InterContinental Hotels Group PLC (IHG) 2007 Q1 法說會逐字稿

Thank you for standing by and welcome to the IHG Q1 results conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session [OPERATOR INSTRUCTIONS]. I must advise you that this conference is being recorded today, Wednesday, May 9, 2007.

This announcement contains certain forward-looking statements as defined under the 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 relate to historical or current facts. Forward-looking statements often use words such as target, expect, intend, believe or other words of similar meaning.

By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of forward-looking factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Factors that could affect the business and the financial results are described in the risk factors in the InterContinental Hotels Group PLC Annual Report on Form 20-F filed with the U.S. State Securities and Exchange Commission.

I would now like to hand the conference to your speaker today, Richard Solomons. Please go ahead sir.

Thank you for that. Good morning, ladies and gentlemen. Thanks for joining the call. This is Richard Solomons, Finance Director of IHG, and I'm joined by Head of Investor Relations Paul Edgecliffe-Johnson. I would like to briefly highlight a few key points from our Q1 results. Then, we'll be more than happy to take your questions.

The Group had a good first quarter. Trading was healthy around the world and signings of new hotels continued at record pace. Our pipeline now stands at almost 170,000 rooms, which is equivalent to 30% of our existing hotel room count. This, with our strong growth in net room additions, positions us well to exceed our goal of adding 50,000 to 60,000 net room additions by the end of 2008.

The highlights of the quarter are as follows. Total gross revenue, the most important indicator of the growth of our business, increased by 13% on a constant currency basis to nearly $4b. Global RevPAR increased 7.6% on a constant currency basis. Continuing operating profit increased 5% to GBP44m, but was up 19% at constant exchange rates. Continuing earnings per share increased 9% to GBP0.076.

Regionally, EMEA saw the strongest performance, with RevPAR up 13%. Asia Pacific performed well, with RevPAR up 12.5%, with China delivering over 8% RevPAR growth. In the U.S., our RevPAR increased 5.3%, outperforming the market, against a prior year comparable which included significant one-off business arising from Hurricane Katrina displacement. Rate growth was solid at 6.4% and occupancy levels improved through the quarter.

We saw a strong performance from our franchise business, with constant currency operating profit up 11%. Managed business operating profit increased 5% at constant currency, reflecting the set-up costs of our JV with ANA in Japan and investment in development teams in key markets around the world.

We also saw a marked improvement in performance in our continuing owned and leased hotels. In Europe, the InterContinental Paris saw RevPAR increase over 15%, as it continues to build demand after its extensive renovation. The InterContinental London is now almost fully reopened and work is scheduled to complete in early June. The London market is strong and the hotel has already won a good book of business, leaving us positive for the performance of that hotel for the remainder of the year.

In the U.S., trading continued to ramp up at the InterContinental Boston, which has been open just four months, and which, as budgeted, lost $2m in the quarter. The InterContinental New York is driving strong rates and occupancy growth in a buoyant market and the InterContinental Atlanta is outperforming its competitors. The InterContinental Hong Kong also saw continued strong trading in the quarter.

Perhaps the best guide to the health of our business is the number of deals we sign on new hotels. During the quarter, we signed 22,631 rooms into our pipeline. In fact, at 170,000 rooms, our pipeline alone would now create the ninth largest hotel group in the world. We continued to see the benefit of a stronger InterContinental brand, with six more signings in the quarter, making the global pipeline a record 40 hotels. Crowne Plaza also had a very successful quarter, signing over 5,000 rooms, including eight hotels in the U.S. and nine in Asia Pacific.

Looking at our openings, we opened over 8,000 rooms in the quarter and removed just over 6,000, as we continue to drive up the quality of the estate. Quarter one is typically the smallest quarter of the year for openings and we expect to see the number ramp up sharply through the year.

Central overheads were flat at GBP17m [sic - see press release]. As with last year, these costs are backend-weighted, and we still expect central overheads to grow at around the level of inflation in 2007.

During the quarter, we purchased 2m shares at a cost of GBP25m, almost completing the third GBP250m share buyback announced in 2006. The GBP700m special dividend with share consolidation is scheduled to be paid on June 15. On completion of this and the fourth share buyback of GBP150m, IHG will have returned GBP3.6b to shareholders since March 2004.

We have also announced today the appointment of Patrick Imbardelli, the Chief Executive of our Asia Pacific region, to the main IHG Board, with effect from July. His operational management skills are widely recognized and his knowledge of the Asia Pacific region is of particular value, given our strategic focus there. He is a most welcome addition to the Board.

Overall, this has been a very good quarter, with further progress being made towards our targets. We continue to have a positive outlook on the remainder of the year. Thank you, and Paul and I would now be happy to take any questions.

We will now begin the question and answer session. [OPERATOR INSTRUCTIONS]. We have no questions at this time. Please continue.

Well, thank you very much. I guess that was a relatively straight-forward set of results, so I appreciate no questions. Has one come up now, can I see?

Your first question comes from David Katz of CIBC World Markets. Please go ahead.

Morning. I just couldn't leave you all hanging.

Yes, I was waiting for your question, David.

Somebody had to dive in. I guess I'd like as much color as you can give us. And one of the more challenging aspects of the model has been, aside from comparability with the comings and goings, getting the net room adds right. And what visibility can you give us for the next couple of quarters, anyway, about, particularly in the Holiday Inn area, rooms coming out of the system? We've been just guessing at it, and to the degree that you can help us --

Yes, I think, in terms of removals, I certainly wouldn't move from what we said before, it being about 25,000 rooms a year removal this year and probably next year. And most of that is full service Holiday Inn in the U.S. And I think that's pretty much how we see it today.

In terms of adds and how you work that through, we've always been -- I think the industry tends to be backend-weighted in terms of adds, just activity that happens on construction in the summer and people focus on getting stuck in by the year end. So Q1 has always been a bit of a slower quarter for us and you saw that at the net level, with about 2,000 rooms.

So the rooms out have been relatively predictable. It's really the rooms in that are a little bit slower. Did I hear that right?

Yes, it tends to be a little easier to predict the rooms out, because a number of them come about as we look at the end of the license, for example, so we can be a little [clearer].

It's hard to be exact, because in the real estate world it's always hard to be exact. And obviously on the construction side there are months here and there. It's very hard to get to an exact date, which is why we have really -- We have focused on a three year target and we try and give guidance around the removals, but it's hard to predict exactly when the adds will come in.

And on top of the individual construction, you then have major conversions, as we did in the U.K. last month or actually the first day of this month, where we converted 11 Marriott Courtyards to Holiday Inns, and those tend to be lumpy. So I think the broad guidance stands.

One of the issues that's been on the streets' mind, I guess, the last 30 days or so, with your other competitors having already reported for the most part, is what is that gives you all confidence for the remainder of the year? There is certainly quite a bit of discussion out there about whether or not we are being let down slowly or whether or not this quarter was a bit of an anomaly. What is it that drives your confidence, particularly in the second half?

I've seen some of the competitors have been very focused on Q4. I don't think I've talked specifically about that. I think, for us, just as we look at the level of bookings that we've got and the booking pace that we have relative to last year, that gives us confidence. Occupancy has been pretty flat, but rates have been very strong. And as we just go through our normal demand forecasting processes in the hotel, then, as we look at the pace today versus the future bookings, we feel reasonably confident about it.

Are group bookings a -- I would imagine they are, right? They offer a bit more visibility. How are those year over year?

They do, but for us in our business, particularly given the bulk of our Americas business being mid-scale and a chunk of that limited service, group bookings is not nearly as big a deal as they are for some of the other big U.S. companies with very large hotels that rely on that. So I haven't got any particular view to give you on group bookings.

Right, okay. I think we're in pretty good shape. Thanks very much.

It's a pleasure.

[OPERATOR INSTRUCTIONS]. We have no further questions at this time. Please continue.

Okay, well, thank you very much, everybody. I appreciate you sparing the time.

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