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 08 August 2017
 
 
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
Half-year Report dated 08 August 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit No: 99.1
 
 
 
 
InterContinental Hotels Group PLC
 
Half Year Results to 30 June 2017
 
Financial summary1
Reported
Underlying2
 
2017
2016 
% Change
2017
2016 
% Change
Revenue
$857m
$838m
2%
$788m
$756m
4%
Fee Revenue3
$686m
$673m
2%
$697m
$673m
4%
Operating profit
$370m
$344m
8%
$365m
$340m
7%
Adjusted EPS
113.3¢
89.0¢
27%
111.7¢
87.7¢
27%
Basic EPS4
111.7¢
87.7¢
27%
 
 
 
Interim dividend per share
33.0¢
30.0¢
10%
 
 
 
Net debt
$2,056m
$1,829m
 
 
 
 
 
 
1All figures before exceptional items unless otherwise noted.  2Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 2016 exchange rates (CER).  Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates53Group revenue excluding owned & leased hotels, managed leases and significant liquidated damages.  4After exceptional items.
 
Keith Barr, Chief Executive of InterContinental Hotels Group PLC, said:
 
"We have had a good first half. RevPAR growth of 2.1% and net system size growth of 3.7% delivered a 7% increase in underlying operating profit and a 27% increase in underlying EPS, underpinning the Board's decision to increase the interim dividend by 10%.
We continue to make good progress in executing our well-established strategy to deliver high quality sustainable growth, and during the half we passed the landmark of over 1 million open or pipeline rooms.  In June, we announced a new, midscale brand to address a $20 billion underserved segment in the US. We believe this will become another brand of scale for IHG that will deliver superior returns to our owners. Other highlights include the continued roll-out of new design formats across our Holiday Inn Brand Family and the ongoing repositioning of Crowne Plaza. Leveraging our technological capabilities, we are on track to begin roll out of our next generation cloud-based Guest Reservation System in late 2017.
I feel privileged to be the new CEO of IHG and to have the opportunity to build on the strong performance we have delivered. My focus is on driving an acceleration in our growth rate, by increasing the resources dedicated behind the highest opportunity markets and segments, strengthening our brand portfolio, building on our leading loyalty proposition, and enhancing our competitive advantage through prioritising digital and technological innovation. We will continue to focus on enhancing our cost efficiency to generate funds for reinvestment.  This, combined with our cash-generative business model and disciplined approach to capital allocation, will drive superior returns to shareholders.
While we will always face macro-economic and geopolitical uncertainties, we remain confident in the outlook for 2017."
 
Financial Highlights
 
●    Solid revenue growth driven by both RevPAR and rooms
-     Global comparable H1 RevPAR growth of 2.1%, led by occupancy up 0.9%pts. Q2 RevPAR up 1.5%, including a decline of -0.4% in the US, adversely impacted by the timing of Easter.
-     3.7% net room growth year on year, with 23k room openings, up 31% year on year, which includes 3.5k rooms in Makkah, Saudi Arabia, signed in 2015.
●    High-quality business model, focused on disciplined execution, capital allocation and shareholder returns
-     Group fee margin of 51.0%, up 2.4%pts (1.5%pts CER); favourable cost phasing and efficiency improvements.
-     Focused investment and asset recycling led to net capital expenditure5 of $162m (gross: $186m).
-     $0.4bn returned to shareholders in May via a $2.025 per share special dividend with 45 for 47 share consolidation.
-     10% increase in interim dividend to 33.0¢ reflects confidence in our long-term sustainable growth.
 
Strategic Progress
 
●   Strengthening our portfolio of preferred brands
-     Launch, in June, of a high quality midscale brand in the US, leveraging our expertise across the mainstream6 segment where we already have a 21% share of supply and 24% share of pipeline, to build another brand of scale for IHG.  Early interest in the brand from our ~2,000 existing franchisees has been highly encouraging.
-     Continued to roll out innovative guest room and public area enhancements for the Holiday Inn Brand Family; new designs now in more than 400 hotels across US and Europe, driving mid-single digit increases in guest satisfaction.
-     Positive response to Crowne Plaza US Accelerate programme, with owner capital commitments of ~$190m in the last year in hotel purchases and major refurbishment in addition to ~30 hotels committing to renovating guest rooms.   
-     Growing our boutique footprint, with the opening of our second Kimpton outside the US, in Amsterdam, and six more US openings planned this year; and our Hotel Indigo open and pipeline hotels reaching over 150 globally, with openings in Bali and Los Angeles and signings in Beijing and London's Leicester Square.
 
●   Growing through targeted hotel distribution
-     Signed 32k rooms into the pipeline, taking it to 230k rooms. ~45% of the pipeline is under construction.
 
●   Driving revenue delivery through technology and loyalty
-    Innovative cloud-based Guest Reservation System on track for roll-out in 2017, with full deployment expected by late 2018/early 2019. Positive feedback on transformational user-interface. 
-    Continued focus on driving direct bookings with the completion of the global roll out of 'Your Rate by IHG Rewards Club' following the Q1 launch in Greater China.  Loyalty contribution up 0.4%pts YoY and enrolments up 12% YoY.
 
5For definition of non-GAAP measures and reconciliation to GAAP measures refer to the Interim Management Report. 6 Mainstream includes STR midscale and upper midscale segments.
 
 
 
Americas - RevPAR growth slows in second quarter as Easter benefit reverses
 
Comparable RevPAR increased 1.1% (Q2: 0.1%), driven by 1.1% rate growth.  
US RevPAR grew 0.7%, with a decline of -0.4% in Q2, adversely impacted by the shift in timing of Easter.  Holiday Inn and Holiday Inn Express RevPAR grew 1.1% (Q2: 0.2%) and 0.6% (Q2: -0.1%) respectively.  Combined these brands delivered a 6% absolute RevPAR premium to the upper midscale segment. 
Outside of the US, RevPAR grew 4.6%. Canada's 150th anniversary celebrations generated solid demand in urban markets with RevPAR growth of 4.3%, whilst growth in the Mexican economy, buoyed by a relatively weak Peso, contributed to RevPAR growth of 9.1%.
Reported revenue increased 2% (2% CER) and reported operating profit pre-exceptional items increased 3% (3% CER), whilst on an underlying1 basis both revenue and operating profit increased 3%.
On an underlying1 basis, franchised operating profit grew 1% as incremental royalties from RevPAR and net rooms growth were partly offset by lower revenues from hotel signings and the annualisation of our $7m investment in the Americas development team, $4m of which was incurred in H2 2016.
Underlying1 managed operating profit increased 7% benefitting from the continued ramp up of the InterContinental New York Barclay, following its refurbishment and lower costs associated with our 20% interest in the hotel.
Underlying1 owned revenue and operating profit increased 12% and 25% respectively as the Holiday Inn Aruba benefitted from increased North American inbound business.
We opened 11k rooms (95 hotels), including the 900 room InterContinental Los Angeles Downtown. 9k rooms (63 hotels) were removed primarily across the Holiday Inn, Holiday Inn Express and Crowne Plaza brands as we continue to focus on high quality brand representation.
We signed 16k rooms, including the first Kimpton in Mexico and more than 11k rooms (112 hotels) for the Holiday Inn Brand Family.
 
Europe - Strong trading drives double digit profit growth

Comparable RevPAR increased 6.2% (Q2: 5.5%), driven equally by rate and occupancy. UK RevPAR increased by 6.7%, with strong trading in both London (9.0%) and the provinces (5.4%). In Germany, RevPAR growth for the half was 2.3%, Q2 RevPAR declined -3.6% as the estate lapped very strong comparables relating to trade show activity in 2016 in Dusseldorf and Munich. Trading in Paris continues to recover with RevPAR up 11.6% in H1 driven by occupancy gains (8.0%pts).
Reported revenue increased 4% (8% CER) and reported operating profit was up 12% (12% CER). 
On an underlying1 basis revenue increased 11% and operating profit increased 12%. 
We opened 1k rooms (8 hotels) including the Kimpton De Witt in Amsterdam, our first Kimpton hotel in Europe, and signed 3k rooms (20 hotels) including a Hotel Indigo in London's Leicester Square.
In Germany, we signed 10 hotels and opened three, taking the total open and pipeline hotels to 112.  
 
AMEA - Solid trading in key markets offset by weakness in the Middle East
 
Comparable RevPAR increased 1.4% (Q2: 2.7%). Performance outside the Middle East continued to be strong, with 4.2% RevPAR growth. India was up 14.3%, whilst Japan, Australasia and South-East Asia were up low to mid-single digits.
In the Middle East, RevPAR declined -3.7% due to the ongoing impact of low oil prices and industry wide supply growth. RevPAR growth was flat in Q2, due to the favourable timing of Ramadan as well as improved royal business in Saudi Arabia. We expect trading conditions for the rest of the year to remain challenging.
The increasing mix of new rooms opening in developing markets meant that total RevPAR declined -1.9% in the half (Q2: -1.0%).
Reported revenue was flat (2% CER) and operating profit was up 5% (10% CER).
On an underlying1 basis, revenue was up 1% and operating profit increased 11% benefitting from the favourable phasing of costs. We still expect managed profit in 2017 to be broadly in line with 2016.
We opened 7k rooms (9 hotels) in the half, including the first Hotel Indigo resort, in Bali, the first Staybridge Suites in Saudi Arabia and 3.5k rooms in Makkah, Saudi Arabia. The rooms in Makkah relate to the remaining portion of the 5k room signing that we announced in 2015 and, on an annualised basis, are expected to generate ~$1m in fees.
We signed 3k rooms (15 hotels) including three deals in Australia and 1.3k rooms for the Holiday Inn Brand Family.  
 
1Excluding owned asset disposals, managed leases, significant liquidated damages at constant H1 16 exchange rates (CER).  See the Interim Management Report for definition of non-GAAP measures and reconciliation to GAAP measures.
 
 
 
Greater China - Strong mainland trading and 9% rooms growth drive 15% profit growth
 
Comparable RevPAR increased 4.1% (Q2: 4.4%), with growth of 5.1% in mainland China. RevPAR growth in Hong Kong was flat whilst Macau increased 2.1%.  Mainland tier 1 cities continued to trade well, with RevPAR up 5.4% in the half driven by strong meeting and corporate demand, particularly in Shanghai.  Tier 2-4 cities also benefitted from solid meeting demand, leisure groups and the benefit of hotels still ramping up, with occupancy gains driving RevPAR growth of 5.2%.
Our strategy to maximise our long-term growth potential by using our mainstream brands to penetrate less developed cities impacted total RevPAR, which declined -0.3% for the region.
Reported revenue and operating profit increased by 6% (11% CER) and 15% (15% CER) respectively.
Underlying1 revenue increased 11% and underlying operating profit grew 15%, driven by strong trading in mainland China, 9% rooms growth and increased revenues from signing and opening hotels.
We opened 4k rooms (16 hotels) in the half, including our 300th hotel (the 340 room HUALUXE Zhangjiakou), our 40th InterContinental in the region (the 370 room InterContinental Jinan City Centre), and the first two Holiday Inn Express Franchise Plus properties.
Signings for the half totalled 10k rooms, or 46 hotels, the highest number on record. This included the 420 room InterContinental Guangzhou Downtown and the 255 room InterContinental Zhengzhou, and 34 Holiday Inn Express hotels, including 24 on Franchise Plus contracts.
 
Highly cash generative business with disciplined approach to capital allocation 
 
●   Consistent fee margin growth
-    Reported central overheads declined $9m, or $4m on a constant currency basis, benefiting from a $4m increase in central revenues and efficiency improvements.
-    Group fee margin of 51.0%, up 2.4%pts (1.5%pts CER), benefiting from efficiency improvements and favourable cost phasing.  Full year margin growth currently expected to be in the region of the long-term average of ~135bps. 
●    Significant free cash flow from operations
-    Free cash flow2 of $204m compares to $241m in H1 2016 (excluding the $95m benefit from renegotiation of long term partnership agreements), impacted by movement in system fund balances.
●    Investing for growth
-     $186m gross capital expenditure in first half: $44m maintenance capex2 and key money; $80m recyclable investments2 (including $43m in relation to associates and joint ventures); and $62m system funded capital investments.  $7m proceeds received from asset recycling and $17m system fund depreciation released from the system fund surplus, resulting in $162m of net capital expenditure.
-     Gross capex guidance remains unchanged at up to $350m p.a. into the medium term.
●    Shareholder returns
-     10% increase in the interim dividend to 33.0¢.
-     $0.4bn returned to shareholders in May via a $2.025 per share special dividend, in conjunction with a 45 for 47 share consolidation.
 
●    Efficient balance sheet provides flexibility
-   Robust financial position, with on-going commitment to an efficient balance sheet and investment grade credit rating.  
-   Net debt2 of $2,056m (including $228m finance lease on InterContinental Boston), up $0.6bn on the 2016 close following the payment of the $0.4bn special dividend in May.  Net debt to EBITDA now stands at 2.5x (LTM).
 
Foreign exchange - minimal impact on reported profit
 
Revenue impacts of the strong dollar against a number of currencies were offset by cost benefits from the devaluation of sterling against the dollar compared to H1 2016, increasing reported profit by $1m.  If the closing June 2017 exchange rates had existed through H2 2016, there would have been no impact on reported operating profit for that period.  
A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.
 
Interest, tax, and exceptional items
 
Interest: Net financial expenses reduced by $1m to $40m due to a reduction in the cost of debt following the bond refinancing in 2016 and the favourable impact of a weaker pound on translation of sterling interest expense, offset by higher average net debt levels following the payment of the 2016 $1.5bn special dividend.  
 
Tax: Based on the position at the end of the half, the tax charge has been calculated using an interim effective tax rate of 33% (H1 2016: 33%).  We continue to expect the full year 2017 tax rate to be in the low 30s (%).
 
Exceptional operating items:  $4m exceptional operating charge (2016: $5m charge) relating to the Kimpton integration.
 
1Excluding owned asset disposals, managed leases and significant liquidated damages; at constant H1 16 exchange rates (CER).
2 For definition of non-GAAP measures and reconciliation to GAAP measures see the Interim Management Report.
 
 
 
Appendix 1: Comparable RevPAR Movement Summary
 
 
Half Year 2017
 
Q2 2017
 
RevPAR
 
Rate
 
Occ.
 
RevPAR
 
Rate
 
Occ.
 
Group
 
2.1%
0.8%
0.9%pts
 1.5%
0.9%
0.4%pts
Americas
 
1.1%
1.1%
0.0%pts
0.1%
0.9%
(0.6)%pts
Europe
 
6.2%
3.2%
2.0%pts
5.5%
3.3%
1.6%pts
AMEA
 
1.4%
(1.2)%
1.9%pts
2.7%
0.2%
1.7%pts
G. China
 
4.1%
(1.1)%
3.2%pts
4.4%
(0.8)%
3.4%pts
 
 
Appendix 2: RevPAR movement summary at constant exchange rates (CER) vs. actual exchange rates (AER)
 
 
Half Year 2017
 
Q2 2017
 
CER
 
AER
 
Difference
 
CER
 
AER
 
Difference
 
Group
 
2.1%
0.6%
1.5%pts
1.5%
0.0%
1.5%pts
Americas
 
1.1%
0.9%
0.2%pts
0.1%
(0.2)%
0.3%pts
Europe
 
6.2%
(0.4)%
6.6%pts
5.5%
(0.1)%
5.6%pts
AMEA
 
1.4%
0.4%
1.0%pts
2.7%
1.0%
1.7%pts
G. China
 
4.1%
0.0%
4.1%pts
4.4%
0.3%
4.1%pts
 
 
 
 
 
 
 
 
 
 
 
Appendix 3: Half Year System & Pipeline Summary (rooms)
 
 
System
 
Pipeline
 
Openings
 
Removals
 
Net
 
Total
 
YoY%*
 
Signings
 
Total
 
Group
 
22,857
 
(12,317)
 
10,540
 
777,675
 
3.7%
 
31,773
229,526
Americas
 
10,618
 
(8,662)
 
1,956
 
489,949
 
1.6%
 
15,814
 
102,578
 
Europe
 
1,443
 
(1,150)
 
293
 
110,362
 
3.6%
 
3,128
 
23,974
 
AMEA
 
6,910
 
(1,029)
 
5,881
 
81,932
 
11.6%
 
3,003
 
34,807
 
G. China
 
3,886
 
(1,476)
 
2,410
 
95,432
 
9.3%
 
9,828
 
68,167
 
 
 
 
 
 
 
 
 
 
 
 
* compared to H1 2016
 
Appendix 4: Half Year financial headlines
 
Operating Profit $m
 
Total
 
Americas
 
Europe
 
AMEA
 
G. China
 
Central
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
 
Franchised
 
343
340
298
295
37
37
7
6
1
2
-
 
-
 
Managed
 
120
113
33
32
12
10
43
42
32
29
-
 
-
 
Owned & leased
 
16
13
15
12
0
0
1
1
0
0
-
 
-
 
Regional overheads
 
(56)
(60)
(25)
(26)
(11)
(13)
(10)
(10)
(10)
(11)
-
 
-
 
Profit pre central overheads
 
423
406
321
313
38
34
41
39
23
20
-
 
-
 
Central overheads
 
(53)
(62)
-
-
-
-
-
-
-
-
(53)
 
(62)
 
Group Operating profit ex. Exceptional items
 
370
344
321
313
38
34
41
39
23
20
(53)
 
(62)
 
Exceptional Items
 
(4)
(5)
(4)
(5)
-
-
-
-
-
-
-
 
-
 
Group Operating profit
 
366
339
317
308
38
34
41
39
23
20
(53)
 
(62)
 
 
 
Appendix 5: Constant exchange rate (CER) and underlying operating profit movement before exceptional items
 
Total***
 
Americas
 
Europe
 
AMEA
 
G. China
 
Reported
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Actual*
 
CER**
 
Growth / (decline)
 
8%
 
7%
 
3%
 
3%
 
12%
 
12%
 
5%
 
10%
 
15%
 
15%
 
 
 
 
 
 
 
 
Underlying****
Growth / (decline)
 
Total***
 
Americas
 
Europe
 
AMEA
 
G. China
 
7%
 
3%
 
12%
 
11%
 
15%
 
Exchange rates:
GBP:USD
EUR:USD
* US dollar actual currency
 
 
 
H1 2017
0.79
0.92
** Translated at constant H1 2016 exchange rates 1
 
 
 
H1 2016
0.70
0.90
*** After central overheads
 
 
 
 
 
 
Appendix 6: Definitions
CER: constant exchange rates with H1 2016 exchange rates applied to H1 2017.
Comparable RevPAR: Revenue per available room for hotels that have traded for all of 2016 and 2017, reported at CER.
Fee revenue: Group revenue excluding owned and leased hotels, managed leases and significant liquidated damages.
Fee margin: adjusted for owned and leased hotels, managed leases and significant liquidated damages.
Managed lease hotels: properties structured for legal reasons as operating leases but with the same characteristics as management contracts
Americas: Revenue H1 2017 $18m; H1 2016 $20m; EBIT H1 2017 $1m, H1 2016 $1m. Europe: Revenue H1 2017 $38m; H1 2016 $38m; EBIT H1 2017 $1m, H1 2016 $1m. AMEA: Revenue H1 2017 $24m; H1 2016 $24m; EBIT H1 2017 $2m, H1 2016 $2m.
Significant liquidated damages: $nil in H1 2017; $nil in H1 2016.
Total gross revenue: total rooms revenue from franchised hotels and total hotel revenue from managed, owned and leased hotels. Other than owned and leased 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 2016 or 2017, reported at CER.
 
 
 
Appendix 7: Investor information for 2017 interim dividend
 
Ex-dividend date:
 
31 August 2017
 
Record date:
 
1 September 2017 
 
Payment date:
 
6 October 2017
 
Dividend payment:
 
ADRs: 33.0 cents per ADR; The corresponding amount in Pence Sterling per ordinary share will be announced on 20th September 2017, calculated based on the average of the market exchange rates for the three working days commencing 15th September.
 
 
 
For further information, please contact:
 
Investor Relations (Heather Wood; Neeral Morzaria; Tom Yates):
+44 (0)1895 512 176
 
+44 (0)7808 098 724
 
Media Relations (Yasmin Diamond; Mark Debenham):
+44 (0)1895 512 097
 
+44 (0)7527 424 046
 
 
 
 
Webcast 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 London time on 8th August on the web address www.ihgplc.com/interims17.  For those wishing to ask questions please use the dial in details below which will have a Q&A facility. 
The webcast replay will be available on the website later on the day of the results and will remain on it for the foreseeable future. 
 
International dial-in:
US dial-in:
Passcode:
 
+44 (0)203 059 8125
+1 724 928 9460
IHG Investor
 
A replay of the conference call will also be available following the event - details are below. 
 
Replay:
Pin:
 
+44 (0)121 260 4861
6653618#
 
 
US conference call and Q&A:
An additional conference call, primarily for US investors and analysts, at 9:00am New York Time on 8th August. There will be an opportunity to ask questions.
 
International dial-in:
US dial-in:
Passcode:
 
+44 (0)203 059 8125
+1 724 928 9460
IHG Investor
 
A replay of the conference call will also be available following the event - details are below. 
 
Replay:
Pin:
 
+44 (0)121 260 4861
6654548#
 
 
Website:
The full release and supplementary data will be available on our website from 7:00am (London time) on 8th August.  The web address is www.ihgplc.com/interims17
 
 
 
 
 
Notes to Editors:
 
IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including InterContinental® Hotels & Resorts, Kimpton® Hotels & Restaurants, Hotel Indigo®, EVEN® Hotels, HUALUXE® Hotels and Resorts, Crowne Plaza® Hotels & Resorts, Holiday Inn®, Holiday Inn Express®, Holiday Inn Club Vacations®, Holiday Inn Resort®, Staybridge Suites® and Candlewood Suites®.
 
IHG franchises, leases, manages or owns more than 5,200 hotels and nearly 780,000 guest rooms in almost 100 countries, with more than 1,500 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 350,000 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: www.ihgplc.com/media and follow us on social media at: www.twitter.com/ihg, www.facebook.com/ihg and www.youtube.com/ihgplc.
 
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.
 
 
 
 
 
INTERIM MANAGEMENT REPORT
 
This Interim Management Report discusses the performance of InterContinental Hotels Group PLC
(the Group or IHG) for the six months ended 30 June 2017.
 
GROUP
 
 
6 months ended 30 June
Group results
2017
2016
%
 
$m
$m
change
Revenue
 
 
 
 
Americas
499
490
1.8
 
Europe
113
109
3.7
 
AMEA
115
115
-
 
Greater China
58
55
5.5
 
Central
72
69
4.3
 
 
____
____
____
Total
857
838
2.3
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Americas
321
313
2.6
 
Europe
38
34
11.8
 
AMEA
41
39
5.1
 
Greater China
23
20
15.0
 
Central
(53)
(62)
14.5
 
 
____
____
____
 
370
344
7.6
Exceptional operating items
(4)
(5)
20.0
 
____
____
____
Operating profit
366
339
8.0
Net financial expenses
(40)
(41)
2.4
 
____
____
____
Profit before tax
326
298
9.4
 
____
____
____
Earnings per ordinary share
 
 
 
 
Basic
111.7¢
87.7¢
27.4
 
Adjusted
113.3¢
89.0¢
27.3
 
 
 
 
 
Average US dollar to sterling exchange rate
$1 : £0.79
$1 : £0.70
12.9
 
 
During the six months ended 30 June 2017, revenue increased by $19m (2.3%) to $857m and operating profit increased by $27m (8.0%) to $366m.
 
Underlying1 Group revenue and underlying1 Group operating profit increased by $32m (4.2%) and $25m (7.4%) respectively.
 
The net central operating loss before exceptional items decreased by $9m (14.5%) to $53m compared to 2016 and by $4m (6.5%) to $58m at constant currency.
 
Profit before tax increased by $28m to $326m. Basic earnings per ordinary share increased by 27.4% to 111.7¢, whilst adjusted earnings per ordinary share increased by 27.3% to 113.3¢.
 
1 Underlying excludes significant liquidated damages and the results from managed-lease hotels, translated at constant currency by applying
prior-year exchange rates (see the Use of Non-GAAP measures section later in this Interim Management Report).
 
 
 
 
 
Hotels
Rooms
Global hotel and room count
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 188
1
 64,572
922
 
Kimpton
 60
(1)
 11,374
136
 
HUALUXE
 5
1
 1,436
340
 
Crowne Plaza
 410
2
 114,027
224
 
Hotel Indigo
 79
4
 9,515
610
 
EVEN Hotels
 6
-
 1,010
-
 
Holiday Inn1
1,217
(24)
226,941
(4,815)
 
Holiday Inn Express
2,542
45
253,904
6,895
 
Staybridge Suites
245
9
26,612
1,002
 
Candlewood Suites
374
12
35,251
1,059
 
Other
95
(2)
33,033
4,167
 
 
____
____
______
_____
Total
5,221
47
777,675
10,540
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
4,352
31
543,049
399
 
Managed
861
16
232,268
10,195
 
Owned and leased
8
-
2,358
(54)
 
 
____
____
______
_____
Total
5,221
47
777,675
10,540
 
 
____
____
______
_____
1Includes 46 Holiday Inn Resort properties (11,653 rooms) and 26 Holiday Inn Club Vacations properties (7,676 rooms)
  (2016: 46 Holiday Inn Resort properties (11,652 rooms) and 26 Holiday Inn Club Vacations properties (7,601 rooms)).
 
 
 
 
Hotels
Rooms
Global pipeline
 
Change over
 
Change over
 
 
2017
30 June
             2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 63
1
 17,044
(436)
 
Kimpton
 17
(1)
 2,863
(235)
 
HUALUXE
 21
(1)
 6,556
(400)
 
Crowne Plaza
 85
(5)
 23,748
(788)
 
Hotel Indigo
 76
1
 10,486
(107)
 
EVEN Hotels
 7
1
 1,065
285
 
Holiday Inn1
270
9
53,501
823
 
Holiday Inn Express
 702
26
 86,451
2,569
 
Staybridge Suites
 151
11
 16,454
1,133
 
Candlewood Suites
 107
(1)
 9,608
4
 
Other
14
2
1,750
(3,398)
 
 
____
____
______
_____
Total
1,513
43
229,526
(550)
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
1,097
58
124,944
7,250
 
Managed
416
(15)
104,582
(7,800)
 
 
____
____
______
_____
Total
1,513
43
229,526
(550)
 
 
____
____
______
_____
 
 
 
 
 
 
 
 
 
 
1Includes 14 Holiday Inn Resort properties (3,601 rooms) (2016: 14 Holiday Inn Resort properties (3,531 rooms)).
 
 
 
 
THE AMERICAS
 
 
6 months ended 30 June
Americas Results
2017
2016
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
343
338
1.5
 
Managed
82
86
(4.7)
 
Owned and leased
74
66
12.1
 
____
____
____
Total
 
499
490
1.8
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
298
295
1.0
 
Managed
33
32
3.1
 
Owned and leased
15
12
25.0
 
Regional overheads
(25)
(26)
3.8
 
____
____
____
 
 
321
313
2.6
Exceptional items
 
(4)
(5)
20.0
 
____
____
____
Operating profit
317
308
2.9
 
____
____
____
 
 
 
 
 
 
 
 
 
 
                                                                                               
 
Americas Comparable RevPAR movement on previous year
 
6 months ended
30 June 2017
Franchised
 
 
Crowne Plaza
0.2%
 
Holiday Inn
1.8%
 
Holiday Inn Express
0.8%
 
All brands
1.1%
Managed
 
 
InterContinental
(2.0)%
 
Kimpton
2.1%
 
Crowne Plaza
1.4%
 
Holiday Inn
(1.1)%
 
Staybridge Suites
(1.3)%
 
Candlewood Suites
(0.4)%
 
All brands
0.5%
Owned and leased
 
 
All brands
7.6%
 
 
Franchised revenue increased by $5m (1.5%) to $343m and operating profit increased by $3m (1.0%) to $298m. On a constant currency basis, revenue increased by $5m (1.5%) to $343m and operating profit increased by $4m (1.4%) to $299m. Royalties1 growth of 2.1% was driven by 1.6% rooms growth year-on-year and comparable RevPAR growth of 1.1%.
 
Managed revenue decreased by $4m (4.7%) to $82m, and operating profit increased by $1m (3.1%) to $33m. Revenue and operating profit included $18m (2016: $20m) and $1m (2016: $1m) respectively from one managed lease property2. Excluding results from this managed lease hotel, and on a constant currency basis, revenue remained flat and operating profit increased by $2m (6.5%).
 
Owned and leased revenue increased by $8m (12.1%) to $74m, and operating profit increased by $3m (25.0%) to $15m. On a constant currency basis, owned and leased revenue increased by $8m (12.1%), and operating profit increased by $3m (25.0%), as one hotel benefited from increased North Americas inbound business.
 
1 Royalties are fees, based on rooms revenue, that a franchisee pays to the brand owner for use of the brand name.
2 A property that is structured for legal reasons as an operating lease but has the same characteristics as a management contract.
 
 
 
 
Hotels
Rooms
Americas hotel and room count
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
49
1
 17,302
894
 
Kimpton
59
(2)
 11,100
(138)
 
Crowne Plaza
161
(3)
 42,748
(1,368)
 
Hotel Indigo
48
2
 6,418
486
 
EVEN Hotels
6
-
 1,010
-
 
Holiday Inn1
762
(12)
134,283
(2,461)
 
Holiday Inn Express
2,183
29
196,033
3,662
 
Staybridge Suites
234
8
25,110
925
 
Candlewood Suites
374
12
35,251
1,059
 
Other
81
(3)
20,694
(1,103)
 
____
____
______
_____
Total
3,957
32
489,949
1,956
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
3,665
32
 431,648
782
 
Managed
286
-
 56,476
1,174
 
Owned and leased
6
-
 1,825
-
 
____
____
______
_____
Total
3,957
32
489,949
1,956
 
____
____
______
_____
 
1Includes 25 Holiday Inn Resort properties (6,787 rooms) and 26 Holiday Inn Club Vacations (7,676 rooms)
  (2016: 25 Holiday Inn Resort properties (6,791 rooms) and 26 Holiday Inn Club Vacations (7,601 rooms)).
 
 
 
 
Hotels
Rooms
Americas pipeline
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
6
(1)
 1,642
(890)
 
Kimpton
16
(1)
 2,714
(235)
 
Crowne Plaza
15
(2)
 3,256
(30)
 
Hotel Indigo
31
(1)
 3,580
(385)
 
EVEN Hotels
6
-
 775
(5)
 
Holiday Inn1
137
9
17,892
588
 
Holiday Inn Express
496
8
 46,930
134
 
Staybridge Suites
141
10
 14,798
902
 
Candlewood Suites
107
(1)
 9,608
4
 
Other
12
1
1,383
44
 
____
____
______
_____
Total
967
22
102,578
127
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
925
28
95,802
2,507
 
Managed
42
(6)
6,776
(2,380)
 
____
____
______
_____
Total
967
22
102,578
127
 
____
____
______
_____
 
1Includes three Holiday Inn Resort properties (455 rooms) (2016: three Holiday Inn Resort properties (455 rooms)).
 
 
 
EUROPE
 
 
6 months ended 30 June
Europe results
2017
2016
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
50
49
2.0
 
Managed
63
60
5.0
 
____
____
____
Total
 
113
109
3.7
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
37
37
-
 
Managed
12
10
20.0
 
Regional overheads
(11)
(13)
15.4
 
____
____
____
Operating profit
 
38
34
11.8
 
____
____
____
 
 
 
 
 
 
 
 
 
 
 
Europe comparable RevPAR movement on previous year
6 months ended
30 June
2017
 
 
Franchised
 
 
All brands
5.8%
 
 
 
Managed
 
 
All brands
7.5%
 
 
 
 
 
 
Franchised revenue increased by $1m (2.0%) to $50m and operating profit remained flat at $37m. On a constant currency basis, revenue increased by $4m (8.2%) to $53m and operating profit increased by $2m (5.4%) to $39m.
 
Managed revenue increased by $3m (5.0%) to $63m and operating profit increased by $2m (20.0%) to $12m. Revenue included $38m (2016: $38m), and operating profit included $1m (2016: $1m) from managed leases1. Excluding properties operated under this arrangement, and on a constant currency basis, revenue increased by $4m (18.2%) and operating profit increased by $2m (22.2%).
 
 
1 Properties that are structured for legal reasons as an operating lease but have the same characteristics as a management contract.
 
 
 
 
Hotels
 
Rooms
Europe hotel and room count
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
31
-
 9,724
-
 
Kimpton
1
1
 274
274
 
Crowne Plaza
94
2
 21,633
746
 
Hotel Indigo
22
1
 1,970
60
 
Holiday Inn1
282
(9)
 46,112
(1,717)
 
Holiday Inn Express
239
5
 29,508
930
 
Staybridge Suites
7
-
 1,000
-
 
Other
1
-
 141
-
 
____
____
______
_____
Total
677
-
110,362
293
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
624
(5)
95,788
(1,242)
 
Managed
53
5
14,574
1,535
 
____
____
______
_____
Total
677
-
110,362
293
 
____
____
______
_____
 
1Includes one Holiday Inn Resort property (88 rooms) (2016: one Holiday Inn Resort properties (88 rooms)).
 
 
 
 
 
Hotels
Rooms
Europe pipeline
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 6
-
 813
-
 
Kimpton
 1
-
 149
-
 
Crowne Plaza
 13
(1)
 3,003
(182)
 
Hotel Indigo
 18
-
 2,211
(53)
 
Holiday Inn
 35
1
 7,528
259
 
Holiday Inn Express
 60
2
 9,444
49
 
Staybridge Suites
 6
1
 826
189
 
____
____
______
_____
Total
139
3
23,974
262
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
118
7
18,784
876
 
Managed
21
(4)
5,190
(614)
 
____
____
______
_____
Total
139
3
23,974
262
 
____
____
______
_____
 
 
 
ASIA, MIDDLE EAST AND AFRICA (AMEA)
 
 
6 months ended 30 June
AMEA results
2017
2016
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
8
8
-
 
Managed
90
90
-
 
Owned and leased
17
17
-
 
 
____
____
____
Total
 
115
115
-
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
7
6
16.7
 
Managed
43
42
2.4
 
Owned and leased
1
1
-
 
Regional overheads
(10)
(10)
-
 
____
____
____
Operating profit
 
41
39
5.1
 
____
____
____
 
 
 
 
 
 
 
 
 
 
AMEA comparable RevPAR movement on previous year
6 months ended
30 June
2017
 
 
Franchised
 
 
All brands
(1.9)%
 
Managed
 
 
All brands
2.0%
 
 
On an actual and constant currency basis, franchised revenue remained flat at $8m whilst operating profit increased by $1m (16.7%) to $7m.
 
Managed revenue remained flat at $90m and operating profit increased by $1m (2.4%) to $43m. Comparable RevPAR increased by 2.0%. Revenue and operating profit included $24m (2016: $24m) and $2m (2016: $2m) respectively from one managed lease property1. Excluding results from this hotel and on a constant currency basis, revenue increased by $1m (1.5%) and operating profit increased by $3m (7.5%) benefiting from the favourable phasing of costs.
 
In the owned and leased estate, on an actual and constant currency basis, revenue and operating profit remained flat at $17m and $1m respectively.
 
1 A property that is structured for legal reasons as an operating lease but has the same characteristics as a management contract.
 
 
 
 
Hotels
Rooms
AMEA hotel and room count
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 68
(1)
 20,890
(313)
 
Crowne Plaza
 75
2
 21,296
547
 
Hotel Indigo
 3
1
 382
59
 
Holiday Inn1
 92
(1)
 21,175
(137)
 
Holiday Inn Express
 34
-
 7,693
110
 
Staybridge Suites
 4
1
 502
77
 
Other
8
2
9,994
5,538
 
____
____
______
 _____
Total
284
4
81,932
5,881
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
57
2
13,023
453
 
Managed
225
2
68,376
5,482
 
Owned and leased
2
-
533
(54)
 
____
____
______
_____
Total
284
4
81,932
5,881
 
____
____
______
_____
 
1Includes 14 Holiday Inn Resort properties (2,958 rooms) (2016: 14 Holiday Inn Resort properties (2,953 rooms))
 
 
 
 
Hotels
Rooms
AMEA pipeline
 
Change over
 
Change over
 
2017
30 June
2016
31 December
2017
30 June
2016
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 26
(1)
 6,245
(436)
 
Crowne Plaza
 20
(1)
 5,239
(315)
 
Hotel Indigo
 15
1
 2,715
133
 
Holiday Inn1
 48
(1)
 13,003
(261)
 
Holiday Inn Express
 31
(4)
 6,687
(799)
 
Staybridge Suites
 4
-
 830
42
 
Other
1
1
 88
(3,442)
 
____
____
______
_____
Total
145
(5)
34,807
(5,078)
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
12
1
2,605
199
 
Managed
133
(6)
32,202
(5,277)
 
____
____
______
_____
Total
145
(5)
34,807
(5,078)
 
____
____
______
_____
 
1Includes five Holiday Inn Resort properties (1,151 rooms) (2016: five Holiday Inn Resort properties (1,256 rooms))
 
 
 
GREATER CHINA
 
 
6 months ended 30 June
Greater China results
2017
2016
%
 
$m
$m
change
Revenue
 
 
 
 
Franchised
2
2
-
 
Managed
56
53
5.7
 
 
____
____
____
Total
 
58
55
5.5
 
____
____
____
Operating profit before exceptional items
 
 
 
 
Franchised
1
2
(50.0)
 
Managed
32
29
10.3
 
Regional overheads
(10)
(11)
9.1
 
____
____
____
Operating profit
 
23
20
15.0
 
____
____
____
 
 
 
 
 
 
 
 
 
 
 
Greater China comparable RevPAR movement on previous year
6 months ended
30 June
2017
 
 
Managed
 
 
All brands
4.6%
 
 
 
 
 
On an actual and constant currency basis, franchised revenue remained flat at $2m whilst operating profit decreased by $1m (50.0%) to $1m.
 
Managed revenue increased by $3m (5.7%) to $56m and operating profit increased by $3m (10.3%) to $32m. Comparable RevPAR increased by 4.6% and System size grew by 9.0% year-on-year. On a constant currency basis, revenue increased by $6m (11.3%) to $59m, whilst operating profit increased by $4m (13.8%) to $33m primarily due to strong trading in mainland China.
 
 
 
 
 
Hotels
Rooms
 
Greater China hotel and room count
 
 
2017
Change
over 2016
 
2017
Change
over 2016
 
30 June
31 December
30 June
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 40
1
 16,656
341
 
HUALUXE
 5
1
 1,436
340
 
Crowne Plaza
 80
1
 28,350
299
 
Hotel Indigo
 6
-
 745
5
 
Holiday Inn1
 81
(2)
 25,371
(500)
 
Holiday Inn Express
 86
11
 20,670
2,193
 
Other
 5
(1)
 2,204
(268)
 
 
____
____
______
_____
Total
303
11
95,432
2,410
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
6
2
2,590
406
 
Managed
297
9
92,842
2,004
 
 
____
____
______
_____
Total
303
11
95,432
2,410
 
 
____
____
______
_____
 
 
 
 
 
 
 
 
1Includes six Holiday Inn Resort properties (1,820 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms))
 
 
 
 
Hotels
Rooms
 
Greater China pipeline
 
 
2017
Change
over 2016
 
2017
Change
over 2016
 
30 June
31 December
30 June
31 December
Analysed by brand
 
 
 
 
 
InterContinental
 25
3
 8,344
890
 
HUALUXE
 21
(1)
 6,556
(400)
 
Crowne Plaza
 37
(1)
 12,250
(261)
 
Hotel Indigo
 12
1
 1,980
198
 
EVEN Hotels
1
1
290
290
 
Holiday Inn1
 50
-
 15,078
237
 
Holiday Inn Express
 115
20
 23,390
3,185
 
Other
 1
-
 279
-
 
 
____
____
______
_____
Total
262
23
68,167
4,139
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
42
22
7,753
3,668
 
Managed
220
1
60,414
471
 
 
____
____
______
_____
Total
262
23
68,167
4,139
 
 
____
____
______
_____
 
 
 
 
 
 
 
 
1Includes six Holiday Inn Resort properties (1,995 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms))
 
 
 
CENTRAL
 
 
6 months ended 30 June
 
2017
2016
%
Central results
$m
$m
change
 
 
 
 
Revenue
72
69
4.3
Gross costs
(125)
(131)
4.6
 
____
____
____
Operating loss
 
(53)
(62)
14.5
 
____
____
____
 
 
 
 
 
 
Central results
The net operating loss decreased by $9m (14.5%) compared to 2016 (a $4m or 6.5% decrease to $58m at constant currency). Central revenue, which mainly comprises technology fee income, increased by $3m (4.3%) to $72m, driven by increases in both comparable RevPAR and IHG System size in the first half of 2017. At constant currency, gross costs remained flat compared to 2016 (a $6m or 4.6% decrease at actual currency).
 
 
OTHER FINANCIAL INFORMATION
 
Exceptional operating items
The $4m exceptional operating charge, (2016 $5m charge), both relate to the costs of integrating Kimpton into the operations of the Group.
 
Net financial expenses
Net financial expenses decreased by $1m to $40m for the six months ended 30 June 2017. This decrease reflects a reduction in the cost of debt resulting from the refinancing of the £250m 6% bond which matured in December 2016, and the favourable impact of a weaker pound on translation of sterling interest expense, offset by higher average net debt levels following the payment of the $1.5bn special dividend in 2016.
 
Taxation
The tax charge on profit before tax, excluding the impact of exceptional items, has been calculated using an interim effective tax rate of 33%. Excluding the effect of prior-year items, the equivalent effective tax rate would be approximately 34%. This rate is higher than the average UK statutory rate for the year of 19.25% due mainly to certain overseas profits (particularly in the US) being subject to statutory rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.
 
Taxation within exceptional items totalled a credit of $1m representing tax relief on the Kimpton integration costs.
 
Net tax paid in the six months ended 30 June 2017 totalled $50m.
 
Dividends
The Board has proposed an interim dividend per ordinary share of 33.0¢, representing growth of 10% on the 2016 interim dividend.
 
On 21 February 2017, the Group announced a $0.4bn return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (202.5¢ per ordinary share) was paid on 22 May 2017.
 
Capital structure and liquidity management
During the six months ended 30 June 2017, $251m of cash was generated from operating activities. Net cash outflows from investing activities totalled $179m and net cash used in financing activities totalled $142m. Net debt at 30 June 2017 was $2,056m and included $228m in respect of the finance lease obligations for the InterContinental Boston.
 
The Group had net liabilities of $1,097m at 30 June 2017 reflecting that its internally generated brands are not recorded on the balance sheet, in accordance with accounting standards.  The change in net liabilities (from $759m at 31 December 2016) was primarily due to the payment of the $404m special dividend on 22 May 2017.
 
 
 
USE OF NON-GAAP MEASURES
 
In addition to performance measures directly observable in the Interim Financial Statements (IFRS measures), additional measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures and include:
 
●          Total gross revenue;
●          Underlying revenue, underlying operating profit growth, underlying fee revenue, fee margin growth;
●          Total operating profit before exceptional items and tax, adjusted earnings per ordinary share;
●            Net debt;
●            Net capital expenditure;
●          Free cash flow; and
●          Underlying earnings per share.
 
Further information can be found on page 26 of the IHG Annual Report and Form 20-F 2016 (which is available at www.ihgplc.com). 
 
Underlying revenue and underlying operating profit Non-GAAP reconciliations
The following tables:
 
●          show underlying revenue and underlying operating profit on both an actual and constant currency basisa;
●          reconcile segmental underlying revenue and underlying operating profit to Group underlying revenue and operating profit;
●          show underlying Group fee revenue and Group fee margin on both an actual and constant currency basisa; and
●          reconcile Group underlying revenue and underlying operating profit to the GAAP measures included in the Interim Financial Statements.
 
 
a IHG’s method for calculating the constant currency amounts of entities reporting in currencies other than US dollars is to translate the current period results into US dollars using the prior period’s exchange rate. For example, if a UK entity generated revenue of £100m in 2017 and 2016, the Interim Financial Statements would report revenue of $127m in 2017 and $143m in 2016, using the respective average exchange rates for the year of $1=£0.79 and $1=£0.70. For constant currency reporting, 2017 revenue would be translated at $1=£0.70 giving a US dollar value of $143m, thereby showing that underlying revenue was flat year-on-year.
 
 
 
 
Highlights for the six months ended 30 June 2017
 
 
 
Revenue
 
Operating profit
 
 
2017
2016
%
2017
2016
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Per Group income statement
857
838
2.3
366
339
8.0
 
Exceptional items
-
-
-
4
5
(20.0)
 
Managed leases
(80)
(82)
2.4
(4)
(4)
-
 
 
_____
_____
_____
_____
_____
_____
 
Underlying at actual exchange
777
756
2.8
366
340
7.6
 
rates
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
 
 
 
 
At actual exchange rates
 
At constant currency
 
2017
2016
%
2017
2016
%
 
$m
$m
change
$m
$m
change
Underlying revenue
 
 
 
 
 
 
Americas
481
470
2.3
483
470
2.8
Europe
75
71
5.6
79
71
11.3
AMEA
91
91
-
92
91
1.1
Greater China
58
55
5.5
61
55
10.9
Central
72
69
4.3
73
69
5.8
 
_____
_____
_____
_____
_____
_____
Underlying Group revenue
777
756
2.8
788
756
4.2
Owned and leased revenue
 
 
 
 
 
 
included above
(91)
(83)
(9.6)
(91)
(83)
(9.6)
 
_____
_____
_____
_____
_____
_____
Underlying Group fee revenue
686
673
1.9
697
673
3.6
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At actual exchange rates
At constant currency
 
2017
2016
%
2017
2016
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Underlying operating profit
 
 
 
 
 
 
Americas
320
312
2.6
322
312
3.2
Europe
37
33
12.1
37
33
12.1
AMEA
39
37
5.4
41
37
10.8
Greater China
23
20
15.0
23
20
15.0
Central
(53)
(62)
14.5
(58)
(62)
6.5
 
_____
_____
_____
_____
_____
_____
Underlying Group operating profit
366
340
7.6
365
340
7.4
Owned and leased operating
 
 
 
 
 
 
profit included above
(16)
(13)
(23.1)
(16)
(13)
(23.1)
 
_____
_____
_____
_____
_____
_____
Underlying Group fee profit
350
327
7.0
349
327
6.7
 
_____
_____
_____
_____
_____
_____
Group fee margin
51.0%
48.6%
2.4ppts
50.1%
48.6%
1.5ppts
 
_____
_____
_____
_____
_____
_____
 
 
 
Net capital expenditure
 
Net capital expenditure is defined as cash flow from investing activities, less System Fund depreciation (recovery of previous System Fund capital expenditure).  For internal management reporting, capital expenditure is reported as either maintenance, recyclable, or System Fund.  The disaggregation of net capital expenditure provides useful information as it enables users to distinguish between System Fund capital investments and recyclable investments (such as investments in associates and joint ventures), which are intended to be recoverable in the medium term, compared with maintenance capital expenditure (including key money paid), which represents a permanent cash outflow.
 
The reconciliation of cash flow from investing activities to net capital expenditure is as follows:
 
 
 
6 months ended 30 June
 
2017
2016
 
$m
$m
 
 
 
Net cash from investing activities
(179)
(97)
 
Analysed as:
 
 
    Capital expenditure: maintenance and key money
(44)
(36)
    Capital expenditure: recyclable investments
(80)
(25)
    Capital expenditure: System Fund investments
(62)
(47)
 
_____
_____
Gross capital expenditure
(186)
(108)
    Disposal proceeds
7
11
 
_____
_____
 
(179)
(97)
    System Fund depreciation
17
14
 
_____
_____
Net capital expenditure
(162)
(83)
 
_____
_____
 
 
 
Free cash flow
 
Free cash flow is defined as cash flow from operating activities (after interest and tax paid), less purchase of shares by employee share trusts and maintenance capital expenditure, including key money paid.  In 2016, free cash flow also excludes the $95m cash receipt from renegotiation of long-term partnership agreements.  Free cash flow is a useful measure for investors, as it represents the cash available to invest back into the business to drive growth, pay the ordinary dividend, with any surplus being available for additional returns to shareholders.
 
The reconciliation of cash flow from operating activities to free cash flow is as follows:
 
 
 
6 months ended 30 June
 
2017
2016
 
$m
$m
 
 
 
Net cash from operating activities
251
382
Less:
 
 
    Purchase of shares by employee share trusts
(3)
(10)
    Capital expenditure: maintenance and key money
(44)
(36)
    Cash receipt from renegotiation of long-term partnership agreements
-
(95)
 
_____
_____
Free cash flow
204
241
 
_____
_____
 
Underlying earnings per share
 
Underlying earnings per share is calculated by dividing underlying profit for the period available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period.
 
Underlying earnings per share provides a per share measure based on comparable year-on-year trading and reflects underlying trends in the Group's financial performance.  
 
Basic earnings per share can be reconciled to underlying earnings per share as follows:
 
 
 
6 months ended 30 June
 
2017
2016
 
$m
$m
 
 
 
Basic earnings per ordinary share
 
 
Profit available for equity holders
219
200
Basic weighted average number of ordinary shares (millions)
196
228
 
 
 
Basic earnings per ordinary share (cents)
111.7
87.7
 
_____
_____
 
 
 
Underlying earnings per ordinary share
 
 
Profit available for equity holders
219
200
Adjusted for:
 
 
    Exceptional items before tax
4
5
    Tax on exceptional items
(1)
(2)
    Managed leases
(4)
(4)
    Tax on managed leases
1
1
    Currency effects and other
-
-
 
_____
_____
Underlying profit available for equity holders
219
200
 
_____
_____
 
 
 
Underlying earnings per ordinary share (cents)
111.7
87.7
 
_____
_____
 
 
 
RISKS AND UNCERTAINTIES
 
On pages 164 to 167 of the IHG Annual Report and Form 20-F 2016 we set out our assessment of the principal risk issues that would face the business through 2017 under the headings:
 
●          political and economic developments;
●          events that adversely impact domestic or international travel;
●          hotel industry supply and demand cycle; competitive and changing industry;
●          executing and realising the benefits from strategic acquisitions;
●          dependency on external stakeholders and business partners;
●          increasing competition from online travel agents and intermediaries;
●          identifying, securing and retaining franchise and management agreements;
●          changing technology and systems; brand reputation;
●          resilience of our reservation systems and other key technology platforms;
●          variety of risks relating to safety, security and crisis management; requirement for the right people, skills and capability to manage growth; financial stability and ability to borrow and
             satisfy debt covenants;
●          litigation;
●          information security and data privacy;
●          compliance with existing and changing regulations and societal expectations across numerous countries, territories and jurisdictions; and
●          difficulties insuring our business.
 
 
In our view, the nature and potential impact of such risks remain essentially unchanged as regards our performance over the second half of 2017.
 
 
 
GOING CONCERN
 
An overview of the business activities of IHG, including a review of the key business risks that the Group faces, is given in this Interim Management Report. Information on the Group's treasury management policies can be found in note 22 to the Group Financial Statements in the IHG Annual Report and Form 20-F 2016.
 
In March 2017, the Group extended the maturity of its $1.275bn facility to March 2022. The Group now has no significant debt maturities before 2022.
 
At the end of June 2017, the Group was trading significantly within its banking covenants and debt facilities.
 
The Group's fee-based model and wide geographic spread means that it is well placed to manage through uncertain times, and our forecasts and sensitivity projections, based on a range of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.
 
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, the financial statements continue to be prepared on going concern basis.
 
 
DIRECTORS' RESPONSIBILITY STATEMENT
 
The Directors confirm that to the best of their knowledge:
 
●            The condensed set of Financial Statements has been prepared in accordance with IAS 34;
●            The Interim Management Report includes a fair review of the important events during the first six months, and their impact on the financial statements and a description of the principal
               risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and
●            The Interim Management Report includes a fair review of related party transactions and changes therein, as required by DTR 4.2.8R.
 
On behalf of the Board
 
 
 
 
 
 
 
Keith Barr
Paul Edgecliffe-Johnson
Chief Executive Officer
Chief Financial Officer
 
 
7 August 2017
7 August 2017
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the six months ended 30 June 2017
 
 
 
6 months ended 30 June 2017
6 months ended 30 June 2016
 
 
Before
exceptional
items
 Exceptional
items
(note 4)
 
 
Total
Before
exceptional
items
Exceptional
items
(note 4)
 
 
Total
 
$m
$m
$m
$m
$m
$m
Continuing operations
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue (note 3)
857
-
857
838
-
838
Cost of sales
(291)
-
(291)
(270)
-
(270)
Administrative expenses
(156)
(4)
(160)
(177)
(5)
(182)
Share of losses of associates and joint ventures
 
-
 
-
 
-
 
(2)
 
-
 
(2)
Other operating income and expenses
 
7
 
-
 
7
 
3
 
-
 
3
 
_____
____
____
_____
____
____
 
417
(4)
413
392
(5)
387
 
 
 
 
 
 
 
Depreciation and amortisation
(47)
 -
(47)
(48)
-
(48)
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
Operating profit (note 3)
370
(4)
366
344
(5)
339
Financial income
2
-
2
4
-
4
Financial expenses
(42)
-
(42)
(45)
-
(45)
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
Profit before tax
330
(4)
326
303
(5)
298
 
 
 
 
 
 
 
Tax (note 5)
(108)
1
(107)
(99)
2
(97)
 
_____
_____
_____
_____
_____
_____
Profit for the period from continuing operations
 
222
 
(3)
 
219
 
204
 
(3)
 
201
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
 
Equity holders of the parent
222
(3)
219
203
 
(3)
  200
 
 
Non-controlling interest
-
-
-
1
-
1
 
 
_____
_____
_____
_____
_____
_____
 
 
222
(3)
219
204
(3)
201
 
_____
_____
_____
_____
_____
_____
 
 
 
 
 
 
 
Earnings per ordinary share
(note 6)
 
 
 
 
 
 
Continuing and total operations:
 
 
 
 
 
 
 
Basic
 
 
111.7¢
 
 
87.7¢
 
Diluted
 
 
110.6¢
 
 
87.3¢
 
Adjusted
113.3¢
 
 
89.0¢
 
 
 
Adjusted diluted
112.1¢
 
 
88.6¢
 
 
 
_____
 
_____
_____
 
_____
 
 
 
 
 
 
 
 
 
 
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2017
 
 
 
2017
6 months ended
30 June
$m
2016
6 months ended
30 June
$m
 
 
 
Profit for the period
219
201
 
 
 
Other comprehensive income
 
 
 
 
 
Items that may be subsequently reclassified to profit or loss:
 
 
 
Losses on valuation of available-for-sale financial assets, net of related tax charge of $nil (2016 $nil)
 
(2)
 
(3)
 
Exchange (losses)/gains on retranslation of foreign operations, net of related tax credit of $1m (2016 charge of $2m)
 
(35)
 
98
 
_____
_____
 
(37)
95
Items that will not be reclassified to profit or loss:
 
 
 
Re-measurement gains/(losses) on defined benefit plans, net of related tax charge of $1m (2016 credit of $3m)
 
-
 
(11)
 
_____
_____
Total other comprehensive (loss)/income for the period
(37)
84
 
_____
_____
Total comprehensive income for the period
182
285
 
_____
_____
Attributable to:
 
 
 
Equity holders of the parent
181
282
 
Non-controlling interest
1
3
 
_____
_____
 
182
285
 
_____
_____
 
 
 
 
 
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2017
 
 
 
6 months ended 30 June 2017
 
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
 
 
 
 
 
 
At beginning of the period
141
(2,300)
1,392
8
(759)
 
 
 
 
 
 
Total comprehensive income for the period
-
(38)
219
1
182
Transfer of treasury shares to employee share trusts
 
-
 
(20)
 
20
 
-
 
-
Purchase of own shares by employee share trusts
 
-
 
(3)
 
-
 
-
 
(3)
Release of own shares by employee share trusts
 
-
 
29
 
(29)
 
-
 
-
Equity-settled share-based cost
-
-
12
-
12
Tax related to share schemes
-
-
5
-
5
Equity dividends paid
-
-
(531)
(3)
(534)
Exchange adjustments
7
(7)
-
-
-
 
_____
______
_____
_____
_____
At end of the period
148
(2,339)
1,088
6
(1,097)
 
_____
_____
_____
_____
_____
 
 
 
 
6 months ended 30 June 2016
 
 
Equity share capital
Other reserves*
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
 
 
 
 
 
 
At beginning of the period
169
(2,513)
2,653
10
319
 
 
 
 
 
 
Total comprehensive income for the period
-
93
189
3
285
Transfer of treasury shares to employee share trusts
 
-
 
(24)
 
24
 
-
 
-
Purchase of own shares by employee share trusts
 
-
 
(10)
 
-
 
-
 
(10)
Release of own shares by employee share trusts
 
-
 
39
 
(39)
 
-
 
-
Equity-settled share-based cost
-
-
15
-
15
Tax related to share schemes
-
-
2
-
2
Equity dividends paid
-
-
(1,637)
(5)
(1,642)
Transaction costs relating to shareholder returns
 
-
 
-
 
(1)
 
-
 
(1)
Exchange adjustments
(15)
15
-
-
-
 
_____
______
_____
_____
_____
At end of the period
154
(2,400)
1,206
8
(1,032)
 
_____
_____
_____
_____
_____
 
 
*
Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, unrealised gains and losses reserve and currency translation reserve.
 
All items above are shown net of tax.
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
30 June 2017
 
 
2017
30 June
2016
31 December
 
$m
$m
ASSETS
 
 
Property, plant and equipment
422
419
Goodwill and other intangible assets
1,373
1,292
Investment in associates and joint ventures
157
111
Trade and other receivables
-
8
Retirement benefit assets
4
-
Other financial assets
264
248
Non-current tax receivable
23
23
Deferred tax assets
52
48
 
_____
_____
Total non-current assets
2,295
2,149
 
_____
_____
Inventories
3
3
Trade and other receivables
595
472
Current tax receivable
49
77
Other financial assets
15
20
Cash and cash equivalents
166
206
 
_____
_____
Total current assets
828
778
 
_____
_____
Total assets (note 3)
3,123
2,927
 
_____
_____
LIABILITIES
 
 
Loans and other borrowings
(116)
(106)
Derivative financial instruments
-
(3)
Loyalty programme liability
(326)
(291)
Trade and other payables
(641)
(681)
Provisions
(3)
(3)
Current tax payable
(53)
(50)
 
_____
_____
Total current liabilities
(1,139)
(1,134)
 
_____
_____
Loans and other borrowings
(2,106)
(1,606)
Retirement benefit obligations
(100)
(96)
Loyalty programme liability
(417)
(394)
Trade and other payables
(177)
(200)
Provisions
(5)
(5)
Deferred tax liabilities
(276)
(251)
 
_____
_____
Total non-current liabilities
(3,081)
(2,552)
 
_____
_____
Total liabilities
(4,220)
(3,686)
 
_____
_____
Net liabilities
(1,097)
(759)
 
_____
_____
EQUITY
 
 
Equity share capital
148
141
Capital redemption reserve
10
9
Shares held by employee share trusts
(5)
(11)
Other reserves
(2,868)
(2,860)
Unrealised gains and losses reserve
109
111
Currency translation reserve
415
451
Retained earnings
1,088
1,392
 
_____
_____
IHG shareholders' equity
(1,103)
(767)
Non-controlling interest
6
8
 
_____
_____
Total equity
(1,097)
(759)
 
_____
_____
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CASH FLOWS
For the six months ended 30 June 2017
 
 
 
2017
6 months ended
30 June
2016
6 months ended
30 June
 
$m
$m
 
 
 
Profit for the period
219
201
Adjustments reconciling profit for the period to cash flow from operations (note 8)
 
94
 
221
 
_____
_____
Cash flow from operations
313
422
Interest paid
(13)
(12)
Interest received
1
4
Tax paid on operating activities
(50)
(32)
 
_____
_____
Net cash from operating activities
251
382
 
_____
_____
Cash flow from investing activities
 
 
Purchase of property, plant and equipment
(22)
(18)
Purchase of intangible assets
(94)
(69)
Investment in associates and joint ventures
(47)
(7)
Loan advances to associates and joint ventures
-
(1)
Investment in other financial assets
(27)
(10)
Capitalised interest paid
(3)
(3)
Landlord contributions to property, plant and equipment
7
-
Disposal of hotel assets, net of costs and cash disposed
-
(4)
Proceeds from associates and joint ventures
-
2
Repayments of other financial assets
7
13
 
_____
_____
Net cash from investing activities
(179)
(97)
 
_____
_____
Cash flow from financing activities
 
 
Purchase of own shares by employee share trusts
(3)
(10)
Dividends paid to shareholders
(531)
(1,637)
Dividends paid to non-controlling interests
(3)
(5)
Transaction costs relating to shareholder returns
-
(1)
Increase in other borrowings
395
395
 
_____
_____
Net cash from financing activities
(142)
(1,258)
 
_____
_____
Net movement in cash and cash equivalents, net of overdrafts, in the period
 
(70)
 
(973)
 
 
 
Cash and cash equivalents, net of overdrafts, at beginning of the period
117
1,098
Exchange rate effects
20
(30)
 
_____
_____
Cash and cash equivalents, net of overdrafts, at end of the period
67
95
 
_____
_____
 
 
 
 
 
 
 
 
 
INTERCONTINENTAL HOTELS GROUP PLC
NOTES TO THE INTERIM FINANCIAL STATEMENTS
 
 
 
1.
Basis of preparation
 
 
These condensed interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and IAS 34 'Interim Financial Reporting' and have been prepared on a consistent basis using the same accounting policies and methods of computation set out in the InterContinental Hotels Group PLC (the Group or IHG) Annual Report and Form 20-F for the year ended 31 December 2016.
 
The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, the condensed interim financial statements continue to be prepared on a going concern basis.
 
These condensed interim financial statements are unaudited and do not constitute statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006. The auditors have carried out a review of the financial information in accordance with the guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board.
 
The financial information for the year ended 31 December 2016 has been extracted from the Group's published financial statements for that year which were prepared in accordance with IFRSs as adopted by the European Union and which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified with no reference to matters to which the auditor drew attention by way of emphasis and no statement under s498(2) or s498(3) of the Companies Act 2006.
 
The Group continues to prepare for the implementation of IFRS 15 'Revenue from Contracts with Customers' in 2018.  In terms of the impacts and their financial quantification, the guidance provided in the Annual Report and Form 20-F 2016 remains valid; significantly reported higher revenues (of at least $1.6bn) and an immaterial reduction in operating profit.  Conclusions on loyalty programme accounting remain outstanding and could result in the reporting of additional revenues but are not expected to have any further impact on operating profit.
 
 
 
 
2.
Exchange rates
 
 
The results of operations have been translated into US dollars at the average rates of exchange for the period. In the case of sterling, the translation rate is $1 = £0.79 (2016 $1 = £0.70). In the case of the euro, the translation rate is $1 = €0.92 (2016 $1 = €0.90).
 
Assets and liabilities have been translated into US dollars at the rates of exchange on the last day of the period. In the case of sterling, the translation rate is $1 = £0.77 (2016 30 June $1 = £0.74; 31 December $1 = £0.81). In the case of the euro, the translation rate is $1 = €0.88 (2016 30 June $1 = €0.90; 31 December $1 = €0.95).
 
 
 
 
3.
Segmental information
 
 
 
 
 
 
 
Revenue
2017
6 months ended
30 June
2016
6 months ended
30 June
 
 
$m
$m
 
 
 
 
 
Americas 
499
490
 
Europe 
113
109
 
AMEA
115
115
 
Greater China
58
55
 
Central
72
69
 
 
_____
_____
 
Total revenue
857
838
 
 
_____
_____
 
All results relate to continuing operations.
 
 
 
Profit
2017
6 months ended
30 June
$m
2016
6 months ended
30 June
$m
 
 
 
 
 
 
 
Americas 
321
313
 
 
Europe 
38
34
 
 
AMEA
41
39
 
 
Greater China
23
20
 
 
Central
(53)
(62)
 
 
 
_____
_____
 
 
Reportable segments' operating profit
370
344
 
 
Exceptional items (note 4)
(4)
(5)
 
 
 
_____
_____
 
 
Operating profit
366
339
 
 
 
 
 
 
 
Net finance costs
(40)
(41)
 
 
 
_____
_____
 
 
Profit before tax
326
298
 
 
 
_____
_____
 
 
All results relate to continuing operations.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets
2017
30 June
$m
2016
31 December
$m
 
 
 
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