IHG maintains dividend as profits slump 38%

InterContinental Hotels Group (IHG), the world's biggest hotel company by
number of rooms, today reported a 38 per cent slump in first-half profits
but claimed that it was outperforming the competition and winning market
share.

The group, which owns such brands as Holiday Inn, Crowne Plaza and Indigo,
said that although there was still "poor visibility" on forward
bookings, it had seen no further deterioration in demand and had seen a jump
in leisure business in July.

Asked whether the bottom of the market had been reached, Richard Solomons,
chief financial officer and head of commercial development, said it was "too
early to say".

Mr Solomons said that while weekend leisure bookings had perked up, midweek
corporate business remained tough, particularly on rate. The test would be
September and October, the key months for the corporate market.

IHG, which has a total of more than 4,300 hotels with almost 630,000 rooms,
reported a fall in adjusted operating profits from $291 milllion (£177
million) to $179 million in the six months to the end of June, on turnover
down by a quarter to $726 million.

Pre-tax profits for the period fell from $236 million to $151 million,
although the company surprised some analysts by maintaining the interim
dividend at 12.2 cents.

The group also upped the ante on cost savings, forecasting that regional and
central costs would be $80 million lower than 2008, up from the previous
guidance of $70 million.

This included $40 million of "sustainable savings", $20 million of
currency benefit and $20 million of one-off items. Since October, the group
has cut about 300 corporate roles and several hundred mor at the hotels it
owns and manages.

IHG, which consists mostly of franchises and management contracts, added a net
117 hotels with almost 27,000 rooms in the first half. It opened 229 hotels
and removed 112 that failed to meet brand standards and is on track to open
400 in the full year.

It said that it expected to open another 25,000 rooms in the second half of
the year.

Despite the impact of the credit crunch on the ability of developers to fund
new projects, the group still signed a further 159 hotels with about 23,000
rooms, taking the total pipeline to 1,599 hotels with 226,000 rooms.

Andy Cosslett, IHG's chief executive, said: “Trading was very challenging
throughout the first half of the year and we expect the remainder of 2009 to
be tough."

He added: “The continued out performance of our brands around the world is
encouraging, as is our signings pace which, despite the continued scarcity
of financing for developers, is still averaging around one deal a day. "

Revenue per available room (revpar), the key industry measure, fell by 16.2
per cent in the first six months, ahead of market forecasts for a fall of
18-20 per cent.

In the United States, revpar fell by 15.8 per cent after a second-quarter
decline of 18 per cent, although in July the fall narrowed to 14.2 per cent.

The group's management contract busines in the US dipped into the red in the
period due to the minimum guarantee in the agreement with Hospitality
Properties Trust, one of its biggest hotel owners with 130 hotels.

The group's Europe, Middle East and Africa region was down 16.4 per cent after
a second-quarter slump of 20.3 per cent, although again July saw an
improvement as revpar fell by 15.1 per cent. The UK was among the more
resilient countries, with revpar down 10.7 per cent.

Revpar in Asia Pacific was down 17.9 per cent in the first half, widening to
19.3 per cent in the second quarter. The weakest market was China, where IHG
has pushed through ambitious expansion plans, as new supply came on stream.

The group reported exceptionals of $201 million, of which $162 million was a
non-cash impairment charge "reflecting the poorer trading environment
in 2009" .

Peter Gee, partner in the hotels and leisure team at King Sturge, the property
consultants, said that while IHG's results compared very favourably with
those announced by its principal competitors, it needed to address the issue
of a slowing pipeline of new rooms.

"In order for IHG and other hotel groups to maintain their pipelines it
will be essential that the groups commit financial resources to development
rather than relying wholly on management contracts and franchising."

Shares of IHG were unchanged at 758p in mid-morning trading.