27 Nov 2013 07:00
27 November 2013
Hogg Robinson Group plc
('HRG', 'the Company' or 'the Group')
Results for the six months ended 30 September 2013
Steady progress
Summary of results
Six months ended 30 September | |||
Restated (1) | |||
2013 | 2012 | Change | |
Revenue | £168.4m | £168.9m | - |
Underlying earnings (2) | |||
- Operating profit | £22.7m | £22.7m | - |
- Operating profit margin | 13.5% | 13.4% | +0.1pp |
- Profit before tax | £16.0m | £15.6m | +3% |
- Earnings per share | 3.5p | 3.4p | +3% |
Reported earnings | |||
- Operating profit | £18.1m | £20.7m | -13% |
- Profit before tax | £11.4m | £13.6m | -16% |
- Earnings per share | 2.4p | 3.0p | -20% |
Interim dividend per share | 0.63p | 0.60p | +5% |
Net debt | £80.4m | £100.5m | -£20.1m |
Free cash inflow/(outflow) (3) | £10.2m | (£27.0m) | +£37.2m |
Highlights
§ Growth in underlying profit before tax despite flat revenue
§ Underlying operating profit margin up from 13.4% to 13.5% driven by cost management measures
§ Good progress against the actions and strategic priorities as set out in May
§ Net debt reduced by 20% to £80m; equivalent to 1.3 times EBITDA(4) (2012: 1.8 times)
§ Interim dividend up 5% to 0.63p per share (2012: 0.60p per share)
Outlook
Looking ahead to the second half of the year, we expect the trading environment to remain broadly similar to the first half, with a modest recovery in the UK and North America whilst markets elsewhere in Europe and in Asia are likely to remain weak. Revenue in October was 1% up compared to last year. Trading in November has been in line with our expectations. Despite the limited visibility that is inherent for corporate travel management, the Board believes HRG will continue to make progress and will deliver a full-year performance in line with current market expectations due to the actions being taken in the business and as a result of HRG's strong market position.
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"HRG has yet again achieved steady progress. At the full-year results in May, we outlined the strategic actions we are taking to grow our addressable market by continuing to evolve our offer and, at the same time, the measures to further improve our efficiency. During the first half, we have made good progress against these short and longer-term priorities, whilst ensuring that we continue to deliver good value to our clients.
"Notwithstanding that we expect market conditions to remain similar to the first half for the remainder of the year, we see brighter prospects for the coming years driven by the actions we are taking and underlying market conditions. For the full year, we continue to anticipate a performance in line with current market expectations."
Notes:
(1) Profit before tax and earnings per share figures are restated on adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3 to the financial statements)
(2) Before amortisation of acquired intangibles and exceptional items
(3) Free cash flow is the change in net debt before acquisitions and disposals, Employee Benefits Trust purchases, dividends and the impact of foreign exchange movements
(4) 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 | |
Martin Robinson | |
Giles Kernick |
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
A presentation for analysts and institutional investors will be held at 0900h GMT today at Tulchan Communications, 85 Fleet Street, London EC4Y 1AE. A conference call facility and live webcast will also be available for analysts and institutional investors unable to attend in person. Pre-registration for this event is necessary to comply with security procedures at the venue. To register your interest in attending the presentation, to obtain conference call details and access to the live webcast, please contact Tulchan Communications on +44 (0)20 7353 4200.
A replay recording of the presentation via audio webcast and podcast with audio commentary from HRG's presentation team will be available at www.hrgworldwide.com by 1100h GMT today or soon thereafter.
This announcement may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial conditions, business performance and results of Hogg Robinson Group plc (HRG). By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of HRG, including amongst other things, HRG's future profitability, competition with the markets in which the Company operates and its ability to retain existing clients and win new clients, changes in economic conditions generally or in the travel and airline sectors, terrorist and geopolitical events, legislative and regulatory changes, the ability of its owned and licensed technology to continue to service developing demands, changes in taxation regimes, exchange rate fluctuations, and volatility in the Company's share price. As a result, HRG's actual future financial condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements. HRG undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). No statement in this announcement is intended to be a profit forecast or be relied upon as a guide to future performance.
Overview
Market conditions have remained very much as described in our full-year results announcement in May. However, during this period we have seen some modest growth in the UK and North America, and client travel spend at constant currency was up by 4% with transaction activity ahead by 6%. Overall, our headline results for the first half of the financial year show a 2% fall in revenue and unchanged underlying operating profit, both at constant currency.
We set out our key actions for the current financial year when we reported our FY13 results in May. Since then, we have made substantial progress towards our goals.
Specifically, our FY14 actions included the following:
§ Lower the cost base to reinvest in operations by reducing HRG locations, streamlining our back office and by optimising call centre and online services.
Our target is to realise annualised savings of £6.5m. We forecast that this would cost £6.5m, the expenditure largely covering staff redundancies and location closures. In the first six months, we have made an exceptional charge of £2.6m in respect of redundancy costs and onerous lease provisions. We have reduced the number of HRG offices in several countries as part of an ongoing programme to consolidate our service structure through a network of hub locations. Work is progressing well on numerous projects with the objective of gaining greater efficiency in our back office functions and by use of call switching and other procedures to optimise our call centre and online services.
§ Pension deficit - start consultation on the closure of the UK defined benefit scheme to future defined benefit accrual.
Those discussions have now concluded and the active members moved to a defined contribution section. Pre-tax pension liabilities at 30 September 2013 were £173.6m (31 March 2013: £159.4m).
§ Continue to reduce net debt.
As a result of tight working capital management, good free cash generation and rigorous cost control, we have reduced net debt by 20% to £80m year-on-year, equivalent to 1.3 times EBITDA for the last 12 months, and are well on our way to achieving our medium-term objective of net debt / EBITDA in the range 0.7-1.0 times.
We also set out in May our strategic priorities over the next three years. We remain focused on delivering our medium-term strategic priorities that will accelerate our growth as market conditions improve. Good progress has been made on these priorities during the last six months.
(A) Grow our managed travel business
§ Increase our business through new service offerings
An area hitherto unmanaged by many corporates has been their expenditure on meetings, groups and events (MGE). We are actively engaged with many of our clients offering fee-generating advice designed to bring greater control, transparency and leverage. Since the period end, we have won the MGE business of Vodafone.
Clients are demanding ever more data to aid their decision making. What is increasingly apparent is the significant advantage offered through more intelligent data mining. This is an exciting area where our HRG InsightTM technology tool is helping clients find the answers they are seeking, while bringing HRG closer as a business partner or consultant. Amongst clients now benefiting from use of HRG InsightTM are Centrica, DHL, HSBC, NetApp and Unilever.
Our preferred relationship with Citi Commercial Cards, which we entered into during the second half of last financial year, continues to develop positively. HRG now has probably the widest global footprint of any travel management company offering the Central Travel Account facility, which means we can now deliver the best global coverage and support capability to large multinational clients seeking a common payment process across multiple markets. As part of our MGE strategic initiative, we have recently launched our integrated Meetings Management proposition which brings HRG's global meetings services together with Citi Virtual Card, to help clients manage meeting-related costs more effectively.
§ Entering new markets
One of the new markets that we are targeting is the provision of specialised travel logistics associated with the marine, offshore and energy sectors. Our experience of successfully managing complex travel was rewarded when we secured the travel management contract of Statoil, an integrated oil and gas company headquartered in Norway with operations in 34 countries. We have other similar pipeline opportunities.
§ Winning new business by leveraging our technology and service delivery
Lloyds Banking Group (LBG) is one of several clients that renewed and extended their relationship with HRG during the period. In this case, we have expanded our range of services to LBG through the provision of Spendvision expense management tools as a white-label solution for its corporate clients.
(B) Develop a Software as a Service (SaaS) business
Implementation of technology services for new client the Government of Canada is ongoing. User acceptance testing commenced in November.
We have again maintained our consistently high client retention rate which is testament to our staff's attention to detail and provision of excellent service that aims to meet the specific needs of each and every one of our clients around the world. Our new business pipeline is very healthy and we look forward to benefiting from recent client wins, some of which will only start to trade late in the second half of this financial year or beyond.
Financial results
Revenue of £168.4m was unchanged as reported, or down 2% at constant exchange rates. Underlying operating profit, which is stated before exceptional items and charging the amortisation of acquired intangibles, was also unchanged at £22.7m, showing a small margin improvement from 13.4% to 13.5% as a result of our continued focus on operational efficiency and cost control. Favourable movements in exchange rates contributed £0.1m to the underlying operating profit result. The flat underlying earnings performance is partly explained by the award of a technology licensing agreement during the first half of last financial year. Excluding the impact of the technology deal and related net investments, underlying operating profit would have risen by approximately 10%. After the restatement of finance costs as a consequence of applying IAS 19 (revised), underlying profit before tax and underlying EPS were up by 3% to £16.0m and 3.5p, respectively.
Reported operating profit declined by 13% to £18.1m, largely due to exceptional items of £2.6m. Reported profit before tax was down by 16% from £13.6m (restated) to £11.4m and EPS fell by 20% from 3.0p (restated) to 2.4p.
Net debt reduced by £20.1m year-on-year. Since 31 March 2013, net debt declined by £6.6m. One of our medium-term objectives, outlined in our full-year results statement last May, was to reduce net debt to 0.7-1.0 times EBITDA. Net debt of £80.4m at 30 September 2013 represented 1.3 times EBITDA for the last 12 months (2012: 1.8 times). We continue to operate well within our banking covenants.
The Board has declared an interim dividend of 0.63p per share, up 5% on the interim payment a year ago. This dividend will be paid on 3 January 2014 to shareholders on the register at the close of business on 6 December 2013. Our progressive dividend policy remains unchanged.
Current trading and outlook
Looking ahead to the second half of the year, we expect the trading environment to remain broadly similar to the first half, with a modest recovery in the UK and North America whilst markets elsewhere in Europe and in Asia are likely to remain weak. Revenue in October was 1% up compared to last year. Trading in November has been in line with our expectations. Despite the limited visibility that is inherent for corporate travel management, the Board believes HRG will continue to make progress and will deliver a full-year performance in line with current market expectations due to the actions being taken in the business and as a result of HRG's strong market position.
Operational review
Client activity
During the first half of our financial year, client travel spend at constant currency grew by 4% and transaction activity rose by 6%.
While there are signs that the macroeconomic conditions are improving, cost control remains a priority for a significant majority of HRG's clients. Closely linked to this is the priority for many to seek incremental cost savings, while for others, maximising value is the principal objective. Whatever the needs and priorities, clients rely on our experience and expertise to give them tailored advice.
Online self-booking of travel continues to gain approval and acceptance by an increasing number of our clients as it offers lower booking fees which generally result in cost savings. Approximately 40% of all client travel bookings made during the first six months were self-booked online by our clients, up from about 36% last year, with the geographic spread broadening also.
As the booking process and related activities have become more automated, the control of demand for travel has evolved into consideration of management and advisory services. As such, HRG is increasingly seen as a business partner and we are encouraged that this level of management relationship now dominates all client interaction.
Good management decisions are typically grounded on accurate, relevant and reliable information. Clients are now seeking ever more insightful analysis to help them forecast their future travel activity and expenditure. HRG's analytical capabilities are providing fee-generating opportunities in our discussions with clients.
Proper risk management is essential for the ongoing health of any business. In our industry, traveller security has risen in importance for most clients in recent years, particularly for those whose staff need to travel into dangerous areas of the world. However, while HRG's traveller tracking tools and travel alerts have always proved popular - if not, essential - for many of our clients, the last six months has seen a noticeable increase in clients seeking our advice on matters of security.
In a number of our risk management discussions it has become apparent that many clients operate overly complex processes in the areas of travel and related expenditure, often as a result of acquiring legacy systems. Simplicity and adoption of more standardised processes can invariably provide savings through avoidance of cost. We are excited about these trends as they represent additional revenue opportunities for HRG and enable us to demonstrate the true breadth and depth of the Group's travel and expense software offerings.
As always, we are very focused on providing the highest levels of service at all times to all our clients. Our value proposition has once again been rewarded by a consistently high client retention rate. Inevitably, we lose some clients from time to time but we continue to attract new clients and expand our relationships with existing clients. During the first six months of this financial year, we once again won more business than we lost. New clients and expanded relationships of note include: ABB, Bupa, EY, MasterCard, SNC Lavalin and Statoil.
Corporate Travel Management
Europe
Six months ended 30 September | 2013 | 2012 | Change |
Revenue | £113.6m | £113.9m | -0.3% |
Operating profit | £11.0m | £14.8m | -25.7% |
Underlying operating profit (1) | £14.7m | £16.3m | -9.8% |
Underlying margin (1) | 12.9% | 14.3% | -1.4pp |
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was down by 3.2% at constant currency. Underlying operating profit fell by £1.6m, including a £0.1m gain from currency movements. Excluding last year's technology deal, underlying operating profit in Europe declined by 4.6%. Client travel spend rose by 2% year-on-year in real terms and travel activity was up 6%.
Signs of recovery in the UK seen towards the end of the last financial year continued during the first six months of the current year with a rise in client activity levels and spend. This is largely explained by the new business wins secured in the second half of last year, including Unilever, Centrica, Clifford Chance and various UK Government departments. The proportion of rail tickets booked by the Group's UK business continues to grow at a faster rate than hotel or air. Rail transactions now account for more than a third of all transactions booked in the UK. This mix change may be explained by the expansion of our business with the UK Government and clients seeking lower cost, better value alternatives to air and hotel. Tight cost control remains a focus for our UK operations and as activity has started to recover, we have been careful not to add costs back into the business until a clearer trend emerges.
In contrast to the UK, we have yet to see any recovery in the Swiss market. Trading patterns amongst our Swiss clients continue to be mixed. We are now starting to benefit from a range of restructuring initiatives started last financial year. This includes the closure of a number of service locations in the country as we move to a more centralised model.
Growth in the German economy remains fragmented. Most areas of our travel management business showed a weaker performance compared to the first half of last year. The one bright light came from HRG's sports-related business which benefited from German success in the Champions League. Cost reduction measures, initiated last financial year, have continued including consolidating our service network to fewer locations, reducing headcount and trimming overheads.
Over the whole of our Nordic operations, travel booking activity during the first half showed little change from a year ago. Increases in Finland and Denmark were more than offset by declines in Sweden. SME and MGE revenue were sharply down compared to a year ago, particularly in Norway and Sweden. Across the region, clients continue to seek ways to cut their travel and related expenditure and, as elsewhere, have been attracted to the lower costs afforded by online self-booking of travel. We are delighted to have won Statoil as a new client, demonstrating our experience and expertise in specialised travel logistics and management, one of a number of areas we are focusing on for revenue growth.
Client adoption of online self-booking continued to grow during the period, accounting for 33% of all bookings made in the region, up from 29% last year.
North America
Six months ended 30 September | 2013 | 2012 | Change |
Revenue | £32.1m | £31.4m | +2.2% |
Operating profit | £4.8m | £4.3m | +11.6% |
Underlying operating profit (1) | £5.2m | £4.7m | +10.6% |
Underlying margin (1) | 16.2% | 15.0% | +1.2pp |
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was up by 1.6% at constant currency. Underlying operating profit rose by £0.5m with little currency impact. Excluding last year's technology deal, underlying operating profit for North America rose by 24.4%. Client spend was up by 11% in real terms and activity higher by 10%.
HRG operates two businesses in North America: (1) corporate travel management, and (2) loyalty, managing the redemption of credit card loyalty points programmes.
Spend amongst our corporate travel management clients rose by 13% at constant currency while transaction activity grew by 13% year-on-year. Revenue for this business rose by 5% and underlying operating profit increased by 39%, both at constant currency. To an extent, this has reflected the rollover impact of prior year second half wins as well as good organic growth in the existing client base. On the new business front, we are very pleased to have secured additional business with SNC Lavalin, one of the world's leading engineering and construction companies. We have worked hard in recent years to improve the efficiency of our operations in North America. This work is ongoing and includes investing in proprietary technology aimed at reducing our operating costs, helping to drive margin growth for our business in this highly competitive market.
HRG North America is implementing a new state-of-the-art telephony solution across the entire region. This unified contact centre solution will provide seamless integration across all call centres in North America and will allow for new contact centre offerings to customers including web chat and integrated e-mail support. Additionally, new storage area network technology has been introduced in North America resulting in a significant improvement in application performance and efficiency.
Last financial year was one of transition for our loyalty business in North America. We reduced headcount and made structural changes in our Canadian operations aimed at increasing efficiency and protecting margin as our business was impacted by the planned transition to an online environment. Our resized Canadian loyalty business, together with its US counterpart, performed steadily during the first half of this financial year although we did see further growth in online self-booking of travel and this resulted in lower revenue for HRG.
The trends in the loyalty industry continue to be favourable as evidenced by the fact that during the past three years the number of loyalty programme memberships in the US has increased by more than 20% to more than 2.5 billion. We believe HRG is well placed to take advantage of the growth characteristics of this market, where our excellent service delivery and technology products offer significant advantage. Amongst a number of new clients secured during the period, we are very pleased to welcome MasterCard to our portfolio. HRG now manages all US domestic travel for MasterCard's loyalty programme.
Online self-booking of travel by clients continues to grow in the region, accounting for 55% of all transactions compared to 50% last year.
Asia Pacific
Six months ended 30 September | 2013 | 2012 | Change |
Revenue | £12.6m | £14.8m | -14.9% |
Operating profit | - | £0.4m | -100.0% |
Underlying operating profit (1) | £0.4m | £0.4m | - |
Underlying margin (1) | 3.2% | 2.7% | +0.5pp |
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was down by 10.8% at constant currency. Underlying operating profit was unchanged at £0.4m with little currency effect. Client travel spend fell by 3% year-on-year in real terms while travel activity was up 1%.
While the economic outlook for Australia over the next 12 months appears to be cautiously optimistic, fuelled by a pickup in demand for resources, travel activity for our Australian clients during the first half was little changed from a year ago, and the cautious mood amongst those in the professional services, manufacturing and government sectors continued. Revenue fell by 7% at constant currency, while online self-booking by clients rose from 59% to 62%. Strategic revenue growth initiatives focused on helping clients gain better value and lower spend on business meetings and hotel programmes are being implemented, although traction has been slow as the economy remains sluggish. We have accelerated our plans to reduce our operating costs in line with forecast activity levels, lowering headcount and servicing our clients through fewer locations.
The ongoing growth in regional Asian economies is reflected in the positive business sentiment shown by our clients in Singapore in recent months. Client travel spend and activity in the Group's Singapore business showed good growth compared to a year ago. However, patterns are varied. Generally, clients in the financial and pharmaceutical sectors have increased their travel expenditure compared to the same period last year, whereas those in logistics and manufacturing have sought to tighten and enforce their travel compliance policies, and reduced their spend. Overall, revenue was lower by 7% at constant currency with the SME segment worst affected. Despite the more buoyant conditions, we are exercising prudence and do not plan to increase headcount and other resources until we see a clear trend emerge. Our self-help measures designed to increase efficiency and lower costs continue, including seeking ways to use our technology to automate processes where possible.
Our joint ventures in Hong Kong and mainland China continued to perform steadily. As elsewhere in the region, our clients have increased their travel expenditure compared to the first half of last year as the local economies continue to grow strongly, although the rate of expansion appears to be slowing a little. We are starting to target the MGE markets more aggressively in response to greater demand.
Online self-booking of travel in the Asia Pacific region continues to increase and now accounts for 53% of all bookings, up from 51% a year ago.
Spendvision
Six months ended 30 September | 2013 | 2012 | Change |
Revenue | £10.1m | £8.8m | +14.8% |
Operating profit | £2.3m | £1.2m | +91.7% |
Underlying operating profit (1) | £2.4m | £1.3m | +84.6% |
Underlying margin (1) | 23.8% | 14.8% | +9.0pp |
(1) Before amortisation of acquired intangibles and exceptional items
Spendvision is a global technology company specialising in integrated travel, expense, payment and reporting solutions. Delivered direct and through partners across the banking, telecoms and travel sectors, Spendvision's intelligent technology, services and support enable customers to achieve financial benefits, visibility and control of their transactions.
Revenue was up 14.8% at constant currency in the period, driven by new client wins and expanded contracts with existing clients. Underlying operating profit rose by £1.1m, with little impact from currency movements. The 85% increase in underlying margin is explained by increased revenue and lower hosting costs. Our focus on key business objectives, including tight cost control and pursuit of operational efficiency measures, has been rewarded with this further rise in underlying margin. We will continue to invest in this business and plan to increase our sales and marketing efforts during the second half of the financial year.
Several technology enhancements were made during the first half to the Spendvision operating platform. While many of these relate to the specific requirements of new client the Government of Canada, they will also benefit our existing and future clients as the end-to-end solution being implemented for this client enhances the Spendvision product offering.
Technology
HRG's investment in its own technology platform, the HRG Universal Super PlatformTM, continues and recent client wins where the products are being used globally have proved the value this brings to the business and to our clients. As clients continue to seek ways of reducing travel and related expenditure, we continue to enhance our technology product suite as we endeavour to stay ahead of changes in the industry. Independence and flexibility remain key strengths of HRG's technology strategy.
Distribution continues to drive discussion in our markets and across the travel industry. Through our technology position, we have been involved in various initiatives with the distribution chain, including the airlines and GDS providers, to review ways in which the business model could adapt. More recently, we have been involved with the IATA New Distribution Capability initiative.
We continue to make progress on implementing the technology solution for the Government of Canada. Further investment will be made during the second half for the successful 'go live' of the system during the first quarter of next financial year.
We have continued to develop i-SuiteTM, our online portal offering clients access to both HRG and third-party products, reflecting our strategy of responsive design to enable any device size, from phone to desktop, to be catered for automatically, as opposed to providing specific apps.
All products received updates and releases responding to industry change, client requirements and new market entrances. These reflected the power and efficiency of our development methodology. Our integration of Spendvision and the subsequent evolution of modular and integrated products into the Group have also continued successfully.
Following a successful pilot stage, we continue with the process of migration of HRG InsightTM, our new dynamic and flexible reporting tool, to our clients.
Additional financial disclosures
Revenue
Reported revenue marginally reduced by 0.3% to £168.4m, comprised of a reduction of 2.0% at constant exchange rates offset by a 1.7% gain through favourable currency movements.
Revenue per employee
Reported revenue per employee increased by 3.5% from £33.4k to £34.6k. At constant exchange rates, this was an increase of 1.8%.
Operating expenses
Reported operating expenses increased by 1.4% to £150.3m.
Underlying operating expenses, which are before amortisation of acquired intangibles and exceptional items, marginally reduced by 0.3% to £145.7m, or by 2.3% at constant exchange rates. This 2.3% reduction is comprised of a reduction of 5.0% for staff costs, primarily reflecting lower staff numbers, offset by a 3.7% increase in other expenses.
Underlying operating profit
Underlying operating profit, which is before amortisation of acquired intangibles and exceptional items, was in line with the prior period at £22.7m. Underlying operating profit margin slightly increased from 13.4% to 13.5%, inclusive of a 0.2% adverse impact from currency movements.
Exceptional items
The cost of exceptional items was £2.6m (2012: nil). These relate to planned cost reduction programmes in Europe and Australia. They are mainly in respect of redundancy costs and onerous lease provisions.
Net finance costs
Net finance costs reduced by £0.1m to £7.3m, primarily reflecting lower levels of average debt compared to the prior period.
With effect from 1 April 2013, the Group has adopted the revision to IAS 19, Employee Benefits. This replaces interest cost and expected return on plan assets with a finance cost on the pension deficit calculated using the rate currently used to discount defined benefit pension liabilities. The change has been applied retrospectively and comparative figures have been restated (see note 3 to the financial statements).
Taxation
The tax charge of £3.2m (2012 restated: £3.9m) for the current period represents an effective tax rate of 28% (2012 restated: 29%). This includes a £0.1m charge relating to the impact of a reduction in the UK corporation tax rate from 23% to 20%. A charge of £4.8m is recognised in the Consolidated Statement of Comprehensive Income in respect of deferred tax assets on pension liabilities. We anticipate an effective tax rate for the full year of 28%.
Cash flow
Free cash inflow, 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 £10.2m (2012: outflow of £27.0m).
Cash outflow in respect of working capital was £0.2m (2012: £40.2m); the prior period reflected the planned withdrawal of the working capital management programme after 31 March 2012. The cash outflow related to interest was £2.9m (2012: £3.2m). Tax paid in cash was £2.1m (2012: £3.1m) and capital expenditure, which is primarily internal software development and office equipment, was £7.8m (2012: £4.8m). Cash costs for pension deficit reduction were £4.2m (2012: £2.7m).
In addition to free cash flow, the other major cash flow item related to £4.7m of dividends paid to external shareholders during the year (2012: £4.4m). Overall, we reduced net debt by £6.6m during the first half of the financial year.
Funding and net debt
The principal banking facility is a £190m multi-currency revolving credit facility (RCF) that is committed until November 2014. The RCF is used for loans, letters of credit and guarantees, with interest based on LIBOR/EURIBOR plus a margin and costs. The Group has fixed interest on CHF25m until November 2014 and on £20m until February 2017. In addition, the Group has a £30m fixed rate loan, repayable by 2018, and uncommitted facilities amounting to around £19m at the half year.
The principal covenants continue to be measured semi-annually, at the end of March and the end of September, against EBITDA. The covenants require that net debt is less than 3.0 times EBITDA and net external interest is covered at least 4.0 times by EBITDA, both on a rolling 12-month basis. The definition of EBITDA for covenant purposes is not materially different from the definition used in these financial statements.
Net debt reduced by £6.6m to £80.4m and was equivalent to 1.3 times EBITDA for the last 12 months (2012: 1.8 times). This translates into gearing of 39.6% (31 March 2013: 41.8%), or 132% (31 March 2013: 106%) including pension deficits and related deferred tax assets. Net external interest costs were covered 9.1 times by EBITDA (2012: 8.8 times).
Pensions
The Group-wide pension deficits under IAS 19 have increased by £14.2m to £173.6m before tax.
The UK scheme deficit increased by £14.2m to £158.8m. A £6.9m increase in scheme assets was more than offset by a £21.1m increase in scheme liabilities, primarily driven by a lower discount rate adding £16.8m. For several years, the UK defined benefit scheme has been closed to new entrants and has capped increases in pensionable salary. Following a consultation process with active members, the UK defined benefit section was closed to future accrual on 30 June 2013 and replaced with a defined contribution section.
At 30 September 2013, there was a deferred tax asset of £31.8m (31 March 2013: £33.2m) relating to the UK deficit and a liability of £0.1m (31 March 2013: £0.2m) relating to the overseas schemes. The change in UK deferred tax includes the reduction in the headline rate of UK corporation tax.
The revision to IAS 19, Employee Benefits, applied from 1 April 2013, has no impact on the net deficit. The increase in finance cost recognised in the income statement is offset by a corresponding reduction in re-measurements recognised in other comprehensive income.
Related parties
Related party disclosures are provided in note 22 to the financial statements.
Foreign currency
The following principal exchange rates have been used in the financial statements:
Income Statement | Balance Sheet | ||||||
2013 | 2012 | Change | 2013 | 2012* | Change | ||
Euro | 1.17 | 1.25 | +6% | 1.20 | 1.18 | -2% | |
Swiss Franc | 1.44 | 1.50 | +4% | 1.46 | 1.44 | -1% | |
US Dollar | 1.55 | 1.58 | +2% | 1.62 | 1.52 | -7% | |
Canadian Dollar | 1.60 | 1.59 | -1% | 1.66 | 1.54 | -8% | |
* As at 31 March 2013
Going concern
The Board believes that the Group has access to adequate resources for the foreseeable future and has continued to prepare the financial statements on a going concern basis.
Summary income statement | |||
Six months ended 30 September | Restated (2) | As previously stated | |
2013 | 2012 | 2012 | |
£m | £m | £m | |
Revenue | 168.4 | 168.9 | 168.9 |
EBITDA before exceptional items | 28.4 | 28.2 | 28.2 |
Depreciation and amortisation (1) | (5.7) | (5.5) | (5.5) |
Underlying operating profit | 22.7 | 22.7 | 22.7 |
Amortisation of acquired intangibles | (2.0) | (2.0) | (2.0) |
Exceptional items | (2.6) | - | - |
Operating profit | 18.1 | 20.7 | 20.7 |
Share of associates and joint ventures | 0.6 | 0.3 | 0.3 |
Net finance costs (2) | (7.3) | (7.4) | (5.7) |
Profit before tax | 11.4 | 13.6 | 15.3 |
Taxation(2) | (3.2) | (3.9) | (4.3) |
Profit for the period | 8.2 | 9.7 | 11.0 |
Summary balance sheet | |||
30 September | 31 March | ||
2013 | 2013 | ||
£m | £m | ||
Goodwill and other intangible assets | 239.3 | 245.0 | |
Property, plant, equipment and investments | 13.7 | 12.7 | |
Working capital | (49.7) | (50.4) | |
Current tax liabilities (net) | (5.5) | (5.2) | |
Deferred tax assets (net) | 41.0 | 42.8 | |
Net debt | (80.4) | (87.0) | |
Pension liabilities (pre-tax) | (173.6) | (159.4) | |
Provisions and other items | (4.1) | (3.6) | |
Net liabilities | (19.3) | (5.1) | |
Summary cash flow statement | |||
Six months ended 30 September | 2013 | 2012 | |
£m | £m | ||
EBITDA before exceptional items | 28.4 | 28.2 | |
Exceptional items | (1.0) | - | |
Working capital movements | (0.2) | (40.2) | |
Interest paid | (2.9) | (3.2) | |
Tax paid | (2.1) | (3.1) | |
Capital expenditure | (7.8) | (4.8) | |
Pension funding in excess of EBITDA charge | (4.2) | (2.7) | |
Other movements | - | (1.2) | |
Free cash inflow/(outflow) | 10.2 | (27.0) | |
Employee Benefits Trust purchases | - | (8.0) | |
Dividends paid to external shareholders | (4.7) | (4.4) | |
Currency translation and other | 1.1 | (0.1) | |
Reduction/(increase) in net debt | 6.6 | (39.5) |
(1) Excluding amortisation of acquired intangibles
(2) Prior-year numbers are restated on adoption of the revised International Accounting Standard 19, Employee Benefits
Hogg Robinson Group plc | |||
Consolidated Income Statement | |||
For the period ended 30 September 2013 | |||
Notes | Half year ended 30 September | ||
Restated* | |||
2013 | 2012 | ||
£m | £m | ||
Revenue | 7 | 168.4 | 168.9 |
Operating expenses | 8 | (150.3) | (148.2) |
Operating profit | 7 | 18.1 | 20.7 |
Analysed as: | |||
Underlying operating profit | 7 | 22.7 | 22.7 |
Amortisation of acquired intangibles | 7 | (2.0) | (2.0) |
Exceptional items | 7, 8 | (2.6) | - |
Operating profit | 18.1 | 20.7 | |
Share of results of associates and joint ventures | 0.6 | 0.3 | |
Finance income | 10 | 0.1 | 0.1 |
Finance costs | 10 | (7.4) | (7.5) |
Profit before tax | 11.4 | 13.6 | |
Income tax expense | 11 | (3.2) | (3.9) |
Profit for the period | 8.2 | 9.7 | |
Profit attributable to: | |||
Equity shareholders of the Company | 12 | 7.7 | 9.2 |
Non-controlling interests | 0.5 | 0.5 | |
8.2 | 9.7 | ||
Notes | Half year ended 30 September | ||
Restated* | |||
2013 | 2012 | ||
pence | pence | ||
Earnings per share | 12 | ||
Basic | 2.4 | 3.0 | |
Diluted | 2.3 | 2.8 | |
*On adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3)
The notes set out below form an integral part of the condensed consolidated half-yearly financial information.
Hogg Robinson Group plc | ||||||
Consolidated Statement of Comprehensive Income | ||||||
For the period ended 30 September 2013 | ||||||
Half year ended 30 September | Half year ended 30 September | |||||
Other | Retained | Other | Retained | Restated* | ||
reserves | earnings | 2013 | reserves | earnings | 2012 | |
£m | £m | £m | £m | £m | £m | |
Profit for the period | - | 8.2 | 8.2 | - | 9.7 | 9.7 |
Other comprehensive income / (expense) | ||||||
Items that will not be reclassified to profit or loss | ||||||
Remeasurements on defined benefit pension schemes | - | (15.0) | (15.0) | - | (12.1) | (12.1) |
Deferred tax movement on pension liability | - | 3.5 | 3.5 | - | 2.9 | 2.9 |
Deferred tax movement on pension liability | ||||||
attributable to impact of UK rate change | - | (4.8) | (4.8) | - | (1.5) | (1.5) |
Items that may be subsequently reclassified | ||||||
to profit or loss | ||||||
Currency translation differences | (3.4) | - | (3.4) | (2.9) | - | (2.9) |
Amounts charged to hedging reserve | 0.8 | - | 0.8 | (0.3) | - | (0.3) |
Recycling of cash flow hedge | (0.2) | - | (0.2) | (0.9) | - | (0.9) |
Other comprehensive expense for the period, net of tax | (2.8) | (16.3) | (19.1) | (4.1) | (10.7) | (14.8) |
Total comprehensive expense for the period | (2.8) | (8.1) | (10.9) | (4.1) | (1.0) | (5.1) |
Total comprehensive expense attributable to: | ||||||
Equity shareholders of the Company | (2.7) | (8.6) | (11.3) | (4.0) | (1.5) | (5.5) |
Non-controlling interests | (0.1) | 0.5 | 0.4 | (0.1) | 0.5 | 0.4 |
(2.8) | (8.1) | (10.9) | (4.1) | (1.0) | (5.1) | |
*On adoption of the revised International Accounting Standard 19, Employee Benefits, and re-presentation of deferred tax related to share-based incentives (see note 3)
The notes set out below form an integral part of the condensed consolidated half-yearly financial information.
Hogg Robinson Group plc | |||
Consolidated Balance Sheet | |||
As at 30 September 2013 | |||
Notes | 30 September | 31 March | |
2013 | 2013 | ||
£m | £m | ||
Non-current assets | |||
Goodwill and other intangible assets | 14 | 239.3 | 245.0 |
Property, plant and equipment | 15 | 10.2 | 9.5 |
Investments accounted for using the equity method | 3.5 | 3.2 | |
Trade and other receivables | 0.1 | 0.1 | |
Financial assets - derivative financial instruments | 1.0 | 0.7 | |
Deferred tax assets | 41.2 | 43.2 | |
295.3 | 301.7 | ||
Current assets | |||
Trade and other receivables | 99.2 | 98.8 | |
Financial assets - derivative financial instruments | 0.1 | 0.2 | |
Current tax assets | 0.3 | 0.8 | |
Cash and cash equivalent assets | 16 | 38.8 | 49.0 |
138.4 | 148.8 | ||
Total assets | 433.7 | 450.5 | |
Non-current liabilities | |||
Financial liabilities - borrowings | 16 | (118.9) | (134.9) |
Financial liabilities - derivative financial instruments | (0.3) | (0.8) | |
Deferred tax liabilities | (0.2) | (0.4) | |
Retirement benefit obligations | 18 | (173.6) | (159.4) |
Provisions | 17 | (3.1) | (3.4) |
(296.1) | (298.9) | ||
Current liabilities | |||
Financial liabilities - borrowings | 16 | (0.2) | (0.3) |
Financial liabilities - derivative financial instruments | (0.1) | (0.1) | |
Current tax liabilities | (5.8) | (6.0) | |
Trade and other payables | (149.0) | (149.3) | |
Provisions | 17 | (1.8) | (1.0) |
(156.9) | (156.7) | ||
Total liabilities | (453.0) | (455.6) | |
Net liabilities | (19.3) | (5.1) | |
Capital and reserves | |||
Share capital | 19 | 3.2 | 3.2 |
Share premium | 19 | 178.9 | 178.9 |
Other reserves | 20 | 3.2 | 5.9 |
Retained earnings | (205.8) | (193.9) | |
Attributable to owners of Hogg Robinson Group plc | (20.5) | (5.9) | |
Attributable to non-controlling interests | 1.2 | 0.8 | |
Total deficit | (19.3) | (5.1) |
The notes set out below form an integral part of the condensed consolidated half-yearly financial information.
Hogg Robinson Group plc | |||||||
Consolidated Statement of Changes in Equity | |||||||
As at 30 September 2013 | |||||||
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 2013 | 3.2 | 178.9 | 5.9 | (193.9) | (5.9) | 0.8 | (5.1) |
Retained profit for the period | - | - | - | 7.7 | 7.7 | 0.5 | 8.2 |
Total other comprehensive income | - | - | (2.7) | (16.3) | (19.0) | (0.1) | (19.1) |
Transactions with owners: | |||||||
Dividends | - | - | - | (4.7) | (4.7) | - | (4.7) |
Share-based incentives - charge for period | - | - | - | 1.0 | 1.0 | - | 1.0 |
Deferred tax movements on cumulative share-based incentive costs | - | - | - | (0.1) | (0.1) | - | (0.1) |
Tax on exercised share-based incentive costs | - | - | - | 0.5 | 0.5 | - | 0.5 |
Total transactions with owners | - | - | - | (3.3) | (3.3) | - | (3.3) |
Balance at 30 September 2013 | 3.2 | 178.9 | 3.2 | (205.8) | (20.5) | 1.2 | (19.3) |
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* | - | - | - | 9.2 | 9.2 | 0.5 | 9.7 |
Total other comprehensive income | - | - | (4.0) | (10.7) | (14.7) | (0.1) | (14.8) |
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 |
Deferred tax movements on cumulative share-based incentive costs* | - | - | - | (0.6) | (0.6) | - | (0.6) |
Tax on exercised share-based incentive costs* | - | - | - | 1.3 | 1.3 | - | 1.3 |
Acquisition of non-controlling interests | - | - | - | (0.1) | (0.1) | - | (0.1) |
Reclassification | - | - | (4.5) | 4.5 | - | - | - |
Total transactions with owners | - | 1.3 | (4.7) | (7.3) | (10.7) | (0.6) | (11.3) |
Balance at 30 September 2012 | 3.2 | 178.9 | 1.4 | (200.8) | (17.3) | 1.3 | (16.0) |
*Restated on adoption of the revised International Accounting Standard 19, Employee Benefits, and re-presentation of deferred tax related to share-based incentives (see note 3)
The notes set out below form an integral part of the condensed consolidated half-yearly financial information.
Hogg Robinson Group plc | |||
Consolidated Cash Flow Statement | |||
For the period ended 30 September 2013 | |||
Notes | Half year ended 30 September | ||
2013 | 2012 | ||
£m | £m | ||
Cash flows from operating activities | |||
Cash generated from operations | 21 | 23.0 | (14.9) |
Interest paid | (3.3) | (3.5) | |
Tax paid | (2.1) | (3.1) | |
Cash flows from operating activities - net | 17.6 | (21.5) | |
Cash flows from investing activities | |||
Disposals of associates, joint ventures and other investments | - | 0.1 | |
Purchase of property, plant and equipment | (3.5) | (1.0) | |
Purchase and internal development of intangible assets | (4.3) | (3.8) | |
Interest received | 0.1 | 0.1 | |
Dividends received from associates and joint ventures | 0.3 | 0.2 | |
Cash flows from investing activities - net | (7.4) | (4.4) | |
Cash flows from financing activities | |||
Repayment of borrowings | (14.4) | (1.1) | |
New borrowings | - | 20.2 | |
Cash effect of currency swaps | 0.4 | - | |
Acquisition of non-controlling interest | - | (0.1) | |
Employee Benefits Trust | - | (8.0) | |
Dividends paid to external shareholders | (4.7) | (4.4) | |
Dividends paid to non-controlling interests | - | (0.6) | |
Cash flows from financing activities - net | (18.7) | 6.0 | |
Net decrease in cash and cash equivalents | (8.5) | (19.9) | |
Cash and cash equivalents at the beginning of the period | 49.0 | 68.5 | |
Exchange rate effects | (1.7) | (0.8) | |
Cash and cash equivalents at the end of the period | 38.8 | 47.8 | |
Cash and cash equivalent assets | 38.8 | 47.8 | |
The notes set out below form an integral part of the condensed consolidated half-yearly financial information.
Hogg Robinson Group plc
Notes to the Condensed Consolidated Half-Year Financial Information
For the period ended 30 September 2013
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.
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 27 November 2013.
This condensed consolidated half-yearly financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2013 were approved by the Board of Directors on 22 May 2013 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 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 year ended 30 September 2013 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with the Annual Report 2013, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The Directors consider that, taking into account the projected cash flows and available facilities of the Group, the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors adopt the going concern basis for the condensed consolidated half-yearly financial information.
3 Accounting policies
The accounting policies adopted are consistent with those of the previous financial year except as described below:
IAS 19 (revised), 'Employee benefits', amends the accounting for employment benefits. The Group has applied the standard retrospectively in accordance with the transition provisions of the standard. The impact on the Group is to replace interest cost on the defined benefit obligation and the expected return on plan assets with a net interest cost based on the net defined pension liability and the discount rate, measured at the beginning of the year. There is no change to determining the discount rate. This has increased the charge to finance costs recognised in the income statement by £2.3m (2012: £1.7m) as the discount rate applied to assets is lower than the expected return on assets. This has no effect on total comprehensive income as the increased charge to the income statement is offset by a corresponding credit in other comprehensive income. The net deficit remains unchanged.
Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.
There are no other standards or interpretations that are effective for the first time for financial years beginning on or after 1 April 2013 that would be expected to have a material impact on the Group. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Other accounting policies adopted are consistent with those of the Annual Consolidated Financial Statements for the year ended 31 March 2013, 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.
Deferred tax movements relating to share-based incentives have been presented within the Consolidated Statement of Changes in Equity rather than the Consolidated Statement of Comprehensive Income. Comparative figures have been re-presented accordingly.
4 Estimates
The preparation of condensed consolidated half-yearly financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this condensed consolidated half-yearly financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements for the year ended 31 March 2013, with the exception of estimates that are required in determining the provision for income tax expense.
5 Principal risks and uncertainties
The principal risks and uncertainties affecting the Group were identified as part of the Business Review and the Financial Risk Management note set out on pages 8 to 9 and 45 to 46 respectively of the Annual Report 2013, a copy of which is available on the Group's website www.hrgworldwide.com. The Board's view is that these risks and the risk management policies in place remain substantially unchanged for the second half of the current financial year. These risks and uncertainties can be summarised as follows:
Operational risks
· Loss 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 control
· Increased pension funding
· Foreign currency risk
· Interest rate risk
· Credit risk
· Liquidity risk
The Group's financial instruments, measured at fair value, are all classed as level 2 in the fair value hierarchy as defined in note 13 of the Annual Report 2013. There were no transfers between levels during the period.
External risks
· Significant economic or other crisis
· Competitive environment
There may be additional risks unknown to the Group and other risks, currently believed to be immaterial, which could turn out to be material. These risks, whether they materialise individually or simultaneously, could significantly affect the Group's business and financial results.
6 Seasonality
The Group's revenue and operating profit are affected by the seasonality of corporate travel business, with travel declining during the summer and Christmas holiday periods and, to a lesser extent, during Easter holidays, which are times when many corporate travellers are on holiday. Typically, the Group experiences the highest levels of revenue in the last months of its financial year, principally reflecting increased travel activity by its clients during 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 of two core activities, Corporate Travel Management, which is analysed into three distinct geographic segments, and Spendvision. The Group's internal reporting processes do not distinguish between the numerous sources of income that comprise revenue for Corporate Travel Management. The performance of the operating segments is assessed based on a measure of operating profit excluding items of an exceptional nature. Finance income and finance costs, and income tax expense, are not included in the result for each operating segment that is reviewed by the Executive Management Team. Other information provided to the Executive Management Team, except as noted below, is measured in a manner consistent with that in the condensed consolidated half-yearly financial information.
Total segment assets exclude cash and cash equivalent assets, current tax assets and deferred tax assets which are managed on a central basis. These are included as part of the reconciliation to total assets in the Consolidated Balance Sheet.
Corporate Travel Management | ||||||
North | Asia | Sub- | ||||
Europe | America | Pacific | total | Spendvision | Total | |
£m | £m | £m | £m | £m | £m | |
Half year ended 30 September 2013 | ||||||
Revenue from external customers | 113.6 | 32.1 | 12.6 | 158.3 | 10.1 | 168.4 |
Underlying operating profit | 14.7 | 5.2 | 0.4 | 20.3 | 2.4 | 22.7 |
Amortisation of acquired intangibles | (1.5) | (0.4) | - | (1.9) | (0.1) | (2.0) |
Operating profit before exceptional items | 13.2 | 4.8 | 0.4 | 18.4 | 2.3 | 20.7 |
Exceptional items | (2.2) | - | (0.4) | (2.6) | - | (2.6) |
Operating profit | 11.0 | 4.8 | - | 15.8 | 2.3 | 18.1 |
Underlying margin | 12.9% | 16.2% | 3.2% | 12.8% | 23.8% | 13.5% |
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% |
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 2013 | 252.0 | 80.3 | 12.5 | 344.8 | 8.6 | 353.4 |
31 March 2013 | 248.2 | 83.0 | 16.7 | 347.9 | 9.6 | 357.5 |
Reportable segments' assets are reconciled to total assets as follows:
30 September | 31 March | |||||
2013 | 2013 | |||||
£m | £m | |||||
Total segment assets | 353.4 | 357.5 | ||||
Cash and cash equivalent assets | 38.8 | 49.0 | ||||
Current tax assets | 0.3 | 0.8 | ||||
Deferred tax assets | 41.2 | 43.2 | ||||
433.7 | 450.5 |
8 Operating expenses
Half year ended 30 September | ||
2013 | 2012 | |
£m | £m | |
Underlying operating expenses: | ||
Staff costs before exceptional items (note 9) | 97.7 | 100.8 |
Amortisation of intangible assets, other than acquired intangible assets | 3.4 | 3.1 |
Depreciation of property, plant and equipment | 2.3 | 2.4 |
Operating lease rentals - buildings | 6.3 | 6.9 |
Operating lease rentals - other assets | 0.7 | 0.8 |
Currency translation differences | 0.3 | 0.1 |
Other expenses | 35.0 | 32.1 |
145.7 | 146.2 | |
Amortisation of acquired intangibles: | ||
Amortisation of client relationships | 1.9 | 1.9 |
Amortisation of other acquired intangible assets | 0.1 | 0.1 |
2.0 | 2.0 | |
Exceptional items: | ||
Restructuring costs: | ||
Staff costs (note 9) | 2.2 | - |
Other expenses | 0.4 | - |
2.6 | - | |
Total operating expenses | 150.3 | 148.2 |
Exceptional items
Restructuring costs of £2.6m were incurred during the year and relate to planned cost reduction programmes in Europe and Australia. They are primarily in respect of redundancy costs, of which £2.2m is reflected in staff costs, and onerous lease provisions.
9 Staff costs
Half year ended 30 September | |||||
2013 | |||||
Before | 2013 | ||||
exceptional | Exceptional | 2013 | 2012 | ||
items | items | Total | |||
£m | £m | £m | £m | ||
Wages and salaries | 82.3 | - | 82.3 | 83.9 | |
Social security costs | 9.2 | - | 9.2 | 10.1 | |
Pension costs | 5.2 | - | 5.2 | 5.4 | |
Redundancy and termination costs (note 8) | - | 2.2 | 2.2 | 0.3 | |
Share-based incentives | 1.0 | - | 1.0 | 1.1 | |
97.7 | 2.2 | 99.9 | 100.8 | ||
Pension costs comprise: | |||||
Defined benefit schemes | 1.6 | - | 1.6 | 2.1 | |
Defined contribution schemes | 3.6 | - | 3.6 | 3.3 | |
5.2 | - | 5.2 | 5.4 | ||
Half year ended 30 September | |||||||
2013 | 2012 | ||||||
number | number | ||||||
Average monthly number of staff employed by the Group | 4,868 | 5,053 | |||||
10 Finance income and finance costs
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
£m | £m | |
Finance income - bank interest | 0.1 | 0.1 |
Interest on bank loans and overdrafts | (2.8) | (3.0) |
Amortisation of issue costs on bank loans | (0.4) | (0.4) |
Net interest expense on retirement obligations | (3.7) | (3.6) |
Other finance charges | (0.5) | (0.4) |
Foreign exchange loss | (0.2) | (0.9) |
Recycle of cash flow hedge from hedging reserve | 0.2 | 0.9 |
Interest on derivative financial instruments | - | (0.1) |
Finance costs | (7.4) | (7.5) |
Net finance costs | (7.3) | (7.4) |
* On adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3)
11 Income tax expense
The tax charge is split as follows:
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
£m | £m | |
United Kingdom | 1.2 | 1.7 |
Overseas | 1.9 | 2.1 |
Change in headline tax rate | 0.1 | 0.1 |
3.2 | 3.9 | |
* On adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3)
Taxes on income in the half-year periods to 30 September are accrued using the tax rate that would be applicable to the expected total annual earnings by country. An effective tax rate of approximately 28% is anticipated for the year ended 31 March 2014 (2013: 28%).
Tax rate change
Legislation to reduce the UK corporation tax rate to 20% with effect from 1 April 2015 was substantively enacted in July 2013. As a result, the Group is required to revalue all of its recognised UK deferred tax assets and liabilities. The revaluation is anticipated to result in a full year deferred tax charge to the Consolidated Income Statement of £0.1m, together with a charge to the Consolidated Statement of Comprehensive Income of £4.8m in respect of deferred tax assets on pension liabilities. The Group is reflecting the full impact of £4.9m in the first half of the year.
12 Earnings per share
Earnings per share attributable to equity holders of the Company were as follows:
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
pence | pence | |
Earnings per share | ||
Basic | 2.4 | 3.0 |
Diluted | 2.3 | 2.8 |
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
£m | £m | |
Earnings for the purposes of earnings per share |
| |
Profit for the period | 8.2 | 9.7 |
Less: amounts attributable to non-controlling interests | (0.5) | (0.5) |
Total | 7.7 | 9.2 |
*On adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3)
Half year ended 30 September | ||
2013 | 2012 | |
number | number | |
m | m | |
Weighted average number of Ordinary shares in issue | ||
Issued (for basic EPS) | 315.9 | 311.7 |
Dilutive potential ordinary shares | 12.8 | 17.4 |
For diluted EPS | 328.7 | 329.1 |
Underlying earnings per share
Underlying earnings per share attributable to equity holders of the Company were as follows:
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
pence | pence | |
Underlying earnings per share | ||
Basic | 3.5 | 3.4 |
Diluted | 3.3 | 3.2 |
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
£m | £m | |
Earnings for the purposes of underlying earnings per share | ||
Profit before tax from continuing operations | 11.4 | 13.6 |
Add: amortisation of acquired intangibles | 2.0 | 2.0 |
Add: exceptional items | 2.6 | - |
Underlying profit before tax | 16.0 | 15.6 |
Underlying income tax expense | (4.5) | (4.5) |
Underlying profit for the financial year | 11.5 | 11.1 |
Less: amounts attributable to non-controlling interests | (0.5) | (0.5) |
Total | 11.0 | 10.6 |
*On adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3)
Underlying earnings are earnings before amortisation of acquired intangibles, exceptional items and related income tax expense.
13 Dividends
A dividend that related to the year ended 31 March 2013 amounting to 1.5p per ordinary share (£4,690,644) was paid on 29 July 2013. The dividend was paid to shareholders who were on the register at 28 June 2013. The Employee Benefits Trust has waived its rights to dividends.
The Directors have declared an interim dividend in respect of the six months ended 30 September 2013 of 0.63p payable on 3 January 2014 to shareholders who are on the register at 6 December 2013. This interim dividend, amounting to £2.0m has not been recognised as a liability in this half-yearly financial report, in accordance with IAS 10, Events after the Balance Sheet Date.
14 Goodwill and other intangible assets
30 September | 31 March | ||||
2013 | 2013 | ||||
£m | £m | ||||
Goodwill | 219.0 | 222.6 | |||
Other intangible assets | 20.3 | 22.4 | |||
239.3 | 245.0 |
Computer software | |||||
Externally | Internally | Client | |||
Goodwill | acquired | generated | relationships | Total | |
£m | £m | £m | £m | £m | |
Cost | |||||
At 1 April 2012 | 246.2 | 17.2 | 27.3 | 37.5 | 328.2 |
Additions for the year | - | 1.7 | 5.9 | - | 7.6 |
Disposals for the year | - | (0.4) | - | - | (0.4) |
Exchange differences | 2.8 | 0.3 | 0.6 | 0.6 | 4.3 |
At 31 March 2013 | 249.0 | 18.8 | 33.8 | 38.1 | 339.7 |
Additions for the period | - | 0.6 | 3.7 | - | 4.3 |
Disposals for the period | - | (0.1) | - | - | (0.1) |
Exchange differences | (3.6) | (0.7) | (1.3) | (0.9) | (6.5) |
At 30 September 2013 | 245.4 | 18.6 | 36.2 | 37.2 | 337.4 |
Accumulated amortisation | |||||
At 1 April 2012 | 26.4 | 13.8 | 14.2 | 29.2 | 83.6 |
Amortisation charge for the year | - | 1.6 | 5.1 | 3.7 | 10.4 |
Disposals for the year | - | (0.4) | - | - | (0.4) |
Exchange differences | - | 0.4 | 0.1 | 0.6 | 1.1 |
At 31 March 2013 | 26.4 | 15.4 | 19.4 | 33.5 | 94.7 |
Amortisation charge for the period | - | 0.8 | 2.7 | 1.9 | 5.4 |
Disposals for the period | - | (0.1) | - | - | (0.1) |
Exchange differences | - | (0.5) | (0.6) | (0.8) | (1.9) |
At 30 September 2013 | 26.4 | 15.6 | 21.5 | 34.6 | 98.1 |
Carrying amount | |||||
At 1 April 2012 | 219.8 | 3.4 | 13.1 | 8.3 | 244.6 |
At 31 March 2013 | 222.6 | 3.4 | 14.4 | 4.6 | 245.0 |
At 30 September 2013 | 219.0 | 3.0 | 14.7 | 2.6 | 239.3 |
15 Property, plant and equipment
Plant and | |||
Properties | equipment | Total | |
£m | £m | £m | |
Cost | |||
At 1 April 2012 | 10.7 | 50.0 | 60.7 |
Additions for the year | 0.1 | 2.6 | 2.7 |
Disposals for the year | (0.4) | (0.8) | (1.2) |
Exchange differences | 0.2 | 0.7 | 0.9 |
At 31 March 2013 | 10.6 | 52.5 | 63.1 |
Additions for the period | 0.5 | 3.0 | 3.5 |
Disposals for the period | (1.3) | (14.0) | (15.3) |
Exchange differences | (0.4) | (2.1) | (2.5) |
At 30 September 2013 | 9.4 | 39.4 | 48.8 |
Accumulated depreciation | |||
At 1 April 2012 | 8.1 | 41.0 | 49.1 |
Depreciation charge for the year | 0.7 | 4.2 | 4.9 |
Disposals for the year | (0.4) | (0.8) | (1.2) |
Exchange differences | 0.2 | 0.6 | 0.8 |
At 31 March 2013 | 8.6 | 45.0 | 53.6 |
Depreciation charge for the period | 0.4 | 1.9 | 2.3 |
Disposals for the period | (1.3) | (14.0) | (15.3) |
Exchange differences | (0.4) | (1.6) | (2.0) |
At 30 September 2013 | 7.3 | 31.3 | 38.6 |
Carrying amount | |||
At 1 April 2012 | 2.6 | 9.0 | 11.6 |
At 31 March 2013 | 2.0 | 7.5 | 9.5 |
At 30 September 2013 | 2.1 | 8.1 | 10.2 |
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 | |
2013 | 2013 | |
£m | £m | |
Current (due within one year) | ||
Finance leases | 0.2 | 0.3 |
0.2 | 0.3 | |
Non-current (due after more than one year) | ||
Bank loans | 119.7 | 136.0 |
Unamortised loan issue costs | (1.1) | (1.5) |
Finance leases | 0.3 | 0.4 |
118.9 | 134.9 | |
119.1 | 135.2 |
30 September | 31 March | |
2013 | 2013 | |
£m | £m | |
Net debt | ||
Total financial liabilities - borrowings | 119.1 | 135.2 |
Add back: Unamortised loan issue costs | 1.1 | 1.5 |
Cash and cash equivalent assets | (38.8) | (49.0) |
Debt-related derivatives | (1.0) | (0.7) |
Net debt | 80.4 | 87.0 |
Net debt includes only the components of derivative financial instruments relating to the value of debt.
17 Provisions
Re-organisation | Other | Total | |
£m | £m | £m | |
At 1 April 2012 | 1.6 | 4.2 | 5.8 |
Additional provisions made in the year charged in the Consolidated Income Statement | 1.5 | 0.1 | 1.6 |
Amounts used during the year | (2.2) | (0.7) | (2.9) |
Unused provisions reversed | - | (0.2) | (0.2) |
Exchange differences | 0.1 | - | 0.1 |
At 31 March 2013 | 1.0 | 3.4 | 4.4 |
Additional provisions made in the period charged in the Consolidated Income Statement | 2.8 | 0.1 | 2.9 |
Amounts used during the period | (2.0) | (0.3) | (2.3) |
Exchange differences | - | (0.1) | (0.1) |
At 30 September 2013 | 1.8 | 3.1 | 4.9 |
Reorganisation provisions represent redundancy and office closure costs in a number of Group companies and are disclosed as current liabilities because they are likely to give rise to payment within one year of the balance sheet date. At 30 September 2013 £1.6m (2012: £nil) was held against reorganisation provisions in respect of exceptional items.
'Other' includes provisions for onerous contracts, property dilapidations and litigation, which are likely to give rise to payment after more than one year of the balance sheet date.
A provision for onerous contracts has been recognised for contracts where the expected benefits derived by the Group are lower than the unavoidable costs of meeting the Group's obligations under the contract.
Provision has been made for the present value of property lease commitments in respect of properties surplus to operational requirements. Allowance has been made for anticipated sublet rental income, and costs to restore premises to their original condition upon vacating them where such an obligation exists under the lease.
18 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 UK employees until it was closed to new members in March 2003, with benefits based on final pensionable salary. The increase in final pensionable salary since 31 March 2003 is predominantly limited to the lower of the increase in the Retail Prices Index and 5% per annum. The latest actuarial valuation of the scheme was carried out at 31 March 2011 by an independent qualified actuary.
Following a consultation process with active members, the UK defined benefit section was closed to future accrual on 30 June 2013 and replaced with a defined contribution section.
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 | |
2013 | 2013 | |
£m | £m | |
UK scheme: | ||
Defined benefit obligations | (392.0) | (370.9) |
Fair value of plan assets | 233.2 | 226.3 |
Deficit - UK Scheme | (158.8) | (144.6) |
Deficit - Overseas Schemes | (14.8) | (14.8) |
(173.6) | (159.4) |
The following amounts have been included in the Consolidated Income Statement in respect of the UK Scheme:
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
£m | £m | |
Current service charge | 0.8 | 1.3 |
Net interest expense on retirement benefit obligations | 3.4 | 3.3 |
Total charge to the Consolidated Income Statement | 4.2 | 4.6 |
*On adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3)
The current service charge represents the period up until 30 June prior to the closure of the scheme to future accrual. It is computed based on the actuarial assumptions in place at the beginning of the financial year and translates to 21.8% of pensionable salaries (2012: 18.3%).
The key assumptions used for the UK Scheme were:
30 September | 31 March | |
2013 | 2013 | |
Rate of increase in final pensionable salary | 3.40% | 3.30% |
Rate of increase in pensions in payment - accrued before 1999 | 5.00% | 5.00% |
Rate of increase in pensions in payment - accrued after 1999 | 3.40% | 3.30% |
Discount rate | 4.50% | 4.70% |
Inflation - RPI | 3.40% | 3.30% |
Inflation - CPI | 2.40% | 2.60% |
19 Share capital and share premium account
30 September | |
2013 | |
number | |
Authorised | |
Ordinary shares of 1p each | 513,808,171 |
Issued, called up and fully paid | |
At 1 April 2013 and 30 September 2013 | 323,395,753 |
30 September | |
2013 | |
£m | |
Issued, called up and fully paid | |
Ordinary shares of 1p each | 3.2 |
The total number of Ordinary shares in the Company held by the Employee Benefits Trust as at 30 September 2013 was 2,953,043 (31 March 2013: 10,686,135) with a market value of £2.2m (31 March 2013: £6.1m).
Share premium account | |
£m | |
At 1 April 2013 and 30 September 2013 | 178.9 |
20 Other reserves
Total | ||||
Exchange | Hedging | other | ||
reserve | reserve | reserves | ||
£m | £m | £m | ||
Balance at 1 April 2013 | 6.7 | (0.8) | 5.9 | |
Other comprehensive income: | ||||
Fair value movement on cash flow hedges | - | 0.8 | 0.8 | |
Recycle of cash flow hedge from hedging reserve to income statement | - | (0.2) | (0.2) | |
Currency translation differences | (3.3) | - | (3.3) | |
Balance at 30 September 2013 | 3.4 | (0.2) | 3.2 | |
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 |
21 Cash generated from operations
Half year ended 30 September | ||
Restated* | ||
2013 | 2012 | |
£m | £m | |
Profit before tax from continuing operations | 11.4 | 13.6 |
Adjustments for: | ||
Depreciation and amortisation (notes 14 and 15) | 7.7 | 7.5 |
Net increase in provisions | 2.9 | - |
Share of results of associates and joint ventures | (0.6) | (0.3) |
Net finance costs (note 10) | 7.3 | 7.4 |
Share based payments | 1.0 | 1.1 |
29.7 | 29.3 | |
Cash expenditure charged to provisions | (2.3) | (1.3) |
Change in trade and other receivables | (3.7) | 3.0 |
Change in trade and other payables | 3.5 | (43.2) |
Pension funding in excess of charge to operating profit | (4.2) | (2.7) |
Cash generated from operations | 23.0 | (14.9) |
* Restated on adoption of the revised International Accounting Standard 19, Employee Benefits (see note 3) | ||
22 Related party transactions
There have been no material changes in the nature of related party transactions since 31 March 2013 as reported in note 28 of the Group's Annual Report 2013.
23 Contingent assets and contingent liabilities
In 1994 Compagnie Dens Ocean NV (CDO), an indirectly owned subsidiary, received a claim from the Belgian Customs authorities resulting in a liquidator being appointed in 1995. Civil litigation is in process with criminal proceedings being considered pending the final outcome of the civil action. The liquidator is defending the civil action vigorously and has received strong legal advice on the strength of CDO's case. The Directors continue to believe, on the basis of such advice, that any future impact on the net assets of the Group would not be material.
In 1999 a subsidiary company announced to members of the UK pension scheme that, in respect of pensions attributable to service after 1 August 1999, the rate of revaluation of pensions would be reduced. The scheme has been administered and accounted for on this basis. When the Scheme's rules were amended a mistake was made in the drafting of the requisite deed of amendment. The Trustees are supporting the company in a proposed application to the High Court to confirm the intended basis for providing pension increases under the scheme. A court date has not yet been set and while negotiations continue it is not possible to reliably measure the future outcome.
Hogg Robinson Group plc
Statement of Directors' Responsibilities
The Directors confirm that, to the best of their knowledge, this condensed consolidated half-yearly financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the Interim Management Report herein includes a fair review of the information required by DTR 4.2.7R and 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) Chairman
D J C Radcliffe Chief Executive
P J Harrison Group Finance Director
K A Ruffles Chief Operating Officer
A E Isaac(1) (2)
P Williams(1)
(1) Non-Executive Directors
(2) Senior Independent Director
By Order of the Board
Keith Burgess
Company Secretary
27 November 2013
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 Consolidated Financial Statements in the half-yearly financial report for the six months ended 30 September 2013, which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set 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 Conduct Authority.
As described in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of Consolidated Financial Statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of Consolidated Financial Statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Conduct Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of 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 to believe that the condensed set of Consolidated Financial Statements in the half-yearly financial report for the six months ended 30 September 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 November 2013
Notes:
(a) The maintenance and integrity of the Hogg Robinson Group plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the half-yearly financial report since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of the financial information may differ from legislation in other jurisdictions.