28th Jun 2007 07:04
Hogg Robinson Group PLC28 June 2007 Hogg Robinson Group plc ('HRG', 'the Company' or 'the Group') Preliminary Results for the year ended 31st March 2007 Continuing Operations 2007 2006 £m £mRevenue 311.4 297.2Operating Profit 35.4 39.3Operating Profit before exceptional items 39.0 36.2EBITA* 44.1 40.4 *Refer to page 7. Highlights Profits in line with expectations - EBITA up 9.2% to £44.1m (2006: £40.4m) and revenue up 4.8% to £311.4m (2006: £297.2m) - EBITA margin increased to 14.2% (2006: 13.6%) - Final dividend of 2.8p per share, which will be paid on 1st October 2007 to those shareholders on the register at 31st August 2007 Cash - Strong cash flow in H2 - Net debt reduced to £104m Year of Transition - Listed on London Stock Exchange - Rebranded to HRG - HRG global network established and now extends to around 100 countries of which HRG owns or controls entities in 25 countries - Significant new client wins in H2 - Client retention rate remains in excess of 90% Acquisitions - Completed in the USA, Czech Republic, Poland, Slovakia and in the UK - Further infill acquisitions planned in 2007/08 including today's announcement of the acquisition of Belgium based Weinberg Travel Restructuring and efficiency programme - Almost completed in North America - Underway in Europe - Set to roll out in Asia Pacific (AsPac) in early 2008/09 - Confident of delivering benefits in H2 2007/08 Management confident of prospects - Year of growth expected in 2007/08 - weighted towards H2 - Growth continues. New client wins to start contributing - Strong sales pipeline - Improving business mix David Radcliffe, Chief Executive of Hogg Robinson Group plc, said: "I am pleased to report satisfactory results after a year of transition at HRG.They are testament to the hard work of our staff. Our IPO and the rebranding ofHRG have been successfully completed and we are positioned well for another yearof growth. "In addition, I am pleased to advise that we have acquired* the business ofBelgium based Weinberg Travel BVBA, which currently trades as HRG Belgium, for acash consideration of Euros1.5m." Contact Details Hogg Robinson Group +44 (0) 1256 312 600 David Radcliffe +44 (0) 1256 312 602John Kennerley +44 (0) 1256 312 610Jacqui Higgs +44 (0) 1256 312 622 Bell Pottinger Corporate & Financial +44 (0) 20 7861 3232 Nick Lambert +44 (0) 20 7861 3936Andrew Benbow +44 (0) 20 7861 3865 A presentation for analysts will be held at 8.30am for 9.00am today at theMerrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ. Copiesof the presentation with simultaneous, live, audio commentary from HRG'spresentation team will be available at http://investors.hoggrobinson.com/hrg/ir/rp/res/. An audio replay will be available at the same URL from 12pm. This announcement may contain forward-looking statements with respect to certainof the plans and current goals and expectations relating to the future financialconditions, business performance and results of HRG. By their nature, allforward-looking statements involve risk and uncertainty because they relate tofuture events and circumstances that are beyond the control of HRG, including,amongst other things, HRG's future profitability, competition within the marketsin which HRG operates and its ability to retain existing clients and win newclients, changes in economic conditions generally or in the travel and airlinesectors, terrorist and geopolitical events, legislative and regulatory changes,the ability of its owned and licensed technology to continue to servicedeveloping demands, changes in taxation regimes, exchange rate fluctuations, andvolatility in HRG's share price. As a result, HRG's actual future financialcondition, business performance and results may differ materially from theplans, goals and expectations expressed or implied in these forward-lookingstatements. HRG undertakes no obligation to publicly update or reviseforward-looking statements, except as may be required by applicable law andregulation (including the Listing Rules of the Financial Services Authority).No statement in this announcement is intended to be a profit forecast or berelied upon as a guide to future performance. *See Note 11 on Page 29 for further detail Chief Executive's Review Overview The financial year ended 31st March 2007 was one of transition and progress forHRG. During the course of the year, we continued the repositioning of theCompany as a provider of services specialising in the corporate travel andrelated markets and the subsequent rebranding to HRG. In October 2006, wecompleted successfully our listing on the main market of the London StockExchange. As identified in our Interim Results (in respect of the six months ended 30thSeptember 2006), this period of change started in January 2006 with theannouncement that Hogg Robinson was pursuing an independent strategy from ourco-shareholder in BTI. We saw the departure of a number of clients and at thesame time some of our prospective clients put their contract tender processes onhold until the market settled. The results for the year have also been affected by the cost cutting measurestaken early in the year together with the impact of a number of other factors,including the FIFA World Cup(TM) As a result, we grew EBITA from continuingoperations before exceptional items ('EBITA') by 9.2%. Our EBITA margin has alsogrown from 13.6% to 14.2% in the same period as a result of continuing focus oncosts and improving business mix. Restructuring and Efficiency Programmes A key part of our strategy is to focus on the higher value added, 'managed' typeof client which is more international in nature. In executing this strategy, weare reducing our reliance on income from traditional suppliers such as airlines,towards more stable, annuity-like income for which clients pay for the value weadd to their corporate travel and related expenditure. In order to provide these clients with a seamless international service, we areoperationally restructuring HRG from the traditional 'country' organisation intothree geographic divisions each headed by a Regional President. These divisionswill operate increasingly by the main business streams within which we operate,namely Corporate Travel Management, Expense Management, Consulting, Events &Meetings Management, and Sports all of which have a good pipeline of new sales. We are adopting a phased approach to the restructuring and efficiency programmeswhich started in our 'North America' division where the integration of theseparate businesses within the region has largely been concluded. Therestructuring programme has now started in Europe and once this has beencompleted our AsPac division will embark upon a similar programme in early 2008/09. We are confident of a net benefit to our European cost base mainly in 2007/08. Regional Performance Europe's strong position within the Group continues to be driven largely by theUK and the number of recent substantial client wins serves to underpin our topranking. North America continues to develop its service capabilities but early salesgrowth was slower than previously hoped. This, combined with start-up andrestructuring costs and the transfer of certain revenues from North America toCentral Revenue following the introduction of a new global contract, hasresulted in a slight negative variance of (£0.3m) in EBITA compared to theprevious year. We anticipate, however, that the situation will improve in thecoming year as the new structure takes effect and we benefit from expected newclient income. The AsPac region has benefited from the appointment of a new President, KevinRuffles, to bring a more cohesive approach to sales, technology and service and,as a result, profits have increased substantially on the previous year. Althoughthe region is still the smallest in terms of profit contribution, it isstrategically very important to the way we function globally. We anticipategrowth from this region in the coming years. ------------------- ------------------- Continuing Revenue EBITA by source before exceptional items ------------------- ------------------- ---------- ----------- FY 06/07 FY 05/06 FY 06/07 FY 05/06 £m £m £m £m unaudited unaudited ----------- ---------- ---------- -----------Europe 245.7 239.4 39.2 36.1North America 53.9 46.3 4.4 4.7AsPac 11.8 11.5 0.5 (0.4) ----------- ---------- ---------- ----------- 311.4 297.2 44.1 40.4 Global Capability The international corporate travel management market comprises four main globalplayers (of which HRG is one) that have both the experience and the capabilityto offer a truly global service. Our acquisition of Weinberg Travel in Belgiummeans HRG will have ownership or control of entities in 25 countries, supportedby a strong, contracted Partner network extending to approximately 100 countriesthat we continue to manage. Since launching our new HRG brand, when most of the former BTI Partners joinedthe new HRG network, we are delighted with progress in terms of establishing ourglobal HRG footprint. Crucially, the majority of our partners have worked withHogg Robinson since the mid 1990s and therefore have the expertise andexperience of working in a global environment with us. We are delighted to havestrengthened the network further by welcoming new Partners over the last yearincluding those from Luxembourg, Mexico, Netherlands and Tanzania. HRG's strategy has been to position ourselves as a rounded corporate servicescompany offering a range of services designed to add value to our corporateclients' travel and related expenditure. This strategy is being accepted well inthe market and HRG is included in the majority of major global and internationaltenders. As evidenced by our recent client wins, we are achieving a pleasingnumber of successes. In today's international corporate travel market place,although size is still important, it is the value and knowledge that we bring toour clients in proven international experience, creativity and influence whichwe believe is winning many bids. The range of services we offer is falling increasingly within the remit of ourclients' procurement departments and, in addition to the cost benefits weprovide through consolidation, they are also recognising the importance of ameasurable, quality service. Events & Meetings Management is one of the latest areas where our clients arefocussing their expense consolidation efforts. In our aim to maximise theopportunity, HRG has repositioned its business divisions which are headed up byindustry specialists from both the Events & Meetings Management and Sportsbackgrounds. In addition, our acquisition of Ian Flint & Associates, a wellknown and respected industry consultancy, has enabled HRG to bring together ourindependent consulting capabilities which we are now expanding globally. Expense Management is also a significant potential growth area for us. Ourinvestment in Spendvision online expense management processing is already havingthe predicted effect of helping us maximise savings opportunities for ourclients. Client Activity Our client retention rate was maintained in excess of 90%. Clients who haveretendered and elected to stay with HRG this past year include Agilent (Global),BMW (Germany), Bombardier (Canada), Motorola (UK), the International Ice HockeyFederation (IIHF in Europe) and UBS (UK/Switzerland). I am pleased to report that the aggregate of new signings by far outweighed anylosses in terms of full year effect. New clients we have welcomed include CreditSuisse (UK, USA and Switzerland), Daimler Chrysler (USA), DHL (AsPac), Gambro(Global), Home Office (UK), KPMG (Australia), Merrill Lynch (USA), QinetiQ (UK)and PepsiCo (Europe, Middle East and Asia (EMEA) and AsPac). In addition, theMinistry of Defence and Foreign & Commonwealth Office (UK) have announced theirintention to award their joint contract to HRG subject to due Governmentprocess. These clients will contribute in part to 2007/08 but in full to 2008/09. The sales pipeline for Spendvision, which represents an important part of thestrategic direction for HRG, is extremely satisfying. Spendvision sellsexpense-related online corporate processes to our own clients and increasinglycreates own/white-label services for clients, such as major banks and mobiletelecommunications companies, to offer to their customers. Acquisitions We remain committed to expansion via acquisitions where these fulfil ourstrategic objectives and meet our financial tests. As a result, in February2007, we purchased Executive Travel Associates, a Washington DC based travelmanagement company mainly servicing clients in the legal sector on the EastCoast of the USA and have also announced the acquisition of Weinberg Travel, aBelgium-based family-owned corporate travel company. We anticipate furtherinfill acquisitions in the current year which we intend to fund from ourexisting resources. Acquisitions of travel management companies were also made during the year inthe Czech Republic, Poland and Slovakia, and of the consulting business of IanFlint & Associates in the UK. These have now all been fully integrated intotheir regional divisions and synergies continue to be realised as part of therestructuring and efficiency programme. Technology Technology is a vital component in both our capability to deliver service andour ability to generate margin improvement in future years. Past investmentshave enabled us to develop a stand-alone independent technology platform,Universal Super Platform, which will be rolled out in Europe and North America.It will, among other benefits, enable our front-end booking processes to linkdirectly to wherever inventories of air seats, hotel beds and car rentals areheld giving us the capability to link directly to airlines, hotel groups, theInternet and classic global distribution systems. The ability to link to anarray of inventory is becoming very important within our industry as thetraditional relationship between classic reservation systems and supplierschanges. Another important technological development is the linking together of travelreservation centres in the UK, Hungary, Sweden, Singapore and Canada. As clientswork around the globe, we are able to adopt a 'follow the sun' strategy with ourservice centres providing support for clients regardless of geography or time ofday. Airlines in the United States of America and in the UK have renegotiatedagreements with the global distribution systems (GDS) through which HRG makesair, hotel and car reservations. Where appropriate, HRG has signed opt-inagreements with the GDS which effectively reduces our income from them butshields us from new surcharges certain airlines will be making for using theGDS, and secures necessary access to appropriate fares and inventory for ourclients. We are known as an innovative company and our proprietary technology products,including our traveller tracking capability and independent data warehousing,are increasingly well received by our clients in this security-conscious age. Risks A full summary of risks associated with an investment in the Company is listedon Page 6 of the Prospectus and these continue to be relevant. Outlook The one-off benefit of the accommodation, travel and event services of the FIFAWorld Cup 2006TM, which contributed approximately £3m to EBITA in 2006/07, willmean that the first half of 2007/8 may be lower in comparison to thecorresponding period in 2006/07. However, our repositioning and renewed focushas led to a substantial number of client wins, and this new client revenue, therestructuring programme in Europe and the continuing growth in Spendvision areexpected to drive another year of satisfactory growth in 2007/08. Our successwill continue to be based on providing more of our value enhancing solutions toour geographically diverse client base. Margins in the lower yield transactions business continue to come underpressure. We anticipate our ability to offer clients a range of value enhancingservices will allow us to build on the transaction business to protect and growmargin in future years. The market remains buoyant, albeit very competitive at the transaction end ofthe business. Our recent sales wins, continuing focus on higher margin productsand our ongoing efficiency programme mean that we remain confident of theprospects for the coming year. Financial Review Overview Hogg Robinson Group (HRG) is an award winning corporate services companyproviding a range of business travel related products and services. The keyfinancial measures of the Group's performance in the financial year to 31 March2007 compared to the prior year are shown below. In order to aid theunderstanding of the results for the continuing business, a pro-formaConsolidated Income Statement has been included on page 16 which shows operatingprofit excluding certain exceptional items. Years ended 31st March ------------------ ------ --------- 2007 2006Continuing operations £m £m % changeRevenue 311.4 297.2 4.8%EBITDA (1) 48.5 44.2 9.7%EBITA (2) 44.1 40.4 9.2%Operating profit before exceptional items (3) 39.0 36.2 7.7%Operating profit 35.4 39.3 (9.9%)Profit for the year from continuing operations 9.8 1.3 1. Earnings before Interest, Taxation, Depreciation and Amortisation(EBITDA) is calculated as operating profit from continuing operations beforeexceptional items, including HRG's share of results of associates and jointventures, but before net finance costs, income taxes, depreciation, amortisationand impairment. 2. Earnings before Interest, Taxation and Amortisation (EBITA) iscalculated as operating profit from continuing operations before exceptionalitems, including HRG's share of results of associates and joint ventures, butbefore net finance costs, income taxes, amortisation and impairment. 3. For more information on HRG's exceptional items see analysis below. The line items referred to in footnotes (1) and (2) above are themselvesunaudited but are derived from audited financial information. For notes on basis of preparation, critical accounting policies andforward-looking statements and Non-GAAP measures, please refer to the AdditionalFinancial Information section on page 21. Group Financial Results The following information has been extracted from the Group's Consolidatedfinancial statements for the year ended 31 March 2007. Years ended 31 March ---------------------- 2007 % of 2006 % ofContinuing operations £m revenue £m revenue Revenue 311.4 297.2 Personnel costs (172.4) 55.4 (166.8) 56.1Other administrative costs (90.9) 29.2 (86.4) 29.1Depreciation (4.4) 1.4 (3.8) 1.3Amortisation (4.7) 1.5 (4.0) 1.3 ------- -------Operating profit before exceptional items (1) 39.0 12.5 36.2 12.2 Exceptional pension items 6.0 7.0Adjustments to goodwill on recognition of taxassets (2.9) (3.9)IPO costs (4.0) -Rebranding costs (2.7) - ------- -------Operating profit 35.4 39.3 Net share of profit of associates and jointventures 0.4 0.2Net finance costs (22.9) (37.4) ------- -------Profit before tax 12.9 2.1 Income taxes (3.1) (0.8) ------- -------Profit for the year from continuingoperations 9.8 1.3 Minority interests (1.3) (0.8) ------- -------Earnings from continuing operations 8.5 0.5 Profit / (loss) from discontinued operations 4.9 (8.1) ------- -------Profit / (loss) for the year 13.4 (7.6) ------- ------- Reconciliation of operating profit before exceptional items to EBITDA: Operating profit before exceptional items (1) 39.0 36.2Add back amortisation 4.7 4.0Net share of profit of associates and jointventures 0.4 0.2 ------- -------EBITA (2) 44.1 14.2 40.4 13.6Add back depreciation 4.4 3.8 ------- -------EBITDA (3) 48.5 15.6 44.2 14.9 1. For more information on operating profit before exceptional items, see"Non-GAAP measures" on page 21 and for more information on HRG's exceptionalitems see analysis below. 2. Earnings before Interest, Taxation and Amortisation (EBITA) iscalculated as operating profit from continuing operations before exceptionalitems, including HRG's share of results of associates and joint ventures, butbefore net finance costs, income taxes, amortisation and impairment. For moreinformation on EBITA, see "Non-GAAP measures" on page 21. 3. Earnings before Interest, Taxation, Depreciation and Amortisation(EBITDA) is calculated as operating profit from continuing operations beforeexceptional items, including HRG's share of results of associates and jointventures, but before net finance costs, income taxes, depreciation, amortisationand impairment. For more information on EBITDA, see "Non-GAAP measures" on page21. The line items referred to in footnotes (2) and (3) above are themselvesunaudited but are derived from audited financial information. Revenue Revenue for the twelve months ended 31 March 2007 increased by £14.2m to£311.4m, being 4.8% higher than the prior year. Revenue increases reflectedorganic growth, £8.7m, and acquisitions, £5.5m. North America achieved asignificant organic percentage increase of 14.6%, £6.8m. Europe was beneficiallyimpacted by the FIFA World Cup and increases in Central revenue of £6.8m due toincreased revenue from distribution and system usage agreements. This Centralrevenue included Spendvision as a subsidiary and the transfer of certain revenuefrom North America following the introduction of a new global contract. Personnel costs The increase in personnel costs of £5.6m, 3.4%, reflected annual salaryinflation as well as increased headcount from acquired businesses during theyear, which added £1.8m to cost. Share-based payment schemes have been put inplace and costs of £0.1m were included. Had these schemes been in place at thestart of the year, the full year cost would have been £0.6m. Other administrative costs The increase in other administrative costs of £4.5m, 5.2%, included an increaseof £2.9m due to acquired businesses. In total, administrative costs, such as IT,facilities and selling expenses, was 29.2% of total revenue, a slight increaseon the previous year of 29.1%. Depreciation and amortisation Depreciation increased by £0.6m primarily due to increased capital expenditure,£0.1m from acquired businesses. Intangible assets consist of software, bothexternally acquired and internally generated, and client relationships. Theamortisation on these assets increased by £0.7m, from £4.0m to £4.7m. Thisincrease can be split into externally acquired software of £0.4m (Total £1.4m),internally generated software of £0.2m (Total £0.7m) and client relationships of£0.1m (Total £2.6m). Operating profit before exceptional items Operating profit before exceptional items for the twelve months ended 31 March2007 increased by £2.8m from £36.2m to £39.0m, a 7.7% increase compared with theprior year. The increase reflected revenue growth and improved cost managementin each region. Compared to prior year, operating profit before exceptionalitems included acquisitions of £1.1m and exchange rate movements during the yearof £0.6m on translation to the Group's functional currency. Exceptional pension items Exceptional pension items for twelve months ended 31 March 2007 netted to £6.0m.Of this total, £5.0m reflected the actuarial gain on the settlement ofliabilities to deferred pensioners in the UK pension scheme. A further net gainof £1.0m arose on the settlement of pension liabilities in Norway. Thesesettlements are unlikely to recur in future years. Adjustments to goodwill on recognition of tax assets The Group has acquired businesses with tax losses and other deferred tax assets.These have been recognised in the Consolidated Balance Sheet on acquisition tothe extent that they were expected to be realised based on information at theacquisition date. The Group has subsequently been able to use tax losses and other assets to agreater extent than anticipated on acquisition thereby reducing the value ofgoodwill. In order to comply with the requirements of IAS12, Income Taxes, acharge was reported in operating expenses with a matching credit included in thetax charge. The Group makes maximum use of all brought forward losses and other availablereliefs in mitigating in-territory cash tax payable. IPO costs The Company issued 200,177,777 Ordinary shares of 1p each on 12 October 2006. Total cost of the IPO amounted to £21.4m. Of this amount, £2.5m related to thearrangement of new borrowing facilities; this amount was deducted from theprincipal amount of drawings of the new facility and is being amortised over thefive-year term of the facility. A further £4.0m related to the listing of shareswhich existed before the IPO. This proportion of the cost was charged as anexceptional item in the Group's Consolidated Income Statement. The remainingelement of the cost, £14.9m, related to the issue and listing of new shares andwas taken to the share premium account. Rebranding costs During the year, the Group rebranded itself under the HRG name. The cost of thisrebranding exercise, £2.7m, was charged as an exceptional item in the Group'sConsolidated Income Statement. Net finance costs Net finance costs decreased to £22.9m from £37.4m. The level of finance costsfell substantially following the completion of the IPO in October 2006, bothwith the receipt of proceeds from the issue of new shares and the reduction inthe borrowing margin on the remaining debt. In the previous year the disposal ofBenefits and Consulting Services in July 2005 gave rise to a reduction in debt,although at a much lower level. The effect of rising interest rates since theIPO has been to increase borrowing costs by £0.3m on an annualised basis. Income taxes The tax charge for the twelve months to 31 March 2007 amounted to £3.1m, beingan effective rate of 24% of profit before tax. The increase in tax charge overthe prior year is due primarily to the accelerated write-off of loan issue costsin the prior year and the settlement gain on the UK pension scheme from thepayment to the deferred members. A low effective rate of taxation is expected tobe sustained for the foreseeable future while losses in the UK, Germany andNorth America are utilised. Dividend Subject to approval at the Annual General Meeting, a dividend of 2.8 pence pershare will be paid on 1 October 2007 to shareholders on the register as at 31August 2007. This dividend is intended to provide a return to shareholders forthe period from the IPO in October 2006 until 31 March 2007. As required underaccounting rules this dividend is not charged in the Consolidated IncomeStatement for the year ended 31 March 2007. Discontinued operations Profits from discontinued operations for the year to 31 March 2007 amounted to£4.9m, predominantly due to the receipt of additional contingent disposalproceeds in respect of the sale of Benefits and Consulting Services. Earnings per share The total basic earnings per share were 6.7p based on the Group's reportedresults for the year ended 31 March 2007. These results included the periodprior to the IPO on 12 October 2006. In particular the level of interest costswere substantially higher before the IPO and the weighted average number ofordinary shares in issue substantially lower. The pro-forma shows a full year interest cost of £10.9m per annum, which, alongwith the elimination of exceptional pension items, costs of the IPO andrebranding costs, which gives rise to earnings per share from continuingbusinesses of 6.5p. A pro-forma Consolidated Income Statement is shown later inthis section on page 16. Liquidity and capital resources Consolidated Cash Flow StatementFor the year ended 31 March 2007 Years ended 31 March -------------- 2007 2006 £'000 £'000Cash flows from operating activities Cash generated from operations before special pension contributions 41,009 30,603 Pension contributions following IPO (25,000) - Other pension contributions in respect of deferred pensioners (16,031) - Interest paid (14,988) (17,298) Tax paid (3,036) (2,092) -------- ------- Net Cash flows (used in) / generated from operating activities (18,046) 11,213 -------- ------- Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (8,782) (20,337) Acquisition of associates, joint ventures and other investments (1,253) (1,689) Disposals 3,165 112,863 Purchase of property, plant and equipment (4,530) (5,249) Purchase of intangible assets (2,573) (2,155) Proceeds from sale of property, plant and equipment 167 56 Interest received 1,295 1,970 Dividend received from associates and joint ventures 202 243 -------- ------- Cash flows (used in) / generated from investing activities (12,309) 85,702 -------- ------- Cash flows from financing activities Repayment of borrowings (297,897) (81,662) New borrowings 164,051 11,202 Issue costs of new borrowings (2,549) (1,754) Issue of shares 180,160 6 Issue of share warrants 88 - Issue and listing costs of shares (18,682) - Dividends paid to minority shareholders (736) (926) -------- ------- Cash flows generated from / (used in) financing activities 24,435 (73,134) -------- ------- -------- -------Net (decrease) / increase incash, cash equivalents and bankoverdrafts (5,920) 23,781 ======== ======= Net (decrease) / increase incash, cash equivalents and bankoverdrafts (5,920) 23,781 Cash, cash equivalentsand bank overdrafts at beginning ofthe year 68,577 44,052 Exchange rateeffects (2,533) 744 -------- -------Cash, cash equivalentsand bank overdrafts at end of theyear 60,124 68,577 ======== ======= Cash and cash equivalentassets 61,336 68,879Overdrafts (1,212) (302) -------- ------- 60,124 68,577 ======== ======= Cash flows from operating activities Cash flows from operating activities before interest, tax and special pensioncontributions were £41.0m compared with £30.6m in the year ended 31 March 2006.This improvement was mainly driven by the increase in EBITDA of £4.3m, from£44.2m to £48.5m, and a positive movement year on year in working capital of£5.7m, of which £3.5m relates to continuing businesses. Pension funding inexcess of charge to operating profit excluding special pension contributions wasan outflow of £6.5m (2006: £5.7m). The special pension contributions consisted of £25.0m to the Hogg Robinson(1987) Pension Scheme (the UK Scheme) from IPO proceeds and £16.0m provided tothe UK Scheme to finance transfer values for deferred members, of which £3.5mwas funded from IPO proceeds. Cash flows from investing activities Payments made on acquisition of companies amounted to £8.8m (2006: £20.3m). Thisamount included £1.5m on the acquisition of a further 8% stake in SpendvisionHoldings Limited, £2.1m for the acquisition of Hogg Robinson s.r.o (CzechRepublic), £1.1m for the acquisition of Hogg Robinson Polska Sp. z.o.o and £3.8mfor the acquisition of Executive Travel Associates in the USA. Cash receipts inthe current year in respect of disposals made in prior years amounted to £3.2m.Capital expenditure on intangible assets and property, plant and equipment was£7.1m (2006: £7.4m). Cash flows from financing activities Cashflow from financing activities included the proceeds from the issue of200,177,777 Ordinary shares of 1p each at a price of 90p per share totalling£180.2m. Payments made for the costs of the issue and listing of existing sharesamounted to £18.7m. A further £2.5m was paid to arrange new borrowingfacilities. Net repayment of borrowings was £133.8m, which included preferenceshares and accumulated premium totalling £94.5m. This compares to a netrepayment of borrowings of £70.4m in the prior year which includes a repaymentof £80.0m following the sale of Benefits and Consulting Services. Reconciliation between cash and cash equivalent assets and net debt Years ended 31 March ---------------- ---- -------- 2007 2006 £m £mCash and cash equivalent assets 61.3 68.9Non current financial liabilities - borrowings (160.4) (287.8)Current financial liabilities - borrowings (3.0) (7.3) -------- --------Net borrowings (102.1) (226.2) Current finance leases 0.1 0.1Non current finance leases 0.3 0.1Unamortised issue costs (2.3) (2.4)Preference shares - 89.6 -------- --------Net debt (104.0) (138.8) ======== ======== Net debt and liquidity Net debt of the Group at 31 March 2007 amounted to £104.0m. The Group has entered into a new £220m multi-currency revolving credit facilityfor a period of five years to September 2011. The facility is available forutilisation by way of loans, the issue of letters of credit or guarantees. Theapplicable rate of interest on loans comprises LIBOR (EURIBOR forEuro-denominated loans), a margin and mandatory costs, if any, incurred by thelenders. The margin is currently 1.15% but may fall depending on achievement offinancial tests, with a minimum margin of 0.55%. The maximum utilisation of the facility, including guarantees, has been £206.7m.At 31 March 2007, utilisation of the facility amounted to £184.4m. The facilityis expected to be adequate for the needs of the Group for the period until itsexpiry. Treasury policy The Group funding and treasury policy specifically prohibits entering intotransactions of a speculative nature. The Group's foreign exchange transaction risk exposure is limited, with themajority of its transactions denominated in local currency, i.e. the currency ofrevenue matches the currency of expense. In the few instances where there is nomatch, short-term hedges are taken once the exposure can be accuratelyidentified. Intercompany cross-border loans are typically arranged so as toinclude a UK borrower or lender. The loans are denominated in the currency ofthe non-UK party. The UK party hedges its exposure using short-term foreignexchange swaps to preserve the sterling value of the loans and negate the netcurrency exposure. With operations and subsidiary companies around the world, the Group facesforeign exchange translation risk with respect to its non-sterling earnings. Tohedge partially this exposure, the Group's strategy is to distribute its debtamong the currencies in which its assets and earnings are denominated. In thetwo years ended 31 March 2007, foreign exchange translation had a minimal impacton HRG's reported profits. Where appropriate the Group uses interest rate caps to establish maximuminterest rates on core borrowings while enabling it to benefit from short-terminterest rates at a level below that capped rate. Retirement benefit obligations Years ended 31 March ------------------------------ ---------------- 2007 2006 UK Overseas Total UK Overseas Total £m £m £m £m £m £mDefined benefitobligations (246.7) (28.1) (274.8) (274.5) (35.7) (310.2)Fair value of planassets 195.2 19.7 214.9 160.5 25.2 185.7 ------- ------- ------- ------- ------- -------Deficit (51.5) (8.4) (59.9) (114.0) (10.5) (124.5) ======= ======= ======= ======= ======= ======= The Group's retirement benefit liability under the accounting standard IAS 19'Employee Benefits' has fallen from £124.5m at 31 March 2006 to £59.9m at 31March 2007. The obligations on the Hogg Robinson (1987) Pension Scheme (the UK Scheme) havefallen from £114.0m to £51.5m. During the year Hogg Robinson (Travel) Limited, asubsidiary of the Company, agreed a funding deed with the UK Scheme Trusteeswith the intention of eliminating the deficit on the scheme over a period of tenyears to 2016. Under the terms of this deed £25.0m of the IPO proceeds were paidto the UK Scheme. Offers of enhanced transfer values were made to deferredmembers of the UK Scheme. The Group contributed £16.0m to the UK Scheme tofinance these offers, including £3.5m from the proceeds of the IPO. An actuarialgain of £5.0m was made on these settlements, reflecting the extent to which thebook value of the liability under IAS 19 exceeded the transfer values. A revisedschedule of Company contributions to the scheme was agreed with the trustees ofthe pension scheme and approved by the Pensions Regulator, providing for paymentof 17% of pensionable salaries plus £6.25m per annum. The net deficits of overseas schemes fell from £10.5m to £8.4m. Pro-forma financial information The Consolidated Income Statement for the year ended 31 March 2007 has beenpresented including results before the IPO on 12 October 2006. In particular thelevel of interest cost was substantially higher before the IPO. Using a pro-forma full year interest cost of £10.9m per annum following the IPO,and eliminating the exceptional pension items, the costs of the IPO and therebranding costs, profit and earnings per share for the year would have beenreported as follows: Actual Adjustments Adjusted *audited unaudited unauditedContinuing operations £m £m £m Operating profit before exceptional items 39.0 - 39.0 Exceptional pension items 6.0 (6.0) -Adjustments to goodwill on recognition oftax assets (2.9) - (2.9)IPO costs (4.0) 4.0 -Rebranding costs (2.7) 2.7 - ------- --------- --------Operating profit 35.4 0.7 36.1 Net share of profit of associates andjoint ventures 0.4 - 0.4Net finance costs (22.9) 12.0 (10.9) ------- --------- --------Profit before tax 12.9 12.7 25.6Income taxes (3.1) (1.3) (4.4) ------- --------- --------Profit for the year from continuingoperations 9.8 11.4 21.2Less: profit attributable to minorityinterests (1.3) - (1.3) ------- --------- --------Earnings from continuing operations 8.5 11.4 19.9Profit from discontinued operations 4.9 - 4.9 ------- --------- --------Profit for the year 13.4 11.4 24.8 ======= ========= ========* Extracted from audited Consolidated financial statements. number mActual number of Ordinary shares post IPO 305.6 ======== Earnings per share penceContinuing businesses 6.5Discontinued operations 1.6 -------- 8.1 ======== Half year split for dividend calculation Year ended 31 March 2007 ---------------------- --- -------- --- ------- HI H2 Full Year unaudited unaudited *auditedContinuing operations £m £m £m Operating profit before exceptionalitems 12.8 26.2 39.0 Exceptional pension items 4.5 1.5 6.0Adjustments to goodwill onrecognition of tax assets (0.5) (2.4) (2.9)IPO costs - (4.0) (4.0)Rebranding costs - (2.7) (2.7) -------- -------- -------Operating profit 16.8 18.6 35.4 Net share of profit of associates andjoint ventures 0.2 0.2 0.4Net finance costs (16.7) (6.2) (22.9) -------- -------- -------Profit before tax 0.3 12.6 12.9Income taxes (0.9) (2.2) (3.1) -------- -------- -------Profit / (loss) for the year fromcontinuing operations (0.6) 10.4 9.8Less profit attributable to minorityinterests (1.1) (0.2) (1.3) -------- -------- -------Earnings from continuing operationsafter minority interests (1.7) 10.2 8.5Profit from discontinued operations 4.8 0.1 4.9 -------- -------- -------Profit for the year 3.1 10.3 13.4 ======== ======== =======* Extracted from audited Consolidated financial statements.Add back: IPO costs 4.0 Tax effect of IPO costs (0.1) --------Adjusted profit for 6 months ended 31March 2007 14.2 Number of Ordinary shares in issue(m) 305.6Dividend per share (p) 2.8 Yield based on a price of 90p pershare 3.1% Hogg Robinson Group plcConsolidated Income StatementFor the year ended 31 March 2007 Years ended 31 March ------------------ Notes 2007 2006 £'000 £'000Continuing operations Revenue 1 311,388 297,228Operatingexpenses 2 (276,008) (257,919) ------- --------- Operatingprofit 35,380 39,309--------------------------- ------- -- ------- ------ ---------Analysed as:Operatingprofit beforeexceptionalitems 38,999 36,222Exceptionalitems 2 (3,619) 3,087 ------- --------- Operatingprofit 35,380 39,309 ======= ========= -- -------------------------- ------- -- ------- ------ --------- Net share ofprofit ofassociates andjoint ventures 404 169Finance income 3 1,255 2,225Finance costs 3 (24,160) (39,572) ------- --------- Profit beforetax 12,879 2,131Income taxes 4 (3,087) (799) ------- --------- Profit for theyear fromcontinuingoperations 9,792 1,332 Discontinued operationsProfit /(loss) for theyear fromdiscontinuedoperations 4,870 (8,077) ------- --------- Profit /(loss) for theyear 14,662 (6,745) ======= ========= Attributable to:Equity holdersof the parent 13,436 (7,587)Minorityinterests 8 1,226 842 Years ended 31 March ------------------ Notes 2007 2006 pence penceEarnings /(loss) pershare 5 Continuing operations, basic 4.3 0.5 Continuing operations, diluted 4.3 0.5 Discontinued operations, basic 2.4 (7.8) Discontinued operations, diluted 2.4 (7.8) Total, basic 6.7 (7.3) Total, diluted 6.7 (7.3) Hogg Robinson Group plcConsolidated Balance SheetAs at 31 March 2007 As at 31 March ---------------- Notes 2007 2006 restated £'000 £'000 Non current assets Goodwill and other intangible assets 219,214 215,312 Property, plant and equipment 10,793 10,686 Investments accounted for using the equity method 3,296 4,548 Trade and other receivables 545 1,603 Deferred tax assets 37,775 40,250 ------- ------ 271,623 272,399 ------- ------ Current assets Financial assets - other investments - 1,750 Trade and other receivables 107,543 112,740 Financial assets - derivative financial instruments 301 429 Current tax assets 81 498 Cash and cash equivalent assets 61,336 68,879 ------- ------ 169,261 184,296 ------- ------ Total assets 440,884 456,695 ------- ------ Non current liabilities Financial liabilities - borrowings (160,392) (287,771) Deferred tax liabilities (3,795) (3,867) Retirement benefit obligations (59,932) (124,523) ------- ------ (224,119) (416,161) ------- ------ Current liabilities Financial liabilities - borrowings (2,998) (7,335) Current tax liabilities (8,359) (7,817) Financial liabilities - derivative financial instruments (8) (47) Trade and other payables (160,632) (168,261) Provisions (3,504) (5,756) ------- ------ (175,501) (189,216) ------- ------ Total liabilities (399,620) (605,377) ------- ------ Net assets / (liabilities) 41,264 (148,682) ======= ====== Capital and reserves attributable to equity holders Share capital 6 3,056 37 Share warrants 6 - 5,290 Share premium 6 171,289 3,604 Other reserves 7 1,253 1,208 Retained earnings 7 (137,605) (159,769) ------- ------ 37,993 (149,630) Minority interest 8 3,271 948 ------- ------ Total equity 41,264 (148,682) ======= ====== For details of the restatement for 31 March 2006 refer to note 9. Hogg Robinson Group plcConsolidated Statement of Recognised Income and ExpenseFor the year ended 31 March 2007 Notes Years ended 31 March ------------- 2007 2006 £'000 £'000 Profit /(loss) for theyear 14,662 (6,745) ------- ------- Income and expense recognised directly in equity Currency translation differences (99) (4,632) Actuarial gain 12,516 13,559 Deferred tax movement on pension liability (3,788) (4,524) ------- ------- 8,629 4,403 ------- ------- Totalrecognisedincome andexpense 23,291 (2,342) ======= ======= Attributable to: Equity holders of the parent 22,065 (3,184) Minority interest 8 1,226 842 ------- ------- 23,291 (2,342) ======= ======= Additional Financial Information Basis of preparation The Consolidated financial statements have been prepared in compliance withInternational Financial Reporting Standards (IFRS) as endorsed and adopted foruse by the European Union, IFRIC interpretations and with those parts of theCompanies 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 estimatesand assumptions that affect the reported amounts of assets and liabilities atthe date of the financial statements and the reported amounts of revenues andexpenses during the year. This Financial Review should be read in conjunction with the audited GroupConsolidated financial statements. The discussions contain forward-lookingstatements that appear in a number of places and include statements regardingHRG's intentions, beliefs or current expectations concerning, among otherthings, results of operations, revenue, financial condition, liquidity, growth,strategies, new products and the markets in which HRG operates. Readers arecautioned that any such forward-looking statements are not guarantees of futureperformance and involve risks and uncertainties. All comparative figures discussed in this Financial Review section are extractedfrom the IFRS Consolidated financial statements for year ended 31 March 2006rather than the Prospectus, which excluded all demerged operations. Non-GAAP measures Earnings Before Interest, Taxation and Amortisation (EBITA) is calculated asoperating profit from continuing operations before exceptional items, includingHRG's share of results of associates and joint ventures but before net financecosts, income taxes, amortisation and impairment. Earnings Before Interest,Taxation, Depreciation and Amortisation (EBITDA) is calculated as operatingprofit from continuing operations before exceptional items, including HRG'sshare of results of associates and joint ventures but before net finance costs,income taxes, depreciation, amortisation and impairment. Operating profit beforeexceptional items (a GAAP measure) relates to continuing operations only. The Directors believe that the presentation of EBITA, EBITDA and operatingprofit before exceptional items enhances an investor's understanding of HRG'sfinancial performance. However, EBITA, EBITDA and operating profit beforeexceptional items should not be considered in isolation or viewed as substitutesfor retained profit, cash flow from operations or other measures of performanceas defined by IFRS. EBITA and EBITDA as used in this announcement, are notnecessarily comparable to other similarly titled captions of other companies dueto potential inconsistencies in the method of calculation and are unaudited lineitems but are derived from audited financial information. The Directors useEBITA, EBITDA and operating profit before exceptional items to assess HRG'soperating performance and to make decisions about allocating resources amongvarious geographic segments. 1 Business and geographical segments Business segmentationAll revenue, operating profit for the year, assets and liabilities, capitalexpenditure, depreciation and amortisation from continuing operations derived from one primary segment, Business Travel. Geographical segmentationSegment information is provided for regions reflecting the principal economicenvironments in which the Group operates. Years ended 31 March ------------------- 2007 2006 £'000 £'000External revenue from clients by origin (where the Group is located) Central 14,337 7,476 Other Europe 231,346 231,899 ---------- --------- Europe 245,683 239,375 North America 53,921 46,309 AsPac 11,784 11,544 ---------- --------- 311,388 297,228 ========== ========= External revenue from clients by geographical area (where the client is located) Europe 243,383 239,480 North America 56,153 46,236 AsPac 11,852 11,512 ---------- --------- 311,388 297,228 ========== ========= Total assets by geographical location Europe 257,283 284,310 North America 75,419 55,200 AsPac 8,990 7,558 ---------- --------- 341,692 347,068 Cash and cash equivalent assets 61,336 68,879 Current tax assets 81 498 Deferred tax assets 37,775 40,250 ---------- --------- 440,884 456,695 ========== ========= ------------------- Capital expenditure by geographical location Europe 5,307 6,467 North America 1,754 651 AsPac 566 286 ---------- --------- 7,627 7,404 ========== ========= 2 Operating expenses Years ended 31 March ----------------- 2007 2006 £'000 £'000 restated Staff costs 172,402 166,782 Depreciation, amortisation and impairment charges 9,078 7,832 Auditors' remuneration for audit services 1,167 1,156 Operating lease rentals - buildings 12,518 11,947 Operating lease rentals - other assets 2,438 3,884 Other expenses 78,405 66,318 --------- --------- 276,008 257,919 ========= ========= Years ended 31 March ----------------- 2007 2006 £'000 £'000 Exceptional items: Adjustments to goodwill on recognition of tax assets (note 4) 2,929 3,865 Rebranding costs 2,672 - IPO costs charged in operating results 4,016 - Pension past service credit - defined benefit schemes (6,298) (6,952) Pension past service charge - defined contribution schemes 300 - --------- --------- 3,619 (3,087) Operating expenses 272,389 261,006 --------- --------- Total operating expenses 276,008 257,919 ========= ========= Operating expenses in the year ended 31 March 2006 have been restated to reflect reclassification of costs between Auditors' remuneration for audit services, operating lease rentals and other expenses. Rebranding costs have arisen as a result of the Group rebranding itself under the HRG name during the year. IPO refers to 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. 3 Finance income and finance costs Years ended 31 March -------------- 2007 2006 £'000 £'000 Finance income 1,255 2,225 ------- ------- Interest on bank overdrafts and loans (14,451) (19,616) Amortisation of issue costs on bank loans (2,524) (6,481) Interest on obligations under finance leases (14) (19) Premium on preference shares (4,889) (7,763) Expected return on pension scheme assets less interest cost on pension scheme liabilities (1,985) (5,258) Other finance charges (297) (435) ------- ------- Finance costs (24,160) (39,572) ------- ------- Net finance costs (22,905) (37,347) ======= ======= 4 Income taxes Years ended 31 March -------------- 2007 2006 £'000 £'000 Current tax: Tax on profits of the year 4,558 4,856 Adjustments in respect of the previous years (502) 910 ------- ------- Total current tax 4,056 5,766 ------- ------- Deferred tax: Origination and reversal of temporary differences 4,067 (999) Adjustments in respect of the previous years (2,107) (103) Adjustments to goodwill on recognition of tax assets (2,929) (3,865) ------- ------- Total deferred tax (969) (4,967) ------- ------- Tax charge 3,087 799 ======= ======= 5 Earnings per share The following amounts have been used in the calculation of earnings per share. The average number of shares in issue 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 -------------- 2007 2006 £'000 £'000 Earnings for the purposes of earnings per share: Profit for the year from continuing operations 9,792 1,332 Less: amount attributable to minority interest (1,226) (842) ------- ------- Continuing operations 8,566 490 Discontinued operations 4,870 (8,077) ------- ------- 13,436 (7,587) ======= ======= Years ended 31 March -------------- Weighted average number of ordinary shares 2007 2006 in issue number number 000s 000s Issued (for basic EPS) 199,216 103,291 Issuable under share options and performance awards 1,871 - Less: issuable at average market price (1,686) - ------- ------- For diluted EPS 199,401 103,291 ======= ======= Years ended 31 March -------------- 2007 2006 number number 000s 000s Weighted average number of ordinary shares on a normalised basis Issued (for basic EPS) 305,634 103,291 Issuable under share options and performance awards 1,871 - Less: issuable at average market price (1,686) - ------- ------- For diluted EPS 305,819 103,291 ======= ======= 6 Share capital, warrants and share premium account Global offer and admission to the Official List of the Financial ServicesAuthority and to trading on the London Stock Exchange The Company's shares were admitted to the Official List of the FinancialServices Authority and to trading on the main market of the London StockExchange on 12 October 2006. In advance of the listing, all existing shares were re-classified as Ordinaryshares. 405,909 shares were issued representing the outstanding entitlement ofall warrant holders. A bonus issue of 25 new shares for each existing share wasarranged resulting in issue of 101,400,225 shares. Under the global offer of shares, 200,000,000 new shares were issued at a priceof 90p per share. A further 177,777 shares were issued to Non-ExecutiveDirectors at a price of 90p per share. The net cash proceeds from the issue were as follows: £'000 Proceeds on issue of shares 180,160Issue costs paid in the year (18,682)Costs of new loan facilities (2,549) ------- Net receipts in the year 158,929Accrual for future costs (171) ------- Net receipts 158,758 ======= Funds from the issue in the year were used as follows: £'000 Payment to UK Pension Scheme 28,500Reduction of principal amounts of borrowings 130,429 ------- 158,929 ======= The payment to the UK Pension Scheme consists of £25.0 million in accordancewith the funding deed agreed with the Trustees of the Scheme in advance of theIPO plus £3.5 million to permit deferred members to transfer their entitlementout of the Scheme on enhanced terms. Reduction of principal amount of borrowings includes £94,526,000 to repaypreference shares and accumulated redemption premium. 6 Share capital, warrants and share premium account (cont'd) The net receipts of the issue have been accounted for as follows: Net Proceeds Costs £'000 £'000 £'000 Share capital 2,002 2,002 -Share premium account 163,321 178,158 (14,837)Operating costs (4,016) - (4,016)Deducted from debt principal (2,549) - (2,549) ------- ------- ------- 158,758 180,160 (21,402) ======= ======= ======= The amount taken to share capital is the nominal value of 200,177,777 sharesissued at 1p each. The amount taken to share premium account is 200,177,777 shares issued at apremium of 89p per share (90p cash received less 1p per share nominal value),less expenses of £14,837,000 relating to the issue and listing of new shares. £4,016,000 has been taken to the Consolidated Income Statement as operatingcosts. This is an apportionment of the costs of listing to the shares inexistence before the IPO. The costs of new debt facilities, £2,549,000, are deducted from loan principalat the onset of the facility and are amortised over the period of the facility.Amortisation of these costs is included in finance costs. 7 Reserves Retained earnings Years ended 31 March -------------- 2007 2006 £'000 £'000 At 1 April (159,769) (161,217) Retained profit / (loss) for the year 14,662 (6,745) Minority interest (1,226) (842) Actuarial gain 12,516 13,559 Deferred tax movement on pension liability (3,788) (4,524) ------- ------- At 31 March (137,605) (159,769) ======= ======= Other reserves Share- based Exchange incentives reserve reserve Total £'000 £'000 £'000 At 1 April 2005 5,840 - 5,840 Currency translation differences (4,632) - (4,632) ------- ------- ------- At 1 April 2006 1,208 - 1,208 Currency translation differences (99) - (99) Share-based incentives - 144 144 ------- ------- ------- At 31 March 2007 1,109 144 1,253 ======= ======= ======= 8 Minority interests Years ended 31 March ----------------- 2007 2006 £'000 £'000 At 1 April 948 1,032 Exchange differences (62) 11 Acquisitions 1,965 (11) Disposals (70) - Dividends paid (736) (926) Share of profit after tax 1,226 842 -------- --------- At 31 March 3,271 948 ======== ========= 9 Acquisitions Years ended 31 March ----------------- 2007 2006 £'000 £'000 Cash (paid) / received: Spendvision Holdings Limited (1,508) - Hogg Robinson s.r.o (Czech Republic) (2,093) - Hogg Robinson Polska Sp. z.o.o (1,115) - Ian Flint Associates (152) - Executive Travel Associates (3,758) - Euro Lloyd MAN Reiseburo GmbH (841) - Advance Meeting Partners Corporation (329) - Partnership Travel Consulting Inc - (141) Robustelli World Travel 452 (4,021) Advanced Reservation Centre SRL - (33) Sea Gate Travel Group LLC - (17,086) Cash and deposits of businesses acquired 562 944 -------- --------- (8,782) (20,337) ======== ========= Adjustment to amounts reported in prior periods Robustelli World Travel In the twelve months to 31 March 2007, £497,000 was received by the Group as aresult of an agreement with the vendor to an adjustment to the considerationpaid to Robustelli World Travel in February 2006. There were also additionalacquisition costs paid in the year totalling £45,000 and an adjustment toincrease net assets by £213,000. Goodwill arising on the acquisition has beenreduced by £239,000. The balance sheet as at 31 March 2006 has been restated toreflect this adjustment. Advance Meeting Partners Corporation In the twelve months to 31 March 2007 there was a reduction to the purchaseprice for the remaining 17.65% shareholding in Advance Meeting PartnersCorporation of £129,000 and an increase in net assets acquired of £38,000.Goodwill arising on the acquisition has been reduced by £167,000. The balance sheet as at 31 March 2006 has been restated toreflect this adjustment. 10 Contingent liabilities and contingent assets In 1994 Compagnie Dens Ocean NV (CDO), an indirectly owned subsidiary, receiveda claim from the Belgian Customs authorities resulting in a liquidator beingappointed in 1995. Civil litigation is in process with criminal proceedingsbeing considered pending the final outcome of the civil action. The liquidatoris defending the civil action vigorously and has received strong legal advice onthe strength of CDO's case. The Directors continue to believe, on the basis ofsuch advice, that any future impact on the net assets of the Group would notexceed the existing provision. The Group has potential claims against former owners of businesses acquired bythe Group for (inter alia) breach of non-competition restrictions. In theDirectors' view, the resultant value of any such claim cannot be quantified withcertainty. 11 Post balance sheet events On 27 June 2007 the Group contracted to acquire the business of Weinberg TravelBVBA, the Group's existing partner in Belgium. The agreed consideration was Euro1,500,000. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hogg Robinson Group