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Preliminary Results Presentation 26 February 2004

Preliminary Results Presentation 26 February 2004. Sir Ian Robinson Chairman. Brian Wallace Deputy Group Chief Executive and Group Finance Director. Hilton Group plc - Summary of Performance. Year to 31 December. 2003 £m. 2002 £m. Variance B(W). Hotels 146.5 212.1 (30.9)%

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Preliminary Results Presentation 26 February 2004

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  1. Preliminary Results Presentation26 February 2004

  2. Sir Ian RobinsonChairman

  3. Brian WallaceDeputy Group Chief Executive and Group Finance Director

  4. Hilton Group plc - Summary of Performance Year to 31 December 2003 £m 2002 £m Variance B(W) Hotels 146.5 212.1 (30.9)% Betting 214.1 149.3 43.4% Central costs and income (13.6) (13.3) (2.3)% Operating profit (1) 347.0 348.1 (0.3)% Interest (74.6) (76.7) 2.7% Profit before tax (1) 272.4 271.4 0.4% Effective tax rate (1) 22.0% 22.0% EBITDA (1) 485.3 486.1 (0.2)% EPS (1) 13.4p 13.4p 0.0% (1)Before goodwill amortisation and exceptional items

  5. Exceptional Items Exceptionals £m Operating: Impairment of assets and investments 11.3 Non-operating: Profit on disposal of Pandox (3.2) Losses on disposals including provisions 20.9 17.7 Total charge29.0

  6. Hotels - Like for Like Profit Year to 31 December 2003 £m 2002 £m Variance B(W) Reported profit (1) 146.5 212.1 (30.9)% Sale and leaseback rent 24.6 8.4 Sale and leaseback associate (6.9) (2.5) Closed for refurbishment2.9 (4.0) Disposals / new openings 1.4 3.7 Foreign exchange(5.9) - Like for like profit (1) 162.6 217.7 (25.3)% (1)Before goodwill amortisation and exceptional items

  7. Hotels Worldwide Revpar 2003 vs 2002 Like for Like Hotels, Constant Currencies Including Scandic March / April have been combined to avoid the distortion caused by the timing of Easter

  8. Worldwide Revpar by Ownership Type Like for Like Hotels, Constant Currencies Revpar growth 2003 vs 2002 - first half, second half, full year H1 H2 FY H1 FY H1 H2 FY H2

  9. Hotels - Cost Management (2nd half) Like for Like, Constant Currencies Second Half Total £m Increasing revenue £m Declining revenue £m Revenue movement 25.3 74.1 (48.8) GOP Movement (1) 8.1 45.8 (37.7) Incremental conversion 32.0% 61.8% 22.7% Rental & Owners return (24.6) Depreciation / FF&E 2.6 One off costs / credits (7.4) Accounting reallocations (2.7) Operating profit decline (1) (24.0) (1)Before goodwill amortisation and exceptional items

  10. UK Hotels Revpar 2003 vs 2002 Like for Like Hotels 10% 5% 0% (5)% (10)% London Provinces (15)% Total UK (20)% Jan Feb Mar/Apr May June July Aug Sep Oct Nov Dec Jan March / April have been combined to avoid the distortion caused by the timing of Easter

  11. Europe (Hilton brand) - Revpar by country Like for Like, Constant Currencies, First Half, Second Half, Full Year H1 FY H1 H2 FY H1 H2 FY H2

  12. Scandic Revpar 2003 vs 2002 Like for Like Hotels, Constant Currencies, Scandic Acquired Revpar growth 2003 vs 2002 March / April have been combined to avoid the distortion caused by the timing of Easter

  13. Scandic Performance 2003 vs 2002 Year to 31 December Like for like revenue gainers (a) £m Like for like revenue losers (a) £m Other (b) £m 2003 Actual £m 2002 Actual £m Revenue 461.4 6.4 (18.3) 50.5 500.0 GOP 188.1 1.2 (18.1) 13.5 184.7 Inc. conversion 18.8% 1.1% Profit 34.5 1.4 (14.2) (1.9) 19.8 (a) At constant currencies (b) Includes support office costs not allocated to individual hotels and foreign exchange

  14. Worldwide Betting Year to 31 December Operating Profit (1) 2003 2002 £m £m Gross Win 2003 2002 £m £m UK Retail 575.1 460.8 173.1 113.2 Ireland & Belgium 67.6 60.8 11.5 11.2 Telephone Betting - excluding high rollers 30.5 26.6 10.6 7.4 - high rollers (1.6) 0.8 (1.2) 0.7 28.9 27.4 9.4 8.1 eGaming 63.7 53.4 14.2 11.3 Vernons 20.2 20.0 5.9 5.5 Worldwide Betting 755.5 622.4 214.1 149.3 (1)Before goodwill amortisation and exceptional items

  15. UK Retail Year to 31 December 2003 £m 2002 £m Variance B(W) Gross win 575.1 460.8 24.8% Duty / Gross profits tax (84.4) (67.1) Other costs (317.6) (280.5) Operating profit173.1 113.2 52.9% Staff costs per slip 32.67p 30.94p 5.6% Stake per slip (1) £8.37 £8.06 3.8% (1)Excluding machines

  16. Telephone Betting (excluding high rollers) Year to 31 December 2003 £m 2002 £m Variance B(W) Gross win 30.5 26.6 14.7% Gross profits tax (4.6) (4.0) Other costs (15.3) (15.2) Operating profit10.6 7.4 43.2% Average stake per call £78.94 £81.92 (3.6)% Salary cost per call 67.8p 74.0p 8.4% No. of calls (000’s) 5,995 4,736 26.6% Active customers (000’s) (1) 117.0 103.6 12.9% (1)Active customers are those who placed a bet during the period

  17. eGaming Year to 31 December 2003 £m 2002 £m Variance B(W) Gross win 63.7 53.4 19.3% Gross profits tax (3.2) (3.5) Other costs (46.3) (38.6) Operating profit14.2 11.3 25.7% Active customers (000’s) (1) Sportsbook 206 168 22.6% Casino 80 46 73.9% Sportsbook registrations (000’s)267 209 27.8% (1)Active customers are those who placed a bet during the period

  18. Hilton Group plc - Cash Flow Year to 31 December 2003 £m 2002 £m Cash inflow from operating activities 501.9 455.7 Interest, tax and dividends paid (261.5) (248.7) Free cash flow 240.4 207.0 Capital expenditure (189.9) (188.3) Free cash flow after capex 50.5 18.7 Proceeds from asset sales 20.0 341.2 Acquisitions / disposals 40.7 (22.1) 111.2 337.8 Exchange and other movements (1) (94.1) (28.7) Net borrowings movement 17.1 309.1 Opening net borrowings (1,164.8) (1,473.9) Closing net borrowings (1,147.7) (1,164.8) (1)Includes £96.0m adverse exchange (2002: £28.6m adverse)

  19. Analysis of 2003 Capital Expenditure £m Hotels Acquisition linked development: Luxembourg (hotel acquisition) 18.2 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 26.4 Dusseldorf (refurb) 18.2 75.7 Other 68.1 Total Hotels 143.8 LivingWell 3.5 147.3 Worldwide Betting Shop transmission system and TVs 11.8 Development 14.6 Other (including EPOS £1.7m, terminals £1.7m, Ireland £2.4m) 10.4 eGaming / Telephone betting 5.8 42.6 Total Group 189.9

  20. Brian WallaceDeputy Group Chief Executive and Group Finance Director

  21. David MichelsGroup Chief Executive

  22. Ladbrokes Trading “Trading in the first six weeks has been good in all three areas”

  23. Ladbrokes Shop Performance – UK & Jersey 1999 2000 2001 2002 2003 Average number of shops PBIT £m 78.8 78.6 86.1 113.0 175.2 PBIT per shop £k 41.3 41.8 45.7 59.7 93.6 1,910 1,879 1,882 1,893 1,872 Over the counter gross win grew by 9% in 2003

  24. UK Shops / New Competition

  25. FOBTs – Voluntary Code of Conduct • Max four machines/terminals per shop • Max £500 payout per spin • Max stake of £15 chip and £100 per spin • Minimum betting time of 20 seconds • when betting with existing credits • Takes effect 1 April, 2004

  26. eGaming: Trading for the Last Four Months Operating Profit

  27. Poker & Games

  28. Ladbrokescasino.com

  29. Betting Exchanges

  30. Telephone Betting

  31. Resort / Entertainment Casinos

  32. Brand

  33. Vernons and LivingWell • Profits up 51% • Profits up 7%

  34. Hotels Trading

  35. Scandic

  36. Franchising

  37. Hilton Franchising

  38. Conrad

  39. Property

  40. Pipeline Growth • Openings 2004 • Openings 2005 • Alexandria Green Plaza • Newcastle Gateshead, England • Phuket, Thailand (Conrad) • Hurghada Long Beach, Egypt • Shenzhen, China • Miami, USA (Conrad) • Jeddah Palace, Saudi Arabia • Cebu, Philippines • Bali, Indonesia (Conrad) • Agra, India (Trident Hilton) • Bhubaneshwar, India (Trident Hilton) • Chennai, India (Trident Hilton) • Cochin, India (Trident Hilton) • Jaipur, India (Trident Hilton) • Udaipur, India (Trident Hilton) • Hilton Towers Mumbai, India • Santo Domingo, Dominican Republic • Paris Arc de Triomphe, France • Dubrovnik, Croatia • Kuala Lumpar, Malaysia • Hilton Sydney, Australia • Hilton Barbados, Caribbean • Valencia, Spain • Venice, Italy • Sharm Nabq, Egypt • Casablanca Airport, Morocco • Denarau, Fiji • Warsaw, Poland • Evian, France • Hilton Malabo, Equatorial Guinea • Hilton Seychelles Resort, Seychelles • Hilton Beirut, Lebanon • Hilton d'Haiti, Haiti • Tahiti Papeete, Tahiti • Tahiti Bora Bora, Tahiti • Tahiti Rangiroa, Tahiti • Zhuhai, China • Shenyang, China

  41. Internet / Booking Patterns Gross Reservations through Hilton Brand websites Iraq War Commences SARS

  42. ‘Our Best Rates. Guaranteed’

  43. BDRC Survey Measure Europe UK Asia Pacific Middle East Awareness Prompted 89% 1st 90% 1st 95% 1st 94% 2nd Unprompted 51% 1st 52% 1st 42% 1st 69% 2nd Brand Preference 1st Choice 9.8% 1st 15.2% 1st 11.5% 1st 15% 2nd 1st or 2nd Choice 17.9% 1st 25.7% 1st 21.9% 1st 28% 2nd Brand Usage* 12.9% 4th 15.8% 4th 22% 1st 26% 2nd Brand Loyalty** 74% 2nd 73% 1st 57% 7th 73% 4th Brand Ranking Index*** 56 1st 55 1st 51.5 2nd 53 2nd * Number of business travellers who have used the brand in the last 12 months ** Own guests who rate the brand 1st or 2nd choice or are “happy to use” *** Composite of all BDRC’s key brand measures

  44. Hotel Profit Breakdown 2003

  45. Preliminary Results Presentation26 February 2004

  46. Appendices

  47. Hotels - Analysis by Contract Type Fixed lease Contingent lease Owned Total Managed LivingWell No. of hotels 68 49 150 125 n/a 392 No. of rooms 17,160 10,337 32,538 38,654 n/a 98,689 £m Turnover 544.2 269.8 759.8 1,087.6 50.2 2,711.6 Gross operating profit 182.2 98.9 265.0 410.3 19.9 976.3 Less: Rental & owners return (8.7) (65.8) (173.1) (374.5) (3.8) (625.9) Depreciation (50.8) (22.4) (29.0) - (4.6) (106.8) Other costs / income (40.1) (6.4) (28.1) - (4.1) (78.7) 2003 Profit 82.6 4.3 34.8 35.8 7.4 164.9 2002 Profit 110.0 23.4 54.8 32.8 4.9 225.9

  48. Geographical RevPAR by Ownership Type Like for Like Hotels, Constant Currencies Owned & fixed lease Contingent lease Managed UK (3.1)% (3.7)% (2.7)% Europe & Africa (8.0)% 2.1% 1.4% Middle East & Asia Pacific 11.6% 19.1% (1.7)% Americas (15.3)% 52.7% 7.5% Total (5.8)% 3.2% (0.1)%

  49. Hotels - Like for Like Profit (2nd half) Second Half 2003 £m 2002 £m Variance B(W) Reported profit (1) 90.4 114.3 (20.9)% Sale and leaseback rent 13.0 8.4 Sale and leaseback associate (3.2) (2.5) Closed for refurbishment1.4 (2.1) Disposals / new openings (1.8) 2.6 Foreign exchange (3.1) - Like for like profit (1) 96.7 120.7 (19.9)% (1)Before goodwill amortisation and exceptional items

  50. 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

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