooms exited year to
date.
• The room count at the end of the quarter was 543,775. 6,242 rooms have been added year to date, positioning
IHG well to add in the region of 10,000 rooms by the year end. InterContinental and Crowne Plaza have added
5,246 of these net rooms year to date, enhancing the mix of IHG's hotel portfolio and the distribution of
IHG's upscale brands.
Disposals and returns of funds
The sale of seven Continental European InterContinental branded hotels to Morgan Stanley Real Estate Funds was completed
during September for a total of €634m.
IHG's net debt at the period end was £116m, including the $186m (£99m) finance lease on the InterContinental Boston.
14.0m shares were repurchased under IHG's ongoing buyback programme during the third quarter, at a cost of £125m. There
were 357m shares outstanding at the end of the third quarter. Since the period end, a further 0.8m shares have been
repurchased, at a cost of £8m, leaving £41m of the £250m buyback still to be completed.
Further returns of funds will be made to shareholders in due course, as previously stated. An announcement on timing and
quantum of further returns will be made not later than IHG's preliminary results in February 2007.
Appendix 1: Asset disposal programme detail
Number of hotels Proceeds Net book value
Disposed to date 175 £3.0bn £2.9bn
Remaining hotels 24 - £1.0bn
Appendix 2: Return of funds programme*
Timing Total return Returned to date Still to be returned
£501m special dividend Paid December 2004 £501m £501m Nil
First £250m share Completed in 2004 £250m £250m Nil
buyback
£996m capital return Paid 8 July 2005 £996m £996m Nil
Second £250m share Completed in 2006 £250m £250m Nil
buyback
£497m special dividend Paid 22 June 2006 £497m £497m Nil
Third £250m share Underway £250m £201m £49m
buyback
Total £2.75bn £2.70bn £0.05bn
*To 30 September 2006.
Appendix 3: Financial headlines
Q3 £m Total Americas EMEA Asia Pacific Central
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
Franchised operating profit 63 61 57 55 6 6 - - - -
Managed operating profit 20 17 7 4 9 9 4 4 - -
Continuing owned and leased 4 2 2 2 - (1) 2 1 - -
operating profit
Regional overheads (15) (17) (8) (10) (4) (5) (3) (2) - -
Continuing operating profit pre 72 63 58 51 11 9 3 3 - -
central overheads
Central overheads (19) (16) - - - - - - (19) (16)
Continuing operating profit 53 47 58 51 11 9 3 3 (19) (16)
Discontinued owned and leased 9 17 2 2 7 11 - 4 - -
operating profit
Total operating profit 62 64 60 53 18 20 3 7 (19) (16)
Appendix 4: Constant currency continuing operating profits before special items
for the period.
Americas EMEA Asia Pacific Total***
Actual Constant Actual Constant Actual Constant Actual Constant
currency* currency** currency* currency** currency* currency* currency**
currency**
Growth 14% 20% 22% 22% 0% 33% 13% 21%
Exchange rates USD:GBP EUR:GBP
Q3 2006 1.87 1.47
Q3 2005 1.79 1.46
* Sterling actual currency
** Translated at constant Q3 2005 exchange rates
*** After Central Overheads
For further information, please contact:
Investor Relations (Paul Edgecliffe-Johnson): +44 (0) 1753 410 176
+44 (0) 7808 098867
Media Affairs (Leslie McGibbon): +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.
Conference call for Analysts and Shareholders
A conference call with Andrew Cosslett (Chief Executive) and Richard Solomons
(Finance Director) will commence at 09.30am (London time) on 14 November. There
will be an opportunity to ask questions.
UK Local Rate 0845 245 5000
Standard International Dial In +44 (0)1452 562 716
Conference ID: 9543944
A recording of the conference call will be available for 7 days. To access this
please dial the relevant number below and use the access number 9543944#
UK dial in 0845 245 5205
International dial-in +44 (0)1452 550 000
US Q&A conference call
There will also be a conference call, primarily for US investors and analysts,
at 11.45am (Eastern Standard Time) on 14 November with Andrew Cosslett (Chief
Executive). There will be an opportunity to ask questions.
International dial-in +44 (0)1452 562 716
US Toll Free 1866 832 0717
Conference ID: 9543957
A recording of the conference will also be available for 7 days. To access this
please dial the relevant number below and use the access number 9543957#
International dial-in +44 (0)1452 550 000
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 14 November 2006. The web address is www.ihgplc.com/Q3.
Note to Editors:
InterContinental Hotels Group PLC of the United Kingdom (LON:IHG, NYSE:IHG
(ADRs)) is the world's largest hotel group by number of rooms. InterContinental
Hotels Group owns, manages, leases or franchises, through various subsidiaries,
over 3,600 hotels and 543,775 guest rooms in nearly 100 countries and
territories around the world. The Group 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 IndigoTM, and
also manages the world's largest hotel loyalty programme, Priority Club(R)
Rewards.
InterContinental Hotels Group offers information and online reservations for all
its hotel brands at www.ichotelsgroup.com and information for the Priority Club
Rewards programme at www.priorityclub.com.
For the latest news from InterContinental Hotels Group, visit our online Press
Office at www.ihgplc.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 ' target', 'expect', 'intend', '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 2006
3 months ended 30 September 2006 3 months ended 30 September 2005
Continuing Discontinued Continuing Discontinued
operations operations operations operations
Total Total
£m £m £m £m £m £m
Revenue (note 3) 202 35 237 183 271 454
Cost of sales (92) (25) (117) (83) (194) (277)
Administrative expenses (44) - (44) (38) (20) (58)
____ ____ ____ ____ ____ ____
66 10 76 62 57 119
Depreciation and amortisation (13) (1) (14) (15) (17) (32)
Other operating income and - - - (9) - (9)
expenses (note 8)
____ ____ ____ ____ ____ ____
Operating profit (note 4) 53 9 62 38 40 78
Financial income 5 - 5 7 - 7
Financial expenses (9) - (9) (12) (3) (15)
____ ____ ____ ____ ____ ____
Profit before tax 49 9 58 33 37 70
____ ____ ____ ____ ____ ____
UK tax 2 - 2 (5) - (5)
Foreign tax (10) (3) (13) (10) (5) (15)
____ ____ ____ ____ ____ ____
Total tax (note 9) (8) (3) (11) (15) (5) (20)
____ ____ ____ ____ ____ ____
Profit after tax 41 6 47 18 32 50
Gain on disposal of assets, - 115 115 - - -
net of tax charge of £4m
(2005 £1m)
____ ____ ____ ____ ____ ____
Profit for the period 41 121 162 18 32 50
==== ==== ==== ==== ==== ====
Attributable to:
Equity holders of the
parent
41 121 162 18 26 44
Minority equity interest - - - - 6 6
____ ____ ____ ____ ____ ____
Profit for the period 41 121 162 18 32 50
==== ==== ==== ==== ==== ====
Earnings per ordinary share
(note 10):
Basic 11.4p 33.7p 45.1p 4.1p 5.9p 10.0p
Diluted 11.1p 32.6p 43.7p 4.0p 5.7p 9.7p
Adjusted 11.4p - - 5.7p - -
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the nine months ended 30 September 2006
9 months ended 30 September 2006 9 months ended 30 September 2005
Continuing Discontinued Continuing Discontinued
operations operations operations operations
Total Total
£m £m £m £m £m £m
Revenue (note 3) 587 149 736 519 995 1,514
Cost of sales (260) (115) (375) (241) (731) (972)
Administrative expenses (125) - (125) (109) (57) (166)
____ ____ ____ ____ ____ ____
202 34 236 169 207 376
Depreciation and amortisation (43) (4) (47) (40) (57) (97)
Other operating income and 25 - 25 (17) - (17)
expenses (note 8)
____ ____ ____ ____ ____ ____
Operating profit (note 4) 184 30 214 112 150 262
Financial income 22 - 22 24 - 24
Financial expenses (27) - (27) (44) (6) (50)
____ ____ ____ ____ ____ ____
Profit before tax 179 30 209 92 144 236
____ ____ ____ ____ ____ ____
UK tax (1) - (1) 6 (25) (19)
Foreign tax (39) (10) (49) (38) (14) (52)
Special tax (note 8) 96 - 96 8 - 8
____ ____ ____ ____ ____ ____
Total tax (note 9) 56 (10) 46 (24) (39) (63)
____ ____ ____ ____ ____ ____
Profit after tax 235 20 255 68 105 173
Gain on disposal of assets, - 124 124 - 14 14
net of tax charge of £9m
(2005 £21m)
____ ____ ____ ____ ____ ____
Profit for the period 235 144 379 68 119 187
==== ==== ==== ==== ==== ====
Attributable to:
Equity holders of the
parent
235 144 379 68 100 168
Minority equity - - - - 19 19
interest
____ ____ ____ ____ ____ ____
Profit for the period 235 144 379 68 119 187
==== ==== ==== ==== ==== ====
Earnings per ordinary share
(note 10):
Basic 58.7p 36.0p 94.7p 12.3p 18.2p 30.5p
Diluted 57.0p 35.0p 92.0p 12.1p 17.7p 29.8p
Adjusted 30.2p - - 13.6p - -
Dividends per ordinary share:
Final paid in the 10.70p 10.00p
period
Special interim paid 118.00p -
Interim proposed 5.10p 4.60p
InterContinental Hotels Group PLC
GROUP STATEMENT of recognised income and expense
For the nine months ended 30 September 2006
2006 2005
9 months 9 months
ended 30 September ended 30 September
£m £m
Income and expense recognised directly in equity
Gains/(losses) on valuation of available-for-sale assets 1 (5)
Exchange differences on retranslation of foreign operations
(27) 29
Actuarial gains on defined benefit pension plans 6 -
_____ _____
(20) 24
Transfers to the income statement
On disposal of foreign operations 3 -
On disposal of available-for-sale assets (14) -
Tax on items above taken directly to or transferred from equity 9 -
_____ _____
Net (expense)/income recognised directly in equity (22) 24
Profit for the period 379 187
_____ _____
Total recognised income and expense for the period 357 211
===== =====
Attributable to:
Equity holders of the parent 357 192
Minority equity interest - 19
_____ _____
357 211
===== =====
InterContinental Hotels Group PLC
GROUP CASH FLOW STATEMENT
For the nine months ended 30 September 2006
2006 2005
9 months 9 months
ended 30 September ended 30 September
£m £m
Profit for the period 379 187
Adjustments for:
Net financial expenses 5 26
Income tax (credit)/charge (46) 63
Gain on disposal of assets, net of tax (124) (14)
Other operating income and expenses (25) 17
Depreciation and amortisation 47 97
Equity settled share-based cost, net of payments 9 7
____ _____
Operating cash flow before movements in working capital 245 383
Increase in inventories - (1)
(Increase)/decrease in receivables (21) 11
Decrease in provisions and other payables (6) (63)
Decrease in employee benefit obligation - (27)
_____ _____
Cash flow from operations 218 303
Interest paid (25) (45)
Interest received 22 22
Tax paid (35) (40)
_____ _____
Net cash from operating activities 180 240
_____ _____
Cash flow from investing activities
Purchases of assets - Hotels (75) (91)
Disposal of assets, net of cash disposed of - Hotels 630 1,438
Proceeds from other financial assets - Hotels 118 8
Purchases of property, plant and equipment - Soft Drinks - (38)
_____ _____
Net cash from investing activities 673 1,317
_____ _____
Cash flow from financing activities
Proceeds from the issue of share capital 13 10
Purchase of own shares (240) (144)
Payment to shareholders as a result of the capital reorganisation
on 27 June 2005
- (996)
Purchase of own shares by employee share trusts (39) (26)
Proceeds on release of own shares by employee share trusts 12 14
Dividends paid to shareholders (543) (61)
Dividends paid to minority interests (1) (125)
Decrease in borrowings (67) (155)
_____ _____
Net cash from financing activities (865) (1,483)
_____ _____
Net movement in cash and cash equivalents in the period (12) 74
Cash and cash equivalents at beginning of the period 324 72
Exchange rate effects (3) (14)
_____ _____
Cash and cash equivalents at end of the period 309 132
===== =====
INTERCONTINENTAL HOTELS GROUP PLC
GROUP BALANCE SHEET
As at 30 September 2006
2006 2005
30 September 31 December
£m £m
ASSETS
Property, plant and equipment 1,011 1,356
Goodwill 109 118
Intangible assets 143 120
Investment in associates 32 42
Other financial assets 107 113
_____ _____
Total non-current assets 1,402 1,749
_____ _____
Inventories 3 3
Trade and other receivables 212 252
Current tax receivable 16 22
Cash and cash equivalents 309 324
Other financial assets 1 106
_____ _____
Total current assets 541 707
Non-current assets classified as held for sale 52 279
______ ______
Total assets 1,995 2,735
===== =====
LIABILITIES
Loans and other borrowings (5) (2)
Trade and other payables (400) (468)
Current tax payable (214) (324)
_____ _____
Total current liabilities (619) (794)
_____ _____
Loans and other borrowings (420) (410)
Employee benefits (66) (76)
Provisions and other payables (102) (107)
Deferred tax payable (129) (210)
_____ _____
Total non-current liabilities (717) (803)
Liabilities classified as held for sale (2) (34)
_____ ______
Total liabilities (1,338) (1,631)
===== =====
Net assets (note 13) 657 1,104
===== =====
EQUITY
IHG shareholders' equity 651 1,084
Minority equity interest 6 20
______ ______
Total equity 657 1,104
===== =====
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 2005
InterContinental Hotels Group PLC (IHG) Annual Report and 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 Bulletin 1999/4 'Review of interim
financial information' issued by the Auditing Practices Board and their report is set out on page 16.
The financial information for the year ended 31 December 2005 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.
Discontinued operations are those relating to hotels sold or those classified as held for sale when the
results relate to a separate line of business, geographical area of operations, or where there is a
co-ordinated plan to dispose of a separate line of business or geographical area of operations.
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 is £1= $1.82 (2006 3 months, £1 = $1.87; 2005 9 months, £1 = $1.85; 2005 3 months, £1 = $1.79).
In the case of the euro, the translation rate for the nine months ended 30 September is £1 = €1.46 (2006 3
months, £1 = €1.47; 2005 9 months, £1 = €1.46; 2005 3 months, £1 = €1.46).
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=$1.87
(2005 31 December £1 = $1.73). In the case of the euro, the translation rate is £1 = €1.48 (2005 31
December £1= €1.46).
3. Revenue
2006 2005 2006 2005
3 months 3 months* 9 months 9 months**
ended 30 Sept ended 30 Sept ended 30 Sept ended 30 Sept
£m £m £m £m
Continuing operations
Hotels
Americas (note 5) 110 102 325 282
EMEA (note 6) 54 53 146 148
Asia Pacific (note 7) 24 18 78 59
Central 14 10 38 30
____ ____ ____ ____
202 183 587 519
Discontinued operations
Hotels 35 97 149 451
Soft Drinks - 174 - 544
____ ____ ____ ____
35 271 149 995
____ ____ ____ ____
237 454 736 1,514
==== ==== ==== ====
* Other than for Soft Drinks which reflects 12 weeks ended 2 October 2005.
** Other than for Soft Drinks which reflects 40 weeks ended 2 October 2005.
4. Operating profit
2006 2005 2006 2005
3 months 3 months* 9 months 9 months**
ended 30 Sept ended 30 Sept ended 30 Sept ended 30 Sept
£m £m £m £m
Continuing operations
Hotels
Americas (note 5) 58 51 168 139
EMEA (note 6) 11 9 28 25
Asia Pacific (note 7) 3 3 19 13
Central (19) (16) (56) (48)
____ ____ ____ ____
53 47 159 129
Discontinued operations
Hotels 9 17 30 88
Soft Drinks - 23 - 62
____ ____ ____ ____
9 40 30 150
____ ____ ____ ____
62 87 189 279
Other operating income and - (9) 25 (17)
expenses (note 8)
____ ____ ____ ____
Operating profit 62 78 214 262
==== ==== ==== ====
* Other than for Soft Drinks which reflects 12 weeks ended 2 October 2005.
** Other than for Soft Drinks which reflects 40 weeks ended 2 October 2005.
5 Americas
2006 2005 2006 2005
3 months 3 months 9 months 9 months
ended 30 Sept ended 30 Sept ended 30 Sept ended 30 Sept
$m $m $m $m
Revenue
Owned & leased 49 46 151 141
Managed 34 29 107 86
Franchised 123 109 335 294
____ ____ ____ ____
Continuing operations 206 184 593 521
Discontinued operations - Owned &
leased
14 13 41 97
____ ____ ____ ____
Total $m 220 197 634 618
==== ==== ==== ====
Sterling equivalent £m 118 111 348 335
==== ==== ==== ====
Operating profit
Owned & leased 4 4 18 16
Managed 13 7 40 26
Franchised 106 98 291 260
____ ____ _____ ____
123 109 349 302
Regional overheads (15) (17) (43) (46)
____ ____ _____ ____
Continuing operations 108 92 306 256
Discontinued operations - Owned &
leased
3 4 7 21
____ ____ _____ ____
Total $m 111 96 313 277
==== ==== ==== ====
Sterling equivalent £m 60 53 172 150
==== ==== ==== ====
6. EMEA
2006 2005 2006 2005
3 months 3 months 9 months 9 months
ended 30 Sept ended 30 Sept ended 30 Sept ended 30 Sept
£m £m £m £m
Revenue
Owned & leased 25 30 72 84
Managed 18 15 48 36
Franchised 11 8 26 28
____ ____ ____ ____
Continuing operations 54 53 146 148
Discontinued operations - Owned &
leased
27 71 126 350
____ ____ ____ ____
Total 81 124 272 498
==== ==== ==== ====
Operating profit
Owned & leased - (1) (2) (4)
Managed 9 9 26 22
Franchised 6 6 18 22
____ ____ ____ ____
15 14 42 40
Regional overheads (4) (5) (14) (15)
____ ____ ____ ____
Continuing operations 11 9 28 25
Discontinued operations - Owned &
leased
7 11 26 68
____ ____ ____ ____
Total 18 20 54 93
==== ==== ==== ====
7. Asia Pacific
2006 2005 2006 2005
3 months 3 months 9 months 9 months
ended 30 Sept ended 30 Sept ended 30 Sept ended 30 Sept
$m $m $m $m
Revenue
Owned & leased 27 22 90 74
Managed 16 11 46 32
Franchised 2 1 6 4
____ ____ _____ ____
Continuing operations 45 34 142 110
Discontinued operations - Owned &
leased
- 29 - 88
____ ____ _____ ____
Total $m 45 63 142 198
==== ==== ==== ====
Sterling equivalent £m 24 35 78 107
==== ==== ==== ====
Operating profit
Owned & leased 4 2 18 11
Managed 9 6 28 22
Franchised 1 1 4 3
____ ____ ____ ____
14 9 50 36
Regional overheads (6) (4) (15) (12)
____ ____ ____ ____
Continuing operations 8 5 35 24
Discontinued operations - Owned &
leased
- 7 - 17
____ ____ ____ ____
Total $m 8 12 35 41
==== ==== ==== ====
Sterling equivalent £m 3 7 19 22
==== ==== ==== ====
8. Special items
2006 2005 2006 2005
3 months 3 months 9 months 9 months
ended 30 Sept ended 30 Sept ended 30 Sept ended 30 Sept
£m £m £m £m
Other operating income and expenses*
Gain on sale of investment (note a) - - 25 -
Restructuring costs (note b) - - - (8)
Property damage (note c) - (9) - (9)
____ ____ ____ ____
- (9) 25 (17)
==== ==== ==== ====
Taxation*
Tax on other operating income and
expenses
- 2 (7) 2
Special tax credit (note d) - - 96 8
____ ____ ____ ____
- 2 89 10
==== ==== ==== ====
Gain on disposal of assets
Gain on disposal of assets 119 1 133 35
Tax charge (4) (1) (9) (21)
_____ ____ ____ ____
115 - 124 14
===== ==== ==== ====
* Relates to continuing operations.
a. Gain on the sale of the Group's investment in FelCor Lodging Trust, Inc.
b. Restructuring costs relate to the delivery of the further restructuring of the Hotels business.
c. Damage to properties related to fire and natural disasters.
d. Represents the release of provisions which are special 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 profit before tax, excluding the impact of special items (note 8), has been calculated
using an estimated effective annual tax rate of 24% (2005 29%).
By also excluding the effect of prior year items, the equivalent effective tax rate would be approximately
31%. Prior year items have been treated as relating wholly to continuing operations.
10. 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 2006, shareholders approved a share capital consolidation on the basis of 7 new ordinary shares
for every 8 existing ordinary shares, together with a special dividend of 118 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.
2006 2006 2005 2005
Continuing Continuing
3 months ended 30 September operations Total operations Total
Basic earnings per share
Profit available for equity holders (£m) 41 162 18 44
Basic weighted average number of ordinary shares
(millions)
359 359 441 441
Basic earnings per share (pence) 11.4 45.1 4.1 10.0
==== ===== ==== =====
Diluted earnings per share
Profit available for equity holders (£m) 41 162 18 44
Diluted weighted average number of ordinary shares
(millions) (see next page)
371 371 453 453
Diluted earnings per share (pence) 11.1 43.7 4.0 9.7
==== ===== ==== =====
2006 2006 2005 2005
Continuing Continuing
9 months ended 30 September operations Total operations Total
Basic earnings per share
Profit available for equity holders (£m) 235 379 68 168
Basic weighted average number of ordinary shares
(millions)
400 400 551 551
Basic earnings per share (pence) 58.7 94.7 12.3 30.5
==== ===== ==== =====
Diluted earnings per share
Profit available for equity holders (£m) 235 379 68 168
Diluted weighted average number of ordinary shares
(millions) (see next page)
412 412 563 563
Diluted earnings per share (pence) 57.0 92.0 12.1 29.8
==== ===== ==== =====
10. Earnings per ordinary share (continued)
The diluted weighted average number of ordinary shares is calculated as:
2006 2005 2006 2005
3 months 3 months 9 months 9 months
ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
millions millions millions millions
Basic weighted average number of ordinary
shares 359 441 400 551
Dilutive potential ordinary shares - employee
share options 12 12 12 12
____ _____ _____ _____
371 453 412 563
==== ===== ==== =====
2006 2005 2006 2005
3 months 3 months 9 months 9 months
ended ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept
Adjusted earnings per share £m £m £m £m
Continuing operations
Profit available for equity holders 41 18 235 68
Less adjusting items (note 8):
Other operating income and expenses - 9 (25) 17
Tax on other operating income and expenses - (2) 7 (2)
Special tax credit - - (96) (8)
____ ____ ____ ____
Adjusted earnings 41 25 121 75
Basic weighted average number of ordinary
shares (millions)
359 441 400 551
Adjusted earnings per share (pence) 11.4 5.7 30.2 13.6
==== ==== ==== ====
Adjusted earnings per ordinary share is disclosed in order to show performance undistorted by special
items, to give a more meaningful comparison of the Group's performance.
11. Cash flows from discontinued operations
2006 2005
9 months 9 months
ended 30 Sept ended 30 Sept
£m £m
Hotels
Operating profit before interest, depreciation
and amortisation
34 109
Investing activities (6) (20)
Financing activities (25) (15)
____ ____
3 74
==== ====
Soft Drinks
Operating profit before interest, depreciation
and amortisation
- 98
Investing activities - (38)
Financing activities - 110
____ ____
- 170
==== ====
12. Net debt
2006 2005
30 September 31 December
£m £m
Cash and cash equivalents 309 324
Loans and other borrowings - current (5) (2)
Loans and other borrowings - non-current (420) (410)
____ ____
(116) (88)
==== ====
13. Net assets
2006 2005
30 September 31 December
£m £m
Hotels
Americas 365 369
EMEA 377 951
Asia Pacific 283 296
Central 75 88
____ ____
1,100 1,704
Net debt (116) (88)
Unallocated assets and liabilities (327) (512)
____ ____
657 1,104
==== ====
14. Movement in IHG shareholders' equity
2006 2005
9 months 9 months
ended 30 Sept ended 30 Sept
£m £m
At 1 January 1,084 1,817
Total recognised income and expense for the period 357 192
Equity dividends paid (543) (61)
Issue of ordinary shares 13 10
Purchase of own shares (242) (147)
Cash element of capital reorganisation - (996)
Movement in shares in employee share trusts and share
schemes
(18) (5)
____ ____
At 30 September 651 810
==== ====
15. Capital commitments and contingencies
At 30 September 2006, amounts contracted for but not provided in the financial statements for expenditure on
property, plant and equipment was £47m (2005 31 December £76m).
At 30 September 2006, the Group had contingent liabilities of £15m (2005 31 December £20m), 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 £147m (2005 31 December £134m). 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.
16. Post balance sheet event
On 23 October 2006, IHG signed a hotel operating joint venture agreement with All Nippon Airways (ANA). IHG
will invest £8m for a majority stake in the venture which will be named IHG ANA Hotels Group Japan.
Completion of the deal is expected in December 2006. IHG will also invest approximately £10m over the next
two years in brand advertising and research and will lend up to £7m to the joint venture to part fund the
implementation of an enhanced IT platform.
INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP PLC
Introduction
We have been instructed by the Company to review the financial information for the three months and nine
months ended 30 September 2006 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 16. We have
read the other information contained in the Interim Report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained in Bulletin 1999/4 'Review
of interim financial information' 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 Report, including the financial information contained therein, is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for preparing the Interim Report in
accordance with the Listing Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent with those applied in
preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 'Review of interim
financial information' issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether the accounting policies and
presentation have been consistently applied, unless otherwise disclosed. A review excludes audit procedures
such as tests of controls and verification of assets, liabilities and transactions. It is substantially
less in scope than an audit performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not express an
audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the
financial information as presented for the three months and nine months ended 30 September 2006.
Ernst & Young LLP
London
13 November 2006
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