Introducing IHG

Introducing IHG

Tab 1

5,795

Open hotels

1,941

Pipeline hotels

864,699

Open rooms

289,135

Pipeline rooms

Figures as at 30 September 2019

We are listed on the London Stock Exchange and are a member of the FTSE 100 index, with a secondary listing on the New York Stock Exchange, via an ADR programme. Since becoming a standalone business in 2003, we have consistently delivered ordinary dividend growth and returned $13.6bn to shareholders.

Our industry

From growing consumer demand for branded hotels, to an expanding middle class and greater disposable incomes, we operate in an industry with high growth potential.

Compelling structural growth drivers

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Cheaper and more efficient air travel

Revenues growth icon

Industry demand growth closely linked to GDP growth

Ageing population icon

Ageing population with wealth and time to travel

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Growing middle class within emerging markets

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Greater disposable incomes

High barriers to entry

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Brands & heritage

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Strong loyalty programmes

Marketing fund icon

Size of marketing fund

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High capital cost to market entry

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Sophisticated technology required

Growing our business

Our clear and successful strategy consistently delivers strong shareholder returns and we have the right plans, brands and structure in place to deliver future growth.

1

Consistent execution of our successful strategy delivers high‑quality revenue growth

1

Consistent execution of our successful strategy delivers high-quality revenue growth

Our successful strategy...

Value creation:
Delivering industry-leading medium term net rooms growth whilst doing business responsibly

Strategic model

1Build and leverage scale

The size of our portfolio and our presence in the world's most attractive markets delivers significant economies of scale, leading to higher margins and greater operating leverage.

2Strengthen loyalty programme

Our innovative and industry‑leading loyalty programme helps to build lifetime relationships with our guests, and drives high value revenue across our hotel estate.

Strong loyalty programme

3Enhance revenue delivery

From industry-leading marketing that supports brand awareness, to a rich mobile booking experience, we drive demand to our hotels through our direct channels. This reduces distribution costs and delivers better returns for our owners.

Digital channel evolution

4Evolve owner proposition

Preferred brands, effective operational support and collaborative relationships all play a vital role in making IHG the No.1 choice for owners. We continue to invest in initiatives that drive superior returns for them.

Leading brands and loyalty

  • World class, differentiated brand portfolio with high awareness and guest satisfaction
  • Low financing costs for hotel owners; scalable solutions
  • Strong loyalty offer

System fund
 

  • Powerful fund supporting marketing, reservations and loyalty across IHG’s system
  • Managed centrally and funded by hotel contributions
  • Not run at a profit or loss for IHG

First-class technology

  • Cloud-based hotel technology platform IHG Concerto™, including industry-leading GRS
  • Leading booking app and mobile capability
  • Focus on direct channel delivery

5Optimise portfolio of brands for owners & guests

In a highly competitive industry, we are focused on ensuring our brand portfolio provides a differentiated offering for both guests and owners. We do this by strengthening our existing brands and enhancing our portfolio with new brands.

Target portfolio

  • Attractive markets
  • High‑growth segments
  • Asset-light: Managed and franchised model

Disciplined execution

  • Scale and efficiency of operations
  • Capital discipline and commitment to sustainable growth in the ordinary dividend and returning surplus funds to shareholders

...is based around three drivers of revenue...

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RevPAR

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Rooms

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Royalty rate

...and delivers consistent outperformance

Growth rate graph (2004–16 CAGR%)
* Source: STR
Total gross revenue

2

We deliver margin growth through scale investments and cost efficiencies

2

We deliver margin growth through scale investments and cost efficiencies

Building relevant scale around the world...

 Figures as at 30 September 2019
Singings pace

...delivers margin growth

Fee revenue growth
Fee margin growth

*at CER
**Excluding the impact of investment in growth initiatives ahead of savings realised and a one-off impact in revenue and costs related to marketing assessments, fee margin would have been 53.2%

3

We are highly cash generative and take a disciplined approach to capital allocation

3

We are highly cash generative and disciplined approach to capital allocation

Improving operating profitability*

Operating profitability graph *Operating profit before exceptional items from reportable segments.

Strong free cash flow

Capital graph

Low capital intensity model focused on growth

Low capital intensity

Efficient balance sheet with commitment to investment grade credit rating

Leverage target: 2.5x to 3.0x net debt/EBITDA*
* Range represents best proxy for investment grade credit rating under accounting standard IFRS 16 – equivalent to 2.0 – 2.5x net debt: EBITDA under the previous standard

Current S&P rating: BBB (Stable)

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We have experienced leadership and a strong governance structure

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We have experienced leadership and a strong governance structure

Board

  • Diverse composition; 36% female
  • Broad expertise (finance, brands & marketing, digital, hospitality)
  • Annual strategy reviews

Leadership Team

  • CEO 25+ years industry experience
  • CFO 13+ years at IHG
  • Strong Executive Committee with balance of industry experience and innovation

Governance

  • Commitment to highest standards of corporate governance
  • Strong company culture and values, supported by Code of Conduct and training
  • Risk management at core of company strategy, culture, processes and controls

Reputation for doing business responsibly

Leaders in sustainability

FTSE4Good

Value a diverse and inclusive culture

  • D&I Board chaired by CEO
  • Focus on inclusive colleague groups and workshops
  • International external recognition

5

We have a long-term track record of strong shareholder returns

5

We have a long-term track record of strong shareholder returns

Consistent ordinary dividend growth (¢ per share)

Dividend growth graph Past performance cannot be relied on as a guide to future performance.

Returning $13.6bn* to shareholders (2003-18)($bn)

Shareholders return graph * $500m special dividend with share consolidation paid in Q1 2019.

Our structure

We have hotels in more than 100 countries, split across three operating regions;
Americas; Europe, Middle East, Asia and Africa (EMEAA); and Greater China.

  1, 2 Excludes impact of System fund and hotel cost reimbursements

Our brand portfolio

We have a family of 16 hotel brands, including the world’s largest luxury hotel brand, InterContinental Hotels & Resorts, and our Holiday Inn Brand Family, the world's biggest mainstream brand.

 

Cautionary note regarding forward-looking statements

This presentation may contain projections and forward looking statements. The words “believe”, “expect”, “anticipate”, “intend” and “plan” and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company’s financial position, potential business strategy, potential plans and potential objectives, are forward looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For a description of the Company’s risk factors see IHG’s Annual Report for the year ended 31 December 2018 (ahqygc.com/investors/annual-report).

Such forward-looking statements are based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this document speak only as at the date of this presentation and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements.

This presentation is not an invitation to invest and the merits or suitability of investing in any securities previously issued or issued in future by the Company for any investor’s particular situation should be independently determined by such investor. Any such determination should involve, inter alia, an assessment of the risks involved as well as the legal, tax, accounting, regulatory, financial, credit and other related aspects of the transaction in question.