ii view: A slower growth environment at IHG

InterContinental reports slower growth, but ups the dividend payment by 10%

Half-year results  

• Revenue up 8% to $2.3 billion
• Adjusted operating profit up 14% to $457 million
• Net debt up 30% to $2.84 billion
• Dividend payment up 10% to 39.9 cents per share

Chief executive Keith Barr said:

"Eighteen months ago, we set out a series of strategic initiatives to drive an acceleration in growth to ambitious new levels.  Our approach is built around strengthening our established brands, adding new brands in high opportunity segments and optimising our owner proposition.   In a slower RevPAR growth environment, we've made significant progress, opening a record number of rooms in the first half which have delivered a 5.7% increase in net system size growth, our best performance in over a decade, with future growth underpinned by our highest level of signings over the same period.”

ii round-up:

Tracing its history back to the first Bass brewery in 1777, today InterContinental Hotels Group (LSE:IHG) is a global hotels company.  

It has over 840,000 rooms spread across more than 5,600 hotels in more than 100 countries. 

Its brands include Intercontinental, Holiday Inn, Crowne Plaza and avid hotels. 

It recently opened its 400th hotel in Greater China. More than 60% of openings globally have been in its Holiday Inn branding. 

Key hotel industry metric revenue per available room (RevPAR) rose by 0.1% during the first-half, down from growth of 0.3% in the first quarter. 

US RevPAR proved flat, hit by tough comparatives due to hurricane related room demand last year. Its recently targeted growth market of China reported a 0.3% decline, impacted by strong comparatives and recent unrest in Hong Kong.  

More favourably, the UK enjoyed RevPAR growth of 2%, aided by the Cricket World Cup, while Continental Europe grew by 3% assisted by a favourable German trade fair calendar. Guidance for the full year was left unchanged. 

The share price declined by just under 2% in morning UK stock market trading. 

ii view:

InterContinental largely looks to operate hotels as opposed to owning them. In previous years it undertook a series of asset sales and subsequent returns of cash to shareholders. The company offers diversity in both its brands and market positioning, and geographical breath. 

For investors, today’s 10% increase in the dividend payment suggests management confidence in the longer-term outlook. A forward dividend yield in the region of 2% and covered more than twice by earnings provides some appeal. but a forward price earnings ratio in line with the ten-year average suggests the shares could, for now, be up with events. 

Positives: 

• Strong and diverse brand portfolio
• Cost savings of $125 million per year by 2020 on track

Negatives:

• Group net debt increased
• Subject to macro-economic and geopolitical uncertainties

The average rating of stock market analysts:

Weak hold