preliminary results presentation 26 february 2004
TRANSCRIPT
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.