Intercontinental Hotels Group PLC 6-K, filed Feb 18, 2020
Intercontinental Hotels Group PLC (IHG)
About this 6-K
Intercontinental Hotels Group PLC filed this 6-K on February 18, 2020.
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For 18 February 2020
InterContinental Hotels Group PLC
(Registrant's name)
Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F Form 40-F
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable
EXHIBIT INDEX
| 99.1 | Final<br>Results dated 18 February 2020 |
|---|
Exhibit No: 99.1
IHG PLC - Full Year Results to 31 December 2019
| Reported | Underlying5 | |||
|---|---|---|---|---|
| 2019 | 2018 Restated1 | % Change | % Change | |
| REPORTABLE SEGMENTS2 | ||||
| Revenue3 | $2,083m | $1,933m | 8% | 6% |
| Revenue from fee business | $1,510m | $1,486m | 2% | 2% |
| Operating profit3 | $865m | $832m | 4% | 6% |
| Fee margin4 | 54.1% | 53.3% | 0.8%pts | |
| Adjusted EPS6 | 303.3¢ | 293.2¢ | 3% | KEY METRICS |
| GROUP RESULTS | ● $27.9bn total gross revenue<br>(up 2%; 3% at CER) | |||
| Total revenue | $4,627m | $4,337m | 7% | |
| Operating profit | $630m | $582m | 8% | ● <br>(0.3)% global FY RevPAR |
| Basic EPS | 210.4¢ | 183.7¢ | 15% | |
| Total dividend per share | 125.8¢ | 114.4¢ | 10% | ● <br>(1.8)% global Q4 RevPAR |
| Net debt | $2,665m | $1,965m | 36% |
1 Restated following the adoption of IFRS 16 'Leases' from 1 January 2019 and the amended definitions for fee margin and adjusted EPS. 2 Excludes System Fund results, hotel cost reimbursements and exceptional items. 3 Comprises the Group's fee business and owned, leased, and managed lease hotels. 4 Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group's captive insurance company. 5 Reportable segment results excluding significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER). 6 Calculated using results from Reportable Segments and Adjusted Interest, and excluding changes in fair value to contingent consideration.
● Net system size growth of 5.6% (5.0% excluding Sands partnership in Macau SAR), the strongest in over a decade, with 65k room additions. Ongoing focus on the long-term health of established brands drove 18k removals, leaving 884k rooms across the global estate.
● FY Comparable RevPAR: Global = (0.3)%; Americas = (0.1)% (US = (0.2)%); EMEAA = 0.3%; Greater China = (4.5)%. Performance was impacted by macro and geopolitical factors, increased supply growth ahead of demand in some markets, and ongoing unrest in Hong Kong SAR.
● Operating profit from reportable segments up 4%; operating profit up 8% after System Fund result and exceptional items, which in 2019 include impairment charges to the UK leased portfolio and Kimpton management agreements.
● Full year signings of 98k rooms (down 1% YoY), includes record performance in Greater China and EMEAA. Total pipeline now stands at 283k rooms.
● Continued progress optimising our brand portfolio for future growth:
o Six Senses: grown at pace with 10 signings since acquisition in February 2019; 18 properties now open
o Kimpton: signed 11 further deals, growing portfolio to almost 100 open and pipeline hotels
o Crowne Plaza: launched six flagship properties in key cities with new room and public space designs
o voco: signed 33 hotels across 16 countries since launch; 12 open; plan to continue global expansion in 2020
o Holiday Inn: opened >13k rooms; best ever full year performance for the brand
o Holiday Inn Express: new guest room and public space designs open or committed to in >1,600 hotels
o avid: 10 properties now open, with >80 more under construction or with planning approved
| Keith Barr, Chief Executive Officer, IHG, said: |
|---|
| "Our<br>performance in 2019 reflects the continued successful execution of<br>our strategy, with the investments we're making in our brands,<br>owner offer and enterprise capabilities accelerating net room<br>openings and supporting sustainable long-term growth. These<br>investments are being funded by our group-wide efficiency<br>programme, which is on track to deliver 125m of annual savings,<br>with the majority already realised and being reinvested across the<br>business.<br><br> <br><br>During<br>the year we grew our estate by 5.6%, our highest rate in more than<br>a decade, which helped deliver a 6% increase in underlying<br>operating profit in a weaker RevPAR environment. We increased our<br>ordinary dividend by 10%, and remain committed to returning surplus<br>cash to our shareholders.<br><br> <br><br>Led by<br>strong demand for our established brands, we opened a record number<br>of rooms, including our best ever performance for the Holiday Inn<br>Brand Family, and we increased our share of signings in key markets<br>globally. Future rooms growth will be further supported by our<br>newer brands, with avid, Atwell Suites, Regent and Six Senses all<br>attracting strong interest, and voco set to continue its global<br>expansion in 2020, following an excellent performance in<br>EMEAA.<br><br> <br><br>Given<br>the ongoing impact of coronavirus following the outbreak in China,<br>our top priority remains the health and safety of our colleagues,<br>guests and our partners on the ground, and we are doing all we can<br>to support them at this difficult time.<br><br> <br><br>The<br>fundamentals of our industry remain strong, and our<br>cash-generative, resilient fee-based model, underpinned by a<br>commitment to operate a responsible business, gives us confidence<br>to continue making the strategic investments that will drive our<br>long-term growth." |
| Update on strategic initiatives |
| We continue to make good progress in executing against our<br>strategic model to deliver industry leading net rooms growth over<br>the medium term<br><br> <br><br>● <br> Build and<br>leverage scale - Building a leading position in the world's most<br>attractive markets and highest opportunity segments, where our<br>scale and resources matter most<br><br>- Our<br>focus on building scale has seen us accelerate our rate of net<br>system size growth over the last three years from ~3% to<br>5.6%.<br><br>- Over<br>the same period, we have signed more than 280k rooms into our<br>pipeline, which now stands at 283k rooms, or 32% of our system<br>size, with 40% under construction.<br><br>- Achieved<br>our best ever openings performance for the Holiday Inn Brand<br>Family, with 38k rooms (260 hotels) opened in 2019.<br><br>- Record<br>performance for openings and signings in Greater China, with 24k<br>rooms (88 hotels) opened and a further 36k rooms (158 hotels)<br>signed into the pipeline. Total open rooms now at 136k (470 hotels)<br>with a further 85k (393 hotels) in the pipeline.<br><br>- EMEAA<br>also saw a record performance for signings, with 29k rooms (160<br>hotels) signed into the pipeline across 50 different<br>countries.<br><br> <br><br>● <br> Strengthen loyalty<br>programme - Continuing to innovate IHG Rewards Club to build<br>stronger and deeper relationships with our guests to drive high<br>value revenue across our hotel estate<br><br>- Loyalty<br>room revenue contribution flat year-on-year. A better<br>representation of the full value of our loyalty programme to<br>deliver revenue to our hotels from both qualified and redeemed<br>stays is loyalty room night contribution, which was ~46% for<br>2019.<br><br>- Strengthened<br>our ability to offer unique experiences to IHG Rewards Club members<br>through a partnership with the US Open Tennis Championships, and<br>enhanced our luxury and boutique offering to members through an<br>exclusive partnership with world-renowned travel club, Mr & Mrs<br>Smith.<br><br>- <br> InterContinental Alliance Resorts<br>partnership with Sands China in Macau SAR and the extension of our<br>alliance with The Venetian Resort Las Vegas gives guests the<br>opportunity to earn and redeem points in highly desirable<br>destinations.<br><br>- Offering<br>members greater flexibility and value for their points through<br>trials of dynamic reward night pricing and the option to use<br>loyalty points to pay for amenities and services during their<br>stay.<br><br> <br><br>● <br> Enhance<br>revenue delivery - Driving a higher share of revenues through IHG's<br>low cost booking channels to deliver better returns for our<br>owners<br><br>- IHG<br>revenue delivery enterprise drove system contribution of 79%, up<br>4%pts in 3 years.<br><br>- Digital<br>(web and mobile) revenue up 7% in 2019 to 5.6bn, with 1.5bn of<br>revenue from our award winning IHG mobile app (up 18%<br>YoY).<br><br>- <br> Piloting enhanced functionality, including<br>attribute pricing, for our cloud-based Guest Reservation System,<br>with extensive trials through H1 2020.<br><br>- IHG<br>Connect, our seamless Wi-Fi guest login, is now implemented or<br>being installed in >4,500 hotels globally, creating a platform<br>for greater connectivity across the guest stay, such as our new<br>digital in-room entertainment solution, IHG Studio.<br><br> <br><br>● <br> Evolve owner proposition - Outstanding<br>operational support and optimised owner returns to unlock<br>growth<br><br>- Embedded<br>new processes in the Americas to help reduce the time taken from<br>hotel signing to ground break to opening, and scaling across EMEAA<br>and Greater China in 2020. We have seen an acceleration in ground<br>break pace in the Americas during 2019, with a year-on-year<br>increase in the number of Q4 openings.<br><br>- Increasing<br>demand for our franchise offer in Greater China, with ~90% of<br>Holiday Inn Express deals signed under the franchise model in 2019.<br>We now have 89 franchise hotels open and a further 169 signed into<br>the pipeline in Greater China.<br><br> <br><br>● <br> Optimise our portfolio of brands for owners and<br>guests - Maintaining a strong portfolio of distinct and preferred<br>brands, serving the highest growth segments in the largest<br>markets<br><br> <br><br>- Mainstream<br>- (115bn global segment with 65bn growth potential to<br>2025)<br><br> <br><br>- Holiday<br>Inn: Continue to roll out updated room and public space<br>designs, with >180 hotels open or committed across the Americas,<br>and our Open Lobby open or committed to in >90% of our Europe<br>estate.<br><br>- Holiday<br>Inn Express: Our 'Formula Blue' guestroom and public space<br>designs are now open or committed to in >1,600 hotels across the<br>US and Canada.<br><br>- Staybridge<br>Suites & Candlewood Suites: Grown extended stay<br>portfolio to >700 open hotels and are seeing strong owner<br>interest in our transformational new room and public space design<br>prototypes.<br><br>- avid<br>hotels: >200 hotels (20k rooms) signed since launch, and<br>10 hotels now open, with 54 hotels (5k rooms) signed in 2019. Over<br>80 more properties under construction or with planning<br>approved.<br><br>- Atwell<br>Suites: 10 signings in 2019 following registration of<br>franchise documents in September for our new all-suites upper<br>midscale brand Atwell Suites, which targets an 18bn industry<br>segment.<br><br> <br><br>- Upscale<br>- (40bn global segment with 20bn growth potential to<br>2025)<br><br> <br><br>- Crowne<br>Plaza: Launched flagship properties, showcasing new room and<br>public space designs, in six key cities around the world, driving<br>significant uplifts in guest love and increased restaurant and bar<br>revenue.<br><br>- Hotel<br>Indigo: Accelerating momentum for the brand with record<br>number of rooms signed in 2019. We now have deals signed into the<br>pipeline that will take Hotel Indigo to 16 new countries<br>globally.<br><br>- voco:<br>33 hotels signed across 16 countries in EMEAA (11k rooms in total)<br>over the past 18 months. Planning on continuing to accelerate<br>voco's global expansion in 2020.<br><br> <br><br>- <br> Luxury - (60bn global segment with 35bn<br>growth potential to 2025)<br><br> <br><br>- Six<br>Senses Hotels Resorts Spas: Ten new signings since<br>February 2019 acquisition, including properties in London, the<br>Galápagos Islands and the Loire Valley.<br><br>- Regent<br>Hotels & Resorts: Signed three new properties since<br>acquisition and developed new brand hallmarks to position Regent in<br>the top tier of luxury.<br><br>- InterContinental<br>Hotels & Resorts: Reinforced position as largest global<br>luxury hotel brand with nine openings in 2019, including the<br>InterContinental Hayman Island, Australia and the InterContinental<br>Maldives.<br><br>- Kimpton<br>Hotels & Restaurants: Global expansion continues with<br>the opening of two further properties in the UK and 11 signings<br>globally in 2019, taking combined system and pipeline to almost 100<br>hotels.<br><br> <br><br>● <br> Commitment to operate a responsible business -<br>Providing True Hospitality for everyone<br><br>- Made<br>further progress in 2019 to reduce plastic waste, including being<br>the first global hotel company to announce our commitment to<br>eliminate bathroom miniatures across our entire estate during<br>2021.<br><br>- Committing<br>(a) to a Science Based Target to reduce our greenhouse gas<br>emissions, and (b) to implement the recommendations of the Task<br>Force on Climate-related Financial Disclosures.<br><br>- Advancing<br>our existing water stewardship program by becoming a signatory to<br>the CEO Water Mandate.<br><br>- Named<br>as one of the Best Places to Work for LGBTQ Equality by the Human<br>Rights Campaign Foundation for the sixth consecutive year and<br>became a member of The Valuable 500. |
| 1 Comprises the Group's fee business and owned, leased,<br>and managed lease hotels from reportable segments. This excludes<br>exceptional items, System Fund results and hotel cost<br>reimbursements.<br><br><br>2 Results from reportable segments excluding<br>significant liquidated damages and current year acquisitions at<br>constant FY 2019 exchange rates (CER).<br><br>See the<br>Business Review for definition of non-GAAP measures and<br>reconciliation to GAAP measures.<br><br><br>3 For definition of non-GAAP measures and<br>reconciliation to GAAP measures see the Business<br>Review.<br><br><br>4 Based on monthly average exchange rates each<br>year.<br><br><br>5 Excludes exceptional items and System Fund<br>results. |
All values are in US Dollars.
| Appendix 1: RevPAR Movement Summary | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q4 2019 | |||||||||||||||||
| Rate | Occ. | RevPAR | Rate | Occ. | |||||||||||||
| Group | (0.4)% | 0.1%pts | (1.8)% | (1.5)% | (0.2)%pts | ||||||||||||
| Americas | 0.2% | (0.2)%pts | (1.6)% | (0.6)% | (0.7)%pts | ||||||||||||
| EMEAA | (0.6)% | 0.7%pts | 0.2% | (0.4)% | 0.4%pts | ||||||||||||
| G.<br>China | (4.7)% | 0.2%pts | (10.5)% | (11.5)% | 0.7%pts | ||||||||||||
| Appendix 2: Comparable RevPAR movement at constant exchange rates<br>(CER) vs. actual exchange rates (AER) | |||||||||||||||||
| Q4 2019 | |||||||||||||||||
| AER | Difference | CER | AER | Difference | |||||||||||||
| Group | (1.7)% | (1.4)%pts | (1.8)% | (2.1)% | (0.3)%pts | ||||||||||||
| Americas | (0.4)% | (0.3)%pts | (1.6)% | (1.7)% | (0.1)%pts | ||||||||||||
| EMEAA | (2.9)% | (3.2)%pts | 0.2% | (0.3)% | (0.5)%pts | ||||||||||||
| G.<br>China | (7.9)% | (3.4)%pts | (10.5)% | (12.0)% | (1.5)%pts | ||||||||||||
| Appendix 3: Full Year System & Pipeline Summary<br>(rooms) | |||||||||||||||||
| System | Pipeline | ||||||||||||||||
| Openings | Net | Total | YoY% | Signings | Total | ||||||||||||
| Group | 65,220 | (18,198) | 47,022 | 883,563 | 5.6% | 97,754 | 283,043 | ||||||||||
| Americas | 26,121 | (11,603) | 14,518 | 524,647 | 2.8% | 32,956 | 116,862 | ||||||||||
| EMEAA | 15,335 | (3,064) | 12,271 | 223,370 | 5.8% | 29,125 | 81,106 | ||||||||||
| G.<br>China | 23,764 | (3,531) | 20,233 | 135,546 | 17.5% | 35,673 | 85,075 | ||||||||||
| Appendix 4: Full Year financial headlines | |||||||||||||||||
| GROUP | REPORTABLE SEGMENTS | ||||||||||||||||
| Total | Americas | EMEAA | G. China | Central | |||||||||||||
| 2018* | 2019 | 2018* | 2019 | 2018* | 2019 | 2018* | 2019 | 2018* | |||||||||
| Revenue<br>(m) | |||||||||||||||||
| Revenue from reportable segments | 2,083 | 1,933 | 1,040 | 1,051 | 723 | 569 | 135 | 143 | 185 | 170 | |||||||
| System<br>Fund | 1,373 | 1,233 | - | - | - | - | - | - | - | - | |||||||
| Hotel<br>Cost Reimbursements | 1,171 | 1,171 | - | - | - | - | - | - | - | - | |||||||
| Group Revenue | 4,627 | 4,337 | 1,040 | 1,051 | 723 | 569 | 135 | 143 | 185 | 170 | |||||||
| Operating<br>Profit (m) | |||||||||||||||||
| Fee<br>Business | 938 | 910 | 663 | 638 | 202 | 202 | 73 | 70 | - | - | |||||||
| Owned,<br>leased & managed lease | 52 | 39 | 37 | 35 | 15 | 4 | - | - | - | - | |||||||
| Central<br>overheads | (125) | (117) | - | - | - | - | - | - | (125) | (117) | |||||||
| Operating profit from reportable segments | 865 | 832 | 700 | 673 | 217 | 206 | 73 | 70 | (125) | (117) | |||||||
| System<br>Fund result | (49) | (146) | - | - | - | - | - | - | - | - | |||||||
| Operating profit before exceptionals | 816 | 686 | 700 | 673 | 217 | 206 | 73 | 70 | (125) | (117) | |||||||
| Operating<br>exceptional items | (186) | (104) | (62) | (36) | (109) | (12) | - | (1) | (15) | (55) | |||||||
| Operating Profit after exceptionals | 630 | 582 | 638 | 637 | 108 | 194 | 73 | 69 | (140) | (172) |
All values are in US Dollars.
*Restated following the adoption of IFRS 16 'Leases'
Appendix 5: Reported operating profit before exceptional items from reportable segments at actual & constant exchange rates
| Total*** | Americas | EMEAA | G. China | |||||
|---|---|---|---|---|---|---|---|---|
| Reported | Actual* | CER** | Actual* | CER** | Actual* | CER** | Actual* | CER** |
| Growth<br>/ (decline) | 4% | 5% | 4% | 4% | 5% | 9% | 4% | 7% |
Appendix 6: Underlying**** operating profit movement before exceptional items
| Total*** | Americas | EMEAA | G. China | |||
|---|---|---|---|---|---|---|
| Growth<br>/ (decline) | 6% | 4% | 10% | 16% | ||
| Exchange rates: | USD:GBP | USD:EUR | * US<br>dollar actual currency | |||
| --- | --- | --- | --- | |||
| FY 2019 | 0.78 | 0.89 | **<br>Translated at constant FY 2019 exchange rates | |||
| FY 2018 | 0.75 | 0.85 | ***<br>After central overheads | |||
| **** At<br>CER and excluding: significant liquidated damages, current year<br>acquisitions, System Fund results and hotel cost<br>reimbursements | ||||||
| Appendix 7: Definitions | ||||||
| --- | ||||||
| CER: constant exchange rates with FY 2019 exchange<br>rates applied to FY 2018.<br><br><br>Comparable RevPAR: revenue per available room for<br>hotels that have traded for all of 2018 and 2019, reported at<br>CER.<br><br><br>Fee revenue: group revenue from reportable segments<br>excluding owned, leased and managed lease hotels, and significant<br>liquidated damages.<br><br><br>Fee margin: adjusted to exclude owned, leased and<br>managed lease hotels, significant liquidated damages, and the<br>results of the Group's captive insurance company<br><br><br>Reportable segments: group results excluding System<br>Fund results, hotel cost reimbursements and exceptional<br>items.<br><br><br>Significant liquidated damages: $11m in 2019 ($11m<br>EMEAA fee business); $13m in 2018 ($7m in EMEAA fee business and<br>$6m in Greater China fee business).<br><br><br>Total gross revenue: total rooms revenue from<br>franchised hotels and total hotel revenue from managed, owned,<br>leased and managed lease hotels. Other than owned, leased and<br>managed lease hotels, it is not revenue attributable to IHG, as it<br>is derived mainly from hotels owned by third parties.<br><br><br>Total RevPAR: Revenue per available room including<br>hotels that have opened or exited in either 2018 or 2019, reported<br>at CER.<br><br><br>Adjusted Interest: adds back interest relating to the<br>System Fund. | ||||||
| Appendix 8: Investor information for 2019 Final<br>dividend | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Ex-dividend date: | 2 April<br>2020 | Record date: | 3 April<br>2020 | Payment date: | 14 May<br>2020 | |
| Dividend payment: | ADRs:<br>85.9 cents per ADR; the corresponding amount in Pence Sterling per<br>ordinary share will be announced on 24 April 2020, calculated<br>based on the average<br>of the market exchange rates for the three working days commencing<br>21 April 2020. A DRIP is available, allowing shareholders of<br>ordinary shares to elect to reinvest their cash dividend by<br>purchasing additional ordinary shares. | |||||
| For further information, please contact: | ||||||
| Investor<br>Relations (Sonya Ghobrial, Matthew Kay, Rakesh Patel): | +44<br>(0)1895 512 176 | +44<br>(0)7527 419 431 | ||||
| Media<br>Relations (Yasmin Diamond; Mark Debenham): | +44<br>(0)1895 512 097 | +44<br>(0)7527 424 046 | ||||
| Presentation for Analysts and Shareholders:<br><br><br>A<br>conference call and webcast presented by Keith Barr, Chief<br>Executive Officer and Paul Edgecliffe-Johnson, Chief Financial<br>Officer will commence at 9.30am on 18 February 2020 on the web<br>address:<br><br><br>https://www.investis-live.com/ihg/5e2b011c8d57e8130019ead1/cdfs<br><br><br><br><br><br>For<br>those wishing to ask questions please use the dial in details below<br>which will have a Q&A facility: | ||||||
| UK | +44 (0)<br>203 936 2999 | |||||
| --- | --- | |||||
| US | +1 646<br>664 1960 | |||||
| All<br>other locations: | +44 (0)<br>203 936 2999 | |||||
| Participant<br>Access Code: | 12 03<br>32 |
The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future: www.ihgplc.com/en/investors/results-and-presentations.
A replay will be available following the event, details are below:
| UK: | +44 (0)<br>203 936 3001 |
|---|---|
| US: | +1 845<br>709 8569 |
| All<br>other locations: | +44 (0)<br>203 936 3001 |
| Replay<br>pin | 50 60<br>94 |
| Website:<br><br><br>The full release and supplementary data will be available on our<br>website from 7:00am (London time) on 18th February. The<br>web address is www.ihgplc.com/en/investors/results-and-presentations. | |
| --- | |
| Notes to Editors:<br><br><br>IHG® (InterContinental<br>Hotels Group) [LON:IHG,<br>NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of<br>hotel brands, including Six Senses Hotels Resorts<br>Spas, Regent Hotels &<br>Resorts, InterContinental® Hotels<br>& Resorts, Kimpton® Hotels<br>& Restaurants, Hotel Indigo®, EVEN® Hotels, HUALUXE® Hotels<br>and Resorts, Crowne Plaza® Hotels<br>& Resorts, voco™, Holiday Inn® Hotels<br>& Resorts , Holiday<br>Inn Express®, Holiday<br>Inn Club Vacations®, avid™<br>hotels, Staybridge<br>Suites®, Atwell<br>Suites™,<br>and Candlewood<br>Suites®.<br><br><br><br><br><br>IHG franchises, leases, manages or owns more than 5,900 hotels and<br>approximately 884,000 guest rooms in more than 100 countries, with<br>over 1,900 hotels in its development pipeline. IHG also<br>manages IHG® Rewards<br>Club, our global loyalty<br>programme, which has more than 100 million enrolled<br>members.<br><br><br><br><br><br>InterContinental Hotels<br>Group PLC is the<br>Group's holding company and is incorporated in Great Britain and<br>registered in England and Wales. More than 400,000 people work<br>across IHG's hotels and corporate offices<br>globally.<br><br><br><br><br><br>Visit www.ihg.com for hotel information and reservations<br>and www.ihgrewardsclub.com for<br>more on IHG Rewards Club. For our latest news,<br>visit: https://www.ihgplc.com/en/news-and-media and<br>follow us on social media at: https://twitter.com/ihgcorporate, www.facebook.com/ihgcorporate and www.linkedin.com/company/intercontinental-hotels-group. | |
| Cautionary note regarding forward-looking statements:<br><br><br>This<br>announcement contains certain forward-looking statements as defined<br>under United States law (Section 21E of the Securities Exchange Act<br>of 1934) and otherwise. These forward-looking statements can<br>be identified by the fact that they do not relate only to<br>historical or current facts. Forward-looking statements often<br>use words such as 'anticipate', 'target', 'expect', 'estimate',<br>'intend', 'plan', 'goal', 'believe' or other words of similar<br>meaning. These statements are based on assumptions and<br>assessments made by InterContinental Hotels Group PLC's management<br>in light of their experience and their perception of historical<br>trends, current conditions, expected future developments and other<br>factors they believe to be appropriate. By their nature,<br>forward-looking statements are inherently predictive, speculative<br>and involve risk and uncertainty. There are a number of<br>factors that could cause actual results and developments to differ<br>materially from those expressed in or implied by, such<br>forward-looking statements. The main factors that could<br>affect the business and the financial results are described in the<br>'Risk Factors' section in the current InterContinental Hotels Group<br>PLC's Annual report and Form 20-F filed with the United States<br>Securities and Exchange Commission. |
This Business Review provides a commentary on the performance of InterContinental Hotels Group PLC
(the Group or IHG) for the financial year ended 31 December 2019. The 2018 comparatives have been restated to reflect the adoption of IFRS 16 'Leases'.
GROUP PERFORMANCE
| 12 months ended 31 December | ||||
|---|---|---|---|---|
| Group results | 2018 | |||
| 2019 | Restated | % | ||
| $m | $m | change | ||
| Revenuea | ||||
| Americas | 1,040 | 1,051 | (1.0) | |
| EMEAA | 723 | 569 | 27.1 | |
| Greater<br>China | 135 | 143 | (5.6) | |
| Central | 185 | 170 | 8.8 | |
| ____ | ____ | ____ | ||
| Revenue<br>from reportable segments | 2,083 | 1,933 | 7.8 | |
| System<br>Fund revenues | 1,373 | 1,233 | 11.4 | |
| Reimbursement<br>of costs | 1,171 | 1,171 | - | |
| ____ | ____ | ____ | ||
| Total<br>revenue | 4,627 | 4,337 | 6.7 | |
| ____ | ____ | ____ | ||
| Operating profita | ||||
| Americas | 700 | 673 | 4.0 | |
| EMEAA | 217 | 206 | 5.3 | |
| Greater<br>China | 73 | 70 | 4.3 | |
| Central | (125) | (117) | 6.8 | |
| ____ | ____ | ____ | ||
| Operating<br>profit from reportable segments | 865 | 832 | 4.0 | |
| System<br>Fund result | (49) | (146) | (66.4) | |
| ____ | ____ | ____ | ||
| Operating<br>profit before exceptional items | 816 | 686 | 19.0 | |
| Operating<br>exceptional items | (186) | (104) | 78.8 | |
| ____ | ____ | ____ | ||
| Operating<br>profit | 630 | 582 | 8.2 | |
| Net<br>financial expenses | (115) | (96) | 19.8 | |
| Fair<br>value gains/(losses) on contingent purchase<br>consideration | 27 | (4) | (775.0) | |
| ____ | ____ | ____ | ||
| Profit<br>before tax | 542 | 482 | 12.4 | |
| ____ | ____ | ____ | ||
| Earnings<br>per ordinary share | ||||
| Basic | 210.4¢ | 183.7¢ | 14.5 | |
| Adjusted | 303.3¢ | 293.2¢ | 3.4 | |
| Average<br>US dollar to sterling exchange rate | $1 : £0.78 | $1 :<br>£0.75 | 4.0 |
Group results
During the year ended 31 December 2019, total revenue increased by $290m (6.7%) to $4,627m, whilst revenue from reportable segments increased by $150m (7.8%) to $2,083m, primarily resulting from 5.6% rooms growth and the annualised benefit of an addition of a portfolio of hotels in the UK in mid-2018. Operating profit and profit before tax increased by $48m (8.2%) and $60m (12.4%) respectively, due in part to a $97m lower in-year System Fund deficit, partially offset by a $82m increase in operating exceptional items, driven by $131m impairment charges ($81m recognised in relation to the UK leased portfolio and $50m in relation to Kimpton management agreements, see Other Financial Information). Operating profit from reportable segments increased by $33m (4.0%) to $865m.
Underlyingb revenue and underlyingb operating profit increased by $123m (6.5%) and $47m (5.8%) respectively.
Comparable RevPAR decreased by 0.3% (including a decrease in average daily rate of 0.4%). IHG System size increased by 5.6% to 883,563 rooms, whilst underlyingb fee revenue increased by 2.0%.
Fee marginb increased by 0.8 percentage points to 54.1%.
Basic earnings per ordinary share increased by 14.5% to 210.4¢, whilst adjusted earnings per ordinary share increased by 3.4% to 303.3¢.
a Americas and EMEAA include revenue and operating profit before exceptional items from both fee business and owned, leased and managed lease hotels. Greater China includes revenue and operating profit before exceptional items from fee business.
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
| 12 months ended 31 December | |||
|---|---|---|---|
| 2019 | 2018 | % | |
| Total gross revenuea | $bn | $bn | change |
| InterContinental | 5.1 | 5.1 | - |
| Kimpton | 1.4 | 1.3 | 7.7 |
| HUALUXE | 0.1 | 0.1 | - |
| Crowne<br>Plaza | 4.3 | 4.5 | (4.4) |
| Hotel<br>Indigo<br><br><br>EVEN<br>Hotels | 0.6<br><br><br>0.1 | 0.5<br><br><br>0.1 | 20.0<br><br><br>- |
| Holiday<br>Inn | 6.3 | 6.5 | (3.1) |
| Holiday<br>Inn Express | 7.3 | 7.1 | 2.8 |
| Staybridge<br>Suites | 1.0 | 0.9 | 11.1 |
| Candlewood<br>Suites | 0.9 | 0.8 | 12.5 |
| Other | 0.8 | 0.5 | 60.0 |
| ____ | ____ | ____ | |
| Total | 27.9 | 27.4 | 1.8 |
| ____ | ____ | ____ |
a Total gross revenue provides a measure of the overall strength of the Group’s brands. It comprises total rooms revenue from franchised hotels and total hotel revenue from managed, owned, leased and managed lease hotels and excludes revenue from the System Fund and reimbursement of costs. Other than owned, leased and managed lease hotels, total gross revenue is not revenue attributable to IHG as it is derived from hotels owned by third parties.
| Hotels | Rooms | ||||
|---|---|---|---|---|---|
| Global hotel and room count<br><br><br>at 31 December | 2019 | Change<br><br><br>over<br><br><br>2018 | 2019 | Change<br><br><br>over<br><br><br>2018 | |
| Analysed<br>by brand | |||||
| Six<br>Senses<br><br><br>Regent | 18<br><br><br>6 | 18<br><br><br>- | 1,448<br><br><br>2,003 | 1,448<br><br><br>(2) | |
| InterContinental | 212 | 8 | 70,981 | 1,700 | |
| Kimpton | 66 | - | 13,046 | 131 | |
| HUALUXE | 9 | 1 | 2,710 | 375 | |
| Crowne<br>Plaza<br><br><br>Hotel<br>lndigo | 431<br><br><br>118 | 2<br><br><br>16 | 120,582<br><br><br>14,574 | 414<br><br><br>1,825 | |
| EVEN<br>Hotels | 13 | 3 | 1,949 | 398 | |
| voco | 12 | 10 | 4,293 | 3,762 | |
| Holiday<br>Inn1 | 1,284 | 33 | 239,894 | 6,042 | |
| Holiday<br>Inn Express<br><br><br>avid<br>hotels | 2,875<br><br><br>7 | 149<br><br><br>6 | 299,234<br><br><br>635 | 19,718<br><br><br>548 | |
| Staybridge<br>Suites | 300 | 24 | 32,633 | 2,416 | |
| Candlewood<br>Suites | 410 | 14 | 38,332 | 1,122 | |
| Other | 142 | 16 | 41,249 | 7,125 | |
| ____ | ____ | ______ | _____ | ||
| Total | 5,903 | 300 | 883,563 | 47,022 | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 4,870 | 255 | 614,974 | 37,995 | |
| Managed<br><br><br>Owned,<br>leased and managed lease | 1,007<br><br><br>26 | 42<br><br><br>3 | 262,253<br><br><br>6,336 | 8,687<br><br><br>340 | |
| ____ | ____ | ______ | _____ | ||
| Total | 5,903 | 300 | 883,563 | 47,022 | |
| ____ | ____ | ______ | _____ |
1 Includes 46 Holiday Inn Resort properties (11,502 rooms) and 28 Holiday Inn Club Vacations properties
(8,592 rooms), (2018: 45 Holiday Inn Resort properties (11,301 rooms) and 27 Holiday Inn Club Vacations properties (7,927 rooms)).
Hotels
Rooms
| Global pipeline<br><br><br>at 31 December | 2019 | Change<br><br><br>over<br>2018 | 2019 | Change<br><br><br>over<br>2018 | |
|---|---|---|---|---|---|
| Analysed<br>by brand | |||||
| Six<br>Senses<br><br><br>Regent | 25<br><br><br>5 | 25<br><br><br>2 | 1,770<br><br><br>944 | 1,770<br><br><br>430 | |
| InterContinental | 65 | 5 | 17,018 | 1,223 | |
| Kimpton | 33 | 6 | 6,203 | 1,729 | |
| HUALUXE | 22 | 1 | 6,180 | 81 | |
| Crowne<br>Plaza<br><br><br>Hotel<br>Indigo | 88<br><br><br>101 | 9<br><br><br>9 | 24,506<br><br><br>15,148 | 2,372<br><br><br>2,070 | |
| EVEN<br>Hotels | 26 | 8 | 4,342 | 1,158 | |
| voco1 | 17 | 9 | 6,220 | 4,710 | |
| Holiday<br>Inn2 | 275 | (13) | 52,909 | (2,742) | |
| Holiday<br>Inn Express | 754 | (30) | 95,874 | (2,550) | |
| avid<br>hotels | 207 | 36 | 19,068 | 3,257 | |
| Staybridge<br>Suites | 182 | - | 20,734 | (115) | |
| Candlewood<br>Suites | 91 | (11) | 8,186 | (935) | |
| Atwell<br>Suites | 10 | 10 | 1,000 | 1,000 | |
| Other | 17 | (7) | 2,941 | (1,363) | |
| ____ | ____ | ______ | _____ | ||
| Total | 1,918 | 59 | 283,043 | 12,095 | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 1,411 | 13 | 166,641 | 5,298 | |
| Managed | 506 | 46 | 116,247 | 6,797 | |
| Owned,<br>leased and managed lease | 1 | - | 155 | - | |
| ____ | ____ | ______ | _____ | ||
| Total | 1,918 | 59 | 283,043 | 12,095 | |
| ____ | ____ | ______ | _____ |
1 Does not include three open and one pipeline hotel that will be re-branded to voco.
2 Includes 29 Holiday Inn Resort properties (6,335 rooms) and one Holiday Inn Club Vacations property (110 rooms), (2018: 19 Holiday Inn Resort properties (5,229 rooms) and zero Holiday Inn Club Vacations properties (zero rooms)).
| AMERICAS | 12 months ended 31<br>December | |||
|---|---|---|---|---|
| Americas Results | 2018 | |||
| 2019 | Restated | % | ||
| $m | $m | change | ||
| Revenue from<br>the reportable segment | ||||
| Fee<br>business | 853 | 853 | - | |
| Owned,<br>leased and managed lease | 187 | 198 | (5.6) | |
| ____ | ____ | ____ | ||
| Total | 1,040 | 1,051 | (1.0) | |
| ____ | ____ | ____ | ||
| Operating profit from the reportable segment | ||||
| Fee<br>business | 663 | 638 | 3.9 | |
| Owned,<br>leased and managed lease | 37 | 35 | 5.7 | |
| ____ | ____ | ____ | ||
| 700 | 673 | 4.0 | ||
| Operating<br>exceptional items | (62) | (36) | 72.2 | |
| ____ | ____ | ____ | ||
| Operating<br>profit | 638 | 637 | 0.2 | |
| ____ | ____ | ____ | ||
| Americas Comparable RevPAR movement on previous year | 12 months ended<br><br><br>31 December<br><br><br>2019 | |||
| --- | --- | --- | --- | |
| Fee<br>business | ||||
| InterContinental | 0.7% | |||
| Kimpton | 2.2% | |||
| Crowne<br>Plaza | (1.6)% | |||
| Hotel<br>Indigo | 0.2% | |||
| EVEN<br>Hotels | (5.3)% | |||
| Holiday<br>Inn | (0.7)% | |||
| Holiday<br>Inn<br>Express | 0.1% | |||
| Staybridge<br>Suites | 0.1% | |||
| Candlewood<br>Suites | (1.1)% | |||
| All<br>brands | (0.1)% | |||
| Owned,<br>leased and managed lease | ||||
| InterContinental | 3.0% | |||
| EVEN<br>Hotels | 0.9% | |||
| Holiday<br>Inn | 6.2% | |||
| All<br>brands | 4.1% |
Americas results
Revenue from the reportable segmenta decreased by $11m (1.0%) to $1,040m, whilst operating profit increased by $1m (0.2%) to $638m, impacted by a $26m increase in operating exceptional items. Operating profit from the reportable segmenta increased by $27m (4.0%) to $700m. On an underlyingb basis, revenue decreased by $9m (0.9%), as growth from net room additions was held back by $9m one-off marketing assessments in the prior year, whilst underlying operating profit increased by $29m (4.3%), benefiting from a continued focus on maintaining an efficient cost base.
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
Fee business revenueb remained in line with 2018 at $853m, partly impacted by adverse foreign exchangec ($2m), whilst fee business operating profit increased by $25m (3.9%) to $663m, also partly impacted by adverse foreign exchangec ($2m).
Owned, leased and managed lease revenueb decreased by $11m (5.6%) to $187m, whilst operating profitb increased by $2m (5.7%) to $37m, benefiting from strong trading across a number of hotels and the mitigation of losses by business interruption insurance at one hotel. There was no material impact of foreign exchangec on either revenue or operating profit.
a Americas reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenues and expenses and reimbursement of costs, for both fee business and owned, leased and managed lease hotels
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
c The impact of movements between the previous year’s actual exchange rates and average rates in 2019.
| Hotels | Rooms | ||||
|---|---|---|---|---|---|
| Americas hotel and room count<br><br><br>at 31 December | 2019 | Change<br><br><br>over<br>2018 | 2019 | Change<br><br><br>over<br>2018 | |
| Analysed<br>by brand | |||||
| InterContinental | 51 | - | 17,896 | 143 | |
| Kimpton | 61 | (3) | 11,997 | (310) | |
| Crowne<br>Plaza | 149 | (7) | 39,875 | (1,624) | |
| Hotel<br>Indigo | 64 | 7 | 8,267 | 772 | |
| EVEN<br>Hotels | 13 | 3 | 1,949 | 398 | |
| Holiday<br>Inn1 | 783 | 9 | 135,286 | 794 | |
| Holiday<br>Inn Express<br><br><br>avid<br>hotels | 2,368<br><br><br>7 | 79<br><br><br>6 | 214,993<br><br><br>635 | 8,373<br><br><br>548 | |
| Staybridge<br>Suites | 283 | 22 | 30,244 | 2,212 | |
| Candlewood<br>Suites | 410 | 14 | 38,332 | 1,122 | |
| Other | 118 | 16 | 25,173 | 2,090 | |
| ____ | ____ | ______ | _____ | ||
| Total | 4,307 | 146 | 524,647 | 14,518 | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 4,008 | 155 | 465,265 | 15,163 | |
| Managed | 292 | (9) | 57,160 | (644) | |
| Owned,<br>leased and managed lease | 7 | - | 2,222 | (1) | |
| ____ | ____ | ______ | _____ | ||
| Total | 4,307 | 146 | 524,647 | 14,518 | |
| ____ | ____ | ______ | _____ |
1 Includes 22 Holiday Inn Resort properties (6,003 rooms) and 28 Holiday Inn Club Vacations properties
(8,592 rooms), (2018: 23 Holiday Inn Resort properties (6,184 rooms) and 27 Holiday Inn Club Vacations
properties (7,927 rooms)).
| Americas pipeline<br><br><br>at 31 December | 2019 | Hotels<br><br><br><br><br><br>Change<br><br><br>over<br>2018 | 2019 | Rooms<br><br><br><br><br><br>Change<br><br><br>over<br>2018 | |
|---|---|---|---|---|---|
| Analysed<br>by brand | |||||
| Six<br>Senses | 5 | 5 | 422 | 422 | |
| InterContinental | 7 | 1 | 1,549 | 72 | |
| Kimpton | 21 | 5 | 3,459 | 1,124 | |
| Crowne<br>Plaza | 5 | (1) | 1,093 | (170) | |
| Hotel<br>Indigo | 37 | 2 | 5,172 | 649 | |
| EVEN<br>Hotels | 15 | 5 | 1,866 | 570 | |
| Holiday<br>Inn1 | 98 | (28) | 12,506 | (3,546) | |
| Holiday<br>Inn Express | 448 | (51) | 43,103 | (4,517) | |
| avid<br>hotels | 206 | 35 | 18,853 | 3,042 | |
| Staybridge<br>Suites | 162 | (1) | 16,874 | (28) | |
| Candlewood<br>Suites | 91 | (11) | 8,186 | (935) | |
| Atwell<br>Suites | 10 | 10 | 1,000 | 1,000 | |
| Other | 16 | (6) | 2,779 | (1,103) | |
| ____ | ____ | ______ | _____ | ||
| Total | 1,121 | (35) | 116,862 | (3,420) | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 1,077 | (38) | 109,986 | (3,671) | |
| Managed | 44 | 3 | 6,876 | 251 | |
| ____ | ____ | ______ | _____ | ||
| Total | 1,121 | (35) | 116,862 | (3,420) | |
| ____ | ____ | ______ | _____ |
1 Includes three Holiday Inn Resort properties (490 rooms) and one Holiday Inn Club Vacations property (110 rooms), (2018: one Holiday Inn Resort property (165 rooms) and zero Holiday Inn Club Vacations properties (zero rooms)).
EMEAA
| 12 months ended 31<br>December | ||||
|---|---|---|---|---|
| EMEAA results | 2018 | |||
| 2019 | Restated | % | ||
| $m | $m | change | ||
| Revenue from the reportable segment | ||||
| Fee<br>business | 337 | 320 | 5.3 | |
| Owned,<br>leased and managed lease | 386 | 249 | 55.0 | |
| ____ | ____ | ____ | ||
| Total | 723 | 569 | 27.1 | |
| ____ | ____ | ____ | ||
| Operating profit from the reportable segment | ||||
| Fee<br>business | 202 | 202 | - | |
| Owned,<br>leased and managed lease | 15 | 4 | 275.0 | |
| ____ | ____ | ____ | ||
| 217 | 206 | 5.3 | ||
| Operating<br>exceptional items | (109) | (12) | (808.3) | |
| ____ | ____ | ____ | ||
| Operating<br>profit | 108 | 194 | (44.3) | |
| ____ | ____ | ____ | ||
| EMEAA comparable RevPAR movement on previous year | 12 months ended<br><br><br>31 December<br><br><br>2019 | |||
| --- | --- | --- | --- | |
| Fee<br>business | ||||
| InterContinental | 1.5% | |||
| Crowne<br>Plaza | (0.6)% | |||
| Hotel<br>Indigo | 1.5% | |||
| Holiday<br>Inn | (0.5)% | |||
| Holiday<br>Inn Express | 1.2% | |||
| Staybridge<br>Suites | (3.9)% | |||
| All<br>brands | 0.3% | |||
| Owned,<br>leased and managed leases | ||||
| InterContinental | 1.5% | |||
| Holiday<br>Inn | 2.6% | |||
| All<br>brands | 1.6% |
EMEAA results
Revenue from the reportable segment a increased by $154m (27.1%) to $723m and operating profit decreased by $86m (44.3%) to $108m, impacted by a $97m increase in operating exceptional items, whilst both included the benefit of $11m significant liquidated damages (2018: $7m). Operating profit from the reportable segment a increased by $11m (5.3%) to $217m. On an underlying b basis, revenue increased by $112m (20.5%) and underlying operating profit increased by $19m (9.8%) driven by increases in net rooms supply and the annualisation of the UK portfolio transaction, that completed in July 2018.
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
Fee business revenueb increased by $17m (5.3%) to $337m, partly impacted by adverse foreign exchangec ($8m), whilst fee business operating profitb remained in line with 2018 at $202m, but was also impacted by adverse foreign exchangec ($6m). Comparable RevPAR increased by 0.3%, driven by gains in occupancy.
Owned, leased and managed lease revenueb increased by $137m (55.0%) to $386m, due to the annualisation of the UK portfolio transaction, that completed in July 2018 and was partly impacted by adverse foreign exchangec ($7m). Owned, leased and managed lease operating profitb increased by $11m to $15m, (foreign exchangec impact $nil), driven by solid trading conditions outside of the UK for a number of hotels and benefiting from partial usage of the IFRS 16 lease liability for the German leased hotels. Trading conditions in the UK in the second half of the year resulted in $17m of rental guarantee lease payments being charged against the IFRS 16 lease liability.
a EMEAA reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenues and expenses and reimbursement of costs, for both fee business and owned, leased and managed lease hotels.
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
c The impact of movements between the previous year’s actual exchange rates and average rates in 2019.
| EMEAA hotel and room count<br><br><br>at 31 December | Hotels<br><br><br><br><br><br>2019 | Change<br><br><br>over<br>2018 | Rooms<br><br><br><br><br><br>2019 | Change<br><br><br>over<br>2018 | ||
|---|---|---|---|---|---|---|
| Analysed<br>by brand | ||||||
| Six<br>Senses | 17 | 17 | 1,326 | 1,326 | ||
| Regent<br><br><br>InterContinental | 3<br><br><br>113 | -<br><br><br>7 | 771<br><br><br>33,515 | 2<br><br><br>1,216 | ||
| Kimpton | 4 | 2 | 920 | 312 | ||
| Crowne<br>Plaza<br><br><br>Hotel<br>Indigo | 186<br><br><br>41 | 4<br><br><br>6 | 46,411<br><br><br>4,439 | 152<br><br><br>691 | ||
| voco | 12 | 10 | 4,293 | 3,762 | ||
| Holiday<br>Inn1 | 394 | 9 | 73,432 | 2,079 | ||
| Holiday<br>Inn Express | 324 | 20 | 46,454 | 2,722 | ||
| Staybridge<br>Suites | 17 | 2 | 2,389 | 204 | ||
| Other | 15 | (2) | 9,420 | (195) | ||
| ____ | _____ | _____ | _____ | |||
| Total | 1,126 | 75 | 223,370 | 12,271 | ||
| ____ | _____ | _____ | _____ | |||
| Analysed<br>by ownership type | ||||||
| Franchised | 773 | 47 | 126,455 | 8,333 | ||
| Managed | 334 | 25 | 92,801 | 3,597 | ||
| Owned,<br>leased and managed lease | 19 | 3 | 4,114 | 341 | ||
| ____ | _____ | _____ | _____ | |||
| Total | 1,126 | 75 | 223,370 | 12,271 | ||
| ____ | _____ | _____ | _____ |
1 Includes 17 Holiday Inn Resort properties (3,604 rooms), (2018: 16 Holiday Inn Resort properties (3,391
rooms)).
| Hotels | Rooms | ||||
|---|---|---|---|---|---|
| EMEAA pipeline<br><br><br>at 31 December | 2019 | Change<br><br><br>over<br>2018 | 2019 | Change<br><br><br>over<br>2018 | |
| Analysed<br>by brand | |||||
| Six<br>Senses | 17 | 17 | 1,179 | 1,179 | |
| Regent<br><br><br>InterContinental | 4<br><br><br>31 | 1<br><br><br>2 | 664<br><br><br>7,507 | 150<br><br><br>588 | |
| Kimpton | 7 | - | 1,247 | 7 | |
| Crowne<br>Plaza<br><br><br>Hotel<br>Indigo | 35<br><br><br>40 | 1<br><br><br>- | 9,415<br><br><br>5,652 | 399<br><br><br>(109) | |
| EVEN<br>Hotels | - | (1) | - | (200) | |
| voco1 | 17 | 9 | 6,220 | 4,710 | |
| Holiday<br>Inn2 | 119 | 13 | 25,936 | 1,597 | |
| Holiday<br>Inn Express | 112 | (2) | 19,049 | (105) | |
| avid<br>hotels | 1 | 1 | 215 | 215 | |
| Staybridge<br>Suites | 20 | 1 | 3,860 | (87) | |
| Other | 1 | - | 162 | 19 | |
| ____ | ____ | ______ | _____ | ||
| Total | 404 | 42 | 81,106 | 8,363 | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 165 | 6 | 27,331 | 1,650 | |
| Managed | 238 | 36 | 53,620 | 6,713 | |
| Owned,<br>leased and managed lease | 1 | - | 155 | - | |
| ____ | ____ | ______ | _____ | ||
| Total | 404 | 42 | 81,106 | 8,363 | |
| ____ | ____ | ______ | _____ |
1 Does not include three open and one pipeline hotel that will be re-branded to voco.
2 Includes 18 Holiday Inn Resort properties (3,662 rooms), (2018: 10 Holiday Inn Resort properties (2,353
rooms)).
GREATER CHINA
| 12 months ended 31<br>December | ||||
|---|---|---|---|---|
| Greater China results | 2019 | 2018<br>Restated | % | |
| $m | $m | Change | ||
| Revenue from the reportable segment | ||||
| Fee<br>business | 135 | 143 | (5.6) | |
| ____ | ____ | ____ | ||
| Total | 135 | 143 | (5.6) | |
| ____ | ____ | ____ | ||
| Operating profit from the reportable segment | ||||
| Fee<br>business | 73 | 70 | 4.3 | |
| ____ | ____ | ____ | ||
| Operating<br>exceptional items<br><br><br><br><br><br>Operating<br>profit | -<br><br><br><br><br><br>73 | (1)<br><br><br><br><br><br>69 | -<br><br><br><br><br><br>5.8 | |
| ____ | ____ | ____ | ||
| Greater China comparable RevPAR movement on previous<br>year | 12 months ended<br><br><br>31 December<br><br><br>2019 | |||
| --- | --- | --- | ||
| Fee<br>business | ||||
| InterContinental | (4.6)% | |||
| HUALUXE | 6.6% | |||
| Crowne<br>Plaza | (4.9)% | |||
| Hotel<br>Indigo | (8.1)% | |||
| Holiday<br>Inn | (4.0)% | |||
| Holiday<br>Inn Express | (4.7)% | |||
| All<br>brands | (4.5)% |
Greater China results
Revenue from the reportable segmenta decreased by $8m (5.6%) to $135m and operating profit increased by $4m (5.8%) to $73m, both impacted by a reduction in significant liquidated damages to $nil (2018: $6m). Operating profit from the reportable segmenta increased by $3m (4.3%) to $73m. On an underlyingb basis, revenue increased by $3m (2.3%) and underlyingb operating profit increased by $10m (15.9%), driven by 17.5% net rooms growth and cost efficiencies partially offset by a 4.5% decline in comparable RevPAR, impacted by ongoing unrest in Hong Kong SAR.
a Greater China reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenue and expenses and reimbursement of costs, for both fee business and owned, leased and managed lease hotels.
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
| Hotels | Rooms | ||||
|---|---|---|---|---|---|
| Greater China hotel and room count<br><br><br>at 31 December | 2019 | Change<br><br><br>over<br>2018 | 2019 | Change<br><br><br>over<br>2018 | |
| Analysed<br>by brand | |||||
| Six<br>Senses | 1 | 1 | 122 | 122 | |
| Regent | 3 | - | 1,232 | (4) | |
| InterContinental | 48 | 1 | 19,570 | 341 | |
| Kimpton | 1 | 1 | 129 | 129 | |
| HUALUXE | 9 | 1 | 2,710 | 375 | |
| Crowne<br>Plaza | 96 | 5 | 34,296 | 1,886 | |
| Hotel<br>Indigo | 13 | 3 | 1,868 | 362 | |
| Holiday<br>Inn1 | 107 | 15 | 31,176 | 3,169 | |
| Holiday<br>Inn Express | 183 | 50 | 37,787 | 8,623 | |
| Other | 9 | 2 | 6,656 | 5,230 | |
| ____ | ____ | ______ | _____ | ||
| Total | 470 | 79 | 135,546 | 20,233 | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 89 | 53 | 23,254 | 14,499 | |
| Managed | 381 | 26 | 112,292 | 5,734 | |
| ____ | ____ | ______ | _____ | ||
| Total | 470 | 79 | 135,546 | 20,233 | |
| ____ | ____ | ______ | _____ |
1 Includes seven Holiday Inn Resort properties (1,895 rooms), (2018: six Holiday Inn Resort properties (1,726 rooms)).
| Hotels | Rooms | ||||
|---|---|---|---|---|---|
| Greater China pipeline<br><br><br>at 31 December | 2019 | Change<br><br><br>over<br>2018 | 2019 | Change<br><br><br>over<br>2018 | |
| Analysed<br>by brand | |||||
| Six<br>Senses | 3 | 3 | 169 | 169 | |
| Regent | 1 | 1 | 280 | 280 | |
| InterContinental | 27 | 2 | 7,962 | 563 | |
| Kimpton | 5 | 1 | 1,497 | 598 | |
| HUALUXE | 22 | 1 | 6,180 | 81 | |
| Crowne<br>Plaza | 48 | 9 | 13,998 | 2,143 | |
| Hotel<br>Indigo | 24 | 7 | 4,324 | 1,530 | |
| EVEN<br>Hotels | 11 | 4 | 2,476 | 788 | |
| Holiday<br>Inn1 | 58 | 2 | 14,467 | (793) | |
| Holiday<br>Inn Express | 194 | 23 | 33,722 | 2,072 | |
| Other | - | (1) | - | (279) | |
| ____ | ____ | ______ | _____ | ||
| Total | 393 | 52 | 85,075 | 7,152 | |
| ____ | ____ | ______ | _____ | ||
| Analysed<br>by ownership type | |||||
| Franchised | 169 | 45 | 29,324 | 7,319 | |
| Managed | 224 | 7 | 55,751 | (167) | |
| ____ | ____ | ______ | _____ | ||
| Total | 393 | 52 | 85,075 | 7,152 | |
| ____ | ____ | ______ | _____ |
1 Includes eight Holiday Inn Resort properties (2,183 rooms), (2018: eight Holiday Inn Resort properties (2,711 rooms)).
CENTRAL
| 12 months ended 31 December | |||
|---|---|---|---|
| 2018 | |||
| 2019 | Restated | % | |
| Central results | $m | $m | change |
| Revenue | 185 | 170 | 8.8 |
| Gross<br>costs | (310) | (287) | 8.0 |
| ____ | ____ | ____ | |
| (125) | (117) | 6.8 | |
| Operating<br>exceptional items | (15) | (55) | (72.7) |
| ____ | ____ | ____ | |
| Operating<br>loss | (140) | (172) | (18.6) |
| ____ | ____ | ____ |
Central results
Net operating loss decreased by $32m (18.6%) compared to 2018, driven by a $40m (72.7%) decrease in operating exceptional items. Central revenue, which mainly comprises technology fee income, increased by $15m (8.8%) to $185m, driven by IHG System size growth (5.6%) and partly impacted by adverse foreign exchangea ($2m). Gross costs increased by $23m (8.0%), driven by reinvestment of a substantial portion of growth investment funded by savings elsewhere in the business, also benefiting from the impact of $5m foreign exchangea.
Net operating loss before exceptional items increased by $8m (6.8%) to $125m, benefiting from the impact of $3m foreign exchangea, as an increase in central revenues was offset by continued investments in growth initiatives.
a The impact of movements between the previous year’s actual exchange rates and average rates in 2019.
OTHER FINANCIAL INFORMATION
System Fund
The Group operates a System Fund to collect and administer cash assessments from hotel owners for the specific purpose of use in marketing, the Guest Reservation Systems, and hotel loyalty programme, IHG Rewards Club. The Fund also receives proceeds from the sale of loyalty points under third-party co-branding arrangements. The Fund is not managed to generate a profit or loss for IHG over the longer term, although an in-year surplus or deficit can arise, but is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.
In the year to 31 December 2019, System Fund revenue increased by $140m (11.4%) to $1,373m. The primary driver was a favourable adjustment relating to a change in the actuarial assumptions around the ultimate rate of consumption of IHG Rewards Club points ('breakage') leading to increased revenue recognition year-over-year. The increase in non-loyalty revenue was driven by increased assessment fees and contributions from hotels, reflecting increased System Size.
Reimbursement of costs
In the year to 31 December 2019, reimbursable revenue remained in line with 2018 at $1,171m.
Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed and franchised properties and relates, predominantly, to payroll costs at managed properties where we are the employer. As we record cost reimbursements based upon costs incurred with no added mark up, this revenue and related expenses has no impact on either our operating profit or net income.
Exceptional items
Pre-tax exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share as well as other Non-GAAP measures (see Use of Non-GAAP measures) in order to provide a more meaningful comparison of performance and can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, and restructuring costs.
2019 pre-tax exceptional items totalled a charge of $148m. The charge included: $28m relating to management's best estimate of a settlement in respect of a lawsuit filed against the Group in the Americas region, together with the cost of an arbitration award made against the Group in the EMEAA region; $20m relating to reorganisation costs (see below); $131m arising from impairment charges further discussed below, the impact of which was partially offset by a corresponding fair value gain on contingent purchase consideration of $38m, and $7m relating to acquisition and integration costs arising from the Group's recent acquisitions.
Impairment
Impairment of $131m comprises a $50m impairment on the Kimpton management agreements and an $81m impairment relating to the UK portfolio, comprising $49m related to goodwill and $32m related to right-of-use assets. The impact of the impairment arising on the UK portfolio is partially offset by the fair value gain of $38m.
Reorganisation costs
In September 2017, the Group launched a comprehensive efficiency programme funding a series of new strategic initiatives to drive an acceleration in IHG's future growth. The programme is centred around strengthening the Group's organisational structure to redeploy resources to leverage scale in the highest opportunity markets and segments. The programme was completed in 2019.
The programme is expected to realise c.$125m in annual savings by 2020, of which c.$75m will benefit the System Fund. These savings, primarily in administrative expenses, are planned to be reinvested as they are realised to accelerate medium-term revenue growth.
Costs incurred since 2017 to achieve these savings, including amounts charged to the System Fund, total $196m. The exceptional cost charged to the Group income statement in 2019 of $20m includes severance costs of $8m and consultancy fees of $6m.
Net financial expenses
Net financial expenses, which were restated for IFRS 16, increased by $19m to $115m and adjusted interest (see Use of Non-GAAP measures) increased by $18m to $133m. The increase is primarily due to interest on the €500m bond issued in November 2018, and related currency swaps.
Financial expenses included $63m (2018: $48m) of interest costs on the public bonds, which are fixed rate debt. Interest expense on lease liabilities was $41m (2018: $39m).
Fair value gains / losses on contingent purchase consideration
Contingent purchase consideration arose on the acquisitions of Regent, the UK portfolio and Six Senses. The net gain of $27m (2018: loss of $4m) comprises an exceptional gain of $38m in respect of the UK portfolio (see Impairment above), offset by a loss of $11m in respect of Regent. The total contingent purchase consideration liability at 31 December 2019 is $91m.
Taxation
The effective rate of tax on profit before exceptional items and System Fund was 24% (2018: 22%). Excluding the impact of prior year items, the equivalent tax rate would be 26% (2018: 23%). The effective rate is higher than the UK Corporation Tax rate of 19% (2018: 24%), due mainly to certain overseas profits (particularly in the US) being subject to statutory tax rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
Taxation within exceptional items totalled a credit of $20m (2018: credit of $27m). This predominantly included a current tax credit of $4m on reorganisation costs, a $6m deferred tax credit in respect of future tax relief available on litigation costs and a $12m deferred tax credit in respect of impairment and adjustments to contingent purchase consideration (see above).
Net tax paid in 2019 totalled $141m (2018: $68m). The 2019 tax paid was more than 2018 principally due to material amounts of tax recovered in 2018
Dividends
The Board has proposed a final dividend per ordinary share of 85.9¢. With the interim dividend per ordinary share of 39.9¢, the full-year dividend per ordinary share for 2019 will total 125.8¢, an increase of 10% over 2018.
On 19 October 2018, the Group announced a $500m return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (262.1¢ per ordinary share) was paid on 29 January 2019.
IHG pays its dividends in pounds sterling and US dollars. The sterling amount of the final dividend will be announced on 24 April 2020 using the average of the daily exchange rates for the three working days commencing 21 April 2020.
Earnings per ordinary share
Basic earnings per ordinary share increased by 14.5% to 210.4¢ from 183.7¢ in 2018 whilst adjusted earnings per ordinary share increased by 3.4% to 303.3¢.
Share price and market capitalisation
The IHG share price closed at £52.08 on 31 December 2019, up from £42.49 on 31 December 2018. The market capitalisation of the Group at the year-end was £9.5bn.
Sources of liquidity
In November 2018, the Group issued a €500m, 2.125% euro bond repayable in May 2027. The bond extends the maturity profile of the Group's debt. Currency swaps were transacted at the same time the bonds were issued in order to swap the proceeds and interest flows into pounds sterling. The currency swaps fix the bond debt at £436m, with interest payable semi-annually at a rate of 3.5%. This is in addition to £400m of public bonds which are repayable on 28 November 2022, £300m repayable on 14 August 2025 and £350m repayable on 24 August 2026.
The Group is further financed by a $1.275bn revolving syndicated bank facility (the Syndicated Facility) and a $75m revolving bilateral facility (the Bilateral Facility) which mature in March 2022, under which $125m was drawn at 31 December 2019 (31 December 2018: $nil). The Syndicated and Bilateral Facilities contain the same terms and two financial covenants; interest cover; and net debt divided by operating profit before exceptional items, depreciation and amortisation and System Fund revenue and expenses. The Group is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding in the near future. The Group has started to review and plan for the expected discontinuation of LIBOR after 2021. The Group's main exposure to LIBOR is the underlying reference rate in the syndicated and bilateral facilities. The terms of this agreement will need to be renegotiated to address the discontinuation of LIBOR. The replacement of LIBOR with alternative reference rates is not expected to have a material impact on the group at this stage.
Additional funding is provided by other uncommitted bank facilities. In the Group's opinion, the available facilities are sufficient for the Group's present liquidity requirements.
Borrowings included bank overdrafts of $87m (2018: $104m), which were matched by an equivalent amount of cash
and cash equivalents under the Group's cash pooling arrangements. Under these arrangements, each pool contains a number of bank accounts with the same financial institution, and the Group pays interest on net overdraft balances within each pool. The cash pools are used for day-to-day cash management purposes and are managed daily as
closely as possible to a zero balance on a net basis for each pool. Overseas subsidiaries are typically in a cash-
positive position, with the most significant balances in the US and the matching overdrafts are held by the Group's central treasury company in the UK.
Net debt of $2,665m (2018: $1,965m restated) is analysed by currency as follows:
| 2019 | 2018<br><br><br>Restated | ||
|---|---|---|---|
| $m | $m | ||
| Borrowings | |||
| Sterling* | 2,022 | 1,956 | |
| US<br>dollar | 721 | 620 | |
| Euros | 44 | 37 | |
| Other | 73 | 56 | |
| Cash<br>and cash equivalents | |||
| Sterling | (25) | (479) | |
| US<br>dollar | (91) | (91) | |
| Euros | (13) | (23) | |
| Canadian<br>dollar | (7) | (12) | |
| Chinese<br>renminbi | (17) | (58) | |
| Other | (42) | (41) | |
| ____ | ____ | ||
| Net<br>debt | 2,665 | 1,965 | |
| ____ | ____ | ||
| Average<br>debt levels | 2,720 | 2,174 | |
| *<br>Includes the impact of currency swaps. | ____ | ____ |
USE OF NON-GAAP MEASURES
In addition to performance measures directly observable in the Business Review (IFRS measures), certain financial measures are used when discussing the Group's performance which are not measures of financial performance or liquidity under International Financial Reporting Standards (IFRS). In management's view these measures provide investors and other users with an enhanced understanding of IHG's operating performance, profitability, financial strength and funding requirements. These measures do not have standardised meanings under IFRS, and companies do not necessarily calculate these in the same way.
Global revenue per available room (RevPAR) growth
RevPAR is the primary metric used by management to track hotel performance across regions and brands. RevPAR is also a commonly used performance measure in the hotel industry.
RevPAR comprises IHG's System rooms revenue divided by the number of room nights available and can be derived from occupancy rate multiplied by average daily rate (ADR). ADR is rooms revenue divided by the number of room nights sold.
References to RevPAR, occupancy and ADR are presented on a comparable basis, comprising groupings of hotels that have traded in all months in both the current and prior year. The principal exclusions in deriving this measure are new hotels (including those acquired), hotels closed for major refurbishment and hotels sold in either of the two years.
RevPAR and ADR are quoted at a constant US$ conversion rate, in order to allow a better understanding of the comparable year-on-year trading performance excluding distortions created by fluctuations in exchange rates.
Total gross revenue in IHG's System
Total gross revenue is revenue not wholly attributable to IHG, however, management believes this measure is meaningful to investors and other users as it provides a measure of System performance, giving an indication of the strength of IHG's brands and the combined impact of IHG's growth strategy and RevPAR performance.
Total gross revenue refers to revenue which IHG has a role in driving and from which IHG derives an income stream.
Total gross revenue comprises:
● total rooms revenue from franchised hotels;
● total hotel revenue from managed hotels includes food and beverage, meetings and other revenues
and reflects the value IHG drives to managed hotel owners by optimising the performance of their
hotels; and
● total hotel revenue from owned, leased and managed lease hotels.
Other than total hotel revenue from owned, leased and managed lease hotels, total gross hotel revenue
is not revenue attributable to IHG as these managed and franchised hotels are owned by third-parties.
Revenue and operating profit measures
Revenue and operating profit from (1) fee business and (2) owned, leased and managed lease hotels, are described as 'revenue from reportable segments' and 'operating profit from reportable segments', respectively.
These measures are presented for each of the Group's regions.
Management believes revenue and operating profit from reportable segments is meaningful to investors and other users as it excludes the following elements and reflects how management monitors the business:
System Fund - the Fund is not managed to generate a profit or loss for IHG over the longer term, but is managed for the benefit of the hotels within the IHG System. The System Fund is operated to collect and administer cash assessments from hotel owners for the specific purpose of use in marketing, the Guest Reservation Systems and hotel loyalty programme.
Revenues related to the reimbursement of costs - there is a cost equal to these revenues so there is no profit impact. Cost reimbursements are not applicable to all hotels, and growth in these revenues is not reflective of growth in the performance of the Group. As such, management do not include these revenues in their analysis of results.
Exceptional items are identified by virtue of either their size or nature and can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, and reorganisation costs. As each item is different in nature and scope, there will be little continuity in the detailed composition and size of the reported amounts which affect performance in successive periods. Separate disclosure of these amounts facilitates the understanding of performance including and excluding such items.
In further discussing the Group's performance in respect of revenue and operating profit, additional non-IFRS measures are used and explained further below:
● Underlying revenue;
● Underlying operating profit;
● Underlying fee revenue; and
● Fee margin.
Operating profit measures are, by their nature, before interest and tax. Management believes such measures are useful for investors and other users when comparing performance across different companies as interest and tax can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company's capital structure, debt levels and credit ratings. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate.
Although management believe these measures are useful to investors and other users in assessing the Group's ongoing financial performance and provide improved comparability between periods, there are limitations in their use as compared to measures of financial performance under IFRS. As such, they should not be considered in isolation or viewed as a substitute for IFRS measures. In addition, these measures may not necessarily be comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation.
Underlying revenue and underlying operating profit
These measures adjust revenue from reportable segments and operating profit from reportable segments, respectively, to exclude revenue and operating profit generated by owned, leased and managed lease hotels which have been disposed and significant liquidated damages, which are not comparable year on year and are not indicative of the Group's ongoing profitability. The revenue and operating profit of current year acquisitions are also excluded as these obscure underlying business results and trends when comparing to the prior year. In addition, in order to remove the impact of fluctuations in foreign exchange, which would distort the comparability of the Group's operating performance, prior year measures are restated at constant currency using current year exchange rates.
Management believe these are meaningful to investors and other users to better understand comparable year-on-year trading and enable assessment of the underlying trends in the Group's financial performance.
Underlying fee revenue growth
Underlying fee revenue is used to calculate underlying fee revenue growth. Underlying fee revenue is calculated on the same basis as underlying revenue as described above but for the fee business only.
Management believes underlying fee revenue is meaningful to investors and other users as an indicator of IHG's ability to grow the core fee-based business, aligned to IHG's asset-light strategy.
Fee margin
Fee margin is presented at actual exchange rates and is a measure of the profit arising from fee revenue. Fee margin is calculated by dividing 'fee operating profit' by 'fee revenue'. Fee revenue and fee operating profit are calculated from the revenue from reportable segments and operating profit from reportable segments, as defined above, adjusted to exclude the revenue and operating profit from the Group's owned, leased and managed lease hotels and significant liquidated damages.
In addition, fee margin is adjusted for the results of the Group's captive insurance company, where premiums are intended to match the expected claims, and as such these amounts are adjusted from the fee margin to better depict the profitability of the fee business.
Management believes fee margin is meaningful to investors and other users as an indicator of the sustainable long-term growth in the profitability of IHG's core fee-based business, as the scale of IHG's operations increases with growth in IHG's System size.
Adjusted interest
Adjusted interest excludes the following items of interest which are recorded within the System Fund:
● IHG records an interest charge on the outstanding cash balance relating to the IHG Rewards Club programme. These interest payments are recognised as interest income for the Fund and interest expense for IHG.
● The System Fund also benefits from the capitalisation of interest related to the development of the next-generation Guest Reservation System.
As the Fund is included on the Group income statement, these amounts are included in the reported net Group financial expenses, reducing the Group's effective interest cost. Given results related to the System Fund are excluded from adjusted measures used by management, these are excluded from adjusted interest and adjusted earnings per share (see below).
Management believes adjusted interest is a meaningful measure for investors and other users as it provides an indication of the comparable year-on-year expense associated with financing the business including the interest on any balance held on behalf of the System Fund.
Tax excluding the impact of exceptional items and System Fund
As outlined above, exceptional items can vary year on year and, where subject to tax at a different rate than the Group as a whole, therefore they can impact the current year's tax charge. The System Fund is not managed to a profit or loss for IHG over the long term and is, in general, not subject to tax either.
Management believes removing these provides a better view of the Group's underlying tax rate on ordinary operations and aids comparability year-on-year, thus providing a more meaningful understanding of the Group's ongoing tax charge.
Adjusted earnings per ordinary share
Adjusted earnings per ordinary share adjusts the profit available for equity holders used in the calculation of basic earnings per share to remove System Fund revenue and expenses, the items of interest related to the System Fund as excluded in adjusted interest, the change in fair value of contingent purchase consideration, exceptional items, and the related tax impacts of such adjustments.
Management believes that adjusted earnings per share is a meaningful measure for investors and other users as it provides a more comparable earnings per share measure aligned with how management monitors the business.
Net debt
Net debt is used in the monitoring of the Group's liquidity and capital structure and is used by management in the calculation of the key ratios attached to the Group's bank covenants and in maintaining an investment grade credit rating. Net debt is used by investors and other users to evaluate the financial strength of the business.
Net debt comprises loans and other borrowings, lease liabilities, the exchange element of the fair value of derivatives hedging debt values, less cash and cash equivalents.
Gross capital expenditure, net capital expenditure, free cash flow
These measures have limitations as they omit certain components of the overall cash flow statement. They are not intended to represent IHG's residual cash flow available for discretionary expenditures, nor do they reflect the Group's future capital commitments. These measures are used by many companies, but there can be differences in how each company defines the terms, limiting their usefulness as a comparative measure. Therefore, it is important to view these measures only as a complement to the Group statement of cash flows.
Gross capital expenditure
Gross capital expenditure represents the consolidated capital expenditure of IHG inclusive of System Fund capital investments. Gross capital expenditure is defined as net cash from investing activities, adjusted to include contract acquisition costs (key money). In order to demonstrate the capital outflow of the Group, cash flows arising from any disposals or distributions from associates and joint ventures are excluded. The measure also excludes any material investments made in acquiring businesses, including any subsequent payments of deferred or contingent purchase consideration included within investing activities, which represent ongoing payments for acquisitions.
Gross capital expenditure is reported as either maintenance, recyclable, or System Fund. This disaggregation provides useful information as it enables users to distinguish between:
● System Fund capital investments which are strategic investments to drive growth at hotel level;
● recyclable investments (such as investments in associates and joint ventures), which are intended to be recoverable in the medium term and are to drive the growth of the Group's brands and expansion in priority markets; and
● maintenance capital expenditure (including contract acquisition costs), which represents a permanent cash outflow.
Management believe gross capital expenditure is a useful measure as it illustrates how the Group continues to invest in the business to drive growth. It also allows for comparison year-on-year.
Net capital expenditure
Net capital expenditure provides an indicator of the capital intensity of IHG's business model. Net capital expenditure is derived from net cash from investing activities, adjusted to include contract acquisition costs (net of repayments) and to exclude any material investments made in acquiring businesses, including any subsequent payments of deferred or contingent purchase consideration included within investing activities, which represent ongoing payments for acquisitions. Net capital expenditure includes the inflows arising from any disposal receipts, or distributions from associates and joint ventures.
In addition, System Fund depreciation and amortisation relating to property, plant and equipment and intangible assets, respectively, is added back, reducing the overall cash outflow. This reflects the way in which System Funded capital investments are re-charged to the System Fund, over the life of the asset.
Management believes net capital expenditure is a useful measure as it illustrates the net capital investment by IHG, after taking into account capital recycling through asset disposal and the funding of strategic investments by the System Fund. It provides investors and other users with visibility of the cash flows which are allocated to long-term investments to drive the Group's strategy.
Free cash flow
Free cash flow is net cash from operating activities adjusted to exclude: (1) the cash outflow arising from the purchase of shares by employee share trusts reflecting the requirement to satisfy incentive schemes which are linked to operating performance; (2) maintenance capital expenditure (excluding contract acquisition costs); (3) the principal element of lease payments; and (4) payments of deferred or contingent purchase consideration included within net cash from operating activities.
In 2016, free cash flow was also adjusted for the cash receipt arising from the renegotiation of a long-term partnership agreement.
Management believe free cash flow is a useful measure for investors and other users, as it represents the cash available to invest back into the business to drive future growth and pay the ordinary dividend, with any surplus being available for additional returns to shareholders.
The following definitions have been amended and the prior year comparatives restated accordingly:
● The adoption of IFRS 16 'Leases' has impacted all but the revenue derived Non-GAAP measures. Prior year measures have therefore been restated to provide year on year comparability. The definitions of free cash flow and net debt have been amended following the adoption of IFRS 16:
- Free cash flow: has been amended to include the principal element of lease payments, reflecting the non-discretionary nature of these lease payments.
- Net debt: has been amended to include lease liabilities, providing consistency with metrics used by investors and rating agencies.
● The application of constant currency which impacts underlying revenue, underlying operating profit and underlying fee revenue has been amended so that prior period results are now restated using current year exchange rates, rather than restating current year results at prior period exchange rates. Management considers this to be a simplified approach and provides consistency between underlying results and the associated revenue and operating profit from reportable segments from which they are derived.
● Fee margin has been amended to exclude the results of the Group's captive insurance company. Over the longer term, premiums are intended to match the expected claims, and as such these amounts are adjusted from the fee margin in order to provide a more comparable analysis of IHG's year-on-year fee margin progression.
● Adjusted earnings per ordinary share have been amended to exclude the change in fair value of contingent purchase consideration. Since the changes in fair value are prone to volatility and are not necessarily reflective of the performance of the Group, excluding these amounts provides a more comparable year-on-year measure for investors and other users, aligned to how management monitor the business.
● Gross capital expenditure, net capital expenditure and free cash flow have been amended to adjust for payments of contingent and deferred purchase consideration, as applicable. As payments relate to prior year acquisitions the exclusion of these amounts provides a more representative year-on-year measure for investors and other users, aligned to how management monitor the business.
● Net capital expenditure has been amended to treat repayment of contract acquisition costs consistently with how this is reported internally.
The following Non-GAAP measure has been removed:
Underlying earnings per ordinary share. This measure has been removed in order to rationalise the number of non-IFRS earnings per share measures.
Underlying revenue and underlying operating profit Non-GAAP reconciliations
Highlights for the year ended 31 December 2019
| Revenue | Operating profit | |||
|---|---|---|---|---|
| 2019 | 2019 | |||
| m | m | |||
| Per<br>Group income statement | 4,627 | 630 | ||
| System<br>Fund | (1,373) | 49 | ||
| Reimbursement<br>of costs | (1,171) | - | ||
| Operating<br>exceptional items | - | 186 | ||
| _____ | _____ | |||
| Reportable<br>segments | 2,083 | 865 | ||
| _____ | _____ | |||
| Reportable<br>segments analysed as:<br><br><br>Fee<br>business | 1,510 | 813 | ||
| Owned,<br>leased and managed lease | 573 | 52 | ||
| _____ | _____ | |||
| Reportable<br>segments | 2,083 | 865 | ||
| % | % | |||
| change | change | |||
| Reportable<br>segments (see above) | 7.8 | 4.0 | ||
| Significant<br>liquidated damages | (15.4) | (15.4) | ||
| Current<br>year acquisition of businesses | - | - | ||
| Currency<br>impacta | - | - | ||
| _____ | _____ | |||
| Underlying | 6.5 | 5.8 |
All values are in US Dollars.
| Revenue | |||
|---|---|---|---|
| 2018 | |||
| 2019 | Restated | % | |
| $m | $m | change | |
| Underlying fee revenue | |||
| Reportable<br>segments fee business (see above) | 1,510 | 1,486 | 1.6 |
| Significant<br>liquidated damages | (11) | (13) | (15.4) |
| Current<br>year acquisition of businesses | (14) | - | - |
| Currency<br>impacta | - | (17) | - |
| _____ | _____ | _____ | |
| Underlying fee business | 1,485 | 1,456 | 2.0 |
a Excludes $1m of adverse currency impact to both revenue and operating profit related to significant liquidated damages in the Greater China region.
| Highlights by regions | |||||
|---|---|---|---|---|---|
| Americas | 2018 | ||||
| Restated | % | % | |||
| m | change | change | |||
| Per<br>Group financial statements | 1,051 | (1.0) | 4.0 | ||
| Reportable<br>segments analysed as: | |||||
| Fee<br>business | 853 | - | 3.9 | ||
| Owned,<br>leased and managed lease | 198 | (5.6) | 5.7 | ||
| _____ | _____ | _____ | |||
| 1,051 | (1.0) | 4.0 | |||
| Reportable<br>segments (see above) | 1,051 | (1.0) | 4.0 | ||
| Currency<br>impact | (2) | - | - | ||
| _____ | _____ | _____ | |||
| Underlying | 1,049 | (0.9) | 4.3 | ||
| Owned, leased and managed lease included in the above | (198) | (5.6) | 5.7 | ||
| _____ | _____ | _____ | |||
| Underlying fee business | 851 | 0.2 | 4.2 | ||
| EMEAA | 2018 | ||||
| Restated | % | % | |||
| m | change | change | |||
| Per<br>Group financial statements | 569 | 27.1 | 5.3 | ||
| Reportable<br>segments analysed as: | |||||
| Fee<br>business | 320 | 5.3 | - | ||
| Owned,<br>leased and managed lease | 249 | 55.0 | 275.0 | ||
| _____ | _____ | _____ | |||
| 569 | 27.1 | 5.3 | |||
| Reportable<br>segments (see above) | 569 | 27.1 | 5.3 | ||
| Significant<br>liquidated damages | (7) | 57.1 | 57.1 | ||
| Current<br>year acquisition of businesses | - | - | - | ||
| Currency<br>impact | (15) | - | - | ||
| _____ | _____ | _____ | |||
| Underlying | 547 | 20.5 | 9.8 | ||
| Owned, leased and managed lease included in the above | (242) | 43.4 | 225.0 | ||
| _____ | _____ | _____ | |||
| Underlying fee business | 305 | 2.3 | 5.3 | ||
| Greater China | 2018 | ||||
| Restated | % | % | |||
| m | change | change | |||
| Per<br>Group financial statements | 143 | (5.6) | 4.3 | ||
| Reportable<br>segments analysed as: | |||||
| Fee<br>business | 143 | (5.6) | 4.3 | ||
| _____ | _____ | _____ | |||
| 143 | (5.6) | 4.3 | |||
| Reportable<br>segments (see above) | 143 | (5.6) | 4.3 | ||
| Significant<br>liquidated damages | (6) | - | - | ||
| Currency<br>impactb | (5) | - | - | ||
| _____ | _____ | _____ | |||
| Underlying | 132 | 2.3 | 15.9 | ||
| a Before<br>exceptional items.<br><br><br>b Excludes 1m of adverse<br>currency impact to both revenue and operating profit related to<br>significant liquidated damages.<br><br><br> <br><br><br> <br><br><br>Highlights for the year ended 31 December 2018 | |||||
| Operating<br>profit | |||||
| 2018 | |||||
| % | Restated | ||||
| change | m | ||||
| Per<br>Group income statement | 6.4 | 582 | |||
| System<br>Fund | (0.7) | 146 | |||
| Reimbursement<br>of costs | 6.2 | - | |||
| Operating<br>exceptional items | - | 104 | |||
| _____ | _____ | ||||
| Reportable<br>segments | 11.7 | 832 | |||
| _____ | _____ | ||||
| Reportable<br>segments analysed as:<br><br>Fee<br>business | 7.8 | 793 | |||
| Owned,<br>leased and managed lease | 27.4 | 39 | |||
| _____ | _____ | ||||
| Reportable<br>segments | 11.7 | 832 |
All values are in US Dollars.
| Revenue | |||
|---|---|---|---|
| 2018 | 2017 | Change | |
| $m | $m | m | |
| Underlying fee revenue | |||
| Reportable<br>segments fee business (see above) | 1,486 | 1,379 | 107 |
| Significant<br>liquidated damages | (13) | - | (13) |
| Current<br>year acquisition of businesses | (1) | - | (1) |
| Currency<br>impact | - | 4 | (4) |
| _____ | _____ | _____ | |
| Underlying fee business | 1,472 | 1,383 | 89 |
| Fee margin reconciliation | |||
| 2018 | 2017 | ||
| 2019 | Restated | Restated | |
| $m | $m | m | |
| Revenue | |||
| Reportable<br>segments analysed as fee business (see above) | 1,510 | 1,486 | 1,379 |
| Significant<br>liquidated damages | (11) | (13) | - |
| Captive<br>insurance company | (19) | (11) | (9) |
| _____ | _____ | _____ | |
| Underlying fee business | 1,480 | 1,462 | 1,370 |
| Operating profit | |||
| Reportable<br>segments analysed as fee business (see above) | 813 | 793 | 731 |
| Significant<br>liquidated damages | (11) | (13) | - |
| Captive<br>insurance company | (1) | (1) | - |
| _____ | _____ | _____ | |
| Underlying fee business | 801 | 779 | 731 |
| Fee margin | 54.1% | 53.3% | 53.4% |
All values are in US Dollars.
Gross and net capital expenditure reconciliation
| 12 months ended 31 December | ||
|---|---|---|
| 2018 | ||
| 2019 | Restated | |
| $m | $m | |
| Net cash from investing activities | (493) | (197) |
| Adjusted<br>for: | ||
| Contract acquisition costs, net of repayments | (61) | (54) |
| Tax paid on disposals | - | 2 |
| System Fund depreciation and<br>amortisationa | 49 | 45 |
| Acquisition of businesses, net of cash<br>acquired | 292 | 34 |
| Payment of contingent purchase consideration | 2 | 4 |
| _____ | _____ | |
| Net<br>capital expenditure | (211) | (166) |
| Add<br>back: | ||
| Disposal receipts | (4) | (8) |
| Repayment of contract acquisition costs | (1) | (2) |
| Distributions from associates and joint ventures | - | (32) |
| System Fund depreciation and<br>amortisationa | (49) | (45) |
| _____ | _____ | |
| Gross<br>capital expenditure | (265) | (253) |
| _____ | _____ | |
| Analysed<br>as: | ||
| Capital<br>expenditure: maintenance<br><br><br>(including<br>contract acquisition costs of $62m (2018: $56m)) | (148) | (116) |
| Capital<br>expenditure: recyclable investments | (19) | (38) |
| Capital<br>expenditure: System Fund investments | (98) | (99) |
| _____ | _____ | |
| Gross<br>capital expenditure | (265) | (253) |
| _____ | _____ |
a Excludes depreciation on right-of-use assets.
Free cash flow reconciliation
| 12 months ended 31 December | |||||
|---|---|---|---|---|---|
| 2018 | 2017 | ||||
| 2019 | Restated | Restated | 2016a | 2015 a | |
| $m | $m | $m | $m | $m | |
| Net cash from operating activities | 653 | 709 | 616 | 710 | 569 |
| Less: | |||||
| Payment of contingent purchase consideration | 6 | - | - | - | - |
| Principal element of lease payments | (59) | (35) | (25) | - | - |
| Purchase of shares by employee share trusts | (5) | (3) | (3) | (10) | (47) |
| Capital expenditure: maintenance (excluding contract acquisition<br>costs money) | (86) | (60) | (72) | (54) | (56) |
| Cash receipt from renegotiation of long-term partnership<br>agreement | - | - | - | (95) | - |
| _____ | _____ | _____ | _____ | _____ | |
| Free cash flow | 509 | 611 | 516 | 551 | 466 |
| _____ | _____ | _____ | _____ | _____ |
a Not restated for the impact of IFRS 15 or IFRS 16.
Adjusted interest reconciliation
The following table reconciles net financial expenses to adjusted interest.
| 12 months ended 31 December | ||
|---|---|---|
| 2018 | ||
| 2019 | Restated | |
| $m | $m | |
| Net financial expenses | ||
| Financial<br>income | 6 | 5 |
| Financial<br>expenses | (121) | (101) |
| _____ | _____ | |
| (115) | (96) | |
| Adjusted<br>for: | ||
| Interest payable on<br>balances with the System Fund | (13) | (14) |
| Capitalised<br>interest relating to System Fund assets | (5) | (5) |
| _____ | _____ | |
| (18) | (19) | |
| Adjusted<br>interest | (133) | (115) |
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2019
| 2019<br><br><br>Year ended 31<br><br><br>December | 2018<br><br><br>Year ended 31 December<br><br><br>Restated* | ||
|---|---|---|---|
| $m | $m | ||
| Revenue<br>from fee business | 1,510 | 1,486 | |
| Revenue<br>from owned, leased and managed lease hotels | 573 | 447 | |
| System<br>Fund revenues | 1,373 | 1,233 | |
| Reimbursement<br>of costs | 1,171 | 1,171 | |
| _____ | _____ | ||
| Total revenue (notes 4 and 5) | 4,627 | 4,337 | |
| Cost of<br>sales | (790) | (688) | |
| System<br>Fund expenses | (1,422) | (1,379) | |
| Reimbursed<br>costs | (1,171) | (1,171) | |
| Administrative<br>expenses | (385) | (415) | |
| Share<br>of losses of associates and joint ventures | (3) | (1) | |
| Other<br>operating income (note 4) | 21 | 14 | |
| Depreciation<br>and amortisation | (116) | (115) | |
| Impairment<br>charges (note 6) | (131) | - | |
| _____ | _____ | ||
| Operating profit (note 4) | 630 | 582 | |
| Operating<br>profit analysed as: | |||
| Operating profit before System Fund and exceptional<br>items | 865 | 832 | |
| System Fund | (49) | (146) | |
| Operating exceptional items (note 6) | (186) | (104) | |
| _____ | _____ | ||
| 630 | 582 | ||
| Financial<br>income | 6 | 5 | |
| Financial<br>expenses | (121) | (101) | |
| Fair<br>value gains/(losses) on contingent purchase<br>consideration | 27 | (4) | |
| _____ | _____ | ||
| Profit before tax | 542 | 482 | |
| Tax<br>(note 8) | (156) | (132) | |
| _____ | _____ | ||
| Profit for the year from continuing operations | 386 | 350 | |
| _____ | _____ | ||
| Attributable<br>to: | |||
| Equity holders of the parent | 385 | 349 | |
| Non-controlling interest | 1 | 1 | |
| _____ | _____ | ||
| 386 | 350 | ||
| _____ | _____ | ||
| Earnings per ordinary share (note 9) | |||
| Continuing<br>and total operations: | |||
| Basic | 210.4¢ | 183.7¢ | |
| Diluted | 209.2¢ | 181.8¢ | |
| Adjusted | 303.3¢ | 293.2¢ | |
| Adjusted<br>diluted | 301.6¢ | 290.1¢ | |
| *<br>Restated for the adoption of IFRS 16 (see note 2). | |||
| --- |
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2019
| 2019<br><br><br>Year ended<br><br><br>31 December<br><br><br><br><br><br>$m | 2018<br><br><br>Year ended<br><br><br>31 December<br><br><br>Restated*<br><br><br>$m | |
|---|---|---|
| Profit for the year | 386 | 350 |
| Other comprehensive income | ||
| Items<br>that may be subsequently reclassified to profit or<br>loss: | ||
| (Losses)/gains on<br>cash flow hedges, net of related tax credit of nil (2018:<br>including related tax credit of 1m) | (34) | 5 |
| Costs<br>of hedging | (6) | (1) |
| Hedging<br>losses/(gains) reclassified to financial expenses | 38 | (8) |
| Exchange<br>(losses)/gains on retranslation of foreign operations, net of<br>related tax credit of 3m (2018: including related tax credit of<br>2m) | (39) | 44 |
| _____ | _____ | |
| (41) | 40 | |
| Items<br>that will not be reclassified to profit or loss: | ||
| Gains/(losses) on equity instruments classified as fair value<br>through other comprehensive income,<br>net of related tax charge of 2m (2018: including<br> related tax charge of<br>2m) | 10 | (14) |
| Re-measurement<br>(losses)/gains on defined benefit plans, net of related tax credit<br>of 1m (2018: net of related tax charge of 4m) | (6) | 8 |
| _____ | _____ | |
| 4 | (6) | |
| _____ | _____ | |
| Total other comprehensive (loss)/income for the year | (37) | 34 |
| _____ | _____ | |
| Total comprehensive income for the year | 349 | 384 |
| _____ | _____ | |
| Attributable<br>to: | ||
| 348 | 382 | |
| 1 | 2 | |
| _____ | _____ | |
| 349 | 384 | |
| _____ | _____ |
All values are in US Dollars.
| * <br>Restated for the adoption of IFRS 16 (see note 2). |
|---|
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2019
| Year ended 31 December 2019 | |||||
|---|---|---|---|---|---|
| Equity<br><br><br>share<br><br><br>capital | Other<br><br><br>reserves* | Retained<br><br><br>earnings | Non-<br><br><br>controlling<br><br><br>interest | Total<br><br><br>equity | |
| $m | $m | $m | $m | $m | |
| At<br>beginning of the year (restated for IFRS 16) | 146 | (2,396) | 1,111 | 8 | (1,131) |
| Total<br>comprehensive income for the year | - | (31) | 379 | 1 | 349 |
| Transfer<br>of treasury shares to employee share trusts | - | (19) | 19 | - | - |
| Purchase<br>of own shares by employee share trusts | - | (5) | - | - | (5) |
| Release<br>of own shares by employee share trusts | - | 23 | (23) | - | - |
| Equity-settled<br>share-based cost | - | - | 41 | - | 41 |
| Tax<br>related to share schemes | - | - | 4 | - | 4 |
| Equity<br>dividends paid | - | - | (721) | (1) | (722) |
| Transaction<br>costs relating to shareholder returns | - | - | (1) | - | (1) |
| Exchange<br>adjustments | 5 | (5) | - | - | - |
| _____ | _____ | _____ | _____ | _____ | |
| At end of the year | 151 | (2,433) | 809 | 8 | (1,465) |
| _____ | _____ | _____ | _____ | _____ | |
| Year ended 31 December 2018 | |||||
| --- | --- | --- | --- | --- | --- |
| Equity<br><br><br>share<br><br><br>capital | Other<br><br><br>reserves* | Retained<br><br><br>earnings | Non-<br><br><br>controlling<br><br><br>interest | Total<br><br><br>equity | |
| $m | $m | $m | $m | $m | |
| At<br>beginning of the year as previously reported | 154 | (2,431) | 969 | 7 | (1,301) |
| Impact<br>of adopting IFRS 16 (see note 2) | - | - | (53) | - | (53) |
| _____ | _____ | _____ | _____ | _____ | |
| At the<br>beginning of the year (restated for IFRS 16) | 154 | (2,431) | 916 | 7 | (1,354) |
| Total<br>comprehensive income for the year | - | 25 | 357 | 2 | 384 |
| Transfer<br>of treasury shares to employee share trusts | - | (19) | 19 | - | - |
| Purchase<br>of own shares by employee share trusts | - | (3) | - | - | (3) |
| Release<br>of own shares by employee share trusts | - | 24 | (24) | - | - |
| Equity-settled<br>share-based cost | - | - | 39 | - | 39 |
| Tax<br>related to share schemes | - | - | 3 | - | 3 |
| Equity<br>dividends paid | - | - | (199) | (1) | (200) |
| Exchange<br>adjustments | (8) | 8 | - | - | - |
| _____ | _____ | _____ | _____ | _____ | |
| At end of the year | 146 | (2,396) | 1,111 | 8 | (1,131) |
| _____ | _____ | _____ | _____ | _____ | |
| * | Other<br>reserves comprise the capital redemption reserve, shares held by<br>employee share trusts, other reserves, fair value reserve, cash<br>flow hedging reserve and currency translation reserve. | ||||
| --- | --- | ||||
| All<br>items above are shown net of tax. | |||||
| --- |
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
31 December 2019
| 2019<br><br><br>31 December | 2018<br><br><br>31 December<br><br><br>Restated* | |
|---|---|---|
| $m | $m | |
| ASSETS | ||
| Goodwill<br>and other intangible assets | 1,376 | 1,143 |
| Property,<br>plant and equipment | 309 | 273 |
| Right-of-use<br>assets | 490 | 513 |
| Investment<br>in associates and joint ventures | 110 | 104 |
| Other<br>financial assets | 284 | 260 |
| Derivative<br>financial instruments | - | 7 |
| Non-current<br>tax receivable | 28 | 31 |
| Deferred<br>tax assets | 66 | 63 |
| Contract<br>costs | 67 | 55 |
| Contract<br>assets | 311 | 270 |
| _______ | _______ | |
| Total non-current assets | 3,041 | 2,719 |
| _______ | _______ | |
| Inventories | 6 | 5 |
| Trade<br>and other receivables | 666 | 610 |
| Current<br>tax receivable | 16 | 27 |
| Other<br>financial assets | 4 | 1 |
| Derivative<br>financial instruments | 1 | 1 |
| Cash<br>and cash equivalents | 195 | 704 |
| Contract<br>costs | 5 | 5 |
| Contract<br>assets | 23 | 20 |
| _______ | _______ | |
| Total current assets | 916 | 1,373 |
| Assets<br>classified as held for sale | 19 | - |
| _______ | _______ | |
| Total assets (note 4) | 3,976 | 4,092 |
| __ <br>___ | __ <br>___ | |
| LIABILITIES | ||
| Loans<br>and other borrowings | (87) | (104) |
| Lease<br>liabilities | (65) | (55) |
| Trade<br>and other payables | (568) | (616) |
| Deferred<br>revenue | (555) | (572) |
| Provisions | (40) | (10) |
| Current<br>tax payable | (50) | (50) |
| _______ | _______ | |
| Total current liabilities | (1,365) | (1,407) |
| _______ | _______ | |
| Loans<br>and other borrowings | (2,078) | (1,910) |
| Lease<br>liabilities | (595) | (615) |
| Derivative<br>financial instruments | (20) | - |
| Retirement<br>benefit obligations | (96) | (91) |
| Trade<br>and other payables | (116) | (125) |
| Deferred<br>revenue | (1,009) | (934) |
| Provisions | (22) | (17) |
| Deferred<br>tax liabilities | (118) | (124) |
| _______ | _______ | |
| Total non-current liabilities | (4,054) | (3,816) |
| Liabilities<br>classified as held for sale | (22) | - |
| _______ | _______ | |
| Total liabilities | (5,441) | (5,223) |
| _______ | _______ | |
| Net liabilities | (1,465) | (1,131) |
| ______ | ______ | |
| EQUITY | ||
| --- | --- | --- |
| IHG<br>shareholders' equity | (1,473) | (1,139) |
| Non-controlling<br>interest | 8 | 8 |
| _______ | _______ | |
| Total equity | (1,465) | (1,131) |
| _______ | ______ | |
| *Restated<br>for the adoption of IFRS 16 (see note 2). |
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the year ended 31 December 2019
| 2019<br><br><br>Year ended<br><br><br>31 December | 2018<br><br><br>Year ended<br><br><br>31 December<br><br><br>Restated* | |
|---|---|---|
| $m | $m | |
| Profit for the year | 386 | 350 |
| Adjustments<br>reconciling profit for the year to cash flow from operations before<br>contract acquisition costs (note 12) | 582 | 564 |
| _____ | _____ | |
| Cash<br>flow from operations before contract acquisition costs | 968 | 914 |
| Contract<br>acquisition costs, net of repayments | (61) | (54) |
| _____ | _____ | |
| Cash flow from operations | 907 | 860 |
| Interest<br>paid | (110) | (87) |
| Interest<br>received | 3 | 2 |
| Contingent<br>purchase consideration paid | (6) | - |
| Tax<br>paid on operating activities | (141) | (66) |
| _____ | _____ | |
| Net cash from operating activities | 653 | 709 |
| _____ | _____ | |
| Cash flow from investing activities | ||
| Purchase<br>of property, plant and equipment | (75) | (46) |
| Purchase<br>of intangible assets | (104) | (112) |
| Investment<br>in associates and joint ventures | (10) | (1) |
| Investment<br>in other financial assets | (9) | (33) |
| Acquisition<br>of businesses, net of cash acquired (note 11) | (292) | (34) |
| Contingent<br>purchase consideration paid | (2) | (4) |
| Capitalised<br>interest paid | (5) | (5) |
| Distributions<br>from associates and joint ventures | - | 32 |
| Repayments<br>of other financial assets | 4 | 8 |
| Tax<br>paid on disposals | - | (2) |
| _____ | _____ | |
| Net cash from investing activities | (493) | (197) |
| _____ | _____ | |
| Cash flow from financing activities | ||
| Purchase<br>of own shares by employee share trusts | (5) | (3) |
| Dividends<br>paid to shareholders (note 10) | (721) | (199) |
| Dividend<br>paid to non-controlling interest | (1) | (1) |
| Transaction<br>costs relating to shareholder returns | (1) | - |
| Issue<br>of long-term bonds, including effect of currency swaps | - | 554 |
| Principal<br>element of lease payments | (59) | (35) |
| Increase/(decrease)<br>in other borrowings | 127 | (268) |
| Proceeds<br>from currency swaps | - | 3 |
| _____ | _____ | |
| Net cash from financing activities | (660) | 51 |
| _____ | _____ | |
| Net movement in cash and cash equivalents, net of overdrafts, in<br>the year | (500) | 563 |
| Cash<br>and cash equivalents, net of overdrafts, at beginning of the<br>year | 600 | 58 |
| Exchange<br>rate effects | 8 | (21) |
| _____ | _____ | |
| Cash and cash equivalents, net of overdrafts, at end of the<br>year | 108 | 600 |
| _____ | _____ | |
| *Restated<br>for the adoption of IFRS 16 (see note 2). | ||
| --- |
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
| 1. | Basis of preparation |
|---|---|
| The audited consolidated financial statements of InterContinental<br>Hotels Group PLC (the Group or IHG) for the year ended 31 December<br>2019 have been prepared in accordance with International Financial<br>Reporting Standards (IFRSs) as adopted by the European Union and as<br>applied in accordance with the provisions of the Companies Act<br>2006. Other than the changes arising from the adoption<br>of new accounting standards set out in note 2, they have been<br>prepared on a consistent basis using the accounting policies set<br>out in the InterContinental Hotels Group PLC Annual Report and<br>Financial Statements for the year ended 31 December<br>2018. | |
| Other<br>than line items which have been restated for IFRS 16 as set out in<br>note 2, financial information for the year ended 31 December 2018<br>has been extracted from the Group's published financial statements<br>for that year which were prepared in accordance with IFRSs as<br>adopted by the European Union and which have been filed with the<br>Registrar of Companies. The auditor's report on those financial<br>statements was unqualified with no reference to matters to which<br>the auditor drew attention by way of emphasis and no statement<br>under s498(2) or s498(3) of the Companies Act 2006. | |
| 2. | Adoption of new accounting standards and other presentational<br>changes |
| --- | --- |
| IFRS 16 'Leases' | |
| IFRS<br>16, which supersedes IAS 17, sets out the principles for the<br>recognition, measurement, presentation and disclosure of leases and<br>requires lessees to account for most leases under a single<br>on-balance sheet model. The Group has a number of material<br>property and equipment leases.<br><br><br><br><br><br>The<br>Group has adopted IFRS 16 using the full retrospective method of<br>adoption with the date of initial application being 1 January<br>2019. The Group elected to use the transition practical<br>expedient allowing the standard to be applied only to contracts<br>that were previously identified as leases applying IAS 17 at the<br>date of initial application. The Group also elected to<br>use the recognition exemptions for lease contracts that, at the<br>commencement date, have a lease term of 12 months or less and do<br>not contain a purchase option ('short-term leases'), lease<br>contracts for which the underlying asset is of low value<br>('low-value assets'), and leases of intangible assets. | |
| Before<br>the adoption of IFRS 16, the Group classified each of its leases at<br>the inception date as either a finance lease or an operating<br>lease. A lease was classified as a finance lease if it<br>transferred substantially all of the risks and rewards incidental<br>to ownership of the leased asset to the Group; otherwise it was<br>classified as an operating lease. Finance leases were<br>capitalised at the commencement of the lease at the inception date<br>fair value of the leased asset or, if lower, at the present value<br>of the minimum lease payments. Lease payments were<br>apportioned between interest (recognised as finance cost) and<br>reduction of the lease liability. In an operating lease, the<br>leased asset was not capitalised, and the lease payments were<br>recognised as rent expense in the Group income statement on a<br>straight-line basis over the lease term. Any prepaid<br>rent and accrued rent were recognised within prepayments and trade<br>and other payables, respectively. | |
| Under<br>IFRS 16, the Group recognises right-of-use assets at the<br>commencement date of the lease (i.e. the date the underlying asset<br>is available for use). Right-of-use assets are measured at<br>cost, less any accumulated depreciation and impairment losses, and<br>adjusted for any re-measurement of lease liabilities. The<br>cost of right-of-use assets includes the amount of lease<br>liabilities recognised, initial direct costs incurred, and lease<br>payments made at or before the commencement date, less any lease<br>incentives received. Unless the Group is reasonably certain<br>to obtain ownership of the leased assets at the end of the lease<br>term, recognised right-of-use assets are depreciated to a residual<br>value over the shorter of their estimated useful life or lease<br>term. Right-of-use assets are subject to impairment<br>testing. | |
| At<br>the commencement date of the lease, the Group recognises lease<br>liabilities measured at the present value of lease payments to be<br>made over the lease term. The lease payments include fixed<br>payments (including 'in-substance fixed' payments) less any lease<br>incentives receivable, variable lease payments that depend on an<br>index or a rate, and amounts expected to be paid under residual<br>value guarantees. Variable lease payments that do not<br>depend on an index or a rate are recognised as expense in the<br>period over which the event or condition that triggers the payment<br>occurs. | |
| The lease acquired with the UK portfolio<br>acquisition includes variable lease payments where rentals are<br>linked to the performance of the hotels by way of reductions in<br>rentals in the event that lower than target cash flows are<br>generated by the hotels. In the event that rent<br>reductions are not applicable, the Group's exposure to this type of<br>rental payment in excess of amounts reflected in the measurement of<br>lease liabilities is £46m per annum over the remaining lease<br>term of 24 years. Additional rentals, which are<br>uncapped, are also payable and are calculated as a percentage of<br>the profit earned by the hotels. Two German hotel leases<br>operate under a similar structure. | |
| --- | |
| In<br>calculating the present value of lease payments, the Group uses its<br>incremental borrowing rate at the lease commencement date if the<br>interest rate implicit in the lease is not readily<br>determinable. After the commencement date, the amount<br>of lease liabilities is increased to reflect the accretion of<br>interest and reduced for lease payments made. In<br>addition, the carrying amount of lease liabilities is re-measured<br>if there is a modification, a change in the lease term, a change in<br>the 'in-substance fixed' lease payment or a change in the<br>assessment regarding the purchase of the underlying<br>asset.<br><br><br><br><br><br>The<br>Group applies the short-term lease recognition exemption to its<br>short-term leases of equipment (i.e. those leases that have a lease<br>term of 12 months or less from the commencement date and do not<br>contain a purchase option). It also applies the lease of<br>low-value assets recognition exemption to leases that are<br>considered of low value. Lease payments on short-term<br>leases and leases of low-value assets are recognised as an expense<br>on a straight-line basis over the lease term.<br><br><br><br><br><br>Lessor<br>accounting under IFRS 16 is substantially unchanged from IAS<br>17. The Group is not party to any material leases where it<br>acts as a lessor.<br><br><br><br><br><br>In<br>accordance with the full retrospective method of adoption, the<br>Group applied IFRS 16 at the date of initial application as if it<br>had always been effective at the commencement date of existing<br>lease contracts. Accordingly, the comparative information in<br>these condensed consolidated financial statements has been<br>restated, as summarised and set out below. | |
| For the 12 months ended 31 December 2018: | |
| ● <br> Depreciation expense<br>increased by $35m relating to the depreciation of new right-of-use<br>assets recognised.<br><br><br>● <br> Rent expense decreased<br>by $51m relating to previous operating leases.<br><br><br>● <br> Financial expenses<br>increased by $19m relating to the interest expense on additional<br>lease liabilities recognised.<br><br><br>● <br> Income tax expenses<br>decreased by $1m relating to the tax effect of these<br>changes.<br><br><br>● <br> Net cash from operating<br>activities increased by $43m and the combination of cash from<br>investing and financing activities reduced by the same amount,<br>representing repayments of principal on the recognised lease<br>liabilities. | |
| At<br>31 December 2018: | |
| ● <br> Right-of-use assets of<br>$513m were recognised and presented separately in the Group<br>statement of financial position. This includes $174m<br>relating to leased assets previously recognised under finance<br>leases, within property, plant and equipment.<br><br><br>● <br> Lease liabilities of<br>$670m were recognised and presented separately in the Group<br>statement of financial position. Finance lease liabilities of<br>$235m previously included in loans and other borrowings are now<br>included in lease liabilities.<br><br><br>● <br> Prepayments of $3m and<br>trade and other payables of $35m related to leases previously<br>classed as operating leases were derecognised.<br><br><br>● <br> Net deferred tax<br>liabilities decreased by $10m because of the deferred tax impact of<br>the changes in assets and liabilities.<br><br><br>● <br> The net effect of these<br>adjustments increased the Group's net liabilities by<br>$54m. |
Impact of IFRS 16 on the Group income statement
For the year ended 31 December 2018
| As previously<br><br><br>reported | IFRS 16 adoption | As<br><br><br>restated | |
|---|---|---|---|
| $m | $m | $m | |
| Total revenue | 4,337 | - | 4,337 |
| Cost<br>of sales | (706) | 18 | (688) |
| System<br>Fund expenses | (1,379) | - | (1,379) |
| Reimbursed<br>costs | (1,171) | - | (1,171) |
| Administrative<br>expenses | (448) | 33 | (415) |
| Share<br>of losses of associates and joint ventures | (1) | - | (1) |
| Other<br>operating income | 14 | - | 14 |
| Depreciation<br>and amortisation | (80) | (35) | (115) |
| _____ | _____ | _____ | |
| Operating profit | 566 | 16 | 582 |
| Financial<br>income | 5 | - | 5 |
| Financial<br>expenses | (82) | (19) | (101) |
| Fair<br>value losses on contingent purchase consideration | (4) | - | (4) |
| _____ | _____ | _____ | |
| Profit<br>before tax | 485 | (3) | 482 |
| Tax | (133) | 1 | (132) |
| _____ | _____ | _____ | |
| Profit for the year from continuing operations | 352 | (2) | 350 |
| ____ | ____ | ____ |
Impact of IFRS 16 on the Group statement of comprehensive income
For the year ended 31 December 2018
| As previously reported<br><br><br>$m | IFRS 16 adoption<br><br><br>$m | As restated<br><br><br>$m | |
|---|---|---|---|
| Profit<br>for the year | 352 | (2) | 350 |
| Exchange<br>gains on retranslation of foreign operations, including related tax<br>credit of $2m | 43 | 1 | 44 |
| Other<br>items | (10) | - | (10) |
| ____ | ____ | ____ | |
| Total comprehensive income for the year | 385 | (1) | 384 |
| _____ | _____ | _____ |
Impact of IFRS 16 on the Group statement of financial position
31 December 2018
| As previously<br><br><br>reported<br><br><br>$m | IFRS 16<br><br><br>adoption<br><br><br>$m | As<br><br><br>restated<br><br><br>$m | |
|---|---|---|---|
| Property,<br>plant and equipment | 447 | (174) | 273 |
| Right-of-use<br>assets | - | 513 | 513 |
| Deferred<br>tax assets | 60 | 3 | 63 |
| Other<br>non-current assets | 1,870 | - | 1,870 |
| _______ | _______ | _______ | |
| Total non-current assets | 2,377 | 342 | 2,719 |
| _______ | _______ | _______ | |
| Trade<br>and other receivables | 613 | (3) | 610 |
| Other<br>current assets | 763 | - | 763 |
| _______ | _______ | _______ | |
| Total current assets | 1,376 | (3) | 1,373 |
| _______ | _______ | _______ | |
| Total assets | 3,753 | 339 | 4,092 |
| _______ | _______ | _______ | |
| Loans<br>and other borrowings | (120) | 16 | (104) |
| Lease<br>liabilities | - | (55) | (55) |
| Trade<br>and other payables | (618) | 2 | (616) |
| Other<br>current liabilities | (632) | - | (632) |
| _______ | _______ | _______ | |
| Total current liabilities | (1,370) | (37) | (1,407) |
| _______ | _______ | _______ | |
| Loans<br>and other borrowings | (2,129) | 219 | (1,910) |
| Lease<br>liabilities | - | (615) | (615) |
| Trade<br>and other payables | (158) | 33 | (125) |
| Deferred<br>tax liabilities | (131) | 7 | (124) |
| Other<br>non-current liabilities | (1,042) | - | (1,042) |
| _______ | _______ | _______ | |
| Total non-current liabilities | (3,460) | (356) | (3,816) |
| _______ | _______ | _______ | |
| Total liabilities | (4,830) | (393) | (5,223) |
| _______ | _______ | _______ | |
| Net liabilities | (1,077) | (54) | (1,131) |
| _______ | _______ | _______ | |
| Currency<br>translation reserve | 419 | 1 | 420 |
| Retained<br>earnings | 1,166 | (55) | 1,111 |
| Other<br>equity | (2,670) | - | (2,670) |
| _______ | _______ | ________ | |
| IHG shareholders' equity | (1,085) | (54) | (1,139) |
| Non-controlling<br>interest | 8 | - | 8 |
| _______ | _______ | ________ | |
| Total equity | (1,077) | (54) | (1,131) |
| ________ | _______ | ________ |
Impact of IFRS 16 on the Group statement of cash flows
For the year ended 31 December 2018
| As<br><br><br>previously<br><br><br>reported<br><br><br>$m | IFRS 16<br><br><br>adoption<br><br><br>$m | As<br><br><br>restated<br><br><br>$m | |
|---|---|---|---|
| Profit for the year | 352 | (2) | 350 |
| Adjustments<br>reconciling profit for the year to cash flow from operations before<br>contract acquisition costs | 502 | 62 | 564 |
| _____ | _____ | _____ | |
| Cash<br>flow from operations before contract acquisition costs | 854 | 60 | 914 |
| Contract<br>acquisition costs, net of repayments | (54) | - | (54) |
| _____ | _____ | _____ | |
| Cash flow from operations | 800 | 60 | 860 |
| Interest<br>paid | (70) | (17) | (87) |
| Interest<br>received | 2 | - | 2 |
| Tax<br>paid on operating activities | (66) | - | (66) |
| _____ | _____ | _____ | |
| Net cash from operating activities | 666 | 43 | 709 |
| _____ | _____ | _____ | |
| Landlord<br>contribution to property, plant and equipment | 8 | (8) | - |
| Other<br>cash flows from investing activities | (197) | - | (197) |
| _____ | _____ | _____ | |
| Net cash from investing activities | (189) | (8) | (197) |
| _____ | _____ | _____ | |
| Principal<br>element of lease payments | - | (35) | (35) |
| Other<br>cash flows from financing activities | 86 | - | 86 |
| _____ | _____ | _____ | |
| Net cash from financing activities | 86 | (35) | 51 |
| _____ | _____ | _____ | |
| Net movement in cash and cash equivalents in the year | 563 | - | 563 |
| _____ | _____ | _____ | |
| Cash<br>and cash equivalents at beginning of the year | 58 | - | 58 |
| Exchange<br>rate effects | (21) | - | (21) |
| _____ | _____ | _____ | |
| Cash and cash equivalents at end of the year | 600 | - | 600 |
| _____ | _____ | _____ |
Impact of IFRS 16 on basic and diluted earnings per ordinary share
For the year ended 31 December 2018
| As<br><br><br>previously<br><br><br>reported | IFRS 16<br><br><br>adoption | As restated | |
|---|---|---|---|
| Basic<br>earnings per ordinary share | 184.7ȼ | (1.0)ȼ | 183.7ȼ |
| Diluted<br>earnings per ordinary share | 182.8ȼ | (1.0)ȼ | 181.8ȼ |
| Other<br>presentational changes<br><br><br><br><br><br>The<br>presentation of the Group income statement has been amended to<br>include exceptional items within the line item to which they<br>relate, with a separate analysis of operating profit before System<br>Fund and exceptional items.<br><br><br><br><br><br>Fair<br>value gains and losses on contingent purchase consideration<br>reported within financial expenses in 2018 are now presented as a<br>separate line item on the face of the Group income<br>statement. | |||
| --- | |||
| 3. | Exchange<br>rates | ||
| --- | --- | ||
| The<br>results of operations have been translated into US dollars at the<br>average rates of exchange for the year. In the case of sterling,<br>the translation rate is $1 = £0.78 (2018: $1 = £0.75). In<br>the case of the euro, the translation rate is $1 = €0.89<br>(2018: $1 = €0.85).<br><br><br><br><br><br>Assets<br>and liabilities have been translated into US dollars at the rates<br>of exchange on the last day of the year. In the case of sterling,<br>the translation rate is $1 = £0.76 (2018: $1 = £0.78). In<br>the case of the euro, the translation rate is $1 = €0.89<br>(2018: $1 = €0.87). | |||
| 4. | Segmental information | ||
| --- | --- | ||
| The Group has four reportable segments reflecting its geographical<br>regions and its Central functions:<br><br><br>●<br>Americas;<br><br><br>●<br>EMEAA;<br><br><br>●<br>Greater China; and<br><br><br>●<br>Central.<br><br><br><br><br><br>Central functions include technology, sales and marketing, finance,<br>human resources and corporate services; Central revenue arises<br>principally from technology fee income.<br><br><br><br><br><br>No operating segments have been aggregated to form these reportable<br>segments.<br><br><br><br><br><br>Management monitors the operating results of these reportable<br>segments for the purpose of making decisions about resource<br>allocation and performance assessment. Each of the geographical<br>regions is led by its own Chief Executive Officer, who reports to<br>the Group Chief Executive Officer.<br><br><br><br><br><br>The System Fund is not viewed as being part of the Group's core<br>operations as it is not managed to generate a profit or loss for<br>IHG over the longer term. As such, its results are not regularly<br>reviewed by the Chief Operating Decision Maker (CODM) and it does<br>not constitute an operating segment under IFRS 8. Similarly,<br>reimbursements of costs are not reported to the CODM and so are not<br>included within the reportable segments.<br><br><br><br><br><br>Segmental performance is evaluated based on operating profit or<br>loss and is measured consistently with operating profit or loss in<br>the Group Financial Statements, excluding System Fund and<br>exceptional items. Group financing activities, fair value<br>gains/(losses) on contingent purchase consideration and income<br>taxes are managed on a Group basis and are not allocated to<br>reportable segments. | |||
| Revenue | |||
| --- | --- | --- | |
| 2019 | 2018 | ||
| $m | $m | ||
| Americas | 1,040 | 1,051 | |
| EMEAA | 723 | 569 | |
| Greater<br>China | 135 | 143 | |
| Central | 185 | 170 | |
| _____ | _____ | ||
| Revenue from reportable segments | 2,083 | 1,933 | |
| System<br>Fund revenues | 1,373 | 1,233 | |
| Reimbursement<br>of costs | 1,171 | 1,171 | |
| _____ | _____ | ||
| Total revenue | 4,627 | 4,337 | |
| _____ | _____ | ||
| All<br>items above relate to continuing operations. | |||
| Profit | 2018<br><br><br>Restated<br><br><br>$m | ||
| --- | --- | ||
| Americas<br>(see below) | 673 | ||
| EMEAA | 206 | ||
| Greater<br>China | 70 | ||
| Central | (117) | ||
| _____ | |||
| Operating profit from reportable segments | 832 | ||
| System<br>Fund | (146) | ||
| Operating<br>exceptional items (note 6) | (104) | ||
| _____ | |||
| Operating profit | 582 | ||
| Net<br>finance costs | (96) | ||
| Fair<br>value gains/(losses) on contingent purchase<br>consideration | (4) | ||
| _____ | |||
| Profit before tax | 482 | ||
| _____ | |||
| All<br>items above relate to continuing operations. | |||
| Operating<br>profit from reportable segments includes business interruption<br>insurance proceeds of 10m in 2019, relating to the Americas<br>region, which is included in 'other operating income' in the Group<br>income statement. |
All values are in US Dollars.
| Assets | 2019<br><br><br><br><br><br>$m | 2018<br><br><br>Restated<br><br><br>$m |
|---|---|---|
| Americas | 1,784 | 1,656 |
| EMEAA* | 978 | 738 |
| Greater<br>China | 136 | 110 |
| Central | 772 | 755 |
| _____ | _____ | |
| Segment assets | 3,670 | 3,259 |
| Unallocated<br>assets: | ||
| Derivative<br>financial instruments | 1 | 8 |
| Tax<br>receivable | 44 | 58 |
| Deferred tax<br>assets | 66 | 63 |
| Cash<br>and cash equivalents | 195 | 704 |
| _____ | _____ | |
| Total assets | 3,976 | 4,092 |
| _____ | _____ |
* Includes assets classified as held for sale of $19m (2018: $nil).
5. Disaggregation of revenue
The following tables present Group revenues disaggregated by type of revenue stream and by reportable segment:
| Year ended 31 December 2019 | |||||||
|---|---|---|---|---|---|---|---|
| Americas<br><br><br><br><br><br>$m | EMEAA<br><br><br><br><br><br>$m | Greater<br><br><br>China<br><br><br>$m | Central<br><br><br><br><br><br>$m | Total<br><br><br><br><br><br>$m | |||
| Franchise<br>and base management fees | 840 | 247 | 87 | - | 1,174 | ||
| Incentive<br>management fees | 13 | 90 | 48 | - | 151 | ||
| Central<br>revenue | - | - | - | 185 | 185 | ||
| _____ | _____ | _____ | _____ | _____ | |||
| Revenue<br>from fee business | 853 | 337 | 135 | 185 | 1,510 | ||
| Revenue<br>from owned, leased and managed lease hotels | 187 | 386 | - | - | 573 | ||
| _____ | _____ | _____ | _____ | _____ | |||
| 1,040 | 723 | 135 | 185 | 2,083 | |||
| _____ | _____ | _____ | _____ | ||||
| System<br>Fund revenues | 1,373 | ||||||
| Reimbursement<br>of costs | 1,171 | ||||||
| _____ | |||||||
| Total revenue | 4,627 | ||||||
| _____ | |||||||
| Year ended 31 December 2018 | |||||||
| --- | --- | --- | --- | --- | --- | ||
| Americas | EMEAA | Greater<br><br><br>China | Central | Total | |||
| $m | $m | $m | $m | $m | |||
| Franchise<br>and base management fees | 835 | 227 | 94 | - | 1,156 | ||
| Incentive<br>management fees | 18 | 93 | 49 | - | 160 | ||
| Central<br>revenue | - | - | - | 170 | 170 | ||
| _____ | _____ | _____ | _____ | _____ | |||
| Revenue<br>from fee business | 853 | 320 | 143 | 170 | 1,486 | ||
| Revenue<br>from owned, leased and managed lease hotels | 198 | 249 | - | - | 447 | ||
| _____ | _____ | _____ | _____ | _____ | |||
| 1,051 | 569 | 143 | 170 | 1,933 | |||
| _____ | _____ | _____ | _____ | ||||
| System<br>Fund revenues | 1,233 | ||||||
| Reimbursement<br>of costs | 1,171 | ||||||
| _____ | |||||||
| Total revenue | 4,337 | ||||||
| _____ | |||||||
| 6. | Exceptional items | ||||||
| --- | --- | --- | --- | --- | --- | ||
| 2019<br><br><br>$m | 2018<br><br><br>$m | ||||||
| Operating exceptional items: | |||||||
| Administrative<br>expenses: | |||||||
| Acquisition<br>and integration costs (a) | (7) | (15) | |||||
| Litigation<br>(b) | (28) | (18) | |||||
| Reorganisation<br>costs (c) | (20) | (56) | |||||
| Pension<br>settlement cost (d) | - | (15) | |||||
| _______ | _______ | ||||||
| (55) | (104) | ||||||
| Impairment charges: | |||||||
| Goodwill<br>(note 7) | (49) | - | |||||
| Right-of-use<br>assets (note 7) | (32) | - | |||||
| Management<br>agreements (e) | (50) | - | |||||
| _____ | _____ | ||||||
| (131) | - | ||||||
| _____ | _____ | ||||||
| Total operating exceptional items | (186) | (104) | |||||
| Fair value gains on contingent purchase<br>consideration (note 7) | 38 | - | |||||
| _____ | _____ | ||||||
| Exceptional items before tax | (148) | (104) | |||||
| _____ | _____ | ||||||
| Tax: | |||||||
| Tax on<br>exceptional items (f) | 20 | 22 | |||||
| Exceptional<br>tax (g) | - | 5 | |||||
| _____ | _____ | ||||||
| Total Tax | 20 | 27 | |||||
| _____ | _____ | ||||||
| All<br>items above relate to continuing operations. These items are<br>treated as exceptional by reason of their size or<br>nature. | |||||||
| --- | --- | ||||||
| a) | In<br>2019, primarily relates to the acquisition of Six Senses (see note<br>11) and, in 2018, related to the acquisition of Regent and the UK<br>portfolio deal. | ||||||
| b) | In<br>2019, primarily represents management's best estimate of a<br>settlement in respect of a lawsuit filed against the Group in the<br>Americas region, together with the cost of an arbitration award<br>made against the Group in the EMEAA region. There are certain<br>indemnities and claims that the Group will be able to pursue in<br>relation to these matters, although it is not practicable to<br>quantify the amounts at this point in time. In 2018, primarily<br>related to a material settlement agreed in respect of a lawsuit<br>filed against the Group in the Americas region, together with<br>associated legal fees. | ||||||
| c) | In<br>September 2017, the Group launched a comprehensive efficiency<br>programme funding a series of new strategic initiatives to drive an<br>acceleration in IHG's future growth. The programme is centred<br>around strengthening the Group's organisational structure to<br>redeploy resources to leverage scale in the highest opportunity<br>markets and segments. The programme was completed in<br>2019. The cost includes consultancy fees of $6m (2018: $25m)<br>and severance costs of $8m (2018: $18m). An additional $28m<br>(2018: $47m) has been charged to the System Fund. | ||||||
| d) | Arose<br>from the termination of the US funded Inter-Continental Hotels<br>Pension Plan. | ||||||
| e) | Relates<br>to impairment of the Kimpton management agreements in the Americas<br>region following a re-assessment of the recoverable amount based on<br>the value in use. | ||||||
| f) | In<br>2019, comprises a current tax credit of $4m on reorganisation costs<br>(2018: $11m), a $6m deferred tax credit (2018: $5m current<br>tax credit) in respect of litigation, a $1m deferred tax charge<br>representing the net tax impact of the right-of-use asset<br>impairment and the fair value gain on contingent purchase<br>consideration, a $13m deferred tax credit in relation to the<br>management agreement impairment and a $2m prior year deferred tax<br>charge relating to a 2014 disposal. Additionally, in 2018<br>there was a $6m tax credit ($5m current tax and $1m deferred tax)<br>arising from the US pension settlement, a $2m current tax credit in<br>respect of acquisition costs and a $2m prior year current tax<br>charge on the 2017 sale of a minority investment. | ||||||
| g) | In<br>2018, related to a $5m tax credit in regard to US tax reform<br>impacts. | ||||||
| 7. | UK Portfolio | ||||||
| --- | --- | ||||||
| In<br>2019, an impairment charge of $81m has been recognised in relation<br>to the UK leased portfolio, triggered by trading disruption as a<br>result of renovations and the re-branding of the hotels and<br>increasingly challenging trading conditions in 2019. <br>Management has re-assessed its short and medium-term forecasts<br>which assume that some disruption continues into 2020, and that<br>hotels see progressive trading improvements when the renovation and<br>re-branding projects complete. As a result of the impairment,<br>goodwill of $49m recorded on acquisition of the portfolio has been<br>written off in full, with a further $32m recognised as an<br>impairment of the IFRS 16 right-of-use asset.<br><br><br><br><br><br>The<br>same underlying cash flows are used to measure the fair value of<br>the contingent purchase consideration liability which was<br>consequently reduced by $38m, leading to a fair value gain of $38m<br>in the income statement.<br><br><br><br><br><br>Both<br>adjustments have been treated as exceptional items with the net<br>impact being a $43m charge to the income statement, excluding the<br>related tax impacts.<br><br><br><br><br><br>The<br>lease agreement also contains a guarantee that the Group will fund<br>any shortfalls in lease payments up to annual and cumulative caps.<br>Under IFRS 16, the cumulative guaranteed amount is accounted for as<br>an 'in-substance fixed' lease payment and therefore recognised as a<br>right-of-use asset with a corresponding lease liability (see note<br>2). Rental guarantee payments of $17m (2018: $3m) were charged<br>against the lease liability. | |||||||
| 8. | Tax | ||||||
| The tax<br>charge on profit from continuing operations, excluding the impact<br>of exceptional items (note 6) and System Fund, has been calculated<br>using a tax rate of 24% (2018: 22%) analysed as follows: | |||||||
| Year ended 31 December | 2019 | 2019 | 2019 | 2018 | 2018 | 2018 | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Profit<br><br><br><br><br><br>$m | Tax<br><br><br><br><br><br>$m | Tax rate | Profit<br><br><br>Restated<br><br><br>$m | Tax<br><br><br>Restated<br><br><br>$m | Tax rate<br><br><br>Restated | ||
| Before<br>exceptional items and System Fund | 739 | (176) | 24% | 732 | (159) | 22% | |
| System<br>Fund | (49) | - | (146) | - | |||
| Exceptional<br>items (note 6) | (148) | 20 | (104) | 27 | |||
| _____ | _____ | _____ | _____ | ||||
| 542 | (156) | 482 | (132) | ||||
| _____ | _____ | _____ | _____ | ||||
| Analysed<br>as: | |||||||
| UK<br>tax | (17) | (21) | |||||
| Foreign<br>tax | (139) | (111) | |||||
| _____ | _____ | ||||||
| (156) | (132) | ||||||
| _____ | _____ | ||||||
| 9. | Earnings per ordinary share | ||||||
| --- | --- | ||||||
| Basic<br>earnings per ordinary share is calculated by dividing the profit<br>for the year available for IHG equity holders by the weighted<br>average number of ordinary shares, excluding investment in own<br>shares, in issue during the year.<br><br><br><br><br><br>Diluted<br>earnings per ordinary share is calculated by adjusting basic<br>earnings per ordinary share to reflect the notional exercise of the<br>weighted average number of dilutive ordinary share awards<br>outstanding during the year.<br><br><br><br><br><br>Adjusted<br>earnings per ordinary share* is disclosed to show performance<br>undistorted by exceptional items and changes in the fair value of<br>contingent purchase consideration, to give a more meaningful<br>comparison of the Group's performance. Additionally,<br>earnings attributable to the System Fund are excluded from the<br>calculation of adjusted earnings per ordinary share, as IHG has an<br>agreement with the IHG Owners Association to spend Fund income for<br>the benefit of hotels in the IHG System such that the Group does<br>not make a gain or loss from operating the Fund over the longer<br>term.<br><br><br><br><br><br>IHG<br>also records an interest charge on the outstanding cash balance<br>relating to the IHG Rewards Club programme. These<br>interest payments are recognised as interest income for the Fund<br>and interest expense for IHG. The System Fund also benefits<br>from the capitalisation of interest related to the development of<br>the next-generation Guest Reservation System. As the<br>Fund is included on the Group income statement, these amounts are<br>included in reported Group net financial expenses. Given that<br>all results related to the Fund are excluded from the calculation<br>of adjusted earnings per ordinary share, these interest amounts are<br>deducted from profit available for equity holders. | |||||||
| Continuing and total operations | 2019 | 2018<br><br><br>Restated | |||||
| --- | --- | --- | |||||
| Basic earnings per ordinary share | |||||||
| Profit<br>available for equity holders ($m) | 385 | 349 | |||||
| Basic<br>weighted average number of ordinary shares (millions) | 183 | 190 | |||||
| Basic<br>earnings per ordinary share (cents) | 210.4 | 183.7 | |||||
| _____ | _____ | ||||||
| Diluted earnings per ordinary share | |||||||
| Profit<br>available for equity holders ($m) | 385 | 349 | |||||
| Diluted<br>weighted average number of ordinary shares (millions) | 184 | 192 | |||||
| Diluted<br>earnings per ordinary share (cents) | 209.2 | 181.8 | |||||
| _____ | _____ | ||||||
| Adjusted earnings per ordinary share | |||||||
| Profit<br>available for equity holders ($m) | 385 | 349 | |||||
| Adjusting<br>items: | |||||||
| System Fund revenues and expenses ($m) | 49 | 146 | |||||
| Interest attributable to the System Fund ($m) | (18) | (19) | |||||
| Operating exceptional items ($m) (note 6) | 186 | 104 | |||||
| Change in fair value of contingent purchase consideration<br>($m)** | (27) | 4 | |||||
| Tax on exceptional items ($m) (note 6) | (20) | (22) | |||||
| Exceptional tax ($m) (note 6) | - | (5) | |||||
| _____ | _____ | ||||||
| Adjusted<br>earnings ($m) | 555 | 557 | |||||
| _____ | _____ | ||||||
| Basic<br>weighted average number of ordinary shares (millions) | 183 | 190 | |||||
| Adjusted<br>earnings per ordinary share (cents) | 303.3 | 293.2 | |||||
| _____ | _____ | ||||||
| Adjusted diluted earnings per ordinary share | |||||||
| Adjusted<br>earnings ($m) | 555 | 557 | |||||
| Diluted<br>weighted average number of ordinary shares (millions) | 184 | 192 | |||||
| Adjusted<br>diluted earnings per ordinary share (cents) | 301.6 | 290.1 | |||||
| _____ | _____ |
* See the Use of Non-GAAP Measures section in the Business Review.
** Adjusted earnings per ordinary share has been restated to exclude the change in fair value of contingent purchase consideration.
| The<br>diluted weighted average number of ordinary shares is calculated<br>as: | ||||||
|---|---|---|---|---|---|---|
| 2019<br><br><br>millions | 2018<br><br><br>millions | |||||
| Basic<br>weighted average number of ordinary shares | 183 | 190 | ||||
| Dilutive<br>potential ordinary shares | 1 | 2 | ||||
| _____ | _____ | |||||
| 184 | 192 | |||||
| _____ | _____ | |||||
| 10. | Dividends and shareholder returns | |||||
| --- | --- | --- | --- | --- | --- | --- |
| 2019<br><br><br>cents per<br><br><br>share | 2018<br><br><br>cents per<br><br><br>share | 2019<br><br><br><br><br><br>$m | 2018<br><br><br><br><br><br>$m | |||
| Paid<br>during the year: | ||||||
| 78.1 | 71.0 | 139 | 130 | |||
| 39.9 | 36.3 | 72 | 69 | |||
| 262.1 | - | 510 | - | |||
| _____ | _____ | _____ | _____ | |||
| 380.1 | 107.3 | 721 | 199 | |||
| _____ | _____ | _____ | _____ | |||
| Proposed<br>for approval at the Annual General Meeting (not recognised as a<br>liability at 31 December): | ||||||
| Final | 85.9 | 78.1 | 156 | 141 | ||
| _____ | _____ | _____ | _____ | |||
| In<br>October 2018, the Group announced a 500m return of funds to<br>shareholders by way of a special dividend and share<br>consolidation. On 11 January 2019, shareholders approved the<br>share consolidation on the basis of 19 new ordinary shares of<br>20 340/399p per share for<br>every 20 existing ordinary shares of 19 17/21p, which became<br>effective on 14 January 2019 and resulted in the consolidation of<br>10m shares. The special dividend was paid on 29 January 2019.<br>The dividend and share consolidation had the same economic effect<br>as a share repurchase at fair value, therefore previously reported<br>earnings per share has not been restated.<br><br> <br><br>The<br>total number of shares held as treasury shares at 31 December 2019<br>was 5.7m. |
All values are in US Dollars.
| 11. | Acquisition of businesses<br><br><br><br><br><br>Six Senses<br><br><br><br><br><br>On 12<br>February 2019, the Group acquired a 100% ownership interest in Six<br>Senses Hotels Resorts Spas (Six Senses). Six Senses is a leading<br>operator of top tier luxury hotels, resorts and spas with a<br>world-renowned reputation for wellness and sustainability. Six<br>Senses will sit at the top of IHG's luxury portfolio.<br><br><br><br><br><br>Six<br>Senses contributed revenue of $38m and an operating loss of $7m for<br>the period between the date of acquisition and the balance sheet<br>date. The results of Six Senses are included in the EMEAA and<br>Greater China reportable segments. If the acquisition had<br>taken place at 1 January 2019, there would have been no material<br>difference to reported Group revenue and operating profit for the<br>year ended 31 December 2019. |
|---|---|
| The fair values of<br>the identifiable assets acquired and liabilities assumed, and the<br>purchase consideration, have been finalised and reflect facts and<br>circumstances that existed at the date of<br>acquisition: | |
| --- | --- |
| $m | |
| Identifiable<br>intangible assets: | |
| Brands | 189 |
| Management agreements | 45 |
| Right-of-use<br>assets | 19 |
| Other<br>non-current assets | 8 |
| Trade<br>and other receivables | 12 |
| Cash<br>and cash equivalents | 7 |
| Other<br>current assets | 1 |
| Trade<br>and other payables | (14) |
| Lease<br>liabilities | (19) |
| Other<br>liabilities | (2) |
| _____ | |
| Net identifiable assets acquired | 246 |
| Goodwill | 58 |
| _____ | |
| Total purchase consideration | 304 |
| _____ | |
| Comprising: | |
| Cash<br>paid on acquisition, including working capital<br>settlement | 299 |
| Contingent<br>purchase consideration | 5 |
| _____ | |
| 304 | |
| _____ |
The goodwill is attributable to the global growth opportunities identified for the acquired business. The full amount of goodwill is expected to be deductible for income tax purposes.
UK portfolio - acquisition of additional hotels
On 14 February 2019, following on from the UK portfolio deal completed in 2018 to operate 10 UK hotels under long-term leases from Covivio, the Group added a further two hotels to the portfolio bringing the total hotels in the UK portfolio to 12.
The total purchase consideration for the two hotels was $11m, comprising purchase consideration of $1m and contingent purchase consideration of $10m. The contingent purchase consideration has been revalued as at 31 December 2019.
The two additional hotels contributed revenue of $15m and an operating loss of $2m for the period between the date of acquisition and the balance sheet date. The results of the hotels are included in the EMEAA business segment. If the acquisition had taken place at 1 January 2019, there would have been no material difference to reported Group revenue and operating profit for the year ended 31 December 2019.
Assets acquired and liabilities assumed primarily comprise goodwill of $12m, of which nil is expected to be deductible for tax purposes, and a right-of-use asset of $6m offset by an equal lease liability. The goodwill was attributable to the trading potential of the acquired hotel operations and growth opportunities.
| 2019<br><br><br>$m | 2018<br><br><br>$m | ||
|---|---|---|---|
| Cash flows relating to acquisitions: | |||
| Cash<br>paid on acquisition, including working capital<br>settlement | 299 | 22 | |
| Settlement<br>of stamp duty liability | 3 | 14 | |
| Less:<br>cash and cash equivalents acquired | (7) | (2) | |
| Less:<br>working capital settlement received in year following<br>acquisition | (3) | - | |
| _____ | _____ | ||
| Net<br>cash outflow arising on acquisitions | 292 | 34 | |
| _____ | _____ | ||
| 12. | Reconciliation of profit for<br>the year to cash flow from operations before<br>contract acquisition costs | ||
| --- | --- | --- | --- |
| 2019 | 2018<br><br><br>Restated | ||
| $m | $m | ||
| Profit<br>for the year | 386 | 350 | |
| Adjustments<br>for: | |||
| Net<br>financial expenses | 115 | 96 | |
| Fair<br>value gains/(losses) on contingent purchase<br>consideration | (27) | 4 | |
| Income<br>tax charge | 156 | 132 | |
| Depreciation and<br>amortisation | 116 | 115 | |
| System<br>Fund depreciation and amortisation | 54 | 49 | |
| Impairment<br>charges | 131 | - | |
| Other<br>operating exceptional items (including System Fund) | 83 | 151 | |
| Share-based<br>payments cost | 42 | 38 | |
| Dividends from<br>associates and joint ventures | 7 | 5 | |
| Increase in<br>contract costs | (11) | (3) | |
| Increase in<br>deferred revenue | 57 | 141 | |
| Utilisation of<br>provisions, net of charge | 7 | (6) | |
| Retirement benefit<br>contributions, net of costs | (3) | (12) | |
| Changes<br>in net working capital | (113) | (32) | |
| Cash<br>flows relating to exceptional items | (55) | (137) | |
| Contract assets<br>deduction in revenue | 21 | 19 | |
| Other<br>items | 2 | 4 | |
| _____ | _____ | ||
| Total<br>adjustments | 582 | 564 | |
| _____ | _____ | ||
| Cash flow from operations before contract acquisition<br>costs | 968 | 914 | |
| _____ | _____ | ||
| 13. | Net debt | ||
| --- | --- | --- | --- |
| 2019 | |||
| $m | $m | ||
| Cash<br>and cash equivalents | 195 | 704 | |
| Loans<br>and other borrowings - current | (87) | (104) | |
| - non-current | (2,078) | (1,910) | |
| Lease<br>liabilities - current | (65) | (55) | |
| - non-current | (595) | (615) | |
| - classified as held for sale | (20) | - | |
| Derivative<br>financial instruments hedging debt values | (15) | 15 | |
| _____ | _____ | ||
| Net debt* | (2,665) | (1,965) | |
| _____ | _____ | ||
| * See<br>the Use of Non-GAAP Measures section in the Business<br>Review. | |||
| 14. | Movement<br>in net debt | ||
| --- | --- | --- | --- |
| 2019 | 2018<br><br><br>Restated | ||
| $m | $m | ||
| Net<br>(decrease)/increase in cash and cash equivalents, net of<br>overdrafts | (500) | 563 | |
| Add<br>back cash flows in respect of other components of net<br>debt: | |||
| Principal element of lease payments | 59 | 35 | |
| Issue of long-term bonds, including effect of currency<br>swaps | - | (554) | |
| (Increase)/decrease in other borrowings | (127) | 268 | |
| _____ | _____ | ||
| (Increase)/decrease<br>in net debt arising from cash flows | (568) | 312 | |
| Non-cash<br>movements: | |||
| Lease<br>obligations | (43) | (27) | |
| Increase in accrued<br>interest | (7) | (3) | |
| Acquisitions | (25) | (51) | |
| Exchange and other<br>adjustments | (57) | 57 | |
| _____ | _____ | ||
| (Increase)/decrease in net debt | (700) | 288 | |
| Net<br>debt at beginning of the year | (1,965) | (2,253) | |
| _____ | _____ | ||
| Net debt at end of the year | (2,665) | (1,965) | |
| _____ | _____ | ||
| 15. | Commitments and guarantees | ||
| --- | --- | ||
| At 31<br>December 2019, the amount contracted for but not provided for in<br>the financial statements for expenditure on property, plant and<br>equipment, intangible assets and key money was $194m (2018:<br>$136m). A loan facility of $5m (2018: $5m) has also been made<br>available to a hotel owner; this was undrawn at 31 December<br>2019. The Group has also committed to invest a further $6m<br>(2018: $nil) in one of its associates.<br><br><br><br><br><br>In<br>limited cases, the Group may provide performance guarantees to<br>third-party hotel owners to secure management agreements. At<br>31 December 2019, the amount provided in the financial statements<br>was $2m (2018: $3m) and the maximum payouts remaining under such<br>guarantees was $85m (2018: $42m).<br><br><br><br><br><br>In<br>limited cases, the Group may guarantee bank loans made to<br>facilitate third-party ownership of hotels under IHG management or<br>franchise agreements. These contracts are treated as<br>insurance contracts as IHG is insuring the bank against default by<br>the hotel, with a liability only being recognised in the event that<br>a payout becomes probable. At 31 December 2019, there were<br>guarantees of $55m in place (2018: $43m). | |||
| 16. | Contingencies<br><br><br><br><br><br>Security incidents | ||
| --- | --- | ||
| In<br>2016, the Group was notified of (a) a security incident at a number<br>of Kimpton hotels that resulted in unauthorised access to guest<br>payment card data, and (b) security incidents at a number of IHG<br>branded hotels including the installation of malware on servers<br>that processed payment cards used at restaurants and bars of 12 IHG<br>managed properties, together the Security Incidents. The<br>Group has now reached agreement with the impacted card networks on<br>the amount of assessments payable and the total amount of $3m has<br>now been settled under the Group's insurance<br>programmes.<br><br><br><br><br><br>The<br>Group may also be exposed to investigations regarding compliance<br>with applicable State and Federal data security standards, and<br>legal action from individuals and organisations impacted by the<br>Security Incidents. Due to the general nature of the<br>regulatory inquiries received and class action filings to date,<br>other than described below, it is not practicable to make a<br>reliable estimate of the possible financial effects of any such<br>claims on the Group at this time. These contingent<br>liabilities are potentially recoverable under the Group's insurance<br>programmes, although specific agreement will need to be reached<br>with the relevant insurance providers at the time any claim is<br>made.<br><br><br><br><br><br>To<br>date, four lawsuits have been filed against IHG entities relating<br>to the Security Incidents. One of these has been withdrawn<br>and a settlement has been agreed in respect of another with an<br>expected total payment of less than $2m, all of which is expected<br>to be paid under the Group's insurance programmes.<br><br><br><br><br><br><br><br><br>Litigation<br><br><br><br><br><br>From<br>time to time, the Group is subject to legal proceedings the<br>ultimate outcome of each being always subject to many uncertainties<br>inherent in litigation. The Group has also given warranties<br>in respect of the disposal of certain of its former<br>subsidiaries. It is the view of the Directors that, other<br>than to the extent that liabilities have been provided for in these<br>Financial Statements, it is not possible to quantify any loss to<br>which these proceedings or claims under these warranties may give<br>rise, however, as at the date of reporting, the Group does not<br>believe that the outcome of these matters will have a material<br>effect on the Group's financial position.<br><br><br><br><br><br>At 31<br>December 2019, the Group had no other contingent liabilities (2018:<br>$nil). | |||
| 17. | Group financial statements | ||
| --- | --- | ||
| The<br>preliminary statement of results was approved by the Board on 17<br>February 2020. The preliminary statement of results shown in this<br>announcement does not represent the statutory accounts of the Group<br>and its subsidiaries within the meaning of Section 435 of the<br>Companies Act 2006. Full Group financial statements for<br>the year ended 31 December 2019 will be delivered to the Registrar<br>of Companies in due course. Other than for line items which have<br>been restated for IFRS 16, financial information for the year ended<br>31 December 2018 has been extracted from the Group's financial<br>statements for that year as filed with the Registrar of<br>Companies. | |||
| Auditor's review | |||
| --- | |||
| The<br>auditor, Ernst & Young LLP, has given an unqualified report in<br>respect of the Group's financial statements for the year ended 31<br>December 2019 with no reference to matters to which the auditor<br>drew attention by way of emphasis and no statement under s498(2) or<br>s498(3) of the Companies Act 2006. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| InterContinental Hotels Group PLC | |
|---|---|
| (Registrant) | |
| By: | /s/ F.<br>Cuttell |
| Name: | F.<br>CUTTELL |
| Title: | ASSISTANT<br>COMPANY SECRETARY |
| Date: | 18 February 2020 |