Hilton expects hotels to recover
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Hilton Hotel in Caracas, Venezuela
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LONDON, England (Reuters) -- Britain's Hilton Group reported flat underlying annual profit on Thursday but said it saw signs of a gradual recovery emerging in the hotel sector, which would lead to earnings and dividend growth in 2004.
The operator of around 400 hotels outside the United States and some 2,000 Ladbroke UK betting shops, said its 2003 gaming profits rose strongly and 2004 had begun well in all its gaming businesses -- betting shops, eGaming and telephone betting.
Deputy Chief Executive Brian Wallace said despite difficult pockets in continental Europe, like France, there was a gradual recovery emerging in the hotel sector but this needed to be maintained over the coming months to restore full confidence.
"We see some hotel recovery coming through in 2004 and this should strengthen in 2005,'' Wallace said in an interview.
The group which has seen buoyant betting profits offset a hotel industry downturn reported a marginal 0.4 percent rise in underlying pre-tax profits to £272.4 million ($516 million), towards the top of analyst forecasts of £237 million to £276 million and compared to 2002's £271.4 million.
Analysts said Ladbroke betting was the star performer from the results while hotels were showing a slow recovery and together these prompted them to upgrade profits forecasts.
The shares rose two percent to 230 pence by 0840 GMT, almost doubling since hitting a low of 128 pence in March 2003.
Hilton shares, like other hotel stocks, have rallied since early last year on hopes of a sustained recovery after the worldwide hotel industry suffered from the September 2001 attacks on the U.S., the war in Iraq and the deadly SARS virus.
Analyst Julian Easthope at Hilton's joint broker UBS raised his 2004 pre-tax profit forecast to £320 million from £305 million on the back of stronger-than-expected betting profits and the slow recovery in hotels.
ABN AMRO analysts also upgraded to £315 million for 2004 from £300 million and raised their price target to 265p from 250p, while sticking with a buy recommendation.
Hilton's Wallace said the full-year 2003 dividend was held at 8.92p a share in line with flat earnings per share of 13.4 pence, but as earnings are expected to grow in 2004 he said the dividend payout would also increase.
Overall hotel profits fell nearly 31 percent compounded by the lack of U.S. travellers due to concerns over terrorism, SARS and war in the Middle East, but the group reiterated that an encouraging improving trend had emerged towards the end of 2003.
Hilton has weathered the hotel sector downturn better than others, thanks to its Ladbroke chain, which has benefited from steps to deregulate Britain's gambling laws, such as the abolition of betting tax in October 2001.
Betting profits were up 43.4 percent, helped by growth in virtual betting machines, or fixed-odds betting terminals, where the betting industry and the UK government last year agreed a code of conduct on how to operate these controversial machines.
The rapid growth in usage of these machines, which offer games such as roulette, had come under fire from some consumer groups fearing they will only fuel addictions to gambling.
Britain's Hilton has a global marketing alliance with the U.S.-based Hilton Hotels Corp., agreed in January 1997, to market the Hilton brand around the world.
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