3rd Jun 2008 07:00
3 June 2008 Hogg Robinson Group plc (`HRG', `the Company' or `the Group') Preliminary Results for the year ended 31 March 2008
Financial Highlights
* Revenue growth of 6.7% with organic growth of 2.0% * EBITA(1) of ‚£40.3m in line with recent guidance, broadly unchanged from prior year after adjusting for the one-off prior year benefit of ‚£3.4m from the FIFA World CupTM * Profit before tax ‚£25.2m and EPS (basic) from continuing operations 5.5p * Continuing strong free cash flow(2) of ‚£16.3m * Final dividend unchanged at 2.8p per share; brings full year to 4.0p per share; payout ratio 73% of EPS
Business Highlights
* Net new business wins well ahead of the prior year * Client retention rate remains above 90% * Acquisitions performed well * Mixed performance in Europe; restructuring programme completed: - Resilient performance from managed travel business - Some softening in demand in Events and unmanaged (SME) business in fourth quarter * Transitional year in North America with investment for the future * Good performance in Asia Pacific * Spendvision more than doubled revenue to ‚£6.1m; ownership interest increased to 58%
(1) Earnings Before Interest, Taxation and Amortisation from continuing operations before exceptional items, including HRG's after-tax share of results of associates and joint ventures.
(2) A summary of free cash flow is shown in the Financial Review below.
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"Despite the difficult market conditions, we have been able to report revenue growth through good client retention and new client signings which provide a solid foundation for the new financial year. We continue to work hard to position the business for the future and are clearly focused on improving the efficiency of service delivery across the Company. The economic climate remains uncertain but our positive momentum gives us confidence that the year ahead will be one of growth."
Contact DetailsHogg Robinson Group +44 (0)1256 312 600 David Radcliffe, Chief Executive Julian Steadman, Group Finance Director Angus Prentice, Head of Investor Relations Tulchan Communications +44 (0)20 7353 4200 David Allchurch Stephen Malthouse
A presentation for analysts and institutional investors will be held at 0900h BST today at the Merrill Lynch Financial Centre, 2 King Edward Street London EC1A 1HQ. (Pre-registration for this event is necessary to comply with security procedures at Merrill Lynch.) Copies of the presentation with audio commentary from HRG's presentation team will be available at http://investors.hoggrobinsongroup.com/hrg/ir/rp/res/ from 1400h.
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. 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.
Chairman's Statement
I am pleased to present results for our first full year since the Group was re-listed on the London Stock Exchange. It has been a difficult year for many companies but, despite the short-term challenges, we have come through with a good business that is well positioned for the longer term.
Our strategy remains clearly focused on managed travel for corporate clients and I am delighted to report that, in addition to continuing high levels of client retention, we also added some significant new clients during the year. We also continue to have a strong pipeline of prospects for the future. We are working with our existing clients to provide a range of services which add value to their travel and related expenditure, and deliver improved operational efficiencies and cost savings through the use of proprietary technology.
Towards the end of the financial year we recognised some softening of demand in our Events & Meetings Management (`EMM') activities and unmanaged corporate (SME) clients, particularly in Europe. These activities only account for around 20-30% of revenues but are much more susceptible to any general economic slowdown. We identified the downturn too slowly and were disappointed that we had to lower expectations during March. We have now rebalanced to the right cost levels, whilst remaining ready to take advantage of any improvement in market conditions.
Managed travel has historically been more resilient than unmanaged travel in times of economic uncertainty. However, no business can be immune to the fallout from the continuing crisis of confidence in financial markets. Certainly, we began to see some changes in the final quarter of the financial year and some of our managed clients, particularly those in financial services, have sought to reduce their overall travel expenditure. However, as we have shown in the past, we can help clients reduce their travel budgets and at the same time protect our own financials through the use of a wide range of services and products designed to reduce costs for our clients.
Our Spendvision expense management business doubled in size during the year, albeit from a small base, and remains an exciting higher-growth part of our portfolio in the longer term.
Financial highlights
Group revenue for the year increased by 6.7% to ‚£332m while reported basic earnings per share increased by 28% to 5.5p. Comparisons with prior-year earnings are complicated by the inclusion of nearly six months of pre-IPO activity when the level of interest costs and the number of shares outstanding were significantly different. We also enjoyed a one-off benefit of ‚£3.4m from the FIFA World CupTM in the prior year. Looking at our primary measure of performance during the year, EBITA, our performance was very close to the prior year after adjusting for the FIFA World CupTM.
The year end net debt was ‚£110m, which was essentially unchanged from the prior year after allowing for an increase of ‚£6m due to movements in exchange rates. The Group's total pension deficits reduced by ‚£12m to ‚£48m before tax.
Dividend
The Board is recommending an unchanged final dividend of 2.8p, which will be payable on 1 August 2008 to shareholders on the register as at 4 July 2008. This brings the full-year dividend to 4.0p per share which represents 73% of the reported earnings per share and means that the full-year dividend is covered 1.4 times by earnings. The payout is slightly higher than the 50-65% indicated in our dividend policy at the time of the IPO. A scrip dividend alternative will be offered and the relevant documents are being posted to shareholders during June.
Shareholders will be pleased to note that the final dividend payment has been brought forward by two months compared to last year.
Looking ahead, we remain committed to at least maintaining the current full-year dividend with the intention of adopting a progressive dividend policy as improved earnings bring the payout back to the 50-65% range indicated at the time of the IPO.
People
I am delighted to welcome Julian Steadman who joined the Board as Group Finance Director from Christian Salvesen, replacing John Kennerley in December 2007. Julian has quickly settled into the role and is already making a significant and valuable contribution to the business. On behalf of my Board colleagues, I would like to thank John for his sterling contribution during his time at HRG.
Our people continue to be our greatest asset and, in a business which relies on delivering excellent service, it is essential that we recruit and retain excellent talent. In a year of business growth and repositioning, our staff have adapted well and I would like to thank all of them - around the world - for their continued hard work, enthusiasm, loyalty and professionalism. Their dedication and commitment to providing world class service to our clients is an integral part of our offer and is reflected in the favourable feedback that we receive regularly from our clients.
Outlook
Market conditions remain challenging and economic uncertainties exist. However, we enter the new financial year with a strong pipeline of new prospects and expect to see the benefit from new clients added last year together with our continuing focus on reducing costs flowing through to earnings. We remain cautious about our EMM and SME activities in the short term. Overall, supported by the proven resilience of our managed travel business, we expect to deliver growth this year.
Chief Executive's ReviewOverview
HRG provides services linked to corporate travel and its related expenses. Its principal target market comprises multinational companies which benefit from having these expenditures independently managed. HRG owns operations in 25 countries with contracted partners operating under the HRG brand in a further 81 countries.
The financial year ended 31 March 2008 will probably best be remembered for the substantial increase in the cost of oil and the crisis in the financial markets. Despite these challenging conditions, we were able to deliver a creditable performance from our managed business, particularly when measured against a strong prior year that included a one-off pre-tax benefit of ‚£3.4m from the FIFA World CupTM. Unfortunately, we failed to see a downturn in EMM and unmanaged SME quickly enough to take remedial action and, regrettably, this resulted in our issuing a cautionary trading statement during March.
We were pleased to show continued organic revenue growth whilst maintaining our high level of client retention. We completed the consolidation of our North American acquisitions and continue to look at how we can streamline these operations further. During the year we restructured the European operations away from the traditional country orientation in order to provide a seamless international service to our multinational clients and also to lower our cost base for the future.
Our new structure will drive closer alignment of our service offerings within Corporate Travel Services, which includes Corporate Travel Management, Consulting, EMM and Sports. Spendvision, our expense management business, doubled in scale during the year and continues to represent an exciting growth opportunity.
In October 2007, we completed the acquisition of the business of Weinberg Travel BVBA, HRG's existing network partner in Belgium, which has already been fully integrated into our European operations. Last year's acquisitions in the USA, the Czech Republic and Poland all performed well during the year. We also increased our ownership in Spendvision to 58% during the year. Further small acquisitions will be considered, particularly in markets which handle the consolidation of travel programmes and where inclusion in the HRG global network will enhance value.
Looking at the financial performance, revenue increased by 6.7% to ‚£332.2m. EBITA was down ‚£3.8m to ‚£40.3m, which is close to the prior year performance after adjusting for the one-off benefit of the FIFA World CupTM in the prior year.
In the past, we have reported EBITA margin. Going forward, we will be concentrating on operating profit margin, which is a measure that is more commonly used. The underlying operating profit margin has reduced from 12.5% to 10.5% as a result of the World Cup impact, margin pressure in Germany and the Nordic region, coupled with the costs of investment in new client start-ups and infrastructure improvements in North America.
Exceptional items produced a net gain of ‚£1.2m. We are pleased to have concluded our arbitration with Kuoni Reisen Holding AG (`Kuoni') which produced a pre-tax exceptional gain of ‚£4.4m, net of expenses. This has however been largely offset by two exceptional costs. The first is a ‚£2.4m charge for estimated unrecoverable cost associated with a long-standing contract in North America following a review by our new Group Finance Director. The second is a technical accounting item, namely a ‚£0.8m adjustment to goodwill associated with recognition of German deferred tax assets on acquisitions in earlier years.
People
HRG has a unique culture, with an enviable level of employee loyalty and commitment. Our people make the difference and I would like to thank them sincerely for their dedication and enthusiasm during a very challenging year.
The year saw a number of management changes which were a necessary part of our re-shaping of the business.
Tragically, we had the premature death of our senior management colleague Reto Bacher, who was President of EMM and Sports. His enormous presence and wise counsel will be sadly missed.
Roger Westwood, Overseas Investments Director, retired from the Executive Board on 31 March 2008 and Mike Platt, Group Industry Affairs Director, will retire from the Executive Board on 30 June 2008. Both Roger and Mike have made a significant contribution to HRG over many years and we thank them sincerely for their support and contribution.
These roles have been incorporated within the existing team.
Client activity
The net new business wins for the year were well ahead of the prior year and we enter the year with a pipeline of new prospects that is at least as strong as last year. We are pleased with our new signings, which include a number of clients yet to start trading. New clients that we welcomed to HRG and who are yet to trade a full year include Ericsson, IMG, Interpublic, Lloyds TSB, Ministry of Defence / Foreign & Commonwealth Office (`MOD/FCO'), Pepsico Technip, TeliaSonera and Weatherford. At the same time, the retention rate for existing clients remained above 90%. These figures provide tangible evidence that clients see the real value that HRG is providing in an increasingly competitive market. On the new client front, the new financial year has started well.
The trend to outsource travel management services is well established, although the client tender process is becoming longer. It is common for a global bid to take 12 to 18 months from initial submission to implementation. Clients seek to implement global travel management programmes in different ways, with early adopters generally preferring to set global travel policies centrally and implement from a single location. More recently we have seen many clients seeking to set policies centrally or regionally and then implement on a regional and even local country basis. HRG's flexible approach to delivering bespoke solutions and a strong geographic footprint is proving to be a key driver in winning new business.
Awards
Our high levels of client service have continued to be recognised through industry awards including:
* Business Travel Agency of the Year to HRG Belgium (Travel Magazine's 2007 Travel Awards) * Best Business Travel Management Company (Turnover above ‚£50m) to HRG UK (Buying Business Travel Awards 2008).
Technology
Travel management is a data-rich business and technology is critical to success. Within our industry, technology serves our clients in a wide variety of disciplines from accessing information on travel routes and alternative pricing to self-booking tools and passenger tracking. For HRG, it enables our staff to access information from several sources simultaneously, thereby allowing us to deliver a swift and cost-effective service to our clients around the world on a 24x7 basis. Our decision to develop our own technology has proved to be a real unique selling point since it provides us with the ability to offer products and solutions that address our clients' needs rather than fitting our clients' requirements to a template.
We made some significant advances in technology during the year. The deployment of our stand-alone, independent technology platform, HRG Universal Super PlatformTM (`USPTM'), began in Europe and North America. As the name suggests, this technology provides us with a base from which to link, for example, our front-end booking process to air, hotel and car suppliers and their services. During the year, successful pilot schemes, running our own electronic point of sale (POS) systems off the USPTM, were conducted in London and New York. Using this technology, we are now able to offer more flexibility to our clients, delivering travel products and services that are tailored to their specific needs. This system also helps us work more effectively with our suppliers, providing HRG with access to powerful new information. For example, we are now able to offer clients online check-in facilities directly through our system as well as specific menu pricing and seat assignments from suppliers to customers. This platform could also enable us to hold inventory for our clients in the future.
Operating review
The consolidated results are as follows:
Years ended 31 March 2008 2007 Change Revenue ‚£332.2m ‚£311.4m +6.7% Operating profit ‚£36.0m ‚£35.4m +‚£0.6m
Underlying operating profit (1) ‚£34.8m ‚£39.0m -‚£4.2m
Underlying operating profit 10.5% 12.5% -2.0% margin (1)
Year end capital employed (2) ‚£188.0m ‚£179.6m +‚£8.4m
Return on capital employed (2) 18.6% 21.9% -3.3%
(1) before exceptional items (2) includes goodwill EuropeYears ended 31 March 2008 2007 Change Revenue ‚£247.7m ‚£241.0m +2.8% Operating profit ‚£36.2m ‚£33.7m +‚£2.5m
Underlying operating profit (1) ‚£32.6m ‚£36.6m -‚£4.0m
Underlying operating profit 13.2% 15.2% -2.0%margin (1) (1) before exceptional items
Overall, our European performance during the year was mixed. Reported revenue was up by 2.8%, essentially unchanged after allowing for the small positive impact of acquisitions and changes in exchange rates. Underlying operating profit was down by ‚£4.0m, but is measured against a prior year that included a one-off benefit from the FIFA World CupTM. Lower profits from German and Nordic SME clients was offset by strong performances in the UK and Switzerland and underscores the resilient nature of our managed client business.
As the credit squeeze dented client confidence towards the end of the year, we did experience some softening in demand in our EMM and unmanaged SME activities, particularly in the Nordic region and Germany, and this had an effect on the full-year result. Although we initially reacted too slowly to these changes, we have now rebalanced to the right level. We have also integrated EMM activities with those of managed travel, thereby providing coordinated contact with our managed client base. However, we remain well placed to take advantage of any increased demand as economic conditions improve.
Our European restructuring programme, which is designed to improve our service to multinational clients, was completed during the year at a total cost of ‚£ 1.9m. Savings of ‚£3.3m were delivered in the year.
An important part of this programme was the re-positioning of our operations in Germany, one of the three largest managed travel markets in Europe, where we have now appointed a new managing director to drive growth. We also enhanced our service offering through investment in a new integrated telephony system to link our major European call centres in Glasgow, Berlin and Stockholm, and also our low-cost service centre in Budapest. The new system has already improved call management by optimising capacity, skill set and language across country boundaries.
The recent acquisitions in the Czech Republic, Poland and Belgium all performed as expected during the year and we also added new partners in Kosovo, Luxembourg and Israel to the HRG worldwide network.
In the UK, the implementation of our contract with the MOD/FCO began last December on a phased basis. As with most large new contracts, start-up costs impacted profitability in the early months and we look forward to the full benefit accruing in the future.
In spring 2008, our three Manchester offices were consolidated into one new state-of-the-art centre in the heart of Manchester's business district.
North AmericaYears ended 31 March 2008 2007 Change Revenue ‚£65.3m ‚£56.3m +16.0% Operating (loss)/profit ‚£(1.3)m ‚£1.8m -‚£3.1m
Underlying operating profit (1) ‚£1.1m ‚£2.5m -‚£1.4m
Underlying operating profit 1.7% 4.4% -2.7%margin (1) (1) before exceptional items
This was a challenging year for our North American operations as we re-positioned the business for the future. The reported revenue increase of 16.0% includes 5.4% of organic growth, together with the full-year impact of Executive Travel Associates (`ETA') and a minimal amount from changes in exchange rates.
Implementation costs for new clients, together with continued investment in capacity and infrastructure, contributed to the decline in underlying operating profit for the year. There is significant pressure on margins in this very competitive market and we will continue to improve the efficiency of our service delivery. To that end, work on amalgamating our businesses in the USA and Canada was completed early in the year and we are continuing to drive additional productivity now that the new structure is more settled.
We opened a new state-of-the-art service centre in Charlotte during the year which again included the launch of a new telephony system. In addition to providing capacity for future growth, this will now enable us to provide a global `follow the sun' service to our clients by linking our offices in Singapore, London and Halifax, Canada. An additional benefit is that we are able to track clients wherever they are in the world. In addition we expanded our operations in Halifax and New York to handle new business.
ETA, which was acquired in February 2007, also performed well and contributed an additional ‚£1.9m of operating profit during the year.
Following a review by our new Group Finance Director, we identified some potentially unrecoverable costs associated with a long-standing contract and have recognised an exceptional charge of ‚£2.4m. We have made changes to our financial procedures to improve the control of this contract.
We continued to build brand awareness in North America and this undoubtedly contributed to the fact that we are now included on invitations to tender for almost all major contracts in the region. As a result, we have yet to see the full benefit from several new clients or from regional extensions of existing clients that were achieved during the year. We built a healthy pipeline of new business during the year and that momentum has continued. I am pleased to report that the new financial year has started well.
Asia PacificYears ended 31 March 2008 2007 Change Revenue ‚£19.1m ‚£14.1m +35.8% Operating profit/(loss) ‚£1.1m ‚£(0.1)m +‚£1.2m
Underlying operating profit (1) ‚£1.1m -- +‚£1.1m
Underlying operating profit 5.8% -- +5.8% margin (1)
(1) before exceptional items
The region performed strongly throughout the year and delivered healthy revenue growth of 35.8%, equivalent to organic growth of 27.7% after adjusting for changes in exchange rates. Underlying operating profit increased by ‚£1.1m due to a strong performance in Australia. Operating profit includes Australia and Singapore, but excludes the joint ventures in Hong Kong and China.
In Australia we were successful in winning state and federal government business including signing contracts with the Queensland Government and the Department of Water and Environment. We are pleased to announce that we have commenced a pilot phase with the Queensland Government on our fully integrated travel and expense management system. This system enables a client to handle the process from travel authorisation to expense reclaim through a single application environment. Using our USPTM this modular delivery will give clients the choice of individual or a full suite of products. We also opened a new service centre in Canberra to manage travel for members of the Australian Parliament and the federal government.
In Hong Kong we relocated to new offices at the harbour, to provide a better working environment for our staff. This move has already improved our ability to recruit staff in a competitive market.
Spendvision
HRG's Spendvision expense management business continued to grow rapidly during the year and more than doubled its revenue to ‚£6.1m, with operating profit improving from breakeven to ‚£0.7m. These results are part of the geographic analysis above. Spendvision's business includes a number of clients who are not HRG travel clients and remains an exciting long-term opportunity for the Group. During the year we increased our ownership interest by 7% to 58%.
Financial ReviewOverviewYears ended 31 March 2008 2007 Change Revenue ‚£332.2m ‚£311.4m +6.7% Underlying earnings from continuing operations* - EBITA ‚£40.3m ‚£44.1m -‚£3.8m - Profit before tax ‚£24.0m ‚£16.5m +‚£7.5m Reported earnings from continuing operations - Profit before tax ‚£25.2m ‚£12.9m +‚£12.3m - Earnings per share (p) 5.5p 4.3p +27.9% Return on capital employed 18.6% 21.9% -3.3% Free cash flow ‚£16.3m ‚£16.1m +‚£0.2m Net debt ‚£110.4m ‚£104.4m +‚£6.0m* before exceptional itemsRevenue
Revenue increased by 6.7% to ‚£332m (2007: ‚£311m) comprised of 2.0% from organic growth, 2.9% from acquisitions and 1.8% from changes in exchange rates. Looking at organic growth, Europe was essentially unchanged, North America was up 5.4% and Asia Pacific was up 27.7%.
EBITA
To date, the Group has reported EBITA (i.e. earnings before interest, taxes and amortisation, before any exceptional items and including HRG's share of associates and joint ventures) as one of its primary performance measures. EBITA for the year decreased by ‚£3.8m, from ‚£44.1m to ‚£40.3m. The prior year includes a contribution of ‚£3.4m from the FIFA World CupTM which only occurs every four years. The current year includes ‚£1.9m of restructuring costs, including the costs associated with replacing the Group Finance Director, which produced ‚£3.3m in savings during the year. Acquisitions contributed an additional ‚£2.7m during the year. The impact of favourable movements in exchange rates was not material. Elsewhere, there were lower profits in Germany, the Nordic region and North America with higher profits in Asia Pacific.
Depreciation and amortisation
During the year, the depreciation charge remained unchanged at ‚£4.4m, with amortisation increasing by ‚£0.7m to ‚£5.4m.
Exceptional items
Exceptional items for the year produced a net benefit of ‚£1.2m, compared against a net cost of ‚£3.6m in the prior year. The current year includes ‚£4.4m from the settlement of an arbitration with Kuoni Reisen Holding AG, partially offset by a ‚£2.4m charge for estimated unrecoverable costs associated with management of a long-standing contract in North America and ‚£0.8m in respect of an adjustment to goodwill associated with recognition of German deferred tax assets on acquisitions in earlier years. This latter item is essentially offset by a deferred tax credit and therefore has a minimal impact on net earnings for the year.
The prior year included ‚£9.6m of exceptional costs, including expenditure related to the IPO (‚£4.0m), an adjustment to goodwill for German deferred tax assets (‚£2.9m) and re-branding (‚£2.7m). These costs were partially offset by exceptional pension credits of ‚£6.0m related to the settlement of liabilities to deferred pensioners in the UK (‚£5.0m) and Norway (‚£1.0m).
Net finance costs
Net finance costs were more than halved from ‚£22.9m to ‚£10.9m due to the change in capital structure following the IPO in October 2006. Of this, the net finance costs relating to pension accounting under IAS19 were ‚£0.4m for the year (2007: ‚£2.0m). Net finance costs are covered 3.3 times by reported operating profit.
Profit before tax
Underlying profit on continuing operations before tax and exceptional items increased by ‚£7.5m, from ‚£16.5m to ‚£24.0m. The reported profit before tax increased by ‚£12.3m from ‚£12.9m to ‚£25.2m.
Taxation
The tax charge for the year represents an overall tax rate of 31% of the reported profit before tax, compared to an overall rate of 24% in the prior year. These rates reflect the tax on exceptional items together with a number of non-recurring tax items - for the current year, the impact on deferred tax balances of lower future tax rates in UK and Germany; for the prior year, the non-deductible premium paid on preference share redemption and the benefit from deferred tax recognition following the IPO. Excluding these items, the normal tax rate for the current year was 33% compared to 36% in the prior year. We anticipate a tax rate of around 30% in the future.
Discontinued operations
The profits from discontinued operations of ‚£4.9m in the prior year were predominantly due to the receipt of additional contingent disposal proceeds in respect of the sale of Benefits and Consulting Services.
Earnings per share
Underlying earnings per share for the year (i.e. excluding all exceptional items and the results of discontinued operations) increased by 34% from 3.5p to 4.7p, primarily due to a reduction in net finance costs and an increase in the number of ordinary shares in issue immediately following the October 2006 IPO.
The reported earnings per share for the year increased by 28% from 4.3p to 5.5p, again influenced by a reduction in interest costs and an increase in the number of ordinary shares in issue immediately following the IPO.
Dividend
Subject to approval at the Annual General Meeting, a final dividend of 2.8p per share will be paid on 1 August 2008 to shareholders on the register as at 4 July 2008. This will bring the annual dividend to 4.0p, which represents a payout of 73% of reported earnings per share and means that it is covered 1.4 times by reported earnings per share.
Return on capital employed
Return on capital employed is calculated by dividing operating profit before exceptional items plus share of associates and joint ventures by the year end net assets. Net assets exclude net debt, pension deficits and tax provisions. The return for the year was 18.6% (2007: 21.9%).
Cash flow
Free cash flow, which includes all cash flow except special pension contributions, acquisition spending, cash effect of currency swaps, dividends and debt repayments, was essentially unchanged at ‚£16.3m (2007: ‚£16.1m). Capital expenditure on intangible assets and property, plant and equipment was ‚£7.8m compared to ‚£6.9m in the prior year.
There were no special pension contributions during the year, although the prior year included ‚£41.0m to finance transfer values for deferred members and to add a portion of IPO cash proceeds.
The ‚£3.5m of net acquisition and disposal spending in the current year related to the increased ownership of Spendvision Holdings Limited (‚£1.4m), the acquisition of the business of Weinberg Travel BVBA in Belgium (‚£1.0m) and payment of deferred consideration relating to the acquisition in the Czech Republic (‚£1.9m). The ‚£6.9m of net acquisition and disposal spending in the prior year included the increased ownership of Spendvision Holdings Limited (‚£ 1.5m) and acquisitions in the Czech Republic (‚£2.1m), Poland (‚£1.1m) and the USA (‚£3.8m).
Cash flow from financing activities in the current year included ‚£12.9m for dividends and ‚£12.5m to repay borrowings. In the prior year the issue of Ordinary shares for the IPO produced gross proceeds of ‚£180.2m, with IPO expenses of ‚£18.7m and a further ‚£2.5m to arrange new borrowing facilities. The prior year also included ‚£133.8m for repayment of borrowings, which included preference shares and accumulated premium totalling ‚£94.5m.
Retirement benefit obligations
The Group's retirement benefit liabilities under the accounting standard IAS 19 `Employee Benefits' have reduced by ‚£11.8m to ‚£48.1m before tax (2007: ‚£59.9m).
The UK scheme deficit reduced by ‚£12.9m, from ‚£51.5m to ‚£38.6m. The scheme assets increased by ‚£1.6m. The scheme liabilities decreased by ‚£11.3m with increased life expectancy adding ‚£19.5m and an increase in the discount rate from 5.3% to 6.3% saving approximately ‚£30.0m.
Annual payments amount to 17% of pensionable salaries plus additional annual payments of ‚£6.3m that were designed to eliminate the deficit on the scheme by 2016. The total charge against profits decreased by ‚£1.6m to ‚£0.4m (2007: ‚£ 2.0m).
The overseas schemes are primarily in Germany and Switzerland, and the year-end deficit increased by ‚£1.1m to ‚£9.5m (2007: ‚£8.4m), primarily due to changes in exchange rates.
At the year end, there was a deferred tax asset of ‚£10.8m (2007: ‚£15.9m) related to the UK deficit and ‚£0.5m (2007: ‚£0.5m) related to the overseas schemes.
Funding and capital structure
At the year end, net debt was ‚£110.4m (2007: ‚£104.4m) and represented gearing of 69% (2007: 72%). Excluding the pension deficits and related deferred tax assets, year-end gearing was 56% (2007: 55%).
Net debt included ‚£53.4m of non-sterling debt (2007: ‚£44.8m) with the change in year-end exchange rates, including the effect of currency swaps, increasing the reported balance by ‚£5.7m.
Treasury policies
The financial risks arising from changes in foreign currency and interest rates are managed centrally by the Group treasury department with policies that are approved by the board. The Group does not enter into transactions of a speculative nature.
Foreign currency
The following principal exchange rates have been used in the financialstatements: Income Statement Balance Sheet 2008 2007 Change 2008 2007 Change Euro 1.42 1.48 4% 1.25 1.47 18% Swiss franc 2.32 2.35 1% 1.97 2.39 21% US dollar 2.01 1.90 (5%) 1.99 1.96 (2%) Canadian 2.07 2.16 4% 2.04 2.26 11%dollar
The Group is exposed to translation risk with respect to its non-sterling earnings. The Group uses non-sterling debt as a partial hedge for this exposure and, for the year to March 2009, has hedged the remaining balance. The overall impact of changes in exchange rates on net earnings for the year is minimal.
The Group's transaction exposure is limited, with the majority of its transactions denominated in the currency of the country of operation. In the few instances where there is exposure, short-term hedges are taken once the exposure can be accurately identified.
Liquidity and interest rates
The Group has a ‚£220m multi-currency revolving credit facility that is committed until September 2011. The facility is used for loans, and the issue of letters of credit and guarantees. The rate of interest is based on LIBOR (EURIBOR for Euro-denominated loans), a margin and mandatory costs incurred by the lenders. During the year, the maximum utilisation of the facility, including guarantees, was ‚£201m with ‚£184m at year end.
Where appropriate the Group considers the use of interest rate caps to limit its exposure to interest rates on its core borrowings. At present the interest rates on core borrowings are not capped.
Going concern
The Group's finances and balance sheet remain sound. The Directors believe that the Group has adequate resources to continue to operate for the foreseeable future and have continued to adopt the going concern basis in preparing the Consolidated Financial Statements.
Share price
The closing mid-market price at the year end was 40p (2007: 96p). During the year, the price ranged from 40p to 104p per share.
Summary income statement Years ended 31 March 2008 2007 ‚£m ‚£m Continuing operations Revenue 332.2 311.4 Operating profit before exceptional 34.8 39.0items Exceptional items 1.2 (3.6) Operating profit 36.0 35.4 Net share of profit of associates and 0.1 0.4joint ventures Net finance costs (10.9) (22.9) Profit before tax 25.2 12.9 Taxation (7.7) (3.1) Profit from continuing operations 17.5 9.8 Profit from discontinued operations -- 4.9 Profit for the year 17.5 14.7 Summary balance sheet As at 31 March 2008 2007 ‚£m ‚£m Goodwill and other intangible assets 231.4 219.7 Property, plant and equipment, and 15.4 14.2investments Working capital (55.3) (53.3) Current tax liabilities (8.2) (8.4) Deferred tax assets 28.8 34.0 Net debt (110.4) (104.4) Retirement benefit obligations (48.1) (59.9) Other items (3.6) (1.0) Net assets 50.0 40.9 Summary cash flow statement Years ended 31 March 2008 2007 ‚£m ‚£m EBITDA(1) 45.8 44.5 Working capital movements 0.7 0.8 Interest paid (9.8) (13.5) Tax paid (6.0) (3.0) Non cash exceptional items (0.7) 0.9 Capital expenditure (7.8) (6.9) Pension funding in excess of EBITDA (6.5) (6.5)charge Other movements 0.6 (0.2) Free cash flow 16.3 16.1 Net IPO proceeds -- 161.5 Repayment of preference shares -- (89.6) Exceptional pension contributions -- (41.0) Acquisitions and disposals (3.5) (6.9) Dividends paid to external (11.6) -- shareholders Other movements (1.5) (10.0) Net cash flow (0.3) 30.1 Foreign exchange (5.7) 4.5 (Increase)/decrease in net debt (6.0) 34.6
(1) EBITDA is EBITA plus depreciation.
Hogg Robinson Group plc Consolidated Income Statement For the year ended 31 March 2008 Years ended 31 March Notes 2008 2007 ‚£'000 ‚£'000 Continuing operations Revenue 1 332,194 311,388 Operating expenses 2 (296,200) (276,008) Operating profit 35,994 35,380 Analysed as: Operating profit before exceptional 34,785 38,999 items Exceptional items 2 1,209 (3,619) Operating profit 35,994 35,380 Net share of profit of associates and 138 404 joint ventures Finance income 3 1,534 1,255 Finance costs 3 (12,439) (24,160) Profit before tax 25,227 12,879 Income taxes 4 (7,713) (3,087) Profit for the year from continuing 17,514 9,792 operations Discontinued operations Profit for the year from discontinued - 4,870 operations Profit for the year 17,514 14,662 Attributable to: Equity holders of the parent 16,673 13,436 Minority interests 8 841 1,226 17,514 14,662 Earnings per share 5 pence pence Continuing operations, basic 5.5 4.3 Continuing operations, diluted 5.4 4.3 Discontinued operations, basic - 2.4 Discontinued operations, diluted - 2.4 Total, basic 5.5 6.7 Total, diluted 5.4 6.7 Hogg Robinson Group plc Consolidated Balance Sheet As at 31 March 2008 As at 31 March Notes 2008 2007 restated ‚£'000 ‚£'000 Non current assets Goodwill and other intangible assets 231,352 219,670 Property, plant and equipment 12,634 10,864 Investments accounted for using the 2,811 3,296 equity method Trade and other receivables 429 545 Deferred tax assets 31,562 37,775 278,788 272,150 Current assets Trade and other receivables 123,762 107,938 Financial assets - derivative financial 250 301 instruments Current tax assets 447 81 Cash and cash equivalent assets 49,637 61,336 174,096 169,656 Total assets 1 452,884 441,806 Non current liabilities Financial liabilities - borrowings (155,032) (160,392) Deferred tax liabilities (2,806) (3,795) Retirement benefit obligations (48,080) (59,932) Provisions (3,279) - (209,197) (224,119) Current liabilities Financial liabilities - borrowings (3,146) (2,998) Current tax liabilities (8,664) (8,458) Financial liabilities - derivative (1,271) (8) financial instruments Trade and other payables (179,496) (161,788) Provisions (1,137) (3,504) (193,714) (176,756) Total liabilities (402,911) (400,875) Net assets 49,973 40,931 Capital and reserves attributable to equity holders Share capital 3,068 3,056 Share premium 171,942 171,289 Other reserves 7 5,256 1,253 Retained earnings 7 (132,833) (137,605) 47,433 37,993 Minority interests 8 2,540 2,938 Total equity 49,973 40,931 For details of the restatement for 31 March 2007 refer to note 9. Hogg Robinson Group plc Consolidated Cash Flow Statement
For the year ended 31 March 2008
Notes Years ended 31 March 2008 2007 restated ‚£'000 ‚£'000 Cash flows from operating activities Cash generated from 40,064 37,852 operations before special pension contributions Pension contributions - (25,000) following IPO Other pension - (16,031) contributions in respect of deferred pensioners Interest paid (11,455) (14,988) Tax paid (6,041) (3,036) Cash flows from operating 22,568 (21,203) activities - net Cash flows from investing activities Acquisition of 9 (4,282) (8,782) subsidiaries, net of cash acquired Acquisition of associates, - (1,253) joint ventures and other investments Disposals of subsidiaries 46 3,165 Disposals of associates, 705 - joint ventures and other investments Purchase of property, (4,937) (4,530) plant and equipment Purchase of intangible (2,920) (2,573) assets Proceeds from sale of 22 167 property, plant and equipment Interest received 1,517 1,295 Dividend received from 179 202 associates and joint ventures Cash flows from investing (9,670) (12,309) activities - net Cash flows from financing activities Repayment of borrowings (41,558) (297,897) New borrowings 29,048 164,051 Issue costs of new (65) (2,549) borrowings Cash effect of currency (3,412) 1,654 swaps Issue of shares - 180,160 Issue of share warrants - 88 Issue costs of shares (110) (18,682) Purchase of treasury 7 (1,600) - shares Dividends paid to external (11,600) - shareholders Dividends paid to minority (1,348) (736) interests Cash flows generated from (30,645) 26,089 financing activities - net Net decrease in cash, cash (17,747) (7,423) equivalents and bank overdrafts Net decrease in cash, cash (17,747) (7,423) equivalents and bank overdrafts Cash, cash equivalents and 60,124 68,577 bank overdrafts at beginning of the year Exchange rate effects 6,155 (1,030) Cash, cash equivalents and 48,532 60,124 bank overdrafts at end of the year Cash and cash equivalent 49,637 61,336 assets Overdrafts (1,105) (1,212) 48,532 60,124
Net decrease in cash, cash equivalents and bank overdrafts for the year ended 31 March 2007 have been restated to reflect reclassification of foreign exchange movements and the cash effect of currency swaps between cash flow from operating activities, cash flow from financing activities and the reconciliation between opening and closing cash, cash equivalents and bank overdrafts to more fairly reflect cash flows from operating activities.
Hogg Robinson Group plc Consolidated Statement of Recognised Income and Expense For the year ended 31 March 2008 Notes Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Profit for the year 17,514 14,662 Income and expense recognised directly in equity Currency translation differences 7 3,300 (99) Actuarial gain 5,120 12,516 Deferred tax movement on pension liability (1,587) (3,788) Net impact of tax rate change on deferred tax assets (1,609) - / liabilities 5,224 8,629 Total recognised income and expense 22,738 23,291 Attributable to: Equity holders of the parent 21,897 22,065 Minority interests 8 841 1,226 22,738 23,291
Additional Financial Information
Basis of preparation
The Consolidated Financial Statements have been prepared in compliance with International Financial Reporting Standards (`IFRS') as endorsed and adopted for use by the European Union, International Financial Reporting Interpretations Committee (`IFRIC') interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
Critical accounting policies and forward-looking statements
The preparation of the IFRS financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the year.
This Financial Review should be read in conjunction with the audited Group Consolidated Financial Statements. The discussions contain forward-looking statements that appear in a number of places and include statements regarding HRG's intentions, beliefs or current expectations concerning, among other things, results of operations, revenue, financial condition, liquidity, growth, strategies, new products and the markets in which HRG operates. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties.
Non-GAAP measures
Earnings Before Interest, Taxation and Amortisation (`EBITA') is calculated as operating profit from continuing operations before exceptional items, including HRG's share of results of associates and joint ventures but before net finance costs, income taxes, amortisation and impairment. Earnings Before Interest, Taxation, Depreciation and Amortisation (`EBITDA') is calculated as operating profit from continuing operations before exceptional items, including HRG's share of results of associates and joint ventures but before net finance costs, income taxes, depreciation, amortisation and impairment. Operating profit before exceptional items (a GAAP measure) relates to continuing operations only.
The Directors believe that the presentation of EBITA, EBITDA and operating profit before exceptional items enhances an investor's understanding of HRG's financial performance. However, EBITA, EBITDA and operating profit before exceptional items should not be considered in isolation or viewed as substitutes for retained profit, cash flow from operations or other measures of performance as defined by IFRS. EBITA and EBITDA as used in this announcement are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation and are unaudited line items but are derived from audited financial information. The Directors use EBITA, EBITDA and operating profit before exceptional items to assess HRG's operating performance and to make decisions about allocating resources among various geographic segments.
Geographical segmentation
1 Business and geographical segments Business segmentation All revenue, operating profit for the year, assets and liabilities, capital expenditure, depreciation and amortisation from continuing operations is derived from one primary segment, Business Travel. Segment information is provided for regions reflecting the principal economic environments in which the Group operates. Years ended 31 March 2008 2007 ‚£'000 ‚£'000 restated External revenue from clients by origin (where the Group entity is located) Europe 247,743 241,012 North America 65,310 56,280 AsPac 19,141 14,096 332,194 311,388
External revenue from clients by geographical area (where the client is located)
Europe 247,076 242,819 North America 65,720 56,159 AsPac 19,398 12,410 332,194 311,388 External revenue has been restated in the year ended 31 March 2007 to reflect the reclassification of central revenue among the three geographical segments. In the prior year Consolidated Financial Statements, the Group disclosed a `Central' segment which included revenue from global marketing agreements and distribution and system usage agreements with suppliers, and expenses associated with Group functions. In the current year, a methodology has been introduced to allocate Group revenue, costs and assets to the geographical segments to which they relate. Operating profit / (loss) Europe 36,208 33,687 North America (1,315) 1,840 AsPac 1,101 (147) 35,994 35,380
Operating profit / (loss) excluding exceptional items
Europe 32,579 36,556 North America 1,105 2,480 AsPac 1,101 (37) 34,785 38,999 Years ended 31 March 2008 2007 ‚£'000 ‚£'000 restated Total assets by geographical location Europe 275,032 254,485 North America 80,277 75,422 AsPac 15,929 12,707 371,238 342,614 Cash and cash equivalent assets 49,637 61,336 Current tax assets 447 81 Deferred tax assets 31,562 37,775 452,884 441,806 Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Capital expenditure by geographical location Europe 5,932 5,307 North America 1,552 1,754 AsPac 813 566 8,297 7,627 AsPac refers to the Asia Pacific region.
IPO refers to the Initial Public Offering in relation to the Group's global
offer and admission to the Official List of the Financial Services Authority
and to trading on the London Stock Exchange during the year ended 31 March
2007.2 Operating expenses Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Staff costs 192,674 172,402 Amortisation of client relationships 2,799 2,582 Amortisation of other intangible assets 2,603 2,141 Depreciation of property, plant and equipment 4,361 4,355 Auditors' remuneration for audit services 1,470 1,167 Operating lease rentals - buildings 13,102 12,518 Operating lease rentals - other assets 2,631 2,438 Loss on disposal of property, plant and equipment 139 39 Other expenses 76,421 78,366 296,200 276,008 Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Exceptional items: Settlement of arbitration, net of costs (4,456) - Adjustments to goodwill on recognition of deferred 827 2,929 tax assets Irrecoverable costs of long standing contract 2,420 - Rebranding costs - 2,672 IPO costs charged in operating results - 4,016 Pension past service credit - defined benefit schemes - (6,298) Pension past service charge - defined contribution - 300 schemes Exceptional (credit) / charge (1,209) 3,619 Operating expenses 297,409 272,389 Total operating expenses 296,200 276,008
The settlement of arbitration, net of costs, is with regard to a claim
against Kuoni Reisen Holding AG, former owners of companies acquired by the
Group,for a breach of the relevant sale and purchase agreement. Tax expense
in respect of this was ‚£nil.
An exceptional accrual of ‚£2,420,000 has been made to cover estimated
irrecoverable amounts under a long standing contract in North America.
Rebranding costs were incurred as a result of the Group rebranding itself
under the HRG name during the year ended 31 March 2007.
The pension past service credit on defined benefit schemes in the year
ended 31 March 2007 relates to an actuarial gain on the settlement of
transfer values to deferred members of the UK scheme of ‚£5,019,000 and a
settlement of pension liabilities in Norway of ‚£1,279,000. 3 Finance income and finance costs Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Finance income 1,534 1,255 Interest on bank overdrafts and loans (11,373) (14,451) Amortisation of issue costs on bank loans (498) (2,524) Interest on obligations under finance leases (14) (14) Premium on preference shares - (4,889) Expected return on pension scheme assets less
interest cost on pension scheme liabilities (440) (1,985)
Other finance charges (114) (297) Finance costs (12,439) (24,160) Net finance costs (10,905) (22,905) 4 Income Taxes Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Current tax: Tax on profits of the year 4,326 4,558 Adjustments in respect of previous years 628 (502) Total current tax 4,954 4,056 Deferred tax: Origination and reversal of temporary 2,484 4,067 differences Adjustments in respect of the previous years (38) (2,107) Net impact of rate change on deferred tax 933 - assets and liabilities Adjustments to goodwill on recognition of (620) (2,929) deferred tax assets Total deferred tax 2,759 (969) Taxation charge 7,713 3,087 Years ended 31 March 2008 2007 The tax charge is split as follows: ‚£'000 ‚£'000 United Kingdom 5,562 908 Overseas 2,771 5,108 Adjustment to goodwill on recognition of (620) (2,929) deferred tax assets Taxation charge 7,713 3,087 5 Earnings per share
Basic earnings per share (`EPS') is calculated by dividing the earnings
attributable to Shareholders by the weighted average number of Ordinary
shares outstanding during the year, excluding those purchased by the
Company and held as treasury shares.
For diluted earnings per share, the weighted average of Ordinary shares in
issue is adjusted to assume conversion of all dilutive potential Ordinary
shares.
The following amounts have been used in the calculation of earnings per
share. The average number of shares in issue for the year ended 31 March
2007 takes into account the exercise of warrants and the 25-for-1 bonus
issue of shares which took place in October 2006 in connection with the
IPO. Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Earnings for the purposes of earnings per share: Profit for the year from continuing 17,514 9,792 operations Less: amount attributable to minority (841) (1,226) interest Continuing operations 16,673 8,566 Discontinued operations - 4,870 16,673 13,436 Years ended 31 March Weighted average number of ordinary shares 2008 2007 in issue number number 000s 000s Issued (for basic EPS) 304,862 199,216 Dilutive potential Ordinary shares 1,217 185 For diluted EPS 306,079 199,401 6 Dividends per share
The dividends paid to the Company's Shareholders in the year ended 31 March
2008 were: Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Final dividend in respect of year ended 31 8,558 - March 2007- 2.8p per share Interim dividend in respect of year ended 31 3,667 - March 2008- 1.2p per share Total dividends (note 7) 12,225 -
Scrip dividends to the value of ‚£625,000 in respect of the interim dividend
for the year ended 31 March 2008 were taken instead of a cash payment.
A dividend in respect of the year ended 31 March 2008 of 2.8p per Ordinary
share, amounting to a total dividend of ‚£8,591,326, is to be proposed at the
Annual General Meeting on 21 July 2008. These Consolidated Financial Statements
do not reflect this dividend payable. 7 Reserves Retained earnings Years ended 31 March 2008 2007 ‚£'000 ‚£'000 At 1 April (137,605) (159,769) Retained profit for the year 17,514 14,662 Dividends paid (note 6) (12,225) - Minority interest (841) (1,226) Treasury shares purchased (1,600) - Actuarial gain 5,120 12,516 Deferred tax movement on pension (3,196) (3,788) liability At 31 March (132,833) (137,605) Other reserves Share- Foreign based exchange incentives reserve reserve Total ‚£'000 ‚£'000 ‚£'000 At 1 April 2006 1,208 - 1,208 Currency translation differences (99) - (99) Share-based incentives - 144 144 At 1 April 2007 1,109 144 1,253 Currency translation differences 3,300 - 3,300 Share-based incentives - 703 703 At 31 March 2008 4,409 847 5,256 8 Minority Interests As at 31 March 2008 2007 ‚£'000 ‚£'000 At 1 April 2,938 948 Exchange differences 154 (62) Acquisitions - 1,632 Disposals (45) (70) Dividends paid (1,348) (736) Share of profit after tax 841 1,226 At 31 March 2,540 2,938 9 Acquisitions Years ended 31 March 2008 2007 ‚£'000 ‚£'000 Cash (paid) / received: HRG Belgium NV (1,009) - Spendvision Holdings Limited (1,344) (1,508) Hogg Robinson s.r.o (Czech Republic) (1,920) (2,093) Hogg Robinson Polska Sp. z.o.o - (1,115) Ian Flint Associates - (152) Executive Travel Associates (9) (3,758) Euro Lloyd MAN Reiseburo GmbH - (841) Advance Meeting Partners Corporation - (329) Robustelli World Travel - 452 Cash and deposits of businesses acquired - 562 (4,282) (8,782) HRG Belgium NV
On 1 October 2007 the Group acquired a 100% interest in the business of
Weinberg Travel BVBA, the Group's existing partner in Belgium. This busines
was acquired by HRG Belgium NV, a Group company. Consideration was ‚£829,000
in cash settled on acquisition and a reduction of ‚£50,000 relating to a
working capital adjustment on completion in December 2007. Spendvision Holdings Limited
On 13 March 2008 the Group acquired an additional 7% in Spendvision
Holdings Limited for ‚£1,344,000, bringing its total holding to date to
58%. Significant adjustment to amounts reported in prior years Hogg Robinson s.r.o (Czech Republic)
In the twelve months to 31 March 2008, an adjustment was made in Hogg
Robinson s.r.o (Czech Republic) to increase the net assets by ‚£265,000.
Deferred consideration on the purchase of Hogg Robinson s.r.o was paid
in the year ended 31 March 2008 and was ‚£871,000 higher than originally
anticipated. Goodwill arising on the acquisition has been increased by ‚£
606,000 to reflect these adjustments. The Consolidated Balance Sheet as
at 31 March 2007 has been restated to reflect these adjustments. Spendvision Holdings Limited
In the year ended 31 March 2008, an adjustment was made in Spendvision
to decrease the net assets by ‚£191,000. Goodwill arising on acquisition
has been increased by ‚£191,000. The Consolidated Balance Sheet at 31
March 2007 has been restated to reflect these adjustments.
10 Contingent liabilities and contingent assets
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 exceed the existing provision.
11 Post balance sheet events
On 25 February 2008 an award was made in respect of certain aspects of an arbitration which has been initiated by the Group against Kuoni Reisen Holding AG, the former owners of companies acquired by the Group, for breaches of the relevant sale and purchase agreement. As a result of that award and actions resulting from that award, a final settlement was reached with Kuoni Reisen Holding AG as to the precise amount of damages and the credit for these amounts is included in the results for the year ended 31 March 2008 as exceptional items (note 2).
vendorRelated Shares:
Hogg Robinson Group