InterContinental Hotels Group PLC

Hello and welcome to IHG's 2025 Four-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, and Michael Glover, 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 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 isgplc.com. Now over to our 2025 Highlights Reel, followed by Ellie. Why, why, why?

Hello, I'm Eli Malouf, Chief Executive Officer of IHG Hotels and Resorts. Welcome to IHG's 2025 Full Year Results presentation. I will kick things off in a moment by sharing highlights from the year, a period of excellent financial performance, and further progress on a clear strategy that's unlocking IHG's full potential for all stakeholders. Michael Glover, our Chief Financial Officer, will then provide a financial review, after which I will share areas of progress on our strategic priorities. We delivered excellent financial performance in 2025. Revpar grew by 1.5% driven by rate and occupancy gains, reflecting the breadth of our global footprint and the diversification of our demand drivers. We opened a record 443 hotels in the year to take our total estate to more than 6,900 hotels and over 1 million rooms. Gross system growth was 6.6% and net system growth was 4.7%, representing the fourth consecutive year of accelerating growth. We signed 102,000 rooms across almost 700 hotels, 9% ahead of 2024 levels when excluding the Ruby acquisition and Novum conversions. Signings were driven by strong momentum across our brands, and our pipeline now stands at almost 2,300 hotels, representing 33% future rooms growth. Our fee margin grew by 360 basis points, further increasing operating profit, and EPS grew even faster, supported by 2025's $900 million share buyback program. Today we're pleased to launch a new $950 million share buyback, which together with growing our ordinary dividend payments, is expected to return over $1.2 billion to shareholders in 2026. Cumulatively over five years, this will mean IHG has returned more than $5 billion to our shareholders. We're also very excited to announce the launch of our new premium collection brand, Noted Collection. Together with the acquisition of Ruby, this new brand will further strengthen our portfolio and growth potential in the critically important premium segment. More on this later. Altogether, we delivered another excellent set of results, demonstrating the strength and resilience of our business model and the power of our growth algorithm, despite some turbulent trading conditions. Revpar growth, system growth, and margin expansion collectively drove a 13% increase in EBIT, And with the strength of our cash conversion, which funds our investments, dividends, and share buybacks, we delivered adjusted EPS growth of 16%. 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 as we enter 2026 that we will continue delivering on this growth algorithm going forward. Let me now hand over to Michael to take you through the details of our financial results.

Thanks, Eli. I'm Michael Glover, Chief Financial Officer for IHG Hotels and Resorts. Let me take you through some more detail on a great set of results for 2025. I'll start as usual with reportable segments, which includes the fee business and our owned and leased portfolio of 17 hotels. Revenue was $2.5 billion and EBIT was $1,265,000,000, growing 7% and 13% respectively. Within this, we saw similar trends in fee business revenue and fee business operating profit, which also increased by 7% and 13%, respectively. Fee margin increased by 360 basis points to 64.8%. I'll touch more on this excellent performance shortly. Adjusted interest increased to $200 million, which was at the midpoint of our guidance range of $195 to $205 million. Our adjusted tax rate was 27%, unchanged from the prior year. Adjusted earnings per share includes the accretion benefit from the $900 million share buyback program executed in the year, as well as the annualized impact of 2024's $800 million program. The combination of strong revenue growth and fee margin progression, together with the accretion from the buybacks, resulted in earnings per share increasing by an impressive 16%. The total dividend is proposed to increase 10%, consistent with the growth rate in each of the past three years. Moving on to a summary of RedPAR performance. America's REVPAR grew 0.3% for the year with a 0.5% increase in rate more than offsetting a slight 0.1 percentage point decline in occupancy. After strong growth of 3.5% in Q1, REVPAR declined 0.5% in Q2 with the shift in timing of Easter between March and April, and the onset of reductions in certain types of business and leisure travel in light of macroeconomic developments. Repar declined 0.9% in Q3 and by 1.4% in Q4 when there were tougher year-on-year comparatives due to hurricane-related demand in the fourth quarter of 2024. Outside the U.S., Repar for the year grew 4%, with Canada, Mexico, and the Latin America and Caribbean subregion all delivering growth. In the MEAA, Repar grew 4.6% for the year, with occupancy up 1.6 percentage points and rate up 2.4%. In Q4, Repar accelerated strongly to 7.1%, driven broadly evenly by increases in occupancy and rate, and with good growth in each of business, leisure, and groups. By major geographic markets, full-year red-par growth ranged from 1.1% in the UK to 4.2% in continental Europe, 5.5% for the East Asia and Pacific sub-region, and just under 9% in the Middle East. In Greater China, RepR for the year declined 1.6%, with occupancy up 0.5 percentage points and rate 2.4% lower. The RepR decline of 3.5% in Q1 was followed by 3% in Q2, further improving sequentially to a 1.8% decline in Q3 before returning to growth of 1.1% in Q4, with notable improvement in leisure demand. This slide shows the business, leisure, and groups demand drivers presenting booked revenue broken down by room nights and ADR. global rooms revenue for business bookings grew 2% on a comparable hotel basis, driven by both room nights and rate. Groups revenue increased by 1%, predominantly due to rate, while leisure revenue was unchanged year on year, with both occupancy and rate broadly in line with 2024's strong performance. Turning to development activity, gross growth was 6.6% as a record number of hotel openings saw over 65,000 rooms added to the system, 10% more year-on-year. Just over half of all openings were conversions. 26,000 rooms left the system, equivalent to a 1.9% removal rate when adjusting for the Venetian. This is slightly higher than the 1.5% average we would generally expect, though not indicative of a longer-term trend. Higher removals in China reflecting lagged post-COVID exits combined with the natural lumpiness of exits elsewhere led to this temporary variance. Taken together, reported year-on-year net system growth was 4% or 4.7% when adjusting for the Venetian. We signed over 102,000 rooms in 2025, a 9% year-on-year increase when adjusted to exclude the Ruby acquisition and the prior year's Novum agreement. Pleasingly, both new build developments and conversion activity contributed to this performance. a little over half of all signings were new builds moving to cost control as i noted in our half year results isg has maintained a disciplined approach to cost management for many years with this mindset embedded in how the business operates Through process redesign, greater leverage of centralized support, and enhanced use of technology, including AI, we continue to build a highly efficient, scalable cost base, with step change savings delivered in 2025 that are sustainable over the long term. Set up expenditure to realign our business in this manner resulted in an exceptional cost within the fee business of $12 million. This delivers a cash-on-cash payback within 12 months with further savings thereafter. These actions, alongside those taken in previous years, are therefore already yielding results. Fee business overheads of $666 million in 2025 were $23 million lower than in 2024, a reduction of 3%. Going forward, this sets us up to continue holding overheads growth to a lower rate of increase than revenues, and therefore driving further margin expansion. Moving then to fee margin, which increased by a very pleasing 360 basis points, this was achieved through a combination of improved core operating leverage, including the disciplined cost management I highlighted, and step-ups in ancillary fee streams. As a reminder on those step-ups, in 2024 we announced that revenue generated from the sale of loyalty points would begin to flow directly 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 recognized in 2025. This delivered an uplift in margin equivalent to 50 basis points. We've also seen a step up in co-brand credit card fees. When we announced the new arrangements in November 2024, we said we expected an incremental $40 million of co-brand revenue in 2025. This was achieved and delivered a further margin uplift equivalent to 80 basis points. Historically, ISG's central costs exceeded central revenues, resulting in a central loss. With the step-ups in point sales and co-brand fees, this segment now generates a net profit after central overheads. For analysts and investors who maintain models looking to forecast ISG's central division, I'd refer you to an episode of ISG Checks In On released today alongside these 2025 results. This episode provides more detail about the composition of Central, how we report it, what has changed in the last two years, and how you should think about modeling it going forward. So, there was a combined 130 basis points of margin improvement from step-ups in ancillaries, and our operational leverage and cost actions drove the other 230 basis points of margin improvement. Both the Americas and EMEA delivered strong margin expansion, while China saw a slight decrease due to strategic one-off cost investments and lower incentive management fees. It's worth reiterating that the overall margin achievement in 2025 was unusually strong, driven by the step-ups in ancillaries and by the additional cost action that was taken. Going forward, it remains our ambition to expand the fee margin by 100 to 150 basis points a year on average. which would be driven by achieving fee revenue growth of a high single-digit whilst controlling overhead growth to a low single-digit increase per year on average. Moving on to cash flow. Adjusted free cash flow was $893 million, representing a year-on-year increase of $238 million. This improvement was driven by the increase in EBITDA of $143 million, or 12%. There was also some lower outflows, including cash tax being $36 million lower than the previous year and capex within free cash flow $29 million lower, which I will come on to in just a moment. Free cash conversion was a very strong 115% of adjusted earnings, well above the around 100% average we expect over the medium to long term. After other flows beneath free cash flow, principally the $1.1 billion of returns to shareholders, the overall increase in net debt was $551 million, which resulted in leverage at the end of the year of 2.5 times net debt to EBITDA, thus returning us back into our target range. Back at our Q3 update, I noted that in September, we issued an 850 million five-year Euro bond swapped to $990 million, with interest payable semi-annually at 4.9%. In December, we then entered into a new $1.5 billion RCF, replacing the previous arrangement. This new five-year facility is covenant-free and remains undrawn. A look now at capital expenditure. Key money investment totaled $177 million, $29 million lower year-on-year. We previously indicated that we expected key money spend in 2025 to be broadly in line with 2024. but some of the outflows we had expected in late 2025 have shifted into 2026. Importantly, our total key money and maintenance capex guidance remains unchanged at $200 to $250 million. Gross recyclable capital expenditure of just $16 million was $52 million lower year-on-year. These arrangements are often inherently lumpy, and some of these have also carried over into 2026, but such that we still remain within our average annual gross capex guidance of $350 million. This chart shows you the evolution of our capital expenditure deployment. A key takeaway is that our overall CapEx spend has been stable, while revenue and profit has grown. As I will show you on the next slide, this is a testament to our capital discipline. In the earlier four years on this chart, you can see that System Fund CapEx and Maintenance CapEx were the largest components. With the completion of our GRS investment and rollout between 2016 and 2019, together with the ongoing reduction of our owned and leased estate, and along with the greater utilization of software as a service solutions, CapEx requirements for the System Fund and Maintenance categories have since decreased. These prior investments have also ensured we have a very well-invested, scalable tech stack and enterprise platform to support future growth. Therefore, in more recent years, the strong growth of our premium and luxury and lifestyle brands have shifted the mix of CapEx towards expansionary investment in key money and recyclable CapEx. In 2025, overall CapEx spend was lower than anticipated. And in 2026, we may catch up on some timing slippages. But to reiterate, our annual gross CapEx guidance on average of around $350 million remains unchanged. The strength of our model is resoundingly evident when comparing the acceleration of our fee business revenue, which has grown at a CAGR of 4% over the last decade. and fee business profit, which has grown at a CAGR of 7%, against our gross and net capex, which continues to represent a small proportion of our income. The takeaway is clear. We are achieving very attractive returns on the relatively limited capital required. which supports our medium- to long-term growth ambitions, as already shown by the acceleration of fee revenues and profits in the more recent years. For analysts and investors who want to understand in more detail IHG's approach to capital expenditure and with particular focus on key money, today we have released a mini-teach-in on this topic as a further episode of IHG Checks In On. In this episode, I discuss these areas with Stuart Ford, head of investor relations, and two of our regional chief financial officers, Blake Longstaff, CFO Americas, and Matt Woollard, CFO of the EMEAA region. 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, as mentioned, we are pleased to propose a final dividend growing by 10%. That rate of growth has been consistent for each of our dividend payments over the last three years. A year ago, we announced a $900 million buyback program, which completed in December. This repurchased 7.6 million shares and reduced the share count by 4.8%. Together with ordinary dividend payments, we returned over $1.1 billion to shareholders, which was equivalent to 5.9% of IHG's market capitalization at the start of 2025. Today, we are pleased to announce that a new share buyback program will commence immediately, returning a further $950 million. Together with the anticipated sustainable growth in ordinary dividend payments, this will return another $1.2 billion to shareholders. equivalent to 5.8% of ISG's market capitalization at the start of 2026. Cumulatively, for the five years of 2022 to 2026, this will mean ISG has returned more than $5 billion to our shareholders. And finally, modeling considerations. The interest expense is expected to increase to within a range of $230 to $250 million for 2026, given the increase in average net debt and a slightly higher blended cost of borrowing. We anticipate no change to our adjusted tax rate of 27%. Capital expenditure guidance also remains unchanged, with key money in maintenance capex of $200 to $250 million, within a gross total of up to $350 million on average annually. 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.