IHG revenue jumps as it swings to operating profit

(Sharecast News) - InterContinental Hotels Group reported strong trading in its final results on Tuesday, with global revenue per available room (RevPAR) increasing 16.1% year-on-year for 2023, with a notable 7.6% increase in the fourth quarter alone. The FTSE 100 company said that compared to the pre-pandemic comparator in 2019, global RevPAR was up 10.9% for the full year.

It said the Americas region saw a year-on-year RevPAR increase of 7.0% for the full year, with Europe, the Middle East, Africa, and Asia (EMEAA) experiencing a substantial 23.7% increase, and Greater China 71.7% growth, reflecting varying levels of travel restrictions in place during 2022.

IHG's average daily rate rose 5% compared to 2022 and by 13% compared to 2019, with occupancy up by six percentage points versus 2022 and one percentage point lower compared to 2019.

Total gross revenue reached $31.6bn, marking a 23% increase over 2022 and a 13% increase over 2019.

IHG reported a fee margin of 59.3%, up by 3.4 percentage points, driven by trading recovery in the EMEAA and Greater China regions.

Operating profit from reportable segments amounted to $1.02bn, a 23% increase, including a $13m adverse currency impact.

Reported operating profit stood at $1.07bn, including a profit of $19m from system fund and reimbursables, swinging from a loss of $105m in 2022, and a $28 million exceptional profit compared to $95m in net exceptional charges a year earlier.

Net cash from operating activities reached $893m, with adjusted free cash flow amounting to $819m, representing 129% conversion of adjusted earnings.

The company's net debt increased by $421m, reflecting strong adjusted free cash flow, $1bn of shareholder returns, and a $105m net foreign exchange adverse impact.

Adjusted EBITDA amounted to $1.09bn, up 21% compared to 2022, resulting in a net debt-to-adjusted EBITDA ratio of 2.1x.

In 2023, IHG completed a $750m share buyback programme and paid $245m in ordinary dividends.

A final dividend of 104 cents was proposed, marking a 10% increase over 2022, resulting in a total dividend for the year of 152.3 cents.

Additionally, IHG launched a new $800m buyback programme, in addition to ordinary dividends, expected to return over $1bn to shareholders in 2024.

"Travel demand was strong across all markets, with RevPAR up 16% on last year and 11% ahead of the 2019 pre-pandemic peak," said chief executive officer Elie Maalouf.

"Combined with the power of our enterprise and efficient operating model, profit from reportable segments grew 23% and exceeded one billion dollars for the first time, and adjusted earnings per share grew 33%.

"Today we are announcing a further $800m share buyback programme, which together with ordinary dividends is expected to return over $1bn to shareholders in 2024."

Maalouf said that, alongside strong trading and financial performances, the firm continued to grow its portfolio and the global footprint of its brands.

"We opened 275 hotels in 2023 and signed more than double that amount - 556 hotels - into our pipeline.

"Adjusting for the effect of the Iberostar hotels joining IHG's system, openings for the fourth quarter grew by 27% year‑on‑year and signings were up by 50%, representing one of our biggest ever quarters for development activity."

Looking ahead, Elie Maalouf said the company's evolved strategic priorities and plans would further reinforce it as the hotel company of choice for guests and owners.

"The travel industry has attractive, long-term drivers of demand, and the strength of our brand portfolio and enterprise platform will continue to boost our RevPAR and system size growth.

"Combined with our scale and cost base efficiencies, this will further expand the fee margin.

"IHG's strong cash generation supports investment in growth initiatives, sustainably increasing our ordinary dividend and the regular return of surplus capital such as through buybacks."

At 0842 GMT, shares in InterContinental Hotels Group were up 1.09% at 7,996p.

Reporting by Josh White for Sharecast.com.