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IHG Interim Results Presentation. 22 nd August 2006. Agenda. Operating Review. Interim Results. Overview. Q & A. Strong performance in H1 2006. Overview. Business performing strongly: Total gross revenue up 14% to £4.1bn RevPAR outperformance in all key profit generators

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IHG Interim Results Presentation

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Ihg interim results presentation

IHGInterim Results Presentation

22nd August 2006


Agenda

Agenda

Operating Review

InterimResults

Overview

Q & A


Strong performance in h1 2006

Strong performance in H1 2006

Overview

  • Business performing strongly:

    • Total gross revenue up 14% to £4.1bn

    • RevPAR outperformance in all key profit generators

    • 11.2% global RevPAR growth

    • Continuing revenue up 16%*: continuing EBIT up 30%*

    • Interim dividend increased by 11% to 5.1p per share

Note: Total gross revenue is defined as total room revenue from franchise hotels and total revenue from managed, owned and leased hotels. It is NOT revenue attributable to IHG, deriving as it does from hotels owned by 3rd parties. We highlight the metric as an indication of the scale and reach of our brands.

* Before other operating income and expenses


Hotel industry remains buoyant

Hotel industry remains buoyant

Overview

  • Low supply growth, high demand growth

    • US room night demand + 3.6% last 12 months

    • US room supply +0.5% last 12 months

  • 2007 and 2008 industry forecasts suggest continued growth in US

    • RevPAR +6% per annum.

    • Industry revenue + 8% per annum

  • Long term drivers remain favourable

    • 3.3% CAGR global GDP growth 2006-10

    • Doubling of US travel and tourism spend forecast by 2015

    • Increase in global internet users from 870m in 2005 to 1.4bn by 2010

    • Growth in low cost airlines and new sources of travellers, including China

Source: Smith Travel Research; GTN; Deloittes


Strong performance in h1 20061

Overview

Strong performance in H1 2006

  • Business performing strongly:

    • Total gross revenue up 14%

    • RevPAR outperformance in all key profit generators

    • 11.2% global RevPAR growth

    • Continuing revenue up 16%*: continuing EBIT up 30%*

    • Interim dividend increased by 11% to 5.1p per share

  • Further asset disposals:

    • Sales proceeds of £680m; £3.0bn of hotels now sold

    • 90% of hotels sold successfully converted to managed or franchised

    • Long term EBIT stream of over £30m per annum created

  • Progress on growth strategy:

    • Room count up 3,469 - up at least 10k by year end 2006

    • 41k rooms signed; pipeline now 130k rooms, 1,028 hotels, up 20%

Note: Total gross revenue is defined as total room revenue from franchise hotels and total revenue from managed, owned and leased hotels. It is NOT revenue attributable to IHG, deriving as it does from hotels owned by 3rd parties. We highlight the metric as an indication of the scale and reach of our brands.

* Before other operating income and expenses


Agenda1

Agenda

Operating Review

InterimResults

Overview

Q & A


Financial highlights

Interim

Results

Financial Highlights

  • Total gross revenue* up 14% to £4.1bn

  • Total EBIT** of £127m

  • Continuing EBIT** up 30% to £107m

  • Adjusted continuing earnings per share*** up 132% to 19.0p

  • Interim dividend increased 11% to 5.1p per share

*Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, derived as it is from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands

** Up 25% at constant exchange rate

*** Before other operating items and expenses


Total group results impacted by asset sales

Interim

Results

Total Group results impacted by asset sales

*Before other operating items and expenses

Excludes results of Britvic, disposed in December 2005.


Excellent growth in the continuing business

Interim

Results

Excellent growth in the continuing business

* Before other operating income and expenses


Strong regional continuing operating profit growth

Interim

Results

Strong regional continuing operating profit growth

* Before other operating income and expenses

** CER is constant exchange rate, translated at constant H1 2005 exchange rates


Improving business mix

88% of EBIT* now recurring fee income

Geographic EBIT*

70% from Americas

11% from Asia

19% from EMEA

Interim

Results

Owned and leased**

Franchised

Managed

Improving business mix

* Pre regional and central overheads

** 2005 and 2006 owned and leased adjusted fro closure of InterContinental London Park Lane


Hotel franchising high margin fee growth continues

Interim

Results

Hotel franchising –high margin fee growth continues

Total gross revenue £bn* (rooms only)

Drivers of gross revenue change, %

2.5

H1’06 vs H1’05

83%

17%

2.2

H1’05

(1%)

H1’05 vs H1’04

101%

2.0

Avail. Rooms

RevPAR

Franchise fees £m

Franchise EBIT £m (margin%)

135

117 (87%)

117**

100 (85%)**

111

92 (83%)

Note: based on constant USD:GBP translation rate of 1.80

*Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, derived as it is from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands

**Adjusted for one-off £7m liquidated damages receipt in the first half of 2005


Hotel management operating profit growth continues

Interim

Results

Hotel management -operating profit growth continues

Total gross revenue £bn* (total hotel)

Drivers of gross revenue change, %

1.4

10%

24%

66%

H1’06 vs H1’05

1.1

H1’05

(7%)

36%

14%

57%

H1’05 vs H1’04

1.0

Transfers from owned

Avail. Rooms

RevPAR

F&B

Managed EBIT £m (margin%)

Management fees £m

39 (61%)

64

46

29 (63%)

41

23 (56%)

* Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, as it is derived from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands

Note 1: Total Gross Revenue based on constant USD:GBP translation rate of 1.80

Note 2: Hotel management fees and EBIT exclude the results of leased properties


Ihg interim results presentation

Interim Results

Continuing owned and leased estate –growing margins

O&L revenues £m

Drivers of revenue change, %

159 adjusted**

144

44%

36%

20%

H1’06 vs H1’05

144 adjusted**

141

H1’05 vs H1’04

50%

13%

38%

121

Rate

Occupancy

F&B

O&L EBITDA (pre overheads) £m

O&L EBIT (pre overheads) £m (margin%)

22 adjusted**

(14%)

37 adjusted**

31

20 (11%)

15 (11%)

29 adjusted**

14 adjusted**(10%)

21 (12%)

10 (7%)

25

6 (5%)

20

1 (1%)

Note: based on constant USD:GBP translation rate of 1.80

** Adjusted by substituting InterContinental London's H1 ’05 and H1’06 results for its H1’04 result , to reflect its closure for refurbishment in 2005


Total group operating cash flow

Interim

Results

Total Group operating cash flow

* Before other operating income and expenses and results of the Soft Drinks business, disposed in December 2005


Significant free cash flow generated

Interim

Results

Significant free cash flow generated

* Before other operating income and expenses


Investment for future growth

Interim

Results

Investment for future growth

  • Total capital expenditure in first half of £46m

  • Maintenance of retained assets and operating systems:

    • £22m spent in the first half

      • £4m continuing hotels, £6m sold hotels, £12m non hotel

  • Refurbishment of retained owned and leased assets:

    • £21m spent in the first half, £17m on InterContinental London Park Lane

  • Expectations for the full year remain unchanged

    • Maintenance and refurbishment £130m; growth investment £50m

  • 2007 will see lower maintenance capital expenditure and near elimination of refurbishment expenditure


Asset disposal programme

Interim

Results

Asset disposal programme


Returns to shareholders on target

Interim

Results

Returns to shareholders on target


Further returns of capital

Interim

Results

Further returns of capital

  • Net debt at half year of £320m

  • £174m still to be returned to shareholders at 30 June 2006

    • £68m remaining at 22 August 2006

  • In excess of £400m further disposal proceeds this year

  • Further returns will be made to shareholders


Financial highlights1

Interim

Results

Financial Highlights

  • Total gross revenue* up 14% to £4.1bn

  • Total EBIT of £127m

  • Continuing EBIT up 30% to £107m

  • Adjusted continuing earnings per share** up 132% to 19.0p

  • Interim dividend up 11% to 5.1p per share

*Total gross revenue is defined as total room revenue from franchise hotels and total hotel revenue from managed, owned and leased hotels. It is not revenue attributable to IHG, derived as it is from hotels owned by third parties. We highlight the metric as an indicator of the scale and reach of our brands

** Before special items


Agenda2

Agenda

Operating Review

InterimResults

Overview

Q & A


Revpar outperformance in all key profit generators

Operating review

RevPAR outperformance in all key profit generators

H1’06 RevPAR change, IHG key profit generators v segment

Source: Smith Travel Research; Deloittes


Growth in system contribution attracts owners

Operating review

Growth in system contribution attracts owners

Total Gross Revenue

£4.1bn, +14%

Enhanced reservation channel and loyalty club room night delivery

47.7%%

42.6%

34.1%

32.1%

Channels

Channels

PCR

PCR


Ihg journey

Operating review

Goal

Target

Strategy

Priorities

IHG Journey

Faster growth bymaking IHG’s brandsthe first-choice forguests and hotel owners

By end 2008:

Net, organic growth of 50,000 - 60,000 rooms

Build the industry’s strongest operating system focused on the biggest markets and segments where scale really counts

  • Brand performance

  • Excellent hotel returns

  • Market scale/knowledge

  • Aligned organisation


Driving performance

Operating review

Driving performance

Improved

organisational

structure

Strengthened management capabilities

Innovation in operating system and IT

Organisation focused on common targets and priorities

Added more developers signing new deals

Refocused sales and marketing activities

Increased infrastructure in China

Deepened brand analysis and insight


Growth in room count gaining momentum

Operating review

Growth in room count gaining momentum

Room count change during H1 2006, ‘000

548

2006 year end

forecast


Pipeline now 130 100 rooms

Represents 1,028 hotels

85% of pipeline is "new build"

40% of pipeline already under construction

c. 80% of current pipeline expected to open by end 2008

All brands and geographies well represented

Operating review

Pipeline now 130,100 rooms


All brands growing pipeline around the world

Operating review

Americas Holiday Inn

25.000

20.000

15.000

Rooms

10.000

5.000

-

Dec'02

Jun'03

Dec'03

Jun'04

Dec'04

Jun'05

Dec'05

June'06

Holiday Inn

Holiday Inn Express

InterContinental

Crowne Plaza

Candlewood

Staybridge Suites

Indigo

All brands growing pipeline around the world

Global IHG Pipeline

Rooms


Growing our market share

Operating review

Growing our market share

Pipeline share US new build versus current market share

*

Source: STR/Dodge construction pipeline

Note: Candlewood Suites and Staybridge Suites share of midscale and upscale extended stay respectively

* Crowne Plaza has a 34% conversion market share


Us industry revenue growth outstrips revpar

Operating review

Revenue

growth

6% CAGR

RevPAR

growth

4% CAGR

US industry revenue growth outstrips RevPAR

Source: STR


Industry growth across key markets and segments

Operating review

USA

China

Japan

Other

Industry growth across key markets and segments

Current global room distribution

by segment

Forecast global room growth

by segment, 2005-10

Rooms (Millions)

Rooms ('000s)

Source: IHG estimates

Note: growth across top 20 global markets


Ihg interim results presentation

Operating review

E-concierge

Revised brand positioning for InterContinental

  • Previous demographic

  • Tended to be older (>55)

  • “Empty nesters”

  • Conservative and traditional

  • "In the know" demographic

  • Aged 35-54

  • Young family; holiday at resorts

  • Seek authentic and enriching experiences


New marketing focus

Operating review

CNN sponsorship

Aston Martin racing sponsorship

New marketing focus

"In the know" campaign


Ihg interim results presentation

Operating review

InterContinental Atlanta

18 Leadership Sessions

420 Management Sessions

All 140 GMs Trained

1,800 Employee Sessions

  • Launched 2004

    • 78% occupancy 2006 ytd

    • June 2006: highest RevPAR in market

  • 6 InterContinentals signed in US in 18 months post opening Atlanta

40,000 Hotel Employees Attending

24 Languages

Delivering the brand experience


5 new intercontinentals opened around the world

Operating review

5 new InterContinentals opened around the world

Mar Menor

Bora Bora

Kansas City

Panama

Baltimore


Intercontinental brand performance improving

Operating review

InterContinental brand performance improving

InterContinental Total Gross

Revenue H1` 2006

EMEA +11%

Asia Pacific +11%

Americas +10%

InterContinental System and Pipeline

Hotels

RevPAR growth outperformance versus global luxury segment

2005 +2.2% outperformance

H1 2006 +3.4% outperformance

System

Pipeline


Ihg interim results presentation

Operating review


New marketing approach

Operating review

New marketing approach


New marketing approach1

Operating review

New marketing approach


New marketing approach2

Operating review

New marketing approach


Us holiday inn prototype

Operating review

Holiday Inn

Prototype

opened

US Holiday Inn Prototype

Americas Holiday Inn signings 2003-2006

Holiday Inn Prototype, opened 2004

Rooms

  • Launched 2004

  • 13 Prototypes now open

    • Already at a 7% RevPAR premium*

  • 131 Prototypes under development

* Premium to IHG's Holiday Inn estate


Ihg interim results presentation

Operating review

Hotel indigo launched 2004


Ihg interim results presentation

Operating review

Right brand positioning, right product

Indigo Gold Coast

Hotel Indigo, Houston


Ihg interim results presentation

Operating review

Open (4)

Pipeline – under construction (6)

Pipeline (11)

In final negotiation (11)

Strong Development Pipeline

Total of 21 hotels in less than two years


Delivering against our targets

Operating review

Delivering against our targets


Agenda3

Agenda

Operating Review

InterimResults

Overview

Q & A


Ihg interim results presentation1

IHGInterim Results Presentation

22nd August 2006


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