Millennium & Copthorne Hotels Regulatory News (MLC)

21 Feb 2005 07:01

Millennium & Copthorne Hotels PLC21 February 2005 21 February 2005 MILLENNIUM & COPTHORNE HOTELS PLC RESULTS FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2004 Millennium & Copthorne Hotels plc today presents its results for the twelvemonths ended 31 December 2004. The Group owns, asset manages and/or operates 87hotels located in the Americas, Europe, The Middle-East, Asia and Australasia. Group results •Group turnover up 4.6% to £547.1m (2003: £523.1m) •Group operating profit before exceptional items up 37% to £85.9m (2003: £62.5m) •Gross hotel operating margin increased 1.5 percentage points to 33.6% (2003: 32.1%) •Pre-tax profit before exceptional items to £55.0m (2003: £26.4m) •Pre-tax profit after exceptional items to £94.8m (2003: £18.7m) •Earnings per share 24.5p (2003: 3.9 p) •Total dividend of 12.50p per share (2003: 6.25p) Highlights •New York Plaza sale, a £376m deal, the largest single hotel asset sale in New York. Our 50% share after transaction costs, a profit before tax on a historic cost basis of £69m or a net profit before tax of £52m after revaluation reserves •Particularly strong performances from New York and London •Continued recovery in Regional US following focused management attention - RevPAR up 16% in Q4 •Continued signs of a solid recovery in Asia with rate improvements in Q4 •Establishment of strong team focused on Millennium brand and development •Dedicated management team appointed to run Copthorne UK Commenting today, Mr Kwek Leng Beng, Chairman said: "2004 was a pivotal year for the Group. We started the year facing the tradinguncertainties caused by numerous external events. We have finished with asignificantly higher hotel operating performance and a substantial profit fromasset disposals. "The Group has been able to complete two strategic disposals at a substantialpremium to book value which have had a positive financial impact on the Group.Meanwhile, the US region has staged a strong turnaround supported by theMillenium Hilton, which is now fully operational and making good profitcontributions. "The asset disposals and improvement in the Group's hotel trading performanceclearly demonstrates the success of our business strategy of being both an assetowner and operator. "The Board proposes to maintain the ongoing dividend per share for 2004 at thesame level as for 2003 (6.25p) and in addition, to recommend a special dividendof 6.25p per share in recognition of the exceptional profits achieved in 2004.Thus the total dividend for 2004 will be at the same level as for 2002." Enquiries: Tony Potter, Chief Executive 020 7404 5959 (21 February)Millennium & Copthorne Hotels plc David Cashman, Group Chief Financial 020 7404 5959 (21 February)OfficerMillennium & Copthorne Hotels plc Kate Miller/Chi Lo 020 7404 5959Brunswick Group LLP A copy of the press release and analyst presentation will be available on http://www.millenniumhotels.com/ from 9.15am on 21 February 2005. An audio webcast of the results presentation to analysts and investors will be available later this morning on www.millenniumhotels.com and www.cantos.com MILLENNIUM & COPTHORNE HOTELS PLC RESULTS FOR THE TWELVE MONTHS ENDED 31DECEMBER 2004 CHAIRMAN'S STATEMENT GROUP RESULTS We are pleased to announce that 2004 was a year of continued recovery for theGroup with RevPAR growth across all regions and an ongoing improvement inprofitability. Whilst this was most prominent in the second quarter, primarilydue to the weak comparators in 2003, the other quarters have all seen sustainedgrowth year on year. We saw particularly strong performances from New York andLondon, with ongoing improvement in regional US following focussed managementattention. We continue to see signs of a solid recovery in Asia with rateimprovements coming through in the final quarter. Group turnover for the year was up 4.6% to £547.1m (2003: £523.1m).Pre-exceptional Group operating profit increased 37.4% to £85.9m (2003: £62.5m)and our pre-exceptional profit before tax increased to £55.0m (2003: £26.4m).Post exceptional profit before tax was £94.8m (2003: £18.7m). The final quarter of the year finished well with RevPAR growth up in all regionsagainst the strongest comparable quarter of 2003. Occupancies were strong and weachieved rate growth in all our regions. 83% of the resultant £4.1m revenueincrease was converted to Group operating profit reflecting both the impact ofimproved rates and our continued management emphasis on controlling costs. 3 months 3 months 12 months 12 months to 31 Dec 2004 to 31 Dec 2003 to 31 Dec 2004 to 31 Dec 2003 £m £m £m £mGroup turnover (Note 1) 149.6 145.5 547.1 523.1Pre-exceptional Group operating profit 28.1 25.0 85.9 62.5Pre-exceptional profit before tax 21.6 19.0 55.0 26.4Exceptional items (Note 2) 39.3 (0.6) 39.8 (7.7)Post-exceptional 60.9 18.4 94.8 18.7profit before tax Note 1------3 months to 31 December 2003 in constant currency £139.9m12 months to 31 December 2003 in constant currency £495.5m Note 2------Includes £55.0m of profit on property disposals and an impairment charge of£15.2m 2004 was a successful year for reaping the real estate benefits from our hotelinvestments and for realising profit from our non-core portfolio. Thepost-exceptional profit number includes £55.0m made up of the following: • The Plaza, New YorkIn August, we announced the sale of The Plaza, New York in which we had a 50%joint interest. We completed the sale in October for a sale price of US$675m(£376m), which is considered to be a record price for a New York hoteltransaction. This represented a 46% premium to the hotel's net book value ofUS$462m which itself included a US$61m revaluation surplus. After transactionexpenses but before tax, our share of the profit was US$92.8m or £51.8m. From ahistorical cost perspective, our share of the profit on disposal would beUS$123.3m (£68.9m). • Birkenhead Point Shopping Centre and Marina Facility, AustraliaIn October we announced the sale of Birkenhead Point Shopping Centre and MarinaFacility in Australia, which was held by a 61.3% owned subsidiary. The sale wascompleted on 30 November giving a pre-tax profit on disposal of £2.7m and ahistorical cost profit of £15.3m, as the carrying value contained a £12.6mrevaluation surplus • Staff accommodation block, LondonIn January we completed the sale of a staff accommodation block in London,resulting in a pre-tax profit of £0.5m. These disposals have collectively realised cash proceeds of £136 million and hasbeen the significant contributing factor to bringing the Group's net debt from£681 million to £479 million and gearing to be reduced to 37% from 53%. In addition to property disposals, we continue to explore ways to create valuethrough alternative uses for assets. DIVIDEND The Board proposes to maintain the ongoing dividend per share for 2004 at thesame level as for 2003 (6.25p) and, in addition, to recommend a special dividendof 6.25p per share in recognition of the exceptional profits achieved in 2004.Thus the total dividend for 2004 will be at the same level as for 2002. TheGroup will again be offering shareholders the option of a scrip dividend. THE BOARD Following changes at the executive board level, management arrangements were putin place with the appointment of Tony Potter and Wong Hong Ren as the JointInterim Chief Executives. Tony Potter and Wong Hong Ren were charged withproviding continuity to the Group, reviewing the Group's assets and operationsand establishing forward programmes. Under my leadership and direction, thesubstance of these tasks were successfully completed by the year end. TonyPotter has become Group Chief Executive at 1 January 2005 and Wong Hong Ren hasreverted to his former role as Executive Director. REVIEW OF ASSETS AND OPERATIONS We conducted an appraisal of the Group's assets and operations last year. The Group's strategy of being an owner and operator of hotel assets remainsunchanged. We believe that, particularly in a rising market, this continues tobe right for a Group of our scale and size and with our specific property andasset management skills. Going forward, our focus is to develop our existing Millennium and Copthornebrands, and to drive improved returns through operational excellence. As anoutcome of our review, we have decided to establish a separate team to managethe Copthorne brand in the UK. The focus will be on increasing the profitabilityof the existing hotels and building on the brand's strong position in the UKthrough new management contracts and franchising. PROSPECTS The recent asset disposals and improvement in the Group's hotel tradingperformance clearly demonstrate the success of our business strategy of beingboth an asset owner and operator. With our portfolio of quality assets in keylocations, we remain confident that we are well positioned to make furtherprogress in the improving trading environment. KWEK LENG BENGCHAIRMAN21 February 2005 OPERATING REVIEW GROUP PERFORMANCE The first half of 2004 showed a significant improvement over 2003 and the secondhalf was one of steady growth. Business has been returning to all regions and asa result our turnover for the year was £547.1m (2003: £523.1m). Pre-exceptionalGroup operating profit was £85.9m (2003: £62.5m). Occupancy for the Group was71.8% (2003: 65.1%) and the average room rate was £60.59 (2003: £61.60)resulting in a RevPAR up 8.5% at £43.50 (2003: £40.10). The Group GOP margin was33.6% (2003: 32.1%). In order to assist the understanding of our key operating statistics we arepresenting statistics in constant currency by restating 2003 figures at 2004exchange rates. On this basis 2003 revenue was £495.5m, which represents a£51.6m revenue improvement in 2004. On this same basis the re-statedpre-exceptional Group operating profit before was £60.2m in 2003. With constant rates of exchange, the average room rate in 2003 was £58.31, andthe resultant RevPAR was £37.96. With a 2004 RevPAR of £43.50, this is a 15%year on year improvement. REGIONAL PERFORMANCE UNITED STATES New York Occupancy for the region was 84.0% (2003: 82.6%), reflecting our more aggressiverate approach. As a result, the average room rate was £108.77 (2003: £94.61) andthe resultant RevPAR was £91.37 (2003: £78.15). The RevPAR improvement reflects our aggressive rate strategy in New York. Aspreviously reported, the Millennium Broadway encountered strong competition inthe conference market which presented a challenge throughout the year. We tookthe opportunity of low business levels at the end of the year to renovate theHudson Theatre Conference Facility and have received positive feedback and salesenquiries, which are expected to turn into increased business levels in 2005.Our booking pace for the lucrative final three quarters in New York alreadyreflects this initiative. The Millennium UN Plaza had a strong year and after a flat January and February,RevPAR growth over 2003 was experienced every month. A similar pattern isanticipated in 2005. The Millenium Hilton re-opened in May 2003. Its performance has been impressiveand it continues to capture an increasing share of the market. In the finalquarter of 2004, which is the first quarter where comparisons might be regardedas meaningful, RevPAR has increased by 23%. The Group continues to pursue its claim against the insurance company. We remainconfident that the claim will be resolved in our favour. Regional US The occupancy for the region improved to 61.2% (2003: 57.0%). The average roomrate was £52.91 (2003: £52.03) and the resultant RevPAR was £32.38 (2003:£29.66). As outlined at our interim results, the first half of 2004 saw a decline inoperating performance year on year in this region of £0.5m. The second half hasseen profit of £4.7m compared to a second half profit of £1.6m in 2003 whichrepresents a £3.1m improvement. Management focus on this region is continuingand beginning to show a positive effect and US domestic air travel volumes arenow reported to be back to 2000 levels. This is assisting in driving occupancythroughout the region. 2005 has had an encouraging start. Overall the performance of the region's hotels was encouraging, with continuedgrowth across the region. Occupancy and RevPAR have increased in all but threeproperties and two thirds of the regional portfolio have increased average rate.Only one Millennium property failed to increase RevPAR over 2003. One of thestrongest performers this year has been the Millennium Biltmore Hotel, LosAngeles. This property started to improve towards the end of 2003 and thisgrowth has been maintained in 2004 with a US$1.5m improvement in operatingprofit. This reflects improving market conditions and also the benefits offocused management attention. In the year the Group repossessed the La Quinta Inn at Lakeside, Florida due toloan repayment default. This property had been sold by way of a loan note aspart of the disposal programme following the Regal acquisition. As this propertyhas been held for re-sale the operating statistics have not been included in theresults. A small profit of £0.1m has been included in the regional profit. Itwill be operated as a Best Western franchise and is expected to make a positivegrowth contribution in 2005 to the US region. It is our intention to hold thisasset in the short term due to the uplift in the Orlando market which presents atwo to three year profit opportunity. EUROPE London The occupancy for the region was 83.5% (2003: 80.9%). The average room rate was£79.79 (2003: £73.85) and the resultant RevPAR was £66.62 (2003: £59.74). The London hotel market has seen a strong improvement in business in 2004. Intotal our properties have experienced RevPAR growth of 11.5% over 2003, rangingbetween 8.5% and 13.8%. This growth has been experienced across all our majormarket sectors. Food & Beverage revenues have also shown solid growth in 2004with total revenues up 12% on 2003. Particular emphasis was placed on growing rate at the Millennium Knightsbridge,and this was successfully achieved as this hotel has shown the largest rategrowth of all our hotels in London. The Copthorne Tara in Kensington has recovered all the targeted aircrew businesslost in the first half of 2003 and has sold an additional 21,000 rooms in thissector this year. Signed contracts are in place which form an appropriate baseof business for 2005 and beyond. Rest of Europe The occupancy for the region was 72.8% (2003: 69.8%). The average room rate was£66.67 (2003: £66.41) and the resultant RevPAR was £48.54 (2003: £46.35). This region includes both Regional UK and Continental Europe. Both regionsshowed increases in occupancy. The average rate on the Continent showed a smalldecline but not to the extent of the overall markets. The three strongest performances in Regional UK were all in the South East,reflecting both the increased business levels being seen in the London area, anda focus on increasing average rates. Despite overall RevPAR improvement inRegional UK, three properties (Cardiff, Merry Hill and Newcastle) experiencedminor decreases in RevPAR, reflecting the fact that the recovery has not yetreached all parts of the UK. Newcastle experienced significant new competitionin the city and we are pleased to note the Q4 year on year RevPAR growth hascontinued into 2005. We are particularly pleased with the overall performance of our four hotels inFrance and Germany. Despite the widely reported difficult trading conditions allfour properties increased occupancy and RevPAR, although average rate fell attwo properties, namely Stuttgart and Charles de Gaulle. Oversupply continues at Charles de Gaulle airport, and the hotel adopted anaggressive approach to increasing volume in order to increase market share.Trading at Hannover remains dependant on the various trade fare cycles, and theIAA trade fare was a major contributor this year to the improved average rate.The opening of the new musical "Mama Mia" has helped to improve food andbeverage trading at the Millennium Stuttgart in the latter part of 2004. Theoperating loss in our German hotels was £2.3m (2003: £4.5m). ASIA The occupancy for the region was 73.2% (2003: 56.5%). The average room rate was£46.76 (2003: £47.71) and the resultant RevPAR for the year was £34.23 (2003:£26.96). 2004 has been a very strong year in comparison to 2003. A major part of theimprovement in RevPAR is as a result of the effect of SARS in the early to midpart of 2003 and is occupancy driven. Every hotel in the region has experienceddouble digit growth in occupancy over 2003, even properties in those countrieswhich were not directly impacted by SARS. The full year improvement is not justa result of the depressed 2003 business levels though. It should be noted thatfor every month in the second half of 2004, RevPAR has exceeded that of 2002. As previously reported, rate pressure was an issue across the region in theearly parts of this year as a result of large volume rises and a time lag instabilising rates. The final quarter has seen overall rate growth each month andmanagement are focused on further rate improvement in 2005. The Millennium Hilton Seoul has increased occupancy every month although therewas a reduction in average rate for the year. This was a result of market mix.All market sectors except airline increased their average rate, but the majorityof the increased volume was in those sectors which had a lower average rate,therefore diluting the overall rate performance. AUSTRALASIA The occupancy for the region was 71.5% (2003: 68.7%). The average room rate was£38.77 (2003: £38.05) and the resultant RevPAR was £27.72 (2003: £26.14). We remain pleased with the performance of our New Zealand properties with RevPARincreasing by a further 6.0% over 2003. We operate three brands within NewZealand and occupancy and average rate have increased year on year in each ofthose with the exception of the Kingsgate chain, where average rate remainedflat. CURRENT TRADING Whilst the early part of the year is not a significant trading period in thecontext of overall Group performance, we are encouraged by the early signs. Inthe period to 14 February 2005 the Group RevPAR increased by 7.9% compared tothe corresponding period in 2004. REVIEW OF FINANCE RESULTS The total Group turnover for the year was £603.3m (2003: £583.2m) including£56.2m as a share of the turnover of joint ventures (2003: £60.1m). The totalGroup operating profit before exceptional items was £85.9m (2003: £62.5m). TheGroup share of operating profits of joint ventures and associates was £8.0m(2003: £7.0m) to give a total pre exceptional operating profit of £93.9m (2003:£69.5m). PROPERTY The Group has made a net profit on the disposal of fixed assets of £55.0m. Thisprimarily comprises £51.8m relating to the sale of its joint venture interest inThe Plaza in New York. Of the other £3.2m, £2.7m relates to the disposal inNovember of the Group's investment property in Sydney (Birkenhead Point ShoppingCentre and Marina) and the remaining £0.5m relates to the sale of staffaccommodation. Both the Plaza and Birkenhead contained £17.1m and £12.6m revaluation surplusesas at 31 December 2003. The historic profits from each of these disposals aretherefore £68.9m and £15.3m respectively. The Group has a policy of revaluing approximately one third of its owned hotelportfolio each year. In the year there were 19 hotels revalued as part of thisnormal revaluation cycle. In addition the Group undertakes impairment reviews asrequired by FRS 11 - Impairment of Fixed Assets and Goodwill.The result of the annual revaluations and impairment reviews has resulted insome property carrying values being increased and others falling. The netposition is a surplus of £13.8m. The carrying values of certain fixed assets andfixed assets held within investments in joint ventures has therefore increasedby £29.0m based on external valuations performed on behalf of the Group. In someinstances we have limited the surplus recognised to an amount below thatindicated in the external valuation. Where the carrying values were reduced,this was on properties where carrying values are now below historic cost andtherefore an impairment charge of £15.2m has been incurred this year. The majority of the writedown is in relation to St. Louis and is from decliningearnings due to decreased convention business. In addition, the MillenniumHarvest House Hotel, Boulder has been affected by the steady rise in the numberof hotels entering the market in the region. Expansion of the economic base inBoulder market has stimulated the construction of three full-service hotels inrecent years. Certain other properties which were reviewed for impairment havenot incurred a charge where their alternative use value is at or in excess ofthe current carrying values. INTEREST Total interest receivable and similar income was £5.8m (2003: £3.1m) of which£0.5m (2003: £0.7m) was received from joint ventures. Total interest payable was £44.7m (2003: £46.2m). The main reason for thereduction is the repayment of both Group and joint venture debt and favourableexchange rates. The Group net interest payable (excluding joint ventures) was£35.7m (2003: £38.3m). Of the total interest payable, £3.2m (2003: £4.8m) was in respect of the Group'sshare of the interest payable by joint ventures. The lower joint ventureinterest cost reflects favourable foreign exchange rates and repayment inOctober of the US joint venture debt. The Group interest payable for the year was £41.5m (2003: £41.4m), which wascovered 2.9 times (2003: 2.4 times) by pre-exceptional EBITDA of £121.8m (2003:£101.0m). TAXATION The tax charge is 7.6% of the current year profit before exceptional items(2003: 19.7%). The total tax charge in respect of exceptional items recorded in the profit andloss account is £12.2m, comprising £11.8m current taxation and a deferred taxcharge of £0.4m. In addition a further £6.1m of deferred taxation has beencharged directly in the statement of recognised gains and losses, to match therevaluation gains recognised in prior years arising on disposed properties. Theexceptional tax charge has been significantly reduced by the availability of taxlosses, which have been used to reduce the taxable gain on the Plaza disposal.To the extent these tax losses had previously been recognised as assets, anon-cash deferred tax charge arises. The future effective tax charge will be affected by the mix of profits generatedfrom the different tax jurisdictions in which the Group operates and the extentto which the Group is in a position to use the tax losses which it hasavailable. The 2005 tax rate will be reported under IAS 12: Income taxes. Weanticipate the 2005 tax rate to be around 25%. MINORITY INTERESTS During the year, the Group increased its shareholding in Kingsgate InternationalCorporation Limited (Kingsgate). Kingsgate has property interests in Australiaand was, prior to this transaction, listed on the New Zealand stock exchange. The Group's shareholding in Kingsgate is held through its majority ownedsubsidiary CDL Hotels New Zealand Limited which has increased its interest inKingsgate from 50.74% to 61.30%. The total purchase consideration ofapproximately NZ$15.2m (£5.4m) represents NZ$0.36 for each share acquired by theGroup and was settled in the second half of the year. The minority interests' share of Group profits arises due to the equity interestthat external shareholders hold in subsidiaries and joint ventures of the Group.The equity minority interest charge was £8.8m (2003: £5.7m) which largely arisesin Taiwan and Australasia. Of the £8.8m, £1.6m relates to the sale ofBirkenhead. Minority interests at 31 December 2004 have increased by £3.2m as aresult of the purchase of the Kingsgate minority interest, and by £4.8m as aresult of exchange movements, offset by an increase of £7.6m due to the minorityinterests share of the revaluation of fixed assets and share of profits. DIVIDENDS AND EARNINGS PER SHARE The directors are proposing a final dividend of 4.17p per share, plus a specialdividend of 6.25p per share (2003: 2.05p). This means that the total dividendper share for the full year will be 12.50p (2003: 6.25p). The total earnings per share were 24.5p (2003: 3.9p). Pre-exceptional earningsper share were 15.3p (2003: 5.4p). MILLENIUM HILTON The Group is involved in insurance litigation with respect to the damageincurred as a result of the terrorist attacks on 11 September 2001. The primaryfocus of the parties' dispute has been the extent of business interruptioninsurance applicable to the closure of the Hotel. As at 31 December 2004 nofinal agreement has been reached. But we expect to make an announcement onsettlement in due course. CAPITAL EXPENDITURE AND DEPRECIATION The Millennium Hotel Sydney was closed on 31 March 2003 to allow for thecommencement of the new Zenith project, which involves the redevelopment of oneof the two hotel towers into residential accommodation. The Group continues toevaluate all viable financial options with regards to this investment. As at 31December 2003, £2.0m had been spent on the conversion and in this year a further£3.8m has been spent. In the fourth quarter the carrying value held at 31December 2003 of £11.6m together with the conversion expenditure incurred in theyear of £5.8m has been transferred from fixed assets to development propertieswork in progress, within stocks. The Group's capital expenditure in 2004, excluding the above project totalled£25.2m (2003: £29.1m), of which £0.4m (2003: £14.3m) related to therefurbishment of the Millenium Hilton New York. The depreciation charge for the year was £35.9m (2003: £38.5m). CASHFLOW AND GEARING Net cash inflow from operations was £122.8m (2003: £93.1m). Gross debt has fallen by £152.1m to £573.7m (2003: £725.8m). There was anoverall net increase in cash and short term deposits of £52.2m (2003: decrease£11.8m) which, together with foreign exchange translation differences, givesrise to a cash and short term deposit balance at 31 December 2004 of £94.8m(2003: £44.9m). The Group gearing as at 31 December 2004 was 37% (2003: 53%).Consolidated profit and loss account for the year ended 31 December 2004 Pre Total Pre Total except Except except Except -ional -ional -ional -ional items items items items 2004 2004 2004 2003 2003 2003 £m £m £m £mTURNOVERGroup and share of joint ventures 603.3 - 603.3 583.2 - 583.2Less share of turnover of joint ventures (56.2) - (56.2) (60.1) - (60.1) -------- -------- -------- -------- GROUP TURNOVER 547.1 - 547.1 523.1 - 523.1Cost of sales (243.8) - (243.8) (242.1) - (242.1) -------- -------- -------- -------- GROSS PROFIT 303.3 - 303.3 281.0 - 281.0Administrative expenses (217.4) (15.2) (232.6) (218.5) - (218.5) Other operating expenses - - - - (8.1) (8.1) -------- -------- -------- -------- GROUP OPERATING PROFIT 85.9 (15.2) 70.7 62.5 (8.1) 54.4Share of operating profits of joint ventures 8.0 - 8.0 7.0 - 7.0 -------- -------- -------- -------- TOTAL OPERATING PROFIT 93.9 (15.2) 78.7 69.5 (8.1) 61.4Profit on disposal of fixed assets - 3.2 3.2 - 0.4 0.4Profit on disposal of joint ventures - 51.8 51.8 - - - -------- -------- -------- -------- PROFIT BEFORE INTEREST AND TAXATION 93.9 39.8 133.7 69.5 (7.7) 61.8Interest receivable and similar income Group 5.8 - 5.8 3.1 - 3.1 -------- -------- -------- -------- 5.8 - 5.8 3.1 - 3.1Interest payable and similar charges Group (41.5) - (41.5) (41.4) - (41.4) Joint ventures (3.2) - (3.2) (4.8) - (4.8) (44.7) - (44.7) (46.2) - (46.2) -------- -------- -------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 55.0 39.8 94.8 26.4 (7.7) 18.7Tax on profit on ordinary activities (4.2) (12.2) (16.4) (5.2) 3.3 (1.9) -------- -------- -------- -------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 50.8 27.6 78.4 21.2 (4.4) 16.8Minority interests - equity (7.2) (1.6) (8.8) (5.7) - (5.7) -------- -------- -------- -------- Profit for the financial year 43.6 26.0 69.6 15.5 (4.4) 11.1Dividends paid and proposed (17.8) (17.9) (35.7) (17.7) - (17.7) -------- -------- -------- -------- RETAINED PROFIT/(LOSS)FOR THE FINANCIAL YEAR 25.8 8.1 33.9 (2.2) (4.4) (6.6) -------- -------- -------- -------- Earnings per share 15.3p 9.2p 24.5p 5.4p (1.5p) 3.9pDiluted earnings per share 15.3p 9.1p 24.4p 5.4p (1.5p) 3.9pDividends per share - ordinary / special 6.25p 6.25p 12.50p 6.25p - 6.25p All turnover and group operating profit in the current and prior years derivefrom continuing operations. Consolidated statement of total recognised gains and losses for the year ended31 December 2004 2004 2003 £m £m Profit for the financial year 69.6 11.1Loss on foreign currency translation (48.4) (55.6)Surplus/(deficit) on revaluation of fixed assets Group 10.4 (2.4) Joint ventures 11.0 -Taxation charge arising on disposal of revalued fixed assets (6.1) - ----- -----Total recognised gains and losses relating to the financial year 36.5 (46.9) ----- ----- Note of historical cost profits and losses for the year ended 31 December 2004 2004 2003 £m £m Reported profit on ordinary activities before taxation 94.8 18.7Difference between a historical cost depreciation charge and the actual depreciation charge for the year calculated on the revalued amount 0.5 0.5Difference between a historical cost profit on disposal and the actual profit on disposal for the year calculated on the revalued amount 29.7 - ------ -------Historical cost profit on ordinary activities before taxation and minorities 125.0 19.2 ------ ------- Historical cost profit/(loss) for the year retained after taxation, minority interests and dividends 50.7 (6.1) ------ ------- The difference between historical cost profit on disposal and the actual profiton disposal for the year calculated on the revalued amount is shown before thededuction of the share of profits of minority interests of £7.3m. The groupshare of the profit on disposal after minority interest is £22.4m. Consolidated balance sheet as at 31 December 2004 2004 2004 2003 £m £m £m FIXED ASSETS Tangible assets 1,970.6 2,103.0Investments in joint ventures Share of gross assets 133.6 256.6Share of gross liabilities (73.1) (178.9)Share of minority interests (20.2) (19.6)Loans to joint ventures 22.3 32.7 ------ ------- 62.6 90.8Investment in associated undertakings 0.4 0.5Other investments 0.8 0.9 ------ ------- 63.8 92.2 ------ ------- 2,034.4 2,195.2 ------ -------CURRENT ASSETS Stocks 36.0 16.0Debtors falling due within one year 50.4 59.6Debtors falling due after more than one year 2.0 1.9 ------ ------- 52.4 61.5Cash and short term deposits 94.8 44.9 ------ ------- 183.2 122.4CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (477.2) (178.2) ------ ------- NET CURRENT LIABILITIES (294.0) (55.8) ------ ------- TOTAL ASSETS LESS CURRENT LIABILITIES 1,740.4 2,139.4 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (258.6) (671.0)PROVISIONS FOR LIABILITIES AND CHARGES (54.3) (55.0) ------ ------- NET ASSETS 1,427.5 1,413.4 ======= ======= CAPITAL AND RESERVES Called up share capital 85.9 84.8Share premium account 846.1 845.8Revaluation reserve 287.9 296.4Profit and loss account 77.5 59.5 ------ -------SHAREHOLDERS' FUNDS - EQUITY 1,297.4 1,286.5MINORITY INTERESTS - EQUITY 130.1 126.9 ------ -------TOTAL CAPITAL EMPLOYED 1,427.5 1,413.4 ======= ======= Consolidated cash flow statement for the year ended 31 December 2004 2004 2004 2003 2003 £m £m £m £m CASH FLOW STATEMENT Net cash inflow from operating activities 122.8 93.1 Dividends received from joint ventures - 0.3 Returns on investments and servicing of finance (37.7) (45.5) Taxation paid (10.5) (5.3) Net cash inflow/(outflow) for capital expenditure and financial investment 19.7 (23.7) Net cash inflow/(outflow) for acquisitions and disposals 90.8 (28.0) Equity dividends paid (3.0) (35.3) --------- --------- Cash inflow/(outflow) before use of liquid resources and financing 182.1 (44.4)Management of liquid resources (45.6) -Financing Net cash (outflow)/inflow from the issue of shares and purchase of minority interests (4.5) 0.1 (Decrease)/increase in debt and lease financing (125.4) 32.5 --------- --------- Net cash (outflow)/inflow from financing (129.9) 32.6 --------- ------- Increase/(decrease) in cash in the year 6.6 (11.8) --------- ------- 2004 2004 2003 2003 £m £m £m £m RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase/(decrease) in cash in the year 6.6 (11.8) Cash outflow from increase in liquid funds 45.6 - Cash outflow/(inflow) from the decrease/(increase) in debt and lease financing 125.4 (32.5) --------- --------- Change in net debt resulting from cash flows 177.6 (44.3)Acquisitions - (12.6)Deferred finance costs 0.6 0.4Translation differences and other non cash movements 23.8 51.1 --------- -------Movement in net debt in the year 202.0 (5.4)Net debt at 1 January (680.9) (675.5) --------- -------Net debt at 31 December (478.9) (680.9) --------- ------- Reconciliation of operating profit to net cash inflow from operating activities 2004 2003 £m £m Group operating profit 70.7 54.4Depreciation 35.9 38.5Tangible fixed assets impairment 15.2 -Tangible fixed assets written off 0.2 0.6Increase in stocks (9.0) (0.3)Decrease in debtors 6.0 10.1Increase/(decrease) in creditors 4.2 (9.7)Decrease in provisions (0.4) (0.5) -------- --------Net cash inflow from operating activities 122.8 93.1 ======== ======== ANALYSIS OF NET DEBT Translation differences As at 1 Deferred and other As at 31 January Cash finance non cash December 2004 flow costs movements 2004 £m £m £m £m £m Cash 31.8 5.8 - (0.9) 36.7Overdrafts (1.5) 0.8 - - (0.7) ------- 6.6 Short term deposits 13.1 45.6 - (0.6) 58.1 Debt due after one year (491.2) 141.4 - 211.0 (138.8)Debt due within one year (20.7) 20.3 - (191.3) (191.7)Finance leases (7.7) 1.6 - 0.1 (6.0)Bonds due after one year (162.1) (80.8) 0.6 137.3 (105.0)Bonds due within one year (42.6) 42.9 - (131.8) (131.5) ------- 125.4 ------- ------- -------- -------- --------Total (680.9) 177.6 0.6 23.8 (478.9) ======= ======= ======== ======== ======== Analysis of cash flows for headings netted in the cash flow statement 2004 2003 £m £mReturns on investment and servicing of finance------------------------------------------------Interest received 3.3 2.2Interest paid (38.6) (39.0)Payment of interest on deferred consideration - (4.8)Loan arrangement fees paid (0.6) (0.4)Interest element of finance lease rental payments (0.2) (0.9)Dividends paid to minorities (1.6) (2.6) -------- -------- Net cash outflow for returns on investments and servicing of finance (37.7) (45.5) ======== ======== Capital expenditure and financial investment----------------------------------------------Purchase of tangible fixed assets (25.4) (17.6)Millenium Hilton New York capital expenditure - (14.7)Proceeds from the sale of investments - 2.5Sale of other fixed assets 45.1 6.1 -------- -------- Net cash inflow/(outflow) for capital expenditure and financial investment 19.7 (23.7) ======== ======== Acquisitions and disposals----------------------------Acquisition of subsidiary undertakings - (2.6)Payment of deferred consideration - (25.4)Proceeds from sale of joint ventures 90.8 - -------- -------- Net cash inflow/(outflow) for acquisitions and disposals 90.8 (28.0) ======== ======== Management of liquid resources--------------------------------Cash placed on short term deposit (45.6) - -------- -------- Net cash outflow from management of liquid resources (45.6) - ======== ======== Financing-----------Issue of shares from the exercise of options 1.4 0.1Purchase of shares from minority interests (5.9) - -------- -------- (4.5) 0.1 -------- -------- Drawdown of third party loans 273.1 304.7Repayment of third party loans (396.9) (261.1)Capital element of finance lease rental repayment (1.6) (11.1) -------- -------- (125.4) 32.5 -------- -------- -------- --------Net cash (outflow)/inflow from financing (129.9) 32.6 ======== ======== Notes 1. SEGMENTAL INFORMATION Rest Regional of New York US London Europe Asia Australasia Group 2004 2004 2004 2004 2004 2004 2004 £m £m £m £m £m £m £mTurnoverHotel 77.6 100.7 77.2 93.0 136.6 44.5 529.6Non-hotel - 2.5 - - 1.4 13.6 17.5 --- ----- --- --- ----- ------ ------ Total 77.6 103.2 77.2 93.0 138.0 58.1 547.1 ------ ------- ------ ------ ------- ------ ------- Hotel gross operating profit 22.4 21.1 39.5 27.9 48.4 18.5 177.8Hotel fixed charges (12.2) (17.0) (12.9) (17.3) (21.2) (8.6) (89.2) -------- -------- -------- -------- -------- ------- -------- Hotel operating profit 10.2 4.1 26.6 10.6 27.2 9.9 88.6Non-hotel operating profit - 0.6 - - 0.8 7.6 9.0 --- ----- --- --- ----- ----- ----- Profit before central costs 10.2 4.7 26.6 10.6 28.0 17.5 97.6 Other operating expenses - - - - - - - Impairment - (15.2) - - - - (15.2) Central costs - - - - - - (11.7) -------- Group operating profit - - - - - - 70.7Share of operating profits of joint ventures 0.6 - - - 7.4 - 8.0Profit on disposal of fixed assets 51.8 - - - 0.5 2.7 55.0 Net interest payable - - - - - - (38.9) -------- Profit on ordinary activities before taxation - - - - - - 94.8 ------ Hotel fixed charges include property rent, taxes and insurance, depreciation andamortisation, operating lease rentals and management fees. There are no inter segment sales. Turnover by origin is not significantly different from turnover by destination. Turnover derives from two classes of business; hotel operations and non-hoteloperations comprising property transactions. Regional Rest New York US London of Europe Asia Australasia Group 2003 2003 2003 2003 2003 2003 2003 £m £m £m £m £m £m £mTurnoverHotel 68.9 104.3 69.4 89.4 126.5 42.6 501.1Non-hotel - 3.5 - - 1.6 16.9 22.0 --- ----- --- --- ----- ------ ------ Total 68.9 107.8 69.4 89.4 128.1 59.5 523.1 ------ ------- ------ ------ ------- ------ ------- Hotel gross operating profit 17.8 21.0 34.3 25.0 45.3 17.4 160.8Hotel fixed charges (13.9) (19.5) (11.9) (18.7) (22.0) (9.7) (95.7) -------- -------- -------- -------- -------- ------- -------- Hotel operating profit 3.9 1.5 22.4 6.3 23.3 7.7 65.1 Non-hotel operating profit - 1.4 - - 1.0 7.0 9.4 --- ----- --- --- ----- ----- ----- Profit before central costs 3.9 2.9 22.4 6.3 24.3 14.7 74.5 Other operating expenses (8.1) - - - - - (8.1) Impairment - - - - - - - --- ---Central costs - - - - - - (12.0) -------- Group operating profit - - - - - - 54.4Share of operating profits of joint ventures 3.1 - - - 3.9 - 7.0Profit on disposal of fixed assets - - - - - - 0.4 Net interest payable - - - - - - (43.1) -------- Profit on ordinary activities before taxation - - - - - - 18.7 ------ For 2003 the New York hotel operating profit excludes pre-opening and legal feeswith respect to the Millenium Hilton, these are disclosed in other operatingexpenses. 2. TAXATION Pre- expectional Exceptional items items Total 2004 2004 2004 2003 £m £m £m £mThe tax charge comprises: Current tax:UK Corporation tax