Shares in Intercontinental Hotels Group (IHG) were flat despite the firm announcing a $950 million buyback alongside its FY25 results. The group owns the Crowne Plaza, Holiday Inn and Intercontinental chains, with revenue heavily weighted to the Americas.
| Share price: $144.60 (unch) | PE: 27x |
| Market cap: $21.8bn | Yield: 1.3% |
Weak underlying growth
For FY25, IHG posted a 7% rise in hotel revenue to $2.5 billion, slightly ahead of the $2.45 billion consensus. However, most of the gain was due to a 4.7% increase in new rooms, as global RevPAR (revenue per available room) increased just 1.5%.
Average room prices across the group were up 0.8%, while occupancy was up just 0.5%. Meanwhile, fee income increased 7%, which lifted the group operating margin at no extra cost.
As a result, adjusted operating profit rose 13% to $1.26 billion, in line with forecasts. Adjusted EPS rose 16% to $5.01, which was 2c ahead of the consensus.
Notwithstanding, the group announced a new $950 million share buyback which together with dividends means a $1.2 billion payout for 2026. It also said it would target compound EPS growth of 12% to 15% ‘over the medium to long term’.
These are far from blowout results from IHG and but for the buyback we suspect the shares would be down. RevPAR was anaemic, and hotel revenue only increased due to the opening of 65,000 new rooms across 443 hotels.
Interestingly, net debt is up by $550 million, mainly due to last year’s $1.1 billion of buybacks and dividends. In other words, the company is borrowing to return capital to shareholders as it isn’t generating enough cash flow.
With the shares at all-time highs and inbound tourism into the US in 2026 in question, we would avoid. Walt Disney (DIS) has already warned about foreign visitor numbers to its parks, and World Cup tickets aren’t selling.
In investing, you make money when you buy not when you sell, and IHG shares currently offer zero safety margin.
Read the press release here: https://www.ihgplc.com/en/investors
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