Intercontinental Hotels Group PLC - Interim / Quarterly Report 2018

SECURITIES AND EXCHANGE COMMISSION

Washington DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 AND 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For 07 August 2018

InterContinental Hotels Group PLC

(Registrant's name)

Broadwater Park, Denham, Buckinghamshire, UB9 5HJ, United Kingdom

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F Form 40-F

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes No

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable

EXHIBIT INDEX

99.1 Half-year Report dated 07 August 2018

Exhibit No: 99.1

IHG PLC - Half Year Results to 30 June 2018

Strong H1 performance across all regions and good progress against new strategic initiatives

	Reported — 2018	2017	% Change	Underlying 3 — 2018	2017	% Change
REPORTABLE SEGMENTS 1
Revenue	$900m	$838m	7%	$875m	$838m	4%
Revenue from fee business	$719m	$664m	8%	$699m	$664m	5%
Operating profit	$406m	$370m	10%	$398m	$370m	8%
Fee margin 2	53.5%	52.7%	0.8%pts	54.4%	52.7%	1.7%pts
Adjusted EPS	145.8¢	113.8¢	28%	142.1¢	113.8¢	25%
GROUP RESULTS 4
Total revenue	$2,113m	$1,964m	8%	KEY METRICS
Operating profit	$394m	$395m	-	●
$13.3bn total gross revenue (up 9%)
Basic EPS	123.2¢	126.5¢	(3)%	●
3.7% global H1 RevPAR (Q2 = 3.7%)
Interim dividend per share	36.3¢	33.0¢	10%	●
4.1% net system growth to 810k rooms
Net debt	$1,802m	$2,056m	(12)%	●
46k signings; 262k pipeline rooms

1 Excludes System Fund results, hotel cost reimbursements and exceptional items. 2 Also excludes owned, leased and managed lease hotels, and significant liquidated damages. 3 Reportable segment results excluding owned asset disposals & significant liquidated damages and stated at constant H1 2017 exchange rates (CER). 4 Includes System Fund results, hotel cost reimbursements and excludes exceptional items (except for Basic EPS).

● H1 Comparable RevPAR: Americas = 3.2% (US = 2.7%); EMEAA = 3.0%, Greater China = 10.1%

● 22k room additions, up 11% excluding 3.5k rooms added in Makkah, Saudi Arabia in H1 2017. 10k rooms removed.

● Regent Hotels & Resorts and UK portfolio deals agreed in H1 will complete in Q3, adding 4.2k rooms (1.1k pipeline).

● Highest signings for 10 years; including 16.8k rooms in Greater China, up 71% YOY and our best ever performance.

| Keith Barr, Chief Executive Officer, IHG, said: |
| --- |
| "We've
had a strong first half, delivering our best signings performance
for a decade. RevPAR grew at 3.7%, which together with 4.1% net
system size growth, drove underlying operating profit up 8% and
underlying EPS up 25%. This underpins our decision to raise
the interim dividend by 10%. Each of
our regions continue to deliver strong momentum. This is led
by Greater China, where double digit growth in both RevPAR and net
system size, as well as record signings, reflects the ongoing
benefits of our long term strategic focus on this important
market. Demand for our unique Chinese owner proposition
"Franchise Plus" continues to be excellent and we now have more
than 100 Holiday Inn Express hotels for this model either in the
pipeline or open. In
February, we set out a series of new initiatives, funded by a
comprehensive efficiency programme, that build on our
well-established strategy to drive an acceleration in net rooms
growth. Our new organisational structure has enabled us to
move at pace; we've added three new brands in the last year, avid
hotels last September, for which we've now signed 130 hotels, voco
in June and Regent Hotels & Resorts in July. Our existing
brands continue to strengthen, as demonstrated by the continued
global expansion of Kimpton Hotels & Restaurants, with flagship
hotels secured for four UK locations, including London, as part of
a portfolio deal to rebrand and operate 12 high quality hotels in
the UK. Our
plans to enhance revenue delivery are on track, with IHG Concerto
featuring our innovative new Guest Reservation System now in over
half of the estate, with complete roll-out by the end of 2018 /
beginning of 2019. The
fundamentals for our industry are strong, we are confident in the
outlook for the balance of the year and in our ability to deliver
industry-leading net rooms growth over the medium
term." |

| Update on new strategic initiatives |
| --- |
| Optimise our preferred portfolio of brands for owners and
guests ● Mainstream - avid hotels: 130 hotels signed to date (82 signed in H1), with the
first on track to open in Q3'18. - Holiday Inn Express: continued roll out of new guest room designs
across all regions and rapid deployment of new breakfast offering
in the US. ● Upscale - voco:
brand launched in June, primarily for conversion
opportunities. Four hotels will be added as part of the UK
portfolio deal, plus a further three hotels have been signed to
date (1.4k rooms in total). ● Luxury - Regent
Hotels & Resorts: 51% acquisition of the brand completed in
July; adding 6 open and 3 pipeline hotels, and with several new
sites under discussion in key gateway cities and resort locations
around the world. - Kimpton Hotels & Restaurants: global expansion gathering pace
with H1 signings in Frankfurt, Shanghai, and Mexico City; plus,
four UK hotels in July as part of the portfolio deal, including the
first for London. Superior returns for shareholders and owners: focus on
driving long term, sustainable growth. ●
On track to deliver ~$125m in annual
savings, including System Fund, by 2020 for reinvestment to drive
growth. - $6m benefit to underlying profit in
the first half due to timing differences between the realisation of
savings and reinvestment in growth initiatives. We continue to
expect savings to be fully reinvested on an annual
basis. - H1 fee margin up 0.8%pts (1.7% at CER). Medium term annual
fee margin progression is still expected to be broadly in line with
the historic average of ~135bps. ●
Exceptional cash costs to achieve the
savings remain unchanged at $200m; $48m in H1'18 ($31m in 2017),
with ~$70m now expected in H2'18 and the remainder in
2019. ●
IHG's strategy for uses of cash is
unchanged, including our commitment to return surplus funds to
shareholders. |

| Americas - Improving US RevPAR performance; avid hotels' momentum
continues |
| --- |
| Comparable
RevPAR increased 3.2% (Q2: up 3.4%), driven by 2.2% rate growth. US
RevPAR was up 2.7% in the first half, with 2.9% growth in the
second quarter driven by corporate and group bookings and, as
expected, some benefit from the earlier timing of Easter. Canada
was up 7.5% in the first half with continued strength in urban
markets, whilst Mexico was down 0.2% impacted by strong prior year
comparables. Reported
revenue increased 5% (CER 5%) and reported operating profit
increased 3% (CER 4%), whilst underlying 1 revenue and
operating profit were up 5% and 4%, respectively. Underlying 1 fee business operating profit was up 3%, with incremental royalties
from RevPAR and net rooms growth partly offset by (i) $9m combined
impact from lower hotel termination fees and costs relating to
legal disputes and (ii) a $1m net negative impact from previously
disclosed items: Crowne Plaza Accelerate owner financial
incentives, higher US healthcare costs and a payroll tax
credit. Underlying 1 owned, leased and managed lease operating profit increased 13% led
by one Caribbean hotel where demand from hurricane reconstruction
efforts continues to drive strong RevPAR growth. We
opened 9k rooms (91 hotels) in H1 2018, with more than two thirds
driven by the Holiday Inn Brand Family. As we continue to focus on
a high-quality estate, we removed 6k rooms (43 hotels). We signed
195 hotels (20k rooms), 82 of which were for avid hotels, where
momentum continues to exceed expectations with 130 signings since
launch, including four in Canada and one in Mexico. Our first
property, in Oklahoma City, remains on track to open in the third
quarter of 2018. _ US
hotel demand drivers remain strong, which will support continued
underlying RevPAR momentum in the second half. Reported
figures will be impacted, however, by unfavourable calendar shifts
and strong comparables driven by hurricane-related demand in
2017. As
previously disclosed: (i) the owner financial incentives relating
to the Crowne Plaza Accelerate programme will reduce fees by $5m in
2018 (H1'18: $2.5m); (ii) we don't expect our US healthcare
programme to be in a surplus position in 2018, which will result in
a $5m increase in fee business costs year on year; (H1'18:
$2.5m). |
| EMEAA - Continued recovery in terror impacted markets; tough
comparables in the UK |
| Comparable
RevPAR increased 3.0% (Q2: up 3.0%) driven by rate up 1.9%.
Continental Europe RevPAR was up 5.9% in the first half, with
continued recovery in terror impacted markets. Germany was down
1.0% due to a weak trade fair calendar, and the UK was down 0.2%
(London down 1.4%, provinces up 0.6%) impacted by strong prior year
comparables. Elsewhere, Middle East was down 7.0% due to high
supply growth, whilst Japan and Australia were both up
3.5%. Total
RevPAR growth of 0.4% reflects the increasing mix of new rooms
opening in developing markets. Reported
revenue increased 8% (2% CER) and reported operating profit
increased 21% (15% CER), including $3m of individually significant
liquidated damages receipts, as previously disclosed. On an
underlying 1 basis, revenue
increased 1%, driven by rooms and RevPAR growth, partly offset by
lower revenue from managed lease hotels, and operating profit grew
12%, including a $4m benefit from timing differences between the
realisation of savings and their reinvestment in growth
initiatives. We
opened 5k rooms (25 hotels) driving 5% net rooms growth, and signed
9k rooms (49 hotels), including more than 2k rooms across eight
properties in key resort destinations in Thailand under the Holiday
Inn, Holiday Inn Express and Staybridge Suites brands. _ As
previously disclosed, a $15m payment was received in the first
quarter of 2018 in relation to the termination of a portfolio of
hotels in Germany. This has been / will be recognised as
individually significant liquidated damages receipts as follows:
$2.8m in H1 2018, a further $3.9m in H2 2018, $7.7m in 2019 and
$1.0m in 2020. |
| Greater China - Continued industry outperformance; record room
signings and openings |
| Comparable
RevPAR increased 10.1% (Q2: up 9.3%), significantly outperforming
the market. In Mainland China RevPAR was up 9.1% for the half, with
tier 1 cities up 10.0% and tier 2-4 cities up 8.4%, driven by
continued strength in corporate and meeting demand. RevPAR in
Hong Kong SAR and Macau SAR was up 13.1% and 19.5%
respectively. Our
continued acceleration in net rooms growth in the region, and our
increasing penetration in higher growth, lower RevPAR, cities,
resulted in H1 2018 total RevPAR growth of 4.5%. Reported
revenue increased by 25% (CER 18%), and reported operating profit
increased by 33% (CER 25%), including $4m of individually
significant liquidated damages receipts. On an
underlying 1 basis, revenue
increased by 13% and operating profit increased by 13%, driven by
the strong trading across the region and 12% net rooms
growth. We
opened a record 7k rooms (28 hotels), driving 12% net rooms growth.
Signings totalled 17k rooms (78 hotels), our highest ever first
half for the region, including 5 hotels for the InterContinental
brand, and 32 for Holiday Inn Express Franchise Plus. We now have
15 open and >90 pipeline hotels for the brand under this
innovative new model. |
| Highly cash generative business with disciplined approach to cost
control and capital allocation |
| Strong free cash flow generation fuelling investment ● Free cash
flow 2 of $261m was up $57m
year on year, with $45m lower cash tax offset by $48m of
exceptional cash costs incurred in relation to the group wide
efficiency programme. ● Net capital
expenditure 2 of $111m (H1 2017:
$162m) with $129m gross (H1 2017: $186m). This comprised: $47m
maintenance capex and key money; $32m gross recyclable investments;
and $50m system funded capital investments; offset by $2m net
proceeds from asset recycling and $16m System Fund depreciation and
amortisation. Capex guidance unchanged at up to $350m gross,
and $150m net, per annum. ● Exceptional cash costs of $55m
in the half, including $48m relating to the group wide efficiency
programme ($16m in relation to the System Fund). Efficient balance sheet provides flexibility ●
Financial position remains robust, with an on-going
commitment to an investment grade credit rating. ●
Net debt of $1,802m (including $233m finance lease on
InterContinental Boston), down $49m on the 2017 close. 10% interim dividend growth to 36.3¢ demonstrates confidence
in future growth prospects |
| Foreign exchange |
| Average
USD exchange rates for H1 2018 against a number of currencies
(particularly Sterling, Euro and Renminbi) were lower than in H1
2017, with a net favourable impact on reported profit of
$2m 3 . If the
30 June 2018 spot rate had existed throughout H2 2017, H2 2017
reported profit would have decreased by $2m. A full
breakdown of constant currency vs. actual currency RevPAR by region
is set out in Appendix 2. |
| Other |
| System Fund: Under
IFRS 15, Fund revenues and costs are now recognised on a gross
basis with the in-year surplus or deficit recorded in the Group
income statement, but excluded from underlying results and adjusted
EPS, as the Fund is operated for the benefit of the hotels in the
IHG System such that the Group does not make a gain or loss from
operating the Fund. The
Fund surplus of ~$160m, which had built up following the
introduction of the IHG Rewards Club expiry policy and the
renegotiation of long term partnership agreements, was derecognised
from the Group balance sheet at the start of the year on the
adoption of IFRS 15. In 2018, we continue to expect to spend
the majority of the surplus on marketing, loyalty and technology
initiatives, and costs associated with IHG's efficiency
programme. This resulted in the recording of a $12m Fund
income statement deficit in the first half. Interest: Net
financial expenses of $38m includes interest income relating to the
System Fund of $9m (H1 2017 $6m). Excluding this, H1 2018
underlying 2 interest expense of
$47m was higher than in H1 2017 ($40m), reflecting the impact of a
stronger pound on translation of sterling interest expense and
higher US dollar interest rates payable on bank borrowings and
balances with the System Fund. Tax: ● Effective rate 4 for H1 2018 was 23% (H1 2017: 32%) with the
reduction predominantly as a result of a lower US tax rate
following tax reform. We continue to expect that our full year 2018
effective tax rate will be in the mid to low 20s percentage point
range. ●
In H1 2018 there was a net cash tax outflow of $5m (H1
2017: $50m). This is lower owing to the receipt of refunds of
$36m in respect of earlier tax periods. The full year cash tax rate
is expected to be in the high single digit percentage point range
in the full year as previously guided. There may continue to
be some short-term volatility in the underlying cash tax rate, but
we continue to expect the longer-term rate to more closely align
with the Group P&L effective tax rate. Exceptional operating items: Before
tax exceptional items total $53m charge and comprise: $32m costs
incurred in relation to the group wide efficiency programme; $6m of
acquisition costs; and a $15m one-off cost relating to the buy-out
of the US pension liability. A
further $30m of costs related to the group wide efficiency
programme were incurred by the System Fund and are included within
System Fund expenses in the group income statement. |

1 Excluding owned asset disposals, significant liquidated damages, System Fund results and hotel cost reimbursements at constant H1 2017 exchange rates (CER). See the Business Review for definition of non-GAAP measures and reconciliation to GAAP measures.

2 For definition of non-GAAP measures and reconciliation to GAAP measures see the Business Review.

3 Based on monthly average exchange rates each year with an additional adjustment removing the results from three properties in Venezuela.

4 Excludes exceptional items and System Fund results

Appendix 1: RevPAR Movement Summary
	Half Year 2018				Q2 2018
	RevPAR	Rate	Occ.		RevPAR		Rate	Occ.
Group	3.7%	2.1%	1.1%pts		3.7%		2.3%	1.0%pts
Americas	3.2%	2.2%	0.7%pts		3.4%		2.3%	0.7%pts
EMEAA	3.0%	1.9%	0.8%pts		3.0%		2.2%	0.6%pts
G.
China	10.1%	3.9%	3.6%pts		9.3%		4.0%	3.3%pts
Appendix 2: Comparable RevPAR movement at constant exchange rates
(CER) vs. actual exchange rates (AER)
	Half Year 2018				Q2 2018
	CER	AER	Difference		CER		AER	Difference
Group	3.7%	5.9%	(2.2)%pts		3.7%		5.2%	(1.5)%pts
Americas	3.2%	3.3%	(0.1)%pts		3.4%		3.3%	0.1%pts
EMEAA	3.0%	9.1%	(6.1)%pts		3.0%		7.0%	(4.0)%pts
G.
China	10.1%	17.2%	(7.1)%pts		9.3%		16.1%	(6.8)%pts
Appendix 3: Half Year System & Pipeline Summary
(rooms)
	System								Pipeline
	Openings	Removals	Net	Total		YoY%			Signings	Total
Group	21,528	(9,714)	11,814	809,889		4.1%			46,230	262,384
Americas	9,497	(5,681)	3,816	501,276		2.3%			20,238	115,472
EMEAA	5,314	(2,571)	2,743	201,819		5.0%			9,191	67,137
G.
China	6,717	(1,462)	5,255	106,794		11.9%			16,801	79,775
Appendix 4: Half Year financial headlines
		GROUP		REPORTABLE SEGMENTS
		Total		Americas		EMEAA		G. China		Central
		2018	2017	2018	2017	2018	2017	2018	2017	2018	2017
Revenue
($m)
Revenue from reportable segments		900	838	514	491	233	215	69	55	84	77
System
Fund Revenue		618	592	-	-	-	-	-	-	-	-
Hotel
Cost Reimbursements		595	534	-	-	-	-	-	-	-	-
Group Revenue		2,113	1,964	514	491	233	215	69	55	84	77
Operating Profit
($m)
Fee
Business		436	400	310	302	94	74	32	24	-	-
Owned
& leased & managed lease		18	20	18	16	-	4	-	-	-	-
Central
overheads		(48)	(50)	-	-	-	-	-	-	(48)	(50)
Operating profit from reportable segments before
exceptionals		406	370	328	318	94	78	32	24	(48)	(50)
System
Fund surplus / (deficit)		(12)	25	-	-	-	-	-	-	-	-
Operating profit before exceptionals		394	395	328	318	94	78	32	24	(48)	(50)
Exceptional
items		(53)	(4)	(15)	(4)	(5)	-	-	-	(33)	-
Operating Profit after exceptionals		341	391	313	314	89	78	32	24	(81)	(50)

Appendix 5: Reported operating profit before exceptional items from reportable segments at actual & constant exchange rates

Reported	Total** — Actual	CER**	Americas — Actual*	CER**	EMEAA — Actual*	CER**	G. China — Actual*	CER**
Growth
/ (decline)	10%	9%	3%	4%	21%	15%	33%	25%

Appendix 6: Underlying**** operating profit movement before exceptional items

	Total***	Americas	EMEAA	G. China
Growth
/ (decline)	8%	4%	12%	13%

| Exchange rates: | GBP:USD | EUR:USD | * US
dollar actual currency |
| --- | --- | --- | --- |
| H1 2018 | 0.73 | 0.83 | **
Translated at constant H1 2017 exchange rates |
| H1 2017 | 0.79 | 0.92 | ***
After central overheads |
| | | | **** At
CER and excluding: owned asset disposals, significant liquidated
damages, System Fund results and hotel cost
reimbursements |

| Appendix 7: Definitions |
| --- |
| CER: constant exchange rates with H1 2017 exchange rates
applied to H1 2018. Comparable RevPAR: revenue per available room for hotels
that have traded for all of 2017 and 2018, reported at
CER. Fee revenue: group revenue excluding owned, leased and
managed lease hotels, and significant liquidated
damages. Fee margin: adjusted to exclude owned, leased and managed
lease hotels, and significant liquidated damages. Reportable segments: group results excluding System Fund
results, hotel cost reimbursements and exceptional
items Significant liquidated damages: $7m in H1 2018 ($3m EMEAA
fee business, $4m Greater China fee business); $nil in H1
2017. Total gross revenue: total rooms revenue from franchised
hotels and total hotel revenue from managed, owned, leased and
managed lease hotels. Other than owned and leased hotels, it is not
revenue attributable to IHG, as it is derived mainly from hotels
owned by third parties. Total RevPAR: Revenue per available room including hotels
that have opened or exited in either 2017 or 2018, reported at
CER. Underlying Interest: excludes interest relating to the
System Fund. |

| Appendix 8: Investor information for 2018 Interim
dividend — Ex-dividend date: | 30
August 2018 | 31 August
2018 | 5
October 2018 |
| --- | --- | --- | --- |
| Dividend payment: | ADRs:
36.3 cents per ADR; the corresponding amount in Pence Sterling per
ordinary share will be announced on 18 September 2018, calculated
based on the average of the
market exchange rates for the three working days commencing 13
September . A DRIP is available, allowing shareholders of
ordinary shares to elect to reinvest their cash dividend by
purchasing additional ordinary shares. | | |
| For further information, please contact: | | | |
| Investor
Relations (Catherine Dolton, Matthew Kay): | | +44 (0)1895 512 176 | +44
(0)7527 419 431 |
| Media
Relations (Yasmin Diamond; Mark Debenham): | | +44
(0)1895 512 097 | +44
(0)7527 424 046 |
| Presentation for Analysts and Shareholders: A
conference call and webcast presented by Keith Barr, Chief
Executive Officer and Paul Edgecliffe-Johnson, Chief Financial
Officer will commence at 9:30am London time on 7th August on the
web address www.ihgplc.com/interims18 . For those
wishing to ask questions please use the dial in details below which
will have a Q&A facility. There
will be a live audio webcast of the results presentation on the web
address: https://www.investis-live.com/ihg/5b3a47fa2e7c290b005d4468/omwa The
archived webcast of the presentation is expected to be on this
website later on the day of the results and will remain on it for
the foreseeable future. For those wishing to ask questions please use the dial-in details
below which will have a Q&A facility. However, for the duration
of the presentation a listen only facility will be on; details are
below: | | | |
| UK:
020 3936 2999 US:
+1 845 709 8568 All other
locations:
+44 203 936 2999 Participant Access
Code:
55 55 05 | | | |
| A
replay will be available following the event, details are
below: UK:
020 3936 3001 US:
+1 845 709 8569 All other
locations:
+44 203 936 3001 Participant
Access
Code:
84 37 25 | | | |
| Website: The full release and supplementary data will be available on our
website from 7:00am (London time) on 7 th August. The web address is www.ihgplc.com/interims18 . | | | |
| Notes to Editors: IHG ® (InterContinental
Hotels Group) [LON:IHG,
NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of
hotel brands, including Regent Hotels &
Resorts , InterContinental ® Hotels &
Resorts , Kimpton ® Hotels &
Restaurants , Hotel
Indigo ® , EVEN ® Hotels , HUALUXE ® Hotels and
Resorts , Crowne Plaza ® Hotels &
Resorts , voco™
Hotels , Holiday Inn ® , Holiday Inn
Express ® , Holiday Inn Club
Vacations ® , Holiday Inn
Resort ® , avid™
hotels , Staybridge
Suites ® and Candlewood
Suites ® . IHG franchises, leases, manages or owns more than 5,400 hotels and
810,000 guest rooms in almost 100 countries, with nearly 1,800
hotels in its development pipeline. IHG also manages IHG ® Rewards
Club , our global loyalty
programme, which has more than 100 million enrolled
members. InterContinental Hotels Group PLC is the Group's holding company and is
incorporated in Great Britain and registered in England and Wales.
More than 375,000 people work across IHG's hotels and corporate
offices globally. Visit www.ihg.com for hotel information and reservations and www.ihgrewardsclub.com for more on IHG Rewards Club. For our
latest news, visit: www.ihgplc.com/media and follow us on social media
at: www.twitter.com/ihg , www.facebook.com/ihg and www.youtube.com/ihgplc . | | | |

Cautionary note regarding forward-looking statements: This announcement contains certain forward-looking statements as defined under United States law (Section 21E of the Securities Exchange Act of 1934) and otherwise. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan', 'goal', 'believe' or other words of similar meaning. These statements are based on assumptions and assessments made by InterContinental Hotels Group PLC's management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed in or implied by, such forward-looking statements. The main factors that could affect the business and the financial results are described in the 'Risk Factors' section in the current InterContinental Hotels Group PLC's Annual report and Form 20-F filed with the United States Securities and Exchange Commission.

INTERIM MANAGEMENT REPORT

This Interim Management Report discusses the performance of InterContinental Hotels Group PLC (the Group or IHG) for the six months ended 30 June 2018. The 2017 comparatives have been restated to reflect the adoption of IFRS 15 'Revenue from Contracts with Customers', see note 2 in the 2018 Interim Financial Statements.

GROUP

Group results	6 months ended 30 June	2017
	2018	Restated	%
	$m	$m	change
Revenue
Americas	514	491	4.7
EMEAA	233	215	8.4
Greater
China	69	55	25.5
Central	84	77	9.1
	____	____	____
Revenue
from reportable segments	900	838	7.4
System
Fund	618	592	4.4
Reimbursement
of costs	595	534	11.4
	____	____	____
Total
revenue	2,113	1,964	7.6
	____	____	____
Operating profit
Americas	328	318	3.1
EMEAA	94	78	20.5
Greater
China	32	24	33.3
Central	(48)	(50)	4.0
	____	____	____
Operating
profit before exceptional items from reportable
segments	406	370	9.7
System
Fund	(12)	25	(148.0)
	____	____	____
Operating
profit before exceptional items	394	395	(0.3)
Exceptional
items	(53)	(4)	(1,225.0)
	____	____	____
Operating
profit	341	391	(12.8)
Net
financial expenses	(38)	(34)	(11.8)
	____	____	____
Profit
before tax	303	357	(15.1)
	____	____	____
Earnings
per ordinary share
Basic	123.2¢	126.5¢	(2.6)
Adjusted	145.8¢	113.8¢	28.1
Average US dollar to sterling exchange rate	$1 : £0.73	$1 :
£0.79	(7.6)

During the six months ended 30 June 2018, Group revenue increased by $149m (7.6%) to $2,113m and Group operating profit decreased by $50m from $391m to $341m due to the System Fund moving from a $25m in-year surplus to a $12m in-year deficit and a $49m increase in exceptional costs. Revenue from reportable segments increased by $62m (7.4%) to $900m and operating profit before exceptional items from reportable segments increased by $36m (9.7%) to $406m. Underlying 1 Group revenue and underlying 1 Group operating profit increased by $37m (4.4%) and $28m (7.6%) respectively.

The net central operating loss before exceptional items decreased by $2m (4.0%) to $48m compared to 2017 and by $4m (8.0%) to $46m at constant currency.

Basic earnings per ordinary share decreased by 2.6% to 123.2¢, whilst adjusted earnings per ordinary share increased by 28.1% to 145.8¢.

1 Underlying revenue and underlying operating profit both exclude System Fund revenue and expenses, reimbursement of costs, the impact of owned asset disposals, significant liquidated damages and current year acquisitions, all translated at constant currency using prior year exchange rates. Underlying operating profit growth also excludes the impact of exceptional items (see the Use of Non-GAAP measures section later in this Interim Management Report).

| Global hotel and room count | Hotels | Change
over | Rooms | Change
over |
| --- | --- | --- | --- | --- |
| | 2018 30 June | 2017 31
December | 2018 30 June | 2017 31
December |
| Analysed
by brand | | | | |
| InterContinental | 196 | 2 | 66,387 | 389 |
| Kimpton | 67 | 1 | 12,790 | 274 |
| HUALUXE | 7 | - | 2,088 | (1) |
| Crowne
Plaza | 417 | 3 | 116,403 | 1,603 |
| Hotel
Indigo | 89 | 4 | 10,934 | 289 |
| EVEN
Hotels | 9 | 1 | 1,361 | 123 |
| Holiday
Inn 1 | 1,243 | 1 | 232,818 | 125 |
| Holiday
Inn Express | 2,653 | 53 | 269,604 | 7,206 |
| Staybridge
Suites | 263 | 8 | 28,536 | 791 |
| Candlewood
Suites | 383 | 7 | 36,061 | 637 |
| Other | 104 | 3 | 32,907 | 378 |
| | _ | | __ | |
| Total | 5,431 | 83 | 809,889 | 11,814 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 4,500 | 67 | 561,259 | 8,425 |
| Managed | 919 | 16 | 244,759 | 3,389 |
| Owned,
leased and managed leases | 12 | - | 3,871 | - |
| | _ | | ___ | _ |
| Total | 5,431 | 83 | 809,889 | 11,814 |
| | | _ | | |

1 Includes 46 Holiday Inn Resort properties (11,644 rooms) and 26 Holiday Inn Club Vacations properties (7,676 rooms)

(2017: 47 Holiday Inn Resort properties (11,954 rooms) and 26 Holiday Inn Club Vacations properties (7,676 rooms)).

| Global pipeline | Hotels | Change
over | Rooms | Change
over |
| --- | --- | --- | --- | --- |
| | 2018 30 June | 2017 31 December | 2018 30 June | 2017 31
December |
| Analysed by
brand | | | | |
| InterContinental | 64 | 1 | 17,710 | 357 |
| Kimpton | 21 | 3 | 3,067 | 271 |
| HUALUXE | 21 | - | 6,277 | (12) |
| Crowne
Plaza | 89 | 3 | 23,994 | 947 |
| Hotel
Indigo | 91 | 9 | 13,039 | 1,738 |
| EVEN
Hotels | 14 | 2 | 2,682 | 572 |
| Holiday
Inn 1 | 279 | 2 | 54,302 | 746 |
| Holiday
Inn Express | 776 | 10 | 96,772 | 3,412 |
| avid
hotels | 126 | 82 | 11,658 | 7,615 |
| Staybridge
Suites | 169 | 9 | 19,424 | 1,483 |
| Candlewood
Suites | 104 | (8) | 9,302 | (707) |
| Other | 22 | 8 | 4,157 | 1,816 |
| | _ | | __ | |
| Total | 1,776 | 121 | 262,384 | 18,238 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 1,300 | 77 | 148,711 | 9,363 |
| Managed | 475 | 43 | 113,518 | 8,720 |
| Owned,
leased and managed leases | 1 | 1 | 155 | 155 |
| | _ | | ___ | _ |
| Total | 1,776 | 121 | 262,384 | 18,238 |
| | | _ | | |

1 Includes 17 Holiday Inn Resort properties (4,658 rooms) (2017: 13 Holiday Inn Resort properties (3,620 rooms)).

THE AMERICAS

Americas Results	6 months ended 30 June	2017
	2018	Restated	%
	$m	$m	change
Revenue
Fee
Business	413	396	4.3
Owned,
leased and managed leases	101	95	6.3
	____	____	____
Total	514	491	4.7
	____	____	____
Operating profit before exceptional items
Fee
Business	310	302	2.6
Owned,
leased and managed leases	18	16	12.5
	____	____	____
	328	318	3.1
Exceptional
items	(15)	(4)	(275.0)
	____	____	____
Operating
profit	313	314	(0.3)
	____	____	____

Americas Comparable RevPAR movement on previous year	6 months ended 30 June 2018
Fee
business
InterContinental	4.2%
Kimpton	1.6%
Crowne
Plaza	2.5%
Hotel
Indigo	6.3%
EVEN
Hotels	13.0%
Holiday
Inn	2.7%
Holiday
Inn Express	3.0%
Staybridge
Suites	5.0%
Candlewood
Suites	4.1%
All
brands	3.1%
Owned,
leased and managed leases
InterContinental	5.4%
EVEN
Hotels	7.4%
Holiday
Inn	13.4%
All
brands	8.5%

Fee business revenue increased by $17m (4.3%) to $413m, and operating profit increased by $8m (2.6%) to $310m. On a constant currency basis, underlying 1 revenue increased by $17m (4.3%) to $413m and underlying 1 operating profit increased by $10m (3.3%) , driven by 2.3% rooms growth year-on-year and comparable RevPAR growth of 3.1%, partly offset by: the combined impact from lower hotel termination fees and costs relating to legal disputes and; a small net negative impact from higher US healthcare costs, Crowne Plaza Accelerate financial incentives and a payroll tax credit delayed from 2017.

Owned, leased and managed leased revenue increased by $6m (6.3%) to $101m, and operating profit increased by $2m (12.5%) to $18m, on both actual and constant currency basis predominately due to demand in one Caribbean hotel.

| Americas hotel and room count | Hotels | Change
over | Rooms | Change
over |
| --- | --- | --- | --- | --- |
| | 2018 30 June | 2017 31
December | 2018 30 June | 2017 31
December |
| Analysed
by brand | | | | |
| InterContinental | 49 | (1) | 17,048 | (530) |
| Kimpton | 66 | 1 | 12,516 | 274 |
| Crowne
Plaza | 155 | (1) | 41,204 | (74) |
| Hotel
Indigo | 52 | 1 | 6,874 | 46 |
| EVEN
Hotels | 9 | 1 | 1,361 | 123 |
| Holiday
Inn 1 | 771 | (2) | 134,542 | (1,062) |
| Holiday
Inn Express | 2,253 | 36 | 203,157 | 3,747 |
| Staybridge
Suites | 252 | 8 | 26,947 | 791 |
| Candlewood
Suites | 383 | 7 | 36,061 | 637 |
| Other | 87 | (2) | 21,566 | (136) |
| | _ | | __ | |
| Total | 4,077 | 48 | 501,276 | 3,816 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 3,773 | 46 | 441,087 | 3,795 |
| Managed | 297 | 2 | 57,966 | 21 |
| Owned,
leased and managed leases | 7 | - | 2,223 | - |
| | _ | | ___ | _ |
| Total | 4,077 | 48 | 501,276 | 3,816 |
| | | _ | | |

1 Includes 23 Holiday Inn Resort properties (6,188 rooms) and 26 Holiday Inn Club Vacations (7,676 rooms)

(2017: 25 Holiday Inn Resort properties (6,787 rooms) and 26 Holiday Inn Club Vacations (7,676 rooms)).

| Americas pipeline | Hotels | Change
over | Rooms | Change
over |
| --- | --- | --- | --- | --- |
| | 2018 30 June | 2017 31
December | 2018 30 June | 2017 31
December |
| Analysed
by brand | | | | |
| InterContinental | 8 | 1 | 2,168 | 275 |
| Kimpton | 15 | 1 | 2,084 | (154) |
| Crowne
Plaza | 10 | (4) | 1,928 | (791) |
| Hotel
Indigo | 32 | (1) | 4,054 | 28 |
| EVEN
Hotels | 7 | (1) | 1,044 | (70) |
| Holiday
Inn 1 | 123 | (5) | 15,779 | (596) |
| Holiday
Inn Express | 501 | (23) | 47,616 | (1,991) |
| avid
hotels | 126 | 82 | 11,658 | 7,615 |
| Staybridge
Suites | 153 | 7 | 16,402 | 970 |
| Candlewood
Suites | 104 | (8) | 9,302 | (707) |
| Other | 20 | 8 | 3,437 | 1,789 |
| | _ | | __ | |
| Total | 1,099 | 57 | 115,472 | 6,368 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 1,054 | 52 | 108,013 | 5,169 |
| Managed | 45 | 5 | 7,459 | 1,199 |
| | _ | | ___ | _ |
| Total | 1,099 | 57 | 115,472 | 6,368 |
| | | _ | | |

1 Includes one Holiday Inn Resort property (165 rooms) (2017: one Holiday Inn Resort property (165 rooms)).

EMEAA

EMEAA results	6 months ended 30 June	2017
	2018	Restated	%
	$m	$m	change
Revenue
Fee
Business	153	136	12.5
Owned,
leased and managed leases	80	79	1.3
	____	____	____
Total	233	215	8.4
	____	____	____
Operating profit before exceptional items
Fee
Business	94	74	27.0
Owned,
leased and managed leases	-	4	(100.0)
	____	____	____
	94	78	20.5
Exceptional
items	(5)	-	(100.0)
	____	____	____
Operating
profit	89	78	14.1
	____	____	____

EMEAA comparable RevPAR movement on previous year
Fee
business
InterContinental	2.2%
Crowne
Plaza	4.4%
Hotel
Indigo	4.2%
Holiday
Inn	3.8%
Holiday
Inn Express	2.1%
Staybridge
Suites	1.8%
Other	3.5%
All
brands	3.1%
Owned,
leased and managed leases
InterContinental	(4.0)%
Holiday
Inn	8.1%
All
brands	(2.7)%

Fee business revenue increased by $17m (12.5%) to $153m and operating profit increased by $20m (27.0%) to $94m. Excluding the benefit of significant liquidated damages receipts (2018: $3m; 2017: $nil) and on a constant currency basis, underlying 1 revenue increased by $6m (4.4%) and underlying 1 operating profit increased by $13m (17.6%), benefitting from the initial savings generated by our Group-wide efficiency programme.

Owned, leased and managed leased revenue increased by $1m (1.3%) to $80m and operating profit decreased by $4m to $nil. On a constant currency basis, underlying 1 revenue decreased by $4m (5.1%) and underlying 1 operating profit decreased by $4m to $nil.

| EMEAA hotel and room count | Hotels | Change
over | Rooms | Change
over |
| --- | --- | --- | --- | --- |
| | 2018 30 June | 2017 31
December | 2018 30 June | 2017 31
December |
| Analysed
by brand | | | | |
| InterContinental | 104 | - | 31,749 | (42) |
| Kimpton | 1 | - | 274 | - |
| Crowne
Plaza | 175 | (1) | 44,590 | 16 |
| Hotel
Indigo | 30 | 3 | 3,037 | 243 |
| Holiday
Inn 1 | 383 | - | 70,889 | 459 |
| Holiday
Inn Express | 289 | 7 | 41,116 | 1,941 |
| Staybridge
Suites | 11 | - | 1,589 | - |
| Other | 10 | 3 | 8,575 | 126 |
| | _ | | __ | |
| Total | 1,003 | 12 | 201,819 | 2,743 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 705 | 10 | 114,171 | 2,393 |
| Managed | 293 | 2 | 86,000 | 350 |
| Owned,
leased and managed leases | 5 | - | 1,648 | - |
| | _ | | ___ | _ |
| Total | 1,003 | 12 | 201,819 | 2,743 |
| | | _ | | |

1 Includes 16 Holiday Inn Resort properties (3,381 rooms) (2017: 16 Holiday Inn Resort properties (3,347 rooms)).

| EMEAA pipeline | Hotels | Change
over | Rooms | Change
over |
| --- | --- | --- | --- | --- |
| | 2018 30 June | 2017 31
December | 2018 30 June | 2017 31
December |
| Analysed
by brand | | | | |
| InterContinental | 27 | (1) | 6,498 | 18 |
| Kimpton | 3 | 1 | 354 | 155 |
| Crowne
Plaza | 37 | 1 | 8,629 | (26) |
| Hotel
Indigo | 39 | 5 | 5,629 | 889 |
| EVEN
Hotels | 1 | - | 200 | - |
| Holiday
Inn 1 | 99 | 4 | 22,989 | 924 |
| Holiday
Inn Express | 118 | 10 | 19,375 | 1,279 |
| Staybridge
Suites | 16 | 2 | 3,022 | 513 |
| Other | 1 | - | 441 | 27 |
| | _ | | __ | |
| Total | 341 | 22 | 67,137 | 3,779 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 152 | (1) | 23,997 | (831) |
| Managed | 188 | 22 | 42,985 | 4,455 |
| Owned,
leased and managed leases | 1 | 1 | 155 | 155 |
| | _ | | ___ | _ |
| Total | 341 | 22 | 67,137 | 3,779 |
| | | _ | | |

1 Includes 10 Holiday Inn Resort properties (2,365 rooms) (2017: five Holiday Inn Resort properties (1,075 rooms)).

GREATER CHINA

Greater China results	6 months ended 30 June	2017
	2018	Restated	%
	$m	$m	change
Revenue
Fee
Business	69	55	25.5
	____	____	____
Total	69	55	25.5
	____	____	____
Operating profit before exceptional items
Fee
Business	32	24	33.3
	____	____	____
Operating
profit	32	24	33.3
	____	____	____

| Greater China comparable RevPAR movement on previous
year | 6 months ended 30 June 2018 |
| --- | --- |
| Fee
business | |
| InterContinental | 8.7% |
| HUALUXE | 30.9% |
| Crowne
Plaza | 11.7% |
| Hotel
Indigo | 13.5% |
| Holiday
Inn | 8.6% |
| Holiday
Inn Express | 9.8% |
| All
brands | 10.1% |

Fee business revenue increased by $14m (25.5%) to $69m and operating profit increased by $8m (33.3%) to $32m. Comparable RevPAR increased by 10.1% and System size grew by 11.9% year-on-year. Excluding the benefit of significant liquidated damages receipts (2018: $4m; 2017: $nil) and on a constant currency basis, underlying 1 revenue increased by $7m (12.7%) to $62m and underlying 1 operating profit increased by $3m (12.5%) to $27m, driven by strong trading across the region and rooms growth.

| Greater China hotel and room count | Hotels — 2018 | Change over
2017 | Rooms — 2018 | Change over
2017 |
| --- | --- | --- | --- | --- |
| | 30 June | 31
December | 30 June | 31
December |
| Analysed
by brand | | | | |
| InterContinental | 43 | 3 | 17,590 | 961 |
| HUALUXE | 7 | - | 2,088 | (1) |
| Crowne
Plaza | 87 | 5 | 30,609 | 1,661 |
| Hotel
Indigo | 7 | - | 1,023 | - |
| Holiday
Inn 1 | 89 | 3 | 27,387 | 728 |
| Holiday
Inn Express | 111 | 10 | 25,331 | 1,518 |
| Other | 7 | 2 | 2,766 | 388 |
| | _ | | __ | |
| Total | 351 | 23 | 106,794 | 5,255 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 22 | 11 | 6,001 | 2,237 |
| Managed | 329 | 12 | 100,793 | 3,018 |
| | _ | | ___ | _ |
| Total | 351 | 23 | 106,794 | 5,255 |
| | | _ | | |

1 Includes seven Holiday Inn Resort properties (2,075 rooms) (2017: six Holiday Inn Resort properties (1,820 rooms))

| Greater China pipeline | Hotels — 2018 | Change over
2017 | Rooms — 2018 | Change over
2017 |
| --- | --- | --- | --- | --- |
| | 30 June | 31
December | 30 June | 31
December |
| Analysed
by brand | | | | |
| InterContinental | 29 | 1 | 9,044 | 64 |
| Kimpton | 3 | 1 | 629 | 270 |
| HUALUXE | 21 | - | 6,277 | (12) |
| Crowne
Plaza | 42 | 6 | 13,437 | 1,764 |
| Hotel
Indigo | 20 | 5 | 3,356 | 821 |
| EVEN
Hotels | 6 | 3 | 1,438 | 642 |
| Holiday
Inn 1 | 57 | 3 | 15,534 | 418 |
| Holiday
Inn Express | 157 | 23 | 29,781 | 4,124 |
| Other | 1 | - | 279 | - |
| | _ | | __ | |
| Total | 336 | 42 | 79,775 | 8,091 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 94 | 26 | 16,701 | 5,025 |
| Managed | 242 | 16 | 63,074 | 3,066 |
| | _ | | ___ | _ |
| Total | 336 | 42 | 79,775 | 8,091 |
| | | _ | | |

1 Includes six Holiday Inn Resort properties (2,128 rooms) (2017: seven Holiday Inn Resort properties (2,380 rooms))

CENTRAL

	6 months ended 30 June
		2017
	2018	Restated	%
Central results	$m	$m	change
Revenue	84	77	9.1
Gross
costs	(132)	(127)	(3.9)
	____	____	____
	(48)	(50)	4.0
Exceptional
items	(33)	-	(100.0)
	____	____	____
Operating
loss	(81)	(50)	(62.0)
	____	____	____

Central results

The net operating loss increased by $31m (62.0%) compared to 2017. Central revenue, which mainly comprises technology fee income, increased by $7m (9.1%) to $84m (an increase of $5m (6.5%) at constant currency 1 ), driven by increases in IHG System size in the first half of 2018. Gross costs increased by $5m (3.9%) compared to 2017 (an increase of $1m (0.8%) at constant currency). Net operating loss before exceptional items decreased by $2m (4.0%) to $48m (a $4m or 8.0% decrease to $46m at constant currency).

OTHER FINANCIAL INFORMATION

Exceptional items

Pre-tax exceptional items totalled a net charge of $53m (2017 $4m charge) and includes $32m relating to reorganisation costs (see below), $6m of acquisition costs (see note 17 Events after the Reporting Period in the 2018 Interim Financial Statements) and $15m from the termination of the US funded Inter-Continental Hotels Pension Plan which involved certain qualifying members receiving lump-sum cash-out payments with the remaining pension obligations subject to a buy-out by an insurance provider through the purchase of a group annuity contract.

Reorganisation costs

In September 2017, the Group launched a comprehensive efficiency programme which will fund a series of new strategic initiatives to drive an acceleration in IHG's future growth. The programme is centred around strengthening the Group's organisational structure to redeploy resources to leverage scale in the highest opportunity markets and segments. The programme is expected to be completed in 2019. Included in the $32m cost are consultancy fees of $15m and severance costs of $11m. An additional $30m has been charged to the System Fund.

Net financial expenses

Net financial expenses increased by $4m to $38m for the six months ended 30 June 2018 and includes interest income relating to the System Fund of $9m (2017 $6m). Underlying 2 interest increased by $7m to $47m reflecting the unfavourable impact of a stronger pound on translation of sterling interest expense and higher US dollar interest rates payable on bank borrowings and balances with the System Fund.

Taxation

The tax charge on profit before tax, excluding the impact of exceptional items and System Fund, has been calculated using an interim effective tax rate of 23%. Excluding the effect of prior-year items, the equivalent effective tax rate would be approximately 27%. This rate is higher than the average UK statutory rate for the year of 19% due mainly to certain overseas profits (particularly in the US) being subject to statutory rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.

Taxation within exceptional items totalled a credit of $13m representing tax impacts on the accounting exceptional items.

Net tax paid in the six months ended 30 June 2018 totalled $5m.

Dividends

The Board has proposed an interim dividend per ordinary share of 36.3¢, representing growth of 10% on the 2017 interim dividend.

2 Underlying interest excludes interest relating to the System Fund

Capital structure and liquidity management

During the six months ended 30 June 2018, $286m of cash was generated from operating activities. Net cash outflows from investing activities totalled $102m and net cash used in financing activities totalled $69m. Net debt at 30 June 2018 was $1,802m and included $233m in respect of the finance lease obligations for the InterContinental Boston.

The Group had net liabilities of $1,162m at 30 June 2018 ($1,301m at 31 December 2017 restated) reflecting that its internally generated brands are not recorded on the balance sheet, in accordance with accounting standards .

USE OF NON-GAAP MEASURES

In addition to performance measures directly observable in the Interim Financial Statements (IFRS measures), additional measures (described as Non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures and include:

●

Total gross revenue;

●

Underlying revenue, underlying operating profit growth, underlying fee revenue, fee margin growth;

●

Total operating profit before exceptional items and tax, adjusted earnings per ordinary share, underlying earnings per share;

●

Underlying interest;

●

Net debt;

●

Net capital expenditure; and

●

Free cash flow.

Further information can be found on page 26 of the IHG Annual Report and Form 20-F 2017 (which is available at www.ihgplc.com ).

The definitions of underlying revenue, underlying operating profit growth, underlying fee revenue, fee margin growth, adjusted earnings per ordinary share, underlying earnings per share, net capital expenditure and free cash flow have changed following adoption of IFRS 15 and are now defined as follows:

Underlying revenue, underlying operating profit growth, underlying fee revenue, fee margin growth

Underlying revenue and underlying operating profit both exclude System Fund revenue and expenses, reimbursement of costs, the impact of owned asset disposals, significant liquidated damages and current year acquisitions, all translated at constant currency using prior year exchange rates. Underlying operating profit growth also excludes the impact of exceptional items. The presentation of these additional performance measures allows a better understanding of comparable year-on-year trading and thereby allows an assessment of the underlying trends in the Group's financial performance. System Fund results are excluded as the Fund is not managed to a profit or loss for IHG and there is an agreement with the IHG Owners to spend these funds for the benefit of hotels in the System. These measures also provide consistency with the Group's internal management reporting.

Underlying fee revenue and fee margin further exclude the revenue and operating profit of the Group's remaining owned and leased and managed lease properties, thereby providing metrics which measure the underlying performance of the Group's core fee-based business model.

Adjusted earnings per ordinary share and underlying earnings per ordinary share

Adjusted earnings per ordinary share excludes System Fund revenue and expenses, any interest and tax relating to the System Fund, exceptional items, and their related tax impacts. Adjusted earnings per ordinary share provides a per share measure that is not skewed by the result of the System Fund or exceptional items.

Underlying earnings per ordinary share is calculated by dividing underlying profit for the period available for IHG equity holders by the weighted average number of ordinary shares, excluding investment in own shares, in issue during the period. The presentation of underlying earnings per ordinary share allows a better understanding of comparable year-on-year trading and thereby allows an assessment of the underlying trends in the Group's financial performance.

Net capital expenditure

Net capital expenditure is defined as cash flow from investing activities less contract acquisition costs, excluding tax paid on disposals and adjusted for System Fund depreciation and amortisation (recovery of previous System Fund capital expenditure).

For internal management reporting, capital expenditure is reported as either maintenance, recyclable, or System Fund. The disaggregation of net capital expenditure provides useful information as it enables users to distinguish between System Fund capital investments and recyclable investments (such as investments in associates and joint ventures), which are intended to be recoverable in the medium term, compared with maintenance capital expenditure (including key money paid), which represents a permanent cash outflow.

Free cash flow

Free cash flow is defined as cash flow from operating activities (after interest and tax paid) and excluding contract acquisition costs, less purchase of shares by employee share trusts and maintenance capital expenditure (including key money paid). Free cash flow is a useful measure for investors, as it represents the cash available to invest back into the business to drive growth, pay the ordinary dividend, with any surplus being available for additional returns to shareholders.

Underlying revenue and underlying operating profit Non-GAAP reconciliations

The following tables:

●

show underlying revenue and underlying operating profit on both an actual and constant currency basis a ;

●

reconcile segmental underlying revenue and underlying operating profit to Group underlying revenue and operating profit;

●

show underlying Group fee revenue and Group fee margin on both an actual and constant currency basis a ; and

●

reconcile Group underlying revenue and underlying operating profit to the GAAP measures included in the Interim Financial Statements.

Highlights for the six months ended 30 June 2018

	Revenue			Operating profit
		2017			2017
	2018	Restated	%	2018	Restated	%
	$m	$m	change	$m	$m	change
Per
Group income statement	2,113	1,964	7.6	341	391	(12.8)
Significant
liquidated damages	(7)	-	(100.0)	(7)	-	(100.0)
Exceptional
items	-	-	-	53	4	1,225.0
System
Fund	(618)	(592)	(4.4)	12	(25)	148.0
Reimbursement
of costs	(595)	(534)	(11.4)	-	-	-
	_____	_____	_____	_____	_____	_____
Underlying at actual exchange	893	838	6.6	399	370	7.8
	_____	_____	_____	_____	_____	_____
	At actual exchange rates			At constant currency
		2017			2017
	2018	Restated	%	2018	Restated	%
	$m	$m	change	$m	$m	change
Underlying revenue
Americas	514	491	4.7	514	491	4.7
EMEAA	230	215	7.0	217	215	0.9
Greater
China	65	55	18.2	62	55	12.7
Central	84	77	9.1	82	77	6.5
	_____	_____	_____	_____	_____	_____
Underlying
Group revenue	893	838	6.6	875	838	4.4
Owned,
leased and managed leases revenue included above	(181)	(174)	(4.0)	(176)	(174)	(1.1)
	_____	_____	_____	_____	_____	_____
Underlying
Group fee revenue	712	664	7.2	699	664	5.3
	_____	_____	_____	_____	_____	_____

	At actual exchange rates			At constant currency
		2017			2017
	2018	Restated	%	2018	Restated	%
	$m	$m	change	$m	$m	change
Underlying operating profit
Americas	328	318	3.1	330	318	3.8
EMEAA	91	78	16.7	87	78	11.5
Greater
China	28	24	16.7	27	24	12.5
Central	(48)	(50)	4.0	(46)	(50)	8.0
	_____	_____	_____	_____	_____	_____
Underlying
Group operating profit	399	370	7.8	398	370	7.6
Owned,
leased and managed leases operating profit included
above	(18)	(20)	(10.0)	(18)	(20)	(10.0)
	_____	_____	_____	_____	_____	_____
Underlying
Group fee profit	381	350	8.9	380	350	8.6
	_____	_____	_____	_____	_____	_____
Group
fee margin	53.5%	52.7%	0.8ppts	54.4%	52.7%	1.7ppts
	_____	_____	_____	_____	_____	_____

Underlying earnings per share

The following table reconciles basic earnings per ordinary share to underlying earnings per share:

	6 months ended 30 June
		2017
	2018	Restated
	$m	$m
Basic earnings per ordinary share
Profit
available for equity holders	234	248
Basic
weighted average number of ordinary shares (millions)	190	196
Basic
earnings per ordinary share (cents)	123.2	126.5
	_____	_____
Underlying
earnings per ordinary share
Profit
available for equity holders	234	248
Adjusted
for:
Significant
liquidated damages	(7)	-
Tax on
significant liquidated damages	2	-
System
Fund revenue and expenses	12	(25)
Interest
attributable to the System Fund	(9)	(6)
Tax
attributable to the System Fund	-	3
Exceptional items
before tax	53	4
Tax on
exceptional items	(13)	(1)
Currency
effect	(2)	-
	_____	_____
Underlying
profit available for equity holders	270	223
	_____	_____
Underlying
earnings per ordinary share (cents)	142.1	113.8
	_____	_____

Net capital expenditure

The following table reconciles net cash from investing activities to net capital expenditure:

	6 months ended 30 June
		2017
	2018	Restated
	$m	$m
Net cash from investing activities	(102)	(155)
Adjusted
for:
Contract
acquisition costs	(25)	(24)
System
Fund depreciation and amortisation	16	17
	_____	_____
Net
capital expenditure	(111)	(162)
Add
back: Disposal
receipts	(2)	(7)
System
Fund depreciation and amortisation	(16)	(17)
	_____	_____
Gross
capital expenditure	(129)	(186)
	_____	_____
Analysed
as:
Capital expenditure: maintenance and key money	(47)	(44)
Capital expenditure: recyclable investments	(32)	(80)
Capital expenditure: System Fund investments	(50)	(62)
	_____	_____
Gross
capital expenditure	(129)	(186)
	_____	_____

Free cash flow

The following table reconciles net cash from operating activities to free cash flow:

	6 months ended 30 June
		2017
	2018	Restated
	$m	$m
Net cash from operating activities	286	227
Adjusted
for:
Contract acquisition costs	25	24
Less:
Purchase of shares by employee share trusts	(3)	(3)
Capital expenditure: maintenance and key money	(47)	(44)
	_____	_____
Free
cash flow	261	204
	_____	_____

Underlying interest

Underlying interest is a new measure which excludes interest relating to the System Fund. IHG records an interest charge on the outstanding cash balance relating to the IHG Rewards Club programme. These interest payments are recognised as interest income for the Fund and interest expense for IHG. The System Fund also benefits from the capitalisation of interest related to the development of the next-generation Guest Reservation System. As the Fund is included on the Group income statement, these amounts are included in the reported net Group financial expenses. Given all results related to the System Fund are excluded from adjusted measures used by management, interest relating to the System Fund is excluded from underlying interest.

The following table reconciles net financial expenses to underlying interest:

	6 months ended 30 June
	2017
	2018	Restated
	$m	$m
Net financial expenses
Financial
income	2	2
Financial
expenses	(40)	(36)
	_____	_____
Net
financial expenses	(38)	(34)
Adjusted
for:
Interest payable on
balances with the System Fund	(6)	(3)
Capitalised
interest relating to System Fund assets	(3)	(3)
	_____	_____
Underlying
interest	(47)	(40)
	_____	_____

RELATED PARTY TRANSACTIONS

For information on the related party transaction please see note 15 in the 2018 Interim Financial Statements.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties that could substantially affect IHG's business and results in 2018 are set out on pages 20 to 22 of the IHG Annual Report and Form 20-F 2017 (the "Annual Report"). The nature and potential impact of those risks and uncertainties has not materially changed since the publication of the Annual Report, nor are any expected for the remaining half of the financial year. However, there may be unknown risks or risks currently believed to be inconsequential that emerge and could become material. The following summarises the risks and uncertainties set out in the Annual Report:

●

Threats to cybersecurity and information governance could impact IHG's operations, leading to the loss of sensitive data, undermine stakeholder trust and result in fines and legal/regulatory action;

●

Failure to deliver IHG's preferred brands and loyalty programme could impact IHG's competitive positioning, its growth ambitions and reputation with guests and owners;

●

Failure to attract, develop and retain key leadership and talent could impact IHG's ability to achieve its growth ambitions and operate effectively;

●

Failure to capitalise on innovation in booking technology, and maintain and enhance IHG's channel management and technology platforms could impact IHG's revenues and growth ambitions;

●

Risks in the reprioritisation of activities and refocusing of resources to accelerate growth could impact IHG's ability to deliver its strategy and affect its results and stakeholder trust;

●

Failure to maintain an effective safety and security system and ability to respond appropriately in the event of an issue could result in reputational and / or financial damage, and undermine stakeholder confidence;

●

Failure to comply with the global business regulatory environment and legal, regulatory and ethical developments could impact IHG's operations, results and reputation;

●

A material breakdown in financial management and control systems could lead to increased public scrutiny, regulatory investigation and litigation; and

●

The inability to realise value from programme and project delivery could result in lost commercial performance, financial loss and undermine stakeholder confidence.

These principal risks and uncertainties are supported by a broader description of risk factors set out on pages 164 to 167 of the Annual Report.

GOING CONCERN

An overview of the business activities of IHG, including a review of the key business risks that the Group faces, is given in this Interim Management Report. Information on the Group's treasury management policies can be found in note 22 to the Group Financial Statements in the IHG Annual Report and Form 20-F 2017.

The Group has no significant debt maturities before 2022. At the end of June 2018, the Group was trading significantly within its banking covenants and debt facilities.

The Group's fee-based model and wide geographic spread means that it is well placed to manage through uncertain times, and our forecasts and sensitivity projections, based on a range of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities.

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, being a period of not less than 12 months from the date of this report. Accordingly, the financial statements continue to be prepared on going concern basis.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that to the best of their knowledge:

●

The condensed set of Financial Statements has been prepared in accordance with IAS 34;

●

The Interim Management Report includes a fair review of the important events during the first six months, and their impact on the financial statements and a description of the principal risks and uncertainties for the remaining six months of the year, as required by DTR 4.2.7R; and

●

The Interim Management Report includes a fair review of related party transactions and changes therein, as required by DTR 4.2.8R.

On behalf of the Board

Keith Barr Paul Edgecliffe-Johnson

Chief Executive Officer Chief Financial Officer

6 August 2018 6 August 2018

INTERCONTINENTAL HOTELS GROUP PLC

GROUP INCOME STATEMENT

For the six months ended 30 June 2018


Continuing operations
Revenue
from fee business	719	664
Revenue
from owned, leased and managed lease
hotels	181	174
System
Fund revenues	618	592
Reimbursement
of costs	595	534
	____	____
Total revenue (notes 5 and 6)	2,113	1,964
Cost of
sales	(305)	(278)
System
Fund expenses	(630)	(567)
Reimbursed
costs	(595)	(534)
Administrative
expenses	(155)	(161)
Share
of losses of associates and joint ventures	(3)	-
Other
operating income	7	7
Depreciation
and amortisation	(38)	(36)
	____	____
Operating
profit before exceptional items (note 5)	394	395
Exceptional
items (note 7)	(53)	(4)
	_____	_____
Operating profit (note 5)	341	391
Financial
income	2	2
Financial
expenses	(40)	(36)
	_____	_____
Profit before tax	303	357
Tax
(note 8)	(69)	(109)
	_____	_____
Profit for the period from continuing operations	234	248
	_____	_____
Attributable
to:
Equity
holders of the parent	234	248
Non-controlling
interest	-	-
	_____	_____
	234	248
	_____	_____
Earnings per ordinary share (note 9)
Continuing
and total operations:
Basic	123.2¢	126.5¢
Diluted	122.5¢	125.3¢
Adjusted	145.8¢	113.8¢
Adjusted
diluted	145.0¢	112.6¢
	_____	_____
*
Restated for the adoption of IFRS 15 and other presentational
changes (see note 2).

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2018

	2018 6 months ended 30 June $m	2017 6 months ended 30 June Restated* $m
Profit for the period	234	248
Other comprehensive income
Items
that may be subsequently reclassified to profit or
loss:
Losses
on valuation of available-for-sale financial assets, net of related
tax of $nil	-	(2)
Exchange
gains/(losses) on retranslation of foreign operations, including
related tax credit of $1m (2017 net of tax credit of
$1m)	18	(42)
	_____	_____
	18	(44)
Items
that will not be reclassified to profit or loss:
Losses
on valuation of assets classified as fair value through other
comprehensive income, net of related tax of $nil	(7)	-
Re-measurement
gains on defined benefit plans, net of related tax charge of $2m
(2017 $1m)	7	-
	_____	_____
Total other comprehensive income/(loss) for the period	18	(44)
	_____	_____
Total comprehensive income for the period	252	204
	_____	_____
Attributable
to:
Equity
holders of the parent	251	203
Non-controlling
interest	1	1
	_____	_____
	252	204
	_____	_____

Restated for the adoption of IFRS 15 (see note 2).

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2018

	6 months ended 30 June 2018 — Equity share capital	Other reserves*	Retained earnings	Non-controlling interest	Total equity
	$m	$m	$m	$m	$m
At
beginning of the period (as previously reported)	154	(2,417)	1,405	7	(851)
Impact
of adopting IFRS 15 (note 2)	-	4	(454)	-	(450)
	_____	_____	_____	_____	_____
At
beginning of the period (restated for IFRS 15)	154	(2,413)	951	7	(1,301)
Impact
of adopting IFRS 9 (note 2)	-	(18)	18	-	-
	_____	_____	_____	_____	_____
At
beginning of period	154	(2,431)	969	7	(1,301)
Total
comprehensive income for the period	-	10	241	1	252
Transfer
of treasury shares to employee share trusts	-	(17)	17	-	-
Purchase
of own shares by employee share trusts	-	(3)	-	-	(3)
Release
of own shares by employee share trusts	-	24	(24)	-	-
Equity-settled
share-based cost	-	-	19	-	19
Tax
related to share schemes	-	-	2	-	2
Equity
dividends paid	-	-	(130)	(1)	(131)
Exchange
adjustments	(4)	4	-	-	-
	_____	______	_____	_____	_____
At end of the period	150	(2,413)	1,094	7	(1,162)
	_____	_____	_____	_____	_____

	6 months ended 30 June 2017 — Equity share capital	Other reserves*	Retained earnings	Non-controlling interest	Total equity
	$m	$m	$m	$m	$m
At
beginning of the period (as previously reported)	141	(2,300)	1,392	8	(759)
Impact
of adopting IFRS 15 (note 2)	-	15	(402)	-	(387)
	_____	_____	_____	_____	_____
At
beginning of period (restated)	141	(2,285)	990	8	(1,146)
Total
comprehensive income for the period	-	(45)	248	1	204
Transfer
of treasury shares to employee share trusts	-	(20)	20	-	-
Purchase
of own shares by employee share trusts	-	(3)	-	-	(3)
Release
of own shares by employee share trusts	-	29	(29)	-	-
Equity-settled
share-based cost	-	-	12	-	12
Tax
related to share schemes	-	-	5	-	5
Equity
dividends paid	-	-	(531)	(3)	(534)
Exchange
adjustments	7	(7)	-	-	-
	_____	______	_____	_____	_____
At end of the period	148	(2,331)	715	6	(1,462)
	_____	_____	_____	_____	_____

*
All
items above are shown net of tax.

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF FINANCIAL POSITION

30 June 2018

	2018 30 June	2017 31 December Restated*
	$m	$m
ASSETS
Property,
plant and equipment	417	425
Goodwill
and other intangible assets	989	967
Investment
in associates and joint ventures	136	141
Retirement
benefit assets	-	3
Other
financial assets	269	228
Non-current
tax receivable	24	16
Deferred
tax assets	68	75
Contract
costs	54	51
Contract
assets	252	241
	______	______
Total non-current assets	2,209	2,147
	_____	_____
Inventories	3	3
Contract
costs	4	7
Contract
assets	18	17
Trade
and other receivables	675	551
Current
tax receivable	6	101
Other
financial assets	-	16
Cash
and cash equivalents	233	168
	______	______
Total current assets	939	863
	_____	_____
Total assets (note 5)	3,148	3,010
	_____	_____
LIABILITIES
Loans
and other borrowings	(89)	(126)
Trade
and other payables	(502)	(597)
Deferred
revenue	(549)	(490)
Provisions	(16)	(3)
Current
tax payable	(46)	(64)
	_____	_____
Total current liabilities	(1,202)	(1,280)
	_____	_____
Loans
and other borrowings	(1,946)	(1,893)
Retirement
benefit obligations	(94)	(104)
Trade
and other payables	(31)	(36)
Deferred
revenue	(907)	(867)
Provisions	(15)	(5)
Non-current
tax payable	-	(25)
Deferred
tax liabilities	(115)	(101)
	_	_
Total non-current liabilities	(3,108)	(3,031)
	_____	_____
Total liabilities	(4,310)	(4,311)
	_____	_____
Net liabilities	(1,162)	(1,301)
	_____	_____
EQUITY
Equity
share capital	150	154
Capital
redemption reserve	10	10
Shares
held by employee share trusts	(1)	(5)
Other
reserves	(2,869)	(2,874)
Unrealised
gains and losses reserve	53	79
Currency
translation reserve	394	377
Retained
earnings	1,094	951
	_	__
IHG shareholders' equity	(1,169)	(1,308)
Non-controlling
interest	7	7
	_	_
Total equity	(1,162)	(1,301)
	_____	_____
*
Restated for the adoption of IFRS 15 (see note 2).

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF CASH FLOWS

For the six months ended 30 June 2018

	2018 6 months ended 30 June	2017 6 months ended 30 June Restated*
	$m	$m
Profit for the period	234	248
Adjustments
reconciling profit for the period to cash flow from operations
before contract acquisition costs (note 11)	93	62
	_____	_____
Cash
flow from operations before contract acquisition costs	327	310
Contract
acquisition costs	(25)	(24)
	_____	_____
Cash flow from operations	302	286
Interest
paid	(12)	(10)
Interest
received	1	1
Tax
paid on operating activities	(5)	(50)
	_____	_____
Net cash from operating activities	286	227
	_____	_____
Cash flow from investing activities
Purchase
of property, plant and equipment	(16)	(22)
Purchase
of intangible assets	(56)	(70)
Investment
in associates and joint ventures	(1)	(47)
Investment
in other financial assets	(31)	(27)
Capitalised
interest paid	(3)	(3)
Landlord
contributions to property, plant and equipment	3	7
Repayments
of other financial assets	2	7
	_____	_____
Net cash from investing activities	(102)	(155)
	_____	_____
Cash flow from financing activities
Purchase
of own shares by employee share trusts	(3)	(3)
Dividends
paid to shareholders	(130)	(531)
Dividends
paid to non-controlling interest	(1)	(3)
Increase
in borrowings	65	395
	_____	_____
Net cash from financing activities	(69)	(142)
	_____	_____
Net movement in cash and cash equivalents, net of overdrafts, in
the period	115	(70)
Cash
and cash equivalents, net of overdrafts, at beginning of the
period	58	117
Exchange
rate effects	(13)	20
	_____	_____
Cash and cash equivalents, net of overdrafts, at end of the
period	160	67
	_____	_____

Restated for the adoption of IFRS 15 (see note 2).

I NTERCONTINENTAL HOTELS GROUP PLC

NOTES TO THE INTERIM FINANCIAL STATEMENTS

| 1. |
| --- |
| These condensed interim financial statements have been prepared in
accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority and IAS 34
'Interim Financial Reporting'. Other than the changes
described in note 2 below, they have been prepared on a consistent
basis using the same accounting policies and methods of computation
set out in the InterContinental Hotels Group PLC (the Group or IHG)
Annual Report and Form 20-F for the year ended 31 December
2017. The Directors are satisfied that the Group has sufficient resources
to continue in operation for the foreseeable future, being a period
of not less than 12 months from the date of this report.
Accordingly, the condensed interim financial statements have been
prepared on a going concern basis. These condensed interim financial statements are unaudited and do
not constitute statutory accounts of the Group within the meaning
of Section 435 of the Companies Act 2006. The auditors have carried
out a review of the financial information in accordance with the
guidance contained in ISRE 2410 (UK and Ireland) 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Auditing Practices Board. Other
than line items which have been restated for IFRS 15, financial
information for the year ended 31 December 2017 has been extracted
from the Group's published financial statements for that year which
were prepared in accordance with IFRSs as adopted by the European
Union and which have been filed with the Registrar of Companies.
The auditor's report on those financial statements was unqualified
with no reference to matters to which the auditor drew attention by
way of emphasis and no statement under s498(2) or s498(3) of the
Companies Act 2006. |

Adoption of new accounting standards

IFRS 15

With effect from 1 January 2018, the Group has adopted IFRS 15 'Revenue from Contracts with Customers' which introduces a new five-step approach to measuring and recognising revenue from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

The Group has elected to apply the full retrospective method in adopting IFRS 15.

Prior to adoption of IFRS 15, the Group's revenue was primarily comprised of fee-based revenue from franchise and management contracts, and hotel revenue in owned and leased properties. The recognition of these revenue streams is largely unchanged by IFRS 15:

●

Franchise and base management fees are charged as a percentage of underlying revenues in the hotels and are treated as 'variable consideration' under IFRS 15. These fees are recognised as the underlying hotel revenues occur, provided there is no expectation of a subsequent reversal of the revenue.

●

Incentive management fees are generally charged based on the hotel's profitability or cash flows, and are recognised over time when it is considered highly probable that the related performance criteria will be met, provided there is no expectation of a subsequent reversal of the revenue.

●

Hotel revenue in owned and leased properties includes rooms revenue and food and beverage sales, which is recognised when the rooms are occupied and food and beverages are sold.

The key changes resulting from the adoption of IFRS 15 are as follows:

Core IHG adjustments

a) Managed and franchised hotel cost reimbursements

Under IFRS 15, the provision of employees to managed hotels is not considered to be a service that is distinct from the general hotel management service. Reimbursements for the cost of the IHG employees working in managed hotels are therefore shown as revenue with an equal matching cost, and no profit impact. Certain other costs relating to both managed and franchised hotels are also contractually reimbursable to IHG and where IHG is deemed to be acting as principal in the provision of the related services, the revenue and cost are shown on a gross basis under IFRS 15. Under previous accounting policies, no revenue or matching cost was recognised.

b) Initial application and re-licensing fees

Under previous accounting, application and re-licensing fees were recognised as revenue when billed as the monies received are not refundable and IHG has no further obligations to satisfy. Under IFRS 15, there is a requirement to consider whether the payment of these fees transfers a distinct good or service to the customer that is separate from the promise to provide franchise services. As this is not the case, IFRS 15 requires initial application and re-licensing fees to be recognised as services are provided, over the life of the related contract. The spreading of these fees results in an initial reduction to revenue and operating profit, and the recognition of deferred revenue on the statement of financial position, reflecting the profile of increased amounts received in recent years.

c) Contract costs

Contract costs related to securing management and franchise contracts were previously charged to the income statement as incurred. Under IFRS 15, certain costs qualify to be capitalised as the cost of obtaining a contract and are amortised over the initial term of the related contract. This change results in an initial increase to operating profit and the capitalisation of contract costs on the statement of financial position.

d) Amortisation of amounts paid to hotel owners to secure management contracts and franchise agreements ('key money')

Under previous accounting, key money payments were capitalised as intangible assets and amortised over the life of the related contracts. Under IFRS 15, these payments are treated as 'consideration payable to a customer' and therefore recorded as a contract asset and recognised as a deduction to revenue over the contract term. This change results in a reduction to revenue, no change to operating profit, and the reclassification of key money on the statement of financial position from intangible assets to contract assets.

In the statement of cash flows, these contract acquisition costs are reclassified from investing activities to cash flow from operations.

e) Owned hotel disposals subject to a management contract

Under previous accounting, when hotels were sold and the Group retained management of the hotel, the consideration recognised included both the cash received and the fair value of the management contract which was capitalised as an intangible asset and subsequently amortised to the income statement. This accounting was governed by the 'exchange of assets' criteria included in IAS 16 'Property, Plant and Equipment' and IAS 38 'Intangible Assets'. IFRS 15 specifically includes property sales in its scope and results in the sales consideration being recorded at the fair value of the encumbered hotel, which generally will be equivalent to the cash received. This change results in the derecognition of historic intangible asset balances and a lower amortisation charge in the income statement.

f) Other adjustments

Other adjustments, which are immaterial, include re-assessments of IHG's role as principal in other revenue transactions and the treatment of payments under performance guarantees as a reduction to the transaction price within management contracts.

System Fund adjustments

The Group operates a System Fund (the Fund) to collect and administer cash assessments from hotel owners for the specific purpose of use in marketing, the guest reservation systems and hotel loyalty programme. The Fund also receives proceeds from the sale of loyalty points under third-party co-branding arrangements. The Fund is not managed to a profit or loss for IHG, but is managed for the benefit of hotels in the System with the objective of driving revenues for the hotels. Consequently, under previous accounting these revenues and expenses were not recorded in the Group income statement.

Under IFRS 15, an entity is regarded as a principal if it controls a service prior to transfer to the customer. As marketing and reservations expenses primarily comprise payroll and marketing expenses under contracts entered into by the Group, management has determined that the Group controls these services. Fund revenues and expenses are therefore recognised on a gross basis in the Group income statement. Assessment fees from hotel owners are generally levied as a percentage of hotel revenues and are recognised as those hotel revenues occur.

In respect of the loyalty programme (IHG Rewards Club), the Group has determined that the related performance obligation is not satisfied in full until the member has redeemed the points at a participating hotel. Accordingly, revenue related to loyalty points earned by members or sold under co-branding arrangements is deferred in an amount that reflects the stand-alone selling price of the future benefit to the member. As materially all of the points will be redeemed at IHG managed or franchised hotels owned by third parties, IHG is deemed to be acting as agent on redemption and therefore recognises the related revenue net of the cost of reimbursing the hotel that is providing the hotel stay. The deferred revenue balance under IFRS 15 is significantly higher than the points redemption cost liability that was recognised under previous accounting resulting in an increase in the Group's net liabilities.

Management has also determined that in addition to the performance obligation for the redemption of points, co-branding arrangements contain other performance obligations including marketing services and the right to access the loyalty programme. Revenue attributable to the stand-alone selling price of these additional services is recognised over the term of the co-branding arrangement. Certain travel agency commission revenues within the Fund will be recognised on a net basis, where it has been determined that IHG acts as agent under IFRS 15.

Under previous accounting, any Fund short-term timing surplus or deficit was carried in the Group statement of financial position within working capital. Under IFRS 15, the in-year Fund surplus or deficit is recognised in the Group income statement. Both the current accounting treatment and the change on applying IFRS 15, and the equivalent US GAAP standard, are consistent with current and expected future practice across the hotel industry. The Fund surplus of $158m at 31 December 2017 has been derecognised resulting in a reduction in the Group's net liabilities.

IHG also records an interest charge on the outstanding cash balance relating to the IHG Rewards Club programme. In 2017 these interest payments totalled $7m (6 months to 30 June 2017: $3m), and were recognised as interest income for the Fund and interest expense for IHG. The System Fund also benefits from the capitalisation of interest related to the development of the next-generation Guest Reservation System, which totalled $6m in 2017 (6 months to 30 June 2017: $3m). As the Fund is now included on the Group income statement, these amounts are included in the reported net Group financial expenses for 2017.

The System Fund accounting changes result in an increase in recorded revenue and a change to reported profits. However, since the Group's agreement with the IHG Owners Association is that the Fund is not managed to a gain or loss for IHG, any in-year profit or loss resulting from Fund activity is excluded from the calculation of underlying operating profit and adjusted earnings per share as there is an agreement to spend these funds for the benefit of hotels in the System.

The impact of adopting IFRS 15 and other presentational changes (see note 3) on previously reported line items in the Group financial statements is set out on the following pages.

Impact of IFRS 15 and other presentational changes on the Group income statement

For the six months ended 30 June 2017

	As reported	IFRS 15 - Core IHG	IFRS 15 - System Fund	Other changes (note 3)	As restated
	$m	$m	$m	$m	$m
Revenue
from fee business	766	(11)	-	(91)	664
Revenue
from owned, leased and managed lease hotels	91	3	-	80	174
System
Fund revenues	-	-	581	11	592
Reimbursement
of costs	-	534	-	-	534
	_____	_____	_____	_____	_____
Total revenue	857	526	581	-	1,964
Cost
of sales	(291)	2	-	11	(278)
System
Fund expenses	-	-	(556)	(11)	(567)
Reimbursed
costs	-	(534)	-	-	(534)
Administrative
expenses	(156)	(5)	-	-	(161)
Other
operating income	7	-	-	-	7
Depreciation
and amortisation	(47)	11	-	-	(36)
	_____	_____	_____	_____	_____
Operating
profit before exceptional items	370	-	25	-	395
Exceptional
items	(4)	-	-	-	(4)
	_____	_____	_____	_____	_____
Operating profit	366	-	25	-	391
Financial
income	2	-	-	-	2
Financial
expenses	(42)	-	6	-	(36)
Tax	(107)	1	(3)	-	(109)
	_____	_____	_____	_____	_____
Profit after tax	219	1	28	-	248
	____	____	____	____	____

Impact of IFRS 15 on the Group statement of comprehensive income

For the six months ended 30 June 2017

	As reported $m	IFRS 15 adoption $m	As restated $m
Profit
for the period	219	29	248
Exchange
losses on retranslation of foreign operations, net of related tax
credit of $1m	(35)	(7)	(42)
Losses
on valuation of available-for-sale financial assets, net of related
tax of $nil	(2)	-	(2)
	____	____	____
Total comprehensive income for the period	182	22	204
	____	____	____

Impact of IFRS 15 on the Group statement of financial position

31 December 2017

	As reported $m	IFRS 15 adoption $m	As restated $m
Goodwill
and other intangible assets	1,467	(500)	967
Contract
costs	-	51	51
Contract
assets	-	241	241
Deferred
tax assets	56	19	75
Other
non-current assets	813	-	813
	__	_	__
Total non-current assets	2,336	(189)	2,147
	__	_	__
Contract
costs	-	7	7
Contract
assets	-	17	17
Other
current assets	839	-	839
	__	_	___
Total current assets	839	24	863
	__	_	__
Total assets	3,175	(165)	3,010
	__	_	__
Loyalty
programme liability	(343)	343	-
Trade
and other payables	(768)	171	(597)
Deferred
revenue	-	(490)	(490)
Other
current liabilities	(193)	-	(193)
	__	_	__
Total current liabilities	(1,304)	24	(1,280)
	__	_	__
Loyalty
programme liability	(417)	417	-
Trade
and other payables	(121)	85	(36)
Deferred
revenue	-	(867)	(867)
Deferred
tax liabilities	(157)	56	(101)
Other
non-current liabilities	(2,027)	-	(2,027)
	__	_	__
Total non-current liabilities	(2,722)	(309)	(3,031)
	__	_	__
Total liabilities	(4,026)	(285)	(4,311)
	__	_	__
Net liabilities	(851)	(450)	(1,301)
	__	__	__
Equity
share capital	154	-	154
Capital
redemption reserve	10	-	10
Shares
held by employee share trusts	(5)	-	(5)
Other
reserves	(2,874)	-	(2,874)
Unrealised
gains and losses reserve	79	-	79
Currency
translation reserve	373	4	377
Retained
earnings	1,405	(454)	951
	__	_	__
IHG shareholders' equity	(858)	(450)	(1,308)
Non-controlling
interest	7	-	7
	__	__	__
Total equity	(851)	(450)	(1,301)
	__	__	__

Impact of IFRS 15 on the Group statement of cash flows

For the six months ended 30 June 2017

	As reported $m	IFRS 15 adoption $m	As restated $m
Profit for the period	219	29	248
Adjustments
reconciling profit for the period to cash flow from operations
before contract acquisition costs	94	(32)	62
	_____	_____	_____
Cash
flow from operations before contract acquisition costs	313	(3)	310
Contract
acquisition costs	-	(24)	(24)
	_____	_____	_____
Cash flow from operations	313	(27)	286
Interest
paid	(13)	3	(10)
Interest
received	1	-	1
Tax
paid on operating activities	(50)	-	(50)
	_____	_____	_____
Net cash from operating activities	251	(24)	227
	_____	_____	_____
Purchase
of intangible assets	(94)	24	(70)
Other
cash flows from investing activities	(85)	-	(85)
	_____	_____	_____
Net cash from investing activities	(179)	24	(155)
	_____	_____	_____
Net cash from financing activities	(142)	-	(142)
	_____	_____	_____
Net movement in cash and cash equivalents, net of overdrafts, in
the period	(70)	-	(70)
Cash
and cash equivalents, net of overdrafts, at beginning of the
period	117	-	117
Exchange
rate effects	20	-	20
	_____	_____	_____
Cash and cash equivalents, net of overdrafts, at end of the
period	67	-	67
	_____	_____	_____

Impact of IFRS 15 on basic and diluted earnings per ordinary share

For the six months ended 30 June 2017

	As reported cents	IFRS 15 adoption cents	As restated cents
Basic
earnings per ordinary share	111.7	14.8	126.5
Diluted
earnings per ordinary share	110.6	14.7	125.3

IFRS 9

With effect from 1 January 2018, the Group has adopted IFRS 9 'Financial Instruments'. IFRS 9 introduces new requirements for classification and measurement of financial assets and financial liabilities, impairment and hedge accounting.

The Group has applied the requirements of IFRS 9 retrospectively, except for hedge accounting.

The new rules for hedge accounting will be applied prospectively in line with the requirements of the standard. The Group has not applied any practical expedients available under IFRS 9. The Group has not restated prior periods as allowed by the transition provisions of IFRS 9 as restatement is impracticable without the use of hindsight.

The only impact of IFRS 9 on the Group financial statements is to reclassify the impact of historic impairments on equity instruments measured at fair value through other comprehensive income ('FVOCI'). These impairments were originally recorded in the Group income statement, but under IFRS 9 they would have been recorded in the unrealised gains and losses reserve and only transferred to retained earnings when the equity investments are derecognised. An adjustment of $18m has been made to the Group statement of changes in equity at 1 January 2018 to reflect this reclassification.

Changes to the Group's accounting policies resulting from the adoption of IFRS 9 are detailed in the Group's Annual Report and Form 20-F 2017.

In conjunction with implementation of IFRS 9, the Group has also changed its policy for providing for receivables which are more than 180 days past due. Previously, the Group held a provision for 100% of the previous month's aged receivables balances which were more than 180 days past due. As of 1 January 2018, these balances are written off the ledgers rather than fully provided, but continue to be actively pursued. This change resulted in a reduction of $67m to both the gross and provision for trade and other receivables balances at 31 December 2017, but has no impact on trade and other receivables as presented on the Group statement of financial position.

New standards issued but not yet effective

The Group continues to prepare for the implementation of IFRS 16 'Leases' in 2019. Based on the work completed to date, the standard is currently expected to result in an increase of lease liabilities of c$0.4bn (as at 31 December 2017), with an immaterial impact on profit after tax.

Presentational changes

In addition to the adoption of IFRS 15 and IFRS 9, these interim financial statements have been restated to reflect several other changes to the presentation of the Group's financial results.

Exceptional items

Exceptional items, which were previously shown in a separate column of the Group income statement, are now presented as a separate line item, with detailed disclosure in note 7.

New operating segments

See note 5.

Reporting of fee business results

Revenue and operating profit from management and franchise agreements, together with regional and Central overheads, have been combined into one category, 'fee business', to more closely reflect the way the business is now operated as a result of the ongoing reorganisation (see note 7).

Reporting of managed lease hotels

The revenue and operating profit of managed lease hotels, previously reported as part of the Group's managed operations, are now reported with owned and leased hotels. As the full results of these hotels are consolidated into IHG's income statement, this gives a clearer view of the reported fee business revenues and profits.

Overhead allocations

Minor changes have been made to the basis for allocating overheads to the regional and central operating segments.

InterContinental reservation fees and costs

Reservation fees and costs associated with the InterContinental brand have previously been recognised in IHG's income statement. These fees and costs have now been moved to the System Fund to align with the treatment of IHG's other brands. As this programme is not managed to make a profit or loss for IHG, there is no operating profit impact.

Prior year comparatives have been restated to reflect these presentational changes and the impact on the Group income statement for the six months ended 30 June 2017 is as follows:

	Managed leases $m	InterContinental Reservations $m	Total $m
Revenue
from fee business	(80)	(11)	(91)
Revenue
from owned, leased and managed lease hotels	80	-	80
System
Fund revenues	-	11	11
	_____	_____	_____
Total revenue	-	-	-
	_____	_____	_____
Cost
of sales	-	11	11
System
Fund expenses	-	(11)	(11)
	_____	_____	_____
Operating profit	-	-	-
	_____	_____	_____

A full reconciliation and analysis by operating segment of the impacts of IFRS 15 and the presentational changes outlined above are contained in a stock exchange announcement released on 17 April 2018. The announcement and supporting materials are available at www.ihgplc.com .

| 4. |
| --- |
| The
results of operations have been translated into US dollars at the
average rates of exchange for the period. In the case of sterling,
the translation rate is $1 = £0.73 (2017 $1 = £0.79). In
the case of the euro, the translation rate is $1 = €0.83
(2017 $1 = €0.92). Assets
and liabilities have been translated into US dollars at the rates
of exchange on the last day of the period. In the case of sterling,
the translation rate is $1 = £0.76 (2017 30 June $1 =
£0.77; 31 December $1 = £0.74). In the case of the euro,
the translation rate is $1 = €0.86 (2017 30 June $1 =
€0.88; 31 December $1 = €0.83). |

Segmental Information

With effect from 1 January 2018, an internal reorganisation resulted in the formation of a new operating segment, Europe, Middle East, Asia & Africa (EMEAA), bringing together the former segments of Europe and Asia, Middle East & Africa (AMEA). Kenneth Macpherson, previously CEO of Greater China, has been appointed CEO of the new EMEAA region. By bringing together two strong, established regions, there will be an increased focus on growth through increased agility and effectiveness.

Following this reorganisation, the management of the Group's operations, excluding Central functions, is organised within three geographical regions:

● Americas;

● Europe, Middle East, Asia & Africa (EMEAA); and

● Greater China.

These, together with Central functions, comprise the Group's four reportable segments. Each of the geographical regions is led by its own Chief Executive Officer.

No operating segments have been aggregated to form these reportable segments.

Central functions include costs of global functions including technology, sales and marketing, finance, human resources and corporate services; central revenue arises principally from technology fee income.

Management monitors the operating results of the geographical regions and Central functions separately for the purpose of making decisions about resource allocation and performance assessment. The System Fund is not viewed as being part of the Group's core operations as IHG is unable to profit from its activities. As such, its results are not regularly reviewed by the Chief Operating Decision Maker and it does not constitute an operating segment under IFRS 8.

Segmental performance is evaluated based on operating profit or loss and is measured consistently with operating profit or loss in the Consolidated Financial Statements, excluding exceptional items. Group financing activities and income taxes are managed on a group basis and are not allocated to reportable segments.

Comparatives have been restated for IFRS 15 (note 2) and presentational changes (note 3) to show segmental information on a consistent basis.

Revenue	2018 6 months ended 30 June	2017 6 months ended 30 June Restated
	$m	$m
Americas	514	491
EMEAA	233	215
Greater
China	69	55
Central	84	77
	_____	_____
Revenue
from reportable segments	900	838
System
Fund revenues	618	592
Reimbursement
of costs	595	534
	_____	_____
Total revenue	2,113	1,964
	_____	_____
All results relate
to continuing operations.

Profit	2018 6 months ended 30 June $m	2017 6 months ended 30 June Restated $m
Americas	328	318
EMEAA	94	78
Greater
China	32	24
Central	(48)	(50)
	_____	_____
Reportable
segments' operating profit	406	370
System
Fund	(12)	25
	____	____
Operating
profit before exceptional items	394	395
Exceptional
items (note 7)	(53)	(4)
	_____	_____
Operating profit	341	391
Net
financial expenses	(38)	(34)
	_____	_____
Profit before tax	303	357
	_____	_____
All
results relate to continuing operations.

Assets	2018 30 June $m	2017 31 December Restated $m
Americas	1,640	1,500
EMEAA	514	504
Greater
China	103	105
Central	560	541
	_____	_____
Segment assets	2,817	2,650
Unallocated
assets:
Non-current
tax receivable	24	16
Deferred
tax assets	68	75
Current
tax receivable	6	101
Cash
and cash equivalents	233	168
	_____	_____
Total assets	3,148	3,010
	_____	_____

Disaggregation of revenue

The following tables present Group revenues disaggregated by type of revenue stream and by operating segment:

6 months ended 30 June 2018	Americas $m	EMEAA $m	Greater China $m	Central $m	Total $m
Franchise
and base management fees	405	110	46	-	561
Incentive
management fees	8	43	23	-	74
Central
revenues	-	-	-	84	84
	_____	_____	_____	_____	_____
Revenue
from fee business	413	153	69	84	719
Revenue
from owned, leased and managed lease hotels	101	80	-	-	181
	_____	_____	_____	_____	_____
	514	233	69	84	900
	_____	_____	_____	_____
System
Fund revenues					618
Reimbursement
of costs					595
					_____
Total revenue					2,113
					_____

6 months ended 30 June 2017	Americas $m	EMEAA $m	Greater China $m	Central $m	Total $m
Franchise
and base management fees	390	95	35	-	520
Incentive
management fees	6	41	20	-	67
Central
revenues	-	-	-	77	77
	_____	_____	_____	_____	_____
Revenue
from fee business	396	136	55	77	664
Revenue
from owned, leased and managed lease hotels	95	79	-	-	174
	_____	_____	_____	_____	_____
	491	215	55	77	838
	_____	_____	_____	_____
System
Fund revenues					592
Reimbursement
of costs					534
					_____
Total revenue					1,964
					_____

7.	2018 6 months ended 30 June $m	2017 6 months ended 30 June $m
Exceptional items before tax
Administrative
expenses:
Reorganisation
costs (a)	(32)	-
Acquisition
and integration costs (b)	(6)	(4)
Pension
settlement cost (c)	(15)	-
	_____	_____
	(53)	(4)
	_____	_____
Tax
Tax on
exceptional items (d)	13	1
	_____	_____

| All
items above relate to continuing operations. These items are
treated as exceptional by reason of their size or
nature. | |
| --- | --- |
| a) | In
September 2017, the Group launched a comprehensive efficiency
programme which will fund a series of new strategic initiatives to
drive an acceleration in IHG's future growth. The programme is
centred around strengthening the Group's organisational structure
to redeploy resources to leverage scale in the highest opportunity
markets and segments. The programme is expected to be completed in
2019. Included in the $32m cost are consultancy fees of $15m and
severance costs of $11m. An additional $30m has been charged to the
System Fund. |
| b) | In
2018, relates to the acquisitions of Regent and the UK portfolio
(see note 17) and, in 2017, related to the integration of Kimpton
into the operations of the Group. Kimpton was acquired on 16
January 2015 and the integration programme was completed in
2017. |
| c) | Arises
from the termination of the US funded Inter-Continental Hotels
Pension Plan which involved certain qualifying members receiving
lump-sum cash-out payments with the remaining pension obligations
subject to a buy-out by an insurance provider through the purchase
of a group annuity contract. |
| d) | Relates
to tax impacts in relation to the above. |

| 8. |
| --- |
| The tax
charge on profit for the period from continuing operations,
excluding the impact of exceptional items (see note 7), has been
calculated using an interim effective tax rate of 23% (2017 32%)
analysed as follows: |

	2018	2018	2018	2017 Restated	2017 Restated	2017 Restated
6 months ended 30 June	Profit $m	Tax $m	Tax rate	Profit $m	Tax $m	Tax rate
Before
exceptional items and System Fund	359	(82)	23%	330	(107)	32%
System
Fund (including interest)	(3)	-		31	(3)
Exceptional
items (note 7)	(53)	13		(4)	1
	_____	_____		_____	_____
	303	(69)		357	(109)
	_____	_____		_____	_____
Analysed
as:
UK
tax		(6)			(6)
Foreign
tax		(63)			(103)
		_____			_____
		(69)			(109)
		_____			_____

| 9. |
| --- |
| Basic
earnings per ordinary share is calculated by dividing the profit
for the period available for IHG equity holders by the weighted
average number of ordinary shares, excluding investment in own
shares, in issue during the period. Diluted
earnings per ordinary share is calculated by adjusting basic
earnings per ordinary share to reflect the notional impact of the
weighted average number of dilutive ordinary share awards
outstanding during the period. Adjusted
earnings per ordinary share* is disclosed in order to show
performance undistorted by exceptional items, to give a more
meaningful comparison of the Group's performance.
Additionally, following the adoption of IFRS 15, earnings
attributable to the System Fund are excluded from the calculation
of adjusted earnings per ordinary share, as IHG has an agreement
with the IHG Owners Association to spend Fund income for the
benefit of hotels in the IHG System such that the Group does not
make a gain or loss from operating the Fund. IHG
also records an interest charge on the outstanding cash balance
relating to the IHG Rewards Club programme. These interest payments
are recognised as interest income for the Fund and interest expense
for IHG. The System Fund also benefits from the capitalisation of
interest related to the development of the next-generation Guest
Reservation System. As the Fund is included on the Group income
statement, these amounts are included in the reported net Group
financial expenses. Given that all results related to the
System Fund are excluded from the calculation of adjusted earnings
per ordinary share, these interest amounts are deducted from profit
available for equity holders. |

| Continuing and total operations | 2018 6 months ended 30 June | 2017 6
months ended 30 June Restated |
| --- | --- | --- |
| Basic earnings per ordinary share | | |
| Profit
available for equity holders ($m) | 234 | 248 |
| Basic
weighted average number of ordinary shares (millions) | 190 | 196 |
| Basic
earnings per ordinary share (cents) | 123.2 | 126.5 |
| | _ | |
| Diluted earnings per ordinary share | | |
| Profit
available for equity holders ($m) | 234 | 248 |
| Diluted
weighted average number of ordinary shares (millions) | 191 | 198 |
| Diluted
earnings per ordinary share (cents) | 122.5 | 125.3 |
| | | _ |
| Adjusted earnings per ordinary share | | |
| Profit
available for equity holders ($m) | 234 | 248 |
| Adjusting
items ($m): | | |
| System
Fund revenues and expenses | 12 | (25) |
| Interest
attributable to the System Fund | (9) | (6) |
| Tax
attributable to the System Fund | - | 3 |
| Exceptional
items before tax (note 7) | 53 | 4 |
| Tax on
exceptional items (note 7) | (13) | (1) |
| | | |
| Adjusted
earnings ($m) | 277 | 223 |
| Basic
weighted average number of ordinary shares (millions) | 190 | 196 |
| Adjusted
earnings per ordinary share (cents) | 145.8 | 113.8 |
| | _ | |
| Diluted
weighted average number of ordinary shares (millions) | 191 | 198 |
| Adjusted
diluted earnings per ordinary share (cents) | 145.0 | 112.6 |
| | __ | _____ |

See the Use of Non-GAAP measures section in the Interim Management Report.

| The
diluted weighted average number of ordinary shares is calculated
as: | 2018 millions | 2017 millions |
| --- | --- | --- |
| Basic
weighted average number of ordinary shares | 190 | 196 |
| Dilutive
potential ordinary shares | 1 | 2 |
| | _ | |
| | 191 | 198 |
| | __ | _____ |

10.	2018 cents per share	2017 cents per share	2018 $m	2017 $m
Paid
during the period:
Final
(declared for previous year)	71.0	64.0	130	127
Special	-	202.5	-	404
	_____	_____	_____	_____
	71.0	266.5	130	531
	_____	_____	_____	_____
Proposed
for the period:
Interim	36.3	33.0	69	62*
	_____	_____	_____	_____
*
Amount paid.
The
total number of shares held as treasury shares at 30 June 2018 was
6.9m.

Reconciliation of profit for the period to cash flow from operations before contract acquisition costs

	2018 6 months ended 30 June	2017 6 months ended 30 June Restated
	$m	$m
Profit
for the period	234	248
Adjustments
for:
Net
financial expenses	38	34
Income
tax charge	69	109
Depreciation and
amortisation	38	36
System
Fund depreciation and amortisation	16	17
Exceptional
items	83	4
Equity-settled
share-based cost	19	13
Other
non-cash items	12	7
Dividends from
associates and joint ventures	2	2
Increase in
deferred revenue	100	53
Increase in
contract costs	-	(1)
Retirement benefit
contributions, net of costs	(12)	-
Other
changes in net working capital	(217)	(208)
Cash
flows relating to exceptional items	(55)	(4)
	_____	--
Total
adjustments	93	62
	_____	_____
Cash
flow from operations before contract acquisition costs	327	310
	_____	_____

12.	2018 30 June	2017 31 December
	$m	$m
Cash
and cash equivalents	233	168
Loans
and other borrowings - current	(89)	(126)
Loans
and other borrowings - non-current	(1,946)	(1,893)
	_____	_____
Net debt*	(1,802)	(1,851)
	_____	_____
Finance
lease obligation included above	(233)	(231)
	_____	_____
* See
the Use of Non-GAAP measures section in the Interim Management
Report.

13.	2018 6 months ended 30 June	2017 6 months ended 30 June
	$m	$m
Net
increase/(decrease) in cash and cash equivalents, net of
overdrafts	115	(70)
Add
back cash flows in respect of other components of net
debt:
Increase
in other borrowings	(65)	(395)
	_____	_____
Decrease/(increase)
in net debt arising from cash flows	50	(465)
Non-cash
movements:
Finance
lease obligations	(2)	(2)
Increase
in accrued interest	(23)	(21)
Exchange
and other adjustments	24	(62)
	_____	_____
Decrease/(increase) in net debt	49	(550)
Net
debt at beginning of the period	(1,851)	(1,506)
	_____	_____
Net debt at end of the period	(1,802)	(2,056)
	_____	_____

14.
The
table below compares carrying amounts and fair values of the
Group's financial assets and liabilities at 30 June
2018:
	2018 30 June Carrying value $m	2018 30 June Fair value $m	2017 31 December Carrying value $m	2017 31 December Fair value $m
Financial assets:
Equity
securities measured at fair value through other comprehensive
income	120	120	-	-
Equity
securities available-for-sale	-	-	127	127
Financial
assets measured at amortised cost	149	149	-	-
Loans
and receivables	-	-	117	117
	_____	_____	_____	_____
	269	269	244	244
	_____	_____	_____	_____
Financial liabilities:
£400m
3.875% bonds 2022	(534)	(568)	(538)	(593)
£300m
3.75% bonds 2025	(403)	(420)	(406)	(441)
£350m
2.125% bonds 2026	(464)	(437)	(472)	(454)
Finance
lease obligations	(233)	(308)	(231)	(318)
Unsecured
bank loans	(328)	(328)	(262)	(262)
	_____	_____	_____	_____
	(1,962)	(2,061)	(1,909)	(2,068)
	_____	_____	_____	_____

| Cash
and cash equivalents, trade and other receivables, bank overdrafts,
trade and other payables and provisions are excluded from the above
tables as their fair value approximates book value. The fair value
of financial assets measured at amortised cost approximates book
value based on prevailing market rates. The fair value of the
£400m, £300m and £350m bonds is based on their
quoted market price. The fair value of finance lease obligations is
calculated by discounting future cash flows at prevailing interest
rates. The fair value of unsecured bank loans approximates book
value as interest rates reset to market rates on a frequent
basis. Equity
securities measured at fair value through other comprehensive
income are held in the Group statement of financial position at
fair value as set out in the following table. — 30 June 2018 | Level 1 $m | Level 2 $m | Level 3 $m | Total $m |
| --- | --- | --- | --- | --- |
| Assets | | | | |
| Equity
securities measured at fair value through other comprehensive
income: | | | | |
| Quoted
equity shares | 8 | - | - | 8 |
| Unquoted equity
shares | - | - | 112 | 112 |
| 31 December 2017 | Level 1 $m | Level 2 $m | Level 3 $m | Total $m |
| Assets | | | | |
| Equity
securities available-for-sale: | | | | |
| Quoted
equity shares | 10 | - | - | 10 |
| Unquoted equity
shares | - | - | 117 | 117 |
| Level
1: quoted (unadjusted) prices in active markets for identical
assets or liabilities. Level
2: other techniques for which all inputs which have a significant
effect on the recorded fair value are observable, either directly
or indirectly. Level
3: techniques which use inputs which have a significant effect on
the recorded fair value that are not based on observable market
data. | | | | |
| The
Level 3 equity securities relate to investments in unlisted shares
which are valued either by applying an average price-earnings (P/E)
ratio for a competitor group to the earnings generated by the
investment, or by reference to share of net assets if the
investment is currently loss-making or a recent property valuation
is available. The average P/E ratio for the period was 25.0
(31 December 2017 30.7) and a non-marketability factor of 30% (31
December 2017 30%) was applied. A 10%
increase in the average P/E ratio would result in a $2m increase
(31 December 2017 $2m) in the fair value of the investments and a
10% decrease in the average P/E ratio would result in a $2m
decrease (31 December 2017 $2m) in the fair value of the
investments. A 10% increase in net assets would result in a $8m
increase (31 December 2017 $7m) in the fair value of investments
and a 10% decrease in net assets would result in a $8m decrease (31
December 2017 $7m) in the fair value of the
investments. There
were no transfers between Level 1 and Level 2 fair value
measurements during the period and no transfers into and out of
Level 3. The
following table reconciles movements in instruments classified as
Level 3 during the period: | | | | |
| | | | | $m |
| At 1
January 2018 | | | | 117 |
| Additions | | | | 1 |
| Valuation
losses recognised in other comprehensive income | | | | (5) |
| Exchange
and other adjustments | | | | (1) |
| | | | | _ |
| At 30 June 2018 | | | | 112 |
| | | | | __ |

| 15. |
| --- |
| At 30
June 2018, the amount contracted for but not provided for in the
financial statements for expenditure on property, plant and
equipment and intangible assets was $126m (31 December 2017 $104m).
The Group has also committed to invest in a number of its
associates, with an estimated outstanding commitment of $5m at 30
June 2018 based on current forecasts (31 December 2017 $33m); a
$25m funding deposit was made in respect of an associate investment
during the period. A loan facility of $5m (31 December 2017
$5m) has also been made available to a hotel owner which remained
undrawn at 30 June 2018. In
limited cases, the Group may provide performance guarantees to
third-party hotel owners to secure management contracts. At 30 June
2018, the amount provided in the financial statements was $4m (31
December 2017 $6m) and the maximum unprovided exposure under such
guarantees was $48m (31 December 2017 $31m). The
Group may guarantee bank loans made to facilitate third-party
ownership of hotels in which the Group has an equity
interest. At 30 June 2018, there were guarantees of $54m in
place (31 December 2017 $54m). |

| 16. |
| --- |
| In
respect of the Kimpton and Americas Security Incidents (see page
139 of the IHG Annual Report and Form 20-F 2017), $5m remains the
best estimate of the cost of reimbursing the impacted card networks
for counterfeit fraud losses and related expenses, based on
settlements agreed to date and potential new claims. This
estimate involves significant judgement based on currently
available information and remains subject to change as new claims
are made and new information comes to light. The
Group may be exposed to investigations regarding compliance with
applicable State and Federal data security standards, and legal
action from individuals and organisations impacted by the security
incidents. Due to the general nature of the regulatory
enquires received and class action filings to date, it is not
practicable to make a reliable estimate of the possible financial
effects of any such claims on the Group at this time. To date, four
lawsuits have been filed against IHG entities relating to the
security incidents with one having being withdrawn by the
plaintiff. In
respect of the $5m provided in the Financial Statements, it is
expected that a proportion will be recoverable under the Group's
insurance programmes although this, together with any potential
recoveries in respect of the contingent liabilities detailed above,
will be subject to specific agreement with the relevant insurance
providers. Other From
time to time, the Group is subject to legal proceedings the
ultimate outcome of each being always subject to many uncertainties
inherent in litigation. The Group has also given warranties
in respect of the disposal of certain of its former
subsidiaries. It is the view of the Directors that, other
than to the extent that liabilities have been provided for in these
financial statements, it is not possible to quantify any loss to
which these proceedings or claims under these warranties may give
rise, however, as at the date of reporting, the Group does not
believe that the outcome of these matters will have a material
effect on the Group's financial position. Tax
related developments during the first half of 2018 have confirmed
that the Group no longer considers itself at risk of exposure to
the outcome of the EU's State Aid investigation into the UK's
Controlled Foreign Company rules. At 30
June 2018, the Group had no other contingent liabilities (31
December 2017 $nil). |

| 17. |
| --- |
| On 1
July 2018, the Group completed the acquisition of a 51% controlling
interest in a joint venture with Formosa International Hotels
Corporation to acquire the Regent Hotels and Resorts brand and
associated management contracts ('Regent'). Regent is a
leading luxury hotel brand which adds to IHG's brand portfolio at
the top end of the luxury segment. The consideration
comprises $39m in cash paid in three tranches of $13m; the first
was paid on completion, the second is due in 2021 and the third in
2024. The Group also has the option to acquire the remaining
49% stake in a phased manner from 2026 via a combination of put and
call options. The assets and liabilities acquired largely
comprise intangible assets, being the Regent brand and management
contracts, and goodwill. On 25
July 2018, the Group completed a deal to operate nine hotels under
long-term leases from Covivio (formerly Foncière des
Régions), which currently operate under the Principal and De
Vere Hotels brands. The deal establishes IHG as the
leading luxury hotel operator in the UK. Over the next one to
two years, the hotels will be rebranded to other brands in IHG's
luxury and upscale portfolio. Consideration of £7m was
paid on completion and a stamp duty liability of £10m will be
settled post-completion. The assets and liabilities acquired
initially identified comprise hotel operating assets, net working
capital liabilities and goodwill. Completion of the
acquisition of a further three leased hotels from Covivio is
expected in the coming weeks. Due to
the close proximity of the acquisition dates to the date of these
financial statements, the initial accounting for the business
combinations is incomplete and the Group is unable to provide a
quantification of the fair value of the acquired assets and
liabilities. The fair value exercise, which is dependent on
the receipt of third party valuation reports, is ongoing and the
Group will include the acquisition balance sheets in its full-year
results for 2018. Acquisition
transaction costs of $6m were incurred in the six months ended 30
June 2018 (see note 7), of which $5m was paid in the
period. |

| INDEPENDENT REVIEW REPORT TO INTERCONTINENTAL HOTELS GROUP
PLC |
| --- |
| Introduction We have been engaged by the Company to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the Group income
statement, Group statement of comprehensive income, Group statement
of changes in equity, Group statement of financial position, Group
statement of cash flows and the related notes 1 to 17. We have read
the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements. This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed. Directors' Responsibilities The half-yearly financial report is the responsibility of, and has
been approved by, the Directors. The Directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority. As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European
Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the
condensed set of financial statements in the half-yearly financial
report based on our review. Scope of Review We conducted our review in accordance with International Standard
on Review Engagements (UK and Ireland) 2410 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Auditing Practices Board for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly we do not express
an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes
us to believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 June 2018
is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority. Ernst & Young LLP London 6 August 2018 |

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	InterContinental Hotels Group PLC
	(Registrant)
By:	/s/
F. Cuttell
Name:	F.
CUTTELL
Title:	ASSISTANT
COMPANY SECRETARY
Date:	07 August 2018

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