Investors check out of InterContinental Hotels despite cash return

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Investors check out of InterContinental Hotels despite cash return
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Hospitality group InterContinental Hotels Group (LON:IHG) reported that it would return $500 million to shareholders via a special dividend and share consolidation. Revenue per available room during the third quarter was flat in American markets, climbed 4.8% in China, and was up 2.5% in the rest of the world.

Chief executive Keith Barr commented: “We delivered a good third quarter performance. Our strategic focus on improving our rooms growth yielded strong results, driving net system size up 5.1% and our best performance for signings and openings in a decade. Global RevPAR grew 1.0%, with performance in the US impacted by strong prior year demand from the 2017 hurricanes.  

“[…] Reflecting this rapid implementation of our strategic initiatives and in line with our well-established strategy of returning surplus cash to shareholders, we are today announcing a $500m special dividend with share consolidation, to be paid in early 2019.

Shares in InterContinental Hotels fell by 5.01% to 4,005.90p.

Comments (1)

  • Brigstocke Lexden says:

    A share consolidation is not returning surplus cash to shareholders. It is what it says; a share consolidation whereby a smaller number of shares will have a higher price, but the market capitalisation of the company is unchanged.

    Another thing that drives me more than slightly mad is claiming that a share buyback is returning money to shareholders. It is not, it is financial engineering to make the remaining shares have a higher price. I would prefer the company to invest the money in the existing business, new business streams or pay the cash as a special dividend.

    In addition, share buybacks should only be conducted when the share price is below the net asset value per share. However, this is widely ignored as executives conduct share buybacks in order to make them look good and/or increase their bonuses.

    And do not get me started on companies borrowing money to pay for dividends and/or share buybacks…

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