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IHG turns in decent performance as estate continues to grow

By Josh White

Date: Tuesday 18 Feb 2020

IHG turns in decent performance as estate continues to grow

(Sharecast News) - InterContinental Hotels Group reported an 8% improvement in reportable underlying revenue in its full-year results on Tuesday, to $2.08bn (?1.6bn), or a 6% rise on an underlying basis.
The FTSE 100 accommodation operator said revenue from its fee business was $1.51bn for the 12 months ended 31 December, up 2% on a reported and underlying basis, while its operating profit was ahead 4% at $865m, or up an underlying 6%.

Its fee margin was 54.1%, growing 0.8 percentage points compared to 53.3% a year earlier, while adjusted earnings per share were 3% higher at 303.3 US cents.

On a total group basis, revenue was up 7% at $4.63bn and operating profit rose 8% to $630m, while basis earnings per share were ahead 15% at 210.4 cents.

The board said the total dividend per share was up 10% year-on-year at 125.8 cents, while at year-end, net debt stood at $2.67bn.

Looking at its operational performance, IHG siad it saw net system size growth of 5.6% for the year, of 5.0% excluding its Sands partnership in Macau, which was the strongest in more than a decade, with 65,000 room additions.

It said its ongoing focus on the long-term health of its established brands drove 18,000 removals, leaving 884,000 rooms across the global estate.

Full-year comparable revenue per available room (revPAR) was down 0.03% globally, with the Americas specifically down 0.1% and the US off 0.2%, while Europe, the Middle East, Asia and Africa (EMEAA) grew 0.3%, although Greater China was down 4.5%.

The board said its performance was impacted by macro and geopolitical factors, increased supply growth ahead of demand in some markets, and ongoing unrest in the Hong Kong special administrative region.

IHG said its operating profit from reportable segments was up 4%, and was 8% higher after the system fund result and exceptional items, which in 2019 included impairment charges to the UK leased portfolio and Kimpton management agreements.

Full year signings of 98,000 rooms were down 1% year-on-year, but included a record performance in Greater China and EMEAA, with the company's total pipeline now standing at 283,000 rooms.

IHG said it made continued progress optimising its brand portfolio for future growth, noting at at Six Senses, the brand had "grown at pace" with 10 signings since the acquisition in February 2019, and 18 properties now open.

For Kimpton, it signed 11 further deals, growing the portfolio to almost 100 open and pipeline hotels, while at Crowne Plaza, it launched six flagship properties in key cities with new room and public space designs.

IHG said that at the voco brand it signed 33 hotels across 16 countries since launch, with 12 open, and plans to continue the global expansion in 2020, while at Holiday Inn it opened more than 13,000 rooms, which was the best ever full year performance for the brand.

Holiday Inn Express saw new guest room and public space designs open or committed to in more than 1,600 hotels, and at 'avid', 10 properties were now open, with more than 80 under construction or with planning approved.

"Our performance in 2019 reflects the continued successful execution of our strategy, with the investments we're making in our brands, owner offer and enterprise capabilities accelerating net room openings and supporting sustainable long-term growth," said chief executive officer Keith Barr.

"These investments are being funded by our group-wide efficiency programme, which is on track to deliver $125m of annual savings, with the majority already realised and being reinvested across the business.

"During the year we grew our estate by 5.6%, our highest rate in more than a decade, which helped deliver a 6% increase in underlying operating profit in a weaker revPAR environment."

Barr also noted that the company increased its ordinary dividend by 10%, and remained committed to returning surplus cash to our shareholders.

"Led by strong demand for our established brands, we opened a record number of rooms, including our best ever performance for the Holiday Inn brand family, and we increased our share of signings in key markets globally.

"Future rooms growth will be further supported by our newer brands, with avid, Atwell Suites, Regent and Six Senses all attracting strong interest, and voco set to continue its global expansion in 2020, following an excellent performance in EMEAA."

Barr also said that, given the ongoing impact of coronavirus following the outbreak in China, the company's "top priority" remained the health and safety of its staff, guests and its partners on the ground, adding that it was doing all it could to support them.

"The fundamentals of our industry remain strong, and our cash-generative, resilient fee-based model, underpinned by a commitment to operate a responsible business, gives us confidence to continue making the strategic investments that will drive our long-term growth."

At 0923 GMT, shares in InterContinental Hotels Group were down 0.07% at 4,826p.

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