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Interim Results Presentation 28 August 2003

Interim Results Presentation 28 August 2003. Brian Wallace Deputy Group Chief Executive and Group Finance Director. Hilton Group plc - Summary of Performance. 6 months to 30 June 2003 £m. 6 months to 30 June 2002 £m. Variance B(W). Hotels 56.1 97.8 (42.6)%

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Interim Results Presentation 28 August 2003

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  1. Interim Results Presentation28 August 2003

  2. Brian WallaceDeputy Group Chief Executive and Group Finance Director

  3. Hilton Group plc - Summary of Performance 6 months to 30 June 2003£m 6 months to 30 June 2002£m Variance B(W) Hotels 56.1 97.8 (42.6)% Worldwide Betting 101.8 76.5 33.1% Central costs and income (6.6) (6.6) Operating profit (1) 151.3 167.7 (9.8)% Interest (40.8) (37.7) (8.2)% Profit before tax (1) 110.5 130.0 (15.0)% Effective tax rate (1) 22.0% 22.0% EBITDA (1) 220.0 237.7 (7.4)% EPS 5.5p 6.4p (14.1)% (1)Before goodwill amortisation and exceptional items

  4. Hotels - Like for Like Profit 2002£m % change 2003 £m Reported profit (1) 56.1 97.8 (42.6)% Sale and leaseback rent 11.6 - Sale and leaseback associate (3.7) - Closed for refurbishment 1.5 (1.9) Disposals / new openings 3.2 1.1 Foreign exchange (2.8) - Like for like profit (1) 65.9 97.0 (32.1)% (1) Before goodwill amortisation and exceptional items

  5. Hotels Worldwide Occupancy, Rate and RevPAR Performance 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

  6. Worldwide RevPAR by Ownership Type Like for Like Hotels, Constant Currencies RevPAR growth 2003 vs 2002

  7. Hotels - Cost Management Like for Like, Constant Currencies Increasing revenue £m Declining revenue £m Total £m Revenue movement (41.2) 42.9 (84.1) GOP movement (1) (44.5) 25.2 (69.7) Incremental conversion (8.0)% 58.7% 17.1% Rental & Owners return 18.8 Depreciation / FF&E 3.0 Insurance (1.8) Other (6.6) Operating profit decline (1) (31.1) (1) Before exceptional items and goodwill amortisation

  8. UK Hotels RevPAR Performance vs 2002 Like for Like Hotels March / April have been combined to avoid the distortion caused by the timing of Easter

  9. Continental Europe (exc. Scandic branded) RevPAR vs 2002 Like for Like, Constant Currencies March / April have been combined to avoid the distortion caused by the timing of Easter

  10. Scandic RevPAR Progression 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

  11. Scandic Performance 2003 vs 2002 Like for like revenue gainers (a) £m Like for like revenue losers (a) £m Marketing & support costs (a) £m New opened / closed (a) £m 2003 Actual £m Re- brands (a) £m 2002 Actual £m F.x. £m Revenue 221.5 4.9 (9.2) (1.0) 4.5 - 21.7 242.4 GOP 77.1 2.2 (7.8) (2.9) 1.3 (1.2)(b) 7.3 76.0 Inc. conversion 44.9% 15.1% Profit 16.6 1.3 (7.2) (3.0) 0.9 (1.8) 0.7 7.5 Non-recurring items (c) (1.2) 6.3 (a) At constant currencies (b) Support office costs not allocated to individual hotels (c) 2002 one-off credits

  12. Worldwide Betting Operating Profit (1) Gross Win 2003 £m 2002 £m 2003 £m 2002 £m UK Retail274.6 237.0 83.1 58.5 Ireland & Belgium 33.4 30.9 5.5 5.6 Telephone Betting - excluding high rollers 14.9 14.0 5.0 3.9 - high rollers (1.6) 1.0 (1.2) 0.8 13.3 15.0 3.8 4.7 eGaming 30.8 26.8 6.2 5.1 Vernons 10.5 10.2 3.2 2.6 Worldwide Betting 362.6 319.9 101.8 76.5 (1) Before goodwill amortisation and exceptional items

  13. UK Retail Better (worse) % 2003 £m 2002 £m Gross win (1) 274.6 237.0 15.9% Duty / Gross profits tax (40.2) (36.5) Other costs (151.3) (142.0) Operating profit 83.1 58.5 42.1% Staff costs per slip 31.72p 29.56p (7.3)% Stake per slip (2) £8.24 £7.48 10.2% (1) Gross win is before duty / gross profits tax are deducted (2) Excluding machines

  14. Cost Conversion Conversion of Gross Profit Growth to Operating Profit 2003 First Half 2002 Second Half 2002 First Half 2002 Full Year UK Retail72.6% 26.4% 54.0% 39.8% Worldwide Betting 60.4% 31.7% 51.9% 41.6%

  15. Telephone Betting (excluding high rollers) Better (worse) % 2003 £m 2002 £m Gross win (1) 14.9 14.0 6.4% Duty / Gross profits tax (2.2) (2.1) Other costs (7.7) (8.0) Operating profit 5.0 3.9 28.2% Average stake per call £77.75 £83.26 (6.6)% Salary cost per call 67.2p 71.3p 5.8% No. of calls (000’s) 3,060 2,264 35.2% Active customers (000’s) (2) 91.9 87.7 4.8% (1) Gross win is before duty / gross profits tax are deducted (2) Active customers are those who placed a bet during the period

  16. eGaming 2003 £m 2002 £m Better (worse) % Gross win (1) 30.8 26.8 14.9% Duty / Gross profits tax (1.5) (1.9) Other costs (23.1) (19.8) Operating profit 6.2 5.1 21.6% Active customers (000’s) (2) Sportsbook 150.7 130.2 15.7% Casino 36.4 28.1 29.5 % On-line registrations (000’s) 153.2 181.5 (15.6)% (1) Gross win is before duty / gross profits tax are deducted (2) Active customers are those who placed a bet during the period

  17. eGaming Gross Win by Region 2003 2002 UK Far East Europe Other

  18. Hilton Group plc - Cash Flow 2003 £m 2002 £m Cash inflow from operating activities 226.5 211.8 Interest, tax and dividends paid (155.9) (132.2) Free cash flow 70.6 79.6 Capital expenditure (101.8) (85.2) Free cash flow after capex (31.2) (5.6) Proceeds from asset sales 0.8 7.7 Acquisitions / disposals - 3.5 (30.4) 5.6 Exchange and other movements (1) (87.9) (43.6) Net borrowings movement (118.3) (38.0) Opening net borrowings (1,164.8) (1,473.9) Closing net borrowings (1,283.1) (1,511.9) (1) Includes £88.5m adverse exchange (2002: £48.6m adverse exchange), intangible additions £2.1m (2002: £0.2m) and dividends from associates £2.9m (2002: £0.3m)

  19. Hilton Group plc - Analysis of 2003 Capital Expenditure Hotels £m Acquisition linked development: Luxembourg (hotel acquisition) 15.8 HK Copenhagen (acquisition) 12.9 Sydney (refurb) 9.0 Dusseldorf (refurb) 4.7 42.4 Other 31.9 Total Hotels 74.3 Total LivingWell 1.5 75.8 Worldwide Betting Shop transmission system & TVs 9.6 Development 7.0 Other (including EPOS £1.0m) 5.9 eGaming / Telephone betting 3.5 Total Worldwide Betting 26.0 101.8 Total Group

  20. David MichelsGroup Chief Executive

  21. July / August Trading • Hotels • UK - Improving • Europe - Weak • Middle East - Steady progress • Asia Pacific - Improving • Americas - Mixed performance; Caribbean stronger • Betting - Excluding FOBTs underlying business growing steadily

  22. Costs Head office – Maintained at low levels Betting – Strictly controlled with good conversion ratios Hotels – Looking for further improvement wherever possible

  23. Capex H1 2003 £m FYF 2003 £m 2000 £m 2002 £m 2001 £m Capex: Hotels 278 144 88 34 85 Betting 40 40 41 26 61 Major property purchases(1)147 - 59 42 89 Capital expenditure 465 184 188 102 235 Disposals - hotels (13) (355) (335) - 452 (171) (147) 102 (1) Including acquisition linked development

  24. Scandic Operating environment remains tough particularly in Sweden Rebranding programme on hold Performing better than the competition

  25. Franchising Scandic to be franchised in Northern Europe Launch on 1 January, 2004 Franchising of Hilton brand progressing

  26. The Key Issues FOBTs – What next? Betting Exchanges – A level playing field? Hotel trading – Visibility remains poor

  27. FOBTs Popular innovation following the removal of customer tax Judicial declaration expected Q1 2004

  28. Betting Exchanges “We are not against betting exchanges, we are against an uneven playing field”

  29. Outlook Hotels - Will recover. Time and pace of recovery still uncertain • Betting-Maintain steady growth in the underlying business

  30. Interim Dividend “Maintained at last year’s level reflecting confidence in the brands and their future prospects” 3.4 pence per share

  31. Appendices

  32. Hotels - First Half Analysis by Contract Type Fixed lease Contingent lease £m Owned Managed LivingWell Total No. of hotels 69 48 152 117 - 386 No. of rooms 17,406 10,016 33,271 36,740 - 97,433 Turnover 261.9 131.7 378.9 472.7 25.3 1,270.5 Gross operating profit 86.6 50.8 137.3 163.2 9.8 447.7 Less: Rental & owners return (1.8) (35.3) (82.2) (150.7) (1.8) (271.8) Depreciation (25.4) (11.6) (14.9) - (2.4) (54.3) Other costs / income (24.5) (4.5) (26.2) - (2.3) (57.5) 2003 Profit 34.9 (0.6) 14.0 12.5 3.3 64.1 2002 Profit 58.9 8.4 17.7 18.7 2.1 105.8

  33. RevPAR Change Geographically by Ownership Type vs 2002 Like for Like, Constant Currencies Owned & fixed lease Contingent lease Managed UK (5.2)% (5.3)% (9.4)% Europe & Africa (8.8)% 0.7% (7.0)% Middle East & Asia Pacific 19.6% 11.3% (9.4)% Americas (11.6)% 29.1% 7.1% Total(6.6)% 0.7% (7.0)%

  34. Hilton vs London Market Cumulative Year to Date RevPAR Premium Market Source: PKF Hotel Consultancy Services

  35. Hilton vs Provincial UK Market Cumulative Year to Date RevPAR Premium Market Source: PKF Hotel Consultancy Services

  36. Resort Hotels, Occupancy, Rate and RevPAR Performance vs 2002 Like for Like, Constant Currencies March / April have been combined to avoid the distortion caused by the timing of Easter

  37. Worldwide Betting - Revenue 2003 £m 2002 £m Growth % UK Retail (1)2,562.2 1,231.7 108.0% Ireland & Belgium 147.3 121.6 21.1% Telephone Betting 240.7 193.8 24.2% eGaming 215.1 192.3 11.9% Vernons 15.0 15.1 (0.7)% Worldwide Betting 3,180.3 1,754.5 81.3% (1) Includes FOBT turnover, year on year increase £1,160.6m.

  38. eGaming Gross Win

  39. Breakdown of Lease Commitments Forecast land and buildings full year lease commitments for 2003 Fixed lease £m Minimum guarantee £m Contingent lease £m Total £m • Hotels 73.7 56.2 108.4 238.3 • Betting & Gaming 36.4 - - 36.4 • Property 6.2 - - 6.2 • Total116.3 56.2 108.4 280.9 • Also c. £14m other operating lease commitments Forecast contingent commitments based on 2003 forecast results

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