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IHG hails strong UK performance as reported turnover falls

17 February 2015 by

InterContinental Hotels Group (IHG) has hailed a particularly strong performance in the UK in 2014, as the company unveiled its preliminary results for the year to 31 December 2014.

The business saw a slight drop in reported revenues to $1.86b (£1.21b) during the year, down from $1.9b (£1.24b) the year before. Meanwhile, repoted operating profit was down from $668m (£435m) to $651m (£424m).

The business attributed the drop to the disposal of some of its owned hotels, including the sale on 27 March 2014 of its freehold interest in the InterContinental Mark Hopkins San Francisco for $120m (£78.3m).

The move was in line with IHG's ‘asset light' strategy, which has seen it sell the hotels it owns and in many cases then take out long-term management contracts to continue running the properties.

Also in March 2014, it sold 80% of its interest in the InterContinental New York Barclay for $274m (£178m) and a 30-year management contract with two 10-year extension rights. And it received an offer in August that year to acquire InterContinental Paris - Le Grand for proceeds of €330m (£244m) in cash and a 30-year management contract with three 10-year extension rights.

However, underlying revenue at constant FY13 exchange rates rose 6% to $1.67b (£1.08b), while underlying operating profit was up 10% to $648m (£421m).

Overall, the business saw revpar rise 6.1% during the year, led by 7.4% growth in the Americas, which is by far the largest region in terms of the contribution it makes to IHG's operating profits, at 68%.

Europe, meanwhile, which makes up a much smaller contribution to its operating profits, at 11%, saw a more modest 5.1% uplift in comparable revpar, with growth in ADR and occupancy.

However the company said that UK trading was particularly strong, up 8.9%, with low double digit growth in the provinces and high single digit growth in London.

Looking ahead to 2015, IHG said it was in the process of transferring most of its UK managed hotels to franchise contracts, which it claimed would allow it to accelerate growth in this "priority market". A total of 21 hotels transferred in 2014, with the rest transferring this year. It said it expected UK franchised income to rise by a further $3m (£2m) as a result of the changes, up from $10m (£6.5m) in 2014.

Richard Solomons, chief executive of IHG, said: "2014 was an excellent year for IHG as we delivered against our long-term winning strategy for high quality growth. We achieved strong revpar performance of 6.1%, and our best net system size growth since 2009 of 3.4%, increasing our operating profit on an underlying basis by 10%.

"We remain committed to reducing the capital intensity of the business and maintaining an efficient balance sheet with disposal proceeds received in the year of almost $400m (£261) and shareholder returns, including ordinary dividends, of over $1b (£650m). We are proposing an increase in the total dividend for the year of 10%.

"We expanded our brand portfolio and strengthened our position in boutique hotels, the fastest growing segment in the industry over the last five years, with the acquisition of Kimpton Hotels & Restaurants. The first properties for our innovative, consumer focused, EVEN Hotels and HUALUXE Hotels and Resorts brands are now open. Significant growth milestones were achieved across our established brands as we continue to strengthen our scale positions in the most important global markets.

"Looking into 2015, we face many macroeconomic and geopolitical uncertainties, but are confident that our strategy for high quality growth coupled with the momentum in the business positions us well for continued strong performance."

IHG franchises, leases, manages or owns over 4,800 hotels and more than 710,000 guest rooms in nearly 100 countries, with over 1,200 hotels in its development pipeline.

TagsFinance and Hotels
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