InterContinental Hotels Group PLC (ADR) (IHG) Sees Double-Digit Profit Growth

LONDON — InterContinental Hotels Group PLC (LSE:IHG) (NYSE:IHG) this morning announced preliminary figures for the 2012 financial year, which saw the share price dip 46 pence, or 2.3%, to 1,943 pence despite positive results.

Operating profit rose 10% year on year, from $559m in 2011 to $614m, while revenue grew 4% to reach $1.84bn, up $67m from $1.77bn the previous year. Total gross revenue increased 5% to $21.2bn from the hotels in InterContinental Hotels’ system, while fee revenue growth lifted to 6.8% in 2012 against 5.7% the previous year.

However, revenue per available room (RevPAR) growth slipped 1% from 2011, down to 5.2%, although there was a strong performance in the U.S. (increasing to 6.3%). Elsewhere, net debt almost doubled, from $538m in 2011 to $1.07bn.

The owner of the Holiday Inns and Crowne Plaza hotels pointed toward “strong growth and scale efficiencies” in helping the double-digit profit growth.

Net rooms growth came in at 2.7%, up from 1.7% in 2011, fueled “increasingly by expansion in developing markets.” This includes a move into the fast-growth Asia, Middle East and Africa (AMEA) market, with India and Indonesia seeing 4,000 Holiday Inn branded family rooms signed up in the period, as well as a notable mention for the first Holiday Inn Express in India, in Ahmedabad, which was awarded “2012 World’s Leading New Mid-Market Hotel” by World Travel Awards.

Chief executive of InterContinental Hotels, Richard Solomons, commented:

The financing environment remained tough through 2012 in many of our key markets, but we still signed on average one hotel a day into our pipeline. This reflects the excellent relationship we enjoy with our owners and further strengthens our foundation for high-quality growth. We extended our portfolio of preferred brands, launching in the first quarter of 2012 the innovative HUALUXE Hotels & Resorts and EVEN Hotels.

IHG’s proven strategy and resilient business model position us for further good performance in 2013, despite the challenging economic environment. The 16% increase in our dividend demonstrates the confidence we have in our ability to deliver sustained high-quality growth, as we prepare to celebrate our 10th anniversary as a stand-alone business.

Shareholders ought to be encouraged by the 19% increase in basic earnings per share, with the total dividend increased 16% to 64 cents. Solomons also stated: “The $1bn return of capital, announced in August, underlines the benefit of our asset light strategy in delivering strong free cash flow, and our commitment to return value to shareholders.”

Some analysts had previously believed that the shares were too expensive, and so today’s dip in price could be put down to the market expecting better results than those — albeit largely positive — posted this morning. Whether they now present a buying opportunity is, of course, up to you, but it’s important to do your research before you take the plunge.