Good afternoon, ladies and gentlemen and welcome to the IHG Half Year Results Call. My name is Indy, and I’ll be your coordinator for today’s event. For the duration of the call, you will be on listen-only. However, at the end there will be an opportunity to ask questions. [Operator Instructions] I will now hand you over to your host Catherine Dolton to begin today’s conference. Thank you.

Thanks Indy and good morning, everyone. This is Catherine Dolton, Head of Investor Relations at IHG. I’m joined this morning by Richard Solomons, Chief Executive and Paul Edgecliffe-Johnson, Chief Financial Officer. Before I hand over to them for the discussion of our results, I need to remind you that in the following discussion, the Company may make certain forward-looking statements as defined under U.S. Law. Please check this morning’s press release and the Company’s SEC filings for factors that could lead actual results to differ materially from any such forward-looking statements. I’ll now turn the call over to Richard Solomons.

Thanks Catherine and good morning again everyone. Thanks for joining us today. Welcome to our 2016 interim results conference call. Before we get started, I'll just spend a couple of minutes looking at IHG in the context of what's happening in the world right now. So in recent months has been considerable economic and political uncertainty, not at least because of Brexit, concerns about the stability of the European Union, more broadly the U.S. Presidential Election campaign and ongoing unrest in other parts of the world. And in the midst of this, we've seen an increase in terrorism with horrifying scenes in France, Belgium and Germany. As a global business with a footprint in nearly 100 countries, managing through change in uncertainty is something we're very used to and it continues to be one of IHG's greatest strengths and this is underpinned by having a clear long term strategy, significant global scale, brands that have been coming through our guests and long term relationships with our owners. So back to our interim results, before I hand over to Paul, I would like to share some highlights from the first half. We continue to deliver against our well established strategy, maintaining strong momentum for our brands and driving good growth in all of our key metrics. 3.6% net system growth, combined with solid RevPAR increases delivered underlying fee revenue growth of 5%. This top line growth was underpinned as ever by disciplined execution and a clear focus on costs. We continue to invest in key areas of the business, whilst growing our fee-based margin and generating significant free cash flow. Reflecting this performance and our ongoing commitment to generating shareholder value, we have today announced a 9% increase in the interim dividend in dollar terms. I'll now hand over to Paul who will talk in more detail about our financial performance so far this year and I'll return later to discuss execution against our broader strategy.

Thanks Richard and good morning, everyone. We're pleased to report another good financial performance in the half, despite the uncertain environment in some markets. I'll focus my commentary today on our underlying numbers, which includes adjustments for owned hotel disposals, managed leases, significant liquidating damages and the impact of foreign exchange as this gives the clearest explanation of our financial performance. We translated 5% of revenue growth into 10% operating profit growth by leveraging the scalability of our asset-light business and continuing our focus on disciplined cost management and productivity. This is in order to increase our fee margin by 260 basis points year-on-year, while continuing to invest for further growth, but does also reflect that certain costs predominantly in our Americas franchise business will be more weighted towards the second half of the year. Consequently, we expect our fee-based margin growth for the full year to normalize nearer to our long term average of 125 basis points. The slightly lower interest charge was due to increased levels of cash ahead of the $1.5 billion special dividend that was paid at the end of May. Our effective tax rate increased by three points to 33%, but we do still expect for it to be in the low 30s for the full year. The weighted average number of shares decreased following the 5 for 6 share consolidation relating to the special dividend. In aggregate, the enabled us to increase our underlying earnings per share by 11%. Looking now to our levers of growth, our hotels continue to operate at near record occupancies of almost 70%. So our comparable RevPAR growth of 2% was predominantly rate driven. Second quarter RevPAR accelerated from quarter one in each of our four regions with 2.5% growth for the group as a whole. Across the half,…

Thanks Paul. At our Americas Strategy Presentation last month, I spoke about the powerful tailwinds that will continue to drive hotel revenue growth across the globe. These include growing disposable income and aging population and globalization of travel driven by low cost airlines and emerging market expansion and is the major branded hotel company such as IHG that are benefiting most in these positive trends. Branded hotels are growing net share of the global hotel industry with 52% of industry revenues in 2015 up from 46% in 2003. We know that branded hotels appeal to guests as they're more confident of the experience they receive and the value they will get. They also appeal to owners due to the high returns achieved and the relative ease of obtaining debt and equity finance. After all of this, the fact that hotels with powerful brands are more resilient for the cycle and this is why the big branded players such as IHG have been winning and will continue to win market share. This is something that IHG is both contributing to benefiting from. Within this there is a clear distinction between the big five, due to the four branded players of which IHG is one and the rest, between us we have 19% of open rooms around the world, but some 60% of the active industry pipeline. This reflects the many advances of having enough scale confers including a portfolio of powerful brands and loyalty program, funds for sales and marketing, world-class technological capabilities and operations expertise across all key hotel markets and it means that IHG will continue to grow at a faster rate than the industry. So there is a huge opportunity for IHG and our wining strategy optimally positions us to take advantage of this growth in the hospitality…

Thank you. [Operator Instructions] Our first question is from the line of David Loeb from Baird. Please go ahead. Your line is open.

Good afternoon.

Hi David.

Hi. So Richard, you talked about the growth in the two points coming into Your Rates from OTAs. There has been a lot of discussion among owners about the near term impact of these kinds of direct booking initiative. You guys were pretty open on that about that in the past. Can you just talk a little bit about how that trade off has gone and whether you think you're just giving essentially a discount to royal members relative to what they're paying today? Is it cannibalizing or do you think it’s already beginning to show up in greater net revenues?

Look I think from an owner's perspective if done right is extremely beneficial and certainly our owners are incredibly supportive of what we're doing. And as you know with the IHG Owners Association, we have a very direction ongoing dialogue both in the Europe and the Americas and heavily engaged with what we're doing in let’s just advising us and very supportive, I think couple of ways to look at it may be differently to some of the commentary that’s gone out there. Firstly this is in a way a strategic move around driving very important channel. So, even if there were short term impact, which actually from a rate perspective we don’t see. The fact that we are creating more loyal customers, driving heavily and driving enrolment into the Rewards Club at a net cost to owners which is substantiate is beneficial and we know over time and David we talked about this in the past and you know that Rewards Club members stay more and pay more than non-brand loyal guests. So it's got to be the right thing to do. From an OTA perspective, it's very important and we've certainly pitched it this way and believe that OTA is a very important channel to us and it's not going away, nor do we want it to. It enables us to access price sensitive leisure travel very effectively with travelers who are not going to be brand loyal and we're never going to able to afford to access directly. The issue is it's an expensive channel, so the business has to be incremental and profitable, otherwise its way too expensive. So we see them as very much not mutually exclusive. These are both channels that we want to pursue and they work very well and I think we're seeing -- we're seeing a benefit from it.

I totally understand the strategic initiative and agree with you, but it was really more about do you think there is some near term pain that's going on and it's something what you are saying is very little, am I hearing that right?

Paul, do you want to pick that?

Yeah, David what we found when we did our trial on this last year in the U.K. with Holiday Inn Express and then what we found since we launched you're right is that the additional revenue management capability that we have from having this new channel means that we can average up so that any discount that we would otherwise have seen, we're able to negate. So the analysis that we do suggests that we are getting the same average rate as we would have done without the -- without Your Rate channel.

At a much lower cost.

Exactly.

At a lower cost, okay. Great. And more topic if I may, on the increase in the franchise sales step, when do you expect to see that start to pay dividends in terms of more epic pipeline?

Well these guys, the phase in this year and we're already signing it to the record levels and I think it can only help, but I think I’m not sure Paul would give any guidance on the increase in signing, but more feet on the street, we think absolutely will be beneficial.

Great. Thank you.

Thanks Dave.

Thanks Dave.

Thank you. Our next question is from the line of Christopher Agnew. Please go ahead, your line is open.

Thanks very much. Good afternoon.

Hi Chris.

On the strong unit growth in the first half of the year, I think we're normally -- is it fair to say you’ve normally seen stronger growth in the second half of the year. Can we assume that this year and have you seen any delays I think one competitor talked about some cancellations or at lease push outs. Thanks.

Thanks Chris. So you're right that a lot of the openings that we see typically will come through in the fourth quarter. And it will be the same again this year, but if you look at the 3.6% net room price increase that we, saw for the top, it's a comparison to the end of the first half of 2015. So it doesn’t include the rooms that got opened in the fourth quarter of 2015. But we would expect to see more of the rooms come through fourth quarter of 2016. In terms of some of the commentary around the pipeline slowing down a little bit, but I've it's been in China and I think that some of our peers have a slightly different mix of hotels in the pipeline that in more of all this mid-scale and mainstream and getting built and get coming through well, we're continuing to see very strong room openings and very strong room signings in China. So we’re already seeing it to you always will see the old hotel that becomes part of our project that slows or next year, so it might take a little longer, but nothing sort of systemic that will pull out.

Chris, I think I will add just to what Paul was saying is that I think our pipeline is of a higher quality than it's even been. And the nature I think of the markets that we're in today in many countries and the type of owners that we're working with is a very serious player. And for us I know we talk about high quality growth and could be just about so, but it really isn't. We're very choosy about who we're going to do business with. And David's last question about new developers coming into sign deals, we could sign a lot more deals if we were less discriminating. And I might say in the past we may be were but we're very careful now. So I'm not saying we're never going to be affected by also the economic environment and clearly if there's an economic downturn, we know that will be slow. But we are signing a lot of deals also in China signing an opening order we ever have. And I think our diligence and our patience pays off because we're working with the owners who power through and we've certainly seen in China before that our competitors have been impacted by a lot of developers who require the sale of residential to fund hotel developments and we just have many few of those. We're not saying we're perfect, we made mistakes, but I think on balance, it's a very high quality outcome we've got.

Got you. Thank you. And then maybe a follow-up to that, you talked about moving 12,000 rooms focusing on quality. Is there a point at which the overall quality of your portfolios had a point where the removal stats to slow down and is there a point you can sort of anticipate?

Well let me talk just philosophically and then Paul will pick it up, but in any multi-unit retail business, you're going to have some churn. You’ve got assets that age. You’ve got owners that change. You’ve got markets that change and if you think for removing 2% or 3% of our rooms, you're talking about on average a hotel being in 50 years in our system and that’s a long time. And I think if you don’t remove that and we do have a higher removal rate than most of our mentioned competitors, you're ultimately going to be compromising in my view on your portfolio. Just common sense will tell you that look at any retailer who churn their portfolios. So not to do it is great in the short term, but is extremely dangerous in the long term, Paul?

Yes I guess if anything I would add to that is we've talked about the changes we've made to some of our franchise contracts in the U.S. We've removed them from 10 years to 20 years with some stops along the way where there is mandated CapEx. With longer term, I think will probably help us, we've talked about a 2% to 3% removals rate. Past couple of years it's been around the top end of that. So over time maybe we'll drop it down a little bit from that top end, but as Richard said, we will continue to take out rooms that are not, they're absolutely best quality, under the rams and we're pacing with others.

Okay. Thank you. And then little big of a housekeeping, you talked about fee-based margin increase 260 basis points and then did you say that the second half would drop back to a normalized rate of 125 basis points or was that for the full year?

For the full year, what we said is our long term is 125 basis points, that’s being the trend that we're seeing and so we would anticipate that in the second half, it will come closer to that. It might be a fraction ahead of that this year, but my comment was about the year as a whole rather than for the second half.

Okay. Great. Thank you very much.

Thanks Chris.

Thank you. Our next question is from the line of David Katz. Please go ahead. Your line is open.

Hi. Good afternoon, gentlemen.

Hi David.

So as I look at specifically the Americas and the unit growth, if I am reading correctly, it's a 12.7%, which is where it's been. And if I compare that with a couple of the other larger systems in the Americas, particularly in their limited service categories, their net growth is a little bit more than that. Now my question is, is that a function of you being perhaps a bit more aggressive on the removals, which has it's positive aspects from an operating perspective or are there other dynamics in that numbers you sort of look at yours versus the other guys?

Yes, thanks David. So if you look at our gross openings, our gross openings are right up there with anybody's and in the Americas in the first half, we opened almost 13,000 rooms, but then we removed 10,000. And if that is a greater level of pruning that you're seeing from some of our competitors and it's still at broke. It's hotels that we've identified we want to leave as they continue to push up the overall quality. So I think if you look on gross basis, lots of demand, lots of signings. We signed 20,000 rooms in the Americas in the first half, which here is very, very high level and over time as I said, we may bring down the removals level a little.

Obviously adding developers will help so.

Absolutely yes.

Right. And we're not necessarily directly prohibitive. Does that show up in RevPAR index or other operating metrics that you write the improved quality?

It does and it will over time absolutely. And if you look our RevPAR our share market by market then you definitely see it. But I think the share of revenue, market share was all driven by everything that we do and obviously what one removes in a particularly year is very small quantum, but over time absolutely will.

Right. And I wanted to ask about the free cash flow and I'll admit that I've been on and off since this started. So I'll apologize if you discussed this already, but the $336 million is up considerably for the half. Can you explain how the dynamics work of that? I guess long-term partnership agreements and favorable phasing of tax payments what that is?

Sure, happy to into that and some of it might need to get into the nuts and bolts David. So always happy to do it offline. But we did get a -- we got a benefit in this half from a cash receipt, which relates to a couple of reasonably long-term contracts where the funds are effectively for the system funds, but we get the cash. The system fund doesn’t have a separate balance sheet and separate bank accounts. So when we deploy capital on behalf of the system fund, we pay for it and then we get back the depreciation every time through the working capital line. It will be the same with this long term contract, but we'll get the cash up front and then it'll effectively amortize back to the benefit of the system fund over time. And then in terms of tax, there is a few different components in that and try to explain all company's tax payers on a public, I know this is -- it always helps to -- but there is nothing out of the ordinary in that, nothing that’s not ordinary course.

Got it. Okay, that's it for me for now.

Thanks, David.

Thank you. We have no further questions in the queue. [Operator Instructions]

Thanks. Operator, we'll call that a day. I think we've had a few questions and obviously everybody thanks for listening. If you got any questions please call the IR team here and we'll get back to you. Have a good day. Thank you.

Thank you for joining today's conference. You may now replace your handsets.