InterContinental Hotels Group PLC Drops Despite Strong First Half

ihgThe market seems unimpressed with what’s described as a strong first half performance” by InterContinental Hotels (LSE: IHG) (NYSE: IHG.US) marking its share price down 3% so far this morning,

According to the group’s half-year results to 30 June 2014, total gross revenue from system hotels rose 7%, to $11.1bn, with a rise of 6% in underlying profit. But if adjustments for disposals, significant liquidated damages receipts, and managed leases are disregarded, there was a reported decrease in profit of 8%.

InterContinental’s total system size saw 2.2% year-on-year growth, up to 693,000 rooms in 4,732 hotels. The growth was led by 17,000 rooms being opened in the Americas and 11,000 in Greater China. The company says it has a pipeline of 187,000 rooms, over 45% of which are currently under construction, with over 50% in developing markets.

The company also reported that it completed a $500m buyback programme during the half, and had also paid a $750m special dividend during July. And despite a fall in earnings per share (basic down 27%, adjusted down 10%), and net debt rising nearly 20% to $1,031m, the board is recommending an interim dividend of 25 cents, up 9% on last year’s.

Commenting on the results, CEO Richard Solomons said:

We have achieved a strong first half performance, with our preferred brands continuing to drive good momentum through the second quarter. 

“We remain committed to reducing the asset intensity of the business, completing two asset disposals in the half, and good progress is being made with the strategic review of our remaining owned hotels.

Looking ahead, whilst several of our key markets continue to experience some political or economic uncertainty, we are encouraged by current trading trends.

At 2,294p InterContinental’s share price is beating the FTSE 100 so far this year, with a rise of 13.6%, versus a dip of 0.6% for the index. And the story is repeated over five years, with a share price gain of 214% for the hotel group, compared with an increase of 45.5% for the FTSE 100.

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Jon Wallis has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.