2005 interim results 25 august 2005. brian wallace deputy group chief executive and finance director
TRANSCRIPT
2005 Interim Results25 August 2005
Brian WallaceDeputy Group Chief Executive andFinance Director
3
Summary of Performance
(1) Before non-trading items
2005£m
2004£m
VarianceB(W)
Hotels 72.6 65.6 10.7%
Betting 143.6 153.3 (6.3)%
Central costs and income (8.9) (6.5) (36.9)%
Operating profit (1) 207.3 212.4 (2.4)%
Finance costs (15.2) (21.1) 28.0%
Profit before tax (1) 192.1 191.3 0.4%
Effective tax rate (1) 20.0 % 15.5%
EBITDA (1) 275.3 278.4 (1.1)%
EPS (1) 9.6p 10.2p (5.9)%
Half year to 30 June
4
Hotels - Like for Like Profit
Reported profit (1) 72.6 65.6 10.7%
Closed for refurbishment 2.5 0.6
Disposals / new openings (1.9) (2.0)
St Lucia termination receipt (2.3) -
Foreign exchange (0.5) -
Like for like hotels profit (1) 70.4 64.2 9.7%
2005£m
2004£m
VarianceB(W)Half year to 30 June
(1) Before non-trading items
5
Hotels Worldwide Revpar 2005 vs 2004
8.5%
6.2%
8.4%
11.8%
4.2%
7.1%
0%
2%
4%
6%
8%
10%
12%
14%
Jan Feb Mar/Apr May June July
Occupancy % pts growth
Rate growthRevpar growth
March and April results have been combined due to the timing of Easter.
Like for Like Hotels, Constant Currencies
6
Worldwide Revpar by Ownership Type
£30
£35
£40
£45
£50
£55
Owned & Fixed lease Contingent lease Management contract
Rev
par
Like for Like Hotels, Constant Currencies
Revpar growth 2005 vs 2004 - First half
+4.7%
+8.4%
+10.8%
2004 2004 20042005 20052005
7
Hotels - Cost Management
(1) Before non-trading items
Total£m
Increasing revenue
£m
Declining revenue
£mRevenue movement 75.2 100.5 (26.2)1.0
GOP movement (1) 36.7 58.3 (18.4) 0.1
Incremental conversion 48.7% 58.0% 29.6%
Rental & Owners return (25.2)
Property taxes / rates (1.7)
Other (3.6)
Operating profit increase (1) 6.2
LivingWell
£m
Like for Like Hotels, Constant Currencies
Half year to 30 June
8
UK Hotels Profitability
(1) Excludes Tindall associate result
2005£m
2004£m
VarianceB(W)Half year to 30 June
Reported profit (1) 30.6 38.7 (8.1)
Disposals (2.2)
Increased depreciation charge (1.0)
Newcastle compensation (1.1)
5 major hotels decline (4.9)
65 other hotels increase 1.1
Decline in UK Hotels profit (8.1)
Analysis of decline
9
Europe (Hilton brand) - Revpar By Country
£30
£35
£40
£45
£50
£55
£60
£65
Germany France Benelux
Rev
par
2004 2004 20042005 2005 2005
+2.3%
+7.1%
+8.6%
Like for Like Hotels, Constant Currencies, First Half
10
Scandic Revpar 2005 vs 2004
8.5%7.3%
6.1%
8.3%
2.1%
9.7%
(2)%
0%
2%
4%
6%
8%
10%
12%
Jan Feb Mar/Apr May June July
Occupancy % pts growthRate growthRevpar growth
March and April results have been combined due to the timing of Easter.
Like for Like Hotels, Constant Currencies, Scandic Acquired
Revpar growth 2005 vs 2004 - First half
11
Scandic Performance 2005 vs 2004
(a) At constant currencies.
(b) Includes openings, closing and refurbishments.
2005Actual
£mOther (b)
£m
Revenue 241.1 18.5 (3.1) (5.1) 5.8 257.2
GOP 76.2 10.9 (2.6) (2.5) 1.9 83.9
Inc. conversion 58.9% 16.1%
Costs (73.3) (1.8) 0.4 1.4 (1.6) (74.9)
Profit 2.9 9.1 (2.2) (1.1) 0.3 9.0
Like for like
revenue gainers (a)
£m
2004Actual
£m
Like for like
revenue losers (a)
£mExchange
£m
12
Betting & Gaming
UK Retail 342.1 338.0 108.8 119.2
Ireland & Belgium 35.6 35.9 5.7 7.0
Telephone Betting 21.6 25.9 8.5 11.8
eGaming 58.0 44.7 17.5 12.1
Vernons 9.9 10.6 3.1 3.2
Betting & Gaming 467.2 455.1 143.6 153.3
Gross Win2005 2004£m £m
(1) Before non-trading items
Operating Profit (1)
2005 2004£m £m
Half year to 30 June
13
UK Retail
Over-the-counter (1) 242.5 254.2 (4.6)%
Machines* 99.6 83.8 18.9%
Total Gross Win 342.1 338.0 1.2%
*Gross Win on Machines
FOBT 90.7 71.0 27.7%
AWP 8.9 12.8 (30.5)%
(1) Underlying GW after adjusting for major sporting events – Euro 2004, Ascot, Aintree and Cheltenham – fell by 0.3% from 2004
Half year to 30 June2005£m
2004£m
VarianceB(W)
14
Underlying overheads 168.1 162.6 3.4%
Growth in retail estate 12.0 6.0
Opening hours increase 2.6
Total UK Retail costs 182.7 168.6 8.4%
UK Retail – Underlying Cost Growth
2005£m
2004£m
VarianceB(W)Half year to 30 June
15
Telephone Betting (including high rollers)
(1) Active customers are those who placed a bet during the period
Gross win 21.6 25.9 (16.6)%
Gross profits tax (3.3) (3.8) 13.2%
Other costs (9.8) (10.3) 4.9%
Operating profit 8.5 11.8 (28.0)%
Average stake per call £90.98 £79.77 14.1%
Salary cost per call 65.2p 70.0p 6.9%
No. of calls (000’s) 3,751 3,334 12.5%
Active customers (000’s) (1) 103.4 102.2 1.2%
2005£m
2004£m
VarianceB(W)Half year to 30 June
16
Active customers (000’s) (1)
Sportsbook 228 231 (1.3)%
Casino 46 66 (30.3)%
Poker 93 33 181.8%
Online registrations (000’s) 195 213 (8.5)%
eGaming
Gross win 58.0 44.7 29.8%
Gross profits tax (3.2) (2.7) (18.5)%
Other costs (37.3) (29.9) (24.7)%
Operating profit 17.5 12.1 44.6%
(1) Active customers are those who placed a bet during the period
2005£m
2004£m
VarianceB(W)Half year to 30 June
17
Hilton Group plc - Cash Flow
Cash generated by operations 239.2 258.1
Interest, tax and dividends paid (128.1) (126.6)
Cash flow before capex 111.1 131.5
Capital expenditure (82.6) (85.4)
Cash flow after capex 28.5 46.1
Intangible additions (1) (40.4) (19.5)
Acquisitions / hotel disposals (2) 100.9 15.0
Exchange and other movements (3) 66.5 80.0
Net borrowings movement 155.5 121.6
Opening net borrowings (971.9) (1,147.7)
Closing net borrowings (816.4) (1,026.1)(1) Includes £37.1m licence additions and £2.5m software additions (2004: £19.5m)(2) Includes £103.5m on hotel disposals in 2005 (2004: £15.0m)(3) Includes £38.7m favourable exchange (2004: £74.7m favourable) and £30.3m inflow from share capital issue (2004: £3.6m)
2005£m
2004£mHalf year to 30 June
18
Analysis of 2005 Capital Expenditure
£m Hotels Acquisition linked development: Sydney (refurb) 13.2 Dusseldorf (refurb) 1.4
14.6 Other 43.7 Total Hotels 58.3 LivingWell 0.3
58.6
Betting & Gaming Development – operating assets 15.2 Ladbrokes Xtra 0.7 Other (including Ireland £1.9m) 7.4 eGaming / Telephone betting 0.7
24.0
Total Group 82.6
Half year to 30 June
David MichelsGroup Chief Executive
21
2005 – First Half Trading
22
23
Retail Estate
24
Ladbrokes Costs
Total UK Retail 8.4%
Worldwide Betting 9.2%
Like for Like UK Retail 3.4%
25
eGaming
26
eGaming
27
Telephone Betting
28
International Partners
• Sweden
• Denmark
• Finland
• Norway
• Greece
• Turkey
• Spain
•Thailand
•Malaysia
•Singapore
•Ghana
•Tanzania
•Swaziland
•Malawi
29
Casinos
30
31
Franchising
Scandic by Hilton, Syracuse
32
Management Contracts
Barbados Dubrovnik, Croatia
Mount Wolseley, Ireland
33
Hilton International
Hilton International
Americas Commercial Operations Group
Nordic UK and Ireland
Middle East and Asia Pacific
Europe and Africa
Sourcing andProductivity
Sales
Marketing
Distribution
IT
34
BDRC
**BDRC Survey 2004
Measure Europe*UK* Asia Pacific** Middle East**
RankRank RankRank
Brand Preference
-1st Choice
-1st or 2nd Choice
Brand Ranking Index
1st
1st
1st
3rd1st
1st 2nd
1st 2nd
1st
1st
1st
*BDRC Survey 2005
35
GSTS
• Worldwide GSTS figures show an overall satisfaction score of 77% at June 2005, 4% up on December 2004
• MEAP and UK have shown increases of 5 percentage points and 3 percentage points respectively during the first half
36
Sydney Hilton, Australia
37
Sale of Assets
Corby
Dunblane
Norwich
Brighton West Pier
38
Pipeline Growth
• Bari, Italy (Scandic by Hilton)• Dubrovnik, Croatia• Mount Wolseley, Ireland• Cebu, Philippines• Barbados, Caribbean• Syracuse, Italy (Scandic by Hilton)• Dublin Airport, Ireland• Tokyo, Japan (Conrad)• Sydney, Australia• Barcelona Diagonal Mar, Spain• Santo Domingo, Dominican Republic
Hotels Opened - 2005• Phuket, Thailand (Conrad)• Millennium Hilton Bangkok, Thailand• Portorosa, Sicily• Denarau, Fiji• Sanya Resort and Spa, China• London Canary Wharf, UK• Manchester Deansgate, UK• Warsaw, Poland• Sharm Nabq, Egypt• Valencia, Spain• Jumeirah Beach Club, Dubai• Evian, France• Beirut, Lebanon• London Tower Bridge, UK
• Alborea, Italy• Calane, Italy• Il Valentino, Italy• Kalidria, Italy• Qasr al Shaq, Saudi Arabia
Hotels Opening - 2005
Hotels Opening - 2006
39
Hotels 135 140
Betting 80 80
Major property purchase 30 -
Capital Expenditure 245 220
Capex.
Forecast2005£m
Forecast2006£m
40
Scandic
41
Hotel Costs
42
Current Trading
Appendix
45
Revenue 263.1 138.2 430.6 520.6 2.4 26.8 1,381.7
Gross operating profit 79.1 49.3 141.8 194.2 2.4 9.0 475.8
Less:
Rental/owners return (4.0) (33.6) (93.1) (142.4) - (2.3) (275.4)
Depreciation (21.8) (9.9) (14.7) - - (2.5) (48.9)
Other costs/income (12.0) (3.0) (18.0) (32.8) (0.7) (2.3) (68.8)
2005 Profit 41.3 2.8 16.0 19.0 1.7 1.9 82.7
2004 Profit 44.3 0.7 11.2 15.8 1.0 2.7 75.7
Hotels - Analysis by Contract TypeTotalManaged LivingWell
No. of hotels 54 47 154 109 38 n/a 402
No. of rooms 14,650 9,905 34,198 34,478 9,672 n/a 102,903
OwnedFixed Lease
Contingent Lease
£m
FranchiseHalf year to 30 June
46
Geographical Revpar by Ownership Type
Like for Like Hotels, Constant Currencies – First halfOwned &
Fixed LeaseContingent
Lease Managed
UK 0.8% 3.4% 5.9%
Europe & Africa 7.8% 9.6% 7.0%
Middle East & Asia Pacific 0.0% 7.5% 11.9%
Americas 6.5% 19.6% 18.3%
Total 4.7% 8.4% 10.8%
47
Yield Premium - Hilton vs London Market
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 Jun
Rev
par
0%
2%
4%
6%
8%
10%
12%
Rev
par
Pre
miu
m
Hilton Revpar Premium 2005 Hilton Revpar 2005 Market Revpar 2005
Cumulative Year to Date Revpar Premium
48
Yield Premium - Hilton vs UK Provincial Mkt
£30
£35
£40
£45
£50
£55
£60
Jan Feb Mar Apr May Jun
Revpar
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Revpar
Pre
miu
m
Hilton RevPAR Premium 2005 Hilton RevPAR 2005 Market RevPAR 2005
Market Source: PKF Hotel Consultancy ServicesMarket is 8 competitor chains - Marriott International, InterContinental, De Vere, Millennium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton
Cumulative Year to Date Revpar Premium
49
Betting & Gaming - Revenue
(1) Includes FOBT revenue, year on year increase in machines revenue £643.4m
UK Retail (1) 4,750.9 4,065.1 16.9%
Ireland & Belgium 180.4 160.9 12.1%
Telephone Betting 341.4 266.0 28.3%
eGaming 424.6 281.9 50.6%
Vernons 14.5 15.2 (4.6)%
Betting & Gaming 5,711.8 4,789.1 19.3%
2005£m
2004£m
VarianceB(W)
Half year to 30 June
50
Breakdown of Lease Commitments
Fixed Lease£m
Minimum Guarantee
£mTotal£m
Hotels 70.5 80.8 127.4 278.7
Betting 40.2 - - 40.2
Total 110.7 80.8 127.4 318.9
• Also circa £16m other operating lease commitments
Forecast land and buildings full year lease commitments for 2005
Contingent Lease
£m
Forecast contingent commitments are based on 2005 forecast results
51
Taxation
Normal tax charge:
Tax charge at 20% on profit before tax and
non-trading items 38.4
Non-trading tax charge:
Tax charge at 30% on finance income from:
Unrealised gains on derivatives 1.5
Profit on sale of hotels 2.4
Total tax charge 42.3
£m
52
Finance costs
Finance Cost -Underlying (15.2) (21.1) 28.0%
Finance Cost – IAS 39 gain on derivatives 4.9
Total Finance Costs (10.3) (21.1) 51.2%
Derivatives financial instruments are used to hedge interest rate and currency exposures. IAS 39 dictates whether changes in the fair value of these instruments can be matched in the income statement by changes in the fair value of the item being hedged. Where they cannot be matched, or do not fully match, the unmatched gain or loss represents a timing difference that will reverse over the life of the financial instruments.
Therefore, the gains arising on these derivatives in the period have been excluded from the Group’s adjusted profits to better reflect underlying performance.
* IAS 39 applied from 1 January 2005
2005*£m
2004£m
VarianceB(W)