Preliminary Results
24 February 2005
Sir Ian Robinson
Chairman
Brian Wallace
Deputy Group Chief Executive
and Group Finance Director
Hilton Group plc - Summary of Performance
Year to 31 December
2004
£m
2003
£m
Variance
B(W)
Hotels
Betting
Central costs and income
Operating profit (1)
Interest
Profit before tax (1)
171.3
273.4
(14.5)
430.2
(47.1)
383.1
146.5
214.1
(13.6)
347.0
(74.6)
272.4
Effective tax rate (1)
EBITDA (1)
15.5%
561.9
22.0%
485.3
15.8%
20.4p
13.4p
52.2%
EPS (1)
Net Debt
971.9
16.9%
27.7%
24.0%
40.6%
1,147.7
(1) Before goodwill amortisation and exceptional items
3
Hotels - Like for Like Profit
Year to 31 December
2004
£m
2003
£m
Variance
B(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%
(1) Before goodwill amortisation and exceptional items
4
Hotels Worldwide Revpar 2004 vs 2003
Like for Like Hotels, Constant Currencies
18.7%
20%
Occupancy % pts growth
15%
Rate growth
11.7%
12.7%
11.2%
5%
Revpar growth
7.8%
10%
4.2%
12.9%
7.6%
3.6%
5.2%
4.9%
2.5%
0%
(5)%
(3.1)%
(10)%
Jan
Feb
Mar
Apr
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
5
Worldwide Revpar by Ownership Type
Like for Like Hotels, Constant Currencies
Revpar Growth 2004 vs 2003 - First Half, Second Half, Full Year
16%
14.6%
14%
12%
10%
8%
6%
8.6%
8.5%
6.6%
4.8%
6.9%
5.7%
5.5%
3.8%
4%
2%
0%
H1
H2
FY
Owned & Fixed lease
H1
H2
FY
Contingent lease
H1
H2
FY
Management contract
6
Hotels - Cost Management
Like for Like, Constant Currencies
Full Year
Total
£m
Increasing
revenue
£m
Declining
revenue
£m
Revenue movement
144.8
199.8
(55.0)
GOP Movement (1)
73.6
111.0
(37.4)
Incremental conversion
50.8%
Rental & Owners return
Property taxes / rates
Insurance
Other
Operating profit increase (1)
55.6%
32.0%
(35.3)
(3.7)
(2.0)
(3.9)
28.7
(1) Before goodwill amortisation and exceptional items
7
UK Hotels Revpar 2004 vs 2003
Like for Like Hotels
50%
London
40%
Provinces
Total UK
30%
20%
10%
0%
Jan
Feb
Mar
Apr
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
(10)%
8
Europe (Hilton Brand) - Revpar by Country
Like for Like, Constant Currencies, First Half, Second Half, Full Year
10%
7.9%
8%
6.2%
6.6%
6.4%
6%
4.0%
4%
2%
H1
H2
FY
0.3%
0%
H1
H2
FY
H1
(2)%
H2
FY
(1.9)%
(2.7)%
(4)%
(3.6)%
(6)%
Germany
France
Benelux
9
Scandic Revpar 2004 vs 2003
Like for Like Hotels, Constant Currencies, Scandic Acquired
12%
10%
8%
6%
4%
2%
0%
(2)%
(4)%
(6)%
(8)%
(10)%
10.2%
9.2%
8.5%
7.1%
6.0%
0.4%
0.0%
0.1% 2.9%
Occupancy % pts growth
(2.0)%
Rate growth
(4.7)%
(5.5)%
Jan
7.9%
Revpar growth
Feb
Mar
Apr
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
10
Scandic Performance 2004 vs 2003
(excluding Pandox)
Full year
2003
Actual
£m
Revenue
GOP
500.0
162.0
Inc. conversion
Costs
Profit (c)
Like
for like
revenue
gainers (a)
£m
23.4
13.2
Like
for like
revenue
losers (a)
£m
Other (b)
£m
2004
Actual
£m
(2.3)
0.5
515.1
170.6
(6.0)
(5.1)
54.6%
15.0%
(148.1)
(4.3)
1.9
(2.5)
(153.0)
13.9
8.9
(3.2)
(2.0)
17.6
(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
11
Betting and Gaming
Year to 31 December
UK Retail
Ireland & Belgium
Telephone Betting
- excluding high rollers
- high rollers
Gross Win
2004
2003
£m
£m
Operating Profit(1)
2004
2003
£m
£m
652.5
575.1
215.3
173.1
69.0
67.6
13.2
11.5
39.8
6.3
30.5
(1.6)
13.6
4.2
10.6
(1.2)
46.1
28.9
17.8
eGaming
89.3
63.7
21.3
14.2
Vernons
20.2
20.2
5.8
5.9
877.1
755.5
273.4
214.1
Betting and Gaming
9.4
(1) Before goodwill amortisation and exceptional items
12
UK Retail
Year to 31 December
2004
£m
2003
£m
Variance
B(W)
Gross win
652.5
575.1
13.5%
Duty / Gross profits tax
(96.4)
(84.4)
(340.8)
(317.6)
215.3
173.1
Other costs
Operating profit
24.4%
Staff costs per slip
36.30p
32.67p
(11.1)%
Stake per slip(1)
£8.47
£8.37
1.2%
(1) Excluding machines
13
Telephone Betting (Excluding High Rollers)
Year to 31 December
2004
£m
2003
£m
Variance
B(W)
Gross win
39.8
30.5
30.5%
Gross profits tax
(5.9)
(4.6)
(20.3)
(15.3)
Operating profit
13.6
10.6
28.3%
Salary cost per call
69.2p
67.8p
(2.1)%
Other costs
No. of calls (000’s)
6,659
5,995
11.1%
Active customers (000’s) (1)
125.2
117.0
7.0%
(1) Active customers are those who placed a bet during the period
14
eGaming
Year to 31 December
2004
£m
2003
£m
Variance
B(W)
Gross win
89.3
63.7
40.2%
Gross profits tax
(4.9)
(3.2)
(63.1)
(46.3)
Operating profit
21.3
14.2
50.0%
Active customers (000’s) (1)
Sportsbook
Casino
Poker
Sportsbook registrations (000’s)
306
81
64
357
206
80
25
267
48.5%
1.3%
156.0%
33.7%
Other costs
(1) Active customers are those who placed a bet during the period
15
Hilton Group plc - Cash Flow
Year to 31 December
Cash inflow from operating activities
Interest, tax and dividends paid
Cash flow before capex
Capital expenditure
Cash flow after capex
Proceeds from asset sales
Acquisitions / disposals (1)
Exchange and other movements (2)
Net borrowings movement
Opening net borrowings
Closing net borrowings
(1)
(2)
2004
£m
546.8
(243.1)
303.7
(189.6)
114.1
38.6
(6.4)
146.3
29.5
175.8
(1,147.7)
(971.9)
2003
£m
501.9
(261.5)
240.4
(189.9)
50.5
20.0
35.3
105.8
(88.7)
17.1
(1,164.8)
(1,147.7)
Includes betting shop acquisitions
Includes £17.8m favourable exchange (2003: £96.0m adverse)
16
Analysis of 2004 Capital Expenditure
£m
Hotels
Acquisition linked development
Other
Total Hotels
LivingWell
Betting and Gaming
Development – operating assets
FOBTs
Other (including TVs £4.3m, Ireland £2.2m)
eGaming / Telephone betting
Total Group
39.1
87.9
127.0
9.0
136.0
20.4
9.5
17.4
6.3
53.6
189.6
17
Impact of IFRS – Business Performance
UK GAAP
Pro forma IFRS (2)
2004 Profit Before Tax (1)
£383m
£374m
2%
2004 EPS (1)
20.4p
20.0p
2%
£2,554m
£2,388m
7%
2004 Net Assets
(1)
(2)
Before goodwill amortisation and exceptional items
This includes the pro forma impact of IAS 32 and 39, which will not be adopted until 1 January 2005
18
David Michels
Group Chief Executive
Five Year Record
As at 31 December
2000
2001
2002
2003
2004
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%
21
2005 – Trading So Far
22
23
EPOS
24
New Shops
44 shops purchased since January 2004
A further 37 agreed in 2005
25
270 shops will be relocated,
extended or refurbished
26
27
28
2005
9% increase in number of events
7% increase in trading hours
29
eGaming
30
Telephone Betting
31
Ladbrokes Management
Chris Bell
Chief Executive Ladbrokes
Mike O’Kane
Ros Barker
Alan Ross
Andy Scott
John O’Reilly
Steve Roberts
Trading Director
Human Resources
Director
Managing Director
Ladbrokes Ltd
Finance Director
Managing Director
eGaming Ltd
Managing Director
Vernons
Richard Ames
Commercial Director
Alex Kovach
International Business
Development Director
32
Blackpool Casino
33
Betting Exchanges
34
Ian Carter
35
Historical Revpar Chart
Rolling 12 months, Like for Like at Constant Currencies
£
54
53
52
51
50
49
48
01 r 01 01 l 01 01 01 02 r 02 02 l 02 02 02 03 r 03 03 l 03 03 03 04 r 04 04 l 04 04 04
n
y Ju ep ov an a
y Ju ep ov an a
y Ju ep ov an a
y Ju ep ov
Ja Ma Ma
J M Ma
J M Ma
J M Ma
S N
S N
S N
S N
36
Espoo, Finland
Hilton
Hilton
Scandic
State of the Nation
Nagoya, Japan
Otaru, Japan
Offenbach, Germany
Hilton
Hilton
Scandic
Morumbi, Brazil
Athens, Greece
37
Future Openings
Hilton
Bangkok, Thailand
Sydney, Australia
Hilton
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
Hilton
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Millennium Hilton
2005
Barbados
Tokyo, Japan
32 hotels (7,866 rooms) to open in 2006 and beyond
38
Scandic by Hilton
Scandic Franchises
Bari, Italy
39
Conrad
Waldorf, NY, USA
Conrad
Istanbul, Turkey
Conrad
Bangkok, Thailand
Conrad
Conrad
Conrad Hotels
Cairo, Egypt
Miami, USA
40
Hotel Property
Planning to raise £300m-£400m
41
Hilton Taba, Egypt
42
BDRC
Measure
UK*
Rank
Europe* Asia Pacific** Middle East**
Rank
Rank
Rank
Prompted Awareness
Unprompted Awareness
1st
2nd
1st
1st
1st
2nd
3rd
3rd
Brand Preference
-1st Choice
1st
1st
1st
3rd
1st
4th/worse
2nd
3rd
1st
2nd
Brand Usage
1st
2nd
Brand Loyalty
2nd
1st
4th/worse
3rd
Brand Ranking Index 1st
1st
2nd
1st
-1st or 2nd Choice
*BDRC Survey 2003
**BDRC Survey 2004
43
2005 Capex
2000
£m
2001
£m
2002
£m
2003
£m
2004
£m
Forecast
2005
£m
278
144
88
71
97
120
40
40
41
43
54
70
Major property purchases(1) 147
-
59
76
39
20
190
190
210
Capex:
Hotels
Betting
Capital expenditure(2)
465
184
188
Disposals - hotels
(13)
(355)
(335)
452
(171)
(147)
(1)
Including acquisition linked development
(2)
Excludes potential betting shop acquisitions
(9)
181
(36)
154
44
Preliminary Results
24 February 2005
Appendix
Hotels – Analysis by Contract Type
Owned
Fixed Contingent
lease
lease
Managed Franchise LivingWell Total
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
565.6
276.4
833.8
1,002.7
3.6
50.0
2,732.1
103.0
295.2
370.0
3.6
19.1
988.3
(65.5)
(19.4)
(11.4)
(182.4)
(27.6)
(41.6)
(332.0)
-
(0.9)
(4.0)
(4.5)
(4.3)
(592.9)
(96.8)
(101.6)
£m
Turnover
Gross operating profit
197.4
Less:
Rental & owners return (9.0)
Depreciation
(45.3)
Other costs / income
(43.4)
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
47
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%
10.5%
14.0%
18.2%
5.7%
6.9%
8.6%
Americas
Total
48
Yield Premium - Hilton vs London Market
Cumulative Year to Date Revpar Premium
£85
25%
£80
20%
£70
15%
£65
10%
£60
5%
£55
£50
Revpar Premium
Revpar
£75
0%
Jan
Feb
Mar
Apr
Hilton Revpar Premium 2004
May
June
Jul
Aug
Sep
Hilton Revpar 2004
Oct
Nov
Dec
Market Revpar 2004
Market Source: PKF Hotel Consultancy Services
Market is 8 competitor chains - Marriott International, InterContinental, De Vere, Millennium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton
49
Yield Premium - Hilton vs UK Provincial Market
£60
25%
£55
20%
£50
15%
£45
10%
£40
5%
£35
0%
Jan
Feb
Mar
Apr
Hilton Revpar Premium 2004
May
June
Jul
Aug
Sep
Hilton Revpar 2004
Oct
Nov
Revpar Premium
Revpar
Cumulative Year to Date Revpar Premium
Dec
Market Revpar 2004
Market Source: PKF Hotel Consultancy Services
Market is 8 competitor chains - Marriott International, InterContinental, De Vere, Millennium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton
50
Breakdown of Lease Commitments
Forecast land and buildings
lease commitments for 2005
Fixed lease
£m
Minimum
guarantee
£m
Contingent
lease
£m
Total
£m
Hotels
79.5
88.2
110.7
278.4
Betting
38.1
-
-
38.1
5.5
-
-
5.5
88.2
110.7
Property / Centre
Total
123.1
322.0
• Also circa £18m other operating lease commitments
Forecast contingent commitments are based on 2005 forecast results
51
International Financial Reporting Standards
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
52
IFRS – Summary
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
53
IFRS – First Time Adoption Elections
•
Business Combinations
-
no restatement prior to Transition
Date (1 January 2004)
•
Employee Benefits
-
all actuarial gains and losses
recognised in equity at Transition
Date
•
Share-based payments
-
only awards granted after 7
November 2002 have been
considered
•
Financial Instruments
-
not adopted until 1 January 2005, pro
forma impact on 2004 disclosed
•
Property, Plant &
Equipment
-
no remeasurement of assets to fair
value at Transition Date
54