30 Nov 2010 07:00
30 November 2010 Hogg Robinson Group plc (`HRG', `the Company' or `the Group') Results for the six months ended 30 September 2010 Excellent first-half results Good growth prospects Summary of resultsSix months ended 30 September
2010 2009 Change Revenue £169.2m £155.3m +9% Underlying earnings (1) - Operating profit £19.5m £11.3m +73% - Operating profit margin 11.5% 7.3% +4.2 ppts - Profit before tax £15.3m £7.5m +104% - Earnings per share 3.3p 1.6p +106% Reported earnings - Operating profit £17.5m £7.1m +147% - Profit before tax £13.3m £3.3m +303% - Earnings per share 2.8p 0.6p +367% Interim dividend per share 0.5p 0.4p +25% Net debt £85.8m £96.0m -£10.2m Free cash outflow(2) (£6.1m) (£8.7m) +£2.6mFinancial Highlights
* Revenue up 9% at £169.2m (up 6% at constant currency) with growth across
all travel regions
* Underlying operating profit margin up from 7.3% to 11.5% due to operational
gearing * Underlying EPS up by 106% to 3.3p * Free cash flow (2) improvement of £2.6m
* Net debt down £10.2m from September 2009 at £85.8m; equivalent to 1.6x
underlying EBITDA(1) (2009: 2.3x)
* Re-financing of £220m committed credit lines completed, of which £190m
committed until November 2014 and £30m until November 2018
* Interim dividend up 25% to 0.5p per share (2009: 0.4p per share)
Operational Highlights
* Client travel spend up 22% (up 18% at constant currency) * Client retention rate remains above 90%
* HRG's technology supports increased demand by clients for online bookings
* Net new business wins (including Aviva, Avon and Grant Thornton) and new
sales pipeline provides further support for growth * Continued focus by clients on cost control and value for money plays to HRG's consultative strategy
* Disruptions as a result of volcanic ash and strikes generated more work for
HRG as we managed repatriation and other contingency plans, offsetting
travel disruption
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"This is a very good set of results with operating profit up by more than 70%and EPS more than double. Our strategy and business model have delivered overthe last two years. We have a proven management team, a disciplined approach tocost control and a relentless focus on our customers. As a result, we are wellplaced to leverage our global infrastructure and to take advantage of theimproving climate and growth prospects available to us."Uncertainty about the global economy will continue but we are encouraged bythe current signs of recovery in corporate travel and the Board believes thatwe will be slightly ahead of our previous expectations for the full year."
Notes:
(1) Before amortisation of acquired intangibles and exceptional items
(2) Free cash flow is the change in net debt before acquisitions and disposals, dividends and the impact of foreign exchange movements
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 Martin Robinson A presentation for analysts and institutional investors will be held at 0900hGMT today at Tulchan Communications, 85 Fleet Street, London EC4Y 1AE. Copiesof the presentation with audio commentary from HRG's presentation team will beavailable at www.hoggrobinsongroup.com by 1100h GMT today or soon thereafter.
Notes to Editors
Hogg Robinson Group plc (HRG) was established in 1845 and is an international corporate travel services company with headquarters located in Basingstoke, Hampshire, UK. The HRG worldwide network, including contracted partners, extends to 120 countries.
HRG's focus on its clients is underpinned by three differentiators - people,technology and breadth of service. The Company has experienced management andskilled operators together with proprietary technology which has been developedin-house. HRG offers a range of services around the globe to deliver value,cost savings, efficiency and innovation, without compromise.
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 intended tobe a profit forecast or be relied upon as a guide to future performance.
Chief Executive's Statement
Overview
I am pleased to announce a strong set of results for the six months ended 30September 2010. HRG has continued to make excellent progress during thisperiod, showing good performance across all key measures. At the heart of ourstrategy is a focus on delivering value through first-class service that istailored to the specific needs of each client. This approach underpins ourreputation as one of the world's leading international corporate travelservices companies and will help sustain a business which delivers value to allstakeholders.Both client spending and travel bookings were up 18% in real terms during thefirst six months of our financial year compared to the prior year, reflectingstrengthening confidence amongst many of our clients. This was first seen inAsia Pacific and has since followed into North America and Europe. Set againstrecent data published by, amongst others, the International Monetary Fund(IMF), the International Air Transport Association (IATA) and STR Global, wenow have firm evidence of an emerging recovery in corporate travel.Over the past two years, our focus has necessarily been the reduction of ouroperating costs, but we were careful to retain enough flexibility for when theeconomic climate started to improve. Despite increasing activity by our clientsduring the first six months of this financial year, we resisted any increase inour cost base until we were certain that the increased activity would besustained. In simple terms, we managed more activity than last year, and withfewer staff. As a result, average revenue per head was 10% higher at constantcurrency during the period. We will continue to manage this closely to ensurethat our cost base remains consistent with our strategy of delivering valuethrough first-class service.Although our clients are starting to travel more, many of the changes that theyadopted during the recession have continued. Clients remain cost conscious,though the priority now is on seeking travel solutions that offer good valuerather than those focused just simply on reducing overall travel spend. Theincreasing use of lower-cost online self-booking tools is part of that andHRG's own technology, together with the fact that we are able to work withthird-party technologies, is playing an important part in enabling that shift.
We have maintained our enviable client retention rate and have once again won more business than we lost. Amongst several new clients secured during the first half were Aviva, Avon and Grant Thornton.
We were very sorry to have to report the death, on 30 August 2010, of GeorgeBattersby, who had been a non executive director since the IPO in 2006. Georgemade a really significant contribution to the Company in his time on the Boardand we will miss his insight and guidance.
Financial results
Revenue of £169.2m was up 9.0% as reported, or up 5.8% at constant exchangerates. Underlying operating profit, which is stated before charging theamortisation of acquired intangibles and exceptional items, was up by 73% to £19.5m, and represents a margin improvement of 4.2 ppts to 11.5%. The operatingprofit includes a contribution of £0.8m from favourable movements in exchangerates. After taking account of net interest costs, underlying profit before taxwas up by 104% to £15.3m and underlying EPS increased by 106% from 1.6p to3.3p.
After reflecting the amortisation of acquired intangibles and last year's exceptional items, reported operating profit was up by 147% to £17.5m; profit before tax was up by 303% to £13.3m; EPS increased by 367% from 0.6p to 2.8p.
We have again chosen to manage our working capital requirements down at the endof September 2010, albeit to a lesser extent than at the end of March 2010. Asin previous years, the first half of our financial year has required higherworking capital which is expected to reduce in the second half of the year.Free cash flow improved by £2.6m, to a net outflow of £6.1m. Net debt reducedby £10.2m to £85.8m, representing 1.6x underlying EBITDA for the last 12 months(2009: 2.3x). Interest cover also improved to 15.2x underlying EBITDA for thelast 12 months (2009: 8.3x).We have also recently completed the re-financing of our £220m committed creditlines, of which £190m is committed until November 2014 and £30m is committeduntil November 2018. As expected, as a result of the current market, thisrefinancing will add approximately £4m per annum to our borrowing costs.There are some drawbacks associated with the low interest environment that weare currently enjoying. One of those is the accounting valuation of pensionliabilities, which increases as interest rates fall, even in schemes like ourswhich have been closed to new entrants for several years and have benefit capsin place. For HRG, although cash contributions have remained unchanged, theGroup-wide pre-tax pension deficits have increased by £28.7m since the year endto £155.1m as the net effect of a lower inflation rate and a lower discountrate on the valuation of the liabilities was only partially offset by positiveinvestment performance. Inflation and discount rates are volatile and can varysignificantly as market conditions change and it is worth noting that the useof current rates would reduce the deficit by approximately £40m.In line with our progressive dividend policy, the Board has declared an interimdividend of 0.5p per share, up 25% on the interim payout a year ago. Thisdividend will be paid on 6 January 2011 to shareholders on the register at theclose of business on 10 December 2010.
The Board
We were pleased to announce the promotion of Kevin Ruffles, Regional President,Europe & Asia Pacific, to the newly created position of Chief Operating Officerand his appointment to the Board of HRG as an executive director with effectfrom 1 October 2010.Pending the appointment of an additional non executive director, the Board hasadopted voting procedures to ensure that it continues to comply with the spiritof the UK Corporate Governance Code.
Current trading and outlook
There are encouraging signs that the positive momentum from the first half willcontinue, and we have clearly demonstrated that we can manage the cost base.The second half of the financial year has started well, although we do facemore challenging revenue comparatives. We are continuing to manage the businessfor the longer term and have already begun to invest in additional staff tomaintain service levels and to create the capacity to support further growth.
Whilst recognising the global economic uncertainties and more demanding comparatives in the second half, the Board believes that the outcome for the year as a whole will be slightly ahead of our previous expectations.
David RadcliffeChief ExecutiveOperational ReviewMarket overview
Following the first signs of a recovery towards the end of calendar 2009, market conditions have generally continued to improve through 2010. Recent data indicate that the initial post-recession recovery has been followed by continuing growth, albeit at a more modest level.
Macro indicators point to an increasing level of confidence in the economic recovery. The IMF has upgraded its estimate of year-on-year global economic growth for 2010, and believes that a similar rate of growth will continue into 2011.
Within the travel sector, IATA now predicts that airlines will show an aggregate net profit of $8.9 billion in 2010, after a $9.9 billion loss in 2009.
The improving trend in passenger air traffic numbers, which was first seen inthe summer of 2009, has continued into 2010 and been interrupted only brieflyby the impact of the Icelandic volcano in April. For the six months to the endof September, IATA figures reveal that the overall annual growth rate inpassenger traffic, which includes leisure travel, was just under 9% andpassenger numbers are now back above their pre-recession level of early 2008.In the most recent published data, premium traffic, which is often used as abarometer of business confidence, showed an increase of over 10% year-on-yearfor the last reported quarter.
Figures from STR Global provide a similar picture of recovery. The year-on-year monthly global hotel RevPAR growth rate has averaged at approximately 10% during the six months to the end of September.
Although our business does not correlate closely with any one particular set of data, the IMF, IATA and STR Global figures serve to underscore a generally positive trend and our business is responding in the same way.
Client activity
Not surprisingly, many companies have changed their travel programmes over thelast two years and we have seen a drive towards greater policy compliance andcost control. This has made clients more receptive to alternative ways ofmaximising the value of their travel spend. These changes include differenttravel itineraries and the adoption of consolidated service configurations and,coupled with increased demand for data and analysis, has further improved ourvalue proposition.Other trends are also emerging. There has been a move towards online,self-booking of simpler travel itineraries, most noticeably in North America,Australia and selected European countries. Pressure by suppliers has alsoforced many clients to review their supplier contracts and we have seen greaterreliance on HRG for support, consultation and analysis. There is now closerscrutiny and control of hotel bookings as companies recognise the opportunitiesfor better control of this expenditure. We are encouraged by thesedevelopments, all of which offer additional revenue opportunities for HRG.During our first half year, we have seen the strongest growth in revenue fromclients in the Pharmaceuticals & Healthcare and Manufacturing sectors while,understandably, there has been a modest decline in revenue from our Governmentcontracts, though these only account for around 10% of client revenue.Our value proposition, delivered through first-class service, continues to paydividends in terms of client retention and new business. Once again, wedelivered net new business wins during the first half and our client retentionrate remained above 90%.We were pleased to welcome several new clients during the period includingAviva, Avon, Grant Thornton, HCL Axon, Institute of International Education andStora Enso. In addition, we have secured expanded contracts with existingclients such as Agilent, Ericsson, Rolls Royce, SGS, Syngenta and Volkswagen.Notable amongst many clients renewing their contracts with HRG were ABB,Bilfinger Berger, Bombardier, GlaxoSmithKline, National Australia Bank,PepsiCo, Roche, Takeda, Weatherford and Willis. These successes are furtherevidence of the enormous diversity of HRG's client base, in terms of bothsector and geography, which represents one of HRG's key strengths.Corporate Travel ManagementEuropeSix months ended 30 September 2010 2009 Change Revenue £115.1m £109.1m +5.5% Operating profit £12.1m £5.1m +£7.0m Underlying operating profit (1) £13.6m £8.9m +£4.7m Underlying margin (1) 11.8% 8.2% +3.6 ppts
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was up by 5.1% at constant currency. Underlying operating profit rose by £4.7m, including a £0.2m benefit from currency movements.
Client travel spend rose by 14% year-on-year in real terms and travel activitywas up 12%. Importantly, in our key markets of the UK, Germany and Switzerlandwe performed well. Combined with the benefits from the mainland European branchconsolidation that began three years ago, we were able to deliver strong growthin profits and margin.The recent changes in our European service network have enabled us to absorbthe increase in activity more efficiently, helped by an increase in onlinebookings. The branch network consolidation, increased flexibility of telephonecall-flow switching and an increase in travel consultants working from homehave all contributed to the margin improvement. Increasingly, we expect toprovide service to our clients through fewer strategic hubs.In addition to increases in corporate travel, HRG's sports-related business inGermany benefited from the success of the national team in the football WorldCup as well as a strong performance by the Bundesliga teams in the ChampionsLeague. Another key development was the initiation of service for Volkswagen,which enhances HRG's position in the German market. The general economicrecovery in business has meant a return to normal working patterns, followinglast year's reduced working-time initiative introduced by the GermanGovernment.Our Swiss business also grew well, as existing clients began to increase theirtravel activity and new clients, including Novartis, began to trade with us. Asin Germany, this was accompanied by a return to normal working patterns.North AmericaSix months ended 30 September 2010 2009 Change Revenue £38.0m £32.2m +18.0% Operating profit £5.2m £2.0m +£3.2m Underlying operating profit (1) £5.6m £2.3m +£3.3m Underlying margin (1) 14.7% 7.1% +7.6 ppts
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was up by 9.4% at constant currency. Underlying operating profit roseby £3.3m, including a £0.5m boost from currency movements. The underlyingoperating profit margin more than doubled to 14.7% as a result of the sharpincrease in revenue and the benefits of operational gearing on the realignedcost base. Client travel spend rose by 28% in real terms and travel activitywas up 33%.There has been a progressive recovery in the North American market since ourfull-year report in May. The trend towards online self-booking by corporateclients has continued and now represents almost half of all travel bookings.Our investment over the past few years to reduce our cost base and improveproductivity is helping us manage these trends in this competitive market. Workto streamline our front, middle and back-office operations and further reduceour operating costs via a number of specific initiatives is ongoing.
Our loyalty business in Canada, which manages the redemption of credit card loyalty points for several banks, performed very well, with cardholders choosing to redeem their points, rather than cash, for travel rewards.
Asia PacificSix months ended 30 September 2010 2009 Change Revenue £10.1m £8.3m +21.7% Operating loss (£0.1m) (£0.5m) +£0.4m Underlying operating loss (1) (£0.1m) (£0.5m) +£0.4m Underlying margin (1) -1.0% -6.0% +5.0 ppts
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was up by 7.4% at constant currency with good growth across the region.Client travel spend rose by 28% year-on-year at constant currency and travelactivity was up 25%.In Australia, our largest market in the region, clients are becoming moreoptimistic about the economic recovery. The roll-out of HRG's fully-integratedtravel management system for the Queensland Government progressed well duringthe period, and our appointment to the panel of preferred suppliers for theAustralian Federal Government should offer further growth opportunities. As inother regions, we are seeing a general trend towards more online self-bookingand this now represents around half of all travel bookings.Singapore also performed well and, as a result, we have added office space andare recruiting additional staff to support this growth. Singapore is becoming akey hub for travel consolidation in the region and we have recently opened anew regional service centre to provide a multi-country service consolidationfor one of our larger clients.
Our joint ventures in Hong Kong and mainland China both grew nicely but, as associates, their results are not included in the table above.
Spendvision
Six months ended 30 September 2010 2009 Change Revenue £6.0m £5.7m +5.3% Operating profit £0.3m £0.5m -£0.2m Underlying operating profit (1) £0.4m £0.6m -£0.2m Underlying margin (1) 6.7% 10.5% -3.8 ppts
(1) Before amortisation of acquired intangibles and exceptional items
Revenue was down 3.5% at constant currency. Underlying operating profit fell by£0.2m, with little impact from currency movements, due to continuing investmentin product delivery and customer support. These investments are an essentialpart of our growth plans for Spendvision.The rollout of the Visa IntelliLink Spend Management product, a white-labelversion of the Spendvision platform, is continuing and is expected to beinstalled in all Visa commercial card issuing banks around the world by the endof 2011. As part of the Visa contract, we signed an agreement with Barclaycardfor the implementation of card management and payment applications.
We also signed a contract with Rio Tinto for worldwide implementation of Spendvision expense management.
Technology
Throughout the recession, HRG's technology became more important to clients asthey sought to manage their travel expenditure, and many changes in practicehave been retained as conditions have improved. HRG's technology is bothflexible and independent, with a clear focus of addressing client needs in adynamic market.During the first half of the financial year, we released upgrades to all ourmajor technology products. Client adoption of HRG's i-SuiteTM, offering clientsa gateway to both HRG and third-party products, continues to grow rapidly, withmore than 500,000 users now having access.We began development during the period of a white label version of HRGOnlineTM, our internally-developed, proprietary online booking tool, followinga deal signed with Travelport at the end of last financial year. Recognisingthe value of the application, the agreement enables Travelport to market afully-branded version of the tool to its corporate client base, thus extendingthe reach of HRG corporate technology beyond its own in-house use.In July, we announced a mobile technology partnership with Sabre Travel Networkwhich enables us to offer Tripcase, a mobile itinerary management application,to our clients. In addition to location-based messaging capabilities, thispioneering solution includes full integration of travel plans, which allows HRGto enhance the traveller experience through the provision of timely andrelevant information delivered to a mobile device.In August, we launched our innovative HRG Security SuiteTM at the Houstonconference of the National Business Travellers Association (NBTA). Managingtraveller safety and security is a key part of any corporate travel programmeand HRG Security SuiteTM delivers a full range of security services frompre-trip destination intelligence, traveller tracking and security training, tointernational emergency response services in association with global securityexperts, red24.In September, we launched a new cost saving function for corporate rail travel.The new feature, unveiled within HRG OnlineTM version 8.6, enables clients toview savings on ticket costs and manage UK rail spend more effectively.Following an agreement reached last year with a global provider of broadbandand wireline/wireless communications, we have begun to consolidate our IP WAN(voice and data traffic) as part of our unified communications strategy, withsuccessful deployment in Germany, the USA and Canada during the period.We will continue to develop flexible technology, for access from any locationor mobile device, as part of our vision for leadership amongst global travelmanagement companies.
Additional Financial Disclosures
Revenue
Reported revenue increased by 9.0% to £169.2m, comprised of an increase of 5.8% at constant exchange rates and an increase of 3.2% from favourable currency movements.
Revenue per Employee
Reported revenue per employee increased by 13.9%, from £28.7k to £32.7k. At constant exchange rates, the increase was 10.5%.
Operating expenses
Reported operating expenses increased by 2.4% to £151.7m.
Underlying operating expenses, before amortisation of acquired intangibles andexceptional items, increased by 4.0% from £144.0m to £149.7m. This representsan increase of 1.0% at constant exchange rates, comprising 0.9% for staff costsand 1.2% for other expenses.
The increase of 0.9% in staff costs compares to a reduction of 4.3% in average staff numbers, and reflects higher costs for staff incentives and UK pensions.
Underlying operating profit
Underlying operating profit, before amortisation of acquired intangibles andexceptional items, increased by 73%, from £11.3m to £19.5m, and included abenefit of £0.8m from favourable currency movements. The underlying operatingprofit margin, which is not affected by currency movements, increased from
7.3%to 11.5%.Exceptional items
There were no exceptional items reported in the period. The £2.3m of cost in the prior year related to planned cost reduction programmes in Europe.
Net finance costs
Net finance costs increased from £3.8m to £4.3m, reflecting the acceleratedamortisation of bank fees ahead of the renewal of the Group's fundingarrangements, and higher pension accounting charges. Net external interestdecreased by £0.3m, due to lower average borrowing and a modest reduction ininterest rates.
For the 12 months to September 2010, net external interest costs were covered 15.2 times by EBITDA (2009: 8.3x).
Taxation
The £4.1m charge for the current year represents the expected full-yeareffective tax rate of 31%, and compares to an effective tax rate of 33% in theprior year. The current rate of 31% includes a £0.2m charge relating to theimpact of a reduction in the UK corporation tax rate from 28% to 27%. Anadditional charge of £1.4m is reflected in the Consolidated Statement ofComprehensive Income in respect of deferred tax assets on pension liabilities.
Cash flow
Free cash flow, which includes all cash flow except acquisitions and disposals,dividends and the impact of foreign exchange movements on debt balances,improved by £2.6m from an outflow of £8.7m to an outflow of £6.1m, and wasprimarily due to improved trading offset by increased working capital outflows.In addition to free cash flow, the final dividend of £2.4m in respect of theyear ended March 2010 was paid to shareholders during the period. There was nofinal dividend payment in the prior year.
Funding and net debt
The Group has recently completed the re-financing of its £220m committed creditlines. The principal borrowing is a £190m multi-currency revolving creditfacility (RCF) that is committed until November 2014. The facilities are usedfor loans, letters of credit and guarantees, with interest based on LIBOR/EURIBOR plus a margin and costs. In addition, we have secured a £30m fixed rateloan that is repayable by 2018 and have also retained uncommitted facilities,amounting to around £23m at 30 September 2010, which are used for localflexibility.The principal covenants will continue to be measured twice each year, at theend of March and the end of September, against EBITDA. The covenants requirethat net debt is less than 3.0 times EBITDA and net external interest iscovered at least 4.0 times by EBITDA. The definition of EBITDA for covenantpurposes is not materially different to the definition used in these financialstatements.Net debt of £85.8m is £10.2m lower than the level at 30 September 2009 andcompares to £77.5m at 31 March 2010. This translates into gearing of 46% (31March 2010: 45%), or 123% (31 March 2010: 99%) including the pension deficitsand related deferred tax assets. The Group has an active programme to reduceworking capital requirements at the end of each half-year reporting period.This programme reduced working capital by approximately £26m in September 2010,compared to £25m in September 2009 and £35m in March 2010.
Pensions
The Group pension deficits under IAS19 have increased by £28.7m from 31 March 2010 to £155.1m before tax (£115.3m after tax).
The deficit for the principal UK defined benefit scheme increased by £28.8m to£144.7m over the same period, with a lower discount rate adding £39.9m and alower inflation rate reducing liabilities by £16.2m. For several years, the UKdefined benefit scheme has been closed to new entrants and has capped increasesin pensionable salary. Cash contributions are set at essentially the same levelas agreed at the time of the IPO in 2006, and equate to 15.2% of pensionablesalaries plus an additional deficit reduction payment of £6.6m per annum.At 30 September 2010 there was a deferred tax asset of £39.1m (31 March 2010: £32.4m) related to the UK deficit and £0.7m (31 March 2010: £0.7m) related
tothe overseas schemes.Foreign currencyThe following principal exchange rates have been used in the financialstatements: Income Statement Balance Sheet 2010 2009 Change 2010 2009* Change Euro 1.19 1.14 -4% 1.15 1.12 -3% Swiss Franc 1.61 1.73 +7% 1.54 1.60 +4% US Dollar 1.53 1.60 +4% 1.57 1.52 -3% Canadian 1.59 1.79 +11% 1.62 1.54 -5%Dollar * As at 31 March 2010.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 2010 2009 £m £m Revenue 169.2 155.3 EBITDA before exceptional items 24.3
15.8
Depreciation and amortisation (1) (4.8) (4.5) Underlying operating profit 19.5 11.3 Amortisation of acquired intangibles (2.0) (1.9) Exceptional items -- (2.3) Operating profit 17.5 7.1
Share of associates and joint ventures 0.1
-- Net finance costs (4.3) (3.8) Profit before tax 13.3 3.3 Taxation (4.1) (1.1) Profit for the period 9.2 2.2 Summary balance sheet 30 September 31 March 2010 2010 £m £m Goodwill and other intangible assets 249.5
253.5
Property, plant, equipment and 16.0 17.5investments Working capital (80.2) (101.2) Current tax liabilities (net) (8.6) (8.4) Net debt (85.8) (77.5) Pension liabilities (pre-tax) (155.1) (126.4) Deferred tax assets (net) 52.0 47.2 Provisions and other items (4.0) (4.0) Net (liabilities)/assets (16.2) 0.7 Summary cash flow statement Restated Six months ended 30 September 2010 2009 £m £m EBITDA before exceptional items 24.3
15.8
Cash flow from exceptional items (0.9) (4.6) Working capital movements (19.4) (7.4) Interest paid (1.4) (2.0) Tax paid (2.3) (2.2) Capital expenditure (3.9) (4.9) Pension funding in excess of EBITDA (3.0) (3.7)charge Other movements 0.5 0.3 Free cash (outflow) (6.1) (8.7) Acquisitions and disposals (0.3) --
Dividends paid to external shareholders (2.4)
-- Currency translation 0.5 (0.9) Other movements -- (1.1) (Increase) in net debt (8.3) (10.7)
1. Excluding amortisation of acquired intangibles
The comparatives in the summary cash flow statement have been restated to separately identify cash flow from exceptional items.
Hogg Robinson Group plc Consolidated Income Statement For the period ended 30 September 2010
Notes Half year ended 30 September 2010 2009 £m £m Revenue 6 169.2 155.3 Operating expenses 7 (151.7) (148.2) Operating profit 6 17.5 7.1 Analysed as: Underlying operating profit 6 19.5 11.3 Amortisation of acquired intangibles (2.0) (1.9) Exceptional items 7 - (2.3) Operating profit 17.5 7.1
Share of results of associates and joint 0.1
-ventures Finance income 9 0.1 0.1 Finance costs 9 (4.4) (3.9) Profit before tax 13.3 3.3 Income tax expense 10 (4.1) (1.1)
Profit for the period from continuing 9.2
2.2operations Profit attributable to:
Equity Shareholders of the Company 11 8.5
1.7 Minority interests 0.7 0.5 9.2 2.2 Note Half-year ended 30 September 2010 2009 pence pence Earnings per share Basic 11 2.8 0.6 Diluted 2.7 0.5Hogg Robinson Group plc
Consolidated Statement of Comprehensive Income For the period ended 30 September 2010
Notes Half year ended 30 September 2010 2009 £m £m Profit for the period 9.2 2.2 Other comprehensive income Currency translation differences 18 (1.2)
(8.9)
Actuarial loss on pension schemes (30.2)
(64.5)
Deferred tax movement on pension liability 8.4
18.0
Deferred tax movement on pension liability
attributable
to change in headline tax rate 10 (1.4)
- Other comprehensive loss for the period, net of (24.4) (55.4)tax Total comprehensive loss for the period (15.2) (53.2)
Total comprehensive loss attributable to: Equity Shareholders of the Company (15.9) (53.7) Minority interests 0.7 0.5 (15.2) (53.2) Hogg Robinson Group plc Consolidated Balance Sheet As at 30 September 2010 Notes 30 31 March September 2010 2010 £m £m Non current assets
Goodwill and other intangible assets 13 249.5 253.5 Property, plant and equipment 14 13.3 14.8 Investments accounted for using the equity 2.7 2.7
method Trade and other receivables 0.1 0.1 Deferred tax assets 53.9 48.8 319.5 319.9 Current assets Trade and other receivables 107.8 115.4
Financial assets - derivative financial 0.1 0.2instruments Current tax assets 0.1 1.0 Cash and cash equivalent assets 15 53.3 58.8
161.3 175.4 Total assets 480.8 495.3 Non current liabilities
Financial liabilities - borrowings 15 (137.7) (135.1) Deferred tax liabilities (1.9) (1.6) Retirement benefit obligations 16 (155.1) (126.4)
Provisions (2.9) (3.5) (297.6) (266.6) Current liabilities
Financial liabilities - borrowings 15 (1.4) (0.4) Financial liabilities - derivative financial (0.4) -
instruments Current tax liabilities (8.7) (9.4) Trade and other payables (188.1) (216.7) Provisions (0.8) (1.5) (199.4) (228.0) Total liabilities (497.0) (494.6) Net (liabilities) / assets (16.2) 0.7
Capital and reserves attributable to equity
shareholders Share capital 17 3.1 3.1 Share premium 172.2 172.2 Other reserves 18 13.2 13.4 Retained earnings (208.5) (191.4) (20.0) (2.7) Minority interests 3.8 3.4 Total (deficit) / equity (16.2) 0.7 Hogg Robinson Group plc
Consolidated Statement of Changes in Equity As at 30 September 2010 Attributable to owners of the Company Share Share Other Retained Minority Total capital premium reserves earnings Total Interest Equity £m £m £m £m £m £m £m Balance at 1 April 3.1 172.2 24.1 (155.2) 44.2 3.5 47.72009 Retained profit for - - - 1.7 1.7 0.5 2.2the period Other comprehensive income: Actuarial loss on - - - (64.5) (64.5) - (64.5)pension schemes Deferred tax movement - - - 18.0 18.0 - 18.0on pension liability Currency translation - - (8.9) - (8.9) - (8.9)differences Total comprehensive - - (8.9) (44.8) (53.7) 0.5 (53.2)income Transactions with owners: Dividends - - - - - (0.5) (0.5) Shares purchased by - - - (1.1) (1.1) - (1.1)Employee Benefits Trust Total transactions - - - (1.1) (1.1) (0.5) (1.6)with owners Balance at 30 3.1 172.2 15.2 (201.1) (10.6) 3.5 (7.1)September 2009 Balance at 1 April 3.1 172.2 24.1 (155.2) 44.2 3.5 47.72009 Retained profit for - - - 13.4 13.4 0.9 14.3the year Other comprehensive income: Actuarial loss on - - - (66.0) (66.0) - (66.0)pension schemes Deferred tax movement - - - 18.7 18.7 - 18.7on pension liability Currency translation - - (11.8) - (11.8) - (11.8)differences Total comprehensive - - (11.8) (33.9) (45.7) 0.9 (44.8)income Transactions with owners: Dividends - - - (1.2) (1.2) (1.0) (2.2) Shares purchased by - - - (1.1) (1.1) - (1.1)Employee Benefits Trust Share-based incentives - - 1.1 - 1.1 - 1.1 Total transactions - - 1.1 (2.3) (1.2) (1.0) (2.2)with owners Balance at 31 March 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.72010 Hogg Robinson Group plc
Consolidated Statement of Changes in Equity (Continued) As at 30 September 2010 Attributable to owners of the Company Share Share Other Retained Minority Total capital premium reserves earnings Total Interest Equity £m £m £m £m £m £m £m Balance at 1 April 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.72010 Retained profit for - - - 8.5 8.5 0.7 9.2the period Other comprehensive income: Actuarial loss on - - - (30.2) (30.2) - (30.2)pension schemes Deferred tax movement - - - 8.4 8.4 - 8.4on pension liability Deferred tax movement on pension liability attributable to change in headline - - - (1.4) (1.4) - (1.4)tax rate Currency translation - - (1.2) - (1.2) - (1.2)differences Total comprehensive - - (1.2) (14.7) (15.9) 0.7 (15.2)income Transactions with owners: Dividends - - - (2.4) (2.4) (0.3) (2.7) Share-based incentives - - 1.0 - 1.0 - 1.0 Total transactions - - 1.0 (2.4) (1.4) (0.3) (1.7)with owners Balance at 30 3.1 172.2 13.2 (208.5) (20.0) 3.8 (16.2)September 2010 Hogg Robinson Group plc
Consolidated Statement of Cash Flows For the period ended 30 September 2010
Notes Half year ended 30 September 2010 2009 £m £m
Cash flows from operating activities Cash generated from operations 19 1.8
0.9 Interest paid (1.5) (2.4) Tax paid (2.3) (2.2) Cash flows from operating activities - net (2.0) (3.7)
Cash flows from investing activities Acquisition of subsidiaries, net of cash (0.3)
-acquired Purchase of property, plant and equipment (1.1)
(2.1)
Purchase and internal development of intangible (2.8) (2.9)assets
Proceeds from sale of property, plant and -
0.1equipment Interest received 0.1 0.2
Dividends received from associates and joint -
0.2ventures Cash flows from investing activities - net (4.1) (4.5)
Cash flows from financing activities
Repayment of borrowings (3.3) (13.7) New borrowings 6.5 - Cash effect of currency swaps 0.6 0.8 Employee Benefits Trust - (1.1)
Dividends paid to external shareholders (2.4)
-
Dividends paid to minority shareholders (0.3) (0.5) Cash flows from financing activities - net 1.1 (14.5) Net decrease in cash and cash equivalents (5.0)
(22.7)
Cash and cash equivalents at the beginning of 58.2
63.3the period Exchange rate effects (1.0) (0.3)
Cash and cash equivalents at the end of the 52.2
40.3period
Cash and cash equivalent assets 53.3
41.4 Overdrafts (1.1) (1.1) 52.2 40.3 Hogg Robinson Group plc
Notes to the Consolidated Half-Yearly Financial Information
For the period ended 30 September 2010
1 General information
Hogg Robinson Group plc 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 2010.
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 2010 were approved by the Boardof Directors on 26 May 2010 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 Chapter 3of Part 16 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 2010 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 2010, 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 2010, as described in those statements.
The following amended standards and interpretations to existing standards aremandatory for the first time for the financial year beginning 1 April 2010. Theadoption of these amendments and interpretations does not have a materialimpact on the condensed consolidated half-yearly financial information:
* IAS 27 (revised), Consolidated and Separate Financial Statements, effective
for accounting periods beginning on or after 1 July 2009. The revised
standard requires the effect of all transactions with non-controlling
interests to be recorded in equity if there is no change in control and
these transactions will no longer result in goodwill or gains and losses.
* IFRS 2 (amendments), Group cash-settled share-based payments transactions.
The amendments expand on the guidance in the classification of group arrangements. * IFRIC 17, Distributions of Non-cash Assets to Owners, effective for
accounting periods beginning on or after 1 July 2009. The interpretation
was published in November 2008 and provides guidance on accounting for
arrangements whereby an entity distributes non-cash assets to shareholders
either as a distribution of reserves or as dividends.
The following standards, amendments to standards and interpretations have beenissued, but are not effective for the financial year beginning 1 April 2010 andhave not been early adopted. Unless otherwise stated, the Directors anticipatethat the adoption of these standards, amendments and interpretations will nothave a material impact on the Group:
* IAS 24 (revised), Related Party Disclosures, effective from 1 January 2011.
This supersedes IAS 24, Related Party Disclosures, issued in 2003.
* IFRS 9, Financial Instruments, effective from 1 January 2013, addresses the
classification and measurement of financial assets. The impact on the Group
of adopting IFRS 9 is yet to be assessed. * IFRIC 14 (amendment), IAS 19 - Prepayments of a minimum funding requirement, effective for accounting periods beginning on or after 1 January 2011.
* IFRIC 19, Extinguishing financial liabilities with financial instruments,
effective for accounting periods beginning on or after 1 July 2010,
clarifies the requirements of IFRSs when an entity renegotiates the terms
of a financial liability with its creditor and the creditor agrees to
accept the entity's shares or other equity instruments in full or partial
settlement of the financial liability.
The following amendments to standards and interpretations are effective for the financial year beginning 1 April 2010 but are not relevant to the Group:
* Amendment to IFRS 1, Additional exemptions for first-time adopters
* IFRIC 18, Transfers of assets from customers
4 Risks and uncertainties
The principal risks and uncertainties affecting the Group were identified aspart of the Business Review, set out on pages 7 to 8 of the Hogg Robinson Groupplc Annual Report and Financial Statements 2010, a copy of which is availableon the Group's website www.hoggrobinsongroup.com. These remain the relevantrisks for the second half of the current financial year and comprise strategic,financial, operational and external risks.
5 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.6 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 excludingamortisation of acquired intangible assets and items of an exceptional nature.Finance income and costs and income tax are not included in the result for eachoperating segment that is reviewed by the Executive Management Team. Otherinformation provided to the Executive Management Team, except as noted below,is measured in a manner consistent with that in the condensed consolidatedhalf-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 part of the reconciliation to total Consolidated Balance Sheet assets.
Corporate Travel Management North Asia Europe America Pacific Total Spendvision Total £m £m £m £m £m £m
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 (1.5) (0.4) - (1.9) (0.1) (2.0)intangibles Operating profit before 12.1 5.2 (0.1) 17.2 0.3 17.5exceptional items Exceptional items - - - - - - 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% Half year ended 30 September 2009 (restated) Revenue from external customers 109.1 32.2 8.3 149.6 5.7 155.3 Underlying operating profit 8.9 2.3 (0.5) 10.7 0.6 11.3 Amortisation of acquired (1.5) (0.3) - (1.8) (0.1) (1.9)intangibles Operating profit before 7.4 2.0 (0.5) 8.9 0.5 9.4exceptional items Exceptional items (2.3) - - (2.3) - (2.3) Operating profit 5.1 2.0 (0.5) 6.6 0.5 7.1 Underlying margin 8.2% 7.1% -6.0% 7.2% 10.5% 7.3%
The segmental disclosures for the half year ended 30 September 2009 have been restated to reflect Spendvision as a separate operating segment.
There is no material inter-segment revenue.
A reconciliation of operating profit to total profit before income tax expense is provided on 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 2010 263.6 90.3 12.8 366.7 6.8 373.5 31 March 2010 272.0 95.7 12.1 379.8 6.9 386.7
Reportable segments' assets are reconciled to total assets as follows:
30 September 31 March 2010 2010 £m £m Total segment assets 373.5 386.7 Cash and cash equivalent assets 53.3 58.8 Current tax assets 0.1 1.0 Deferred tax assets 53.9 48.8 480.8 495.3 7 Operating expenses Half year ended 30 September 2010 2009 £m £m
Underlying operating expenses:
Staff costs (note 8) 98.8 95.4
Amortisation of intangible assets, other than
acquired intangible assets 2.2 2.1 Depreciation of property, plant and equipment 2.6
2.4
Operating lease rentals - buildings 7.3
7.1
Operating lease rentals - other assets 0.9
0.9
Currency translation differences 0.1 0.2 Other expenses 37.8 35.9 149.7 144.0
Amortisation of acquired intangibles: Amortisation of client relationships 1.9
1.8
Amortisation of other acquired intangible assets 0.1 0.1 2.0 1.9 Exceptional items: Restructuring costs: Staff costs (note 8) - 1.8 Other expenses - 0.5 - 2.3 Total operating expenses 151.7 148.2
Restructuring costs during the half year ended 30 September 2009 related to planned cost reduction programmes in Europe.
8 Staff costs Half year ended 30 September 2010 2010 2010 2009 2009 2009 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total £m £m £m £m £m £m Salaries 82.7 - 82.7 80.1 - 80.1 Social security costs 9.4 - 9.4 9.9 - 9.9 Pension costs 5.1 - 5.1 4.5 - 4.5 Redundancy and 0.6 - 0.6 0.9 1.8 2.7termination costs Share-based incentives 1.0 - 1.0 - - - 98.8 - 98.8 95.4 1.8 97.2 Pension costs comprise: Defined benefit schemes 2.0 - 2.0 1.3 - 1.3 Defined contribution 3.1 - 3.1 3.2 - 3.2schemes 5.1 - 5.1 4.5 - 4.5 Half year ended 30 September 2010 2009 number number Average monthly number of staff employed by the 5,183 5,416Group
9 Finance income and finance costs
Half year ended 30 September 2010 2009 £m £m
Finance income - bank interest 0.1
0.1
Interest on bank loans and overdrafts (1.5)
(1.9)
Amortisation of issue costs on bank loans (0.8)
(0.3)
Expected return on pension scheme assets less interest cost on pension scheme liabilities (1.9) (1.6) Other finance charges (0.2) (0.1) Finance costs (4.4) (3.9) Net finance costs (4.3) (3.8)10 Income tax expense
The tax charge is split as follows:
Half year ended 30 September 2010 2009 £m £m United Kingdom 2.0 2.2 Overseas 1.9 (1.1) Change in headline tax rate 0.2 - 4.1 1.1 Half year ended 30 September 2010 2009 £m £m On recurring business 4.1 1.7 Exceptional items - (0.6) 4.1 1.1
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.
Tax rate change
The UK government is reducing the rate of corporation tax from 28% to 27% witheffect from 1 April 2011. Consequently, the Group is required to revalue all ofits recognised UK deferred tax assets and liabilities. The revaluation isanticipated to result in a full year deferred tax charge to the ConsolidatedIncome Statement of £0.2m, together with a charge to the Consolidated Statementof Comprehensive Income of £1.4m in respect of deferred tax assets on pensionliabilities. The Group is reflecting the full impact of £1.6m in the first halfof the year.Further proposals to reduce the UK rate by 1% per annum to 24% by April 2014have not been substantively enacted at the balance sheet date and, therefore,are not reflected in this condensed consolidated half-yearly financialinformation.
11 Earnings per share
Earnings per share attributable to equity holders of the Company were asfollows: Half year ended 30 September 2010 2009 pence pence Earnings per share Basic 2.8 0.6 Diluted 2.7 0.5 Half year ended 30 September 2010 2009 £m £m
Earnings for the purposes of earnings per share
Profit for the period 9.2 2.2 Less: amount attributable to minority interests (0.7) (0.5) Total 8.5 1.7 Half year ended 30 September 2010 2009 number number m m
Weighted average number of Ordinary shares in issue
Issued (for basic EPS) 300.7 302.3 Dilutive potential ordinary shares 11.7 9.6 For diluted EPS 312.4 311.9
Underlying earnings per share
Underlying earnings per share attributable to equity holders of the Companywere as follows: Half year ended 30 September 2010 2009 pence pence
Underlying earnings per share
Basic 3.3 1.6 Diluted 3.2 1.5 Half year ended 30 September 2010 2009 £m £m
Earnings for the purposes of underlying earnings per share Profit before tax from continuing operations 13.3
3.3
Add: amortisation of acquired intangibles 2.0 1.9 Add: exceptional items - 2.3 Underlying profit before tax 15.3
7.5
Underlying income tax expense (4.7)
(2.3)
Underlying profit for the financial year 10.6
5.2
Less: amounts attributable to minority interests (0.7) (0.5) Total 9.9 4.7
Underlying earnings are earnings before amortisation of acquired intangibles and exceptional items and related income tax expense.
12 Dividends
A dividend that related to the year ended 31 March 2010 amounting to 0.8p perordinary share (£2,405,819) was paid on 2 August 2010. The dividend was paid toshareholders who were on the register at 2 July 2010. The Employee BenefitsTrust waived its rights to dividends in respect of 7,035,546 shares held in theCompany.The Directors have declared an interim dividend in respect of the six monthsended 30 September 2010 of 0.5p payable on 6 January 2011 to shareholders whoare on the register at 10 December 2010. This interim dividend, amounting to £1.5m has not been recognised as a liability in this half-yearly financialreport, in accordance with IAS 10, Events after the Balance Sheet Date.
13 Goodwill and other intangible assets
30 September 31 March 2010 2010 £m £m Goodwill 219.6 221.8 Other intangible assets 29.9 31.7 249.5 253.5 Computer software Externally Internally Client Goodwill acquired generated relationships Total £m £m £m £m £m Cost At 1 April 2009 252.0 16.9 12.1 38.1 319.1 Additions for the year - 1.6 5.1 - 6.7 Disposals for the year - (2.9) - - (2.9) Adjustments to deferred (0.2) - - - (0.2)consideration Exchange differences (3.6) 0.6 0.7 (0.7) (3.0) At 31 March 2010 248.2 16.2 17.9 37.4 319.7 Additions for the period - 0.3 2.5 - 2.8 Reclassification of assets - (0.4) - - (0.4) Exchange differences (2.2) (0.2) - (0.1) (2.5) At 30 September 2010 246.0 15.9 20.4 37.3 319.6 Accumulated amortisation At 1 April 2009 26.4 12.0 4.5 18.2 61.1 Amortisation charge for the - 1.9 2.6 3.6 8.1year Disposals for the year - (2.9) - - (2.9) Exchange differences - 0.2 (0.1) (0.2) (0.1) At 31 March 2010 26.4 11.2 7.0 21.6 66.2 Reclassification of assets - (0.3) - - (0.3) Amortisation charge for the - 0.8 1.5 1.9 4.2period At 30 September 2010 26.4 11.7 8.5 23.5 70.1 Carrying amount At 1 April 2009 225.6 4.9 7.6 19.9 258.0 At 31 March 2010 221.8 5.0 10.9 15.8 253.5 At 30 September 2010 219.6 4.2 11.9 13.8 249.5
14 Property, plant and equipment
Plant and Properties equipment Total £m £m £m Cost At 1 April 2009 10.6 46.4 57.0 Additions for the year 0.2 4.3 4.5 Disposals for the year (0.6) (2.2) (2.8) Exchange differences 0.3 1.3 1.6 At 31 March 2010 10.5 49.8 60.3 Additions for the period 0.1 1.3 1.4 Reclassification of assets - 0.4 0.4 Disposals for the period - (0.6) (0.6) Exchange differences (0.2) (0.7) (0.9) At 30 September 2010 10.4 50.2 60.6 Accumulated depreciation At 1 April 2009 6.6 35.3 41.9 Depreciation charge for the year 0.9 4.2 5.1 Disposals for the year (0.6) (1.9) (2.5) Exchange differences 0.3 0.7 1.0 At 31 March 2010 7.2 38.3 45.5 Reclassification of assets - 0.3 0.3 Depreciation charge for the period 0.3 2.3 2.6 Disposals for the period - (0.5) (0.5) Exchange differences (0.2) (0.4) (0.6) At 30 September 2010 7.3 40.0 47.3 Carrying amount At 1 April 2009 4.0 11.1 15.1 At 31 March 2010 3.3 11.5 14.8 At 30 September 2010 3.1 10.2 13.3
The Group does not have any material capital commitments in respect of the purchase of property, plant and equipment.
15 Financial liabilities - borrowings
30 September 31 March 2010 2010 £m £m At amortised cost Current (due within one year) Overdrafts 1.1 0.6 Bank loans 0.1 0.2 Unamortised loan issue costs - (0.6) Finance leases 0.2 0.2 Total current 1.4 0.4
Non-current (due after more than one year)
Bank loans 137.7 135.2 Unamortised loan issue costs - (0.2) Finance leases - 0.1 Total non-current 137.7 135.1 Total 139.1 135.5 Net debt Total financial liabilities - borrowings 139.1
135.5
Add back: Unamortised loan issue costs -
0.8
Cash and cash equivalent assets (53.3) (58.8) Net debt 85.8 77.5
16 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. Its benefits arebased on final pensionable salary. The increase in final pensionable salarysince 31 March 2003 is limited to a maximum of the Retail Prices Index and 5%per annum. The latest actuarial valuation of the scheme was carried out at 6April 2008 by an independent qualified actuary.
The Group also operates defined benefit schemes in Norway, Switzerland, Germany and Italy.
The amounts recognised on the Consolidated Balance Sheet are determined asfollows: 30 September 31 March 2010 2010 £m £m UK scheme: Defined benefit obligations (350.3) (319.3) Fair value of plan assets 205.6 203.4 Deficit - UK Scheme (144.7) (115.9) Deficit - Overseas Schemes (10.4) (10.5) (155.1) (126.4) The amounts recognised in the Consolidated Income Statement in respect of theUK Scheme are as follows: Half year ended 30 September 2010 2009 £m £m Current service charge 1.3 0.7 Expected return on scheme assets (7.1) (6.0) Charge to finance costs 8.7 7.4
Total charge to the Consolidated Income Statement 2.9
2.1
The current service charge is computed based on the actuarial assumptions in place at the beginning of the financial year and translates to 20.6% of pensionable salaries (2009: 10.5%).
The key assumptions used for the UK Scheme were:
30 September 31 March 2010 2010 Rate of increase in final pensionable salary 3.00%
3.50%
Rate of increase in pensions in payment - accrued 5.00% 5.00%before 1999 Rate of increase in pensions in payment - accrued 3.00% 3.50%after 1999 Discount rate 5.00% 5.50% Inflation 3.00% 3.50%
Expected rate of return on plan assets:
Equity instruments 7.50% 8.00% Debt instruments 3.50% 4.50% Property 7.50% 8.00% Other assets 3.80% 4.40%17 Share capital 30 September 2010 number Authorised Ordinary shares of 1p each 513,808,171
Issued, called up and fully paid At 1 April 2010 and 30 September 2010 307,762,884 30 September 2010 £m
Issued, called up and fully paid
Ordinary shares of 1p each 3.1 18 Other reserves Share-based Exchange Other incentives reserve reserves £m £m £m Balance at 1 April 2009 2.1 22.0 24.1 Other comprehensive income: Currency translation differences - (8.9) (8.9) Balance at 30 September 2009 2.1 13.1 15.2 Balance at 1 April 2009 2.1 22.0 24.1 Other comprehensive income: Currency translation differences - (11.8) (11.8) Transactions with owners: Share-based incentives 1.1 - 1.1 Balance at 31 March 2010 3.2 10.2 13.4 Balance at 1 April 2010 3.2 10.2 13.4 Other comprehensive income: Currency translation differences - (1.2) (1.2) Transactions with owners: Share-based incentives 1.0 - 1.0 Balance at 30 September 2010 4.2 9.0 13.2
19 Cash generated from operations
Half year ended 30 September 2010 2009 £m £m Profit before tax from continuing operations 13.3 3.3 Adjustments for: Depreciation and amortisation 6.8 6.4 Net increase in provisions 0.7 3.2
Share of results of associates and joint (0.1)
-ventures Net finance costs 4.3 3.8 Other timing differences 1.2 0.1 26.2 16.8 Cash expenditure charged to provisions (2.0)
(4.8)
Change in trade and other receivables 6.1
3.2
Change in trade and other payables (25.5)
(10.6)
Pension funding in excess of charge to (3.0) (3.7)operating profit Cash generated from operations 1.8
0.9
20 Related party transactions
There have been no material changes in the nature of related party transactionssince 31 March 2010 as reported in note 28 of the Group's 31 March 2010 AnnualReport and Consolidated Financial Statements.
21 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 2010 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) Chairman
D J C Radcliffe Chief Executive
J A Steadman Group Finance Director
K A Ruffles Chief Operating Officer (appointed 1 October 2010)
A E Isaac(1) (2)
(1) Non-Executive Directors
(2) Senior Independent Director
By Order of the BoardKeith BurgessCompany Secretary30 November 2010Hogg 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 2010, 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 responsibility
Our 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 2010 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 2010Notes:(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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