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19/09/2001

Six Continents PLC Trading Update

Six Continents PLC Trading Update

Six Continents PLC today announced that the Company has performed in line with expectations in the first 48 weeks of the year. However, we cannot predict with any certainty at present how significant the effects of the terrorist activities on 11 September will be on the balance of the year ended 30 September 2001.

Tim Clarke, Chief Executive, commented: "In the first 48 weeks we have made substantial progress in delivering on our operational and strategic goals. As we outlined at our interims, we reacted swiftly and effectively to the downturn in the US and London hotel markets through a combination of increased marketing programmes and cost management. In Retail, we have continued the conversion process to high quality branded outlets generating large sales uplifts and good returns on capital."

He also said: "Following the tragic events of 11 September, we are thankful that our staff and our guests are all safe."

Hotels

RevPAR (revenue per available room) in the 48 weeks to end August 2001 had held up well against the background of weakening market conditions.

In the Americas, Inter-Continental has high exposure to the cities worst affected by the economic slowdown, namely New York, Chicago and San Francisco, and has had over 10% of rooms closed for refurbishment. Consequently, RevPAR in our owned and leased Inter-Continental hotels was down 14% in the first 48 weeks, whilst in the Crowne Plaza owned and leased business RevPAR was down 2.0%. Total system RevPAR for Holiday Inn was down 0.9% and Holiday Inn Express up 1.9% with both these brands outperforming their relevant sectors in recent months.

In EMEA, RevPAR for owned and leased Inter-Continental and Crowne Plaza hotels was up 0.7% and 1.6% respectively. Total system RevPAR for Holiday Inn was up 3% and Express up over 5%.

The total system has grown by nearly 25,000 rooms in the year to date and now stands at 516,000 rooms. This has been driven by Holiday Inn Express (10,000 rooms) and Crowne Plaza (4,000 rooms), as well as the acquisition of Posthouse (12,000 rooms). Over 25% of our pipeline of 65,000 rooms is now in our upscale brands, Crowne Plaza and Inter-Continental.

Refurbishment of 10 Inter-Continental hotels also remains on plan with a large element of the work taking place in Europe next year.

The Posthouse conversion programme is proceeding as expected with over 23 hotels already converted to the Holiday Inn brand and a further 40 to be converted by the end of October. Our original estimate that 15 hotels would need to be sold has proved conservative, and we now expect to sell no more than 10. The acquisition of the former Regent Hotel in Hong Kong was completed in August as planned.

Retail

Overall sales within the ongoing estate are ahead by 4.2%, with drink sales up 2.9% and food sales up 9.4%. In core uninvested outlets like for like sales are down 1.0% reflecting an improved performance during the second half of the year during which time they were level. Average sales per outlet have risen to nearly £14,000 per week this year. Close attention to costs has meant that operating margins have only fallen by 0.3 percentage points despite the significant increases experienced in employment and property costs. The underlying increase in profit has been masked by pre-opening and closure cost increases of £11 million.

In the Development Estate, the conversion programme continues to plan with 242 outlets now completed and a further 58 outlets currently being converted. Sales for those sites completed are over 40% higher than the last full year under the previous owners.

The continuing process of industry restructuring is bringing overall supply and demand back into closer balance and is expected to lead to further market share gains for large branded outlets.

The roll-out of the Alex brand in Germany has reached 28 outlets with a further seven on-site. With the opening of the first All Bar One in Cologne next month, we are increasingly confident of the prospects for our retail development in Europe.

Soft Drinks

Turnover in Britvic soft drinks rose by 6% in the first 48 weeks of the year. The Robinsons' brand was particularly strong with volume growth of over 17%.

Guidance

Our prospects for the coming year are difficult to forecast given the background of economic uncertainty both in the Americas and Europe together with the effects of 11 September. With over 20% of our hotel profits generated in September and October the short term effects could be substantial. That said we believe our business is robust with a number of strong defensive qualities. In particular less than 10% of total operating profits come from owned US hotels while 20% come from the less operationally geared US franchise business. We also believe that we have a strong record of reducing costs during periods of economic downturn.

Significant factors influencing 2002 are likely to be:-

  • A 1% change in RevPAR would impact our full year operating profits in the Americas and EMEA by $9 million and $15 million respectively, before a reduction in associated costs.
  • The net impact of the major Inter-Continental refurbishment programme in 2001/02 will be to decrease EMEA profits by $40m. Given the downturn in business in the key cities of New York, San Francisco and Chicago we do not expect profits from US refurbished properties to be higher than 2000/01.
  • Posthouse and the Inter-Continental Hong Kong will contribute a full year's profit in 2002 as opposed to six months and one month respectively in 2000/01.
  • Within the retail business, shorter closure periods will decrease the cost of closure and pre-opening costs by £5 million whilst at the same time the division will benefit from the high level of rebranding completed in 2000/01.
  • Within our UK businesses, we expect significant increases in costs relating to business rates, the climate change levy and employment regulations.
  • We shall adopt FRS19 as a result of which we estimate our effective tax rate will increase to around 31%.

The group strategy remains sharply focused on creating value through building brand scale in hotels and converting more of our retail estate into high return branded outlets. We have added to our hotel portfolio during the last year with the purchase of the Posthouse properties and the former Regent in Hong Kong, and continue to assess a range of possible acquisitions. Our market leading brands and strong finances are providing us with increasing opportunities but our financial criteria for purchase remain unchanged. We are confident that we will outperform our respective markets over the next year by providing a consistently high quality of service and value to our guests.

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This Trading Update contains certain forward-looking statements as defined under US legislation (Section 21E of the Securities Exchange Act of 1934). By their nature, such statements involve uncertainty; as a consequence, actual results and developments may differ from those expressed in or implied by such statements.

For further information, please contact:

Mark Rigby, Corporate Affairs 020 7409 8105
Alastair Scott, Investor Relations 020 7409 8532

Notes to editors:

Six Continents is a leading global hospitality group with over 3,200 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 3,200 hotels and over 500,000 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.

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