Interim results to 30 June 2020

REPORTABLE SEGMENTS1ReportedUnderlying5
20202019%Change%Change
Revenue2$488m$1,012m(52)%(51)%
Revenue from fee business$375m$730m(49)%(48)%
Operating profit2$74m$410m(82)%(83)%
Fee margin326.1%54.1%(28.0)%pts
Adjusted EPS414.3¢148.6¢(90)%
GROUP RESULTS
Total revenue$1,248m$2,280m(45)%
Operating (loss)/profit$(233)m$442m(153)%
Basic EPS(115.4)¢167.2¢(169)%
Total dividend per share39.9¢(100)%
Net debt$2,515m$2,847m(12)%

Key metrics

  • $6.6bn total gross revenue (down (52)%; (51)% at CER)
  • (51.7)% global H1 RevPAR
  • (74.7)% global Q2 RevPAR

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.
3 Excludes owned, leased and managed lease hotels, significant liquidated damages and the results of the Group’s captive insurance company, with 2019 restated accordingly.
4 Calculated using results from Reportable Segments and Adjusted Interest, and excluding changes in fair value of contingent consideration.
5 Reportable segment results excluding significant liquidated damages, current year disposals and stated at constant H1 2020 exchange rates (CER).

  • H1 Comparable RevPAR: Global (52)%. Q2: Global (75)%; Americas (71)%; EMEAA (88)%; Greater China (59)%.
  • Net system size growth of 3.2% YoY. In H1, 12k room additions and 12k removals, including 2k relating to a previously flagged portfolio of hotels in Germany. Global estate now 883k rooms, over 5,900 hotels.
  • First half signings of 26k rooms (181 hotels). Total pipeline now stands at 288k rooms (1,932 hotels).
  • Operating profit from reportable segments down 82% to $74m before System Fund result of $(52)m and operating exceptional items of $(255)m predominantly comprising non-cash impairments to owned and leased hotels and acquired management agreements, together with impairments of trade deposits and receivables.
  • On track to reduce Fee Business costs by ~$150m in 2020; targeting around half this level to be sustainable into 2021.
  • Q2 free cash flow broadly neutral, resulting from strong cash management; H1 outflow of $66m.
  • Total available liquidity of $2.0bn at end of June and end of July.
  • July comparable RevPAR expected to be ~(58)%; occupancy levels in comparable open hotels improved to ~45%. 317 hotels or 5% of the estate closed as at end of July; 3% of Americas, 16% of EMEAA and <1% of Greater China.
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Keith Barr, Chief Executive Officer, IHG, said: “Throughout the crisis we have continued to act responsibly, doing all we can to support our hotel colleagues and owners, and create a clean, safe stay experience that we know guests can trust. The teamwork, dedication and care that our colleagues and owners have shown to adapt our approach is central to meeting the evolving needs and expectations of guests, as well as the communities in which we operate. I would like to sincerely thank everyone for ensuring that our purpose of providing True Hospitality shines through, even in the toughest of times.

The impact of Covid-19 on our business has been substantial. Global RevPAR declined by 52% in the first half and was down 75% in the second quarter, when occupancy at comparable hotels fell to 25%. Despite this challenging environment, we delivered an operating profit of $74m. Small but steady improvements in occupancy and RevPAR through the second quarter continued into July, with an expected RevPAR decline of 58%, and occupancy rising to around 45%.

The support we have offered owners, such as fee relief and increased payment flexibility, was well received. Together with other measures we’ve taken to preserve cash, we have maintained substantial liquidity of around $2bn. Our ongoing actions to reduce costs include plans to make around half of the $150m of savings we will achieve this year sustainable into 2021, alongside continued investment in our growth initiatives. However, with limited visibility of the pace and scale of market recovery, we are not proposing an interim dividend.

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As has been the case in previous downturns, domestic mainstream travel is proving to be the most resilient. Our weighting in this segment, led by our industry-leading Holiday Inn Brand Family, positions us well as demand returns in our key markets. In the US, our mainstream estate of almost 3,500 hotels is seeing lower levels of RevPAR decline than the industry, and is operating at occupancy levels of over 50%.

Reflecting our long-term growth prospects, and the strength of our brands and owner relationships, we opened more than 90 hotels in the half and strengthened our pipeline with an average of one new signing a day, including almost 100 for our Holiday Inn Brand Family. We have also taken voco, our upscale conversion brand, outside of EMEAA, with initial signings in the US and Greater China.

The impact of this crisis on our industry cannot be underestimated, but we are seeing some very early signs of improvement as restrictions ease and traveller confidence returns. Whilst the near-term outlook remains uncertain and the time period for market recovery is unknown, we are well positioned with preferred brands in the largest markets and segments, a leading loyalty platform and one of the most resilient business models in the industry. This gives us confidence in our ability to meet the needs of our guests and owners, and to emerge strongly when markets recover.”

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