InterContinental Hotels Group Plc 2026 H1 Earnings Call

Hello, and welcome to IHG's 2026 half-year results presentation. I'm Stuart Ford, Senior Vice President and Head of Investor Relations at IHG Hotels & Resorts. Shortly, you'll be hearing from Elie Maalouf, our Chief Executive Officer, and Michael Glover, Chief Financial Officer. Before we proceed, I'm obliged to remind all viewers and listeners that the company may make certain forward-looking statements as defined under U.S. law. Please refer to the accompanying results announcement and the company's SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. In addition, the presentation will refer to certain non-GAAP financial measures. Once again, please refer to the accompanying results announcement and SEC filings for reconciliations of these measures to the most directly comparable line items within the financial statements.

The results announcement, together with the usual supplementary data pack, as well as the presentation slides accompanying this webcast, can all be downloaded from the Results and Presentations section under the Investors tab on ihgplc.com. Now, over to our first half highlights reel, followed by Elie.

Hello, I'm Elie Maalouf, Chief Executive Officer of IHG Hotels & Resorts. Welcome to IHG's 2026 half-year results presentation. I will begin with a short overview of our results in the first half, a period of strong financial performance, record development activity, and further progress on a clear strategy that's unlocking IHG's full potential. Michael Glover, our Chief Financial Officer, will then provide a financial review. After that, I will return to take you through the progress we are making on our strategic priorities. IHG delivered a strong financial performance in the first half of 2026. Global RevPAR grew 4.1%, net system growth reached 5%, fee revenue grew 7%, and fee margin expanded by 120 basis points, driving 10% growth in operating profit from reportable segments. Supported by strong cash conversion in our share buybacks, EPS grew even faster at 13%.

Today, we are pleased to declare an interim dividend of $0.645, an increase consistent with our 10% growth rate since 2022. Dividend payments, along with a $950 million share buyback program, are expected to return over $1.2 billion to shareholders in 2026. Together, the results reflect the strength and resilience of our business model, the diversification and scale of our estate, and the long-term value creation potential of our enterprise platform. They are a clear demonstration of how IHG's continuing to deliver against the growth algorithm we set out in 2024. Let me now hand over to Michael to take you through the financial results in more detail.

Thanks, Elie. I'm Michael Glover, Chief Financial Officer for IHG Hotels & Resorts. Let me take you through some more detail on the strong financial performance delivered in the first half of 2026. I'll start, as usual, with our reportable segments, which includes the fee business together with our owned and leased portfolio of 17 hotels. Revenue was $1,255 million, and EBIT was $655 million, growing 7% and 10% respectively. Within this, fee business revenue increased 7% to $971 million, and fee business operating profit increased 8% to $640 million. Fee margin increased by 120 basis points to 65.9%. I'll come back to the drivers of that performance in more detail shortly. Adjusted interest increased to $106 million, putting us on track for our full-year guidance range that we've narrowed to $230 million-$240 million.

Our adjusted tax rate was 26%, consistent with the rate in the first half of last year. Adjusted earnings per share includes the accretion benefit from the $950 million share buyback program announced earlier this year, together with the annualized effect of last year's $900 million program. The combination of revenue growth, further margin progression, and buyback accretion resulted in adjusted earnings per share increasing by 13% to 274.7 cents. The interim dividend is increasing by 10% to 64.5 cents, consistent with the growth rate in each of the past four years. Moving on to a summary of RevPAR performance. Global RevPAR increased 4.1% in the first half, with occupancy up one percentage point and ADR up 2.5%. Q2 RevPAR grew 3.5%, and positive RevPAR growth was delivered in each of our three operating regions, both in Q2 and for the first half overall.

In the Americas, RevPAR increased 4.8% in the first half. Performance accelerated through the period, increasing from 3.6% in Q1 to 5.4% in Q2. Supportive trading conditions from a strong U.S. economy led to growth in all three demand drivers, as shown on the next slide. The World Cup added approximately 100 basis points to Americas Q2 RevPAR growth. Excluding that uplift, there was clearly very good and broad-based growth right across the region. In EMEAA, RevPAR increased 3% in the first half. After growth of 5.6% in Q1, growth in Q2 was 0.6%, reflecting the well-documented impact of the conflict in the Middle East. This sub-region, which represents 5% of IHG globally, or just under 20% of the EMEAA region, declined by 19% in Q2.

The rest of EMEAA grew by 4% in Q2, including growth of 3% in the U.K., 2.3% in Continental Europe, and 6% in East Asia and Pacific. The breadth and diversification of the EMEAA portfolio therefore continues to be a significant strength. In Greater China, RevPAR increased 3.1% in the first half. Following stellar growth in Q1 of 5.7%, Q2 had an impact from public holiday timings, though RevPAR in this latest quarter still grew by 0.8%. This slide presents the Business, Leisure, and Groups demand drivers, showing a breakdown of booked revenue split by room nights and ADR. At a global level, all three demand drivers delivered growth. Groups was again the strongest, up 6%, with particularly strong growth, as expected, in the Americas. Business increased 2% globally, and Leisure increased 3% globally. As we've highlighted before, this diversification remains an important strength of IHG.

Growth is being supported by a range of customer segments, geographic markets, and travel purposes, rather than relying on a single demand driver. Turning now to system growth, where we delivered record levels of development activity. We opened 31,500 rooms across 197 hotels during the first half, delivering gross system growth of 6.5%. Excluding rooms from the Ruby acquisition, openings increased by 8% year-on-year, continuing the strong momentum we've seen across the business in recent periods. This further demonstrates the continued attractiveness of IHG's brand and enterprise platform to owners globally. The mix of openings remained balanced, with 55% from new builds, 43% from conversions, and 2% from Ruby. Just under 9,000 rooms were removed from our system during the half, representing a removal rate of 1.5%. Taken together, this drove net system size growth of 5% year-on-year, continuing the momentum we had already seen in the first quarter.

This represents a strong outcome, with increasing openings, a normalized level of removals, and sustained net system growth across the portfolio. Moving now to signings. We signed 49,200 rooms across 352 hotels in the first half. Signings on an organic basis also increased by 8% year-on-year, and the composition of signings was again well-balanced, with 51% from new builds and 49% from conversions. By region, we signed 12,500 rooms in the Americas, 19,500 rooms in EMEAA, and 17,100 rooms in Greater China. Development activity remains strong with signings growth in all three regions, including in EMEAA, which continued to perform particularly well despite the disruption experienced in parts of the Middle East during the period. The strength of signings continues to support our confidence in IHG's outlook for future system growth. Coming back to our fee margin progress.

This increased by a further 120 basis points to 65.9%, in line with our medium to long-term ambition of delivering annual margin accretion of between 100 and 150 basis points on average. Importantly, the improvement was broad-based across all geographic regions. The Americas delivered a 150 basis point increase in fee margin to 84.2%, driving operating profit growth of 7% to $442 million. EMEAA increased fee margin by 400 basis points to 69.8%, supporting 10% profit growth to $141 million. While Greater China achieved outstanding profit growth of 25% to $55 million, underpinned by fee margin expansion of 460 basis points to 62.5%. The central reporting segment had a revenue increase of 13%. The central margin came down slightly simply due to the planned timing of cost investment, which is a little more weighted to the first half, but fully consistent with our view for the year as a whole.

The operating profit of central therefore increased by 5% in the first half of the year. As I noted at our full-year results, IHG has maintained a disciplined approach to cost management for many years. With this mindset embedded in how the business operates. Through process redesign, greater leverage of centralized support, and enhanced use of technology, we continue to build a highly efficient, scalable cost base, with step changes delivered in our recent programs that are achieving sustainable savings over the long term. As you can see from this chart, we have consistently increased fee revenues over time whilst maintaining strong discipline over our overheads, therefore driving substantial margin expansion. That's what we've achieved once again in the first half of 2026, with a 7% increase in fee business revenue delivered on a lower level of cost growth.

The 4% increase in fee business overheads in the first half included the timing of certain costs that were front-loaded in the year. There is no change to our view for the year as a whole. We remain confident of delivering an overhead increase within the range of 1%-3%, reinforcing our commitment to disciplined cost management and achieving further fee margin expansion. Moving on to cash flow. Adjusted free cash flow was $360 million, an increase of $58 million on the first half of 2025, driven by the increase in profit. Cash conversion on a trailing 12-month base has remained above 100%. The increase in net debt is a result of the ordinary dividend payments to shareholders, together with returning further surplus capital via share buybacks. As expected, financial leverage remains within our target range. Looking now at capital expenditure in more detail.

Key money and maintenance CapEx totaled $95 million in the first half, with $83 million of key money and $12 million of maintenance CapEx. Recyclable investments were a net outflow of $40 million, comprising gross outflows of $42 million and gross inflows of $2 million. These support attractive development opportunities within IHG, recouping the outflows over time. As previously described, these arrangements are often inherently lumpy. Along with system fund investments, overall gross CapEx was therefore $158 million, and net CapEx was $123 million. These align with our unchanged guidance for key money and maintenance CapEx of around $200 million-$250 million annually, and for gross CapEx of around $350 million a year on average. Our strategy for the uses of cash remains unchanged. After investing to drive long-term growth, which is the foremost priority, we look to sustainably grow the ordinary dividend.