interim results presentation 28 august 2003. brian wallace deputy group chief executive and group...
TRANSCRIPT
Interim Results Presentation28 August 2003
Brian WallaceDeputy Group Chief Executive
and Group Finance Director
Hilton Group plc - Summary of Performance
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)%
Effective tax rate (1) 22.0% 22.0%
EBITDA (1) 220.0 237.7 (7.4)%
EPS 5.5p 6.4p (14.1)%
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)%
Effective tax rate (1) 22.0% 22.0%
EBITDA (1) 220.0 237.7 (7.4)%
EPS 5.5p 6.4p (14.1)%
6 months to 30 June 2003
£m
6 months to 30 June 2003
£m
6 months to30 June 2002
£m
6 months to30 June 2002
£mVariance
B(W)Variance
B(W)
(1) Before goodwill amortisation and exceptional items
Hotels - Like for Like Profit
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)%
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)%
2003£m
2003£m
%change
%change
2002£m
2002£m
(1) Before goodwill amortisation and exceptional items
Hotels Worldwide Occupancy, Rate and RevPAR Performance 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)%
(4.8)%
3.2%
(3.6)%
3.3%
(12)%
(10)%
(8)%
(6)%
(4)%
(2)%
0%
2%
4%
6%
Jan Feb Mar/Apr May June July
Occupancy % pts growth
Rate growth
RevPAR growth
Worldwide RevPAR by Ownership Type
(6.6)%
0.7%
(7.0)%(8)%
(7)%
(6)%
(5)%
(4)%
(3)%
(2)%
(1)%
0%
1%
2%
Owned & Fixed lease Contingent lease Management contract
Like for Like Hotels, Constant Currencies
RevPAR growth 2003 vs 2002
Hotels - Cost Management
Like for Like, Constant Currencies
(1) Before exceptional items and goodwill amortisation
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 18.8Depreciation / FF&E 3.0Insurance (1.8)Other (6.6)
Operating profit decline (1) (31.1)
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 18.8Depreciation / FF&E 3.0Insurance (1.8)Other (6.6)
Operating profit decline (1) (31.1)
Total£m
Total£m
Increasing
revenue£m
Increasing
revenue£m
Declining revenue
£m
Declining revenue
£m
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
(30)%
(25)%
(20)%
(15)%
(10)%
(5)%
0%
5%
10%
Jan Feb Mar/Apr May June July
London 5 star
London 4 star
Provinces
Total UK
Continental Europe (exc. Scandic branded) RevPAR vs 2002
(25)%
(20)%
(15)%
(10)%
(5)%
0%
5%
10%
Jan Feb Mar/Apr May June July
Germany
France
Benelux
Europe
Like for Like, Constant Currencies
March / April have been combined to avoid the distortion caused by the timing of Easter
Scandic RevPAR Progression
0.9%
(5.0)% (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
Occupancy % pts growth
Rate growth
RevPAR growth
Like for Like Hotels, Constant Currencies, Scandic Like for Like Hotels, Constant Currencies, Scandic
acquiredacquired
RevPAR growth 2003 vs 2002RevPAR growth 2003 vs 2002
March / April have been combined to avoid the distortion caused by the timing of Easter
Scandic Performance 2003 vs 2002
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
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
Like for like revenue
gainers (a)
£m
Like for like revenue
gainers (a)
£m
(a) At constant currencies
(b) Support office costs not allocated to individual hotels
(c) 2002 one-off credits
Re-brands (a)
£m
Re-brands (a)
£m
New opened / closed
(a)
£m
New opened / closed
(a)
£m
Marketing &
supportcosts (a)
£m
Marketing &
supportcosts (a)
£m
2002 Actual
£m
2002 Actual
£m
2003Actual
£m
2003Actual
£m
Like for likerevenue losers (a)
£m
Like for likerevenue losers (a)
£mF.x.£mF.x.£m
Worldwide Betting
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
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
2003£m
2003£m
2002£m
2002£m
2003£m
2003£m
2002£m
2002£m
Operating Profit (1)
Operating Profit (1)
Gross WinGross Win
(1) Before goodwill amortisation and exceptional items
UK Retail
2003£m
2003£m
2002£m
2002£m
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%
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%
Better (worse)%
Better (worse)%
(1) Gross win is before duty / gross profits tax are deducted
(2) Excluding machines
Cost Conversion
UK Retail 72.6% 26.4% 54.0% 39.8%
Worldwide Betting 60.4% 31.7% 51.9% 41.6%
UK Retail 72.6% 26.4% 54.0% 39.8%
Worldwide Betting 60.4% 31.7% 51.9% 41.6%
2003First Half
2003First Half
Conversion of Gross Profit Growth to Operating Profit
2002First Half
2002First Half
2002Second
Half
2002Second
Half
2002Full Year
2002Full Year
Telephone Betting (excluding high rollers)
2003£m
2003£m
2002£m
2002£m
Gross win (1) 14.9 14.0 6.4%
Duty / Gross profits tax (2.2) (2.1)
Other costs (7.7) (8.0)
Operating 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 (000’s) 3,060 2,26435.2%
Active customers (000’s) (2) 91.9 87.7 4.8%
Gross win (1) 14.9 14.0 6.4%
Duty / Gross profits tax (2.2) (2.1)
Other costs (7.7) (8.0)
Operating 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 (000’s) 3,060 2,26435.2%
Active customers (000’s) (2) 91.9 87.7 4.8%
Better (worse)%
Better (worse)%
(1) Gross win is before duty / gross profits tax are deducted
(2) Active customers are those who placed a bet during the period
eGaming
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 (000’s) (2)
Sportsbook 150.7 130.2 15.7%
Casino 36.4 28.1 29.5%
On-line registrations (000’s) 153.2 181.5 (15.6)%
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 (000’s) (2)
Sportsbook 150.7 130.2 15.7%
Casino 36.4 28.1 29.5%
On-line registrations (000’s) 153.2 181.5 (15.6)%
2003£m
2003£m
2002£m
2002£m
(1) Gross win is before duty / gross profits tax are deducted(2) Active customers are those who placed a bet during the period
Better (worse)%
Better (worse)%
eGaming
Gross Win by Region
UK Far East Europe Other
20032003 20022002
9%
18% 2%
71%
67%
23%
8% 2%
Hilton Group plc - Cash Flow
Cash inflow from operating activities 226.5 211.8Interest, 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 7.7Acquisitions / disposals - 3.5
(30.4) 5.6Exchange 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)
Cash inflow from operating activities 226.5 211.8Interest, 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 7.7Acquisitions / disposals - 3.5
(30.4) 5.6Exchange 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)
2003£m
2003£m
2002£m
2002£m
(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)
Hilton Group plc - Analysis of 2003 Capital Expenditure
Acquisition linked development: Luxembourg (hotel acquisition) 15.8 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 9.0 Dusseldorf (refurb) 4.7
42.4Other 31.9Total Hotels 74.3Total LivingWell 1.5
75.8
Acquisition linked development: Luxembourg (hotel acquisition) 15.8 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 9.0 Dusseldorf (refurb) 4.7
42.4Other 31.9Total Hotels 74.3Total LivingWell 1.5
75.8
Shop transmission system & TVs 9.6Development 7.0Other (including EPOS £1.0m) 5.9eGaming / Telephone betting 3.5
Total Worldwide Betting 26.0101.8
Shop transmission system & TVs 9.6Development 7.0Other (including EPOS £1.0m) 5.9eGaming / Telephone betting 3.5
Total Worldwide Betting 26.0101.8
HotelsHotels
Worldwide BettingWorldwide Betting
£m£m
Total GroupTotal Group
David Michels Group Chief Executive
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
Costs
• Head office – Maintained at low levels
• Betting – Strictly controlled with good conversion ratios
• Hotels – Looking for further improvement wherever possible
Capex
Capex:Capex:
HotelsHotels 278278 144144 8888 3434 8585
BettingBetting 4040 4040 4141 2626 6161
Major property purchasesMajor property purchases(1)(1) 147147 -- 5959 4242 8989
Capital expenditureCapital expenditure 465465 184184 188188 102102 235235
Disposals - hotelsDisposals - hotels (13)(13) (355)(355) (335)(335) --
452452 (171)(171) (147)(147) 102102
Capex:Capex:
HotelsHotels 278278 144144 8888 3434 8585
BettingBetting 4040 4040 4141 2626 6161
Major property purchasesMajor property purchases(1)(1) 147147 -- 5959 4242 8989
Capital expenditureCapital expenditure 465465 184184 188188 102102 235235
Disposals - hotelsDisposals - hotels (13)(13) (355)(355) (335)(335) --
452452 (171)(171) (147)(147) 102102
2000£m
2000£m
2001£m
2001£m
2002£m
2002£m
H12003£m
H12003£m
FYF2003£m
FYF2003£m
(1) Including acquisition linked development
Scandic
• Operating environment remains tough particularly in Sweden
• Rebranding programme on hold
• Performing better than the competition
Franchising
• Scandic to be franchised in Northern Europe
• Launch on 1 January, 2004
• Franchising of Hilton brand progressing
The Key Issues
• FOBTs – What next?
• Betting Exchanges – A level playing field?
• Hotel trading – Visibility remains poor
FOBTs
• Popular innovation following the removal of customer tax
• Judicial declaration expected Q1 2004
Betting Exchanges
“We are not against betting exchanges, we are against an uneven playing field”
Outlook
• Hotels - Will recover. Time and pace of recovery still uncertain
• Betting - Maintain steady growth in the underlying business
Interim Dividend
“Maintained at last year’s level reflecting confidence in the brands and their
future prospects”
3.4 pence per share3.4 pence per share
Appendices
No. of hotels 69 48 152 117 - 386
No. of rooms 17,406 10,016 33,271 36,740 - 97,433
Turnover 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
Less:
Rental & owners return (1.8) (35.3) (82.2) (150.7) (1.8) (271.8)
Depreciation (25.4) (11.6) (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
Hotels - First Half Analysis by Contract Type
Fixed leaseFixed leaseOwnedOwned
Contingent lease
Contingent lease Manage
dManage
dLivingWellLivingWell TotalTotal£m£m
RevPAR Change Geographically by Ownership Type vs 2002
Owned & fixed lease
Owned & fixed lease
Contingent leaseContingent lease ManagedManaged
Like for Like, Constant CurrenciesLike for Like, Constant Currencies
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)%
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)%
Hilton vs London Market
Cumulative Year to Date RevPAR Premium
Market Source: PKF Hotel Consultancy Services
£50
£55
£60
£65
£70
Jan Feb Mar Apr May June
Rev
PA
R
0%
5%
10%
15%
20%
25%
Rev
PA
R P
rem
ium
Hilton RevPAR Premium 2003 Hilton RevPAR 2003 Market RevPAR 2003
Hilton vs Provincial UK Market
Cumulative Year to Cumulative Year to Date RevPAR Premium RevPAR Premium
Market Source: PKF Hotel Consultancy Services
£30
£35
£40
£45
£50
£55
Jan Feb Mar Apr May June
Rev
PA
R
0%
5%
10%
15%
20%
25%
Rev
PA
R P
rem
ium
Hilton RevPAR Premium 2003 Hilton RevPAR 2003 Market RevPAR 2003
Resort Hotels, Occupancy, Rate and RevPAR Performance vs 2002
(3.6)%
1.2%
(2.6)%
20.0%
10.6%
22.5%
(10)%
(5)%
0%
5%
10%
15%
20%
25%
Jan Feb Mar/Apr May June July
Occupancy % pts growth
Rate growth
RevPAR growth
Like for Like, Constant Currencies
March / April have been combined to avoid the distortion caused by the timing of Easter
Worldwide Betting - Revenue
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%
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%
2003£m
2003£m
2002£m
2002£m
Growth%
Growth%
(1) Includes FOBT turnover, year on year increase £1,160.6m.
eGaming Gross Win
30.8
26.626.8
15.9
10.4
0
5
10
15
20
25
30
35
First half 2001 Second half 2001 First half 2002 Second half 2002 First half 2003
£m
World cup
Hong Kong business
Hotels 73.7 56.2 108.4238.3
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
Hotels 73.7 56.2 108.4238.3
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
Breakdown of Lease Commitments
Fixed lease£m
Fixed lease£m
Minimum guarantee
£m
Minimum guarantee
£m
Contingentlease£m
Contingentlease£m
Total£m
Total£m
Forecast land and buildings full year lease commitments for 2003
Forecast land and buildings full year lease commitments for 2003
Forecast contingent commitments based on 2003 forecast results