- Profits rise 50% in 2022
- Hotels giant announces new US$750 million buyback
- CEO excited by ongoing China reopening
Despite a drag from China, InterContinental Hotels (IHG) delivered significantly improved revenues and pre-tax profit for the year to December 2022 thanks to a strong rebound in travel following the Covid-19 pandemic.
One of the world’s largest hotel businesses, operating brands such as InterContinental, Crowne Plaza and Holiday Inn, the cash-generative company demonstrated confidence in its prospects by raising the total annual dividend by 61% to $1.38 and announcing a new US$750 million share buyback.
PROFITS JUMP 50%
The hotels and resorts chain reported a near-50% surge in pre-tax profit to $540 million for 2022 on total revenue up 34% year-on-year to $3.89 billion.
A FTSE 100 constituent, InterContinental Hotels is benefiting from its mixture of brands that enable it to cater for both the leisure and business market, both of which have shown signs of stronger demand as Covid is placed in the rear-view mirror in terms of disruption to the hospitality industry.
However, the shares cheapened 1.5% to £55.12 on profit-taking after a strong recent run.
WHAT DID THE COMPANY SAY?
Chief executive Keith Barr commented: ‘In 2022 we saw demand return strongly in most of our markets, pushing group revenue per available room (RevPAR) back close to 2019 levels and fee margin ahead. It’s particularly pleasing that in the second half of the year we exceeded 2019 levels for both RevPAR and profitability.’
Looking to 2023 and despite the economic uncertainties ahead, Barr expects ‘continued strong leisure demand in many markets, alongside further return of business and group travel and the ongoing reopening of China’, where the business has substantial exposure.
Barr also insisted that InterContinental Hotels is a ‘stronger and more resilient company than ever before, and we are proud of the advancements made in each of our strategic priorities.’
EXPERT VIEWS
AJ Bell investment director Russ Mould said the scale of the hotelier’s recovery story is ‘quite impressive with full year revenue up 34%, operating profit up 27%, net debt down 2% and shareholders are getting a 61% hike in the dividend.
‘The amount it has been able to charge per available room went up each quarter in the 12-month period, while at the same time more hotel rooms were added to its estate.’
Mould added: ‘The next leg of the recovery story should come from China as the economy reopens following a lengthy period of stringent Covid containment measures. It is well placed to benefit from Chinese residents having the freedom to move around the country, and from foreign tourists visiting the Asian superpower.’
Julie Palmer, partner at Begbies Traynor (BEG:AIM), commented: ‘The travel industry’s bounce back continues with InterContinental Hotels performing better than pre-pandemic levels when there were no Covid restrictions.’
Palmer continued: ‘With almost a million rooms across 6,000 hotels either directly owned or franchised under InterContinental’s various brands, and plans to add a further 1,800 properties, management are betting big on this recovery continuing.
‘But they are confident enough in the future to increase the dividend and launch a $750m share buyback. As long an travellers remain confident to check in, then InterContinental’s strategy checks out.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Ian Conway) own shares in AJ Bell.
