Intercontinental Hotels Group PLC — Interim / Quarterly Report 2018

Feb 20, 2018

6-K 1 a3309f-edgar.htm FINAL RESULTS Document created using Blueprint(R) - powered by Issuer Direct - www.issuerdirect.com Copyright 2018 Issuer Direct Corporation Blueprint

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 20 February 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 Final Results dated 20 February 2018

Exhibit No: 99.1

IHG PLC - Preliminary Results for the year to 31 December 2017

Strong 2017 performance & initiatives set out to drive medium-term industry-leading rooms growth

Financial summary 1 — & Headlines	Reported — 2017	2016	% Change	Underlying 2 — 2017	2016	% Change
Revenue	$1,784m	$1,715m	4%	$1,633m	$1,553m	5%
Total Gross Revenue	$25,702m	$24,479m	5%	$25,942m	$24,479m	6%
Fee Revenue 3	$1,437m	$1,380m	4%	$1,449m	$1,380m	5%
Operating profit	$759m	$707m	7%	$759m	$700m	8%
Fee margin 3	50.4%	48.8%	1.6%pts	50.2%	48.8%	1.4%pts
Adjusted EPS	244.6¢	203.3¢	20%	245.1¢	200.9¢	22%
Basic EPS 4	306.7¢	195.3¢	57%
Total dividend per share	104.0¢	94.0¢	11%
Net debt	$1,851m	$1,506m

● Net system size of 798k rooms, up 4.0% (highest organic growth since 2009); 48k rooms added,17k removed.

● Room signings of 83k, (highest for nine years) takes the pipeline to 244k rooms. ~45% under construction.

● Global comparable RevPAR growth of 2.7%, with 4.0% in Q4.

1 All figures before exceptional items unless otherwise noted. 2 Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY16 exchange rates (CER). Underlying adjusted EPS based on underlying EBIT, effective tax rate, and reported interest at actual exchange rates. See the Business Review for definition of nonGAAP measures and reconciliation to GAAP measures. 3 Group result excluding owned & leased hotels, managed leases and significant liquidated damages. 4 After exceptional items.

| Keith Barr, Chief Executive of IHG, said: |
| --- |
| "We
delivered a strong performance in 2017, with RevPAR growth of 2.7%
and net system size growth of 4.0%. This has driven an 8% increase
in underlying operating profit and a 22% increase in underlying
EPS, and underpins our decision to raise the total dividend by 11%
for the year. In
recent years, we have built a powerful and effective enterprise
which has supported our transition to being fully asset light, and
driven strong performance across our 5,300 hotels. Today we
are announcing a series of new initiatives that build on our
well-established strategy and will drive an acceleration in our
growth rate. These
initiatives are focused around redeploying and refocusing resources
to leverage our scale; strengthening our loyalty programme;
continuing to prioritise digital and technological innovation;
enhancing our industry leading franchise proposition; strengthening
our existing brands; and adding new brands where we see the
greatest potential for growth. We
moved at pace to develop and roll-out the concept for our new
mainstream brand, avid hotels. Since September we have signed 75
hotels, with the first due to open later this year and a global
launch being planned. Building on this successful approach,
we will launch a new upscale conversion brand in 2018, leveraging
the power of our system to capture share of this significant
premium priced market. We will also build out our development
resource and capability in the sizeable global luxury segment,
where we are looking to acquire small luxury brand(s) to incubate
and grow. In
order for us to capitalise on the opportunities ahead, we are
undertaking a comprehensive efficiency programme to realise ~$125m
in annual savings for reinvestment to drive growth. This builds on
our ongoing work to relentlessly manage costs, which has led to
significant margin growth in recent years. We
remain positive in the outlook for the year ahead and we are
confident that our ambitious plans will deliver a meaningful change
in IHG's growth and drive industry-leading net rooms growth over
the medium term." |
| Strategic update - making our model work harder to deliver
medium-term industry-leading net rooms growth |
| a.
Build and leverage scale - New organisational design will redeploy resources to leverage our
scale better, and to accelerate our growth: a new regional
structure, integrated commercial & technology organisation, and
a new global marketing organisation. b.
Strengthen loyalty programme - Continue to innovate IHG Rewards Club to further differentiate our
offering and to leverage loyalty partnerships. c.
Enhance revenue delivery - Prioritise digital and technological innovation to drive increased
direct revenues e.g. Guest Reservation System. d.
Evolve owner proposition - Upweight owner support to accelerate growth; expand our
industry-leading franchise offer for Greater China; and evolve the
owner proposition and operating model for Kimpton Hotels &
Restaurants to further accelerate growth. e.
Optimise our preferred portfolio of brands for owners and
guests - Strengthen portfolio of existing brands; continued innovation to
drive accelerated growth. - Augment portfolio with new brands to match identified
opportunities: grow avid hotels to a scale position; launch an
upscale conversion brand in 2018; build out global luxury brand
portfolio, development resource and capability. f. Superior returns for
shareholders and owners: focus on driving long term,
sustainable growth. - Targeting ~$125m in annual savings, including system fund, by 2020
for reinvestment to drive growth. - $200m exceptional cash costs to achieve the savings; $31m in 2017
with the majority of the remainder in 2018. - Given this investment to drive growth, no additional capital return
will be paid in calendar year 2018. IHG's commitment to
return surplus funds to shareholders remains
unchanged. - Ongoing disciplined approach to capital allocation; capex guidance
of up to $350m gross per annum unchanged. - Growth initiatives expected to maintain future fee margin
progression broadly in line with long term average (~135bps per
annum). |
| IHG's New Strategic Initiatives |
| IHG has
consistently executed its clearly defined strategy and has
delivered market outperformance over the past 14 years, whilst
returning some $13bn to shareholders. To ensure we continue
to outperform, we are today announcing a series of strategic
initiatives that will enable us to redirect resources and focus on
areas where we can enhance our proven business model, to allow us
to deliver industry leading net rooms growth. |
| a.
Build and leverage scale |
| ●
IHG has designed a new organisational structure, effective 1
January 2018, which redeploys our resources to leverage our scale
and to accelerate our growth. There are three main
changes: 1.
New regional operating structure ●
Directing our focus and effort on those markets that matter
most, whilst leveraging best practices. ●
Americas and Greater China: remain largely unchanged,
recognising their importance as IHG's largest markets with a
continued focus on driving profitable system size
expansion. - Americas Regional CEO: Elie Maalouf (US based). - Greater China Regional CEO: Jolyon Bulley (China
based). ●
Europe, Middle East, Asia and Africa (EMEAA): new
region combining what was previously Europe and AMEA. - Leveraging scale across 72 countries to share best practice and
upweight investment in those markets with highest growth
potential. - Operating as four geographically-focused business units, empowered
to deliver locally, whilst leveraging IHG's global systems and
processes. - Clear focus on driving accelerated growth aligned to the most
valuable market opportunities. - EMEAA Regional CEO: Kenneth Macpherson (UK based). ●
Information on IHG's regions: |

| | Americas | Greater
China | EMEAA |
| --- | --- | --- | --- |
| Market
Size (rooms revenue) | ~$190bn | ~$50bn | ~$200bn |
| Market
Growth to 2025 (rooms revenue) 1 | ~$90bn | ~$30bn | ~$120bn |
| % of
market branded 2 | 65% | 58% | 42% |
| IHG's
share of total market | 7% | 4% | 2% |
| IHG's
share of active pipeline | 13% | 21% | 7% |
| % of
IHG's system | 62% | 13% | 25% |
| % of
IHG's pipeline | 45% | 29% | 26% |
| % of
IHG's profit | 74% | 6% | 20% |
| Fee
EBIT growth (2014-17) | 18% | 24% 3 | 11% |

| Note:
Comparables for 2016 and 2017 reflecting (i) this new regional
reporting structure, (ii) the impact of IFRS 15, and (iii) the
merger of the managed and franchised and regional cost lines for
each region will be provided on 17 April 2018. Paul
Edgecliffe-Johnson, CFO, will host a session to discuss these
changes at 9.30 GMT the same day. This will be held at
Goldman Sachs, Rivercourt, 120 Fleet Street, London, EC4A
2BE. The event will also be webcast live. 2.
Integrated Commercial and Technology organisation ●
B2B Sales, booking channels, revenue management integrated
with technology to maximise revenue delivery. ●
Will enable us to increase the speed at which we deploy new
products and services. ●
Will result in improved efficiency through removal of
duplication across functions. ●
Chief Commercial & Technology Officer: Eric Pearson (US
based). |
| --- |
| 3.
Global Marketing organisation ●
Brings together Brands, IHG Rewards Club and Marketing into
one global function and strengthens our capabilities in these areas
to drive agility and efficiency. ●
Creation of three distinct brand categories: mainstream;
upscale; and luxury, to improve performance and accelerate
growth. ●
Leverage shared services to maximise scale benefits and
drive more effective marketing. ●
Chief Marketing Officer: Claire Bennett (US
based). |

1 2 3 Excludes a small number of one-off items that contributed approximately $5m to EBIT in 2014 (as previously disclosed)

| b.
Strengthen Loyalty Programme |
| --- |
| ● IHG Rewards
Club is well positioned as an industry leading loyalty
programme: - 11% increase in members in 2017, up 34% over three
years. - Delivers 42.5% of rooms revenues into our hotels (up 3.5%pts over
three years). ●
We have taken significant steps to enhance our loyalty
offer in recent years: - 2015: Launched Spire
Elite , a new top tier status, which now delivers one-quarter
of our loyalty revenue. - 2016: Launched Your Rate
by IHG Rewards Club , our exclusive member pricing
initiative. Drove 3.4%pts uplift in direct channel growth and
2.0%pt uplift in retail segment growth in the 12 months after
launch. - 2017: Launched numerous major partnerships e.g. Amazon
Kindle, Fuel Rewards, OpenTable and Grubhub. ●
Looking ahead we will continue to innovate IHG Rewards
Club to create a more personalised and differentiated offering and
to further leverage loyalty partnerships. |
| c.
Enhance revenue delivery |
| ●
IHG's revenue delivery enterprise supports 5,300+ hotels
across ~100 countries and delivers: - 76% of room
revenues (up 5%pts over three years). - Digital (web and mobile revenue) is our largest channel and
delivers 22% of room revenues, totalling $4.6bn; with mobile the
fastest growing component, more than doubling its revenue over 3
years to >$2bn. ●
We have piloted IHG
Concerto into >225 hotels across all
regions: - Cloud based technology platform incorporating multiple capabilities
into a seamless hotel management tool. - Initial functionality is IHG's new Guest Reservation System (developed in conjunction with Amadeus) and our proprietary revenue
management solutions. - In the future, it will comprise an entire suite of hotel solutions
including property management, sales & catering and point of
sale systems. - On track to complete roll out end of 2018/beginning of
2019. ●
We will continue to innovate in the digital and technology
space , focusing on initiatives we can scale and which make a
meaningful impact to our guests. Recent examples
include: - Mobile check-out :
live in >3,000 US hotels. 90% of guests reported an improved
checkout experience. - Alipay Integration :
IHG is the first hotel company to have Alipay fully integrated into
its app; 70% of our hotels in Greater China can now take payment
via Alipay from within the app. - IHG Connect seamless Wi-Fi
logon : Implemented or being installed in >3,000 hotels in
the Americas and now scaling for global roll-out. Driving
internet Guest Love uplifts of ~5%pts. |
| d.
Evolve owner proposition |
| ●
IHG's enterprise is designed to deliver an industry
leading owner proposition; optimising owner returns is at the heart
of our strategy: - High value
brands: ■
Higher brand awareness and guest satisfaction, lower financing
costs, scalable & flexible design solutions, turn-key
procurement solutions for effective & efficient build out,
design & engineering support. - Efficient costs of
operation: ■
Leading operations support, hotel standard operating procedures,
IHG Marketplace purchasing platform, industry leading suite of
technology solutions, IHG Green Engage online sustainability
tool. - High quality revenue
generation: ■
Centrally negotiated OTA and travel agent commissions, higher
proportion of direct revenues e.g. via Your Rate, online
distribution and performance marketing, revenue management for
hire, the power of IHG Rewards Club. ●
We are now enhancing
and expanding this to unlock further growth: - Increasing investment in
development resources aligned to our focus
markets. - Increased owner
support to facilitate faster hotel openings and enhanced
owner relationships. - Greater China :
building on the success of Holiday Inn Express Franchise Plus, we
have now extended our franchise offer to our Holiday Inn and Crowne
Plaza brands in the region. Four agreements to date,
including a return to IHG's system for Holiday Inn Beijing Lido,
which opened as our first ever hotel in Greater China in
1984. - Kimpton Hotels &
Restaurants : evolving the owner proposition and operating
model to further accelerate growth. |

| e.
Optimise our portfolio of brands for owners and guests |
| --- |
| 1. Strengthening our existing brands We have restructured our brand organisation into categories to
maximise synergies & efficiencies and to drive performance and
we are innovating all of our brands to ensure they stay fresh and
relevant and continue to drive growth: ● Mainstream; 551k rooms open
(175k pipeline room), delivering $14bn rooms revenue in
2017: - Holiday Inn : modern, high impact new guest
room and public area design; new food & beverage solutions, new
brand identity and global marketing campaigns. - Holiday Inn Express :
fresh new guest room design; complete overhaul of breakfast
offering; new brand identity and global marketing
campaigns. - Candlewood Suites & Staybridge
Suites : comprehensive update to interior design over the
next 18 months, increased investment in extended stay
marketing. ● Upscale: 129k rooms open (43k
pipeline rooms), delivering $4bn rooms revenue in
2017: - Crowne Plaza : $200m Accelerate
programme underway in the Americas to strengthen the brand. Working
to transform the guest experience globally with new design features
such as Plaza Workspace and WorkLife Room, new service philosophy
and new food and beverage standards. - HUALUXE : the brand has been
adapted and evolved to ensure it remains competitive, with less
focus on food and beverage. With 7 hotels open and 21 in the
pipeline, it is now well positioned for future
growth. - EVEN Hotels : expanding into new
markets with the 1 st signing of a
multi-unit agreement to develop 10-15 hotels across Australia and
New Zealand. Greater China brand debut with three signings in
2017. - Hotel Indigo : expanding its
footprint with highest openings for 5 years and accessing new
neighbourhood locations, including the first signing for Japan and
our fourth for London, located in Leicester
Square. ● Luxury: 79k rooms open (20k
pipeline rooms), delivering $4bn rooms revenue in
2017: - InterContinental Hotels &
Resorts : rolling out enhanced Club InterContinental
Experience; new design style and visual identity guidelines;
launched a luxury & lifestyle sales team dedicated to luxury
B2B; multi-year global marketing campaign "Live the
InterContinental Life" under way. - Kimpton Hotels &
Restaurants : driving global growth - record year for US
openings, with 1.3k rooms added. Signings in Greater China
and South East Asia, with several further deals in progress which
will secure our presence for the brand in ten major markets around
the world. Leveraging design and food and beverage best practices
into IHG's network; Kimpton Karma fully integrated into IHG Rewards
Club. |
| 2. Augment portfolio with new brands to match
identified opportunities We have grown our brand portfolio to 13 brands, totalling almost
800k rooms, with a further 244k rooms in the pipeline. We are
focused on broadening our portfolio of brands with a highly
targeted, insight-driven approach to create the optimum mix of
brands for both our owners and guests. To do this, we take a
rigorous approach to assessing and pursuing the potential for new
brand opportunities: - We aim to tap into high value segments which have significant growth
potential. - We ensure that the opportunity is very attractive for owners; and
allows them to add material supply at high ROI. - We ensure that IHG is advantaged to win in the identified space, and that we are able to
drive superior revenue delivery, at a premium price point. This approach has enabled us to identify new opportunities in each
of our brand categories: ● Mainstream: - ~$115bn global segment with ~$65bn
growth potential to 2025. - Owners with new build opportunities
looking for a streamlined, lower labour cost operating model with
low risk, attractive returns and low cost of
investment. - IHG is the clear global leader in the
segment, with 16% of existing global market share and 26% of
pipeline. - We launched avid hotels in the US in
September 2017 and the results to date are exceeding our
expectations: a.
75 signings to date, with first hotel due to open in Oklahoma City
in the third quarter of 2018. b.
First signings announced in Canada and the brand is also being
launched in Mexico. c.
Global launch of the brand is now being planned. |

| ● Upscale: - ~$40bn global segment with ~$20bn growth potential to
2025. - Existing hotel owners looking for access to low cost, high demand
revenue delivery systems. - IHG is advantaged by its industry leading revenue management &
reservation solutions, a strong B2B sales offer and powerful
loyalty programme. - We will be launching an upscale conversion brand in 2018; initially
focussed on our EMEAA region. |
| --- |
| ● Luxury: - ~$60bn global segment with ~$35bn growth potential to
2025. - Owners with existing hotels and new build opportunities looking for
a superior product that generates sizeable returns per asset in a
superior real estate location. - IHG is advantaged as the largest global Luxury brand operator with
InterContinental Hotels & Resorts. - We are creating a new "Luxury Division" to better leverage and
enhance our heritage and expertise to redefine operational
excellence in this segment. - Significant number of owners wanting to partner with IHG on another
luxury brand, at a higher price point. - We will address this via the acquisition of small, asset light
luxury brand(s) which we will incubate and grow. |

2017 Results in Detail

| Americas - Stronger US RevPAR performance; avid hotels' momentum
accelerates |
| --- |
| Comparable
RevPAR increased 1.6% (Q4: up 3.5%), driven by 1.2% rate growth. US
RevPAR was up 1.2% in the year, with 3.0% growth in the fourth
quarter, which included the ongoing benefit from demand in
hurricane impacted areas and a small favourable impact from the
reversal of calendar shifts from the previous quarter. In the
fourth quarter, Canada benefitted from strong corporate and group
demand with RevPAR growth of 8.9%; whilst Mexico grew 2.5%,
impacted by the previous quarter's earthquake. Reported
revenue increased 3% (CER 4%) and reported operating profit
increased 2% (CER 3%), whilst underlying 1 revenue and
operating profit were up 4% and 3%, respectively. Underlying 1 franchise operating profit was up 1%, as incremental royalties from
RevPAR and net rooms growth were partly offset by a delay in the
recognition of an annual payroll tax credit, the impact of the
previously disclosed Crowne Plaza Accelerate financial incentives,
and the annualisation of our investment in the Americas development
team. Underlying 1 managed operating profit was up 11%, but normalising for notional
foreign exchange translation impacts in Venezuela, was up 2%. This
was driven by 5% rooms growth and lower costs associated with our
20% interest in the InterContinental New York Barclay, offset by
lower hotel termination fees and a small performance guarantee
payment at one property. Underlying 1 owned revenue and operating profit increased 10% and 21%
respectively due to North American inbound business to Holiday Inn
Aruba and the ramp up of EVEN Hotels Brooklyn. Regional
overheads benefitted $2m year on year from lower than expected
claims in our US healthcare programme (2017: $5m surplus, 2016: $3m
surplus). We
opened 22k rooms (190 hotels), our highest level of hotel openings
since 2010, with two thirds driven by our Holiday Inn Brand Family.
As we continue to focus on a high-quality estate, we removed 12k
rooms (86 hotels). We signed 37k rooms (365 hotels), including 16k
Holiday Inn Express rooms, up 15% year on year. Momentum for avid
hotels continues to be ahead of expectations, with 44 signings
during 2017 and our first ground break in Oklahoma City which we
expect to open in the third quarter of 2018. Since the end of 2017
we have signed a further 31 deals, including our first in
Canada. 2018: We
continue to make progress with our $200m Crowne Plaza Accelerate
investment plan to refresh the brand and enhance its performance.
As previously disclosed, as part of this initiative we are
providing financial incentives to owners that have successfully
implemented the new brand hallmarks. These reduced fees by $2m in
2017, and in 2018 we expect the negative fee impact to total $7m
(incremental $5m). We
expect to recognise the $4m payroll tax credit that was delayed
from 2017, in early 2018 (this totalled $6m in 2016 and won't be
repeated past 2018). We do
not expect our US healthcare programme to be in a surplus position
again in 2018, which will result in a $5m increase to regional
costs year on year. |
| Europe - Double digit profit growth driven by strong UK RevPAR and
recovery in terror impacted markets |
| Comparable
RevPAR increased 6.3% (Q4: up 5.6%) driven by rate up 3.4%. UK
RevPAR growth of 4.5% in the year was ahead of the industry, with
strong growth in both the Provinces (up 4.6%) and London (up 4.3%).
Fourth quarter RevPAR in London was down 1.7%, due to strong
comparables and lower US inbound demand. In Germany, RevPAR grew by
2.1% in the year and 1.0% in the fourth quarter due to more
normalised trade fair activity relative to 2016. Recovery in
markets previously impacted by terror attacks led to RevPAR growth
in the year of 7.1% in France and double digit growth in Belgium
and Turkey. Strong demand in Southern European markets led to
double digit growth in the year. Reported
revenue increased 6% (6% CER) and reported operating profit
increased 15% (13% CER). On an
underlying 1 basis, revenue
increased 10% and operating profit increased 16%, driven by strong
trading, 3.0% rooms growth and effective cost control to maintain
overheads in line with the prior year. We
opened 5k rooms (26 hotels) and signed 9k rooms (59 hotels),
including the 74-room Hotel Indigo Venice - Sant Elena. In Germany,
we opened a record 2k rooms (11 hotels), and signed 4k rooms (19
hotels), a fourth consecutive record year. |
| AMEA - Double digit rooms' growth; strong trading outside the
Middle East |
| Comparable
RevPAR increased 1.5% (Q4: up 2.6%), as occupancy gains of 1.7%pts
offset rate declines of 0.9%. Outside of the Middle East, RevPAR
was up 4.4%. In Australasia, RevPAR was up 5.8% benefitting from
strong domestic travel, whilst South East Asia was up 5.5%, driven
by international arrivals in Indonesia and Thailand. Trading
conditions in the Middle East remained challenging, with RevPAR
down 4.1%. Total
RevPAR declined 3.0% (Q4: down 4.5%) due to the increasing mix of
new rooms opening in developing markets. Reported
revenue increased 3% (CER 5%) and reported operating profit
increased by 6% (CER 10%). On an
underlying 1 basis, revenue was
up 5% and operating profit increased 12%, driven by 12.6% rooms
growth and a 5% reduction in overheads. We
opened a record 11k rooms (26 hotels) in 2017. This included 3.5k
rooms in Makkah, Saudi Arabia, the remaining proportion of the 5k
room signing we announced in 2015, expected to generate ~$1m in
annualised fees. We signed 13k rooms (63 hotels), including the
rebranding of a portfolio of 14 properties (~2k rooms) in India to
the Holiday Inn Express brand, and 1k rooms in
Australia. |
| Greater China - Continued industry outperformance; record room
openings |
| Comparable
RevPAR increased 6.0% (Q4: up 7.3%) outperforming the Greater China
market. In mainland China RevPAR was up 6.6% (Q4: up 6.7%), whilst
Hong Kong and Macau were up 2.7% and 11.4%, respectively. RevPAR in
mainland tier 1 cities increased 6.9%, benefitting from strong
transient, corporate and meeting demand. Tier 2-4 cities benefitted
from strong meeting demand and weak comparables in the second half
of the year, as RevPAR grew 6.5%, principally driven by
occupancy. As we
continued to increase our penetration in higher growth, lower
RevPAR cities, full year total RevPAR was up 1.4%. Reported
revenue increased by 8% (CER 9%) and reported operating profit
increased by 16% (CER 16%). Underlying 1 revenue increased by 9% and underlying operating profit increased
by 16%, driven by strong trading in mainland China and 9% rooms
growth as well as robust cost control as we continue to leverage
the scale of the operational platform we have built in Greater
China. We
opened 11k rooms (43 hotels), a record for the region, bringing
total room count above the 100k rooms (>300 hotels) threshold
for the first time. Holiday Inn Express also passed a significant
milestone, with more than 100 hotels now open. Signings for the
year totalled 24k rooms (118 hotels), our highest for the region in
ten years. We
continue to see strong demand for our Franchise Plus offer for
Holiday Inn Express, with full year signings of 54 hotels. In the
fourth quarter, we expanded our franchise offering to include
Crowne Plaza and Holiday Inn, and have seen strong owner demand,
including the signing of the 433-room Holiday Inn Beijing
Lido. |

1 Excluding owned asset disposals, managed leases and significant liquidated damages at constant FY16 exchange rates (CER). See the Business Review for definition of non-GAAP measures and reconciliation to GAAP measures.

| Highly cash generative business with disciplined approach to cost
control and capital allocation |
| --- |
| Fee margin growth through strategic cost management ●
Group fee margin of 50.4%, increased 1.6%pts (1.4%pts
CER) due to our ongoing relentless focus on cost
management. ●
Growth initiatives expected to maintain future fee
margin progression broadly in line with long term average (~135bps
per annum). ●
Reported central overheads were reduced by $18m, ($15m
CER); benefitting from an increase in central revenues and the
impact of our cost management programme, including the initial
benefits of our group reorganisation. Strong free cash flow generation fuelling investment ●
Free cash flow 1 of $516m was broadly
flat year on year, after adjusting for $95m received in 2016 on
behalf of the system fund from the renegotiation of long term
partnership agreements and $31m of exceptional cash costs in 2017
incurred in relation to the group wide efficiency programme (2016
free cash flow: $646m). ●
Net capital expenditure 1 of $227m (2016:
$185m) with $342m gross (2016: $241m). This comprised: $115m
maintenance capex and key money; $85m gross recyclable investments;
and $142m system funded capital investments; offset by $79m net
proceeds from asset recycling and a $36m system fund depreciation
and amortisation inflow via working capital. ●
Capex guidance unchanged at up to $350m gross, and
$150m net, per annum into the medium term. ●
$67m outflow relating to the initial system fund
surplus spend down, driven by additional investment behind
marketing, loyalty and technology. We expect to fully spend the
remaining surplus in 2018; with $60m on marketing, loyalty and
technology, and the balance included within the exceptional cash
costs associated with the efficiency programme. Efficient balance sheet provides flexibility ●
Financial position remains robust, with an on-going
commitment to an investment grade credit rating. ●
Year-end net debt of $1,851m (including $231m finance
lease on InterContinental Boston), up $345m on 2016 as strong free
cash flow from operations was offset by: payment of the $404m
special dividend in May and $189m in ordinary dividends; $227m net
capital expenditure and $117m adverse impact from foreign exchange
and other non-cash items. Net debt to EBITDA now stands at 2.1x
(LTM). Dividend growth demonstrates confidence in future growth
prospects ●
Proposed 10.9% increase in the final dividend to
71.0¢, taking the total dividend for the year up 10.6%,
reflecting IHG's confident outlook. |
| Foreign exchange |
| Cost
benefits from the devaluation of sterling against the dollar were
offset by revenue impacts of the strong dollar against a number of
currencies, increasing reported profit for the year by
$2m 2 . Currency
markets continue to be volatile; if the average exchange rate
during January 2018 had existed throughout 2017, 2017 reported
profit would have increased by a further $3m (with $2m of that in
H1). A full
breakdown of constant currency vs. actual currency RevPAR by region
is set out in Appendix 2. |
| Interest, tax and exceptional items |
| Interest: Net
financial expenses of $85m were lower than in 2016 ($87m) due to
the impact of the weaker pound on translation of sterling interest
expense and a reduction in the average interest rate payable on
bond debt following the 2016 refinancing, offset by higher average
net debt levels in 2017. |
| Tax: ●
Effective rate for 2017 was 30%
(2016: 30%). The impact of US tax reform is expected to have a
mid-to-high single digit percentage point benefit on our Group
effective tax rate from 2018 onwards, taking our effective tax rate
to the mid to low 20s percentage point range. ●
The 2018 full year cash tax rate
is expected to be reduced to the high single digit percentage point
range due to tax payments made on account in 2017. Although
we may see some short-term volatility in the underlying cash tax
rate thereafter, we 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 $4m (credit) and comprise: $73m gain on
sale of our interest in Avendra; $15m charge related to the Kimpton
integration, $18m of impairment charges related to the Barclay
associate which owns InterContinental New York Barclay and $36m of
IHG P&L costs incurred in relation to the group wide efficiency
programme. The majority of the $116m exceptional tax credit relates
to a $108m exceptional tax credit resulting from significant US tax
reform, which will be realised in cash terms over a long period
from 2018. |

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

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

Appendix 1: RevPAR Movement Summary
	Full Year 2017			Q4 2017
	RevPAR	Rate	Occ.	RevPAR	Rate	Occ.
Group	2.7%	1.1%	1.1%pts	4.0%	2.0%	1.4%pts
Americas	1.6%	1.2%	0.3%pts	3.5%	2.1%	0.9%pts
Europe	6.3%	3.4%	2.0%pts	5.6%	3.3%	1.6%pts
AMEA	1.5%	(0.9)%	1.7%pts	2.6%	(0.1)%	2.0%pts
G.
China	6.0%	0.4%	3.5%pts	7.3%	2.8%	2.9%pts
Appendix 2: Comparable RevPAR movement at constant exchange rates
(CER) vs. actual exchange rates (AER)
	Full Year 2017			Q4 2017
	CER	AER	Difference	CER	AER	Difference
Group	2.7%	2.4%	0.3%pts	4.0%	5.7%	(1.7)%pts
Americas	1.6%	1.7%	(0.1)%pts	3.5%	3.9%	(0.4)%pts
Europe	6.3%	5.7%	0.6%pts	5.6%	13.1%	(7.5)%pts
AMEA	1.5%	0.5%	1.0%pts	2.6%	3.0%	(0.4)%pts
G.
China	6.0%	4.6%	1.4%pts	7.3%	9.8%	(2.5)%pts
Appendix 3: Full Year System & Pipeline Summary
(rooms)
	System					Pipeline
	Openings	Removals	Net	Total	YoY%	Signings	Total
Group	48,187	(17,247)	30,940	798,075	4.0%	83,481	244,146
Americas	21,615	(12,148)	9,467	497,460	1.9%	37,419	109,104
Europe	4,917	(1,571)	3,346	113,415	3.0%	9,241	25,988
AMEA	11,085	(1,475)	9,610	85,661	12.6%	12,620	37,370
G.
China	10,570	(2,053)	8,517	101,539	9.2%	24,201	71,684
Appendix 4: Full Year financial headline

Operating Profit $m	Total — 2017	2016	Americas — 2017	2016	Europe — 2017	2016	AMEA — 2017	2016	G. China — 2017	2016	Central — 2017	2016
Franchised	707	693	606	600	85	78	14	12	2	3	-	-
Managed	255	239	65	64	26	22	91	89	73	64	-	-
Owned
& leased	31	26	29	24	-	-	2	2	-	-	-	-
Regional
overheads	(124)	(123)	(56)	(55)	(25)	(25)	(20)	(21)	(23)	(22)	-	-
Profit pre central overheads	869	835	644	633	86	75	87	82	52	45	-	-
Central
overheads	(110)	(128)	-	-	-	-	-	-	-	-	(110)	(128)
Operating profit before exceptional items	759	707	644	633	86	75	87	82	52	45	(110)	(128)
Exceptional
items	4	(29)	37	(29)	(2)	-	(2)	-	-	-	(29)	-
Total operating profit	763	678	681	604	84	75	85	82	52	45	(139)	(128)

Appendix 5: Reported operating profit movement before exceptional items at actual and constant exchange rates

Reported	Total** — Actual	CER**	Americas — Actual*	CER**	Europe — Actual*	CER**	AMEA — Actual*	CER**	G. China — Actual*	CER**
Growth/
(decline)	7%	8%	2%	3%	15%	13%	6%	10%	16%	16%

Appendix 6: Underlying operating profit movement before exceptional items

Underlying****	Total***	Americas	Europe	AMEA	G. China
Growth/
(decline)	8%	3%	16%	12%	16%

| Exchange rates: | GBP:USD | EUR:USD | * US
dollar actual currency |
| --- | --- | --- | --- |
| 2017 | 0.78 | 0.89 | **
Translated at constant FY 2016 exchange rates 1 |
| 2016 | 0.74 | 0.90 | ***
After central overheads |
| | | | **** At
CER and excluding: owned asset disposals, results from managed
lease hotels and significant liquidated damages (see below for
definitions) 1 1 For definition of non-GAAP measures and reconciliation to
GAAP measures see the Business Review. |

| Appendix 6: Definitions |
| --- |
| CER: constant exchange rates with FY 2016 exchange rates
applied to FY 2017. Comparable RevPAR: Revenue per available room for hotels
that have traded for all of 2016 and 2017, reported at
CER. Fee revenue: Group revenue excluding owned and leased
hotels, managed leases and significant liquidated
damages. Fee margin: adjusted for owned and leased hotels, managed
leases and significant liquidated damages. Managed lease hotels: properties structured for legal
reasons as operating leases but with the same characteristics as
management contracts Americas: Revenue FY 2017 $34m; FY 2016 $34m; EBIT FY 2017
$nil, FY 2016 $nil. Europe: Revenue FY 2017 $77m; FY 2016 $77m; EBIT FY 2017 $0m, FY 2016 $2m. AMEA: Revenue FY 2017 $52m;
FY 2016 $51m; EBIT FY 2017 $4m, FY 2016 $5m. Significant liquidated damages: $nil in FY 2017; $nil in FY
2016. Total gross revenue: total rooms revenue from franchised
hotels and total hotel revenue from managed, owned and leased
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 2016 or 2017, reported at
CER. |

| Appendix 7: Investor information for 2017 Final
dividend — Ex-dividend date: | 29
March 2018 | 3 April
2018 | 11 May
2018 |
| --- | --- | --- | --- |
| Dividend payment: | ADRs:
71.0 cents per ADR; the corresponding amount in Pence Sterling per
ordinary share will be announced on 23 rd April 2018,
calculated based on the
average of the market exchange rates for the three working days
commencing 18 th April . 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): | | +44
(0)1895 512 176 | +44
(0)7527 419 431 |
| Media
Relations (Yasmin Diamond; Zoe Bird): | | +44
(0)1895 512 097 | +44
(0)7527 424 046 |
| Presentation for Analysts and Shareholders: A
presentation of the results with Keith Barr, Chief Executive
Officer and Paul Edgecliffe-Johnson, Chief Financial Officer will
commence at 9.30am on 20 February 2018 at Goldman Sachs,
Rivercourt, 120 Fleet Street, London, EC4A 2BE. The reception team
will be issuing passes to pre-registered guests from 8:45am, and
after the presentation there will be an opportunity to put your
questions to the presenters. There
will be a live audio webcast of the results presentation on the web
address: http://www.investis-live.com/ihg/5a65e01cf10c5e0d00277ea0/ukhy . 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. | | | |

| There
will also be a live listen only dial-in facility, details are
below: | |
| --- | --- |
| UK: | +44 (0)
203 936 2999 |
| US: | +1 845
709 8568 |
| All
other locations: | +44 (0)
203 936 2999 |
| Participant
Access Code: | 41 66
06 |
| A
replay will be available following the event, details are
below: | |
| UK: | +44 (0)
203 936 3001 |
| US: | +1 845
709 8569 |
| All
other locations: | +44 (0)
203 936 3001 |
| Replay
pin | 04 63
03 |

US conference call and Q&A:
There
will be an additional conference call, primarily for US investors
and analysts, with Keith Barr and Paul Edgecliffe-Johnson, at
2.00pm (London time) 9.00am (New York time) on 20 February
2018. There will be an opportunity to ask questions during a
Q&A session.
Dial-in
details as follows:
UK:	+44 (0)
203 936 2999
US:	+1 845
709 8568
All
other locations:	+44 (0)
203 936 2999
Participant
Access Code:	15
88 24
A
replay of the 2.00pm conference call will be available following
the event, details are below:
UK:	+44 (0)
203 936 3001
US:	+1 845
709 8569
All
other locations:	+44 (0)
203 936 3001
Replay
pin	39 96
35

| Website: The full release and supplementary data will be available on our
website from 7:00am (London time) on 20 th February. The web address is www.ihgplc.com/prelims17. |
| --- |
| Notes to Editors: IHG ® (InterContinental
Hotels Group) [LON:IHG,
NYSE:IHG (ADRs)] is a global organisation with a broad portfolio of
hotel brands, including InterContinental ® Hotels &
Resorts , Kimpton ® Hotels &
Restaurants , Hotel
Indigo ® , EVEN ® Hotels , HUALUXE ® Hotels and
Resorts , Crowne Plaza ® Hotels &
Resorts , 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 5,300 hotels and
nearly 800,000 guest rooms in almost 100 countries, with nearly
1,700 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. |

This Business Review provides a commentary on the performance of InterContinental Hotels Group PLC

(the Group or IHG) for the financial year ended 31 December 2017 and should be read in conjunction with the Non-GAAP reconciliations.

GROUP PERFORMANCE

Group results	12 months ended 31 December — 2017	2016	%
	$m	$m	change
Revenue
Americas	1,025	993	3.2
Europe	241	227	6.2
AMEA	244	237	3.0
Greater
China	126	117	7.7
Central	148	141	5.0
	____	____	___
	1,784	1,715	4.0
	____	____	___
Operating profit before exceptional items
Americas	644	633	1.7
Europe	86	75	14.7
AMEA	87	82	6.1
Greater
China	52	45	15.6
Central	(110)	(128)	14.1
	___	____	___
	759	707	7.4
Exceptional
items	4	(29)	113.8
	___	___	___
Operating
profit	763	678	12.5
Net
financial expenses	(85)	(87)	2.3
	___	___	___
Profit
before tax	678	591	14.7
	___	___	___
Earnings per ordinary share
Basic	306.7¢	195.3¢	57.0
Adjusted	244.6¢	203.3¢	20.3
Average US dollar to sterling exchange rate	$1:£0.78	$1:£0.74	5.4

During the year ended 31 December 2017, revenue increased by $69m (4.0%) to $1,784m primarily resulting from 4.0% rooms growth and 2.7% comparable RevPAR growth. Operating profit and profit before tax increased by $85m (12.5%) and $87m (14.7%) respectively. Operating profit before exceptional items increased by $52m (7.4%) to $759m.

Underlying a Group revenue and underlying a Group operating profit increased by $80m (5.2%) and $59m (8.4%) respectively.

Comparable Group RevPAR increased by 2.7% (including an increase in average daily rate of 1.1%). IHG System size increased by 4.0% to 798,075 rooms, whilst Group fee revenue b increased by 4.1% (5.0% at constant currency).

The net central operating loss before exceptional items decreased by $18m (14.1%) to $110m compared to 2016 and by $15m (11.7%) to $113m at constant currency due to an increase in central revenues and the impact of our strategic cost management programme.

Group fee margin was 50.4%, up 1.6 percentage points (up 1.4 percentage points at constant currency) on 2016, after adjusting for owned and leased hotels, managed leases, and significant liquidated damages. Group fee margin benefited from efficiency improvements and by leveraging our global scale.

Basic earnings per ordinary share increased by 57.0% to 306.7¢, whilst adjusted earnings per ordinary share increased by 20.3% to 244.6¢, reflecting the increase in operating profit before tax and the impact of the share capital reduction as a result of the share consolidation in May 2017.

a Underlying excludes the results from managed-lease hotels, translated at constant currency by applying prior-year exchange rates (see the Use of Non-GAAP measures section later in this Business Review). Underlying operating profit growth also excludes the impact of exceptional items.

b Underlying fee revenue is defined as Group revenue excluding revenue from owned and leased hotels, managed leases and significant liquidated damages

(see the Use of Non-GAAP measures section later in this Business Review).

	12 months ended 31 December — 2017	2016	%
Group total gross revenue a	$bn	$bn	change
InterContinental	4.8	4.6	4.3
Kimpton	1.1	1.1	-
Crowne
Plaza	4.3	4.1	4.9
Hotel
Indigo	0.4	0.4	-
Holiday
Inn	6.3	6.2	1.6
Holiday
Inn Express	6.7	6.3	6.3
Staybridge
Suites	0.9	0.8	12.5
Candlewood
Suites	0.8	0.7	14.3
Other	0.4	0.3	33.3
	____	____	____
Total	25.7	24.5	4.9
	____	____	____

a One measure of IHG System performance is the growth in total gross revenue. For further information see the Use of Non-GAAP measures section later in this Business Review.

| Global hotel and room count at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 194 | 7 | 65,998 | 2,348 |
| Kimpton | 66 | 5 | 12,516 | 1,278 |
| HUALUXE | 7 | 3 | 2,089 | 993 |
| Crowne
Plaza | 414 | 6 | 114,800 | 997 |
| Hotel
Indigo | 85 | 10 | 10,645 | 1,740 |
| EVEN
Hotels | 8 | 2 | 1,238 | 228 |
| Holiday
Inn 1 | 1,242 | 1 | 232,693 | 937 |
| Holiday
Inn Express | 2,600 | 103 | 262,398 | 15,389 |
| Staybridge
Suites | 255 | 19 | 27,745 | 2,135 |
| Candlewood
Suites | 376 | 14 | 35,424 | 1,232 |
| Other | 101 | 4 | 32,529 | 3,663 |
| | _ | | __ | |
| Total | 5,348 | 174 | 798,075 | 30,940 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 4,433 | 112 | 552,834 | 10,184 |
| Managed | 907 | 62 | 242,883 | 20,810 |
| Owned
and leased | 8 | - | 2,358 | (54) |
| | _ | | ___ | _ |
| Total | 5,348 | 174 | 798,075 | 30,940 |
| | | _ | | |

1 Includes 47 Holiday Inn Resort properties (11,954 rooms) and 26 Holiday Inn Club Vacations properties

(7,676 rooms) (2016: 46 Holiday Inn Resort properties (11,652 rooms) and 26 Holiday Inn Club Vacations

properties (7,601 rooms)).

| Global pipeline at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 63 | 1 | 17,353 | (127) |
| Kimpton | 18 | - | 2,796 | (302) |
| HUALUXE | 21 | (1) | 6,289 | (667) |
| Crowne
Plaza | 86 | (4) | 23,047 | (1,489) |
| Hotel
Indigo | 82 | 7 | 11,301 | 708 |
| EVEN
Hotels | 12 | 6 | 2,110 | 1,330 |
| Holiday
Inn 1 | 277 | 16 | 53,556 | 878 |
| Holiday
Inn Express | 766 | 90 | 93,360 | 9,478 |
| avid
hotels | 44 | 44 | 4,043 | 4,043 |
| Staybridge
Suites | 160 | 20 | 17,941 | 2,620 |
| Candlewood
Suites | 112 | 4 | 10,009 | 405 |
| Other | 14 | 2 | 2,341 | (2,807) |
| | _ | | __ | |
| Total | 1,655 | 185 | 244,146 | 14,070 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 1,223 | 184 | 139,348 | 21,654 |
| Managed | 432 | 1 | 104,798 | (7,584) |
| | _ | | ___ | _ |
| Total | 1,655 | 185 | 244,146 | 14,070 |
| | | _ | | |

1 Includes 13 Holiday Inn Resort properties (3,620 rooms) (2016: 14 Holiday Inn Resort properties (3,531 rooms)).

AMERICAS

	12 months ended 31 December — 2017	2016	%
Americas results	$m	$m	change
Revenue
Franchised	703	685	2.6
Managed	172	172	-
Owned
and leased	150	136	10.3
	____	____	____
Total	1,025	993	3.2
	____	____	____
Operating profit before exceptional items
Franchised	606	600	1.0
Managed	65	64	1.6
Owned
and leased	29	24	20.8
Regional
overheads	(56)	(55)	(1.8)
	____	____	____
	644	633	1.7
Exceptional
items	37	(29)	227.6
	____	____	____
Operating
profit	681	604	12.7
	____	____	____

Americas Comparable RevPAR movement on previous year	12 months ended 31 December 2017
Franchised
Crowne
Plaza	1.9%
Holiday
Inn	1.9%
Holiday
Inn Express	1.7%
All
brands	1.8%
Managed
InterContinental	(0.9)%
Kimpton	0.4%
Crowne
Plaza	1.2%
Holiday
Inn	0.0%
Staybridge
Suites	(0.7)%
Candlewood
Suites	0.4%
All
brands	0.2%
Owned
and leased
All
brands	6.6%

Americas results

Franchised revenue and operating profit increased by $18m (2.6%) to $703m and by $6m (1.0%) to $606m respectively. On a constant currency basis, revenue increased by $17m (2.5%) and operating profit increased by $6m (1.0%) as incremental royalties a growth from RevPAR and net rooms growth were partly offset by a delay in the recognition of a payroll tax credit, the implementation of the previously disclosed Crowne Plaza Accelerate financial incentives, and the annualisation of our investment in the Americas development team. Royalties growth of 3.3% was driven by comparable RevPAR growth of 1.8%, including 1.9% for Holiday Inn and 1.7% for Holiday Inn Express, together with 1.5% rooms growth.

Managed revenue remained flat at $172m, whilst operating profit increased by $1m (1.6%) to $65m. Revenue and operating profit included $34m (2016: $34m) and $nil (2016: $nil) respectively from one managed-lease property. Excluding results from this managed-lease hotel and on a constant currency basis, revenue increased by $6m (4.3%) and operating profit increased by $7m (10.9%) respectively.

Owned and leased revenue increased by $14m (10.3%) to $150m, whilst operating profit increased by $5m (20.8%) to $29m due to North American inbound business to Holiday Inn Aruba and the ramp up of EVEN Hotels Brooklyn.

a Royalties are fees, based on rooms revenue, that a franchisee pays to the brand owner for use of the brand name.

| Americas hotel and room count at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 50 | 2 | 17,578 | 1,170 |
| Kimpton | 65 | 4 | 12,242 | 1,004 |
| Crowne
Plaza | 156 | (8) | 41,278 | (2,838) |
| Hotel
Indigo | 51 | 5 | 6,828 | 896 |
| EVEN
Hotels | 8 | 2 | 1,238 | 228 |
| Holiday
Inn 1 | 773 | (1) | 135,604 | (1,140) |
| Holiday
Inn Express | 2,217 | 63 | 199,410 | 7,039 |
| Staybridge
Suites | 244 | 18 | 26,156 | 1,971 |
| Candlewood
Suites | 376 | 14 | 35,424 | 1,232 |
| Other | 89 | 5 | 21,702 | (95) |
| | _ | | __ | |
| Total | 4,029 | 104 | 497,460 | 9,467 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 3,727 | 94 | 437,292 | 6,426 |
| Managed | 296 | 10 | 58,343 | 3,041 |
| Owned
and leased | 6 | - | 1,825 | - |
| | _ | | ___ | _ |
| Total | 4,029 | 104 | 497,460 | 9,467 |
| | | _ | | |

1 Includes 25 Holiday Inn Resort properties (6,787 rooms) and 26 Holiday Inn Club Vacations properties

(7,676 rooms) (2016: 25 Holiday Inn Resort properties (6,791 rooms) and 26 Holiday Inn Club Vacations

properties (7,601 rooms)).

| Americas pipeline at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 7 | - | 1,893 | (639) |
| Kimpton | 14 | (3) | 2,238 | (711) |
| Crowne
Plaza | 14 | (3) | 2,719 | (567) |
| Hotel
Indigo | 33 | 1 | 4,026 | 61 |
| EVEN
Hotels | 8 | 2 | 1,114 | 334 |
| Holiday
Inn 1 | 128 | - | 16,375 | (929) |
| Holiday
Inn Express | 524 | 36 | 49,607 | 2,811 |
| avid
hotels | 44 | 44 | 4,043 | 4,043 |
| Staybridge
Suites | 146 | 15 | 15,432 | 1,536 |
| Candlewood
Suites | 112 | 4 | 10,009 | 405 |
| Other | 12 | 1 | 1,648 | 309 |
| | _ | | __ | |
| Total | 1,042 | 97 | 109,104 | 6,653 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 1,002 | 105 | 102,844 | 9,549 |
| Managed | 40 | (8) | 6,260 | (2,896) |
| | _ | | ___ | _ |
| Total | 1,042 | 97 | 109,104 | 6,653 |
| | | _ | | |

1 Includes one Holiday Inn Resort properties (165 rooms) (2016: three Holiday Inn Resort properties (455 rooms)).

EUROPE

	12 months ended 31 December — 2017	2016	%
Europe results	$m	$m	change
Revenue
Franchised	109	102	6.9
Managed	132	125	5.6
	____	____	____
Total	241	227	6.2
	____	____	____
Operating profit before exceptional items
Franchised	85	78	9.0
Managed	26	22	18.2
Regional
overheads	(25)	(25)	-
	____	____	____
	86	75	14.7
Exceptional
items	(2)	-	-
	____	____	____
Operating
profit	84	75	12.0
	____	____	____

Europe comparable RevPAR movement on previous year	12 months ended 31 December 2017
Franchised
All
brands	6.1%
Managed
All
brands	7.2%

Europe results

Franchised revenue increased by $7m (6.9%) to $109m, whilst operating profit increased by $7m (9.0%) to $85m. On a constant currency basis, revenue and operating profit increased by $8m (7.8%) and $7m (9.0%) respectively, positively impacted by strong US inbound tourism to the UK in the first half of the year.

Managed revenue increased by $7m (5.6%) and operating profit increased by $4m (18.2%). Revenue and operating profit included $77m (2016: $77m) and $nil (2016: $2m) respectively from managed leases. Excluding properties operated under this arrangement, and on a constant currency basis, revenue increased by $7m (14.6%) and operating profit increased by $5m (25.0%).

| Europe hotel and room count at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 32 | 1 | 9,889 | 165 |
| Kimpton | 1 | 1 | 274 | 274 |
| Crowne
Plaza | 97 | 5 | 22,477 | 1,590 |
| Hotel
Indigo | 24 | 3 | 2,182 | 272 |
| Holiday
Inn 1 | 286 | (5) | 46,928 | (901) |
| Holiday
Inn Express | 244 | 10 | 30,508 | 1,930 |
| Staybridge
Suites | 7 | - | 1,000 | - |
| Other | 1 | - | 157 | 16 |
| | _ | | __ | |
| Total | 692 | 15 | 113,415 | 3,346 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 636 | 7 | 98,302 | 1,272 |
| Managed | 56 | 8 | 15,113 | 2,074 |
| | _ | | ___ | _ |
| Total | 692 | 15 | 113,415 | 3,346 |
| | | _ | | |

1 Includes one Holiday Inn Resort property (88 rooms) (2016: one Holiday Inn Resort property (88 rooms)).

| Europe pipeline at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 5 | (1) | 779 | (34) |
| Kimpton | 1 | - | 149 | - |
| Crowne
Plaza | 16 | 2 | 3,199 | 14 |
| Hotel
Indigo | 20 | 2 | 2,353 | 89 |
| Holiday
Inn | 38 | 4 | 7,781 | 512 |
| Holiday
Inn Express | 67 | 9 | 10,410 | 1,015 |
| Staybridge
Suites | 7 | 2 | 921 | 284 |
| Other | 1 | 1 | 396 | 396 |
| | _ | | __ | |
| Total | 155 | 19 | 25,988 | 2,276 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 135 | 24 | 20,774 | 2,866 |
| Managed | 20 | (5) | 5,214 | (590) |
| | _ | | ___ | _ |
| Total | 155 | 19 | 25,988 | 2,276 |
| | | _ | | |

ASIA, MIDDLE EAST AND AFRICA (AMEA)

	12 months ended 31 December — 2017	2016	%
AMEA results	$m	$m	change
Revenue
Franchised	17	16	6.3
Managed	193	184	4.9
Owned
and leased	34	37	(8.1)
	____	____	____
Total	244	237	3.0
	____	____	____
Operating profit before exceptional items
Franchised	14	12	16.7
Managed	91	89	2.2
Owned
and leased	2	2	-
Regional
overheads	(20)	(21)	4.8
	____	____	____
	87	82	6.1
Exceptional
items	(2)	-	-
	____	____	____
Operating
profit	85	82	3.7
	____	____	____

AMEA comparable RevPAR movement on previous year	12 months ended 31 December 2017
Franchised
All
brands	(1.6)%
Managed
All
brands	2.1%

AMEA results

Franchised revenue increased by $1m (6.3%) to $17m, whilst operating profit increased by $2m (16.7%) to $14m. On a constant currency basis, revenue stayed flat at $16m and operating profit increased by $2m (16.7%).

Managed revenue and operating profit increased by $9m (4.9%) to $193m and $2m (2.2%) to $91m respectively. Comparable RevPAR increased by 2.1%, with average daily rate declines offset by occupancy gains. Australasia benefitted from strong domestic travel, whilst growth in South East Asia was driven by international arrivals in Indonesia and Thailand. Revenue and operating profit included $52m (2016: $51m) and $4m (2016: $5m) respectively from one managed-lease property. Excluding results from this hotel and on a constant currency basis, revenue increased by $12m (9.0%) to $145m, whilst operating profit increased by $6m (7.1%) to $90m.

In the owned and leased estate, on an actual and constant currency basis, revenue decreased by $3m (8.1%) to $34m and operating profit stayed flat at $2m.

| AMEA hotel and room count at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 72 | 3 | 21,902 | 699 |
| Crowne
Plaza | 79 | 6 | 22,097 | 1,348 |
| Hotel
Indigo | 3 | 1 | 612 | 289 |
| Holiday
Inn 1 | 97 | 4 | 23,502 | 2,190 |
| Holiday
Inn Express | 38 | 4 | 8,667 | 1,084 |
| Staybridge
Suites | 4 | 1 | 589 | 164 |
| Other | 6 | - | 8,292 | 3,836 |
| | _ | | __ | |
| Total | 299 | 19 | 85,661 | 9,610 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 59 | 4 | 13,476 | 906 |
| Managed | 238 | 15 | 71,652 | 8,758 |
| Owned
and leased | 2 | - | 533 | (54) |
| | _ | | ___ | _ |
| Total | 299 | 19 | 85,661 | 9,610 |
| | | _ | | |

1 Includes 15 Holiday Inn Resort properties (3,259 rooms) (2016: 14 Holiday Inn Resort properties (2,953 rooms)).

| AMEA pipeline at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 23 | (4) | 5,701 | (980) |
| Kimpton | 1 | 1 | 50 | 50 |
| Crowne
Plaza | 20 | (1) | 5,456 | (98) |
| Hotel
Indigo | 14 | - | 2,387 | (195) |
| EVEN
Hotels | 1 | 1 | 200 | 200 |
| Holiday
Inn 1 | 57 | 8 | 14,284 | 1,020 |
| Holiday
Inn Express | 41 | 6 | 7,686 | 200 |
| Staybridge
Suites | 7 | 3 | 1,588 | 800 |
| Other | - | - | 18 | (3,512) |
| | _ | | __ | |
| Total | 164 | 14 | 37,370 | (2,515) |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 18 | 7 | 4,054 | 1,648 |
| Managed | 146 | 7 | 33,316 | (4,163) |
| | _ | | ___ | _ |
| Total | 164 | 14 | 37,370 | (2,515) |
| | | _ | | |

1 Includes five Holiday Inn Resort properties (1,075 rooms) (2016: five Holiday Inn Resort properties (1,256 rooms)).

GREATER CHINA

	12 months ended 31 December — 2017	2016	%
Greater China results	$m	$m	Change
Revenue
Franchised	4	3	33.3
Managed	122	114	7.0
	____	____	____
Total	126	117	7.7
	____	____	____
Operating profit before exceptional items
Franchised	2	3	(33.3)
Managed	73	64	14.1
Regional
overheads	(23)	(22)	(4.5)
	____	____	____
Operating
profit	52	45	15.6
	____	____	____

| Greater China comparable RevPAR movement on previous
year | 12 months ended 31 December 2017 |
| --- | --- |
| Managed | |
| All
brands | 6.1% |

Greater China results

On an actual and constant currency basis, franchised revenue increased by $1m (33.3%) to $4m, whereas operating profit decreased by $1m (33.3%) to $2m due to additional investment in growth initiatives.

Managed revenue and operating profit increased by $8m (7.0%) to $122m and by $9m (14.1%) to $73m respectively. Comparable RevPAR increased by 6.1%, whilst the Greater China System size grew by 7.6%. RevPAR in Tier 1 mainland cities benefitted from strong transient, corporate and meeting demand. On a constant currency basis, revenue and operating profit increased by $10m (8.8%) to $124m and by $10m (15.6%) to $74m respectively.

| Greater China hotel and room count at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 40 | 1 | 16,629 | 314 |
| HUALUXE | 7 | 3 | 2,089 | 993 |
| Crowne
Plaza | 82 | 3 | 28,948 | 897 |
| Hotel
Indigo | 7 | 1 | 1,023 | 283 |
| Holiday
Inn 1 | 86 | 3 | 26,659 | 788 |
| Holiday
Inn Express | 101 | 26 | 23,813 | 5,336 |
| Other | 5 | (1) | 2,378 | (94) |
| | _ | | __ | |
| Total | 328 | 36 | 101,539 | 8,517 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 11 | 7 | 3,764 | 1,580 |
| Managed | 317 | 29 | 97,775 | 6,937 |
| | _ | | ___ | _ |
| Total | 328 | 36 | 101,539 | 8,517 |
| | | _ | | |

1 Includes six Holiday Inn Resort properties (1,820 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms)).

| Greater China pipeline at 31 December | Hotels — 2017 | Change over
2016 | Rooms — 2017 | Change over
2016 |
| --- | --- | --- | --- | --- |
| Analysed
by brand | | | | |
| InterContinental | 28 | 6 | 8,980 | 1,526 |
| Kimpton | 2 | 2 | 359 | 359 |
| HUALUXE | 21 | (1) | 6,289 | (667) |
| Crowne
Plaza | 36 | (2) | 11,673 | (838) |
| Hotel
Indigo | 15 | 4 | 2,535 | 753 |
| EVEN
Hotels | 3 | 3 | 796 | 796 |
| Holiday
Inn 1 | 54 | 4 | 15,116 | 275 |
| Holiday
Inn Express | 134 | 39 | 25,657 | 5,452 |
| Other | 1 | - | 279 | - |
| | _ | | __ | |
| Total | 294 | 55 | 71,684 | 7,656 |
| | | _ | | |
| Analysed
by ownership type | | | | |
| Franchised | 68 | 48 | 11,676 | 7,591 |
| Managed | 226 | 7 | 60,008 | 65 |
| | _ | | ___ | _ |
| Total | 294 | 55 | 71,684 | 7,656 |
| | | _ | | |

1 Includes seven Holiday Inn Resort properties (2,380 rooms) (2016: six Holiday Inn Resort properties (1,820 rooms)).

CENTRAL

	12 months ended 31 December — 2017	2016	%
Central results	$m	$m	change
Revenue	148	141	5.0
Gross
costs	(258)	(269)	4.1
	____	____	____
	(110)	(128)	14.1
Exceptional
items	(29)	-	-
	____	____	____
Operating
loss	(139)	(128)	(8.6)
	____	____	____

Central results

The net operating loss increased by $11m (8.6%) compared to 2016. Central revenue, which mainly comprises technology fee income, increased by $7m (5.0%) to $148m (an increase of $8m (5.7%) at constant currency), driven by increases in both comparable RevPAR (2.7%) and IHG System size (4.0%). At constant currency, gross costs decreased by $7m (2.6%) compared to 2016 (an $11m or 4.1% decrease at actual currency) benefitting from the impact of our cost management programme. Net operating loss before exceptional items decreased by $18m (14.1%) to $110m (a $15m or 11.7% decrease at constant currency).

SYSTEM FUND

	2017	2016	%
System Fund assessments	$m	$m	change
Assessment
fees and contributions received from hotels	1,562	1,439	8.5
Proceeds
from sale of IHG Rewards Club points	324	283	14.5
	____	____	____
Total	1,886	1,722	9.5
	____	____	____

System Fund assessments

In addition to franchise or management fees, hotels within the IHG System pay assessments and contributions (other than for Kimpton and InterContinental) which are collected by IHG for specific use within the System Fund. The System Fund also receives proceeds from the sale of IHG Rewards Club points. The System Fund is managed for the benefit of hotels in the IHG System with the objective of driving revenues for the hotels.

The System Fund is used to pay for marketing, the IHG Rewards Club loyalty programme and the Guest Reservation System. The operation of the System Fund does not result in a profit or loss for the Group and consequently the revenues and expenses of the System Fund are not included in the Group Income Statement.

In the year to 31 December 2017, System Fund income increased by 9.5% to $1,886m primarily as a result of an 8.5% increase in assessment fees and contributions from hotels resulting from increased hotel room revenues, reflecting increases in RevPAR and IHG System size. Continued strong performance in co-branded credit card schemes drove the 14.5% increase in proceeds from the sale of IHG Rewards Club points.

OTHER FINANCIAL INFORMATION

Exceptional items

Pre-tax exceptional items totalled a net gain of $4m. (Exceptional tax items are described below). The gain included $73m from the sale of IHG's 6.29% interest in Avendra, LLC, a North American hospitality procurement services provider, in December 2017. Exceptional charges included $15m relating to the cost of integrating Kimpton into the operations of the Group, which has now been completed, $36m relating to reorganisation costs (see below) and an $18m impairment charge relating to an associate investment in the Americas region resulting from the currently depressed trading outlook for the New York hotel market.

Exceptional items are treated as exceptional by reason of their size or nature and are excluded from the calculation of adjusted earnings per ordinary share in order to provide a more meaningful comparison of performance.

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 organisational changes include combining Europe and Asia, Middle East and Africa into one business unit, and creating a new Global Marketing organisation and a new Commercial and Technology function. The strategic initiatives will involve strengthening our loyalty programme, continuing to prioritise digital and technological innovation, enhancing our industry leading franchise proposition, strengthening our existing brands and also adding new brands where we see the greatest potential for growth .

The programme is expected to realise c.$125m in annual savings by 2020, of which c.$75m will benefit the System Fund. These savings, primarily in administrative expenses, are planned to be reinvested as they are realised to accelerate medium term revenue growth. There will be an estimated $200m cost to achieve these savings, (of which $45m was incurred in 2017), including amounts charged to the System Fund. The exceptional cost charged to the Group income statement in 2017 of $36m includes consultancy fees of $24m and severance costs of $8m.

Net financial expenses

Net financial expenses reduced by $2m to $85m, due to the impact of a weaker pound on translation of sterling interest expense and a reduction in the average interest rate payable on bond debt following the 2016 refinancing, offset by higher average net debt levels in 2017.

Financing costs included $7m (2016: $3m) of interest costs associated with IHG Rewards Club where interest is charged on the accumulated balance of cash received in advance of the redemption of points awarded. The increase in 2017 is due to US base rate increases in 2016 and 2017. Financing costs in 2017 also included $20m (2016: $20m) in respect of the InterContinental Boston finance lease.

Taxation

The effective rate of tax on operating profit excluding the impact of exceptional items was 30% (2016: 30%). Excluding the impact of prior-year items, the equivalent tax rate would be 31% (2016: 31%). This rate is higher than the average UK statutory rate of 19.25% (2016: 20%), due mainly to certain overseas profits (particularly in the US) being subject to statutory tax rates higher than the UK statutory rate, unrelieved foreign taxes and disallowable expenses.

Taxation within exceptional items totalled a credit of $116m (2016: credit of $12m). In 2017, this included a $108m credit, comprising a $140m deferred tax credit net of a $32m current tax charge, as a result of significant US tax reform that was enacted in December 2017, a current tax charge of $28m arising on the sale of Avendra, a current tax credit of $13m on reorganisation costs, a $7m (2016: $6m) deferred tax credit in respect of the impairment charge relating to the InterContinental Barclay associate, a $10m deferred tax credit representing a reduction in the Group's unremitted earnings provision and a $6m (2016: $5m) deferred tax credit on Kimpton integration costs.

Net tax paid in 2017 totalled $172m (2016: $130m). Tax paid represents an effective rate of 25% (2016: 22%) on total profits (excluding exceptionals) and is lower than the effective income statement tax rate of 30% (2016: 30%), primarily due to the timing of US tax payments and the impact of deferred taxes.

Dividends

The Board has proposed a final dividend per ordinary share of 71.0¢. With the interim dividend per ordinary share of 33.0¢, the full-year dividend per ordinary share for 2017 will total 104.0¢, an increase of 11% over 2016.

On 21 February 2017, the Group announced a $0.4bn return of funds to shareholders by way of a special dividend and share consolidation. The special dividend (202.5¢ per ordinary share) was paid on 22 May 2017.

IHG pays its dividends in pounds sterling and US dollars. The sterling amount of the final dividend will be announced on 23 April 2018 using the average of the daily exchange rates from 18 April 2018 to 20 April 2018 inclusive.

Earnings per ordinary share

Basic earnings per ordinary share increased by 57.0% to 306.7¢ from 195.3¢ in 2016. Adjusted earnings per ordinary share increased by 20.3% to 244.6¢ from 203.3¢ in 2016.

Share price and market capitalisation

The IHG share price closed at £47.19 on 31 December 2017, up from £36.38 on 31 December 2016. The market capitalisation of the Group at the year end was £9.0bn.

Capital structure and liquidity management

The Group is primarily financed by public bonds, £400m of which are repayable on 28 November 2022, £300m repayable on 14 August 2025 and £350m repayable on 24 August 2026. This is in addition to a $1.275bn revolving syndicated bank facility (the Syndicated Facility) and a $75m revolving bilateral facility (the Bilateral Facility) which mature in March 2022. $264m was drawn under the Syndicated and Bilateral Facilities at the year end.

The Syndicated and Bilateral Facilities contain the same terms and two financial covenants; interest cover; and net debt divided by earnings before interest, tax, depreciation and amortisation (EBITDA). The Group is in compliance with all of the financial covenants in its loan documents, none of which is expected to present a material restriction on funding in the near future.

Additional funding is provided by the 99-year finance lease (of which 88 years remain) on InterContinental Boston and other uncommitted bank facilities. In the Group's opinion, the available facilities are sufficient for the Group's present liquidity requirements. Borrowings included bank overdrafts of $110m (2016: $89m), which were matched by an equivalent amount of cash and cash equivalents under the Group's cash pooling arrangements. Under these arrangements, each pool contains a number of bank accounts with the same financial institution, and the Group pays interest on net overdraft balances within each pool. The cash pools are used for day-to-day cash management purposes and are managed daily as closely as possible to a zero balance on a net basis for each pool. Overseas subsidiaries are typically in a cash-positive position, with the most significant balances in the US and Canada, and the matching overdrafts are held by the Group's central treasury company in the UK.

Net debt of $1,851m (2016: $1,506m) is analysed by currency as follows:

	2017	2016
	$m	$m
Borrowings
Sterling	1,416	1,289
US
dollar	601	418
Euros	2	2
Other	-	3
Cash
and cash equivalents
Sterling	(13)	(27)
US
dollar	(75)	(127)
Euros	(13)	(12)
Canadian
dollar	(13)	(8)
Chinese
renminbi	(12)	(7)
Other	(42)	(25)
	____	____
Net
debt	1,851	1,506
	____	____
Average
debt levels	1,810	1,235
	____	____

USE OF NON-GAAP MEASURES

In addition to performance measures directly observable in the Business Review (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 ordinary share;

● 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 will be available on 1 March 2018 at www.ihgplc.com ).

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 Group Financial Statements.

Highlights for the year ended 31 December 2017

	Revenue — 2017	2016	%	Operating profit — 2017	2016	%
	$m	$m	change	$m	$m	change
At actual exchange rates
Per
Group income statement	1,784	1,715	4.0	763	678	12.5
Managed
leases	(163)	(162)	(0.6)	(4)	(7)	42.9
Exceptional
items	-	-	-	(4)	29	(113.8)
	_____	_____	_____	_____	_____	_____
Underlying
at actual exchange	1,621	1,553	4.4	755	700	7.9
rates	_____	_____	_____	_____	_____	_____
	At actual exchange rates			At constant currency
	2017	2016	%	2017	2016	%
	$m	$m	change	$m	$m	change
Underlying revenue
Americas	991	959	3.3	996	959	3.9
Europe	164	150	9.3	165	150	10.0
AMEA	192	186	3.2	195	186	4.8
Greater
China	126	117	7.7	128	117	9.4
Central	148	141	5.0	149	141	5.7
	_____	_____	_____	_____	_____	_____
Underlying
Group revenue	1,621	1,553	4.4	1,633	1,553	5.2
Owned
and leased revenue
included
above	(184)	(173)	(6.4)	(184)	(173)	(6.4)
	_____	_____	_____	_____	_____	_____
Underlying
Group fee revenue	1,437	1,380	4.1	1,449	1,380	5.0
	_____	_____	_____	_____	_____	_____

a IHG's method for calculating the constant currency amounts of entities reporting in currencies other than US dollars is to translate the current period results into US dollars using the prior period's exchange rate. For example, if a UK entity generated revenue of £100m in 2017 and 2016, the Group Financial Statements would report revenue of $128m in 2017 and $135m in 2016, using the respective average exchange rates for the year of $1=£0.78 and $1=£0.74. For constant currency reporting, 2017 revenue would be translated at $1=£0.74 giving a US dollar value of $135m, thereby showing that underlying revenue was flat year-on-year.

	At actual exchange rates — 2017	2016	%	At constant currency — 2017	2016	%
	$m	$m	change	$m	$m	change
Underlying operating profit
Americas	644	633	1.7	649	633	2.5
Europe	86	73	17.8	85	73	16.4
AMEA	83	77	7.8	86	77	11.7
Greater
China	52	45	15.6	52	45	15.6
Central	(110)	(128)	14.1	(113)	(128)	11.7
	_____	_____	_____	_____	_____	_____
Underlying
Group operating profit	755	700	7.9	759	700	8.4
Owned
and leased operating
profit
included above	(31)	(26)	(19.2)	(31)	(26)	(19.2)
	_____	_____	_____	_____	_____	_____
Underlying
Group fee profit	724	674	7.4	728	674	8.0
	_____	_____	_____	_____	_____	_____
Group
fee margin	50.4%	48.8%	1.6 ppts	50.2%	48.8%	1.4 ppts
	_____	_____	_____	_____	_____	_____

Underlying earnings per ordinary share

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.

Underlying earnings per ordinary share provides a per share measure based on comparable year-on-year trading and reflects underlying trends in the Group's financial performance.

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

	12 months ended 31 December — 2017	2016
	$m	$m
Basic earnings per ordinary share
Profit
available for equity holders	592	414
Basic
weighted average number of ordinary shares (millions)	193	212
Basic
earnings per ordinary share (cents)	306.7	195.3
	_____	_____
Underlying
earnings per ordinary share
Profit
available for equity holders	592	414
Adjusted
for:
Exceptional items before tax	(4)	29
Tax on exceptional items	2	(12)
Exceptional tax credit	(118)	-
Managed leases	(4)	(7)
Tax on managed leases	1	2
Currency effect	4	-
	_____	_____
Underlying
profit available for equity holders	473	426
	_____	_____
Underlying
earnings per ordinary share (cents)	245.1	200.9
	_____	_____

Net capital expenditure

Net capital expenditure is defined as cash flow from investing activities, 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.

The following table reconciles net cash from investing activities to net capital expenditure as included in the Group Financial Statements.

	12 months ended 31 December — 2017	2016
	$m	$m
Net cash from investing activities	(263)	(216)
Adjusted
for:
Tax paid on disposals	25	-
System Fund depreciation and
amortisation	36	31
	_____	_____
Net
capital expenditure	(202)	(185)
Add
back:
Disposal receipts	(104)	(25)
System Fund depreciation and
amortisation	(36)	(31)
	_____	_____
Gross
capital expenditure	(342)	(241)
	_____	_____
Analysed
as:
Capital expenditure: maintenance and key money	(115)	(96)
Capital expenditure: recyclable investments	(85)	(40)
Capital expenditure: System Fund investments	(142)	(105)
	_____	_____
Gross
capital expenditure	(342)	(241)
	_____	_____

Free cash flow

Free cash flow is defined as cash flow from operating activities (after interest and tax paid), less purchase of shares by employee share trusts and maintenance capital expenditure, including key money paid. In 2016, free cash flow excluded the $95m cash receipt from renegotiation of long-term partnership agreements. 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.

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

	12 months ended 31 December — 2017	2016
	$m	$m
Net cash from operating activities	634	752
Less:
Purchase of shares by employee share trusts	(3)	(10)
Capital expenditure: maintenance and key money	(115)	(96)
Cash receipt from renegotiation of long-term partnership
agreements	-	(95)
	_____	_____
Free
cash flow	516	551
	_____	_____

INTERCONTINENTAL HOTELS GROUP PLC

GROUP INCOME STATEMENT

For the year ended 31 December 2017

	Year ended 31 December 2017 — Before exceptional items	Exceptional items (note 4)	Total	Year ended 31 December 2016 — Before exceptional items	Exceptional items (note 4)	Total
	$m	$m	$m	$m	$m	$m
Revenue (note 3)	1,784	-	1,784	1,715	-	1,715
Cost of
sales	(608)	-	(608)	(580)	-	(580)
Administrative
expenses	(328)	(51)	(379)	(339)	(13)	(352)
Share
of gains/(losses) of associates and joint ventures	3	-	3	(2)	-	(2)
Other
operating income and expenses	11	73	84	9	-	9
	_____	_____	_____	_____	_____	_____
	862	22	884	803	(13)	790
Depreciation
and amortisation	(103)	-	(103)	(96)	-	(96)
Impairment
charges	-	(18)	(18)	-	(16)	(16)
	_____	_____	_____	_____	_____	_____
Operating profit (note 3)	759	4	763	707	(29)	678
Financial
income	4	-	4	6	-	6
Financial
expenses	(89)	-	(89)	(93)	-	(93)
	_____	_____	_____	_____	_____	_____
Profit before tax	674	4	678	620	(29)	591
Tax
(note 5)	(201)	116	(85)	(186)	12	(174)
	_____	_____	_____	_____	_____	_____
Profit for the year from continuing operations	473	120	593	434	(17)	417
	____	_____	_____	____	_____	_____
Attributable
to:
Equity
holders of the parent	472	120	592	431	(17)	414
Non-controlling
interest	1	-	1	3	-	3
	____	_____	____	_____	____	____
	473	120	593	434	(17)	417
	____	_-____	_____	____	_-____	_____
Earnings per ordinary share (note 6)
Continuing
and total operations:
Basic			306.7¢			195.3¢
Diluted			305.2¢			193.5¢
Adjusted	244.6¢			203.3¢
Adjusted
diluted	243.3¢			201.4¢
	_____		_____	_____		_____

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2017

	2017 Year ended 31 December $m	2016 Year ended 31 December $m
Profit for the year	593	417
Other comprehensive income
Items
that may be subsequently reclassified to profit or
loss:
Gains
on valuation of available-for-sale financial assets, net of related
tax charge of $3m (2016 $nil)	41	5
Fair
value gains reclassified to profit on disposal of
available-for-sale financial assets	(73)	(7)
Exchange
(losses)/gains on retranslation of foreign operations, net of
related tax credit of $1m (2016 charge of $3m)	(77)	182
	_____	_____
	(109)	180
Items
that will not be reclassified to profit or loss:
Re-measurement
losses on defined benefit plans, including related tax credit of
$nil (2016 $4m)	(4)	-
Deferred tax charge
on defined benefit plans arising from significant US tax
reform	(11)	-
	_____	_____
	(15)	-
	_____	_____
Total other comprehensive (loss)/income for the year	(124)	180
	_____	_____
Total comprehensive income for the year	469	597
	_____	_____
Attributable
to:
Equity
holders of the parent	467	594
Non-controlling
interest	2	3
	_____	_____
	469	597
	_____	_____

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2017

	Year ended 31 December 2017 — Equity share capital	Other reserves*	Retained earnings	Non-controlling interest	Total equity
	$m	$m	$m	$m	$m
At
beginning of the year	141	(2,300)	1,392	8	(759)
Total
comprehensive income for the year	-	(110)	577	2	469
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	-	-	29	-	29
Tax
related to share schemes	-	-	9	-	9
Equity
dividends paid	-	-	(593)	(3)	(596)
Exchange
adjustments	13	(13)	-	-	-
	_____	_____	_____	_____	_____
At end of the year	154	(2,417)	1,405	7	(851)
	_____	_____	_____	_____	_____

	Year ended 31 December 2016 — Equity share capital	Other reserves*	Retained earnings	Non-controlling interest	Total equity
	$m	$m	$m	$m	$m
At
beginning of the year	169	(2,513)	2,653	10	319
Total
comprehensive income for the year	-	180	414	3	597
Transfer
of treasury shares to employee share trusts	-	(24)	24	-	-
Purchase
of own shares by employee share trusts	-	(10)	-	-	(10)
Release
of own shares by employee share trusts	-	39	(39)	-	-
Equity-settled
share-based cost	-	-	23	-	23
Tax
related to share schemes	-	-	11	-	11
Equity
dividends paid	-	-	(1,693)	(5)	(1,698)
Transaction
costs relating to shareholder returns	-	-	(1)	-	(1)
Exchange
adjustments	(28)	28	-	-	-
	_____	_____	_____	_____	_____
At end of the year	141	(2,300)	1,392	8	(759)
	_____	_____	_____	_____	_____

*Other reserves comprise the capital redemption reserve, shares held by employee share trusts, other reserves, unrealised gains and losses reserve and currency translation reserve.

All items above are shown net of tax.

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF FINANCIAL POSITION

31 December 2017

	2017 31 December	2016 31 December
	$m	$m
ASSETS
Property,
plant and equipment	425	419
Goodwill
and other intangible assets	1,467	1,292
Investment
in associates and joint ventures	141	111
Trade
and other receivables	-	8
Retirement
benefit assets	3	-
Other
financial assets	228	248
Non-current
tax receivable	16	23
Deferred
tax assets	56	48
	_____	_____
Total non-current assets	2,336	2,149
	_____	_____
Inventories	3	3
Trade
and other receivables	551	472
Current
tax receivable	101	77
Other
financial assets	16	20
Cash
and cash equivalents	168	206
	_____	_____
Total current assets	839	778
	_____	_____
Total assets (note 3)	3,175	2,927
	_____	_____
LIABILITIES
Loans
and other borrowings	(126)	(106)
Derivative
financial instruments	-	(3)
Loyalty
programme liability	(343)	(291)
Trade
and other payables	(768)	(681)
Provisions	(3)	(3)
Current
tax payable	(64)	(50)
	_____	_____
Total current liabilities	(1,304)	(1,134)
	______	______
Loans
and other borrowings	(1,893)	(1,606)
Retirement
benefit obligations	(104)	(96)
Loyalty
programme liability	(417)	(394)
Trade
and other payables	(121)	(200)
Provisions	(5)	(5)
Non-current
tax payable	(25)	-
Deferred
tax liabilities	(157)	(251)
	______	______
Total non-current liabilities	(2,722)	(2,552)
	_____	_____
Total liabilities	(4,026)	(3,686)
	_____	_____
Net liabilities	(851)	(759)
	_____	_____
EQUITY
Equity
share capital	154	141
Capital
redemption reserve	10	9
Shares
held by employee share trusts	(5)	(11)
Other
reserves	(2,874)	(2,860)
Unrealised
gains and losses reserve	79	111
Currency
translation reserve	373	451
Retained
earnings	1,405	1,392
	______	______
IHG shareholders' equity	(858)	(767)
Non-controlling
interest	7	8
	______	______
Total equity	(851)	(759)
	_____	_____

INTERCONTINENTAL HOTELS GROUP PLC

GROUP STATEMENT OF CASH FLOWS

For the year ended 31 December 2017

	2017 Year ended 31 December	2016 Year ended 31 December
	$m	$m
Profit for the year	593	417
Adjustments
reconciling profit for the year to cash flow from operations (note
8)	263	536
	_____	_____
Cash flow from operations	856	953
Interest
paid	(76)	(75)
Interest
received	1	4
Tax
paid on operating activities	(147)	(130)
	_____	_____
Net cash from operating activities	634	752
	_____	_____
Cash flow from investing activities
Purchase
of property, plant and equipment	(44)	(32)
Purchase
of intangible assets	(229)	(175)
Investment
in associates and joint ventures	(47)	(14)
Loan
advances to associates and joint ventures	-	(2)
Investment
in other financial assets	(30)	(13)
Capitalised
interest paid	(6)	(5)
Landlord
contributions to property, plant and equipment	14	-
Costs
relating to hotel disposals	-	(5)
Repayments
related to intangible assets	-	3
Loan
repayments by and proceeds from associates and joint
ventures	9	2
Repayments
of other financial assets	20	25
Disposal
of equity securities available-for-sale (note 4)	75	-
Tax
paid on disposals	(25)	-
	_____	_____
Net cash from investing activities	(263)	(216)
	_____	_____
Cash flow from financing activities
Purchase
of own shares by employee share trusts	(3)	(10)
Dividends
paid to shareholders	(593)	(1,693)
Dividend
paid to non-controlling interest	(3)	(5)
Transaction
costs relating to shareholder returns	-	(1)
Issue
of long-term bonds	-	459
Long-term
bonds repaid	-	(315)
Increase
in other borrowings	153	109
	_____	_____
Net cash from financing activities	(446)	(1,456)
	_____	_____
Net movement in cash and cash equivalents, net of overdrafts, in
the year	(75)	(920)
Cash
and cash equivalents, net of overdrafts, at beginning of the
year	117	1,098
Exchange
rate effects	16	(61)
	_____	_____
Cash and cash equivalents, net of overdrafts, at end of the
year	58	117
	_____	_____

I NTERCONTINENTAL HOTELS GROUP PLC

NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS

| 1. |
| --- |
| The audited consolidated financial statements of InterContinental
Hotels Group PLC (the Group or IHG) for the year ended 31 December
2017 have been prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and as
applied in accordance with the provisions of the Companies Act
2006. Other than the changes set out below, they have
been prepared on a consistent basis using the accounting policies
set out in the InterContinental Hotels Group PLC Annual Report and
Financial Statements for the year ended 31 December
2016. |
| With effect from 1 January 2017, the Group has adopted 'Amendments
to IAS 7 Statement of Cash Flows: Disclosure Initiative' and
'Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax
Assets for Unrealised Losses' neither of which has had an impact on
these preliminary financial statements. The Group will adopt IFRS 15 'Revenue from Contracts with
Customers' and IFRS 9 'Financial Instruments' with effect from 1
January 2018. Management's assessment of the impact of these
standards is substantially complete. If the results for the
year ended 31 December 2017 had been reported under IFRS 15, the
Group would have reported estimated additional revenues of $2.3bn,
largely due to employee cost reimbursements and System Fund
receipts (including loyalty revenues), and $1m lower operating
profit before any in-year System Fund deficit which is still being
assessed. As the Group has an agreement with the IHG Owners
Association to operate the System Fund on a break-even basis over
the medium term, any in-year surplus or deficit arising from
temporary timing differences will be excluded from the calculation
of Adjusted EPS. The adoption of IFRS 9 does not have a
material impact on the Group's financial statements. Further
details on the adoption of these standards will be included in the
InterContinental Hotels Group PLC Annual Report and Financial
Statements for the year ended 31 December 2017. |

| 2. |
| --- |
| The
results of operations have been translated into US dollars at the
average rates of exchange for the year. In the case of sterling,
the translation rate is $1= £0.78 (2016 $1=£0.74). In the
case of the euro, the translation rate is $1 = €0.89 (2016 $1
= €0.90). Assets
and liabilities have been translated into US dollars at the rates
of exchange on the last day of the year. In the case of sterling,
the translation rate is $1=£0.74 (2016 $1 = £0.81). In
the case of the euro, the translation rate is $1 = €0.83
(2016 $1 = €0.95). |

3 .
Revenue
	2017	2016
	$m	$m
Americas	1,025	993
Europe	241	227
AMEA	244	237
Greater
China	126	117
Central	148	141
	_____	_____
Total revenue	1,784	1,715
	_____	_____
All
results relate to continuing operations.

Profit	2017 $m	2016 $m
Americas	644	633
Europe	86	75
AMEA	87	82
Greater
China	52	45
Central	(110)	(128)
	_____	_____
Reportable segments' operating profit	759	707
Exceptional
items (note 4)	4	(29)
	_____	_____
Operating profit	763	678
Net
finance costs	(85)	(87)
	_____	_____
Profit before tax	678	591
	_____	_____
All
results relate to continuing operations.

Assets	2017 $m	2016 $m
Americas	1,525	1,417
Europe	350	321
AMEA	264	249
Greater
China	154	147
Central	541	439
	_____	_____
Segment assets	2,834	2,573
Unallocated
assets:
Non-current
tax receivable	16	23
Deferred
tax assets	56	48
Current
tax receivable	101	77
Cash
and cash equivalents	168	206
	_____	_____
Total assets	3,175	2,927
	_____	_____

4.	2017 $m	2016 $m
Exceptional items before tax
Administrative
expenses:
Kimpton
integration costs (a)	(15)	(13)
Reorganisation
costs (b)	(36)	-
	_	_
	(51)	(13)
Other
operating income and expenses:
Gain
on disposal of equity securities available-for-sale
(c)	73	-
Impairment charges:
Associates
(d)	(18)	(16)
	_____	_____
	4	(29)
	_____	_____
Tax
Tax on
exceptional items (e)	(2)	12
Exceptional tax
(f)	118	-
	_____	_____
	116	12
	_____	_____

| All
items above relate to continuing operations. These items are
treated as exceptional by reason of their size or
nature. | |
| --- | --- |
| a) | Relates
to the cost of integrating Kimpton Hotel and Restaurant Group, LLC
into the operations of the Group, which has now been
completed. |
| b) | 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 $36m cost are
consultancy fees of $24m and severance costs of $8m. An
additional $9m has been charged to the System Fund. |
| c) | In
December 2017, the sale of Avendra, LLC ('Avendra') to Aramark
Services, Inc., resulted in the Group receiving cash proceeds of
$75m from its 6.29% interest in Avendra and the recording of a $73m
exceptional gain. Avendra is a North American hospitality
procurement services provider. |
| d) | Relates
to an associate investment in The Americas region resulting from
the currently depressed trading outlook for the New York hotel
market. |
| e) | Comprises
a $7m (2016 $6m) deferred tax credit in respect of an associate
investment impairment, a $6m (2016 $5m) deferred tax credit
representing future tax relief on Kimpton integration costs, a $13m
current tax credit in respect of reorganisation costs and a $28m
current tax charge relating to the gain on disposal of
Avendra. In 2016, there was also a $1m credit in respect of
other items. |
| f) | Includes $108m relating to the impact of significant US tax reform
that was enacted on 22 December 2017. This includes a current
tax charge of $32m, relating predominantly to the Group's estimated
'transition tax' liability on previously undistributed earnings of
foreign subsidiaries of US entities, and a deferred tax credit of
$140m, being principally the impact of the US federal tax rate
reduction from 35% to 21% (effective 1 January 2018) on the Group's
US deferred tax liabilities, as well as the release of liabilities
related to the Group's undistributed post-acquisition earnings of
subsidiaries that are no longer required as a result of the US
transition tax. In addition, a deferred tax credit of
$10m arises on the release of a contingency, previously charged as
an exceptional item, which is no longer required due to statute of
limitations expiry. |

| 5. |
| --- |
| The tax
charge on profit from continuing operations, excluding the impact
of exceptional items (note 4), has been calculated using a tax rate
of 30% (2016 30%) analysed as follows: |

Year ended 31 December	2017	2017	2017	2016	2016	2016
	Profit $m	Tax $m	Tax rate	Profit $m	Tax $m	Tax rate
Before
exceptional items	674	(201)	30%	620	(186)	30%
Exceptional
items	4	116		(29)	12
	____	____		____	____
	678	(85)		591	(174)
	_____	_____		_____	_____
Analysed
as:
UK
tax		7			20
Foreign
tax		(92)			(194)
		____			____
		(85)			(174)
		_____			_____

| 6. |
| --- |
| Basic
earnings per ordinary share is calculated by dividing the profit
for the year available for IHG equity holders by the weighted
average number of ordinary shares, excluding investment in own
shares, in issue during the year. Diluted
earnings per ordinary share is calculated by adjusting basic
earnings per ordinary share to reflect the notional exercise of the
weighted average number of dilutive ordinary share awards
outstanding during the year. 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. |

Continuing and total operations	2017	2016
Basic earnings per ordinary share
Profit
available for equity holders ($m)	592	414
Basic
weighted average number of ordinary shares (millions)	193	212
Basic
earnings per ordinary share (cents)	306.7	195.3
	_____	_____
Diluted earnings per ordinary share
Profit
available for equity holders ($m)	592	414
Diluted
weighted average number of ordinary shares (millions)	194	214
Diluted
earnings per ordinary share (cents)	305.2	193.5
	_____	_____
Adjusted earnings per ordinary share
Profit
available for equity holders ($m)	592	414
Adjusting
items (note 4):
Exceptional
items before tax ($m)	(4)	29
Tax on
exceptional items ($m)	2	(12)
Exceptional
tax ($m)	(118)	-
	____	____
Adjusted
earnings ($m)	472	431
Basic
weighted average number of ordinary shares (millions)	193	212
Adjusted
earnings per ordinary share (cents)	244.6	203.3
	_____	_____
Adjusted diluted earnings per ordinary share
Diluted
weighted average number of ordinary shares (millions)	194	214
Adjusted
diluted earnings per ordinary share (cents)	243.3	201.4
	_____	_____

| The
diluted weighted average number of ordinary shares is calculated
as: | 2017 millions | 2016 millions |
| --- | --- | --- |
| Basic
weighted average number of ordinary shares | 193 | 212 |
| Dilutive
potential ordinary shares | 1 | 2 |
| | _ | _ |
| | 194 | 214 |
| | _ | ___ |

7.	2017 cents per share	2016 cents per share	2017 $m	2016 $m
Paid
during the year:
Final
(declared for previous year)	64.0	57.5	127	137
Interim	33.0	30.0	62	56
Special	202.5	632.9	404	1,500
	_____	_____	_____	_____
	299.5	720.4	593	1,693
	_____	_____	_____	_____
Proposed
for approval at the Annual GeneralMeeting (not recognised as a
liability at31 December):
Final	71.0	64.0	135	126
	_____	_____	_____	_____
In
February 2017, the Group announced a $400m return of funds to
shareholders by way of a special dividend and share
consolidation. On 5 May 2017, shareholders approved the share
consolidation on the basis of 45 new ordinary shares of 19 17 / 21 p per share for
every 47 existing ordinary shares of 18 318 / 329 p, which became
effective on 8 May 2017 and resulted in the consolidation of 9m
shares. The special dividend was paid on 22 May 2017. The
dividend and share consolidation had the same economic effect as a
share repurchase at fair value, therefore previously reported
earnings per share has not been restated. The
total number of shares held as treasury shares at 31 December 2017
was 7.6m.

8.	2017	2016
	$m	$m
Profit
for the year	593	417
Adjustments
for:
Net
financial expenses	85	87
Income
tax charge	85	174
Depreciation and
amortisation	103	96
Impairment	18	16
Other
exceptional items	(22)	13
Equity-settled
share-based cost	21	17
Dividends from
associates and joint ventures	4	5
Net
change in loyalty programme liability and System Fund
surplus	8	65
System
Fund depreciation and amortisation	36	31
Other
changes in net working capital	(27)	78
Utilisation of
provisions, net of insurance recovery	-	(4)
Retirement benefit
contributions, net of costs	(1)	(32)
Cash
flows relating to exceptional items	(44)	(19)
Other
items	(3)	9
	_____	_____
Total
adjustments	263	536
	_____	_____
Cash flow from operations	856	953
	_____	_____

9.	2017	2016
	$m	$m
Cash
and cash equivalents	168	206
Loans
and other borrowings - current	(126)	(106)
Loans
and other borrowings - non-current	(1,893)	(1,606)
	_____	_____
Net debt*	(1,851)	(1,506)
	_____	_____
Finance
lease obligations included above	(231)	(227)
	_____	_____
* See
the Use of Non-GAAP measures section in the Business
Review.

10.	2017	2016
	$m	$m
Net
decrease in cash and cash equivalents, net of
overdrafts	(75)	(920)
Add
back cash flows in respect of other components of net
debt:
Issue
of long-term bonds	-	(459)
Long-term bonds
repaid	-	315
Increase in other
borrowings	(153)	(109)
	_____	_____
Increase
in net debt arising from cash flows	(228)	(1,173)
Non-cash
movements:
Finance
lease obligations	(4)	(4)
Decrease/(increase)
in accrued interest	1	(6)
Exchange
and other adjustments	(114)	206
	_____	_____
Increase in net debt	(345)	(977)
Net
debt at beginning of the year	(1,506)	(529)
	_____	_____
Net debt at end of the year	(1,851)	(1,506)
	_____	_____

| 11. |
| --- |
| At 31
December 2017, the amount contracted for but not provided for in
the financial statements for expenditure on property, plant and
equipment and intangible assets was $104m (2016 $97m). The
Group has also committed to invest in a number of its associates,
with an estimated outstanding commitment of $33m at 31 December
2017 (2016 $36m) based on current forecasts. A loan facility
of $5m (2016 $nil) has also been made available to a hotel owner
which was undrawn at 31 December 2017. In
limited cases, the Group may provide performance guarantees to
third-party hotel owners to secure management contracts. At
31 December 2017, the amount provided in the financial statements
was $6m (2016 $5m) and the maximum unprovided exposure under such
guarantees was $31m (2016 $14m). The
Group may guarantee bank loans made to facilitate third-party
ownership of hotels under IHG management or franchise
contracts. At 31 December 2017, there were guarantees of $54m
in place (2016 $33m). In
March 2017, the Group invested $43m in the Barclay associate in
conjunction with a refinancing of the hotel. The cash was
used to repay a $43m supplemental bank loan for which the Group had
previously provided an indemnity for 100% of the related
obligations. As a consequence, the indemnity has been
extinguished. |

| 12. |
| --- |
| In
2016, the Group was notified of (a) a security incident at a number
of Kimpton hotels that resulted in unauthorised access to guest
payment card data (the Kimpton Security Incident), and (b) a
security incident that involved malware being installed on servers
that processed payment cards used at restaurants and bars of 12 IHG
managed properties (the Americas Security incident), together the
Security Incidents. A provision of $5m was made at 31
December 2016, and remains in place at 31 December 2017, to cover
the estimated cost of reimbursing the impacted card networks for
counterfeit fraud losses and related expenses. At 31 December
2017, this estimate relates to both the Kimpton and Americas
Security Incidents whereas at 31 December 2016 it was Kimpton
related only. The estimates continue to involve significant
judgement based on currently available information and remain
subject to change as actual 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
enquiries 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, all of which are in the early stages of
litigation. In
respect of the $5m provision, 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. Tax In
November 2017, the European Commission ('EC') gave formal notice of
a preliminary view it had reached that the Group Financing
Exemption, included in the UK's Controlled Foreign Company rules,
is in breach of the EU's State Aid rules. The EC will conduct
its detailed investigation during 2018, with a final decision
expected later in the year, or even in 2019. Should the
EC conclude that the State Aid rules are breached, the UK can
appeal before the General Court (and possibly the Court of Justice
thereafter). The Group and its advisors consider that it is
unlikely that a finding of State Aid will ultimately be
upheld. 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. At 31
December 2017, the Group had no other contingent liabilities (2016
$nil). |

| 13. |
| --- |
| The
preliminary statement of results was approved by the Board on 19
February 2018. The preliminary statement of results shown in this
announcement does not represent the statutory accounts of the Group
and its subsidiaries within the meaning of Section 435 of the
Companies Act 2006. Full Group financial statements for
the year ended 31 December 2017 will be delivered to the Registrar
of Companies in due course. Financial information for the year
ended 31 December 2016 has been extracted from the Group's
financial statements for that year as filed with the Registrar of
Companies. |

| Auditor's review |
| --- |
| The
auditor, Ernst & Young LLP, has given an unqualified report in
respect of the Group's financial statements for the year ended 31
December 2017 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. |

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:	20 February 2018

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