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IHG’s first half profit up 20 percent

Richard Solomons IHG

IHG has recorded a solid first half to June 30, 2013, with profit up 20% and revenue up 7% on 2012.

Strong RevPAR growth in the United States and Asia has driven global numbers up almost 4% and the figures have pleased IHG’s CEO Richard Solomons (pictured).

“We have delivered a good performance in the first half, with our preferred brands driving RevPAR growth of 3.7%, including 4.0% in the second quarter,” he said.

“Our global scale has allowed us to reinvest in the business whilst growing margins, resulting in solid underlying profit gains led by our Americas region, and strong cash flows.

“Consistent with our long track record of returning value to shareholders, we today announce a USD$350 million special dividend. In addition we are increasing the interim dividend by 10% reflecting our good first half results and the confidence we have in the future prospects of the business.

“We continue to strengthen our foundation for future growth, signing more than 200 hotels into our pipeline, a notable increase on the first half of 2012, reflecting our owners’ confidence in both IHG and the industry demand drivers.

“Our high quality pipeline, broad geographic spread and fee based model give us confidence in the outlook, despite the ongoing challenging economic conditions in some of our markets,” he said.

In Asia, the Middle East and Africa (AMEA), RevPAR was up 6.2% (with 1.6% rate growth) and second quarter RevPAR was up 6.8% (with 2.3% rate growth). Southeast Asia and Japan reported high single digit RevPAR growth; the Middle East and Australasia both achieved mid-single digit RevPAR increases.

Revenue decreased 6% (3% CER) to $102 million and operating profit increased 3% (5% CER) to $41 million. At CER and excluding results from one managed lease hotel, revenue decreased 6% and operating profit increased 5%.

According to IHG, “this was driven by strong RevPAR growth and lower costs in the managed business, partly offset by a $3 million negative impact from the renewal of a small number of long-standing contracts onto current commercial terms (full year impact expected to be $6 million)”.

The company opened 2,000 rooms in the region (six hotels) in the first half, including an InterContinental hotel in Osaka, the first new build InterContinental to open in Japan for over 15 years.

The company also signed 3,000 rooms (10 hotels) in AMEA in the first half, up over 80% year on year, including a Crowne Plaza hotel in Oman and 2,000 rooms for the Holiday Inn brand family including the first Holiday Inn hotel for Mauritius.

In July IHG also announced a 15 hotel multiple development agreement in Australia for Holiday Inn Express.

To view a video of IHG’s CFO Tom Singer reviewing the first half results, click on the image below.

In Greater China, RevPAR decreased 0.1%, (with rate down 1.2%) outperforming the industry by 5.9% points. Second quarter RevPAR decreased 1.9% with a 2.0% rate decline.

According to IHG, this “reflects the adverse impact from a series of natural disasters in Western China in Q2 and the ongoing impact from the slower macroeconomic conditions”.

The company opened 2000 rooms (five hotels) in the first half, including a 500 room Crowne Plaza resort hotel in Xishuangbanna, the first major international hotel to open in this prime leisure market in Southwest China, and the first Hotel Indigo hotel in Hong Kong. IHG signed 9000 rooms (30 hotels) taking the pipeline to 58,000 rooms.

In Europe, RevPAR increased 0.4%, with 0.5% rate decline. Second quarter RevPAR increased 2.2% (with 0.3% rate growth). Trading was resilient in IHG’s key markets with H1 RevPAR up 1.6% in the UK, 1.1% in Germany and 4.0% in France.

In the Americas, RevPAR increased 4.5% (with 2.9% rate growth) and second quarter RevPAR increased 4.6% (with 2.5% rate growth). US RevPAR was up 4.7% in both the first half and the second quarter. Revenue increased 14% to $457 million and operating profit increased 21% to $282 million.

The company opened 10,000 rooms (89 hotels) in the first half, with more than half of these rooms under the Holiday Inn brand family. IHG signed and opened 4000 rooms on US Army bases in the first half, taking the total open under this contract to 12,000 rooms. Signings of 18,000 rooms (161 hotels) are up 39% year on year (up 8% excluding the rooms on US Army bases), and included two EVEN Hotels properties.

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