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InterContinental still confident

RESULTS: The market may have lost its nerve but InterContinental Hotels remains confident about the future, and its got the numbers to prove it - for now, anyway.
August 9, 2011

Despite fear in the market over the economic outlook, InterContinental Hotels says it views the future with confidence. Shares in the hotel management company have lost over a fifth of their value during the past two weeks on worries that a renewed economic slowdown will hammer trading. However, management believes strong conditions across its key regions, and tight supply following a post-credit crunch hotel-building hiatus, bodes well - indeed, in July, revenue per available room (RevPAR) grew 5.6 per cent.

IC TIP: Hold at 959p

North America, which generates two thirds of profits, lifted operating profits by 26 per cent to $225m (£137m) during the half and continues to benefit from the Holiday Inn rebranding. Moreover, room rate growth accelerated to 8.1 per cent in the second quarter. The European, Middle East and Africa (EMEA) business suffered due to political unrest in the region, but profits still rose 22 per cent to $71m. Meanwhile, strong trading in Greater China, which experience RevPar growth of 12.7 per cent, helped boost Asian profits by 31 per cent to $46m. InterContinental now has 154 hotels in Greater China and 142 more in the pipeline. The group also sold four hotels, raising $143m - which was 36 per cent above book value.

Evolution Securities expects full-year adjusted pre-tax profit of $464m, giving EPS of 112¢ (2010: $382/95.9¢).

INTERCONTINENTAL HOTELS (IHG)
ORD PRICE:959pMARKET VALUE:£2.78bn
TOUCH:958-961p12-MONTH HIGH:1,440p939p
DIVIDEND YIELD:3.3%PE RATIO:15
NET ASSET VALUE:121¢*NET DEBT:228%

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201077219248.412.8
201185020554.016.0
% change+10+7+12+25

Ex-div: 24 Aug

Payment: 7 Oct

*Includes intangibles of $373m, or 128¢ per share

£1=$1.64

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