29 Nov 2012 07:00
29 November 2012 Hogg Robinson Group plc ('HRG', 'the Company' or 'the Group') Results for the six months ended 30 September 2012 Resilient profit performance in a tough market Summary of results Six months ended 30 September 2012 2011 Change Revenue £168.9m £186.8m -10% Underlying earnings (1) - Operating profit £22.7m £23.4m -3% - Operating profit margin 13.4% 12.5% +0.9pp - Profit before tax £17.3m £18.7m -7% - Earnings per share 3.8p 4.1p -7% Reported earnings - Operating profit £20.7m £21.3m -3% - Profit before tax £15.3m £16.6m -8% - Earnings per share 3.4p 3.6p -6% Interim dividend per share 0.6p 0.6p - Net debt £100.5m £68.9m +£31.6m Free cash outflow (2) (£27.0m) (£0.7m) -£26.3m Highlights
Resilient profit performance in a tough market
Revenue down 10%, down 7% at constant currency
Underlying operating profit margin up from 12.5% to 13.4% driven by cost reduction measures and new technology sales
Net new business wins including Airservices, Bayer, Cricket Australia, Hansel, Pirelli and Unilever
Net debt at 30 September 2012 equivalent to 1.8x EBITDA(3) (2011: 1.2x)
Interim dividend held at 0.6p per share
Outlook
Although it is difficult to predict the future direction of economies globally,given the Company's current forward visibility of workload, combined with thebenefits of new business and the cost reduction measures we are taking, theBoard believes that HRG will continue to make progress and will deliver afull-year performance broadly in line with current market expectations.
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"HRG has delivered a resilient profit performance in challenging marketconditions and in the face of more demanding year-on-year comparatives. Thisperformance reflects the strength of our business model and our ongoing work toimprove the efficiency of our operations and ensure that our cost base isappropriate for the market backdrop. We focused on this during the first halfand will continue to do so throughout the second half whilst not compromisingour excellent customer service.
"Corporates are understandably cautious in their approach to travel but our proven ability to help our clients achieve best value from their travel budgets is reflected in our ongoing strong client retention rate and success in securing net new business wins including Bayer, Pirelli and Unilever.
"Although it is difficult to predict the future direction of economiesglobally, on the basis of our performance in the second half to date, combinedwith new business wins and our cost reduction measures, the Board believes thatHRG will continue to make progress and will deliver a full-year performancebroadly in line with current market expectations."
Notes:
(1) Before amortisation of acquired intangibles
(2) Free cash flow is the change in net debt before acquisitions and disposals,Employee Benefits Trust purchases, dividends and the impact of foreign exchangemovements
(3) Earnings before interest, tax, depreciation and amortisation (EBITDA)
For further information contact:
Hogg Robinson Group +44 (0)1256 312 600 David Radcliffe, Chief Executive Philip Harrison, Group Finance Director Angus Prentice, Head of Investor Relations Tulchan Communications +44 (0)20 7353 4200 Stephen Malthouse David Allchurch Martin Robinson A briefing by conference call for analysts and institutional investors will beheld at 0900h GMT today. For conference call details, please contact TulchanCommunications on +44 (0)20 7353 4200. The presentation slides used in thisbriefing will be available at http://investors.hoggrobinsongroup.com/hrg/en/investor-relations/presentation from 0845h today. A replay recording of the conference call will be available via audio webcastand podcast at http://investors.hoggrobinsongroup.com/hrg/en/investor-relations/presentation
later today. Notes to Editors
Hogg Robinson Group plc (HRG) is the award-winning international corporate services company. Established in 1845 and headquartered in Basingstoke, Hampshire, UK, HRG specialises in travel, expense and data management underpinned by proprietary technology. With a worldwide network that comprises over 120 countries, HRG provides unparalleled global expertise and local knowledge in Europe, North America, Asia Pacific, Africa, Latin America and MEWA. Read the latest HRG news and search our archives.
www.hrgworldwide.com
This announcement may contain forward-looking statements with respect tocertain of the plans and current goals and expectations relating to the futurefinancial conditions, business performance and results of Hogg Robinson GroupPlc (HRG). By their nature, all forward-looking statements involve risk anduncertainty because they relate to future events and circumstances that arebeyond the control of HRG, including amongst other things, HRG's futureprofitability, competition with the markets in which the Company operates andits ability to retain existing clients and win new clients, changes in economicconditions generally or in the travel and airline sectors, terrorist andgeopolitical events, legislative and regulatory changes, the ability of itsowned and licensed technology to continue to service developing demands,changes in taxation regimes, exchange rate fluctuations, and volatility in theCompany's share price. As a result, HRG's actual future financial condition,business performance and results may differ materially from the plans, goalsand expectations expressed or implied in these forward-looking statements. HRGundertakes no obligation to publicly update or revise forward-lookingstatements, except as may be required by applicable law and regulation(including the Listing Rules). No statement in this announcement is intendedto be a profit forecast or be relied upon as a guide to future performance.Overview Given the widespread macroeconomic uncertainties that have prevailed for muchof the past year, HRG's performance in the face of demanding year-on-yearcomparatives during the first half of the current financial year was once againtestament to the resilience of the Group's business model. This resilience isdrawn from the bulk of our revenue coming from fees charged to clients for thework that we do for them. Our headline results for the first half of thefinancial year show a 7% fall in revenue and a 2% decline in underlyingoperating profit, both at constant currency. For the six months to 30September, client travel spend at constant currency and transaction activityfell by 8%. We saw further evidence during the period of clients choosing cheaper traveland accommodation options, reflecting an increasingly cautious approach totravel with many clients reducing discretionary spending. Most of our clientsare asking us to help them prioritise their travel plans and many are imposingrestrictions on their staff through tighter enforcement of travel policy. Asan example of this type of cost reduction activity, we continue to see ourclients take up online self-booking tools, including our own HRG OnlineTM. Inresponse to the lower transaction activity, we have taken action to reduce ourown operating costs and continue to seek self-help measures designed to furtherreduce our costs and protect margin. As a direct result of our continuing client focus and determination to meet thespecific needs of each of our clients, we have maintained our consistently highclient retention rate. We have won more business than we lost. New clientsthat we welcomed during the first half include Airservices, Bayer, CricketAustralia, the governing body of professional and amateur cricket in Australia,Hansel, the central procurement unit of the Finnish Government, Pirelli and, aspreviously announced, Unilever. Historically, we have been very successful atwinning additional business from existing clients. In the case of Pirelli, forexample, HRG has managed group transfers for its F1TM business during the pastyear. We were then invited to tender for the broader corporate travelmanagement operation for the Pirelli Group, and were delighted to be awardedtheir multi-country contract. We also secured expanded contracts with existing clients such as Ernst & Young,ExecuJet, Holcim, the UK Government and Volkswagen. Notable amongst the manyclients that renewed their contracts with HRG during the period were BNPParibas, Deutsche Bank, GDF Suez, Julius Berger, KPMG and Lloyds Banking Group.
Our pipeline of new business prospects remains strong.
As part of our previously mentioned strategy to provide technology solutionsnot only to our existing clients but also to the wider travel industry, webenefited in the period from a recently-signed agreement to licence some of ourtravel technology to a leading global distribution system (GDS) provider,reinforcing the Group's B2B technology strategy.
Since the period end, we entered into a preferred relationship with Citi Commercial Cards, a leading commercial card provider to large and multi-national organisations globally. The new relationship provides an opportunity to maximise our combined intellect and technologies to deliver enhanced travel programme solutions to the end-to-end process of travel, payment and expense management.
Financial results Revenue of £168.9m was down 10% as reported, or down 7% at constant exchangerates. Underlying operating profit, which is stated before charging theamortisation of acquired intangibles, fell by 3% (£0.7m) to £22.7m, showing amargin improvement from 12.5% to 13.4% as a result of our continued focus onoperational efficiency, cost control and new technology sales. Our newtechnology sales contributed approximately 10% of operating profit for theperiod. Unfavourable movements in exchange rates contributed £0.3m to theoperating profit decline. Underlying profit before tax was down by 7% to £17.3m and underlying EPS fell by 7% to 3.8p. After reflecting the amortisation of acquired intangibles, reported operatingprofit was lower by 3% at £20.7m, profit before tax was down by 8% to £15.3mand EPS fell by 6% from 3.6p to 3.4p. Net debt rose year-on-year, as expected. The increase of £31.6m reflects ourpreviously-announced decision to discontinue the active working capitalprogramme (£18.6m), acquisitions including the purchase of Spendvision (£10.3m)and share purchases by the Employee Benefits Trust (£8.1m). The Group's activeworking capital programme was introduced during 2009 to help remove uncertaintyabout compliance with banking covenants. Net debt of £100.5m at 30 September2012 represented 1.8x EBITDA for the last 12 months. We continue to operatewell within our banking covenants. We have noted in the past that inflation and discount rates are volatile andthat the current low interest rate environment increases the accountingvaluation of pension liabilities. Our principal UK scheme has been closed tonew entrants for several years and has benefit caps in place. On an accountingbasis, the Group-wide pre-tax pension deficits have increased by £12.5m sincethe year end to £158.3m as the impact of a further reduction in the discountrate was only partially offset by inflation rate changes. The Board has declared an interim dividend of 0.6p per share. This dividendwill be paid on 3 January 2013 to shareholders on the register at the close ofbusiness on 7 December 2012. Our progressive dividend policy remainsunchanged. Current trading and outlook We expect the challenging market conditions to continue. Revenue in Octoberwas 4% down compared to prior year. Trading in November has been in line withour expectations. Although forward visibility continues to be limited, weremain focused on maintaining a cost base that is appropriate to underlyingrevenue and workload while ensuring that our usual high standard of clientservice is not compromised. We have worked successfully in recent years to improve the efficiency of theGroup's global operations. This work was sustained during the first half ofthe current financial year. Additional cost-saving initiatives are being takenin the second half of the year to reflect our cautious view of marketconditions in the coming months. Historically, a higher proportion of theGroup's earnings and cash flow has come in the second half of the financialyear. While earnings growth remains our priority, we are confident that our strongpipeline and clear focus on the delivery of excellent service to our clientswill result in further new business wins in the second half. Going forward, wealso anticipate growth in income from new technology partnerships. Although it is difficult to predict the future direction of economies globally,given the Company's current forward visibility of workload, combined with thebenefits of new business and the cost reduction measures we are taking, theBoard believes that HRG will continue to make progress and will deliver afull-year performance broadly in line with current market expectations. Operational Review Client activity
During the first half of our financial year, both our client travel spend at constant currency and transaction activity fell by 8%.
Given the economic uncertainties and dampened business confidence, it is notsurprising that clients continued to seek further, incremental cost savings. While most recognise the need to travel, a cautious approach prevails. Amajority of major clients are scrutinising their future travel commitments andhave established plans to cut travel spend. As we have seen when similarconditions have existed in the past, our clients place heavy reliance on ourexpertise, experience and tailored advice to help maximise value from theirtravel and related expenditure. We saw further evidence in the first half of growth in client adoption ofonline self-booking of travel, particularly for simpler travel itineraries, asclients continued to seek further cost savings. Other notable trends includedthe adoption of authorisation to travel processes and more rigorous control andtighter management driving greater adherence to travel compliance policies. With client cost reduction and savings plans gathering momentum, we areidentifying more areas where we can help our clients. Two areas where we areseeing particular interest are the management of costs associated with hotelaccommodation and business meetings. Our Consulting division is in greatdemand to provide specialist help to identify and support cost-savinginitiatives. We are encouraged by these developments, all of which offeradditional revenue opportunities for HRG. Following our move to full ownership of Spendvision, it is pleasing to reportgrowing interest by our clients for integrated 'end-to-end' travel and expensemanagement solutions. As we continue the integration of Spendvision into HRG,we are increasingly seeing opportunities to include discussion of such alignedprogrammes with current and prospective clients. Our focus at all times and throughout the business remains on providing asuperior service of the highest quality to each of our clients around theworld. Inevitably, we lose clients from time to time. However, we continue toattract new clients and extend our services and geographic coverage forexisting clients. Once again, our reward for offering good value and superiorservice has been a consistently high client retention rate.
One of HRG's strengths is its ability to serve its clients and their travellers right around the globe, offering expertise and local knowledge through a worldwide network that comprises over 120 countries. During the period, we added Nepal and Uzbekistan to the network and, more recently, appointed new partners in Peru and Tunisia to extend our global reach and provide further depth and strength to the organisation.
Corporate Travel Management EuropeSix months ended 30 September 2012 2011 Change Revenue £113.9m £125.1m -9.0% Operating profit £14.8m £13.4m +10.4% Underlying operating profit (1) £16.3m £15.0m +8.7% Underlying margin (1) 14.3% 12.0% +2.3pp
(1) Before amortisation of acquired intangibles
Revenue was down by 4.0% at constant currency. Underlying operating profitrose by £1.3m, including a £0.3m loss from currency movements. Underlyingoperating profit margin improved, up from 12.0% to 14.3%. Client travel spendfell by 4% year-on-year in real terms and travel activity was down 4%. Despitea reduction in revenue, underlying operating profit rose due to tight controlof our cost base along with a contribution from new technology sales. In the face of lower client travel activity in the UK, cost reduction measureswere implemented across all areas and these contributed to growth in earningsdespite a small decline in revenue. Further efficiency measures involvingproperties, management and support services continue to be evaluated. Therewas a noticeable decline in travel activity in August - typically a quiet monthfor business travel - due to the Olympics but this was in line with ourexpectations. On an annualised basis and for the first time, HRG's UK businessnow books more rail tickets than air or hotels, a result of a number of factorsincluding changes to travel patterns and increasing business with the UKGovernment. Clients continue to seek more cost effective solutions and ouronline self-booking solutions, using HRG's proprietary technology orthird-party booking tools, continue to prove attractive. In the Nordic countries, clients remain very cost conscious, particularly inSweden. The trend towards online self-booking of travel continued in theperiod. We made several changes to our network in the region during the periodand further efficiency measures are ongoing. Technology improvements areenabling us to reduce our branch network further. We are pleased to have wonHansel, the central procurement unit of the Finnish Government, as a newclient, further evidence of our expertise in and experience of working with theGovernment sector. As industrial output in Germany has slowed, our clients have become moredependent on HRG's ability to offer innovative solutions that provideincremental cost savings. We launched 'Simply HRG' in Germany during theperiod, offering a range of services to small and mid-sized companies. Implementation work for DHL, a major new client won last financial year, wascompleted. This is the first significant global client consolidation on onecontract from Germany and we have rolled out our service to DHL in 48countries. Similar consolidation exercises are underway for clients Volkswagenand BMW. Amongst our Swiss clients, activity was mixed. Banking clients traded down interms of activity and spend, while our pharmaceutical clients showed strongexpansion. Activity levels for our SME clients are historically volatile andfell sharply year-on-year in the first half. We were able to captureproductivity increases from our recent investment in new telephony systemsallowing us to divert calls more easily within the branch network. North AmericaSix months ended 30 September 2012 2011 Change Revenue £31.4m £39.0m -19.5% Operating profit £4.3m £6.4m -32.8% Underlying operating profit (1) £4.7m £6.8m -30.9% Underlying margin (1) 15.0% 17.4% -2.4pp
(1) Before amortisation of acquired intangibles
Revenue was down by 20.5% at constant currency. Underlying operating profitfell by £2.1m with little currency impact. Client spend was down by 17% inreal terms and activity lower by 13%.
HRG operates two businesses in North America: (1) corporate travel management, and (2) loyalty, managing the redemption of credit card loyalty points programmes.
Following the restructuring of our loyalty business in Canada last year,referred to in our full-year results announcement last May, the plannedtransition to an online environment in cooperation with another supplier hasresulted in significantly lower fee income. These changes have had a materialimpact on the overall revenue and earnings of our North American operations inthe period. Roughly two thirds of the revenue decline and approximately threequarters of the fall in underlying operating profit in North America isattributable to the restructuring of the Canadian loyalty business. Excludingour loyalty business in North America, client travel spend fell by 4% atconstant currency while transaction activity was in line with the prior year. Our travel management business showed a weaker performance compared to the sameperiod last year. However, we were encouraged by additional business securedwith a number of existing clients including Volkswagen. Revenue from ourlarger multinational clients grew strongly. In a competitive market wherelower-price transactions account for much of the domestic travel in the region,our focus in recent years has been on investing in proprietary technology aimedat reducing our operating costs and driving increased efficiency. Onlineself-booking solutions continue to be attractive to clients seeking to gainbetter value from their travel spend and accounts for more than half of allclient air transactions. Asia PacificSix months ended 30 September 2012 2011 Change Revenue £14.8m £15.6m -5.1% Operating profit £0.4m £0.7m -42.9% Underlying operating profit (1) £0.4m £0.7m -42.9% Underlying margin (1) 2.7% 4.5% -1.8pp
(1) Before amortisation of acquired intangibles
Revenue was down by 5.1% at constant currency. Underlying operating profit fell by £0.3m with little currency effect. Client travel spend fell by 13% year-on-year in real terms and activity was down 20%.
As in other geographies, HRG's clients in Asia Pacific showed signs of greatercaution in terms of travel spend during the period, amid concerns about theimpact of the ongoing issues in the Eurozone region. In particular, we saw amarked decline in activity in Australia during the period with a number of ourclients imposing aggressive cost reduction programmes within their businesses.
We have taken specific actions to streamline our operations and reduce our operating costs to better match the anticipated activity for the remainder of the year.
Down trading by clients in Singapore has been less pronounced than in other countries in the region, perhaps helped by the relative stability of the country's economy. Online self-booking of travel is beginning to be seen as an attractive alternative for some clients in this country.
In mainland China and Hong Kong, our joint ventures performed steadily. Asassociates, their results are not included in the table above. While growth ofthe Chinese economy has slowed in recent months, the organic growth of ourexisting Chinese clients continues to drive the business. Pricing remains verycompetitive. SpendvisionSix months ended 30 September 2012 2011 Change Revenue £8.8m £7.1m +23.9% Operating profit £1.2m £0.8m +50.0% Underlying operating profit (1) £1.3m £0.9m +44.4% Underlying margin (1) 14.8% 12.7% +2.1 pp
(1) Before amortisation of acquired intangibles
Revenue was up 22.5% at constant currency, driven by a strong performance fromour banking clients in North America, while our direct client base in Australiaand New Zealand also showed good growth. Underlying operating profit rose by £0.4m, with little impact from currency movements. The continued rise inunderlying margin is encouraging and reflects the growth in the revenues and anongoing focus on key business objectives. Banking partnerships have been strengthened further with a new agreement signedwith Lloyds Bank in the UK. Uptake of the Visa IntelliLink Spend Managementsolution, a white-label version of the Spendvision platform provided through analliance with Visa, has progressed well with Spendvision continuing to provideconsultative support to help roll the solution out to issuers and theircustomers.
Spendvision has a strong pipeline of new business opportunities, particularly in the banking sector through white-label offerings. We look forward to further capitalising on our strengths in the travel and expense management arena in the coming period.
Technology With clients seeking ways to reduce travel and related expenditure whilemaximising the value of their spend, and with airlines, hotels and otherproviders looking for greater efficiency and reduced operating costs, the useof technology in the delivery of travel and related expense solutions hasbecome more important. Independence and flexibility are key strengths of HRG'stechnology strategy. Through the HRG Universal Super PlatformTM, the Group'sproprietary technology underpins all our products and services, deliveringinnovative and cost-effective solutions to HRG's clients and, increasingly, tothe wider travel industry and related expense sectors. HRG remains at the forefront of technology development in the industry. Duringthe first half of the financial year, we successfully reached a ten-yearagreement with a leading GDS provider, to utilise our travel technology infuture products. Our earnings in the period benefitted from this agreement andwe will see further contribution through the life of the agreement. FollowingHRG's purchase of the minority interest in Spendvision at the end of last year,we have been working hard to integrate Spendvision's transaction managementtechnology into the Group. Work involved in the development of a nextgeneration travel and expense management solution began in the period, withrelease targeted for late next year. HRG InsightTM, our new dynamic and flexible data reporting tool, entered pilotstage during the final quarter of last financial year. Through improvedanalysis of data, this product offers travellers and travel managers betterinformation about travel transactions and expenditure. Results obtained duringthe period from the pilot studies were excellent and deployment of this productto our clients has begun.
Additional Financial Disclosures
Revenue
Reported revenue reduced by 9.6% to £168.9m, comprised of a reduction of 6.5% at constant exchange rates and 3.1% through adverse currency movements.
Revenue per Employee
Reported revenue per employee reduced by 2.6% from £34.3k to £33.4k. At constant exchange rates this was a marginal increase of 0.7%.
Operating expenses
Reported operating expenses reduced by 10.5% to £148.2m.
Underlying operating expenses, which are before amortisation of acquiredintangibles, reduced by 10.5% from £163.4m to £146.2m, or by 7.2% at constantexchange rates. This 7.2% reduction is comprised of 5.7% for staff costs and10.5% for other expenses, primarily reflecting lower staff numbers and acontinuing focus on cost management.
Underlying operating profit
Underlying operating profit, which is before amortisation of acquiredintangibles, reduced by 3% from £23.4m to £22.7m, including a deterioration of£0.3m from unfavourable currency movements. Underlying operating profit marginincreased from 12.5% to 13.4%, inclusive of a 0.2% benefit from currencymovements. Exceptional items
There were no exceptional items reported in the current or prior periods.
Net finance costs
Net finance costs increased by £0.6m to £5.7m, primarily reflecting an increased IAS 19 pension charge as a result of a reduction in the discount rate applied to the defined benefit pension schemes.
Taxation
The tax charge of £4.3m for the current period represents an effective tax rateof 28% on profit before tax of £15.3m compared to a tax charge of £5.0m lastyear (30%). This includes a £0.1m charge relating to the impact of a reductionin the UK corporation tax rate from 24% to 23%. The Consolidated Statement ofComprehensive Income includes a charge of £1.5m in respect of deferred taxassets on pension liabilities. We anticipate an effective tax rate for thefull year of approximately 28%.
Cash flow
Free cash outflow, which is the change in net debt before acquisitions and disposals, Employee Benefits Trust purchases, dividends and the impact of foreign exchange movements on net debt balances, was £27.0m (2011: £0.7m) for the six months ended 30 September 2012.
Cash outflow in respect of working capital was £40.2m, primarily due to thewithdrawal of the working capital management programme which was previouslyused to reduce working capital requirements at the end of each half-yearreporting period. The cash outflow related to interest was £3.2m (2011: £3.4m). Tax paid in cash was £3.1m (2011: £2.3m) and capital expenditure, whichis primarily internal software development and office equipment, was £4.8m(2011: £5.3m). Cash costs for additional pension funding reduced to £2.7m(2011: £3.1m). In addition to free cash flow, the other major cash flow items are related todividends paid to shareholders during the period of £4.4m (2011: £2.8m) inrespect of the year ended March 2012 and share purchases made by the EmployeeBenefits Trust of £8.0m (2011: £2.4m).
Funding and net debt
The principal banking facility is a £190m multi-currency revolving creditfacility (RCF) that is committed until November 2014. The RCF is used forloans, letters of credit and guarantees, with interest based on LIBOR/EURIBORplus a margin and costs. The Group has fixed interest on CHF 25m untilNovember 2014 and on £20m until February 2017. In addition, the Group has a £30m fixed rate loan, repayable by 2018, and uncommitted facilities amounting toaround £19m at the half year. The principal covenants continue to be measured semi-annually, at the end ofMarch and the end of September, against EBITDA. The covenants require that netdebt is less than 3.0 times EBITDA and net external interest is covered atleast 4.0 times by EBITDA, both on a rolling 12-month basis. The definition ofEBITDA for covenant purposes is not materially different to the definition usedin these financial statements. Net debt increased by £31.6m to £100.5m and was equivalent to 1.8 times EBITDA(2011: 1.2 times). This translates into gearing of 48% (31 March 2012: 35%),or 119% (31 March 2012: 99%) including the pension deficits and relateddeferred tax assets. Net external interest costs were covered 8.8 times byEBITDA (2011: 8.6 times). Pensions
The Group pension deficits under IAS19 have increased by £12.5m from 31 March 2012 to £158.3m before tax.
The UK scheme deficit increased by £12.9m to £147.0m over the same period. Thescheme assets increased by £6.0m and the scheme liabilities increased by £18.9m, primarily driven by a lower discount rate adding £32.0m to theliability, partly offset by a £19.4m reduction as a result of a lower inflationrate. For several years, the UK defined benefit scheme has been closed to newentrants and has capped increases in pensionable salary. At 30 September 2012 there was a deferred tax asset of £33.8m (31 March 2012: £32.2m) related to the UK deficit and an asset of £0.5m (31 March 2012: £0.5m)related to the overseas schemes.
Related parties
Related party disclosures are provided in note 21.
Foreign currency
The following principal exchange rates have been used in the financialstatements: Income Statement Balance Sheet 2012 2011 Change 2012 2011* Change Euro 1.25 1.13 -11% 1.25 1.20 -4% Swiss Franc 1.50 1.37 -9% 1.52 1.44 -6% US Dollar 1.58 1.63 +3% 1.61 1.60 -1% Canadian Dollar 1.59 1.58 -1% 1.59 1.60 +1% * As at 31 March 2012 Going concern
The Board believes that the Group has access to adequate resources for the foreseeable future and has continued to prepare the Consolidated Financial Statements on a going concern basis.
Summary income statement Six months ended 30 September 2012 2011 £m £m Revenue 168.9 186.8 EBITDA 28.2 28.7 Depreciation and amortisation (1) (5.5) (5.3) Underlying operating profit 22.7 23.4 Amortisation of acquired intangibles (2.0) (2.1) Operating profit 20.7 21.3 Share of associates and joint ventures 0.3 0.4 Net finance costs (5.7) (5.1) Profit before tax 15.3 16.6 Taxation (4.3) (5.0) Profit for the period 11.0 11.6 Summary balance sheet 30 September 31 March 2012 2012 £m £m Goodwill and other intangible assets 239.5
244.6
Property, plant, equipment and investments 13.8 14.9 Working capital (46.3) (86.9) Current tax liabilities (net) (5.4) (6.4) Deferred tax assets (net) 44.3 43.9 Net debt (100.5) (61.0) Pension liabilities (pre-tax) (158.3) (145.8) Provisions and other items (3.1) (2.9) Net (liabilities)/assets (16.0) 0.4 Summary cash flow statement Six months ended 30 September 2012 2011 £m £m EBITDA 28.2 28.7 Working capital movements (40.2) (16.1) Interest paid (3.2) (3.4) Tax paid (3.1) (2.3) Capital expenditure (4.8) (5.3) Pension funding in excess of EBITDA charge (2.7) (3.1) Other movements (1.2) 0.8 Free cash outflow (27.0) (0.7) Acquisitions and disposals - (1.4) Employee Benefits Trust purchases (8.0)
(2.4)
Dividends paid to external shareholders (4.4)
(2.8)
Currency translation and other (0.1) (0.5) Increase in net debt (39.5) (7.8)
Excluding amortisation of acquired intangibles
Hogg Robinson Group plc Consolidated Income Statement For the period ended 30 September 2012 Notes Half year ended 30 September 2012 2011 £m £m Revenue 7 168.9 186.8 Operating expenses 8 (148.2) (165.5) Operating profit 7 20.7 21.3 Analysed as: Underlying operating profit 7 22.7 23.4 Amortisation of acquired intangibles (2.0) (2.1) Operating profit 20.7 21.3 Share of results of associates and joint ventures 0.3 0.4 Finance income 10 0.1 0.1 Finance costs 10 (5.8) (5.2) Profit before tax 15.3 16.6 Income tax expense 11 (4.3) (5.0) Profit for the period 11.0 11.6 Profit attributable to: Equity shareholders of the Company 12 10.5 10.8 Non-controlling interests 0.5 0.8 11.0 11.6 Notes Half year ended 30 September 2012 2011 pence pence Earnings per share 12 Basic 3.4 3.6 Diluted 3.2 3.4
The notes on pages 13 to 24 form an integral part of the consolidated half-yearly financial information.
Hogg Robinson Group plc Consolidated Statement of Comprehensive Income For the period ended 30 September 2012 Notes Half year ended 30 September 2012 2011 £m £m Profit for the period 11.0 11.6 Other comprehensive income Currency translation differences 19 (2.9)
0.4
Amounts charged to hedging reserve (0.3) - Recycling of cash flow hedge (0.9) - Actuarial loss on pension schemes (13.8)
(32.2)
Deferred tax movement on pension liability 3.3
8.4
Deferred tax movement on pension liability attributable to impact of UK rate change (1.5)
(1.3)
Deferred tax movement on cumulative share-based incentive costs (0.6) - Tax on exercised share-based incentive costs 1.3
-
Other comprehensive loss for the period, net of tax (15.4)
(24.7)
Total comprehensive loss for the period (4.4)
(13.1)
Total comprehensive loss attributable to: Equity shareholders of the Company (4.9) (13.8) Non-controlling interests 0.5 0.7 (4.4) (13.1)
The notes on pages 13 to 24 form an integral part of the consolidated half-yearly financial information.
Hogg Robinson Group plc Consolidated Balance Sheet As at 30 September 2012 Notes 30 September 31 March 2012 2012 £m £m Non currentassets Goodwill and other intangible assets 14 239.5
244.6
Property, plant and equipment 15 10.7
11.6
Investments accounted for using the equity method 3.1 3.3 Trade and other receivables - 0.1 Deferred tax assets 45.3 45.0 298.6 304.6 Current assets Trade and other receivables 97.5 102.4 Financial assets - derivative financial instruments 0.9
0.5
Cash and cash equivalent assets 16 47.8 68.5 146.2 171.4 Total assets 444.8 476.0 Non currentliabilities Financial liabilities - borrowings 16 (147.5) (126.8) Deferred tax liabilities (1.0) (1.1) Retirement benefit obligations 17 (158.3) (145.8) Provisions (3.9) (4.2) (310.7) (277.9) Current liabilities Financial liabilities - borrowings 16 (0.4) (0.3) Current tax liabilities (5.4) (6.4) Trade and other payables (143.8) (189.4) Provisions (0.5) (1.6) (150.1) (197.7) Total liabilities (460.8) (475.6) Net (liabilities) / assets (16.0) 0.4 Capital and reserves Share capital 18 3.2 3.2 Share premium 18 178.9 177.6 Other reserves 19 1.4 10.1 Retained earnings (200.8) (192.0) Attributable to owners of Hogg Robinson Group plc (17.3)
(1.1)
Attributable to non-controlling interests 1.3 1.5 Total (deficit) / equity (16.0) 0.4
The notes on pages 13 to 24 form an integral part of the consolidated half-yearly financial information.
Hogg Robinson Group plc Consolidated Statement of Changes in Equity As at 30 September 2012 Attributable to equity holders of the Company Non- Share Share Other Retained controlling Total capital premium reserves
earnings Total interests equity
£m £m £m £m £m £m £m Balance at 1 April 2012 3.2 177.6 10.1
(192.0) (1.1) 1.5 0.4
Retained profit for the period - - - 10.5 10.5 0.5 11.0 Other comprehensive income: Actuarial loss on pension schemes - - - (13.8) (13.8) - (13.8)
Deferred tax movement on pension liability - - -
3.3 3.3 - 3.3 Deferred tax movement on pension liability
attributable to impact of UK rate change - - - (1.5) (1.5)
- (1.5) Deferred tax movement on share-based incentives - - - (0.6) (0.6) - (0.6)
Tax on exercised share-based incentive costs - - -
1.3 1.3 - 1.3 Amounts charged to hedging reserve - - (0.3) - (0.3) - (0.3) Recycling of cash flow hedge - - (0.9) - (0.9) - (0.9) Currency translation differences - - (2.8) - (2.8) (0.1) (2.9) Total comprehensive income - - (4.0) (0.8) (4.8) 0.4 (4.4) Transactions with owners: Dividends - - - (4.4) (4.4) (0.6) (5.0) New shares issued to satisfy share-based incentives - 1.3 (1.3) - - - -
Shares purchased by Employee Benefits Trust - - - (8.0) (8.0)
- (8.0)
Share-based incentives - charge for period - - 1.1
- 1.1 - 1.1 Acquisition of non-controlling interests - - - (0.1) (0.1) - (0.1) Reclassification - - (4.5) 4.5 - - - Total transactions with owners - 1.3 (4.7)
(8.0) (11.4) (0.6) (12.0)
Balance at 30 September 2012 3.2 178.9 1.4 (200.8) (17.3) 1.3 (16.0)
The notes on pages 13 to 24 form an integral part of the consolidated half-yearly financial information.
Hogg Robinson Group plc Consolidated Statement of Changes in Equity (Continued) As at 30 September 2012 Attributable to equity holders of the Company Non- Share Share Other Retained controlling Total capital premium reserves
earnings Total interests equity
£m £m £m £m £m £m £m Balance at 1 April 2011 3.1 172.2 14.0
(171.9) 17.4 3.6 21.0
Retained profit for the period - - - 10.8 10.8 0.8 11.6 Other comprehensive income: Actuarial loss on pension schemes - - - (32.2) (32.2) - (32.2)
Deferred tax movement on pension liability - - -
8.4 8.4 - 8.4 Deferred tax movement on pension liability
attributable to impact of UK rate change - - - (1.3) (1.3)
- (1.3) Transfer from exchange reserve to retained earnings - - (0.9) 0.9 - - - Currency translation differences - - 0.5 - 0.5 (0.1) 0.4 Total comprehensive income - - (0.4)
(13.4) (13.8) 0.7 (13.1)
Transactions with owners: Dividends - - - (2.8) (2.8) - (2.8) New shares issued to satisfy share-based incentives - 0.1 - - 0.1 - 0.1 Transfer from share-based incentives reserve to retained earnings - - (2.5) 2.5 - - -
Shares purchased by Employee Benefits Trust - - - (2.4) (2.4)
- (2.4)
Share-based incentives - charge for period - - 1.2
- 1.2 - 1.2 Share-based incentives - exercise of CSOP options - - (0.1) - (0.1) - (0.1) Total transactions with owners - 0.1 (1.4) (2.7) (4.0) - (4.0) Balance at 30 September 2011 3.1 172.3 12.2 (188.0) (0.4) 4.3 3.9
The notes on pages 13 to 24 form an integral part of the consolidated half-yearly financial information.
Hogg Robinson Group plc Consolidated Cash Flow Statement For the period ended 30 September 2012 Notes Half year ended 30 September 2012 2011 £m £m Cash flows from operating activities Cash generated from operations 20 (14.9) 10.3 Interest paid (3.5) (3.6) Tax paid (3.1) (2.3) Cash flows from operating activities - net (21.5) 4.4 Cash flows from investing activities Acquisition of associates, joint ventures and other investments
- (1.4)
Disposals of associates, joint ventures and other investments 0.1 - Purchase of property, plant and equipment
(1.0) (2.7)
Purchase and internal development of intangible assets (3.8) (2.6) Interest received 0.1 0.1 Dividends received from associates and joint ventures 0.2 0.1 Cash flows from investing activities - net
(4.4) (6.5)
Cash flows from financing activities Repayment of borrowings (1.1) (35.0) New borrowings 20.2 18.7 Cash effect of currency swaps
- (0.1)
Acquisition of non-controlling interest (0.1) - Employee Benefits Trust (8.0) (2.4) Dividends paid to external shareholders
(4.4) (2.8)
Dividends paid to non-controlling interests (0.6) - Cash flows from financing activities - net
6.0 (21.6)
Net decrease in cash and cash equivalents
(19.9) (23.7)
Cash and cash equivalents at the beginning of the period 68.5 70.4 Exchange rate effects (0.8) (0.8) Cash and cash equivalents at the end of the period 47.8 45.9 Cash and cash equivalent assets 47.8 47.4 Overdrafts - (1.5) 47.8 45.9
The notes on pages 13 to 24 form an integral part of the consolidated half-yearly financial information.
Hogg Robinson Group plc
Notes to the Consolidated Half-Year Financial Information
For the period ended 30 September 2012
1 General information
Hogg Robinson Group plc is an international corporate services company and specialises in travel, expense and data management underpinned by proprietary technology solutions and products.
The Company is a public limited company, incorporated in the UK under the Companies Act 2006. The address of its registered office is Global House, Victoria Street, Basingstoke, Hampshire, RG21 3BT, United Kingdom.
The Company is listed on the Official List of the UK Listing Authority and the London Stock Exchange, and its registered number is 3946303.
This condensed consolidated half-yearly financial information was approved for issue on 29 November 2012.
This condensed consolidated half-yearly financial information does not comprisestatutory accounts within the meaning of Section 434 of the Companies Act 2006.Statutory accounts for the year ended 31 March 2012 were approved by the Boardof Directors on 23 May 2012 and delivered to the Registrar of Companies. Thereport of the auditors on those accounts was unqualified, did not contain anemphasis of matter paragraph and did not contain any statement under section498 of the Companies Act 2006.
This condensed consolidated half-yearly financial information has been reviewed, not audited.
2 Basis of preparation This condensed consolidated half-yearly financial information for the half yearended 30 September 2012 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34, InterimFinancial Reporting, as adopted by the European Union. The half-yearlycondensed consolidated financial report should be read in conjunction with theAnnual Report and Financial Statements for the year ended 31 March 2012, whichhave been prepared in accordance with International Financial ReportingStandards (IFRSs) as adopted by the European Union. The Directors consider that, taking into account the projected cash flows andavailable facilities of the Group, the Group has adequate resources to continuein operational existence for the foreseeable future. For this reason, theDirectors adopt the going concern basis for the condensed consolidatedhalf-yearly financial information. 3 Accounting policies
During the half year ended 30 September 2012 the Group adopted the following accounting policy in respect of technology revenue.
Revenue from sales of software licences is recognised upon persuasive evidenceof an arrangement, delivery of the software and determination that collectionof a fixed or determinable fee is reasonably assured. When the fees forsoftware upgrades, enhancements and maintenance are bundled with the licencefee, they are unbundled using objective evidence of the fair value of theelements. If evidence of fair value exists for all undelivered elements andthere is no such evidence of fair value established for delivered elements,revenue is first allocated to the elements where fair value has beenestablished and the residual amount is allocated to the delivered elements. Ifevidence of fair value for any undelivered element of the arrangement does notexist, all revenue from the arrangement is deferred until such time thatevidence of fair value exists or undelivered elements of the arrangement aredelivered.
Other accounting policies adopted are consistent with those of the Annual Consolidated Financial Statements for the year ended 31 March 2012, as described in those statements.
Income tax expense in the half-year period is accrued using the tax rate that would be applicable to expected total annual earnings.
There are no standards or interpretations that are effective for the first timefor the financial year beginning on or after 1 April 2012 that would beexpected to have a material impact on the Group. The Group has not earlyadopted any standard, interpretation or amendment that has been issued but isnot yet effective. 4 Estimates The preparation of condensed consolidated half-yearly financial informationrequires management to make judgements, estimates and assumptions that affectthe application of accounting policies and the reported amounts of assets andliabilities, income and expense. Actual results may differ from theseestimates. In preparing this condensed consolidated half-yearly financial information, thesignificant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied to the Consolidated Financial Statements for the year ended 31March 2012, with the exception of changes in estimates that are required indetermining the provision for income tax expense. 5 Principal risks and uncertainties The principal risks and uncertainties affecting the Group were identified aspart of the Business Review and the Financial Risk Management note set out onpages 8 to 9 and 45 to 46 respectively of the Hogg Robinson Group plc AnnualReport 2012, a copy of which is available on the Group's websitewww.hrgworldwide.com. The Board's view is that these risks and the riskmanagement policies in place remain substantially unchanged for the second halfof the current financial year. These risks and uncertainties can be summarisedas follows: Operational risksLoss of a major client
Volatility of client activity
Loss of a supplier
Retention of key staff
Corruption or reputation risk
Technology or systems failure
Cyber terrorism Financial risks
The reported results of the Group could be adversely affected by:
Access to funding at affordable rates
Cost and capital controlIncreased pension fundingForeign currency riskInterest rate riskCredit riskLiquidity risk
The Group's financial instruments, measured at fair value, are all classed as level 2 in the fair value hierarchy, which is unchanged from 31 March 2012.
External risks
Significant economic or other crisis
Competitive environment
There may be additional risks unknown to the Group and other risks, currentlybelieved to be immaterial, which could turn out to be material. These risks,whether they materialise individually or simultaneously, could significantlyaffect the Group's business and financial results. 6 Seasonality The Group's revenue and operating profit are affected by the seasonality ofcorporate travel business, with travel declining during the summer andChristmas holiday periods and, to a lesser extent, during Easter holidays,which are times when many corporate travellers are on holiday. Typically, theGroup experiences the highest levels of revenue in the last months of itsfinancial year, principally reflecting increased travel activity by its clientsduring this period. 7 Operating segments
The chief operating decision maker has been identified as the Executive Management Team, which reviews the Group's internal reporting in order to assess performance and allocate resources. The Executive Management Team has determined the operating segments based on these reports.
The Executive Management Team considers the business from the perspective oftwo core activities, Corporate Travel Management, which is analysed into threedistinct geographic segments, and Spendvision. The Group's internal reportingprocesses do not distinguish between the numerous sources of income thatcomprise revenue for Corporate Travel Management. The performance of theoperating segments is assessed based on a measure of operating profit excludingitems of an exceptional nature. Finance income and costs and income taxexpense are not included in the result for each operating segment that isreviewed by the Executive Management Team. Other information provided to theExecutive Management Team, except as noted below, is measured in a mannerconsistent with that in the condensed consolidated half-yearly financialinformation. Total segment assets exclude cash and cash equivalent assets, current taxassets and deferred tax assets which are managed on a central basis. These areincluded as part of the reconciliation to total Consolidated Balance Sheetassets. Corporate Travel Management North Asia Sub- Europe America Pacific total Spendvision Total £m £m £m £m £m £m Half year ended 30 September 2012 Revenue from external customers 113.9 31.4 14.8 160.1 8.8 168.9 Underlying operating profit 16.3 4.7 0.4 21.4 1.3 22.7 Amortisation of acquired intangibles (1.5) (0.4) - (1.9) (0.1) (2.0) Operating profit 14.8 4.3 0.4 19.5 1.2 20.7 Underlying margin 14.3% 15.0% 2.7% 13.4% 14.8% 13.4% Half year ended 30 September 2011 Revenue from external customers 125.1 39.0 15.6 179.7 7.1 186.8 Underlying operating profit 15.0 6.8 0.7 22.5 0.9 23.4 Amortisation of acquired intangibles (1.6) (0.4) - (2.0) (0.1) (2.1) Operating profit 13.4 6.4 0.7 20.5 0.8 21.3 Underlying margin 12.0% 17.4% 4.5% 12.5% 12.7% 12.5%
There is no material inter-segment revenue.
External revenue from clients by origin (where the Group's operations are located) is not materially different from external revenue from clients by geographical area (where the client is located) disclosed above.
A reconciliation of operating profit to total profit before income tax expense is provided in the Consolidated Income Statement.
` Corporate Travel Management North Asia Sub- Europe America Pacific total Spendvision Total £m £m £m £m £m £m Total segment assets 30 September 2012 244.6 82.0 15.7 342.3 9.4 351.7 31 March 2012 251.8 85.6 16.4 353.8 8.7 362.5
Reportable segments' assets are reconciled to total assets as follows:
30 September 31 March 2012 2012 £m £m Total segment assets 351.7 362.5 Cash and cash equivalent assets 47.8 68.5 Deferred tax assets 45.3 45.0 444.8 476.0 8 Operating expenses
Half year ended 30 September
2012 2011 £m £m Underlying operating expenses: Staff costs (note 9) 100.8 111.0
Amortisation of intangible assets, other than acquired intangible assets
3.1 2.6 Depreciation of property, plant and equipment 2.4 2.7 Operating lease rentals - buildings 6.9 7.3 Operating lease rentals - other assets 0.8 0.9 Currency translation differences 0.1 - Other expenses 32.1 38.9 146.2 163.4 Amortisationof acquired intangibles: Amortisation of client relationships 1.9 2.0 Amortisation of other acquired intangible assets 0.1 0.1 2.0 2.1 Total operating expenses 148.2 165.5 9 Staff costs Half year ended 30 September 2012 2011 £m £m Salaries 83.9 93.6 Social security costs 10.1 10.5 Pension costs 5.4 5.4 Redundancy and termination costs 0.3 0.3 Share-based incentives 1.1 1.2 100.8 111.0 Pension costs comprise: Defined benefit schemes 2.1 1.9 Defined contribution schemes 3.3 3.5 5.4 5.4 Half year ended 30 September 2012 2011 number number
Average monthly number of staff employed by the Group 5,053
5,446 10 Finance income and finance costs Half year ended 30 September 2012 2011 £m £m Finance income - bank interest 0.1
0.1
Interest on bank loans and overdrafts (3.0)
(3.0)
Amortisation of issue costs on bank loans (0.4)
(0.4)
Expected return on pension scheme assets less interest cost on pension scheme liabilities (1.9) (1.2) Other finance charges (0.4) (0.4) Foreign exchange loss (0.9) - Recycle of cash flow hedge from hedging reserve 0.9
-
Interest on derivative financial instruments (0.1) (0.2) Finance costs (5.8) (5.2) Net finance costs (5.7) (5.1) 11 Income tax expense
The tax charge is split as follows:
Half year ended 30 September 2012 2011 £m £m United Kingdom 2.1 1.2 Overseas 2.1 3.7 Change in headline tax rate 0.1 0.1 4.3 5.0 Taxes on income in the half-year periods to 30 September are accrued using thetax rate that would be applicable to the expected total annual earnings bycountry. An effective tax rate of approximately 28% is anticipated for the yearended 31 March 2013 (2012: 29%). Tax rate change The UK government is reducing the rate of corporation tax from 24% to 23% witheffect from 1 April 2013. Consequently, the Group is required to revalue all ofits recognised UK deferred tax assets and liabilities. The revaluation isanticipated to result in a full year deferred tax charge to the ConsolidatedIncome Statement of £0.1m, together with a charge to the Consolidated Statementof Comprehensive Income of £1.5m in respect of deferred tax assets on pensionliabilities. The Group is reflecting the full impact of £1.6m in the first halfof the year. Further proposals to reduce the UK rate by 1% per annum to 22% by April 2014have not been substantively enacted at the balance sheet date and, therefore,are not reflected in this condensed consolidated half-yearly financialinformation. 12 Earnings per share Earnings per share attributable to equity holders of the Company were asfollows: Half year ended 30 September 2012 2011 pence pence Earnings per share Basic 3.4 3.6 Diluted 3.2 3.4 Half year ended 30 September 2012 2011 £m £m Earnings for the purposes of earnings per share Profit for the period 11.0 11.6 Less: amounts attributable to non-controlling interests (0.5) (0.8) Total 10.5 10.8 Half year ended 30 September 2012 2011 number number m m Weighted average number of Ordinary shares in issue Issued (for basic EPS) 311.7 302.0 Dilutive potential ordinary shares 17.4 14.7 For diluted EPS 329.1 316.7
Underlying earnings per share
Underlying earnings per share attributable to equity holders of the Companywere as follows: Half year ended 30 September 2012 2011 pence pence Underlying earnings per share Basic 3.8 4.1 Diluted 3.6 3.9 Half year ended 30 September 2012 2011 £m £m Earnings for the purposes of underlying earnings per share Profit before tax from continuing operations 15.3
16.6
Add: amortisation of acquired intangibles 2.0
2.1
Underlying profit before tax 17.3
18.7
Underlying income tax expense (4.9)
(5.6)
Underlying profit for the financial year 12.4
13.1
Less: amounts attributable to non-controlling interests (0.5) (0.8) Total 11.9 12.3
Underlying earnings are earnings before amortisation of acquired intangibles and related income tax expense.
13 Dividends A dividend that related to the year ended 31 March 2012 amounting to 1.4p perordinary share (£4,360,870) was paid on 30 July 2012. The dividend was paid toshareholders who were on the register at 29 June 2012. The Employee BenefitsTrust has waived its rights to dividends in respect of 11,873,331 shares heldin the Company at that date. The Directors have declared an interim dividend in respect of the six monthsended 30 September 2012 of 0.6p payable on 3 January 2013 to shareholders whoare on the register at 7 December 2012. This interim dividend, amounting to £1.9m has not been recognised as a liability in this half-yearly financialreport, in accordance with IAS 10, Events after the Balance Sheet Date. 14 Goodwill and other intangible assets 30 September 31 March 2012 2012 £m £m Goodwill 216.3 219.8 Other intangible assets 23.2 24.8 239.5 244.6 Computer software Externally Internally Client Goodwill acquired generated relationships Total £m £m £m £m £m Cost At 1 April 2011 247.4 17.0 22.6 38.1 325.1 Additions 2.0 0.8 4.6 - 7.4 Disposals for the year - (0.2) - - (0.2) Exchange differences (3.2) (0.4) 0.1 (0.6) (4.1) At 31 March 2012 246.2 17.2 27.3 37.5 328.2 Additions - 1.0 2.8 - 3.8 Exchange differences (3.5) (0.2) 0.2 (1.5) (5.0) At 30 September 2012 242.7 18.0 30.3 36.0 327.0 Accumulated amortisation At 1 April 2011 26.4 12.8 10.1 25.9 75.2 Amortisation charge for the year - 1.5 4.2 3.8 9.5 Disposals for the year - (0.2) - - (0.2) Exchange differences - (0.3) (0.1) (0.5) (0.9) At 31 March 2012 26.4 13.8 14.2 29.2 83.6 Amortisation charge for the period - 0.8 2.4 1.9 5.1 Exchange differences - - 0.1 (1.3) (1.2) At 30 September 2012 26.4 14.6 16.7 29.8 87.5 Carrying amount At 1 April 2011 221.0 4.2 12.5 12.2 249.9 At 31 March 2012 219.8 3.4 13.1 8.3 244.6 At 30 September 2012 216.3 3.4 13.6 6.2 239.5 15 Property, plant and equipment Plant and Properties equipment Total £m £m £m Cost At 1 April 2011 10.6 52.3 62.9 Additions for the year 0.4 4.7 5.1 Disposals for the year (0.2) (6.1) (6.3) Exchange differences (0.1) (0.9) (1.0) At 31 March 2012 10.7 50.0 60.7 Additions for the period 0.1 1.6 1.7 Disposals for the period - (0.1) (0.1) Exchange differences (0.1) (0.8) (0.9) At 30 September 2012 10.7 50.7 61.4 Accumulated depreciation At 1 April 2011 7.6 42.4 50.0 Depreciation charge for the year 0.8 4.5 5.3 Disposals for the year (0.2) (5.3) (5.5) Exchange differences (0.1) (0.6) (0.7) At 31 March 2012 8.1 41.0 49.1 Depreciation charge for the period 0.4 2.0 2.4 Disposals for the period - (0.1) (0.1) Exchange differences - (0.7) (0.7) At 30 September 2012 8.5 42.2 50.7 Carrying amount At 1 April 2011 3.0 9.9 12.9 At 31 March 2012 2.6 9.0 11.6 At 30 September 2012 2.2 8.5 10.7
The Group does not have any material capital commitments in respect of the purchase of property, plant and equipment.
16 Financial liabilities - borrowings 30 September 31 March 2012 2012 £m £m Current (due within one year) Finance leases 0.4 0.3 0.4 0.3 Non-current (due after more than one year) Bank loans 148.2 128.0 Unamortised loan issue costs (2.0) (2.4) Finance leases 1.3 1.2 147.5 126.8 147.9 127.1 30 September 31 March 2012 2012 £m £m Net debt Total financial liabilities - borrowings 147.9
127.1
Add back: Unamortised loan issue costs 2.0
2.4
Cash and cash equivalent assets (47.8) (68.5) Debt-related derivatives (1.6) - Net debt 100.5 61.0
Net debt includes only the components of derivative financial instruments relating to the value of debt.
17 Retirement benefit obligations
Defined benefit pension arrangements
The Group's principal defined benefit pension arrangement is the Hogg Robinson(1987) Pension Scheme (the UK Scheme). The UK Scheme was available to most UKemployees until it was closed to new members in March 2003, with benefits basedon final pensionable salary. The increase in final pensionable salary since 31March 2003 is predominantly limited to the lower of the increase in the RetailPrices Index and 5% per annum. The latest actuarial valuation of the scheme wascarried out at 31 March 2011 by an independent qualified actuary.
The Group also operates defined benefit schemes in Norway, Switzerland, Germany, Italy and France.
The provision in the Consolidated Balance Sheet arising from obligations in respect of defined benefit schemes is as follows:
30 September 31 March 2012 2012 £m £m UK scheme: Defined benefit obligations (352.2) (333.3) Fair value of plan assets 205.2 199.2 Deficit - UK Scheme (147.0) (134.1) Deficit - Overseas Schemes (11.3) (11.7) (158.3) (145.8) The following amounts have been included in the Consolidated Income Statementin respect of the UK Scheme: Half year ended 30 September 2012 2011 £m £m Current service charge 1.3 1.1 Expected return on scheme assets (6.5) (7.7) Charge to finance costs 8.3 8.8 Total charge to the Consolidated Income Statement 3.1 2.2
The current service charge is computed based on the actuarial assumptions in place at the beginning of the financial year and translates to 18.3% of pensionable salaries (2011: 18.4%).
The key assumptions used for the UK Scheme were:
30 September 31 March 2012 2012 Rate of increase in final pensionable salary 2.70%
3.20%
Rate of increase in pensions in payment - accrued before 1999 5.00%
5.00%
Rate of increase in pensions in payment - accrued after 1999 2.70%
3.10% Discount rate 4.60% 5.00% Inflation - RPI 2.70% 3.20% Inflation - CPI 2.00% 2.70% Expected rate of return on plan assets: Equity instruments 7.25% 7.25% Debt instruments 4.70% 4.70% Property 7.25% 7.25% Other assets 4.70% 4.70% 18 Share capital and share premium account 30 September 2012 number Authorised Ordinary shares of 1p each 513,808,171 Issued, called up and fully paid At 1 April 2012 and 30 September 2012 317,948,446 Shares issued in the period 5,415,632 At 30 September 2012 323,364,078 30 September 2012 £m Issued, called up and fully paid Ordinary shares of 1p each 3.2 The Company issued 5,405,403 shares for a total consideration of £1,335,135during the period ending 30 September 2012 on the exercise of options under theCompany Share Option Plan (CSOP) and 10,229 shares for total consideration of £4,460 on the exercise of options under the Sharesave Scheme.
The total number of Ordinary shares in the Company held by the Employee Benefits Trust as at 30 September 2012 was 11,054,410 (31 March 2012: 6,566,884) with a market value of £5.6m (31 March 2012: £4.6m).
Share premium account £m At 1 April 2012 177.6 Shares issued in the period 1.3 At 30 September 2012 178.9 19 Other reserves Share- Total based Exchange Hedging other incentives reserve reserve reserves £m £m £m £m Balance at 1 April 2012 4.7 4.9 0.5 10.1 Other comprehensive income: Fair value movement on cash flow hedges
- - 0.4 0.4
Recycle of cash flow hedge from hedging reserve to income statement
- - (0.9) (0.9) Reclassification - 0.7 (0.7) - Currency translation differences - (3.5) - (3.5) Transactions with owners: New shares issued to satisfy share-based incentives
(1.3) - - (1.3)
Share-based incentives - charge for period
1.1 - - 1.1
Reclassification to retained earnings
(4.5) - - (4.5)
Balance at 30 September 2012
- 2.1 (0.7) 1.4
Balance at 1 April 2011
5.4 8.6 - 14.0
Other comprehensive income: Transfer from exchange reserve to retained earnings
- (0.9) - (0.9)
Currency translation differences - 0.5 - 0.5 Transactions with owners:
Transfer from share-based incentives reserve to retained earnings (2.5) - - (2.5)
Share-based incentives - charge for period
1.2 - - 1.2
Share-based incentives - exercise of CSOP options
(0.1) - - (0.1)
Balance at 30 September 2011 4.0 8.2 - 12.2
During the period the balance of the share-based incentives reserve was transferred to retained earnings.
20 Cash generated from operations Half year ended 30 September 2012 2011 £m £m Profit before tax from continuing operations 15.3 16.6 Adjustments for: Depreciation and amortisation (notes 14 and 15) 7.5 7.4 Net increase in provisions - 0.2 Share of results of associates and joint ventures (0.3) (0.4) Net finance costs (note 10) 5.7 5.1 Other timing differences 1.1 1.4 29.3 30.3 Cash expenditure charged to provisions (1.3)
(0.8)
Change in trade and other receivables 3.0
6.4
Change in trade and other payables (43.2)
(22.5)
Pension funding in excess of charge to operating profit (2.7)
(3.1)
Cash generated from operations (14.9) 10.3 21 Related party transactions There have been no material changes in the nature of related party transactionssince 31 March 2012 as reported in note 28 of the Group's 31 March 2012 AnnualReport and Consolidated Financial Statements. 22 Contingent assets and contingent liabilities
No change has taken place in the contingent assets and contingent liabilities as reported in note 26 of the Group's 31 March 2012 Annual Report and Consolidated Financial Statements.
Hogg Robinson Group plc
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge, this condensedconsolidated half-yearly financial information has been prepared in accordancewith IAS 34 as adopted by the European Union and that the Interim ManagementReport herein includes a fair review of the information required by DTR 4.2.7Rand DTR 4.2.8R, namely:
an indication of important events that have occurred during the first six months and their impact on the condensed set of consolidated financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors of Hogg Robinson Group plc are as follows:
J D Coombe(1) ChairmanD J C Radcliffe Chief ExecutiveP J Harrison Group Finance DirectorK A Ruffles Chief Operating OfficerA E Isaac(1) (2)P Williams(1) (1) Non-Executive Directors
(2) Senior Independent Director
By Order of the BoardKeith BurgessCompany Secretary 29 November 2012 Hogg Robinson Group plc
Independent review report to Hogg Robinson Group plc
Introduction
We have been engaged by the Company to review the condensed set of ConsolidatedFinancial Statements in the half-yearly financial report for the six monthsended 30 September 2012, which comprises the Consolidated Income Statement,Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet,Consolidated Statement of Changes in Equity, Consolidated Statement of CashFlows and related notes. We have read the other information contained in thehalf-yearly financial report and considered whether it contains any apparentmisstatements or material inconsistencies with the information in the condensedset of Consolidated Financial Statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As described in note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of Consolidated Financial Statements included in this half-yearlyfinancial report has been prepared in accordance with International AccountingStandard 34, 'Interim Financial Reporting', as adopted by the European Union. Our responsibilityOur responsibility is to express to the Company a conclusion on the condensedset of Consolidated Financial Statements in the half-yearly financial reportbased on our review. This report, including the conclusion, has been preparedfor and only for the Company for the purpose of the Disclosure and TransparencyRules of the Financial Services Authority and for no other purpose. We do not,in producing this report, accept or assume responsibility for any other purposeor to any other person to whom this report is shown or into whose hands it maycome save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity', issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of Consolidated Financial Statements in thehalf-yearly financial report for the six months ended 30 September 2012 is notprepared, in all material respects, in accordance with International AccountingStandard 34 as adopted by the European Union and the Disclosure andTransparency Rules of the United Kingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered AccountantsLondon29 November 2012 Notes:(a) The maintenance and integrity of the Hogg Robinson Group plc web site isthe responsibility of the Directors; the work carried out by the auditors doesnot involve consideration of these matters and, accordingly, the auditorsaccept no responsibility for any changes that may have occurred to thehalf-yearly financial report since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and dissemination of the financial information may differ from legislation in other jurisdictions.
XLON