InterContinental Hotels Group PLC — 2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; Q4 trading comparisons are included below. Financial statements are prepared under IFRS as issued by the IASB.
Business context
IHG is a global, predominantly asset-light hotel group that franchises brands and manages hotels for third-party owners. At year-end it had 18 brands, 6,164 open hotels with 911,627 rooms, and a pipeline of 1,859 hotels with 281,468 rooms. The company described recovery from pandemic-related travel restrictions as the main driver of improved trading.
Financial and operating performance
| Metric | 2022 | 2021 | Change / context |
|---|---|---|---|
| Total revenue | $3.892bn | $2.907bn | Up 33.9%; includes System Fund revenue and cost reimbursements |
| Revenue from reportable segments | $1.843bn | $1.390bn | Up 32.6% |
| Gross revenue in IHG’s System | $25.8bn | $19.4bn | Up 33.1%; largely generated by third-party hotel owners and not wholly attributable to IHG |
| Operating profit | $628m | $494m | Up 27.1%; after $95m net exceptional charges and a $105m System Fund loss |
| Operating profit from reportable segments | $828m | $534m | Up 55.1% |
| Profit for the year | $376m | $265m | Up 41.9% |
| Basic / adjusted EPS | 207.2¢ / 282.3¢ | 145.4¢ / 147.0¢ | Adjusted EPS up 92.1% |
| Fee margin | 56.2% | 49.6% | Up 6.6 percentage points; 2.1 points above 2019 |
| Global comparable RevPAR | Up 36.6% year on year | Up 46.0% | Full-year RevPAR remained 3.3% below 2019; Q4 was 4.1% above 2019 |
| Net cash from operating activities | $646m | $636m | Up $10m |
| Adjusted free cash flow | $565m | $571m | Down $6m |
| Net debt / leverage | $1.851bn / 2.1x | $1.881bn | Net debt down $30m; leverage below IHG’s 2.5–3.0x target range |
RevPAR recovery varied by region: full-year performance versus 2019 was up 3.3% in the Americas, down 7.5% in EMEAA and down 38.1% in Greater China. Q4 RevPAR versus 2019 was up 9.0% in the Americas and 8.8% in EMEAA, while Greater China was down 42.1%.
IHG’s System Fund is administered for the benefit of hotels in its system, rather than to generate a profit for IHG. Its reported loss widened to $105m from $11m, reflecting higher marketing, loyalty and direct-channel investment, including the IHG One Rewards relaunch. Cost reimbursements rose to $832m but have matching costs and no reported profit impact.
Liquidity, debt and shareholder returns
- Year-end liquidity was $2.224bn, comprising $874m of cash and cash equivalents net of overdrafts and restricted cash, plus an undrawn $1.350bn revolving credit facility.
- Reported cash and cash equivalents were $976m. Total borrowings were $2.396bn, and lease liabilities were $427m.
- The new $1.350bn revolving facility matures in 2027. At year-end, covenant leverage was 2.12x versus a maximum of 4.0x, and interest cover was 8.22x versus a minimum of 3.5x; the facility was undrawn.
- Debt maturities include a €500m bond in 2024 and a £300m bond in 2025. Management’s viability assessment assumes refinancing these maturities.
- Dividends paid in 2022 totalled 129.8p per ordinary share (138.4¢ per ADR). A further 94.5¢ per ADR final dividend was proposed, subject to shareholder approval. A $500m buyback completed in January 2023, and a further $750m buyback was announced for 2023.
Material changes, outlook and risks
- Recovery in travel demand, higher room rates and disciplined cost management drove increased profit and fee margin. Adjusted net system-size growth was 4.3%, excluding the effect of ceasing operations in Russia; 80,338 rooms were signed and 49,443 opened.
- IHG entered a long-term commercial agreement with Iberostar Hotels & Resorts, adding the Iberostar Beachfront Resorts brand and 33 hotels to the system by year-end. Luxury & Lifestyle brands comprised 13% of system size and 20% of the pipeline.
- Management expected further recovery in business and group travel alongside continued leisure demand in 2023, and cited positive signs following Greater China’s reopening. The filing does not provide a clear numerical 2023 financial guidance range. Management also highlighted inflation and cost pressures, labour shortages, supply-chain and construction constraints, and economic uncertainty.
- Viability analysis considered a base case, a recession downside and a severe downside resembling the 2008–09 crisis. The Group forecast positive adjusted free cash flow in each case through 2025. Under the severe downside, covenant headroom was limited at certain test dates before discretionary cost actions; the Board concluded it had a reasonable expectation that the Group could continue operating and meet liabilities through December 31, 2025.
- Russia exit resulted in $17m of costs and impairment charges. Net operating exceptional charges were $95m, including $28m of commercial litigation and disputes, a $60m exceptional share of losses from the Barclay associate, and impairment charges and reversals.
- In September 2022, criminal unauthorised access to technology systems disrupted booking channels and other applications. The company reported no evidence of unauthorised access to systems storing guest data; a class action was filed, and the potential financial effect was not estimable from the filing. Management said it reviewed security measures and remediation.
- Other key risks include cyber and data security, owner investment appetite, competition, talent retention, supply-chain resilience, legal and regulatory developments, litigation, climate transition and physical risks, and renewed travel disruption. The filing identifies uncertainty in loyalty-point breakage estimates; loyalty-programme deferred revenue was $1.411bn, and a one-percentage-point change in the breakage estimate would change that liability by approximately $63m.
Investor verification priorities
- Confirm the definition and reconciliation of non-GAAP measures, including adjusted EPS, fee margin, adjusted free cash flow, net debt and segment operating profit.
- Assess the sustainability of RevPAR recovery, especially Greater China, and whether reported room growth translates into openings and fee revenue.
- Review the $1.411bn loyalty-programme deferred revenue estimate, breakage assumptions and System Fund accounting and cash position.
- Track the cyber incident’s remediation, any litigation or regulatory developments, and whether further financial effects arise.
- Verify dividend approval and payment, completion of the $500m buyback, execution of the announced $750m 2023 buyback, and refinancing plans for 2024–25 maturities.
- Review covenant headroom under weaker trading scenarios and the assumptions supporting the 2025 viability conclusion.