InterimResults2004

Interim Results Presentation26 August 2004: 

Interim Results Presentation 26 August 2004

Brian WallaceDeputy Group Chief Executive and Group Finance Director: 

Brian Wallace Deputy Group Chief Executive and Group Finance Director

Hilton Group plc - Summary of Performance: 

Hilton Group plc - Summary of Performance (1) Before goodwill amortisation and exceptional items 2004 £m 2003 £m Variance B(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

Taxation: 

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

Hotels Worldwide RevPAR 2004 vs 2003: 

Hotels Worldwide RevPAR 2004 vs 2003 Like for Like Hotels, Constant Currencies

Worldwide RevPAR by Ownership Type: 

Worldwide RevPAR by Ownership Type Like for Like Hotels, Constant Currencies RevPAR growth 2004 vs 2003 - first half Q1 Q2 H1 Q1 Q2 H1 Q1 Q2 H1

Hotels - Cost Management: 

Hotels - Cost Management (1) Before goodwill amortisation and exceptional items Total £m Increasing revenue £m Declining revenue £m First 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

UK Hotels RevPAR 2004 vs 2003: 

UK Hotels RevPAR 2004 vs 2003 Like for Like

Europe (Hilton brand) - RevPAR by Country: 

Europe (Hilton brand) - RevPAR by Country Like for Like, Constant Currencies, First Half Q1 Q2 H1 Q1 Q2 H1 Q1 Q2 H1

Scandic RevPAR 2004 vs 2003: 

Scandic RevPAR 2004 vs 2003 Like for Like Hotels, Constant Currencies, Scandic Acquired RevPAR growth 2004 vs 2003

Scandic Performance 2004 vs 2003: 

Scandic Performance 2004 vs 2003 (a) At constant currencies (b) Includes support office costs not allocated to individual hotels 2004 Actual £m Other (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 2003 Actual £m Like for like revenue losers (a) £m Half year to 30 June

Worldwide Betting: 

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 Win 2004 2003 £m £m (1) Before goodwill amortisation and exceptional items Operating Profit (1) 2004 2003 £m £m Half year to 30 June

UK Retail: 

UK Retail (1) Excluding machines 2004 £m 2003 £m Variance B(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

Telephone Betting (excluding high rollers): 

Telephone Betting (excluding high rollers) (1) Active customers are those who placed a bet during the period 2004 £m 2003 £m Variance B(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

eGaming: 

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 Variance B(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

Hilton Group plc - Cash Flow: 

Hilton Group plc - Cash Flow 2004 £m 2003 £m Cash inflow from operating activities 255.6 226.5 Interest, tax and dividends paid (126.6) (155.9) Free cash flow 129.0 70.6 Capital 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 0.8 Acquisitions / 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

Analysis of 2004 Capital Expenditure: 

Analysis of 2004 Capital Expenditure £m Hotels 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 : 

David Michels Group Chief Executive

Chart of Past EPS: 

Chart of Past EPS Earnings per Share (p)

Recent Trading - Betting: 

Recent Trading - Betting “A good year, so far, with growth in all three areas”

Recent Trading - Hotels: 

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

Property: 

Property £2.3bn of hotel assets

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

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

Hilton and Scandic Brand Websites: 

Hilton and Scandic Brand Websites (excludes Third party Website bookings) Reservations Launch of localised websites

Pipeline Growth: 

Pipeline Growth Openings 2004 London Waldorf, UK Odawara, Japan Helsinki Kalastajatorppa, Finland Bali, Indonesia (Conrad) 7 x Trident by Hilton, India Mumbai Towers, India Newcastle Gateshead, UK Paris Arc de Triomphe, France Miami, USA (Conrad) Shenzhen, China Santo Domingo, Dominican Republic San Salvador, El Salvador Kuala Lumpur, Malaysia Hilton Barbados, Caribbean Cebu, Philippines Openings 2005 Jeddah Palace, Saudi Arabia Valencia, Spain Venice, Italy Casablanca Airport, Morocco Phuket, Thailand (Conrad) Sharm Nabq, Egypt Hilton Diagonal Mar, Spain Warsaw, Poland Dubrovnik, Croatia Sydney, Australia Evian, France Hilton Malabo, Equatorial Guinea Dublin Airport, Ireland Tokyo, Japan (Conrad) Hilton Beirut, Lebanon Millennium Hilton Bangkok, Thailand Hilton Seychelles Resort, Seychelles Denarau, Fiji

Capital Expenditure 2005: 

Capital Expenditure 2005 £110m - £120m on hotels Less than £100m on betting but will still invest to grow the business

Fixed Odds Betting Terminals (FOBTs): 

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

Over-the-Counter : 

Over-the-Counter Over-the-counter business up 14%

eGaming: 

eGaming

Telephone Betting: 

Telephone Betting First half profits more than double

Anthony Harris: 

Anthony Harris

Hilton University: 

Hilton University

Outlook : 

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: 

Interim Results Presentation 26 August 2004

Appendices: 

Appendices

Hotels - Analysis by Contract Type: 

Turnover 273.8 130.4 398.5 478.3 1.4 24.8 1,307.2 Gross operating profit 92.5 47.2 138.8 169.6 1.4 9.0 458.5 Less: Rental & owners return (4.5) (32.5) (89.0) (153.8) - (1.9) (281.7) Depreciation (22.5) (10.8) (14.0) - - (2.1) (49.4) Other costs / income (21.2) (3.2) (21.4) - (0.4) (2.3) (48.5) 2004 Profit 44.3 0.7 14.4 15.8 1.0 2.7 78.9 2003 Profit 34.9 (0.6) 14.0 12.5 - 3.3 64.1 Hotels - Analysis by Contract Type Total Managed LivingWell No. of hotels 67 49 154 112 23 n/a 405 No. of rooms 17,087 10,337 33,614 34,646 6,654 n/a 102,326 Owned Fixed lease Contingent lease £m Franchise

Geographical RevPAR by Ownership Type: 

Geographical RevPAR by Ownership Type Like for Like Hotels, Constant Currencies Owned & fixed lease Contingent lease Managed UK 10.6% 8.1% 14.8% Europe & Africa 0.0% 6.3% 7.1% Middle East & Asia Pacific 1.7% 27.8% 18.2% Americas 6.3% 14.9% 20.0% Total 4.9% 8.3% 14.6%

Hotels - Like for Like Profit: 

Hotels - Like for Like Profit (1) Before goodwill amortisation and exceptional items 2004 £m 2003 £m Variance B(W) Reported profit (1) 67.1 56.1 19.6% Less: LivingWell (2.7) (3.3) 64.4 52.8 22.0% Closed for refurbishment (0.1) 1.5 Disposals / new openings (2.3) 1.2 Pandox associate disposal - (2.9) Foreign exchange 2.2 - Like for like hotels profit (1) 64.2 52.6 22.1% Half year to 30 June

Yield Premium - Hilton vs London Market: 

Yield Premium - Hilton vs London Market Cumulative Year to Date RevPAR Premium Market Source: PKF Hotel Consultancy Services Market is 8 competitor chains - Marriott International, InterContinental, De Vere, Millenium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton

Yield Premium - Hilton vs UK Provincial Mkt: 

Yield Premium - Hilton vs UK Provincial Mkt Cumulative Year to Date RevPAR Premium Market Source: PKF Hotel Consultancy Services Market is 8 competitor chains - Marriott International, InterContinental, De Vere, Millenium & Copthorne, Thistle, Le Meridien, Whitbread, Sheraton

Scandic Incremental Conversion: 

Scandic Incremental Conversion GOP Movement £m Rate growth at 90% conversion (2.6) (2.4) (2.4) (2.1) Volume growth at incremental cost 9.2 6.8 (2.2) (1.6) F&B / Other revenue growth at 50% conversion 5.0 2.5 (2.8) (1.4) Other (inc. payroll inflation) - (1.0) - (1.2) Incremental 11.6 5.9 (7.4) (6.3) Conversion 50.9% 14.9% Revenue Movement £m Half year to 30 June Incremental GOP conversion Like for like Revenue Movement £m GOP Movement £m Gainers Losers

Worldwide Betting - Revenue: 

Worldwide Betting - Revenue (1) Includes FOBT turnover, year on year increase in machines turnover £1,412.1m 2004 £m 2003 £m Variance B(W) Half year to 30 June UK Retail (1) 4,063.9 2,562.2 58.6% Ireland & Belgium 160.9 147.3 9.2% Telephone Betting 266.0 240.7 10.5% eGaming 281.9 215.1 31.1% Vernons 15.2 15.0 1.3% Worldwide Betting 4,787.9 3,180.3 50.5%

eGaming Gross Win: 

eGaming Gross Win 2003 2004

Breakdown of Lease Commitments: 

Breakdown of Lease Commitments Fixed lease £m Minimum guarantee £m Total £m Hotels 83.4 73.0 115.3 271.7 Betting 36.5 - - 36.5 Property / Centre 6.2 - - 6.2 Total 126.1 73.0 115.3 314.4 Also circa £17m other operating lease commitments Forecast land and buildings full year lease commitments for 2004 Contingent lease £m Forecast contingent commitments are based on 2004 forecast results