IHG reinstates dividend as FY profit soars on travel rebound

InterContinental Hotels Group reinstated its dividend as annual profits more than doubled on the back of a strong final quarter in the US and China driven by economic recovery after the Covid pandemic.

Operating profit at the Kimpton, Holiday Inn and Crowne Plaza chains for the 12 months to December 31 more than doubled to $534m as revenue per available room, a key metric, reached 70% of pre-pandemic 2019 levels. A dividend of 85.9 cents a share was declared after it was pulled the year before.

RevPar grew 71% in the fourth quarter, and 46% for the full year. Group revenue rose to $2.91bn from $2.39bn the year prior, while group operating profit was $494m, rebounding from a $153m loss in 2020.

On a regional basis, RevPar room recovered strongly in the US to 20% below 2019 levels, while the company’s operations in Greater China and the Europe, the Middle East and Africa regions were down 29% and 52% on the same year respectively.

The company said demand had returned rapidly, led by removals of travel restrictions, vaccinations, and a revival of economic activity.

It added that discretionary business travel, group bookings and international trips had also more recently shown “encouraging” signs of recovery.

"The signs are encouraging that we are nearing the end of the pandemic, and we are confident in the strength of IHG's enterprise, market positioning and ability to drive attractive levels of long-term, sustainable growth," the company said.

"Trading improved significantly in 2021, with RevPAR getting closer to pre-pandemic levels as the year went on, profitability and cash flow rebounding strongly, and signings accelerating in Q4.”

Keith Bowman, investment analyst at Interactive Investor said heightened geopolitical tensions over Ukraine "now overshadow the wider travel industry".

"An estimated forward price/earnings ratio above the 10-year average also suggests the shares are not obviously cheap. On the upside, a recovery from the pandemic is evident. It has a strong brand and geographical diversity, while a longer-term expansion of hotel numbers and rooms is ongoing."

"In all, and with the share price sat close to the consensus analyst estimate of fair value of just over £53 per share, market opinion currently points towards a strong 'hold'.”