preliminary results 24 february 2005
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Preliminary Results24 February 2005
Sir Ian RobinsonChairman
Brian WallaceDeputy Group Chief Executive and Group Finance Director
4
Hilton Group plc - Summary of Performance
(1) Before goodwill amortisation and exceptional items
2004£m
2003£m
VarianceB(W)
Hotels 171.3 146.5 16.9%
Betting 273.4 214.1 27.7%
Central costs and income (14.5) (13.6)
Operating profit (1) 430.2 347.0 24.0%
Interest (47.1) (74.6)
Profit before tax (1) 383.1 272.4 40.6%
Effective tax rate (1) 15.5% 22.0%
EBITDA (1) 561.9 485.3 15.8%
EPS (1) 20.4p 13.4p 52.2%
Net Debt 971.9 1,147.7
Year to 31 December
5
Hotels - Like for Like Profit
2004£m
2003£m
VarianceB(W)
Reported profit (1) 171.3 146.5 16.9%
Disposal of Pandox - (5.9)
Closed for refurbishment (0.5) 2.5
Disposals / new openings (7.7) (2.4)
Middle East litigation costs 2.4 -
Foreign exchange 3.9 -
Like for like profit (1) 169.4 140.7 20.4%
Year to 31 December
(1) Before goodwill amortisation and exceptional items
6
Hotels Worldwide Revpar 2004 vs 2003
Like for Like Hotels, Constant Currencies
12.9%12.7%
18.7%
7.8%
11.7%
4.2%
11.2%
(3.1)%
3.6% 4.9%2.5%
5.2%7.6%
(10)%
(5)%
0%
5%
10%
15%
20%
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan
Occupancy % pts growth
Rate growth
Revpar growth
7
Worldwide Revpar by Ownership Type
4.8%
8.5%
14.6%
6.6%5.5%
3.8%
5.7%6.9%
8.6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Owned & Fixed lease Contingent lease Management contract
Like for Like Hotels, Constant Currencies
H1 H2 FY H1 H2 FY H1 H2 FY
Revpar Growth 2004 vs 2003 - First Half, Second Half, Full Year
8
Hotels - Cost Management
Like for Like, Constant Currencies Total£m
Increasing revenue
£m
Declining revenue
£mFull Year
Revenue movement 144.8 199.8 (55.0)
GOP Movement (1) 73.6 111.0 (37.4)
Incremental conversion 50.8% 55.6% 32.0%
Rental & Owners return (35.3)Property taxes / rates (3.7)Insurance (2.0)Other (3.9)
Operating profit increase (1) 28.7
(1) Before goodwill amortisation and exceptional items
9
(10)%
0%
10%
20%
30%
40%
50%
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan
London
Provinces
Total UK
UK Hotels Revpar 2004 vs 2003
Like for Like Hotels
10
Europe (Hilton Brand) - Revpar by Country
Like for Like, Constant Currencies, First Half, Second Half, Full Year
6.2%
(3.6)%
0.3%
6.6%
(1.9)%
7.9%
6.4%
(2.7)%
4.0%
(6)%
(4)%
(2)%
0%
2%
4%
6%
8%
10%
Germany France Benelux
H1 H2 FY
H1 H2 FY
H1 H2 FY
11
(5.5)%
7.1%
(2.0)%(4.7)%
0.1% 2.9%
8.5%
0.0%
9.2%
0.4%
6.0%7.9%
10.2%
(10)%
(8)%
(6)%(4)%
(2)%
0%
2%
4%
6%8%
10%
12%
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan
Occupancy % pts growth
Rate growth
Revpar growth
Scandic Revpar 2004 vs 2003
Like for Like Hotels, Constant Currencies, Scandic Acquired
12
(a) At constant currencies
(b) Includes support office costs not allocated to individual hotels and foreign exchange
(c) 2003 excludes £5.9m of Pandox associate profit, the investment was sold in December 2003
2004Actual
£mOther (b)
£m
Revenue 500.0 23.4 (6.0) (2.3) 515.1
GOP 162.0 13.2 (5.1) 0.5 170.6Inc. conversion 54.6% 15.0%
Costs (148.1) (4.3) 1.9 (2.5) (153.0)
Profit (c) 13.9 8.9 (3.2) (2.0) 17.6
Like for like revenue
gainers (a)
£m
2003Actual
£m
Like for like revenue losers (a)
£mFull year
Scandic Performance 2004 vs 2003 (excluding Pandox)
13
Betting and Gaming
UK Retail 652.5 575.1 215.3 173.1
Ireland & Belgium 69.0 67.6 13.2 11.5
Telephone Betting - excluding high rollers 39.8 30.5 13.6 10.6 - high rollers 6.3 (1.6) 4.2 (1.2)
46.1 28.9 17.8 9.4
eGaming 89.3 63.7 21.3 14.2
Vernons 20.2 20.2 5.8 5.9
Betting and Gaming 877.1 755.5 273.4 214.1
Gross Win2004 2003£m £m
Operating Profit(1)
2004 2003£m £mYear to 31 December
(1) Before goodwill amortisation and exceptional items
14
UK Retail
(1) Excluding machines
2004£m
2003£m
VarianceB(W)
Gross win 652.5 575.1 13.5%
Duty / Gross profits tax (96.4) (84.4)
Other costs (340.8) (317.6)
Operating profit 215.3 173.1 24.4%
Staff costs per slip 36.30p 32.67p (11.1)%
Stake per slip(1) £8.47 £8.37 1.2%
Year to 31 December
15
Telephone Betting (Excluding High Rollers)
(1) Active customers are those who placed a bet during the period
2004£m
2003£m
VarianceB(W)
Gross win 39.8 30.5 30.5%
Gross profits tax (5.9) (4.6)
Other costs (20.3) (15.3)
Operating profit 13.6 10.6 28.3%
Salary cost per call 69.2p 67.8p (2.1)%
No. of calls (000’s) 6,659 5,995 11.1%
Active customers (000’s) (1) 125.2 117.0 7.0%
Year to 31 December
16
eGaming
2004£m
2003£m
VarianceB(W)
Gross win 89.3 63.7 40.2%
Gross profits tax (4.9) (3.2)
Other costs (63.1) (46.3)
Operating profit 21.3 14.2 50.0%
Year to 31 December
(1) Active customers are those who placed a bet during the period
Active customers (000’s) (1) Sportsbook 306 206 48.5% Casino 81 80 1.3% Poker 64 25 156.0%Sportsbook registrations (000’s) 357 267 33.7%
17
Hilton Group plc - Cash Flow2004£m
2003£m
Cash inflow from operating activities 546.8 501.9 Interest, tax and dividends paid (243.1) (261.5) Cash flow before capex 303.7 240.4 Capital expenditure (189.6) (189.9)Cash flow after capex 114.1 50.5 Proceeds from asset sales 38.6 20.0 Acquisitions / disposals (1) (6.4) 35.3
146.3 105.8Exchange and other movements (2) 29.5 (88.7)Net borrowings movement 175.8 17.1 Opening net borrowings (1,147.7) (1,164.8)
Closing net borrowings (971.9) (1,147.7)
Year to 31 December
(1) Includes betting shop acquisitions(2) Includes £17.8m favourable exchange (2003: £96.0m adverse)
18
HotelsAcquisition linked development 39.1Other 87.9Total Hotels 127.0LivingWell 9.0
136.0Betting and GamingDevelopment – operating assets 20.4FOBTs 9.5Other (including TVs £4.3m, Ireland £2.2m) 17.4eGaming / Telephone betting 6.3
53.6Total Group 189.6
Analysis of 2004 Capital Expenditure£m
19
UK GAAP Pro forma IFRS (2)
2004 Profit Before Tax (1) £383m £374m
2004 EPS (1) 20.4p 20.0p
2004 Net Assets £2,554m £2,388m
(1) Before goodwill amortisation and exceptional items(2) This includes the pro forma impact of IAS 32 and 39, which will not be adopted until 1 January 2005
2%
7%
2%
Impact of IFRS – Business Performance
David MichelsGroup Chief Executive
22
Five Year Record
Dividend 8.50p 8.92p 8.92p 8.92p 9.60p
Debt (£m) 1,374.3 1,473.9 1,164.8 1,147.7 971.9
EPS 14.6p 14.3p 13.4p 13.4p 20.4p
FTSE Ranking 89th 73rd 68th 59th 60th
TSR Growth 9.4% 5.2% (17.1%) 43.2% 31.8%
200320022000 2001 2004As at 31 December
23
2005 – Trading So Far
24
25
EPOS
26
New Shops
44 shops purchased since January 2004
A further 37 agreed in 2005
27
270 shops will be relocated, extended or refurbished
28
29
30
2005
9% increase in number of events
7% increase in trading hours
31
eGaming
32
Telephone Betting
33
Ladbrokes Management
Chris BellChief Executive Ladbrokes
Mike O’KaneTrading Director
Ros BarkerHuman Resources
Director
Andy ScottFinance Director
Alan RossManaging Director
Ladbrokes Ltd
John O’ReillyManaging Director
eGaming Ltd
Steve RobertsManaging Director
Vernons
Richard AmesCommercial Director
Alex KovachInternational BusinessDevelopment Director
34
Blackpool Casino
35
Betting Exchanges
36
Ian Carter
37
Historical Revpar Chart
48
49
50
51
52
53
54
£Rolling 12 months, Like for Like at Constant Currencies
38
State of the Nation
Scan
dic
Athens, GreeceOtaru, Japan
Espoo, Finland
Nagoya, Japan
Morumbi, Brazil
Offenbach, Germany
Hil
ton
Hil
ton
Scan
dic
Hil
ton
Hil
ton
39
Future Openings
• Bari, Italy (Scandic by Hilton)• Shenzhen, China• Qasr al Shaq, Saudi Arabia• Barbados, Caribbean• Santo Domingo, Dominican Republic• Cebu, Philippines• Phuket, Thailand (Conrad)• Barcelona Diagonal Mar, Spain• Dubrovnik, Croatia• Sydney, Australia• Dublin Airport, Ireland• Tokyo, Japan (Conrad)• Millennium Hilton Bangkok, Thailand• Portorosa, Sicily
2005
Mil
lenn
ium
Hil
ton
Bangkok, Thailand Sydney, Australia
Hil
ton
Hil
ton
Barbados
Hil
ton
Tokyo, Japan
32 hotels (7,866 rooms) to open in 2006 and beyond
40
Scandic Franchises
Bari, Italy
Scan
dic
by H
ilto
n
41
Conrad HotelsC
onra
d
Bangkok, Thailand
Con
rad
Con
rad
Waldorf, NY, USA
Istanbul, Turkey
Con
rad
Cairo, Egypt
Con
rad
Miami, USA
42
Hotel Property
Planning to raise £300m-£400m
43
Hilton Taba, Egypt
44
BDRC
**BDRC Survey 2004
Measure Europe*UK* Asia Pacific** Middle East**
RankRank RankRank
Prompted Awareness
Unprompted Awareness
Brand Preference
-1st Choice
-1st or 2nd Choice
Brand Usage
Brand Loyalty
Brand Ranking Index
1st
1st
1st
1st
4th/worse
1st
1st
1st 1st
2nd2nd
3rd1st
1st 2nd
2nd 3rd
2nd
1st 2nd
4th/worse
3rd 3rd
1st
1st
2nd
1st
3rd
*BDRC Survey 2003
45
2005 Capex
(1) Including acquisition linked development
(2) Excludes potential betting shop acquisitions
Capex:
Hotels 278 144 88 71 97 120
Betting 40 40 41 43 54 70
Major property purchases(1) 147 - 59 76 39 20
Capital expenditure(2) 465 184 188 190 190 210
Disposals - hotels (13) (355) (335) (9) (36)
452 (171) (147) 181 154
2000£m
2001£m
2002£m
2003£m
Forecast2005£m
2004£m
Preliminary Results24 February 2005
Appendix
48
Turnover 565.6 276.4 833.8 1,002.7 3.6 50.0 2,732.1
Gross operating profit 197.4 103.0 295.2 370.0 3.6 19.1 988.3Less: Rental & owners return (9.0) (65.5) (182.4) (332.0) - (4.0) (592.9) Depreciation (45.3) (19.4) (27.6) - - (4.5) (96.8) Other costs / income (43.4) (11.4) (41.6) - (0.9) (4.3) (101.6)
2004 Profit 99.7 6.7 43.6 38.0 2.7 6.3 197.0
2003 Profit 82.6 4.3 34.8 35.8 - 7.4 164.9
TotalManaged LivingWell
No. of hotels 64 49 154 110 26 n/a 403
No. of rooms 16,350 10,337 33,625 34,618 7,706 n/a 102,636
OwnedFixed lease
Contingent lease
£m
Franchise
Hotels – Analysis by Contract Type
49
Geographical Revpar by Ownership Type
Like for Like Hotels, Constant Currencies
Owned & fixed lease
Contingent lease Managed
UK 8.7% 5.9% 10.0%
Europe & Africa 1.6% 6.0% 1.9%
Middle East & Asia Pacific 9.1% 14.7% 10.6%
Americas 10.5% 14.0% 18.2%
Total 5.7% 6.9% 8.6%
50
Yield Premium - Hilton vs London Market
Cumulative Year to Date Revpar Premium
Market Source: PKF Hotel Consultancy ServicesMarket is 8 competitor chains - Marriott International, InterContinental, De Vere, Millennium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton
£50
£55
£60
£65
£70
£75
£80
£85
Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec
Rev
par
0%
5%
10%
15%
20%
25%
Rev
par P
rem
ium
Hilton Revpar Premium 2004 Hilton Revpar 2004 Market Revpar 2004
51
Yield Premium - Hilton vs UK Provincial Market
Cumulative Year to Date Revpar Premium
Market Source: PKF Hotel Consultancy ServicesMarket is 8 competitor chains - Marriott International, InterContinental, De Vere, Millennium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton
£35
£40
£45
£50
£55
£60
Jan Feb Mar Apr May June Jul Aug Sep Oct Nov Dec
Rev
par
0%
5%
10%
15%
20%
25%
Rev
par
Pre
miu
m
Hilton Revpar Premium 2004 Hilton Revpar 2004 Market Revpar 2004
52
Breakdown of Lease Commitments
Fixed lease£m
Minimum guarantee
£mTotal£m
Hotels 79.5 88.2 110.7 278.4
Betting 38.1 - - 38.1
Property / Centre 5.5 - - 5.5
Total 123.1 88.2 110.7 322.0
• Also circa £18m other operating lease commitments
Forecast land and buildings lease commitments for 2005
Contingent lease£m
Forecast contingent commitments are based on 2005 forecast results
53
Background• Under EU regulation, Hilton is required to report its results for 2005 under IFRS
• Key differences from UK GAAP highlighted at 2003 Prelims announcement
• Pensions and employee benefits
• Deferred tax
• Goodwill, brands and licences
• Share-based payments
• Derivatives, hedge accounting and convertible bond
• 2004 opening balance sheet and 2004 comparative information now completed and audited. This comparative information may be amended by future changes in IFRS and its interpretation
• Hilton has adopted Financial Instruments standards (IAS32 & IAS 39) from 1 January 2005
• Unaudited pro forma financial information has been prepared to illustrate the impact of IAS 32 & IAS 39 on 2004 results
International Financial Reporting Standards
54
Key Impacts
• 2004 pro forma EPS reduced by 2%
• Potential for increased volatility due to fair value of derivatives and pensions
• 2004 Net Assets reduced from £2,554m to £2,388m (pro forma)
• Cash flows unaffected
IFRS Timetable
• Detailed reconciliations from UK GAAP are available on website www.hiltongroup.com
• IFRS conference call for interested parties at 10am (UK time) on
3 March 2005
• Interim IFRS financials announced 25 August 2005
IFRS – Summary
55
• Business Combinations
• Employee Benefits
• Share-based payments
• Financial Instruments
• Property, Plant & Equipment
- no restatement prior to Transition Date (1 January 2004)
- all actuarial gains and losses recognised in equity at Transition Date
- only awards granted after 7 November 2002 have been considered
- not adopted until 1 January 2005, pro forma impact on 2004 disclosed
- no remeasurement of assets to fair value at Transition Date
IFRS – First Time Adoption Elections
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