Good morning everyone and welcome IHG’s 2018 Interim Results Presentation. This is Catherine Dolton, Head of Investor Relations. I’m joined this morning by Keith Barr, Chief Executive; and Paul Edgecliffe-Johnson, Chief Financial Officer. As you can see, we are holding today’s results presentation by webcast and we will be taking you through the slides over the next 30 or so minutes. You can find the link on our corporate website and our last stock exchange announcement. If you haven’t already, please do log on, so you could follow the slides. We won’t be holding a separate call for U.S. Investors today, but will be making the replay of this presentation available in our website. So, before I hand over to Keith and Paul, I need to remind you that in the discussions today, the company may make certain forward-looking statements as defined under U.S. law. Please refer to this morning’s announcement and the company’s SEC filings for factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. I’ll now turn the call over to Keith.

Thanks, Catherine. Good morning, everyone, and thank you for joining us today. In a moment, Paul will talk you through our financial performance. So, let me first share some quick highlights. We delivered a strong first half performance with our best earnings for a decade, we are driving momentum across each of our regions, which have all performed well in the half, delivering 3.7% RevPAR growth at a group level. Together, with 4.1% net rooms growth, our best for eight years, this drove underlying operating profit up 8%, and underlying earnings per share up 25%. You have seen that we have taken the decision to increase our dividend by 10%, reflecting the strong performance, as well as our confident outlook for the rest of the year. It’s just over 12 months, since I became CEO, and first spoke about my plan to make IHG’s well-established strategic model work even harder to accelerate our growth and deliver continued strong returns for our owners and shareholders. Well, it’s been an incredibly busy year and in February we announced a series of new strategic initiatives that build on our existing strategy and positions IHG to delivery industry leading net rooms growth over the medium-term. These initiatives represent a meaningful change in the way that we lead and run our business. They are funded by a comprehensive efficiency program that realize $125 million to reinvestment by the end of 2020. We’ve already made good progress against each strategic initiative. Our new organizational structure is being embedded and we are starting to drive some meaningful results. You have heard me say before that our brands are at the heart of everything we do, and we moved at pace over the last 12 months to add three more to our portfolio, avid hotels in the midscale segment, Regent Hotels & Resorts in the luxury segment, and most recently, voco in the upscale segment. So, whilst it's still early days, we're delivering against our new strategic initiatives and are continuing to drive strong performance from our existing business in each of our regions. Paul will now spend a few minutes taking you through the detail of our half year results. I’ll then spend a bit of time talking through the progress we’re making with our brand portfolio before we open to Q&A.

Thank you, Keith, and good morning everyone. We’re pleased to report a solid financial performance for the first half with growth in all our key metrics. Before I get into the detail, I should remind you that our commentary focuses on our results from reportable segments. These exclude the impact of hotel cost reimbursements and the system fund, which are now reported as part of our group results following our adoption of IFRS 15 at the beginning of this year. We set out the impact of IFRS 15, and other reporting changes as an event in April. Further information, including the event presentation and recording can be found on our website. Looking now to our performance. I’m starting with the column on the right of the slide. Reported revenue increased 7% to $900 million and operating profit increased 10% to $406 million. This number did benefit $6 million of timing differences between the realization of savings relating to our group efficiency program and reinvestment in growth initiatives. We continue to expect the savings to be fully re-invested on an annual basis. So, this $6 million will reverse in the second half, on an underlying basis. So, excluding $7 million individually significant liquidated damages and at constant currency. We grew revenue by 4%, which translates into 8% operating profit growth. This resulted in fee margin growth of 80 basis points year-on-year or 170 basis points at constant currency. Underlying interest increased by $7 million, reflecting the impact of a stronger pound on the translation of our Sterling interest expense, and higher U.S. dollar interest rates payable on bank borrowing. Our reported tax rate fell at 23% in-line with guidance, predominantly due to U.S. tax reform. The weighted average number of shares decreased by 3%, as a result cumulative effect of the…

Thanks, Paul. In February, I talked about how we will make our strategy work harder to deliver industry-leading net rooms growth. You will recognize our model on this slide, which we've evolved and fine-tuned and which maps across each of our strategic initiatives. Taking each of these briefly in turn, I'll spend a little time this morning talking about how we are redeploying resources to better leverage our scale. Our loyalty program, IHG Rewards Club, is core to our owner value proposition, and we are working to build on this strong position to create a more personalized and differentiated offering. The rollout of our cloud-based technology program, IHG Concerto, featuring our innovative new guest reservation system, is on track. We now have more than 50% of our hotels on the system and it's up and running in all brands and regions. We are planning an investor and analyst event in December to showcase the platform. Demand for our unique owner proposition, Franchise Plus, in a Greater China continues to be excellent. More than 100 Holiday Inn Express hotels have signed up to this model, with 15 already opened. Where I want to focus most of my attention today, however, is on the fifth element of the wheel, the work we've been doing to strengthen our preferred portfolio of brands. For that though, I'd like to spend a couple of minutes talking through some of the structural changes we've made to make sure the shape of the business better supports our growth plans, while freeing up capacity for reinvestments in our new initiatives. Back in September, we announced several changes to our organizational design, which became effective on the January 1 this year, and which we’ve already started to benefit from. Firstly, we brought together two of our regional divisions, Europe…

[Operator Instructions] Sir, we currently have seven questions on the line. Our first question comes from Jamie Rollo from Morgan Stanley. Jamie, your line is open, go ahead.

Thanks. Good morning, everyone. Three questions, please. First, could we go back to Slide 8? Was hoping you've broken down the components of the fee income growth. I can see there's sort of 1.2 percentage point difference between comparable and total RevPAR and you explained that well. There's also somewhat of a gap between the rooms growth contribution. So, if you could just please explain a bit about that total because in total sort of about 2.5 percentage point difference between the fee income growth and the sum of comparable RevPAR and net rooms growth. Secondly, could you please give us a feeling for when you think you will get to the sort of 6-ish percent level of industry net rooms growth? Because in the first half, your openings actually fell and you're guiding to higher removals in the year. So, assuming you don't include Regent or principal, could this year be narrowed to 4% than the sort of 5%-plus level? And then finally, on the outlook for slower RevPAR growth in the second half, is that just these sorts of calendar effects and hurricane benefit from last year? Or do you think the underlying picture is a bit slow as well? Thanks.

Great. Thanks, Jamie. Why don't I start with the RevPAR growth commentary? So, I think if you look at the U.S. performance, we saw an acceleration in Q2, the 2.9%, based upon strengthening GDP growth, so a solid first half. And you hear solid fundamentals in the United States. When you look at GDP growth, a kind of muted supply growth, slightly under 2%, around 2%, the impact of the tax changes, record low unemployment. So, I think really strong fundamentals in the United States to drive that business forward, but the industry does face tougher comparables. In the second half, you've got the shift to some holidays, you've got the religious observances falling at different times during the week, and of course, the hurricane impact in the second half of the year where you had hundreds of thousands of people displaced in the Southern U.S., which created abnormal demand, too. So again, tough comparables for the industry in the second half, but we remain very confident in our performance going forward there to continue to grow our business. I'll let Paul talk about Slide 8, and then we talk about rooms growth as well.

Yes. So, look, Jamie, as you know, we started putting this information out because I think it's helpful for people to see what are the underlying drivers. Because we are opening up a lot of rooms in developing markets still where RevPAR is our lowest, so you've got some mix impact coming in. And when you open up a room, obviously, depends on what the contribution it's going to make. So, hopefully, this gives a closer proxy to the underlying growth. There are always some other factors that will come in and create a little bit of noise in how it translates through into the absolute fee growth. And this year, one of the things you'd have to take into account is the Crowne Plaza accelerate discounts which we talked about and which were there last year and then you get it this year and the year-on-year reduction in the Americas liquidated damages, which are coming through as well. So, these are other factors that influenced, but hopefully, you can see what's driving the totality there. And look, in terms of the net rooms growth, we're pleased with the step-up that we've seen, very much in line with what we are aspiring to in terms of getting to the industry-leading level of net rooms growth. Our acquisitions of Regent and the principal acquisition, they closed just after the end of the second quarter. So, if you map those into our first quarter where the work is really done, that would take us up to 4.7% net rooms growth. But we see that come into the third quarter, so that will translate through. But we're really pleased with both what we're seeing in terms of openings coming through, but also and really importantly in terms of the number of signings that we're seeing, up 46% year-on-year at 46,000, and that just augurs really well for our long-term growth because it's storing up a real bank of rooms that will open up over the next few years.

Thanks. But just on the – I get the point about the long-term growth, but just on this year specifically. I mean, I'm sure you won't be including the two deals in the sort of organic system growth. But is this going to be a year of step-up? Or is this a year that's going to be similar to last year given removals are going to go up? And also, on the Americas LDs, I don't recall you separating that last year. What exactly do those refer to? Which hotels have been lost, please?

So, look, in terms of the liquidated damages, we won't pull out – we never pull out exactly which hotel. What it is, is that, normally, you will have some hotels that leave and will pay us. Relatively small hotels in the Americas potentially had a lower level than usual and then we did last year in the Americas. So, in many ways, it's a good thing, right? Those hotels, they're continuing to pay us fees, and then you're not getting the liquidated damages coming through in the revenues. And in terms of the growth in the net rooms growth, yes, look, on an organic basis, excluding any deals that we might choose to do, yes, we do expect to see a step-up. To exactly what level, let's wait and see, but certainly, the momentum is good. There's a lot of rooms getting ready to open up. And then there will be a boost from the Regent deal and the principal deal, so we would expect to see a step-up on 2017.

Okay. Thanks a lot.

Thanks Jamie.

Our next question comes from Jarrod Castle from UBS London. Jarrod, your line is open. Go ahead.

Good morning, gentlemen. Three as well. One, some good interim dividend growth, up 10%, but adjusted EPS, up 25%. Just wondering if it could be some kind of EPS growth, so some catch-up in the dividend growth at the end of the year, should EPS continue to grow, other rates higher than your payout? Two, just in terms of signings, clearly, you're kind of ramping up, is there a level where you kind of turn things away in terms of the ability of the organization to cope in terms of how quickly you grow the pipeline? And then just lastly, just on the GRS, any updates, and in terms of how the benefits are coming through, seems to be halfway through now.

Great. Thank you. We'll take those, I think, in reverse order. So, in terms of GRS, we're really excited about the progress we’re making. Over 50% of the estate now on GRS, all brands, all markets, look forward to completing GRS by the end of 2018, early 2019 and some setting Holidex. In the first phase of GRS, we've seen benefits from the operational side, so owner feedback has been fantastic in terms of it being a more user-friendly, more intuitive system. We didn't model any RevPAR benefits into version 1 because it's principally a like-for-like replacement with some enhanced functionality here or there versus Holidex. We see the real revenue benefits coming from future updates in version 2, 2.1, 2.2. So, again, very pleased with where we're at and getting great feedback from our owners. In terms of ramping up, I mean, one of our core focus is, how do we accelerate our growth as a business through industry-leading net system size growth? And that was going to come from a couple of things. One was bringing in new brands, either launching them or acquiring brands intelligently to round out our portfolio, and we've shown, I think, good progress against that in the last about 6 to 9 months. Your question about, do we turn things away? Well, I think we do turn some signings away. We always do because if it's not with the right brand, with the right owner, right location, right market, there's always more hotels we could sign, but that's more of a strategic decision than a capability decision. And when the efficiency program we have created is freeing up capacity to reinvest to strengthen our enterprise, so that is about launching new brands, but it's also going into how do we open hotels faster, how do we move quicker from signings to ground break, and how do we just again make the machine work harder to drive that growth, too. So, there's nothing holding us back from a capacity standpoint of the signings. It's much more of us being thoughtful about how we build out a brand portfolio that's sustainable for the long-term and not just making a dash for growth.

And Jarrod, in respect of the dividend, we're not slavish in terms of saying, well, if the earnings per share were up 25%, then the dividend has to go up 25%. Hopefully, an increase of 10% will be seen as appropriately generous given the growth in the business. And of course, we also have returns of funds to shareholders via special dividends, which the strategy has not changed on, so we're not announcing one obviously today. We said at the prelims that we will not be paying one during 2018, but our strategy remains exactly the same. So, if we have surplus, as and when we have surplus funds available, then a special dividend will get declared and that will be returned to shareholders via a buyback mechanic.

Okay. Thanks very much.

Thanks Jarrod.

Our next question comes from Richard Clarke from AB Bernstein. Richard your line is open, go ahead.

Good morning. Three questions from me as well, please. On Slide 39, you've broken down the fee margin by the different regions and some quite different trends there. It looks like Americas fee margin is actually down a little bit year-on-year, whereas you got a big growth in EMEAA, and there's a lot of E’s and A’s right there. Perhaps if you could just talk about – talk to why you're seeing such a variation trend there. Second one, Crowne Plaza, with the fee holiday plus the money you've put in sort of Accelerate program, you've spent quite a lot of money at Crowne Plaza over the last year. The pipeline in the U.S. is still looking pretty small. I think it's nine hotels at the moment in the pipeline. Are you still confident that's money well spent and you're going to see some acceleration there? And then lastly, on the closures, you talked about kind of closing underperforming – some of the underperforming hotels. Could you give any sense what benefit that's given to RevPAR? Your peers are still slightly outperforming you. And despite the fact you're closing a lot of these underperforming hotels, would you expect that that strategy should result in outperformance in the long term?

Great. Well, why don't I pick up the Crowne Plaza conversation and let Paul will pick up the other two points. I think we talked about Crowne Plaza Accelerate being a long-term journey for us, and we're pleased with the progress we've made. So, we've seen about a 90% adoption of the essentials, which are the core components of the program in the Americas portfolio. We've got new guestrooms being deployed. We've got some new public areas being deployed. We did focus on both utilization of capital to retain key assets and have some fee discounts in order to incent owners to move down the journey, to reinvest into the hotels in the U.S. And so, we've seen rising customer satisfaction. We've seen growing RevPAR in the U.S. The pipeline is still is growing, but small, but we've opened up some fantastic hotels most recently in New York City, an incredible Crowne Plaza, that's performing exceptionally well. And I think every single one of those is a proof point about where Crowne Plaza is headed. Are we where we want to be today in the U.S.? No, but we are making progress on the journey. And we're seeing again great performance outside of the U.S. with growing signings and great positioning in Greater China as well, too. So, and again, we're seeing Holiday Inn signings continue to go up as well. So, it's a really solid performance across our brands. We've seen Holiday Inn continue to grow. We're seeing Crowne Plaza continue to grow new brands, but it will be a journey for Crowne Plaza. It's our best signings in 10 years. 4,000 rooms, about 3,500 of those are in Greater China though, so we're excited about that progress. But we will be talking about the Crowne Plaza journey for the next few years. It's not done and so we're not trying to say anything other than we're making good progress.

And similarly, we will continue to be talking about our journey on exits over the next few years. And as you know, we do see potential to move the number of exits down from around the top end of our 3% range down to around 2% over the coming years. In terms of what the competitors are doing, well, you may have seen Marriott said they're going to be running at around 2% deletions, so exits of their system for similar reasons to us. So, I think that this will actually normalize. I suspect that most competitors over the long run will realize that you need to take out, on average, hotels every 50 years, right? That's what 2% removals mean. And we continue to run at a very high level of gross openings, and that gives us some capacity to take out hotels and locations where we think we can replace with a better product. In terms of what it does to your numbers, that’s really hard to track through amongst, Richard. Yes, I wouldn't try and do that and give you a specific margin or RevPAR benefit tracking through precisely to that. In terms of fee margins by region, I said at the prelims this is going to get a bit noisy with the savings that we're making and a few of the other factors that we've pulled out. I mean, in the Americas, you've got the Crowne Plaza Accelerate discounts from the low level of liquidated damages, which is impacting on your revenues. And then in terms of the costs, you’ve got the impact of the U.S. health care not being in surplus, which it was in 2017, and the high level of legal costs. So, those all impact. And then in Europe, Middle East and Africa, you have got the timing of the savings coming through. We'll not sort of step back from – in terms of all of that and say that over an extended period of time, we've been able to increase our margins by, on average, 135 basis points a year and that's still my aspiration and expectation. This year, at the first half, we're up 170 basis points at constant currency. And whether we get to exactly 135 basis points for the full-year 2018, let's see. There's a lot of moving parts in that, but then trend changes.

Okay. Thank you very much.

Thanks Richard.

Sir, our next question comes from Monique Pollard from Citigroup. Monique, your line is open, go ahead.

Hello, good morning everyone. Just a few questions from me, please. Firstly, in terms of the U.S. RevPAR growth, so I understand the point that the 4Q comps get hard because of the hurricane. But are we seeing any underlying pickup in those oil regions anyway that could sort of, to some extent, offset those tougher comps? Then on the voco signing, so you mentioned you now have 20 deals under discussion. I mean, in terms of your plans and what you had expected at this point, are you sort of happy? Are they going better than expected or within expectations there? And then, finally, on China, obviously, you make the point that long-term trends are all good and we've seen very strong RevPAR growth in China in the first half of the year. In terms of current trading, how is that tracking? Because, obviously, we do get those stronger comps coming in, in China for the second half.

Excellent. Thank you. In terms of U.S. RevPAR growth, the second half of the year, we talked about the industry has tougher comparables for all the reasons we've previously mentioned. We have seen some definite pickup in the oil market. As you've seen, the oil prices move up. You've seen rig counts move. So those will definitely have the ability to offset some level of the impact of the hurricane. There are so many puts and calls in the second half of the year around that time frame, so it's really difficult to pin it down and say what specifically will – when will the hurricane effects completely taper off, what will the rig counts move, but it's a reasonable assumption that there is some positive impact for oil, but it's really pretty hard to quantify it right now, too. In terms of voco, it's in line with expectations. We did a great event here in London, went out to market with it and that was in May effectively. So, we're just effectively selling it in really kind of June and getting out to the market really talking to owners and already having three hotels signed just spoke to the demand we've created. We've got a number of other properties in discussion, 20 right now, so that's a nice pace to have considering it's a new brand. And we expect to have an increase in acceleration of signings as the year goes on and achieve kind of the long-term positioning we said of a couple of hundred hotels, too. So, again, very confident with voco, with we're at. And we'll give you more updates on the full-year results.

And in terms of China, Monique, yes, look, we're really pleased with how the China business is progressing. What we expected would come to pass in terms of the RevPAR growth, in terms of the signings, in terms of the net rooms growth, all coming through very well. And we've built now the level of infrastructure that we need over there, so we're also now starting to see it come through the operating profit line for the last couple of years, which, again, it's very pleasing. In terms of sort of current trading, about 85% of our business in Greater China is Mainland China, so that's the Tier 1 cities, which is about 35%, and then Tier 2 to Tier 4, that's about 50%. Mainland Tier 1, a little stronger, so around 10%. But the Tier 2 and Tier 4 cities, around 8% as well. And this is very strong demand, just enough supply coming through so that we can add more hotels, but it is going down a little. And then in Hong Kong and Macau, that's the icing on the cake, if you like. Macau up almost 20%, a relatively small part of our business over there, only about 5%, but it does add in. So, really, across the whole the Greater China region, we're seeing very strong demand through our preferred brand and continued very strong industry outperformance.

Okay, great. Thank you.

Thanks, Monique.

Our next question comes from Jaafar Mestari from Exane BNP Paribas. Jaafar, your line is open, go ahead.

Hi, good morning. I have two questions, please. The first one is on avid hotels where it looks like you signed around 3,000 rooms in Q2, which is a bit below the 4,000 of each of the two previous quarters. So, you're not signing one hotel every two days anymore. You talked about pent-up demand, was there that much of a pain effect in the very first two quarters and the pace moderating already? Or is it just a wobble and can you make it to 15,000 or maybe 20,000 rooms in the pipeline by the end of the year? And then a more general question on new brands. So, voco was very clearly targeted at owners who you may not have interacted with before, not part of a chain. The other new brands and concepts or models, avid, Regent, Holiday Inn Express, Franchise Plus, I'm curious, where are the signings and potential signings coming from, from these new brands and models? Are you mostly adding properties with owners that you already talked to, or have you unlocked completely new pools of owners and with these new offers?

Okay. Well, thank you very much. In terms of avid, I don't think we could be more delighted with where we're at in terms of signings. If you would ask me when we launched the brand, where we have 130 signed to date and 80-plus in the first half, I will say I didn't think we could do that. We did build up just phenomenal demand. What we ended up doing was launching at our owners' conference in the U.S. and talking about what we were doing, and that did create, again, that pent-up demand which has just come to fruition. We are going to see that normalized. And what that normalized looks like, we'll see over time, but we don't think we were going to be signing many of this to date, and no one historically signed hotels at this pace. I mean, it's a record-breaking launch really for a hotel brand. So again, we said that will normalize over time. And I think you'll see some solid results for the rest of this year from that brand. The other brands where you talk about where they're coming from, again, voco targeting conversion of existing assets and so forth. You look at regions and avid to reach avid hotels. 75% of the deals we've signed for avid are coming from existing owners, so that's fantastic for strengthening our relationships. But in markets mostly where we already have a Holiday Inn Express, so it's not cannibalizing Express, it's shows the additive effect of a new product targeted at the right segment with our ownership base, too, and that's why we can get such traction and leverage. Regent is a mix, I'd say. We are actually seeing owners who we haven't worked within the past because we haven't had a product at that price point come to us, which is very exciting. We also with some of our existing owners who haven't been able to work with us because they already had an InterContinental in that market who wanted to do a deal coming to us as well, too. So, I think we're benefiting from both our existing base and a new set of owners overall, too. And again, I think both of those show the importance of strategically understanding your brand portfolio. And when you get the product right, how it kind of leverages the existing relationships and strength within IHG, too, so I think we're well positioned in all those brand launches to see us build the pipeline, again, but thoughtfully around each one.

Thank you. That’s great color. Thank you very much.

Thanks, Jaafar.

Our next question comes from Tim Barrett from Numis. Tim, your line is open, go ahead.

Hi, good morning both of you. I have two questions as well, please. Interested in the $125 million cost program and your comments around synchronization of that, are you definitely going to spend that $6 million in the second half? And in terms of potential to exceed the $125 million, is there any potential? And could you see some drop-through of that? Second question, you've been very clear in terms of outlook for the second half. Logically, do those one-offs mean that 2019 could be better than the second half of this year? And how are you feeling about next year? Thanks a lot.

Hi Tim. So, look, I said at the prelims back in February that it was going to be a bit noisy. And yes, I would have preferred to have spent the $6 million that is sort of banked, if you like, in the first half behind growth projects, but it is difficult to time the ramp-up of new investment spend and the money that we save and get it exactly into the same quarter. And if I can, then we will get it out the door in the second half of the year, but only on projects, obviously, that have good returns for shareholders. And so, if those projects are not ready to be invested in, then the money won't go out. So, there is certainly a scenario where there will be some benefit. But again, those projects are well developed, so that would then not be a permanent saving. We will then spend that money in 2019. And what I'll do is, if that is the case at the full-year, I'll come back and identify it just as I have at the half year, so it's really clear what's the underlying permanent EBIT and what we are going to continue to invest into the business to drive the long term. In terms of could we exceed the $125 million? Look, as you know, we are very ambitious in terms of our cost control of the business. And if we can find opportunities to do more than, certainly, we will do more. And we are looking at every aspect of our businesses we have for many years to see what the opportunities are. And we want to grow that top line, but we also want to continue to have a very efficient and effective business. In terms of half two and how that might translate through, yes, I mean, you're not wrong. That's the math, right, that second half of 2019, the equivalent of the comparables will look a little different and we'll have to see how that maps through, but there could be some benefit into the second half of 2019. Of course, there may be other factors set between now and then come into play. But arithmetically, you're not wrong there.

Okay. And do you share the view that the supply side might look more favorable in 2019?

Well, obviously, all the numbers in terms of the hotels that are getting opened are out in the market, lodging kind of metrics and therefore have that. So, we can see what's coming through because no hotels get open in 2019 that is not broken ground on. So, I think there's pretty good forward visibility. And obviously, a lot of value thereof that's coming through, which we're pleased with. So, the supply chain side environment remains pretty benign. But where we are in this point in the cycle, after 88 record months, it's pleasing to see that you're still probably below 2% growth in the U.S. It will mean that we can continue to drive RevPAR for the long term with a very strong demand dynamic continuing through. And it's solid, but relatively conservative levels of supply.

Okay. Thank you.

Thanks Tim.

Sir, we currently have two more questions on the line. Our next question comes from Stuart Gordon from Berenberg. Stuart, your line is open, go ahead.

Good morning, guys. Just on the U.S., we're hearing that construction costs are going up. Two things attached that, first of all, do you see any risk particularly for avid openings in terms of people slowing down construction? And secondly, linked to the construction costs generally, have you seen any risk to signings, turning and openings with people stepping back from beginning construction? And the last thing is just, could you give us some color on what we could expect from FX in the second half of this year? Thanks.

In terms of avid, Paul and I were intimately involved in the development of that and one of the critical things we focus on was the cost per key to develop avid and also making sure that it was procurement ready. And what does procurement ready mean? How much of this could be designed in advance from a procurement standpoint to help us accelerate openings and also make the ease of construction even easier going forward, too. So that was inherent in our thinking of developing the avid brand. And you saw the fact that one of our owners is able to ground break open very, very quickly. So, we don't see any risk today from an avid perspective in terms of these signings transitioning to openings candidly because the return on these investments, even with increased cost, is still so significant. It's a fantastic investment overall, we're seeing. And again, overall construction costs have gone up, but we're not seeing a significant slowdown or impact on our – from ground breaks into openings right now. And our signings are continuing to grow. I think it speaks to the way that we continue to cost engineer our brands every single year, that continuous improvement, helping us to have the owners absorb these costs and how we use procurement as well to take costs out.

Yes. And look, just adding to Keith's comments there. Once you get a hotel open and cash flowing, you're doing extremely well. You're running record levels of occupancy, very high levels of ADR. So, hotel owners make a great return there and there's also a very good secondary market, obviously. You've got hotels under our brand, that's what they want to do. They didn't want to sign it. They want to an open, cash-flowing hotel and that's how they generate their income. In terms of second half FX was you took the second half of 2017 and put it to the June 29, 2018 spot rate, then you pay a $2 million reduction to operating profit. But I guess that's the best that we can do at this point. If you look at Slide 38, then that breaks that up a little bit more, so hopefully that's helpful.

Thank you.

Thanks Stuart.

We now have a follow-up question from Jarrod Castle from UBS London. Jarrod, your line is open, go ahead.

Just quickly one on the U.K. I know it's not a massive market, even though it's actually a high market. But just to get some color, one on, does the warm weather have any impact? And two, just in terms of U.K. pipeline, what's going on there, is Brexit having any impact in terms of how people view the market? Thanks.

In terms of warm weather, while we know it's caused a lot of consumption of carbonated beverages in the U.K., in terms of – U.K. is an incredible market, particularly international inbound. You're seeing some of the RevPAR results be more challenged. It just got the tougher comparables right now. When you look at what happened with the sterling a year ago, international inbound, I was just at one of our flagship properties here the other day. We're running 94%, 95% occupancy in the month of July, too, so significant amount of international inbound, just tougher comps in H1. H2 does get easier because that's kind of when it begins to roll over. U.K. pipeline, again, we're seeing positive movement in the U.K. pipeline. Right now, we've had the principal hotel today, which you're all aware. There's 12 hotels coming in which we're excited about. And we've got 33 hotels, almost 5,000 rooms in the pipeline here in the U.K., too, so we're seeing the business continue to grow. And I think also the voco hotel brand will give us another opportunity to tap into those independent hotels that today are maybe struggling with their cost of distribution and look further announcing hopefully some voco deals here in the U.K. in the near-term.

Thanks a lot.

Thanks Jarrod.

Sir, we currently have no more questions on the phone lines.

Great. Well, thank you, everyone. On behalf of Paul and I, very, very thoughtful questions and appreciate your engagement for the day and look forward to catching up with you all in the near term. So, thank you all very much, and that concludes the call.