IHG Interim Results Presentation

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IHGInterim Results Presentation

• 22nd August 2006

2
Agenda
InterimResults
Operating Review
Q A
Overview
3
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
4
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
5
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
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Agenda
InterimResults
Operating Review
Q A
Overview
7
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
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Total Group results impacted by asset sales
m 6mths to 30 Jun 06 6mths to 30 Jun 05 Change
Turnover 499 690 (28)
EBITDA 160 193 (17)
Operating Profit 127 153 (17)
Interest (1) (15) 93
Profit before tax 126 138 (9)
Tax rate 25 29
Basic earnings per share 51.5p 20.4p 152
Weighted average shares (m) 421 607
Interim dividend 5.1p 4.6p 11
Before other operating items and
expenses Excludes results of Britvic, disposed in
December 2005.
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Excellent growth in the continuing business
m 6mths to 30 Jun 06 6mthsto 30 Jun 05 Change
Turnover 394 340 16
EBITDA 137 107 28
Operating Profit 107 82 30
Margin 27 24 3pts
Interest (1) (15) 93
Profit before tax 106 67 58
Before other operating income and expenses
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Strong regional continuing operating profit growth
m 6mths to 30 Jun 06 6mths to 30 Jun 05 Change CER Change
Americas 111 88 26 21
EMEA 17 16 6 9
Asia Pacific 16 10 60 45
Central Overheads (37) (32) (16)
Continuing Operating Profit 107 82 30 25
Continuing EBITDA 137 107 28
Before other operating income and expenses
CER is constant exchange rate, translated at
constant H1 2005 exchange rates
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Improving business mix

• 88 of EBIT now recurring fee income
• Geographic EBIT
• 70 from Americas
• 11 from Asia
• 19 from EMEA

Pre regional and central overheads 2005 and
2006 owned and leased adjusted fro closure of
InterContinental London Park Lane
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Hotel franchising high margin fee growth
continues
Total gross revenue bn (rooms only)
Drivers of gross revenue change,
2.5
H106 vs H105
83
17
2.2
H105
(1)
101
H105 vs H104
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 USDGBP 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

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Hotel management -operating profit growth
continues
Total gross revenue bn (total hotel)
Drivers of gross revenue change,
1.4
10
24
66
H106 vs H105
1.1
H105
(7)
36
14
57
H105 vs H104
1.0
Transfers from owned
Avail. Rooms
RevPAR
FB
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 USDGBP translation
rate of 1.80 Note 2 Hotel management fees and
EBIT exclude the results of leased properties

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Continuing owned and leased estate growing
margins
OL revenues m
Drivers of revenue change,
159 adjusted
144
36
44
20
H106 vs H105
144 adjusted
141
H105 vs H104
50
38
13
121
Rate
Occupancy
FB
OL EBITDA (pre overheads) m
OL EBIT (pre overheads) m (margin)
37 adjusted
22 adjusted (14)
31
20 (11)
15 (11)
29 adjusted
14 adjusted(10)
21 (12)
25
10 (7)
20
6 (5)
1 (1)
Note based on constant USDGBP translation rate
of 1.80 Adjusted by substituting
InterContinental London's H1 05 and H106
results for its H104 result , to reflect its
closure for refurbishment in 2005

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Total Group operating cash flow
m 6mths to 30 Jun 06 6mths to 30 Jun 05
Operating Profit 127 153
Depreciation - Hotel depreciation - Non hotel depreciation 23 10 31 9
Working capital (37) (43)
Other 5 5
Cash flow from operations 128 155
Capital Expenditure (46) (63)

Net Cash/(Debt) (320) (5)
Before other operating income and expenses and
results of the Soft Drinks business, disposed in
December 2005
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Significant free cash flow generated
m 6mths to30 Jun 06 6mths to30 Jun 05
Continuing hotels EBITDA 137 107
Maintenance Capital Expenditure - Hotel capex - Non hotel capex 10 12 25 8
Free Cash Flow 115 74
Before other operating income and expenses
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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

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Asset disposal programme
Disposals to date 175 hotels 35,768 rooms
Net book value of hotels sold to date 2.9bn
Proceeds received to date 3.0bn
Proportion kept under IHG's brands 90 (157 hotels 32,334 rooms)
Post fee EBITDA exit multiple 12x
Estimated fee stream created In excess of 30m
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Returns to shareholders on target
Returned to date m Still to be returned m
Share repurchase
First 250 0
Second 250 0
Third 76 174
Special dividend (Dec 04) 501 0
Capital return (July 05) 996 0
Special dividend (June 06) 497 0
Total 2,570 174
20
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

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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
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Agenda
InterimResults
Operating Review
Q A
Overview
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RevPAR outperformance in all key profit generators
H106 RevPAR change, IHG key profit generators v
segment
Source Smith Travel Research Deloittes
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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
PCR
Channels
Channels
PCR
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IHG Journey
Faster growth bymaking IHGs brandsthe
first-choice forguests and hotel owners
By end 2008 Net, organic growth of 50,000 -
60,000 rooms
Build the industrys strongest operating system
focused on the biggest markets and segments where
scale really counts

• Brand performance
• Excellent hotel returns
• Market scale/knowledge
• Aligned organisation

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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
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Growth in room count gaining momentum
Room count change during H1 2006, 000
548
2006 year end forecast
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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

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All brands growing pipeline around the world
Global IHG Pipeline
Rooms
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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
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US industry revenue growth outstrips RevPAR
Source STR
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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
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Revised brand positioning for InterContinental

• Previous demographic
• Tended to be older (gt55)
• Empty nesters
• Conservative and traditional
• "In the know" demographic
• Aged 35-54
• Young family holiday at resorts
• Seek authentic and enriching experiences

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New marketing focus
"In the know" campaign

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Delivering the brand experience
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5 new InterContinentals opened around the world
Mar Menor
Bora Bora
Baltimore
Panama
Kansas City
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InterContinental brand performance improving
InterContinental Total Gross Revenue H1
2006 EMEA 11 Asia Pacific 11 Americas
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InterContinental System and Pipeline
Hotels
RevPAR growth outperformance versus global luxury
segment
2005 2.2 outperformance H1 2006
3.4 outperformance
Pipeline
System
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New marketing approach
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New marketing approach
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New marketing approach
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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
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Hotel indigo launched 2004
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Right brand positioning, right product
Indigo Gold Coast
Hotel Indigo, Houston
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Strong Development Pipeline
Total of 21 hotels in less than two years
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Delivering against our targets
Starting position 30/06/2005 Target by end 2008 30/06/06 2006 year end forecast
Net rooms growth 538k 50k-60k 3k 10k
InterContinentals 136 15-25 6 8
Hotels open in China 47 78 10 20
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Agenda
InterimResults
Operating Review
Q A
Overview
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IHGInterim Results Presentation

• 22nd August 2006