Wednesday August 8, 2012
InterContinental Hotels to return US$1bil
It plans US$500mil special dividend, share buyback
LONDON: InterContinental Hotels, the world's biggest hotelier, cheered investors by promising to return US$1bil to them funded from the planned sale of a New York hotel and added that its flagship London Park Lane hotel is set to be next on the block.
The Britain-based group, home to the Crowne Plaza, Holiday Inn as well as InterContinental brands, said it would pay a special dividend in the fourth quarter costing US$500mil, and also kick off a US$500mil share buyback in the same three months.
Chief executive Richard Solomons said the return of capital reflected the planned sale of its New York Barclay hotel, which analysts expect to fetch around US$300mil, as the group reported a 6% rise in half-year profit boosted by good trading in its two biggest markets, the United States and China.
The hotelier's strategy to sell hotel assets in return for management contracts is similar to US peers like Marriott, and has helped return US$8.9bil since the group's formation in 2003.
The capital return helped boost its shares up 6.5% to 1,727p by 0933 GMT to be the biggest riser in the FTSE 100 index in a largely flat London stock market.
The group only owns 10 of its 4,500-plus hotels worldwide with a book value of US$1.6bil, with most of that value being in its flagship hotels in New York, London, Paris and Hong Kong which are all expected to be eventually sold.
The year-long sale process of the New York Barclay should be closed in the next few months, Solomons said, and talks were under way with one exclusive buyer, which analysts said was likely to be the Qatari hotel owner Ghanim Bin Saad Al Saad.
Solomons said that once the group opened its second InterContinental in London in the first quarter of 2013 then it was likely to sell its Park Lane hotel in return for a management contract. Analysts estimate its value at over US$330mil.
He added that this was consistent with the group's “asset light” strategy and returning funds to shareholders while still maintaining the group's BBB investment grade credit rating.
“Interest will come from high net worth and sovereign wealth money from the Middle East, Russia and possibly South-East Asia,” said Robert Seabrook, head of hotel transactions at property consultant Savills. “It's one down from the likes of the Dorchester but is at the bottom of arguably the best hotel street in London.” - Reuters
Solomons said the group reported growth in the half year across all regions, and both hotel occupancy and room rates increased and, despite a tough economic environment, the group was trading well and continued to see growth for the future.
“There might be a little bit of a slowdown in July but that is for one-off factors and for the medium time, the outlook is good,” said Solomons.
He added that the one-off factors included the US July 4 independence day falling in mid-week, and by the end of July growth rates were back running similar to the half year.
Growth in half-year global revenue per available room (RevPAR), a key industry measure, grew 6.5% with the United States and China ahead 7.2% and 9.7%, respectively. In July, global growth slowed by 3.8%.
The Olympic Games had seen the group's 51 London hotels full, but the effect was “financially neutral” as games guests replaced regular London visitors, Solomons said.
The hotelier, which operates more than 660,000 rooms in over 4,500 hotels worldwide, posted a 6% rise in half-year operating profit to US$286mil, in line with an average forecast of US$285mil in a company-compiled consensus.
Revenue increased 3% to US$878mil.
The half-year dividend rose 31% to 21 US cents following a decision to rebalance its interim towards one third of the total for the year. - Reuters