ii view: IHG beefs up shareholder returns but shares fall

Full-year results to 31 December

• Total revenue up 6% to $4.92 billion
• Full-year Revenue per available room (RevPAR) up 3%
• Fourth quarter RevPAR up 4.6%
• Pre-tax profit down 11% to $897 million
• Group net debt up 22% to $2.78 billion 
• Final dividend of 114.4 US cents per share
• Total dividend for the year up 10% to 167.6 US cents per share
• New $900 million buyback programme

Chief executive Elie Maalouf said:

“Thanks to the hard work and dedication of our teams around the world, 2024 was an excellent year of financial performance, strong growth and important progress against a clear strategy that is unlocking the full potential of our business for all stakeholders. 

“Strong demand globally from hotel owners and developers for our brands drove the opening of 371 hotels and an impressive 714 properties signed into our pipeline, equivalent to almost two a day. 

“We enter 2025 with confidence in further capitalising on our scale, leading positions and the attractive long term demand drivers for our markets, all of which supports the ongoing successful delivery of our growth algorithm.”

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ii round-up:

Global hotelier InterContinental Hotels Group (LSE:IHG) today detailed profits broadly matching City forecasts but with a new share buyback programme for the year ahead marginally below expectations. 

Growth in fourth-quarter Revenue per Available Room (RevPar), a key industry metric, of 4.6%, helped drive annual 2024 operating profit up 10% to $1.12 billion. Higher investment spending and the $116 million purchase of new hotel brand Ruby hindered free cashflow, leaving a newly announced 2025 share buyback programme of $900 million below analysts' hopes of around $1 billion. 

Shares in the FTSE 100 company fell 2% in UK trading having come into this latest news up by just over a third during the last year. That’s similar to rivals Hilton Worldwide Holdings Inc (NYSE:HLT) and Accor SA (EURONEXT:AC) and ahead of a 13% gain for the FTSE 100 index itself over that time.

InterContinental operates 19 global hotel brands from budget to luxury names and including Holiday Inn, Crown Plaza and Six Senses. The newly purchased 20th Ruby brand was started in 2013. It currently operates 20 hotels or 3,483 rooms across Europe with another 10 hotels or 2,235 rooms in the pipeline.

As normal, InterContinental offered no guidance for the year ahead, but with City forecasts point to REVpar growth of around 2.3%. 

A final dividend of 114.4 US cents per share leaves the total payment for 2024 up 10% at 167.6 US cents per share. An $800 million share buyback over 2024 helped drive group net debt up 22% to $2.78 billion.

Pre-tax profit fell 11% year-over-year to $897 million. A first-quarter trading update to 31 March is scheduled for 8 May.

ii view:

Headquartered in Buckinghamshire, InterContinental operates over 6,600 hotels in more than 100 countries, with a developmental pipeline up 10% from a year ago to over 2,200 properties. IHG charges fees to the owners of the properties to operate and run them under its hotel brands. The Americas and including the key US market generated its biggest slug of operating profit during this latest year at around 73%. That was followed by Europe, the Middle East, Asia, and Africa (EMEAA) at close to a quarter and Greater China the balance.  

For investors, the economic backdrop for its various markets matters, with China REVpar down 4.8% over the year and likely hindered by its challenged economy. High borrowing costs continue to squeeze spending for consumers and corporate customers initiating business travel. Geopolitical tensions such as those across the Middle East cannot be ignored, while the group’s expanding China operations comes against the backdrop of continued political tensions with the West.

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On the upside, geographical and brand diversity are high. New hotels continue to be signed and opened. An asset light business model is being pursued, while shareholder returns focus on both share buybacks and a forecast dividend yield of around 1.3%.

On balance, and despite ongoing risks, this global hotelier appears to remain worthy of its place in diversified investor portfolios. 

Positives: 

• Brand and geographical diversity
• Focus on shareholder returns 

Negatives:

• Uncertain economic outlook 
• Heightened global geopolitical tensions

The average rating of stock market analysts:

Weak hold