Intercontinental Hotels Group ROIC dropped on 47.2 pp from 92.2% to 45% in 2018 while Revenue increased on 6.4%
19 Feb 2019 • About Intercontinental Hotels Group (
$IHG) • By InTwits
Intercontinental Hotels Group reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Intercontinental Hotels Group is a growth stock: 2018 revenue growth was 6.4%, 5 year revenue CAGR was 17.9% at 2018 ROIC 45%
- EBITDA Margin is declining: 14.9% in 2018 vs. 19.7% in 2017 vs. 42.0% in 2014
- EBITDA Margin is quite volatile: 14.9% in 2018, 19.7% in 2017, 20.2% in 2016, 88.6% in 2015, 42.0% in 2014
- Intercontinental Hotels Group has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.9%. At the same time it's a lot of higher than industry average of 78.6%.
- CAPEX is quite volatile: 38 m in 2018, 30 m in 2017, 37 m in 2016, 42 m in 2015, 84 m in 2014
- The company has highly profitable business model: ROIC is 45.0%
- It operates with high leverage: Net Debt/EBITDA is 3.1x while industry average is 1.7x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 6.4%. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 4.8 pp from 19.7% to 14.9% in 2018. During 2014-2018 EBITDA Margin topped in 2015 at 88.6% and was declining since that time.
Gross Margin decreased on 2.3 pp from 86.0% to 83.7% in 2018. During 2014-2018 Gross Margin topped in 2016 at 86.0% and was declining since that time. SG&A as a % of Revenue showed almost no change in 2018. SG&A as a % of Revenue followed a declining trend at -4.8 pp per annum in the last 5 years.
Net Income margin decreased on 5.2 pp from 13.3% to 8.1% in 2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 0.88% in 2018. The company showed small CAPEX/Revenue decline of 1.5 pp from 2.3% in 2015 to 0.88% in 2018. For the last three years the average CAPEX/Revenue was 0.85%. CAPEX as a % of Revenue followed a declining trend at -0.89 pp per annum in 2014-2018.
Leverage (Debt)
Debt level is 3.1x Net Debt / EBITDA and 4.1x Debt / EBITDA. Net Debt / EBITDA surged on 0.8x from 2.3x to 3.1x in 2018. Debt jumped on 32.9% while cash jumped on 319%. During the last 5 years Net Debt/EBITDA bottomed in 2015 at 0.3x and was growing since that time.
Intercontinental Hotels Group has no short term refinancing risk: cash is higher than short term debt (442.8%).
Valuation and dividends
Intercontinental Hotels Group's trades at EV/EBITDA 16.1x and P/E 24.0x.
Management team
The company's CEO is Keith Barr. Keith Barr is a founder and has 2 years tenure with the company. The company's CFO is Paul Edgecliffe Johnson. Paul Edgecliffe Johnson has 6 years tenure at the company.
Financial and operational results
FY ended 31 Dec 2018
Intercontinental Hotels Group ($IHG) key annual financial indicators| mln. | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 1,858 | 1,803 | 3,912 | 4,075 | 4,337 | 6.4% |
| Gross Profit | 1,117 | 1,163 | 3,364 | 3,504 | 3,631 | 3.6% |
| SG&A | 442 | 370 | 291 | 284 | 283 | -0.4% |
| EBITDA | 780 | 1,598 | 789 | 803 | 647 | -19.4% |
| Net Income | 391 | 1,222 | 456 | 540 | 351 | -35.0% |
Balance Sheet
|
|---|
| Cash | 162 | 1,137 | 206 | 168 | 704 | 319.0% |
| Short Term Debt | 126 | 427 | 106 | 126 | 159 | 26.2% |
| Long Term Debt | 1,569 | 1,239 | 1,606 | 1,893 | 2,525 | 33.4% |
Cash flow
|
|---|
| Capex | 84 | 42 | 37 | 30 | 38 | 26.7% |
Ratios
|
|---|
| Revenue growth | -2.4% | -3.0% | 117.0% | 4.2% | 6.4% | |
| EBITDA growth | 4.0% | 104.9% | -50.6% | 1.8% | -19.4% | |
|
|---|
| Gross Margin | 60.1% | 64.5% | 86.0% | 86.0% | 83.7% | -2.3% |
| EBITDA Margin | 42.0% | 88.6% | 20.2% | 19.7% | 14.9% | -4.8% |
| SG&A, % of revenue | 23.8% | 20.5% | 7.4% | 7.0% | 6.5% | -0.4% |
| Net Income Margin | 21.0% | 67.8% | 11.7% | 13.3% | 8.1% | -5.2% |
| CAPEX, % of revenue | 4.5% | 2.3% | 0.9% | 0.7% | 0.9% | 0.1% |
|
|---|
| ROIC | 56.3% | 96.6% | 51.2% | 92.2% | 45.0% | -47.2% |
| Net Debt/EBITDA | 2.0x | 0.3x | 1.9x | 2.3x | 3.1x | 0.8x |
Peers in Travel & Leisure
Below you can find Intercontinental Hotels Group benchmarking vs. other companies in Travel & Leisure industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Nektan ($NKTN) | | -71.7% | 995.3% | 129.1% | 50.1% |
| Celtic ($CCP) | | -21.1% | 1.8% | 74.3% | 12.1% |
| Webis Holdings ($WEB) | | 29.7% | 45.3% | 65.8% | 24.0% |
| Easyhotel ($EZH) | | 56.4% | 8.7% | 39.7% | 33.7% |
| Eclectic Bar Grp ($BAR) | | -1.9% | 1.4% | 38.6% | 1.2% |
| |
|---|
| Median (26 companies) | 9.6% | 7.6% | 8.3% | 7.9% | 7.8% |
|---|
| Intercontinental Hotels Group ($IHG) | | -3.0% | 117.0% | 4.2% | 6.4% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Eclectic Bar Grp ($BAR) | 79.0% | 79.4% | 80.7% | 82.3% | 82.9% |
| Paddy Power ($PAP) | 81.0% | 74.7% | 76.9% | 76.8% | |
| Action Hotels ($AHCG) | 73.3% | 74.0% | 70.7% | 69.8% | |
| Nektan ($NKTN) | 57.6% | 42.6% | 67.9% | 64.1% | 62.2% |
| Dalata Hotel Group ($DAL) | 62.8% | 61.5% | 62.2% | 63.2% | |
| |
|---|
| Median (17 companies) | 39.7% | 40.1% | 39.3% | 36.2% | 41.3% |
|---|
| Intercontinental Hotels Group ($IHG) | 60.1% | 64.5% | 86.0% | 86.0% | 83.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Irish Continental Group ($ICGC) | 27.3% | 23.6% | 25.7% | 32.8% | |
| Ryanair Hldgs ($RYA) | 20.1% | 25.1% | 28.9% | 30.6% | 31.2% |
| Dalata Hotel Group ($DAL) | 7.7% | 20.8% | 24.5% | 29.5% | |
| Heavitree Brewery ($HVT) | 22.7% | 23.7% | 25.0% | 27.8% | 24.5% |
| Paddy Power ($PAP) | 29.8% | 20.4% | 17.0% | 26.7% | |
| |
|---|
| Median (26 companies) | 12.3% | 12.5% | 15.9% | 16.7% | 15.7% |
|---|
| Intercontinental Hotels Group ($IHG) | 42.0% | 88.6% | 20.2% | 19.7% | 14.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Easyhotel ($EZH) | 209.8% | 46.8% | 153.2% | 269.8% | 412.1% |
| Action Hotels ($AHCG) | 90.0% | 172.4% | 120.1% | 139.5% | |
| Dalata Hotel Group ($DAL) | 26.7% | 12.7% | 37.4% | 39.0% | |
| Everyman Media Group ($EMAN) | 25.9% | 56.4% | 64.2% | 38.4% | |
| Richoux Group ($RIC) | 14.3% | 10.0% | 17.0% | 34.3% | |
| |
|---|
| Median (26 companies) | 5.4% | 7.2% | 14.1% | 7.4% | 8.5% |
|---|
| Intercontinental Hotels Group ($IHG) | 4.5% | 2.3% | 0.9% | 0.7% | 0.9% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Irish Continental Group ($ICGC) | 40.0% | 33.9% | 30.1% | 35.4% | |
| Air Partner ($AIP) | 21.2% | 20.0% | 20.4% | 24.6% | 34.6% |
| Ryanair Hldgs ($RYA) | 9.5% | 13.3% | 17.2% | 17.7% | 18.4% |
| Hanatour Service Inc ($TOUR) | 19.6% | 19.4% | 8.6% | 15.7% | 7.6% |
| Tui Ag ($TUI) | 16.1% | 15.0% | 15.5% | 14.4% | 12.1% |
| |
|---|
| Median (27 companies) | 4.8% | 5.9% | 5.3% | 6.5% | 8.1% |
|---|
| Intercontinental Hotels Group ($IHG) | 56.3% | 96.6% | 51.2% | 92.2% | 45.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Action Hotels ($AHCG) | 9.6x | 12.3x | 14.4x | 23.9x | |
| Marston'S ($MARS) | 14.0x | 8.2x | 6.2x | 6.9x | 8.7x |
| Rotala ($ROL) | 2.8x | 3.6x | 3.6x | 3.9x | |
| Heavitree Brewery ($HVT) | 2.9x | 4.6x | 4.1x | 3.7x | 3.7x |
| Fuller Smith & Turner ($BA80) | 2.7x | 2.8x | 3.2x | 3.1x | 3.0x |
| |
|---|
| Median (23 companies) | 1.1x | 1.5x | 2.3x | 1.9x | 1.7x |
|---|
| Intercontinental Hotels Group ($IHG) | 2.0x | 0.3x | 1.9x | 2.3x | 3.1x |
