SECURITIES AND EXCHANGE COMMISSION
 
 
Washington DC 20549
 
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For 18 February 2020
 
 
InterContinental Hotels Group PLC
(Registrant's name)
 
 
Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom
(Address of principal executive offices)
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
 
 
Form 20-F           Form 40-F
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
 
Yes           No
 
 
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable
 
 
 
 
 
EXHIBIT INDEX
 
99.1
Final Results dated 18 February 2020
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit No: 99.1
 
 IHG PLC - Full Year Results to 31 December 2019
 
 
Reported
 
Underlying5
 
2019
2018 Restated1
% Change
 
% Change
 
REPORTABLE SEGMENTS2
 
 
 
 
 
 
Revenue3
$2,083m
$1,933m
8%
 
6%
 
Revenue from fee business
$1,510m
$1,486m
2%
 
2%
 
Operating profit3
$865m
$832m
4%
 
6%
 
Fee margin4
54.1%
53.3%
0.8%pts
 
 
 
Adjusted EPS6
303.3¢
293.2¢
3%
 
KEY METRICS
 
 
 
 
 
 
 
GROUP RESULTS
 
 
 
 
●  $27.9bn total gross revenue (up 2%; 3% at CER)
Total revenue
$4,627m
$4,337m
7%
 
Operating profit
$630m
$582m
8%
 
●  (0.3)% global FY RevPAR
Basic EPS
210.4¢
183.7¢
15%
 
Total dividend per share
125.8¢
114.4¢
10%
 
●  (1.8)% global Q4 RevPAR
Net debt
$2,665m
$1,965m
36%
 
 
1 Restated following the adoption of IFRS 16 'Leases' from 1 January 2019 and the amended definitions for fee margin and adjusted EPS. 2 Excludes System Fund results, hotel cost reimbursements and exceptional items. 3  Comprises the Group's fee business and owned, leased, and managed lease hotels. 4 Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group's captive insurance company. 5 Reportable segment results excluding significant liquidated damages, current year acquisitions and stated at constant FY 2019 exchange rates (CER). 6 Calculated using results from Reportable Segments and Adjusted Interest, and excluding changes in fair value to contingent consideration.
 
 
●        Net system size growth of 5.6% (5.0% excluding Sands partnership in Macau SAR), the strongest in over a decade, with 65k room additions. Ongoing focus on the long-term health of established brands drove 18k removals, leaving 884k rooms across the global estate.
 
●      FY Comparable RevPAR: Global = (0.3)%; Americas = (0.1)% (US = (0.2)%); EMEAA = 0.3%; Greater China = (4.5)%. Performance was impacted by macro and geopolitical factors, increased supply growth ahead of demand in some markets, and ongoing unrest in Hong Kong SAR.
 
●          Operating profit from reportable segments up 4%; operating profit up 8% after System Fund result and exceptional items, which in 2019 include impairment charges to the UK leased portfolio and Kimpton management agreements.
 
●          Full year signings of 98k rooms (down 1% YoY), includes record performance in Greater China and EMEAA. Total pipeline now stands at 283k rooms.
 
●            Continued progress optimising our brand portfolio for future growth:
 
o  Six Senses: grown at pace with 10 signings since acquisition in February 2019; 18 properties now open
 
o  Kimpton: signed 11 further deals, growing portfolio to almost 100 open and pipeline hotels
 
o  Crowne Plaza: launched six flagship properties in key cities with new room and public space designs
 
o  voco: signed 33 hotels across 16 countries since launch; 12 open; plan to continue global expansion in 2020
 
o  Holiday Inn: opened >13k rooms; best ever full year performance for the brand
 
o  Holiday Inn Express: new guest room and public space designs open or committed to in >1,600 hotels
 
o  avid: 10 properties now open, with >80 more under construction or with planning approved
 
 
Keith Barr, Chief Executive Officer, IHG, said:
 
 
"Our performance in 2019 reflects the continued successful execution of our strategy, with the investments we're making in our brands, owner offer and enterprise capabilities accelerating net room openings and supporting sustainable long-term growth. These investments are being funded by our group-wide efficiency programme, which is on track to deliver $125m of annual savings, with the majority already realised and being reinvested across the business.
 
During the year we grew our estate by 5.6%, our highest rate in more than a decade, which helped deliver a 6% increase in underlying operating profit in a weaker RevPAR environment. We increased our ordinary dividend by 10%, and remain committed to returning surplus cash to our shareholders.
 
Led by strong demand for our established brands, we opened a record number of rooms, including our best ever performance for the Holiday Inn Brand Family, and we increased our share of signings in key markets globally. Future rooms growth will be further supported by our newer brands, with avid, Atwell Suites, Regent and Six Senses all attracting strong interest, and voco set to continue its global expansion in 2020, following an excellent performance in EMEAA.
 
Given the ongoing impact of coronavirus following the outbreak in China, our top priority remains the health and safety of our colleagues, guests and our partners on the ground, and we are doing all we can to support them at this difficult time.
 
The fundamentals of our industry remain strong, and our cash-generative, resilient fee-based model, underpinned by a commitment to operate a responsible business, gives us confidence to continue making the strategic investments that will drive our long-term growth."
 
Update on strategic initiatives
 
We continue to make good progress in executing against our strategic model to deliver industry leading net rooms growth over the medium term
 
●        Build and leverage scale - Building a leading position in the world's most attractive markets and highest opportunity segments, where our scale and resources matter most
-        Our focus on building scale has seen us accelerate our rate of net system size growth over the last three years from ~3% to 5.6%.
-        Over the same period, we have signed more than 280k rooms into our pipeline, which now stands at 283k rooms, or 32% of our system size, with 40% under construction.
-        Achieved our best ever openings performance for the Holiday Inn Brand Family, with 38k rooms (260 hotels) opened in 2019.
-        Record performance for openings and signings in Greater China, with 24k rooms (88 hotels) opened and a further 36k rooms (158 hotels) signed into the pipeline. Total open rooms now at 136k (470 hotels) with a further 85k (393 hotels) in the pipeline.
-        EMEAA also saw a record performance for signings, with 29k rooms (160 hotels) signed into the pipeline across 50 different countries.
 
●      Strengthen loyalty programme - Continuing to innovate IHG Rewards Club to build stronger and deeper relationships with our guests to drive high value revenue across our hotel estate
-     Loyalty room revenue contribution flat year-on-year. A better representation of the full value of our loyalty programme to deliver revenue to our hotels from both qualified and redeemed stays is loyalty room night contribution, which was ~46% for 2019.
-      Strengthened our ability to offer unique experiences to IHG Rewards Club members through a partnership with the US Open Tennis Championships, and enhanced our luxury and boutique offering to members through an exclusive partnership with world-renowned travel club, Mr & Mrs Smith.
-      InterContinental Alliance Resorts partnership with Sands China in Macau SAR and the extension of our alliance with The Venetian Resort Las Vegas gives guests the opportunity to earn and redeem points in highly desirable destinations.
-       Offering members greater flexibility and value for their points through trials of dynamic reward night pricing and the option to use loyalty points to pay for amenities and services during their stay.
 
●          Enhance revenue delivery - Driving a higher share of revenues through IHG's low cost booking channels to deliver better returns for our owners
-       IHG revenue delivery enterprise drove system contribution of 79%, up 4%pts in 3 years.
-     Digital (web and mobile) revenue up 7% in 2019 to $5.6bn, with $1.5bn of revenue from our award winning IHG mobile app (up 18% YoY).
-     Piloting enhanced functionality, including attribute pricing, for our cloud-based Guest Reservation System, with extensive trials through H1 2020.
-        IHG Connect, our seamless Wi-Fi guest login, is now implemented or being installed in >4,500 hotels globally, creating a platform for greater connectivity across the guest stay, such as our new digital in-room entertainment solution, IHG Studio.
 
●            Evolve owner proposition - Outstanding operational support and optimised owner returns to unlock growth
-        Embedded new processes in the Americas to help reduce the time taken from hotel signing to ground break to opening, and scaling across EMEAA and Greater China in 2020. We have seen an acceleration in ground break pace in the Americas during 2019, with a year-on-year increase in the number of Q4 openings.
-        Increasing demand for our franchise offer in Greater China, with ~90% of Holiday Inn Express deals signed under the franchise model in 2019. We now have 89 franchise hotels open and a further 169 signed into the pipeline in Greater China.
 
●          Optimise our portfolio of brands for owners and guests - Maintaining a strong portfolio of distinct and preferred brands, serving the highest growth segments in the largest markets
 
-        Mainstream - ($115bn global segment with $65bn growth potential to 2025)
 
-        Holiday Inn: Continue to roll out updated room and public space designs, with >180 hotels open or committed across the Americas, and our Open Lobby open or committed to in >90% of our Europe estate.
-        Holiday Inn Express: Our 'Formula Blue' guestroom and public space designs are now open or committed to in >1,600 hotels across the US and Canada.
-        Staybridge Suites & Candlewood Suites: Grown extended stay portfolio to >700 open hotels and are seeing strong owner interest in our transformational new room and public space design prototypes.
-        avid hotels: >200 hotels (20k rooms) signed since launch, and 10 hotels now open, with 54 hotels (5k rooms) signed in 2019. Over 80 more properties under construction or with planning approved.
-        Atwell Suites: 10 signings in 2019 following registration of franchise documents in September for our new all-suites upper midscale brand Atwell Suites, which targets an $18bn industry segment.
 
-        Upscale - ($40bn global segment with $20bn growth potential to 2025)
 
-        Crowne Plaza: Launched flagship properties, showcasing new room and public space designs, in six key cities around the world, driving significant uplifts in guest love and increased restaurant and bar revenue.
-        Hotel Indigo: Accelerating momentum for the brand with record number of rooms signed in 2019. We now have deals signed into the pipeline that will take Hotel Indigo to 16 new countries globally.
-        voco: 33 hotels signed across 16 countries in EMEAA (11k rooms in total) over the past 18 months. Planning on continuing to accelerate voco's global expansion in 2020.
 
-         Luxury - ($60bn global segment with $35bn growth potential to 2025)
 
-       Six Senses Hotels Resorts Spas: Ten new signings since February 2019 acquisition, including properties in London, the Galápagos Islands and the Loire Valley.
-        Regent Hotels & Resorts: Signed three new properties since acquisition and developed new brand hallmarks to position Regent in the top tier of luxury.
-        InterContinental Hotels & Resorts: Reinforced position as largest global luxury hotel brand with nine openings in 2019, including the InterContinental Hayman Island, Australia and the InterContinental Maldives.
-        Kimpton Hotels & Restaurants: Global expansion continues with the opening of two further properties in the UK and 11 signings globally in 2019, taking combined system and pipeline to almost 100 hotels.
 
●            Commitment to operate a responsible business - Providing True Hospitality for everyone
-       Made further progress in 2019 to reduce plastic waste, including being the first global hotel company to announce our commitment to eliminate bathroom miniatures across our entire estate during 2021.
-       Committing (a) to a Science Based Target to reduce our greenhouse gas emissions, and (b) to implement the recommendations of the Task Force on Climate-related Financial Disclosures.
-        Advancing our existing water stewardship program by becoming a signatory to the CEO Water Mandate.
-        Named as one of the Best Places to Work for LGBTQ Equality by the Human Rights Campaign Foundation for the sixth consecutive year and became a member of The Valuable 500.
 
 
Americas - Full year US RevPAR performance in line with the segments in which we compete
 
 
 
 
Comparable RevPAR decreased 0.1% (Q4: down 1.6%), with 0.2% ADR growth offset by lower occupancy. US RevPAR was down 0.2% for the year with our performance in line with the segments in which we compete. The 1.7% decline in the fourth quarter was driven by ongoing softness in small groups business, which impacted our Holiday Inn and Crowne Plaza brands, along with increased room supply in the Upper Midscale segment. Canada was down 1% (Q4: down 3%), impacted by weaker corporate and group business in Ontario and Alberta. Latin America and the Caribbean were up 6% (Q4: up 4%), with strong performances in Brazil and Colombia. Mexico RevPAR was down 2% (Q4: down 2%).
 
Reported revenue1 of $1,040m was down 1% against the prior year (also down 1% at CER) and reported operating profit1 of $700m increased 4% (CER 4%).
 
Underlying2 revenue and underlying operating profit were in line with reported growth rates. Fee business revenue was flat, with growth from net room additions held back by $9m of one-off P&L marketing assessments in the prior year as previously disclosed. Fee business operating profit was up 4%, benefitting from a continued focus on maintaining an efficient cost base.
 
Reported Owned, Leased and Managed Lease revenue was down 6% and operating profit was up 6%, with strong trading performances across a number of properties and the mitigation of losses by business interruption insurance at one hotel.
 
We opened 26k rooms (233 hotels) during the year, our best performance in eight years which included our best performance for our Holiday Inn Brand Family for a decade, and >4k rooms (43 hotels) opened across our Extended Stay brands. We continue to focus on a high-quality estate and removed 12k rooms (87 hotels). Together, this drove a 2.8% increase in net system size which marks a continued acceleration from 1.8% in 2016.
 
We signed 305 hotels (33k rooms), including nine Kimpton properties and a further 11 hotels for our Hotel Indigo brand. We also signed our first 10 Atwell Suites, following the registration of franchise documents in September 2019.
 
 
 
EMEAA - Best ever signings performance and continued growth for voco
 
 
 
 
Comparable RevPAR increased 0.3% (Q4: up 0.2%) driven by occupancy growth of 0.7%pts. UK RevPAR was up 1% for the year with London up 3% and the Provinces down 1%. Fourth quarter RevPAR in the UK was down 2% with London down 2% due to strong prior year comparables, whilst the Provinces were also down 2%, impacted by softer corporate demand.
 
Continental Europe RevPAR was up 3% in 2019 (Q4: up 4%). In France, RevPAR was down 1% with performance impacted by social unrest in Paris, and a 3% decrease in the fourth quarter due to the lapping of the 2018 Motor Show. Germany grew RevPAR 2% in the year with a favourable trade fair calendar driving growth of 6% in the fourth quarter.
 
 
Trading conditions in the Middle East remained subdued, with RevPAR down 3% in 2019 due to increased supply and political unrest weighing on demand. Australia RevPAR was down 1% (Q4: down 1%) impacted by continued supply growth and lower corporate and retail demand. Japan RevPAR grew 1% in the year with increased demand from the Rugby World Cup partially offset by ongoing trade disputes with South Korea.
 
Reported revenueof $723m increased 27% (31% CER) and reported operating profit1 of $217m increased 5% (9% CER). Results include an $11m benefit from individually significant liquidated damages, of which $10m is not expected to repeat in 2020. On an underlying2 basis, revenue increased 20% and operating profit increased 10%. Underlying fee business revenue was up 2%, with operating profit up 5%.
 
The full year saw the annualisation of the UK portfolio transaction, which completed in July 2018 and contributed to a $137m increase in Owned, Leased and Managed Lease revenue for the region. Owned, Leased and Managed Lease operating profit increased by $11m, driven by solid trading conditions outside the UK for a number of hotels and benefitting from partial usage of the IFRS 16 lease liability for the German leased hotels. Trading conditions in the UK were increasingly challenging through the second half of the year resulting in $17m of rental guarantee payments being charged against the IFRS 16 lease liability.
 
We opened 15k rooms (90 hotels), driving 5.8% net rooms growth, including seven InterContinental and two further Kimpton openings in the year.
 
We signed 29k rooms (160 hotels) in 2019, our best ever performance for EMEAA, including 11 new signings for Hotel Indigo and 8k rooms for voco.
 
 
 
Greater China - Market outperformance in Mainland China; declines in Hong Kong SAR
 
 
 
 
Comparable RevPAR decreased 4.5% (Q4: down 10.5%), impacted by ongoing unrest in Hong Kong SAR. In Mainland China, RevPAR was down 1%, with market outperformance throughout the year. Tier 1 and 2 cities were flat (Q4: up 1%), with higher levels of corporate demand in Guangzhou partially offset by declines in Shanghai, which saw higher levels of supply growth, and tougher trading conditions in Shenzhen. Tier 3 and 4 cities were down 3% (Q4: down 1%), with softening levels of demand across major industrial cities.
 
RevPAR in Hong Kong SAR was down 27% for the year, and down 63% in Q4, impacted by the ongoing unrest, whilst Macau SAR RevPAR was down 1% for the year.
 
Reported revenue1 of $135m decreased by 6% (decreased 1% at CER) and reported operating profit of $73m increased by 4% (CER 7%).
 
On an underlying2 basis, revenue increased by 2% and operating profit increased by 16%, with an anticipated $5m adverse impact from Hong Kong trading offset by the ongoing ramp up of new hotels and cost efficiencies. 
 
We opened a record 24k rooms (88 hotels), including our 400th hotel in Greater China and our 100th Holiday Inn hotel. This drove 17.5% net rooms growth, taking the total number of open rooms to over 135k (470 hotels). Signings totalled 36k rooms (158 hotels), our highest ever for the region, and included 5k rooms from our InterContinental Alliance Resorts partnership with Sands.
 
 
 
Highly cash generative business with disciplined approach to cost control and capital allocation
 
 
 
 
Driving fee margin through strategic cost management
●      Cost efficiency programme to deliver ~$125m in annual savings, including System Fund, by FY 2020 substantially complete, with savings being fully reinvested in growth initiatives.
●      2019 fee margin was up 80bps (up 60bps at CER), held back by the acquisition of Six Senses which, as expected, made an operating loss in 2019, partially offset by the non-recurrence of $9m of one-off P&L marketing assessments (and equivalent cost of investment) in the prior year as previously disclosed. Excluding these items, fee margin increased 160bps (up 140bps at CER).
●     Net central operating loss before exceptional items increased by $8m, ($11m CER); an increase in central revenues was offset by continued investments in growth initiatives. Central overheads include the reinvestment of a substantial proportion of growth investment funded by savings elsewhere in the business.
 
Free cash flow generation fuelling investment
●     Free cash flow3 of $509m was down $102m year on year with higher levels of cash tax and working capital offsetting lower levels of exceptional items.
●     Net capital expenditure3 of $211m (2018: $166m) with $265m gross (2018: $253m). This comprised: $147m maintenance capex and key money; $19m gross recyclable investments; and $98m System Fund capital investments; offset by $4m net proceeds from asset recycling (down $36m against the prior year) and $49m System Fund depreciation and amortisation. Capex guidance unchanged at up to $350m gross, and $150m net, per annum into the medium term.
●     Exceptional cash costs of $55m during the year, including $46m relating to the group wide efficiency programme ($28m in relation to the System Fund).
 
 
Efficient balance sheet provides flexibility
●     Financial position remains robust, with an on-going commitment to an investment grade credit rating; the best proxy for which is 2.5-3.0x Net debt:EBITDA following the adoption of IFRS 16 (equivalent to 2.0-2.5x Net debt:EBITDA under the previous accounting standard).
●     Net debt of $2,665m (2018: $1,965m), including the payment of the $500m special dividend (announced in October 2018) and $300m acquisition of Six Senses.
●     This results in Net debt:EBITDA of 2.7x at 2019 year end.
 
Cash generative business driving shareholder returns
●     Proposed 10% increase in the final dividend to 85.9¢, taking total dividend for the year up 10% to 125.8¢.
 
 
 
Foreign exchange
 
 
 
 
The impact of the movement in average USD exchange rates for FY 2019 against a number of currencies (particularly Sterling, Euro and Renminbi) netted to a $7m negative impact on reported profit4. If the average exchange rate during January 2020 had existed throughout 2019, 2019 reported profit would have been unchanged.
 
A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.
 
 
 
Other
 
 
 
 
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 such that the Group does not make a gain or loss from operating the Fund over the longer term.
 
In 2019 we recorded a System Fund income statement deficit of $49m, largely due to the continued spend down of a previously accumulated surplus, which was partially offset by favourable adjustments due to changes in the value estimations of outstanding IHG Rewards Club points.
 
Interest:
Net financial expenses were $115m. Adjusted3 interest expense of $133m, which adds back interest relating to the System Fund, was $18m higher than in 2018, reflecting the annualisation of interest on the €500m bond issued
in November 2018.
 
Tax:
Effective ratefor FY 2019 was 24% (FY 2018: 22%). We expect our full year 2020 effective tax rate will be in the mid to low 20s percentage point range. 
 
Exceptional items:
Before tax exceptional items total $148m charge and comprise:

●      Impairment charge of $81m recorded against goodwill and IFRS 16 right-of-use assets arising from the UK leased hotel portfolio deal in July 2018, partially offset by a $38m fair value adjustment credit recorded below operating profit.
●      Impairment charge of $50m recorded against Kimpton Hotels & Restaurants management contracts acquired in January 2015. Impairment testing only applies to the value of contracts acquired as part of the initial deal and does not take into account any Kimpton signings since acquisition.
●     $28m provision for estimated litigation costs; $20m costs incurred in relation to the group wide efficiency programme; and $7m of acquisition and integration costs. A further $28m of costs related to the group wide efficiency programme were incurred by the System Fund and are included within System Fund expenses in the Group income statement.
 
 
 
 
 
 
 
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 at constant FY 2019 exchange rates (CER).
See the Business Review for definition of non-GAAP measures and reconciliation to GAAP measures.
3 For definition of non-GAAP measures and reconciliation to GAAP measures see the Business Review.
Based on monthly average exchange rates each year.
5 Excludes exceptional items and System Fund results.
 
 
 
 
 
 
Appendix 1: RevPAR Movement Summary
 
 
 
Full Year 2019
 
Q4 2019
 
 
RevPAR
 
Rate
 
Occ.
 
RevPAR
 
Rate
 
Occ.
 
 
Group
 
(0.3)%
(0.4)%
0.1%pts
(1.8)%
(1.5)%
(0.2)%pts
 
Americas
 
(0.1)%
0.2%
(0.2)%pts
(1.6)%
(0.6)%
(0.7)%pts
 
EMEAA
 
0.3%
(0.6)%
0.7%pts
0.2%
(0.4)%
0.4%pts
 
G. China
 
(4.5)%
(4.7)%
0.2%pts
(10.5)%
(11.5)%
0.7%pts
 
Appendix 2: Comparable RevPAR movement at constant exchange rates (CER) vs. actual exchange rates (AER)
 
 
Full Year 2019
 
Q4 2019
 
 
CER
 
AER
 
Difference
 
CER
 
AER
 
Difference
 
 
Group
 
(0.3)%
(1.7)%
(1.4)%pts
(1.8)%
(2.1)%
(0.3)%pts
 
Americas
 
(0.1)%
(0.4)%
(0.3)%pts
(1.6)%
(1.7)%
(0.1)%pts
 
EMEAA
 
0.3%
(2.9)%
(3.2)%pts
0.2%
(0.3)%
(0.5)%pts
 
G. China
 
(4.5)%
(7.9)%
(3.4)%pts
(10.5)%
(12.0)%
(1.5)%pts
 
Appendix 3: Full Year System & Pipeline Summary (rooms)
 
System
 
Pipeline
 
Openings
 
Removals
 
Net
 
Total
 
YoY%
 
Signings
 
Total
 
Group
 
65,220
 
(18,198)
 
47,022
 
883,563
 
5.6%
 
97,754
 
283,043
 
Americas
 
26,121
 
(11,603)
 
14,518
 
524,647
 
2.8%
 
32,956
 
116,862
 
EMEAA
 
15,335
 
(3,064)
 
12,271
 
223,370
 
5.8%
 
29,125
 
81,106
 
G. China
 
23,764
 
(3,531)
 
20,233
 
135,546
 
17.5%
 
35,673
 
85,075
 
 
Appendix 4: Full Year financial headlines
 
 
GROUP
 
REPORTABLE SEGMENTS
 
 
 
Total
 
Americas
 
EMEAA
 
G. China
 
Central
 
 
2019
 
2018*
 
2019
 
2018*
 
2019
 
2018*
 
2019
 
2018*
 
2019
 
2018*
 
 
Revenue ($m)
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from reportable segments
 
2,083
1,933
1,040
1,051
723
569
135
143
185
 
170
 
 
System Fund
 
1,373
1,233
-
-
-
-
-
-
-
 
-
 
 
Hotel Cost Reimbursements
 
1,171
1,171
-
-
-
-
-
-
-
 
-
 
 
Group Revenue
 
4,627
4,337
1,040
1,051
723
569
135
143
185
 
170
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit ($m)
 
 
 
 
 
 
 
 
 
 
 
 
Fee Business
 
938
910
663
638
202
202
73
70
-
 
-
 
 
Owned, leased & managed lease
 
52
39
37
35
15
4
-
-
-
 
-
 
 
Central overheads
 
(125)
(117)
-
-
-
-
-
-
(125)
 
(117)
 
 
Operating profit from reportable segments
 
865
832
700
673
217
206
73
70
(125)
 
(117)
 
 
System Fund result
 
(49)
(146)
-
-
-
-
-
-
-
 
-
 
 
Operating profit before exceptionals
 
816
686
700
673
217
206
73
70
(125)
 
(117)
 
 
Operating exceptional items
 
(186)
(104)
(62)
(36)
(109)
(12)
-
(1)
(15)
 
(55)
 
 
Operating Profit after exceptionals
 
630
582
638
637
108
194
73
69
(140)
 
(172)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
*Restated following the adoption of IFRS 16 'Leases'
 
Appendix 5: Reported operating profit before exceptional items from reportable segments at actual & constant exchange rates
 
Total***
 
Americas
 
EMEAA
 
G. China
 
Reported
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Growth / (decline)
 
4%
 
5%
 
4%
 
4%
 
5%
 
9%
 
4%
 
7%
 
 
Appendix 6: Underlying**** operating profit movement before exceptional items
 
Total***
 
Americas
 
EMEAA
 
G. China
 
Growth / (decline)
 
6%
 
4%
 
10%
 
16%
 
 
Exchange rates:
USD:GBP
USD:EUR
* US dollar actual currency
FY 2019
0.78
0.89
** Translated at constant FY 2019 exchange rates
FY 2018
0.75
0.85
*** After central overheads
 
 
 
**** At CER and excluding: significant liquidated damages, current year acquisitions, System Fund results and hotel cost reimbursements
 
 
 
Appendix 7: Definitions
CER: constant exchange rates with FY 2019 exchange rates applied to FY 2018.
Comparable RevPAR: revenue per available room for hotels that have traded for all of 2018 and 2019, reported at CER.
Fee revenue: group revenue from reportable segments excluding owned, leased and managed lease hotels, and significant liquidated damages.
Fee margin: adjusted to exclude owned, leased and managed lease hotels, significant liquidated damages, and the results of the Group's captive insurance company
Reportable segments: group results excluding System Fund results, hotel cost reimbursements and exceptional items.
Significant liquidated damages: $11m in 2019 ($11m EMEAA fee business); $13m in 2018 ($7m in EMEAA fee business and $6m in Greater China fee business).
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.
Total RevPAR: Revenue per available room including hotels that have opened or exited in either 2018 or 2019, reported at CER.
Adjusted Interest: adds back interest relating to the System Fund.
 
 
Appendix 8: Investor information for 2019 Final dividend
Ex-dividend date:
 
2 April 2020
 
Record date:
 
3 April 2020
 
Payment date:
 
14 May 2020
 
Dividend payment:
 
ADRs: 85.9 cents per ADR; the corresponding amount in Pence Sterling per ordinary share will be announced on 24 April 2020, calculated based on the average of the market exchange rates for the three working days commencing 21 April 2020. A DRIP is available, allowing shareholders of ordinary shares to elect to reinvest their cash dividend by purchasing additional ordinary shares.
 
 
For further information, please contact:
 
 
Investor Relations (Sonya Ghobrial, Matthew Kay, Rakesh Patel):
+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 will commence at 9.30am on 18 February 2020 on the web address:
https://www.investis-live.com/ihg/5e2b011c8d57e8130019ead1/cdfs
 
For those wishing to ask questions please use the dial in details below which will have a Q&A facility:
 
 
 
 
 
 
 
 
 
 
UK
+44 (0) 203 936 2999

US
 
+1 646 664 1960
 
All other locations:
 
+44 (0) 203 936 2999
 
Participant Access Code:
 
12 03 32
 
 
 
The archived webcast of the presentation is expected to be on this website later on the day of the results and will remain on it for the foreseeable future: www.ihgplc.com/en/investors/results-and-presentations.
 
 
A replay will be available following the event, details are below:
 
UK:        
 
+44 (0) 203 936 3001
US:        
 
+1 845 709 8569
 
All other locations:
 
+44 (0) 203 936 3001
 
Replay pin
 
50 60 94
 
 
Website:
The full release and supplementary data will be available on our website from 7:00am (London time) on 18th February. The web address is www.ihgplc.com/en/investors/results-and-presentations.
 
 
Notes to Editors:
IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including Six Senses Hotels Resorts Spas, Regent Hotels & ResortsInterContinental® Hotels & ResortsKimpton® Hotels & RestaurantsHotel Indigo®EVEN® HotelsHUALUXE® Hotels and ResortsCrowne Plaza® Hotels & Resortsvoco™Holiday Inn® Hotels & Resorts Holiday Inn Express®Holiday Inn Club Vacations®avid™ hotelsStaybridge Suites®Atwell Suites™, and Candlewood Suites®.
 
IHG franchises, leases, manages or owns more than 5,900 hotels and approximately 884,000 guest rooms in more than 100 countries, with over 1,900 hotels in its development pipeline. IHG also manages IHG® Rewards Club, our global loyalty programme, which has more than 100 million enrolled members.
 
InterContinental Hotels Group PLC is the Group's holding company and is incorporated in Great Britain and registered in England and Wales. More than 400,000 people work across IHG's hotels and corporate offices globally.
 
Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our latest news, visit: https://www.ihgplc.com/en/news-and-media and follow us on social media at: https://twitter.com/ihgcorporatewww.facebook.com/ihgcorporate and www.linkedin.com/company/intercontinental-hotels-group.
 
 
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 2019. The 2018 comparatives have been restated to reflect the adoption of IFRS 16 'Leases'.
 
GROUP PERFORMANCE
 
            12 months ended 31 December
Group results
 
2018
 
 
2019
Restated
%
 
$m
$m
change
Revenuea
 
 
 
Americas
1,040
1,051
(1.0)
EMEAA
723
569
27.1
Greater China
135
143
(5.6)
Central
185
170
8.8
 
____
____
____
Revenue from reportable segments
2,083
1,933
7.8
 
 
 
 
System Fund revenues
1,373
1,233
11.4
Reimbursement of costs
1,171
1,171
-
 
____
____
____
Total revenue
4,627
4,337
6.7
 
____
____
____
Operating profita
 
 
 
Americas
700
673
4.0
EMEAA
217
206
5.3
Greater China
73
70
4.3
Central
(125)
(117)
6.8
 
____
____
____
Operating profit from reportable segments
865
832
4.0
System Fund result
(49)
(146)
(66.4)
 
____
____
____
Operating profit before exceptional items
816
686
19.0
Operating exceptional items
(186)
(104)
78.8
 
____
____
____
Operating profit
630
582
8.2
Net financial expenses
(115)
(96)
19.8
Fair value gains/(losses) on contingent purchase consideration
27
(4)
(775.0)
 
____
____
____
Profit before tax
542
482
12.4
 
____
____
____
Earnings per ordinary share
 
 
 
 
Basic
210.4¢
183.7¢
14.5
 
Adjusted
303.3¢
293.2¢
3.4
 
 
 
 
 
Average US dollar to sterling exchange rate
$1 : £0.78
$1 : £0.75
4.0
 
 
 
 
 
Group results
 
During the year ended 31 December 2019, total revenue increased by $290m (6.7%) to $4,627m, whilst revenue from reportable segments increased by $150m (7.8%) to $2,083m, primarily resulting from 5.6% rooms growth and the annualised benefit of an addition of a portfolio of hotels in the UK in mid-2018. Operating profit and profit before tax increased by $48m (8.2%) and $60m (12.4%) respectively, due in part to a $97m lower in-year System Fund deficit, partially offset by a $82m increase in operating exceptional items, driven by $131m impairment charges ($81m recognised in relation to the UK leased portfolio and $50m in relation to Kimpton management agreements, see Other Financial Information). Operating profit from reportable segments increased by $33m (4.0%) to $865m.
 
Underlyingb revenue and underlyingb operating profit increased by $123m (6.5%) and $47m (5.8%) respectively.
 
Comparable RevPAR decreased by 0.3% (including a decrease in average daily rate of 0.4%). IHG System size increased by 5.6% to 883,563 rooms, whilst underlyingb fee revenue increased by 2.0%.
 
Fee marginb increased by 0.8 percentage points to 54.1%.
 
Basic earnings per ordinary share increased by 14.5% to 210.4¢, whilst adjusted earnings per ordinary share increased by 3.4% to 303.3¢.
 
 
a Americas and EMEAA include revenue and operating profit before exceptional items from both fee business and owned, leased and managed lease hotels. Greater China includes revenue and operating profit before exceptional items from fee business.
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
 
 
 
 
 
 
12 months ended 31 December
 
 
2019
2018
%
Total gross revenuea
$bn
$bn
change
 
 
 
 
InterContinental
5.1
5.1
-
Kimpton
1.4
1.3
7.7
HUALUXE
0.1
0.1
-
Crowne Plaza
4.3
4.5
(4.4)
Hotel Indigo
EVEN Hotels                                                     
0.6
0.1
0.5
0.1
20.0
-
Holiday Inn
6.3
6.5
(3.1)
Holiday Inn Express
7.3
7.1
2.8
Staybridge Suites
1.0
0.9
11.1
Candlewood Suites
0.9
0.8
12.5
Other
0.8
0.5
60.0
 
____
____
____
Total
27.9
27.4
1.8
 
____
____
____
 
 
 
 
 
a Total gross revenue provides a measure of the overall strength of the Group’s brands. It comprises total rooms revenue from franchised hotels and total hotel revenue from managed, owned, leased and managed lease hotels and excludes revenue from the System Fund and reimbursement of costs. Other than owned, leased and managed lease hotels, total gross revenue is not revenue attributable to IHG as it is derived from hotels owned by third parties. 
 
 
Hotels
 
Rooms
 
Global hotel and room count
at 31 December
2019
Change
over
2018
2019
Change
over
2018
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
Regent
18
6
18
-
1,448
2,003
1,448
(2)
 
InterContinental
212
8
70,981
1,700
 
Kimpton
66
-
13,046
131
 
HUALUXE
9
1
2,710
375
 
Crowne Plaza
Hotel lndigo                                                               
431
118
2
16
120,582
14,574
414
1,825
 
EVEN Hotels
13
3
1,949
398
 
voco
12
10
4,293
3,762
 
Holiday Inn1
1,284
33
239,894
6,042
 
Holiday Inn Express
avid hotels
2,875
7
149
6
299,234
635
19,718
548
 
Staybridge Suites
300
24
32,633
2,416
 
Candlewood Suites
410
14
38,332
1,122
 
Other
142
16
41,249
7,125
 
 
____
____
______
_____
Total
5,903
300
883,563
47,022
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
4,870
255
614,974
37,995
 
Managed
Owned, leased and managed lease
1,007
26
42
3
262,253
6,336
8,687
340
 
 
____
____
______
_____
Total
5,903
300
883,563
47,022
 
 
____
____
______
_____
 
Includes 46 Holiday Inn Resort properties (11,502 rooms) and 28 Holiday Inn Club Vacations properties
  (8,592 rooms), (2018: 45 Holiday Inn Resort properties (11,301 rooms) and 27 Holiday Inn Club Vacations properties (7,927 rooms)).
 
 
 
                                                                                                                                                                                                                                                Hotels                                                                                                                                        Rooms
 
Global pipeline
at 31 December
2019
Change
over 2018
2019
Change
over 2018
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
Regent
25
5
25
2
1,770
944
1,770
430
 
InterContinental
65
5
17,018
1,223
 
Kimpton
33
6
6,203
1,729
 
HUALUXE
22
1
6,180
81
 
Crowne Plaza
Hotel Indigo
88
101
9
9
24,506
15,148
2,372
2,070
 
EVEN Hotels
26
8
4,342
1,158
 
voco1
17
9
6,220
4,710
 
Holiday Inn2
275
(13)
52,909
(2,742)
 
Holiday Inn Express
754
(30)
95,874
(2,550)
 
avid hotels
207
36
19,068
3,257
 
Staybridge Suites
182
-
20,734
(115)
 
Candlewood Suites
91
(11)
8,186
(935)
 
Atwell Suites
10
10
1,000
1,000
 
Other
17
(7)
2,941
(1,363)
 
 
____
____
______
_____
Total
1,918
59
283,043
12,095
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
1,411
13
166,641
5,298
 
Managed
506
46
116,247
6,797
 
Owned, leased and managed lease
1
-
155
-
 
 
____
____
______
_____
Total
1,918
59
283,043
12,095
 
 
____
____
______
_____
 
Does not include three open and one pipeline hotel that will be re-branded to voco.
 
2 Includes 29 Holiday Inn Resort properties (6,335 rooms) and one Holiday Inn Club Vacations property (110 rooms), (2018: 19 Holiday Inn Resort properties (5,229 rooms) and zero Holiday Inn Club Vacations properties (zero rooms)).
 
  
AMERICAS
 
        12 months ended 31 December
Americas Results
 
2018
 
 
2019
Restated
%
 
$m
$m
change
Revenue from the reportable segment
 
 
 
 
Fee business
853
853
-
 
Owned, leased and managed lease
187
198
(5.6)
 
____
____
____
Total
 
1,040
1,051
(1.0)
 
____
____
____
Operating profit from the reportable segment
 
 
 
 
Fee business
663
638
3.9
 
Owned, leased and managed lease
37
35
                           5.7
 
____
____
____
 
 
700
673
4.0
Operating exceptional items
 
(62)
(36)
72.2
 
____
____
____
Operating profit
638
637
0.2
 
____
____
____
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas Comparable RevPAR movement on previous year
12 months ended
31 December
2019
Fee business
 
 
InterContinental
0.7%
 
Kimpton
2.2%
 
Crowne Plaza
(1.6)%
 
Hotel Indigo
0.2%
 
EVEN Hotels
(5.3)%
 
Holiday Inn
(0.7)%
 
Holiday Inn Express                                                                            
  0.1%
 
Staybridge Suites
                                              0.1%
 
Candlewood Suites
                                            (1.1)%
 
All brands
                                            (0.1)%
Owned, leased and managed lease
 
 
InterContinental
3.0%
 
EVEN Hotels
0.9%
 
Holiday Inn
6.2%
 
All brands
4.1%
 
 
 
 
 
Americas results
 
Revenue from the reportable segmenta decreased by $11m (1.0%) to $1,040m, whilst operating profit increased by $1m (0.2%) to $638m, impacted by a $26m increase in operating exceptional items. Operating profit from the reportable segmentincreased by $27m (4.0%) to $700m. On an underlyingb basis, revenue decreased by $9m (0.9%), as growth from net room additions was held back by $9m one-off marketing assessments in the prior year, whilst underlying operating profit increased by $29m (4.3%), benefiting from a continued focus on maintaining an efficient cost base.
 
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
 
Fee business revenueb remained in line with 2018 at $853m, partly impacted by adverse foreign exchangec ($2m), whilst fee business operating profit increased by $25m (3.9%) to $663m, also partly impacted by adverse foreign exchangec ($2m).
 
Owned, leased and managed lease revenueb decreased by $11m (5.6%) to $187m, whilst operating profitb increased by $2m (5.7%) to $37m, benefiting from strong trading across a number of hotels and the mitigation of losses by business interruption insurance at one hotel. There was no material impact of foreign exchangec on either revenue or operating profit.
 
 
a Americas reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenues and expenses and reimbursement of costs, for both fee business and owned, leased and managed lease hotels
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
The impact of movements between the previous year’s actual exchange rates and average rates in 2019.
 
 
 
Hotels
 
                    
                                                                                                                                              Rooms
 
Americas hotel and room count
at 31 December
   2019
Change
over 2018
2019
        Change
over 2018
Analysed by brand
 
 
 
 
 
InterContinental
51
-
17,896
143
 
Kimpton
61
(3)
11,997
(310)
 
Crowne Plaza
149
(7)
39,875
(1,624)
 
Hotel Indigo
64
7
8,267
772
 
EVEN Hotels
13
3
1,949
398
 
Holiday Inn1
783
9
135,286
794
 
Holiday Inn Express
avid hotels
2,368
7
79
6
214,993
635
8,373
548
 
Staybridge Suites
283
22
30,244
2,212
 
Candlewood Suites
410
14
38,332
1,122
 
Other
118
16
25,173
2,090
 
 
____
____
______
_____
Total
4,307
146
524,647
14,518
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
4,008
155
465,265
15,163
 
Managed
292
(9)
57,160
(644)
 
Owned, leased and managed lease
7
-
2,222
(1)
 
 
____
____
______
_____
Total
4,307
146
524,647
14,518
 
 
____
____
______
_____
 
1 Includes 22 Holiday Inn Resort properties (6,003 rooms) and 28 Holiday Inn Club Vacations properties
(8,592 rooms), (2018: 23 Holiday Inn Resort properties (6,184 rooms) and 27 Holiday Inn Club Vacations
 properties (7,927 rooms)).
 
 
 
 
 
Americas pipeline
at 31 December
 
 
2019
Hotels
 
Change
over 2018
 
 
2019
Rooms
 
Change
over 2018
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
5
5
422
422
 
InterContinental
7
1
1,549
72
 
Kimpton
21
5
3,459
1,124
 
Crowne Plaza
5
(1)
1,093
(170)
 
Hotel Indigo
37
2
5,172
649
 
EVEN Hotels                                              
             15
5
1,866
               570 
 
Holiday Inn1
98
(28)
12,506
(3,546)
 
Holiday Inn Express
448
(51)
43,103
(4,517)
 
avid hotels
206
35
18,853
3,042
 
Staybridge Suites
162
(1)
16,874
(28)
 
Candlewood Suites
91
(11)
8,186
(935)
 
Atwell Suites
10
10
1,000
1,000
 
Other
16
(6)
2,779
(1,103)
 
 
____
____
______
_____
Total
1,121
(35)
116,862
(3,420)
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
1,077
(38)
109,986
(3,671)
 
Managed
44
3
6,876
251
 
 
 
 
____
____
______
_____
Total                
1,121
(35)
116,862
(3,420)
 
 
____
____
______
_____
 
1 Includes three Holiday Inn Resort properties (490 rooms) and one Holiday Inn Club Vacations property (110 rooms), (2018: one Holiday Inn Resort property (165 rooms) and zero Holiday Inn Club Vacations properties (zero rooms)).
 
 
 
EMEAA
 
 
 
         12 months ended 31 December
EMEAA results
 
2018
 
 
2019
Restated
%
 
$m
$m
change
Revenue from the reportable segment
 
 
 
 
Fee business
337
320
5.3
 
Owned, leased and managed lease
386
249
55.0
 
____
____
____
Total
 
723
569
27.1
 
____
____
____
Operating profit from the reportable segment
 
 
 
 
Fee business
202
202
-
 
Owned, leased and managed lease
15
4
275.0
 
____
____
____
 
 
217
206
5.3
Operating exceptional items
 
(109)
(12)
(808.3)
 
 
____
____
____
Operating profit
108
194
(44.3)
 
____
____
____
 
 
 
 
 
 
 
 
 
EMEAA comparable RevPAR movement on previous year
12 months ended
31 December
2019
 
 
Fee business
 
 
InterContinental
1.5%
 
Crowne Plaza
(0.6)%
 
Hotel Indigo
1.5%
 
Holiday Inn
(0.5)%
 
Holiday Inn Express
1.2%
 
Staybridge Suites
(3.9)%
 
All brands
0.3%
 
 
 
Owned, leased and managed leases
 
 
InterContinental
1.5%
 
Holiday Inn
2.6%
 
All brands
1.6%
 
 
 
 
 
 
 
 
EMEAA results
 
Revenue from the reportable segment a increased by $154m (27.1%) to $723m and operating profit decreased by $86m (44.3%) to $108m, impacted by a $97m increase in operating exceptional items, whilst both included the benefit of $11m significant liquidated damages (2018: $7m). Operating profit from the reportable segment a increased by $11m (5.3%) to $217m. On an underlying b basis, revenue increased by $112m (20.5%) and underlying operating profit increased by $19m (9.8%) driven by increases in net rooms supply and the annualisation of the UK portfolio transaction, that completed in July 2018.
 
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
 
Fee business revenueb increased by $17m (5.3%) to $337m, partly impacted by adverse foreign exchangec ($8m), whilst fee business operating profitb remained in line with 2018 at $202m, but was also impacted by adverse foreign exchangec ($6m). Comparable RevPAR increased by 0.3%, driven by gains in occupancy.
 
Owned, leased and managed lease revenueb increased by $137m (55.0%) to $386m, due to the annualisation of the UK portfolio transaction, that completed in July 2018 and was partly impacted by adverse foreign exchangec ($7m). Owned, leased and managed lease operating profitb increased by $11m to $15m, (foreign exchangec impact $nil), driven by solid trading conditions outside of the UK for a number of hotels and benefiting from partial usage of the IFRS 16 lease liability for the German leased hotels. Trading conditions in the UK in the second half of the year resulted in $17m of rental guarantee lease payments being charged against the IFRS 16 lease liability.
 
 
EMEAA reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenues and expenses and reimbursement of costs, for both fee business and owned, leased and managed lease hotels.
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
The impact of movements between the previous year’s actual exchange rates and average rates in 2019.
 
 
 
EMEAA hotel and room count
at 31 December
     
Hotels
 
2019
 
 
Change
over 2018
 
       Rooms
                 
             2019
 
 
Change
over 2018
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
17
17
1,326
1,326
 
Regent
InterContinental
3
113
-
7
771
33,515
2
1,216
 
Kimpton
4
2
920
312
 
Crowne Plaza
Hotel Indigo
186
41
4
6
46,411
4,439
152
691
 
voco
12
10
4,293
3,762
 
Holiday Inn1
394
9
73,432
2,079
 
Holiday Inn Express
324
20
46,454
2,722
 
Staybridge Suites
17
2
2,389
204
 
Other
15
(2)
9,420
(195)
 
 
____
_____
_____
_____
Total
1,126
75
223,370
12,271
 
 
____
_____
_____
_____
Analysed by ownership type
 
 
 
 
 
Franchised
773
                47
126,455
8,333
 
Managed
334
25
92,801
3,597
 
Owned, leased and managed lease
19
3
4,114
341
 
 
____
_____
_____
_____
Total
1,126
75
223,370
12,271
 
 
____
_____
_____
_____
 
 
 
 
 
 
 
 
1 Includes 17 Holiday Inn Resort properties (3,604 rooms), (2018: 16 Holiday Inn Resort properties (3,391
rooms)).
 
 
 
Hotels
Rooms
EMEAA pipeline
at 31 December
 
2019
Change
over 2018
 
2019
Change
over 2018
 
 
 
 
 
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
17
17
1,179
1,179
 
Regent
InterContinental
4
31
1
2
664
7,507
150
588
 
Kimpton
7
-
1,247
7
 
Crowne Plaza
Hotel Indigo
35
40
1
-
9,415
5,652
399
(109)
 
EVEN Hotels
-
(1)
-
(200)
 
voco1
17
9
6,220
4,710
 
Holiday Inn2
119
13
25,936
1,597
 
Holiday Inn Express
112
(2)
19,049
(105)
 
avid hotels
1
1
215
215
 
Staybridge Suites
20
1
3,860
(87)
 
Other
1
-
162
19
 
 
____
____
______
_____
Total
404
42
81,106
8,363
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
165
6
27,331
1,650
 
Managed
238
36
53,620
6,713
 
Owned, leased and managed lease
1
-
155
-
 
 
____
____
______
_____
Total
404
42
81,106
8,363
 
 
____
 
____
______
_____
 
Does not include three open and one pipeline hotel that will be re-branded to voco.
 
2 Includes 18 Holiday Inn Resort properties (3,662 rooms), (2018: 10 Holiday Inn Resort properties (2,353
rooms)).
 
 
GREATER CHINA
 
 
 
       12 months ended 31 December
 
 
 
 
Greater China results
2019
2018 Restated
%
 
$m
$m
Change
 
 
 
 
Revenue from the reportable segment
 
 
 
 
Fee business
135
143
(5.6)
 
 
____
____
____
Total
 
135
143
(5.6)
 
____
____
____
Operating profit from the reportable segment
 
 
 
 
Fee business
73
70
4.3
 
____
____
____
 
Operating exceptional items
 
Operating profit
 
 
-
 
73
 
(1)
 
69
 
-
 
5.8
 
____
____
____
 
 
 
 
 
 
 
 
Greater China comparable RevPAR movement on previous year
12 months ended
31 December
2019
 
 
Fee business
 
 
InterContinental
(4.6)%
 
HUALUXE
6.6%
 
Crowne Plaza
(4.9)%
 
Hotel Indigo
(8.1)%
 
Holiday Inn
(4.0)%
 
Holiday Inn Express
(4.7)%
 
All brands
 
(4.5)%
 
Greater China results
 
Revenue from the reportable segmenta decreased by $8m (5.6%) to $135m and operating profit increased by $4m (5.8%) to $73m, both impacted by a reduction in significant liquidated damages to $nil (2018: $6m). Operating profit from the reportable segmenta increased by $3m (4.3%) to $73m. On an underlyingb basis, revenue increased by $3m (2.3%) and underlyingb operating profit increased by $10m (15.9%), driven by 17.5% net rooms growth and cost efficiencies partially offset by a 4.5% decline in comparable RevPAR, impacted by ongoing unrest in Hong Kong SAR.
 
 
a Greater China reportable segment includes revenue and operating profit before exceptional items, excluding System Fund revenue and expenses and reimbursement of costs, for both fee business and owned, leased and managed lease hotels.
b Definitions for Non-GAAP revenue and operating profit measures can be found in the ‘Use of Non-GAAP measures’ section along with reconciliations of these measures to the most directly comparable line items with the Group Financial Statements.
 
 
           Hotels
            Rooms
Greater China hotel and room count
at 31 December
 
2019
Change
over 2018
 
2019
Change
over 2018
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
                 1
1
122
         122
 
Regent
                 3
-
1,232
(4)
 
InterContinental
               48
1
19,570
341
 
Kimpton
                 1
1
               129 
129
 
HUALUXE
                 9
1
2,710
375
 
Crowne Plaza
96
5
34,296
1,886
 
Hotel Indigo
13
3
1,868
362
 
Holiday Inn1
107
15
31,176
3,169
 
Holiday Inn Express
183
50
37,787
8,623
 
Other
9
2
6,656
5,230
 
 
____
____
______
_____
Total
470
79
135,546
20,233
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
89
53
23,254
14,499
 
Managed
381
26
112,292
5,734
 
 
____
____
______
_____
Total
470
79
135,546
20,233
 
 
____
____
______
_____
 
1 Includes seven Holiday Inn Resort properties (1,895 rooms), (2018: six Holiday Inn Resort properties (1,726 rooms)).
 
 
 
 
          Hotels
           Rooms
Greater China pipeline
at 31 December
 
2019
Change
over 2018
 
2019
Change
over 2018
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Six Senses
3
3
169
         169
 
Regent
1
1
280
280
 
InterContinental
27
2
7,962
563
 
Kimpton
5
1
        1,497
598
 
HUALUXE
22
1
6,180
81
 
Crowne Plaza
48
9
13,998
2,143
 
Hotel Indigo
24
7
4,324
1,530
 
EVEN Hotels
11
4
2,476
788
 
Holiday Inn1
58
2
14,467
(793)
 
Holiday Inn Express
194
23
33,722
2,072
 
Other
-
(1)
-
(279)
 
 
____
____
______
_____
Total
393
52
85,075
7,152
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
169
45
29,324
7,319
 
Managed
224
7
55,751
(167)
 
 
____
____
______
_____
Total
393
52
85,075
7,152
 
 
____
____
______
_____
 
1 Includes eight Holiday Inn Resort properties (2,183 rooms), (2018: eight Holiday Inn Resort properties (2,711 rooms)).
 
 
 
CENTRAL
 
12 months ended 31 December
 
 
 
2018
 
 
2019
Restated
%
Central results
$m
$m
change
 
 
 
 
Revenue
185
170
8.8
Gross costs
(310)
(287)
8.0
 
____
____
____
 
 
(125)
(117)
6.8
Operating exceptional items
 
(15)
(55)
(72.7)
 
____
____
____
Operating loss
(140)
(172)
(18.6)
 
____
____
____
 
Central results
Net operating loss decreased by $32m (18.6%) compared to 2018, driven by a $40m (72.7%) decrease in operating exceptional items. Central revenue, which mainly comprises technology fee income, increased by $15m (8.8%) to $185m, driven by IHG System size growth (5.6%) and partly impacted by adverse foreign exchangea ($2m). Gross costs increased by $23m (8.0%), driven by reinvestment of a substantial portion of growth investment funded by savings elsewhere in the business, also benefiting from the impact of $5m foreign exchangea.
 
Net operating loss before exceptional items increased by $8m (6.8%) to $125m, benefiting from the impact of $3m foreign exchangea, as an increase in central revenues was offset by continued investments in growth initiatives.
 
 a The impact of movements between the previous year’s actual exchange rates and average rates in 2019.
 
  
OTHER FINANCIAL INFORMATION
 
System Fund
The Group operates a System Fund to collect and administer cash assessments from hotel owners for the specific purpose of use in marketing, the Guest Reservation Systems, and hotel loyalty programme, IHG Rewards Club. The Fund also receives proceeds from the sale of loyalty points under third-party co-branding arrangements. The Fund is not managed to generate a profit or loss for IHG over the longer term, although an in-year surplus or deficit can arise, but is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.
 
In the year to 31 December 2019, System Fund revenue increased by $140m (11.4%) to $1,373m.  The primary driver was a favourable adjustment relating to a change in the actuarial assumptions around the ultimate rate of consumption of IHG Rewards Club points ('breakage') leading to increased revenue recognition year-over-year. The increase in non-loyalty revenue was driven by increased assessment fees and contributions from hotels, reflecting increased System Size.
 
Reimbursement of costs
In the year to 31 December 2019, reimbursable revenue remained in line with 2018 at $1,171m.
 
Cost reimbursements revenue represents reimbursements of costs incurred on behalf of managed and franchised properties and relates, predominantly, to payroll costs at managed properties where we are the employer. As we record cost reimbursements based upon costs incurred with no added mark up, this revenue and related expenses has no impact on either our operating profit or net income.
 
Exceptional items
Pre-tax exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share as well as other Non-GAAP measures (see Use of Non-GAAP measures) in order to provide a more meaningful comparison of performance and can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, and restructuring costs.
 
2019 pre-tax exceptional items totalled a charge of $148m. The charge included: $28m relating to management's best estimate of a settlement in respect of a lawsuit filed against the Group in the Americas region, together with the cost of an arbitration award made against the Group in the EMEAA region; $20m relating to reorganisation costs (see below); $131m arising from impairment charges further discussed below, the impact of which was partially offset by a corresponding fair value gain on contingent purchase consideration of $38m, and $7m relating to acquisition and integration costs arising from the Group's recent acquisitions.
 
Impairment
Impairment of $131m comprises a $50m impairment on the Kimpton management agreements and an $81m impairment relating to the UK portfolio, comprising $49m related to goodwill and $32m related to right-of-use assets. The impact of the impairment arising on the UK portfolio is partially offset by the fair value gain of $38m.
 
Reorganisation costs
In September 2017, the Group launched a comprehensive efficiency programme funding a series of new strategic initiatives to drive an acceleration in IHG's future growth. The programme is centred around strengthening the Group's organisational structure to redeploy resources to leverage scale in the highest opportunity markets and segments. The programme was completed in 2019.
 
The programme is expected to realise c.$125m in annual savings by 2020, of which c.$75m will benefit the System Fund. These savings, primarily in administrative expenses, are planned to be reinvested as they are realised to accelerate medium-term revenue growth.
 
Costs incurred since 2017 to achieve these savings, including amounts charged to the System Fund, total $196m. The exceptional cost charged to the Group income statement in 2019 of $20m includes severance costs of $8m and consultancy fees of $6m.
 
Net financial expenses
Net financial expenses, which were restated for IFRS 16, increased by $19m to $115m and adjusted interest (see Use of Non-GAAP measures) increased by $18m to $133m. The increase is primarily due to interest on the €500m bond issued in November 2018, and related currency swaps.
 
Financial expenses included $63m (2018: $48m) of interest costs on the public bonds, which are fixed rate debt. Interest expense on lease liabilities was $41m (2018: $39m).
 
Fair value gains / losses on contingent purchase consideration
Contingent purchase consideration arose on the acquisitions of Regent, the UK portfolio and Six Senses. The net gain of $27m (2018: loss of $4m) comprises an exceptional gain of $38m in respect of the UK portfolio (see Impairment above), offset by a loss of $11m in respect of Regent. The total contingent purchase consideration liability at 31 December 2019 is $91m.
  
Taxation
The effective rate of tax on profit before exceptional items and System Fund was 24% (2018: 22%). Excluding the impact of prior year items, the equivalent tax rate would be 26% (2018: 23%). The effective rate is higher than the UK Corporation Tax rate of 19% (2018: 24%), due mainly to certain overseas profits (particularly in the US) being subject to statutory tax rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
 
Taxation within exceptional items totalled a credit of $20m (2018: credit of $27m).  This predominantly included a current tax credit of $4m on reorganisation costs, a $6m deferred tax credit in respect of future tax relief available on litigation costs and a $12m deferred tax credit in respect of impairment and adjustments to contingent purchase consideration (see above).
 
Net tax paid in 2019 totalled $141m (2018: $68m). The 2019 tax paid was more than 2018 principally due to material amounts of tax recovered in 2018
 
Dividends
The Board has proposed a final dividend per ordinary share of 85.9¢. With the interim dividend per ordinary share of 39.9¢, the full-year dividend per ordinary share for 2019 will total 125.8¢, an increase of 10% over 2018.
 
On 19 October 2018, the Group announced a $500m return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (262.1¢ per ordinary share) was paid on 29 January 2019.
 
IHG pays its dividends in pounds sterling and US dollars. The sterling amount of the final dividend will be announced on 24 April 2020 using the average of the daily exchange rates for the three working days commencing 21 April 2020.
 
Earnings per ordinary share
Basic earnings per ordinary share increased by 14.5% to 210.4¢ from 183.7¢ in 2018 whilst adjusted earnings per ordinary share increased by 3.4% to 303.3¢.
 
Share price and market capitalisation
The IHG share price closed at £52.08 on 31 December 2019, up from £42.49 on 31 December 2018. The market capitalisation of the Group at the year-end was £9.5bn.
 
Sources of liquidity
In November 2018, the Group issued a €500m, 2.125% euro bond repayable in May 2027. The bond extends the maturity profile of the Group's debt. Currency swaps were transacted at the same time the bonds were issued in order to swap the proceeds and interest flows into pounds sterling. The currency swaps fix the bond debt at £436m, with interest payable semi-annually at a rate of 3.5%. This is in addition to £400m of public bonds which are repayable on 28 November 2022, £300m repayable on 14 August 2025 and £350m repayable on 24 August 2026.
 
The Group is further financed by a $1.275bn revolving syndicated bank facility (the Syndicated Facility) and a $75m revolving bilateral facility (the Bilateral Facility) which mature in March 2022, under which $125m was drawn at 31 December 2019 (31 December 2018: $nil).  The Syndicated and Bilateral Facilities contain the same terms and two financial covenants; interest cover; and net debt divided by operating profit before exceptional items, depreciation and amortisation and System Fund revenue and expenses. The Group is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding in the near future. The Group has started to review and plan for the expected discontinuation of LIBOR after 2021. The Group's main exposure to LIBOR is the underlying reference rate in the syndicated and bilateral facilities. The terms of this agreement will need to be renegotiated to address the discontinuation of LIBOR. The replacement of LIBOR with alternative reference rates is not expected to have a material impact on the group at this stage.
 
Additional funding is provided by other uncommitted bank facilities. In the Group's opinion, the available facilities are sufficient for the Group's present liquidity requirements.
 
Borrowings included bank overdrafts of $87m (2018: $104m), which were matched by an equivalent amount of cash
and cash equivalents under the Group's cash pooling arrangements. Under these arrangements, each pool contains a number of bank accounts with the same financial institution, and the Group pays interest on net overdraft balances within each pool. The cash pools are used for day-to-day cash management purposes and are managed daily as
closely as possible to a zero balance on a net basis for each pool. Overseas subsidiaries are typically in a cash-
positive position, with the most significant balances in the US and the matching overdrafts are held by the Group's central treasury company in the UK.
 
 
Net debt of $2,665m (2018: $1,965m restated) is analysed by currency as follows:
 
 
2019
2018
Restated
 
$m
$m
 
 
 
Borrowings
 
 
 
Sterling*
2,022
1,956
 
US dollar
721
620
 
Euros
44
37
 
Other
73
56
Cash and cash equivalents
 
 
 
Sterling
(25)
(479)
 
US dollar
(91)
(91)
 
Euros
(13)
(23)
 
Canadian dollar
(7)
(12)
 
Chinese renminbi
(17)
(58)
 
Other
(42)
(41)
 
 
____
____
Net debt
2,665
1,965
 
____
____
 
 
 
Average debt levels
2,720
2,174
 
* Includes the impact of currency swaps.
____
____
 
 
 
 
USE OF NON-GAAP MEASURES
 
In addition to performance measures directly observable in the Business Review (IFRS measures), certain financial measures are used when discussing the Group's performance which are not measures of financial performance or liquidity under International Financial Reporting Standards (IFRS). In management's view these measures provide investors and other users with an enhanced understanding of IHG's operating performance, profitability, financial strength and funding requirements. These measures do not have standardised meanings under IFRS, and companies do not necessarily calculate these in the same way.
 
Global revenue per available room (RevPAR) growth
RevPAR is the primary metric used by management to track hotel performance across regions and brands. RevPAR is also a commonly used performance measure in the hotel industry.
 
RevPAR comprises IHG's System rooms revenue divided by the number of room nights available and can be derived from occupancy rate multiplied by average daily rate (ADR). ADR is rooms revenue divided by the number of room nights sold.
 
References to RevPAR, occupancy and ADR are presented on a comparable basis, comprising groupings of hotels that have traded in all months in both the current and prior year. The principal exclusions in deriving this measure are new hotels (including those acquired), hotels closed for major refurbishment and hotels sold in either of the two years.
RevPAR and ADR are quoted at a constant US$ conversion rate, in order to allow a better understanding of the comparable year-on-year trading performance excluding distortions created by fluctuations in exchange rates.
 
Total gross revenue in IHG's System
Total gross revenue is revenue not wholly attributable to IHG, however, management believes this measure is meaningful to investors and other users as it provides a measure of System performance, giving an indication of the strength of IHG's brands and the combined impact of IHG's growth strategy and RevPAR performance.
 
Total gross revenue refers to revenue which IHG has a role in driving and from which IHG derives an income stream.
 
Total gross revenue comprises:
● total rooms revenue from franchised hotels;
● total hotel revenue from managed hotels includes food and beverage, meetings and other revenues
and reflects the value IHG drives to managed hotel owners by optimising the performance of their
hotels; and
● total hotel revenue from owned, leased and managed lease hotels.
 
Other than total hotel revenue from owned, leased and managed lease hotels, total gross hotel revenue
is not revenue attributable to IHG as these managed and franchised hotels are owned by third-parties.
 
Revenue and operating profit measures
Revenue and operating profit from (1) fee business and (2) owned, leased and managed lease hotels, are described as 'revenue from reportable segments' and 'operating profit from reportable segments', respectively.
 
These measures are presented for each of the Group's regions.
Management believes revenue and operating profit from reportable segments is meaningful to investors and other users as it excludes the following elements and reflects how management monitors the business:
 
System Fund - the Fund is not managed to generate a profit or loss for IHG over the longer term, but is managed for the benefit of the hotels within the IHG System. The System Fund is operated to collect and administer cash assessments from hotel owners for the specific purpose of use in marketing, the Guest Reservation Systems and hotel loyalty programme.
 
Revenues related to the reimbursement of costs - there is a cost equal to these revenues so there is no profit impact. Cost reimbursements are not applicable to all hotels, and growth in these revenues is not reflective of growth in the performance of the Group. As such, management do not include these revenues in their analysis of results.
 
Exceptional items are identified by virtue of either their size or nature and can include, but are not restricted to, gains and losses on the disposal of assets, impairment charges and reversals, and reorganisation costs. As each item is different in nature and scope, there will be little continuity in the detailed composition and size of the reported amounts which affect performance in successive periods. Separate disclosure of these amounts facilitates the understanding of performance including and excluding such items.
 
In further discussing the Group's performance in respect of revenue and operating profit, additional non-IFRS measures are used and explained further below:
● Underlying revenue;
● Underlying operating profit;
● Underlying fee revenue; and
● Fee margin.
 
Operating profit measures are, by their nature, before interest and tax. Management believes such measures are useful for investors and other users when comparing performance across different companies as interest and tax can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company's capital structure, debt levels and credit ratings. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate.
 
Although management believe these measures are useful to investors and other users in assessing the Group's ongoing financial performance and provide improved comparability between periods, there are limitations in their use as compared to measures of financial performance under IFRS. As such, they should not be considered in isolation or viewed as a substitute for IFRS measures. In addition, these measures may not necessarily be comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation.
 
Underlying revenue and underlying operating profit
These measures adjust revenue from reportable segments and operating profit from reportable segments, respectively, to exclude revenue and operating profit generated by owned, leased and managed lease hotels which have been disposed and significant liquidated damages, which are not comparable year on year and are not indicative of the Group's ongoing profitability. The revenue and operating profit of current year acquisitions are also excluded as these obscure underlying business results and trends when comparing to the prior year. In addition, in order to remove the impact of fluctuations in foreign exchange, which would distort the comparability of the Group's operating performance, prior year measures are restated at constant currency using current year exchange rates.
 
Management believe these are meaningful to investors and other users to better understand comparable year-on-year trading and enable assessment of the underlying trends in the Group's financial performance.
 
Underlying fee revenue growth
Underlying fee revenue is used to calculate underlying fee revenue growth. Underlying fee revenue is calculated on the same basis as underlying revenue as described above but for the fee business only.
 
Management believes underlying fee revenue is meaningful to investors and other users as an indicator of IHG's ability to grow the core fee-based business, aligned to IHG's asset-light strategy.
 
Fee margin
Fee margin is presented at actual exchange rates and is a measure of the profit arising from fee revenue. Fee margin is calculated by dividing 'fee operating profit' by 'fee revenue'. Fee revenue and fee operating profit are calculated from the revenue from reportable segments and operating profit from reportable segments, as defined above, adjusted to exclude the revenue and operating profit from the Group's owned, leased and managed lease hotels and significant liquidated damages.
 
In addition, fee margin is adjusted for the results of the Group's captive insurance company, where premiums are intended to match the expected claims, and as such these amounts are adjusted from the fee margin to better depict the profitability of the fee business.
 
Management believes fee margin is meaningful to investors and other users as an indicator of the sustainable long-term growth in the profitability of IHG's core fee-based business, as the scale of IHG's operations increases with growth in IHG's System size.
 
Adjusted interest
Adjusted interest excludes the following items of interest which are recorded within the System Fund:
 
● IHG records an interest charge on the outstanding cash balance relating to the IHG Rewards Club programme. These interest payments are recognised as interest income for the Fund and interest expense for IHG.
● The System Fund also benefits from the capitalisation of interest related to the development of the next-generation Guest Reservation System.
 
As the Fund is included on the Group income statement, these amounts are included in the reported net Group financial expenses, reducing the Group's effective interest cost. Given results related to the System Fund are excluded from adjusted measures used by management, these are excluded from adjusted interest and adjusted earnings per share (see below).
 
Management believes adjusted interest is a meaningful measure for investors and other users as it provides an indication of the comparable year-on-year expense associated with financing the business including the interest on any balance held on behalf of the System Fund.
 
 
Tax excluding the impact of exceptional items and System Fund
As outlined above, exceptional items can vary year on year and, where subject to tax at a different rate than the Group as a whole, therefore they can impact the current year's tax charge. The System Fund is not managed to a profit or loss for IHG over the long term and is, in general, not subject to tax either.
 
Management believes removing these provides a better view of the Group's underlying tax rate on ordinary operations and aids comparability year-on-year, thus providing a more meaningful understanding of the Group's ongoing tax charge.
 
Adjusted earnings per ordinary share
Adjusted earnings per ordinary share adjusts the profit available for equity holders used in the calculation of basic earnings per share to remove System Fund revenue and expenses, the items of interest related to the System Fund as excluded in adjusted interest, the change in fair value of contingent purchase consideration, exceptional items, and the related tax impacts of such adjustments.
 
Management believes that adjusted earnings per share is a meaningful measure for investors and other users as it provides a more comparable earnings per share measure aligned with how management monitors the business.
 
Net debt
Net debt is used in the monitoring of the Group's liquidity and capital structure and is used by management in the calculation of the key ratios attached to the Group's bank covenants and in maintaining an investment grade credit rating. Net debt is used by investors and other users to evaluate the financial strength of the business.
 
Net debt comprises loans and other borrowings, lease liabilities, the exchange element of the fair value of derivatives hedging debt values, less cash and cash equivalents.
 
Gross capital expenditure, net capital expenditure, free cash flow
These measures have limitations as they omit certain components of the overall cash flow statement. They are not intended to represent IHG's residual cash flow available for discretionary expenditures, nor do they reflect the Group's future capital commitments. These measures are used by many companies, but there can be differences in how each company defines the terms, limiting their usefulness as a comparative measure. Therefore, it is important to view these measures only as a complement to the Group statement of cash flows.
 
Gross capital expenditure
Gross capital expenditure represents the consolidated capital expenditure of IHG inclusive of System Fund capital investments. Gross capital expenditure is defined as net cash from investing activities, adjusted to include contract acquisition costs (key money). In order to demonstrate the capital outflow of the Group, cash flows arising from any disposals or distributions from associates and joint ventures are excluded. The measure also excludes any material investments made in acquiring businesses, including any subsequent payments of deferred or contingent purchase consideration included within investing activities, which represent ongoing payments for acquisitions.
Gross capital expenditure is reported as either maintenance, recyclable, or System Fund. This disaggregation provides useful information as it enables users to distinguish between:
 
● System Fund capital investments which are strategic investments to drive growth at hotel level;
● recyclable investments (such as investments in associates and joint ventures), which are intended to be recoverable in the medium term and are to drive the growth of the Group's brands and expansion in priority markets; and
● maintenance capital expenditure (including contract acquisition costs), which represents a permanent cash outflow.
 
Management believe gross capital expenditure is a useful measure as it illustrates how the Group continues to invest in the business to drive growth. It also allows for comparison year-on-year.
 
Net capital expenditure
Net capital expenditure provides an indicator of the capital intensity of IHG's business model. Net capital expenditure is derived from net cash from investing activities, adjusted to include contract acquisition costs (net of repayments) and to exclude any material investments made in acquiring businesses, including any subsequent payments of deferred or contingent purchase consideration included within investing activities, which represent ongoing payments for acquisitions. Net capital expenditure includes the inflows arising from any disposal receipts, or distributions from associates and joint ventures.
 
In addition, System Fund depreciation and amortisation relating to property, plant and equipment and intangible assets, respectively, is added back, reducing the overall cash outflow. This reflects the way in which System Funded capital investments are re-charged to the System Fund, over the life of the asset.
 
Management believes net capital expenditure is a useful measure as it illustrates the net capital investment by IHG, after taking into account capital recycling through asset disposal and the funding of strategic investments by the System Fund. It provides investors and other users with visibility of the cash flows which are allocated to long-term investments to drive the Group's strategy.
 
 
Free cash flow
Free cash flow is net cash from operating activities adjusted to exclude: (1) the cash outflow arising from the purchase of shares by employee share trusts reflecting the requirement to satisfy incentive schemes which are linked to operating performance; (2) maintenance capital expenditure (excluding contract acquisition costs); (3) the principal element of lease payments; and (4) payments of deferred or contingent purchase consideration included within net cash from operating activities.
 
In 2016, free cash flow was also adjusted for the cash receipt arising from the renegotiation of a long-term partnership agreement.
 
Management believe free cash flow is a useful measure for investors and other users, as it represents the cash available to invest back into the business to drive future growth and pay the ordinary dividend, with any surplus being available for additional returns to shareholders.
 
  
The following definitions have been amended and the prior year comparatives restated accordingly:
 
● The adoption of IFRS 16 'Leases' has impacted all but the revenue derived Non-GAAP measures. Prior year measures have therefore been restated to provide year on year comparability. The definitions of free cash flow and net debt have been amended following the adoption of IFRS 16:
-   Free cash flow: has been amended to include the principal element of lease payments, reflecting the non-discretionary nature of these lease payments.
-   Net debt: has been amended to include lease liabilities, providing consistency with metrics used by investors and rating agencies.
 
● The application of constant currency which impacts underlying revenue, underlying operating profit and underlying fee revenue has been amended so that prior period results are now restated using current year exchange rates, rather than restating current year results at prior period exchange rates. Management considers this to be a simplified approach and provides consistency between underlying results and the associated revenue and operating profit from reportable segments from which they are derived.
 
● Fee margin has been amended to exclude the results of the Group's captive insurance company. Over the longer term, premiums are intended to match the expected claims, and as such these amounts are adjusted from the fee margin in order to provide a more comparable analysis of IHG's year-on-year fee margin progression.
 
● Adjusted earnings per ordinary share have been amended to exclude the change in fair value of contingent purchase consideration. Since the changes in fair value are prone to volatility and are not necessarily reflective of the performance of the Group, excluding these amounts provides a more comparable year-on-year measure for investors and other users, aligned to how management monitor the business.
 
● Gross capital expenditure, net capital expenditure and free cash flow have been amended to adjust for payments of contingent and deferred purchase consideration, as applicable. As payments relate to prior year acquisitions the exclusion of these amounts provides a more representative year-on-year measure for investors and other users, aligned to how management monitor the business.
 
● Net capital expenditure has been amended to treat repayment of contract acquisition costs consistently with how this is reported internally.
 
The following Non-GAAP measure has been removed:
 
Underlying earnings per ordinary share. This measure has been removed in order to rationalise the number of non-IFRS earnings per share measures.
  
 
Underlying revenue and underlying operating profit Non-GAAP reconciliations
 
Highlights for the year ended 31 December 2019
 
 
        Revenue
           Operating profit    
 
 
2018
 
 
2018
 
 
2019
Restated
%
2019
Restated
%
 
$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
Operating Profit
 
 
 
2018
 
 
2018
 
 
2019
Restated
%
2019
Restated
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Reportable segments (see above)
2,083
          1,933
      7.8
865
832
4.0
Significant liquidated damages
(11)
              (13)
    (15.4)
(11)
(13)
(15.4)
Current year acquisition of businesses
(53)
-
-
6
                -
-
Currency impacta
-
              (24)
-
-
(6)
-
 
____
_____
_____
_____
_____
_____
Underlying
 
2,019
1,896
        6.5
860
813
5.8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Revenue
 
 
 
2018
 
 
2019
Restated
%
 
$m
$m
change
 
 
 
 
Underlying fee revenue
 
 
 
Reportable segments fee business (see above)
1,510
1,486
1.6
Significant liquidated damages
(11)
(13)
(15.4)
Current year acquisition of businesses
(14)
-
-
Currency impacta
-
(17)
-
 
_____
_____
_____
Underlying fee business
  1,485
1,456
2.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
a Excludes $1m of adverse currency impact to both revenue and operating profit related to significant liquidated  damages in the Greater China region. 
 
 
Highlights by regions
 
                         Revenue
 
Operating Profita
 
Americas
 
2018
 
 
2018
 
 
2019
Restated
%
2019
Restated
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Per Group financial statements
1,040
1,051
(1.0)
700
673
4.0
 
 
 
 
 
 
 
Reportable segments analysed as:
 
 
 
 
 
 
Fee business
853
853
-
             663
            638
3.9
Owned, leased and managed lease
187
              198
(5.6)
                37
35
5.7
 
_____
_____
_____
          _____
_____
_____
 
1,040
1,051
(1.0)
700
673
4.0
 
 
 
 
 
 
 
Reportable segments (see above)
1,040
1,051
(1.0)
              700
673
4.0
Currency impact
          -
              (2)
            -
                  -
              (2)
            -
 
_____
_____
_____
          _____
_____
_____
Underlying
 
  1,040
1,049
(0.9)
             700
671
4.3
Owned, leased and managed lease included in the above
(187)
(198)
(5.6)
(37)
(35)
5.7
 
_____
_____
_____
          _____
_____
_____
Underlying fee business
853
851
0.2
663
636
4.2
 
 
Revenue
 
 
Operating Profita
EMEAA
 
2018
 
 
2018
 
 
2019
Restated
%
2019
Restated
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Per Group financial statements
723
569
27.1
217
206
5.3
 
 
 
 
 
 
 
Reportable segments analysed as:
 
 
 
           
 
 
 
 
 
            
 
   
   
Fee business
337
320
5.3
202
202
-
Owned, leased and managed lease
386
              249
55.0
                15
4
275.0
 
_____
_____
_____
          _____
_____
_____
 
723
569
27.1
217
206
5.3
 
 
 
 
 
 
 
Reportable segments (see above)
723
569
27.1
              217
206
5.3
Significant liquidated damages
    (11)
              (7)
       57.1
            (11)
             (7)
       57.1
Current year acquisition of businesses
(53)
-
-
6
-
-
Currency impact
-
(15)
-
-
(6)
-
 
_____
_____
_____
          _____
_____
_____
Underlying
 
     659
547
20.5
            212
193
9.8
Owned, leased and managed lease included in the above
(347)
(242)
43.4
(13)
(4)
225.0
 
_____
_____
_____
          _____
_____
_____
Underlying fee business
312
305
2.3
199
189
5.3
 
 
Revenue
 
 
Operating Profita
Greater China
 
2018
 
 
2018
 
 
2019
Restated
%
2019
Restated
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Per Group financial statements
135
143
(5.6)
73
70
4.3
 
 
 
 
 
 
 
Reportable segments analysed as:
 
 
 
           
 
 
Fee business
135
143
(5.6)
             73
            70
4.3
 
_____
_____
_____
          _____
_____
_____
 
135
143
(5.6)
73
70
4.3
 
 
 
 
 
 
 
Reportable segments (see above)
135
143
(5.6)
              73
70
4.3
Significant liquidated damages
         -
               (6)
           -
                 -
              (6)
           -
Currency impactb
          -
                (5)
            -
                  -
              (1)
            -
 
_____
_____
_____
          _____
_____
_____
Underlying
 
  135
132
2.3
             73
63
15.9
 
 
 
a Before exceptional items.
b Excludes $1m of adverse currency impact to both revenue and operating profit related to significant liquidated damages.
 
 
Highlights for the year ended 31 December 2018
 
 
 
        Revenue
 
         Operating profit
 
 
 
 
 
 
2018
2017
 
 
 
2018
2017
%
Restated
Restated
%
 
 
$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
 
   
 
 
 
2018
2017
 
 
2019
Restated
Restated
 
 
$m
$m
$m
 
 
 
 
 
 
Revenue
 
 
 
 
Reportable segments analysed as fee business (see above)
1,510
1,486
1,379
 
Significant liquidated damages
(11)
(13)
-
 
Captive insurance company
(19)
(11)
(9)
 
 
_____
_____
_____
 
Underlying fee business
  1,480
1,462
1,370
 
 
 
 
 
 
Operating profit
 
 
 
 
Reportable segments analysed as fee business (see above)
813
793
731
 
Significant liquidated damages
(11)
(13)
-
 
 
 
 
Captive insurance company
(1)
(1)
-
 
 
 
 
 
_____
_____
_____
 
 
 
 
Underlying fee business
801
779
731
 
 
 
 
 
 
 
 
 
 
 
 
Fee margin
54.1%
53.3%
53.4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Gross and net capital expenditure reconciliation
 
 
12 months ended 31 December
 
 
2018
 
2019
Restated
 
$m
$m
 
 
 
Net cash from investing activities
(493)
(197)
Adjusted for:
 
 
    Contract acquisition costs, net of repayments
(61)
(54)
    Tax paid on disposals
-
2
    System Fund depreciation and amortisationa
49
45
    Acquisition of businesses, net of cash acquired
292
34
    Payment of contingent purchase consideration
2