A pick up in business activity last year delivered an unexpected boost for InterContinental Hotels. The group, which owns the franchised Holiday Inn and Crowne Plaza brands, experienced a recovery in room occupancy in Europe and, in particular, the US to register a solid recovery in underlying operating profits – up 26 per cent year on year to $559m (£354m). Performance since the period ended has been solid, too and – led by the Americas – global revenue per available room (RevPAR) rose 6 per cent in January.
Significantly, InterContinental's operationally geared business model means that small sales gains can translate quickly into significant profit increases. For example, at the key Americas division, overall sales rose just 2.9 per cent in the period to $830m, but a 7.5 per cent rise in RevPAR drove operating profits up an impressive 22.2 per cent to $451m. The revenue mix also changed, with the company shifting resources towards its budget Holiday Inn Express brand, which now has 1,874 hotels in the Americas, an increase of 27. Most of its premium range brands, meanwhile – such as InterContinental – were scaled back.
The European side, the next largest division, enjoyed a sales increase of 24.2 per cent to $405m, with operating profits up 33.3 per cent to $104m. Most of this growth came from a 4.7 per cent RevPAR increase, combined with a net 13 hotels, or 2,236 rooms, added to the European estate. Meanwhile, China's strong internal growth helped the greater China division increase sales 15 per cent to $205m, with operating profits there up 24 per cent to $67m. In fact, the division's room count grew by 6,655 in the period to 55,182, with hotel numbers up by 22 to 167.
Shore Capital has upgraded its forecasts for 2012 by 5 per cent and now expects underlying pre-tax profit of $529m, giving EPS of 129¢ (from $497m and 130.4¢ in 2011).
INTERCONTINENTAL HOTELS (IHG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,401p | MARKET VALUE: | £4.1bn | |
| TOUCH: | 1,400-1,402p | 12-MONTH HIGH: | 1,440p | LOW: 939p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 188¢* | NET DEBT: | 97% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | 1.77 | 444 | 131 | 40.7 |
| 2008 | 1.90 | 316 | 91 | 41.4 |
| 2009 | 1.54 | -64 | 73 | 41.4 |
| 2010 | 1.63 | 397 | 101 | 48.0 |
| 2011 | 1.77 | 532 | 159 | 55.0 |
| % change | +9 | +34 | +57 | +15 |
Ex-div: 21 Mar Payment: 1 Jun *Includes intangible assets of $400m, or 138¢ a share £1=$1.58 | ||||
