2005 interim results 25 august 2005. brian wallace deputy group chief executive and finance director

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)