interim results presentation 26 august 2004

Interim Results Presentation26 August 2004

Brian WallaceDeputy Group Chief Executive

and Group Finance Director

3

Hilton Group plc - Summary of Performance

(1) Before goodwill amortisation and exceptional items

2004£m

2003£m

VarianceB(W)

Hotels 67.1 56.1 19.6%

Betting 153.7 101.8 51.0%

Central costs and income (6.8) (6.6) (3.0)%

Operating profit (1) 214.0 151.3 41.4%

Interest (24.3) (40.8) 40.4%

Profit before tax (1) 189.7 110.5 71.7%

Effective tax rate (1) 15.5% 22.0%

EBITDA (1) 280.0 220.0 27.3%

EPS (1) 10.1p 5.5p 83.6%

Half year to 30 June

4

Taxation

Normal tax charge:

Tax charge at 15.5% on profit before tax,

exceptional items and goodwill amortisation 29.4

Exceptional tax credit:

Tax on exceptional items -

Exceptional tax credit (9.0)

Total tax charge 20.4

£m

5

Hotels Worldwide RevPAR 2004 vs 2003

Like for Like Hotels, Constant Currencies

12.6%

18.9%

7.8%

11.7%

4.2%

11.1%

(3.3)%

(10)%

(5)%

0%

5%

10%

15%

20%

25%

Jan Feb Mar Apr May June July

Occupancy % pts growth

Rate growth

RevPAR growth

6

Worldwide RevPAR by Ownership Type

1.3%

6.5% 6.2%8.3%

10.0%

23.5%

4.9%

8.3%

14.6%

0%

5%

10%

15%

20%

25%

Owned & Fixed lease Contingent lease Management contract

Like for Like Hotels, Constant Currencies

RevPAR growth 2004 vs 2003 - first half

Q1 Q2 H1 Q1 Q2 H1 Q1 Q2 H1

7

Hotels - Cost Management

(1) Before goodwill amortisation and exceptional items

Total£m

Increasing revenue

£m

Declining revenue

£mFirst Half

Revenue movement 101.3 124.8 (23.5)

GOP movement (1) 54.8 72.0 (17.2)Incremental conversion 54.1% 57.7% 26.8%

Rental & Owners return (36.5)Property taxes / rates (2.3)Insurance (0.9)Other (3.5)

Operating profit increase (1) 11.6

Like for Like, Constant Currencies

8

UK Hotels RevPAR 2004 vs 2003

(5)%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Jan Feb Mar Apr May June July

London

Provinces

Total UK

Like for Like

9

Europe (Hilton brand) - RevPAR by Country

Like for Like, Constant Currencies, First Half

3.9%

(8.4)%

(3.0)%

8.5%

0.4%

3.1%

6.2%

(3.6)%

0.3%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

8%

10%

Germany France Benelux

Q1 Q2 H1

Q1

Q2

H1 Q1

Q2 H1

10

Scandic RevPAR 2004 vs 2003

6.0%

0.4%

9.2%

(4.7)%

(2.0)%

7.1%

(5.5)%

(10)%

(8)%

(6)%

(4)%

(2)%

0%

2%

4%

6%

8%

10%

Jan Feb Mar Apr May June July

Occupancy % pts growth

Rate growth

RevPAR growth

Like for Like Hotels, Constant Currencies, Scandic Acquired

RevPAR growth 2004 vs 2003

11

Scandic Performance 2004 vs 2003

(a) At constant currencies

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

2004Actual

£mOther (a) (b)

£m

Revenue 242.4 11.6 (7.4) 1.1 247.7 (a)

GOP 76.0 5.9 (6.3) (0.9) 74.7 (a)

Inc. conversion 50.9% 14.9%

Costs (69.7) (1.3) 1.7 0.7 (68.6)

Profit 3.4 4.6 (4.6) (0.2) 3.2 (a)

Disposal of Pandox 2.9 -

Exchange translation - (0.3)

6.3 2.9

Like for like revenue

gainers (a)

£m

2003Actual

£m

Like for like revenue losers (a)

£m

Half year to 30 June

12

Worldwide Betting

UK Retail 338.0 274.6 119.6 83.1

Ireland & Belgium 35.9 33.4 7.0 5.5

Telephone Betting - excluding high rollers 25.9 14.9 11.8 5.0 - high rollers - (1.6) - (1.2)

25.9 13.3 11.8 3.8

eGaming 44.7 30.8 12.1 6.2

Vernons 10.6 10.5 3.2 3.2

Worldwide Betting 455.1 362.6 153.7 101.8

Gross Win2004 2003£m £m

(1) Before goodwill amortisation and exceptional items

Operating Profit (1)

2004 2003£m £m

Half year to 30 June

13

UK Retail

(1) Excluding machines

2004£m

2003£m

VarianceB(W)

Gross win 338.0 274.6 23.1%

Duty / Gross profits tax (50.2) (40.2) (24.9)%

Other costs (168.2) (151.3) (11.2)%

Operating profit 119.6 83.1 43.9%

Staff costs per slip 34.29p 31.72p (8.1)%

Stake per slip (1) £8.37 £8.24 1.6%

• First half OTC growth of 14% benefited from good results at Ascot, Cheltenham and Euro 2004.• Machines gross win grew 62% to £83.8m with average number of FOBTs at 4,363 (2003: 2,230).

Half year to 30 June

14

Telephone Betting (excluding high rollers)

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

2004£m

2003£m

VarianceB(W)

Gross win 25.9 14.9 73.8%

Gross profits tax (3.8) (2.2) (72.7)%

Other costs (10.3) (7.7) (33.8)%

Operating profit 11.8 5.0 136.0%

Average stake per call £79.77 £77.75 2.6%

Salary cost per call 70.0p 67.2p (4.2)%

No. of calls (000’s) 3,334 3,060 9.0%

Active customers (000’s) (1) 102.2 91.9 11.2%

Half year to 30 June

15

Active customers (000’s) (1)

Sportsbook 231 151 53.0%

Casino 66 36 83.3%

Poker 33 14 135.7%

On-line registrations (000’s) 213 153 39.2%

eGaming

2004£m

2003£m

VarianceB(W)

Gross win 44.7 30.8 45.1%

Gross profits tax (2.7) (1.5) (80.0)%

Other costs (29.9) (23.1) (29.4)%

Operating profit 12.1 6.2 95.2%

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

Half year to 30 June

16

Hilton Group plc - Cash Flow

2004£m

2003£m

Cash inflow from operating activities 255.6 226.5Interest, tax and dividends paid (126.6) (155.9)

Free cash flow 129.0 70.6Capital expenditure (88.8) (101.8)Free cash flow after capex 40.2 (31.2)Intangible (betting shop licence) additions (13.6) (2.1)Proceeds from asset sales 12.6 0.8Acquisitions / disposals 1.3 -Exchange and other movements (1) 81.1 (85.8)

Net borrowings movement 121.6 (118.3)Opening net borrowings (1,147.7) (1,164.8)

Closing net borrowings (1,026.1) (1,283.1)(1) Includes £74.7m favourable exchange (2003: £88.5m adverse)

Half year to 30 June

17

Analysis of 2004 Capital Expenditure

£mHotels

Acquisition linked development:

Sydney (refurb) 18.7

Dusseldorf (refurb) 2.5

21.2

Other 35.7

Total Hotels 56.9

LivingWell 3.6

60.5

Worldwide Betting

Development – operating assets 7.8

FOBTs 7.0

Other (including TVs £2.6m, Ireland inc. EPOS £2.4m) 9.8

eGaming / Telephone betting 3.7

28.3

Total Group 88.8

David MichelsGroup Chief Executive

20

Chart of Past EPS

5

6

7

8

9

10

11

H1 2001 H1 2002 H1 2003 H1 2004

Earnings per Share (p)

21

Recent Trading - Betting

“A good year, so far, with growth in all three areas”

22

Recent Trading - Hotels

London

Japan

Canada

Germany

Holland

France

UK Provinces

Caribbean

Australia

Belgium

Sweden

Norway

Finland

Middle East

South America

Turkey

Rest of Asia

Egypt

23

Property

£2.3bn of hotel assets

24

Hilton’s Central London Occupancy (11 hotels) – First 7 months

Like for Like Hotels

70%

71%

72%

73%

74%

75%

76%

77%

78%

79%

80%

2001 2002 2003 2004

25

Hilton and Scandic Brand Websites

(excludes Third party Website bookings)

Res

erva

tion

s

0

10,000

20,000

30,000

40,000

50,000

60,000

J an-03 Feb-03 Mar-03 Apr-03 May-03 J un-03 J ul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 J an-04 Feb-04 Mar-04 Apr-04 May-04 J un-04

Brand Websites Linear (Brand Websites)

Launch of localised websites

26

Pipeline Growth

Openings 2004 London Waldorf, UK

Odawara, JapanHelsinki Kalastajatorppa, FinlandBali, Indonesia (Conrad)7 x Trident by Hilton, IndiaMumbai Towers, IndiaNewcastle Gateshead, UKParis Arc de Triomphe, FranceMiami, USA (Conrad)Shenzhen, ChinaSanto Domingo, Dominican RepublicSan Salvador, El SalvadorKuala Lumpur, MalaysiaHilton Barbados, CaribbeanCebu, Philippines

Openings 2005

Jeddah Palace, Saudi ArabiaValencia, SpainVenice, ItalyCasablanca Airport, MoroccoPhuket, Thailand (Conrad)Sharm Nabq, EgyptHilton Diagonal Mar, SpainWarsaw, PolandDubrovnik, CroatiaSydney, AustraliaEvian, FranceHilton Malabo, Equatorial GuineaDublin Airport, IrelandTokyo, Japan (Conrad)Hilton Beirut, LebanonMillennium Hilton Bangkok, ThailandHilton Seychelles Resort, SeychellesDenarau, Fiji

27

Capital Expenditure 2005

• £110m - £120m on hotels

• Less than £100m on betting but will still invest to grow the business

28

Fixed Odds Betting Terminals (FOBTs)

• 21% reduction in transactions per terminal since the introduction of the Code of Conduct

• There is an increase of 7% in the average stake per transaction

• Net effect is a 16% decline in the average weekly gross win per terminal to June

29

Over-the-Counter

Over-the-counter business up 14%

30

eGaming

31

Telephone Betting

First half profits more than double

32

Anthony Harris

33

Hilton University

34

Outlook

Hotels – “difficult to forecast, but cautiously optimistic”

Betting – “continued growth, but at a slower rate than the first half”

Interim Results Presentation26 August 2004