InterContinental Earnings Decline on Lower Revenue

InterContinental Hotels Group Plc, Europe’s second-largest publicly traded hotel operator, said first-half profit declined 8 percent as the company generated less revenue in the Americas region. The shares fell to the lowest in three months.

Operating profit before exceptional items and tax fell to $310 million from $338 million a year earlier, the Denham, England-based company said in a statement today. That beat $307 million, the average of 10 analyst estimates compiled by Bloomberg. Revenue declined by 3 percent to $908 million.

Marcato Capital Management LP, a hedge fund that owns about 4 percent of InterContinental, yesterday said it hired Houlihan Lokey to conduct a strategic review of the company to find ways to increase shareholder value. The announcement followed a May report by Sky News that the company had spurned an offer that valued it at about 6 billion pounds ($10 billion). InterContinental declined to comment on the bid speculation or the strategic review.

“The U.S. lodging industry continues to perform strongly, but we would anticipate only marginal movements in consensus EPS estimates,” Numis Securities Ltd. analysts led by Wyn Ellis said in a note today. “In the absence of material M&A activity, we consider the shares to be reasonably valued.” Numis cut its rating on the stock today to hold from buy.

InterContinental was down 3.3 percent to 2,288 pence at the 5:30 p.m. close of trading in London, the lowest since May 1. The shares have gained about 5 percent this year.

Higher Revpar

Revenue per available room, an industry measure of occupancy and rates known as revpar, increased 5.8 percent globally and 6.7 percent in the Americas. Revenue in the Americas, which accounts for about half of the total, dropped 5 percent to $435 million.

“Whilst several of our key markets continue to experience some political or economic uncertainty, we are encouraged by current trading trends,” Chief Executive Officer Richard Solomons said in the statement.

InterContinental plans to pay a dividend of 25 cents a share for the first half, up from 23 cents a year earlier. The company has a market value of 5.4 billion pounds. Accor SA, its biggest European competitor, is valued at 8.1 billion euros ($10.8 billion).

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