SHAREHOLDERS could be in line for a further payout from InterContinental Hotels Group (IHG) on top of Tuesday’s bumper $1 billion (£650 million) return of cash, analysts have suggested.
The group, which owns the Crowne Plaza and Holiday Inn brands, has unveiled plans to pay $500m to investors through a special dividend and a further $500m by buying back shares.
Both mechanisms will kick in during the final three months of this year and come on top of a 31 per cent increase in the firm’s interim dividend to 21 cents on the back of profits rising by 6 per cent to $286m for the six months to 30 June.
Chief executive Richard Solomons said: “Consistent with our asset-light strategy and strong track record of returning funds to shareholders, we today announce a $1bn return of capital.
“This recognises the expected proceeds from the ongoing disposal of InterContinental New York Barclay and our commitment to maintaining an investment grade credit rating.”
However, analysts have suggested that more cash could be handed back to investors after the firm also announced plans to sell a property in London.
Wyn Ellis, an analyst at Numis Securities, noted: “The group has announced that the InterContinental Park Lane will be put on the market, making further
returns of capital highly likely.”
Investec Securities analyst James Hollins agreed, saying: “We project more cash could be returned, particularly if the 447-room InterContinental Park Lane is sold following the opening of the InterContinental Westminster in early 2013. We estimate the Park Lane hotel is valued at more than $330m.”
Hollins raised his target price on IHG to 1,850p from 1,700p on the back of the giant cash payout and retained his “buy” rating.
However, analyst Greg Johnson, at Shore Capital, said: “We reiterate our ‘sell’ stance,
although the capital return is likely to be taken favourably.
“The figure is higher than the anticipated circa $500m but is likely to reflect anticipated disposal proceeds, including the Barclay New York, which are likely to modestly dilute earnings on completion.”
News of the windfall came as IHG posted a 3 per cent rise in interim revenues to $878m, with net debt falling to $564m from $818m.
The group said “Holiday Inn continues to outperform”, particularly in the US.
But it reported a slowdown in revenue growth in Europe during the second quarter due to the “continued uncertainty in macro-economic conditions”.
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Monday 20 May 2013
Temperature: 9 C to 20 C
Wind Speed: 7 mph
Wind direction: West
Temperature: 8 C to 18 C
Wind Speed: 10 mph
Wind direction: North west