Hilton Group PLC
24 February 2005
Preliminary statement of results for the year to 31 December 2004
Year to Year to
31 December 2004 31 December 2003
£m £m
Turnover 11,893.4 8,930.5
Operating Profit*
Hotels 171.3 146.5
Betting and Gaming 273.4 214.1
Central costs and income (14.5) (13.6)
430.2 347.0
Interest (47.1) (74.6)
Profit before taxation* 383.1 272.4
Exceptional charges before taxation (0.6) (29.0)
Profit before taxation, after goodwill amortisation
and exceptional items 311.3 171.2
EBITDA* 561.9 485.3
Earnings per share* 20.4p 13.4p
Earnings per share, after goodwill amortisation and
exceptional items 16.5p 7.1p
Diluted earnings per share* 19.3p 13.4p
Dividend per share 9.60p 8.92p
* Before goodwill amortisation and exceptional items
Group Highlights
• Group profit before taxation, goodwill amortisation and exceptional items
up 41% to £383.1 million.
• Earnings per share before goodwill amortisation and exceptional items up
52% to 20.4 pence.
• Net borrowings reduced by £175.8 million to £971.9 million since
31 December 2003.
• Final dividend of 6.0 pence (up 8.7%) making a total of 9.6 pence for 2004.
• The Group intends to raise £300 million to £400 million of proceeds from
the disposal of hotel assets during the next 12 months, a substantial part
of which, is expected to be returned to shareholders.
Betting and Gaming Highlights
• Ladbrokes' profit up 28% to a record £273.4 million with strong growth in
all channels despite some adverse racing and football results towards the
end of the year.
• UK Retail profits up 24% to £215.3 million reflecting year on year
'over-the-counter' growth and increased machine profitability.
• eGaming profits up 50% to £21.3 million with particularly strong growth
from the poker site.
Hotels Highlights
• Hotel profits up 17% to £171.3 million as the overall recovery in hotel
trading continues.
• On a worldwide basis, overall like for like revpar at constant exchange
rates was up 7%, with an increase in occupancy of 4.3 percentage points and
an increase in rate of 0.2%.
• Profit in the UK and Ireland increased by 15% to £95.1 million.
• Profit in Europe and Africa increased 28% to £58.2 million with some
countries seeing encouraging growth towards the end of the year.
Sir Ian Robinson, Chairman, commented:
'Hilton Group enjoyed one of its best performances in recent years and the Board
is pleased to present a strong set of financial results with earnings per share
rising by 52%. The final dividend for the year will be 6.0 pence, up 8.7% on
last year, giving a full year total dividend of 9.6 pence; an increase of 7.6%.
The increasing profitability of Ladbrokes, up 28%, is just reward for its
innovative and professional approach to the betting and gaming business; it is
worthy of its pole position in the sector.
The hotel division has seen signs of recovery and increased its profitability by
17% in 2004. We continue to open new hotels under management contract and this
programme is set to continue. We were pleased to announce the appointment of
Ian Carter as Chief Executive of Hilton International, his international
experience of marketing quality brands will help consolidate and grow our market
leading position.
I am very proud of the brands we own and in the year ahead we will build further
on their strengths.'
David Michels, Group Chief Executive, commented:
'Continuing success in our betting and gaming businesses and the steady
improvement in the hotel division resulted in a good performance by the Group
overall, in what was an eventful but also encouraging year.
The appointment of Ian Carter at the end of the year as Chief Executive of
Hilton International marked an important stage for the Group. His approach to
the hotels business will, I believe, offer a fresh insight to the opportunities
that lie ahead.
2004 was the first uninterrupted year of hotel recovery for some time. Revpar
rose steadily and more Hilton and Scandic properties were added during the
course of the year. On a less positive note we felt the impact of increasing
cost pressures and while many remain outwith our control, we will nonetheless
seek to mitigate these costs where possible. Our brand remains our greatest
asset and this was reinforced in the latest BDRC research, which measures our
brand position in terms of awareness, usage and performance; in most places we
continue to lead in our particular market.
The advent of the Gambling Bill has subjected the betting and gaming industry to
unprecedented scrutiny with casinos, Fixed Odds Betting Terminals and betting
exchanges all receiving widespread news coverage. We believe, however, that the
core betting shop business will continue to grow and our online businesses will
expand further afield with ever more innovative products. We will also seek to
take advantage of Regional casino opportunities, assuming the Gambling Bill is
enacted.
The Group intends to raise £300 million to £400 million of proceeds from the
disposal of hotel assets during the next 12 months, a substantial part of which
is expected to be returned to shareholders.'
Outlook
The Group has had a satisfactory start to 2005. Hotel trading is improving in
most parts of the world and the acceleration of development at Ladbrokes will
further reinforce our leading position in the UK betting sector.
Enquiries to:
David Michels, Group Chief Executive
Brian Wallace, Deputy Group Chief Executive and Finance Director
Alex Pagett, Director Group Corporate Affairs (mobile +44 (0)7974 229888)
James Mason, Head of Investor Relations (mobile +44 (0)7974 229462)
Telephone: +44 (0)20 7856 8109
A live audiocast of the presentation to analysts, together with this news
release and slide presentation, will be available on Hilton Group's corporate
website which may be found at www.hiltongroup.com.
High-resolution print quality images to accompany this announcement can be
downloaded free of charge on www.vismedia.co.uk.
Overview of Results
Group profit before taxation, goodwill amortisation and exceptional items rose
41% to £383.1 million.
Betting and Gaming gross win increased by 16% to £877.1 million with growth in
all channels. With operating costs increasing by 11%, mainly due to increased
opening hours in the expanding UK and Irish shop estate and transactional growth
in our eGaming and Telephone betting businesses, operating profit increased by
28% to a record £273.4 million.
The hotel division saw operating profit rise by 17% to £171.3 million as the
steady recovery in overall trading continued, driven mainly by an encouraging
performance in London and, in the second half, Europe. Underlying profit, after
adjusting for property changes, one off charges and exchange movements,
increased by 20%.
The Group is currently progressing the disposal of 11 UK hotels, which without
considerable capital investment, would not have met Hilton brand standards.
Additionally, the Group is examining the possibility of further asset disposals
during the next 12 months either through outright sales or through 'sale and
manage' arrangements. Should these disposals be achieved, it is envisaged that
the related proceeds from all asset sales would total £300 million to £400
million. It is currently the Group's intention to return a substantial part of
these proceeds to shareholders although the mechanism of this return of capital
has yet to be determined.
Further asset disposals will be considered in subsequent periods, subject to
market conditions.
The Board
Ian Carter was appointed Chief Executive of Hilton International and a director
of Hilton Group plc on 1 February 2005. Ian was formerly officer and President
of Black and Decker Corporation, Europe, Middle East, Africa and Asia and has
broad international management and marketing experience gained through 11 years
with General Electric and Low & Bonar plc.
On 1 June 2004 Pippa Wicks was appointed as a non-executive director of Hilton
Group plc. Pippa was appointed Managing Director of AlixPartners, the
performance improvement and turnaround specialist advisory firm, in 2003. She
previously held senior positions with Pearson plc and was Group Finance Director
at Courtaulds Textiles plc from 1993 to 1999.
Dividend
The Board has recommended a final dividend of 6.0 pence per share payable on 1
June 2005 to shareholders on the register on 4 March. This final dividend,
together with the interim dividend of 3.6 pence, gives a total dividend of 9.6
pence and represents an increase of 7.6% on last year's dividend.
Betting and Gaming
Business Review
Ladbrokes continued to improve its product and service offer to customers across
all channels. Our lead in technology, shop design, product development and
customer service continued to be the catalyst for growth, with record levels of
gross win and profit in 2004.
The UK shop business completed the installation of Fixed Odds Betting Terminals
(FOBTs) in June, faster than any other company. At the end of 2004, 5,995
terminals and 1,482 Amusements With Prizes (AWP) machines were in place.
Ladbrokes leads the industry in FOBT product development and fully complies with
the FOBT Code of Practice agreed with the Department of Culture, Media & Sport
(DCMS) and the Gaming Board, which became applicable on 1 April 2004. In
addition, Ladbrokes was proud to be the first company to gain a compliance
accreditation from Gamcare, the organisation which supports problem gamblers and
their families.
Ladbrokes' staff won the 'Young Customer Services Professional' and 'Retail
Customer Services Team' titles at the prestigious National Customer Services
Awards 2004, confirming our staff to be the best and most knowledgeable in the
industry and key to our continuing success. We have continued to invest in the
shop estate with the acquisition of 44 shops and the opening of 8 new locations.
In addition 63 shops were relocated or extended and 90 refurbished. This
activity continues to improve the quality and size of the estate and at the end
of 2004 there were 1,921 Ladbrokes shops. We will accelerate this level of
activity in 2005.
Shop opening hours increased by 9% and the number of shop trading days by 2.7%.
Just as importantly, we increased the number of betting events available to our
customers by 14%, examples being virtual reality horse and dog racing and
betting-in-running on football matches and other sporting tournaments. These
new events were underpinned by the increasing number of live horse and greyhound
races taking place each day. Our focus on technology allows us to present this
expanding array of products in an efficient and exciting manner.
Betting and Gaming (continued)
Ladbrokes is the only betting company able to offer a total betting service
which allows its customers to bet whenever and wherever they want - using their
one customer account. Launched early in 2004, customers can place bets and
deposit or withdraw betting funds through any of Ladbrokes' distribution
channels - shops, internet, telephone and interactive TV.
Telephone betting active customers increased by 7% and call volumes by 11%.
Investment in technology continued with the introduction of intelligent
telephone call routing and an improved call recording system; both have improved
customer service and operational efficiency. Our ambition to increase market
share, and simultaneously, profitability is delivering the desired results.
The rapid growth of eGaming continued with another strong performance. The
poker site, Ladbrokespoker.com, is the leader within Europe. Revenues from
table rake and tournaments more than doubled in 2004, with active customers
exceeding 60,000. Ladbrokes runs some of the biggest poker tournaments in the
world, including Pokermillion - the finals of which generate large television
audiences and in 2005 will provide a $1 million first prize.
Ladbrokes' sportsbook continues to grow both in terms of active customers and
the depth and breadth of product offering. A significant area of development in
2004 has been betting-in-play. The increasingly live nature of the sportsbook
is proving beneficial both in terms of customer numbers and their usage of the
site.
Ladbrokesgames.com increased its offer to over 20 games, whilst
Ladbrokescasino.com continued to grow both active customers and gross win in a
very competitive market.
Vernons, using its well known brand, continued to develop its online and postal
games products to offset the decline in the traditional weekly pools betting
business. Total sales in 2004 remained constant.
Ladbrokes continues to evaluate the opportunity presented by the Gambling Bill
to develop a Regional casino, where and when the legislation defines the
opportunity. Such a venture would bring together the Group's unique set of
operational skills and world beating brands.
Betting and Gaming (continued)
We have been encouraged by progress made with Government to seek an equitable
solution to the taxation of betting exchanges and will continue these efforts.
Betting and Gaming (continued)
Operating Results
Gross win by business Year to Year to
31 December 2004 31 December 2003
£m £m
UK Retail 652.5 575.1
Ireland & Belgium 69.0 67.6
Telephone Betting 46.1 28.9
eGaming 89.3 63.7
Vernons 20.2 20.2
Betting and Gaming 877.1 755.5
Operating profit by business Year to Year to
31 December 2004 31 December 2003
£m £m
UK Retail 215.3 173.1
Ireland & Belgium 13.2 11.5
Telephone Betting 17.8 9.4
eGaming 21.3 14.2
Vernons 5.8 5.9
Betting and Gaming 273.4 214.1
Operating profit is before goodwill amortisation and exceptional items
Betting and Gaming (continued)
Gross win increased by 16% to £877.1 million with growth in all channels. After
deducting gross profits tax and VAT, gross profit grew 17% to £748.6 million.
Operating costs increased by 11%, mainly due to increased opening hours in the
expanding UK and Irish shop estate, plus the transactional growth in our eGaming
and Telephone betting business.
Consequently, operating profit increased by 28% to a record £273.4 million.
UK Retail
• Shop numbers increased from 1,875 to 1,921 with 52 shops acquired or
opened. In addition, 153 shops were relocated, extended or refurbished.
• Gross win increased by 13% to £652.5 million. Excluding machines,
over-the-counter (OTC) increased by 6%. In the first half OTC growth was 14%
helped by good results at Cheltenham, the Grand National and Greece's success at
Euro 2004. However, poor horse and football results, notably in the European
Champions League and UEFA Cup tournaments, led to a 2.5% decline in the second
half of the year. Slippage grew by 5% in 2004 and average stake per slip
increased by 1% to £8.47.
• Gross win from FOBTs and AWPs grew by 41%. Having completed the
installation programme for FOBTs in June, we ended the year with 5,995 terminals
and 1,482 AWPs. The average weekly gross win per FOBT for the year was £584.
• Operating costs increased by 7% to £340.8 million resulting mainly from
the greater number of shops and increased shop trading days. Our horse race
levy payments increased as a direct consequence of our success at increasing UK
horse racing gross win.
• Operating profit was £215.3 million representing a 24% increase.
European Retail
• Gross win in Ireland and Belgium increased by 2% and operating profit
increased by 15% to £13.2 million.
• Ireland benefited from an aggressive shop development programme with 14
shops acquired or opened, and a further 6 relocated and refurbished. We have
also completed the £2 million introduction of an Electronic Point of Sale system
and new screen systems.
Betting and Gaming (continued)
Telephone Betting
• Gross win increased by 60% to £46.1 million, generated by increased
call volumes and a good run of results in the year improving margin from 6.1% to
7.3%. Excluding results from high rollers, underlying gross win grew by 30%.
• Call volumes increased 11% to 6.7 million due to an ever improving
service and product offering. The number of active customers in the period grew
7% to 125,000.
• Operating costs grew by 41% reflecting the growth in call volumes,
banking transactions and increased UK horserace betting levy. Average operator
cost per call increased by 2% in the year.
• Operating profit increased 89% to £17.8 million.
eGaming
• Gross win increased by 40% to £89.3 million with particularly strong
growth in Poker and Sportsbook.
• Poker gross win more than doubled with 64,000 active players, an
increase of 156%. Sportsbook gross win benefited from a 49% increase in active
customers to 306,000 and good results in Euro 2004. Sportsbook registrations
increased by 34% to 357,000, and remain a focal point for recruitment for our
gaming products. In spite of the casino market remaining highly competitive, we
continued to grow and achieved a 7% increase in gross win. Gross win from games
increased by 79% and is an increasingly important area for us.
• Operating costs grew 36%, due mainly to higher transaction volumes and
marketing costs.
• Operating profit increased by 50% to £21.3 million.
Vernons
• Notwithstanding the continuing decline in traditional pools betting,
gross win remained level, with 2004 generating an operating profit of £5.8
million.
Hotels
Business Review
Encouraging signs emerged in 2004 with both corporate and leisure business
improving. The potential impact of war, terrorism and other natural disasters
remain, but appear to have lessened, and the prospects for the sector are better
than they have been for several years.
As trading improves we continue to focus on mitigating the impact of cost rises
in certain areas, notably wages, energy and business rates.
Capital expenditure remains under tight control. Excluding the Hilton Sydney
redevelopment, which is due for completion in the second half of this year, 2004
capital expenditure was £102 million.
The importance of technology and the growth of internet bookings continues. Our
distribution strategy, to guarantee the best price through our own branded
websites, remains. 2004 was also a year of strong growth in our Global
Distribution Systems (GDS) business and there was an increase of 94% in
reservations through our branded websites. Overall, electronic reservations
revenue from GDS and branded websites represented 24% of all rooms booked across
our hotels. By 2008, we estimate half of all reservations will come from
electronic channels.
The brands continue to expand with 17 new Hilton hotels opened in 2004 including
the Arc de Triomphe, Paris, and Shenzhen, China, with a further 28 due to open
over the course of the next two years. Although still in its infancy,
franchising of the Hilton and Scandic brands is now underway. The interest in
franchising is encouraging and future plans for this business are being
explored.
Hilton Worldwide Resorts continued its success during 2004 with significant
growth, strong tour operator partnerships, increased online package bookings and
a high number of repeat guests. The total upscale resort portfolio increased to
59 properties located in exotic places around the world. In November, Hilton
Worldwide Resorts won the coveted 'Marketing Strategy of the Year Award' at the
prestigious National Business Awards in the UK and expansion is set to continue.
Hotels (continued)
The luxury Conrad brand, a joint venture with Hilton Hotels Corporation, had a
successful year. Improved trading performance was achieved in all regions and
successful new hotels enjoyed high profile openings in Asia and the US. The
prospects of further new development opportunities in Tokyo, Phuket,
Indianapolis, Las Vegas and Dubai, have helped to create a greater sense of
momentum for Conrad.
The strength of the Hilton brand was recognised with numerous awards over the
last year. Hilton International won 'Best International Hotel Chain' at the
12th annual Grand Travel Awards 2004, 'Best Hotel Loyalty Scheme' for Hilton
HHonors at the Business Traveller Reader Awards 2004, 'Europe's Leading Hotel
Group' at the World Travel Awards 2004 and two awards at the Worldwide
Hospitality Awards 2004 in Paris.
Hilton University - the global forum for learning and development - had another
successful year in 2004. Every hotel participates in the University and learners
completed over 45,000 e-learning programmes. In addition, a range of other
development opportunities were offered including executive education programmes
for senior managers with the IMD Business School in Switzerland and online
English language learning. The University is continuing to make an important
contribution to our ability to attract and develop the best human talent in the
industry.
LivingWell performed well in a difficult UK market and increased membership over
the period. Two new clubs were opened in Australia (Willoughby, north Sydney
and the Gold Coast) bringing the total overseas to 14. The hotel based concept
'LivingWell Express' continued to flourish with 14 new clubs being added to the
existing ten. New contracts were secured to manage the Corporate health clubs
at the new offices for Barclays in London and Sage in Newcastle.
Sadly, in October, the Hilton resort hotel in Taba, Egypt, suffered at the hands
of terrorists and we lost 31 guests and staff. Following the terrible Tsunami
events in the Far East at the end of 2004, Hilton hotels were fortunate to
escape largely unscathed and the five Hilton properties we operate in the
regions affected remained operational. Despite these tragic events, the Group
remains fully committed to working in these locations and we believe that
helping to achieve economic recovery through tourism is, perhaps, the most
important contribution.
Hotels (continued)
Operating Results
Turnover and operating profit by Year to 31 December 2004 Year to 31 December 2003
region
Operating Operating
Turnover profit* Turnover profit*
£m £m £m £m
United Kingdom 655.1 95.1 621.4 82.6
Europe & Africa 1,138.3 58.2 1,134.5 45.6
Middle East & Asia Pacific 652.7 18.5 675.8 16.4
The Americas 236.0 18.9 229.7 12.9
LivingWell 50.0 6.3 50.2 7.4
2,732.1 197.0 2,711.6 164.9
Central and
non-operating items - (25.7) - (18.4)
2,732.1 171.3 2,711.6 146.5
Memo: Scandic acquired 503.1 17.6 500.0 19.8 **
* Operating profit is before goodwill amortisation and exceptional items
('profit')
** Includes £5.9 million Pandox associate income, the investment was disposed of
in December 2003
Revenue per available room ('revpar') by Year to Year to Change
region (like for like, constant exchange 31 December 2004 31 December 2003
rates) £ £
Hilton Branded:
United Kingdom
- London 76.19 67.74 12.5%
- Provinces 51.53 49.87 3.3%
Total United Kingdom 61.53 57.11 7.7%
Europe & Africa 51.20 48.74 5.0%
Middle East & Asia Pacific
- Middle East 41.36 34.66 19.3%
- Asia Pacific 48.46 45.75 5.9%
Total Middle East & Asia Pacific 45.24 40.77 11.0%
The Americas 44.50 39.04 14.0%
Total Hilton Branded 50.81 46.84 8.5%
Scandic Branded 34.50 33.98 1.5%
Total Hotels Division
Revpar 46.65 43.58 7.0%
Occupancy 67.2% 62.9% 4.3% pts
Average room rate 69.46 69.31 0.2%
Hotels (continued)
Profit in the year rose by £24.8 million (16.9%) to £171.3 million. Underlying
profit after adjusting for property changes, the disposal of Pandox in 2003, one
off charges and exchange rate movements increased by 20.4%.
On a worldwide basis (like for like properties at constant exchange rates)
revpar increased by 7.0%. The revpar increase was primarily occupancy driven
(up by 4.3 percentage points) with a slight increase in rate of 0.2%.
Maintaining tight control on capital expenditure remains a priority. The
re-development of the Sydney Hilton is continuing and the property is now
expected to open in the second half of 2005 and is the only major ongoing
project within the owned estate.
Four non-core UK properties have been disposed of during the last twelve months
with a further eleven currently on the market.
United Kingdom and Ireland
• Profit in the United Kingdom and Ireland increased by 15.1% to £95.1
million. After adjusting for property acquisitions and disposals,
underlying profit increased by 16.0%.
• Overall like for like revpar was up 7.7% driven by both rate (up 5.0%) and
occupancy (up 1.9 percentage points).
• London saw a good improvement in revpar throughout the year with
occupancies remaining high and rate improving, especially in the fourth
quarter.
• Performance in the provincial estate was more mixed. However the larger
conference hotels experienced an improvement in Corporate and meetings
business.
• We continue to sign management contracts for new properties. The
previously announced Hiltons at Dublin airport and Manchester are scheduled
to open in 2005 and 2006 respectively.
Hotels (continued)
Europe and Africa
• Overall profit rose by 27.6% to £58.2 million, with some countries seeing
encouraging growth, especially in the later part of the second half.
• Hilton branded Europe & Africa revpar was up 5.0% with Germany seeing some
signs of recovery as revpar rose by 6.4% - primarily occupancy driven.
• Paris continued to experience difficult trading conditions, however
properties in Central and Eastern Europe, notably Czech Republic and Romania
performed well.
• Recovery in the Hilton branded owned and leased estate continued
throughout the year with revpar increasing by 4.1%.
• Revpar in the Scandic properties increased by 1.5%. The second half saw
some encouraging levels of business return into the key markets of Stockholm
and Helsinki.
Middle East and Asia Pacific
• The bounce back from the Iraqi conflict and SARS in 2003 saw profits rise
by 12.8% to £18.5 million.
• The effect of the Tsunami in December on our properties in Phuket, Colombo
and the Maldives was minimal and little or no damage was suffered.
• Growth in China was strong with revpar up 48.1%. However, the Japanese
market remains difficult with significant downward pressure on rates.
• Overall, the Middle East saw good performances with revpar growing by
19.3%, particularly Egypt with revpar up 32.2%.
• Eight properties in India have been co-branded as Trident Hilton under a
franchise arrangement.
Hotels (continued)
The Americas
• The area saw profit rise by 46.5% to £18.9 million as economic stability
in Latin America and the recovery post SARS in Canada helped results.
• Revpar for the year saw a growth of 14.0%, with a 10.5% growth in the
owned and fixed leased estate.
• The resort properties in the Caribbean had an excellent year and saw
profits increase by 28.3%, as successful marketing campaigns increased
demand.
• Latin America saw revpar increase by 36.1% with Venezuela (up 91.0%) and
Brazil (up 23.9%) seeing the highest levels of improvement.
LivingWell
• LivingWell saw profit fall by 14.9% to £6.3 million. After excluding
pre-opening costs for the new clubs in Australia, profit fell by 8.1%.
• Following a very difficult start to the year membership overall rose by
10,195 (7.5%) with strong sales in the last six months.
• Significant pricing pressure exists in the market place and yields are
down as a result.
• During the year significant focus has been placed on member retention,
resulting in a 3.6 percentage point improvement to 67.8% an all-time member
retention high for LivingWell.
Operating and Financial Review
Financial review
Turnover and profit before Year to Year to
tax
31 December 2004 31 December 2003
Turnover Profit Turnover Profit
£m £m £m £m
Hotels 1,770.8 171.3 1,663.4 146.5
Betting and Gaming 10,122.6 273.4 7,267.1 214.1
Central costs - (14.5) - (13.6)
11,893.4 430.2 8,930.5 347.0
Interest - (47.1) - (74.6)
11,893.4 383.1 8,930.5 272.4
Profit is before goodwill amortisation and exceptional items.
Trading summary
Turnover for the Group was £11,893.4 million an increase of £2,962.9 million
(33%), mainly as a result of higher Fixed Odds Betting Terminal (FOBT) revenue
in the Betting and Gaming division. Hotels increased £107.4 million to £1,770.8
million (after the impact of £53 million adverse exchange). Second-half Group
turnover of £6,259.3 million was up £1,297.7 million, again largely as a result
of FOBT revenue.
Operating profit before goodwill amortisation and exceptional items rose 24.0%
to £430.2 million (2003: £347.0 million) including a £4.2 million adverse
exchange impact mainly in Hotels. Betting and Gaming profits increased by £59.3
million (27.7%) to £273.4 million and Hotel profits rose £24.8 million (16.9%)
to £171.3 million. Second-half Group operating profit was up 10.5% to £216.2
million, with a 6.6% increase in Betting and Gaming and a 15.3% increase in
Hotels.
Interest
The interest charge for the year of £47.1 million is 36.9% lower than last year
(£74.6 million). This reduction was due to the full year impact from repayment
of the £125 million of 8.875% bonds in August 2003 and the £300 million 3.375%
convertible bonds issued October 2003 combined with lower bank interest rates,
lower average debt levels and disposal of the Pandox associate at the end of
2003. EBITDAR interest cover (after adjusting for payments under fixed leases
and minimum guarantees, excluding associates) of 5.6 times (2003: 4.0 times).
Profit Before Tax
The 24.0% increase in operating profit combined with the 36.9% reduction in
interest charge resulted in a 40.6% increase in profit before taxation,
exceptional items and goodwill amortisation to £383.1 million (2003: £272.4
million).
Exceptional items
The £0.6 million exceptional charge for the year is due to net losses on
disposal of non-core fixed assets, including provisions for future disposals.
There is no related tax charge or credit. The £9.0 million exceptional tax
credit relates to a specific case settled during the year in respect of which
related losses were previously treated as exceptional items.
Taxation
The taxation charge in 2004 was £59.4 million, before exceptional items. This
represents an effective tax rate of 15.5% on profits before goodwill
amortisation and exceptional items (2003: 22.0%). This rate reflects the
satisfactory resolution of a number of issues with tax authorities, the
recognition of deferred tax assets in respect of tax losses and continuing
initiatives to reduce the underlying rate. The 2005 rate is expected to be 20%.
Earnings per share (EPS)
EPS (before the impact of goodwill amortisation and exceptional items) grew
52.2% to 20.4 pence (2003: 13.4 pence) reflecting the increase in profit before
tax and lower effective tax rate. EPS (including the impact of goodwill
amortisation and exceptional items) was 16.5 pence (2003: 7.1 pence). Fully
diluted EPS was 15.6 pence (2003: 7.1 pence) after adjustment for outstanding
share options and the convertible bond issued in October 2003.
Dividend
The Board has proposed a final dividend of 6.0 pence per share, an increase of
8.7%, bringing the total dividend for the year to 9.6 pence per share (2003:
8.92 pence per share), covered 2.1 times (2003: 1.5 times) by EPS (before the
impact of goodwill amortisation and exceptional items). The total cost of the
dividend is £152.3 million (2003: £141.1 million) and is covered 2.1 times by
earnings before goodwill amortisation and exceptional items (2003: 1.5 times)
and 1.7 times by profit attributable to shareholders (2003: 0.8 times).
Cash flow, capital expenditure and borrowings
Cash Flow Year to Year to
31 December 2004 31 December 2003
£m £m
Operating Activities 546.8 501.9
Capital Expenditure (189.6) (189.9)
Operating Cash Flow 357.2 312.0
Disposals 40.1 63.1
Other 19.1 0.5
Interest & Tax (98.6) (120.5)
Free Cash Flow 317.8 255.1
Acquisitions (23.2) (5.4)
Dividends (144.5) (141.0)
Net Cash Flow 150.1 108.7
Cash flow from operating activities in 2004 was £546.8 million, £44.9 million
better than in 2003 (£501.9 million), mainly due to higher EBITDA offset by
working capital movements.
Capital expenditure on operating assets of £189.6 million was £0.3 million below
2003 (£189.9 million), with £39.1 million of acquisition linked development in
hotels including the major refurbishment in the Sydney and Dusseldorf
properties. Planned capital expenditure for 2005, excluding Sydney, is £190
million, with £120 million for Hotels and £70 million for Betting and Gaming
(excluding shop acquisitions).
Interest and tax outflows amounted to £98.6 million compared to £120.5 million
in 2003, due primarily to lower interest payments. Free cash flow before
acquisitions and dividends increased £62.7 million to £317.8 million.
Acquisitions in the year of £23.2 million related to Betting and Gaming.
Cash inflow from operating activities for the second half is £291.2 million,
£15.8 million higher than last year. The increase is mainly due to the increase
in EBITDA and working capital movements. Capital expenditure on operating for
the second half was £100.8 million compared to £88.1 million in 2003.
At 31 December 2004, the Group had gross borrowings of £1,455.2 million and cash
and short-term investments of £483.3 million, resulting in net debt of £971.9
million (2003: £1,147.7 million). The £175.8 million decrease in borrowings is
after a favourable exchange translation impact of £17.8 million.
International Financial Reporting Standards (IFRS)
From 2005 the Group will prepare its consolidated accounts in accordance with
IFRS. Reconciliations of UK GAAP to IFRS for 2004 profit before tax and 2004 and
2003 net assets are shown in Note 8 to the accounts. More details of the impact
of IFRS on the Group's financial statements are available at
www.hiltongroup.com.
Consolidated profit and loss account
Year to Year to
31 December 2004 31 December 2003
Before Before
exceptional exceptional
items and items and
goodwill goodwill
amortisation Total amortisation Total
£m £m £m £m
Turnover - continuing operations 11,893.4 11,893.4 8.930.5 8.930.5
Cost of sales before goodwill
amortisation and depreciation (11,247.6) (11,247.6) (8,351.7) (8,354.0)
Goodwill amortisation - (71.2) - (71.8)
Depreciation and amounts written off
tangible and intangible fixed assets (131.7) (131.7) (138.3) (147.3)
Cost of sales (11,379.3) (11,450.5) (8,490.0) (8,573.1)
Gross profit 514.1 442.9 440.5 357.4
Administrative expenses (96.9) (96.9) (113.0) (113.0)
Group operating profit
- continuing operations 417.2 346.0 327.5 244.4
Share of results from associated
undertakings 13.0 13.0 19.5 19.5
Share of goodwill amortisation of
associated undertakings - - - (0.4)
Total operating profit 430.2 359.0 347.0 263.5
Continuing operations:
Profit / (loss) on fixed assets - (0.6) - (17.7)
Profit before interest 430.2 358.4 347.0 245.8
EBITDA 561.9 561.3 485.3 465.3
Interest (47.1) (47.1) (74.6) (74.6)
Profit on ordinary activities before
taxation 383.1 311.3 272.4 171.2
Tax on profit on ordinary activities (59.4) (50.4) (59.9) (59.0)
Profit on ordinary activities after
taxation 323.7 260.9 212.5 112.2
Equity minority interests (0.1) (0.1) (0.2) (0.2)
Profit attributable to shareholders 323.6 260.8 212.3 112.0
Dividends (152.3) (152.3) (141.1) (141.1)
Transferred to / (from) reserves 171.3 108.5 71.2 (29.1)
Earnings per share:
- basic 20.4p 16.5p 13.4p 7.1p
- diluted 19.3p 15.6p 13.4p 7.1p
Consolidated balance sheet
31 December 2004 31 December 2003
£m £m
Intangible assets 1,616.4 1,633.2
Operating assets 2,561.0 2,568.6
Investments 57.1 77.4
4,234.5 4,309.2
Assets held for resale 2.8 2.7
Stocks 15.8 16.9
Debtors 368.1 346.7
Cash at bank and in hand 483.3 600.6
870.0 966.9
Creditors less than one year (988.0) (1,150.2)
Net current liabilities (118.0) (183.3)
Creditors greater than one year (1,354.8) (1,458.5)
Provisions (207.6) (220.1)
2,554.1 2,447.3
Capital and reserves
Called up share capital 158.6 158.2
Share premium account 1,729.6 1,722.2
Revaluation reserve 243.3 241.5
Other reserves 143.7 150.3
Profit and loss account 276.0 171.5
Equity shareholders' funds 2,551.2 2,443.7
Equity minority interests 2.9 3.6
2,554.1 2,447.3
Statement of total recognised gains and losses
Year to Year to
31 December 2004 31 December 2003
£m £m
Profit attributable to shareholders 260.8 112.0
Currency translation differences on
foreign currency net investments (2.2) 6.5
Total recognised gains and losses relating
to the period 258.6 118.5
Consolidated cash flow
Year to Year to
31 December 2004 31 December 2003
£m £m
Cash inflow from operating activities 546.8 501.9
Dividends received from associated undertakings 2.3 4.0
Returns on investments and servicing of finance
Net interest paid (44.0) (63.4)
Net cash outflow from returns on investments and
servicing of finance (44.0) (63.4)
Taxation
UK corporation tax paid (34.2) (27.6)
Overseas tax paid (20.4) (29.5)
Taxation paid (54.6) (57.1)
Capital expenditure and financial investment
Payments for operating assets (189.6) (189.9)
Payments for intangible assets (23.2) (5.4)
Payments for fixed asset investments - (1.1)
Receipts from sales of intangible and operating assets 38.6 20.0
Receipts from sales of other investments 1.5 -
Net cash outflow for capital expenditure and financial
investment (172.7) (176.4)
Acquisitions and disposals
Repayment of loans from associates 17.9 -
Disposals of associates - 43.1
Loans to associates (1.1) (2.0)
Purchase of interests in associates - (0.4)
Net cash inflow from acquisitions and disposals
16.8 40.7
Total equity dividends paid (144.5) (141.0)
Cash inflow before use of liquid resources and
financing 150.1 108.7
Opening net borrowings (1,147.7) (1,164.8)
Net cash inflow 150.1 108.7
Exchange movements 17.8 (96.0)
Issue of ordinary share capital 7.8 3.9
Other non-cash movements 0.1 0.5
Closing net borrowings (971.9) (1,147.7)
Reconciliation of movements in shareholders' funds
Year to Year to
31 December 2004 31 December 2003
£m £m
Opening shareholders' funds 2,443.7 2,465.8
Total recognised gains and losses 258.6 118.5
Dividends (152.3) (141.1)
New share capital subscribed 7.8 3.9
Net decrease due to shares held in ESOP trusts (6.6) (3.4)
Closing shareholders' funds 2,551.2 2,443.7
Note of historical cost profits and losses
Year to Year to
31 December 2004 31 December 2003
£m £m
Reported profit on ordinary activities before taxation 311.3 171.2
Adjustment for previously recognised revaluation (losses)
/ gains (4.5) 3.2
Historical cost profit on ordinary activities before
taxation 306.8 174.4
Transfer from profit and loss reserve after taxation,
minority interest and dividends 104.0 (25.9)
Notes to the accounts
1. Turnover and profit by activity
Year to 31 December 2004 Profit before Profit after
exceptionals exceptionals
& goodwill & goodwill
Turnover amortisation amortisation
£m £m £m
Continuing operations:
Hotels 1,770.8 171.3 99.5
Betting and Gaming 10,122.6 273.4 273.4
Central costs and income - (14.5) (14.5)
11,893.4 430.2 358.4
Interest - (47.1) (47.1)
11,893.4 383.1 311.3
Year to 31 December 2003 Profit before Profit after
exceptionals exceptionals
& goodwill & goodwill
Turnover amortisation amortisation
£m £m £m
Continuing operations:
Hotels 1,663.4 146.5 45.3
Betting and Gaming 7,267.1 214.1 214.1
Central costs and income - (13.6) (13.6)
8,930.5 347.0 245.8
Interest - (74.6) (74.6)
8,930.5 272.4 171.2
Notes to the accounts
2. Exceptional items
Year to Year to
31 December 2004 31 December 2003
£m £m
Operating items
Amounts written off tangible and intangible
fixed assets and investments (a) - (11.3)
Total operating exceptional items - (11.3)
Non-operating items
Continuing operations:
Net loss on tangible fixed assets including
provisions (b) (0.6) (17.7)
Total non-operating exceptional items (0.6) (17.7)
Exceptional items before taxation (0.6) (29.0)
Taxation thereon (c) - 0.9
Exceptional tax credit (d) 9.0 -
Exceptional items after taxation 8.4 (28.1)
(a) Amounts written off tangible and intangible fixed assets and investments
in 2003 comprise impairment in the value of hotels across the estate and
investments.
(b) The net loss on tangible fixed assets in 2004 relates to disposal of
non-core assets and also includes provisions for losses on certain non-core
hotels. The loss in 2003 included provisions for losses on certain non-core
hotels and £3.2m profit on disposal of the Pandox associate.
(c) There is no tax relief on the 2004 exceptional loss, the tax credit for
2003 related to operating exceptional items.
(d) The £9.0m exceptional tax credit in 2004 relates to a specific case
settled in the period where related losses were historically expensed through
exceptional items.
3. Interest
The interest charge is net of interest receivable of £42.0m (2003: £34.2m) and
includes a share of interest charge from associated undertakings of £8.0m (2003:
£10.3m). The interest charge, excluding associate interest, is covered 5.6
times (2003: 4.0 times) by profit before depreciation, goodwill amortisation and
exceptional items (adjusted for payments under fixed leases and minimum
guarantees).
Notes to the accounts
4. Analysis of total tax charge
Year to Year to
31 December 2004 31 December 2003
£m £m
UK corporation tax based on the taxable profit for
the year at a rate of 30.0% (2003: 30.0%) 48.7 38.9
Double taxation relief - (5.9)
48.7 33.0
Prior year adjustments (9.0) -
Overseas tax 19.8 19.3
Associated undertakings 1.3 0.7
Current tax charge 60.8 53.0
Deferred tax charge (10.4) 6.0
Total tax charge 50.4 59.0
5. Earnings per share
The calculation of basic and diluted earnings per share before and after
exceptional items and goodwill amortisation and the weighted average number of
shares is set out below. It is included as it provides a better understanding
of the underlying trading performance of the Group.
Year to Year to
31 December 2004 31 December 2003
millions millions
Basic weighted average number of shares 1,584.2 1,580.5
Dilutive potential ordinary shares:
- Employee share options 12.5 2.2
- Convertible bond shares 115.4 -
- Contingently issuable shares 3.4 -
Diluted weighted average number of shares 1,715.5 1,582.7
Basic Diluted Basic
earnings earnings* EPS Diluted EPS
Year to 31 December 2004 £m £m pence per pence per
share share
Profit attributable to shareholders before
exceptional items and goodwill amortisation 323.6 330.7 20.4p 19.3p
Exceptional items net of tax 8.4 8.4 0.6p 0.5p
Goodwill amortisation (71.2) (71.2) (4.5)p (4.2)p
Profit attributable to shareholders 260.8 267.9 16.5p 15.6p
Notes to the accounts
5. Earnings per share (continued)
Basic Diluted Basic
earnings earnings* EPS Diluted EPS
Year to 31 December 2003 £m £m pence per pence per
share share
Profit attributable to shareholders before
exceptional items and goodwill amortisation 212.3 212.3 13.4p 13.4p
Exceptional items net of tax (28.1) (28.1) (1.8)p (1.8)p
Goodwill amortisation (72.2) (72.2) (4.5)p (4.5)p
Profit attributable to shareholders 112.0 112.0 7.1p 7.1p
*Diluted earnings include an adjustment to the attributable profit to reflect a
reduction in the interest charge, net of tax of £7.1 million (2003: £nil) which
would result from the conversion of the convertible bond into ordinary share
capital.
6. Reconciliation of operating profit to net cash inflow from operating
activities
Year to Year to
31 December 2004 31 December 2003
£m £m
Operating profit 359.0 263.5
Depreciation 131.7 138.3
Write off tangible and intangible fixed assets and
investments - 11.3
Amortisation of subsidiary goodwill 71.2 71.8
Increase in assets held for resale (0.1) -
(Increase)/decrease in stocks (0.3) 0.5
(Increase)/decrease in debtors (14.7) 4.9
Increase in creditors 16.3 34.0
Decrease in provisions (3.3) (3.5)
Share of profits from associated undertakings (13.0) (19.5)
Amortisation of associated undertaking goodwill - 0.4
Other items - 0.2
Net cash inflow from operating activities 546.8 501.9
Notes to the accounts
7. Basis of reporting
(a) The financial statements have been prepared on the basis of the
accounting principles set out in the Group's 2003 statutory accounts.
(b) The financial information set out in this document does not constitute
the Group's statutory accounts for the years ended 31 December 2004 or 31
December 2003. The annual report and accounts for the year ended 31 December
2004 were approved by the Board of Directors today but have not yet been
delivered to the Registrar of Companies. The auditors' report on the statutory
accounts for 2004 was unqualified and did not contain a statement under section
237 of the Companies Act 1985. Statutory accounts for 2003 have been delivered
to the Registrar of Companies. The auditors' report on the statutory accounts
for 2003 was unqualified and did not contain a statement under section 237 of
the Companies Act 1985.
The 2004 report and accounts, together with details of the dividend arrangements
and the annual general meeting, will be despatched to shareholders on 4 April
2005. The annual general meeting will take place at the Hilton London Metropole
at 11.00am on 20 May 2005.
8. International Financial Reporting Standards (IFRS)
Hilton is required to adopt International Financial Reporting Standards (IFRS)
for financial reporting from 2005 onwards. The Group's first results reported
under IFRS will be the interim results for 2005.
A reconciliation of the impact on profit before tax, goodwill amortisation and
exceptional items ('profit before tax') and net assets is shown below.
Profit before tax Net assets
2004 2004 2003
£m £m £m
UK GAAP 383.1 2,554.1 2,447.3
Employee benefits (3.5) (91.1) (81.3)
Share-based payments (2.0) - -
Other (0.9) (10.6) (10.9)
Income tax - (242.4) (242.4)
Business combinations - 71.2 -
Dividends - 95.3 87.4
Preliminary IFRS 376.7 2,376.5 2,200.1
Financial Instruments (IAS 32/39)* (3.1) 11.8 13.2
Pro forma IFRS (unaudited) 373.6 2,388.3 2,213.3
*The Group will only apply IAS 32 and IAS 39, Financial Instruments, from 1
January 2005 as permitted by the transition arrangements in IFRS 1. A
reconciliation to pro forma IFRS financial information is shown calculated as if
the Group had the appropriate hedging documentation in place throughout 2004 and
had applied the principles of these standards during this period.
The preliminary IFRS financial information has been prepared on the basis of
IFRS expected to be in issue at 31 December 2005 and therefore may require
adjustment before constituting the final IFRS result.
This information is provided by RNS
The company news service from the London Stock Exchange
|
