InterContinental Hotels plans special dividend and organic growth focus

As it announced a robust set final results, InterContinental Hotels Group will return $1.5bn to shareholders via a special dividend and share consolidation.

On top of the special dividend, which will be paid in the second quarter, the total dividend was also increased 10% to 85 cents as directors expressed confidence about prospects for the hotel industry.

Reflecting the completion of its strategy to sell off its owned hotels in places such as Paris and Hong Kong and focus on hotel management and franchising, group revenue fell 3% to $1.8bn but fee revenue, which excludes owned and leased hotels, rose 7% to $1.35bn.

Reported operating profits grew 4% to $680m and adjusted earnings by 10% to 174.9 cents per share, with underlying profits grew 11% to $650m and underlying EPS by 19% to 167 cents.

Chief executive Richard Solomons also pointed out that the FTSE 100 group delivered its highest room openings since 2009 and its best signings with franchisees since 2008.

Revenue per available room (revPAR) increased in all regions, with a global 4.4% rise, led by a 3.1% rate increase up 3.1%.

Helped by the acquisition of boutique hotel operator Kimpton just over a year ago, there was net room growth of 4.8%, or 3.2% excluding Kimpton, with 44,000 room openings, an 8% increase year-on-year.

The pipeline of new signings is at its strongest level for seven years, as part of Solomons strategy to grow through targeted hotel distribution.

Led by the American, 78,000 rooms have been signed into the pipeline, up 13% year-on-year, which Solomons said demonstrated owners' confidence in IHG and its brands.

With a rooms pipeline of roughly 214,000, IHG has around a 15% share of the active industry pipeline, more than three times its current supply share.

"We have strengthened our brand portfolio, adding Kimpton Hotels & Restaurants into the IHG family and accelerating signings across our mainstream and extended stay brands," Solomon said.

And he added: "Looking into the medium term, despite economic and political uncertainty in some markets, the prospects for the hotel industry remain good and the strength of our business model gives us the confidence to propose a 10% increase in total dividend for the year."

Analyst Steve Clayton at Hargreaves Lansdown said the news that the cash pile will be paid back to investors will change the market's focus, which had been on IHG as a potential acquisitive predator, return to IHG’s organic potential, which "looks strong".

He added: "Uncertainty over a potential Chinese slowdown could keep the stock price moving around a bit more than usual, given that IHG has a big pipeline of new hotels set to come to market across China. But over the longer term, IHG’s exposure to the US and China leaves it well positioned.”

Shares in the company spiked almost 4% to 2,548.5, their highest level since the start of the year.