SIX CONTINENTS PLC ANNUAL GENERAL MEETING TRADING UPDATE
14 February 2002
SIX CONTINENTS PLC ANNUAL GENERAL MEETING TRADING UPDATE
(First 16 weeks of the year to 19 January for Retail and the first 13 weeks to 31 December for Hotels)
Summary of performanceSix Continents has performed substantially in line with expectations in the current financial year to date despite difficult trading conditions in the global hotel market. Successful marketing activity, supported by cost control, limited the reduction in Hotel profits in the first quarter. At the same time, we achieved strong profit growth in the ongoing Retail business, maintaining margins despite the regulatory cost increases. In Britvic, our soft drinks business, volumes and profits were again ahead of last year.
HOTELSIn Hotels the franchised businesses of Holiday Inn and Express performed very well in difficult market conditions, maintaining or increasing their RevPAR premium over their respective competitive sets. The owned and managed businesses, notably Inter-Continental, suffered the sharpest falls in RevPAR reflecting the city centre locations and guest characteristics of these hotels.
Inter-Continental and Crowne Plaza were hardest hit in North America with EMEA not far behind. Much less severe RevPAR falls were suffered by Holiday Inn and Express in North America while Express achieved RevPAR gains in EMEA and Asia Pacific.
Looking at the month by month performance of our hotel businesses from October through January, we see recovery trends in North America but more mixed patterns in EMEA.
Our response to the extraordinary decline in demand since the events of 11th September 2001 has been twofold. We have made major reductions in the running costs of our hotels, most particularly in staff costs. Concurrently we have invested in various initiatives to stimulate demand including substantial increases in the sales force, in marketing spend and in employee incentive schemes.
Overall hotel operating profits have improved since October when we reported a decline of £20m versus last year and are currently running at an average monthly decline (October through December) of £15m.
Our renovation of the 'Big 10' Inter-Continental hotels continues as scheduled. The Le Grand Inter-Continental in Paris closed in December and re-opens in Spring 2003. Work is under way on the South Tower in Chicago while Madrid will be completed later this year.
RETAILIn Retail, total sales in the 16 weeks ended 19 January were up 8% in the ongoing estate, with Restaurants up 13% and Pubs and Bars up 6%. Average sales per outlet increased by £900 per week, an advance of 6.7% against the comparable period last year. Uninvested like for like sales were unchanged for the period, with a strong performance during the two week Christmas period when they rose by 5%.
We successfully defended our margins despite the regulatory pressures on employment costs, higher business rates and the climate change levy. Total profit growth was thus in line with the growth in sales.
We continue to make excellent progress with the former Allied sites, with 320 now converted to our brands. Average sales uplifts are well over 40% as compared to the last year under Allied ownership and are in line with our pre-acquisition expectations.
OUTLOOKLooking ahead is still difficult given the reduction in travel following the 11 September and the uncertainties surrounding the world economy. However, there are encouraging signs of recovery in internal US travel, principally affecting the midscale segments. In contrast, we have yet to see any significant recovery in transatlantic travel, particularly outbound from the United States, and thus any improvement in the performance of our upscale hotels in key gateway cities.
We said in our trading update at the end of September 2001 that a 1% change in RevPAR would impact full year operating profits in the Americas and EMEA by $9m and $15m respectively, before a reduction in associated costs. These relationships still apply. We also said that the net impact of the Inter-Continental refurbishment programme would be to decrease EMEA profits by $40m in the current financial year and this remains the case. On the positive side, we have first time contributions from the Posthouse hotels in the UK and Inter-Continental in Hong Kong and we continue to manage the cost base aggressively.
In Retail, our business is relatively resilient to any downturn in consumer spending. While our London business is still trading below last year's levels, the outlook for the rest of the business remains positive reflecting the strength of our brand conversion programme.
For further information, please contact:
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Notes 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, operates 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, Edwards, 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.