Profits dip at Hilton - Thursday 12th of May 2005

Hotels and gaming company Hilton Group (LSE: HG.L - news - msgs) said profits for the first four months of 2005 dipped 4 percent but it was betting on a recovery in gaming later this year, after being hit by a lucky streak for gamblers.Hilton, which operates around 400 hotels outside the United States and nearly 1,900 Ladbroke betting shops in Britain, showed the fall in January-April pretax pre-exceptional profits after reporting a challenging start to 2005 in betting.Chief Executive David Michels said Hilton's betting business suffered as gamblers had a cracking start to the year at the expense of the bookies, especially at major horse race meetings such as Cheltenham and the Grand National.

"But as results usually level out over the year, we expect improving margins should lead to good growth in the second half in gaming," Michels told Reuters in an interview on Friday after issuing a trading statement ahead of the annual general meeting.On the hotels side, Michels reported a continued recovery from the industry low point of 2001, with revenue per available room (revpar) up 10 percent in the first four months. He said it looked promising that 2005 hotel profit would be ahead of 2004.Michels stuck with his forecast that the hotel industry will only see full recovery in 2006, compared with pre-2001 levels, and expected improvements to continue during the rest of 2005.The group's Ladbroke betting and gaming side saw a level total gross win -- the amount lost by gamblers -- compared with a year earlier, but UK betting shops saw their gross win fall by 1 percent.Earlier this month, William Hill (LSE: WMH.L - news) leapfrogged Ladbroke to become Britain's biggest bookmaker by buying Stanley Leisure's 624 betting shops for 504 million pounds to add to its existing 1,600 betting shops.

William Hill also reported tough trading with a level gross win.Hilton shares edged up 0.8 percent to 278-3/4 pence by 0950 GMT. After hitting a high of 326p in February, they have drifted off due to concern over tough trading on the betting side.HOTEL SALES ABN AMRO (Amsterdam: AAH.AS - news) analyst Simon Larkin said the weaker-than-expected four-month profit numbers would prompt him to cut his 2005 pretax profit forecast to 425 million pounds from 445 million previously, after Hilton made 383.1 million in 2004.He said that, for the shares to move towards 350-400p, Hilton would have to sell off more hotels and then eventually move towards a split of the group between hotels and gaming.In February, the group said it planned to sell a number of hotels over the next 12 months to raise 300-400 million pounds and return most of the proceeds to shareholders.

The next month it sold 11 UK hotels outright for 111 million pounds. Michels said he will put further hotels on the market in the next few months to make up the balance. Analysts expect him to sell up to six hotels although he is expected to retain control of these through sale and manage-back deals.The company currently owns outright around 70 of its 400 hotels and it is taking advantage of the upswing in the hotel cycle and the existence of many buyers in the market. Sale and manage-back deals have been popular with hotel rivals such as InterContinental.Hilton shares have underperformed the benchmark FTSE 100 index (news) by 5 percent and InterContinental by 3 percent since the start of 2005.

uk.news.yahoo.com

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