Owner of Holiday Inn, Crowne Plaza and Hotel Indigo brands reported 4% rise in revenues and 7% rise in operating profits. Confident outlook enabled group to raise interim dividend by 10%.
As Intercontinental Hotels reports its first half results Helal Miah, investment research analyst at The Share Centre, explains what it means for investors:
Intercontinental Hotels Group (IHG), the owner of Holiday Inn, Crowne Plaza and Hotel Indigo, today reported its half year results in which it said that underlying revenues came in at $788m, up 4% on the same period last year, while operating profits rose by 7% to $365m.
These gains were driven by Revenue Per Available Room (RevPAR) growth of 2.1%, an improvement in occupancy rates and the expansion in the size of its network as 23,000 new rooms were added, including 3,500 in Saudi Arabia.
Interested investors will note that the shares opened lower by around 4% on the back of today's news as the numbers fell short of expectations. The disappointment seems to come from the company's largest regional exposure, the Americas, while the Middle Eastern Markets were also weak.
Nonetheless, investors should appreciate that management are still very growth orientated despite having just passed the landmark of 1 million open or pipeline rooms. The company has just launched a high quality midscale brand in the US, it continues to grow its boutique brands in Europe and it has 32,000 rooms in the pipeline as it looks to deliver more growth through technology and loyalty.
With this relatively confident outlook, the group and the new CEO have today announced that it will raise the interim dividend by 10%. However, having had a great run, we continue to recommend Intercontinental Hotels Group as a 'hold' for medium risk investors seeking growth.
For investors interested in this industry, our preference is PPHE Hotel Group due to the company's success in growing in a niche part of the hotel sector and the potential for further growth in London and Europe.