UPDATE 1-IHG slides on lack of cash payout and higher costs

Tue Feb 18, 2014 5:37am EST

LONDON Feb 18 (Reuters) - Shares in InterContinental Hotels Group fell on Tuesday as a failure to announce a return of cash to shareholders and higher-than-expected costs for 2014 eclipsed a 10 percent rise in 2013 profit.

The firm, which declined to comment on future plans for cash returns, said refurbishments to hotels in Asia and the Middle East, Paris and New York would put capital expenditure at around $385 million in 2014, ahead of analyst forecasts, with the impact from hotel and room closures reducing operating profit by $9 million.

IHG's strategy of managing hotels they have sold to developers has enabled it to return around $9.6 billion to shareholders in 10 years, and some analysts had expected more to come following the $240 million sale of IHG's stake in its New York Barclay hotel.

Shares in IHG, home to brands such as Crowne Plaza, Holiday Inn, and InterContinental, slipped 4.3 percent to 1958 pence on Tuesday, as analyst expectations for further cash returns failed to materialise, taking the shine off a rise in pretax profit to $600 million.

"Fourth quarter trading and full year results were positive, although 2014 is shaping up as a high capex year," Investec analyst James Hollins said in a note, adding the higher investment could be a potential delay to further cash returns.

Alongside its results IHG, which competes with the likes of Accor, Marriott and Starwood, said it had sold its Mark Hopkins hotel in San Francisco for $120 million, taking total gross disposal proceeds for 2013 to $830 million.

The group posted 2013 revenue up 3.7 percent to $1.9 billion, and said global revenue per available room (RevPAR), a key industry measure, rose 3.8 percent for the year, helped by solid trading in the United States, where hoteliers are benefiting from improving demand and lower than average growth in new rooms.

Trading strengthened across the group in its fourth quarter, remaining solid in Asia and the Middle East, and in the United States, which accounts for roughly two-thirds of IHG's operating profit. Europe posted a sharp increase in RevPAR from 0.7 percent in the first nine months to 4.9 percent in the last quarter.

There was also an improvement in Greater China, where almost a third of IHG's expansion pipeline is located, with the firm shrugging off slower macroeconomic conditions.

"Looking into 2014, although economic conditions in some markets remain uncertain, forward bookings data is encouraging and we are confident that we will deliver another year of growth," Chief Executive Richard Solomons said in a statement.

IHG raised its total dividend per share by 9 percent to 70 cents.