InterContinental Hotels Group PLC (IHG) 2006 Q2 法說會逐字稿

Thank you for standing by. Welcome to the InterContinental Hotels Group interim results conference call. (OPERATOR INSTRUCTIONS). I must advise you that this conference is being recorded today, Tuesday, August 22, 2006. I would now like to turn the conference over to your speaker today, Paul Edgecliffe-Johnson, Head of Investor Relations. Please go ahead, sir.

Good morning. This announcement contains certain forward-looking statements as defined under U.S. law Section 21E of the Securities Exchange Act of 1934. These forward-looking statements can be identified by the fact that they do not direct to historic or current facts. Forward-looking statements often use words, such as target, expect, intend, believe, or other words of similar meaning. By their nature, forward-looking statements are inherently predictive, speculative, and involve risk and uncertainty.

There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by such forward-looking statements. Factors that could affect the business and the financial results are described in risk factors in the InterContinental Hotels Group PLC Annual Report on Form 20-F, filed with the United States Securities and Exchange Commission. I will now pass you over to our Chief Executive, Andy Cosslett.

Good morning, everybody. This is Andy Cosslett. I'm here this morning with Richard Solomons, our Finance Director. You will have seen our results for the first half of 2006. I am going to review just some of the highlights for the period. Richard and I will then be very happy to take any questions.

IHG had a very strong first half in 2006. Each of our regions performed well with the Americas in particular outperforming a strong market. We made considerable progress towards our goal of adding 50,000 to 60,000 net organic rooms by year-end 2008. At June 30, 2006, our room development pipeline stood at 130,100 rooms, translating into over 1,000 hotels under development as our brands continue to garner strong interest from owners all around the world.

In the half year to June 30, continuing revenue was up 16% to 394 million pounds sterling. Profits, EPS, and RevPAR all grew strongly. Operating profits in our continuing activities were up 30%. EPS in our continuing business on an adjusted basis was up 132%. Across the group, RevPAR grew 11.2%. In Asia-Pacific, RevPAR was up 9.3% with greater China RevPAR growing at 12.8%. In the EMEA region, RevPAR rose 11.5%, driven by increased occupancy and an 8.5% increase in rates. RevPAR in the Americas was up 11.5% with InterContinental, Crowne Plaza, Holiday Inn, Holiday Inn Express, and Candlewood Suites all outperforming their market segments.

Our room count increased by 3,469 in the period, bringing our total number of rooms to over 541,000 now, the largest in the world. 2006 as a whole, we expect to add roughly 10,000 rooms. We added 21,580 rooms to our pipeline, and this now stands at a record 130,100 rooms -- 80% of which we expect to open by the end of the year 2008.

The IHG system is a source of great strength for our group, driving value for owners through reservation channels; through our Web scheme; and the Priority Club Rewards program, which is the largest in the industry. Again, we had an excellent performance here with 48% of total room revenue booked through our reservation channels. Internet revenues continue -- increased to 17% of total rooms revenue; 86% of this came from IHG's own websites.

We continue to make great strides in China. As of today, we have 57 hotels in China with 16 hotels, over 8,000 rooms signed in the first half, including 4 InterContinentals, 1 Crowne Plaza, 7 Holiday Inns, and 4 Holiday Inn Expresses.

In the half, we made further progress on our asset disposal program. We now have sold 175 hotels, which has released in total some 3 billion pounds sterling in low-returning capital. On the back of this, IHG has now returned 2.6 billion pounds to shareholders since April 2003. In the last quarter alone, we completed a second share buyback of 250 million pounds, began a third share buyback of 250 million pounds, and returned 497 million pounds to shareholders through a special dividend. An announcement relating to quantum and timing of further returns will be made no later than IHG's preliminary results in February 2007. We have increased the interim dividend 11% to 5.1% per ordinary share; this is well ahead of inflation.

We have also significantly strengthened the IHG organization worldwide with clearer reporting relationships; more accountability in the regions; and more business development staff on the ground in the Americas, Asia Pacific, and EMEA. Summing up, the performance in the first half was very strong. Pipeline and room adds are developing as planned. IHG is a tighter and more focused worldwide organization. We're looking forward to a great finish to 2006 and an even better 2007. We are now very happy to take your questions. Thanks very much.

(OPERATOR INSTRUCTIONS). David Katz, CIBC World Markets.

Congrats on a good quarter. I was looking through some of the supplemental information, and I see that you have RevPAR growth by months through July. I observed that July in general, irrespective of the InterContinentals, was weaker than just about any other month for the year. I was wondering if you could give us some additional color on how August is looking so far. We have been checking in with our industry contacts along those lines and would love yours as well.

We see it trending pretty strong at the moment. I have to say, we don't have precise numbers that we're giving out in August. But we've continued to see operating performance generally around the world through the month of August. July was a tad softer, but it really wasn't anywhere that we didn't expect it to be I think. There were no bad surprises for us in the numbers for July. It was a bit patchy. But generally speaking, we thought they were another good set of RevPAR numbers. And any difference just really reflects local conditions. Richard, do you have anything to say?

Yes, and I think, David, just in terms of booking pace and room rates in our second half -- ahead of where we were last year. But don't forget as we get into the second half, then we're lapping more difficult comps as we had a very good, strong second half last year and it will be the same thing in '07. So we're not seeing any slowdown. What we're seeing is continued very strong performance but against stronger comps.

I think just one last thing to add a final comment on that is if you actually look at the Middle East, which obviously is an area where people have got some concern, to the end of June, our RevPAR was up 23% for the whole region and in July it was up 27%. So even though there's issues in the Middle East, we continue to see fantastic business performance there, which again just really speaks to the point that it's a bit patchy and variable in certain parts of the world. But underlying trends look good.

So just to be clear -- in the U.S., would it be fair to say that August is better, worse or directionally better or worse or the same as July?

Well we're not making particular comments on August, given where we are in the month. Our overall trading outlook looks good for August. We're having no -- we are seeing no bad results. If anything, we look more positive and we appreciate it. But we're not being specific about the month of August. We continue to think it's a pretty positive outlook in America, and we see nothing in our forward book that gives us any cause for concern.

One last one and then I will give someone else a chance. But there's some commentary on the front page of your release that discusses capital return. I wonder if you could comment on the next capital return, which I assume we're supposed to find out the quantity and form and timing of which next February. Could you just I guess elaborate a bit on your thinking as to why we're waiting until February? Is there some question about the – whether or not the capital will be returned in its entirety or in parts or what's going on there?

I will try to elaborate, and perhaps again Richard can make another comment. But our position is simply this. We've returned 2.75 billion pounds so far, which to say again is more than the market covered the Company when we announced the merger back in 2003. So we've clearly I think lived up to our commitments to do our best by the shareholders to return wherever we could these funds.

We don't want an inefficient balance sheet. We're looking at the debt position clearly as we go on. I think for us, the main point for us now is to say, look, we haven't actually got this money in the bank yet from the sale of the last set of assets. We're slightly premature. This is the last big chunk of proceeds that will come from the asset disposal process. And therefore, it's important that we take a very considered and thoughtful step as we decide how to use that because it will be our last real piece of flexibility we've got to manage capital structure, the business, etc.

So we are looking at that very hard. And as I said, I think we've made the commitment today to further return of funds, and I think that continues in good faith the commitment we've made on that front. It may well be before February that we can say something in terms of what we intend to do. But at the latest, we've said it will be at the finals next February. And I don't think that's unreasonable, given our track record today on the return of funds front.

(OPERATOR INSTRUCTIONS). We have no further questions at this time, sir. Please continue.

Thanks, everybody, for your attention this morning. I look forward to addressing you again with hopefully continuation of this good performance at the moment. Cheerio. Bye-bye.

That does conclude our conference for today. Thank you for participating. You may all disconnect.