30 Nov 2011 07:00
30 November 2011 Hogg Robinson Group plc ('HRG', 'the Company' or 'the Group') Results for the six months ended 30 September 2011 Strong first-half results Continuing good prospects Summary of results Six months ended 30 September 2011 2010 Change Revenue £186.8m £169.2m +10% Underlying earnings (1) - Operating profit £23.4m £19.5m +20% - Operating profit margin 12.5% 11.5% +1.0 pp - Profit before tax £18.7m £15.3m +22% - Earnings per share 4.1p 3.3p +24% Reported earnings - Operating profit £21.3m £17.5m +22% - Profit before tax £16.6m £13.3m +25% - Earnings per share 3.6p 2.8p +29% Interim dividend per share 0.6p 0.5p +20% Net debt £68.9m £85.8m -£16.9m Free cash outflow (2) (£0.7m) (£6.1m) +£5.4m Financial Highlights
Revenue up 10% to £187m, up 6% at constant currency (2010: up 6% at constant currency) with growth across all travel regions and Spendvision
Underlying operating profit margin up from 11.5% to 12.5%
Profitability up across all travel regions and Spendvision
Cost management demonstrates continued flexibility
Underlying EPS up by 24% to 4.1p
Free cash flow (2) improvement of £5.4m for the six months
Net debt down £16.9m from September 2010 at £68.9m; equivalent to 1.2x EBITDA (3) (2010: 1.6x)
New UK triennial pension valuation finalised with a modest increase in cash contributions
Interim dividend up 20% to 0.6p per share (2010: 0.5p per share)
Full-year dividend to be at least 1.8p per share (+20% over last year)
Operational Highlights
Client travel transaction activity up 7% (2010: up 18%)
Client travel spend up 13%, up 9% at constant currency (2010: up 18% at constant currency)
Client retention rate remains above 90%
HRG enters exploratory discussions with American Airlines on 'direct connect'
New business wins including AIG, Allianz, CGI, CSL, MMG and Posten Norge
New sales pipeline provides further support for growth
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"The strong first-half performance continues the momentum we reported earlier in the year. This steady and consistent growth serves to highlight the strength of our business model, which is underpinned by our ability to help clients maximise the value of their corporate travel budgets.
"Our strong cash flow has reduced net debt over the last 12 months and recently we have reached a positive agreement with the UK pension trustees which provides greater certainty regarding funding.
"We remain mindful of prevailing macroeconomic uncertainty but have confidencethat our compelling customer proposition, strong foundations and momentum willsee HRG deliver a full year in line with 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 Julian Steadman, Group Finance Director Angus Prentice, Head of Investor Relations
Tulchan Communications +44 (0)20 7353 4200 David Allchurch Stephen Malthouse 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 corporateservices company. Established in 1845 and headquartered in Basingstoke,Hampshire, UK, HRG specialises in travel, expense and data managementunderpinned by proprietary technology solutions and products. With a worldwidenetwork that comprises over 120 countries, HRG provides unparalleled localknowledge and global expertise in North America, Europe, Asia Pacific, Africa,Latin America and MEWA. www.hoggrobinsongroup.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.
Chief Executive's Statement
Overview
I am pleased to report that HRG has produced another strong set of results.
The good momentum that we achieved last financial year has continued despitethe uncertain macroeconomic conditions. We have delivered steady andconsistent growth, providing further testament to the strength of the Group'sbusiness model and strategy. This good performance is even more creditablegiven the tougher year-on-year comparatives. The corporate travel market has continued to recover from the effects of therecession. Following growth of 8% in 2010, industry forecasts are for asimilar growth rate in 2011. We have seen our own business expand during thefirst six months of our financial year, with client spend increasing by 13%. As our interim results indicate, our clients are travelling more frequently andspending more on their travel than they did a year ago. However, their focusremains one of cost consciousness balanced with a stated aim of maximising theoverall value of their travel-related expenditure. With this has come a moremandatory approach to travel policy compliance and a geographic consolidationof service. The application of HRG's proprietary technology and its ease ofconnectivity with third-party systems continues to play an important role here,and the increasing use of lower-cost online self-booking tools is one exampleof how clients are gaining better value in their travel spend.
We have maintained our client retention rate of over 90%. Amongst several new clients secured during the first half were AIG, Allianz, CGI, CSL, MMG and Posten Norge.
The breadth of the Group's service offering has widened as it has grown inrecent years. HRG is an international corporate services company specialisingin travel, expense and data management underpinned by proprietary technologysolutions and products. We remain focused on delivering value throughexcellent service that is tailored to the specific needs of each client. Thisapproach enforces our reputation as a leading international corporate servicescompany and will help sustain a business which delivers value to allstakeholders. Financial resultsRevenue of £186.8m was up 10% as reported, or up 6% at constant exchangerates. Underlying operating profit, which is stated before charging theamortisation of acquired intangibles, rose by 20% (£3.9m) to £23.4m, showing amargin improvement from 11.5% to 12.5% as a result of our continued focus onoperational efficiency and cost control. Favourable movements in exchangerates contributed £0.8m to the operating profit improvement. Underlying profitbefore tax was up by 22% to £18.7m and underlying EPS increased by 24% to4.1p. After reflecting the amortisation of acquired intangibles, reported operatingprofit was higher by 22% at £21.3m, profit before tax was up by 25% to £16.6mand EPS rose by 29% from 2.8p to 3.6p. We continue to demonstrate strong cash flow generation. Net debt of £68.9m was£16.9m lower than September 2010 and represented 1.2x EBITDA for the last 12months. This improvement has been achieved at the same time as reducing ouractive working capital programme by £7.2m since September 2010. 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, even in our principal UK scheme which hasbeen closed to new entrants for several years and has benefit caps in place. On an accounting basis, the Group-wide pre-tax pension deficits have increasedby £30.1m since the year end to £144.8m as the impact of a further reduction inthe discount rate and weak investment performance was only partially offset byinflation rate changes. Importantly, the actuary for the principal UK schemeestimates that the actuarial deficit at March 2011 was £21.5m lower than theequivalent accounting basis and, therefore, in our latest triennial valuationwe have agreed a new ten-year recovery plan with the Trustees with annualdeficit reduction payments increasing by £0.7m to £7.3m in the currentfinancial year and in line with RPI thereafter. This relatively small increasein cash contributions provides greater certainty for the funding requirementswhilst allowing HRG to retain balance sheet flexibility.
Dividend
In line with our progressive dividend policy and in recognition of ourcontinued strong performance and improved financial position, the Board hasdeclared an interim dividend of 0.6p per share, up 20% on the interim payout ayear ago. This dividend will be paid on 5 January 2012 to shareholders on theregister at the close of business on 9 December 2011. We expect the full-yeardividend to be at least 1.8p per share which would represent a 20% increaseover the 1.5p per share paid last year.
Outlook
Whilst we are mindful of the prevailing economic uncertainty, the Board is confident that HRG will continue to progress and deliver profit before tax for the full year in line with expectations.
David RadcliffeChief Executive Operational Review Market overviewThe recovery in corporate travel which began in late calendar 2009 continuedduring the first six months of our financial year. As we have stated before,HRG's fee-based business model is not as cyclical as that of suppliers such
asairlines and hotel groups.
In its latest forecast, the IMF projects that global growth will be about 4% in 2011 and 2012, down from 5% in 2010, and notes that the outlook is for continuing, but bumpy, expansion.
According to IATA, air travel expanded more strongly than expected during thefirst half of this calendar year and airlines managed to restore assetutilisation during the second quarter. For the six months to the end ofSeptember, IATA figures show that the overall growth rate in passenger traffic,which includes leisure travel, was 7%. HRG's client transactions were up 7%during the period. IATA's forward view shows a weaker picture than this. The hotel industry has shown greater robustness during the first six months ofour financial year, according to data published by STR Global. Globally,year-on-year growth in monthly revenue per available room averaged 9% duringthe period, similar to the growth of 10% in the same period last year. Generally, room rates in Europe have risen sharply since last year while, incontrast, those in the Middle East and Africa have fallen. Following growth of 8% in 2010, the Global Business Travel Associationforecasts that global spending on corporate travel will grow by 9% in calendar2011, while the World Travel & Tourism Council forecasts a 6% increase for
thesame period.
IATA currently forecasts airline industry profitability of $6.9 billion in 2011 (2010: $16 billion) reducing to $4.9 billion in 2012.
Client activity
In general, business confidence has held up well across our global anddiversified portfolio of clients. While there remains a keen focus onoptimising travel expenditure and reducing costs, a majority of our clients arekeen to use our value-adding services to manage their total travel spend andHRG continues to play a pivotal role in helping them achieve these objectives. Client spend rose by 13%, or 9% at constant currency, during the first sixmonths of the financial year, while transaction activity rose by 7%. In theprior year, spend rose by 22% (18% at constant currency) and transactions roseby 18%.
There is increasing evidence of clients seeking to consolidate their travelmanagement through fewer locations. This is often part of a general move bycompanies to move to a more centralised model for all outsourced services. Inthe case of travel management, this trend is increasing as companies look forgreater policy compliance, security monitoring, consistency of service andeconomies of scale. We anticipated this trend and continue to develop ourmulti-country service capability through fewer locations.
Risk and security advice has also become a priority for many of our clients, especially since the earthquakes and tsunami in Asia Pacific and during the period of ongoing civil unrest in certain countries in the Middle East and North Africa region.
Costs associated with corporate meetings have often been overlooked and we are now helping our clients gain better control of this expenditure.
Demand for relevant data and analysis to manage these issues has increased.
These trends represent additional revenue opportunities for HRG and enable us to demonstrate the true breadth of the Group's service offering using HRG's proprietary tools and solutions.
HRG's business model is centred on providing excellent bespoke travelmanagement solutions to each of its clients. Our value proposition, deliveredthrough superior client service, has once again been rewarded in terms ofclient retention and new business as our client retention rate remained above90%.
We are very focused on our clients and value all of our relationships. One ofour key assets is the diversification of our client portfolio and the fact thatno one client has a material effect on our financial performance. Inevitably,we lose some clients each year but we continue to attract new clients andexpand our relationships with existing clients. We were pleased to welcome several new clients during the period including AIG,Allianz, CGI, CSL, MMG and Posten Norge. These new client wins have added tothe great diversity of HRG's client base, in terms of both sector andgeography. In addition, we secured expanded contracts with existing clientssuch as BG Group, Polarcus and Sweco. Notable amongst many clients renewingtheir contracts with HRG in the first half were ABB, Agilent, Bloomberg, ErgonEnergy, Liebherr, Timberland, Weatherford and Wells Fargo. Earlier this month,we were also awarded Lot 1 of the UK Central Government business whichrepresents those departments with predominance in international travel. Thisrenewal of our existing business also brings four new Government departments. Corporate Travel Management EuropeSix months ended 30 September 2011 2010 Change Revenue £125.1m £115.1m +8.7% Operating profit £13.4m £12.1m +10.7%
Underlying operating profit (1) £15.0m £13.6m
+10.3% Underlying margin (1) 12.0% 11.8% +0.2 pp
(1) Before amortisation of acquired intangibles
Revenue was up by 3.4% at constant currency. Underlying operating profit roseby £1.4m, including a £0.7m benefit from currency movements. Client travelspend rose by 6% year-on-year in real terms and travel activity was up 4%.
Our business in Europe returned another good set of results with strong performances in each of our key businesses in the UK, Germany and Switzerland. Our continuing commitment to improve efficiency has enabled the uplift in revenue to help improve our operating margin.
We continue to rationalise our service network in Europe to focus, where appropriate, on fewer service points or strategic hubs, and to seek further service and cost efficiencies without compromising the excellent service quality that is core to our business. Our investment in online self booking offers scope for further efficiency.
In the UK, overall client transaction activity and spending was broadly unchanged as we focused on delivering excellent service for our clients.
Client activity and spend rose sharply in Germany during the period, driven byexisting clients and Volkswagen, a major new client that commenced trading withus in October 2010. HRG's sports-related business performed well against aprior year that benefitted from the success of the national team in thefootball World Cup and the Bundesliga teams in the Champions league.
Our business in Switzerland returned a typically robust performance, with a majority of existing clients increasing their activity and spend. A key development was the initiation of service for new client Novartis in June 2010.
North AmericaSix months ended 30 September 2011 2010 Change Revenue £39.0m £38.0m +2.6% Operating profit £6.4m £5.2m +23.1%
Underlying operating profit (1) £6.8m £5.6m
+21.4% Underlying margin (1) 17.4% 14.7% +2.7 pp
(1) Before amortisation of acquired intangibles
Revenue was up by 4.7% at constant currency. Underlying operating profit roseby £1.2m with little currency impact. Underlying operating profit marginshowed strong improvement, up from 14.7% to 17.4%, with client spend up by 8%in real terms and activity up by 6%. Our business in North America performed steadily during the first half, withtop-line growth resulting from increased client activity and the provision ofadditional travel management products and services to existing clients. Meetings management is one example of a specialist area that is gainingpopularity with clients in this region, particularly with those with limitedinternal resource. Our online self-booking solutions, using HRG's proprietarytechnology or third-party booking tools, continue to prove attractive andaccount for more than half of all client air transactions.
Our loyalty business in Canada, which manages the redemption of credit card loyalty points programmes, continued to perform well. This business is currently being restructured to take account of a significant move into an online environment in cooperation with another supplier. We have recently entered the loyalty market in the USA with new client Miles and More.
The North American travel market remains very competitive and we are continuingto look for additional productivity opportunities to mitigate pressure onmargins. Our ongoing investment in efficient systems is enabling us to handlehigh volumes of lower-priced transactions while continuing to grow ouroperating margin. Asia PacificSix months ended 30 September 2011 2010 Change Revenue £15.6m £10.1m +54.5% Operating profit / (loss) £0.7m (£0.1m) +£0.8m
Underlying operating profit / (loss) (1) £0.7m (£0.1m)
+£0.8m Underlying margin (1) 4.5% (1.0%) +5.5%
(1) Before amortisation of acquired intangibles
Revenue was up by 42% at constant currency with good growth across the regionwhile underlying operating margin climbed 5.5% into positive territory. Clienttravel spend rose by 38% year-on-year in real terms and activity was up 49%. Growth in Australia has been fuelled in recent years by the boom in itsresources sector with strong demand coming from the emerging economies of Chinaand India. Our business performed well during the period as we expanded ourservice to existing clients and won several new clients. As in other parts ofthe world, we are seeing a desire for more detailed data and analysis and thisis offering scope for additional revenue. Self booking of travel now accountsfor more than 50% of all bookings, and we continue to refine our serviceconfigurations to take advantage of the opportunities that this trend offers. Singapore has shown strong recovery in corporate travel since the end of theglobal recession, with clients in the financial sectors leading the way. WithSingapore a natural key hub for client travel consolidation in the region, weopened a regional after-hours service during the period. We also expanded ourevents and meetings service to cope with a rise in demand. Our joint ventures in China and Hong Kong also performed strongly benefitingfrom a background of good economic growth. As associates, their results arenot included in the table above. SpendvisionSix months ended 30 September 2011 2010 Change Revenue £7.1m £6.0m +18.3% Operating profit £0.8m £0.3m +166.7% Underlying operating profit (1) £0.9m £0.4m +125.0% Underlying margin (1) 12.7% 6.7% +6.0 pp
(1) Before amortisation of acquired intangibles
Revenue was up 16.6% at constant currency, largely driven by increased businesswith clients in the banking sector. Underlying operating profit rose by £0.5m,aided by £0.1m impact from currency movements. The sharp rise in underlyingmargin is encouraging and has come as a result of much sharper focus within
thebusiness. Spendvision is a leading innovator in the development and support oftransaction management solutions, including end-to-end expense management andpayables automation. The online platform makes it easy for companies tocapture, pay for, manage and understand all their corporate transactions,giving complete control over spend and increased cost efficiency. It alsoautomates expense claims processing for employees. The solution is availableto corporate clients directly and through banking partners. Spendvisionhandles over 100 million transactions a year and its platform is accessed byusers in nearly 130 countries and is available in 16 languages. The uptake of the Visa IntelliLink Spend Management solution, a white-labelversion of the Spendvision platform provided through an alliance with Visa, hasbeen a major focus during the period with 65 issuers signed up for theproduct. Spendvision has provided consultative support to assist Visa with theroll-out to issuers and their customers. Spendvision has a strong pipeline of new business opportunities, particularlyin the banking sector through white-label offerings. As part of an end-to-endtravel management and expenses solution, we see good opportunities forcontactless payments and eMoney, together with our payables financingfunctionality. TechnologyThe thirst for more and more information delivered in a convenient and timelymanner shows little sign of being quenched in the area of corporate travel asin any other part of corporate life. Both travel managers and travellerscontinue to seek more relevant information delivered faster, and the phenomenalgrowth of smartphone usage, particularly in the corporate environment, istestament to this trend. Our clients' dependence on HRG's technology washeightened during the recession as they sought to manage their expenditure, andwe have seen many of the practices adopted during that period retained asconditions have improved. HRG's technology is flexible and independent, andfocused on the needs of our clients. It is our ability to develop and adaptour technology to changes in client requirements that is one of the keyattractions of our technology offering. During the first half of the year, we released upgrades to several of ourtechnology products. HRG OnlineTM, our in-house developed online booking tool,was enhanced with many client-driven new features and further integration. This integration includes access to additional content from low-cost carriersand high-speed rail providers through the new Travelport Universal applicationprogramming interface as a complement to its core GDS content. The latestversion of HRG i-SuiteTM, our online portal offering clients access to both HRGand third-party products, enables users within a company to share and writereviews on their hotel stay with this social content only available to fellowemployees. Provision of travel information and functionality via smartphone mobile devicescontinued during the period. Pilot testing of TripCase, a mobile itinerarymanagement application developed through our partnership with Sabre TravelNetwork, was extended to include clients in Australia and Germany in additionto those in the UK. A version for Sabre and Amadeus is being developed.
One of the important debates in the travel industry is that of 'direct connect', whereby an airline sells its inventory directly rather than via a global distribution system. HRG's systems capability gives us an important role in that debate. In August, American Airlines and HRG announced an agreement to explore a long-term arrangement for the benefit of their corporate clients, in which HRG would receive guaranteed direct long-term access to American Airlines's fares, schedules, and customised travel products and services. At this point, these are exploratory discussions.
Technology is a key element of our strategy and we continue to develop productsand processes that best serve the needs of our clients and HRG itself. Webelieve HRG's technology is best in class amongst the global travel managementcompanies.
Additional Financial Disclosures
Revenue
Reported revenue increased by 10.4% to £186.8m, comprised of an increase of 6.4% at constant exchange rates and an increase of 4.0% from favourable currency movements.
Revenue per Employee
Reported revenue per employee increased by 5.2%, from £32.6k to £34.3k. At constant exchange rates, the increase was 1.5%.
Operating expenses
Reported operating expenses increased by 9.1% to £165.5m.
Underlying operating expenses, which are before amortisation of acquiredintangibles and exceptional items, increased by 9.2% from £149.7m to £163.4m,or by 5.2% at constant exchange rates. The 5.2% increase comprised of a 7.9%increase for staff costs and a 0.2% decrease for other expenses; the increasein staff costs reflects an increase of 5.1% in staff numbers and higher averagecompensation. Underlying operating profitUnderlying operating profit, which is before amortisation of acquiredintangibles, increased by 20% from £19.5m to £23.4m, including a benefit of £0.8m from favourable currency movements. The underlying operating profitmargin, which has not been materially affected by currency movements, increasedfrom 11.5% to 12.5%. Exceptional items
There were no exceptional items reported in the current or prior period income statements.
Net finance costsNet finance costs increased from £4.3m to £5.1m, as a result of a refinancingof the Group's credit facilities in November 2010. Higher lenders' marginscontributed to the increase of £1.9m in net external interest costs, partlyoffset by a return to normal amortisation of bank fees following theaccelerated amortisation in the prior year ahead of the refinancing. The IAS19 pension charge, which is based on the 31 March position, decreased by £0.7m. Taxation
The tax charge of £5.0m for the current period represents an effective tax rateof 30% compared to an effective tax rate of 31% last year, including a £0.1mcharge relating to the impact of a reduction in the UK corporation tax ratefrom 26% to 25%. There was an additional charge of £1.3m in the ConsolidatedStatement of Comprehensive Income in respect of the impact of this UKcorporation tax rate change on deferred tax assets. We anticipate an effectivetax rate for the full year of approximately 30%.
Cash flow
Free cash outflow, which is the change in net debt before acquisitions anddisposals, dividends and the impact of foreign exchange movements on net debtbalances, was £0.7m and represented an improvement of £5.4m from the prioryear. The normal seasonal cash outflow from working capital improved by £3.3m overthe prior year. This improvement is despite £3.4m of lower cash flow in thecurrent year from the active working capital management programme describedbelow. The cash outflow related to borrowings was £3.4m (2010: £1.4m). Taxpaid in cash was £2.3m (2010: £2.3m) and capital expenditure, which isprimarily internal software development and office equipment, was £5.3m (2010:£3.9m). Cash costs for additional pension funding was £3.1m (2010: £3.0m). In addition to free cash flow, the other major cash flow items are related todividends paid to shareholders during the period of £2.8m (2010: £2.4m) inrespect of the year ended March 2011 and share purchases made by the EmployeeBenefits Trust of £2.4m (2010: £nil). Funding and net debtThe Group completed the refinancing of its £220m committed credit facilities inNovember 2010. The principal borrowing is a £190m multi-currency revolvingcredit facility (RCF) that is committed until November 2014. The facilitiesare used for loans, letters of credit and guarantees, with interest based onLIBOR/EURIBOR plus a margin and costs. In addition, we have a £30m fixed rateloan that is repayable by 2018 and uncommitted facilities, amounting to around£23m at 30 September 2011.
The principal covenants are measured semi-annually, at the end of March and theend of September, and require that net debt is less than 3.0 times EBITDA andnet external interest is covered at least 4.0 times by EBITDA, both on arolling 12-month basis. The definition of EBITDA for covenant purposes is notmaterially different to the definition used in these financial statements. Atthe end of September, net debt represented 1.2 times EBITDA (2010: 1.6 times)and net external interest was covered 8.6 times by EBITDA (2010: 18.3 times). At 30 September 2011, net debt of £68.9m was £16.9m lower than the prior yearand compares to £61.1m at 31 March 2011. This translates into gearing of 37%(31 March 2011: 36%). Average net debt during the period, measured on a weeklybasis, was £21m lower than the first half of last year. The Group has an active programme to reduce working capital requirements at theend of each half-year reporting period. This programme reduced working capitalrequirements by £18.6m in September 2011, compared to £25.8m in September
2010and £31.1m in March 2011. Pensions
The Group pension deficits under IAS19 have increased by £30.1m from 31 March 2011 to £144.8m before tax.
The UK scheme deficit increased by £30.2m to £134.3m over the same period, witha lower discount rate adding £21.1m, a lower inflation rate reducingliabilities by £9.7m and a reduction in assets of £11.1m. For several years,the UK defined benefit scheme has been closed to new entrants and has cappedincreases in pensionable salary. At 30 September 2011 there was a deferred taxasset of £33.6m (31 March 2011: £27.0m) related to the UK deficit and aliability of £0.9m (31 March 2011: £0.9m) related to the overseas schemes. Foreign currencyThe following principal exchange rates have been used in the financialstatements: Income Statement Balance Sheet 2011 2010 Change 2011 2010* Change Euro 1.13 1.19 +5% 1.16 1.13 -3% Swiss Franc 1.37 1.61 +15% 1.41 1.47 +4% US Dollar 1.63 1.53 -7% 1.56 1.60 +3% Canadian Dollar 1.58 1.59 +1% 1.62 1.56 -4% * As at 31 March 2011. 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 2011
2010 £m £m Revenue 186.8 169.2
EBITDA before exceptional items 28.7
24.3
Depreciation and amortisation (1) (5.3) (4.8) Underlying operating profit 23.4 19.5 Amortisation of acquired intangibles (2.1) (2.0) Operating profit 21.3 17.5
Share of associates and joint ventures 0.4
0.1 Net finance costs (5.1) (4.3) Profit before tax 16.6 13.3 Taxation (5.0) (4.1) Profit for the period 11.6 9.2 Summary balance sheet 30 September 31 March 2011 2011 £m £m Goodwill and other intangible assets 247.9
249.9
Property, plant, equipment and investments 16.8
15.3 Working capital (83.6) (99.8) Current tax liabilities (net) (6.3) (4.7) Deferred tax assets (net) 44.7 38.9 Net debt (68.9) (61.1) Pension liabilities (pre-tax) (144.8) (114.7) Provisions and other items (1.9) (2.8) Net assets 3.9 21.0 Summary cash flow statement
Six months ended 30 September 2011
2010 £m £m
EBITDA before exceptional items 28.7
24.3
Cash flow from exceptional items - (0.9) Working capital movements (16.1) (19.4) Interest paid (3.4) (1.4) Tax paid (2.3) (2.3) Capital expenditure (5.3) (3.9) Pension funding in excess of EBITDA charge (3.1) (3.0) Other movements 0.8 0.5 Free cash inflow/(outflow) (0.7) (6.1) Acquisitions and disposals (1.4) (0.3)
Employee Benefits Trust purchases (2.4)
-
Dividends paid to external shareholders (2.8) (2.4) Currency translation (0.5) 0.5 Decrease/(increase) in net debt (7.8) (8.3)
Excluding amortisation of acquired intangibles
Hogg Robinson Group plc Consolidated Income Statement
For the period ended 30 September 2011
Notes Half year ended 30 September 2011 2010 £m £m Revenue 7 186.8 169.2 Operating expenses 8 (165.5) (151.7) Operating profit 7 21.3 17.5 Analysed as: Underlying operating profit 7 23.4 19.5 Amortisation of acquired intangibles (2.1) (2.0) Operating profit 21.3 17.5
Share of results of associates and joint ventures 0.4
0.1 Finance income 10 0.1 0.1 Finance costs 10 (5.2) (4.4) Profit before tax 16.6 13.3 Income tax expense 11 (5.0) (4.1)
Profit for the period from continuing operations 11.6
9.2 Profit attributable to:
Equity shareholders of the Company 12 10.8
8.5 Non-controlling interests 0.8 0.7 11.6 9.2 Notes Half year ended 30 September 2011 2010 pence pence Earnings per share 12 Basic 3.6 2.8 Diluted 3.4 2.7 Hogg Robinson Group plc
Consolidated Statement of Comprehensive Income For the period ended 30 September 2011
Notes Half year ended 30 September 2011 2010 £m £m Profit for the period 11.6 9.2 Other comprehensive income Currency translation differences 19 0.4
(1.2)
Actuarial loss on pension schemes (32.2)
(30.2)
Deferred tax movement on pension liability 8.4
8.4
Deferred tax movement on pension liability attributable to impact of UK rate change (1.3) (1.4) Other comprehensive loss for the period, net of tax (24.7) (24.4) Total comprehensive loss for the period (13.1) (15.2)
Total comprehensive loss attributable to:
Equity shareholders of the Company (13.8)
(15.9)
Non-controlling interests 0.7 0.7 (13.1) (15.2) Hogg Robinson Group plc Consolidated Balance Sheet As at 30 September 2011 Notes 30 31 September March 2011 2011 £m £m Non current assets Goodwill and other intangible assets 14 247.9
249.9
Property, plant and equipment 15 12.9
12.9
Investments accounted for using the equity method 3.9
2.4 Trade and other receivables 0.1 0.1 Deferred tax assets 46.6 40.9 311.4 306.2 Current assets Trade and other receivables 106.3 114.7
Financial assets - derivative financial instruments 0.4
- Current tax assets 0.7 0.7
Cash and cash equivalent assets 16 47.4
70.5 154.8 185.9 Total assets 466.2 492.1 Non current liabilities Financial liabilities - borrowings 16 (112.7) (128.0) Deferred tax liabilities (1.9) (2.0) Retirement benefit obligations 17 (144.8) (114.7) Provisions (4.0) (4.2) (263.4) (248.9) Current liabilities Financial liabilities - borrowings 16 (0.7)
(0.3)
Financial liabilities - derivative financial (0.1) (0.3)instruments Current tax liabilities (7.0) (5.4) Trade and other payables (190.0) (214.6) Provisions (1.1) (1.6) (198.9) (222.2) Total liabilities (462.3) (471.1) Net assets 3.9 21.0 Capital and reserves Share capital 18 3.1 3.1 Share premium 18 172.3 172.2 Other reserves 19 12.2 14.0 Retained earnings (188.0) (171.9)
Attributable to owners of Hogg Robinson Group plc (0.4)
17.4
Attributable to non-controlling interests 4.3
3.6 Total equity 3.9 21.0 Hogg Robinson Group plc
Consolidated Statement of Changes in Equity As at 30 September 2011 Attributable to equity holders of the Company Share Share Other Retained Non-controlling Total capital premium reserves earnings Total interests equity £m £m £m £m £m £m £m Balance at 1 April 2010 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.7
Retained profit for the period - - - 8.5 8.5 0.7 9.2 Other comprehensive income: Actuarial loss on pension - - - (30.2) (30.2) - (30.2)schemes Deferred tax movement on - - - 8.4 8.4 - 8.4pension liability Deferred tax movement on pension liability attributable to impact of - - - (1.4) (1.4) - (1.4)UK rate change Currency translation - - (1.2) - (1.2) - (1.2)differences
Total comprehensive income - - (1.2) (14.7) (15.9)
0.7 (15.2)
Transactions with owners: Dividends - - - (2.4) (2.4) (0.3) (2.7) Share-based incentives - - - 1.0 - 1.0 - 1.0charge for period
Total transactions with owners - - 1.0 (2.4) (1.4)
(0.3) (1.7)
Balance at 30 September 2010 3.1 172.2 13.2 (208.5) (20.0)
3.8 (16.2) Balance at 1 April 2010` 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.7
Retained profit for the year - - - 19.1 19.1 0.7 19.8 Other comprehensive income: Actuarial gain on pension - - - 8.5 8.5 - 8.5schemes Deferred tax movement on - - - (2.4) (2.4) - (2.4)pension liability Deferred tax movement on pension liability attributable to impact of - - - (2.1) (2.1) - (2.1)UK rate change Deferred tax movement on cumulative share-based incentives cost - - - 0.3 0.3 - 0.3 Currency translation - - (1.6) - (1.6) 0.1 (1.5)differences
Total comprehensive income - - (1.6) 23.4 21.8
0.8 22.6
Transactions with owners: Dividends - - - (3.9) (3.9) (0.6) (4.5) Share-based incentives - - - 2.2 - 2.2 - 2.2charge for year
Total transactions with owners - - 2.2 (3.9) (1.7)
(0.6) (2.3) Balance at 31 March 2011 3.1 172.2 14.0 (171.9) 17.4 3.6 21.0 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 - - - (32.2) (32.2) - (32.2)schemes Deferred tax movement on - - - 8.4 8.4 - 8.4pension liability Deferred tax movement on pension liability attributable to impact of - - - (1.3) (1.3) - (1.3)UK rate change Transfer from exchange reserve - - (0.9) 0.9 - - -to retained earnings Currency translation - - 0.5 - 0.5 (0.1) 0.4differences 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 - 0.1 - - 0.1 - 0.1share-based incentives Transfer from share based incentives reserve to retained earnings - - (2.5) 2.5 - - - Shares purchased by Employee - - - (2.4) (2.4) - (2.4)Benefits Trust Share-based incentives - - - 1.2 - 1.2 - 1.2charge for period Share-based incentives - - - (0.1) - (0.1) - (0.1)exercise of CSOP options
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 Hogg Robinson Group plc
Consolidated Cash Flow Statement For the period ended 30 September 2011
Notes Half year ended 30 September 2011 2010 £m £m
Cash flows from operating activities Cash generated from operations 20 10.3
1.8 Interest paid (3.6) (1.5) Tax paid (2.3) (2.3) Cash flows from operating activities - net 4.4 (2.0)
Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired -
(0.3)
Acquisition of associates, joint ventures and other investments (1.4)
-
Purchase of property, plant and equipment (2.7)
(1.1)
Purchase and internal development of intangible assets (2.6) (2.8) Interest received 0.1 0.1
Dividends received from associates and joint ventures 0.1
- Cash flows from investing activities - net (6.5) (4.1)
Cash flows from financing activities
Repayment of borrowings (35.0) (3.3) New borrowings 18.7 6.5 Cash effect of currency swaps (0.1) 0.6 Employee Benefits Trust (2.4) - Dividends paid to external shareholders (2.8)
(2.4)
Dividends paid to non-controlling interests - (0.3)
Cash flows from financing activities - net (21.6)
1.1 Net decrease in cash and cash equivalents (23.7)
(5.0)
Cash and cash equivalents at the beginning of the period 70.4
58.2 Exchange rate effects (0.8) (1.0)
Cash and cash equivalents at the end of the period 45.9
52.2
Cash and cash equivalent assets 47.4
53.3 Overdrafts (1.5) (1.1) 45.9 52.2 Hogg Robinson Group plc
Notes to the Consolidated Half-Year Financial Information
For the period ended 30 September 2011
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 30 November 2011.
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 2011 were approved by the Boardof Directors on 25 May 2011 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 2011 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 2011, whichhave been prepared in accordance with International Financial ReportingStandards (IFRSs) as adopted by the European Union. The Directors consider that, taking into account the assets and revenue of theGroup, the Group has adequate resources to continue in operational existencefor the foreseeable future. For this reason, the Directors adopt the goingconcern basis for the condensed consolidated half-yearly financial information. 3 Accounting policies
The accounting policies adopted are consistent with those of the Annual Consolidated Financial Statements for the year ended 31 March 2011, as described in those statements.
Exceptional items are disclosed and described separately in the financialstatements where it is necessary to do so to provide further understanding ofthe financial performance of the Group. They are material items of income orexpense that have been shown separately due to the significance of their natureor amount.
Income tax expense in the half-year period is accrued using the tax rate that would be applicable to expected total annual earnings.
The following amended standards and interpretations to existing standards are mandatory for the first time for the financial year beginning 1 April 2011.
The adoption of these amendments and interpretations does not have a material impact on the condensed consolidated half-yearly financial information:
IAS 24 (revised), Related Party Disclosures, effective for accounting periods beginning on or after 1 January 2011. The revised standard clarifies and simplifies the definition of a related party.
IFRIC 14 (amendments), Prepayments of a Minimum Funding Requirement, effectivefor accounting periods beginning on or after 1 January 2011 and appliesretrospectively to the earliest comparative period presented. The amendmentscorrect an unintended consequence of IFRIC 14, IAS 19 - The Limit on a DefinedBenefit Asset, Minimum Funding Requirements and their Interaction. Without theamendments, entities are not permitted to recognise as an asset some voluntaryprepayments for minimum funding contributions. IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments,effective for accounting periods beginning on or after 1 July 2010, clarifiesthe accounting by an entity when the terms of a financial liability arerenegotiated and result in the entity issuing equity instruments to a creditorof the entity to extinguish all or part of the financial liability (debt forequity swap).
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not 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 2011, 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 10 to 11 and 48 to 49 respectively of the Hogg Robinson Group plc AnnualReport and Financial Statements 2011, a copy of which is available on theGroup's website www.hoggrobinsongroup.com. The Board's view is that theserisks and the risk management policies in place remain substantially unchangedfor the second half of the current financial year. These risks anduncertainties can be summarised as follows: Operational risksLoss of a major clientVolatility of client activityLoss of a key supplierLoss of key staffCorruption or reputation riskTechnology or systems failure Financial risks
The reported results of the Group could be adversely affected by:
Lack of access to adequate funding
Lack of cost and capital control
Increased pension fundingForeign currency riskInterest rate riskCredit riskLiquidity risk 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 Europe America Pacific Total Spendvision Total £m £m £m £m £m £m
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%
Half year ended 30 September 2010
Revenue from external customers 115.1 38.0 10.1 163.2
6.0 169.2 Underlying operating profit 13.6 5.6 (0.1) 19.1 0.4 19.5 Amortisation of acquired intangibles (1.5) (0.4) - (1.9) (0.1) (2.0) Operating profit 12.1 5.2 (0.1) 17.2 0.3 17.5 Underlying margin 11.8% 14.7% (1.0%) 11.7% 6.7% 11.5%
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 Europe America Pacific Total Spendvision Total £m £m £m £m £m £m Total segment assets 30 September 2011 260.3 87.7 16.4 364.4 7.1 371.5 31 March 2011 268.2 89.4 15.8 373.4 6.6 380.0
Reportable segments' assets are reconciled to total assets as follows:
30 September 31 March 2011 2011 £m £m Total segment assets 371.5 380.0
Cash and cash equivalent assets 47.4 70.5 Current tax assets 0.7 0.7 Deferred tax assets 46.6 40.9 466.2 492.1 8 Operating expenses Half year ended 30 September 2011 2010 £m £m
Underlying operating expenses:
Staff costs (note 9) 111.0 98.8 Amortisation of intangible assets, other than acquired intangible 2.6 2.2assets
Depreciation of property, plant and equipment 2.7
2.6
Operating lease rentals - buildings 7.3
7.3
Operating lease rentals - other assets 0.9
0.9
Currency translation differences -
0.1 Other expenses 38.9 37.8 163.4 149.7
Amortisation of acquired intangibles: Amortisation of client relationships 2.0
1.9
Amortisation of other acquired intangible assets 0.1
0.1 2.1 2.0 Total operating expenses 165.5 151.7 9 Staff costs Half year ended 30 September 2011 2010 £m £m Salaries 93.6 82.7 Social security costs 10.5 9.4 Pension costs 5.4 5.1
Redundancy and termination costs 0.3
0.6 Share-based incentives 1.2 1.0 111.0 98.8 Pension costs comprise: Defined benefit schemes 1.9 2.0 Defined contribution schemes 3.5 3.1 5.4 5.1 Half year ended 30 September 2011 2010 number number
Average monthly number of staff employed by the Group 5,446 5,183
10 Finance income and finance costs Half year ended 30 September 2011 2010 £m £m
Finance income - bank interest 0.1
0.1 Interest on bank loans and overdrafts (3.0)
(1.5)
Amortisation of issue costs on bank loans (0.4)
(0.8)
Expected return on pension scheme assets less interest cost on pension scheme liabilities (1.2) (1.9) Other finance charges (0.4) (0.2)
Interest on derivative financial instruments (0.2)
- Finance costs (5.2) (4.4) Net finance costs (5.1) (4.3) 11 Income tax expense
The tax charge is split as follows:
Half year ended 30 September 2011 2010 £m £m United Kingdom 1.2 2.0 Overseas 3.7 1.9 Change in headline tax rate 0.1 0.2 5.0 4.1
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 30% is anticipated for the yearended 31 March 2012 (2011: 31%). Tax rate change The UK government is reducing the rate of corporation tax from 26% to 25% witheffect from 1 April 2012. Consequently, the Group is required to revalue allof its 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 £1.3m in respect of deferred tax assets on pensionliabilities. The Group is reflecting the full impact of £1.4m in the first
halfof the year. Further proposals to reduce the UK rate by 1% per annum to 23% 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 2011 2010 pence pence Earnings per share Basic 3.6 2.8 Diluted 3.4 2.7 Half year ended 30 September 2011 2010 £m £m
Earnings for the purposes of earnings per share Profit for the period 11.6 9.2 Less: amounts attributable to (0.8) (0.7)non-controlling interests Total 10.8 8.5 Half year ended 30 September 2011 2010 number number m m
Weighted average number of Ordinary shares in issue
Issued (for basic EPS) 302.0 300.7 Dilutive potential ordinary shares 14.7 11.7 For diluted EPS 316.7 312.4
Underlying earnings per share
Underlying earnings per share attributable to equity holders of the Companywere as follows: Half year ended 30 September 2011 2010 pence pence Underlying earnings per share Basic 4.1 3.3 Diluted 3.9 3.2 Half year ended 30 September 2011 2010 £m £m
Earnings for the purposes of underlying earnings per share Profit before tax from continuing operations 16.6
13.3
Add: amortisation of acquired intangibles 2.1
2.0
Underlying profit before tax 18.7
15.3
Underlying income tax expense (5.6)
(4.7)
Underlying profit for the financial year 13.1
10.6
Less: amounts attributable to non-controlling interests (0.8)
(0.7) Total 12.3 9.9
Underlying earnings are earnings before amortisation of acquired intangibles and exceptional items and related income tax expense.
13 Dividends A dividend that related to the year ended 31 March 2011 amounting to 1.0p perordinary share (£3,022,355) was paid on 1 August 2011. The dividend was paidto shareholders who were on the register at 1 July 2011. The Employee BenefitsTrust has waived its rights to dividends in respect of 6,490,647 shares held inthe Company and subsequently repaid an amount of £0.2m in respect of previousdividends. The Directors have declared an interim dividend in respect of the six monthsended 30 September 2011 of 0.6p payable on 5 January 2012 to shareholders whoare on the register at 9 December 2011. This interim dividend, amounting to £1.8m 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 2011 2011 £m £m Goodwill 221.1 221.0 Other intangible assets 26.8 28.9 247.9 249.9 Computer software Externally Internally Client Goodwill acquired generated relationships Total £m £m £m £m £m Cost At 1 April 2010 248.2 16.2 17.9 37.4 319.7 Additions - 0.8 4.6 - 5.4 Exchange differences (0.8) - 0.1 0.7 - At 31 March 2011 247.4 17.0 22.6 38.1 325.1 Additions - 0.3 2.3 - 2.6 Disposals - (0.1) - - (0.1) Exchange differences 0.1 (0.3) (0.1) 0.4 0.1 At 30 September 2011 247.5 16.9 24.8 38.5 327.7 Accumulated amortisation At 1 April 2010 26.4 11.2 7.0 21.6 66.2 Amortisation charge for the - 1.5 3.2 3.7 8.4year Exchange differences - 0.1 (0.1) 0.6 0.6 At 31 March 2011 26.4 12.8 10.1 25.9 75.2 Amortisation charge for the - 0.8 1.9 2.0 4.7period Disposals - (0.1) - - (0.1) Exchange differences - (0.2) - 0.2 - At 30 September 2011 26.4 13.3 12.0 28.1 79.8 Carrying amount At 1 April 2010 221.8 5.0 10.9 15.8 253.5 At 31 March 2011 221.0 4.2 12.5 12.2 249.9 At 30 September 2011 221.1 3.6 12.8 10.4 247.9 15 Property, plant and equipment Plant and Properties equipment Total £m £m £m Cost At 1 April 2010 10.5 49.8 60.3 Additions for the year 0.8 3.0 3.8 Disposals for the year (0.7) (0.8) (1.5) Exchange differences - 0.3 0.3 At 31 March 2011 10.6 52.3 62.9 Additions for the period 0.1 2.6 2.7 Disposals for the period - (2.2) (2.2) Exchange differences (0.1) (0.5) (0.6) At 30 September 2011 10.6 52.2 62.8 Accumulated depreciation At 1 April 2010 7.2 38.3 45.5 Depreciation charge for the year 0.8 4.5 5.3 Disposals for the year (0.3) (0.7) (1.0) Exchange differences (0.1) 0.3 0.2 At 31 March 2011 7.6 42.4 50.0 Depreciation charge for the period 0.4 2.3 2.7 Disposals for the period - (2.2) (2.2) Exchange differences (0.1) (0.5) (0.6) At 30 September 2011 7.9 42.0 49.9 Carrying amount At 1 April 2010 3.3 11.5 14.8 At 31 March 2011 3.0 9.9 12.9 At 30 September 2011 2.7 10.2 12.9
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 2011 2011 £m £m At amortised cost Current (due within one year) Overdrafts 1.5 0.1 Bank loans - - Unamortised loan issue costs (0.9) - Finance leases 0.1 0.2 0.7 0.3
Non-current (due after more than one year)
Bank loans 114.6 131.2 Unamortised loan issue costs (2.0) (3.3) Finance leases 0.1 0.1 112.7 128.0 113.4 128.3 Net debt Total financial liabilities - borrowings 113.4
128.3
Add back: Unamortised loan issue costs 2.9
3.3
Cash and cash equivalent assets (47.4) (70.5) Net debt 68.9 61.1 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 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 2011 2011 £m £m UK scheme: Defined benefit obligations (343.4) (324.3) Fair value of plan assets 209.1 220.2 Deficit - UK Scheme (134.3) (104.1) Deficit - Overseas Schemes (10.5) (10.6) (144.8) (114.7)
The following amounts have been included in the Consolidated Income Statement in respect of the UK Scheme:
Half year ended 30 September 2011 2010 £m £m Current service charge 1.1 1.3
Expected return on scheme assets (7.7)
(7.1) Charge to finance costs 8.8 8.7
Total charge to the Consolidated Income Statement 2.2
2.9
The current service charge is computed based on the actuarial assumptions in place at the beginning of the financial year and translates to 18.4% of pensionable salaries (2010: 20.6%).
The key assumptions used for the UK Scheme were:
30 September 31 March 2011 2011
Rate of increase in final pensionable salary 3.00%
3.40%
Rate of increase in pensions in payment - accrued before 5.00%
5.00%1999
Rate of increase in pensions in payment - accrued after 1999 3.00%
3.40% Discount rate 5.20% 5.50% Inflation - RPI 3.00% 3.40% Inflation - CPI 2.50% 2.90%
Expected rate of return on plan assets:
Equity instruments 8.00% 8.00% Debt instruments 4.95% 4.50% Property 8.00% 8.00% Other assets 3.65% 4.90% 18 Share capital and share premium account Share capital 30 September 2011 number Authorised Ordinary shares of 1p each 513,808,171
Issued, called up and fully paid
At 1 April 2011 307,781,171 Shares issued in the year 1,028,194 At 30 September 2011 308,809,365 30 September 2011 £m
Issued, called up and fully paid
Ordinary shares of 1p each 3.1
The Company issued 1,028,194 shares for a total consideration of £131,403 during the period ending 30 September 2011 on the exercise of options under the Company Share Option Plan (CSOP).
The HRG Employee Benefits Trust acquired 3,784,111 of the Company's Ordinaryshares through purchases on the London Stock Exchange in the period. The totalamount paid to acquire the shares in the period ended 30 September 2011 was £2.4m and has been deducted from retained earnings. The total number of Ordinaryshares in the Company held by the HRG Employee Benefits Trust as at 30September 2011 was 6,490,647 (31 March 2011: 6,302,678) with a market value of£3.3m (31 March 2011: £3.7m). 3,596,142 shares have been used during the periodto satisfy vesting of certain share-based incentives. Share premium account £m At 1 April 2011 172.2 Shares issued in the year 0.1 At 30 September 2011 172.3 19 Other reserves Total Share-based Exchange other incentives reserve reserves £m £m £m Balance at 1 April 2010 3.2 10.2 13.4 Other comprehensive income:
Currency translation differences - (1.2)
(1.2)
Share-based incentives - charge for period 1.0 - 1.0 Balance at 30 September 2010 4.2 9.0 13.2 Balance at 1 April 2010 3.2 10.2 13.4 Other comprehensive income:
Currency translation differences - (1.6)
(1.6) Transactions with owners: Share-based incentives - charge for year 2.2 - 2.2 Balance at 31 March 2011 5.4 8.6 14.0 Balance at 1 April 2011 5.4 8.6 14.0 Other comprehensive income:
Transfer from exchange reserve to retained - (0.9)
(0.9)earnings Currency translation differences - 0.5 0.5 Transactions with owners: Transfer from share-based incentives reserve (2.5) - (2.5) to retained earnings Share-based incentives - charge for period 1.2 -
1.2
Share-based incentives - exercise of CSOP (0.1) - (0.1)options Balance at 30 September 2011 4.0 8.2 12.2 20 Cash generated from operations Half year ended 30 September 2011 2010 £m £m
Profit before tax from continuing operations 16.6
13.3 Adjustments for:
Depreciation and amortisation (notes 14 and 15) 7.4
6.8 Net increase in provisions 0.2 0.7 Share of results of associates and joint ventures (0.4) (0.1) Net finance costs (note 10) 5.1 4.3 Other timing differences 1.4 1.2 30.3 26.2 Cash expenditure charged to provisions (0.8)
(2.0)
Change in trade and other receivables 6.4
6.1
Change in trade and other payables (22.5)
(25.5)
Pension funding in excess of charge to operating profit (3.1) (3.0)
Cash generated from operations 10.3
1.8 21 Related party transactions There have been no material changes in the nature of related party transactionssince 31 March 2011 as reported in note 28 of the Group's 31 March 2011 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 2011 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 4.2.7and DTR 4.2.8, 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 ExecutiveJ A Steadman 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 Board Keith BurgessCompany Secretary 30 November 2011 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 2011, 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 2011 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 AccountantsLondon30 November 2011 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.
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