Slide 1: Preliminary results 2005
Preliminary results 2005 Friday 3rd March 2006
Slide 2: Alun Cathcart, chairman
Alun Cathcart chairman
Slide 3: Mike Smith, chief executive
Mike Smith chief executive
Slide 4: Themes for the day
Themes for the day Financial results Continuing operations Gaming down; Hard Rock up Discontinued businesses Deluxe Film up; Deluxe Media down Deluxe Deluxe Film - sold Deluxe Media - committed to exit Capital restructuring Share buyback; pension funding addressed; ongoing dividend reviewed Outlook
Slide 5: Peter Gill, finance director
Peter Gill finance director
Slide 6: Basis of reporting
Basis of reporting • IFRS adoption • Blue Square revenue recognition • Discontinued businesses
Slide 7: 2005 financial headlines
2005 financial headlines - continuing operations • Revenue up 2.9% to £810.3m • Operating profit down 6.3% to £127.5m • Adjusted profit before tax down 13.6% to £85.4m • Adjusted EPS of 10.1p (2004: 12.7p) • Operating cash flow of £88.9m (2004: £155.1m) • Net debt £739.4m (2004: £641.8m) • Final div
Slide 8: Adjusted profit
Adjusted profit* £m 2005 2004 Revenue 810.3 787.6 Operating profit 127.5 136.1 Joint ventures (1.4) (0.5) Interest (40.7) (36.8) Profit before tax 85.4 98.8 Effective tax rate 24.9% 22.7% Adjusted earnings per share 10.1p 12.7p * Profits and earnings before discontinued operations, exceptional items
Slide 9: Operating profit
Operating profit* £m 2005 2004 Gaming 105.8 117.0 Hard Rock 34.8 27.9 US Holidays 2.2 4.1 Central costs (15.3) (12.9) 127.5 136.1 * Excluding exceptional items
Slide 10: Gaming
Gaming Revenue Operating profit £m 2005 2004* 2005 2004* Mecca 295.6 292.6 80.2 81.0 Grosvenor 207.9 200.8 27.3 33.4 Blue Square 26.3 25.6 (1.7) 2.7 529.8 519.0 105.8 117.1 * 2004 excludes RLMS (turnover £4.4m, operating loss £0.1m) and exceptional items
Slide 11: Mecca Bingo
Mecca Bingo Revenue Operating profit £m 2005 2004 2005 2004* UK 264.0 265.3 70.2 73.3 Spain 31.6 27.3 10.0 7.7 295.6 292.6 80.2 81.0 * Excluding exceptional items Mecca UK 2005 2004 Admissions (‘000) 19,728 20,933 Spend per head (£) 13.38 12.67
Slide 12: Grosvenor Casinos (UK)
Grosvenor Casinos (UK) Revenue Operating profit £m 2005 2004 2005 2004 London - upper 24.9 23.4 4.8 3.8 London - other 56.0 56.7 9.6 11.3 Provincial 101.1 97.3 22.4 24.7 Hard Rock 13.0 11.0 0.3 (0.5) Divisional costs (11.2) (7.6) 195.0 188.4 25.9 31.7
Slide 13: Blue Square
Blue Square Stakes placed* Gross win/revenue £m 2005 2004 2005 2004 Online 488.6 375.9 22.5 20.8 Telephone 59.2 63.7 3.8 4.8 547.8 439.6 26.3 25.6 Operating (loss) profit (1.7) 2.7 * Excluding betting shop and rails business
Slide 14: Hard Rock
Hard Rock Revenue Operating profit £m 2005 2004 2005 2004* Company cafes 228.2 216.4 29.2 25.4 Franchise cafes 6.3 5.2 5.0 5.3 Hotels & casinos 15.6 10.4 12.5 7.4 Equity distributions 4.5 2.2 Overheads (16.4) (12.4) 250.1 232.0 34.8 27.9 * Excluding exceptional items
Slide 15: Statutory profit & loss
Statutory profit & loss £m 2005 2004 Adjusted profit before tax 85.4 98.8 Foreign exchange on (16.0) 5.9 inter-company balances Amortisation of equity component (3.0) - of convertible bond Profit before tax and exceptional items 66.4 104.7 Exceptional items (15.7) (41.5) Profit before tax 50.7 63.2
Slide 16: Discontinued operations
Discontinued operations (Deluxe Film & Deluxe Media) Film Media £m 2005 2004 2005 2004 Operating profit (loss) 65.7 59.8 (16.4) 9.6 Exceptional operating charge (150.4) - (136.5) (127.0) Net loss (96.9) 43.8 (157.2) (118.1)
Slide 17: Group cash flow
Group cash flow £m 2005 2004 Cash inflow from operating activities Before Deluxe contract advances 202.5 245.5 Deluxe contract advances, net of repayments (27.2) 17.8 175.3 263.3 Capital expenditure (88.0) (115.6) Fixed asset disposal 1.6 7.4 Operating cash flow 88.9 155.1 Acquisitions and investmen
Slide 18: Movement in net debt
Movement in net debt £m 35 739 48 642 27 35 -13 607 UK GAAP IFRS Deluxe Film FX on US Cashflow Closing net net debt at adjustments contract borrowings debt at 31 Dec 2004 at 1 Jan 2005 advances 31 Dec 2005
Slide 19: Deluxe Film: use of disposal proceeds
Deluxe Film Use of disposal proceeds Retained funds Working capital adjustment £12m £66m Capital return Refinancing costs £12m £200m Transaction costs £30m £100m Additional pension payments
Slide 20: Review of capital structure
Review of capital structure • New £650m banking facility in place • Net debt/EBITDA operating range of 3.5x to 4.0x • Dividend cover rebased to 2.0x • £200m share buy-back from March • UK property sale and leaseback under consideration
Slide 21: Mike Smith, chief executive
Mike Smith chief executive
Slide 22: A watershed year
A watershed year Sale of Deluxe Film achieved Sale of Deluxe Media remains priority Exceptional level of cash return Aggregate £1bn over last 6 years Normalised future returns Strategy for continuing operations
Slide 23: Rank continuing businesses
Rank continuing businesses • Hard Rock - build on brand strengths – growth through franchise/licensing – increasing importance of casino/hotel revenues • Gaming - build on market strengths – growth through UK deregulation and product introduction – leverage recent investments • Growth largely organi
Slide 24: Hard Rock
Hard Rock Increasing contributions from hotels, casinos and franchise cafes 65% 63% 57% 43% Franchise/ 37% other 35% Owned cafes 2003 2004 2005 Hard Rock £23.1m £27.9m £34.8m op profit
Slide 25: Hard Rock Cafes
Hard Rock Cafes • Improving performance essential to reinvigoration • Improved food & beverage results • Upgraded merchandise • Higher traffic sites • Acceleration in franchise cafe roll-out
Slide 26: Hard Rock Casino development
Hard Rock Casino development • Florida (Tampa & Hollywood) – exceeded targets – will add product & capacity • Mississippi (Biloxi) – re-launch plan • UK (London & Manchester) – London banner year • Looking actively beyond USA and UK
Slide 27: Hard Rock Hotels development
Hard Rock Hotels development • Universal Hotels JV (Orlando) – very strong year – successfully refinanced • Lifestar JV – North America Chicago/New York City/ San Diego/ Copper Mountain – Europe Madrid (opening 2006)
Slide 28: Hard Rock - a big and growing brand
Hard Rock - a big and growing brand • $1.5bn third party investment • $2.0bn system-wide revenue
Slide 29: Gaming
Gaming • Build on market strengths – deregulation: well-invested estate • Deregulation: less/slower • Duty changes: more/faster • Cost increases • No triennial review • Smoking ban
Slide 30: Blue Square
Blue Square £m £m 600 27 Gross win 500 26 Total stakes 400 25 300 24 200 23 100 22 0 21 2003 2004 2005 Win margin 5.9% 5.8% 4.8%
Slide 31: Blue Square
Blue Square • Integrated multi-platform sports betting and gaming model – customer migration from sportsbook to gaming – shared purse across sportsbook and gaming • Gaming – c.50% of total stakes and gross win after just three years – continued product development (bingo) • Sportsbook – sector-wide
Slide 32: Mecca Bingo
Mecca Bingo • Strong position in mature market – limited deregulation upside • Steady market share • Lower admissions • Strong spend per head • High quality estate • Review of operations
Slide 33: Mecca Bingo - initiatives
Mecca Bingo - initiatives • Additional machines • Linked games • Fully electronic bingo club - a UK first • Hand-held electronic bingo
Slide 34: Mecca Bingo - smoking ban
Mecca Bingo - smoking ban • Smoking ban takes effect in Scotland from March 26th – 14 Mecca clubs in Scotland – estimated 45% of Mecca customers smoke • Management action to mitigate impact – extend sessions to allow scheduled breaks to minimise impact on interval games & machines – cashlink across
Slide 35: Grosvenor Casinos
Grosvenor Casinos • High growth market – deregulation prospects • Growing market share – increased membership/ admissions – lower handle per head • High quality estate – additional licences
Slide 36: Grosvenor Casinos: deregulation benefits
Grosvenor Casinos Strong position to deliver benefits of deregulation • October 2005 • Q4 trading patterns – 24-hour membership – admissions up rule abolished – handle-per-head down – gaming machine – machine revenues up restrictions relaxed substantially • Opportunity in 2007 • September 2007 – imp
Slide 37: Grosvenor Casino - estate
Grosvenor Casino - estate • Investment in relocations & extensions – Manchester/Luton/Reading – improved car parking • More gaming positions & machines • More and improved poker rooms • Additional licences – 7 granted/ 3 pending
Slide 38: Summary
Summary • Watershed year • Rank now a focussed leisure and gaming entity • Encouraging start to 2006 - but industry challenges ahead • Demonstrable opportunities for growth
Slide 39: Appendix
Appendix
Slide 40: Exceptional items
Exceptional items £m Exceptional items within continuing operations Increase in vacant properties onerous lease provision 12.1 Finance costs relating to closure of tax issue 3.6 Pre-tax exceptional charge: continuing operations 15.7 Exceptional items within discontinued operations DMS – restructurin
Slide 41: Capital expenditure
Capital expenditure £m 2006E 2005 Gaming 50-60 28.2 Hard Rock 15-25 16.8 US Holidays 1-3 1.1 Discontinued businesses - 41.9 66-88 88.0
Slide 42: Hard Rock hotels & casinos
Hard Rock Hotels & casinos Lifestar Universal Rank Hotels HLC Seminole Indian Nation Premier Entertainment Grosvenor Casinos 50:50 JV (Sol Melia) 25% equity stake (Florida) (Rank) Hard Rock Hotel Hard Rock Hotel Hard Rock Resort Hard Rock Hotel & Casino Hard Rock Hotel & Casino Hard Rock Casino Chic