InterContinental Hotels has reported upbeat results but its shares have fallen back on disappointment there was no news on any cash return to shareholders.
The company, whose brands include Holiday Inn and Crowne Plaza, has been selling off unwanted hotels such as one of its trophy assets, the Barclay in New York. Alongside the results it announced another disposal, that of the Mark Hopkins hotel in San Francisco for $120m.
Overall, profits rose 10% to $600m, ahead of forecasts, and the company said it was increasingly confident about the current year after strong demand in the US and an improvement in European trading. Fourth quarter trading in China also improved despite difficult economic conditions.
But its shares have dropped 86p to £20.21, making it the biggest faller in the FTSE 100. It has raised some $830m during the year from hotel sales, and some analysts had hoped for news that part of this would be given back to shareholders. Numis said:
IHG has reported solid 2013 preliminary results. There is no new news on the further return of cash to shareholders, but a further $120m disposal has been announced. We believe that the underlying outlook remains positive, but there are uncertainties about China, and IHG faces some short term headwinds given dilution from asset disposals and planned refurbishment. We suspect that consensus forecasts may drift back a little.
Overall, the FTSE 100 has slipped back ahead of UK inflation figures which could well show a dip below the Bank of England's 2% target, with the index down 14.04 points at 6721.96. Michael Hewson, chief market analyst at CMC Markets UK, said:
If the annual inflation rate were to drop to 1.9%, and the general consensus would appear to be that it might, then market expectations of a future interest rate rise are likely to be kept on the back burner for a little while yet.
British Gas owner Centrica is also helping to drag the market lower. The company, which is under political pressure over energy prices charged to consumers, has lost 10.8p to 307.6p ahead of results on Thursday. Analysts at UBS have cut their rating from neutral to sell and their price target from 340p to 280p. UBS said:
The UK Energy Secretary's letter to Ofgem highlighting areas of energy market concern – where British Gas' gas retail margin and large market share was the primary focus – leaves Centrica facing risks from both the opposition Labour party and the coalition government. We see nothing untoward in Centrica's high gas/low electricity pricing structure, but this strategy is likely now unsustainable. We see all Centric retail margins moving to 4% to reduce political risk (cutting earnings per share by 10%-16%, all else equal). And we still see significant downside risk from political intervention: (1) Labour's tariff freeze plus a possible retail reregulation (earnings per share down a further 13%-15%), or (2) the government restricting retail market share to 20% (-5% earnings per share).
Meanwhile Deutsche Bank has lowered its target from 315p to 300p. Deutsche said:
We expect full year results on 20 February to be in line with guidance and Reuters consensus estimates. However, the bigger concern is likely to be the outlook, with all three main divisions facing headwinds. The UK competition assessment in March seems increasingly likely to call for a full Competition Commission review. Meanwhile all North Sea gas producers are facing rising cash costs, and retailers in Texas are seeing a margin squeeze. We cut 2014-16 earnings per share estimates by around 4%-9% and reduce our target price. Hold.
Elsewhere BHP Billiton has added 16p to £19.28 following a 31% surge in first half profits to $7.76bn, compared to expectations of $6.9bn.
