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06/12/2001

Preliminary announcement of the results for the financial year ended 30 September 2001

Preliminary announcement of the results for the financial year ended 30 September 2001

Strong results despite difficult market conditions

  • Turnover* up 6.8 per cent to £4,033 million
  • Operating profit** up 2.1 per cent to £792 million, including:
     - Six Continents Hotels up by 13.6 per cent
     - Six Continents Retail up by 1.1 per cent
     - Britvic Soft Drinks up by 23.9 per cent
  • Profit before tax and major exceptional items was £731 million, down 3.3 per cent
  • Adjusted earnings per share down 3.4 per cent to 60.1 pence
  • Dividend per share up 3.0 per cent to 34.3 pence
  • Strong pipeline of 69,000 hotel rooms and 700 retail sites with conversion potential

Six Continents PLC announced today an increase in operating profit from continuing operations (before major exceptional items) of 2.1 per cent to £792 million on turnover up 6.8 per cent to £4,033 million.

Profit before tax and major exceptional items was down 3.3 per cent to £731 million and adjusted earnings per share were down 3.4 per cent to 60.1 pence both due for the most part to the dilutive effect of the disposals last year.

A final dividend of 23.9 pence is recommended for payment on 18 February 2002, which together with the interim dividend of 10.4 pence per share amounts to 34.3 pence per share for the year, an increase of 3.0 per cent over 2000.

*continuing operations
**continuing operations before major exceptional items

Commenting on the results, Sir Ian Prosser, Chairman, Six Continents PLC said:

"During the financial year to 30 September 2001, we have continued to strengthen our hotel portfolio with two valuable acquisitions building on our position as the world's leading global hotel company.

In our retail business we sold 988 smaller unbranded pubs and are successfully achieving our targeted 40 per cent turnover uplifts on the 300 former Allied outlets converted to our brands and templates.

We also adopted the new name Six Continents following the sale of the Bass name with the brewing business in August 2000.

With our financial strength and resilient businesses we are well positioned to take advantage of opportunities arising from the current downturn."

Tim Clarke, Chief Executive, Six Continents PLC commented:

"I am pleased to report that we have made good progress across the Group and that we have performed well despite a more difficult economic climate.

In the hotel business our position improved despite obvious trading difficulties. Our system size grew by 24,000 rooms to 515,000 raising our system fund to $350 million a year. Our excellent reservation system continued to support growth in the business, generating over 30 per cent of total US midscale room nights. Priority club, our loyalty programme, grew by almost 2 million members to 12.4 million.

Overall, hotel profit rose by 13.6 per cent in the year including the acquisition of Posthouse; excluding that acquisition, profits were up by 3.7 per cent.

Profit in our ongoing retail business, after adjusting for opening and closure costs of conversions was up by 4.9 per cent. Over 60 per cent of our sales are now from branded outlets. This year we have converted some 175 unbranded outlets to brands such as Ember Inns, Vintage Inns and Harvester. Our returns on conversions are running in excess of 15 per cent. In the year, sales per week per outlet grew to £14,000, nearly three times the industry average and we now have 350 outlets with sales of over £20,000 per week.

Britvic Soft Drinks had an outstanding year and delivered an increase in profit of 23.9 per cent."

He added:

"Overall, Six Continents' business is resilient with 70 per cent of our profits either having the limited operational gearing of the franchise and managed business, or in retail and soft drinks, have strong growth opportunities and limited exposure to GDP movements.

This resilience is a source of competitive advantage as we aggressively manage through this downturn, accelerating our cost reduction programmes, upweighting our marketing and sales activity to gain market share and continuing to renovate and upgrade our assets and systems.

We also have the benefit of low financial gearing with 13 times interest cover, having completed £3 billion of disposals into more buoyant financial markets."

He concluded:

"We are extracting the benefits from recent investments, and in particular the Allied and Posthouse properties we purchased. While the strong site pipeline in both Hotels and Retail will underpin organic opportunities for growth.

And finally, we have consciously prepared for the downturn, conserving the bulk of our resources should potential opportunities arise that meet our rigorous criteria."

Current trading

Within hotels it is clear that in the United States, following the dire trading conditions in the two weeks following the terrorist attacks, there has been some improvement, although trading remains at depressed levels.

Within Europe the position is not as clear. It would appear that there has not as yet been any recovery in long haul travel and so trading in upscale hotels has not shown any meaningful improvements since 11 September.

Anticipating tough market conditions, Six Continents took decisive action early in the year to reduce costs across the division. Overall profit in the hotel division for the month of October was $30 million less than the previous year.

Both the retail division and the soft drinks business remain unaffected by the events of 11 September. During the first eight weeks of the year total sales growth in retail was 8.6 per cent while like for like sales in the core estate were up 0.9 per cent. In Britvic total volumes were some 4.2 per cent higher than last year.

The attached tables show the RevPAR movements over the last five months cut across our major profit contributors.

The upscale business across the United Kingdom, United States and France is all now trading at 30-40 per cent RevPAR decline, which remains lower than the July figures. This decline is relatively evenly split between rate and occupancy in both the United Kingdom and United States.

The US mid-scale business is faring better, with November RevPAR some 16 per cent down for Holiday Inn and 5 per cent down for Express. November is the first month where all segments have shown a rate decline.

In EMEA the mid-scale business has recently showed occupancy decline not rate decline across most European countries, but overall RevPAR declines are now reaching double digit levels.

While there are signs of optimism, particularly with regard to occupancy in the major cities and the United States, we remain cautious over rate trends.

Outlook

Overall, Six Continents' business is resilient with 70 per cent of our profits either having the limited operational gearing of the franchise and managed business, or in retail and soft drinks, have strong growth opportunities and limited exposure to GDP movements.

In the hotel business occupancy has declined both as a result of attitudes to flying and heavy corporate cutbacks on travel.

In the short term the evidence from the Gulf War and the early nineties recession is that it will take at least six months for confidence in international travel, particularly outbound from the United States, to recover and, therefore, we are taking a cautious view on market conditions in our upscale business. By contrast, we anticipate a faster recovery for domestic US travel.

In the near-term, the outlook for our retail business is supported by both the brand conversion strategy and the more favourable industry trends.

While so far there are no signs of any consumer downturn in the United Kingdom, our central London business may continue to be affected by recent events.

Overall, Six Continents is in a strong position. We have two leading businesses, with excellent brands, revenue premiums and real scale economies in our industries.

-- ends --

RevPAR – July to November (% Change vs FY00)
             
  RevPAR          
    Jul Aug Sept Oct Nov
    2001 2001 2001 2001 2001
Americas Owned & Leased          
  Inter-Continental (22.8%) (22.5%) (51.4%) (44.9%) (36.4%)
  Crowne Plaza (4.4%) (8.6%) (30.4%) (20.3%) (24.6%)
             
Americas Total System          
  Crowne Plaza (6.5%) (7.5%) (30.3%) (23.3%) (33.0%)
  Holiday Inn (5.0%) (4.3%) (20.2%) (16.2%) (15.7%)
  Holiday Inn Express (1.2%) (0.6%) (10.3%) (4.9%) (4.5%)
             
EMEAOwned & Leased          
  UK UK Upscale (22.3%) (14.1%) (25.8%) (34.2%) (30.8%)
  HI UK (Total) (7.1%) (5.9%) (0.8%) (18.9%) (16.4%)
             
  France   10.0% 5.6% (20.8%) (51.4%) (35.5%)
  Germany   15.1% (1.3%) (8.6%) (5.6%) (21.9%)
  Benelux   (9.9%) (15.8%) (14.0%) (12.7%) (36.5%)
             
OCCUPANCY – Percentage points change        
    Jul Aug Sept Oct Nov
    2001 2001 2001 2001 2001
Americas Owned & Leased          
  Inter-Continental (10.9%) (10.4%) (30.5%) (21.4%) (17.3%)
  Crowne Plaza (6.7%) (7.3%) (21.9%) (11.1%) (15.1%)
             
Americas Total System          
  Crowne Plaza (4.8%) (5.0%) (18.8%) (11.9%) (14.3%)
  Holiday Inn (3.7%) (3.4%) (11.8%) (8.6%) (6.2%)
  Holiday Inn Express (3.1%) (2.7%) (7.5%) (3.7%) (2.3%)
             
EMEA Owned & Leased          
  UK UK Upscale (5.8%) (6.1%) (11.8%) (19.1%) (14.6%)
  HI UK (Total) (4.3%) (4.6%) (2.3%) (11.4%) (10.2%)
  France   0.4% (1.6%) (17.4%) (35.5%) (25.3%)
  Germany   (0.3%) (5.3%) (8.4%) (7.7%) (15.3%)
  Benelux   (8.7%) (6.2%) (9.5%) (11.6%) (27.4%)
             
  AVERAGE RATE          
    Jul Aug Sept Oct Nov
    2001 2001 2001 2001 2001
Americas Owned & Leased          
  Inter-Continental (9.5%) (10.1%) (20.6%) (25.0%) (17.6%)
  Crowne Plaza 4.0% 0.5% (4.7%) (4.5%) (6.7%)
             
Americas Total System          
  Crowne Plaza 0.3% (0.6%) (6.5%) (9.0%) (15.6%)
  Holiday Inn 0.1% 0.4% (3.5%) (4.3%) (5.8%)
  Holiday Inn Express 3.1% 3.2% 0.9% 0.5% (0.5%)
             
EMEA Owned & Leased          
  UK UK Upscale (16.6%) (6.9%) (13.8%) (15.3%) (16.6%)
  HI UK (Total) (1.7%) 0.4% 2.4% (5.0%) (4.4%)
  France   9.5% 7.7% (1.8%) (19.7%) (5.6%)
  Germany   11.2% 7.4% 3.9% 4.2% (1.1%)
  Benelux   2.1% (8.0%) (3.4%) 2.1% (3.2%)

Note to editors:

Six Continents is a leading global hospitality group with over 3,260 hotels across nearly 100 countries and territories and over 2,000 restaurants and bars in the UK and Germany.

  • Six Continents Hotels is the world's leading global hotel group whose brands include Inter-Continental Hotels and Resorts, Crowne Plaza Hotels and Resorts, Holiday Inn, Express by Holiday Inn and Staybridge Suites. It owns, manages, leases or franchises more than 3,260 hotels and over 514,000 guest rooms in nearly 100 countries and territories around the world.
  • Six Continents Retail is the UK's leading managed restaurant, pubs and bars group with over 2,000 outlets including brands such as Vintage Inns, Harvester, Toby, Browns, All Bar One, It's A Scream, O'Neill's, Edward's, Ember Inns and Goose.
  • Britvic Soft Drinks is one of the leading UK producers and distributors of branded soft drinks with brands such as Tango, Robinsons, Britvic and the UK franchise for Pepsi.

Please refer to this website for more information on the company, including press releases.

Photographs can be accessed from www.newscast.co.uk

For further information, please contact:

Six Continents PLC  
Switchboard 020 7409 1919
Mark Rigby, Corporate Affairs 020 7409 8105
Alastair Scott, Investor Relations 020 7355 6532

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