Hilton profits soar as hotel sale is finalised
Thursday, 23, Feb 2006 12:17
Hilton Group has reported a sharp rise in profits as it completes the sale of its UK hotel operations to its sister US company, Hilton Hotels Corporation.
The British-based group, which owns the world's largest high-street betting chain Ladbrokes, saw profits before tax rise by 9.9 per cent to £413.9 million last year, with its online gambling services showing significant growth.
Hilton announced that it was expecting to complete the £3.3 billion sale of its Hilton International hotel business later today, and would return up to £4.2 billion to shareholders in the second quarter of the year.
The sale is part of a shift of strategy for Hilton away from hotels towards a purely gaming group, with Asia and China in particular earmarked as key markets over the coming years.
This is despite the fact that its gaming and gambling arms saw operating profits fall by 2.3 per cent last year to £266.6 million, while its hotel division posted an 18 per cent profit rise to £187.5 million.
David Michels, Hilton's group's chief executive, defended the strategy and insisted that the sale of its hotel operations was a "commercially sound" move.
"Hilton Group made record profits in 2005, in what was a good year for both hotels and betting," Mr Michels said.
"I am proud to have been associated with the company and even prouder to have led it as group chief executive for six years. Hilton Group's key strengths have been its staff, its depth of management and its brands, all of which I have seen grow and develop in my time with the company.
"The sale of Hilton International is, in my opinion, commercially sound in all respects and I believe that real value has been created for our shareholders."
Although the statement revealed that Ladbrokes retail had suffered losses so far this year as a result of the cancellation of a number of horserace meetings due to cold weather, its overall outlook remained positive, with this summer's World Cup finals expected to boost betting activity.
Hilton has recently launched an online Mahjong site aimed primarily at the Chinese market, while it is also planning to open its first bricks-and-mortar casino in Paddington, west London, in the second half of the year.
However, despite the reassurances over the sale of Hilton International and the announcement of the bumper payouts to investors, London-listed Hilton Group's shares were down on the back of the results, falling by 3.25p to 379.50p on mid-morning trading.