InterContinental Hotels Group PLC

Hello and welcome to IHG's 2024 Full Year Results presentation. I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG Hotels and Resorts. And shortly you'll be hearing from Ellie Maloof, our Chief Executive Officer, and Michael Glover, our Chief Financial Officer. Before we proceed, I'm obliged to remind all viewers and listeners that the company may make certain forward-looking statements as defined under U.S. law. Please refer to the accompanying four-year results announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. In addition, the presentation will refer to certain non-GAAP financial measures. Once again, please refer to the accompanying four-year results announcement and the company's SEC filings for reconciliations of these measures to the most directly comparable line items within the financial results. The results released, together with the usual supplementary data pack, as well as the presentation slides accompanying this webcast, can all be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. I would also draw your attention to the two additional announcements that accompanied the 2024 full year results. Those were the announcement launching a new $900 million buyback program for 2025 and the announcement regarding our acquisition of the Ruby Urban Lifestyle brand. Both of those are summarized within the results announcement itself and with further details within their own individual announcements. Now over to the 2024 highlights reel and followed by Ellie.

Hello and welcome to ISG's 2024 full-year results presentation. I'm Elie Malouf, Chief Executive Officer of ISG Hotels and Resorts. Thank you very much. 2024 was a very strong year of financial performance, growth, and important progress against a clear strategy that is unlocking the full potential of our business for all stakeholders. Ref Bar grew by 3% for the year, driven by rate and occupancy gains, with good performance across groups, leisure, and business, and a strong finish in Q4. We added 59,000 rooms to our system, taking our total estate to 987,000 rooms across more than 6,600 hotels. Gross system growth was 6.2% and net system growth was 4.3%, representing the third consecutive year of acceleration. We signed 106,000 rooms across 714 hotels, 34% ahead of 2023 levels and equivalent to almost two a day, driven by strong momentum across our brand portfolio. This takes our pipeline to more than 2,200 hotels. Our fee margin grew 190 basis points, contributing to a 10% increase in operating profit from reportable segments, Adjusted EPS grew 15%, supported by the $800 million share buyback program. Today, we launched a new $900 million share buyback, which together with growing ordinary dividend payments, is expected to return over $1.1 billion to shareholders in 2025. We're also very excited to announce the acquisition of the Ruby brand for $116 million, extending our portfolio into the premium urban lifestyle segment. Now, let me hand over to Michael, who will take you through the details of our financial results.

Thanks, Ellie. I'm Michael Glover, Chief Financial Officer for ISG Hotels and Resorts. Let me take you through some more detail of the great set of results our teams have delivered through 2024. I'll start, as usual, with our reportable segments, which is the fee business together with the owned and leased portfolio of 16 hotels. Revenue was $2.3 billion, and EBIT was $1,124,000,000. representing growth of 7% and 10%, respectively. Within this, fee business revenue increased 6%, and fee business operating profit increased 9%. On an underlying basis, which measures growth at constant currency, fee revenues were up 7%, and profit was up 11%. Fee margin increased by 190 basis points to 61.2%. I'll touch on this in more detail shortly. Interest increased to $165 million in line with guidance. This reflects higher average net debt due to returning capital to shareholders, a slightly increased blended interest rate following a bond refinancing, and the interest charged in the year on the system fund cash position. The effective tax rate of 27% was also in line with guidance. Earnings per share included the accretion benefit from the $800 million share buyback program we completed in 2024, as well as the annualization of the previous year's $750 million program. Through this combination of strong trading performance, fee margin progression, and accretion from buybacks, earnings per share increased 15%. Moving on to a summary of rep part performance. The Americas finished the year strongly, with Q4 rep part growth of 4.6%, leading to 2.5% for the full year. While ADR growth of 2% was the primary growth driver of this, the 0.3 percentage point uptick in occupancy demonstrates the robust demand patterns for the region. By sub-region, economic stability in the U.S. pushed its red part up 2% for the year, while Canada, Latin America, and the Caribbean saw growth of 9%. we delivered another very strong quarter of performance in the EMEA-A region, with rub-par growth of 6.9%, contributing to a full-year performance of 6.6%. By major geographic submarkets, 2024 saw growth of over 10% in East Asia and the Pacific, which included the benefit of inbound leisure travel from Greater China. There was 6% growth in both the Middle East and continental Europe and 2% growth in the U.K., In Greater China, where Repar was down 4.8% for the year, as I explained at the last trading update, year-on-year comparatives were especially tough in Q3, with Repar down 10.3% as we lapped a particularly strong leisure performance in summer 2023. Normalization then occurred as we progressed through the remainder of the year, with Repar easing to 2.8% down in Q4. Occupancy was actually up in the fourth quarter and for the year was pretty much flat. It was the rate decline that drove the red part performance, and this was principally due to higher rate leisure activity in 2023 moving outbound in 2024. We remain very confident in the attractive medium and long-term growth outlook for Greater China, as reflected in the record level of hotel openings and signings seen in 2024. So taking the three regions together, our global rep part improved to growth of 4.6% in Q4, elevating the performance for the full year to growth of 3%. This slide presents the business, leisure, and groups demand drivers, showing a breakdown of the booked revenue split by room nights and ADR. Groups showed the strongest performance globally up 6% as this driver saw strong demand recovery in 2024. Elsewhere, it was particularly pleasing to see an increase in leisure demand across all three regions, resulting in 3% rooms revenue growth. Business demand continued to perform well with global rooms revenue up 2%. So on a global basis, all three demand areas showed positive rooms revenue growth. Turning to system growth, our openings in 2024 resulted in gross growth of 6.2% as 59,000 rooms joined the system. This was 23% more than 2023, and the 24,000 rooms added in Q4 was the second strongest quarterly performance in IHG's history. 18,000 rooms exited the system, equivalent to a 1.9% removal rate. This is a little higher than the 1.5% average we generally expect. but we do not consider the slightly elevated removals seen in 2024 as an indicator of a longer-term trend. The somewhat lumpy nature of hotel exits simply means that there are occasionally fluctuations either side of the mean average. Taken together, net system growth was therefore 4.3%. We signed a very impressive 106,000 rooms in the year, up 34% on 2023, demonstrating the attractiveness of our brands across the chain scales. The signings mix drives the pipeline to be weighted 53% across mid-scale segments and 47% across upscale and luxury. which will continue to drive a more balanced system mix and fee stream over the coming years. While we welcomed growth of 3% in the number of new build rooms signed, it was predominantly conversion activity which drove performance, with signings up 88% compared to 2023. Moving on now to give some further brief highlights for each region. I've already covered REBPAR, so let me touch on profit as well as openings and signings, starting with the Americas. Operating profit for the Americas was $828 million, up 2%, which closely matched the growth in revenue. Fee margin was down by a percentage point as we continued to invest for growth in the region, though as we've said before, there's still further runway for the America's fee margin. Gross system growth was 3.2%, with openings up 62%, albeit on 2023's relatively low base. A typical removals rate of 1.6% meant that net system growth for the Americas was 1.6%. Meanwhile, the 27,000 rooms signed in the year were broadly in line with the strong performance of 28,000 signed in 2023. We maintained a pipeline of 109,000 rooms despite the elevated level of openings in the year, and this represents future growth equivalent to 21% of the region's system size. In our EMEAA region, operating profit jumped 26% to $270 million, outstripping the 10% growth in revenue. The increase in IMFs of 17% was clearly a factor in this, as was improvement in owned and leased profitability from $1 million in 2023 to $12 million in 2024. Fee business margin was up 480 basis points. driven by strong trading and the growth in IMFs. Growth system growth was 9.6% with the opening of 24,000 rooms, representing the strongest annual performance ever delivered by the EMEAA region. The November portfolio contributed 10,000 of the room openings. Over 50,000 rooms were signed across the EMEAA region in 2024. Again, a record performance and more than double 2023's total. There were nearly 18,000 rooms that came with the Novum Agreement as part of this. But even if you were to exclude these and Aberastar, signings were still up by 31%. The EMEAA pipeline jumped 26% year-on-year, and now at over 100,000 rooms, represents 39% growth on the current system size for the region. Moving on to Greater China, where operating profit of $98 million was 2% up despite the challenging trading environment. This helped support margin growth, which increased 130 basis points to 60.9%. A record number of hotel openings in the year saw 19,000 rooms join ISG's system, and growth accelerated back into double digits at 10.4%. Just over 5,000 rooms left the system, resulting in a removals rate of 3%. This was higher than we typically expect, though simply reflects the lag of some hotels exiting post-COVID. A record number of hotel signings saw nearly 30,000 rooms added to the pipeline. Our broad progress across chain scales saw 93 hotel signings for the Holiday Inn brand family, as well as 27 luxury and lifestyle hotel signings. It was another strong year for Crowne Plaza, too, with 17 signings underlining the continued strength of the brand in the region. The total pipeline for Greater China is up 7% and is equivalent to 58% growth of current system size. Moving to summarize on fee margin, which was up 190 basis points. positive operating leverage from trading performance delivered 130 basis points of this, as fee revenue growth of 6% exceeded fee business cost growth of just 1%. On top of this, our margin was further enhanced around 60 basis points due to the previously referenced $25 million of revenue from the sale of certain loyalty points and other ancillary revenues now being included within IHG's reportable segments. As a reminder, ancillary fee streams such as those relating to loyalty point sales and the co-brand credit card are within central revenue and therefore do not contribute to the regional margin performance. In 2025, there will be further step-ups in fee margin from the full effect of the change in arrangements regarding the loyalty point sales and from the new co-brand credit card agreements. Moving on to cash flow, ISG typically converts approximately 100% of adjusted earnings to free cash flow. In recent years, we've seen performance well ahead of that, with 2023 delivering record free cash flow of $837 million at a conversion rate of 132%. This elevated cash conversion was partly due to the scale of inflows from the system fund as a result of better than anticipated trading performance driving higher receipts we noted at the half-year stage our expectation for cash conversion to be lower than 100 in 2024 due to our planned spin down of the system fund surplus as well as higher key money outflows however initial cash inflows received in relation to the new co-brand credit card agreements Improve this measure. We finish the year, therefore, with cash conversion of 94% and expect to return to typical levels of around 100% cash conversion going forward. A quick look now at capital expenditure in more detail. We have historically seen annual gross capex of up to $350 million, and net capex, effectively key money and maintenance expenditure, of between $150 and $200 million. Due to increased development activity, particularly in the premium and luxury and lifestyle segments, and some key money on the novum conversion portfolio, net capex was $253 million. Key money is the biggest component of our net capital spend, and it doubled in the year to $206 million. As a leadership team, we strive to ensure disciplined spend of our capital in order to deliver high-quality growth. 2024 was a year in which a number of strategically important growth opportunities presented themselves, and we did not shy away from investing in this future growth, nor will we as we move forward. We expect key money and maintenance capex of $200 to $250 million annually. We expect net capex to be around this range. and our guidance for gross capex continues to be up to $350 million a year. Our strategy for uses of cash remains unchanged. After investing behind long-term growth, which is the foremost priority, we look to sustainably grow the ordinary dividend. In this regard, we are pleased to propose the final dividend will increase to 114.4 cents, representing 10% growth. That rate of growth has been consistent for each of our dividend payments over the last three years. A year ago, we announced an $800 million buyback program, which completed in December. This repurchased 7.5 million shares and reduced the share count by 4.6%. Together with ordinary dividend payments, we returned over $1 billion to shareholders, which was equivalent to 7.1% of IHG's market capitalization at the start of 2024. We are pleased to announce that a new share buyback program will commence immediately, targeting to return $900 million in 2025. On a perspective basis, given expectations for growth in EBITDA and cash generation this year, and together with the acquisition of the Ruby brand for around $116 million, we would expect this to result in leverage around the lower end of our target range of 2.5 to 3 times at the end of 2025. Concluding then with a wrap-up of points for those who maintain forecast models of IHG's performance. Interest costs will rise from 2024's $165 million to between $190 and $205 million, given the increase in average net debt and the slightly higher blended cost of borrowing. Our adjusted effective tax rate is expected to hold steady around 27%, in line with what we have just reported for 2024. On CapEx, as noted a moment ago, our normal course gross CapEx spend could total up to $350 million, and our normal course net CapEx is a range of $200 to $250 million. As a reminder, this slide also shows a summary of our growth ambitions over the medium to long term. With that, let me now hand back to Ellie.