InterContinental Advances on Share-Buyback Plan: London Mover

InterContinental Advances on Share-Buyback Plan
An employee passes a logo in the reception area of InterContinental Hotels Group Plc's headquarters in Denham. Photographer: Chris Ratcliffe/Bloomberg

InterContinental Hotels Group Plc, the world’s largest provider of hotel rooms, climbed to an all-time high after announcing a plan to return $1 billion to shareholders through a special dividend and share buyback.

The owner of the Holiday Inn chain rose 6.4 percent to 1,725 pence at the 4:30 p.m. close in London, the second-biggest gain in the FTSE 100 Index. That’s the highest price since the Denham, England-based company first sold shares to the public in 2003.

InterContinental plans to pay a one-time dividend costing $500 million in the fourth quarter and will distribute the same amount in a share buyback program starting in that period, the company said in a statement today. InterContinental raised its first-half dividend to 21 cents a share from 16 cents after operating profit excluding exceptional items climbed 6 percent to $286 million.

Rising demand in emerging markets such as the greater China region, which accounts for about 10 percent of revenue, is helping InterContinental boost profits. About 30 percent of the company’s global expansion over the next three to five years will be in the region. The Americas account for about half of InterContinental’s revenue.

InterContinental’s strategy is to return capital to shareholders by selling assets and it has paid out $8.9 billion since going public in 2003. The hotelier plans to sell the New York Barclay hotel this year and the London Park Lane in 2013.

Sale Talks

The $1 billion return to shareholders “recognizes the expected proceeds” from the sale of the New York Barclay, Chief Executive Officer Richard Solomons said in the statement. The hotelier is in exclusive talks with a prospective buyer and expects to close a deal in “coming months,” Chief Financial Officer Tom Singer said on a conference call with reporters. The shareholder payments aren’t contingent on the sale, he added.

“The return of capital to shareholders was to be expected, but the fact that they’re doing it before the sale of the Barclay is a sign of real confidence,” said Wyn Ellis, a Numis Securities analyst in London with an add rating on the stock.

First-half revenue per available room, a measure of room rates and occupancy known as revpar, rose 9.7 percent in Greater China, where InterContinental opened the world’s largest Holiday Inn in April. In the Americas, revpar increased 7.1 percent.

InterContinental has gained 73 percent in the past 12 months, the best performance in the Bloomberg Europe Lodging Index of five stocks. That increased the company’s market value to 5.03 billion pounds ($7.87 billion).

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