Heather Wood: Thanks. Good morning, everyone and welcome to IHG’s 2018 full year results presentation. I’m Heather Wood, Head of Investor Relations. And in a moment, I am going to hand over to Keith Barr, Chief Executive Officer and Paul Edgecliffe-Johnson, Chief Financial Officer, to take you through our results in more detail. But first, as we won’t be holding a separate call for U.S.

investors today but will be making the replay of this presentation available on our website, I need to remind you that in the discussion today, the company may make certain forward-looking statements as defined under U.S. law. So please refer to this morning’s announcement and our SEC filings, the factors that could lead the actual results to differ materially from those expressed in or implied by any such forward-looking statements. I will now hand the presentation over to Keith.

Keith Barr: Thanks, Heather.

Good morning, everyone. In a moment, Paul will talk you through our financial performance. But first, let me share some quick highlights. We delivered a strong performance in 2018. Our room signings and openings were at the highest level for a decade and we are driving real momentum in each of our regions, delivering 2.5% RevPAR growth for the group.

Together with net system size growth of 4.8%, this drove underlying operating profit up 6% and underlying earnings per share up 19%. Our high-quality fee streams and disciplined use of capital continue to generate significant cash flow. Coupled with our strong performance and confident outlook, we have taken the decision to increase our total annual ordinary dividend by 10%, in addition to the $500 million special dividend that we paid last month. 2018 has been a year of meaningful change for IHG. Last February, we set out a series of strategic initiatives, which were underpinned by a renewed focus on delivering long-term sustainable growth for our business.

Combined, these initiatives will help drive industry-leading net rooms growth over the medium term, along with continued strong returns for our owners and shareholders, whilst delivering on our commitment to provide true hospitality for everyone. At the heart of this are our brands. We are constantly enhancing our established portfolio and we are moving quickly to add new brands in the underserved areas of the market where we see a clear opportunity to strengthen our offer to guests and owners. To that point, our rollout of Avid and VOCO we did pace in 2018, and we added Regent Hotels & Resorts to our luxury portfolio. Further strengthening our luxury footprint is the acquisition of Six Senses announced last week, an event that extends to our mainstream category with the news today that we will launch a new brand in the fast-growing all-suites segment of the upper midscale market later this year.

To support the growth across our business, we’ve embedded a new organizational structure, which is helping us move with greater focus, speed and agility. You will recall that we brought together 2 of our 4 operating regions to better focus resources on the highest-opportunity markets. We’ve also combined our commercial and technology functions and created a new brand and marketing organization with global accountability. These moves are already driving efficiencies, speeding up our pace of innovation, improving the efficiency and impact of our marketing spend, and ultimately maximizing revenue delivery for our owners and for IHG. The investments in our strategic initiatives are being funded by our $125 million efficiency program, which is on track with savings being wholly reinvested back into the business.

So there is a lot to celebrate from 2018 as we’ve driven strong performance from our existing business and made rapid progress executing against strategic initiatives that will set us up for faster growth in the future. I’ll go into more detail later on this morning. But before that, 2018 was also a year in which our business suffered a great loss. We recently announced changes to our Executive Committee after Eric Pearson, our Chief Commercial and Technology officer, sadly passed away in December. Eric had taken some time off from the business with illness, during which time George Turner, our EVP, General Counsel and Company Secretary, had taken on additional commercial and technology responsibilities on an interim basis.

I am pleased to say that George has now been appointed into the role permanently. Nicolette Henfrey, currently SVP, Deputy Company Secretary and Head of Corporate Legal, will take up the position of General Counsel and Company Secretary. I am going to hand over to Paul now, who will spend a few minutes taking you through our full year results. I’ll then come back to talk through more detail behind our strategic initiatives before we open up to Q&A. Paul?
Paul Edgecliffe-Johnson: Thank you, Keith and good morning everyone.

Before I get into the details, there is a little feedback. Can you hear me okay? Yes. Before I get into details, I should remind you that my commentary focuses on our results from reportable segments. These exclude the impact of hotel cost reinvestment and the system funds, which are now reported as part of our group results following our adoption of IFRS 15 at the beginning of 2018. Focusing on these reportable segments, we’re pleased to report another year of strong financial performance, with growth in all our key metrics.

Starting with the column on the right hand side of the slide, reported revenue increased 12% to $1.9 billion and operating profit increased 8% to $816 million. On an underlying basis, so excluding current year acquisitions, $13 million of individually significant liquidated damages and at constant currency, we grew revenue by 6%. Underlying revenue and operating profit from the fee business grew 7%. This resulted in our fee margin being up 10 basis points year-on-year at constant currency, and I’ll come back to the drivers of this shortly. Underlying interest increased by $15 million, reflecting the impact of high U.S.

dollar interest rates on bank borrowings and balances with the system funds, along with finance charges related to deferred and contingent consideration on acquisitions. For 2019, I expect our underlying interest charge will be higher, partly due to $20 million of interest on the €500 million bond we raised in November. 2019 interest will also include around $30 million of charges relating to the adoption of IFRS 16 and finance charges on acquisitions, two-thirds of which has a corresponding benefit to operating profit and so will not impact net income. Our reported tax rate fell to 22%, in line with guidance, predominantly due to U.S. tax reform.

In aggregate, this performance enabled us to increase our underlying earnings per share by 19% and gave the board the confidence to raise the total dividend by 10%. Looking now at our levers of growth, we added 56,000 new rooms to the system, which is the highest level of openings we’ve had since 2009. At the same time, we remain focused on removing underperforming properties, exiting 18,000 rooms. At 2.2% of our net system size, this is lower than I had previously guided for 2018, largely due to timing. As a result, for 2019, I anticipate removals will be in the top half of our 2% to 3% point range, which I still expect towards the lower end of this range over the medium-term.

This brought net system size growth to 4.8% or 4.3% on a purely organic basis. We also achieved our strongest ever signings in a decade. 99,000 rooms entered our pipeline, which leaves us well positioned for a further acceleration in net rooms growth. Net system size growth, combined with RevPAR growth of 2.5%, brought total underlying fee revenue up 7%, with around 40% of this growth coming from new and ramping up hotels. When looking at fee revenue, year-on-year rooms growth and comparable RevPAR are good proxy to understand how growing our net system size and revenue per available room translates into incremental fee revenue at the time.

However, they do not reflect several factors that impacts in-the-year fee growth, the phasing of openings and removals, changes in relative brand and geographical mix and the ramp-up of newly opened hotels. I have therefore also shown the total rooms available and total RevPAR growth, as these have a much more linear relationship with fee revenue growth in the year. As we opened more hotels and markets where the demands are that are still being built, lower levels of absolute RevPAR in the early years dilute our overall RevPAR growth. In the longer term, as these markets mature, they will support sustained RevPAR growth, and of course, the fees which we generate there are incremental to those we receive in established markets, so this will continue to be positive for our top line. All the details are a bit at a regional level, which I have shown previously, can be found in the appendix.

I will now take you through our 2018 performance in each of our regions in more detail. Starting first with the Americas, where U.S. industry demand remains at record levels, as a result, our hotels in the region are continuing to drive record occupancies of nearly 70%. This meant predominately rate-driven RevPAR increases, with the Americas up 1.9% and the U.S. up 1.3%.

In the fourth quarter, the U.S. was up 0.6%, a good performance, bearing in mind the drag from hurricane-related demand in the back half of 2017. Elsewhere in the region, Canada had another strong year, up 5%, driven by demand across most urban markets. Underlying profit in the Americas grew 4%, with fee business profit also up 4%. This was largely driven by growth in fee revenue from incremental rooms and RevPAR and a $4 million nonrecurring benefit from a payroll tax credit.

Against this was a $6 million negative impact from lower hotel termination fees and from the financial incentives we have provided for our Crowne Plaza Accelerate program. We opened 22,000 rooms during the year, 60% of which were for the Holiday Inn Brand Family and signed a further 43,000 rooms into our pipeline, including 12,000 rooms for our new brand, avid hotels. Using available industry data, it is clear that we have grown our share of signings in the U.S. through 2018. The investments we’re making to optimize our brand portfolio make our brands increasingly attractive to owners and expand the number of opportunities that they have to work us is paying off.

Moving now to our Europe, Middle East, Asia and Africa region, where RevPAR was up 2.7% for the year, in the UK, RevPAR was up 1%, with nearly 3% growth in London, whilst the provinces were flat. In the fourth quarter, we saw a 10% RevPAR growth in the capital, principally due to strong leisure demand. Continental Europe was up over 5%, with strong performances in France and Belgium. Coupled with strong net rooms growth, this performance translated into fee revenue growth of 5%. Fee operating profit growth of 16% benefited from savings generated by our group efficiency program.

We opened 15,000 rooms in the region and signed a further 27,000 rooms into our pipeline, our fastest pace for 10 years. This strong momentum is a direct result of our increased focus on aligning our resources in the highest opportunity segment of the market across the region. Finally, moving to Greater China, where we’ve continued to outperform the industry. RevPAR across the region grew 7%, with growth moderating in the second half of the year due to the lapping of stronger comparables. In Mainland China, RevPAR was up 6% for the year, benefiting from strong transient meetings and corporate demand in Tier 1 and Tier 2 cities.

Tier 3 and 4 cities saw broadly flat RevPAR due to new supply coming in from Sanya and difficult trading conditions in Changbaishan. Excluding these locations, RevPAR in these cities would have been up mid-single digit. The combination of strong RevPAR performance and a 14% increase in net rooms delivered underlying revenue growth of 15%. Underlying profit was up 19% as we continue to leverage the scale of the operational platform we have built in Greater China. We opened 19,000 rooms, including nearly 14 Holiday Inn Express Hotels.

A further 29,000 rooms entered our pipeline, providing a clear runway for future growth. This is our best performance on record and included 71 Franchise Plus hotel signings for Holiday Inn Express. All together, this underlines the strength of our position and owner offer in Greater China. We have seen great potential in China since we opened our first hotel there in 1984. Since then, population growth, urbanization and rising wealth and emerging middle class have been driving solid demand for hotel rooms across the region.

Significant investments in road, rails and their infrastructure and tourism being one of the strategic pillars of the Chinese economy means the long-term tailwinds for our industry are strong. Against this backdrop, our deliberate strategy to grow a sustainable domestic business as our second home market is delivering results. We were early to identify the potential to expand outside of Tier 1 cities and have been adding hotels in these areas whilst the demand drivers are being built. As demand outpaces supply, this will provide a long runway for faster RevPAR growth compared to the more mature market. With three-fourth of our open hotels and nearly 90% of our pipeline in Tier 2 to 4 locations, we are well positioned to capture future growth in these markets.

We are also adapting our model to take the maximum share of owner demand. In 2016, we launched our tailored franchising solution for Holiday Inn Express and have since opened 29 hotels, with a further 117 in the pipeline. Whereas other players are using master franchise agreements, we are able to retain the full economic benefits of the fee stream. We have further optimized this offer for our owners by taking our highly successful franchise performance support bots from the U.S. and adapting it for the Chinese market.

This new offer is providing us with access to a broader and deeper pool of capital amongst the China owner community. 3/4 of our signings in the year came from private hotel investors and unlisted real estate companies compared to less than half of the existing system. We are also seeing the benefits of increasing scale in our financial results. Whilst building out our system and pipeline in China to nearly 200,000 rooms in over 100 cities, we have consistently invested ahead of the curve to build a scalable infrastructure to support growth, and our business there is now delivering sustainable growth in margins. Turning now to fee margins and our group-wide efficiency program, as Keith mentioned in his introduction, our new strategic initiatives are designed to deliver industry leading net rooms growth over the medium-term.

However, as I have said before, in our business, there is a requirement to invest ahead of profit delivery. It takes time to generate meaningful new fee streams. To that end, we have identified $125 million of efficiency savings, which we are delivering through simplifying our organizational structure, making it leaner and flatter, outsourcing more non-core activities and introducing increased levels of automation. These savings provide additional capacity for reinvestment into our strategic initiatives. This will drive industry-leading net system size growth, fueling future revenue growth and future margin accretion.

Our plan is that on an annual basis the delivery of these savings matches around CapEx spend on new initiatives. As a result, on a full year group wide basis, the net impact of new investments and all the savings overall should be minimal. And that was the case in 2018 where we invested all the savings back into the business, along with an additional $5 million. This time last year, I said the fee margin would be lumpy as we work through this efficiency program and the reinvestment into strategic initiatives. Excluding the impact of 2 one-off items, group fee margin increased 80 basis points on a constant currency basis.

Over time, the benefit of growth from the investments we are making and ongoing disciplined cost management should result in fee margin progression being broadly in line with our historic average. Moving on now to cash flow, our business model continues to generate significant free cash flow, which increased in 2018 to $609 million, for the benefit of owners in 2018, which resulted in a $146 million system fund deficit in the group’s income statement after $47 million of costs relating to our group efficiency program. On this cash flow side, we present the system funds result before this cost, resulting in a $99 million outflow before adjustment to deferred revenue on the loyalty program presented here within working capital. We will continue to manage the systems fund on a cash basis to ensure we deploy receipts in the year they are received. For 2019, we expect this will result in a system fund deficit on the group income statement of a similar level to 2018.

Our gross CapEx was covered at 2.9x by our underlying operating cash flow, whilst our permanently invested maintenance capital and key money recovered nearly 7x. The overall net cash movement resulted in a $321 million reduction in net debt to $1.5 billion. I’ve talked on many occasions about our priorities for uses of cash. Our first focus is to reinvest capital to drive growth. During the year, we spent gross CapEx of $245 billion and net CapEx of $158 million.

This is in line with our medium-term guidance of around $150 million per annum. For the year, maintenance and key money capital expenditure totaled $108 million, and recyclable investments were offset by disposals. Gross system fund capital expenditure totaled $99 million, but after $45 million of system fund depreciation and amortization, the net cash flow impact was $54 million. As well as using cash to reinvest behind our long-term growth, we continue to generate sufficient funds to support growth in the ordinary dividend. We have announced today that the 2018 total dividend will increase by 10%.

Combined with the $500 million special dividend we paid in January, this takes the total amount returned to shareholders since 2003 to $13.6 billion, which is around 1.5x our current market cap. Looking ahead, our long-term funding sources are secure. In November last year, we issued an 8.5-year €500 million bond, giving us a staggered maturity profile of our first bond not due until 2022. We also have access to a $1.4 billion revolving credit facility for additional cash requirements. I would now like to take a moment to talk through the impacts of IFRS 16, which drove interest.

At this stage, we estimate that applying the standard to our 2019 results will result in EBIT increasing by around $12 million and a reduction to net profit in the region of $5 million to $7 million after a full year impact of the UK portfolio deal. The capitalized leases lead to a material increase in our year-end net debt of $431 million. This has no impact on cash, financial capacity, banking covenants or our investment grade credit rating. In fact, credit rating agencies were already making similar adjustments. We finished the year at 1.7x net debt to EBITDA, including the payment of the $500 million special dividend, the acquisition of Six Senses and the adoption of IFRS 16.

Our trailing pro forma net debt to EBITDA will be 2.9x. As you know, we remain committed to an investment grade credit rating. The best external proxy for this following the accounting change is 2.5 to 3x net debt to EBITDA. In that context, our financial capacity and our strategy for uses of cash remain unchanged. Our first focus is to reinvest capital to drive growth.

Second, we want to generate sufficient funds to support growth in the ordinary dividend. Lastly, while there is further cash available which is truly surplus, we will return this to shareholders, as we have demonstrated over the last 15 years. The efficiency program we are undertaking is freeing up capacity to reinvest to drive sustained growth, and we remain committed to returning surplus funds to shareholders in the future. Thank you. And I will now hand back to Keith.

Keith Barr: Thanks, Paul. You will recognize our strategic model on this slide. I’m going to talk today about the progress we are making against the strategic initiatives designed to make this model work harder. We are successfully redeploying resources across our business to better leverage our scale and drive an acceleration in growth. IHG Rewards Club Loyalty program is a key part of our owner value proposition.

We have seen the member contribution grow by 4 percentage points over the past 4 years, and we are enhancing the program to drive even greater levels of member engagement. We have continued to strengthen our enterprise and enhance revenue delivery with our new Guest Reservation System now fully rolled out across our entire estate. GRS will allow us to maximize revenue delivery for our owners, and it forms a key component of our cloud-based technology platform, IHG Concerto. In short, IHG Concerto will increase efficiency in hotels and help future-proof our business, and both IHG and our owners are rightly very excited about it. When it comes to our owners more broadly, the investments we are making in our development capabilities and our existing relationships are driving an increase in signings pace.

Our franchise products in Greater China are helping us broaden our owner base. And we continue to invest across the hotel lifecycle to help make sure we are turning our signings into openings at a faster pace. And we continue to make significant progress in strengthening our established brands and further enhancing our offer through targeted acquisitions and new brand launches. I am going to spend a bit of time now looking at how we are enhancing our loyalty and digital proposition and some of the specific actions we have taken in 2018. Our revenue delivery enterprise supports the 5,600 hotels in our system, and we continue to innovate to ensure that we have a best-in-class owner offer.

We have continued to grow the percentage of revenue generated by our most loyal guests. And we are enriching the value proposition for members by introducing variable pricing on reward night redemptions. The downloads of our mobile app have continued to grow and is delivering increasingly more revenue into our business as a booking platform. IHG Connect, our seamless Wi-Fi guest log-in, is now live across more than 4,000 hotels, driving tangible improvement to the guest experience. IHG Connect provides a platform for the future introduction of greater connectivity across the guest stay such as the ability to stream content in room smart TVs or to order room service through the IHG app.

Following our global agreement with Alipay, we have now signed an agreement with WeChat Pay, bringing more payment options to our Chinese guests across our online and mobile channels. WeChat Pay is China’s second-largest mobile payment platform with over 800 million users. With functionality now scaling at pace across our Greater China region, this demonstrates our commitment to building a sustainable domestic business in our second home market. Looking now at IHG Concerto and I am delighted to say that initial functionality is fully rolled out to all hotels across our estate. Today, IHG Concerto hosts our new Guest Reservation System and our price optimization software, replacing the green screen of Holidex with a more intuitive dashboard design.

But IHG Concerto is more than just a user-friendly dashboard. It lays the foundation for the next stage of technology investment. The flexible infrastructure is designed to future-proof our technology platform, creating efficiencies when we want to upgrade or add new systems and provide scalability to grow in line with our business. When coupled with the ability to optimize pricing and drive greater levels of guest satisfaction, IHG Concerto enhances our owner offer and delivers a clear competitive advantage for IHG. An integral part of IHG Concerto is our new Guest Reservation System.

With the successful rollout of the initial phase now completed, we can look ahead to the next phase, the development and piloting of attribute pricing. Once completed, this will offer guests a much greater degree of customization over their stay as they will be able to book a room based on the specific attributes that matter most to them. It will also offer owners greater flexibility in how they fill their rooms, creating opportunity through more sophisticated yield management and price optimization. Finally, it will enhance our book direct proposition, as this functionality will only be available to IHG Reward Club members who come through our direct channels. With development already underway, we will be running extensive piloting through 2019 and expect to be able to start rolling out this functionality to a select number of hotels towards the end of the year.

Turning now to look at the steps we are taking to enhance our strong and differentiated brand portfolio. In the last year, we have talked a lot about the new brands we have added which are of course important. We are going to start with our established brands, which have driven the bulk of our 4.8% net system size growth. As you can see on the slide, we have a commanding position in the mainstream category, with an industry leading share of both the system and the pipeline. In the upscale segment, the pace of growth of our brands has increased over the last 3 years, positioning us well in a segment that’s set to see revenue increase by 50% in the coming years.

And in luxury, InterContinental, the largest luxury brand in the world, has continued to drive our growth. And we’ve also seen a real acceleration in the international expansion of Kimpton. All of our existing brands are crucial to our sustained growth and so we continue to invest in, ensuring they remain fresh, successful and competitive. The rollout of Formula Blue hotel designs for Holiday Express has continued at pace, almost 1,400 open and pipeline hotels now have the new room and public space designs and we’re bringing them to our European estate, too. Brexit is a key differentiator in this market.

We’ve been transforming our U.S. estate this year, rolling out a new offer that’s proved very successful in the UK. The new Holiday Inn Express breakfast is providing a higher quality experience, is driving an increase in guest satisfaction. In less than a year, this offer is now in more than three-fourth of our U.S. hotels, with the rest committed to implementing in the near future.

We are seeing immediate results with Guest Love scores up 3 percentage points on average. We see similar progress with our rollout of new guest rooms for Holiday Inn, which is bringing fresh and modern designs to our hotels across the Americas. Closely following this, our new public space designs for the region which builds on an Open Lobby product that is now in almost 100 properties across Europe. This is driving impressive results, with hotels seeing a meaningful uplift in guest satisfaction and owners benefiting from increased food and beverage revenue. We have started rolling out new guest room designs in Europe, too, with the initial feedback again showing a significant uplift in the guest experience.

Turning now to Crowne Plaza and our Accelerate program in the Americas, which started in 2016, with an increased focus on quality, we have removed 26 hotels over the past 3 years, and we have been working with existing owners to drive improvement in the guest experience. This includes rolling out refreshed guestrooms that have been designed to create a modern unique space for guests to work, socialize and rest. We have now renovated 6,000 rooms across the Americas, with another 9,000 rooms committed. And our focus on public space design has seen our new Plaza Workspace installed in 16 hotels, with another 12 expected during the first quarter of this year. Outside of the Americas, we are taking some of this innovation to Europe, with properties in London, Paris and Hamburg set to showcase our new room and public space designs.

Our boutique brand, Hotel Indigo, has seen an acceleration of growth in 2018. We celebrated the opening of our 100th property, and the brand has enjoyed its best year ever for signings and openings. We continue to see increasing guest and owner appetite for reliable yet individual boutique hotels. And Hotel Indigo is ideally positioned to take advantage, providing the successful mix of a locally inspired design-led approach with the reassurance of a consistent upscale experience. With new hotels in the pipeline, we are set to double the presence of the brand over the next 5 years.

2018 was also a big year for InterContinental brand, which marked the opening of its 200th property with a spectacular Shanghai Wonderland. If you haven’t seen it until now, let me quickly describe it. This unique hotel is built into the side of a disused quarry. It has 2 floors above ground and 16 floors below, including 2 floors underwater. It is probably one of the most talked about hotels we’ve ever had, which is no surprise.

It’s something of an architectural and experiential masterpiece. Highlighting the brand’s appeal in Greater China, the property was one of 8 InterContinental openings in the region in 2018. And illustrating the brand appeal more globally, InterContinental was named the world’s leading hotel brand for the 12th time at the World Travel Awards in 2018. This is a remarkable achievement and one that demonstrates the consistent high-quality guest experience InterContinental provides. When it comes to adding to our portfolio, we’ve talked about the strategic approach we take when assessing the opportunities out there.

In short, we focus on high-value markets where we can tap into deep pools of unmet demand to create scale positions and on developing a differentiated guest and owner offer. With these two things, we can determine the optimum positioning for a new brand. This highly targeted, rigorous and insights-driven approach has guided our decision-making for Avid, VOCO and Regent. avid capitalizes on a $20 billion segment of the industry where guests are feeling underserved by the existing mid-scale brands at a price point below Holiday Inn Express. VOCO targets owners of high-quality individual assets who see the benefits of being part of IHG system, and the brand appeals to guests who are looking for more differentiated upscale experience.

Regent helps build out our luxury portfolio, creating opportunities to unlock the potential of a well-respected brand and work with new and existing owners in the top tier of this segment. Building on this approach, you will have seen the news of our $300 million acquisition of Six Senses and I will come on how this fits into our overall luxury strategy shortly. But first, I want to touch on another opportunity we have identified within our mainstream portfolio and our decision to launch a new all-suites brand in the upper mid-scale segment this year. The all-suites segment of the Americas’ upper mid-scale market has grown in scale by around 70% over the last 4 years, which speaks for itself in terms of the clear demand from both guests and owners. Appealing to travelers looking for design-led authentic experience on what are typically longer stays than your normal transient guests, we estimate there to be an $18 billion pool of guests in this segment.

When you take into account our track record with established mainstream brand and of delivering operational excellence and high returns for our owners through our extended stay brands, this represents a significant opportunity for IHG. Let me now just spend a few minutes looking at the progress we are making with these new brands, starting with avid. We have continued to see strong demand from owners, with more than 170 properties signed since launching the brand 18 months ago. As anticipated, our signings pace has now normalized and we expect that the 22 properties we signed during the fourth quarter will be more representative of our longer-term run rate for the brand. We opened our first property during the second half of the year in Oklahoma City and it’s already proving a hit with guests, receiving great reviews across the hotel’s website and other media.

With planning approvals obtained and/or ground broken on a further 27 hotels, we expect to have our next property opened this summer. Following launches in Mexico and Canada, we’re also bringing avid to Europe with the signing of a multiple development agreement with an existing partner for 15 hotels in Germany. Since launching VOCO 8 months ago, we already have 3 hotels open across the UK and Australia, which are seeing great guest reviews. We have signed a further 13 properties to date, including some fantastic locations in Dubai, Melbourne and Bangkok. Owner interest is very strong and we remain confident of growing it to more than 200 hotels over the next decade.

Let me now pause on luxury and our approach to the opportunities within this fast growing $60 billion segment. Whilst we continue to enjoy great success with InterContinental, we are cognizant of the fact that luxury travelers are increasingly looking for more differentiated experiences across a variety of stay occasions. By building on our luxury offer, we’re able to add greater depth and variety to both our guest and owner propositions. They must capture a greater share of the growth opportunity within this segment. This is evident in our positioning of Kimpton, which is allowing us to sign properties in the lifestyle and boutique luxury space, whilst the addition of Regent creates opportunities to grow in the top tier of luxury.

Finally, the acquisition of Six Senses gives us a high-quality presence and growth opportunities to some of the most prestigious leisure and resort locations in the world, right at the very top of the luxury segment. So let’s take a look at some of these brands in a bit more detail. 2018 was a standout year for Kimpton. We almost doubled the number of rooms signed in the previous year and strong owner demand meant signings with the highest level since we acquired the brand in 2015. International expansion is at the heart of this growth and our re-branding of a portfolio of upscale and luxury hotels in the UK means we opened our first property in this important market, the Kimpton Fitzroy in London.

In total, we now have a presence secured for the brand in 14 countries around the world, including signings in Frankfurt, Barcelona and Tokyo. A key part of our success in accelerating the growth of Kimpton has been preserving the brand’s DNA, the distinctive approach and values that had made it so loved by guests, employees and owners alike. We were therefore delighted that Kimpton was again recognized on Fortune’s 100 Best Companies to work for list in 2018 and also named the top brand in its category by J.D. Powers. Last February, we talked about our desire to round out our brand portfolio by adding 1 or 2 asset luxury brands that we can incubate and grow.

Following our acquisition of Regent in July, we have moved that pace to integrate the brand into our business. Building on the deep brand heritage of Regent, we have repositioned it with new hallmarks, service ethos and updated design philosophy and have signed 3 properties since acquisition. Alongside the planned refurbishment of the InterContinental Hong Kong and the subsequent re-branding back to Regent, we are on track to grow to more than 40 properties over the long-term. Turning now to last week’s announcement of our $300 million acquisition of Six Senses, as one of the world’s leading operators of luxury hotels, resorts and spas, this is a fantastic addition to our brand portfolio. Six Senses has a world-renowned positioning around sustainability and wellness, which is consistently executed through the hallmarks of a brand.

With hotels in some of the leading resort destinations around the world, Six Sense strengthens IHG guest and owner offer at the top end of the luxury segment. The Six Senses Management team brings a wealth of knowledge and experience of the luxury market to IHG and will remain in place as we look to grow the brand. Six Senses will add 16 high-quality hotels to our system in locations such as the Maldives, Seychelles and Portugal’s Douro Valley with a further 18 management contracts signed into the pipeline and more than 50 deals under active discussion. We expect to accelerate Six Senses’ growth to more than 60 hotels over the long term. So looking again at overview of our brand portfolio, you can see how our strategic approach has targeted new brands in the areas where we see the greatest potential for growth.

We are focused on adding greater depth, whilst maintaining a balance across the segments and geographies. The four new brands we added over the past 18 months and the new brand we will be launching later this year are all focused on meeting significant guests and owner demand. This ensures that we have the right brands in the right markets to set ourselves up for continued growth. So, to sum it up, we have delivered strong financial results whilst executing against the strategic initiatives we outlined last year. We are investing in our business to make our strategic model

work harder: strengthening our established brands, adding new brands targeted at high-value opportunities and optimizing our owner proposition and revenue delivery enterprise.

We are already seeing positive results, and we are confident that the steps we are taking will drive industry-leading net rooms growth over the medium term. Our approach to capital allocation remains unchanged and our business model continues to drive high-quality sustainable growth in free cash flow. The fundamentals of our business remain strong. And while there are macroeconomic and geopolitical uncertainties in some markets, we are confident for the year ahead. With that, Paul and I are happy to take your questions.

Operator: [Operator Instructions] [Technical Difficulty]

Keith Barr: Jamie?

Jamie Rollo: Good morning. Jamie Rollo from Morgan Stanley. Three questions on room openings, please. First, what’s happening in China? Because the signings fell by about a quarter in the fourth quarter and the removals doubled in the year. So, is that a sign of just weaker owner confidence or is that just timing? Secondly, again, what’s happening with avid? 20-ish signings in the fourth quarter, another sequential slowdown, if that’s the sort of run rate going forward, is that not a bit disappointing? And then finally, if we look at the bigger picture at the group level for net openings this year, I know you’re talking about 6-ish percent medium term, but it sounds like with removals being up again this year and the exit rate of signings weaker, are we looking at another year of under 5%? Thank you.

Keith Barr: Paul, do you want to take China Q4?
Paul Edgecliffe-Johnson: Sure. So obviously, when you’re opening up as many hotels as we are in China and signing as many, it will vary a little bit quarter by quarter. And there’s no underlying drop off in the level of interest in signing the brands. We had a very strong first 9 months of signings. And there may be in a few deals the team could have got over the year in the fourth quarter but didn’t quite get there, so they’ll come in the first quarter of the year.

So, you tend to see that a little bit after a very strong first 9 months of the year. And the same with openings really. We did have one large 2 large unbranded hotels that we took out in China in the fourth quarter, which we’d signed a few years ago. The owner was going to put CapEx in and bring them into the brands as the representation that we wanted them to be in one of our brands. In the end, we couldn’t make that work with them, so we exited those.

So that’s part of the reason for the high level of removals there.

Keith Barr: I think, Jamie, on your other question, when you think about avid on the way that we launched that brand to the market to the owner communities, we built up a significant pent-up demand for avid before we were able to sign it because we did have the FDD available for a period of time. So that led to the acceleration of signings in getting the 170-plus signed to date. We think the run rate of 20 to 25 per quarter going forward is about the right run rate for the brand. We’re quite happy to see that because that will continue to grow at pace.

In net openings, I think when we launched the strategic initiatives a year ago, we said that we’re going to accelerate the industry-leading net rooms growth over the medium term. And so, we saw an acceleration in 2018 and we expect to see an acceleration into 2019 into 2020 as, again, the existing business effectively drives the bulk of that and the new brands and new initiatives kind of are the top of that and gives the incremental growth.

Jamie Rollo: Is that an acceleration on the 4.8% including the 2 deals or the 4.3%?

Keith Barr: On top of the 4.8%. So, I mean, we would be disappointed we think industry-leading is in the 5% to 6% range and we’d be disappointed if we weren’t somewhere in the 5s.

Richard Clarke: Hi good morning.

I am Richard Clarke from Bernstein. Apologies for my voice. A couple of questions on margin, please. You pointed to the fact that kind of underlying margin went up 80 basis points this year. Why is that below the historic run rate, which I think is around 135? And then secondly, thinking into next year, are there any additional investments you’re making that means you can’t get back up to that sort of 100 basis points or even the 80 basis points number? And then the last question on Six Senses.

By my maths, you’re paying about 5x per room what you paid for Regent. So just thinking about how you can think about getting a return on that $300 million compared to what you paid for Regent? Thanks. Paul Edgecliffe-Johnson: So why don’t I take these ones. So, we did 10 basis points of margin in 2018, obviously quite a lot below our historic run rate. I did say at this time last year it was going to be lumpy.

There are 2 things that are impacting on the margin. If you exclude that and they are one-offs that only really happen in 2018, then we’ll be back at 80 basis points, which is a little below our long-term run rate. When you’re going through so much change as we have been, some of the levers that we would normally pull to drive the margin, really control the costs are harder to do through a year of transformation. Our focus on cost efficiency, on procurement, on really delivering long-term sustainable growth in margins hasn’t changed though, so I would expect that going forward, we’re still going to see strong growth in margins. Whether it’s 100 or whether it’s 135, we’ll have to see.

We do have a few more areas that we can invest in, which Keith was talking about. So, in a given year, we might earn another couple of million dollars behind that, which might mean rather than 135, it’s 100. So, looking into 2019, I’m pretty confident on the 80 to so the 80 to 120 basis point range, so in the middle of that most likely. And look, in terms of Six Senses versus Regent, they’re very different businesses that we’re buying and different acquisition structures as well. I mean, Six Senses is more, if you like evolved.

With the acquisition of Regent, we’re buying we bought an IP shell almost, which we’re then having to invest significantly behind to build that back out. Six Senses, we’re buying a lot of a big pipeline in that. So, it’s not a particularly easy comparison. With Six Senses, of course, you also have to take off the tax advantage that we get in looking at the price there. It will grow over time from the open hotels and the pipeline to a business that we’ll be making better than $50 million of fee income over time.

So that’s really how we think about the business, what’s the opportunity in the longer term.

Keith Barr: Thanks, Richard.

Alex Brignall: Good morning. It’s Alex Brignall from Redburn. Three questions, please.

The first one on Concerto, you’ve talked about the increased ability to manage pricing for owners. Could you talk a little bit about what we might expect to see on numbers that we can look at within our models? So, call it RevPAR or revenue or overall pricing, that would be great thank you. On luxury, how much of that growth in that as an area of focus has to do with some of the pressures that we see in structural pressures within the industry on distribution or on other new entrants? And then thirdly, this is extremely boring. But on interest costs, they were higher this year and I don’t think all the bond was in there. So, could you just guide as to where that might be for next year, please? Thank you very much.

Keith Barr: I’ll let Paul pickup the very exciting topic of interest. So, starting on Concerto, so when we rolled out the program, we talked about the initial phase being the foundational component to it and that’s rolling out additional functionality. So, in 2019, we’ll be piloting attribute pricing effectively and then begin rolling it out across different regions and different brands over time, and then having more functionality every year thereafter. We’re not going to provide specific guidance on every single piece of functionality. We roll out because of like an app update, it will be 2 to 4 times a year we’re rolling out some new functionality.

But we’re doing it because, fundamentally, we believe it’s going to do a few things. One is, will increase overall pricing ability at the hotels. Now we’re principally a franchise estate so it’s a question of how did the franchisees take advantage of it, but we’ve got robust training around that. We also think those can help us on the conversion side, too, by us being able to package up and serve content and pricing and products differently across our brands to be much more relevant, too. So clearly, we’re making the investment in there because we believe it will drive incremental revenues to our hotels, but we’re not going to guide on specifically any uplift in RevPAR by functionality.

The reason for luxury, when we sat there a few years ago and looked at our portfolio saying we’ve got a great brand with InterContinental, now 200 hotels, let’s be candid about, there are some markets where we have reached scale, where there’s no more InterContinentals to put in that market. And so what other opportunities could we access if we had a different brand? In Shanghai now, we have 6 in Shanghai, I believe. It’s really difficult to put another InterContinental there, but we could put a Regent in there and so it’s accessing that opportunity. Then we looked at the acquisition of Kimpton in the lifestyle luxury boutique space, very different profile of asset and customer base as well, and with Six Senses. And so, if you look at those 4 brands, they are very differently and uniquely positioned against one another, both in price point and customer experience.

So, there’s no cannibalization, but there are synergies across them in terms of customer stay and also to strengthen the overall loyalty proposition for the company in terms of redemptions for that premium customer. So, we think there is both the benefit economically in terms of the fee income that Paul mentioned, but the strategic benefit of big strength of the overall enterprise and interesting enough, a lot of commonality in those owners, too. And when we have some owners today, one this weekend I was talking to, owns a Crowne Plaza, owns a Six Senses, and he’s building a Regent right now. And so, our ability to kind of have a greater share of wallet from one customer base will be really important for us. Paul Edgecliffe-Johnson: So, interest is complicated at the moment with IFRS 16.

I guess, the simpler piece is the euro bond because we have put out what the interest costs on that was. So, you’ll we brought it out in November so you’ll then have the full year impact of that. IFRS 16 is fiendishly complicated, if I’m honest, in that it brings an additional income into EBIT, and then you have additional interest charges coming through together with some interest charges that relate to the deferred consideration on the Regent acquisition as that’s unamortized over time. The IR team, very happy to spend lots of time talking through all the moving parts on that to help you get your numbers to the right place. But the easiest part of it, as I say, is the bond.

The other pieces will probably take a little bit of just talking through, factor by factor.

Jarrod Castle: Thanks. It’s Jarrod Castle from UBS. Also three if I may, please. There has been a little bit of, I guess, cautious comments from the likes of Hilton and Choice in terms of kind of their RevPAR guidance, so interesting just to get your thoughts.

Secondly, I mean, you spoke a little bit about a bit more about the luxury segment. But how do you approach kind of the kind of build versus buy question, given that building new brands is part of your DNA? And then just coming back to the fee margin progression, I mean, how many years do you think you could keep pushing within that 80 to 120 basis point range? Thanks.

Keith Barr: Do you want to take 1 and 3?
Paul Edgecliffe-Johnson: Yes. So, in terms of Hilton and Choice, I think that Hilton’s guidance was pretty much what people expected eventually. I think they narrowed down their range, but you’re better off talking to Chris as to what he’s expecting there.

Typically, we don’t perform materially differently to Hilton. They have a slightly more weight slightly greater weighting into the upscale, a few more hotels up there. We’re actually pleased with our fourth quarter numbers. Outperforming the mid-scale segment is not easy but we did outperform, and we’re hoping that, that will continue with the key we’re doing differently, which we think is giving us some assistance there. So, we’ll continue to track that.

And then if you look at the U.S. longer term, the supply-demand dynamics still look pretty good. And we’ve built a business there with very preferred brands. If you look at China, our business continues to perform well there. We’ve got a very broadly spread business right across all the different tiers of the market, and demand continues to be very strong there.

It’s really a, it’s a domestic business, which does demand adjust. And in terms of the margin progression, I guess, if you go back in 2004, so I think that over the next 15 years, we could sort of average up 135 basis points of margin progression. I might not have been that confident. I guess that we have and there’s a lot that we’ve over that time. Partly it is aided, as you know, by the fact that some of our franchise income in the U.S.

comes through at very high margins because we do have a large overhead base there already. If you think about China, where we’ve got a very strong infrastructure there and we’re not done to see more of the growth coming through there, without having to add much more costs, that’s helping us. And as I’d say, we’re also very focused on procurement, cost efficiency and continuing to drive up the margin in the business. So, I wouldn’t put an upper level on it. We still think there’s lots of opportunity.

Keith Barr: In terms of luxury and build versus buy, I think it goes back to thinking about our overall strategy about how do we build out our brand portfolio and really using kind of our strategic analysis to understand where the pools of demand that are out there that we can access, in what segments and then what’s our ability to really win against those segments. So, if we’re in mainstream, we’re going to build it organically. I mean, we effectively can go it just falls into what we do better than anyone else in the industry is build mainstream brands and scale them up quickly in the most important markets. And so, we wouldn’t need to go buy that. I think VOCO was another good example of in the upscale segment.

We recognize we could build that brand out. When you move into luxury, I don’t think anyone out there in the industry has proven to be successful without investing either quite a bit in physical assets, going out investing a lot of capital in a lot of hotels to position them well over time in luxury than to create a brand. That’s just expensive and takes a lot of time. It isn’t on our strategy in terms of how we want to use our capital. And so, going out and finding, honestly, companies that have been built over time by other individuals that are still asset light that we can then scale up, and luxury was what we said we would do, and I think Regent and Six Senses are bang-on strategy, both in terms of where they fall in the segments and also how we acquire them.

And that’s what we’ll continue to consider to do going forward, both organically and inorganically, where we see a big enough demand and a gap in our portfolio.

Jaafar Mestari: Hi good morning. It’s Jaafar Mestari from Exane BNP Paribas. Two questions for me, please. Firstly, on the new studio brand, can you tell us a little bit more about the price points compared to Candlewood, Staybridge and a little bit more about the launch strategy? Who’s the target audience there if we compare it to, say, avid, where you built a lot of pent-up demand, where you signed mostly with your existing owners? Is this something similar here? And then second question related on the strategy you’ve unveiled 18 months ago now.

If I remember correctly, it was one angle which was adding new brands. I’m not saying it’s done, but I think we’ve seen many examples of that. What about the second pillar, which I think you described as evolving the owner proposition? So, is it going to be continuous small tweaks to TRS functionalities, et cetera? Or is there a big reveal where we wake up one day and you say we add 150 management personnel in the U.S. or something like that, more of a step change?

Keith Barr: Excellent. Again, so in regards on the new studio brand, I think in terms of we made the announcement today that we’re moving into the space, which is similar to what we’ve done in the past with VOCO.

So, our intention will be to later on this year do a scale launch to our owning community, talking about the brand positioning, the proposition, the name, the visualized entities, the design, and then having an FDD available later on this year to then be able to sell it effectively. And so, kind of very similar path to what we were able to do with VOCO and with avid as well. So essentially to be able to be selling this brand in 2019 to our core owners in the U.S., in terms of the price point, it’s going to be an upper mid-scale, so it’s going to be sitting from a price point below where Staybridge Suites is going to be currently today. Upper mid-scale is where Holiday Inn, Holiday Inn Express are basically positioned. And again, it will be an opportunity for both a new build principally, but also a conversion play for appropriate high-quality upper mid-scale assets that have the right physical design, too.

So, whereas avid was pure-play new build, this will be principally new build but with some conversion opportunities. We did yes, we didn’t lean in to saying we’re going to be launching new brands to fill customer needs I mean, owner needs. We’ll continue to look at that. I think, right now, we’ve done a fair bit in a short period of time and so want to make sure that we continue to scale and execute those. We’ve done a lot on the enterprise as well too.

Concerto is a key component of that in our technology and digital platforms, so continuing to up-weight our investment there. We also do have quite a bit of work happening on the owner proposition in terms of how we engage with owners. And it’s really around how do we go faster from signings to ground breaks to openings, providing more value through procurement to make our properties even more high value in terms of returns to owner, and then how do they ramp up those hotels faster. So, we’re making significant investment in those areas as well, too. So, it is kind of the holistic approach of having the right brands in the right markets and then continuing to enhancing our revenue delivery and services is the way that we’re going to continue to create more value.

So, we’re being quite balanced about it. We have talked a lot about brands, but there’s a lot happening behind the scenes in those other areas.

Julian Easthope: It’s Julian Easthope from RBC. Yes, 3 quick questions from me. First one, in terms of your ability to make any further acquisitions now, you’re 2.9x pro forma in terms of your net debt-to-EBITDA and you got a limit of 2.5 to 3x or at least a target.

So, I just wondered how far you’d be happy to breach that if anything else further came up, or are you limited on acquisitions now? Secondly, probably the weakest spot at the moment is Middle East in terms of the performance. I just and that appears to be as much supply driven as it is anything else. So, I just wonder what your thoughts are as to how the Middle East is likely to progress from a supply point of view. And finally, the sort of nerdy question. IFRS 16, will you restate 2018? And will I presume that you’ll we should adopt it for first half and as well as the full year and should we just assume an equal split between the 2? Thanks.

Paul Edgecliffe-Johnson: Thanks, Julian. So, in terms of acquisitions, we have made these two acquisitions in a relatively quick succession. We also returned the $500 million in January. So that takes us to 2.9x on 2018 earnings. The business does deliver pretty quickly.

As you know, very strong cash generation. We also do still own a few assets, not huge. And we are seeing whether when we’ll monetize then you’ll remember we had some money in the evens. We put in about $130 million, $140 million of those. So, if we monetize that, we may decide to recycle that as part of the strategy.

You saw it on the slides that we recycled about $45 million last year. When we talked about what we the gaps that we really wanted to close this time last year, we talked about luxury and the opportunities there, so we’re pleased with what we found there. Those were the opportunities we were particularly focused on at that time, so we are very pleased that we’ve closed those down. So, we’ve been pretty consistent with our leverage approach and our conservatism, if you like, in terms of the balance sheet. I wouldn’t expect that we’re going to be moving away from that.

If something else came up and it was very, very attractive and it was very small, then we’d probably evaluate it, but I think it’s relatively unlikely in the very short term. In terms of the Middle East, the Middle East has been a good market for us over a very long term. We went into Beirut back in the 1960s with the Phoenicia there. So, we’ve got very strong brand and brand recognition is very strong, owner relationship, and it will come good again. It had some tough years, probably the new supply coming into the UAE, the political instability there, but we’re not just in any of our markets for the short term.

You have to be in and support your owners, support your guests and that’s what we’ll continue to do. In terms of IFRS 16, yes, we will restate the 2018 results onto an IFRS 16 basis and it will be applicable from 1st of January 2019. And as I said with the interest, we’re very happy to spend time and just talk through all the implications that it has and the puts and the takes into the numbers because it is quite complicated. Thanks, Julian.

Keith Barr: Upfront, sorry.

Unidentified Analyst: [Indiscernible]. Just a couple of questions from me, please. The first one is just on VOCO, obviously, that was conversion of branded launch. Of the 3,000 rooms in the pipeline, are they all conversions or some of them ended up being new owners as well? And then the second one, a small one, just on the U.S. RevPAR, has there been any material impact from the government shutdown? And therefore, is there any benefit sort of to be seen from 2Q onwards from that?

Keith Barr: Great.

VOCO, so we launched it principally as an upscale conversion brand. We had been approached by some owners who have new build properties who really like the brand proposition and who have embarked with us on it. So, we do actually have some new build coming into the pipeline, which we expected to happen over time. We thought we would have to get more conversions done in the marketplace to get the new build opportunity. But when we did some fantastic launch events in, we did it in Dubai, we did it in Paris, we did it in Sydney, it just generated significant owner demand already in the new build space, too, so it will have a bit more of a new build profile to it than we had expected.

U.S. RevPAR government shutdown, we haven’t seen any material impact. The benefit of our scale in the U.S. is we’re not that geographically concentrated in Washington, D.C. and also into the upper upscale luxury space there.

We’re in Topeka, Kansas, in Dallas, in Boston, in Chicago. So, our business is so big that the shutdown has not shown to have any material impact at this time. I think we how much more time do we have? Yes, maybe just one last question, if there is one, going once, going twice, sold.

Keith Barr: Alright. Well, thanks everyone.

Really appreciate the opportunity to be with you today and your questions, and look forward to catching up with you all in the near future.

Operator: Ladies and gentlemen that does conclude today’s call. Thank you for joining. You may now disconnect your lines.