preliminary results presentation 26 february 2004

Preliminary Results Presentation26 February 2004

Sir Ian RobinsonChairman

Brian WallaceDeputy Group Chief Executive

and Group Finance Director

Hilton Group plc - Summary of Performance

(1) Before goodwill amortisation and exceptional items

2003£m

2002£m

VarianceB(W)

Hotels 146.5 212.1 (30.9)%

Betting 214.1 149.3 43.4%

Central costs and income (13.6) (13.3) (2.3)%

Operating profit (1) 347.0 348.1 (0.3)%

Interest (74.6) (76.7) 2.7%

Profit before tax (1) 272.4 271.4 0.4%

Effective tax rate (1) 22.0% 22.0%

EBITDA (1) 485.3 486.1 (0.2)%

EPS (1) 13.4p 13.4p 0.0%

Year to 31 December

Exceptional Items

Operating:

Impairment of assets and investments 11.3

Non-operating:

Profit on disposal of Pandox (3.2)

Losses on disposals including provisions 20.9

17.7

Total charge 29.0

Exceptionals£m

Hotels - Like for Like Profit

(1) Before goodwill amortisation and exceptional items

2003£m

2002£m

VarianceB(W)

Reported profit (1) 146.5 212.1 (30.9)%

Sale and leaseback rent 24.6 8.4

Sale and leaseback associate (6.9) (2.5)

Closed for refurbishment 2.9 (4.0)

Disposals / new openings 1.4 3.7

Foreign exchange (5.9) -

Like for like profit (1) 162.6 217.7 (25.3)%

Year to 31 December

Hotels Worldwide Revpar 2003 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)%

2.0%

(4.8)%

3.3%

(3.6)%

3.2%3.3%

1.9%3.0%

6.8%

2.1%

(12)%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

8%

Jan Feb Mar/Apr May June July Aug Sep Oct Nov Dec Jan

Occupancy % pts growth

Rate growth

RevPAR growth

Worldwide Revpar by Ownership Type

Like for Like Hotels, Constant Currencies

Revpar growth 2003 vs 2002 - first half, second half, full year

H1 H2 FY

H1 H2 FY

H1

H2

FY

(6.6)%

0.7%

(7.0)%

(5.0)%

5.6%6.7%

(5.8)%

3.2%

(0.1)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

8%

Owned & Fixed lease Contingent lease Management contract

Hotels - Cost Management (2nd half)

Like for Like, Constant Currencies

(1) Before goodwill amortisation and exceptional items

Total£m

Increasing revenue

£m

Declining revenue

£mSecond Half

Revenue movement 25.3 74.1 (48.8)

GOP Movement (1) 8.1 45.8 (37.7)

Incremental conversion 32.0% 61.8% 22.7%

Rental & Owners return (24.6)Depreciation / FF&E 2.6One off costs / credits (7.4)Accounting reallocations (2.7)

Operating profit decline (1) (24.0)

UK Hotels Revpar 2003 vs 2002

Like for Like Hotels

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

(20)%

(15)%

(10)%

(5)%

0%

5%

10%

Jan Feb Mar/Apr May June July Aug Sep Oct Nov Dec Jan

London

Provinces

Total UK

Europe (Hilton brand) - Revpar by country

Like for Like, Constant Currencies, First Half, Second Half, Full Year

H1

H2

FY H1 H2 FY H1 H2 FY

(10.7)%

(7.6)%

(11.2)%

0.4%

(14.0)%

(9.6)%

(5.3)%

(10.9)% (10.4)%

(16)%

(14)%

(12)%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

Germany France Benelux

Scandic Revpar 2003 vs 2002

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

Like for Like Hotels, Constant Currencies, Scandic Acquired

Revpar growth 2003 vs 2002

(6.1)%

(2.3)%

0.9%

(5.0)%

1.0% 1.9%

(2.8)%

(5.5)%(5.1)%

0.2%

(6.8)%(5.6)%

(12)%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

8%

Jan Feb Mar/Apr May June July Aug Sep Oct Nov Dec Jan

Occupancy % pts growth

Rate growth

RevPAR growth

Scandic Performance 2003 vs 2002

(a) At constant currencies

(b) Includes support office costs not allocated to individual hotels and foreign exchange

2003Actual

£mOther (b)

£m

Revenue 461.4 6.4 (18.3) 50.5 500.0

GOP 188.1 1.2 (18.1) 13.5 184.7

Inc. conversion 18.8% 1.1%

Profit 34.5 1.4 (14.2) (1.9) 19.8

Like for like revenue

gainers (a)

£m

2002Actual

£m

Like for like revenue losers (a)

£m

Year to 31 December

Worldwide Betting

UK Retail 575.1 460.8 173.1 113.2

Ireland & Belgium 67.6 60.8 11.5 11.2

Telephone Betting - excluding high rollers 30.5 26.6 10.6 7.4 - high rollers (1.6) 0.8 (1.2) 0.7

28.9 27.4 9.4 8.1

eGaming 63.7 53.4 14.2 11.3

Vernons 20.2 20.0 5.9 5.5

Worldwide Betting 755.5 622.4 214.1 149.3

Gross Win2003 2002£m £m

(1) Before goodwill amortisation and exceptional items

Operating Profit (1)

2003 2002£m £m

Year to 31 December

UK Retail

(1) Excluding machines

2003£m

2002£m

VarianceB(W)

Gross win 575.1 460.8 24.8%

Duty / Gross profits tax (84.4) (67.1)

Other costs (317.6) (280.5)

Operating profit 173.1 113.2 52.9%

Staff costs per slip 32.67p 30.94p 5.6%

Stake per slip (1) £8.37 £8.06 3.8%

Year to 31 December

Telephone Betting (excluding high rollers)

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

2003£m

2002£m

VarianceB(W)

Gross win 30.5 26.6 14.7%

Gross profits tax (4.6) (4.0)

Other costs (15.3) (15.2)

Operating profit 10.6 7.4 43.2%

Average stake per call £78.94 £81.92 (3.6)%

Salary cost per call 67.8p 74.0p 8.4%

No. of calls (000’s) 5,995 4,736 26.6%

Active customers (000’s) (1) 117.0 103.6 12.9%

Year to 31 December

eGaming

2003£m

2002£m

VarianceB(W)

Gross win 63.7 53.4 19.3%

Gross profits tax (3.2) (3.5)

Other costs (46.3) (38.6)

Operating profit 14.2 11.3 25.7%

Year to 31 December

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

Active customers (000’s) (1)

Sportsbook 206 168 22.6%

Casino 80 46 73.9%

Sportsbook registrations (000’s) 267 209 27.8%

Hilton Group plc - Cash Flow

2003£m

2002£m

Cash inflow from operating activities 501.9 455.7Interest, tax and dividends paid (261.5) (248.7)

Free cash flow 240.4 207.0Capital expenditure (189.9) (188.3)Free cash flow after capex 50.5 18.7Proceeds from asset sales 20.0 341.2Acquisitions / disposals 40.7 (22.1)

111.2 337.8Exchange and other movements (1) (94.1) (28.7)

Net borrowings movement 17.1 309.1Opening net borrowings (1,164.8) (1,473.9)

Closing net borrowings (1,147.7) (1,164.8)

Year to 31 December

(1) Includes £96.0m adverse exchange (2002: £28.6m adverse)

Analysis of 2003 Capital Expenditure

£mHotels Acquisition linked development: Luxembourg (hotel acquisition) 18.2 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 26.4 Dusseldorf (refurb) 18.2

75.7 Other 68.1 Total Hotels 143.8 LivingWell 3.5

147.3Worldwide Betting Shop transmission system and TVs 11.8 Development 14.6 Other (including EPOS £1.7m, terminals £1.7m, Ireland £2.4m) 10.4 eGaming / Telephone betting 5.8

42.6Total Group 189.9

Brian WallaceDeputy Group Chief Executive

and Group Finance Director

David MichelsGroup Chief Executive

Ladbrokes Trading

“Trading in the first six weeks has been good in all three areas”

Ladbrokes Shop Performance – UK & Jersey

1999 2000 2001 2002 2003

Average number of shops

PBIT £m 78.8 78.6 86.1 113.0 175.2

PBIT per shop £k 41.3 41.8 45.7 59.7 93.6

1,910 1,879 1,882 1,893 1,872

Over the counter gross win grew by 9% in 2003

UK Shops / New Competition

FOBTs – Voluntary Code of Conduct

• Max four machines/terminals per shop

• Max £500 payout per spin

• Max stake of £15 chip and £100 per spin

• Minimum betting time of 20 secondswhen betting with existing credits

• Takes effect 1 April, 2004

eGaming: Trading for the Last Four Months

Operating Profit

0

0.5

1

1.5

2

2.5

3

3.5

Oct Nov Dec Jan

£m

2002/2003 2003/2004

Poker & Games

Ladbrokescasino.com

Betting ExchangesBetting Exchanges

Telephone Betting

Resort / Entertainment Casinos

Brand

Vernons and LivingWell

• Profits up 51%

• Profits up 7%

Hotels Trading

Scandic

Franchising

Hilton Franchising

Conrad

Property

Pipeline Growth

Openings 2004 Alexandria Green Plaza

Newcastle Gateshead, EnglandPhuket, Thailand (Conrad)Hurghada Long Beach, EgyptShenzhen, ChinaMiami, USA (Conrad)Jeddah Palace, Saudi ArabiaCebu, PhilippinesBali, Indonesia (Conrad)Agra, India (Trident Hilton)Bhubaneshwar, India (Trident Hilton)Chennai, India (Trident Hilton)Cochin, India (Trident Hilton)Jaipur, India (Trident Hilton)Udaipur, India (Trident Hilton)Hilton Towers Mumbai, IndiaSanto Domingo, Dominican RepublicParis Arc de Triomphe, FranceDubrovnik, CroatiaKuala Lumpar, MalaysiaHilton Sydney, AustraliaHilton Barbados, Caribbean

Openings 2005 Valencia, Spain

Venice, ItalySharm Nabq, EgyptCasablanca Airport, MoroccoDenarau, FijiWarsaw, PolandEvian, FranceHilton Malabo, Equatorial GuineaHilton Seychelles Resort, SeychellesHilton Beirut, LebanonHilton d'Haiti, HaitiTahiti Papeete, TahitiTahiti Bora Bora, TahitiTahiti Rangiroa, TahitiZhuhai, ChinaShenyang, China

Internet / Booking Patterns

Gross Reservations through Hilton Brand websites

Iraq War Commences

SARS

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03

Hilton.com Local Language Websites

‘Our Best Rates. Guaranteed’

BDRC Survey

Prompted 89% 1st 90% 1st 95% 1st 94% 2nd

Unprompted 51% 1st 52% 1st 42% 1st 69% 2nd

1st Choice 9.8% 1st 15.2% 1st 11.5% 1st 15% 2nd

1st or 2nd Choice 17.9% 1st 25.7% 1st 21.9% 1st 28% 2nd

12.9% 4th 15.8% 4th 22% 1st 26% 2nd

74% 2nd 73% 1st 57% 7th 73% 4th

56 1st 55 1st 51.5 2nd 53 2nd

Brand Usage*

Brand Loyalty**

Brand Ranking Index***

Measure

Awareness

Brand Preference

Europe UK Asia Pacific Middle East

* Number of business travellers who have used the brand in the last 12 months** Own guests who rate the brand 1st or 2nd choice or are “happy to use”*** Composite of all BDRC’s key brand measures

Hotel Profit Breakdown 2003

50%

16%

12%

10%

8%4%

United Kingdom

Europe & Africa

Scandic (as acquired)

Middle East & AsiaPacific

The Americas

LivingWell

Preliminary Results Presentation26 February 2004

Appendices

Turnover 544.2 269.8 759.8 1,087.6 50.2 2,711.6

Gross operating profit 182.2 98.9 265.0 410.3 19.9 976.3

Less:

Rental & owners return (8.7) (65.8) (173.1) (374.5) (3.8) (625.9)

Depreciation (50.8) (22.4) (29.0) - (4.6) (106.8)

Other costs / income (40.1) (6.4) (28.1) - (4.1) (78.7)

2003 Profit 82.6 4.3 34.8 35.8 7.4 164.9

2002 Profit 110.0 23.4 54.8 32.8 4.9 225.9

Hotels - Analysis by Contract Type

TotalManaged LivingWell

No. of hotels 68 49 150 125 n/a 392

No. of rooms 17,160 10,337 32,538 38,654 n/a 98,689

OwnedFixed lease

Contingent lease

£m

Geographical RevPAR by Ownership Type

Like for Like Hotels, Constant Currencies

Owned & fixed lease

Contingent lease Managed

UK (3.1)% (3.7)% (2.7)%

Europe & Africa (8.0)% 2.1% 1.4%

Middle East & Asia Pacific 11.6% 19.1% (1.7)%

Americas (15.3)% 52.7% 7.5%

Total (5.8)% 3.2% (0.1)%

Hotels - Like for Like Profit (2nd half)

(1) Before goodwill amortisation and exceptional items

2003£m

2002£m

VarianceB(W)

Reported profit (1) 90.4 114.3 (20.9)%

Sale and leaseback rent 13.0 8.4

Sale and leaseback associate (3.2) (2.5)

Closed for refurbishment 1.4 (2.1)

Disposals / new openings (1.8) 2.6

Foreign exchange (3.1) -

Like for like profit (1) 96.7 120.7 (19.9)%

Second Half

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, Millenium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton

£50

£55

£60

£65

£70

£75

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 2003 Hilton RevPAR 2003 Market RevPAR 2003

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, Millenium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton

£35

£40

£45

£50

£55

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 2003 Hilton RevPAR 2003 Market RevPAR 2003

Worldwide Betting - Revenue

(1) Includes FOBT turnover, year on year increase £3,025.4m

2003£m

2002£m

VarianceB(W)

Year to 31 December

UK Retail (1) 6,001.2 2,755.6 117.8%

Ireland & Belgium 298.7 243.8 22.5%

Telephone Betting 476.0 393.2 21.1%

eGaming 462.3 390.3 18.4%

Vernons 28.9 29.0 (0.3)%

Worldwide Betting 7,267.1 3,811.9 90.6%

eGaming Gross Win

2002 2003

0

2

4

6

8

10

12

14

16

18

20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

£m

World cup

Hong Kong business

Breakdown of Lease Commitments

Fixed lease£m

Minimum guarantee

£mTotal£m

Hotels 83.1 76.4 102.9 262.4

Betting 33.8 - - 33.8

Property / Centre 6.2 - - 6.2

Total 123.1 76.4 102.9 302.4

• Also circa £23m other operating lease commitments

Forecast land and buildings lease commitments for 2004

Contingent lease£m

Forecast contingent commitments are based on 2004 forecast results

Conversion to IFRS

• Comprehensive, ongoing programme to achieve conversion, working closely with our auditors

• Substantial progress made to date, but a number of standards only issued December 2003 and more expected before March 2004 cut off

• IASB also expected to issue further standards during 2004 and 2005, early adoption will be considered case by case

• In addition, IFRIC expected to issue interpretations mandatory for 2005

• Based on work to date, major impacts on conversion in 2005 are expected to be due to differences in accounting for:

Derivatives, hedge accounting and convertible bond Goodwill, brands and licences Fixed assets - annual assessment of residual values Share based payments Pensions and employee benefits Deferred tax Segmental reporting, presentation and disclosure

NB. Comments are based on information currently available and reflect the findings of our conversion project to date. They should not be taken as a comprehensive or complete indication of the impacts that conversion to IFRS might have on the Group.