Intercontinental Hotels shares rally despite $223m loss and dividend cancellation

FTSE 100 listed hotelier, Intercontinental Hotels Group (LON:IHG), saw its shares rally healthily during Tuesday trading, despite the company’s difficult half-year being reflected in its results.

The company booked reportable revenues of $488 million and total revenues of $1.25 million, narrowing by 52% and 45% respectively during the first half year-on-year.

This led the Intercontinental Hotels to swing from a $442 million operating profit during the first half of 2019, to a $233 million loss for H1 2020. Similarly, the company’s fee margin narrowed by 28.0% points, to 26.1%, though its net debt also decreased by 12%, down to $2.52 billion.

The Group’s challenging half-year was also – if not more acutely – felt by its shareholders. Its basic EPS collapsed 169%, down from a profit of 167.2 cents per share, to a 115.4 cent loss per unit. Similarly, the company cancelled its dividend, which stood at 39.9 cents per share at the end of the half-year in 2019.

Intercontinental Hotels response

Commenting on the company’s performance, CEO Keith Barr stated that the company had made significant savings during the difficult half-year of trading, and had seen some promising early signs of recovery as it began reopening its sites. He stated:

“The impact of Covid-19 on our business has been substantial. Global RevPAR declined by 52% in the first half and was down 75% in the second quarter, when occupancy at comparable hotels fell to 25%. Despite this challenging environment, we delivered an operating profit of $74m. Small but steady improvements in occupancy and RevPAR through the second quarter continued into July, with an expected RevPAR decline of 58%, and occupancy rising to around 45%.”

“The support we have offered owners, such as fee relief and increased payment flexibility, was well received. Together with other measures we’ve taken to preserve cash, we have maintained substantial liquidity of around $2bn. Our ongoing actions to reduce costs include plans to make around half of the $150m of savings we will achieve this year sustainable into 2021, alongside continued investment in our growth initiatives. However, with limited visibility of the pace and scale of market recovery, we are not proposing an interim dividend.”

“As has been the case in previous downturns, domestic mainstream travel is proving to be the most resilient. Our weighting in this segment, led by our industry-leading Holiday Inn Brand Family, positions us well as demand returns in our key markets. In the US, our mainstream estate of almost 3,500 hotels is seeing lower levels of RevPAR decline than the industry, and is operating at occupancy levels of over 50%.”

Investor insights

Despite the seemingly downbeat the news, Intercontinental shares rallied 4.17% or 167.00p to 4,168.00p per share 11/08/20 12:30 BST. This is ahead of where the company’s consensus target price stood on Monday – which was just over 3,914.00p per share – though this may of course be adjusted given today’s rally and the company’s overall share price recovery in recent weeks. The company’s p/e ratio currently stands at 17.25.