Interim Results Presentation 28 August 2003

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Interim Results Presentation28 August 2003
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Brian WallaceDeputy Group Chief Executive
and Group Finance Director


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Hilton Group plc - Summary of Performance
6 months to 30 June 2003m
6 months to 30 June 2002m
Variance B(W)
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) Effec
tive tax rate (1) 22.0 22.0 EBITDA
(1) 220.0 237.7 (7.4) EPS 5.5p 6.4p (14.1)
(1) Before goodwill amortisation and exceptional
items
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Hotels - Like for Like Profit
2002m
2003 m
change
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)
(1) Before goodwill amortisation and
exceptional items
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Hotels Worldwide Occupancy, Rate and RevPAR
Performance vs 2002
Like for Like Hotels, Constant Currencies
Including Scandic March / April have been
combined to avoid the distortion caused by the
timing of Easter
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Worldwide RevPAR by Ownership Type
Like for Like Hotels, Constant Currencies
RevPAR growth 2003 vs 2002
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Hotels - Cost Management
Like for Like, Constant Currencies
Increasing revenue m
Declining revenue m
Total m
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 18.8 Depreciation
/ FFE 3.0 Insurance (1.8) Other (6.6) Operati
ng profit decline (1) (31.1)
(1) Before exceptional items and goodwill
amortisation
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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
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Continental Europe (exc. Scandic branded) RevPAR
vs 2002
Like for Like, Constant Currencies
March / April have been combined to avoid the
distortion caused by the timing of Easter
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Scandic RevPAR Progression
Like for Like Hotels, Constant Currencies,
Scandic acquired RevPAR growth
2003 vs 2002
March / April have been combined to avoid the
distortion caused by the timing of Easter
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Scandic Performance 2003 vs 2002
Like for like revenue gainers (a) m
Like for like revenue losers (a) m
Marketing support costs (a) m
New opened / closed (a) m
2003 Actual m
Re- brands (a) m
2002 Actual m
F.x. m
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
(a) At constant currencies (b) Support office
costs not allocated to individual hotels (c)
2002 one-off credits
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Worldwide Betting
Operating Profit (1)
Gross Win
2003 m
2002 m
2003 m
2002 m
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
(1) Before goodwill amortisation and
exceptional items
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UK Retail
2003 m
2002 m
Better (worse)
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
(1) Gross win is before duty / gross profits
tax are deducted (2) Excluding machines
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Cost Conversion
Conversion of Gross Profit Growth to Operating
Profit
2003 First Half
2002 First Half
2002 Second Half
2002 Full Year
UK Retail 72.6 26.4 54.0 39.8 Worldwide
Betting 60.4 31.7 51.9 41.6
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Telephone Betting (excluding high rollers)
2003 m
2002 m
Better (worse)
Gross win (1) 14.9 14.0 6.4 Duty / Gross
profits tax (2.2) (2.1) Other costs (7.7) (8.0) O
perating profit 5.0 3.9 28.2 Average stake per
call 77.75 83.26 (6.6) Salary cost per call
67.2p 71.3p 5.8 No. of
calls (000s) 3,060
2,264 35.2 Active customers (000s)
(2) 91.9 87.7 4.8
(1) Gross win is before duty / gross profits tax
are deducted (2) Active customers are those who
placed a bet during the period
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eGaming
2003 m
2002 m
Better (worse)
Gross win (1) 30.8 26.8 14.9 Duty / Gross
profits tax (1.5) (1.9) Other costs (23.1) (19.8)
Operating profit 6.2 5.1 21.6 Active customers
(000s) (2) Sportsbook
150.7 130.2 15.7
Casino
36.4 28.1 29.5 On-line registrations
(000s) 153.2 181.5 (15.6)
(1) Gross win is before duty / gross profits tax
are deducted (2) Active customers are those who
placed a bet during the period
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eGaming
Gross Win by Region
2003
2002
UK
Far East
Europe
Other
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Hilton Group plc - Cash Flow
2003 m
2002 m
Cash inflow from operating activities 226.5 211.8
Interest, 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 7.7 Acquisitions / disposals - 3.5 (30
.4) 5.6 Exchange 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)
(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)
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Hilton Group plc - Analysis of 2003 Capital
Expenditure
Hotels
m
Acquisition linked development Luxembourg
(hotel acquisition) 15.8 HK Copenhagen
(acquisition) 12.9 Sydney (refurb) 9.0
Dusseldorf (refurb) 4.7 42.4 Other
31.9 Total Hotels 74.3 Total
LivingWell 1.5 75.8
Worldwide Betting
Shop transmission system TVs 9.6 Development
7.0 Other (including EPOS 1.0m) 5.9 eGaming /
Telephone betting 3.5 Total Worldwide
Betting 26.0 101.8
Total Group
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David Michels Group Chief Executive


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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

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Costs

• Head office Maintained at low levels
• Betting Strictly controlled with good
  conversion ratios
• Hotels Looking for further improvement
  wherever possible

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Capex
H1 2003 m
FYF 2003 m
2000 m
2001 m
2002 m
Capex Hotels 278 144 88 34 85
Betting 40 40 41 26 61 Major property
purchases(1) 147 - 59 42 89 Capital
expenditure 465 184 188 102 235 Disposals -
hotels (13) (355) (335) - 452 (171) (147) 102
(1) Including acquisition linked development
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Scandic

• Operating environment remains tough particularly
  in Sweden
• Rebranding programme on hold
• Performing better than the competition

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Franchising

• Scandic to be franchised in Northern Europe
• Launch on 1 January, 2004
• Franchising of Hilton brand progressing

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The Key Issues

• FOBTs What next?
• Betting Exchanges A level playing field?
• Hotel trading Visibility remains poor

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FOBTs

• Popular innovation following the removal of
  customer tax
• Judicial declaration expected Q1 2004

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Betting Exchanges

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

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Outlook

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

• Betting - Maintain steady growth in the
  underlying business

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Interim Dividend
3.4 pence per share

• Maintained at last years level reflecting
  confidence in the brands and their future
  prospects

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Appendices


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Hotels - First Half Analysis by Contract Type
Fixed lease
Contingent lease
Owned
Managed
LivingWell
Total
m
No. of hotels 69 48 152 117 - 386 No. of
rooms 17,406 10,016 33,271 36,740 - 97,433 Turnov
er 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 L
ess Rental owners return (1.8) (35.3) (82.2
) (150.7) (1.8) (271.8) Depreciation (25.4) (1
1.6) (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
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RevPAR Change Geographically by Ownership Type
vs 2002
Like for Like, Constant Currencies
Owned fixed lease
Contingent lease
Managed
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)
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Hilton vs London Market
Cumulative Year to Date RevPAR Premium
Market Source PKF Hotel Consultancy Services
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Hilton vs Provincial UK Market
Cumulative Year to Date RevPAR Premium
Market Source PKF Hotel Consultancy Services
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Resort Hotels, Occupancy, Rate and RevPAR
Performance vs 2002
Like for Like, Constant Currencies
March / April have been combined to avoid the
distortion caused by the timing of Easter
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Worldwide Betting - Revenue
2003 m
2002 m
Growth
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
(1) Includes FOBT turnover, year on year increase
1,160.6m.
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eGaming Gross Win
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Breakdown of Lease Commitments
Forecast land and buildings full year lease
commitments for 2003
Fixed lease m
Minimum guarantee m
Contingent lease m
Total m

• Hotels 73.7 56.2 108.4 238.3
• 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

Forecast contingent commitments based on 2003
forecast results