Half year results:
https://www.investegate.co.uk/announcem ... rt/7681718● Strong trading: H1 RevPAR up +24% YOY; further sequential improvement vs 2019 with Q1 +6.8% and Q2 +9.9%
● Americas H1 RevPAR up +11% YOY, EMEAA +42% and Greater China +94%, reflecting the differing levels of travel restrictions that were still in place in H1 2022
● Average daily rate up +7% vs 2022, +11% vs 2019; occupancy up +9%pts vs 2022, just (1.3)%pts lower vs 2019
● Gross system growth +6.3% YOY; net system size growth of +4.8% YOY
● Opened 21.0k rooms (108 hotels) in H1, +40% more than H1 2022; global estate now at 925k rooms (6,227 hotels)
● Signed 34.2k rooms (239 hotels) in H1, +11% more than H1 2022; global pipeline now at 286k rooms (1,931 hotels), +2.9% YOY; 17.7k rooms (131 hotels) in Q2, +7% ahead of Q1 and +25% more than Q2 2022
● Fee margin of 58.8%, up +3.3%pts vs 2022 on trading recovery in EMEAA and Greater China
● Operating profit from reportable segments of $479m, +27% vs 2022; this included $5m adverse currency impact
● Reported operating profit of $584m, including $87m of System Fund profit and an $18m exceptional profit
● Net cash from operating activities of $315m (2022: $175m), with adjusted free cash flow1 of $277m (2022: $142m)
● Net debt increase of $419m since start of the year includes $372m share buybacks, $166m dividends and a $112m net foreign exchange adverse impact
● Interim dividend 48.3¢, +10% vs 2022; dividend payments in 2023 will return close to $250m to IHG's shareholders
● Trailing 12-month adjusted EBITDA1 of $996m, +23% vs 2022; net debt:adjusted EBITDA ratio of 2.3x
● Current $750m buyback programme 47% complete; share buybacks together with ordinary dividends are on track to return approximately $1.0bn to shareholders in 2023
● New midscale conversion brand launching, with strong interest from owners already expressed
and they say about the dividend:
Dividends and shareholder returns
With the improvement in profitability in the first half of 2023, our net debt:adjusted EBITDA ratio reduced to 2.28x at 30 June 2023. The Board is therefore declaring an interim dividend of 48.3¢, which represents growth of 10% on the 43.9¢ interim dividend paid in 2022.
The ex-dividend date is Thursday 31 August 2023 and the Record date is Friday 1 September 2023. The corresponding dividend amount in Pence Sterling per ordinary share will be announced on Thursday 14 September 2023, calculated based on the average of the market exchange rates for the three working days commencing 11 September 2023. The dividend will be paid on Thursday 5 October, resulting in a cash outflow of around $80m. This will result in total dividends paid to shareholders in 2023 amounting to approximately $250m.
In August 2022 the Board approved a $500m share buyback programme that commenced on 9 August 2022 and completed in January 2023. In February 2023 the Board approved a further $750m share buyback programme, to be completed during 2023. In the six months to 30 June 2023, 5.4m shares were repurchased for total consideration of $372m (including transaction costs) of which $38m relates to the completion of the 2022 programme and $334m to the 2023 programme.
and earlier they said:
Capital allocation: growing the ordinary dividend and returning surplus capital through buybacks
IHG's asset-light business model is highly cash-generative through the cycle and enables us to invest in our brands and strengthen our enterprise platform. We have a disciplined approach to capital allocation which ensures that the business is appropriately invested in, whilst looking to maintain an efficient and conservative balance sheet.
IHG's perspectives on the uses of cash generated by the business are unchanged: ensuring the business is investing to optimise growth that will drive long-term shareholder value creation, funding a sustainably growing dividend, and then returning surplus capital to shareholders, whilst targeting our leverage ratio within a range of 2.5-3.0x net debt:adjusted EBITDA to maintain an investment grade credit rating.
IHG intends for the ordinary dividend to be covered 2-2.5x by Adjusted EPS (a payout ratio of 40-50%). This is consistent with cover averaging 2.3x in the 2012-2019 period. The total dividend for 2022 was covered 2.0x by Adjusted EPS.
Ordinary dividend payments in 2023 will return close to $250m to IHG's shareholders. As announced in February, a $750m share buyback programme is returning further surplus capital. This was expected to reset leverage into our target range, and it follows on from last year's $500m programme which already reduced the total number of voting rights in the Company by 5.0%. At the 30 June 2023 balance sheet date, the current $750m programme was 47% complete with $349.5m (£280.7m) spent repurchasing 5.2 million shares at an average price of £54.44 per share; this reduced the total number of voting rights in the Company by a further 2.9% to 170.2 million up to the balance sheet date.
EPS is calculated using the weighted average number of shares (WANOS) in issue for the period which reduces accordingly to take account of the timing of shares repurchased. For the first half of 2023, the WANOS was 173.1 million shares, a 6% lower share count than the comparable period.
IHG's business model is expected to continue its strong track record of converting around 100% of adjusted earnings into free cash flow. Whilst prioritising investing in the business to optimise growth, our asset-light model is expected to provide the opportunity to routinely return additional capital to shareholders such as through rolling share buybacks, which would further enhance growth of earnings per share.