Interim Results Presentation 28 August 2003. Brian Wallace Deputy Group Chief Executive and Group...

Interim Results Presentation28 August 2003

Brian WallaceDeputy Group Chief Executive

and Group Finance Director

Hilton Group plc - Summary of Performance

Hotels 56.1 97.8 (42.6)%

Worldwide Betting 101.8 76.5 33.1%

Central costs and income (6.6) (6.6)

Operating profit (1) 151.3 167.7 (9.8)%

Interest (40.8) (37.7) (8.2)%

Profit before tax (1) 110.5 130.0 (15.0)%

Effective tax rate (1) 22.0% 22.0%

EBITDA (1) 220.0 237.7 (7.4)%

EPS 5.5p 6.4p (14.1)%

Hotels 56.1 97.8 (42.6)%

Worldwide Betting 101.8 76.5 33.1%

Central costs and income (6.6) (6.6)

Operating profit (1) 151.3 167.7 (9.8)%

Interest (40.8) (37.7) (8.2)%

Profit before tax (1) 110.5 130.0 (15.0)%

Effective tax rate (1) 22.0% 22.0%

EBITDA (1) 220.0 237.7 (7.4)%

EPS 5.5p 6.4p (14.1)%

6 months to 30 June 2003

£m

6 months to 30 June 2003

£m

6 months to30 June 2002

£m

6 months to30 June 2002

£mVariance

B(W)Variance

B(W)

(1) Before goodwill amortisation and exceptional items

Hotels - Like for Like Profit

Reported profit (1) 56.1 97.8 (42.6)%

Sale and leaseback rent 11.6 -

Sale and leaseback associate (3.7) -

Closed for refurbishment 1.5 (1.9)

Disposals / new openings 3.2 1.1

Foreign exchange (2.8) -

Like for like profit (1) 65.9 97.0 (32.1)%

Reported profit (1) 56.1 97.8 (42.6)%

Sale and leaseback rent 11.6 -

Sale and leaseback associate (3.7) -

Closed for refurbishment 1.5 (1.9)

Disposals / new openings 3.2 1.1

Foreign exchange (2.8) -

Like for like profit (1) 65.9 97.0 (32.1)%

2003£m

2003£m

%change

%change

2002£m

2002£m


Hotels Worldwide Occupancy, Rate and RevPAR Performance vs 2002

Like for Like Hotels, Constant Currencies

Including ScandicMarch / April have been combined to avoid the distortion caused by the timing of Easter

(9.7)%(9.0)%

(4.8)%

3.2%

(3.6)%

3.3%

(12)%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

Jan Feb Mar/Apr May June July

Occupancy % pts growth

Rate growth

RevPAR growth

Worldwide RevPAR by Ownership Type

(6.6)%

0.7%

(7.0)%(8)%

(7)%

(6)%

(5)%

(4)%

(3)%

(2)%

(1)%

0%

1%

2%

Owned & Fixed lease Contingent lease Management contract

Like for Like Hotels, Constant Currencies

RevPAR growth 2003 vs 2002

Hotels - Cost Management

Like for Like, Constant Currencies

(1) Before exceptional items and goodwill amortisation

Revenue movement (41.2) 42.9 (84.1)

GOP movement (1) (44.5) 25.2 (69.7)

Incremental conversion (8.0)% 58.7% 17.1%

Rental & Owners return 18.8Depreciation / FF&E 3.0Insurance (1.8)Other (6.6)

Operating profit decline (1) (31.1)

Revenue movement (41.2) 42.9 (84.1)

GOP movement (1) (44.5) 25.2 (69.7)

Incremental conversion (8.0)% 58.7% 17.1%

Rental & Owners return 18.8Depreciation / FF&E 3.0Insurance (1.8)Other (6.6)

Operating profit decline (1) (31.1)

Total£m

Total£m

Increasing

revenue£m

Increasing

revenue£m

Declining revenue

£m

Declining revenue

£m

UK Hotels RevPAR Performance vs 2002

Like for Like Hotels

March / April have been combined to avoid the distortion caused by the timing of Easter

(30)%

(25)%

(20)%

(15)%

(10)%

(5)%

0%

5%

10%


London 5 star

London 4 star

Provinces

Total UK

Continental Europe (exc. Scandic branded) RevPAR vs 2002

(25)%

(20)%

(15)%

(10)%

(5)%

0%

5%

10%


Germany

France

Benelux

Europe



Scandic RevPAR Progression

0.9%

(5.0)% (5.1)%

0.2%

(6.8)%(5.6)%

(12)%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

8%



Rate growth

RevPAR growth

Like for Like Hotels, Constant Currencies, Scandic Like for Like Hotels, Constant Currencies, Scandic

acquiredacquired

RevPAR growth 2003 vs 2002RevPAR growth 2003 vs 2002


Scandic Performance 2003 vs 2002

Revenue 221.5 4.9 (9.2) (1.0) 4.5 - 21.7 242.4

GOP 77.1 2.2 (7.8) (2.9) 1.3 (1.2)(b) 7.3 76.0

Inc. conversion 44.9% 15.1%

Profit 16.6 1.3 (7.2) (3.0) 0.9 (1.8) 0.7 7.5

Non-recurring items (c)

(1.2)

6.3

Revenue 221.5 4.9 (9.2) (1.0) 4.5 - 21.7 242.4

GOP 77.1 2.2 (7.8) (2.9) 1.3 (1.2)(b) 7.3 76.0

Inc. conversion 44.9% 15.1%

Profit 16.6 1.3 (7.2) (3.0) 0.9 (1.8) 0.7 7.5

Non-recurring items (c)

(1.2)

6.3

Like for like revenue

gainers (a)

£m

Like for like revenue

gainers (a)

£m

(a) At constant currencies

(b) Support office costs not allocated to individual hotels

(c) 2002 one-off credits

Re-brands (a)

£m

Re-brands (a)

£m

New opened / closed

(a)

£m

New opened / closed

(a)

£m

Marketing &

supportcosts (a)

£m

Marketing &

supportcosts (a)

£m

2002 Actual

£m

2002 Actual

£m

2003Actual

£m

2003Actual

£m

Like for likerevenue losers (a)

£m

Like for likerevenue losers (a)

£mF.x.£mF.x.£m

Worldwide Betting

UK Retail 274.6 237.0 83.1 58.5

Ireland & Belgium 33.4 30.9 5.5 5.6

Telephone Betting - excluding high rollers 14.9 14.0 5.0 3.9 - high rollers (1.6) 1.0 (1.2) 0.8

13.3 15.0 3.8 4.7

eGaming 30.8 26.8 6.2 5.1

Vernons 10.5 10.2 3.2 2.6

Worldwide Betting 362.6 319.9 101.8 76.5

UK Retail 274.6 237.0 83.1 58.5

Ireland & Belgium 33.4 30.9 5.5 5.6

Telephone Betting - excluding high rollers 14.9 14.0 5.0 3.9 - high rollers (1.6) 1.0 (1.2) 0.8

13.3 15.0 3.8 4.7

eGaming 30.8 26.8 6.2 5.1

Vernons 10.5 10.2 3.2 2.6

Worldwide Betting 362.6 319.9 101.8 76.5

2003£m

2003£m

2002£m

2002£m

2003£m

2003£m

2002£m

2002£m

Operating Profit (1)

Operating Profit (1)

Gross WinGross Win


UK Retail

2003£m

2003£m

2002£m

2002£m

Gross win (1) 274.6 237.0 15.9%

Duty / Gross profits tax (40.2) (36.5)

Other costs (151.3) (142.0)

Operating profit 83.1 58.5 42.1%

Staff costs per slip 31.72p 29.56p (7.3)%

Stake per slip (2) £8.24 £7.48 10.2%

Gross win (1) 274.6 237.0 15.9%


Other costs (151.3) (142.0)


Staff costs per slip 31.72p 29.56p (7.3)%

Stake per slip (2) £8.24 £7.48 10.2%

Better (worse)%

Better (worse)%

(1) Gross win is before duty / gross profits tax are deducted

(2) Excluding machines

Cost Conversion

UK Retail 72.6% 26.4% 54.0% 39.8%

Worldwide Betting 60.4% 31.7% 51.9% 41.6%

UK Retail 72.6% 26.4% 54.0% 39.8%

Worldwide Betting 60.4% 31.7% 51.9% 41.6%

2003First Half

2003First Half

Conversion of Gross Profit Growth to Operating Profit

2002First Half

2002First Half

2002Second

Half

2002Second

Half

2002Full Year

2002Full Year

Telephone Betting (excluding high rollers)

2003£m

2003£m

2002£m

2002£m

Gross win (1) 14.9 14.0 6.4%


Other costs (7.7) (8.0)


Average stake per call £77.75 £83.26 (6.6)%

Salary cost per call 67.2p 71.3p 5.8%

No. of calls (000’s) 3,060 2,26435.2%

Active customers (000’s) (2) 91.9 87.7 4.8%

Gross win (1) 14.9 14.0 6.4%




Average stake per call £77.75 £83.26 (6.6)%

Salary cost per call 67.2p 71.3p 5.8%

No. of calls (000’s) 3,060 2,26435.2%

Active customers (000’s) (2) 91.9 87.7 4.8%

Better (worse)%

Better (worse)%

(1) Gross win is before duty / gross profits tax are deducted

(2) Active customers are those who placed a bet during the period

eGaming

Gross win (1) 30.8 26.8 14.9%




Active customers (000’s) (2)

Sportsbook 150.7 130.2 15.7%

Casino 36.4 28.1 29.5%

On-line registrations (000’s) 153.2 181.5 (15.6)%

Gross win (1) 30.8 26.8 14.9%




Active customers (000’s) (2)

Sportsbook 150.7 130.2 15.7%

Casino 36.4 28.1 29.5%

On-line registrations (000’s) 153.2 181.5 (15.6)%

2003£m

2003£m

2002£m

2002£m

(1) Gross win is before duty / gross profits tax are deducted(2) Active customers are those who placed a bet during the period

Better (worse)%

Better (worse)%

eGaming

Gross Win by Region

UK Far East Europe Other

20032003 20022002

9%

18% 2%

71%

67%

23%

8% 2%

Hilton Group plc - Cash Flow

Cash inflow from operating activities 226.5 211.8Interest, tax and dividends paid (155.9) (132.2)

Free cash flow 70.6 79.6

Capital expenditure (101.8) (85.2)Free cash flow after capex (31.2) (5.6)Proceeds from asset sales 0.8 7.7Acquisitions / disposals - 3.5

(30.4) 5.6Exchange and other movements (1) (87.9) (43.6)

Net borrowings movement (118.3) (38.0)

Opening net borrowings (1,164.8) (1,473.9)

Closing net borrowings (1,283.1) (1,511.9)

Cash inflow from operating activities 226.5 211.8Interest, tax and dividends paid (155.9) (132.2)

Free cash flow 70.6 79.6

Capital expenditure (101.8) (85.2)Free cash flow after capex (31.2) (5.6)Proceeds from asset sales 0.8 7.7Acquisitions / disposals - 3.5

(30.4) 5.6Exchange and other movements (1) (87.9) (43.6)

Net borrowings movement (118.3) (38.0)

Opening net borrowings (1,164.8) (1,473.9)

Closing net borrowings (1,283.1) (1,511.9)

2003£m

2003£m

2002£m

2002£m

(1) Includes £88.5m adverse exchange (2002: £48.6m adverse exchange),

intangible additions £2.1m (2002: £0.2m) and dividends from associates £2.9m (2002: £0.3m)

Hilton Group plc - Analysis of 2003 Capital Expenditure

Acquisition linked development: Luxembourg (hotel acquisition) 15.8 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 9.0 Dusseldorf (refurb) 4.7

42.4Other 31.9Total Hotels 74.3Total LivingWell 1.5

75.8

Acquisition linked development: Luxembourg (hotel acquisition) 15.8 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 9.0 Dusseldorf (refurb) 4.7

42.4Other 31.9Total Hotels 74.3Total LivingWell 1.5

75.8

Shop transmission system & TVs 9.6Development 7.0Other (including EPOS £1.0m) 5.9eGaming / Telephone betting 3.5

Total Worldwide Betting 26.0101.8

Shop transmission system & TVs 9.6Development 7.0Other (including EPOS £1.0m) 5.9eGaming / Telephone betting 3.5

Total Worldwide Betting 26.0101.8

HotelsHotels

Worldwide BettingWorldwide Betting

£m£m

Total GroupTotal Group

David Michels Group Chief Executive

July / August Trading

• Hotels UK - Improving Europe - Weak Middle East - Steady progress Asia Pacific - Improving Americas - Mixed performance; Caribbean

stronger

• Betting - Excluding FOBTs underlying business growing steadily

Costs

• Head office – Maintained at low levels

• Betting – Strictly controlled with good conversion ratios

• Hotels – Looking for further improvement wherever possible

Capex

Capex:Capex:

HotelsHotels 278278 144144 8888 3434 8585

BettingBetting 4040 4040 4141 2626 6161

Major property purchasesMajor property purchases(1)(1) 147147 -- 5959 4242 8989

Capital expenditureCapital expenditure 465465 184184 188188 102102 235235

Disposals - hotelsDisposals - hotels (13)(13) (355)(355) (335)(335) --

452452 (171)(171) (147)(147) 102102

Capex:Capex:

HotelsHotels 278278 144144 8888 3434 8585

BettingBetting 4040 4040 4141 2626 6161

Major property purchasesMajor property purchases(1)(1) 147147 -- 5959 4242 8989

Capital expenditureCapital expenditure 465465 184184 188188 102102 235235

Disposals - hotelsDisposals - hotels (13)(13) (355)(355) (335)(335) --

452452 (171)(171) (147)(147) 102102

2000£m

2000£m

2001£m

2001£m

2002£m

2002£m

H12003£m

H12003£m

FYF2003£m

FYF2003£m

(1) Including acquisition linked development

Scandic

• Operating environment remains tough particularly in Sweden

• Rebranding programme on hold

• Performing better than the competition

Franchising

• Scandic to be franchised in Northern Europe

• Launch on 1 January, 2004

• Franchising of Hilton brand progressing

The Key Issues

• FOBTs – What next?

• Betting Exchanges – A level playing field?

• Hotel trading – Visibility remains poor

FOBTs

• Popular innovation following the removal of customer tax

• Judicial declaration expected Q1 2004

Betting Exchanges

“We are not against betting exchanges, we are against an uneven playing field”

Outlook

• Hotels - Will recover. Time and pace of recovery still uncertain

• Betting - Maintain steady growth in the underlying business

Interim Dividend

“Maintained at last year’s level reflecting confidence in the brands and their

future prospects”

3.4 pence per share3.4 pence per share

Appendices

No. of hotels 69 48 152 117 - 386

No. of rooms 17,406 10,016 33,271 36,740 - 97,433

Turnover 261.9 131.7 378.9 472.7 25.3 1,270.5

Gross operating profit 86.6 50.8 137.3 163.2 9.8 447.7

Less:

Rental & owners return (1.8) (35.3) (82.2) (150.7) (1.8) (271.8)

Depreciation (25.4) (11.6) (14.9) - (2.4) (54.3)

Other costs / income (24.5) (4.5) (26.2) - (2.3) (57.5)

2003 Profit 34.9 (0.6) 14.0 12.5 3.3 64.1

2002 Profit 58.9 8.4 17.7 18.7 2.1 105.8

Hotels - First Half Analysis by Contract Type

Fixed leaseFixed leaseOwnedOwned

Contingent lease

Contingent lease Manage

dManage

dLivingWellLivingWell TotalTotal£m£m

RevPAR Change Geographically by Ownership Type vs 2002

Owned & fixed lease

Owned & fixed lease

Contingent leaseContingent lease ManagedManaged

Like for Like, Constant CurrenciesLike for Like, Constant Currencies

UK (5.2)% (5.3)% (9.4)%

Europe & Africa (8.8)% 0.7% (7.0)%

Middle East & Asia Pacific 19.6% 11.3% (9.4)%

Americas (11.6)% 29.1% 7.1%

Total (6.6)% 0.7% (7.0)%

UK (5.2)% (5.3)% (9.4)%

Europe & Africa (8.8)% 0.7% (7.0)%

Middle East & Asia Pacific 19.6% 11.3% (9.4)%

Americas (11.6)% 29.1% 7.1%

Total (6.6)% 0.7% (7.0)%

Hilton vs London Market

Cumulative Year to Date RevPAR Premium

Market Source: PKF Hotel Consultancy Services

£50

£55

£60

£65

£70

Jan Feb Mar Apr May June

Rev

PA

R

0%

5%

10%

15%

20%

25%

Rev

PA

R P

rem

ium

Hilton RevPAR Premium 2003 Hilton RevPAR 2003 Market RevPAR 2003

Hilton vs Provincial UK Market

Cumulative Year to Cumulative Year to Date RevPAR Premium RevPAR Premium

Market Source: PKF Hotel Consultancy Services

£30

£35

£40

£45

£50

£55

Jan Feb Mar Apr May June

Rev

PA

R

0%

5%

10%

15%

20%

25%

Rev

PA

R P

rem

ium

Hilton RevPAR Premium 2003 Hilton RevPAR 2003 Market RevPAR 2003

Resort Hotels, Occupancy, Rate and RevPAR Performance vs 2002

(3.6)%

1.2%

(2.6)%

20.0%

10.6%

22.5%

(10)%

(5)%

0%

5%

10%

15%

20%

25%



Rate growth

RevPAR growth



Worldwide Betting - Revenue

UK Retail (1) 2,562.2 1,231.7 108.0%

Ireland & Belgium 147.3 121.6 21.1%

Telephone Betting 240.7 193.8 24.2%

eGaming 215.1 192.3 11.9%

Vernons 15.0 15.1 (0.7)%

Worldwide Betting 3,180.3 1,754.5 81.3%

UK Retail (1) 2,562.2 1,231.7 108.0%

Ireland & Belgium 147.3 121.6 21.1%

Telephone Betting 240.7 193.8 24.2%

eGaming 215.1 192.3 11.9%

Vernons 15.0 15.1 (0.7)%

Worldwide Betting 3,180.3 1,754.5 81.3%

2003£m

2003£m

2002£m

2002£m

Growth%

Growth%

(1) Includes FOBT turnover, year on year increase £1,160.6m.

eGaming Gross Win

30.8

26.626.8

15.9

10.4

0

5

10

15

20

25

30

35

First half 2001 Second half 2001 First half 2002 Second half 2002 First half 2003

£m

World cup

Hong Kong business

Hotels 73.7 56.2 108.4238.3

Betting & Gaming 36.4 - - 36.4

Property 6.2 - - 6.2

Total 116.3 56.2 108.4 280.9

• Also c. £14m other operating lease commitments

Hotels 73.7 56.2 108.4238.3

Betting & Gaming 36.4 - - 36.4

Property 6.2 - - 6.2

Total 116.3 56.2 108.4 280.9

• Also c. £14m other operating lease commitments

Breakdown of Lease Commitments

Fixed lease£m

Fixed lease£m

Minimum guarantee

£m

Minimum guarantee

£m

Contingentlease£m

Contingentlease£m

Total£m

Total£m

Forecast land and buildings full year lease commitments for 2003

Forecast land and buildings full year lease commitments for 2003

Forecast contingent commitments based on 2003 forecast results

Interim Results Presentation 28 August 2003. Brian Wallace Deputy Group Chief Executive and Group...

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