Intercontinental Hotels profit, RevPAR rise but no additional capital to be paid out

InterContinental Hotels reported a jump in full-year profit on Tuesday but said it will not be paying out any additional capital this year as it looks to reinvest savings in growth.

In the year to the end of December 2017, operating profit rose 7% to $759m versus consensus of $754m, while pre-tax profit was up 14.7% to $678m. Revenue edged up 4% to $1.8bn and group revenue per available room increased 2.7%.

For the fourth quarter, RevPAR was up 4%.

The company lifted its dividend by 11% for the year to 104 cents and announced a series of new initiatives to build on its strategy and drive an acceleration in its growth rate.

Adjusted earnings per share pushed up 20% to 244.6 cents and net debt rose to $1.9bn from $1.5bn.

Chief executive Keith Barr said: "These initiatives are focused around redeploying and refocusing resources to leverage our scale; strengthening our loyalty programme; continuing to prioritise digital and technological innovation; enhancing our industry leading franchise proposition; strengthening our existing brands; and adding new brands where we see the greatest potential for growth.

"We moved at pace to develop and roll-out the concept for our new mainstream brand, avid hotels. Since September we have signed 75 hotels, with the first due to open later this year and a global launch being planned. Building on this successful approach, we will launch a new upscale conversion brand in 2018, leveraging the power of our system to capture share of this significant premium priced market. We will also build out our development resource and capability in the sizeable global luxury segment, where we are looking to acquire small luxury brand(s) to incubate and grow."

The group also said it is undertaking a comprehensive efficiency programme to realise around $125m in annual savings for reinvestment to drive growth. As a result, no additional capital return will be paid this year, but IHG said its commitment to return surplus funds to shareholders remain unchanged.

Atif Latif, director of trading at Guardian Stockbrokers, said that overall RevPAR trends were pleasing as they have started to move higher.

"Given the positioning of IHG and the direction in which management is trying to steer the business, the update was in line. The drop today we understand as concerns on cash commitments and lack of further dividend payments (albeit they have increased current by 11%) are weighing on the share price. With this in mind the update is pleasing and the dip today should attract more buying as investors look beyond the update."

At 1050 GMT, the shares were down 4.1% to 4,506p.