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 19 02 2019
 
 
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 19 02 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Exhibit No: 99.1
 
 
 
IHG PLC - Preliminary Results for the year to 31 December 2018
 
Executing against our strategic initiatives to accelerate growth and deliver strong financial results
 
 
Reported
 
Underlying4
2018
2017
% Change
 
2018
2017
% Change
REPORTABLE SEGMENTS1
 
 
 
 
 
 
 
 
Revenue2
$1,933m
$1,730m
12%
 
$1,828m
$1,730m
6%
Revenue from fee business
$1,486m
$1,379m
8%
 
$1,469m
$1,379m
7%
Operating profit2
$816m
$758m
8%
 
$805m
$758m
6%
Fee margin3
52.4%
52.4%
0.0%pts
 
52.5%
52.4%
0.1%pts
Adjusted EPS
292.1¢
244.6¢
19%
 
290.5¢
244.6¢
19%
 
 
 
 
 
 
 
GROUP RESULTS5
 
 
Total revenue
$4,337m
$4,075m
6%
 
KEY METRICS
Operating profit
$670m
$724m
(7)%
 
●    $27.4bn total gross revenue (up 6.6%)
Basic EPS
184.7¢
279.8¢
(34)%
 
●    2.5% global FY RevPAR (Q4 = 1.9%)
Total dividend per share
114.4¢
104.0¢
10%
 
●    4.8% net system growth to 837k rooms
Net debt
$1,530m
$1,851m
(17)%
 
●    99k signings; 271k pipeline rooms
 
1 Excludes System Fund results, hotel cost reimbursements and exceptional items. 2  Comprises the Group's fee business and owned, leased, and managed lease hotels, and excludes exceptional items. 3 Also excludes owned, leased and managed lease hotels, and significant liquidated damages. 4 Reportable segment results excluding owned asset disposals, significant liquidated damages, current year acquisitions and stated at constant FY 2017 exchange rates (CER). Includes System Fund results, hotel cost reimbursements and excludes exceptional items (except for Basic EPS).
 
●            FY Comparable RevPAR: Americas = 1.9% (US: FY = 1.3%; Q4 = 0.6%); EMEAA = 2.7%, Greater China = 6.9%.
 
●          Strongest net system size growth in a decade of 4.8% (+4.3% organic), including 56k room additions, up 17% YoY. 18k rooms removed leaving 837k rooms across the global estate.
 
●          Highest signings in a decade (+18% YoY) with nearly half of total signings from the Holiday Inn Brand Family.
 
●          Continued to strengthen and grow existing brands with increased pace of openings and innovations to enhance guest experience and owner returns including:
 
o  Holiday Inn Express new guest room designs now open or committed to in >50% estate globally.
o  Holiday Inn "Open Lobby" public space design now open or committed to in 80% of Europe estate.
o  Crowne Plaza renovation completed or on-going across one-third of the US estate. 
o  Kimpton: continued global expansion, presence secured in 14 countries, with 18 deals signed in the year.
 
●            Rapid progress augmenting portfolio with new brands targeted at strategically identified opportunities:
 
o  avid hotels: >170 signed since launch, including in Canada and Mexico, and brand launched in Germany.
o  voco: our new upscale brand, successfully brought to market with 16 hotels (3k rooms) signed.
o  Regent Hotels & Resorts: acquired and brand re-positioned, with three further signings.
o  Six Senses: acquired brand in the top tier of luxury; expect to grow to over 60 hotels in the next 10 years.
o  New brand launch: Building on existing mainstream strength, 2019 planned launch of all-suites upper midscale brand targeted at an $18bn industry segment where strong guest and owner demand has driven a ~70% increase in room supply in the last 4 years.
 
 
Keith Barr, Chief Executive Officer, IHG, said:
 
 
 
"We have made excellent progress in 2018 executing against the strategic initiatives I set out a year ago to accelerate our growth, whilst delivering a strong financial performance. The investments we have made have had a significant impact, allowing us to further evolve our established brands, move quickly to strengthen our portfolio both organically and by acquisition, and create real momentum in our business. We have made further progress in 2019 with the acquisition of the top-tier luxury brand Six Senses and the planned launch of a new all-suites upper midscale brand.  
 
Our strategic focus on accelerating our net rooms growth helped drive a net system size increase of 4.8%, and our best performance for both openings and signings in a decade, leaving us well positioned for future growth.
 
Global RevPAR increased 2.5%, with underlying operating profit growing 6%. This, combined with a 19% rise in underlying EPS, underpins our decision to raise the total dividend for the year by 10% and follows the payment of a $500m special dividend in January 2019, taking total shareholder returns announced for the year to over $700m.
 
The investments we have made have been funded through our group efficiency programme which is on track to deliver $125m of annual savings by 2020. We have successfully implemented a more efficient and agile organisational structure whilst building resources and capabilities focused on the most attractive growth opportunities.  
 
We also further strengthened our owner proposition and revenue delivery enterprise, with the successful global roll-out of IHG Concerto, featuring our innovative new Guest Reservation System. This gives IHG the most sophisticated, cloud-based platform in the industry, with further enhancements set to be deployed in 2019.
 
The fundamentals of our business remain strong, and while there are macro-economic and geopolitical uncertainties in some markets, we are confident in the year ahead and that our strategy will deliver industry-leading net rooms growth over the medium term."
 
 
Update on strategic initiatives
 
 
 
We are making good progress working our strategic model harder to deliver industry-leading net rooms growth
●            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
-           Net system size up 4.8% to 837k rooms (5,603 hotels), up 4.3% excluding the acquisition of Regent Hotels & Resorts and a UK portfolio deal.
-           Continued to strengthen leading position in US Mainstream segment with 26% share of signings in the year.
-           Further strengthened our penetration in Greater China with 77 hotel openings and 142 hotel signings, taking the combined system and pipeline to over 730 hotels, almost 200k rooms.  Our share of the branded pipeline stands at almost 3x our share of existing branded supply. 
-           Successfully embedded new organisational structure, which redeploys our resources into our largest markets to leverage our scale and into new brand initiatives to accelerate our growth.
-           On track to deliver ~$125m in annual savings by 2020, with savings fully re-invested in growth initiatives.
 
●            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 up 4%pts in 4 years to 43%, including ~50% in the Americas.
-           Loyalty members 7x more likely to book direct, and deliver a 25% stay premium.
-           Testing new features for 2019 roll-out, designed to increase member engagement with variable point pricing.
 
●            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 delivered 78% of room revenues (up 6%pts in 3 years).
-           Digital (web and mobile) revenue, our lowest cost booking channel, up 13% in 2018 to $5.3bn.
-     Roll-out of IHG Concerto, including our new Guest Reservation System (GRS), successfully completed.  This gives IHG the most sophisticated, cloud-based platform in the industry, and provides a foundation to build out our technology architecture over the coming years.  Ongoing development of enhanced GRS functionality to give guests the opportunity to customise their stay based on features they find important - made possible by new ways of classifying and selling room inventory.
 
●            Evolve owner proposition - Outstanding operational support and optimised owner returns to unlock growth
-           Investment in development resources has enabled 18% YoY growth in signings in 2018.
-       Continued strong traction for our innovative Franchise Plus model in Greater China with 71 hotels signed for Holiday Inn Express in the year, taking the total to 143 signed and 29 opened to date. Building on this success, in 2018, we signed 7 franchise deals for Holiday Inn and Crowne Plaza in the region.
-   Investment in enhanced owner support to facilitate faster hotel openings and deeper owner relationships.
 
●            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 Express: roll out of new guest room designs gathering pace, with ~1,400 hotels in the US & Canada open or committed to new Formula Blue format.  Rapid deployment of new breakfast offering in over 1,500 hotels in the US during 2018, driving 3pt increase in guest breakfast satisfaction.
-           Holiday Inn: continued roll out of new "Open Lobby" public space design with 80% of the Europe estate open or committed, and 50 hotels committed in the Americas. 
-           avid hotels: Over 170 hotels (16k rooms) signed since launch (129 hotels (12k rooms) signed in 2018), with the first hotel open in Oklahoma City and 27 more under construction or with planning approved. Signed 10 hotels in Canada and Mexico and launched the brand in Germany through a Multiple Development Agreement with one owner to open 15 hotels over the next 5 years.
-           Planned launch of new all-suites upper midscale brand in 2019 targeted at an $18bn industry segment where strong guest and owner demand has driven a ~70% increase in room supply in the last 4 years.
 
-           Upscale - ($40bn global segment with $20bn growth potential to 2025)
 
-           Crowne Plaza: $200m Accelerate programme delivering improvements in guest satisfaction and strong owner engagement behind strengthening the brand. ~6k rooms renovated across the Americas estate, with a further 9k committed. Growing momentum behind Plaza Workspaces with 16 installed and 12 more expected in Q1 2019. In 2019, our new modern design and dynamic meeting space will be launched in Paris, London, Hamburg and Atlanta flagship hotels.
-           Hotel Indigo: Opened our 100th Hotel Indigo, in Berlin, in 2018, with 33 signings in 2018 taking the total pipeline to 92 hotels (13k) rooms.
-           voco:  Launched brand in June, primarily for conversion opportunities.  Three hotels now open across the UK and Australia. A further 13 hotels across 8 countries have been signed to date (3k rooms in total) including flagship locations in Dubai and in Egypt.
  
 
-           Luxury - ($60bn global segment with $35bn growth potential to 2025)
 
-           InterContinental Hotels & Resorts: Further cemented position as largest global luxury hotel brand with the opening of its 200th hotel - the InterContinental Shanghai Wonderland.  Awarded World's Leading Hotel Brand for the 12th time at the World Travel Awards.
-           Kimpton Hotels & Restaurants: Global expansion gathering strong momentum with doubling of signings and presence secured in 14 countries worldwide. Opened UK flagship, the Kimpton Fitzroy London, with numerous other signings including Frankfurt, Shanghai, Bangkok, Tokyo and Mexico City.
-           Regent Hotels & Resorts: Acquisition completed in July bringing 6 opened hotels to our system. Updated brand positioning, with further signings in Kuala Lumpur, Chengdu and Bali, and several new sites under discussion in key gateway cities around the world. On track to grow to over 40 hotels over the long term.    
-           Six Senses Hotels Resorts Spas: February 2019 acquisition of 16 hotels and resorts, with 18 management contracts signed into its pipeline, and more than 50 further deals under discussion. Expect to grow Six Senses to more than 60 hotels over the next 10 years.    
 
 
 
Americas - Good US RevPAR performance; avid hotels' momentum continues
 
 
 
Comparable RevPAR increased 1.9% (Q4: up 1.3%), driven by 1.7% rate growth. US RevPAR was up 1.3% with 0.6% growth in the fourth quarter, despite the drag from hurricane related demand in Q4 2017. Canada was up 5% (Q4: up 4%), benefitting from continued strength in urban markets. Latin America and the Caribbean were up 13% (Q4: up 11%), with strong demand in a number of countries including Colombia, Brazil and Argentina. Mexico RevPAR was up 2% in the year with the fourth quarter up 3%.
 
Reported revenue1 of $1,051m increased 5% (CER 5%) and reported operating profit1 of $662m increased 4% (CER 4%).
 
Underlying2 revenue and operating profit were in line with reported growth rates, of which fee business was up 4%. Growth in fee revenue from RevPAR, net rooms growth and a non-recurring $4m benefit from a payroll tax credit, were partly offset by $3m lower fees from the termination of hotels and a $3m impact from the Crowne Plaza Accelerate owner financial incentives.
 
We opened 22k rooms (208 hotels) during the year, with more than half coming from our Holiday Inn Brand Family. We also opened our first Kimpton hotel in Canada and broadened distribution of InterContinental Hotels across key cities with openings in San Diego and Minneapolis. We continue to focus on a high-quality estate and removed 10k rooms (76 hotels). Together, this drove a 2.5% increase in our net system size. 
 
We increased our share of overall industry signings in the region, signing 416 hotels (43k rooms), including 12 for the Hotel Indigo brand. Momentum continues to be strong for avid hotels; we signed 129 hotels (12k rooms), including 6 in Mexico and 4 in Canada. Our first property opened in Oklahoma City, receiving positive feedback from guests.
 
 
EMEAA - New operating model embedded; highest signings and openings in 10 years
 
 
 
Comparable RevPAR increased 2.7% (Q4: up 2.7%) driven by rate up 1.8%. UK RevPAR grew 1% in the year with London up 3% and the Provinces flat. Fourth quarter RevPAR in the UK was up 4% with strong leisure demand driving RevPAR in London up 10%, whilst the Provinces were up 1%.
 
Continental Europe RevPAR was up 5.4% in the year (Q4: up 5.7%). In France, RevPAR grew 6% benefitting from good leisure and corporate demand, slowing to 3% in the fourth quarter due to social unrest in Paris. Germany grew RevPAR 1% in the year and 3% in the fourth quarter helped by a favourable trade fair calendar.
 
Trading conditions in the Middle East remained challenging, with RevPAR down 6% in the year due to increased supply, and political unrest impacting demand in certain regions. Australia RevPAR was up 1% in the year with good demand growth offset by supply growth in certain cities. Japan RevPAR grew 3% in the year (Q4: up 3%) benefitting from rate growth in key cities.
 
Total RevPAR growth of 1.2% reflects the increasing mix of new rooms opening in lower rate but fast growing developing markets.
 
Reported revenue1 of $569m increased 25% (23% CER) and reported operating profit1 of $202m increased 18% (18% CER), including $7m of individually significant liquidated damages, as previously disclosed.
 
On an underlying basis2, revenue and operating profit increased 3% and 15% respectively, of which fee business revenue was up 5% and operating profit was up 16%, driven by RevPAR, net rooms growth and lower costs associated with the group wide efficiency programme. 
 
We opened 15k rooms (77 hotels), driving 6% net rooms growth, including 8% growth in both the UK and Germany. 
 
We signed 27k rooms (133 hotels) including 3k rooms in Australia, our best ever performance. Through the UK portfolio transaction, we launched our new upscale brand, voco, and gained scale for the Kimpton brand in the UK.
_____________
1 Comprises the Group's fee business and owned, leased, and managed lease hotels from reportable segments and excludes exceptional items.
2 Excluding owned asset disposals, significant liquidated damages, current year acquisitions, System Fund results, hotel cost reimbursements and exceptional items at constant FY 2017 exchange rates (CER).
See the Business Review for definition of non-GAAP measures and reconciliation to GAAP measures.
 
 
 
Greater China - Continued industry outperformance; record room signings and openings
 
 
 
Comparable RevPAR increased 6.9% (Q4: up 3.4%, impacted by the strong comparables which commenced in Q3 2017). In Mainland China, RevPAR was up 6%, significantly outperforming the market in each quarter of the year. Tier 1 and Tier 2 cities grew 7% (Q4: up 5%) driven by strength in transient and meeting demand. Tier 3 and 4 cities grew RevPAR by 1% in the year and were down 4% in the fourth quarter with strength in resort destinations offset by the impact of new supply in Sanya and difficult trading conditions in Changbaishan. RevPAR in Hong Kong SAR and Macau SAR was up 9% and 8% respectively.
 
Our continued acceleration in net rooms growth in the region, and our increasing penetration in higher growth, lower RevPAR cities, resulted in FY 2018 total RevPAR growth of 2.0%.
 
Reported revenue of $143m increased by 22% (CER 21%), and reported operating profit of $69m increased by 33% (CER 31%), including $6m of individually significant liquidated damages.
 
On an underlying2 basis, revenue increased by 15% and operating profit increased by 19%, driven by strong trading across the region, 14% net rooms growth, and continued benefits of leveraging the scale of the operational platform we have built in Greater China.
 
We opened a record 19k rooms (77 hotels), driving 14% net rooms growth, and taking the total number of open rooms to over 115k (391 hotels). Signings totalled 29k rooms (142 hotels), our highest ever for the region, including 5 hotels for the InterContinental brand and 15 hotels for the Crowne Plaza brand.  Owner demand for our Holiday Inn Express Franchise Plus offering remains strong, with 71 hotels signed in the year.  This new model has accelerated the expansion across China of the Holiday Inn Express brand which now has over 300 open and pipeline hotels (60k rooms).
 
 
Highly cash generative business with disciplined approach to cost control and capital allocation
 
 
 
Driving fee margin through strategic cost management
●            Remain on track to deliver ~$125m in annual savings, including System Fund, by 2020 for reinvestment in growth.
●            As planned, ~40% of annual savings were realised in 2018 and were fully reinvested in growth initiatives.
●            2018 fee margin was flat (up 10bps at CER), held back by investment in growth initiatives being $5m above realised savings, and $9m of one-off on P&L marketing assessments (and equivalent cost of investment). Excluding these impacts, fee margin increased 70bps (up 80bps at CER).
●            Reported central overheads were up $15m, ($14m CER); an increase in central revenues was offset by investments in growth initiatives and $3m higher healthcare costs.  Central overheads now include the reinvestment of a substantial proportion of growth investment funded by savings elsewhere in the business.
●            Growth initiatives, and a continuation of our disciplined cost management and strong efficiency focus, expected to maintain future fee margin progression broadly in line with the long-term average.
 
Strong free cash flow generation fuelling investment
●          Free cash flow3 of $609m was up $93m year on year, with $81m lower cash tax offset by $106m of exceptional cash costs incurred in relation to the group wide efficiency programme.
●          Net capital expenditure3  of $158m (FY 2017: $202m) with $245m gross (FY 2017: $342m). This comprised: $108m maintenance capex and key money; $38m gross recyclable investments; and $99m system funded capital investments; offset by $42m net proceeds from asset recycling and $45m 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 $137m during the year, including $106m relating to the group wide efficiency programme ($47m 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.
●            Successfully raised €500m, 2.125% notes due May 2027.
●            Net debt of $1,530m (including $235m finance lease on InterContinental Boston), down $321m on the 2017 close.
●            Since the year-end, a $500m special dividend was paid in January 2019 and ~$300m was paid on the acquisition of Six Senses.  
 
Dividend growth demonstrates confidence in future growth prospects
●            $500m special dividend with share consolidation announced in October 2018, paid January 2019.
●            Proposed 10.0% increase in the final dividend to 78.1¢, taking the total dividend for the year up 10.0%, reflecting IHG's confident outlook.
________
2 Excluding owned asset disposals, significant liquidated damages, current year acquisitions, System Fund results, hotel cost reimbursements and exceptional items at constant FY 2017 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
 
 
Foreign exchange
 
 
 
The impact of the movement in average USD exchange rates for FY 2018 against a number of currencies (particularly Sterling, Euro and Renminbi) netted to a zero impact on reported profit4.  Currency markets remain volatile. If the average exchange rate during January 2019 had existed throughout 2018, 2018 reported profit would have decreased by $3m.
 
A full breakdown of constant currency vs. actual currency RevPAR by region is set out in Appendix 2.
 
 
Other
 
 
 
System Fund:
Under IFRS 15, Fund revenues and costs are now recognised on a gross basis with the in-year surplus or deficit recorded in the Group income statement, but excluded from 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.   
 
The Fund surplus of ~$160m, which had built up following the introduction of the IHG Rewards Club expiry policy and the renegotiation of long term partnership agreements, was derecognised from the Group balance sheet at the start of the year on the adoption of IFRS 15.  In 2018, we spent the majority of the surplus on marketing, loyalty and technology initiatives, and costs associated with IHG's efficiency programme.  This resulted in the recording of a $146m System Fund income statement deficit for FY 2018.
 
Interest:
Net financial expenses of $81m includes interest income relating to the System Fund of $19m (FY 2017 $13m). Excluding this, FY 2018 underlying5 interest expense of $100m was higher than in FY 2017 ($85m), reflecting higher US dollar interest rates payable on bank borrowings and balances with the System Fund and finance charges related to deferred and contingent consideration on acquisitions.
 
Full year 2019 underlying5 interest expense will be higher than 2018 including $20m interest on the €500m bond issued in November 2018.  In addition, underlying5 interest expense will include ~$30m of charges from IFRS 16 and non-cash amortisation of deferred and contingent consideration, $15-$20m of which has a corresponding benefit to operating profit and therefore does not impact net income.
 
Tax:
Effective ratefor FY 2018 was 22% (FY 2017: 29%) with the reduction predominantly as a result of a lower US tax rate following tax reform. We expect our full year 2019 effective tax rate will be in the mid to low 20s percentage point range. 
 
Exceptional operating items:
Before tax exceptional items total $104m charge and comprise: $56m costs incurred in relation to the group wide efficiency programme; $18m relating to a material legal settlement and associated costs; $15m of acquisition costs; and a $15m one-off cost relating to the buy-out of the US pension liability.  A further $47m 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.
 
Impact of IFRS 16 accounting standards:
●            IFRS 16 will be adopted with effect from 1st Jan 2019 using the retrospective method of application.
●            This results in $431m of lease liabilities being added to 2018 net debt under the new standard.
●            We remain committed to maintaining an investment grade credit rating; the best proxy for which is now 2.5-3.0x net debt/EBITDA under IFRS 16; equivalent to 2.0-2.5x net debt/EBITDA under the previous accounting standard.
●            No impact on cash, financial capacity or banking covenants.  Strategy for use of cash remains unchanged. 
●            If our 2018 results were restated under IFRS 16, operating profit would have been $17m higher, which is offset by a $19m increase in net financial expenses. For 2019, we estimate adoption of IFRS 16 will increase operating profit in the region of ~$12m and reduce net income in the region of ~$5-7m after a full year impact of the UK portfolio deal.
 
 
2019 items
 
 
 
Americas: 
●            $4m benefit from payroll tax credit received in 2018 will not repeat in 2019.
●            $5m of joint venture income will not repeat in 2019.
 
EMEAA:  A previously disclosed $15m cash payment was received in Q1 2018 in relation to the termination of a portfolio of hotels.  This has been / will be recognised as individually significant liquidated damages as follows: $6.7m in 2018, $7.7m in 2019 and $1.0m in 2020.
Greater China:  $6m of individually significant liquidated damages received in 2018 will not repeat in 2019.
 
________________
4 Based on monthly average exchange rates each year
5 For definition of non-GAAP measures and reconciliation to GAAP measures see the Business Review
6 Excludes exceptional items and System Fund results
 
 
Appendix 1: RevPAR Movement Summary
 
 
 
 
Full Year 2018
 
Q4 2018
 
 
 
RevPAR
 
Rate
 
Occ.
 
RevPAR
 
Rate
 
Occ.
 
 
 
Group
 
2.5%
1.8%
0.5%pts
1.9%
1.3%
0.4%pts
 
 
Americas
 
1.9%
1.7%
0.2%pts
1.3%
1.0%
0.2%pts
 
 
EMEAA
 
2.7%
1.8%
0.6%pts
2.7%
1.4%
0.9%pts
 
 
G. China
 
6.9%
3.5%
2.1%pts
3.4%
2.9%
0.3%pts
 
 
Appendix 2: Comparable RevPAR movement at constant exchange rates (CER) vs. actual exchange rates (AER)
 
 
 
Full Year 2018
 
Q4 2018
 
 
 
CER
 
AER
 
Difference
 
CER
 
AER
 
Difference
 
 
 
Group
 
2.5%
2.8%
(0.3)%pts
1.9%
0.1%
1.8%pts
 
 
Americas
 
1.9%
1.6%
0.3%pts
1.3%
0.4%
0.9%pts
 
 
EMEAA
 
2.7%
4.1%
(1.4)%pts
2.7%
(0.6)%
3.3%pts
 
 
G. China
 
6.9%
8.5%
(1.6)%pts
3.4%
(0.3)%
3.7%pts
 
 
Appendix 3: Full Year System & Pipeline Summary (rooms)
 
 
System
 
Pipeline
 
 
Openings
 
Removals
 
Net
 
Total
 
YoY%
 
Signings
 
Total
 
 
Group
 
56,343
 
(17,877)
 
38,466
 
836,541
 
4.8%
 
98,814
 
270,948
 
 
Americas
 
22,248
 
(9,579)
 
12,669
 
510,129
 
2.5%
 
42,766
 
120,282
 
 
EMEAA
 
15,283
 
(3,260)
 
12,023
 
211,099
 
6.0%
 
26,918
 
72,743
 
 
G. China
 
18,812
 
(5,038)
 
13,774
 
115,313
 
13.6%
 
29,130
 
77,923
 
 
 
Appendix 4: Full Year financial headlines
 
 
 
GROUP
 
REPORTABLE SEGMENTS
 
 
 
 
Total
 
Americas
 
EMEAA
 
G. China
 
Central
 
 
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
 
 
Revenue ($m)
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue from reportable segments
 
1,933
1,730
1,051
999
569
457
143
117
170
 
157
 
 
 
System Fund result
 
1,233
1,242
-
-
-
-
-
-
-
 
-
 
 
 
Hotel Cost Reimbursements
 
1,171
1,103
-
-
-
-
-
-
-
 
-
 
 
 
Group Revenue
 
4,337
4,075
1,051
999
569
457
143
117
170
 
157
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Profit ($m)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee Business
 
902
825
633
608
200
165
69
52
-
 
-
 
 
 
Owned, leased & managed lease
 
31
35
29
29
2
6
-
-
-
 
-
 
 
 
Central overheads
 
(117)
(102)
-
-
-
-
-
-
(117)
 
(102)
 
 
 
Operating profit from reportable segments before exceptionals
 
816
758
662
637
202
171
69
52
(117)
 
(102)
 
 
 
System Fund result
 
(146)
(34)
-
-
-
-
-
-
-
 
-
 
 
 
Operating profit before exceptionals
 
670
724
662
637
202
171
69
52
(117)
 
(102)
 
 
 
Exceptional items
 
(104)
4
(36)
37
(12)
(4)
(1)
-
(55)
 
(29)
 
 
 
Operating Profit after exceptionals
 
566
728
626
674
190
167
68
52
(172)
 
 (131)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
8%
 
8%
 
4%
 
4%
 
18%
 
18%
 
33%
 
31%
 
 
  Appendix 6: Underlying**** operating profit movement before exceptional items
 
Total***
 
Americas
 
EMEAA
 
G. China
 
Growth / (decline)
 
6%
 
4%
 
15%
 
19%
 
 
Exchange rates:
USD:GBP
USD:EUR
* US dollar actual currency
FY 2018
0.75
0.85
** Translated at constant FY 2017 exchange rates
FY 2017
0.78
0.89
*** After central overheads
 
 
 
**** At CER and excluding: owned asset disposals, significant liquidated damages, current year acquisitions, System Fund results and hotel cost reimbursements
 
 
 
Appendix 7: Definitions
 
CER: constant exchange rates with FY 2017 exchange rates applied to FY 2018.
Comparable RevPAR: revenue per available room for hotels that have traded for all of 2017 and 2018, 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, and significant liquidated damages.
Reportable segments: group results excluding System Fund results, hotel cost reimbursements and exceptional items.
Significant liquidated damages: $13m in FY 2018 ($7m EMEAA fee business, $6m Greater China fee business); $nil in FY 2017.
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 2017 or 2018, reported at CER.
Underlying Interest: excludes interest relating to the System Fund.
 
 
 
Appendix 8: Investor information for 2018 Final dividend
 
Ex-dividend date:
 
28 March 2019
 
Record date:
 
29 March 2019 
 
Payment date:
 
14 May 2019
 
Dividend payment:
 
ADRs: 78.1 cents per ADR; the corresponding amount in Pence Sterling per ordinary share will be announced on 26April 2019, calculated based on the average of the market exchange rates for the three working days commencing 23 April. 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 (Heather Wood, Matthew Kay):
+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 presentation of the results with Keith Barr, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will commence at 9.30am on 19 February 2019 at Goldman Sachs, Rivercourt, 120 Fleet Street, London, EC4A 2BE. The reception team will be issuing passes to pre-registered guests from 8:45am, and after the presentation there will be an opportunity to put your questions to the presenters.
 
There will be a live audio webcast of the results presentation on the web address:
 
https://www.investis-live.com/ihg/5c52ece5cad1ac0c003b213e/dlgf
 
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.
 
 
 
There will also be a live listen only dial-in facility, details are below:
UK:                                                         +44 (0) 203 936 2999
US:                                                         +1 845 709 8571
All other locations:                                  +44 (0) 203 936 2999
Participant Access Code:                        57 06 48
 
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                                              20 14 68
 
 
 
 
 
Website:
The full release and supplementary data will be available on our website from 7:00am (London time) on 19th February.  The web address is www.ihgplc.com/prelims18.
 
 
 
Notes to Editors:
IHG® (InterContinental Hotels Group) [LON:IHG, NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of hotel brands, including Regent Hotels & ResortsInterContinental® Hotels & ResortsKimpton® Hotels & RestaurantsHotel Indigo®EVEN® HotelsHUALUXE® Hotels and ResortsCrowne Plaza® Hotels & Resortsvoco™Holiday Inn®Holiday Inn Express®Holiday Inn Club Vacations®Holiday Inn Resort®avid™ hotelsStaybridge Suites® and Candlewood Suites®.
 
IHG franchises, leases, manages or owns more than 5,600 hotels and approximately 837,000 guest rooms in more than 100 countries, with almost 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.  
 
In February 2019, IHG acquired Six Senses Hotels Resorts Spas, adding 16 hotels (1,347 rooms) to its system and 18 hotels to its development pipeline.
 
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: www.ihgplc.com/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 2018. The 2017 comparatives have been restated to reflect the adoption of IFRS 15 'Revenue from Contracts with Customers', see note 2 in the 2018 Group Financial Statements.
 
GROUP PERFORMANCE
 
12 months ended 31 December
Group results
 
2017
 
 
2018
Restated
%
 
$m
$m
change
Revenuea
 
 
 
Americas
1,051
999
5.2
EMEAA
569
457
24.5
Greater China
143
117
22.2
Central
170
157
8.3
 
____
____
____
Revenue from reportable segments
1,933
1,730
11.7
 
 
 
 
System Fund revenues
1,233
1,242
(0.7)
Reimbursement of costs
1,171
1,103
6.2
 
____
____
____
Total revenue
4,337
4,075
6.4
 
____
____
____
Operating profita
 
 
 
Americas
662
637
3.9
EMEAA
202
171
18.1
Greater China
69
52
32.7
Central
(117)
(102)
(14.7)
 
____
____
____
Operating profit from reportable segments
816
758
7.7
System Fund result
(146)
(34)
(329.4)
 
____
____
____
Operating profit before exceptional items
670
724
(7.5)
Exceptional items
(104)
4
(2,700.0)
 
____
____
____
Operating profit
566
728
(22.3)
Net financial expenses
(81)
(72)
(12.5)
 
____
____
____
Profit before tax
485
656
(26.1)
 
____
____
____
Earnings per ordinary share
 
 
 
 
Basic
184.7¢
279.8¢
(34.0)
 
Adjusted
292.1¢
244.6¢
19.4
 
 
 
 
 
Average US dollar to sterling exchange rate
$1 : £0.75
$1 : £0.78
(3.8)
 
 
 
 
Group results
 
During the year ended 31 December 2018, total revenue increased by $262m (6.4%) to $4,337m, whilst revenue from reportable segments increased by $203m (11.7%) to $1,933m, primarily resulting from 4.8% rooms growth, 2.5% comparable RevPAR growth and the addition of a portfolio in the UK. Operating profit and profit before tax decreased by $162m (22.3%) and $171m (26.1%) respectively, due to a $108m increase in exceptional costs, largely associated with restructuring costs related to the comprehensive efficiency programme as well as a $112m higher in-year System Fund deficit. Operating profit from reportable segments increased by $58m (7.7%) to $816m.
 
Underlyingb revenue and underlyingb operating profit increased by $98m (5.7%) and $47m (6.2%) respectively.
 
Comparable RevPAR increased by 2.5% (including an increase in average daily rate of 1.8%). IHG System size increased by 4.8% to 836,541 rooms, whilst underlying fee revenuec increased by 6.5%.
 
Fee marginc was 52.4%, remaining in line with 2017 (up 0.1 percentage points at constant currency, removing the impact of foreign exchange movements). Fee margin was impacted by growth investment in excess of realised savings from the comprehensive efficiency programme and a one-off marketing assessment in 2018 and would otherwise have continued to grow, benefiting from efficiency improvements and our global scale.
 
Basic earnings per ordinary share decreased by 34.0% to 184.7¢, whilst adjusted earnings per ordinary share increased by 19.4% to 292.1¢.
 
a Americas, EMEAA and Greater China include revenue and operating profit before exceptional items from both fee business and owned, leased and managed lease hotels
b Underlying revenue and underlying operating profit both exclude System Fund revenue and expenses, the impact of owned asset disposals, significant liquidated damages, current year acquisitions, all translated at constant currency using prior year exchange rates. Operating profit excludes the impact of exceptional items. The presentation of these performance measures allows a better understanding of comparable year-on-year trading and enables an assessment of the underlying trends in the Group's financial performance.
Underlying fee revenue and fee margin further analyses the above footnote b for the Group's fee business only, reflecting the Group's core fee-based business model. Underlying fee revenue is at constant currency using prior year exchange rates, fee margin is at actual exchange rates.
 
 
 
 
 
 
12 months ended 31 December
 
 
2018
2017
%
Group total gross revenuea
$bn
$bn
change
 
 
 
 
 
InterContinental
 
5.1
 
4.8
 
6.3
Kimpton
1.3
1.1
18.2
Crowne Plaza
4.5
4.3
4.7
Hotel Indigo
EVEN Hotel
0.5
0.1
0.4
0.1
25.0
-
Holiday Inn
6.5
6.3
3.2
Holiday Inn Express
7.1
6.7
6.0
Staybridge Suites
0.9
0.9
-
Candlewood Suites
0.8
0.8
-
Other
0.6
0.3
100.0
 
____
____
____
Total
27.4
25.7
6.6
 
____
____
____
 
 
 
 
Hotels
 
Rooms
 
Global hotel and room count
at 31 December
2018
Change
over 2017
2018
Change
over 2017
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Regent
InterContinental
6
204
6
10
2,005
69,281
2,005
3,283
 
Kimpton
66
-
12,915
399
 
HUALUXE
8
1
2,335
246
 
Crowne Plaza
voco
429
2
15
2
120,168
531
5,368
531
 
Hotel Indigo
102
17
12,749
2,104
 
EVEN Hotels
10
2
1,551
313
 
Holiday Inn1
1,251
9
233,852
1,159
 
Holiday Inn Express
avid hotels
2,726
1
126
1
279,516
87
17,118
87
 
Staybridge Suites
276
21
30,217
2,472
 
Candlewood Suites
396
20
37,210
1,786
 
Other
126
25
34,124
1,595
 
 
____
____
______
_____
Total
5,603
255
836,541
38,466
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
4,615
182
576,979
24,145
 
Managed
Owned, leased and managed lease
965
23
62
11
253,566
5,996
12,196
2,125
 
 
____
____
______
_____
Total
5,603
255
836,541
38,466
 
 
____
____
______
_____
 
Includes 45 Holiday Inn Resort properties (11,301 rooms) and 27 Holiday Inn Club Vacations properties
  (7,927 rooms) (2017: 47 Holiday Inn Resort properties (11,954 rooms) and 26 Holiday Inn Club Vacations
  properties (7,676 rooms)).
 
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 pipeline
at 31 December
2018
Change
over 2017
2018
Change
over 2017
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Regent
InterContinental
3
60
3
(3)
514
15,795
514
(1,558)
 
Kimpton
27
9
4,474
1,678
 
HUALUXE
21
-
6,099
(190)
 
Crowne Plaza
voco
79
8
(7)
8
22,134
1,510
(913)
1,510
 
Hotel Indigo
92
10
13,078
1,777
 
EVEN Hotels
18
6
3,184
1,074
 
Holiday Inn1
288
11
55,651
2,095
 
Holiday Inn Express
784
18
98,424
5,064
 
avid hotels
171
127
15,811
11,768
 
Staybridge Suites
182
22
20,849
2,908
 
Candlewood Suites
102
(10)
9,121
(888)
 
Other
24
10
4,304
1,963
 
 
____
____
______
_____
Total
1,859
204
270,948
26,802
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
1,398
175
161,343
21,995
 
Managed
460
28
109,450
4,652
 
Owned, leased and managed lease
1
1
155
155
 
 
____
____
______
_____
Total
1,859
204
270,948
26,802
 
 
____
____
______
_____
 
1 Includes 19 Holiday Inn Resort properties (5,229 rooms) (2017: 13 Holiday Inn Resort properties
(3,620 rooms)).
 
 
AMERICAS
 
12 months ended 31 December
Americas Results
 
2017
 
 
2018
Restated
%
 
$m
$m
change
Revenue from the reportable segment
 
 
 
 
Fee business
853
811
5.2
 
Owned, leased and managed lease
198
188
5.3
 
____
____
____
Total
 
1,051
999
5.2
 
____
____
____
Operating profit from the reportable segment
 
 
 
 
Fee business
633
608
4.1
 
Owned, leased and managed lease
29
29
-
 
____
____
____
 
 
662
637
3.9
Exceptional items
 
(36)
37
(197.3)
 
____
____
____
Operating profit
626
674
(7.1)
 
____
____
____
 
 
 
 
 
 
 
 
 
 
 
 
 
Americas Comparable RevPAR movement on previous year
12 months ended
31 December
2018
 
Fee business
 
 
InterContinental
4.6%
 
Kimpton
1.2%
 
Crowne Plaza
0.3%
 
Hotel Indigo
4.7%
 
EVEN Hotels
9.5%
 
Holiday Inn
1.8%
 
Holiday Inn Express
1.6%
 
Staybridge Suites
3.3%
 
Candlewood Suites
1.7%
 
All brands
1.9%
Owned, leased and managed lease
 
 
InterContinental
1.1%
 
EVEN Hotels
5.6%
 
Holiday Inn
11.5%
 
All brands
5.2%
 
 
 
 
 
 
Americas results
Revenue from the reportable segmenta increased by $52m (5.2%) to $1,051m, whilst operating profit decreased by $48m (7.1%) to $626m. Operating profit from the reportable segmenta increased by $25m (3.9%) to $662m. On an underlyingb basis, revenue increased by $54m (5.4%), whilst operating profit increased by $26m (4.1%), driven predominantly by RevPAR growth in the fee business and an increase in net rooms.
 
Revenue and operating profit from the reportable segmenta are further analysed by fee business and owned, leased and managed lease hotels.
 
Fee business revenue and operating profit increased by $42m (5.2%) to $853m and by $25m (4.1%) to $633m respectively, partly impacted by adverse foreign exchangec (revenue $2m, and operating profit $1m), as RevPAR growth and net rooms growth was partly offset by lower fees from the termination of hotels and the impact from previously disclosed Crowne Plaza Accelerate financial incentives.
 
Owned, leased and managed lease revenue increased by $10m (5.3%) to $198m, whilst operating profit remained flat against 2017.
 
 
 
Americas 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.
Underlying revenue and underlying operating profit both exclude System Fund revenue, the impact of owned asset disposals, significant liquidated damages, current year acquisitions, all translated at constant currency using prior year exchange rates. Operating profit excludes the impact of exceptional items. The presentation of these performance measures allows a better understanding of comparable year-on-year trading and enables an assessment of the underlying trends in the Group's financial performance.
c The impact of movements between the previous year's average exchange rates and actual average rates in 2018.
 
 
 
 
Hotels
 
Rooms
 
Americas hotel and room count
at 31 December
 
2018
 
Change
over 2017
 
2018
 
Change
over 2017
Analysed by brand
 
 
 
 
 
InterContinental
51
1
17,753
175
 
Kimpton
64
(1)
12,307
65
 
Crowne Plaza
156
-
41,499
221
 
Hotel Indigo
57
6
7,495
667
 
EVEN Hotels
10
2
1,551
313
 
Holiday Inn1
774
1
134,492
(1,112)
 
Holiday Inn Express
avid hotels
2,289
1
72
1
206,620
87
7,210
87
 
Staybridge Suites
261
17
28,032
1,876
 
Candlewood Suites
396
20
37,210
1,786
 
Other
102
13
23,083
1,381
 
 
____
____
______
_____
Total
4,161
132
510,129
12,669
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
3,853
126
450,102
12,810
 
Managed
301
6
57,804
(141)
 
Owned, leased and managed leases
7
-
2,223
-
 
 
____
____
______
_____
Total
4,161
132
510,129
12,669
 
 
____
____
______
_____
1 Includes 23 Holiday Inn Resort properties (6,184 rooms) and 27 Holiday Inn Club Vacations properties
(7,927 rooms) (2017: 25 Holiday Inn Resort properties (6,787 rooms) and 26 Holiday Inn Club Vacations properties (7,676 rooms)).
 
 
 
 
 
 
 
Americas pipeline
at 31 December
 
 
2018
Hotels
 
Change
over 2017
 
 
2018
Rooms
 
Change
over 2017
 
 
 
 
 
Analysed by brand
 
 
 
 
 
InterContinental
6
(1)
1,477
(416)
 
Kimpton
16
2
2,335
97
 
Crowne Plaza
6
(8)
1,263
(1,456)
 
Hotel Indigo
35
2
4,523
497
 
EVEN Hotels
10
2
1,296
182
 
Holiday Inn1
126
(2)
16,052
(323)
 
Holiday Inn Express
499
(25)
47,620
(1,987)
 
avid hotels
171
127
15,811
11,768
 
Staybridge Suites
163
17
16,902
1,470
 
Candlewood Suites
102
(10)
9,121
(888)
 
Other
22
10
3,882
2,234
 
 
____
____
______
_____
Total
1,156
114
120,282
11,178
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
1,115
113
113,657
10,813
 
Managed
41
1
6,625
365
 
 
 
 
____
____
______
_____
Total
1,156
114
120,282
11,178
 
 
____
____
______
_____
 
1 Includes one Holiday Inn Resort property (165 rooms) (2017: one Holiday Inn Resort property (165 rooms)).
 
 
EMEAA
 
 
 
         12 months ended 31 December
EMEAA results
 
2017
 
 
2018
Restated
%
 
$m
$m
change
Revenue from reportable segment
 
 
 
 
Fee business
320
294
8.8
 
Owned, leased and managed lease
249
163
52.8
 
____
____
____
Total
 
569
457
24.5
 
____
____
____
Operating profit from reportable segment
 
 
 
 
Fee business
200
165
21.2
 
Owned, leased and managed lease
2
6
(66.7)
 
____
____
____
 
 
202
171
18.1
Exceptional items
 
(12)
(4)
(200.0)
 
 
____
____
____
Operating profit
190
167
13.8
 
____
____
____
 
 
 
 
 
 
 
 
 
EMEAA comparable RevPAR movement on previous year
12 months ended
31 December
2018
 
 
Fee business
 
 
InterContinental
2.6%
 
Crowne Plaza
3.4%
 
Hotel Indigo
4.7%
 
Holiday Inn
3.0%
 
Holiday Inn Express
2.0%
 
Staybridge Suites
1.1%
 
All brands
2.8%
 
 
 
Owned, leased and managed leases
 
 
InterContinental
(1.6%)
 
Holiday Inn
6.9%
 
All brands
(0.7%)
 
 
 
 
 
 
 
 
 
EMEAA results
Revenue from the reportable segment a increased by $112m (24.5%) to $569m and operating profit increased by $23m (13.8%) to $190m, both including the benefit of $7m significant liquidated damages recorded (2017: $nil). Operating profit from the reportable segment a increased by $31m (18.1%) to $202m. On an underlying b basis, revenue increased by $14m (3.1%) and operating profit increased by $25m (14.6%) driven by strong trading, net rooms growth and lower costs associated with the group wide efficiency programme.
 
Overall, comparable RevPAR in EMEAA increased by 2.7%, with the UK and Germany increasing by 1.2% and 1.0% respectively. Recovery in markets previously impacted by terror attacks continued with 6.5% growth in France. The Middle East declined by 6.3%, impacted by increased supply and political instability in certain markets.
 
Revenue and operating profit from the reportable segment are further analysed by fee business and owned, leased and managed lease hotels.
 
Fee business revenue increased by $26m (8.8%) to $320m, whilst operating profit increased by $35m (21.2%) to $200m, partly benefiting from the impact of foreign exchangec (revenue $3m, and operating profit $2m), and benefiting from cost savings associated with the group wide efficiency programme. Comparable RevPAR increased by 2.8%, driven by gains in both average daily rate and occupancy.
 
Owned, leased and managed lease revenue increased by $86m (52.8%) due to the addition of a portfolio in the UK, and partly benefiting from the impact of foreign exchangec ($2m), whilst operating profit decreased by $4m (66.7%), partly impacted by adverse foreign exchangec ($1m).
 
 
EMEAA 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.
Underlying revenue and underlying operating profit both exclude System Fund revenue and expenses, reimbursement of costs, the impact of owned asset disposals, significant liquidated damages and current year acquisitions, all translated at constant currency using prior year exchange rates. Underlying operating profit growth also excludes the impact of exceptional items (see the Use of Non-GAAP measures section later in this Business Review).
The impact of movements between the previous year's average exchange rates and actual average rates in 2018.
 
 
 
 
EMEAA hotel and room count
at 31 December
      Hotels
 
           2018
 
 
Change
over 2017
Rooms
                 
             2018
 
 
Change
over 2017
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Regent
InterContinental
3
106
3
2
769
32,299
769
508
 
Kimpton
2
1
608
334
 
Crowne Plaza
voco
182
2
6
2
46,259
531
1,685
531
 
Hotel Indigo
35
8
3,748
954
 
Holiday Inn1
385
2
71,353
923
 
Holiday Inn Express
304
22
43,732
4,557
 
Staybridge Suites
15
4
2,185
596
 
Other
17
10
9,615
1,166
 
 
____
____
______
_____
Total
1,051
60
211,099
12,023
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
726
31
118,122
6,344
 
Managed
309
18
89,204
3,554
 
Owned, leased and managed lease
16
11
3,773
2,125
 
 
____
____
______
_____
Total
1,051
60
211,099
12,023
 
 
____
____
______
_____
 
 
 
 
 
 
 
 
1 Includes 16 Holiday Inn Resort properties (3,391 rooms) (2017: 16 Holiday Inn Resort properties (3,347 rooms)).
 
 
 
 
Hotels
Rooms
EMEAA pipeline
at 31 December
 
2018
Change
over 2017
 
2018
Change
over 2017
 
 
 
 
 
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Regent
InterContinental
3
29
3
1
514
6,919
514
439
 
Kimpton
7
5
1,240
1,041
 
Crowne Plaza
voco
34
8
(2)
8
9,016
1,510
361
1,510
 
Hotel Indigo
40
6
5,761
1,021
 
EVEN Hotels
1
-
200
-
 
Holiday Inn1
106
11
24,339
2,274
 
Holiday Inn Express
114
6
19,154
1,058
 
Staybridge Suites
19
5
3,947
1,438
 
Other
1
-
143
(271)
 
 
____
____
______
_____
Total
362
43
72,743
9,385
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
159
6
25,681
853
 
Managed
202
36
46,907
8,377
 
Owned, leased and managed lease
1
1
155
155
 
 
____
____
______
_____
Total
362
43
72,743
9,385
 
 
____
 
____
______
_____
 
1 Includes 10 Holiday Inn Resort properties (2,353 rooms) (2017: five Holiday Inn Resort properties (1,075 rooms)).
 
 
 
 
 
GREATER CHINA
 
 
12 months ended 31 December
 
 
 
 
Greater China results
2018
2017 Restated
%
 
$m
$m
Change
 
 
 
 
Revenue from the reportable segment
 
 
 
 
Fee business
143
117
22.2
 
 
____
____
____
Total
 
143
117
22.2
 
____
____
____
Operating profit from the reportable segment
 
 
 
 
Fee business
69
52
32.7
 
____
____
____
 
Exceptional items
 
Operating profit
 
 
(1)
 
68
 
-
 
52
 
-
 
30.8
 
____
____
____
 
 
 
 
 
 
 
 
Greater China comparable RevPAR movement on previous year
12 months ended
31 December
2018
 
 
Fee business
 
 
InterContinental
6.2%
 
HUALUXE
21.5%
 
Crowne Plaza
8.2%
 
Hotel Indigo
9.3%
 
Holiday Inn
4.8%
 
Holiday Inn Express
6.9%
 
All brands
 
6.9%
 
Greater China results
Revenue from the reportable segmenta increased by $26m (22.2%) to $143m and operating profit increased by $16m (30.8%) to $68m, both including the benefit of $6m of significant liquidated damages recorded (2017: $nil). Operating profit from the reportable segment a increased by $17m (32.7%) to $69m. On an underlyingb basis, revenue increased by $18m (15.4%) and operating profit increased by $10m (19.2%). The region achieved comparable RevPAR growth of 6.9%, ahead of the industry, reflecting our scale and management strength in Greater China.
 
These increases in fee business revenue and operating profit were driven by strong trading and 13.6% rooms growth and continued benefits of leveraging the scale of the operational platform we have built in Greater China. Comparable RevPAR of 6.9% benefited from strong transient, corporate and meetings demand in mainland tier 1 and tier 2 cities.
 
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 Underlying revenue and underlying operating profit both exclude System Fund revenue and expenses, reimbursement of costs, the impact of owned asset disposals, significant liquidated damages and current year acquisitions, all translated at constant currency using prior year exchange rates. Underlying operating profit growth also excludes the impact of exceptional items (see the Use of Non-GAAP measures section later in this Business Review).
 
 
 
Hotels
Rooms
Greater China hotel and room count
at 31 December
 
2018
Change
over 2017
 
2018
Change
over 2017
 
 
 
 
 
Analysed by brand
 
 
 
 
 
Regent
InterContinental
3
47
3
7
1,236
19,229
1,236
2,600
 
HUALUXE
8
1
2,335
246
 
Crowne Plaza
91
9
32,410
3,462
 
Hotel Indigo
10
3
1,506
483
 
Holiday Inn1
92
6
28,007
1,348
 
Holiday Inn Express
133
32
29,164
5,351
 
Other
7
2
1,426
(952)
 
 
____
____
______
_____
Total
391
63
115,313
13,774
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
36
25
8,755
4,991
 
Managed
355
38
106,558
8,783
 
 
____
____
______
_____
Total
391
63
115,313
13,774
 
 
____
____
______
_____
 
1 Includes six Holiday Inn Resort properties (1,726 rooms) (2017: six Holiday Inn Resort properties (1,820 rooms)).
 
 
 
 
Hotels
Rooms
Greater China pipeline
at 31 December
 
2018
Change
over 2017
 
2018
Change
over 2017
 
 
 
 
 
Analysed by brand
 
 
 
 
 
InterContinental
25
(3)
7,399
(1,581)
 
Kimpton
4
2
899
540
 
HUALUXE
21
-
6,099
(190)
 
Crowne Plaza
39
3
11,855
182
 
Hotel Indigo
17
2
2,794
259
 
EVEN Hotels
7
4
1,688
892
 
Holiday Inn1
56
2
15,260
144
 
Holiday Inn Express
171
37
31,650
5,993
 
Other
1
-
279
-
 
 
____
____
______
_____
Total
341
47
77,923
6,239
 
 
____
____
______
_____
Analysed by ownership type
 
 
 
 
 
Franchised
124
56
22,005
10,329
 
Managed
217
(9)
55,918
(4,090)
 
 
____
____
______
_____
Total
341
47
77,923
6,239
 
 
____
____
______
_____
 
1 Includes eight Holiday Inn Resort properties (2,711 rooms) (2017: seven Holiday Inn Resort properties (2,380 rooms)).
 
CENTRAL
 
12 months ended 31 December
 
 
2017
 
 
2018
Restated
%
Central results
$m
$m
change
 
 
 
 
Revenue
170
157
8.3
Gross costs
(287)
(259)
(10.8)
 
____
____
____
 
 
(117)
(102)
(14.7)
Exceptional items
 
(55)
(29)
(89.7)
 
____
____
____
Operating loss
(172)
(131)
(31.3)
 
____
____
____
 
Central results
The net operating loss increased by $41m (31.3%) compared to 2017. Central revenue, which mainly comprises technology fee income, increased by $13m (8.3%) to $170m (an increase of $12m (7.6%) at constant currency), driven by increases in both comparable RevPAR (2.5%) and IHG System size (4.8%). Gross costs increased by $28m (10.8%), partially impacted by $2m of adverse foreign exchangea and driven by reinvestment of a portion of savings delivered elsewhere in the business and higher healthcare costs. Net operating loss before exceptional items increased by $15m (14.7%) to $117m (a $14m or 13.7% increase to $116m at constant currency).
 
 
a The impact of movements between the previous year's average exchange rates and actual average rates in 2018.
 
 
OTHER FINANCIAL INFORMATION
 
System Fund
In the year to 31 December 2018, System Fund revenue decreased by 0.7% from $1,242m to $1,233m (2016: $1,199m).  The primary driver was a favourable adjustment in 2017 (as restated) relating to a change in the actuarial assumptions around the ultimate rate of consumption of IHG Rewards Club points ('breakage').  This adjustment was immaterial in 2018.  This is largely offset by an underlying growth of 6.3% in assessment fees and contributions from hotels, reflecting increased RevPAR and System size, and increased revenue relating to co-branding agreements.
.
 
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. 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, 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.
 
Reimbursement of costs
In the year to 31 December 2018, reimbursable revenue increased 6.2% from $1,103m to $1,171m (2016: $1,046m), primarily due to an increase in the number of managed hotels in the Americas driving additional payroll cost.
 
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.
 
2018 pre-tax exceptional items totalled a charge of $104m. The charge included: $18m of litigation costs primarily relating to a material settlement agreed in respect of a lawsuit filed against the Group in the Americas region, together with associated legal fees; $56m relating to reorganisation costs (see below); $15m arising from the termination of the US funded Inter-Continental Hotels Pension Plan and $15m relating to the acquisitions of Regent Hotels and Resorts brand and associated management contracts ('Regent'), the UK portfolio, and Six Senses Hotels Resorts Spas ('Six Senses').
 
On 1 July 2018, the Group completed the acquisition of a 51% controlling interest in an agreement with Formosa International Hotels Corporation ('FIH') to acquire Regent. On 25 July 2018, the Group completed a deal to operate nine hotels under long-term leases from Covivio (formerly Foncière des Régions), which operated under the Principal and De Vere Hotels brands. An additional leased hotel was added to the portfolio on 13 November 2018, bringing the total to ten ('UK portfolio') at 31 December 2018. Two further leased hotels were added on 14 February 2019. On 12 February 2019, the Group completed the acquisition of Six Senses for $300m paid in cash. 
 
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 is expected to be 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. There will be an estimated $200m cost to achieve these savings, (of which $103m was incurred in 2018 (2017: $45m)), including amounts charged to the System Fund. The exceptional cost charged to the Group income statement in 2018 of $56m includes consultancy fees of $25m and severance costs of $18m.
 
Net financial expenses
Net financial expenses increased by $9m to $81m. The increase is primarily due to the unwind of $5m interest on deferred and contingent consideration relating to the Regent and UK portfolio acquisitions and interest on the €500m bond issued in November 2018. On an underlying basis, interest increased from $85m to $100m. 
 
Financing costs included $48m (2017: $44m) of interest costs on the public bonds and $20m (2017: $20m) in respect of the InterContinental Boston finance lease, both of which are fixed rate debt. 
 
Taxation
The effective rate of tax on profit before exceptional items and System Fund was 22% (2017: 29%). Excluding the impact of prior year items, the equivalent tax rate would be 23% (2017: 30%). This rate is higher than the average UK statutory rate of 19% (2017: 19.25%), 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 $27m (2017: credit of $88m). This included a current tax credit of $11m on reorganisation costs, a $5m current tax credit in respect of litigation costs, a $6m tax credit ($5m current tax and $1m deferred tax) arising from a US pension scheme settlement, a $2m current tax credit in respect of acquisition costs, a $2m prior year current tax charge on the sale of Avendra, and a $5m exceptional prior year tax credit in respect of significant US tax reform.
 
Net tax paid in 2018 totalled $68m (2017: $172m). The 2018 tax paid was less than 2017 principally due to material tax repayments from the UK and US tax authorities in 2018 and exceptional tax paid on the sale of Avendra in 2017.
 
Dividends
The Board has proposed a final dividend per ordinary share of 78.1¢. With the interim dividend per ordinary share of 36.3¢, the full-year dividend per ordinary share for 2018 will total 114.4¢, an increase of 10% over 2017.
 
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 ($2.621 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 26 April 2019 using the average of the daily exchange rates from 23 April 2019 to 25 April 2019 inclusive.
 
Earnings per ordinary share
Basic earnings per ordinary share decreased by 34.0% to 184.7¢ from 279.8¢ in 2017 whilst adjusted earnings per ordinary share and underlying earnings per ordinary share increased by 19.4% to 292.1¢ and by 18.8% to 290.5¢ respectively.
 
Share price and market capitalisation
The IHG share price closed at £42.37 on 31 December 2018, down from £47.19 on 31 December 2017. The market capitalisation of the Group at the year-end was £8.1bn.
 
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, both of which were undrawn at the year-end. 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.  Financial covenants will not be affected by the adoption of IFRS 16 'Leases'.
 
Additional funding is provided by the 99-year finance lease (of which 87 years remain) on InterContinental Boston and 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 $104m (2017: $110m), 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 Canada, and the matching overdrafts are held by the Group's central treasury company in the UK.
 
Net debt of $1,530m (2017: $1,851m) is analysed by currency as follows:
 
2018
2017
 
$m
$m
 
 
 
Borrowings
 
 
 
Sterling*
1,895
1,416
 
US dollar
329
601
 
Euros
8
2
 
Other
2
-
Cash and cash equivalents
 
 
 
Sterling
(479)
(13)
 
US dollar
(91)
(75)
 
Euros
(23)
(13)
 
Canadian dollar
(12)
(13)
 
Chinese renminbi
(58)
(12)
 
Other
(41)
(42)
 
 
____
____
Net debt
1,530
1,851
 
____
____
 
 
 
Average debt levels
1,755
1,810
 
* 2018 includes the impact of currency swaps.
____
____
 
 
 
USE OF NON-GAAP MEASURES
 
In addition to performance measures directly observable in the Business Review (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. Where applicable the definitions have been amended to reflect the adoption of IFRS 15.
 
Total gross revenue in IHG's System
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. 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.
 
Revenue and operating profit measures
In each of the following measures, System Fund results are excluded as the System Fund is not managed to a profit or loss for IHG, although an in-year surplus or deficit can arise. Revenues related to the reimbursement of costs, and the related costs, are excluded as operating profit is unaffected and an increase in these does not indicate growth for the business. Exceptional items are also excluded as they can be significantly skewed by one off events, for example reorganisation costs.
 
Operating profit measures are, by their nature, before interest and tax. A pre-interest and pre-tax measure excludes the impact of the Group's financing and external factors such as legislative changes, respectively. A pre-interest and pre-tax measure is considered more reflective of the Group's success in executing against its strategy.
 
Revenue from reportable segments and operating profit from reportable segments - comprises the Group's fee business and owned, leased and managed lease hotels.
 
Underlying revenue and underlying operating profit - adjusts the above to exclude the impact of owned asset disposals, significant liquidated damages, current year acquisitions, all translated at constant currency using prior year exchange rates. The presentation of these performance measures allows a better understanding of comparable year-on-year trading and enables an assessment of the underlying trends in the Group's financial performance.
 
Underlying fee revenue and fee margin - further analyses the above for the Group's fee business only, reflecting the Group's core fee-based business model. Underlying fee revenue is at constant currency using prior year exchange rates, fee margin is at actual exchange rates.
 
Operating profit from reportable segments before central overheads - used only to assist in understanding the relative contribution of IHG's regions to the Group, and as such central overheads are excluded. 
 
Underlying interest
This is a new measure in the year following the adoption of IFRS 15 and includes the interest payable to the System Fund on the outstanding cash balance relating to the IHG Rewards Club programme. In addition, the Group's financial expenses are presented net of System Fund capitalised interest, this interest is related to the assets attributable to the System Fund. These are adjusted as the System Fund is not managed to a profit or loss for IHG therefore removing these provides a better view of the Group's underlying interest expense.
 
Tax excluding the impact of exceptional items and System Fund  
This is a new measure in the year following the adoption of IFRS 15 which gives a more meaningful understanding of the Group's ongoing tax charge. Exceptional items represent distorting or non-recurring items and therefore often skew the current year's tax charge. The System Fund is not managed to a profit or loss for IHG and is, in general, not subject to tax either. Therefore, removing these provides a better view of the Group's underlying tax rate on ordinary operations and aids comparability year-on-year.
 
Adjusted earnings per ordinary share, Underlying earnings per ordinary share
Adjusted earnings per ordinary share excludes System Fund revenue and expenses, any interest and tax relating to the System Fund, exceptional items, and their related tax impacts. Adjusted earnings per ordinary share provides a per share measure that is not skewed by the result of the System Fund or exceptional items. Underlying earnings per ordinary share is calculated by dividing underlying profit for the period available for IHG equity holders by the weighted average number of ordinary shares in issue during the period, excluding investment in own shares. The presentation of underlying earnings per ordinary share allows a better understanding of comparable year-on-year trading and thereby allows an assessment of the underlying trends in the Group's financial performance.
 
Net debt, Net capital expenditure, Free cash flow
Net debt is used in the monitoring of the Group's liquidity and capital structure, and is used to calculate the key ratios attached to the Group's bank covenants. Net debt comprises loans and other borrowings, derivatives hedging debt values, less cash and cash equivalents, and is reconciled to the amounts included in the Group Financial Statements.
 
Net capital expenditure is defined as cash flow from investing activities less contract acquisition costs, excluding the acquisition of businesses net of cash acquired, tax paid on disposals and adjusted for System Fund depreciation and amortisation (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.
 
Free cash flow is defined as cash flow from operating activities (after interest and tax paid) and excluding contract acquisition costs net of repayments, less purchase of shares by employee share trusts and maintenance capital expenditure (including key money paid). 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.
 
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 our 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.
 
Underlying revenue and underlying operating profit Non-GAAP reconciliations
The following tables:
 
●            Reconcile the GAAP measures included in the Group Financial Statements to Group underlying revenue and underlying operating profit;
●            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; and
●            Show underlying Group fee revenue and Group fee margin on both an actual and constant currency basisa.
 
Highlights for the year ended 31 December 2018
 
 
Revenue
 
Operating profit
 
 
 
2017
 
 
2017
 
 
2018
Restated
%
2018
Restated
%
At actual exchange rates
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Per Group income statement
4,337
4,075
6.4
566
728
(22.3)
 
Significant liquidated damages
(13)
-
-
(13)
-
-
 
Exceptional items
-
-
-
104
(4)
2,700.0
 
Acquisition of businesses
(85)
-
-
1
-
-
 
System Fund
(1,233)
(1,242)
0.7
146
34
329.4
 
Reimbursement of costs
(1,171)
(1,103)
(6.2)
-
-
-
 
 
_____
_____
_____
_____
_____
_____
 
Underlying at actual exchange
1,835
1,730
6.1
804
758
6.1
 
rates
_____
_____
_____
_____
_____
_____
 
 
 
 
At actual exchange rates
 
At constant currency
 
 
2017
 
 
2017
 
 
2018
Restated
%
2018
Restated
%
 
$m
$m
change
$m
$m
change
Underlying revenue
 
 
 
 
 
 
Americas
1,051
999
5.2
1,053
999
5.4
EMEAA
478
457
4.6
471
457
3.1
Greater China
136
117
16.2
135
117
15.4
Central
170
157
8.3
169
157
7.6
 
_____
_____
_____
_____
_____
_____
Underlying Group revenue
1,835
1,730
6.1
1,828
1,730
5.7
Owned, leased and managed lease revenue included above
 
(363)
 
(351)
 
(3.4)
 
(359)
 
(351)
 
(2.3)
 
_____
_____
_____
_____
_____
_____
Underlying Group fee revenue
1,472
1,379
6.7
1,469
1,379
6.5
 
_____
_____
_____
_____
_____
_____
 
 
At actual exchange rates
At constant currency
 
 
2017
 
 
2017
 
 
2018
Restated
%
2018
Restated
%
 
$m
$m
change
$m
$m
change
 
 
 
 
 
 
 
Underlying operating profit
 
 
 
 
 
 
Americas
662
637
3.9
663
637
4.1
EMEAA
197
171
15.2
196
171
14.6
Greater China
62
52
19.2
62
52
19.2
Central
(117)
(102)
(14.7)
(116)
(102)
(13.7)
 
_____
_____
_____
_____
_____
_____
Underlying Group operating profit
804
758
6.1
805
758
6.2
Owned, leased and managed lease operating profit included
 
 
 
 
 
 
above
(33)
(35)
5.7
(34)
(35)
2.9
 
_____
_____
_____
_____
_____
_____
Underlying Group fee profit
771
723
6.6
771
723
6.6
 
_____
_____
_____
_____
_____
_____
Group fee margin
52.4%
52.4%
0.0ppts
52.5%
52.4%
0.1ppts
 
_____
_____
_____
_____
_____
_____
 
 
 
 
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 2018 and 2017, the Group Financial Statements would report revenue of $133m in 2018 and $128m in 2017, using the respective average exchange rates for the year of $1=£0.75 and $1=£0.78. For constant currency reporting, 2018 revenue would be translated at $1=£0.78 giving a US dollar value of $128m, thereby showing that underlying revenue was flat year-on-year. An exception to this approach is made for currencies experiencing high volatility in order to remove the distorting effect on underlying results where the average daily rate broadly keeps pace with inflation. In 2018 this exception has been applied to fees earned from hotels in Venezuela.
 
Underlying earnings per ordinary share reconciliation
 
The following table reconciles basic earnings per ordinary share to underlying earnings per ordinary share.
 
 
12 months ended 31 December
 
 
2017
 
2018
Restated
 
 
12 months ended 31 December
 
 
2017
 
2018
Restated
 
$m
$m
Basic earnings per ordinary share
 
 
 
 
 
Profit available for equity holders
351
540
Basic weighted average number of ordinary shares (millions)
190
193
 
 
 
Basic earnings per ordinary share (cents)
184.7
279.8
 
_____
_____
Underlying earnings per ordinary share
 
 
Profit available for equity holders
351
540
Adjusted for:
 
 
    Significant liquidated damages
(13)
-
    Tax on significant liquidated damages
3
-
    Acquisition of businesses
1
-
   Interest relating to deferred and contingent purchase consideration on               current year acquisitions
5
-
    System Fund revenue and expenses
146
34
    Interest attributable to the System Fund
(19)
(13)
    Tax attributable to the System Fund
-
3
    Exceptional items before tax
104
(4)
    Tax on exceptional items
(22)
2
    Exceptional tax
(5)
(90)
    Currency effect
1
-
 
_____
_____
Underlying profit available for equity holders
552
472
 
_____
_____
 
 
 
Underlying earnings per ordinary share (cents)
290.5
244.6
 
_____
_____
 
Net capital expenditure reconciliation
 
The following table reconciles net cash from investing activities to net capital expenditure.
 
 
12 months ended 31 December
 
 
2017
 
2018
Restated
 
$m
$m
 
 
 
Net cash from investing activities
(189)
(206)
Adjusted for:
 
 
    Contract acquisition costs, net of repayments
(54)
(57)
    Tax paid on disposals
2
25
    System Fund depreciation and amortisation
45
36
    Acquisition of businesses, net of cash acquired
38
-
 
_____
_____
Net capital expenditure
(158)
(202)
Add back:
 
 
    Disposal receipts
(10)
(104)
    Distributions from associates and joint ventures
(32)
-
    System Fund depreciation and amortisation
(45)
(36)
 
_____
_____
Gross capital expenditure
(245)
(342)
 
_____
_____
Analysed as:
 
 
    Capital expenditure: maintenance and key money
(108)
(115)
    Capital expenditure: recyclable investments
(38)
(85)
    Capital expenditure: System Fund investments
(99)
(142)
 
_____
_____
Gross capital expenditure
(245)
(342)
 
_____
_____
 
 
 
 
Free cash flow reconciliation
 
The following table reconciles net cash from operating activities to free cash flow.
 
 
12 months ended 31 December
 
 
2017
 
2018
Restated
 
$m
$m
 
 
 
Net cash from operating activities
666
577
 
Adjusted for:
 
 
    Contract acquisition costs, net of repayments
54
57
 
 
 
Less:
 
 
    Purchase of shares by employee share trusts
(3)
(3)
    Capital expenditure: maintenance and key money
(108)
(115)
 
_____
_____
Free cash flow
609
516
 
_____
_____
 
Underlying interest reconciliation
 
The following table reconciles net financial expenses to underlying interest.
 
 
12 months ended 31 December
 
2017
 
2018
Restated
 
$m
$m
Net financial expenses
 
 
 
 
 
Financial income
5
4
Financial expenses
(86)
(76)
 
_____
_____
 
(81)
(72)
 
Adjusted for:
 
 
Interest payable on balances with the System Fund
(14)
(7)
Capitalised interest relating to System Fund assets
(5)
(6)
 
_____
_____
Underlying interest
(100)
(85)
 
_____
_____
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP INCOME STATEMENT
For the year ended 31 December 2018
 
 
     2018
Year ended 31
December
2017
Year ended 31 December
Restated*
 
 
$m
$m
 
 
 
Revenue from fee business
1,486
1,379
Revenue from owned, leased and managed lease hotels
447
351
System Fund revenues
1,233
1,242
Reimbursement of costs
1,171
1,103
 
_____
_____
Total revenue (notes 5 and 6)
4,337
4,075
 
 
 
Cost of sales
(706)
(571)
System Fund expenses
(1,379)
(1,276)
Reimbursed costs
(1,171)
(1,103)
Administrative expenses before exceptional items
(344)
(337)
Share of (losses)/gains of associates and joint ventures
(1)
3
Other operating income
14
11
Depreciation and amortisation
(80)
(78)
 
_____
_____
Operating profit before exceptional items (note 5)
670
724
Impairment charges (note 7)
-
(18)
Other exceptional items (note 7)
(104)
22
 
_____
_____
Operating profit (note 5)
566
728
Financial income
5
4
Financial expenses
(86)
(76)
 
_____
_____
Profit before tax
485
656
 
 
 
Tax (note 8)
(133)
(115)
 
_____
_____
Profit for the year from continuing operations
352
541
 
_____
_____
Attributable to:
 
 
        Equity holders of the parent
351
540
        Non-controlling interest
1
1
 
_____
_____
 
352
541
 
_____
_____
 
 
 
Earnings per ordinary share (note 9)
 
 
Continuing and total operations:
 
 
 
Basic
184.7¢
279.8¢
 
Diluted
182.8¢
278.4¢
 
Adjusted
292.1¢
244.6¢
 
Adjusted diluted
289.1¢
243.3¢
 
 
 
 
 
 
 
* Restated for the adoption of IFRS 15 and other presentational changes (see notes 2 and 3).
 
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2018
 
 
2018
Year ended
31 December
 
$m
2017
Year ended
31 December
Restated*
$m
 
 
 
Profit for the year
352
541
 
 
 
Other comprehensive income
 
 
 
 
 
Items that may be subsequently reclassified to profit or loss:
 
 
Gains on valuation of available-for-sale financial assets**, net of related tax charge of $nil (2017 $3m)
 
-
 
41
Fair value gains reclassified to profit on disposal of available-for-sale financial assets**
 
-
 
(73)
Gains on cash flow hedges, including related tax credit of $1m (2017 $nil)
5
-
Costs of hedging
(1)
-
Hedging gains reclassified to financial expenses
(8)
-
Exchange gains/(losses) on retranslation of foreign operations, including related tax credit of $2m (2017 net of related tax credit of $1m)
 
43
 
(88)
 
_____
_____
 
39
(120)
Items that will not be reclassified to profit or loss:
 
 
      Losses on equity instruments classified as fair value through other       comprehensive income, including related tax charge of $2m (2017 $nil)
 
(14)
 
-
Re-measurement gains/(losses) on defined benefit plans, net of related tax charge of $4m (2017 $nil)
 
8
 
(4)
Deferred tax charge on defined benefit plans arising from significant US
tax reform
 
-
 
(11)
 
_____
_____
 
(6)
(15)
 
_____
_____
Total other comprehensive income/(loss) for the year
33
(135)
 
_____
_____
Total comprehensive income for the year
385
406
 
_____
_____
 
 
 
Attributable to:
 
 
 
Equity holders of the parent
383
404
 
Non-controlling interest
2
2
 
_____
_____
 
385
406
 
_____
 
_____
 
 
 
*  Restated for the adoption of IFRS 15 (see note 2)
** IFRS 9 has been applied from 1 January 2018.  Under the transition method chosen, comparative information has not been restated.
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
 
 
Year ended 31 December 2018
 
Equity share capital
 
Other reserves*
 
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
 
 
 
 
 
 
At beginning of the year (restated for IFRS 15)
154
(2,413)
951
7
(1,301)
Impact of adopting IFRS 9 (note 2)
-
(18)
18
-
-
 
_____
_____
_____
_____
_____
At the beginning of the year (restated for IFRS 15 and IFRS 9)
154
(2,431)
969
7
(1,301)
Total comprehensive income for the year
-
24
359
2
385
Transfer of treasury shares to employee share trusts
 
-
 
(19)
 
19
 
-
 
-
Purchase of own shares by employee share trusts
 
-
 
(3)
 
-
 
-
 
(3)
Release of own shares by employee share trusts
 
-
 
24
 
(24)
 
-
 
-
Equity-settled share-based cost
-
-
39
-
39
Tax related to share schemes
-
-
3
-
3
Equity dividends paid
-
-
(199)
(1)
(200)
Exchange adjustments
(8)
8
-
-
-
 
_____
_____
_____
_____
_____
At end of the year
146
(2,397)
1,166
8
(1,077)
 
_____
 
_____
 
_____
 
_____
 
_____
 
 
 
Year ended 31 December 2017
 
Equity share capital
 
Other reserves*
 
Retained earnings
Non-controlling interest
 
Total equity
 
$m
$m
$m
$m
$m
 
 
 
 
 
 
At beginning of the year (as previously reported)
141
(2,300)
1,392
8
(759)
Impact of adopting IFRS 15 (note 2)
-
15
(402)
-
(387)
 
_____
_____
_____
_____
_____
At beginning of the year (restated for IFRS 15)
141
(2,285)
990
8
(1,146)
 
 
 
 
 
 
Total comprehensive income for the year
-
(121)
525
2
406
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
-
-
29
-
29
Tax related to share schemes
-
-
9
-
9
Equity dividends paid
-
-
(593)
(3)
(596)
Exchange adjustments
13
(13)
-
-
-
 
_____
_____
_____
_____
_____
At end of the year
154
(2,413)
951
7
(1,301)
 
_____
 
_____
 
_____
 
_____
 
_____
 
 
*
Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, fair value reserve, cash flow hedging reserve and currency translation reserve.
 
All items above are shown net of tax.
 
INTERCONTINENTAL HOTELS GROUP PLC
GROUP STATEMENT OF FINANCIAL POSITION
31 December 2018
 
2018
31 December
2017
31 December
Restated*
 
$m
$m
ASSETS
 
 
Property, plant and equipment
447
425
Goodwill and other intangible assets
1,143
967
Investment in associates and joint ventures
104
141
Retirement benefit assets
-
3
Other financial assets
260
228
Derivative financial instruments
7
-
Non-current tax receivable
31
16
Deferred tax assets
60
75
Contract costs
55
51
Contract assets
270
241
 
_______
_______
Total non-current assets
2,377
2,147
 
_______
_______
Inventories
5
3
Trade and other receivables
613
551
Current tax receivable
27
101
Other financial assets
1
16
Derivative financial instruments
1
-
Cash and cash equivalents
704
168
Contract costs
5
7
Contract assets
20
17
 
_______
_______
Total current assets
1,376
863
 
_______
_______
Total assets (note 5)
3,753
3,010
 
__  ___
__  ___
LIABILITIES
 
 
Loans and other borrowings
(120)
(126)
Trade and other payables
(618)
(597)
Deferred revenue
(572)
(490)
Provisions
(10)
(3)
Current tax payable
(50)
(64)
 
_______
_______
Total current liabilities
(1,370)
(1,280)
 
_______
_______
Loans and other borrowings
(2,129)
(1,893)
Retirement benefit obligations
(91)
(104)
Trade and other payables
(158)
(36)
Deferred revenue
(934)
(867)
Provisions
(17)
(5)
Non-current tax payable
-
(25)
Deferred tax liabilities
(131)
(101)
 
_______
______
Total non-current liabilities
(3,460)
(3,031)
 
_______
_______
Total liabilities
(4,830)
(4,311)
 
_______
_______
Net liabilities
(1,077)
(1,301)
 
________
________
EQUITY
 
 
Equity share capital
146
154
Capital redemption reserve
10
10
Shares held by employee share trusts
(4)
(5)
Other reserves
(2,865)
(2,874)
Fair value reserve