InterContinental Hotels Group has promised shareholders an 11 per cent boost to its final dividend, despite warning of rising geopolitical and macroeconomic uncertainty in the coming year.
The world’s largest hotel operator by number of rooms reported revenue per available room rising 6.1 per cent for the year to December 31, driven by 7.4 per cent growth in the Americas, where it makes most of its profits.
However, its shares had fallen back 5 per cent by lunchtime London trading on Tuesday to £24.55.
“The markets where we are earning the great majority of our profits are not necessarily exposed to macroeconomic and geopolitical uncertainties, but the world is becoming riskier,” said Paul Edgecliffe-Johnson, chief financial officer.
The results cap a busy year in which it saw off an informal takeover approach and pressure from activist shareholder Marcato.
Mick McGuire’s Marcato hedge fund, which owns about 4 per cent of the FTSE 100 company, has called for IHG to seek a tie-up with an American rival to allow an “inversion” of corporation tax if the US group moved its headquarters to the UK, where IHG is based.
Richard Solomons, chief executive of IHG, said that while there was “theoretical” value in mergers in any industry, the company was focused on a strategy of organic growth.
“We have delivered more total shareholder returns ahead of anyone else in our industry in the past 10 years, and if someone is interested in our business then it’s up to them to talk to us. But we’re confident in our strategy and that’s what we’re working on,” he said.
Weaker trading in China in the fourth quarter and the lack of news on the anticipated sale of the InterContinental Hong Kong hotel may have disappointed investors, said Wyn Ellis, analyst at Numis Securities. “But the general commitment to an efficient balance sheet and cash returns remains,” he added.
IHG, which owns the Holiday Inn, Crowne Plaza and InterContinental brands, returned more than $1bn to shareholders last year, including a $763m special dividend in May following an informal takeover approach and sale of two hotels. The 11 per cent boost in final dividend to 52 cents brings the total dividend to 77 cents, up 10 per cent.
The chain, which runs on an “asset light” model under which it manages hotels but does not own the property, accepted a €330m offer for the InterContinental Paris Le Grand hotel in the period. Mr Solomons said a decision on what to do with the proceeds would be taken when the sale is completed in the first half of 2015.
Mr Solomons said he was concerned about the “constant sniping at business” in the UK, where acting Walgreens Boots Alliance boss Stefano Pessina sparked controversy last month after saying a Labour government would be a “catastrophe”.
When asked if he thought Ed Miliband, Labour party leader, was supportive of business, Mr Solomons said: “I haven’t heard a lot that sounds supportive of wealth creation and I think that’s unfortunate”.
Reported operating profit fell 3 per cent to $651m, in line with market expectations, following disposals of hotels in 2013. However, underlying operating profits rose 8.1 per cent to $639m, including a $9m hit from currency fluctuations, and the company reported its strongest net room growth since 2009, up 3.4 per cent to 710,000
The company made its first corporate acquisition in a decade last year when it bought the Kimpton US boutique hotel group for $430m in cash. The deal gave IHG 62 upmarket resorts and 71 restaurants, bars and lounges in the US, boosting its presence in the fast-growing sector of the hospitality industry.
Operating profits in the Americas rose 8 per cent on an underlying basis and IHG added 38,000 rooms, a 12 per cent jump and its best performance for six years.
In China, where the company has operated for 30 years and this month launched the first of its Hualuxe hotel brand, revenue per available room fell 3.4 per cent as it shifted focus from large coastal cities to growth in medium-sized centres.
Operating profits rose 9 per cent “in a challenging environment with slower macroeconomic conditions, government austerity measures and protests in Hong Kong”.
The UK and Germany performed well, the company said, but economic troubles in Russia led to a fall in income of $3m.
Instability in Thailand in the first half led to a double-digit decline in revenue per available room, IHG added.