InterContinental Hotels Group PLC

Hello and welcome to IHG's 2025 Half-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 Malouf, our Chief Executive Officer, Michael Glover, Chief Financial Officer, and Jolie Fleming, Chief Product and Technology 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 US law. please refer to the accompanying 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 results announcement and SEC filings for reconciliations of these measures to the most directly comparable line items within the financial statements. The results announcement, 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. Now over to our H1 2025 Highlights Reel, followed by Ellie.

Hello, I'm Elie Malouf, Chief Executive Officer of ISG Hotels and Resorts. Welcome to ISG's 2025 Half-Year Results presentation. I'll kick things off in a moment by sharing highlights from the first half, a period of strong financial performance and excellent execution against our strategic framework. Michael Glover, our Chief Financial Officer, We'll then provide a financial review, after which I'll cover some important areas of strategic progress. We'll then hear from Jolie Fleming, our Chief Product and Technology Officer. Jolie will provide an update on the outstanding progress we're making in the development, evolution, and deployment of our leading connected technology ecosystem across our global hotel estate. The first half of 2025 was another strong period of financial performance and important progress against a clear strategy that is unlocking the full potential of our business for all stakeholders. Global Ref Bar grew by 1.8%, reflecting the breadth of our geographic footprint, the strength of our brands, and the resilience of our operating model. We had an outstanding period of development activity. We added over 31,000 rooms to our system, a record, taking our total estate to 999,000 rooms across more than 6,700 hotels. And in the weeks since, we have reached 1 million open rooms. This significant milestone demonstrates the enduring appeal of our brands and the strength of our enterprise platform. With record openings, gross system growth was 7.7% year over year, and net system growth was 5.4%. We signed more than 51,000 rooms across 324 hotels. This was 15% higher than 2024 levels when excluding M&A and large portfolio conversions. This takes our pipeline to nearly 2,300 hotels, up 4% year-to-date. Our fee margin grew 390 basis points, contributing to a 13% increase in EBIT. Adjusted EPS grew 19%, supported by our share buybacks. We are pleased to declare an interim dividend of 58.6 cents, consistent with our 10% growth rate in each of the last three years. Dividend payments, along with a $900 million share buyback program, are expected to return over $1.1 billion to shareholders in 2025. Altogether, we delivered another period of excellent results. demonstrating the strength and resilience of our model and the power of our growth algorithm. 1.8% rip-off growth, 5.4% net system growth, margin accretion from positive operating leverage, and the step changes in ancillary fees collectively drove a 13% increase in EBIT. And with the strength of our cash conversion, which funds our share buybacks, we delivered adjusted EPS growth of 19%. This performance is above the top end of what we laid out as the compound average that we are targeting over the medium to long term. And we are confident we will continue delivering on this growth algorithm going forward. 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 on the great set of results delivered for the first half of 2025. I'll start, as usual, with our reportable segments, which is the fee business together with the owned and leased portfolio of 17 hotels. Revenue was $1.2 billion and EBIT was $604 million, growing 6% and 13% respectively. Within this, fee business revenue increased 7% and fee business operating profit increased 14%. On an underlying basis, which adjusts for a $7 million liquidated damages receipt, and is at constant currency, fee revenues were up 6% and profit was still up 14%. Fee margin increased by 390 basis points to 64.7%. I'll touch on this outstanding performance in more detail shortly. Adjusted interest increased to $91 million, putting us on track for our full-year guidance range that we've narrowed to between $195 million and $205 million. Our effective tax rate was 26%, down one percentage point. This was predominantly due to the timing of certain items such as non-deductible foreign taxes in the U.S. We still expect a full-year effective tax rate of 27%, unchanged from previous guidance. Earnings per share includes the accretion benefit from the $900 million share buyback program for this year, as well as the annualization of the previous year's $800 million program. Through this combination of strong revenue growth, fee margin progression, and accretion from the buybacks, adjusted earnings per share increased 19%. The interim dividend is increasing by 10%, consistent with the growth rate in each of the past three years. Moving on to a summary of Repar performance. America's Repar for the half grew 1.4%, with occupancy up 0.1 percentage points and rate up 1.3%. After strong Repar growth of 3.5% in Q1, the region moved to a decline of 0.5% in Q2. This was expected given the impact from the shift in timing of Easter between March and April and the broader impact on certain types of business and leisure travel in light of macroeconomic developments. In EMEAA, rep part for the half grew 4.1%, with occupancy of 0.8 percentage points and rate of 2.9%. Strong growth of 5% in Q1 eased to 3% in Q2, in part due to fewer international events compared to the prior year. By major geographic markets, half-won red par ranged from being down 0.8% in the UK to growth of over 5% in each of the Middle East, continental Europe, and East Asia and Pacific. The latter continued to benefit from higher levels of inbound leisure travel from greater China, on top of very strong increases last year. In Greater China, red par for the half was down 3.2%, with occupancy up 0.3 percentage points and rate 3.6% lower. The red par decline of 3.5% in Q1 was followed by 3% in Q2, helped by an easing in the strong comparatives. Half 1 red par was down 1.1% in Tier 1 cities, and down 6% in Tier 2 to 4 cities due to lower groups and business demand and increases in international outbound leisure trips. This slide presents the business, leisure, and group demand drivers showing a breakdown of booked revenue split by room nights and ADR. In the half, global rooms revenue for business bookings grew 2% on a comparable hotel basis, driven by a combination of room nights and rate. Groups revenue also increased 2%, predominantly due to rate, and leisure bookings grew by 1%, driven by room nights with rate held flat. So on a global basis, all three demand drivers showed positive rooms revenue growth. Turning to system growth, openings produced 7.7% gross growth year-on-year as we added 31,000 rooms in the first half of 2025. This was 75% more than last year, a record level of openings, and that's still the case even when adjusting for the non-organic Ruby additions. 20,000 rooms left the system, equivalent to a 2.3% removal rate when adjusting for the Venetian. This is a little higher than the 1.5% average we generally expect, but we do not consider this an indicator of a longer-term trend. A temporary higher removals rate in China reflecting the lagged effect of some hotels exiting post-COVID, combined with the somewhat lumpy nature of hotel exits elsewhere, has resulted in this fluctuation above the mean. Taken together, year-on-year net system growth was 4.6%, or 5.4% when adjusting for the Venetian. We signed over 51,000 rooms in the half, up 15% when excluding the initial signings from the Ruby acquisition and last year's Novum agreement. Conversion activity predominantly drove this performance, with signings up 27%. Pleasingly, new build signings were also up by 9%. Normally at this point in the presentation, I move straight into our margin performance. But before I do that, I want to touch on the strength of our cost control. As you can see from the slide, ISG has maintained a highly disciplined approach to cost management for a long time now. This is a continuous mindset which underpins how our business operates. Ellie and I have been looking at efficiency and effectiveness in our business since day one in the job, and there are always ongoing actions. Through process redesign, greater leverage of centralized support, and enhancing our use of technology, particularly AI, we are driving a highly efficient and scalable cost base with savings that are sustainable in the long term. Setup expenditure to realign our business in this manner resulted in exceptional costs within the fee business of $3 million in the first half, and which we expect to be over $10 million for the year as a whole. These costs are expected to have a cash on cash payback within 12 months, with savings building further beyond that. We have seen these actions, as well as those taken in previous years, already yield results. Our fee business overheads of $318 million in the first half of 2025 was $15 million less than 2024, a reduction of 4.5%. Moving to fee margin, which was up a very pleasing 390 basis points, this has been achieved through a combination of improving our core operating leverage, which includes the tight discipline on costs I just illustrated, as well as step-ups in ancillary fee streams. As a quick reminder on those step-ups, we announced last year that revenue generated from the sale of loyalty points would come to IHG. Initially, 50% of these revenues were recognized in 2024, representing an incremental $25 million to IHG, with 100% of revenues and therefore a further $25 million step-up to be recognized in 2025. We are on track, and therefore, this is equivalent to a margin uplift of 50 basis points. We've also seen a step up in co-brand credit card fees. When we announced the new arrangements in November last year, we said that we'd expect to see an incremental $40 million of co-brand revenue in 2025. Again, we are on track, and this is equivalent to a margin uplift of of a further 80 basis points. It's worth pointing out that historically, ISG's central costs had always outweighed central revenues, and there had always been a central loss. The step-ups in revenue from point sales and co-brand credit card arrangements now mean that this segment generates a net profit after other central overheads. So, there was the combined 130 basis points of margin improvement from the step-ups in ancillaries, and our operational leverage and cost actions drove the other 260 basis points of margin improvement. Pleasingly, improvement was seen in each of the Americas, EMEA and Greater China. Moving on to cash flow. Adjusted free cash flow was $302 million, an increase of $171 million on the first half of 2024. This was driven by progress in trading performance and ancillary revenues, an improvement in working capital, and a $41 million swing in the system fund result. As you may recall, cash outflows for the system fund were higher last year due to the planned spend-down of its prior cumulative surplus. Across the year, IHG typically converts approximately 100% of adjusted earnings to free cash flow. though it is usual for cash generation to accelerate in half too. The year-to-date conversion rate of 80% is therefore very much in line with where we would expect it to be at this point in the year, and conversion on a trailing 12-month basis has been over 100%. A quick look now at capital expenditure in more detail. Key money spend of $86 million was the same as 2024, As we explained at our full year results announcement, increased development activity, particularly in the premium and luxury and lifestyle segments, as well as the novum conversion portfolio, means that key money in 2025 is expected to be in line with last year. We therefore continue to expect key money in maintenance capex of $200 to $250 million annually, and our guidance for gross capex remains at up to $350 million a year. Our strategy for uses of cash remains unchanged. After investing to drive long-term growth, which is the foremost priority. We look to sustainably grow the ordinary dividend. After that, we then look to return surplus funds to shareholders. This year's $900 million buyback program is 47% complete, which has repurchased a further 3.8 million shares, or 2.4% of the share count. The dividend payments to shareholders in 2025, together with the buyback program, will have returned over $1.1 billion, which is equivalent to just under 6% of ISG's market capitalization at the start of the year. On a prospective basis, given consensus expectations for growth in EBITDA and cash generation in 2025, Together with the share buyback program and the cash outflows for the Ruby acquisition, leverage at the end of 2025 is expected to be around the middle of our target range of 2.5 to 3 times net debt to EBITDA. Our guidance remains unchanged from what was communicated at our 2024 full year results back in February. except for a slight narrowing of the forecast range for interest costs. For reference, 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.