IHG First Quarter Results to 31 March 2008

First Quarter Results to 31 March 2008
Headlines

5,267 net rooms added in the quarter. System size up 6% year on year, taking the total to 590,361 rooms (3,983 hotels).
Global constant currency RevPAR growth of 3.5%; impacted by Easter timing.
Total gross revenue* from all hotels in IHG’s system of £2.2bn, up 10% at constant currency.
Continuing revenue up 15% from £196m to £226m, up 14% at constant currency. Excluding £7m liquidated damages relating to one Americas development project leaving the pipeline, continuing revenues up 10% at constant currency.

Continuing operating profit up 38% from £45m to £62m, up 40% at constant currency. Excluding £7m liquidated damages, continuing operating profit up 24% at constant currency.
Adjusted continuing earnings per share (“EPS”) up 47% to 11.6p. Adjusted total EPS of 12.0p. Basic total EPS of 10.6p.
19,678 rooms signed, taking the pipeline to 231,553 rooms (1,720 hotels), equal to 39% of IHG’s existing system size.
*See appendix 5 for definition. All figures and movements unless otherwise noted are at actual exchange rates and before exceptional items. See appendix 3 for analysis of financial headlines. Constant exchange rate comparatives shown in appendix 4.

Commenting on the results and trading, Andrew Cosslett, Chief Executive of InterContinental Hotels Group PLC said:
“IHG delivered a good performance in the first quarter of 2008. Growth in revenue per available room (RevPAR) of 3.5% was solid given the adverse impact of the timing of Easter. We increased the number of rooms in our system by over 5,200, more than twice the increase in the first quarter of 2007. We signed over 150 hotels into our development pipeline which now stands at over 1,700 hotels, giving good visibility on future openings.

“We continue to focus on strengthening our brands. The response from our owner community to the Holiday Inn relaunch has been very encouraging and we now have 21 hotels operating with some or all of the elements of the new brand standards and identity ahead of our full roll out which begins in the summer.

“Even in a less certain economic environment our broad market coverage, record pipeline, strong brands and resilient fee based business model position us well for continued growth.”

Rooms – strong signings and openings
In the quarter 19,678 rooms were signed. The growth of the InterContinental brand continued with five hotels signed, including three in the Americas, taking the total pipeline of hotels to 62. IHG signed its first Hotel Indigo outside the US in London which is due to open in Paddington in the third quarter, and its second Staybridge Suites hotel in the Middle East. This takes the pipeline of Staybridge Suites hotels outside the Americas region to 10. The first Staybridge Suites hotel in the UK will open in June in Liverpool.
11,113 rooms were added to the system and 5,846 rooms were removed, in line with our strategy of driving quality growth, giving net room additions of 5,267.
The pipeline now stands at 1,720 hotels (231,553 rooms). The pipeline of Holiday Inn brand family hotels increased by 23 and now stands at 1,100 hotels (129,232 rooms).

Americas: solid performance
Revenue performance
RevPAR increased 2.3%, driven by rate, with RevPAR growth of 4.6% in the first two months of the year and a 1.2% decline in March due to the timing of Easter. Continuing revenue grew 14% from $201m to $230m, driven by 11% growth in revenues from owned and leased hotels and 16% growth in managed and franchised revenues. Excluding the impact of $13m liquidated damages, continuing revenues grew 8%.

Operating profit performance
Operating profit from continuing operations increased 20% to $112m. Excluding the impact of $13m liquidated damages, continuing operating profit grew 6%. Continuing owned and leased hotel profit increased by $3m to $7m driven by ongoing improvement in trading at the InterContinental Boston, which opened in November 2006 and 10% RevPAR growth at the InterContinental New York. Managed hotel profit increased $12m to $23m including the liquidated damages, and franchised hotel profit increased $4m to $97m.

EMEA: strong performance in the Middle East
Revenue performance
RevPAR increased 5.9%, driven by rate, with RevPAR growth of 9.1% in the first two months and 0.8% in March. The Middle East continued to perform strongly, growing RevPAR by 20.2%. Continental Europe grew RevPAR by 5.7%, including a 12.3% increase in France. In the UK, Holiday Inn and Holiday Inn Express outperformed their market segment recording RevPAR growth of 1.5%. Continuing revenues increased 18% driven by 29% growth in managed and franchised revenues.

Operating profit performance
Operating profit from continuing operations increased £8m to £15m. The contribution from continuing owned and leased hotels increased by £4m to £2m, driven by RevPAR growth of 11.9% at the InterContinental Paris Le Grand and continued improvement in trading at the InterContinental London Park Lane following the completion of its refurbishment in June 2007. Managed hotel profit increased by 38% from £8m to £11m reflecting the increase in number of hotels under management and strong growth in the Middle East. Franchised hotel profit increased from £6m to £7m reflecting 3.8% RevPAR growth and 9.1% net rooms growth.

Asia Pacific: further growth across all brands
Revenue performance
RevPAR increased 5.1%, driven by rate, with RevPAR growth of 6.1% in the first two months and 3.4% in March. InterContinental and Holiday Inn brand performance were strongest with 7.3% and 9.4% RevPAR growth respectively. Greater China RevPAR increased 3.2%, driven by both occupancy and rate growth. Continuing revenues increased 16% to $72m.

Operating profit performance
Operating profit from continuing operations increased 31% to $17m. Owned and leased hotel operating profit increased $2m to $10m driven by RevPAR growth of 9.2% at the InterContinental Hong Kong after completion of its rolling refurbishment at the end of 2007. Managed hotel profit increased $5m to $14m driven by the contribution from the increasing number of hotels under IHG management in the region.

Overheads, Tax and Exceptional items
In the first quarter aggregated regional overheads increased £1m to £17m and central costs increased £1m to £18m. Based on the position at the end of the quarter the tax charge on profit from continuing and discontinued operations, excluding the impact of exceptional items, has been calculated using an estimated effective annual tax rate of 29% (Q1 2007: 28%). As previously disclosed, the effective tax rate in 2008 is expected to be in the mid to high 20s and then will trend upwards over time. As previously announced IHG will make a non-recurring revenue investment of £30m to accelerate implementation of the global relaunch of the Holiday Inn brands, which will be treated as an exceptional item. £3m has been charged in the period.

Disposals and returns of funds
IHG’s net debt at the period end was £845m, including the $200m (£101m) finance lease on the InterContinental Boston.

1.6m shares were repurchased under IHG’s buyback programme during the first quarter, at a cost of £13m, leaving £87m of the current buyback programme to be completed.

After the period end, IHG sold its 17% interest in the Crowne Plaza Amsterdam City Centre for €18m (£14m) including a €6m (£5m) agreed settlement for the previous management contract and €2m (£1m) repayment of existing loans. IHG will continue to manage the hotel under a new 40 year management contract including renewals.

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