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 23
February 2021
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
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Final
Results dated 23 February 2021
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Exhibit
No: 99.1
IHG PLC
– Full Year Results to 31
December 2020
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Reported
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Underlying5
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2020
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2019
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% Change
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% Change
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REPORTABLE SEGMENTS1
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Revenue2
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$992m
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$2,083m
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(52)%
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(52)%
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Revenue from fee business
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$823m
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$1,510m
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(45)%
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(45)%
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Operating profit2
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$219m
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$865m
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(75)%
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(75)%
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Fee margin3
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34.1%
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54.1%
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(20.0)%pts
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Adjusted EPS4
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31.3¢
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303.3¢
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(90)%
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KEY METRICS
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GROUP RESULTS
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● $13.5bn total gross
revenue (down 52%; (51)% at CER)
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Total revenue
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$2,394m
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$4,627m
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(48)%
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Operating (loss)/profit
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$(153)m
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$630m
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(124)%
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● (52.5)% global FY
RevPAR
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Basic EPS
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(142.9)¢
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210.4¢
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(168)%
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Total dividend per share
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-
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39.9¢
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(100)%
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● (53.2)% global Q4
RevPAR
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Net debt
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$2,529m
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$2,665m
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(5)%
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1 Excludes System Fund results, hotel cost reimbursements
and exceptional items. 2 Comprises the Group’s
fee business and owned, leased and managed lease
hotels.
3 Excludes owned, leased and managed lease hotels,
significant liquidated damages and the results of the Group’s
captive insurance company. 4 Calculated using results from Reportable Segments
and Adjusted Interest, and excluding changes in fair value of
contingent consideration. 5 Reportable segment results excluding significant
liquidated damages, current year disposals and stated at constant
2020 exchange rates (CER). Definitions for Non-GAAP measures can be
found in the ‘Use of Non-GAAP measures’ section in the
Business Review, along with reconciliations of these measures to
the most directly comparable line items within the Group Financial
Statements.
●
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FY
RevPAR (52.5)%; variation by region reflects local market Covid-19
restrictions and recovery pace; Greater China recovery most
advanced with Q4 RevPAR (18.2)%, Americas (49.5)%, EMEAA
(70.5)%.
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Continued
outperformance in key markets, driven by portfolio mix and
resilience of our business model.
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$150m
reduction in fee business costs; targeting ~$75m to be sustainable
into 2021, while still investing for growth.
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Operating
profit from reportable segments down 75% to $219m before System
Fund result of $(102)m and operating exceptionals of $(270)m,
predominantly comprising charges already taken in H1 2020,
including impairments to owned and leased hotels and acquired
management agreements.
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Strong
cash management, resulting in free cash inflow of $29m, with an
inflow in H2. Total available liquidity of $2.1bn (on pro forma
basis for repayment of £600m UK Government CCFF at March 2021
maturity).
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Global
estate now 886k rooms (5,964 hotels), with +0.3% net system size
growth (+2.2% excluding impact of SVC portfolio termination);
opened 39k rooms (285 hotels), +4.5% gross growth.
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●
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Signed
56k rooms (360 hotels); Holiday Inn Brand Family half of all
signings; conversions ~25% of all signings.
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Global
pipeline now 272k rooms (1,815 hotels); 11% share of industry
pipeline vs 4% current market share.
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Long-term
attractiveness of our markets and segments remains; strategic
priorities evolved to drive future growth.
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New
2030 Responsible Business Plan, Journey to Tomorrow, sets out
ambitious commitments including our environmental targets, support
for communities and championing diversity, inclusion and
equality.
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Keith Barr, Chief Executive Officer, IHG Hotels & Resorts,
said:
“Since
the very start of the pandemic, we have worked tirelessly to
prioritise the health and safety of colleagues and customers,
quickly protect our business and our thousands of hotel owners, and
help support a strong recovery as travel returns. I would like to
thank our hotel colleagues and owners for their incredible efforts,
including all they have done to help our communities in such
difficult times, bringing to life our purpose of True Hospitality
for Good around the world.
2020
was clearly the most challenging year in our history, with Covid-19
heavily impacting demand across our industry. 2021 has begun with
many of these challenges still in place, with more meaningful
progress towards recovery for the industry unlikely until later in
the year and dependent on global vaccine rollouts, lifting of
restrictions and an acceleration in economic activity.
The
shape of recovery remains varied globally, but we’ve
continued to outperform the industry in key markets thanks to the
strength of our teams, business model and segments in which we
compete. This includes our industry-leading position in upper
midscale, where demand remains stronger. To succeed in this
environment, we’ve evolved our purpose as well as our
strategic priorities, ensuring a focus on continued investment in
our brands and digital capabilities to maximise revenue for our
hotels and create more seamless guest experiences; keeping guests
and owners at the heart of everything we do; and strengthening how
we care for our people, communities and planet. These elements form
the pillars of our corporate strategy, which together with our new
2030 Responsible Business Plan, will ensure we continue to
successfully and sustainably grow our brands and
business.
Despite
so many challenges in 2020, the long-term confidence we share with
our owners was reflected by another 285 hotels opening during the
year and an average of almost one new signing a day. Conversion
activity increased across our brand portfolio, including the launch
of voco in the US and China, taking the brand to more than 20
countries. We’re building avid and Atwell Suites to be future
brands of scale, while continuing to drive the growth of our
established brands, with strong performances for Hotel Indigo and
Kimpton, and our Holiday Inn Brand Family accounting for 60% of all
openings and half of all signings in 2020.
Having
demonstrated resilience and outperformed in 2020, we continue to
work closely with owners to capture demand, alongside investing to
capitalise on our industry’s long-term growth prospects. Our
preferred brands in attractive markets and segments, even stronger
technology and loyalty platforms, and a substantial proportion of
our pipeline being under construction, give us confidence in our
ability to achieve industry-leading net rooms growth as the market
recovers.”
Our response to Covid-19
The
onset of Covid-19 led to the worst period of demand in our
industry’s history. The experience has outlined the
importance of purpose, giving new meaning to our potential to
effect positive change, and highlighted the growing expectation
that we must deliver that change in a challenging world. We have
therefore evolved our purpose from True Hospitality for everyone,
to True Hospitality for Good – still committed to looking
after all those we interact with, but now more focused on the
difference we can make to our people, guests, communities and
planet.
The
experience of 2020 has also demonstrated the importance of agility
and rapid decision-making in order to carry out short-term actions,
whilst still retaining an absolute focus on the long term. Embedded
into IHG’s business model are our behaviours, which are
aligned to our purpose and strategy, encouraging employees to: Move
Fast; be Solutions Focused; Think Return; and Build One
Team.
Our
responses to the pandemic have therefore been framed with pace,
thought and care, guided by our purpose and a commitment to do the
right thing for all our stakeholders, alongside taking every step
to position IHG to outperform in the future and to deliver
long-term sustainable value. These responses included our actions
to significantly reduce costs where appropriate to do so, and to
preserve cash to maintain substantial liquidity and support our
conservative balance sheet approach. Key actions taken to support
specific stakeholders included:
●
Colleagues: provided clear safety
procedures and training; offered mental health, wellbeing and
parenting resources to support colleagues working remotely;
launched support fund for employees affected by temporary changes
to working hours; created a job centre and alumni network for
displaced hotel and corporate colleagues.
●
Guests: reassured consumers with the
launch of our IHG Clean Promise and offered corporate clients an
enhanced Meet with Confidence programme, both underpinned by new
science-led cleaning and safety protocols; provided a flexible
cancellation policy and Book Now Pay Later offer; protected status
and points expiry for loyalty members.
●
Owners: offered temporary fee discounts
and increased payment flexibility to protect cash flow; delayed
mandated renovations and relaxed brand standards to conserve
funding; managed temporary hotel closures and re-openings,
alongside developing tailored recovery toolkits and targeted
marketing campaigns to drive demand; collaborated closely with
governments and trade bodies to drive sustained industry support
and aid the safe resumption of travel.
●
Communities: repurposed our hotels to
accommodate frontline workers, help travellers quarantine and offer
the homeless a safe place to stay; used our hotel kitchens and
resources to provide care packages for the vulnerable; worked with
charity partners to fund vital work from supporting foodbanks to
rebuilding communities; enabled loyalty members to donate points to
charitable causes.
Industry fundamentals remain attractive; IHG well-placed to
capitalise
While
the impact of the Covid-19 pandemic has been severe, our industry
has recovered strongly from previous cyclical and exogenous events,
and the long-term attractiveness of our industry and future growth
potential remains unchanged.
Prior
to 2020, the Travel & Tourism sector outpaced global economic
growth for a decade. Over the past five years, one in four new jobs
globally were created by the sector, which contributed almost $9
trillion, 10%, to the world’s GDP in 2019. Against this
backdrop, the hotel industry has seen RevPAR and branded market
share grow consistently over this last decade.
In the
current environment, IHG’s weighting towards essential
business and domestic leisure travel adds resilience relative to
the wider industry. Our brands within the midscale segments,
including the Holiday Inn Brand Family, represent ~70% of our
system size and have performed well in 2020, given market
conditions. In particular, our market-leading Holiday Inn Express
brand is strongly positioned in upper midscale, with this segment
representing ~70% of our rooms in the US and has historically been
impacted less and recovered faster than other segments in economic
downturns. Our business is also weighted towards non-urban markets
that are less reliant on international inbound travel (~95% of our
US business is domestic driven) and less reliant on large group
meetings and events. These weightings, and our asset-light model,
have supported IHG’s ability to outperform.
As has
been the case in previous downturns, because of IHG’s
asset-light model and weightings, together with leveraging our
scale efficiencies and ability to continue investing in brands,
technology and loyalty programmes, we expect to be able to gain
further market share. This growth will be partly driven by the
potential for increased conversion activity (either from
independently branded hotels or other real estate), as well as an
ongoing level of new-build development, reflecting lenders’
recognition of the strength and value of IHG’s enterprise and
reputation for generating attractive returns. While new-build
development in our industry has been temporarily impacted by
Covid-19, we expect it to return to robust levels of growth in
supply over the longer term. In addition, we anticipate that an
increased consumer focus on trusted brands, booking flexibility and
cleanliness standards should favour our leading brands with both
owners and guests.
As a
recovery becomes sustained, pre-existing long-term industry
tailwinds, such as a growing global population, rising middle
classes, the increasing desire for travel and new experiences, and
the human need to physically interact and collaborate, give
confidence as drivers of continued market growth.
System and pipeline demonstrate continued progress
The
long-term attractiveness of IHG’s brands and the markets we
operate in have supported continued opening and signing activity
throughout the year:
●
With a global
system of 886k rooms (5,964 hotels), net system size growth was
+0.3% year-on-year. Excluding the SVC portfolio termination of 17k
rooms (102 hotels), net system size growth was +2.2%. Other
removals were predominantly those planned as a result of our
continued focus on a high-quality estate. Gross growth was
+4.5%.
●
39k rooms (285
hotels) were opened in the year. Of these, ~25% were conversions,
reflecting an increased level of conversion activity in each of our
brands, with the balance being new builds.
●
56k rooms (360
hotels) were signed, with 20-40 hotels signed in each month during
2020. ~25% of the signings were conversions (27% in
Q4).
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Global pipeline at
272k rooms (1,815 hotels), which represents over 30% of current
system size.
●
Ground breaks
continued in every month, and currently around 40% of our global
pipeline is under construction, which is a similar proportion to a
year earlier.
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Our current system
is weighted 68% across midscale segments, 22% upscale and 10%
luxury; our pipeline is similarly weighted 61%, 31% and 8%,
respectively.
●
Our current system
by region is 58% Americas, 26% EMEAA and 16% Greater China; our
pipeline is 38% Americas, 28% EMEAA and 34% Greater
China.
●
Reflecting our
asset-light model, the current system is 71% franchised and 28%
managed, with 1% represented by owned, leased or managed lease
properties; the pipeline is 58% franchised and 42%
managed.
The
regional performance commentary includes further highlights of
system and pipeline development. The Business Review provides
further detail of the system and pipeline by region, and further
analysis by brand and by ownership type.
Our strategic priorities
Our
ambition is to deliver industry-leading net rooms growth. To
achieve this, our strategy is focused on using our scale and
expertise to create the exceptional guest experiences and owner
returns needed to grow our brands in the industry’s most
valuable markets and segments. Our work is underpinned by a culture
that retains and attracts the best people and embraces
opportunities to positively impact the world around us, reflecting
our purpose of True Hospitality for Good.
Our
actions are guided by four strategic priorities that will increase
guest and owner demand for our brands; prioritise services and
solutions that create superior guest experiences and stronger owner
returns; accelerate our digital first approach; and ensure we
continue to invest in our people and communities and sustainably
grow our business.
1.
Build
loved and trusted brands
As we
look to the future, we have grouped our brands into four
collections that present the breadth of our portfolio in a more
intuitive way for consumers. This move forms part of our refreshed
approach to use the IHG Hotels & Resorts masterbrand, to more
prominently enhance our brand perception, sharpen our marketing and
help us capture a greater share of demand. The collections
are:
●
Luxury & Lifestyle: Six Senses
Hotels Resorts Spas, Regent Hotels & Resorts, InterContinental
Hotels & Resorts, Kimpton Hotels & Restaurants, Hotel
Indigo
●
Premium: Crowne Plaza Hotels &
Resorts, HUALUXE Hotels & Resorts, EVEN Hotels, voco
Hotels
●
Essentials: Holiday Inn Hotels &
Resorts, Holiday Inn Express, avid hotels
●
Suites: Atwell Suites, Staybridge
Suites, Holiday Inn Club Vacations, Candlewood Suites
Across
our portfolio, we continue to move at pace to take our newer brands
to scale in the most attractive segments and high-growth markets,
and to invest in the growth of our established brands by focusing
on design, service and quality.
Scaling up our newest brands – voco, avid hotels and Atwell
Suites
Our
voco brand is now present in
more than 20 countries, with over 50 openings and signings since
launch in 2018 and tracking well against our aim of 200 hotels
within 10 years. The brand is ideally positioned to capitalise on
an increasing number of conversion opportunities, and represented
13% of IHG’s conversion signings globally in 2020. During the
year, we launched voco in Greater China and the Americas, including
two conversions in New York City. In EMEAA, progress included the
first opening in Northern Europe (voco Villach, Austria) and
further momentum elsewhere in Europe including openings in Paris
Montparnasse and Strasbourg Centre, and a signing in Milan. The
brand’s evolution has also seen the first resort location
(Saipan) and the first all-suite property (Doha) added. All three
regions anticipate increased voco signings and openings in
2021.
We
expect avid hotels to be our
next brand of scale in the midscale segment. Its low cost to build,
lean staffing model and attractive operating economics are expected
to increasingly appeal to owners in a more constrained economic
environment, and equally to guests, who look for hospitality
delivered exceptionally well at an attractive price point. Since
launch in 2017, there have been more than 200 signings, and across
the 24 openings to date, customer feedback and satisfaction scores
have been consistently high. This year saw the brand expand beyond
the US, with the first opening in Mexico, built in just 10 months,
and the first ground break in Canada.
Our
upper midscale all-suites brand, Atwell Suites, launched in September
2019 and is also growing at pace. Signings have grown to 19, with
vibrant locations such as Denver, Austin and Charlotte added, and
construction underway on our first property in Miami.
Well-established brands with further growth
opportunities
Holiday Inn Express grew to almost 3,000 hotels in 2020,
with 136 new openings, maintaining its segment leadership position.
A further 132 signings brought its pipeline to 683, which
represents over 20% of the current estate. Building on guest and
owner feedback, a further evolution of the current Formula Blue
guest room and public areas design has been launched. Focused on
strong owner returns, the new design has a purchase-ready supply
chain that leverages our procurement scale and delivers more than
10% cost savings to owners.
Our
Holiday Inn brand opened 32
hotels taking the total estate to 1,248, while 48 hotel signings
took its global pipeline to 262. Notable conversions included
Holiday Inn Club Vacations in New Orleans and that for Holiday Inn
Hotel & Suites Shin Osaka, Japan, which achieved
signing-to-open in just 60 days, with other conversions including
Shanghai Nanjing Road and The Hague in the
Netherlands.
Our
established extended stay portfolio of Staybridge Suites and Candlewood Suites saw strength and
resilience of demand, including nearly 60% occupancy for the year,
an increase in market share and high customer satisfaction scores.
With 25 signings and 44 openings in the year, the portfolio is now
669 hotels. Over 80 Candlewood hotels have so far committed to new
designs over the next two years, and over 100 at Staybridge, which
is also continuing its international expansion with further
properties in Mexico and Dubai and a first in Bangkok.
For
Crowne Plaza, 19 openings
took the total estate to 429, including Adelaide, Sydney Darling
Harbour and 10 properties in Greater China, with Shanghai Hongqiao
marking the 100th for the brand in the region. The brand benefitted
from a number of further conversions including those in Budapest,
Bangkok and Shenzhen Futian; with 27 signings in total, its global
pipeline increased to 89.
Expanding a powerful Luxury & Lifestyle offer
Since
2015, we have added Kimpton Hotels & Restaurants, Regent Hotels
& Resorts and Six Senses Hotels Resorts Spas to our Luxury
& Lifestyle offer, alongside accelerating the international
expansion of our InterContinental Hotels & Resorts and Hotel
Indigo brands. Across these five brands which capture uniquely
different stay occasions, we opened 32 hotels in 2020 to reach a
portfolio of 431 in over 70 countries. There were 56 hotels signed
into the pipeline, with conversions being ~30% of these and
representing an ongoing opportunity across our Luxury &
Lifestyle offer.
We
continue to reinforce the position of InterContinental as the largest global
luxury hotel brand. It is now present in over 60 countries with
more than 200 hotels. Notable recent openings included those at
Dongguan and Chongqing in Greater China, while the InterContinental
Rome conversion marks the return of the brand to Italy and Rabat
our re-entry into Morocco. Two other key conversions were the
prestigious Imperial Mae Ping Hotel in Chiang Mai and Fiji’s
Grand Pacific Hotel in Suva, one of the most famous hotels in the
Pacific. The brand’s pipeline stands at 69
properties.
In
2020, we added seven new signings to our world-renowned
Six Senses brand, including
Belize, Brazil, Italy, Japan and Saudi Arabia, increasing the
global pipeline to 31, which will significantly grow the current
estate of 16. Four signings
have been added to Regent
since acquisition, taking the pipeline to six properties. The
conversion of the Regent Shanghai Pudong marked the opening of our
first property since buying the brand and showcases new hallmarks
that position Regent in the top tier of luxury. Renovation is
progressing to rebrand the InterContinental Hong Kong back to
Regent; Regent Phu Quoc, Vietnam, will open later this year,
increasing the estate to eight; and recent signings will see the
brand enter the Middle East, including Jeddah, Saudi
Arabia.
Kimpton opened another 16 hotels in the year, taking the
estate to 73. Major openings included Miami Palomar South Beach,
Maa-Lai Bangkok, the first in South East Asia, and Shinjuku Tokyo,
the first in Japan. The brand’s global pipeline now stands at
32, with the signing of Kimpton Shanghai New Bund a key step to
developing Kimpton in Greater China. The brand is also developing
strongly in key resort destinations, signing further properties in
Mallorca and Mexico.
Good
momentum for Hotel Indigo
continues, after a record level of signings in 2019. The brand now
has 125 open hotels and a pipeline of 104. Openings included five
hotels in the US, leading locations in Dubai Downtown and in Bath,
UK, a conversion property in Italy and brand debuts in Japan and
Cyprus. Recent signings include a brand entry in Australia and a
resort in the Galapagos.
Continued progress across our other brands
Our
HUALUXE Hotels & Resorts estate increased to
12 hotels, with developments including a rebranding to HUALUXE
Shanghai Twelve at Hengshan, opening the historic HUALUXE
Xi’an Tanghua, and signing a conversion for Shanghai
Changfeng Park.
The
first EVEN Hotel outside of
the Americas opened in Greater China at Nanjing Yangtze River, with
our wellness-focused offering now in 16 hotels, and with over 30
more in the pipeline globally.
Continued focus on quality and consistency of our
estate
Our
ambition remains to deliver an industry-leading level of net rooms
growth, while at the same time protecting our longer-term growth
prospects by ensuring the health of our brands and consistency of
the guest experience and quality of our hotel estate. Between 2016
and 2019, our gross opening pace accelerated from just over 5% to
almost 8%, while our focus on brand health and quality saw the exit
of 2.1-2.3% of the system each year. As a result, ahead of the most
recent year which has been impacted by Covid-19, we achieved an
improvement in net rooms growth from 3.1% in 2016 to 5.6% in
2019.
In
recent years, exits have included a higher proportion of Holiday
Inn and Crowne Plaza hotels in the Americas, reflecting our
continued focus on increasing the average quality of those brands.
This has occurred in conjunction with initiatives to drive physical
and service consistency, such as the Holiday Inn Open Lobby concept
and the Crowne Plaza Accelerate programme.
Holiday
Inn and Crowne Plaza are both powerful global brands with
significant further growth prospects, each with sizeable pipelines
representing around 20% of their current estates. To support their
further growth opportunities, we will continue to focus on ensuring
we deliver against guest expectations for quality and consistency,
which have increased and become even more important post Covid-19.
Across the two brands, the total global estate is 1,677 hotels with
a further 351 in the pipeline. Currently 10-15% of this total
estate, around 200 hotels, are being reviewed, focused on those
that are below where we would like them to be in areas such as
customer satisfaction and property condition. These hotels
generated 2020 fee income of approximately $20m. We will be working
closely with the owners of these hotels to help them raise their
quality levels, including the potential to implement service or
property improvement plans. We will continue to provide further
updates as these initiatives develop, and on our overarching growth
plans for these key brands.
Through
this continuous focus on brand health and quality, and by working
with our owners to help them deliver True Hospitality for Good, we
are confident this will support IHG being well-placed for industry
recovery and will ensure long-term, sustainable
growth.
2.
Customer
centric in all we do
Delivering
True Hospitality means creating seamless and tailored guest
experiences that generate increased demand, and ensuring that as we
deliver those things we do so with efficient operations and high
returns in mind for our owners.
Despite
the operational challenges of Covid-19, our Guest Satisfaction
Index was net positive throughout the year, outperforming
competitors. Actions in 2020 included:
Ensuring cleanliness, health and safety: Reflecting the
heightened focus, we launched the IHG Clean Promise, using new
science-led protocols and redefined service procedures, in
partnership with industry-leading experts. Our IHG Way of Clean
programme was enhanced to include new training and equipment,
increased guest communication and verification processes to ensure
our standards are adhered to. Since launch, we have seen an over
30% uplift in the number of positive third-party social media guest
reviews on cleanliness, and delivered improvements in customer
satisfaction scores.
Enhanced management information for owners: Using machine
learning technology, we have optimised our Revenue Management for
Hire (RMH) services to help owners protect pricing and returns
during periods of volatile demand. Price management solutions are
also increasingly automated to simplify and reduce the number of
rates. Real-time scorecard metrics, such as analysis of guest
satisfaction measures, RevPAR, financial and operational
performance, are now presented live on our Owner Engagement
Portals, which will continually evolve to provide our global owner
community with specific recommendations for action.
Lowered owner costs: While changes to safety and cleanliness
protocols have increased costs, we have worked closely with owners
to reduce costs elsewhere to offset these. This has included the
appropriate temporary relaxation of certain brand standards, which
have lowered overall costs per occupied room. Our actions on
procurement services are also driving substantial benefits for
owners. Our centralised hotel goods and services procurement
capabilities have significantly expanded. Into 2021, we will be
extending our reach across other categories of products and
services that our owners buy, to drive additional savings for
them.
Solution developments for corporate customers: Our
award-winning Business Edge platform, which supports small and
midsize enterprise (SME) customers, goes from strength to strength.
It continued to grow in 2020 to almost 40,000 accounts, leading the
market with its technology platform and innovative content and
partnerships.
Our
Meet with Confidence programme has incorporated new protocols from
our IHG Clean Promise, as well as extending flexibility policies
and enhancing other standards. With technology partners we are now
piloting our hybrid meetings offer: over 90% of meetings currently
booked for under 50 participants, and IHG’s meeting spaces
are weighted towards those used for small and medium sized events,
which can be augmented through a strong virtual and hybrid
solution.
Enhanced loyalty offer: IHG Rewards members traditionally
account for around half of guest stays. During 2020, prioritisation
of our loyalty marketing supported demand from our most loyal
members, who proved the most resilient during the toughest
Covid-impacted periods. Dynamic pricing for Reward Nights has
rolled out globally, with rates now set daily, enabling more than
80% of hotels to reduce their points pricing to deliver around 25%
more value for guests outside of peak times. This has led to a 30%
increase in Reward Night redemption since launch. IHG Rewards was
also recognised in 2020 as Best Hotel Rewards Program and Best for
Families by NerdWallet for good value, ease to earn and our
response to Covid-19.
3.
Create
digital advantage
Our
digital-first approach enables seamless guest experiences across
the entirety of the guest journey, drives direct bookings, creates
efficiencies, and delivers the right data, insights, technology and
platforms to drive performance for owners. Our focus
includes:
The next phase of our GRS - attribute pricing: This key
development for IHG’s Guest Reservation System (GRS) within
our cloud-based IHG Concerto platform is expected to be live across
the estate by the end of this year, enabling tailoring of stays and
selection of add-ons. Initial pilots in 2020 were conducted in each
region, demonstrating to owners the ability to generate maximum
value from their hotel’s unique attributes.
Defining the digital journey and experience for guests:
Leveraging our investment in IHG Concerto on behalf of our owners,
we have been able to remotely and rapidly deploy further
technological developments to support a safe and secure guest
experience and reduce unnecessary contact. Digital check-in has
been fully implemented in over 1,000 properties, receiving strong
guest satisfaction scores, and with roll out to 4,500 hotels
expected by the end of 2021, while Digital check-out is already
live in 4,000 hotels.
Increasing our data-driven capabilities: We have invested to
enable highly personal and targeted promotions, informed by
consumer analysis of those searching and travelling, and where we
can most effectively influence incremental behaviour. Data-driven
analysis is also being applied to guest feedback, ensuring it
informs decision making and is quickly addressed to drive
improvements in satisfaction measures.
Tailoring digital reach and partnerships: We launched our
first flagship store on the leading Chinese OTA platform, as part
of IHG’s partnership with Ctrip, part of Trip.com Group. We
also debuted our loyalty partnership with Mr & Mrs Smith, the
world-renowned travel club and boutique hotel specialists, giving
IHG Rewards members an even wider selection of Luxury &
Lifestyle hotels at which to earn and redeem points.
Enterprise contribution and growth of our digital channels:
Enterprise contribution is an indicator of the value IHG systems
bring to our owners, including the success of our technology
platforms, marketing, sales and loyalty distribution channels.
Enterprise contribution has been growing each year and reached over
75% in 2019, though in 2020 it modestly reduced given the rise in
guests calling hotels directly to understand Covid precautions or
checking-in without prior reservation. Our digital channels are
amongst our largest components of enterprise contribution, with our
mobile app seeing the fastest recovery amongst channel segments; we
expect this to be a continued driver of future growth.
4.
Care
for our people, communities and planet
We
operate within a culture that respects and invests in our people
and embraces the opportunity to contribute positively to local
communities, and act responsibly and sustainably in the world
around us. This priority has become a central pillar to delivering
our strategy, and to evolving our purpose from True Hospitality for
everyone to True Hospitality for Good. To deliver this, we have
announced wide-ranging commitments through our new 2030 Responsible
Business Plan, Journey to Tomorrow, including:
Championing diversity, inclusion and equality: We’re
committed to driving gender balance and a doubling of
under-represented groups across our leadership; cultivating an
inclusive culture for our colleagues, owners and suppliers;
supporting all colleagues to prioritise their wellbeing; and
advancing human rights.
Long-term support for communities: We want to improve the
lives of 30 million people in our communities around the world. We
aim to do this by driving economic and social change through skills
training and innovation; supporting our communities when natural
disasters strike; and collaborating to aid those facing food
poverty.
Ambitious environmental targets: We aspire to grow in a way
that protects the world around us. This approach includes targets
to reduce absolute carbon emissions from our owned, leased and
managed hotels by 15% by 2030, and to reduce carbon emissions per
square metre from our franchised hotels by 46% by 2030, both
against a 2018 base year. For new build hotels, our target is to
operate these at very low/zero carbon emissions. We will also
pioneer the transformation to a minimal waste hospitality industry,
eliminating single use items or moving to reusable or recyclable
alternatives across the guest stay, and minimising water use and
food waste through a “prevent, donate, divert” plan.
Nearer term, we are on track to deliver our pledge to remove
single-use miniature bathroom amenities from our hotels by the end
of 2021. Our 2030 plan also includes initiatives targeting water
conservation and helping to secure water access in those areas at
greatest risk.
We are
making good progress in adopting the recommendations of the
Taskforce on Climate-related Financial Disclosures (TCFD). We are
also driving innovation, peer learning and collaboration through:
our work as a founding member of the Sustainable Hospitality
Alliance; partnering with the World Travel and Tourism Council and
the American Hotel & Lodging Association; and in representation
at important events, such as G20 Tourism, which brought private and
public sector leaders together to discuss how the industry can
protect jobs and support the broader travel and tourism sector.
Early in 2021, we also launched our new IHG Owners Association
Environmental Sustainability Committee to ensure close
collaboration with our hotels and to find opportunities to partner
on key initiatives.
Regional performance
Americas
RevPAR
decreased 48.5% (Q4: down 49.5%), driven by occupancy reducing to
42.3% (Q4: 41.7%). US RevPAR was down 46.9%, with our performance
ahead of the industry. The US franchised estate, which benefits
from a weighting towards domestic demand-driven midscale and upper
midscale hotels, with a lower reliance on large group business and
higher distribution in non-urban markets, declined by 44%. This
compares to a 70% decline for the US managed estate, which is
weighted to luxury and upscale hotels in urban markets. On a
segment basis, the RevPAR decline was most acute in luxury (down
71%) and upper upscale (down 66%), whereas upper midscale, which
represents ~70% of our rooms in the US, declined by
44%.
Reported
revenue1
of $512m was down 51% (decreased 51% at CER and
underlying2) and reported
operating profit1 of $296m decreased
58% (down 57% at CER and underlying2).
Underlying
fee business revenue2 declined by 46% to
$457m, whilst underlying fee business operating profit2 declined by 51% to
$323m.
The decline in demand at our managed hotels led to
$8m lower recognition of incentive management fees; there was also
an increase in expected credit losses. There was offset to these
from the progress made in reducing fee business costs, as well as
the benefit of a $4m litigation settlement at one hotel, and the
recognition of an $8m payroll tax credit.
Reported
owned, leased and managed lease revenue1 was down 71% to
$55m, with a reported operating loss1 of $27m compared to
$37m profit in the prior year. The mitigation of renovation-related
losses by business interruption insurance at one hotel was more
than offset by extended periods of closure and low occupancy across
the entire estate, reflecting the greater dependency on
international travellers in urban and resort
locations.
There
were 16.7k rooms (167 hotels) opened in the year. Of the 27.4k
rooms (176 hotels) removed, 16.7k (102 hotels) related to the SVC
portfolio termination. The net system size reduction was (2.0)% to
514.0k rooms (4,298 hotels); excluding the SVC impact, there was
net system growth of 1.1%. 79 hotels or 2% of the Americas estate
remained temporarily closed at the end of the year. We signed 14.0k
rooms (137 hotels) in the region; the pipeline stands at 102.8k
rooms (986 hotels), which represents 20% of the current system size
in the region.
EMEAA
RevPAR
decreased 64.8% (Q4: down 70.5%), driven by occupancy reducing to
32% (Q4: 29%). In the UK, RevPAR was down 65%, with the fourth
quarter decline of 74% particularly impacted by government-mandated
hotel closures and travel restrictions. Continental Europe RevPAR
was down 74%. Elsewhere, the Middle East was down 53%, with
Australia down 56%, South East Asia and Korea down 61% and Japan
down 62%.
Reported
revenue1
of $221m decreased 69% (down 70% at CER) and the reported operating
loss1 was
$50m, a reduction of $267m on the prior year. Results included the
benefit of a final $1m from a previously disclosed individually
significant liquidated damages settlement (FY 2019:
$11m).
On an
underlying basis, revenue2 decreased 69% to
$218m and the operating loss2 was $54m compared to
$206m profit in the prior year. Underlying fee business
revenue2
was down 67% to $106m, with an operating loss2 of $19m compared to
a $192m profit in the prior year. The adverse impact from hotel
closures and subdued demand across the estate resulted in $76m
lower incentive management fees and there was also an increase in
expected credit losses. These impacts were partially offset by cost
reduction measures.
Reported
owned, leased and managed lease revenue1 was down 70% to
$114m, with operating profit1 decreasing $47m to
an operating loss of $32m. This portfolio consists of 12 properties
in the UK and a further five elsewhere in the region, most of which
were closed for a large proportion of the year. The operating loss
includes the significant cost reduction measures undertaken across
the estate, together with rent reductions received; there was also
the benefit of a $3m gain from the sale of the leased Holiday Inn
Melbourne Airport for proceeds of $2m as previously
disclosed.
There
were 11.3k rooms (61 hotels) opened and 6.8k rooms (38 hotels)
removed in the year (including 2.1k rooms relating to a previously
flagged portfolio of hotels in Germany), resulting in net system
size growth of 2.0% to 227.8k rooms (1,149) hotels. 215 hotels or
19% of the EMEAA estate remained temporarily closed at the end of
the year. We signed 13.9k rooms (82 hotels) in the region; the
pipeline stands at 76.1k rooms (389 hotels), which represents 33%
of the current system size in the region.
Greater China
RevPAR
decreased 40.5% (Q4: down 18.2%), outperforming the industry, with
occupancy reducing to 42% (Q4: 57%). In Mainland China, RevPAR was
down 37%. Tier 1 cities were down 48%, impacted by their greater
weighting toward international travel and group events and meetings
demand. Tier 2-4 cities, which are weighted more towards domestic
travel and leisure demand, performed relatively better with a
decline of 31%.
RevPAR
in Hong Kong SAR was down 78%, impacted by the reliance on inbound
travel and the uncertainty posed by the political disputes, whilst
Macau SAR RevPAR was down 76%.
Reported
revenue1
of $77m decreased by 43% (decreased 44% at CER) and the reported
operating profit1 was $35m, down 52%
on the prior year.
On an
underlying basis, revenue2 decreased by 44% to
$77m, with an operating profit2 of $35m compared to
$73m in the prior year. The adverse impact from the trading
environment, including lower recognition of incentive management
fees (down $32m versus the prior year), were in part offset by cost
reductions across the region.
There
were 11.4k rooms (57 hotels) opened and 2.7k rooms (10 hotels)
removed in the year, resulting in net system size growth of 6.4% to
144.2k rooms (517 hotels). We signed 28.2k rooms (141 hotels) in
the region, with a year-on-year increase achieved in the second
half of the year. The pipeline stands at 93.2k rooms (440 hotels),
which represents 65% of the current system size in the
region.
Cash generation, liquidity and financing
Cash flow
IHG
took rapid and decisive actions to preserve cash from the start of
the pandemic, such that:
●
Free cash flow3 was
an inflow of $29m, down $480m on 2019, driven by the adverse impact
from hotel closures and subdued demand on trading. These were
partially offset by a working capital inflow, reflecting the
proactive management of balances and measures to drive timely
billing and collections from our owners. Despite the most severe
period of impact on trading, free cash flow was broadly neutral in
Q2, improving to an inflow in the second half. Invoices paid by our
owners within 90 days of due date has been improving since May 2020
and is now over 90% in the Americas; the number of hotels targeted
for payment plans has similarly reduced, with a large number of
plans already paid in full.
●
Exceptional cash costs of $87m,
including $45m relating to reorganisation costs ($15m of which was
incurred by the System Fund).
●
Net capital
expenditure3
was $67m (2019: $211m), with $148m gross (2019: $265m), thereby
achieving the targeted $100m reduction initially set out in March
2020. Capex comprised: $107m maintenance capex and key money; $6m
gross recyclable investments; and $35m System Fund capital
investments; offset by $23m net disposal proceeds and distributions
from associates and joint ventures, and $58m System Fund
depreciation and amortisation. Our capex guidance is unchanged at
around $150m net per annum and up to $350m gross into the medium
term.
●
Net debt of
$2,529m, down $136m on the 2019 close; this included a reduction in
lease obligations ($71m from exceptional derecognition and $90m
from an exceptional lease termination), partly offset by $101m of
adverse foreign exchange and other adjustments.
Liquidity and financing
IHG has
taken steps to strengthen liquidity as part of maintaining a
conservative balance sheet and leverage approach,
including:
●
Amended our
existing $1.35bn syndicated and bilateral revolving credit
facilities (RCF) to include a waiver of existing covenants up to
and including 31 December 2021. The covenants for 30 June 2022 and
31 December 2022 have been relaxed on a theoretical severe downside
scenario. During the period of waivers and relaxations, a $400m
minimum liquidity covenant (defined as unrestricted cash and
undrawn facilities with a remaining term of 6 months) has been
introduced.
●
Extended the
maturity of the RCF for 18 months to September 2023.
●
Issued £600m
of commercial paper under the UK Government’s Covid Corporate
Financing Facility (CCFF), maturing on 16 March 2021, when it will
be repaid.
●
To optimise our
staggered bond maturity profile, in October 2020 we issued
€500m 1.625% bonds and £400m 3.375% bonds maturing in
2024 and 2028 respectively; we concurrently repaid early £227m
of our £400m 3.875% bonds maturing in November 2022, thereby
resulting in net proceeds raised of $0.8bn.
●
Our next bond
maturity is the £173m that remains to be repaid in November
2022, with no further bond maturities until Q4 2024.
These
steps, together with our cost actions and cash preservation, have
increased our total available liquidity at 31 December 2020 to
$2,925m, comprising $1,575m of net cash balances6 and the undrawn RCF
of $1,350m. On a pro forma basis for the repayment of the UK
Government CCFF maturing in March 2021, total available liquidity
would be $2.1bn.
Shareholder returns
On 20
March 2020, IHG’s Board withdrew its recommendation of a
final dividend in respect of 2019 of 85.9¢ per share, a
payment of which would have had a cash outflow of ~$150m in the
first half of 2020.
A final
dividend in respect of 2020 is not proposed and there was no
interim dividend for the year. The Board will consider future
dividends once visibility of the pace and scale of market recovery
has improved.
Other financial measures
Cost actions
●
In light of the
emerging Covid-19 global pandemic in March 2020, immediate measures
were taken to reduce costs to protect profitability through
reducing salary and incentives, including substantial decreases for
Board and Executive Committee members, and challenging all areas of
discretionary spend.
●
The targeted $150m
of Fee Business cost reductions was achieved over the balance of
the 2020 financial year.
●
Similar actions
were taken across the System Fund, in response to expected lower
assessment fee receipts, particularly through reducing marketing
spend.
●
Cost containment
action taken across our owned, leased and managed lease hotels,
contributed to $293m of cost reduction during the year for the
estate.
●
Looking ahead,
plans are in place to achieve ~$75m of cost savings (versus the
2019 cost base) to be sustainable in 2021, through ongoing control
of discretionary spend and a re-balancing of resources and actions
to drive further productivity, whilst continuing to invest
appropriately in growth initiatives.
Net central costs
Central
revenues of $182m were $3m lower, driven by temporary technology
fee discounts being largely offset by the increased revenues from
the changes to System Fund recognition. There were lower central
overheads from our measures to reduce our Fee Business costs. As a
result, the Group’s central operating loss before exceptional
items was $62m, $63m lower year-on-year.
The
changes to System Fund recognition impacted a portion of co-brand
credit card revenue and the financial results of the Ambassador
programme (the InterContinental Hotels & Resorts paid-for
loyalty programme). The net effect increased 2020 revenue and
operating profit from reportable segments by $20m and $21m
respectively. The changes were effective from 1 January 2020, with
amounts recognised in prior years unchanged. As previously
announced, if the changes had been effective in 2019, the increases
would have been $18m and $22m respectively in that year. See note 4
to the Group Financial Statements for further
information.
Fee margin
2020
fee margin7 was 34.1%, a
reduction from 54.1% in 2019, impacted by the adverse trading
conditions which were partially offset by cost reduction
measures.
System Fund
System
Fund revenues and costs are recognised on a gross basis with the
in-year surplus or deficit recorded in the Group income statement,
but excluded from results from reportable segments, underlying
results and adjusted EPS, as the Fund is operated for the benefit
of the hotels in the IHG System and is not managed to generate a
profit or loss for IHG over the longer term.
In 2020
we recorded a System Fund income statement deficit of $102m (2019:
deficit of $49m), largely due to lower assessment fees reflecting
the level of reduction in hotel revenues and fee reliefs given,
partly offset by actions targeted to lower costs such as through a
reduction in marketing spend. System Fund expenses included $24m of
expected credit losses, $20m reorganisation costs and $41m
impairment principally relating to the US corporate
headquarters.
Interest
Net
financial expenses were $140m (2019: $115m). Adjusted interest
expense3,
which excludes exceptional finance expenses of $14m and adds back
interest relating to the System Fund of $4m (2019: $18m), was $130m
(2019: $133m). The lower interest payable to the System Fund
largely resulted from lower balances and interest rates in 2020.
This was broadly offset by increased interest expense on the
Group’s higher gross debt levels during the
year.
Tax
The
effective rate5 for 2020 was 38%
(2019: 24%), which included the recognition of a tax credit of $27m
on one-off items, predominantly in connection with adjustments to
deferred taxes following an internal group restructuring, UK law
change and prior year items. Excluding these one-off items, the
effective tax rate would have been 69%, elevated compared to prior
years due to the distortive impact of unrelieved foreign taxes, the
geographic profit mix and other non-tax deductible expenses against
the low profit base. The Group also suffered significant US minimum
taxes as part of the BEAT regulations, and could not recognise the
benefit for tax purposes of losses arising in certain territories
in the year. The effective tax rate is expected to be similarly
elevated in 2021, although forecasting in this area remains
challenging given the uncertainties in the near-term outlook. A
return to the previous mid-20s percentage point range would occur
on a recovery to prior levels and mix of profits, and assuming no
change to tax legislation and rates in each tax
jurisdiction.
Exceptional items
Exceptional
items predominantly comprise impairment charges, with Covid-19
considered as a trigger for impairment testing of all non-current
assets. Cash flow projections used for impairment testing were
based on the latest financial forecasts and assume that RevPAR
recovers to 2019 levels over a five-year period from
2021.
Operating
exceptionals total a net charge of $270m ($255m net charge in the
first half of the year), driven by the following
items:
●
impairment of
financial assets, comprising trade deposits and loans ($48m) which
are now not expected to be recoverable, together with an impairment
of contract assets ($53m);
●
impairment of other
non-current assets, including property, plant and equipment
principally related to owned and leased hotels ($90m), the
recoverable amounts of acquired management agreements ($48m) and
the net impact on our investment in associates ($19m);
●
reorganisation
costs, reflecting the reassessment of near-term priorities and the
resources needed to support reduced levels of demand
($27m);
●
a gain on lease
termination relating to one leased hotel that was part of the SVC
portfolio ($30m);
●
a $22m gain arising
from the net effect of the derecognition of right-of-use assets
($49m) and lease liabilities ($71m), resulting from a change in
accounting estimate in relation to the UK leased portfolio and two
German leases whereby the leases will now be accounted for as fully
variable, together with a provision for onerous contractual
expenditure ($10m).
In
addition, there was $14m of exceptional financial expense relating
to the premium on the partial repayment of the 2022 bonds, and a
$21m exceptional fair value gain on contingent purchase
consideration has been recognised, arising from a reduction in
expected future rents payable on the UK leased
portfolio.
Foreign exchange
The
impact of the movement in average USD exchange rates for 2020
against a number of currencies (particularly Sterling, Euro and
Renminbi) netted to a $1m favourable impact on 2020 operating
profit from reportable segments4.
If the
average exchange rate during January 2021 had existed throughout
2020, the 2020 operating profit from reportable segments would have
been $2m lower.
A
breakdown of constant currency vs. actual currency RevPAR by region
is set out in Appendix 2.
Notes:
1 Comprises the Group’s fee business and owned, leased
and managed lease hotels from reportable segments. This excludes
exceptional items, System Fund results and hotel cost
reimbursements.
2 Results from reportable segments excluding significant
liquidated damages and current year acquisitions and disposals at
constant 2020 exchange rates (CER). The ‘Use of Non-GAAP
measures’ section in the Business Review contains definitions
and reconciliations of these measures to the most directly
comparable line items within the Group Financial
Statements.
3 Definitions for Non-GAAP measures, including free cash
flow, net capital expenditure, adjusted interest and net debt, can
be found the ‘Use of Non-GAAP measures’ section in the
Business Review, along with reconciliations of these measures to
the most directly comparable line items within the Group Financial
Statements.
4 Based on monthly average exchange rates each
year.
5 Excludes exceptional items and System Fund
results.
6 Cash and cash equivalents, net of overdrafts and
restricted cash.
7 Excludes owned, leased and managed lease hotels,
significant liquidated damages and the results of the Group’s
captive insurance company.
Appendix 1: RevPAR movement summary
|
Full Year 2020
|
Q4 2020
|
|
RevPAR
|
ADR
|
Occupancy
|
RevPAR
|
ADR
|
Occupancy
|
Group
|
(52.5)%
|
(17.0)%
|
(29.5)%pts
|
(53.2)%
|
(22.4)%
|
(26.5)%pts
|
Americas
|
(48.5)%
|
(16.2)%
|
(26.5)%pts
|
(49.5)%
|
(21.5)%
|
(23.1)%pts
|
EMEAA
|
(64.8)%
|
(18.4)%
|
(41.9)%pts
|
(70.5)%
|
(24.4)%
|
(44.9)%pts
|
G.
China
|
(40.5)%
|
(13.3)%
|
(19.2)%pts
|
(18.2)%
|
(8.6)%
|
(6.7)%pts
|
Appendix 2: RevPAR movement at constant exchange rates (CER) vs.
actual exchange rates (AER)
|
Full Year 2020
|
Q4 2020
|
|
CER
|
AER
|
Difference
|
CER
|
AER
|
Difference
|
Group
|
(52.5)%
|
(52.5)%
|
0.0%pts
|
(53.2)%
|
(52.6)%
|
0.6%pts
|
Americas
|
(48.5)%
|
(48.7)%
|
(0.2)%pts
|
(49.5)%
|
(49.6)%
|
(0.1)%pts
|
EMEAA
|
(64.8)%
|
(64.7)%
|
0.1%pts
|
(70.5)%
|
(70.0)%
|
0.5%pts
|
G.
China
|
(40.5)%
|
(39.7)%
|
0.8%pts
|
(18.2)%
|
(13.2)%
|
5.0%pts
|
Appendix 3: monthly RevPAR
|
Jan
|
Feb
|
Mar
|
Apr
|
May
|
Jun
|
Jul
|
Aug
|
Sep
|
Oct
|
Nov
|
Dec
|
Group
|
(1.5)%
|
(10.8)%
|
(55.1)%
|
(81.9)%
|
(75.6)%
|
(67.4)%
|
(58.1)%
|
(51.0)%
|
(50.9)%
|
(51.9)%
|
(55.3)%
|
(52.4)%
|
Americas
|
0.2%
|
(0.9)%
|
(49.0)%
|
(80.1)%
|
(72.5)%
|
(62.0)%
|
(54.0)%
|
(48.6)%
|
(46.4)%
|
(48.0)%
|
(51.4)%
|
(49.5)%
|
EMEAA
|
2.1%
|
(11.3)%
|
(62.7)%
|
(89.3)%
|
(88.5)%
|
(85.3)%
|
(74.7)%
|
(66.3)%
|
(69.9)%
|
(70.5)%
|
(72.4)%
|
(68.6)%
|
G.
China
|
(24.6)%
|
(89.3)%
|
(81.4)%
|
(71.2)%
|
(57.1)%
|
(48.6)%
|
(35.9)%
|
(20.2)%
|
(11.0)%
|
(16.9)%
|
(22.5)%
|
(15.1)%
|
Appendix 4: Full Year system and pipeline summary
(rooms)
|
System
|
Pipeline
|
|
Openings
|
Removals
|
Net
|
Total
|
YoY%
|
Signings
|
Total
|
Group
|
39,392
|
(36,919)
|
2,473
|
886,036
|
0.3%
|
56,146
|
272,057
|
Americas
|
16,746
|
(27,381)
|
(10,635)
|
514,012
|
(2.0)%
|
14,039
|
102,757
|
EMEAA
|
11,288
|
(6,809)
|
4,479
|
227,849
|
2.0%
|
13,903
|
76,120
|
G.
China
|
11,358
|
(2,729)
|
8,629
|
144,175
|
6.4%
|
28,204
|
93,180
|
Appendix 5: Full Year financial headlines
|
GROUP
|
REPORTABLE SEGMENTS
|
|
Total
|
Americas
|
EMEAA
|
G. China
|
Central
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
2020
|
2019
|
Revenue
($m)
|
|
|
|
|
|
|
|
|
|
|
Revenue from reportable segments
|
992
|
2,083
|
512
|
1,040
|
221
|
723
|
77
|
135
|
182
|
185
|
System
Fund
|
765
|
1,373
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Hotel
Cost Reimbursements
|
637
|
1,171
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Group Revenue
|
2,394
|
4,627
|
512
|
1,040
|
221
|
723
|
77
|
135
|
182
|
185
|
|
|
|
|
|
|
|
|
|
|
|
Operating Profit
($m)
|
|
|
|
|
|
|
|
|
|
|
Fee
Business excluding central overheads
|
340
|
938
|
323
|
663
|
(18)
|
202
|
35
|
73
|
-
|
-
|
Owned,
leased & managed lease
|
(59)
|
52
|
(27)
|
37
|
(32)
|
15
|
-
|
-
|
-
|
-
|
Central
|
(62)
|
(125)
|
-
|
-
|
-
|
-
|
-
|
-
|
(62)
|
(125)
|
Operating profit/(loss) from reportable segments
|
219
|
865
|
296
|
700
|
(50)
|
217
|
35
|
73
|
(62)
|
(125)
|
System
Fund result
|
(102)
|
(49)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Operating profit/(loss) before exceptionals
|
117
|
816
|
296
|
700
|
(50)
|
217
|
35
|
73
|
(62)
|
(125)
|
Operating
exceptional items
|
(270)
|
(186)
|
(118)
|
(62)
|
(128)
|
(109)
|
(5)
|
-
|
(19)
|
(15)
|
Operating (loss)/profit after exceptionals
|
(153)
|
630
|
178
|
638
|
(178)
|
108
|
30
|
73
|
(81)
|
(140)
|
Appendix 6: % change in operating profit before exceptional items
from reportable segments at AER and CER
|
Total*
|
Americas
|
EMEAA
|
G. China
|
Reported
|
AER
|
CER
|
AER
|
CER
|
AER
|
CER
|
AER
|
CER
|
Growth
/ (decline)
|
(75)%
|
(75)%
|
(58)%
|
(57)%
|
(123)%
|
(123)%
|
(52)%
|
(52)%
|
* After
central overheads
Appendix 7: Underlying % change in operating profit from reportable
segments
|
Total*
|
Americas
|
EMEAA
|
G. China
|
Growth
/ (decline)
|
(75)%
|
(57)%
|
(126)%
|
(52)%
|
* After
central overheads
Appendix 8: definitions
Definitions
for Non-GAAP measures can be found in the ‘Use of Non-GAAP
measures’ section in the Business Review, along with
reconciliations of these measures to the most directly comparable
line items within the Group Financial Statements.
Total gross revenue: total rooms revenue from franchised
hotels and total hotel revenue from managed, owned, leased and
managed lease hotels. Other than owned, leased and managed lease
hotels, it is not revenue attributable to IHG, as it is derived
mainly from hotels owned by third parties.
Reportable segments: Group results excluding System Fund
results, hotel cost reimbursements and exceptional
items.
Fee business revenue: revenue from reportable segments
excluding the results of the Group’s owned, leased and
managed lease hotels.
Fee margin: adjusted to exclude owned, leased and managed
lease hotels, significant liquidated damages, and the results of
the Group’s captive insurance company.
Significant liquidated damages: $1m in 2020 ($1m in EMEAA
fee business); $11m in 2019 ($11m in EMEAA fee
business).
Operating profit from reportable segments: comprises the
Group’s fee business and owned, leased and managed lease
hotels.
Underlying % change in operating profit from reportable
segments: at CER and excludes significant liquidated
damages, in-year acquisitions and current year
disposals.
RevPAR, ADR and occupancy: RevPAR (revenue per available
room), ADR (average daily rate) and occupancy are on a comparable
basis unless otherwise stated, based on comparability as at 31
December 2020 and hotels that have traded in all months in both
2020 and 2019. The principal exclusions in deriving these measures
are new openings, properties under major refurbishment and
removals. These measures include the adverse impact of hotels
temporarily closed as a result of Covid-19. Monthly RevPAR reflects
those hotels which have been designated as comparable at the end of
the respective quarterly period. RevPAR and ADR are on a CER basis
unless otherwise stated.
Total RevPAR: Revenue per available room including hotels
that have opened or exited in either 2019 or 2020. On a CER
basis.
AER: actual exchange rates used for each respective
period.
CER: constant exchange rates with 2020 exchange rates
applied to each comparable period in 2019. The USD:GBP exchange
rate for 2020 was 0.78 (2019: 0.78). The USD:EUR exchange rate for
2020 was 0.88 (2019: 0.89).
Guest Satisfaction Index (GSI): an IHG metric that uses
third party aggregated social review data to benchmark IHG guest
satisfaction performance against that of our
competitors.
Adjusted Interest: adds back interest relating to the System
Fund and excludes exceptional items.
Adjusted EPS: calculated using results from Reportable
Segments and Adjusted Interest, and excluding changes in fair value
of contingent consideration.
Free cash flow: Cash flow from operating activities
excluding payments of contingent purchase consideration, less
purchase of shares by employee share trusts, maintenance capital
expenditure and the principal element of lease
payments.
|
For further information, please contact:
Investor
Relations (Stuart Ford; Rakesh Patel; Kavita Tatla)
|
+44
(0)1895 512 176
|
+44
(0)7527 419 431
|
Media
Relations (Yasmin Diamond; Mark Debenham)
|
+44
(0)1895 512 097
|
+44
(0)7527 424 046
|
Presentation for analysts and shareholders:
A
conference call and webcast presented by Keith Barr, Chief
Executive Officer, and Paul Edgecliffe-Johnson, Chief Financial
Officer and Group Head of Strategy, will commence at 9:30am (London
time) on 23 February 2021 and can be accessed at www.ihgplc.com/en/investors/results-and-presentations
or directly on https://www.investis-live.com/ihg/601020452fb49a0a006e5b57/ndps
For
analysts and shareholders wishing to ask questions, please use the
dial-in details below which will have a Q&A
facility:
UK
local:
|
0203
936 2999
|
UK:
|
0800
640 6441
|
US:
|
+1 855
979 6654
|
All
other locations:
|
+44 203
936 2999
|
Passcode:
|
37 47
52
|
An
archived webcast of the presentation is expected to be available
later on the day of the results and will remain on it for the
foreseeable future, accessed at www.ihgplc.com/en/investors/results-and-presentations.
An audio replay will also be available for 7 days using the
following details:
UK:
|
0203
936 3001
|
All
other locations:
|
+44 203
936 3001
|
Passcode:
|
60 30
28
|
Website:
The
full release and supplementary data will be available on our
website from 7:00am (London time) on 23 February. The web address
is www.ihgplc.com/en/investors/results-and-presentations.
About IHG Hotels & Resorts:
IHG Hotels & Resorts [LON:IHG, NYSE:IHG (ADRs)] is a
global hospitality company, with a purpose to provide True
Hospitality for Good.
With a
family of 16 hotel brands and IHG Rewards,
one of the world’s largest hotel loyalty programmes, IHG has
nearly 6,000 open hotels in more than 100 countries, and a further
1,800 due to open over the next five years.
-
Luxury and lifestyle: Six Senses Hotels
Resorts Spas, Regent
Hotels & Resorts, InterContinental
Hotels & Resorts, Kimpton Hotels &
Restaurants, Hotel
Indigo
-
Premium: HUALUXE Hotels &
Resorts, Crowne
Plaza Hotels
& Resorts, EVEN
Hotels, voco
Hotels
-
Essentials: Holiday Inn Hotels
& Resorts, Holiday Inn
Express, avid
hotels
-
Suites: Atwell Suites,
Staybridge
Suites, Holiday Inn Club
Vacations, Candlewood
Suites
InterContinental
Hotels Group PLC is the Group’s holding company and is
incorporated in Great Britain and registered in England and Wales.
Approximately 350,000 people work across IHG’s hotels and
corporate offices globally.
Visit
us online for more about our hotels and
reservations and IHG Rewards.
For our latest news, visit our Newsroom and
follow us on LinkedIn,
Facebook and
Twitter.
Cautionary note regarding forward-looking statements:
This
announcement contains certain forward-looking statements as defined
under United States law (Section 21E of the Securities Exchange Act
of 1934) and otherwise. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements often use words such
as ‘anticipate’, ‘target’,
‘expect’, ‘estimate’, ‘intend’,
‘plan’, ‘goal’, ‘believe’ or
other words of similar meaning. These statements are based on
assumptions and assessments made by InterContinental Hotels Group
PLC’s management in light of their experience and their
perception of historical trends, current conditions, expected
future developments and other factors they believe to be
appropriate. By their nature, forward-looking statements are
inherently predictive, speculative and involve risk and
uncertainty. There are a number of factors that could cause actual
results and developments to differ materially from those expressed
in or implied by, such forward-looking statements. The main factors
that could affect the business and the financial results are
described in the ‘Risk Factors’ section in the current
InterContinental Hotels Group PLC’s Annual report and Form
20-F filed with the United States 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 2020.
GROUP PERFORMANCE
|
12
months ended 31 December
|
Group results
|
|
|
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
Revenuea
|
|
|
|
Americas
|
512
|
1,040
|
(50.8)
|
EMEAA
|
221
|
723
|
(69.4)
|
Greater
China
|
77
|
135
|
(43.0)
|
Central
|
182
|
185
|
(1.6)
|
|
____
|
____
|
____
|
Revenue
from reportable segments
|
992
|
2,083
|
(52.4)
|
|
|
|
|
System
Fund revenues
|
765
|
1,373
|
(44.3)
|
Reimbursement
of costs
|
637
|
1,171
|
(45.6)
|
|
____
|
____
|
____
|
Total
revenue
|
2,394
|
4,627
|
(48.3)
|
|
____
|
____
|
____
|
Operating profita
|
|
|
|
Americas
|
296
|
700
|
(57.7)
|
EMEAA
|
(50)
|
217
|
(123.0)
|
Greater
China
|
35
|
73
|
(52.1)
|
Central
|
(62)
|
(125)
|
(50.4)
|
|
____
|
____
|
____
|
Operating
profit from reportable segments
|
219
|
865
|
(74.7)
|
System
Fund result
|
(102)
|
(49)
|
108.2
|
|
____
|
____
|
____
|
Operating
profit before exceptional items
|
117
|
816
|
(85.7)
|
Operating
exceptional items
|
(270)
|
(186)
|
45.2
|
|
____
|
____
|
____
|
Operating
(loss)/profit
|
(153)
|
630
|
(124.3)
|
Net
financial expenses
|
(140)
|
(115)
|
21.7
|
Fair
value gains on contingent purchase consideration
|
13
|
27
|
(51.9)
|
|
____
|
____
|
____
|
(Loss)/profit
before tax
|
(280)
|
542
|
(151.7)
|
|
____
|
____
|
____
|
(Loss)/earnings
per ordinary share
|
|
|
|
|
Basic
|
(142.9)¢
|
210.4¢
|
(167.9)
|
|
Adjustedb
|
31.3¢
|
303.3¢
|
(89.7)
|
|
|
|
|
|
Average
US dollar to sterling exchange rate
|
$1: £0.78
|
$1:
£0.78
|
-
|
Group results
Covid-19
significantly impacted IHG’s financial performance in 2020,
resulting in large RevPAR declines in all regions, commencing in
the first quarter as governments across the globe successively
imposed significant and wide-reaching restrictions on mobility
between and within countries. The peak impact to the Group was
witnessed at the beginning of the second quarter at the point where
travel and movement restrictions were in place across much of the
US and Europe, whilst domestic travel restrictions were starting to
be lifted in China. Many hotels were temporarily closed during the
height of the first wave of the pandemic with ~15% of IHG’s
global estate shut by the end of April. Performance improved into
the third quarter, driven by increases in domestic travel in
countries that had lifted restrictions, including the US, where our
performance has been ahead of the industry. As Covid-19 cases rose
through the fourth quarter, particularly in the US and Europe,
varying levels of restrictions were reintroduced in several
countries, resulting in a slowing in the pace of RevPAR
recovery.
Overall,
Group comparable RevPARc declined 25% in the
first quarter, 75% in the second quarter, 53% in the third quarter,
53% in the fourth quarter and 53% in the full year, all compared to
the prior year.
During
the year ended 31 December 2020, total revenue decreased by $2,233m
(48.3%) to $2,394m, whilst revenue from reportable segments
decreased by $1,091m (52.4%) to $992m, due to the significant and
wide-ranging impacts of Covid-19 on both fee revenue and revenues
from owned, leased and managed lease hotels. Operating profit
decreased by $783m (124.3%) to a loss of $153m and profit before
tax decreased by $822m (151.7%) to a loss of $280m, driven
predominantly by materially lower fee revenues, significantly lower
revenues in the owned, leased and managed lease estate, coupled
with a $53m decrease in System Fund result to a $102m deficit, a
$84m net increase in operating exceptional charges, and an increase
in expected credit losses. These reductions in revenue and
increases in charges were partially offset by rapid and decisive
action by management to mitigate against the scale and speed of
trading disruption through limiting discretionary spend, reducing
salaries and incentives, and other targeted cost reductions. The
$270m operating exceptional charge was driven principally by: $274m
of impairment charges including $48m recognised in relation to
trade deposits and loans, $53m recognised in relation to contract
assets, $48m recognised in relation to acquired management
agreements and $90m recognised in relation to property, plant and
equipment, substantially all relating to owned and leased hotel
assets. Additionally, a $52m credit was recognised in related to
the derecognition or termination of certain leases. See Other
Financial Information for further information of
impairments.
Operating
profit from reportable segments decreased by $646m (74.7%) to
$219m.
Underlyingb
revenue and underlyingb operating profit
decreased by $1,071m (52.0%) and $635m (74.7%)
respectively.
IHG
System size increased by 0.3% to 886,036 rooms, increasing by 2.2%
excluding the impact of the exit of hotels associated with the SVC
portfolio, whilst underlying fee revenueb decreased by
45.0%.
Fee
marginb
decreased by 20.0 percentage points to 34.1%, impacted by the
significant reduction in fee revenue driven by Covid-19, partially
offset by targeted cost reductions.
Basic
earnings per ordinary share decreased by 167.9% to a loss per
ordinary share of (142.9)¢, whilst adjustedb earnings per
ordinary share decreased by 89.7% to 31.3¢.
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 within the Group Financial Statements.
c.
Comparable
RevPAR and occupancy include the adverse impact of hotels
temporarily closed as a result of Covid-19.
|
12 months ended 31 December
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
%
|
Total gross revenuea
|
$bn
|
|
$bn
|
|
changeb
|
Analysed by brand
|
|
|
|
|
|
InterContinental
|
2.0
|
|
5.1
|
|
(60.2)
|
Kimpton
|
0.4
|
|
1.4
|
|
(71.2)
|
HUALUXE
|
0.1
|
|
0.1
|
|
5.3
|
Crowne Plaza
|
1.8
|
|
4.3
|
|
(57.3)
|
Hotel Indigo
|
0.3
|
|
0.6
|
|
(56.9)
|
EVEN Hotels
|
0.0
|
|
0.1
|
|
(66.8)
|
Holiday Inn
|
2.8
|
|
6.3
|
|
(55.0)
|
Holiday Inn Express
|
4.2
|
|
7.3
|
|
(42.4)
|
Staybridge Suites
|
0.7
|
|
1.0
|
|
(32.8)
|
Candlewood Suites
|
0.7
|
|
0.9
|
|
(22.3)
|
Other
|
0.5
|
|
0.8
|
|
(41.1)
|
|
____
|
|
____
|
|
____
|
Total
|
13.5
|
|
27.9
|
|
(51.5)
|
|
____
|
|
____
|
|
____
|
|
|
|
|
|
|
Analysed by ownership type
|
|
|
|
|
|
Fee business
|
13.3
|
|
27.3
|
|
(51.1)
|
Owned, leased and managed lease
|
0.2
|
|
0.6
|
|
(70.6)
|
|
____
|
|
____
|
|
____
|
Total
|
13.5
|
|
27.9
|
|
(51.5)
|
|
____
|
|
____
|
|
____
|
Total gross revenue in IHG’s System decreased 51.5% (51.4%
decrease at constant currency) to $13.5bn, due to the significant
RevPAR decline of 52.5% driven by the global impact of
Covid-19.
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.
b.
Year-on-year percentage movement calculated from
source figures, to provide better illustration of relative impact
of Covid-19 on brands and on fee business and owned, leased and
managed lease hotels.
|
|
Hotels
|
Rooms
|
Global hotel and room count
|
|
Change
|
|
Change
|
at 31 December
|
2020
|
over 2019
|
2020
|
over 2019
|
|
|
|
|
|
|
Analysed by brand
|
|
|
|
|
|
Six Senses
|
16
|
(2)
|
1,129
|
(319)
|
|
Regent
|
7
|
1
|
2,190
|
187
|
|
InterContinental
|
205
|
(7)
|
69,941
|
(1,040)
|
|
Kimpton
|
73
|
7
|
13,085
|
39
|
|
HUALUXE
|
12
|
3
|
3,433
|
723
|
|
Crowne Plaza
|
429
|
(2)
|
118,879
|
(1,703)
|
|
Hotel Indigo
|
125
|
7
|
15,604
|
1,030
|
|
EVEN Hotels
|
16
|
3
|
2,410
|
461
|
|
voco
|
18
|
6
|
5,077
|
784
|
|
Holiday Inn1
|
1,276
|
(8)
|
236,554
|
(3,340)
|
|
Holiday Inn Express
|
2,966
|
91
|
309,487
|
10,253
|
|
avid hotels
|
24
|
17
|
2,156
|
1,521
|
|
Staybridge Suites
|
303
|
3
|
32,895
|
262
|
|
Candlewood Suites
|
366
|
(44)
|
32,435
|
(5,897)
|
|
Other2
|
128
|
(14)
|
40,761
|
(488)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
5,964
|
61
|
886,036
|
2,473
|
|
|
____
|
____
|
______
|
_____
|
Analysed by ownership type
|
|
|
|
|
|
Franchised
|
5,005
|
135
|
627,348
|
12,374
|
|
Managed
|
936
|
(71)
|
253,288
|
(8,965)
|
|
Owned, leased and managed lease
|
23
|
(3)
|
5,400
|
(936)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
|
5,964
|
61
|
886,036
|
2,473
|
|
|
____
|
____
|
______
|
_____
|
|
|
|
|
|
|
1.
Includes
47 Holiday Inn Resort® properties (11,446 rooms) and 28
Holiday Inn Club Vacations® properties (8,679 rooms), (2019:
46 Holiday Inn Resort properties (11,502 rooms) and 28 Holiday Inn
Club Vacations properties (8,592 rooms)).
2.
Includes
three open hotels that will be re-branded to voco.
|
|
Hotels
|
Rooms
|
Global Pipeline
|
|
Change
|
|
Change
|
at 31 December
|
2020
|
over 2019
|
2020
|
over 2019
|
|
|
|
|
|
|
Analysed by brand
|
|
|
|
|
|
Six Senses
|
31
|
6
|
2,239
|
469
|
|
Regent
|
6
|
1
|
1,535
|
591
|
|
InterContinental
|
69
|
4
|
17,774
|
756
|
|
Kimpton
|
32
|
(1)
|
6,265
|
62
|
|
HUALUXE
|
25
|
3
|
6,907
|
727
|
|
Crowne Plaza
|
89
|
1
|
24,228
|
(278)
|
|
Hotel Indigo
|
104
|
3
|
15,704
|
556
|
|
EVEN Hotels
|
31
|
5
|
5,046
|
704
|
|
voco
|
29
|
12
|
8,179
|
1,959
|
|
Holiday Inn1
|
262
|
(13)
|
51,163
|
(1,746)
|
|
Holiday Inn Express
|
683
|
(71)
|
87,152
|
(8,722)
|
|
avid hotels
|
192
|
(15)
|
17,526
|
(1,542)
|
|
Staybridge Suites
|
155
|
(27)
|
17,490
|
(3,244)
|
|
Candlewood Suites
|
73
|
(18)
|
6,369
|
(1,817)
|
|
Atwell Suites
|
19
|
9
|
1,849
|
849
|
|
Other2
|
15
|
(2)
|
2,631
|
(310)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
1,815
|
(103)
|
272,057
|
(10,986)
|
|
|
____
|
____
|
______
|
_____
|
Analysed by ownership type
|
|
|
|
|
|
Franchised
|
1,310
|
(101)
|
159,068
|
(7,573)
|
|
Managed
|
504
|
(2)
|
112,834
|
(3,413)
|
|
Owned, leased and managed lease
|
1
|
-
|
155
|
-
|
|
|
____
|
____
|
______
|
_____
|
Total
|
|
1,815
|
(103)
|
272,057
|
(10,986)
|
|
|
____
|
____
|
______
|
_____
|
1.
Includes
34 Holiday Inn Resort properties (7,251 rooms) and zero Holiday Inn
Club Vacations property (zero rooms), (2019: 29 Holiday Inn Resort
properties (6,335 rooms) and one Holiday Inn Club Vacations
properties (110 rooms)).
2.
Includes
one hotel to be branded as voco.
AMERICAS
|
12 months ended 31
December
|
Americas Results
|
|
|
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
Revenue from the reportable segmenta
|
|
|
|
|
Fee
business
|
457
|
853
|
(46.4)
|
|
Owned,
leased and managed lease
|
55
|
187
|
(70.6)
|
|
____
|
____
|
____
|
Total
|
|
512
|
1,040
|
(50.8)
|
|
____
|
____
|
____
|
Operating profit from the reportable segmenta
|
|
|
|
|
Fee
business
|
323
|
663
|
(51.3)
|
|
Owned,
leased and managed lease
|
(27)
|
37
|
(173.0)
|
|
____
|
____
|
____
|
|
|
296
|
700
|
(57.7)
|
Operating
exceptional items
|
|
(118)
|
(62)
|
90.3
|
|
____
|
____
|
____
|
Operating
profit
|
178
|
638
|
(72.1)
|
|
____
|
____
|
____
|
|
|
|
|
|
|
|
|
Americas Comparable RevPARb movement on previous
year
|
12 months ended
31 December
2020
|
Fee
business
|
|
|
|
InterContinental
|
(71.0%)
|
|
|
Kimpton
|
(69.7%)
|
|
|
Crowne
Plaza
|
(65.1%)
|
|
|
Hotel
Indigo
|
(57.0%)
|
|
|
EVEN
Hotels
|
(74.2%)
|
|
|
Holiday
Inn
|
(52.0%)
|
|
|
Holiday
Inn Express
|
(41.6%)
|
|
|
Staybridge
Suites
|
(36.0%)
|
|
|
Candlewood
Suites
|
(23.0%)
|
|
|
All
brands
|
(48.5%)
|
|
Owned,
leased and managed lease
|
|
|
|
EVEN
Hotels
|
(62.0%)
|
|
|
Holiday
Inn
|
(62.2%)
|
|
|
All
brands
|
(62.1%)
|
|
Americas results
Following
solid trading in the first two months of 2020, Covid-19 rapidly
impacted the Americas region from March leading to sharp declines
in RevPAR across the region. Occupancy levels dropped to historic
lows in April, as physical distancing and travel restrictions came
into effect across the region, with ~10% of hotels closed in the US
by the end of April. In the US, occupancyb was ~20% at the
lowest point.
As the
second quarter progressed and restrictions began to be lifted, the
beginnings of a recovery were seen in both RevPAR and occupancy. By
the end of June the majority of hotels had reopened with just ~3%
of US hotels closed and occupancyb in the US of ~42%.
The initial recovery continued into the third quarter, led by the
US franchised estate, which benefits from a weighting towards
hotels in the midscale segments. Those hotels derive the majority
of their business from domestic demand and have a lower reliance on
large group business and higher distribution in non-urban markets.
The recovery continued into the fourth quarter at a slower pace, as
a resurgence in Covid-19 cases led to the reinstatement of
restrictions in a number of locations across the US. By the end of
the year only ~1% of hotels were closed in the US.
Comparable
RevPARb in
the Americas declined 19% in the first quarter of 2020, 71% in the
second quarter, 50% in the third quarter and 50% in the fourth
quarter, with a decline of 49% for the full year.
Revenue
from the reportable segmenta decreased by $528m
(50.8%) to $512m, driven by the impacts of Covid-19. Operating
profit decreased by $460m (72.1%) to $178m, driven by the reduction
in revenue and a $56m net increase in operating exceptional
charges, partially offset by cost saving measures. Operating profit
from the reportable segmenta decreased by $404m
(57.7%) to $296m. On an underlyingc basis, revenue
decreased by $523m (50.5%), whilst underlyingc operating profit
decreased by $400m (57.5%).
Revenue
and operating profit from the reportable segmenta are further analysed
by fee business and owned, leased and managed lease
hotels.
Fee
business revenuec decreased by $396m
(46.4%) to $457m, driven by the significant impact of Covid-19 from
March onwards on RevPAR and consequently fee revenues, including an
$8m reduction in recognition of incentive management fees, and was
also partly impacted by adverse foreign exchanged ($5m). Fee business
operating profitc decreased by $340m
(51.3%) to $323m, due to reductions in fee revenue and an increase
in expected credit losses, partially offset by cost savings
commencing in the second quarter. Fee business operating
profitc
also benefited from a $4m favourable litigation settlement relating
to one hotel, and the recognition of an $8m payroll tax credit, and
was partly impacted by adverse foreign exchanged ($4m).
Owned,
leased and managed lease revenuec decreased by $132m
(70.6%) to $55m, as the majority of hotels were closed during much
of the second quarter, whilst owned, leased and managed lease
operating profitc decreased by $64m
(173.0%) to a loss of $27m, driven by the impact of lower occupancy
and closures, partially offset by the implementation of cost
savings and the benefit of $4m business interruption insurance at
one hotel. There was no material impact of foreign
exchanged
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.
Comparable
RevPAR and occupancy include the adverse impact of hotels
temporarily closed as a result of Covid-19.
c.
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 within the Group Financial Statements.
d.
The
impact of movements between the previous year’s actual
exchange rates and average rates in 2020.
|
Hotels
|
Rooms
|
Americas hotel and room count
at 31 December
|
2020
|
Change
over
2019
|
2020
|
Change
over
2019
|
|
|
|
|
|
Analysed
by brand
|
|
|
|
|
|
InterContinental
|
46
|
(5)
|
16,789
|
(1,107)
|
|
Kimpton
|
64
|
3
|
11,097
|
(900)
|
|
Crowne
Plaza
|
136
|
(13)
|
35,405
|
(4,470)
|
|
Hotel
Indigo
|
67
|
3
|
8,793
|
526
|
|
EVEN
Hotels
|
15
|
2
|
2,239
|
290
|
|
voco
|
1
|
1
|
49
|
49
|
|
Holiday
Inn1
|
766
|
(17)
|
130,942
|
(4,344)
|
|
Holiday
Inn Express
|
2,425
|
57
|
220,342
|
5,349
|
|
avid
Hotels
|
24
|
17
|
2,156
|
1,521
|
|
Staybridge
Suites
|
285
|
2
|
30,057
|
(187)
|
|
Candlewood
Suites
|
366
|
(44)
|
32,435
|
(5,897)
|
|
Other2
|
103
|
(15)
|
23,708
|
(1,465)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
4,298
|
(9)
|
514,012
|
(10,635)
|
|
|
____
|
____
|
______
|
_____
|
Analysed
by ownership type
|
|
|
|
|
|
Franchised
|
4,105
|
97
|
471,802
|
6,537
|
|
Managed
Owned,
leased and managed lease
|
187
6
|
(105)
(1)
|
40,391
1,819
|
(16,769)
(403)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
4,298
|
(9)
|
514,012
|
(10,635)
|
|
|
____
|
____
|
______
|
_____
|
1.
Includes
22 Holiday Inn Resort properties (6,003 rooms) and 28 Holiday Inn
Club Vacations property (8,679 rooms), (2019: 22 Holiday Inn Resort
properties (6,003 rooms) and 28 Holiday Inn Club Vacations
properties (8,592 rooms)).
2.
Includes
one open hotel that will be re-branded to voco.
|
Hotels
|
Rooms
|
Americas pipeline
at 31 December
|
2020
|
Change
over
2019
|
2020
|
Change
over
2019
|
|
|
|
|
|
Analysed
by brand
|
|
|
|
|
|
Six
Senses
|
7
|
2
|
519
|
97
|
|
InterContinental
|
7
|
-
|
1,724
|
175
|
|
Kimpton
|
20
|
(1)
|
3,483
|
24
|
|
Crowne
Plaza
|
6
|
1
|
1,250
|
157
|
|
Hotel
Indigo
|
31
|
(6)
|
4,155
|
(1,017)
|
|
EVEN
Hotels
|
16
|
1
|
1,975
|
109
|
|
voco
|
2
|
2
|
274
|
274
|
|
Holiday
Inn1
|
80
|
(18)
|
10,446
|
(2,060)
|
|
Holiday
Inn Express
|
386
|
(62)
|
37,355
|
(5,748)
|
|
avid
hotels
|
191
|
(15)
|
17,311
|
(1,542)
|
|
Staybridge
Suites
|
135
|
(27)
|
14,061
|
(2,813)
|
|
Candlewood
Suites
|
73
|
(18)
|
6,369
|
(1,817)
|
|
Atwell
Suites
|
19
|
9
|
1,849
|
849
|
|
Other
|
13
|
(3)
|
1,986
|
(793)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
986
|
(135)
|
102,757
|
(14,105)
|
|
|
____
|
____
|
______
|
_____
|
Analysed
by ownership type
|
|
|
|
|
|
Franchised
|
944
|
(133)
|
96,528
|
(13,458)
|
|
Managed
|
42
|
(2)
|
6,229
|
(647)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
986
|
(135)
|
102,757
|
(14,105)
|
|
|
____
|
____
|
______
|
_____
|
1.
Includes
three Holiday Inn Resort properties (490 rooms) and zero Holiday
Inn Club Vacations property (zero rooms), (2019: three Holiday Inn
Resort properties (490 rooms) and one Holiday Inn Club Vacations
property (110 rooms)).
EMEAA
|
12 months
ended 31 December
|
EMEAA results
|
|
|
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
Revenue from the reportable segmenta
|
|
|
|
|
Fee
business
|
107
|
337
|
(68.2)
|
|
Owned,
leased and managed lease
|
114
|
386
|
(70.5)
|
|
____
|
____
|
____
|
Total
|
|
221
|
723
|
(69.4)
|
|
____
|
____
|
____
|
Operating (loss)/profit from the reportable segmenta
|
|
|
|
|
Fee
business
|
(18)
|
202
|
(108.9)
|
|
Owned,
leased and managed lease
|
(32)
|
15
|
(313.3)
|
|
____
|
____
|
____
|
|
|
(50)
|
217
|
(123.0)
|
Operating
exceptional items
|
|
(128)
|
(109)
|
17.4
|
|
|
____
|
____
|
____
|
Operating
(loss)/profit
|
(178)
|
108
|
(264.8)
|
|
____
|
____
|
____
|
EMEAA comparable RevPARb movement on previous
year
|
12 months ended
31 December
2020
|
|
|
Fee
business
|
|
|
InterContinental
|
(64.8%)
|
|
Crowne
Plaza
|
(64.5%)
|
|
Hotel
Indigo
|
(73.7%)
|
|
Holiday
Inn
|
(64.3%)
|
|
Holiday
Inn Express
|
(64.5%)
|
|
Staybridge
Suites
|
(46.6%)
|
|
All
brands
|
(64.6%)
|
|
|
|
Owned,
leased and managed leases
|
|
|
InterContinental
|
(66.7%)
|
|
All
brands
|
(74.2%)
|
|
|
|
EMEAA results
Covid-19
impacted EMEAA from the second half of February onwards as
government-mandated international and domestic travel restrictions
progressed across the region, resulting in a significant drop in
RevPAR in the first quarter and culminating in ~50% of IHG’s
hotels in the region being closed by April, with
occupancyb
dropping to ~11% in the month. Restrictions remained in place
through much of the second quarter, severely impacting travel,
particularly in Europe. The rate of RevPAR decline improved in the
third quarter as government-mandated closures and travel
restrictions were partially eased, with demand largely
leisure-related. Demand began to weaken again in September and the
fourth quarter was further impacted by the reinstatement of
restrictions in many countries following a second wave of Covid-19
cases building through the autumn. By the end of the year ~80% of
hotels were open across EMEAA.
Comparable
RevPARb
declined 26% in the first quarter, 88% in the second quarter, 70%
in the third quarter and 71% in the fourth quarter, with a decline
of 65% for the full year.
Revenue
from the reportable segmenta decreased by $502m
(69.4%) to $221m as the impact of Covid-19 resulted in a
significant reduction in fees as well as temporary closure of many
owned, leased and managed lease hotels. Operating profit decreased
by $286m (264.8%) to an operating loss of $178m, driven by the
reduction in revenue and a $19m net increase in operating
exceptional charges, partially offset by planned cost saving
measures. Operating profit from the reportable segmenta decreased by $267m
(123.0%) to a loss of $50m. On an underlyingc basis, revenue
decreased by $486m (69.0%) and underlyingc operating profit
decreased by $260m (126.2%) to a loss of $54m.
Revenue
and operating profit from the reportable segmenta are further analysed
by fee business and owned, leased and managed lease
hotels.
Fee
business revenuec decreased by $230m
(68.2%) to $107m, driven by the significant impact of Covid-19 on
RevPAR and consequently fee revenues, including a $76m reduction in
recognition of incentive management fees. There was no material
impact of foreign exchanged.
Fee
business operating profitc decreased by $220m
(108.9%) to an operating loss of $18m, driven by lower fee revenue
and an increase in expected credit losses, partially offset by cost
savings commencing in the second quarter, and partly benefiting
from the impact of foreign exchanged ($1m).
Owned,
leased and managed lease revenuec decreased by $272m
(70.5%) to $114m, (foreign exchanged benefit $4m), as
occupancy dropped rapidly through March and the majority of hotels
were closed for a large proportion of the year. Owned, leased and
managed lease operating profitc reduced by $47m
(313.3%) to an operating loss of $32m, (foreign
exchanged
benefit $1m), driven by the impact of lower occupancy and closures,
partially offset by the implementation of cost reduction measures
undertaken across the estate, together with rent reductions
received; there was also the benefit of a $3m gain from the sale of
the lease on the Holiday Inn Melbourne Airport.
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.
Comparable
RevPAR and occupancy include the adverse impact of hotels
temporarily closed as a result of Covid-19.
c.
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 within the Group Financial Statements.
d.
The
impact of movements between the previous year’s actual
exchange rates and average rates in 2020.
|
|
Hotels
|
Rooms
|
EMEAA hotel and room count
|
|
Change
|
|
Change
|
at 31 December
|
2020
|
over 2019
|
2020
|
over 2019
|
|
|
|
|
|
|
Analysed by brand
|
|
|
|
|
|
Six Senses
|
15
|
(2)
|
1,007
|
(319)
|
|
Regent
|
3
|
-
|
771
|
-
|
|
InterContinental
|
108
|
(5)
|
32,474
|
(1,041)
|
|
Kimpton
|
8
|
4
|
1,859
|
939
|
|
Crowne Plaza
|
188
|
2
|
46,524
|
113
|
|
Hotel Indigo
|
46
|
5
|
5,066
|
627
|
|
voco
|
16
|
4
|
4,880
|
587
|
|
Holiday Inn1
|
401
|
7
|
74,984
|
1,552
|
|
Holiday Inn Express
|
329
|
5
|
47,356
|
902
|
|
Staybridge Suites
|
18
|
1
|
2,838
|
449
|
|
Other2
|
17
|
2
|
10,090
|
670
|
|
|
____
|
____
|
______
|
_____
|
Total
|
1,149
|
23
|
227,849
|
4,479
|
|
|
____
|
____
|
______
|
_____
|
Analysed by ownership type
|
|
|
|
|
|
Franchised
|
774
|
1
|
125,720
|
(735)
|
|
Managed
|
358
|
24
|
98,548
|
5,747
|
|
Owned, leased and managed lease
|
17
|
(2)
|
3,581
|
(533)
|
|
|
____
|
____
|
______
|
_____
|
Total
|
|
1,149
|
23
|
227,849
|
4,479
|
|
|
____
|
____
|
______
|
_____
|
1.
Includes
17 Holiday Inn Resort properties (3,330 rooms), (2019: 17 Holiday
Inn Resort properties (3,604 rooms)).
2.
Includes
two open hotels that will be re-branded to voco.
|
|
Hotels
|
Rooms
|
EMEAA Pipeline
|
|
Change
|
|
Change
|
at 31 December
|
2020
|
over 2019
|
2020
|
over 2019
|
|
|
|
|
|
|
Analysed by brand
|
|
|
|
|
|
Six Senses
|
21
|
4
|
1,551
|
372
|
|
Regent
|
5
|
1
|
1,255
|
591
|
|
InterContinental
|
33
|
2
|
7,485
|
(22)
|
|
Kimpton
|
6
|
(1)
|
1,128
|
(119)
|
|
Crowne Plaza
|
35
|
-
|
9,101
|
(314)
|
|
Hotel Indigo
|
41
|
1
|
6,047
|
395
|
|
voco
|
26
|
9
|
7,774
|
1,554
|
|
Holiday Inn1
|
108
|
(11)
|
22,554
|
(3,382)
|
|
Holiday Inn Express
|
92
|
(20)
|
15,233
|
(3,816)
|
|
avid hotels
|
1
|
-
|
215
|
-
|
|
Staybridge Suites
|
20
|
-
|
3,429
|
(431)
|
|
Other
|
1
|
-
|
348
|
186
|
|
|
____
|
____
|
______
|
_____
|
Total
|
389
|
(15)
|
76,120
|
(4,986)
|
|
|
____
|
____
|
______
|
_____
|
Analysed by ownership type
|
|
|
|
|
|
Franchised
|
155
|
(10)
|
25,652
|
(1,679)
|
|
Managed
|
233
|
(5)
|
50,313
|
(3,307)
|
|
Owned, leased and managed lease
|
1
|
-
|
155
|
-
|
|
|
____
|
____
|
______
|
_____
|
Total
|
|
389
|
(15)
|
76,120
|
(4,986)
|
|
|
____
|
____
|
______
|
_____
|
|
|
|
|
|
|
1.
Includes
18 Holiday Inn Resort properties (3,553 rooms), (2019: 18 Holiday
Inn Resort properties (3,662 rooms)).
GREATER CHINA
|
12 months ended 31
December
|
|
|
|
|
Greater China results
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
|
|
|
|
Revenue from the reportable segmenta
|
|
|
|
|
Fee
business
|
77
|
135
|
(43.0)
|
|
|
____
|
____
|
____
|
Total
|
|
77
|
135
|
(43.0)
|
|
____
|
____
|
____
|
Operating profit from the reportable segmenta
|
|
|
|
|
Fee
business
|
35
|
73
|
(52.1)
|
|
____
|
____
|
____
|
Operating
exceptional items
|
(5)
|
-
|
-
|
|
____
|
____
|
____
|
Operating
profit
|
30
|
73
|
(58.9)
|
|
____
|
____
|
____
|
Greater China comparable RevPARb movement on previous
year
|
12 months ended
31 December
2020
|
|
|
Fee
business
|
|
|
InterContinental
|
(36.8%)
|
|
HUALUXE
|
(20.4%)
|
|
Crowne
Plaza
|
(38.4%)
|
|
Hotel
Indigo
|
(44.0%)
|
|
Holiday
Inn
|
(46.9%)
|
|
Holiday
Inn Express
|
(40.6%)
|
|
All
brands
|
(40.5%)
|
Greater China results
Covid-19
impacted Greater China earliest of IHG’s three regions as
government measures were introduced rapidly from the end of January
to contain the spread of the virus. At the lockdown period trough,
40% of the region’s hotels were temporarily closed.
Occupancyb
dropped to single digits and comparable RevPARb declined by 89% in
February, the month most impacted by Covid-19. Domestic travel
restrictions started to ease through the second quarter and travel
slowly started to recover. The recovery continued through the
summer and into the third quarter, boosted by domestic leisure
demand, with some resort destinations seeing absolute year-on-year
growth in RevPAR, despite continued overall decline across the
region. The recovery in RevPAR continued into the fourth quarter
but at a slower pace and less than 1% of hotels remained closed by
the end of December. Hong Kong SAR was impacted by uncertainty
posed by political disputes throughout 2020, as well as by
Covid-19.
Comparable
RevPARb
declined by 65% in the first quarter, 59% in the second quarter,
23% in the third quarter and 18% in the fourth quarter, with a
decline of 41% for the full year.
Revenue
from the reportable segmenta decreased by $58m
(43.0%) to $77m, driven by the impact of Covid-19 on fee revenues,
partially offset by 6.4% net rooms growth. Operating profit
decreased by $43m (58.9%) to $30m as revenue reductions, including
a $32m reduction in recognition of incentive management fees, and a
$5m net increase in operating exceptional charges were partially
offset by cost savings. Operating profit from the reportable
segmenta
decreased by $38m (52.1%) to $35m. Underlyingc revenue decreased by
$60m (43.8%) to $77m and underlyingc operating profit
decreased by $38m (52.1%) to $35m.
a.
Greater
China reportable segment includes revenue and operating profit
before exceptional items, excluding System Fund revenue and
expenses and reimbursement of costs, for the fee
business.
b.
Comparable
RevPAR and occupancy include the adverse impact of hotels
temporarily closed as a result of Covid-19.
c.
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 within the Group Financial Statements.
|
|
Hotels
|
Rooms
|
Greater China hotel and room count
|
|
Change
|
|
Change
|
|
at 31 December
|
2020
|
over 2019
|
2020
|
over 2019
|
|
|
|
|
|
|
|
|
Analysed by brand
|
|
|
|
|
|
|
Six Senses
|
1
|
-
|
122
|
-
|
|
|
Regent
|
4
|
1
|
1,419
|
187
|
|
|
InterContinental
|
51
|
3
|
20,678
|
1,108
|
|
|
Kimpton
|
1
|
-
|
129
|
-
|
|
|
HUALUXE
|
12
|
3
|
3,433
|
723
|
|
|
Crowne Plaza
|
105
|
9
|
36,950
|
2,654
|
|
|
Hotel Indigo
|
12
|
(1)
|
1,745
|
(123)
|
|
|
EVEN Hotels
|
1
|
1
|
171
|
171
|
|
|
voco
|
1
|
1
|
148
|
148
|
|
|
Holiday Inn1
|
109
|
2
|
30,628
|
(548)
|
|
|
Holiday Inn Express
|
212
|
29
|
41,789
|
4,002
|
|
|
Other
|
8
|
(1)
|
6,963
|
307
|
|
|
|
____
|
____
|
______
|
_____
|
|
Total
|
517
|
47
|
144,175
|
8,629
|
|
|
|
____
|
____
|
______
|
_____
|
|
Analysed by ownership type
|
|
|
|
|
|
|
Franchised
|
126
|
37
|
29,826
|
6,572
|
|
|
Managed
|
391
|
10
|
114,349
|
2,057
|
|
|
|
____
|
____
|
______
|
_____
|
|
Total
|
|
517
|
47
|
144,175
|
8,629
|
|
|
|
____
|
____
|
______
|
_____
|
|
|
|
|
|
|
|
|
1.
Includes
eight Holiday Inn Resort properties (2,113 rooms), (2019: seven
Holiday Inn Resort properties (1,895 rooms)).
|
|
Hotels
|
Rooms
|
Greater China Pipeline
|
|
Change
|
|
Change
|
at 31 December
|
2020
|
over 2019
|
2020
|
over 2019
|
|
|
|
|
|
|
Analysed by brand
|
|
|
|
|
|
Six Senses
|
3
|
-
|
169
|
-
|
|
Regent
|
1
|
-
|
280
|
-
|
|
InterContinental
|
29
|
2
|
8,565
|
603
|
|
Kimpton
|
6
|
1
|
1,654
|
157
|
|
HUALUXE
|
25
|
3
|
6,907
|
727
|
|
Crowne Plaza
|
48
|
-
|
13,877
|
(121)
|
|
Hotel Indigo
|
32
|
8
|
5,502
|
1,178
|
|
EVEN Hotels
|
15
|
4
|
3,071
|
595
|
|
voco
|
1
|
1
|
131
|
131
|
|
Holiday Inn1
|
74
|
16
|
18,163
|
3,696
|
|
Holiday Inn Express
|
205
|
11
|
34,564
|
842
|
|
Other2
|
1
|
1
|
297
|
297
|
|
|
____
|
____
|
______
|
_____
|
Total
|
440
|
47
|
93,180
|
8,105
|
|
|
____
|
____
|
______
|
_____
|
Analysed by ownership type
|
|
|
|
|
|
Franchised
|
211
|
42
|
36,888
|
7,564
|
|
Managed
|
229
|
5
|
56,292
|
541
|
|
|
____
|
____
|
______
|
_____
|
Total
|
|
440
|
47
|
93,180
|
8,105
|
|
|
____
|
____
|
______
|
_____
|
|
|
|
|
|
|
1.
Includes
12 Holiday Inn Resort properties (3,208 rooms), (2019: Eight
Holiday Inn Resort properties (2,183 rooms)).
2.
Includes
one hotel to be branded as voco.
CENTRAL
|
12 months ended 31 December
|
|
|
|
|
|
2020
|
2019
|
%
|
Central results
|
$m
|
$m
|
change
|
|
|
|
|
Revenue
|
182
|
185
|
(1.6)
|
Gross
costs
|
(244)
|
(310)
|
(21.3)
|
|
____
|
____
|
____
|
|
|
(62)
|
(125)
|
(50.4)
|
Exceptional
items
|
|
(19)
|
(15)
|
26.7
|
|
____
|
____
|
____
|
Operating
loss
|
(81)
|
(140)
|
(42.1)
|
|
____
|
____
|
____
|
Central results
The net
operating loss decreased by $59m (42.1%), benefiting from a
reduction in gross costs, partially offset by a $4m (26.7%)
increase in operating exceptional charges.
Central
revenue, which mainly comprises technology fee income, decreased by
$3m (1.6%) to $182m, driven by the impacts of Covid-19 and
temporary discounts on technology fees being largely offset by the
$20m net benefit of movement in recognition of some items between
System Fund and reportable segments (see note 4 to the Group
Financial Statements for further information). Revenue was also
partly impacted by adverse foreign exchangea ($1m).
Gross
costs decreased by $66m (21.3%), driven by cost saving measures
introduced from the second quarter. Gross costs also partly
benefited from the impact of foreign exchangea ($1m).
The
operating loss before exceptional items decreased by $63m,
benefiting from the net movement in recognition of some revenues
and expenses between the System Fund and reportable segments
($21m), see note 4 to the Group Financial Statements for further
information. There was no material impact of foreign
exchangea.
a.
The
impact of movements between the previous year’s actual
exchange rates and average rates in 2020.
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 System, and hotel loyalty
programme, IHG Rewards. The System Fund also benefits from 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 2020, System Fund revenue decreased by $608m
(44.3%) to $765m, largely due to lower assessment fees reflecting
the level of reduction in hotel revenues resulting from Covid-19,
as well as fee reliefs given, and lower loyalty revenue due to
lower redemption activity. This was partially offset by a
favourable adjustment relating to a change in the actuarial
assumptions around the ultimate rate of consumption of IHG Rewards
points (‘breakage’) leading to increased revenue
recognition year-over-year. A System Fund income statement deficit
of $102m was recorded over the year, resulting from lower revenues,
partly offset by actions targeted to lower costs including a
reduction in marketing spend. System Fund expenses included $24m of
expected credit losses, $20m reorganisation costs and $41m
impairment principally relating to the US corporate
headquarters.
Reimbursement of costs
In the
year to 31 December 2020, reimbursable revenue decreased by $534m
(45.6%) to $637m. The reduction reflects the significant impact
from Covid-19 on our hotels including hotel closures and staff
furloughs, meaning the overall scale of reimbursements
fell.
Cost
reimbursements revenue represents reimbursements of expenses
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 have no impact on either our operating profit or net
income.
Exceptional items
Exceptional
items are identified by virtue of their size, nature, or incidence
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 reorganisation costs.
Pre-tax
exceptional items totalled a net charge of $263m (2019: $148m net
charge) and include:
●
$22m net gain
relating to derecognition of lease assets and
liabilities;
●
$30m gain on lease
termination;
●
$10m provision for
onerous contractual expenditure relating to the UK
portfolio;
●
$27m reorganisation
costs (2019: $20m);
●
$6m acquisition and
integration costs due to the Six Senses acquisition (2019:
$7m);
●
$5m net litigation
costs (2019: $28m);
●
$48m impairment of
financial assets;
●
$226m impairment
charges of non-current assets (2019: $131m) of which $113m relates
to Americas, $100m to EMEAA, $4m to Greater China and $9m to
Central;
●
$14m exceptional
financial expenses; and
●
$21m fair value
gain on contingent purchase consideration relating to the UK
portfolio.
Further
information on exceptional items can be found in note 5 to the
Group Financial Statements.
Net financial expenses
Net
financial expenses increased by $25m to $140m, primarily due to
$14m exceptional financial expenses relating to the partial
repayment of the 2022 bonds (see below), $8m interest on the new
bonds issued and $3m relating to commercial paper. Adjusted
interest (see Use of Non-GAAP measures), which excludes exceptional
finance expenses and adds back interest relating to the System
Fund, reduced by $3m to $130m. The lower interest payable to the
System Fund largely resulted from lower interest rates in
2020.
In
October 2020 the Group issued a tender offer for its £400m
3.875% 2022 bonds resulting in a repayment of £227m. The Group
concurrently issued €500m 1.625% 2024 bonds and £400m
3.375% 2028 bonds to strengthen liquidity and extend the maturity
profile of the Group’s debt. The $14m premium on repayment
and associated write-off of fees and discount are classified as
exceptional costs due to their size and nature.
Excluding
amounts classified as exceptional, financial expenses includes $69m
(2019: $63m) of total interest costs on the public bonds, which are
fixed rate debt. Interest expense on lease liabilities was $37m
(2019: $41m).
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 $13m (2019: $27m)
comprises an exceptional gain of $21m in respect of the UK
portfolio (see exceptional items above), offset by a loss of $8m in
respect of Regent driven by a reduction in US corporate bond rates.
The total contingent purchase consideration liability at 31
December 2020 is $79m (2019: $91m).
Taxation
The
effective rate of tax on profit before exceptional items and System
Fund was 38% (2019: 24%) which included the recognition of tax
credits on one-off items, predominantly in connection with
adjustments to deferred taxes following an internal group
restructuring, UK law change and prior year items. Excluding these
one-off items, the effective tax rate would be 69%, elevated
compared to prior years due to the distortive impact of unrelieved
foreign taxes, the Group’s geographic profit mix and other
non-tax deductible expenses against the low profit base. The Group
also suffered significant US minimum profit taxes and could not
recognise the benefit for tax purposes of losses arising in certain
territories in the year.
Taxation
within exceptional items totalled a credit of $52m (2019: credit of
$20m) and relates to the tax impact of the exceptional items set
out above. Further information on tax within exceptional items can
be found in note 5 to the Group Financial Statements.
Net tax
paid in 2020 totalled $41m (2019: $141m). The 2020 tax paid was
less than 2019 principally due to refunds in respect of prior year
periods of $24m, as well as lower ‘in-year’ corporate
tax payments required as a result of the deterioration in global
trading.
IHG
pursues an approach to tax that is consistent with its business
strategy and its overall business conduct principles. The approach
seeks to ensure full compliance with all tax filing, payment and
reporting obligations on the basis of communicative and transparent
relationships with tax authorities. Policies and procedures related
to tax risk management are subject to regular review and update and
are approved by the IHG Audit Committee.
The
Group’s Approach to Tax document is available on IHG’s
website at www.ihgplc.com/responsible-business.
Dividends
On 20
March 2020, IHG’s Board withdrew its recommendation of a
final dividend in respect of 2019 of 85.9¢ per share, a
payment of which would have had a cash outflow of approximately
$150m in the first half of 2020.
A final
dividend in respect of 2020 is not proposed and there was no
interim dividend for the year. The Board will consider future
dividends once visibility of the pace and scale of market recovery
has improved.
Earnings per ordinary share
Given
the impact of Covid-19 on operations and the exceptional items
charged this year, the Group’s basic loss per ordinary share
is 142.9¢ (2019: basic earnings per ordinary share:
210.4¢). Adjusted earnings per ordinary share decreased by
89.7% to 31.3¢.
Share price and market capitalisation
The IHG
share price closed at £46.90 on 31 December 2020, down from
£52.08 on 31 December 2019. The market capitalisation of the
Group at the year-end was £8.6bn.
Sources of liquidity
As at
31 December 2020 the Group had total liquidity of $2,925m,
comprising $1,350m of undrawn bank facilities and $1,575m of cash
and cash equivalents (net of overdrafts and restricted
cash).
The
Group currently has $2,898m of sterling and euro bonds outstanding.
The current bonds mature in November 2022 (£173m), October
2024 (€500m), August 2025 (£300m), August 2026
(£350m), May 2027 (€500m) and October 2028
(£400m).
In
October 2020 the Group issued a €500m 1.625% bond repayable
in October 2024 and a £400m 3.375% bond repayable in October
2028. Currency swaps were transacted at the same time as the
€500m bonds were issued in order to swap the proceeds and
interest flows into pounds sterling. The currency swaps fix the
bond debt at £454m, with interest payable semi-annually at a
rate of 2.65%. The Group also repaid £227m of the £400m
3.875% bond maturing in November 2022. The Group currently has a
senior unsecured long-term credit rating of BBB- from Standard and
Poor’s. In the event this rating was downgraded below BBB-
there would be an additional step up coupon of 125bps payable on
the bonds which would result in an additional interest cost of
approximately $36m per year.
In
April 2020, the Group issued £600m of commercial paper under
the UK Covid Corporate Financing Facility (CCFF). This will be
repaid on 16 March 2021 when it matures.
The
Group is further financed by a $1,275m revolving syndicated bank
facility (the Syndicated Facility) and a $75m revolving bilateral
facility (the Bilateral Facility). During the year the maturity of
these facilities was extended by 18 months from March 2022 to
September 2023. The facilities were undrawn at 31 December 2020 (31
December 2019: $125m). The Syndicated and Bilateral Facilities
contain the same terms and two financial covenants: interest cover
and a leverage ratio. Covenants are monitored on a ‘frozen
GAAP’ basis excluding the impact of IFRS 16 and are tested at
half year and full year on a trailing 12-month basis. The interest
cover covenant requires a ratio of Covenant EBITDA to Covenant
interest payable above 3.5:1 and the leverage ratio requires
Covenant net debt to Covenant EBITDA of below 3.5:1. Covenant
EBITDA is calculated (on a frozen GAAP basis) as operating profit
before exceptional items, depreciation and amortisation and System
Fund revenues and expenses. See note 10 to the Group Financial
Statements for further information.
These
covenants have been waived from 30 June 2020 through 31 December
2021 and have been relaxed for test dates in 2022. A minimum
liquidity covenant of $400m has been introduced which will be
tested at each test date up to and including 31 December 2022. The
amended leverage ratio and interest cover covenant test levels for
the facilities are as follows:
|
June & December 2021
|
June 2022
|
December 2022
|
Leverage ratio
|
Waived
|
Less than 7.5x
|
Less than 6.5x
|
Interest cover
|
Waived
|
Greater than 1.5x
|
Greater than 2.0x
|
The
Group is in compliance with all of the applicable financial
covenants in its loan documents, none of which are 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.
Borrowings
included bank overdrafts of $51m (2019: $87m), 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 $2,529m (2019: $2,665m) is analysed by currency as
follows:
|
|
2020
|
2019
|
Borrowings
|
|
$m
|
$m
|
|
Sterling*
|
3,716
|
2,022
|
|
US dollar
|
416
|
721
|
|
Euros
|
20
|
44
|
|
Other
|
52
|
73
|
Cash and cash equivalents
|
|
|
|
Sterling
|
(1,305)
|
(25)
|
|
US dollar
|
(261)
|
(91)
|
|
Euros
|
(12)
|
(13)
|
|
Canadian dollar
|
(8)
|
(7)
|
|
Chinese renminbi
|
(60)
|
(17)
|
|
Other
|
(29)
|
(42)
|
|
|
____
|
____
|
Net debt
|
|
2,529
|
2,665
|
|
|
|
|
Average debt levels
|
2,554
|
2,720
|
*
Includes the impact of currency swaps.
USE OF NON-GAAP MEASURES
In
addition to performance measures directly observable in the
Financial Statements (IFRS measures), the Business Review presents
certain financial measures 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 stakeholders 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. These measures include the adverse impact of hotels
temporarily closed as a result of Covid-19.
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 from hotels 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 stakeholders 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 stakeholders 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 – these are identified by virtue of either their size,
nature, or incidence 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
operating profit;
●
Underlying fee
revenue; and
Operating
profit measures are, by their nature, before interest and tax.
Management believes such measures are useful for investors and
other stakeholders 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 believes these measures are useful to investors and
other stakeholders 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
believes these are meaningful to investors and other stakeholders
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 stakeholders 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 over the longer term, 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
stakeholders 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 is presented before exceptional items and 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 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
ordinary share (see below).
Management
believes adjusted interest is a meaningful measure for investors
and other stakeholders 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
longer 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 stakeholders 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
with the objective of maintaining an investment grade credit
rating. Net debt is used by investors and other stakeholders 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.
Adjusted EBITDA
Adjusted
EBITDA has been added as a measure in 2020 as it has become an
increasingly useful measure to investors for comparing the
performance of different companies.
One of
the key measures used by the Group in monitoring its debt and
capital structure is the net debt:adjusted EBITDA ratio, which is
managed with the objective of maintaining an investment grade
credit rating. The Group has a stated aim of maintaining this ratio
at 2.5-3.0x. Adjusted EBITDA is defined as operating profit,
excluding System Fund revenues and expenses, exceptional items and
depreciation and amortisation.
Adjusted
EBITDA is useful to investors and other stakeholders for comparing
the performance of different companies as depreciation,
amortisation and exceptional items are eliminated. It can also be
used as an approximation of operational cash flow generation. This
measure is relevant to the Group’s banking covenants, which
have been waived until 31 December 2021. Details of covenant levels
and performance against these is provided in note 10 to the Group
Financial Statements. The leverage ratio uses a Covenant EBITDA
measure which is calculated on a ‘frozen GAAP’ basis,
which excludes the effect of IFRS 16.
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
believes 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 are
typically non-recurring in nature. 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 recharged 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 stakeholders 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 for: (1)
the inclusion of 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) the inclusion of maintenance capital expenditure
(excluding contract acquisition costs); (3) the inclusion of the
principal element of lease payments; and (4) the exclusion of
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
believes free cash flow is a useful measure for investors and other
stakeholders, 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.
Revenue and operating profit Non-GAAP reconciliations
Highlights for the year ended 31 December 2020
Reportable segments
|
Revenue
|
|
Operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
%
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
Per Group income statement
|
2,394
|
4,627
|
(48.3)
|
|
(153)
|
630
|
(124.3)
|
System Fund
|
(765)
|
(1,373)
|
(44.3)
|
|
102
|
49
|
108.2
|
Reimbursement of costs
|
(637)
|
(1,171)
|
(45.6)
|
|
-
|
-
|
-
|
Operating exceptional items
|
-
|
-
|
-
|
|
270
|
186
|
45.2
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments
|
992
|
2,083
|
(52.4)
|
|
219
|
865
|
(74.7)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments analysed as:
|
|
|
|
|
|
|
|
Fee business
|
823
|
1,510
|
(45.5)
|
|
278
|
813
|
(65.8)
|
Owned, leased and managed lease
|
169
|
573
|
(70.5)
|
|
(59)
|
52
|
(213.5)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments
|
992
|
2,083
|
(52.4)
|
|
219
|
865
|
(74.7)
|
Underlying revenue and underlying operating profit
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
Operating profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
%
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
Reportable segments (see above)
|
992
|
2,083
|
(52.4)
|
|
219
|
865
|
(74.7)
|
Significant liquidated damagesa
|
(1)
|
(11)
|
(90.9)
|
|
(1)
|
(11)
|
(90.9)
|
Owned asset disposalb
|
(2)
|
(12)
|
(83.3)
|
|
(3)
|
(2)
|
50.0
|
Currency impact
|
-
|
-
|
-
|
|
-
|
(2)
|
-
|
|
____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Underlying revenue and underlying operating profit
|
989
|
2,060
|
(52.0)
|
|
215
|
850
|
(74.7)
|
a.
$1m
recognised in 2020 ($4m in 2019) reflects the continued recognition
of the significant liquidated damages related to the previously
disclosed exit of a portfolio of 2.1k hotels in
Germany.
b.
The
results of the Holiday Inn Melbourne Airport have been removed in
2020 (being the year of disposal) and the prior year to determine
underlying growth compared to the prior year.
c.
Revenue
and operating profit relating to acquisitions made in 2019 are not
excluded when comparing 2020 and 2019 results as the results of
acquisitions are only excluded in the year of acquisition when
comparing to the prior year.
Underlying fee revenue
|
Revenue
|
Operating profit
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
%
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
Reportable segments fee business (see above)
|
823
|
1,510
|
(45.5)
|
|
278
|
813
|
(65.8)
|
Significant liquidated damages
|
(1)
|
(11)
|
(90.9)
|
|
(1)
|
(11)
|
(90.0)
|
Currency impact
|
-
|
(4)
|
-
|
|
-
|
(3)
|
-
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Underlying fee revenue
|
822
|
1,495
|
(45.0)
|
|
277
|
799
|
(65.3)
|
Americas
|
Revenue
|
|
Operating profita
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
%
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
Per Group financial statements
|
512
|
1,040
|
(50.8)
|
|
296
|
700
|
(57.7)
|
|
|
|
|
|
|
|
|
Reportable segments analysed as:
|
|
|
|
|
|
|
|
Fee business
|
457
|
853
|
(46.4)
|
|
323
|
663
|
(51.3)
|
Owned, leased and managed lease
|
55
|
187
|
(70.6)
|
|
(27)
|
37
|
(173.0)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
|
512
|
1,040
|
(50.8)
|
|
296
|
700
|
(57.7)
|
|
|
|
|
|
|
|
|
Reportable segments (see above)
|
512
|
1,040
|
(50.8)
|
|
296
|
700
|
(57.7)
|
Currency impact
|
-
|
(5)
|
-
|
|
-
|
(4)
|
-
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Underlying revenue and underlying operating profit
|
512
|
1,035
|
(50.5)
|
|
296
|
696
|
(57.5)
|
|
|
|
|
|
|
|
|
Owned, leased and managed lease included in the above
|
(55)
|
(187)
|
(70.6)
|
|
27
|
(37)
|
(173.0)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Underlying fee business
|
457
|
848
|
(46.1)
|
|
323
|
659
|
(51.0)
|
a.
Before
exceptional items
EMEAA
|
Revenue
|
|
Operating (loss)/profitd
|
|
|
|
|
|
|
|
|
|
2020
|
2019c
|
%
|
|
2020
|
2019c
|
%
|
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
|
|
Per Group financial statements
|
221
|
723
|
(69.4)
|
|
(50)
|
217
|
(123.0)
|
|
|
|
|
|
|
|
|
|
|
Reportable segments analysed as:
|
|
|
|
|
|
|
|
|
Fee business
|
107
|
337
|
(68.2)
|
|
(18)
|
202
|
(108.9)
|
|
Owned, leased and managed lease
|
114
|
386
|
(71.5)
|
|
(32)
|
15
|
(313.3)
|
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
|
|
221
|
723
|
(69.4)
|
|
(50)
|
217
|
(123.0)
|
|
|
|
|
|
|
|
|
|
|
Reportable segments (see above)
|
221
|
723
|
(69.4)
|
|
(50)
|
217
|
(123.0)
|
|
Significant liquidated damagesa
|
(1)
|
(11)
|
(90.9)
|
|
(1)
|
(11)
|
(90.9)
|
|
Owned asset disposalb
|
(2)
|
(12)
|
(83.3)
|
|
(3)
|
(2)
|
50.0
|
|
Currency impact
|
-
|
4
|
-
|
|
-
|
2
|
-
|
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
|
Underlying revenue and underlying operating profit
|
218
|
704
|
(69.0)
|
|
(54)
|
206
|
(126.2)
|
|
|
|
|
|
|
|
|
|
|
Owned, leased and managed lease included in the above
|
(112)
|
(378)
|
(70.4)
|
|
35
|
(14)
|
(350.0)
|
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
|
Underlying fee business
|
106
|
326
|
(67.5)
|
|
(19)
|
192
|
(109.9)
|
|
a.
$1m
recognised in 2020 ($4m in 2019) reflects the continued recognition
of the significant liquidated damages related to the previously
disclosed exit of a portfolio of 2.1k hotels in
Germany.
b.
The
results of the Holiday Inn Melbourne Airport have been removed in
2020 (being the year of disposal) and the prior year to determine
underlying growth compared to the prior year.
c.
Revenue
and operating profit relating to acquisitions made in 2019 are not
excluded when comparing 2020 and 2019 results as the results of
acquisitions are only excluded in the year of acquisition when
comparing to the prior year.
d.
Before
exceptional items.
Greater China
|
Revenue
|
|
Operating profita
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
%
|
|
2020
|
2019
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
Per Group financial statements
|
|
|
|
|
|
|
|
Reportable segments analysed as:
|
77
|
135
|
(43.0)
|
|
35
|
73
|
(52.1)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Fee business
|
77
|
135
|
(43.0)
|
|
35
|
73
|
(52.1)
|
|
|
|
|
|
|
|
|
Reportable segments (see above)
|
77
|
135
|
(43.0)
|
|
35
|
73
|
(52.1)
|
Currency impact
|
-
|
2
|
-
|
|
-
|
-
|
-
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Underlying revenue and underlying operating profit
|
77
|
137
|
(43.8)
|
|
35
|
73
|
(52.1)
|
Highlights for the year ended 31 December 2019
|
Revenue
|
|
Operating profit
|
|
|
|
|
|
|
|
|
|
2019
|
2018
|
%
|
|
2019
|
2018
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
Per Group income statement
|
4,627
|
4,337
|
6.7
|
|
630
|
582
|
8.2
|
System Fund
|
(1,373)
|
(1,233)
|
11.4
|
|
49
|
146
|
(66.4)
|
Reimbursement of costs
|
(1,171)
|
(1,171)
|
-
|
|
-
|
-
|
-
|
Operating exceptional items
|
-
|
-
|
-
|
|
186
|
104
|
78.8
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments
|
2,083
|
1,933
|
7.8
|
|
865
|
832
|
4.0
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments analysed as:
|
|
|
|
|
|
|
|
Fee business
|
1,510
|
1,486
|
1.6
|
|
813
|
793
|
2.5
|
Owned, leased and managed lease
|
573
|
447
|
28.2
|
|
52
|
39
|
33.3
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments
|
2,083
|
1,933
|
7.8
|
|
865
|
832
|
4.0
|
|
Revenue
|
|
|
|
|
|
|
2019
|
2018
|
Change
|
%
|
|
$m
|
$m
|
$m
|
change
|
Underlying fee revenue
|
|
|
|
|
Reportable segments fee business (see above)
|
1,510
|
1,486
|
24
|
1.6
|
Significant liquidated damages
|
(11)
|
(13)
|
2
|
(15.4)
|
Acquisition of businesses
|
(14)
|
-
|
(14)
|
-
|
Currency impact
|
-
|
(17)
|
17
|
-
|
|
_____
|
_____
|
_____
|
_____
|
Underlying fee business
|
1,485
|
1,456
|
29
|
2.0
|
Highlights for the year ended 31 December 2018
|
Revenue
|
Operating profit
|
|
|
|
|
|
|
|
|
|
2018
|
2017
|
%
|
|
2018
|
2017
|
%
|
|
$m
|
$m
|
change
|
|
$m
|
$m
|
change
|
|
|
|
|
|
|
|
|
Per Group income statement
|
4,337
|
4,075
|
6.4
|
|
582
|
744
|
(21.8)
|
System Fund
|
(1,233)
|
(1,242)
|
(0.7)
|
|
146
|
34
|
329.4
|
Reimbursement of costs
|
(1,171)
|
(1,103)
|
6.2
|
|
-
|
-
|
-
|
Operating exceptional items
|
-
|
-
|
-
|
|
104
|
(4)
|
(2,700.0)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments
|
1,933
|
1,730
|
11.7
|
|
832
|
774
|
7.5
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments analysed as:
|
|
|
|
|
|
|
|
Fee business
|
1,486
|
1,379
|
7.8
|
|
793
|
731
|
8.5
|
Owned, leased and managed lease
|
447
|
351
|
27.4
|
|
39
|
43
|
(9.3)
|
|
_____
|
_____
|
_____
|
|
_____
|
_____
|
_____
|
Reportable segments
|
1,933
|
1,730
|
11.7
|
|
832
|
774
|
7.5
|
|
Revenue
|
|
|
|
|
2018
|
2017
|
Change
|
%
|
|
$m
|
$m
|
$m
|
change
|
Underlying fee revenue
|
|
|
|
|
Reportable segments fee business (see above)
|
1,486
|
1,379
|
107
|
7.8
|
Significant liquidated damages
|
(13)
|
-
|
(13)
|
-
|
Current Year Acquisition of businesses
|
(1)
|
-
|
(1)
|
-
|
Currency impact
|
-
|
4
|
(4)
|
-
|
|
_____
|
_____
|
_____
|
_____
|
Underlying fee business
|
1,472
|
1,383
|
89
|
6.4
|
Fee margin reconciliation
|
2020
|
2019
|
2018
|
2017
|
|
$m
|
$m
|
$m
|
$m
|
Revenue
|
|
|
|
|
Reportable segments analysed as fee business (see
above)
|
823
|
1,510
|
1,486
|
1,379
|
Significant liquidated damages
|
(1)
|
(11)
|
(13)
|
-
|
Captive insurance company
|
(19)
|
(19)
|
(11)
|
(9)
|
|
_____
|
_____
|
_____
|
_____
|
|
803
|
1,480
|
1,462
|
1,370
|
Operating profit
|
|
|
|
|
Reportable segments analysed as fee business (see
above)
|
278
|
813
|
793
|
731
|
Significant liquidated damages
|
(1)
|
(11)
|
(13)
|
-
|
Captive insurance company
|
(3)
|
(1)
|
(1)
|
-
|
|
_____
|
_____
|
_____
|
_____
|
|
274
|
801
|
779
|
731
|
|
|
|
|
|
Fee margin
|
34.1%
|
54.1%
|
53.3%
|
53.4%
|
Net capital expenditure reconciliation
|
12 months ended 31 December
|
|
|
|
|
2020
|
2019
|
|
$m
|
$m
|
|
|
|
Net cash from investing activities
|
(61)
|
(493)
|
Adjusted for:
|
|
|
Contract acquisition costs, net of
repayments
|
(64)
|
(61)
|
System
Fund depreciation and amortisationa
|
58
|
49
|
Acquisition of
businesses, net of cash acquired
|
-
|
292
|
Payment of contingent purchase
consideration
|
-
|
2
|
|
_____
|
_____
|
Net capital expenditure
|
(67)
|
(211)
|
|
_____
|
_____
|
Analysed as:
|
|
|
Capital expenditure: maintenance (including contract acquisition
costs, net of repayments of $64m (2019: $61m))
|
(107)
|
(147)
|
Capital expenditure: recyclable investments
|
17
|
(15)
|
Capital expenditure: System Fund capital investments
|
23
|
(49)
|
|
_____
|
_____
|
Net capital expenditure
|
(67)
|
(211)
|
|
_____
|
_____
|
a.
Excludes
depreciation of right-of-use assets.
Gross capital expenditure reconciliation
|
12 months ended 31 December
|
|
|
|
|
2020
|
2019
|
|
$m
|
$m
|
|
|
|
Net capital expenditure
|
(67)
|
(211)
|
Add back:
|
|
|
Disposal receipts
|
(18)
|
(4)
|
Repayment of contract acquisition
costs
|
-
|
(1)
|
Distributions from associates and joint
ventures
|
(5)
|
-
|
System
Fund depreciation and amortisationa
|
(58)
|
(49)
|
|
_____
|
_____
|
Gross capital expenditure
|
(148)
|
(265)
|
|
_____
|
_____
|
Analysed as:
|
|
|
Capital
expenditure: maintenance
|
(107)
|
(148)
|
(including
contract acquisition costs of $64m (2019: $62m))
|
Capital
expenditure: recyclable investments
|
(6)
|
(19)
|
Capital
expenditure: System Fund investments
|
(35)
|
(98)
|
|
_____
|
_____
|
Gross capital expenditure
|
(148)
|
(265)
|
|
_____
|
_____
|
a.
Excludes
depreciation of right-of-use assets.
Free cash flow reconciliation
|
12 months ended 31 December
|
|
|
|
|
|
|
|
2020
|
2019
|
2018
|
2017
|
2016a
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
|
|
|
|
|
|
Net cash from operating activities
|
137
|
653
|
709
|
616
|
710
|
Adjusted for:
|
|
|
|
|
|
Payment
of contingent purchase consideration
|
-
|
6
|
-
|
-
|
-
|
Principal
element of lease payments
|
(65)
|
(59)
|
(35)
|
(25)
|
-
|
Purchase
of shares by employee share trusts
|
-
|
(5)
|
(3)
|
(3)
|
(10)
|
Capital
expenditure: maintenance (excluding contract acquisition
costs)
|
(43)
|
(86)
|
(60)
|
(72)
|
(54)
|
Cash
receipt from renegotiation of long-term partnership
agreement
|
-
|
-
|
-
|
-
|
(95)
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
Free cash flow
|
29
|
509
|
611
|
516
|
551
|
a.
Does
not include 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
|
|
|
|
2020
|
2019
|
|
$m
|
$m
|
Net financial expenses
|
|
|
Financial income
|
4
|
6
|
Financial expenses
|
(144)
|
(121)
|
|
_____
|
_____
|
|
(140)
|
(115)
|
Adjusted for:
|
|
|
Interest payable on balances with the System Fund
|
(3)
|
(13)
|
Capitalised interest relating to System Fund assets
|
(1)
|
(5)
|
Exceptional financial expenses
|
14
|
-
|
|
_____
|
_____
|
|
10
|
(18)
|
|
|
|
Adjusted interest
|
(130)
|
(133)
|
Adjusted EBITDA reconciliation
|
12 months ended 31 December
|
|
|
|
|
|
2020a
|
2019a
|
2018
|
|
$m
|
$m
|
$m
|
Operating (loss)/profit
|
(153)
|
630
|
582
|
Add back:
|
|
|
|
System Fund result
|
102
|
49
|
146
|
Operating exceptional items
|
270
|
186
|
104
|
Depreciation and amortisation
|
110
|
116
|
115
|
|
_____
|
_____
|
_____
|
Adjusted EBITDA
|
329
|
981
|
947
|
a.
For
covenant purposes, calculated on a frozen GAAP basis, adjusted
EBITDA is $272m (2019: $897m).
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2020
|
2020
Year ended 31
December
|
2019
Year ended 31
December*
|
|
|
$m
|
$m
|
|
|
|
Revenue
from fee business
|
823
|
1,510
|
Revenue
from owned, leased and managed lease hotels
|
169
|
573
|
System
Fund revenues
|
765
|
1,373
|
Reimbursement
of costs
|
637
|
1,171
|
|
_____
|
_____
|
Total revenue (notes 3 and 4)
|
2,394
|
4,627
|
|
|
|
Cost of
sales
|
(354)
|
(782)
|
System
Fund expenses
|
(867)
|
(1,422)
|
Reimbursed
costs
|
(637)
|
(1,171)
|
Administrative
expenses
|
(267)
|
(385)
|
Share
of losses of associates and joint ventures
|
(14)
|
(3)
|
Other
operating income
|
16
|
21
|
Depreciation
and amortisation
|
(110)
|
(116)
|
Impairment
loss on financial assets
|
(88)
|
(8)
|
Other
impairment charges (note 5)
|
(226)
|
(131)
|
|
_____
|
_____
|
Operating (loss)/profit (note 3)
|
(153)
|
630
|
|
|
|
Operating
(loss)/profit analysed as:
|
|
|
Operating profit
before System Fund and exceptional items
|
219
|
865
|
System
Fund
|
(102)
|
(49)
|
Operating
exceptional items (note 5)
|
(270)
|
(186)
|
|
_____
|
_____
|
|
(153)
|
630
|
|
|
|
Financial
income
|
4
|
6
|
Financial
expenses
|
(144)
|
(121)
|
Fair
value gains on contingent purchase consideration
|
13
|
27
|
|
_____
|
_____
|
(Loss)/profit before tax
|
(280)
|
542
|
|
|
|
Tax
(note 6)
|
20
|
(156)
|
|
_____
|
_____
|
(Loss)/profit for the year from continuing operations
|
(260)
|
386
|
|
_____
|
_____
|
Attributable
to:
|
|
|
Equity
holders of the parent
|
(260)
|
385
|
Non-controlling
interest
|
-
|
1
|
|
_____
|
_____
|
|
(260)
|
386
|
|
_____
|
_____
|
|
|
|
(Loss)/earnings per ordinary share (note 7)
|
|
|
Continuing
and total operations:
|
|
|
|
Basic
|
(142.9)¢
|
210.4¢
|
|
Diluted
|
(142.9)¢
|
209.2¢
|
|
Adjusted
|
31.3¢
|
303.3¢
|
|
Adjusted
diluted
|
31.3¢
|
301.6¢
|
|
|
|
|
|
|
*
Amended for
presentational changes (see note 1).
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
|
2020
Year ended
31 December
$m
|
2019
Year ended
31 December
$m
|
|
|
|
(Loss)/profit for the year
|
(260)
|
386
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
Items
that may be subsequently reclassified to profit or
loss:
|
|
|
(Losses)/gains on
cash flow hedges, net of related tax credit of $4m (2019:
$nil)
|
3
|
(34)
|
Costs
of hedging
|
(6)
|
(6)
|
Hedging
(gains)/losses reclassified to financial expenses
|
(13)
|
38
|
Exchange losses on
retranslation of foreign operations, net of related tax credit of
$4m (2019: $3m)
|
(85)
|
(39)
|
|
_____
|
_____
|
|
(101)
|
(41)
|
Items
that will not be reclassified to profit or loss:
|
|
|
(Losses)/gains on
equity instruments classified as fair value through
other comprehensive income, net of related tax credit of $4m
(2019: net of related tax charge of $2m)
|
(43)
|
10
|
Re-measurement
losses on defined benefit plans, net of related tax credit of $1m
(2019: $1m)
|
(7)
|
(6)
|
Tax
related to pension contributions
|
1
|
-
|
|
_____
|
_____
|
|
(49)
|
4
|
|
_____
|
_____
|
Total other comprehensive loss for the year
|
(150)
|
(37)
|
|
_____
|
_____
|
Total comprehensive (loss)/income for the year
|
(410)
|
349
|
|
_____
|
_____
|
|
|
|
Attributable
to:
|
|
|
|
Equity
holders of the parent
|
(410)
|
348
|
|
Non-controlling
interest
|
-
|
1
|
|
_____
|
_____
|
|
(410)
|
349
|
|
_____
|
_____
|
INTERCONTINENTAL HOTELS GROUP PLC
GROUP
STATEMENT OF CHANGES IN EQUITY
For
the year ended 31 December 2020
|
Year ended 31 December 2020
|
|
Equity share capital
|
Other reserves*
|
Retained earnings
|
Non-controlling interest
|
Total equity
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
|
|
|
|
|
|
At
beginning of the year
|
151
|
(2,433)
|
809
|
8
|
(1,465)
|
Total
comprehensive loss for the year
|
-
|
(147)
|
(263)
|
-
|
(410)
|
Transfer
of treasury shares to employee share trusts
|
-
|
(14)
|
14
|
-
|
-
|
Release
of own shares by employee share trusts
|
-
|
18
|
(18)
|
-
|
-
|
Equity-settled
share-based cost, net of $3m reclassification to cash-settled
awards
|
-
|
-
|
27
|
-
|
27
|
Tax
related to share schemes
|
-
|
-
|
(1)
|
-
|
(1)
|
Exchange
adjustments
|
5
|
(5)
|
-
|
-
|
-
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
At end of the year
|
156
|
(2,581)
|
568
|
8
|
(1,849)
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
Year ended 31 December 2019
|
|
Equity share capital
|
Other reserves*
|
Retained earnings
|
Non-controlling interest
|
Total equity
|
|
$m
|
$m
|
$m
|
$m
|
$m
|
|
|
|
|
|
|
At
beginning of the year
|
146
|
(2,396)
|
1,111
|
8
|
(1,131)
|
Total
comprehensive income for the year
|
-
|
(31)
|
379
|
1
|
349
|
Transfer
of treasury shares to employee share trusts
|
-
|
(19)
|
19
|
-
|
-
|
Purchase
of own shares by employee share trusts
|
-
|
(5)
|
-
|
-
|
(5)
|
Release
of own shares by employee share trusts
|
-
|
23
|
(23)
|
-
|
-
|
Equity-settled
share-based cost
|
-
|
-
|
41
|
-
|
41
|
Tax
related to share schemes
|
-
|
-
|
4
|
-
|
4
|
Equity
dividends paid
|
-
|
-
|
(721)
|
(1)
|
(722)
|
Transaction
costs relating to shareholder returns
|
-
|
-
|
(1)
|
-
|
(1)
|
Exchange
adjustments
|
5
|
(5)
|
-
|
-
|
-
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
At end of the year
|
151
|
(2,433)
|
809
|
8
|
(1,465)
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
*
|
Other
reserves comprise the capital redemption reserve, shares held by
employee share trusts, other reserves, fair value reserve, cash
flow hedging reserve and currency translation reserve.
|
|
INTERCONTINENTAL HOTELS GROUP PLC
GROUP
STATEMENT OF FINANCIAL POSITION
31
December 2020
|
2020
31 December
|
2019
31 December
Restated*
|
|
$m
|
$m
|
ASSETS
|
|
|
Goodwill
and other intangible assets
|
1,293
|
1,376
|
Property,
plant and equipment
|
201
|
309
|
Right-of-use
assets
|
303
|
490
|
Investment
in associates and joint ventures
|
81
|
110
|
Other
financial assets
|
168
|
284
|
Derivative
financial instruments
|
5
|
-
|
Deferred
compensation plan investments
|
236
|
218
|
Non-current
tax receivable
|
15
|
28
|
Deferred
tax assets
|
113
|
66
|
Contract
costs
|
70
|
67
|
Contract
assets
|
311
|
311
|
|
_______
|
_______
|
Total non-current assets
|
2,796
|
3,259
|
|
_______
|
_______
|
Inventories
|
5
|
6
|
Trade
and other receivables
|
514
|
666
|
Current
tax receivable
|
18
|
16
|
Other
financial assets
|
1
|
4
|
Derivative
financial instruments
|
-
|
1
|
Cash
and cash equivalents
|
1,675
|
195
|
Contract
costs
|
5
|
5
|
Contract
assets
|
25
|
23
|
|
_______
|
_______
|
Total current assets
|
2,243
|
916
|
Assets
classified as held for sale
|
-
|
19
|
|
_______
|
_______
|
Total assets
|
5,039
|
4,194
|
|
__
___
|
__
___
|
LIABILITIES
|
|
|
Loans
and other borrowings
|
(869)
|
(87)
|
Lease
liabilities
|
(34)
|
(65)
|
Trade
and other payables
|
(466)
|
(568)
|
Deferred
revenue
|
(452)
|
(555)
|
Provisions
|
(16)
|
(40)
|
Current
tax payable
|
(30)
|
(50)
|
|
_______
|
_______
|
Total current liabilities
|
(1,867)
|
(1,365)
|
|
_______
|
_______
|
Loans
and other borrowings
|
(2,898)
|
(2,078)
|
Lease
liabilities
|
(416)
|
(595)
|
Derivative
financial instruments
|
(18)
|
(20)
|
Retirement
benefit obligations
|
(103)
|
(96)
|
Deferred
compensation plan liabilities
|
(236)
|
(218)
|
Trade
and other payables
|
(94)
|
(116)
|
Deferred
revenue
|
(1,117)
|
(1,009)
|
Provisions
|
(44)
|
(22)
|
Deferred
tax liabilities
|
(95)
|
(118)
|
|
_______
|
_______
|
Total non-current liabilities
|
(5,021)
|
(4,272)
|
Liabilities
classified as held for sale
|
-
|
(22)
|
|
_______
|
_______
|
Total liabilities
|
(6,888)
|
(5,659)
|
|
_______
|
_______
|
Net liabilities
|
(1,849)
|
(1,465)
|
|
_______
|
________
|
EQUITY
|
|
|
IHG
shareholders’ equity
|
(1,857)
|
(1,473)
|
Non-controlling
interest
|
8
|
8
|
|
_______
|
_______
|
Total equity
|
(1,849)
|
(1,465)
|
|
_______
|
________
|
*
Restated for deferred compensation plan investments and liabilities
(see note 1).
|
|
|
INTERCONTINENTAL HOTELS GROUP PLC
GROUP
STATEMENT OF CASH FLOWS
For
the year ended 31 December 2020
|
2020
Year ended
31 December
|
2019
Year ended
31 December
|
|
$m
|
$m
|
|
|
|
(Loss)/profit for the year
|
(260)
|
386
|
Adjustments
reconciling (loss)/profit for the year to cash flow from operations
before contract acquisition costs (note 9)
|
632
|
582
|
|
_____
|
_____
|
Cash
flow from operations before contract acquisition costs
|
372
|
968
|
Contract
acquisition costs, net of repayments
|
(64)
|
(61)
|
|
_____
|
_____
|
Cash flow from operations
|
308
|
907
|
Interest
paid
|
(132)
|
(110)
|
Interest
received
|
2
|
3
|
Contingent
purchase consideration paid
|
-
|
(6)
|
Tax
paid on operating activities
|
(41)
|
(141)
|
|
_____
|
_____
|
Net cash from operating activities
|
137
|
653
|
|
_____
|
_____
|
Cash flow from investing activities
|
|
|
Purchase
of property, plant and equipment
|
(26)
|
(75)
|
Purchase
of intangible assets
|
(50)
|
(104)
|
Investment
in associates and joint ventures
|
(2)
|
(10)
|
Investment
in other financial assets
|
(5)
|
(9)
|
Acquisition
of businesses, net of cash acquired
|
-
|
(292)
|
Contingent
purchase consideration paid
|
-
|
(2)
|
Capitalised
interest paid
|
(1)
|
(5)
|
Distributions
from associates and joint ventures
|
5
|
-
|
Disposal
of hotel assets, net of costs and cash disposed
|
1
|
-
|
Repayments
of other financial assets
|
13
|
4
|
Disposal
of equity securities
|
4
|
-
|
|
_____
|
_____
|
Net cash from investing activities
|
(61)
|
(493)
|
|
_____
|
_____
|
Cash flow from financing activities
|
|
|
Purchase
of own shares by employee share trusts
|
-
|
(5)
|
Dividends
paid to shareholders (note 8)
|
-
|
(721)
|
Dividend
paid to non-controlling interest
|
-
|
(1)
|
Transaction
costs relating to shareholder returns
|
-
|
(1)
|
Issue
of long-term bonds, including effect of currency swaps
|
1,093
|
-
|
Issue
of commercial paper
|
738
|
-
|
Repayment
of long-term bonds
|
(290)
|
-
|
Principal
element of lease payments
|
(65)
|
(59)
|
(Decrease)/increase
in other borrowings
|
(125)
|
127
|
Proceeds
from currency swaps
|
3
|
-
|
|
_____
|
_____
|
Net cash from financing activities
|
1,354
|
(660)
|
|
_____
|
_____
|
Net movement in cash and cash equivalents, net of overdrafts, in
the year
|
1,430
|
(500)
|
Cash
and cash equivalents, net of overdrafts, at beginning of the
year
|
108
|
600
|
Exchange
rate effects
|
86
|
8
|
|
_____
|
_____
|
Cash and cash equivalents, net of overdrafts, at end of the
year
|
1,624
|
108
|
|
____
|
____
|
INTERCONTINENTAL HOTELS GROUP PLC
NOTES
TO THE PRELIMINARY FINANCIAL STATEMENTS
1.
|
Basis of preparation
|
|
The preliminary consolidated financial statements of
InterContinental Hotels Group PLC (the Group or IHG) for the year
ended 31 December 2020 have been prepared in accordance with
International Financial Reporting Standards (IFRSs) adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and with international accounting standards as
applied in accordance with the provisions of the Companies Act
2006. The preliminary statement of results shown in this
announcement does not represent the statutory accounts of the Group
and its subsidiaries within the meaning of Section 435 of the
Companies Act 2006.
The
Group financial statements for the year ended 31 December 2020 were
approved by the Board on 22 February 2021. The auditor, Ernst &
Young LLP, has given an unqualified report in respect of those
Group financial statements with no reference to matters to which
the auditor drew attention by way of emphasis and no statement
under s498(2) or s498(3) of the Companies Act 2006. The Group
financial statements for the year ended 31 December 2020 will be
delivered to the Registrar of Companies in due course.
|
|
With
the exception of the accounting for a deferred compensation plan
and the presentational change to the Group income statement as
detailed below, financial information for the year ended 31
December 2019 has been extracted from the Group’s published
financial statements for that year which were prepared in
accordance with IFRSs as adopted by the European Union and which
have been filed with the Registrar of Companies. The
auditor’s report on those financial statements was
unqualified with no reference to matters to which the auditor drew
attention by way of emphasis and no statement under s498(2) or
s498(3) of the Companies Act 2006.
The Group operates a deferred compensation plan in the US which
allows certain employees to make additional provision for
retirement, through the deferral of salary with matching company
contributions within a dedicated trust. The Group has reassessed
the accounting judgement for this plan which was previously not
consolidated based on a control analysis as disclosed in the
Group’s prior year financial statements. The Group has
revisited the judgement regarding the extent of its control over
the plan by placing more weighting on some of the Group’s
legal rights and, giving consideration to both IFRS 10
‘Consolidated Financial Statements’ and IAS 19
‘Employee Benefits’, the Group has changed its
accounting policy and has recognised the related assets and
liabilities on the balance sheet. The Group’s obligation to
employees under the plan is limited to the fair value of assets
held by the plan and so the assets and liabilities are valued at
the same amount, with no net impact on profit or loss. The effect
on the financial statements is the recognition and presentation of
deferred compensation plan investments of $236m (2019: $218m) and
matching deferred compensation plan liabilities. There is no net
impact on the comparative income statements, nor would there have
been any net impact on the Group income statement in earlier
periods.
The presentation of the Group income statement has been amended to
include impairment loss on financial assets as a separate line item
reflecting the increased size of such losses and therefore
providing more reliable and relevant information for the users of
the financial statements. Comparatives have been re-presented on a
consistent basis.
Going concern
The impact of the Covid-19 pandemic on the hospitality industry has
been severe. Through 2020, many of the Group’s hotels were
temporarily closed, while others experienced historically low
levels of occupancy and room rates.
The Group’s fee-based model and wide geographic spread mean
that it is well placed to manage through these uncertain times. The
Group has taken various actions to manage cash outflows, including
a reduction in staff costs, professional fees, capital expenditure
and the suspension of the ordinary dividend. Overall fee business
costs have been reduced by $150m, and capital expenditure by over
$100m on prior year levels. The Group has also taken actions to
reduce costs for owners and support them in managing their cash
flows. Combined, these actions resulted in the Group mitigating the
significant reduction in fee revenue and System Fund assessment
fees to generate a free cash flow in the year of $29m.
The Group has taken steps to strengthen its liquidity, including
agreeing amendments of existing covenants on its syndicated and
bilateral revolving credit facilities (‘the bank
facilities’) until December 2022 and issuing £600m commercial paper under the
UK’s Covid Corporate Financing Facility (‘CCFF’)
which is repayable in March 2021. The covenant amendment agreements
introduce a minimum liquidity covenant of $400m tested at half year
and full year up to and including 31 December 2022. Minimum
liquidity includes undrawn amounts from the bank facilities. The
leverage ratio and interest cover covenants have been waived at
June 2021 and December 2021. The covenants at June 2022 have been
amended to require less than 7.5x for the leverage ratio and
greater than 1.5x for interest cover (see note 10). The maturities
of the bank facilities have also been extended to September
2023.
In October 2020 the Group issued two new bonds, a four-year
€500m 1.625% bond and an eight-year £400m 3.375% bond.
At the same time, a tender offer was completed on the £400m
3.875% November 2022 bond and £227m was repaid early from the
new bond proceeds. These actions have increased the Group’s
liquidity, extended its debt maturity profile and reduced the
Group’s overall average cost of bond financing.
As at 31 December 2020 the Group had total liquidity of $2,925m,
comprising $1,350m of undrawn bank facilities and $1,575m of cash
and cash equivalents (net of overdrafts and restricted
cash).
A period of 18 months has been used, from 1 January 2021 to 30 June
2022, to complete the going concern assessment. There remains
unusually limited visibility on the pace and scale of market
recovery and therefore there are a wide range of possible planning
scenarios over the going concern period. In adopting the going
concern basis for preparing these financial statements the
Directors have considered a scenario (the ‘Base Case’)
which is based on a gradual improvement in demand during 2021 as
vaccines become more widely available, and a steady but gradual
improvement to the end of 2023 by when RevPAR is expected to reach
90% of 2019 levels. Also, it has been assumed that the CCFF is
repaid at maturity in March 2021. There are no other debt
maturities in the period under consideration. The assumptions
applied in the going concern assessment are consistent with those
used for Group planning purposes and for impairment testing. Under
this scenario, the Group is forecast to generate positive cash
flows over the 18-month period of assessment and the bank
facilities remain undrawn. The principal risks and uncertainties
which could be applicable have been considered and are able to be
absorbed within the $400m liquidity covenant and amended covenant
requirements.
The Directors have also reviewed a ‘Downside Case’
scenario which assumes a slower impact from vaccine rollout and is
based on the performance of the second half of 2020 continuing
throughout 2021, with the recovery to 2019 levels starting in 2022.
Under this scenario, the Group is also forecast to generate a
positive cash flow over the 18-month period and the bank facilities
remain undrawn. The Downside Case was used to set the amended
covenants and there is limited headroom to the covenants at 30 June
2022 to absorb additional risks. However, based on experience in
2020, the Directors reviewed a number of actions, such as
reductions in bonuses and other discretionary spend, creating
substantial additional headroom. After these actions are taken, the
principal risks and uncertainties which could be applicable can be
absorbed within the amended covenant requirements.
In the Downside Case, the Group has substantial levels of existing
cash reserves available (approximately $800m at 30 June 2022) and
is not expected to draw on the bank facilities. These cash reserves
would increase after the additional actions are taken as described
above. The Directors reviewed a reverse stress test scenario to
determine how much additional RevPAR downside could be absorbed
before utilisation of the bank facilities would be required. The
Directors concluded that the outcome of this reverse stress test
showed that it was very unlikely the bank facilities would need to
be drawn.
The leverage and interest cover covenant tests at 30 June 2022, the
last day of the assessment period, have been considered as part of
the Base Case and Downside Case scenarios. However, as the bank
facilities are unlikely to be drawn even in a scenario
significantly worse than the downside scenario, the Group does not
need to rely on the additional liquidity provided by the bank
facilities to remain a going concern. This means that in the event
the covenant test was failed, the bank facilities could be
cancelled by the lenders but it would not trigger a repayment
demand or create a cross-default risk. In the event that a further
covenant amendment was required, the Directors believe it is
reasonable to expect that such an amendment could be obtained based
on prior experience in negotiating the 2020 amendments. The Group
also has alternative options to manage this risk including raising
additional funding in the capital markets.
Having reviewed these scenarios, the Directors have a reasonable
expectation that the Group has sufficient resources to continue
operating until at least 30 June 2022 and there are no material
uncertainties that may cast doubt on the Group’s going
concern status. Accordingly, they continue to adopt the
going concern basis in preparing the financial
statements.
|
2.
|
Exchange
rates
|
|
The
results of operations have been translated into US dollars at the
average rates of exchange for the year. In the case of sterling,
the translation rate is $1 = £0.78 (2019: $1 = £0.78). In
the case of the euro, the translation rate is $1 = €0.88
(2019: $1 = €0.89).
Assets
and liabilities have been translated into US dollars at the rates
of exchange on the last day of the year. In the case of sterling,
the translation rate is $1 = £0.73 (2019: $1 = £0.76). In
the case of the euro, the translation rate is $1 = €0.81
(2019: $1 = €0.89).
|
|
Revenue
|
|
|
|
|
2020
|
2019
|
|
|
$m
|
$m
|
|
|
|
|
|
Americas
|
512
|
1,040
|
|
EMEAA
|
221
|
723
|
|
Greater
China
|
77
|
135
|
|
Central
|
182
|
185
|
|
|
_____
|
_____
|
|
Revenue from reportable segments
|
992
|
2,083
|
|
System
Fund revenues
|
765
|
1,373
|
|
Reimbursement
of costs
|
637
|
1,171
|
|
|
_____
|
_____
|
|
Total revenue
|
2,394
|
4,627
|
|
|
_____
|
_____
|
|
|
|
|
|
|
|
|
|
(Loss)/profit
|
2020
$m
|
2019
$m
|
|
|
|
|
|
Americas
|
296
|
700
|
|
EMEAA
|
(50)
|
217
|
|
Greater
China
|
35
|
73
|
|
Central
|
(62)
|
(125)
|
|
|
_____
|
_____
|
|
Operating profit from reportable segments
|
219
|
865
|
|
System
Fund
|
(102)
|
(49)
|
|
Operating
exceptional items (note 5)
|
(270)
|
(186)
|
|
|
_____
|
_____
|
|
Operating (loss)/profit
|
(153)
|
630
|
|
|
|
|
|
Net
financial expenses
|
(140)
|
(115)
|
|
Fair
value gains on contingent purchase consideration
|
13
|
27
|
|
|
_____
|
_____
|
|
(Loss)/profit before tax
|
(280)
|
542
|
|
|
_____
|
_____
|
|
|
|
|
|
All
items above relate to continuing operations.
|
|
In
2020, operating loss includes $88m impairment losses on financial
assets. Of this, $40m relates to trade and other receivables and
$48m is classified as exceptional and relates to trade deposits and
loans (see note 5).
|
4.
|
Disaggregation of revenue
|
|
The following tables present Group revenues disaggregated by type
of revenue stream and by reportable segment:
|
Year ended 31 December 2020
|
|
|
Americas
$m
|
EMEAA
$m
|
Greater China
$m
|
Central
$m
|
Total
$m
|
|
|
|
|
|
|
Franchise
and base management fees
|
452
|
93
|
61
|
-
|
606
|
Incentive
management fees
|
5
|
14
|
16
|
-
|
35
|
Central
revenue
|
-
|
-
|
-
|
182
|
182
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
Revenue
from fee business
|
457
|
107
|
77
|
182
|
823
|
Revenue
from owned, leased and managed lease hotels
|
55
|
114
|
-
|
-
|
169
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
512
|
221
|
77
|
182
|
992
|
|
_____
|
_____
|
_____
|
_____
|
|
System
Fund revenues
|
|
|
|
|
765
|
Reimbursement
of costs
|
|
|
|
|
637
|
|
|
|
|
|
_____
|
Total revenue
|
|
|
|
|
2,394
|
|
|
|
|
|
_____
|
Following
communication with the IHG Owners Association, fees and expenses
associated with the InterContinental Ambassador programme (the
InterContinental Hotels & Resorts paid-for loyalty programme)
previously reported within Central revenue have been moved into the
System Fund to align with the treatment of IHG’s other brand
loyalty programmes. Revenue arising from the licence of
intellectual property under co-brand credit card agreements
previously recorded within the System Fund is now recorded within
Central revenue. This change is effective from 1 January 2020. For
the year ended 31 December 2020, this change resulted in an
increase of $20m to Central revenue and $21m to operating profit
from reportable segments, and an equivalent reduction to System
Fund revenues and increase to System Fund operating loss. Had this
arrangement existed in the prior year, Central revenue and
operating profit in 2019 would have been $18m and $22m higher
respectively; System Fund revenues would have reduced and System
Fund operating loss would have increased by the same
amounts.
|
Year ended 31 December 2019
|
|
|
|
|
|
|
Americas
$m
|
EMEAA
$m
|
Greater China
$m
|
Central
$m
|
Total
$m
|
|
|
|
|
|
|
|
|
Franchise
and base management fees
|
840
|
247
|
87
|
-
|
1,174
|
|
Incentive
management fees
|
13
|
90
|
48
|
-
|
151
|
|
Central
revenue
|
-
|
-
|
-
|
185
|
185
|
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
Revenue
from fee business
|
853
|
337
|
135
|
185
|
1,510
|
|
Revenue
from owned, leased and managed lease hotels
|
187
|
386
|
-
|
-
|
573
|
|
|
_____
|
_____
|
_____
|
_____
|
_____
|
|
|
1,040
|
723
|
135
|
185
|
2,083
|
|
|
_____
|
_____
|
_____
|
_____
|
|
|
System
Fund revenues
|
|
|
|
|
1,373
|
|
Reimbursement
of costs
|
|
|
|
|
1,171
|
|
|
|
|
|
|
_____
|
|
Total revenue
|
|
|
|
|
4,627
|
|
|
|
|
|
|
_____
|
|
|
Contract assets
Contract assets are recorded in respect of key money payments; the
difference, if any, between the initial face and market value of
loans made to owners; and the value of payments under performance
guarantees.
At 31 December 2020, the amount of performance guarantees included
within trade and other payables was $1m (2019: $2m) and the maximum
payout remaining under such guarantees was $72m (2019: $85m). In
estimating amounts due under performance guarantees, the Group has
considered ‘force majeure’ provisions within its
management agreements.
|
5.
|
Exceptional items
The
Group discloses certain financial information both including and
excluding exceptional items. The presentation of information
excluding exceptional items allows a better understanding of the
underlying trading performance of the Group and provides
consistency with the Group’s internal management reporting.
Exceptional items are identified by virtue of their size, nature,
or incidence so as to facilitate comparison with prior periods and
to assess underlying trends in the financial performance of the
Group and its reportable segments. In determining whether an event
or transaction is exceptional, management considers quantitative as
well as qualitative factors.
In the
Group’s interim financial statements as at 30 June 2020,
exceptional items included an impairment of trade receivables of
$22m which had been determined to be directly as a result of
Covid-19. The subsequent improvement in cash collection and the
considerations required to identify whether subsequent expected
credit losses over the extended period of the pandemic are due to
Covid-19 have resulted in none of the full year $40m impairment of
trade receivables being presented within exceptional
items.
|
|
|
2020
$m
|
2019
$m
|
|
Operating exceptional items:
|
|
|
|
|
Cost of
sales:
|
|
|
|
|
Derecognition
of right-of-use assets and lease liabilities (a)
|
22
|
-
|
|
|
Gain
on lease termination (b)
|
30
|
-
|
|
|
Provision
for onerous contractual expenditure (c)
|
(10)
|
-
|
|
|
Reorganisation
costs (d)
|
(8)
|
-
|
|
|
|
_______
|
_______
|
|
|
|
34
|
-
|
|
|
Administrative
expenses:
|
|
|
|
|
Reorganisation
costs (d)
|
(19)
|
(20)
|
|
|
Acquisition
and integration costs (e)
|
(6)
|
(7)
|
|
|
Litigation
(f)
|
(5)
|
(28)
|
|
|
|
_______
|
_______
|
|
|
|
(30)
|
(55)
|
|
|
|
|
|
|
|
Impairment
loss on financial assets (g)
|
(48)
|
-
|
|
|
|
|
|
|
|
Other
impairment charges:
|
|
|
|
|
Goodwill
(g)
|
-
|
(49)
|
|
|
Management
agreements (g)
|
(48)
|
(50)
|
|
|
Property,
plant and equipment (g)
|
(90)
|
-
|
|
|
Right-of-use
assets (g)
|
(16)
|
(32)
|
|
|
Associates
(g)
|
(19)
|
-
|
|
|
Contract
assets (g)
|
(53)
|
-
|
|
|
|
_____
|
_____
|
|
|
|
(226)
|
(131)
|
|
|
|
_____
|
_____
|
|
Operating exceptional items
|
(270)
|
(186)
|
|
|
|
|
|
Financial expenses (h)
|
(14)
|
-
|
|
|
|
|
|
Fair value gains on contingent purchase consideration
(i)
|
21
|
38
|
|
|
|
_____
|
_____
|
|
Exceptional items before tax
|
(263)
|
(148)
|
|
|
|
_____
|
_____
|
|
Tax:
|
|
|
|
|
Tax on
exceptional items (j)
|
52
|
20
|
|
|
|
_____
|
_____
|
|
(a) Derecognition of right-of-use assets and lease
liabilities
The UK
portfolio leases and two German hotel leases contain guarantees
that the Group will fund any shortfalls in lease payments up to an
annual and cumulative cap. Previously the minimum
‘in-substance fixed’ lease payments were estimated to
be equal to the cumulative amount guaranteed under the lease
agreements and therefore a right-of-use asset and corresponding
lease liability equal to the guaranteed amount were recognised. The
unprecedented impact of Covid-19 and subsequent restrictions have
resulted in a reassessment of the estimate of ‘in-substance
fixed’ lease payments, as there is no floor to the rent
reductions applicable under these leases, and the circumstances in
which no rent would be payable are no longer considered to be
remote.
As a
result, the right-of-use assets ($49m) and lease liabilities ($71m)
associated with these leases have been derecognised as they are now
considered to be fully variable. This resulted in a net gain of
$22m.
(b) Gain on lease termination
On 14
December 2020, as a consequence of the termination of a portfolio
of management agreements with Services Properties Trust
(‘SVC’), the lease of InterContinental San Juan was
terminated. The right-of-use assets ($60m) and lease liabilities
($90m) associated with this hotel have therefore been derecognised,
resulting in a net gain of $30m.
(c) Provision for onerous capital expenditure
Under
the terms of the UK portfolio leases, the Group is committed to
certain items of contractual expenditure. A $10m provision was
recognised to the extent the costs of the remaining contractual
expenditure exceeded the future economic benefits expected to be
received under the leases.
(d) Reorganisation costs
In
2020, reorganisation costs relate to the UK portfolio, other owned
and leased hotels and a corporate reorganisation completed in the
year reflecting the reassessment of near-term priorities and the
resources needed to support reduced levels of demand. An additional
$20m relating to the corporate restructuring was charged to the
System Fund.
In
2019, related to a comprehensive efficiency programme to fund a
series of new strategic initiatives to drive an acceleration in
IHG’s future growth. The programme was completed in 2019 and
no further restructuring costs related to this programme were
incurred in 2020. The 2019 cost included consultancy fees of $6m
and severance costs of $8m. An additional $28m was charged to the
System Fund.
|
|
(e) Acquisition and integration costs
In
2019, primarily related to the acquisition of Six Senses and in
2020, relates to the integration of that business into the
operations of the Group.
|
|
(f) Litigation
In
2020, relates to the cost of settlement of $14m agreed in the year
in respect of a lawsuit in the EMEAA region, offset primarily by
the partial release of the 2019 provision related to a lawsuit in
the Americas region which has been settled in the year. In 2019,
primarily represented management’s best estimate of the
settlement in respect of the Americas lawsuit, together with the
cost of an arbitration award made against the Group in the EMEAA
region.
|
|
(g) Impairment of non-current assets
|
|
Discounted
cash flow techniques were used in most cases to calculate the
recoverable amount of non-current assets, and in certain cases
external valuers were engaged to assess fair value less costs of
disposal.
Where
internal valuations were performed, management used economic and
travel demand forecasts from Oxford Economics and Tourism
Economics, respectively. These were overlaid with the Group’s
expectation of how the pace of a vaccine rollout will result in an
industry recovery, together with management’s experience of
recovery periods following previous crises. Management assumed that
vaccines will become widely available during 2021, which will begin
to have a positive impact on travel in the second half of the year.
Further adjustments were made to reflect the Group’s
performance relative to the industry. Group RevPAR is forecast to
recover to 90% of 2019 levels by the end of 2023, and to 100% by
2025. The five-year recovery period from 2021 assumes that
corporate travel recovers slowly as businesses control costs in the
wake of the pandemic and that international travel and groups
business takes longer to recover due to ongoing social distancing
measures. The projections used are consistent with those used for
Group planning purposes and for going concern and viability
assessments. Cash flows beyond the five-year period are
extrapolated using terminal growth rates that do not exceed the
average long-term growth rates for the relevant
markets.
There
was no impairment of goodwill and indefinite life brands in
2020.
Impairment
of management agreements includes $41m relating to the Six Senses
management agreements acquired in 2019.
Impairment
of property, plant and equipment includes $50m relating to the UK
portfolio and $35m relating to three premium-branded hotels in
North America.
Impairment
of right-of-use assets includes $11m relating to the US corporate
headquarters (see below) and $5m relating to a hotel in the EMEAA
region.
Impairment
of associates includes $13m relating
to the Barclay associate which is presented net of a $4m fair value
gain on a put option over part of the Group’s investment, due
to the interaction between the value of the option and the value of
the associate investment. The investment value and option value are
presented separately in the Group statement of financial position;
the put option value of $4m is presented within derivative
financial instruments. The remaining impairment relates to three
other associate investments in the Americas region.
As a
response to workplace efficiency studies conducted in 2019, the
reorganisation completed in 2020 and the anticipated impact of
Covid-19 on working habits, in 2020 management approved a decision
to sublet, and commenced marketing of, approximately half of the
space in the Group’s US corporate headquarters. The corporate
workforce will be consolidated in the retained space and the area
to be sublet is expected to be vacated in the first half of 2021.
The sublease rentals are expected to be lower than the head lease
rentals which, together with the impact of the expected time taken
and costs incurred to sublet the space, result in the recoverable
value of the assets being significantly below carrying value. This
has resulted in a total impairment charge to right-of use assets
and property, plant and equipment of $50m. $37m of this impairment
charge was borne by the System Fund in line with existing
principles for cost allocation relating to this
facility.
Impairment
of trade deposits and loans (included within other financial assets
on the Group statement of financial position), and of contract
assets, primarily relates to deposits of $66m made to SVC in
connection with a portfolio of management agreements. The deposits
were non-interest-bearing and repayable at the end of the
management agreement terms and were therefore previously held at a
discounted value, with the balance on initial recognition recorded
as a contract asset. As a result of Covid-19 the deposit was used
in the first six months of 2020 to fund owner returns and was not
expected to be recoverable. The deposit ($33m) and associated
contract asset ($33m) were therefore impaired in full at 30 June
2020. The management agreements were subsequently terminated on 30
November. A further $20m impairment of contract assets relates to
the Americas ($9m) and EMEAA ($11m) regions.
|
|
In
2019, the impairments of goodwill and right-of-use assets related
to the UK portfolio. The impairment of management agreements
related to Kimpton following a re-assessment of their recoverable
amount based on value in use calculations.
|
|
(h) Financial expenses
In
October 2020 management undertook actions to strengthen liquidity
and extend the maturity profile of the Group’s debt. The
Group issued a tender offer for its £400m 3.875% 2022 bonds
resulting in a repayment of £227m, and concurrently issued
€500m 1.625% 2024 bonds and £400m 3.375% 2028 bonds. The
exceptional charge includes the premium on repayment and associated
write-off of fees and discount.
(i) Fair value gains on contingent purchase
consideration
Contingent
purchase consideration relates to the UK portfolio and comprises
the present value of the above-market element of the expected lease
payments to the lessor. The above-market assessment is determined
by comparing the expected lease payments as a percentage of
forecast hotel operating profit (before depreciation and rent) with
market metrics, on a hotel by hotel basis. A fair value gain of
$21m was recognised in the period (2019: $38m), arising from a
reduction in expected future rentals payable such that there is no
remaining above-market element.
|
|
(j) Tax on exceptional items
The tax
impacts of the exceptional items are shown in the table
below:
|
|
|
2020
|
2020
|
|
2019
|
2019
|
|
Current
Tax
|
Deferred
Tax
|
|
Current
Tax
|
Deferred
Tax
|
|
$m
|
$m
|
|
$m
|
$m
|
Derecognition
of right-of-use assets and lease liabilities
|
-
|
(4)
|
|
-
|
-
|
Provision
for onerous contractual expenditure
|
-
|
2
|
|
-
|
-
|
Reorganisation
costs
|
3
|
2
|
|
4
|
-
|
Acquisition
and integration costs
|
1
|
-
|
|
-
|
-
|
Litigation
|
-
|
-
|
|
-
|
6
|
Impairment
of financial assets
|
4
|
2
|
|
-
|
-
|
Other
impairment charges
|
6
|
37
|
|
-
|
18
|
Financial
expenses
|
-
|
3
|
|
-
|
-
|
Fair
value gains on contingent purchase consideration
|
-
|
(4)
|
|
-
|
(6)
|
Adjustments
in respect of prior years
|
-
|
-
|
|
-
|
(2)
|
|
______
|
______
|
|
______
|
______
|
|
14
|
38
|
|
4
|
16
|
|
_____
|
______
|
|
_____
|
______
|
Total
current and deferred tax
|
|
52
|
|
|
20
|
|
|
_____
|
|
|
_____
|
|
|
|
|
|
|
|
6.
|
Tax
|
|
The tax
credit/charge on profit from continuing operations, excluding the
impact of exceptional items (note 5) and System Fund, has been
calculated using a tax rate of 38% (2019: 24%).
|
|
Year ended 31 December
|
2020
|
2020
|
2020
|
2019
|
2019
|
2019
|
|
|
Profit/(loss)
$m
|
Tax
$m
|
Tax rate
|
Profit/(loss)
$m
|
Tax
$m
|
Tax rate
|
|
|
|
|
|
|
|
|
|
Before
exceptional items and System Fund
|
85
|
(32)
|
38%
|
739
|
(176)
|
24%
|
|
System
Fund
|
(102)
|
-
|
|
(49)
|
-
|
|
|
Exceptional
items (note 5)
|
(263)
|
52
|
|
(148)
|
20
|
|
|
|
_____
|
_____
|
|
_____
|
_____
|
|
|
|
(280)
|
20
|
|
542
|
(156)
|
|
|
|
_____
|
_____
|
|
_____
|
_____
|
|
|
Analysed
as:
|
|
|
|
|
|
|
|
|
UK
tax
|
|
36
|
|
|
(17)
|
|
|
|
Foreign
tax
|
|
(16)
|
|
|
(139)
|
|
|
|
|
_____
|
|
|
_____
|
|
|
|
|
20
|
|
|
(156)
|
|
|
|
|
_____
|
|
|
_____
|
|
7.
|
(Loss)/earnings per ordinary share
|
|
Continuing and total operations
|
2020
|
2019
|
|
Basic (loss)/earnings per ordinary share
|
|
|
|
(Loss)/profit
available for equity holders ($m)
|
(260)
|
385
|
|
Basic
weighted average number of ordinary shares (millions)
|
182
|
183
|
|
Basic
(loss)/earnings per ordinary share (cents)
|
(142.9)
|
210.4
|
|
|
_____
|
_____
|
|
Diluted (loss)/earnings per ordinary share
|
|
|
|
(Loss)/profit
available for equity holders ($m)
|
(260)
|
385
|
|
Diluted
weighted average number of ordinary shares (millions)
|
182
|
184
|
|
Diluted
(loss)/earnings per ordinary share (cents)
|
(142.9)
|
209.2
|
|
|
_____
|
_____
|
|
|
|
|
|
Adjusted earnings per ordinary share*
|
|
|
|
(Loss)/profit
available for equity holders ($m)
|
(260)
|
385
|
|
Adjusting
items:
|
|
|
|
System
Fund revenues and expenses ($m)
|
102
|
49
|
|
Interest
attributable to the System Fund ($m)
|
(4)
|
(18)
|
|
Operating
exceptional items ($m) (note 5)
|
270
|
186
|
|
Exceptional
financial expenses ($m) (note 5)
|
14
|
-
|
|
Change
in fair value of contingent purchase consideration
($m)
|
(13)
|
(27)
|
|
Tax on
exceptional items ($m) (note 5)
|
(52)
|
(20)
|
|
|
_____
|
_____
|
|
Adjusted
earnings ($m)
|
57
|
555
|
|
|
_____
|
_____
|
|
|
|
|
|
Basic
weighted average number of ordinary shares (millions)
|
182
|
183
|
|
Adjusted
earnings per ordinary share (cents)
|
31.3
|
303.3
|
|
|
_____
|
_____
|
|
Adjusted diluted earnings per ordinary share
|
|
|
|
Adjusted
earnings ($m)
|
57
|
555
|
|
Diluted
weighted average number of ordinary shares (millions)
|
182
|
184
|
|
Adjusted
diluted earnings per ordinary share (cents)
|
31.3
|
301.6
|
|
|
_____
|
_____
|
|
|
|
|
|
* See
the Use of Non-GAAP measures section in the Business
Review.
|
|
|
|
The
diluted weighted average number of ordinary shares is calculated
as:
|
|
|
2020
millions
|
2019
millions
|
|
Basic
weighted average number of ordinary shares
|
182
|
183
|
|
Dilutive
potential ordinary shares
|
-
|
1
|
|
|
_____
|
_____
|
|
|
182
|
184
|
|
|
_____
|
_____
|
|
|
|
|
|
The
effect of the notional exercise of outstanding ordinary share
awards is anti-dilutive in 2020 and therefore has not been included
in the diluted earnings per share calculation.
|
8.
|
Dividends
|
|
|
2020
cents per share
|
2019
cents per share
|
2020
$m
|
2019
$m
|
|
Paid
during the year:
|
|
|
|
|
|
|
Final
(declared for previous year)
|
-
|
78.1
|
-
|
139
|
|
|
Interim
|
-
|
39.9
|
-
|
72
|
|
|
Special
|
-
|
262.1
|
-
|
510
|
|
|
_____
|
______
|
_____
|
_____
|
|
|
-
|
380.1
|
-
|
721
|
|
|
_____
|
______
|
_____
|
_____
|
|
|
|
|
|
|
|
On 20
March 2020, the Board withdrew its recommendation of a final
dividend in respect of 2019 of 85.9¢ per share, a payment of
which would have had a cash outflow of approximately $150m in the
first half of 2020. A final dividend in respect of 2020 is not
proposed and there was no interim dividend for the year. The Board
will consider future dividends once visibility of the pace and
scale of market recovery has improved.
|
9.
|
Reconciliation of (loss)/profit for the year to cash flow from
operations before contract acquisition costs
|
|
|
2020
|
2019*
|
|
|
$m
|
$m
|
|
|
|
|
|
(Loss)/profit
for the year
|
(260)
|
386
|
|
Adjustments
for:
|
|
|
|
Net
financial expenses
|
140
|
115
|
|
Fair
value gains on contingent purchase consideration
|
(13)
|
(27)
|
|
Tax
(credit)/charge
|
(20)
|
156
|
|
Depreciation and
amortisation
|
110
|
116
|
|
System
Fund depreciation and amortisation
|
62
|
54
|
|
Impairment loss on
financial assets
|
88
|
8
|
|
System
Fund impairment loss on financial assets
|
24
|
12
|
|
Other
impairment charges (note 5)
|
226
|
131
|
|
System
Fund other impairment charges
|
41
|
-
|
|
Other
operating exceptional items (note 5)
|
(4)
|
55
|
|
System
Fund other operating exceptional items (note 5)
|
20
|
28
|
|
Share
of losses of associates and joint ventures
|
14
|
3
|
|
Share-based
payments cost
|
32
|
42
|
|
Dividends from
associates and joint ventures
|
2
|
7
|
|
Increase in
contract costs
|
(2)
|
(11)
|
|
Increase in
deferred revenue
|
1
|
57
|
|
Utilisation of
provisions, net of charge, excluding exceptional items
|
16
|
7
|
|
Retirement benefit
contributions, net of costs
|
(3)
|
(3)
|
|
Changes
in net working capital
|
(30)
|
(133)
|
|
Cash
flows relating to exceptional items
|
(87)
|
(55)
|
|
Contract assets
deduction in revenue
|
25
|
21
|
|
Other
movements in contract assets
|
(7)
|
(1)
|
|
Other
items
|
(3)
|
-
|
|
|
_____
|
_____
|
|
Total
adjustments
|
632
|
582
|
|
|
_____
|
_____
|
|
Cash flow from operations before contract acquisition
costs
|
372
|
968
|
|
|
_____
|
_____
|
* Amended for
presentational changes (see note 1).
|
|
10.
|
Net debt
|
|
|
2020
|
2019
|
|
|
$m
|
$m
|
|
|
|
|
|
Cash
and cash equivalents
|
1,675
|
195
|
|
Loans
and other borrowings – current
|
(869)
|
(87)
|
|
Loans
and other borrowings – non-current
|
(2,898)
|
(2,078)
|
|
Lease
liabilities – current
|
(34)
|
(65)
|
|
Lease
liabilities – non-current
|
(416)
|
(595)
|
|
Lease
liabilities – classified as held for sale
|
-
|
(20)
|
|
Derivative
financial instruments hedging debt values
|
13
|
(15)
|
|
|
______
|
______
|
|
Net debt*
|
(2,529)
|
(2,665)
|
|
|
______
|
______
|
|
|
|
|
|
* See
the Use of Non-GAAP measures section in the Business
Review.
|
|
|
|
In the
Group statement of cash flows, cash and cash equivalents is
presented net of $51m bank overdrafts (2019: $87m).
|
|
Cash
and cash equivalents includes $5m (2019: $6m) restricted for use on
capital expenditure under hotel lease agreements and therefore not
available for wider use by the Group. An additional $44m (2019:
$16m) is held within countries from which funds are not currently
able to be repatriated to the Group’s central treasury
company.
Current
loans and other borrowings includes £600m ($818m) commercial
paper issued under the UK Government’s CCFF, maturing on 16
March 2021.
|
|
The
Group’s $1,275m revolving syndicated bank facility and $75m
revolving bilateral facility were both undrawn at 31 December 2020
(2019: $125m drawn), providing available committed facilities of
$1,350m and total liquidity of $2,925m. During 2020, the maturities
of both facilities have been extended for 18 months to September
2023.
|
|
The
Syndicated and Bilateral Facilities contain two financial
covenants: interest cover and a leverage ratio. Covenants are
monitored on a ‘frozen GAAP’ basis excluding the impact
of IFRS 16 and are tested at half year and full year on a trailing
12-month basis.
|
|
The
interest cover covenant requires a ratio of Covenant
EBITDA:Covenant interest payable above 3.5:1 and the leverage ratio
requires Covenant net debt:Covenant EBITDA of below 3.5:1. Covenant
EBITDA is calculated (on a frozen GAAP basis) as operating profit
before exceptional items, depreciation and amortisation and System
Fund revenues and expenses. These covenants have been waived from
30 June 2020 through 31 December 2021 and have been relaxed for
test dates in 2022. A minimum liquidity covenant of $400m has been
introduced which will be tested at each test date up to and
including 31 December 2022. For covenant purposes, liquidity is
defined as unrestricted cash and cash equivalents (net of bank
overdrafts) plus undrawn facilities with a remaining term of at
least six months.
|
|
Amended covenant test levels for Syndicated and Bilateral
Facilities
|
|
|
2019 and prior
|
30 June 2020-31 December 2021
|
30 June
2022
|
31 December 2022
|
30 June
2023
|
Leverage
|
<3.5x
|
waived
|
<7.5x
|
<6.5x
|
<3.5x
|
Interest
cover
|
>3.5x
|
waived
|
>1.5x
|
>2.0x
|
>3.5x
|
Liquidity
|
n/a
|
$400m
|
$400m
|
$400m
|
n/a
|
|
|
|
|
|
|
|
|
The
following table details performance against covenant tests. The
measures used in these tests are calculated on a frozen GAAP basis
and do not align to the values reported by the Group as Non-GAAP
measures:
|
|
|
|
|
|
2020
31 December
|
2019
31 December
|
|
Covenant
EBITDA
|
|
|
|
272
|
897
|
|
Covenant
net debt
|
|
|
|
2,375
|
2,241
|
|
Covenant
interest payable
|
|
|
111
|
99
|
|
Leverage
|
|
|
|
8.73
|
2.50
|
|
Interest
cover
|
|
|
|
2.45
|
9.06
|
|
Liquidity
|
|
|
|
2,925
|
n/a
|
11.
|
Movement in net debt
|
|
|
2020
|
2019
|
|
|
$m
|
$m
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents, net of
overdrafts
|
1,430
|
(500)
|
|
Add
back financing cash flows in respect of other components of net
debt:
|
|
|
|
Principal element
of lease payments
|
65
|
59
|
|
Issue
of long-term bonds, including effect of currency swaps
|
(1,093)
|
-
|
|
Issue
of commercial paper
|
(738)
|
-
|
|
Repayment of
long-term bonds
|
290
|
-
|
|
Decrease/(increase)
in other borrowings
|
125
|
(127)
|
|
|
______
|
______
|
|
Decrease/(increase)
in net debt arising from cash flows
|
79
|
(568)
|
|
|
|
|
|
Other
movements:
|
|
|
|
|
Lease
liabilities
|
144
|
(43)
|
|
|
Increase
in accrued interest
|
(5)
|
(7)
|
|
|
Acquisitions
and disposals
|
19
|
(25)
|
|
|
Exchange
and other adjustments
|
(101)
|
(57)
|
|
|
______
|
______
|
|
Decrease/(increase) in net debt
|
136
|
(700)
|
|
|
|
|
|
Net
debt at beginning of the year
|
(2,665)
|
(1,965)
|
|
|
______
|
______
|
|
Net debt at end of the year
|
(2,529)
|
(2,665)
|
|
|
______
|
______
|
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.
Cuttell
|
|
Name:
|
F.
CUTTELL
|
|
Title:
|
ASSISTANT
COMPANY SECRETARY
|
|
|
|
|
Date:
|
23 February 2021
|
|
|
|
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