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Brian Wallace Group Finance Director

Brian Wallace Group Finance Director. Hilton Group plc - Summary of Performance. Half Year to 30 June 2000 £m. Proforma Half Year to 30 June 1999 £m. Hilton International 111.0 96.0 Betting & Gaming 51.3 63.5 Central costs and income (6.8) (9.8) Operating profit 155.5 149.7

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Brian Wallace Group Finance Director

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  1. Brian WallaceGroup Finance Director

  2. Hilton Group plc - Summary of Performance Half Year to 30 June 2000£m Proforma Half Year to 30 June 1999£m Hilton International 111.0 96.0 Betting & Gaming 51.3 63.5 Central costs and income (6.8) (9.8) Operating profit 155.5 149.7 Goodwill amortisation (18.5) (9.7)Interest (46.7) (32.1) Profit before tax 90.3 107.9 Tax (22.9) (26.7) Profit after tax 67.4 81.2 EBITDA before exceptional items 206.5 197.6 Profit before tax, goodwill,FRS15 & exceptional items 120.5 127.5

  3. Hilton International - Underlying Performance Half Year to 30 June 2000£m Proforma Half Year to 30 June 1999£m Increase Operating profitas reported 111.0 96.0 15.6% Net effect of UK propertychanges (mainly disposals) (1.5) (9.4) Inclusion of overheadstreated centrally in 1999 - (5.0) Effect of treating Stakis asacquired on 1 January 1999 - 19.9 Adjusted operating profit 109.5 101.5 7.9%

  4. Hilton International 2000 1999 Proforma Turnover Profit Turnover Profit * Revpar £m £m £m £m Growth UK 281.3 65.1 226.0 63.8 9.1% Europe 267.4 30.0 235.0 20.1 14.8% Middle Eastand Africa 103.0 6.6 93.8 6.2 (1.2)% Asia / Australasia 243.4 4.2 230.4 2.2 8.8% Americas 114.4 10.0 97.9 10.4 4.9% LivingWell 19.4 2.0 9.0 0.9 - 1,028.9 117.9 892.1 103.6 9.0% Central & non-operating Items (6.9) (7.6) 111.0 96.0 15.6% * At constant currencies and including full 6 months of Stakis results.

  5. UK Hotels - P&L Overview 2000£m Proforma 1999*£m Total Sales 281.3 287.4 Comparable sales 265.3 255.9 Comparable GOP 123.4 117.9 GOP percentage 46.5% 46.1% Incremental conversion 59% Other costs (46.5) (36.0) FRS15 depreciation (8.3) (8.1) Comparable profit 68.6 73.8 Costs treated centrally (5.0) - FRS15 on disposed properties - (0.6) Stakis first quarter profit - (18.8) Non comparable profit 1.5 9.4 Reported profit 65.1 63.8 * Including Stakis for 6 months

  6. UK Hotels - "Other Costs" Movement £m £m 1999 costs (36.0) Depreciation (1.7) Owners return / rental (1.6) Pensions (0.5) Insurance / rates (0.8) Training (1.0) Sales & marketing / brand relaunch (5.4) Inflation (1.5) (12.5) Savings 2.0 2000 costs (46.5)

  7. Gross Operating Profit by Area Like for Like GOP% % 48 2000 1999 43 38 33 28 Americas Asia Pacific & Australia Middle East& Africa ContinentalEurope UK Total

  8. Managed Hotels - New Openings Year of operation No. Hotels Average contribution per hotel in 2000 £000 First Year 14 95 Second Year 9 252 Third Year 5 356 Note: Excludes Hanoi projected loss of £1.5m in 2000

  9. Betting & Gaming Half Year Profit Comparison Retail Betting Telephone Betting / Internet Americas Casinos Vernons Total £m £m £m £m £m £m 30 June 1999 40.1 13.2 3.8 3.7 2.7 63.5 High roller activity (8.9) (8.9) Sale ofGolden Gate Fields (3.9) (3.9) Stakis Q1 2.6 2.6 Adjusted profit 40.1 4.3 (0.1) 6.3 2.7 53.3 30 June 2000 43.4 (4.7) 2.9 6.8 2.9 51.3 Movement 3.3 (9.0) 3.0 0.5 0.2 (2.0) Analysed as:-UK Retail Betting 1.9 Other businesses 1.4 3.3

  10. UK Retail Betting - Comparative Analysis Variance£m 2000£m 1999£m Turnover 842.4 860.2 (17.8) Gross profit (including AWP’s) 155.5 146.7 8.8 Gross profit % - including AWP’s 18.5% 17.0% 1.5% - excluding AWP’s 16.9% 15.4% 1.5% Operating costs (116.6) (109.7) (6.9) Net profit 38.9 37.0 1.9

  11. Gross Betting Margin Before Costs (%) 2000 1999 Week 1-23 Week 24-26 Week 1-26 Week 1-26 Horses 16.0 10.3 15.2 14.3 Greyhounds 21.1 16.9 20.5 19.2 Numbers 29.2 27.2 29.0 27.9 Other Sports 10.6 24.5 12.6 14.6 Football 25.0 6.3 21.3 7.2 Total 17.8 11.7 16.9 15.4

  12. Retail Betting - Analysis of Cost Increase 2000 £m Levy 1.0 Pension 1.0 Sunday opening 0.9 Marketing 0.9 Other 3.1 Total 6.9

  13. Analysis of Telephone Betting / Internet - Half Year Profits Variance£m 2000£m 1999£m UK - Telephone Betting 0.1 1.9 (1.8) - Internet Betting (3.5) - (3.5) International - Elite Telebetting 0.3 2.4 (2.1) - Other Telebetting (1.3) - (1.3) - High Roller activity 0.7 8.9 (8.2) - Internet Betting (1.0) - (1.0) (4.7) 13.2 (17.9)

  14. Telebetting Analysis UK Telebetting Gibraltar Call Centre Gibraltar Elite Total 2000 £m 1999 £m 2000 £m 1999 £m 2000 £m 1999 £m 2000 £m 1999 £m 49.3 3.9 (3.8) 0.1 1.3m £33.88 7.9% 69.8 4.8 (2.9) 1.9 1.3m £49.24 6.9% 32.0 1.1 (2.4) (1.3) 0.5m £68.73 3.4% 33.0 1.2 (0.9) 0.3 32k £1,030 3.6% 45.3 3.1 (0.7) 2.4 27k £1,655 6.8% 114.3 6.2 (7.1) (0.9) 1.8m £61.70 5.4% 115.1 7.9 (3.6) 4.3 1.4m £84.64 6.9% Turnover Gross profit Costs Net profit No. of calls Stake per call Gross profit % - - - - - - - Note: Excludes high roller activity in Gibraltar

  15. Cumulative Internet Registrations 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 February March April May June July August to date

  16. Internet Turnover £m Monthly turnover 14 Cumulative turnover 12 10 8 6 4 2 0 February March April May June July

  17. Central Costs Analysis 2000 £m 1999 £m Central costs reported 6.8 9.8 Include Stakis first quarter costs - 3.5 Year 2000 costs - (1.5) Costs reallocated to hotels division - (5.0) Comparable costs 6.8 6.8

  18. Group Cash Flow 2000£m 1999£m Inflow from operating activities 176.8 136.5 Interest paid (26.9) (19.2) Tax paid (22.0) (8.6) Dividends paid (75.2) (130.6) Free cash flow 52.7 (21.9) Capital expenditure (216.2) (180.0) Proceeds from asset sales 0.9 67.7 Acquisitions, disposals 4.8 (350.9) (157.8) (485.1) Exchange & other movements (19.5) (4.9) Opening net debt (1,336.8) (949.5) Closing net debt (1,514.1) (1,439.5)

  19. Analysis of Capital Expenditure Hilton OverseasSao Paulo 24.1 Munich Park 12.8 Caribe 11.8 Other 12.7 61.4 28% UK Caledonian 45.2 London Metropole 21.3 Park Lane 6.0 Nottingham 5.0 Other 50.0 127.5 57% LivingWell 13.3 6% Refurbishment / relocation 5.4 BS2000 EPOS system 3.5 E-commerce 4.5 Other 6.5 19.9 9% 222.1 £m £m Betting & Gaming Note: Includes £5.9m of accrued expenditure

  20. Profit Before Tax - Analysts Forecasts for 2000 £m Consensus analystforecast at May 1999 for 2000 380 Consensus analyst forecast at August 2000 for 2000 300 Movement 80 Factors (estimates) UK revenue growth shortfall (£15m) 10 Hotel closing / delays (eg Caribe, Nottingham) 5 Hilton TV campaign, marketing and training 6 Foreign exchange 4 Accounting changes 4 Absence of high staking Gibraltar activity 12 Investment in E-Gaming (marketing, set up costs, etc) >10 Below expectation Euro 2000 / major race events in June 13 Increased UK pension costs 4 Other 12 80 Note: This is not a company forecast !

  21. Hilton International Profit Analysis by Contract Type Owned Fixed Lease Contingent Lease Mgmt Contract LivingWell Total No. of hotels 97 16 28 79 N/A 220 No. of rooms 20,999 5,928 9,914 25,699 N/A 62,540 £m £m £m £m £m £m Turnover 320.6 121.8 151.9 415.2 19.4 1,028.9 Gross Operating Profit 126.2 45.6 61.4 148.1 19.4 400.7 Less: Rental / Owners return (2.6) (19.6) (39.3) (133.5) - (195.0) Depreciation (25.0) (7.6) (1.1) - (1.6) (35.3) Other Costs / Income (23.3) (6.1) (7.3) - (15.8) (52.5) Half year to 30 June 2000 75.3 12.3 13.7 14.6 2.0 117.9 Proforma to 30 June 1999 71.0 7.4 13.8 10.5 0.9 103.6

  22. David MichelsGroup Chief Executive

  23. New Executive Team David Michels Anthony Harris Charles Anson Ian Payne Brian Wallace Bryan Taker Chris Bell

  24. Objectives • More falls to the bottom line • These businesses are as customer-friendly aswe can make them • That our physical hotel estate lives up to Hilton’s perceived reputation • That our e-gaming investment is sensibly directed • That we expand the group • To improve the long term return on capital ofthe group as a whole

  25. Revenue Per Available Room (Comparable Stakis) Half Year to June Underlying Growth 2000 1999 Growth London 74.9 69.7 7.5% 7.5% Provinces 46.6 42.5 9.6% 9.6% Total UK 57.3 52.5 9.1% 9.1% Continental Europe 56.4 52.0 8.5% 14.8% Africa / Middle East 31.4 31.3 0.3% (1.2)% Total EMEA 46.9 44.1 6.3% 10.7% Asia / Australasia 47.9 40.9 17.1% 8.8% The Americas 43.7 40.1 9.0% 4.9% Overall - Occupancy 68.1% 65.8% - Average room rate 72.3 68.4 5.7% 5.3% - Revpar 49.2 45.0 9.3% 9.0% Note: The 1999 figures include results of Stakis for the full 6 months for comparability purposes

  26. Hilton UK - Year on Year Revpar Growth % 14 12 10 8 6 4 2 0 -2 -4 -6 -8 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 1999 2000

  27. Hilton International- Forecast Capital Expenditure 2000 Total£m 2001 Maintenance£m UK 205 30 Europe, Middle East & Africa 52 15 Asia / Australasia 7 5 Americas 54 5 LivingWell 42 5 Total 360 60

  28. Value of Hotel Portfolio UK 1.9 International 0.7 Total 2.6 £bn

  29. Number of Hotels by Type Fixed Lease Contingent Lease Management Contract Owned Total UK 76 2 3 3 84 Continental Europe 11 10 12 12 45 Africa / Middle East 2 0 5 25 32 Asia / Australasia 1 3 2 28 34 The Americas 7 1 6 11 25 Total 97 16 28 79 220

  30. Signings & Openings 1994 1995 1996 1997 1998 1999 2000 2001 2002 Openings 5 5 3 10 7 8 15 20 10 Signings 8 7 11 20 20 10 18 - -

  31. Hilton Alliance • Hilton Reservations Worldwide • Hilton.com • Conrad • HHonors • Joint sales and marketing • Joint database • Promus effect

  32. HHonors As at June 30 2000 Total current members 8.5m Current active members 4.6m Since 1999 Jan 1 - June 30 stays 3.2m Improvement on last year Split of active membership US 3.3m Non-US 1.3m +77% +74%

  33. Europe on Line - Accor / Forte / Hilton Web Site Strategic Objectives: • Retain / regain control over inventory • Retain direct relationship with customers • Grow incremental revenues • Reduce distribution cost • Share cost of investment in technology

  34. Hilton.com • 2000 Total investment - $13m • Hilton International investment - $2m • 180,000 reservations in first half • Two-fold increase on previous year

  35. Conrad Existing Conrad Hotels: Istanbul Singapore Egypt (x3) Bali Hong Kong Brussels Dublin London

  36. UK Shop First Half Performance 1993 1994 1995 1996 1997 1998 1999 2000 Average number of shops PBIT £m 24.6 26.8 22.8 29.1 37.1 42.8 34.4 35.6 PBIT per shop £k 12.8 14.1 12.1 15.9 19.6 23.0 18.1 19.0 1,921 1,899 1,878 1,831 1,892 1,892 1,901 1,870 Investment, productivity and product mixhave stimulated growth

  37. On-Course Theoretical Margins Runners Margin Per Runner 1995 9.6 120.7 2.16 1996 10.2 122.2 2.18 1997 9.8 121.3 2.17 1998 10.1 122.3 2.21 1999 10.4 120.6 1.98 2000 10.4 121.1 2.03 Theoretical margins are returning towards historic levels

  38. Gambling Review Body - Hilton Submission • Gambling is for adults aged 18 and over • Maintain high levels of probity and socialresponsibility requirements of operators • Careful review of existing legislation and regulation e.g. opening hours, number of slot machines and pay-out levels • Legislation and regulation to apply to both ‘bricks’ and ‘clicks’ • Create a single regulator to manage future industryrules and guidelines • Create a competitive taxation regime that satisfies UKand international customers The UK gambling industry is a world leaderAppropriate modernisation is required

  39. E-Gaming - Distribution Channels Platform Channel Timing Internet Ladbrokes.com Launched Ladbrokes.co.uk Launched Bet.co.uk Launched Vernons.co.uk October Digital TV Cable Telewest Best Bets Launched CWC Matchball; Lucky Clover; Launched Best Bets NTL In discussion Satellite BSkyB In discussion Open November Terrestrial On-Digital In discussion Mobile WAP BT Cellnet Launched GPRS BT Summer 2001 Hotel Bedrooms Hilton Web & ADSL On test

  40. E-Gaming Partnerships Partner Activity Timing Teamtalk UK Soccer June Big Brother Channel 4 TV - Busiest site in UK August QXL Auction on-line August ITN News August Umbro Sportswear August

  41. E-Gaming Future Developments Activity Timing Video streamed greyhounds August 2000 Full audio service September 2000 Fantasy sports games October 2000 Casino & slots October 2000 Vernons Pools October 2000 Bingo & numbers games Mid 2001 Video streamed casino games End 2001 Develop a best of breed betting and gaming portal

  42. Industry Developments Timing Media Rights Now - March 2002 - SIS - RCA Horse Race Levy replacement Now - 2003 - Media Rights - Duty General Betting Duty Now - ongoing - Gross Profits Tax - Place of Consumption Gambling Review Now - 2001 - Regulation - Legislation

  43. Ladbroke Casinos UK Provinces : 21 Clubs London : 6 Clubs Overseas : 4 Clubs

  44. LivingWell Current Membership Numbers : over 100,000 Planned Openings: 2001 2000 Sutton Coldfield Nottingham Malta Carlisle Ashford Inverness York Perth Barnsley Burton on Trent Peterborough Dresden Weimar Berlin Mainz Sydney Prague

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