INTERCONTINENTAL HOTELS GROUP PLC NEW

For the period ended Dec 31, 2023. Filed Feb 29, 2024.

About this filing

The yearly report of a company based outside the US. It covers much of what a 10-K does, and may follow accounting rules other than US ones.

FY2023 · Filed Feb 29, 2024

Use the contents to explore the available documents and sections.

IHG$178.75+1.8%Stored close · as of Nov 6, 2026

See the whole filing, with its images and exhibits

Contents

Viability statement

a Definitions for Non-GAAP measures can be found on pages 84 to 88. Reconciliations of these measures to the most directly comparable line items within the Group Financial Statements can be found on pages 226 to 231.
Looking forward, the Directors have determined that the three-year period to 31 December 2026 is an appropriate period to be covered by the viability statement. The Group’s annual financial planning process builds a three-year plan. This detailed plan takes into consideration the principal risks, the Group’s strategy and current and emerging market conditions. The plan then forms the basis for strategic actions taken across the business and is used as the basis for longer-range planning. The plan is reviewed annually by the Directors. Once approved, the plan is then cascaded to the business and used to set performance metrics and objectives. Performance against those metrics and objectives is regularly reviewed by the Directors.		There are a range of possible planning scenarios over the three-year period considered in this review due to macro uncertainties and geopolitical risks affecting markets in each of our regions. In the US and Europe, an uncertain trajectory for interest rates and inflation links to concerns over the strength of consumer spending and broader economic growth and potential impact on travel demand. In Greater China, challenges in the property sector means it is more difficult to accurately predict the pace of further recovery of domestic demand and also international travel of Chinese consumers. In assessing the viability of the Group, the Directors have reviewed a number of scenarios, weighting downside risks that would threaten the business model, future performance, solvency and liquidity of the Group more heavily than opportunities.		Viability scenarios and assumptions In performing the viability analysis, the Directors have considered a ‘Base Case’ which assumes global RevPAR in 2024 to 2026 continues to grow in line with market expectations in each of our regions. The assumptions applied in the viability assessment are consistent with those used for Group planning purposes, the going concern assessment, for impairment testing and for reviewing recoverability of deferred tax assets (see further detail on page 161). The Directors have also reviewed a ‘Severe Downside Case’ which is based on a severe but plausible scenario equivalent to the market conditions experienced through the 2008-09 global financial crisis. This assumes that the performance during 2024 starts to worsen and then RevPAR decreases significantly by 17% in 2025 and increases by 5% in 2026.
Principal risks		Scenarios modelled		Related to principal risks
The relative strength and resilience of the IHG business model to severe shocks has been proven by performance through the Covid-19 pandemic, with positive cash flows being generated through one of the most challenging periods of trading in the history of the industry. In assessing the viability of the Group, the Directors have considered the impact of the principal risks as outlined on pages 42 to 49. The discussion on those pages includes a description of why these risks are important to the achievement of our objectives and how the Group manages these risks. We have considered which principal risks could have the most significant and direct impact to the viability of the Group during the three-year period of assessment and they are shown below, alongside the scenario that is used to model those risks.		Changes in RevPAR Severe Downside Case This scenario models a prolonged decrease in RevPAR, which may be driven by external or internal factors.		Operational resilience to incidents or disruption or control breakdown Guest preferences or loyalty for branded hotel experiences Talent and capability attraction or retention Our ability to deliver technological or digital performance or innovation Owner preferences for or ability to invest in our brands
	One-off events This scenario models the impact of a specific material incident, which could relate to cybersecurity or an alternative material impact on the cash flow statement.		Data and information usage, storage and transfer Legal and regulatory complexity or litigation trends

We have considered the potential impact of the severe downside scenario on our net system size growth. We do not believe a change in system size growth would have a material impact on the Group during the period under review. We have also considered the principal risks that may impact the viability of the Group over a longer period; for example, the impact of climate change on hospitality. The physical and transition climate risks to which IHG is most exposed are discussed in the TCFD statement on pages 52 to 59. Physical risks are not considered material to the long-term viability of the Group, and transition risks present both opportunities and risks. Whilst some transition risks have been assessed as being potentially material to the Group over the next one to five years under a 1.5°C scenario, this scenario is not considered a likely outcome leading to the probability of a material impact on the Group’s viability assessment through 31 December 2026 as low. Funding	Viability assessment At 31 December 2023 the Group had cash and cash equivalents of $1,322m plus an undrawn bank facility of $1,350m. Under the Base Case and Severe Downside Case the Group is forecast to generate positive free cash flow over the 2024-26 period and the bank facility is undrawn. The principal risks that could be applicable have been considered and are able to be absorbed within the covenant requirements. Under the Severe Downside scenario, there is also headroom to the covenants over the 2024-26 period to absorb multiple additional risks; for example, additional RevPAR impacts and a widespread cybersecurity incident. The bank facility would remain undrawn. The Directors reviewed a number of actions that could be taken if required to reduce discretionary spend, creating substantial additional headroom to the covenants.	The Directors reviewed a reverse stress test scenario to determine what decrease in RevPAR would create a breach of the covenants and the cash reserves that would be available to the Group at that time. The Directors concluded that it was very unlikely that a single risk or combination of the risks considered could create the sustained RevPAR impact required to breach the covenants, except for a significant global event. None of the scenarios modelled indicates that a covenant amendment would be required but, in the event that it was, the Directors believe it is reasonable to expect that such an amendment could be obtained based on experience of negotiating the waivers and amendments during 2020. The Group also has alternative options to manage this risk, including raising additional funding in the capital markets. We continue to plan to maintain an investment-grade credit rating which provides good access to the debt capital markets.
The Group’s $1,350m revolving credit facility was extended by one year in 2023 and now matures in 2028 (‘the bank facility’). There are two financial covenants in the bank facility – interest cover and leverage ratio. The interest cover covenant requires a ratio of Covenant EBITDA to Covenant interest payable above 3.5:1 and the leverage ratio requires Covenant net debt to Covenant EBITDA below 4.0:1. In the event a covenant test was failed whilst the bank facility was undrawn, the facility could be cancelled by the lenders but would not trigger a repayment demand on the bonds which threatened the viability of the Group. See note 24 in the Group Financial Statements for further details. In November 2023 the Group issued a six-year €600m bond. During the assessment period there is a €500m bond maturing in October 2024, a £300m bond maturing in August 2025 and a £350m maturity in August 2026. It has been assumed that the bond maturing in 2024 will be repaid from cash reserves and the 2025 and 2026 bonds will be refinanced up to one year before maturity.	Conclusion The Directors have assessed the viability of the Group over the three-year period to 31 December 2026, taking account of the Group’s current position, the Group’s strategy and the principal risks documented in the Strategic Report. Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period to 31 December 2026.	See also our business model on pages 10 to 13, the going concern assessment on page 161, and the impact of the principal risks on pages 42 to 49.

ContentsView on SEC.gov

The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.