Welcome and thank you for standing by. At this time all participants will be in listen only mode until the question-and-answer session of today's call. [Operator Instructions]. This call is being recorded. If you have any objections you may disconnect at this point. I would now like to turn the call over to your host, Heather Woods. You may begin.

Good morning everyone. This is Heather Woods, Head of Investor Relations at IHG. I am 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. With that, I'll now turn the call over to Richard Solomons.

Thank you, Heather. Good morning everyone. Recording of our 2016 full-year results presentation we gave this morning is on our website. So Paul and I will give you the highlights before opening up to Q&A. 2016 has been an unsettled year for the global economy and particularly the travel and leisure sector. Through the year, we saw multiple terrorist incidents impact travel in Europe as well as two major political events in the UK and U.S. the full implications of which are unclear. Despite this backdrop of considerable economic and political uncertainty, our resilient asset-light business delivered strong results. Before Paul talks through the details of our financial performance, I just wanted to remind you of the journey we have been on. We sold the majority of our owned hotels focusing on becoming an asset-light company. This created the resilience needed to weather the global recession since 2008 to 2010. In 2011, I introduced our winning strategy importance of which cannot be overstated particularly its enduring consistency over the past five years. Through disciplined application of our strategy, we made considered long-term sustainable investments across our business, each building on the growth platform; we've created over the past 13 years as a standalone company. In 2016, the five elements of our winning model remain the same. But we regularly refine our execution to meet ever-changing consumer trends and industry dynamics. This consistent incremental approach means we stay resolutely focused on doing what we do best creating deferred brands and delivering operational excellence which we believe is the best way to drive industry-leading returns for our shareholders. In our first year as a fully asset-light company, our low capital intensity and high quality fee streams continues to generate significant levels of cash flow. In line with our stated strategy of returning surplus cash and maintaining an efficient balance sheet, we have announced today a $400 million special dividend. And reflecting our confidence in the future, we've also increased our total ordinary annual dividend by 11%. Our last major disposal was in September 2015 and so this means we will return over $0.5 billion to shareholders in the first half of 2017 completely funded from underlying operations. I will hand over to Paul.

Thank you, Richard, and good morning everyone. We are pleased to report another year of strong financial performance. On an underlying basis, we translated 4.6% revenue growth into a 9.5% operating profit increase by leveraging the scalability of our asset-light business and by managing our cost base. This has allowed us to increase our fee margin by 250 basis points whilst continuing to invest for future growth. Interest charges were flat on last year and our reported tax rate remained at 30%. We expect our tax rate to stay in the low 30s for the next few years. Weighted average shares decreased following the share consolidation relating to the special dividend in mid-2016. In aggregate this enabled us to increase our underlying earnings per share by 23.1%. Looking now at our levers of growth, rooms and RevPAR. We added 40,000 rooms to the system. At the same time as adding these new high quality representations of our brands, we remain focused on removing underperforming hotels, exiting 17,000 rooms in the year. This took net system sized growth to 3.1% which combined with RevPAR growth of 1.8% drove total underlying fee revenue up 4.4%. To give you some more color, I will now take you through the performance in each of our regions in more detail. First the Americas region where U.S. industry demand has been at record levels for 69 of the last 70 months and supply remains slightly below the long-term average. Consequently, our hotels in the region are continuing to drive record occupancies of nearly 70%. In this environment, RevPAR was predominantly rate driven with Americas RevPAR up 2.1% and U.S. RevPAR up 1.8%. We continue to be impacted by our higher weighting towards the underperforming oil market, where 14% of our rooms are located compared to the…

Thanks, Paul. So going back to our consistent strategy that is delivering these results, the winning model is a virtuous circle of value creation. By leveraging our guest, owner, and industry insights, we invest behind our brands, technology, and people to drive long-term sustainable growth. Since becoming a standalone company, we've continued to build our clearly differentiated portfolio of preferred brands. We do this by enhancing our established brands launching new ones and expanding our presence in new markets. We strengthened our industry-leading loyalty program underpinned by our innovations in digital marketing and technology which is driving an ever increasing number of member bookings to our low cost direct channels. And we're reinforcing our owner proposition with leading operational support. So, I'll now focus on some of our successes from 2016 and how these continue to build IHG's competitive advantage, firstly our brands. Understanding travelers through extensive consumer research gives us the insights we need to accurately target our brands against specific guest needs. And this helps us to make genuinely distinctive and relevant and enables them to compete well against other hotels and of course other accommodation types. Creating and delivering a consistent experience through our preferred brand is at the heart of our commercial strategy. All consumer brands need to be refreshed and honed over time and hotel sector is no exception. Innovation is one important way we ensure they stay relevant and continue to gain share. So let me give you the highlights of the progress we made in 2016. Starting with InterContinental, which celebrated its 70th anniversary last year, we've continued to aggressively expand the brand globally keeping it relevant to the modern luxury traveler and we consolidated InterContinental's position as the largest luxury hotel brand in the world. With nearly twice as many open rooms…

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. One moment please for the first question. And speakers we do have three questions on queue and our first question comes from Chris Agnew. Your line is now open.

Thanks very much. Good morning. First question and thank you for all the color around the direct booking initiatives. I was hoping to dig a little bit into that. One of your competitors has called out the sort of impact on RevPAR from member discounts. I don't know if you have sort about that and can may be quantify what impact it's been having and can you also what percentage -- what share is IHG digital delivery as a percentage of revenue and what was in 2016 and can you compare that to OTA share? And then finally, can you quantify what mobile represents as a percentage of digital delivery? Thanks.

Yes, mobile is about 1.6 billion of 4.3 billion if you take total digital. Another side it's grown basically a third on the prior year. So really accelerating and we've been very focused on mobile, I mean we prioritize investments in app and we saw that coming, I think we were the first big player to have that across every platform. And you asked a question about what was your first question again?

It's just on RevPAR. I think one of your competitors.

I don't think it's anything one can pull out or one can particularly say and really it's in the mix because what you're doing is you're driving -- you're driving direct, you are driving loyalty sales, you are driving -- our loyalty enrolments are up 16%. So there is a real benefit across the piece and obviously direct bookings significantly more profitable to owners, which is ultimately what we're trying to do. So I won't say even if it hit RevPAR a little bit which we really can't isolate, I wouldn't mind about that, that's just an external number whereas internally driving profitability to owners is what we are focused on. Paul, do you want to take the other one?

Yes, so Chris in terms of your question on channel contributions, digital has moved from in 2015 we're at 20.7% up to 21.4% and OTA has moved from 14% up to 15.6%. So what we've seen, we are bringing Your Rate is that with real change in the growth rate there. So our growth in the digital retail channel rate is up 5% and the OTA growth rate is down 2% since the launch, so definitely seeing business shifting across into our direct channels.

Thanks, Paul. And I'll just add Chris; I think what's important is that I mean this has been talked about in different ways, some of our competitors talked about in different ways. We are not anti-OTA. So I think what's important is it's a good channel for price sensitive leisure travelers who are never going to be brand owners, it's a great route to market for us but it's very expensive. And I have told them that, they know that. And so if it's incremental and positive profitable contribution then have that refined with that. But for a lot of guests, direct booking is preferable, they know what they are getting, they know who they are dealing with, we get rich data create and engage them with the brand and obviously again for owners it's much more profitable. So I think they are always going to exist in parallel. The important thing is you target it to the right guest. What you don't want is guests who are loyal or can be brand loyal booking through OTAs is too expensive for the owners and I think they work in tandem.

Thank you. And if I could ask one follow-up and just looking at your U.S. pipeline it's obviously strong pipeline 100 to several hundred thousand rooms and given your gross openings in 2016, 24,000 is it fair to assume that the gross openings should accelerate from here. And then also the -- I guess dispositions or the units removed from the system probably at the higher end of the range, I think you said 2% to 3% before, how should we think about that going forward. Thank you.

Yes, Paul do you want to pick that up.

Yes, so Chris, I mean in terms of the removals and we have said 2% to 3% on what we removed this year was probably in the mid-point of that range and it may vary a little bit year-on-year but I'd hope that we will start to see it come over time down towards the lower end of the range and may be some years where we have to nudge it up a bit, we want to say something else but on average I would expect to say it's come down a bit. And in terms of the openings we started really increasing the signings back from 2011, a lot of what we're signing is new builds. So it does take a period for that to come through and guest open but I would expect that to come through. And in terms of the U.S. we saw the highest rate of room openings in the U.S. in 2015 was seen for a very long time. So it is time to go through and I will expect in 2017 we will see more benefits in that.

Thank you. Our next question comes from Stephen Grambling. Your line is now open.

Thanks for taking the question. So you cited having a differentiated hotel experience as key part of the value proposition, I have some details on slide 53 about technology driving your commercial strategy. Can you just talk a little bit more about how these will translate into improving personalization of the guest experience and perhaps digging into any changes you've made or thought about with the reservation management system as you kind of approach the testing and rollout phase?

Yes that can be very long answer; I will give you a covered copy. I think personalization has many aspects to personalization, I think there used to be a sort of viewpoint well you personalized my stay; I just like green apples in my room when I arrive and it really isn't that. What it is that we see from the research that we do and customers we talk to is they just want to what they want is what they get across the stay. So if you want to walk into the hotel and be greeted and spend a lot of time with the front desk and be taken to your room then that will happen. If you want to have everything done online and just turnout then that can happen. And through technology certainly through digital use of the app, you can do an awful lot of different things to guests and we are piloting things like ordering online, complaining about problems in your room online for your app and so on. And it's knowing your customers better as well, whether it be the room they want, whether it would be time of checking, whatever it might be, there is just an awful you can do. What GRS will do it will give us a state-of-the-art reservation system which allows us to collect data, allows us to sell room attributes and staff attributes in a way that we just can't do today but we have an old mainframe system that works extremely well and extremely efficiently and but doesn't enable us to personalize or sell things in a different way much more in line with what we think guests will need in the future. So there is a lot of pieces to it. I think the important thing here there is a lot of things you can do with technology that actually aren't necessarily a big value to guests and might take up a lot of time and effort. So for example we know that mobile check out is much more attractive to guests than mobile check in. There's different reasons for that, so we focused on that and I think it's easy to get carried away by the art of the possible rather than the art of the relevant.

That's helpful and then I think you may have talked about this on the earlier call but may be if you can elaborate on any change in corporate behavior you may have seen post the U.S. election given the rebound we have seen in small and medium sized business confidence?

I think it is too early to say, Paul would you?

Yes, it really is I mean if you look in the January numbers as well Stephen and we did they weren't a bad set of numbers obviously some benefits from DC and inauguration in that and --

Big inauguration.

Yes, the huge inauguration but nothing really that I will read into the numbers other than that.

Thank you. And then on capital allocation priorities, can you just remind us of why the special dividend versus buyback and how should we think about excess capital going forward or cash going forward? Thank you.

Yes. So what we've said consistently is we think the right leverage ratio for the business is 2 to 2.5 times net debt-to-EBITDA and where we have cash that is genuinely surplus that we can't invest it in the business then we will return it to shareholders over the last 13 years now we've returned $12.8 billion of it. Some of that from disposals of assets and a very large proportion of it about $5 billion of it from operating cash flows in the business, this is about cash generation. We always evaluate how best to return fund, having returned $12.8 billion you have to use every mechanism at your disposal. What we know is quicker to do it as a special dividend; we're quite in a liquid stock now and returning that much stock is always a risk that we're the buyer in the market, which we don't like to be. So, as we look at this time we decided to do the special dividend with check consolidation doesn't mean that we completely rule out a buyback at some point in the future but on this return it's going to be a special dividend.

We talked to our shareholders about it. They are happy with the dividend as are we.

Thank you. Our next question comes from David Katz. Your line is now open.

Good afternoon, all, or good morning. Just a follow-up question on unit growth. Just looking -- we want to be careful not to look at just the total net unit growth and yours versus your competitors'. But when we do that, the net unit growth is a little bit lower than what some of the others have indicated. And I don't want to guess, but my perception is that there are some net removals in there, particularly in the Americas, that is sort of bringing down that net number. Can you just elaborate a bit more on what the strategies are for that? And have you done the math around, is it better to sort of place the standard in a different place and have greater unit growth versus more removals and lower unit growth and presumably a higher-quality REVPAR along the way?

Yes let me start and I'm sure Paul will add. Yes I mean unit growth has been little lower than Hilton and Marriott, so they are ahead of lot of other people. And I think you can talk to them about some of that yes of net at the gross level we're right up there and you are absolutely right, it is do with removals which we've not been shy about, we've talked a lot about and it has been consistent. Some of it has been historic cleanup but we are now in the point of very much very focused on maintaining growing quality. And I think in this business making no comment on competitors because we know what is really in there but from our perspective, we could easily add more rooms. But we are genuinely trying to create and are creating a high quality long-term sustainable growth business and our belief absolutely as I've talked about and you have heard me talk about over the years David, is you have to have brands that are consistent and truly deliver to guests through good and bad times. In good times it's easy to fill rooms but in bad times you do it because you got something they prefer and they will pay a premium for. In order to do that you have to be selective in hotels you bring in the vacations, the owners and the -- you have to be very rigorous in terms of what you removed. And I'm involved with retail businesses have been in the past and in any multi-unit retail business you have to refresh your estate. If you don't do that for whatever reasons your ownership doesn't want it or you're fixated on profit growth in the short-term you will damage the long-term value of the business and we have been very consistent about that. So obviously we always like to see higher system growth that's part of one of our key metrics but we aren't going to do it as expensive quality and future sustainability. Paul, do you want to pick up on the numbers or anything?

Yes, I mean if you look at the breakout of where the removals are coming through and where we are adding, you can see absence, outside of the Americas the other three regions is less than -- the removals are less than 1% of our business there. It's really just in the Americas where we are taking out the rooms. And as I said earlier you think that all will come down a little over time but as Richard said on a stick-build estate, you've got to continue to refresh it and make sure that those brands HolidayInn Express and Candlewood, in particular, they have a finite light when they're built. And so when it's time to move them on them we are adding better representation to the brand. And when you look at the number of signings that we're making which in the U.S. on a hotel basis was highest for a decade, there is an awful lot of demand for the brand. So we can do that, we can bring in more at the top and take a few out at the bottom.

So it is a balance obviously there is I think in a low growth environment where we generated 5% revenue growth to 10% profit growth, 23% earnings growth now think it's a balance we're comfortable with.

Understood. One more question, if I may just on -- and this is as much an industry question as it is related to you. There's certainly been a number of brands launched over the past positive cycle, and you have added some to your roster, as well. A two-part question. One, are we getting to a point where you think there are just too many brands out there? And if we look at some things that Hilton has done and what Marriott is going through, et cetera, it would seem that there are some brands in important categories for you where the competition is going to ramp. And I think privately they would say they're coming for you. What's your perspective or view about the brand landscape, particularly in limited services as it relates to Holiday Inn and Holiday Inn Express, and how you position yourself to compete going forward?

Okay. I think there are lot of brands out there and we say we've done our fair share of them. I think interesting couple of things I would say if they come in; first we're used to that, so not too worries. I think the way to think about brands is a little bit different. So we have tens how you count it -- 10 or 11 brands versus I think is 30 plus from Marriott and it's well into double-digit Hilton if you keep adding new brands and counting recently. And our view is what you want actually large and more powerful brands. So HolidayInn is the largest mid-market brand in the world by far, it's double the size of mix, InterContinental is double the size of the next luxury brand. And as I said it's performing extremely well overtaking Shangri-La as the top luxury brand in China turns a perception not just size. So being able to build owner awareness, customer awareness, scale, density, and marketing efficiency because marketing multiple brand is incredibly expensive versus marketing scale brands. And I think you see the consumer goods companies ducting and doubling down on big brands. So philosophically it's the right way to go. It's easy to add brands again from if you think about it purely from a supply perspective, from a guest perspective if your brand isn't meaningful and relevantly differentiated because I've been talking about then what we are doing is confusing them. So I think it's really important that you continue to -- we continue to take brands seriously, you've got intermediaries who would love to commoditize the industry and then more brands we got that don't stand for something the easier it is to intermediate them. And I think in the mid-market, we’ve obviously done an awful lot with HolidayInn and HolidayInn Express. We do see opportunity in the mid market to add a brand or two particularly as we get to scale in U.S. with HolidayInn and HolidayInn Express where there is always the limited number of places we can fill out, although the prior brand is still in -- well in the hundreds and we're continuing to grow those brands, as you know. So I think that's something we will continue to look at. But I think it's not just about number of brands, it's about the quality of what you’ve got.

Thank you. And we do have a follow-up question from Stephen Grambling. Your line is now open.

Hey, thanks for taking the follow-up. Perhaps I missed this but you called out franchise-plus signings and had some comments on what the new model brings to me. Can you just help clarify what the difference is between these franchise-plus contracts versus the standard contracts? Thanks.

Paul, do you want to pick that.

Yes, so we launched franchise plus in China for the HolidayInn and Express brand in May last year and we've signed 20 to-date. We mandate who the general manger is and we mandate that they use various of our tools which will help them deliver the service proposition. So it's the intermediate step between manage the franchise, you give more control over to the owner because that is what we're looking for but in an environment where there is still a little bit of education required and we want to maintain little bit more control, it works well for the owner and it works well for us and say very strong demand from owners and I'm sure it will yield a lot more contract in 2017.

That's helpful. Thanks.

I think it's important though that it's -- it's an important business model for us in Greater China and I think it's Paul has been saying it enables us to drive quality we're taking control of this business. Whereas others have gone for master franchising with local players which we don't think is a sensible route forward. But because we have scale and we have the quality operation out there, we can grow it and we can retain the economics which is what's important it's a bit get back to the earlier question Dave, about system size, we could drive system size to master franchising but it risks quality, it certainly doesn't drive the economics. So we are taking a slightly different approach in Greater China where I think our leadership position enables us to do that as opposed to having to play catch-up for accelerate growth artificially.

So thanks everybody. Appreciate the questions, appreciate you listening in obviously please follow-up with Heather and the IR team here if you got any more questions and hopefully we will see some of you when we're over there in the U.S. shortly. Thanks very much. Thank you, operator. We are done.

And that concludes today's conference. Thank you so much for your participation. You may now disconnect.