InterContinental Hotels Group PLC

Good morning, everyone, and welcome to IHG's conference call for the 2023 half-year results. So I'm Stuart Ford, Head of Investor Relations at IHG, and I'm joined this morning by Ellie Malouf, our Group Chief Executive, and Michael Glover, our Chief Financial Officer. Just to remind listeners on the call that in discussions today, a company may make certain forward-looking statements as defined under U.S. law. Do please refer to this morning's announcement and the company's SEC filings the factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. For those analysts or institutional investors who are listening via our website, can I remind you that in order to ask questions, you will need to dial in using the details on page two of this morning's R&S release. The release, together with the accompanying presentation and the usual supplementary data pack, can be downloaded from the results and presentation sessions under the Investors tab on isgplc.com.

...business for the past eight years. I'm honored to take over as Group CEO and excited to look ahead with our talented teams and owners to an important next chapter of growth for ISG. In a moment, Michael will talk you through our financials for the half. But first, let me share some key highlights. We had a strong first half across our financial results, hotel openings and signings, which were all significantly above last year. Trading continues to be very healthy. Refbar improved year-on-year across all our markets and has now exceeded 2019 pre-pandemic peaks for four consecutive quarters. H1 global Refbar was up 24% year-on-year and up 8.7% versus 2019. Q2, Refbar was up 17% year-on-year and up 9.9% versus 2019. Looking at system size, our gross growth was 6.3%, and net growth was 4.8%. We opened 108 hotels, 40% more rooms than H1 last year, and we signed 239 hotels. That's 11% more rooms than last year. We continue to successfully capture conversion opportunities, which represented around 40% of signings and openings. And our pipeline increased 3% year-on-year, to more than 286,000 rooms, representing 31% of today's system size. With our fee margin expanding by 3.3 percentage points, this led to an operating profit of $479 million, up 27% year-on-year. We are confident in the strength and continued growth of our highly cash-generated business. Our current $750 million share buyback program, announced in February, was 47% complete, and we are pleased to declare an interim dividend 10% higher than 2022. In recent years, we have strengthened our enterprise platform through significant investments in our master brand, loyalty program, technology, and distribution channels. Our brand portfolio has expanded and diversified through organic launches and acquisitions of seven brands since 2017. We continue to invest in all our brands by optimizing and elevating the format, design, service, and quality, and by increasing their scale. We continually assess our brand portfolio for further growth opportunities that address clear long-term trends and sizable market demand from guests, loyalty members, and our owners. In line with that approach, we are very excited to announce today that we will be launching a new best-in-class mid-scale conversion brand with opportunity for considerable scale. I'll talk more about this later in the presentation. But first, let me hand over to Michael, who will take you through the details of our financial results for the half.

Thank you, Ellie, and good morning, everyone. I'll start with our headline report, results from reportable segments. Revenue of $1 billion and operating profit of $479 million represented growth of 23%, and 27% against 2022, prospectively. Revenue from the fee business increased by 21% to $799 million, or by 24% on an underlying basis, which is at constant currency and excludes the small amount of liquidated damages received in the prior year. Operating profits from the fee business increased by 27% to $470 million, or by 30%, on an underlying basis. The margin, once again, made considerable progress, improving by 330 basis points to 58.8%. And I'll touch on this more later in the presentation. Adjusted interest decreased to $58 million. However, for the full year, we would still expect this increase to be between $130 and $140 million, which is the same as our previous indications. Our effective tax rate was 25%, down 3 percentage points from half-year 2022. We received around a 2 percentage point benefit from the one-off impact of legislation change in the Middle East during the half, which will subsequently lend out to a 1 percentage point benefit for the year as a whole. We therefore anticipate a full-year effective tax rate of around 26% rather than the 27% previously indicated. Taken all together, along with the 6% reduction in our share count as a result of the share buybacks, earnings per share increased by 50% to 182.7 cents. Overall, these results demonstrate strong financial performance in the first half of the year, with it being particularly pleasing to see progress ahead of 2019 levels across all of our headline metrics. Moving on to our REFAR performance by region. EMEA led up in demand with REFAR maintaining strong levels of outperformance versus 2019. Q2 REFAR was up 12% on 2019, while in Q1, which was up 11%. In EMEA, strong performances in the UK and continental Europe, and the continued recovery of markets such as Japan, Korea, and Vietnam meant that the exit rate of indexed Repar hit a new high, with June showing growth of 17% on 2019. Greater China continues its rapid recovery since COVID restrictions were relaxed at the end of 2022. Q2, Repar was down only 0.5% versus 2019, marking clear progress from Q1, when Repar was down 9.1%, and even further for improvement on Q4 2022 when rep part was down 42%. It's worth noting, however, that we would still expect greater China to experience rep part down in the middle single digits versus 2019 in the second half of the year, giving a lag of international inbound travel returning. On a year-on-year basis, greater China rep part will be up very strongly. Looking at the composition of U.S. revenue in more detail, it's clear there are positive readings across all demand drivers. Leisure remains buoyant, with elevated rates showing no sign of weakening. As you can see on the chart on the right-hand side, despite the exceptional performance seen in the first half of 2022, both room nights and ADR have improved further in 2023. Business demand has continued to strengthen. both in terms of occupancy and pricing. We mentioned at the start of the year that corporate rates had recently been renegotiated for the first time since the onset of the pandemic, and this was demonstrated in the half with ADR of 6% versus 2019, compared to tracking slightly down on pre-COVID levels a year ago. Growth, which has been the slowest demand driver to recover, continues to advance. and forward booking data suggest that there will be further progressive improvement to come. As we noted in today's statements, meetings and events bookings have been ahead of 2019 levels for six months now, and what's on the books is 36% ahead of 2019 levels for meetings and events globally. As I previously mentioned, we see further expansion of our fee margin, which is 58.8%, increased 330 basis points ahead of half-year 2022. This improvement was led by NMEAA and greater China regions, which saw margins increase significantly versus the first half of last year as trading performance continued to accelerate. The Americas region saw margins slightly dip down 90 basis points to 81.9%. As you will remember, we had previously signaled that costs would be added back to this part of the business to ensure full investment in order to achieve our future growth targets. And margins are still sustainably ahead of 2019 levels, and sustainably so. Further detail of the components of our revenue and our overheads and our operating profit. In terms of fee business overheads, for half the year. For the year as a whole, we'd expect around 10% increase The underlying inflation rate on our overhead is around 5%. On top of that, we have the integration costs for Averastar, and we have some further area to spend as we develop our systems and invest in opportunities like the launch of our new mid-scale conversion brand. Our efficient cost base and operating model enables investment for growth, as well as expecting a continuation of of operating leverage that should drive the same 100 to 150 basis points a year of margin expansion that ISG has delivered on prior decades. Turning to systems, in the first six months of 2023, we opened 21,000 rooms representing active in the system in the past, equivalent to a 1.5% removal rate year-on-year or a 0.8% rate year-to-date. Thinking together, net system-sized growth over the last 12 months is 4.8%. While year-to-date growth is a quarter to 1.5% at the half. Year-on-year net system-sized growth benefits we still remain confident of achieving consistent expectations of around 4% growth for the year. Quickly touching on development, over 34,000 rooms were signed in the half, an increase of 11% over the same period last year. In the Americas region, signings were up almost 16% compared to the first half of 2022, with a particularly strong second quarter. Strength of ISG's brands and enterprise system has meant that we have continued to develop the pipeline in spite of current challenges to commercial real estate financing. And as Ellie will talk about, we've had strong signings across our brands, and it was very pleasing to see our six luxury and lifestyle brands account for 26% of the signings as part of Turning now to capital expenditure, we spent gross CapEx of $113 million, and net CapEx was an outflow of $65 million after proceeds from disposal and system funds. Key money of $64 million was up from $35 million in 2022, and is indicative of our increased development activity back to pre-COVID levels, and also a mark of our growth in the luxury and lifestyle segment. Importantly, it's also a reflection of our discipline in only deploying funds where the returns justify the investment. Maintenance capex was $16 million, given our emphasis on investing in the long-term health and sustainability of our four-brand business infrastructure and systems to ensure they support our growth. Turning to the system funds. continue to benefit from depreciation levels exceeding capex, which follows the completion of our major investment in the global reservation system. Our median term capital expenditure guidance remains unchanged, at up to $350 million gross per annum. We expect our recyclable investments and system fund capital investments to net to zero over the median term, resulting in net capex of around $150 million Moving now to cash flow. During the hack, adjusted free cash flow saw an inflow of $277 million, nearly double the $142 million this time last year, demonstrating once again the highly cash generative nature of our business model. Within free cash flow with the usual seasonal working capital outflow, the $158 million outflow that you see here The first half of 2023 compared to the $103 million this time last year, and for the 22-year as a whole, this turned to become an inflow. Net cash outflow after the payment of dividends in our share buyback program was just under $300 million. Together with adverse foreign exchange movement, this meant that our closing net debt position increased by just over $400 million. Strategy for the uses of cash remains unchanged. After investing behind long-term growth, which remains our foremost priority, we look to sustainably grow the ordinary dividend. In this regard, we are pleased to announce the interim dividend will be 48.3 cents, representing 10% growth on last year's. In February, we announced a $750 million buyback program with the aim of resetting our leverage ratio to within the targeted 2.5 to 3 times. Having repurchased shares to the value of approximately $350 million during the half, leverage increased to 2.3 times, which also reflects our strong growth in profitability and continued highly efficient cash generation. As we look at the calendar 2023, the combination of ordinary dividends of around $250 million and the buyback program of $750 million are equivalent to over 8% of ISG's current market capitalization. We will continue to closely monitor and assess the quantum of capital terms. With that, let me now hand back to Ellie.