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Intercontinental Hotels sees RevPAR growth ease in China

Net debt of $US1,802mln (including the US$233mln finance lease on InterContinental Boston) narrowed by US$49mln from the end of 2017
Hotel tower
RevPAR growth in China moderated to 9.3% in the second quarter from 11% in the first

Intercontinental Hotels Group PLC (LON:IHG) found the market hard to please on Tuesday with a solid set of half-year results.

Shares in the global hotels giant shed 64p at 4,685p in a moderately firmer market despite the company revealing that revenue per available room (RevPAR) in the first half of the year was up 3.7% year-on-year. UBS had predicted RevPAR growth of 3.6%.

READ: Intercontinental Hotels upbeat after strong first quarter; shares edge higher

RevPAR in the Americas was up 3.2%, although the US improvement was lower at 2.7%, while in Europe, the Middle East, Asia and Africa (EMEAA) RevPAR grew 3%. Growth in China put both regions in the shade, however, with a rise of 10% year-on-year but second-quarter growth of 9.3% was a come-down from the first-quarter growth rate of 11%.

Group revenue rose 7.6% to US$2.11bn from US$1.96bn in the first half of 2017, slightly ahead of UBS’s forecast of US$2.06bn.

Revenue from the group’s reportable segments, which excludes system fund results, hotel cost reimbursements and exceptional items, was up 4% on an underlying basis to US$875mln from US$838mln the year before.

Operating profit was practically unchanged at US$394mln from US$395mln the year before and below the US$411mln UBS had predicted.

Profit before tax fell 15.1% to US$303mln from US357mln the year before but adjusted earnings per share rose 25% to 142.1 US cents from 113.8 US cents the previous year.

The interim dividend has been hiked 10% to 36.3 US cents from 33 US cents.

"We've had a strong first half, delivering our best signings performance for a decade,” said Keith Barr, the chief executive officer of IHG.

“Each of our regions continue to deliver strong momentum. This is led by Greater China, where double-digit growth in both RevPAR and net system size, as well as record signings, reflects the ongoing benefits of our long-term strategic focus on this important market. Demand for our unique Chinese owner proposition "Franchise Plus" continues to be excellent and we now have more than 100 Holiday Inn Express hotels for this model either in the pipeline or open,” Barr said.

The term signings refers to hotels agreeing to operate under the group’s brands.

“The fundamentals for our industry are strong, we are confident in the outlook for the balance of the year and in our ability to deliver industry-leading net rooms growth over the medium term," Barr said.

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