23rd Feb 2006 07:03
Hilton Group PLC23 February 2006 Preliminary statement of results for the year to 31 December 2005 Year to Year to 31 December 2005 31 December 2004 £m £m Continuing operations Total Revenue 11,505.0 10,125.9 Profit from operations (1) Betting and Gaming 266.6 272.8 Central costs and income (18.1) (14.1) 248.5 258.7 Net finance costs (1) (16.9) (34.1) Profit before tax and non-trading items 231.6 224.6 Discontinued operations Hotels profit from operations (1) 187.5 159.0 Net finance costs (1) (5.2) (6.9) 182.3 152.1 Total profit before tax and non-trading items 413.9 376.7 Non-trading items before tax (19.9) (0.6) Profit before tax 394.0 376.1 EBITDA (continuing) (1) 285.7 293.6 Earnings per share (before non-trading items) - Continuing 11.9p 11.5p - Total 22.0p 20.2p Earnings per share 20.7p 20.7p Proposed dividend per share (2) 240.0p 6.0p (1) Before non-trading items. Non-trading items compriseunrealised gains/losses on derivatives and a one-off tax credit. Non-tradingitems in discontinued operations comprise profit/losses on disposal ofnon-current assets. (2) Comprises proposed final dividend of 6.6 pence (2004: 6.0pence) and proposed special dividend of 233.4 pence. Group Highlights • Profit before tax(1) has increased 9.9% to £413.9 million. • Ladbrokes enjoyed another good year, with operating profit of £266.6 million. • Earnings per share(1) for the total business of 22.0 pence has increased 8.9%. • The sale of Hilton International to Hilton Hotels Corporation for £3.3 billion, is expected to complete later today. • Ladbrokes has completed its capital structure review, and there will be a return of cash of up to £4.2 billion to shareholders early in Q2 2006, which equates to 240 pence per share (including final dividend of 6.6 pence per share). Chairman's statement "It has been a momentous year for Hilton Group, culminating in the announcementof the sale of Hilton International on 29 December 2005 for £3.3 billion, withcompletion expected later today. Hilton Group enjoyed a good performance in 2005, with profit before tax andnon-trading items growing by 9.9% to £413.9 million, and EPS (before non-tradingitems) rising by 8.9% to 22.0 pence. The Ladbrokes business has achieved strong growth in recent years in what is aconstantly changing business. After the acquisition of Jack Brown, the Ladbrokesshop estate now numbers 2,583 and our online offering has grown at 94% year onyear, in terms of contribution. We are confident in the future of Ladbrokes andwill continue to innovate and expand its product range and services goingforward. I am pleased to announce the conclusion of Ladbrokes capital structure reviewand subject to completion of the disposal of Hotels Division (which is expectedto occur later today) the Board intends to recommend to shareholders the paymentof dividends totaling 240.0 pence per Existing Ordinary Share (comprising aspecial dividend of 233.4 pence per Existing Ordinary Share and a final dividendof 6.6 pence per Existing Ordinary Share in respect of the year ended 31December 2005). The Board reached this decision having given careful consideration to theproposed method of returning value to shareholders and has examined a number ofalternatives in an effort to balance the interests of all shareholders. At the record date for the proposed dividend the Company will undertake a shareconsolidation, details of which will be sent out in a circular to shareholders,which will be posted shortly. Taking account of the Group's expected capital requirements, potentialinvestment opportunities and other relevant factors, the Board has concludedthat a target net debt to EBITDA range of 3.5 to 3.75 times is appropriate forLadbrokes. Assuming full conversion of the Group's convertible bonds and theexercise of employee share options, the aggregate amount of the return of valueto Shareholders will amount to approximately £4,227 million. Based upon thecurrent issued share capital the aggregate return of value to shareholders willamount to approximately £3,856 million. The Board believes that this is a verysuccessful outcome for all shareholders. Recognising the likely future capital expenditure requirements of the ongoingbusiness, the Board has adopted a dividend policy of about 2 times cover in themedium term. The Board My Board colleagues and I are grateful to David Michels and Brian Wallace fortheir significant contribution to the Group, which is reflected in the growthand success of the business. Both will be resigning from the Board uponcompletion and we wish them success in their future endeavours. David has been Group Chief Executive for the last six years and has verysuccessfully steered the Group through a challenging period in both our sectors,whilst Brian, as Deputy Group Chief Executive and Group Finance Director for thepast six and 11 years respectively, has made a major contribution to thefinancial success of the company. We are fortunate to have Christopher Bell as Chief Executive Officer ofLadbrokes plc. Chris has led our Betting & Gaming business successfully for thelast 11 years. Rosemary Thorne, previously Group Finance Director of Bradford &Bingley and Sainsbury's, joins Ladbrokes as Finance Director. We also welcome John O'Reilly and Alan Ross to the Board, as Managing Directorof eGaming & Telephone Betting and Managing Director of European Retailrespectively; both have been with Ladbrokes for many years and are highlyrespected within their sector. Outlook With just a few weeks of 2006 behind us, whilst the retail estate has sufferedfrom a loss of horseracing fixtures and some poor results, we are encouraged bythe recovery in Telephone Betting and the continued success of our eGamingdivision. We expect 2006 to offer an action packed year on the sporting front.In June and July the World Cup promises to be the biggest betting event ever.The year ends with England's defence of the Ashes in Australia in December,which we hope will again capture the nation's betting attention. These events,together with the final stages of the Champions League, Cheltenham, Aintree,Epsom and Royal Ascot will make this an exciting year for Ladbrokes. We will continue to see innovation in our online gaming operation, witnessedalready this year by the launch of Mahjong and in the second half of the year wewill see the opening of our first new bricks and mortar casino in Paddington.Internationally our consultancy agreement with China demonstrates the value ofour knowledge and experience in the global market and this will be followed byagreements in other markets during 2006." David Michels' statement "Hilton Group made record profits in 2005, in what was a good year for bothhotels and betting. I am proud to have been associated with the company and even prouder to have ledit as Group Chief Executive for six years. Hilton Group's key strengths havebeen its staff, its depth of management and its brands, all of which I have seengrow and develop in my time with the company. The sale of Hilton International is, in my opinion, commercially sound in allrespects and I believe that real value has been created for our shareholders. Inaddition: - it will afford Ladbrokes the opportunity to stand alone with its leading brandand experienced team; and - it will offer new opportunities for our 70,000 Hilton International employeesaround the globe, being part of a unified brand and the world's largest hotelcompany, as well as offering more new and exciting products for our customers. It has been a long, interesting and sometimes challenging journey for HiltonGroup, but a successful one!" Christopher Bell's statement "I am honoured to be leading Ladbrokes into the future. This new chapter in thecompany's journey promises to be more exciting than any in our 120-year historyas we continue to differentiate our brand at home and extend our reach furtherinternationally. Our performance in 2005 represents our second best ever year, following therecord results posted in 2004. Highlights in 2005 included the acquisition of Jack Brown Ltd., the largestbookmaker in Wales. With the rebranding and integration process completedswiftly, we now have 2,282 shops in the UK and Ireland. 2005 also saw the development of Ladbrokes Xtra and the first phase of itsroll-out. The service, which is now available in over 1,000 shops, will beavailable in every shop in time for the World Cup. During the event, expectedto be the biggest betting event of all time, our 8 Xtra screens will be used toscreen live coverage of matches, and to promote our range of odds on each match. Xtra also enables us to offer customers a wider range of betting eventsincluding unique virtual horse and greyhound racing and horse racing from Franceand South Africa, as well as greyhound and horseracing from the USA.Importantly the service is under Ladbrokes' editorial control, enabling us toschedule our own broadcasts to maximise the number of betting opportunitiesthroughout the day. Turning to eGaming, the business has once again performed well. Active playerdays are up across all parts of the business, our average weekly rake in pokeris up 79% and we are encouraged by the increase in our gross win conversion -33.6% this year against last year's 23.9%. 2005 saw continued innovation with the launch of new services such as LadbrokesFinancials, which offers the opportunity to bet on five minute movements in theFTSE and Dow Jones indices, and a Live Dealer casino that combines online gamingwith a live video stream of a casino dealer. The launch of a one-click casinoalso assisted Ladbrokescasino.com in achieving higher growth in 2005 compared tothe previous year. We have followed these with further innovations in 2006 - notably the launch ofan online version of the popular Chinese game Mahjong. Our poker site has benefited from its strategy of developing an online communitythat comes together around offline events, such as the Ladbrokes Poker Millionand the Ladbrokes Poker Cruise. With approaching half a million active customers in nearly 200 countries thesuccess of the eGaming business is an early indication of the internationalappeal of the Ladbrokes brand. The World Cup offers a unique internationalrecruitment opportunity and we will exploit this to the full. Whilst Ladbrokes has already established international credentials, we willcontinue to seek out further opportunities in the global market. During 2006 wewill conduct an early review of our position towards US gaming customers and weexpect to be able to report the outcome before our interim results. In 2005 we began a number of discussions about opportunities in markets aroundthe world, mainly in Asia and Europe, which continue to progress. While we willonly pursue deals where the investment case is a sound one, we are encouraged bythese discussions and firmly believe that there is scope for internationalexpansion. We are also encouraged by our consultancy agreement with the China Sport Lottery(Beijing) Sales and Marketing Co., Ltd. Whilst this will not generatesignificant revenues for a number of years we believe it is an indication ofwhat can be achieved in the international market and clearly illustrates thereach of the Ladbrokes brand. Ladbrokes has strong foundations for the future. We have a strong brand, anexcellent experienced management team, a track record of success and a clearstrategy for growth, underpinned by sound financials. We look forward toimplementing our plans for 2006 and beyond." Enquiries to: Christopher Bell, Chief Executive OfficerRosemary Thorne, Finance DirectorAlex Pagett, Director Group Corporate Affairs (mobile +44 (0)7974 229888)Julian Arlett, Head of Investor Relations (mobile +44 (0)7974 229462)Ciaran O'Brien, Head of PR, Ladbrokes (mobile +44 (0)7976 180173)Telephone: +44 (0)20 7856 8109 A live audiocast of the presentation to analysts, together with this newsrelease and slide presentation, will be available on Hilton Group's corporatewebsite which can be found at www.hiltongroup.com. An additional conference call will take place at 3pm (UK time) today and will behosted by Christopher Bell, Chief Executive Officer, and Rosemary Thorne,Finance Director. To participate in the conference call dial +44 (0) 20 71620025 and ask for the Hilton Group Preliminary Results. High-resolution print quality images to accompany this announcement can bedownloaded free of charge on www.vismedia.co.uk. Betting and Gaming Operating Results Gross win by business Year to Year to 31 December 2005 31 December 2004 £m £m UK Retail 683.6 652.5 Ireland & Belgium Retail 71.0 69.0 Telephone Betting 21.0 46.1 eGaming 123.1 89.3 Vernons 19.3 20.2 Betting & Gaming 918.0 877.1 Profit from operations by business Year to Year to 31 December 2005 31 December 2004 £m £m UK Retail 207.8 214.7 Ireland & Belgium Retail 11.7 13.2 Telephone Betting (0.1) 17.8 eGaming 41.4 21.3 Vernons 5.8 5.8 Betting & Gaming 266.6 272.8 Profit is before non-trading items. Gross win of £918.0 million increased by 4.7% despite the impact of adversehorse race margins in the key meetings in the first half, losses to High Rollersin Telephone Betting in the second half and the benefit of Euro 2004 last year.After deducting gross profits tax and VAT, gross profit of £787.8 million was up5.2%. Operating costs of £521.2 million increased by 9.5% largely due to the impact ofshop acquisitions, new licences, relocations and extensions in Retail, furtherexacerbated by increases in the minimum wage and additional opening hours. Thegrowth of the eGaming business also resulted in cost increases for content,technology provision, shared partnership payments and banking. Operating profit was the second highest in our history at £266.6 million, £6.2million behind last year's record £272.8 million. UK Retail • At the year end Ladbrokes had 2,134 shops in the UK, an increase of 205in the year being 188 acquisitions (including Jack Brown) and 23 new licences,less six disposals and closures. In addition 73 shops were relocated during theyear, 172 were refurbished and 11 were extended, improving the quality of theestate. • In July we acquired 141 shops from Jack Brown. Following agreementwith the OFT, four of these shops are in the process of being sold. The resthave been rebranded, moved to Ladbrokes operating systems and integrated intothe estate ahead of schedule. We have also closed the head office, installed anadditional 210 FOBTs bringing the total to 480 and started a refurbishmentprogram. • Over the Counter ('OTC') gross win increased by 2.1% at £484.5 million.Excluding acquisitions and new licences, like for like OTC gross win was down2.3%. Gross win margin was 16.1% (2004: 16.2%); as announced at the interimsfirst half horseracing margin was impacted by poor results at major events,during the second half football margins were better than the weak prior yearcomparatives. For the year slippage grew by 2.5%, with stake per slip level at£8.47. Following the acquisition of Jack Brown in the second half slippage grew3.6%, with stake per slip down 2.0% at £8.40. • Machines gross win was £199.1 million up 12% (up 7.7% like for like),with average weekly gross win per FOBT down 6.7% to £545 (£554 excluding JackBrown), but the average number of FOBTs increasing 24% to 6,403. The averagenumber of AWPs reduced by 26% to 1,433 as they were replaced by FOBTs, with theaverage weekly gross win per AWP up by 7.4% to £232. • Gross profit, after the cost of VAT and gross profits tax, was up 4.7%to £582.3 million. • Operating costs (including levy) increased by 9.7% to £374.5 million.This includes the impact of acquisitions and new licences. Like for like costsincreased 5.2%, with like for like shop staff costs up 7.3%, including theimpact of additional hours and minimum wage increases. • Operating profit of £207.8 million was 3.2% lower than the recordperformance in 2004. Jack Brown has contributed £3.0 million since itsacquisition in July 2005. Ireland & Belgium Retail • Shop numbers in Ireland increased from 138 to 148 with threeacquisitions and seven new licences. In addition eight shops were relocatedduring the year, six were refurbished and one extended, all targeted to improvethe quality of the estate. • In Belgium, the number of shops decreased from 310 to 301, asunprofitable shops were closed. • Gross win of £71.0 million was up 2.9%, with the 9% increase inIreland, due to development activity, offsetting the 2% decline in Belgium. • After the cost of betting tax, gross profit was £53.8 million, up 4.3%. • Operating costs of £42.1 million increased by 9.6%, with Ireland up 17%due to the impact of development and establishment costs. • Operating profit of £11.7 million declined by 11%, with Ireland down 9%and Belgium down 14%. eGaming • eGaming gross win grew by 38% to £123.1 million. • Poker gross win grew by 79% to £41.4 million, with average monthlyactive player days up 111% to 411,000 and average weekly rake of £793,000. • Casino gross win of £39.1 million was up 16%, with 64,000 averagemonthly active player days, up 14%, and average weekly drop of £749,000. • Sportsbook gross win was up 25% to £33.0 million, including thecontribution from Ladbrokes Financials. Average monthly active player days grewby 13% to 471,000 and stake per bet grew by 18% to £17.01, but margins reducedto 6.8% (2004: 8.3%) as the number of betting opportunities, including bettingin play which tends to be a lower margin product, increased. • Games gross win of £9.6 million grew by 57% following the launch of anumber of new games during the year and average monthly active player days wereup 38% to 54,000. • Operating costs of £75.9 million increased by 20% compared to the 38%increase in gross win. A large proportion of the cost base variesproportionately to gross win or volume. • Operating profit almost doubled to £41.4 million (2004: £21.3 million),with gross win conversion improved to 33.6% (2004: 23.9%). Telephone Betting • Gross win excluding High Rollers was £30.5 million, down 23% andmargins reduced from 8.7% to 7.3%. In addition we had £9.5 million net lossesto High Rollers (2004: £6.3 million gross win). • Active customers remained stable at 125,300. Excluding High Rollers,call volumes increased by 9.5%, but investment in technology and efficienciesreduced the agent cost per call by 8.7%. • Operating costs overall were down 16% to £18.0 million, with staffcosts down 5.8% despite the increase in call volumes. • An operating loss of £0.1 million compares to an operating profit of£17.8 million in 2004, with an adverse year on year swing of £11 million due toHigh Rollers. Vernons • Vernons maintained its operating profit level of £5.8 million andcustomer retention rates continued to improve (79% on 'Numbers' and 89% on 'Pools'). Hotels Operating Results Revenue and profit from Year to Year to operations by region 31 December 2005 31 December 2004 Revenue Profit Revenue Profit £m £m £m £m United Kingdom 630.9 81.3 655.1 88.1 Europe & Africa 1,249.3 82.7 1,138.2 58.2 Middle East & Asia Pacific 726.9 27.0 652.8 18.5 The Americas 263.6 24.0 236.0 18.9 LivingWell 52.7 4.2 50.0 6.3 2,923.4 219.2 2,732.1 190.0 Central costs 1.7 (31.7) 0.4 (31.0) 2,925.1 187.5 2,732.5 159.0 Net finance costs (5.2) (6.9) Profit before taxation 182.3 152.1 Memo: Scandic acquired 529.0 29.0 503.1 17.6 Revenue is that of all hotels whether owned or managed. Profit is before non-trading items and includes acontribution from franchise, management contracts and contingent lease hotels of £131.6 million (2004: £103.3million). Revenue per available room (RevPar) by Year to Year to Change region (like for like, constant exchange 31 December 2005 31 December 2004 rates) £ £ Hilton Branded: United Kingdom - London 78.66 77.11 2.0% - Provinces 52.82 52.51 0.6% Total United Kingdom 63.94 63.07 1.4% Europe & Africa 53.13 49.43 7.5% Middle East & Asia Pacific - Middle East 40.09 36.14 10.9% - Asia Pacific 50.51 46.70 8.2% Total Middle East & Asia Pacific 45.11 41.34 9.1% The Americas 46.51 41.79 11.3% Total Hilton Branded 52.29 49.00 6.7% Scandic Branded 36.75 33.71 9.0% Total Hotels Division RevPar 48.43 45.19 7.2% Occupancy 70.14% 67.13% 3.0% pts Average room rate 69.05 67.31 2.6% Profit in the year rose by £28.5 million (17.9%) to £187.5 million. Underlyingprofit after adjusting for property changes, the disposal of the equityshareholding in the St Lucia Hilton and exchange rate movements increased by17.3%. On a worldwide basis (like for like properties at constant exchange rates)RevPar increased by 7.2%. The RevPar increase was driven by both rate (up 2.6%)and occupancy (up by 3.0 percentage points). During the year a number of hotels have been sold in the UK, in line with thestated strategy of reducing the capital base. In April, seven hotels were soldto Stardon for consideration of £79.8 million, £7.4 million above book value. Afurther 16 properties were sold in November/December for £397.2 million withHilton retaining 30 year management contracts. This represents a profit ondisposal of £28.7 million before the associated goodwill write-off. United Kingdom & Ireland • Profit in the United Kingdom and Ireland fell by 7.7% to £81.3 million, reflecting a tough first half in the provinces and the effect of the London bombings in Q3. After adjusting for property disposals profit decline reduces to 3.4%. • Overall like for like RevPar increased by 1.4%, driven by rate (up 3.4%). • London recovered well from the tragic bombings in July. Fourth quarter RevPar increased by 1.4% versus the prior year. • Performance in the provincial estate was positive, with RevPar increasing by 0.6% versus last year. Europe & Africa • Overall profit rose by 42.1% to £82.7 million. The Scandic acquired properties saw particularly encouraging growth (profit up 64.8%), as did a number of Hilton branded properties. • Hilton branded RevPar was up by 7.5%, driven by occupancy (up by 4.6 percentage points). Paris, Luxembourg and Istanbul all performed well with RevPar increases in excess of 15%. • RevPar in the Scandic properties was strong - up 9.0%, driven by an increase in occupancy (up 4.1 percentage points). • Copenhagen and Stockholm saw the largest volume increases, which resulted in profit increases of 69.7% and 56.2% respectively. • The owned and leased estate saw continued recovery with RevPar increasing by 7.3%. Middle East & Asia Pacific • The area as a whole saw good profit growth up 45.9% to £27.0 million. • Like for like RevPar increased by 9.1% reflecting increases in bothrate (up 5.6%) and occupancy (up 2.5 percentage points). • Trading in the Middle East was particularly strong (RevPar up 10.9%)with very buoyant trading across the region. • Egypt suffered from the bombings in Sharm El Sheik and, although noneof our properties were damaged, occupancy fell dramatically. Encouragingly thefourth quarter has seen some volume return. • Trading in Japan has seen some signs of improvement as the economyrecovers, with RevPar up 3.8%. The Americas • Profits rose by 27.0% to £24.0 million, as continued economic recovery in Latin America and improved leisure volume into the Caribbean drove profits higher. • A 5.3% increase in rate and 3.7 percentage point increase in occupancy resulted in an overall increase in RevPar of 11.3%. • In the Caribbean the Caribe Hilton saw its highest ever revenue. The new Barbados Hilton opened in July and immediately established itself in the market place with higher than expected occupancy. • Trading in Latin America improved, especially our owned property in Sao Paulo, which saw, RevPar increase by 21.2%. • Canada, held back by a disappointing conference market in the first half, saw business recover slightly in the second. Overall RevPar increased by 3.3%. LivingWell • LivingWell profit fell by 33.3% to £4.2 million. • Profit margins were hit by the challenging macro-economic environment, lower consumer spending, increased competition and higher energy costs. • Initiatives that focus on a personalised approach to service, personal fitness coaching and sensory beauty offerings have seen an improvement in profitability in the fourth quarter. Operating and Financial Review Financial review Revenue and profit before tax Year to Year to 31 December 2005 31 December 2004 Revenue Profit Revenue Profit Continuing Operations: £m £m £m £m Retail Betting 9,830.4 225.3 8,905.8 233.7 Other Betting and Gaming 1,675.1 41.3 1,219.9 39.1 Total Betting and Gaming 11,505.5 266.6 10,125.7 272.8 Central costs and income (0.5) (18.1) 0.2 (14.1) 11,505.0 248.5 10,125.9 258.7 Net finance costs - (16.9) - (34.1) 11,505.0 231.6 10,125.9 224.6 Discontinued Operations: Hotels 1,849.4 187.5 1,771.2 159.0 Net finance costs - (5.2) - (6.9) 1,849.4 182.3 1,771.2 152.1 13,354.4 413.9 11,897.1 376.7 Profit is before non-trading items. International Financial Reporting Standards (IFRS) For the first time the Group has prepared its annual accounts under IFRS asadopted by the European Union. Comparative financial information as reconciledto that formerly presented under UK GAAP was presented in the 2004 annualreport. The impact of conversion to IFRS has had no cash impact and noadjustments have been made to the information previously disclosed, other thanto reflect the classification of results of the continuing and discontinuedoperations of the Group. As explained in more detail in note 3, on 29 Decemberthe Group signed a conditional agreement with HHC for the sale of its hotel andleisure division, Hilton International. In accordance with IFRS 5, the resultsof these activities have been presented as discontinued operations. Trading summary - Continuing operations Revenue for continuing operations increased by £1.4 billion (14%) to £11.5billion, mainly as a result of higher FOBTs in Retail and growth in both eGamingand Telephone revenue in Other Betting and Gaming. Central costs and income includes the results of an associate that waspreviously classified as part of the hotel segment but was not included withinthe conditional disposal agreement of the Hotels division. Net costs haveincreased by £4.0 million predominantly due to share award costs. Profit before finance costs and non-trading items decreased 4% to £248.5 million(2004: £258.7 million) reflecting a decrease in Retail Betting profits of £8.4million (4%) to £225.3 million and an increase in Other Betting and Gamingprofits of £2.2 million (6%) to £41.3 million, together with the £4.0 millionincrease in central costs. Finance costs The net finance costs have been disclosed as either continuing or discontinuedoperations, based on where the underlying debt and cash are recorded. The netfinance costs of the continuing operations of £16.9 million were 50% below lastyear (£34.1 million), reflecting lower average debt, the favourable impact oflower interest rates and an accounting benefit following the release of interestaccruals no longer required. Profit before tax - Continuing operations Lower financing costs have been partially offset by the reduced trading profitsto give a 3% increase in profit before taxation and non-trading items to £231.6million (2004: £224.6 million). Trading summary - Discontinued operations Revenue for discontinued operations increased by £78.2 million (4%) to £1,849.4million, giving an increase in profit before finance costs of £28.5 million(18%) to £187.5 million. The net finance costs of the discontinued operations of£5.2 million were 25% below last year giving an increase in profit before tax of£30.2 million (20%). Non-Trading items The £19.9 million non-trading loss relates to the disposal of non-current assets(£28.0 million loss in discontinued operations, which includes a £100 milliongoodwill write off associated with the hotel disposals), partially offset byunrealised gains on derivatives in continuing operations (£8.1 million). Thereis a related tax charge of £0.9 million on these non-trading items, with a £1.5million credit in discontinued operations offset by a £2.4 million charge withincontinuing operations. Taxation The Group taxation charge before non-trading items of £62.1 million representsan effective tax rate of 15.0% (2004: 15.5%). The rate reflects continuedinitiatives to reduce the underlying rate. Of the total tax charge beforenon-trading items, £40.9 million relates to continuing operations and £21.2million relates to discontinued operations. This allocation across continuingand discontinued operations is based upon the taxable profits reported withinthe statutory entities. The 2006 rate for continuing operations is expected tobe in the range of 25% to 30%. Earnings per share (EPS) - Continuing operations EPS (before non-trading items) increased 3.5% to 11.9 pence (2004: 11.5 pence),reflecting the increased profit before tax. EPS (including the impact ofnon-trading items) was 12.3 pence (2004: 12.1 pence). Fully diluted EPS was12.0 pence (2004: 11.6 pence) after adjustment for outstanding share options andthe convertible bond. Earnings per share (EPS) - Group EPS (before non-trading items) increased 9% to 22.0 pence (2004: 20.2 pence),reflecting the increased profit before tax. EPS (including the impact ofnon-trading items) was 20.7 pence (2004: 20.7 pence). Fully diluted EPS was 19.7pence (2004: 19.5 pence) after adjustment for outstanding share options and theconvertible bond. Antepost Bets The accounting treatment of antepost bets under IFRS is currently underdiscussion across the betting industry. Ladbrokes have recorded antepost bets asdeferred revenues for 2005, which is consistent with the treatment on transitionto IFRS and under UK GAAP in previous years. The alternative treatment underdiscussion is to recognise antepost bets as financial instruments. Had antepostbets been accounted for as financial instruments in the year ended 31 December2005, revenue from betting would have been reported as gross win rather than thegross amount staked, with antepost bets at 31 December 2005 being measured attheir fair value. The estimated impact on profit of measuring antepost bets atfair value at 31 December 2005, rather than treating them as deferred revenue,is not material. Discussions are continuing with a view to arriving atconsensus in the industry on the appropriate accounting treatment of antepostbets. Cash flow, capital expenditure and borrowings Year to Year to 31 December 2005 31 December 2004 £m £mCash generated by operations 553.4 549.6Property, plant & equipment capital expenditure (196.9) (174.9)Intangible asset capital expenditure (45.4) (40.7)Operating Cash Flow 311.1 334.0Disposals 540.9 40.1Other 5.5 19.1Interest and tax paid (94.9) (98.6)Free Cash Flow 762.6 294.6Acquisitions (78.0) -Dividends (156.8) (144.5)Net Cash Flow 527.8 150.1Issue of shares 38.1 7.8Exchange & non-cash movements 8.1 17.9Net Debt movement 574.0 175.8 Opening Net Debt (971.9) (1,147.7)Net Debt movement 574.0 175.8Closing Net Debt (397.9) (971.9) Cash flows generated by operations of £553.4 million was up £3.8 million due tothe £19.4 million increase in the total Group's EBITDA, being partially offsetby adverse working capital movements. Capital expenditure on property, plant and equipment of £196.9 million increasedby £22.0 million and included £27.6 million of acquisition linked development inhotels, relating to the major refurbishment in the Sydney and Dusseldorfproperties. Intangible asset capital expenditure of £45.4 million (mainlybetting shop licences) increased by £4.7 million. Proceeds from disposal ofnon-current assets of £540.9 million include £539.5 million relating to hoteldisposals - with the most significant being the sale of 16 hotels to The ManagedHotels Unit Trust for £397.2 million. Acquisition cash outflow of £78.0m includes the acquisition of Jack Brownbookmakers. At 31 December 2005, the Group had gross borrowings of £1,392.5 million andcash, deposits and short-term investments of £994.6 million, resulting inadjusted net debt of £397.9 million (31 December 2004: £971.9 million). The£574.0 million decrease in net debt includes an adverse exchange translationimpact of £5.8 million. Capital structure review The Board is pleased to announce the conclusion of its capital structure reviewfor the ongoing Ladbrokes plc (the "Company"). Taking account of the Company'sexpected capital requirements, potential investment opportunities and otherrelevant factors, the Board has concluded that a target net debt to EBITDA rangeof 3.5 to 3.75 times is appropriate for Ladbrokes. The final debt level,following the disposal and the payment of the special dividend and the 2005final dividend, will depend in part on whether holders of the Company's 3.375per cent Guaranteed Convertible Bonds 2010 and holders of the Company's employeeshare options elect to convert their bonds into ordinary shares or, asapplicable, exercise their options before the record date for those dividends. Subject to completion of the disposal of the Hilton International HotelsDivision (which is expected to occur later today) the Board intends to recommendto shareholders on the record date (which is expected to be 13 April 2006) thepayment of dividends totalling 240 pence per Ordinary Share (comprising aspecial dividend of 233.4 pence per Ordinary Share and a final dividend of 6.6pence per Ordinary Share in respect of the year ended 31 December 2005). Payment of the final dividend will be subject to the passing of an ordinaryresolution approving it at an Extraordinary General Meeting of the Company.Payment of the special dividend will also be subject to the passing ofresolutions by the shareholders at that Extraordinary General Meeting approving(i) an amendment to the borrowing limit in, and certain other amendments to, theCompany's Articles of Association, (ii) the payment of the special dividend and(iii) a consolidation of the Company's share capital. Subject to the passing ofthe necessary resolutions, the final dividend and the special dividend are bothexpected to be paid on 25 April 2006. Payment of the final dividend and the special dividend will also be subject tothe Group completing an internal restructuring and the Company filing interimaccounts at the Companies Registry showing reserves arising from thatrestructuring, sufficient to enable the Company lawfully to pay those dividends.This restructuring is expected to be completed, and the interim accountsfiled, shortly (and in any case before the Extraordinary General Meeting isheld). Details will be set out in a circular, containing the notice convening thenecessary Extraordinary General Meeting, which will posted to shareholdersshortly. A resolution will also be proposed at that meeting to renew theCompany's authority under section 166 of the Companies Act 1985 to make marketpurchases of its own shares (as, for technical reasons, the existing authoritywill no longer be available when share consolidation takes effect). The Board has given careful consideration to the method of returning value toits shareholders. A number of options were considered and, after consultingleading tax counsel, the Board concluded that a payment of a special dividendwas in the interests of all shareholders. The aggregate amount of the dividends to be paid (240 pence per Ordinary Share)was calculated taking into account, amongst other things, the £3.298 billion netcash consideration for the sale of the Hilton International Hotels Division, the£397.2 million proceeds from the sale of the 16 hotels to The Managed HotelsUnit Trust, transaction costs, additional borrowings (consistent with thedesired gearing level referred to above) and the contribution which the Companyis required to make to the Hilton Group Pension Plan at completion under theterms of the agreement for the sale of the Hilton International Hotels division(under which it agreed to contribute 50 percent of the deficit calculated on themore prudent of the IAS 19 basis as at the date of completion or the trusteefunding basis as at 1 July 2005). This contribution is not expected materiallyto exceed £55.5 million. Assuming full conversion of the Company's 3.375 per cent Guaranteed ConvertibleBonds 2010 and the exercise of employee share options, the special dividend of233.4 pence per Ordinary Share will amount to approximately £4,227 million inaggregate, representing approximately 62 per cent of the Company's marketcapitalisation (based on the closing mid-market price of 382.75 pence perExisting Ordinary Share on 22 February 2006, being the latest practicable dateprior to the date of this announcement, the proposed final dividend of 6.6 penceper share). At the record date for the proposed special dividend the Company will undertakea share consolidation, the effect of which will be to reduce the number ofOrdinary Shares in issue by an amount approximately equal to the specialdividend as a proportion of the current aggregate price of the Ordinary Shares.The Board believes it is appropriate to consolidate the Company's share capitalas this will allow comparability of the Company's share price and dividend pershare before and after the payment of the special dividend. The shareconsolidation is also intended to maintain the position of participants underthe Group's share option schemes who will, after the consolidation, retainoptions with substantially the same economic value as they had immediatelybefore it. As all shareholdings in the Company will be consolidated, shareholders'percentage holdings in the issued share capital of the Company will (save inrespect of fractional entitlements) remain unchanged. Similarly, although thenominal value of each Ordinary Share will change, the new Ordinary Shares willhave the same rights, including voting and dividend rights, as the existingOrdinary Shares. Fractional entitlements to new Ordinary Shares arising on consolidation will beaggregated and sold in the market for the best price reasonably obtainable, andthe net proceeds will be paid to the shareholders entitled to them, save thatamounts of less than £1 will be paid to charity. Hilton Group Finance (Jersey) Limited £300,000,000 3.375 per cent. GuaranteedConvertible Bonds due 2010 The Exchange Price of the Convertible Bonds (which determines the number ofOrdinary Shares which a holder receives on exercising his conversion right) willbe adjusted as a result of the payment of the special dividend and the finaldividend and as a result of the share consolidation. The return of value comprising the special dividend and the final dividendtogether amount, in part, to a "Capital Distribution" under the terms of theConvertible Bonds the payment of which gives rise to an adjustment. The returnof value will only be treated as a Capital Distribution to the extent that theaggregate amount of the distributions charged or provided for in the Company'saccounts in the current financial year exceeds 120 per cent of the distributionscharged or provided for in the Company's accounts for the year ended on 31December 2005. The share consolidation will also trigger an adjustment of theExchange Price under the Convertible Bonds linked to the proportion which thenominal amount of each new Ordinary Share bears to the nominal amount of eachexisting Ordinary Share. Subject to the passing of the relevant resolutions and (in the case of thedividend adjustment) the payment of the final dividend and special dividend, theExchange Price of the Convertible Bonds will be adjusted as regards the shareconsolidation on the date on which the consolidation occurs (which is expectedto be 13 April 2006) and, as regards the payment of the dividends, on the dateon which those dividends are paid (which is expected to be 25 April 2006, butwith retrospective effect to the record date for the dividends, which isexpected to be 13 April 2006). Assuming that the Company pays an interim dividend in 2006 a further adjustmentwill be made at the time of payment of that interim dividend. Further details of the calculation of the Exchange Price adjustment can be foundin paragraph (b)(iii) of the "Summary of the Articles of the Issuer relating tothe Share Exchange Rights" on page 19 of the Offering Circular in respect of theConvertible Bonds issued by the Company and Hilton Finance (Jersey) Limited on15 October 2003. Consolidated income statement Year to 31 December 2005 Year to 31 December 2004 Before Before Non-trading non-trading items* Total items* Total £m £m £m £m Continuing Operations Revenue 11,502.4 11,502.4 10,122.6 10,122.6 Share of results from associated undertakings 2.6 2.6 3.3 3.3 Total revenue 11,505.0 11,505.0 10,125.9 10,125.9 Cost of sales before depreciation (11,139.7) (11,139.7) (9,758.7) (9,758.7) Administrative expenses (79.6) (79.6) (73.6) (73.6) EBITDA 285.7 285.7 293.6 293.6 Depreciation and amounts written off non - (37.2) (37.2) (34.9) (34.9)current assets Profit before tax and finance costs 248.5 248.5 258.7 258.7 Finance costs (59.5) (60.5) (74.8) (74.8) Finance income 42.6 51.7 40.7 40.7 Profit before taxation 231.6 239.7 224.6 224.6 Income tax expense (40.9) (40.9) (41.9) (41.9) Tax on non-trading items - (2.4) - - Non-trading tax credit - - - 9.0 Profit for the year - continuing operations 190.7 196.4 182.7 191.7 Discontinued operations Profit for the period from discontinued 161.1 134.6 136.9 136.3operations Profit for the year 351.8 331.0 319.6 328.0 Attributable to: Minority interests 0.2 0.2 0.1 0.1 Equity holders of the parent 351.6 330.8 319.5 327.9 351.8 331.0 319.6 328.0 Earnings per share from continuing operations: - basic 11.9p 12.3p 11.5p 12.1p - diluted 11.7p 12.0p 11.1p 11.6p Earnings per share on profit for the year: - basic 22.0p 20.7p 20.2p 20.7p - diluted 20.9p 19.7p 19.0p 19.5p * Non-trading items are one-off tax credits and unrealised gains on derivatives. Consolidated balance sheet 31 December 2005 31 December 2004 £m £mASSETS Non-current assets Goodwill and intangible assets 386.0 1,722.0Property, plant and equipment 199.0 2,528.9Interests in associates and other investments (12.8) 57.1Other financial assets 2.3 7.9Deferred tax asset 16.6 39.1Derivatives 51.7 -Retirement benefit asset - 1.8 642.8 4,356.8Current assets Inventories - 15.8Trade and other receivables 88.1 327.2Assets classified as held for sale 2.2 2.8Derivatives 8.5 -Cash and cash equivalents 926.6 483.3 1,025.4 829.1Assets of disposal group classified as held for sale 3,767.9 -Total assets 5,436.1 5,185.9 LIABILITIES Current liabilities Interest-bearing loans and borrowings (158.2) (115.6)Obligations under finance leases - (17.6)Derivatives (41.7) -Trade and other payables (181.9) (582.7)Corporation tax liabilities (206.7) (172.6) (588.5) (888.5)Non-current liabilities Interest-bearing loans and borrowings (847.7) (987.5)Obligations under finance leases - (34.5)Convertible bond (279.7) (300.0)Derivatives (5.1) -Other financial liabilities - (16.5)Deferred tax liabilities (86.6) (433.6)Retirement benefit obligation (55.2) (130.4)Provisions (9.4) (18.4) (1,283.7) (1,920.9) Liabilities of disposal group classified as held for sale (968.2) -Total liabilities (2,840.4) (2,809.4) Net assets 2,595.7 2,376.5 EQUITY Called up share capital 160.6 158.6Share premium account 1,767.7 1,729.6Equity component of convertible bond 34.3 -Own shares (16.0) (14.5)Foreign currency translation reserve 4.7 (3.0)Other reserves 158.2 158.2Retained earnings 483.2 344.7Equity shareholders' funds 2,592.7 2,373.6 Equity minority interests 3.0 2.9Total Equity 2,595.7 2,376.5 Consolidated cash flow Year to Year to 31 December 2005 31 December 2004 £m £m Net cash flows from operating activities 420.3 407.8 Cash flows from investing activitiesInterest received 38.2 43.2Dividends received from associates 4.2 2.3Payments for intangible assets (45.4) (40.7)Purchase of plant, property and equipment (196.9) (174.9)Proceeds from the sale of property, plant and equipment 539.5 38.6Purchase of subsidiaries (76.5) -Net cash acquired with subsidiaries 4.4 -Purchase of interests in associates and other investments (5.9) -Proceeds from return of capital in associates 1.1 -Proceeds on disposal of investments 0.3 1.5 263.0 (130.0) Cash flows from financing activities Proceeds from issue of shares 38.1 7.8Proceeds from borrowings 1.3 15.3Proceeds from associates repayment of loans 1.5 17.9Payments of finance lease liabilities (2.1) (1.9)Repayment of borrowings (57.6) (287.5)Payments of new loans to associates (0.2) (1.1)Decrease in deposits - maturity greater than three months 2.5 103.5Dividends paid (156.8) (144.5) (173.3) (290.5) Net increase/(decrease) in cash and cash equivalents 510.0 (12.7) Net foreign exchange difference 6.3 (2.1)Cash and cash equivalents at beginning of period 459.5 474.3 Cash and cash equivalents at end of period 975.8 459.5 Cash and cash equivalents comprise: Cash at bank and in hand and current asset investments 992.0 478.2Bank overdraft (16.2) (18.7) 975.8 459.5Analysed as:Continuing operations 926.3 459.5Discontinued operations 49.5 - 975.8 459.5 Consolidated statement of recognised income and expenditure Year to Year to 31 December 2005 31 December 2004 £m £mCurrency translation differences 7.6 (2.9)Actuarial losses on defined benefit pension scheme (18.9) (10.6)Gains on net cashflow hedges 0.6 -Tax on items directly taken to equity (0.9) 3.1Total income and expenses recognised directly in equity (11.6) (10.4)Profit for the year 331.0 328.0Total recognised income and expense for the year 319.4 317.6 Attributable to:Equity holders of the parent 319.3 318.3Minority interest 0.1 (0.7) 319.4 317.6 Effects of changes in accounting policy:Attributable to equity holders of the parent - decrease in retained earnings at the beginning of the year (22.5) -- increase due to the equity portion of the convertible bond atthe beginning of the year 34.3 -Attributable to minority interest - - 11.8 - Notes to the accounts 1. Basis of preparation (a) The consolidated accounts of HiltonGroup plc and all its subsidiaries have been prepared in accordance withInternational Financial Reporting Standards (IFRSs) as adopted by the EuropeanUnion as they apply to the accounts of the Group for the year ended 31 December2005 for the first time. As permitted by IFRS 1, the Group has applied IAS 32and 39 from 1 January 2005. Reconciliations between UK GAAP and IFRS for thefull year to 31 December 2004 can be found in the Group's 2004 statutoryaccounts. The financial information set out in this document does not constitute theGroup's statutory accounts for the year ended 31 December 2005 or 31 December2004. The annual report and accounts for the year ended 31 December 2005 wereapproved by the Board of Directors yesterday, along with this preliminaryannouncement, but have not yet been delivered to the Registrar of Companies. Theauditors' report on the statutory accounts for 2005 was unqualified and did notcontain a statement under section 237 of the Companies Act 1985. Statutoryaccounts for 2004 have been delivered to the Registrar of Companies. Theauditors' report on the statutory accounts for 2004 was unqualified and did notcontain a statement under section 237 of the Companies Act 1985. The 2005 report and accounts, together with details of the dividend arrangementsand the annual general meeting, will be despatched to shareholders on 22 March2006. The annual general meeting will take place at the QE2 Conference Centreat 11.00am on 26 May 2006. (b) To assist in understanding theunderlying performance of the Group has defined the following items of incomeand expense as non-trading in nature: - Profits/losses on disposal of non-current assets - Profits/losses on disposal of businesses and investments - Unrealised gains/losses on derivative financial instruments that provide an economic hedge but for which hedge accounting is not available - Litigation settlements The non-trading items have been included within the appropriate classificationin the consolidated income statement. (c) The changes in accounting policies result from adoption of the following newor revised standards: IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial Instruments: Recognition and Measurement' The Group adopted IAS 32 (Financial Instruments, Disclosure and Presentation)and IAS 39 (Financial Instruments, Recognition and Measurement) on 1 January2005. The transitional rules of IAS 32 and IAS 39 have not been applied since theGroup has adopted the relief provided by IFRS 1 regarding the restatement of thecomparative information. The Group has produced an explanatory note setting out its accounting policiesunder IFRS, the major differences between UK GAAP and IFRS for the Group, andreconciliations of UK GAAP and IFRS for its 2004 Income Statement and itsBalance Sheets at 1 January 2004 and 31 December 2004, and pro-forma effect forthe adoption of IAS 32 and IAS 39 as at 1 January 2004 and 31 December 2005.This information can be found either within the 2004 Annual Report or at theInvestor Centre at www.hiltongroup.com. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations The Group has applied IFRS 5 prospectively from 1 January 2005 in accordancewith the transitional provisions of IFRS 5, which has resulted in a change inaccounting policy on the recognition of a discontinued operation. (d) For all periods up to and including the year ended 31 December 2004, theGroup prepared its consolidated accounts in accordance with UK generallyaccepted accounting practice (UK GAAP). From 1 January 2005 the Group isrequired to prepare consolidated financial statements in accordance with IFRS asadopted for use in the European Union. Consequently, financial information forthe year ended 31 December 2005 are the first to have been prepared on the basisof IFRS. The general principle that should be applied for first-time adoption of IFRS isthat standards in force at the first reporting date (that is, for the Group, 31December 2005) should be applied retrospectively. However, IFRS 1 'First-timeAdoption of International Financial Reporting Standards' contains a number ofexemptions which companies are permitted to apply. The Group has elected: - not to revisit the basis of accounting for pre-transition combinationsunder UK GAAP. The initial carrying amount of assets and liabilities acquired insuch business combinations is deemed to be equivalent to cost. - to retain UK GAAP carrying values of freehold and leasehold hotelsincluding revaluations as deemed cost at transition. - to recognise the cumulative net deficit on defined benefit pension schemesand similar benefits at transition date in full in equity. - to apply IFRS 2 'Share-based Payments' retrospectively to all grants ofequity instruments after 7 November 2002 that had not vested at 1 January 2005. - not to present comparative information in accordance with IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39 'FinancialInstruments: Recognition and Measurement'. As a result of the above exemptions certain changes apply from 1 January 2004(the Group's date of transition) followed by further changes (due to IAS 32 andIAS 39) to apply from 1 January 2005. In the financial information for the yearended 31 December 2004, financial assets and financial liabilities are accountedfor on the basis of UK GAAP. Under UK GAAP, all derivative financial instruments used for hedging purposesare recognised by applying the accrual method. Under the accrual method, the netinterest received or paid is recognised on an accrual basis in the Group'sincome statement. The notional principal of an interest rate swap is recordedoff balance sheet. For cross currency swaps, the swapped currency is recorded onthe balance sheet. Changes in the derivative's fair value are not recognised. IAS 32 and IAS 39 address the accounting for financial instruments. IAS 32covers disclosure and presentation whilst IAS 39 covers recognition andmeasurement. IAS 39 requires the measurement, at fair value, of a wide range offinancial assets and liabilities and derivatives. The accounting for themovements in fair value is dependent on the designation of the relevantfinancial instrument as part of a hedging relationship. For derivatives, anychanges in fair value are accounted for in income immediately unless thederivative is part of a designated hedging relationship. Under IAS 39, the Group's £300 million convertible bond is required to be splitinto debt and equity components, net of issue costs. Under UK GAAP, theconvertible bond was recorded at nominal value. The effect of adopting IAS 39 at 1 January 2005 is shown as a movement in theGroup shareholders' equity for 2005. 2. Revenue and profit by activity Year to 31 December 2005 Profit before Profit before taxation and taxation and after Revenue non-trading items non-trading items £m £m £m Continuing operations: Retail Betting 9,830.4 225.3 225.3Other Betting and Gaming 1,675.1 41.3 41.3Total Betting and Gaming 11,505.5 266.6 266.6Central costs and income (0.5) (18.1) (18.1) 11,505.0 248.5 248.5Net finance costs - (16.9) (8.8) 11,505.0 231.6 239.7 Discontinued operations: Hotels 1,849.4 187.5 159.5Net finance costs - (5.2) (5.2) 1,849.4 182.3 154.3 13,354.4 413.9 394.0 Year to 31 December 2004 Profit before Profit before taxation and taxation and after Revenue non-trading items non-trading items £m £m £m Continuing operations: Retail Betting 8,905.8 233.7 233.7Other Betting and Gaming 1,219.9 39.1 39.1Total Betting and Gaming 10,125.7 272.8 272.8Central costs and income 0.2 (14.1) (14.1) 10,125.9 258.7 258.7Net finance costs - (34.1) (34.1) 10,125.9 224.6 224.6Discontinued operations: Hotels 1,771.2 159.0 158.4Net finance costs - (6.9) (6.9) 1,771.2 152.1 151.5 11,897.1 376.7 376.1 3. Discontinued Operations On 29 December 2005 Hilton Group plc signed a conditional agreement for the saleof its hotels and leisure division, Hilton International, to HHC for a cashconsideration of approximately £3.3 billion. Completion is expected to be latertoday. Under the terms of the deal, Hilton International, including LivingWelland Scandic, will become part of HHC. Based on this, discontinued operationscomprise the Group's hotels operations, and as such are disclosed under theHotels segment. Year to Year to 31 December 2005 31 December 2004 £m £mRevenue 1,849.4 1,771.2Expenses (1,661.9) (1,612.2)Profit before non-trading items 187.5 159.0Non-trading items:Profit on sale of non-current assets (a) 12.8 5.9Losses on sale of non-current assets (b) (40.8) (6.5)Profit before tax and finance costs 159.5 158.4Net finance costs (5.2) (6.9) Profit before tax from discontinued operations 154.3 151.5Taxation: - related to pre tax profit (21.2) (15.2) - related to non-trading items (c) 1.5 -Profit for the year from discontinued operations 134.6 136.3 (a) The profit on sale of non-current assets in 2005 and 2004 relates todisposal of non-core assets. (b) The majority of the loss on sale of non-current assets in 2005 relates tothe disposal of 16 hotels to The Managed Hotels Unit Trust with an associatedgoodwill write-off. (c) There is no tax on the 2004 profit / losses on non-current assets. The major classes of assets and liabilities of the Hotel division held for saleat 31 December 2005 are as follows: 31 December 2005 £m ASSETS Non-current assets Goodwill and intangible assets 1,382.8Property, plant and equipment 1,926.9Interests in associates and other investments 73.2Other financial assets 5.2Deferred tax asset 26.5Retirement benefit asset 0.4 3,415.0Current assets Inventories 15.1Trade and other receivables 269.8Cash and cash equivalents 68.0 352.9Total assets held for sale 3,767.9 LIABILITIES Current liabilities Interest-bearing loans and borrowings (48.3)Obligations under finance leases (2.6)Trade and other payables (420.9)Corporation tax liabilities (10.7) (482.5)Non-current liabilities Interest-bearing loans and borrowings (12.3)Obligations under finance leases (31.0)Other financial liabilities (20.8)Deferred tax liabilities (329.3)Retirement benefit obligation (88.7)Provisions (3.6) (485.7) Total liabilities held for sale (968.2) During the year, the Hotel Division contributed £314.2 million (2004: £263.3million) to the Group's net operating cash flows, received £401.0 million (2004:paid £97.5 million) in respect of investing activities and paid £33.8 million(2004: £35.3 million) in respect of financing activities. Income and expenses recognised directly in equity relating to the disposal groupclassified as held for sale: Year to Year to 31 December 2005 31 December 2004 £m £mCurrency translation differences 9.2 16.6Actuarial losses on defined benefit pension scheme (10.9) (8.9)Tax on items directly taken to equity 3.3 2.7Total income and expenses recognised directly in equity 1.6 10.4 4. Non-Trading items Year to Year to 31 December 2005 31 December 2004 £m £m Continuing operations: Unrealised gains on derivatives 8.1 - Total non-trading profit before taxation 8.1 - Taxation thereon (2.4) - Non-trading tax credit (a) - 9.0 Non-trading items after taxation 5.7 9.0 (a) The £9.0 million non-trading tax credit in 2004 relates to a specificcase settled during the period where related losses were previously treated asnon-trading items. 5. Taxation The total tax charge for continuing operations was £43.3 million (December 2004:£32.9 million, including a non-trading tax credit of £9.0 million). Thetaxation charge relates to £37.8 million of UK tax and £5.5 million of overseastax. Year to Year to 31 December 2005 31 December 2004 £m £m UK corporation tax based on the taxable profit forthe year at a rate of 30.0% (2004: 30.0%) 118.2 112.8Non-trading tax credit - (9.0)Overseas tax (38.7) (28.7)Utilisation of losses (25.8) (6.0)Other 9.3 1.4Utilisation of prior year tax losses not previouslytreated as a deferred tax asset - (22.4)Total tax charge 63.0 48.1 Analysed as: Discontinued operations tax charge 19.7 15.2Continuing operations tax charge 43.3 32.9 63.0 48.1 6. Dividends Year to Year toPence per share 31 December 2005 31 December 2004 pence pence Interim 3.80 3.60Final (excluding special dividend) 6.60 6.00 10.40 9.60 The dividends paid in 2005 and 2004 were £156.8 million (9.80 pence per share)and £144.4 million (9.12 pence per share) respectively. A final year enddividend of 6.60 pence per share (2004: 6.00 pence per share) amounting to atotal dividend of £106.0 million (2004: £95.9 million) was declared by theDirectors on 22 February 2006. In addition the Board also proposes a specialdividend of 233.4 pence which will be paid at the same time as the finaldividend of 6.6 pence. These financial statements do not reflect this dividendpayable. 7. Earnings per share The calculation of adjusted earnings per share before non-trading items isincluded as it provides a better understanding of the underlying performance ofthe Group. Continuing operations: Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per 31 December 2005 £m £m share share Profit attributable to shareholders 196.4 207.9 12.3p 12.0p Non-trading items net of tax (5.7) (5.7) (0.4)p (0.3)pAdjusted profit attributable toshareholders 190.7 202.2 11.9p 11.7p Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per 31 December 2004 £m £m share share Profit attributable to shareholders 191.7 198.8 12.1p 11.6p Non-trading items net of tax (9.0) (9.0) (0.6)p (0.5)pAdjusted profit attributable toshareholders 182.7 189.8 11.5p 11.1p Discontinued operations: Earnings Diluted Basic EPS Diluted EPS earnings pence per pence per 31 December 2005 £m £m share share Profit attributable to shareholders 134.4 134.4 8.4p 7.7p Non-trading items net of tax 26.5 26.5 1.7p 1.5pAdjusted profit attributable toshareholders 160.9 160.9 10.1p 9.2p Earnings Diluted Basic EPS Diluted EPS earnings pence per pence per 31 December 2004 £m £m share share Profit attributable to shareholders 136.2 136.2 8.6p 7.9p Non-trading items net of tax 0.6 0.6 0.1p -Adjusted profit attributable toshareholders 136.8 136.8 8.7p 7.9p Total Group: 31 December 2005 Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per £m £m share share Profit attributable to shareholders 330.8 342.3 20.7p 19.7p Non-trading items net of tax 20.8 20.8 1.3p 1.2pAdjusted profit attributable toshareholders 351.6 363.1 22.0p 20.9p 31 December 2004 Earnings Diluted Basic EPS Diluted EPS earnings* pence per pence per £m £m share share Profit attributable to shareholders 327.9 335.0 20.7p 19.5p Non-trading items net of tax (8.4) (8.4) (0.5)p (0.5)pAdjusted profit attributable toshareholders 319.5 326.6 20.2p 19.0p *Diluted earnings includes an adjustment to the attributable profits for theContinuing Group to reflect a reduction in the interest charge net of tax of£11.5 million (2004: £7.1 million) which would result from the conversion of theconvertible bond to equity. The number of shares used in the calculation is shown below: Year to Year to 31 December 2005 31 December 2004 millions millions Weighted average number of ordinary shares for the purposesof basic earnings per share 1,599.4 1,584.2 Effect of dilutive potential ordinary shares:Share options 14.0 12.5Convertible bond conversion to ordinary share capital 115.4 115.4Issue of contingently issuable shares 4.6 3.4 Weighted average number of ordinary shares for the purposesof dilutive earnings per share 1,733.4 1,715.5 8. Net debt The Group's net debt structure is as follows: Continuing Discontinued operations operations Total Total 31 December 31 December 31 December 31 December 2005 2005 2005 2004 £m £m £m £mNon-current assets Derivative financial instruments 51.7 - 51.7 - Current assets Derivative financial instruments 8.5 - 8.5 -Cash and cash equivalents 926.6 68.0 994.6 483.3 Current liabilitiesInterest-bearing loans and borrowings (158.2) (48.3) (206.5) (115.6)Obligations under finance leases - (2.6) (2.6) (17.6)Derivative financial instruments (41.7) - (41.7) - Non-current liabilitiesInterest-bearing loans and borrowings (847.7) (12.3) (860.0) (987.5)Obligations under finance leases - (31.0) (31.0) (34.5)Convertible bond (279.7) - (279.7) (300.0)Derivative financial instruments (5.1) - (5.1) - Net debt per balance sheet (345.6) (26.2) (371.8) (971.9) Net debt adjustments :Equity component of convertible bond (34.3) -Amortisation of convertible bond 7.3 -Interest rate fair value of net investment hedges 0.9 - Adjusted Net Debt (397.9) (971.9) Adjusted net debt movement in the period: Year to Year to 31 December 2005 31 December 2004 £m £m Opening net debt (971.9) (1,147.7) Net debt adjustments at 1 January 2005 (4.1) - Adjusted opening net debt (976.0) (1,147.7) Net cash inflow from operating activities 420.3 407.8 Cash inflows/(outflows) from investing activities 263.0 (130.0) Proceeds from associates repayment of loans 1.5 17.9 Payment of new loans to associates (0.2) (1.1) Dividends paid (156.8) (144.5) Exchange movements (5.8) 17.8 Issue of ordinary share capital 38.1 7.8Other non-cash movements 18.0 0.1 Adjusted closing net debt (397.9) (971.9) 9. Reconciliation of profit to net cash inflow from operating activities Year to Year to 31 December 2005 31 December 2004 £m £m Profit before tax and finance costs 436.0 417.7 Depreciation 124.7 124.9Amortisation of intangible assets 8.1 6.8Costs of share based payments 6.2 2.0 Movement on derivatives (22.2) - Other items (4.2) 1.3 Operating cashflows before movements in working capital 548.6 552.7 Decrease/(increase) in assets classified as held for sale 0.6 (0.1) Decrease/(increase) in inventories 0.7 (0.3) Increase in receivables (13.5) (13.6) Increase in payables 26.6 17.9 Decrease in provisions (5.3) (3.3) Share of results from associates (4.3) (3.7) Cash generated by operations 553.4 549.6Income taxes paid (64.4) (54.6) Interest paid (68.7) (87.2) Net cash inflow from operating activities 420.3 407.8 Cash and cash equivalents in the balance sheet comprise: Year to Year to 31 December 2005 31 December 2004 £m £m Continuing Cash at bank and in hand 25.9 73.3 Short-term deposits and current asset investments 900.4 404.9Deposits with maturity greater than three months 0.3 5.1 926.6 483.3 Discontinued Cash at bank and in hand 47.4 - Short-term deposits and current asset investments 18.3 -Deposits with maturity greater than three months 2.3 - 68.0 - 994.6 483.3 Cash and cash equivalents in the cashflow statement comprise cash at bank andother short-term highly liquid investments with a maturity of three months orless and overdrafts: Year to Year to 31 December 2005 31 December 2004 £m £m Continuing Cash at bank and in hand 25.9 25.1 Short-term deposits and current asset investments 900.4 383.5 926.3 408.6 Discontinued Cash at bank and in hand 47.4 48.2 Short-term deposits and current asset investments 18.3 21.4Bank overdrafts (16.2) (18.7) 49.5 50.9 975.8 459.5 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ladbrokes Coral