International Hotels Group PLC's (LON:IHG) shares dropped 4% in early trading on Tuesday as it revealed that no additional capital would be paid out to investors in 2018 despite reporting stronger than expected 2017 results.
The FTSE 100-listed hotel conglomerate said its full-year operating profit rose by 7% to US$759mln, up from US$707mln a year earlier, and above the US$752.1mln forecast provided by the company.
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IHG saw its revenue increase by 4% to US$1,784mln, with global revenue per available room (RevPAR) up 2.7%, with a 4% rise in the fourth quarter.
The group increased its full-year dividends by 11% to US$1.04 per share, up from US$0.94 in 2016.
The company also announced a series of new initiatives to accelerate growth and to target a return of about US$125mln in annual savings by 2020, but offered no new returns for shareholders.
Keith Barr, IHG's chief executive, said: “These initiatives are focused around redeploying and refocusing resources to leverage our scale; strengthening our loyalty programme; continuing to prioritise digital and technological innovation; enhancing our industry leading franchise proposition; strengthening our existing brands; and adding new brands where we see the greatest potential for growth.”
He added: “In order for us to capitalise on the opportunities ahead, we are undertaking a comprehensive efficiency programme to realise ~US$125mln in annual savings for reinvestment to drive growth. This builds on our ongoing work to relentlessly manage costs, which has led to significant margin growth in recent years.”
New initiatives to take time to digest
In a note to clients, analysts at Liberum Capital commented: “The main focus will be on new initiates with changes to divisional structures (Europe folds into AMEA), segmentation moves back to more simplified Mainstream, Upscale and Luxury.”
They added: “We believe this new initiatives will likely take time to digest with exceptional cash cost of $200m in achieve the efficiencies weighing on cashflows in the near term."
Liberum retained a 'hold' rating and 4,950p price target on IHG shares.
In early trading, the stock was the biggest FTSE 100 faller, down 3.8% at 4,519p.
-- Adds share price, broker comment --