20th Nov 2007 10:44
Hogg Robinson Group PLC20 November 2007 This replaces RNS Number: 0552I issued at 07:03 on 20 November 2007, and amendsincorrectly stated $ signs to £ and column headings in Consolidated Cash Flow Statement. Hogg Robinson Group plc ('HRG', 'the Company' or 'the Group') Results for the six months ended 30 September 2007 +-----------------------------------+-----------------------------------------+| | Half-year ended 30 September |+-----------------------------------+----------------------+------------------+|Continuing operations | 2007 | 2006 || | | || | £m | £m |+-----------------------------------+----------------------+------------------+|Revenue | 154.4| 149.2|+-----------------------------------+----------------------+------------------+|Operating profit | 10.7| 16.8|+-----------------------------------+----------------------+------------------+|Operating profit before exceptional| 10.7| 12.8||items | | |+-----------------------------------+----------------------+------------------+|Profit/(loss) for the period from | 2.4| (0.5)||continuing operations | | |+-----------------------------------+----------------------+------------------+|EBITA* | 13.2| 15.1|+-----------------------------------+----------------------+------------------+|Adjusted EBITA* (see Highlights) | 14.0| 12.3|+-----------------------------------+----------------------+------------------+ * 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. Highlights • Encouraging first half performance • After adjusting for the previously announced one-off prior year benefit of the FIFA World CupTM and the current year incremental European restructuring costs: o Revenue up 6% o EBITA up 14% • Good new business wins • Client retention rate maintained above 90% • Cash - significant working capital improvement compared to H1 2006/07 • Declared interim dividend of 1.2p per share • Expect to deliver revenue and EBITA growth in 2007/08 on full-year basis David Radcliffe, Chief Executive of Hogg Robinson Group plc, said: "We delivered an encouraging first half performance in line with Management'sexpectations. After adjusting for the prior year benefit of the FIFA World CupTMand the current year incremental European restructuring costs, we havedemonstrated our ability to grow revenue and EBITA. We were also successful ingrowing our client base. We believe that HRG continues to be well positioned forgrowth in the full year." Contact Details Hogg Robinson Group +44 (0)1256 312 600 David Radcliffe, Chief ExecutiveJohn Kennerley, Group Finance DirectorAngus Prentice, Head of Investor Relations Bell Pottinger Corporate & Financial +44 (0)20 7861 3232 Charles CookMike DaviesNick Lambert A presentation for analysts and institutional investors will be held at 0900hGMT today at the Credit Suisse presentation suite, Tower 42, 25 Old Broad Street, London EC2N 1HQ. (Pre-registration for this event is necessary to comply withsecurity procedures at Tower 42.) Copies of the presentation with simultaneous,live, audio commentary from HRG's presentation team will be available at http://investors.hoggrobinsongroup.com/hrg/ir/rp/res/. An audio replay will be available at the same URL from 1400h. Chief Executive's Review HRG delivered an encouraging performance in the first half of 2007/08, in linewith our expectations. We have successfully grown our client base in a period oftransition. We started to restructure our operations in Europe in order to takeadvantage of developments in our industry. In North America we continued toinvest in infrastructure and people and have identified further opportunities toimprove the efficiency of our operations. On an adjusted basis, we grew Group revenue by approximately 6% and EBITA byabout 14%. This is after allowing for the previously announced one-off benefitof the FIFA World CupTM, the bulk of which impacted H1 2006/07, and theincremental effect of the European restructuring programme. We believe this isan encouraging performance. Without adjusting for these items, revenue stillgrew by 4% although EBITA was down by 13%. The Group's EBITA growth is not necessarily always linked directly to revenuegrowth since our business model for managed clients focuses on helping themreduce their travel expenditure while providing them with a variety of addedvalue, travel related services. HRG is, therefore, able to generate profit whileassisting its clients reduce their overall travel spend and consequently HRG'srevenue. In accordance with our stated dividend policy, an interim dividend of 1.2p isdeclared. Last year, we did not pay an interim dividend. However we did say thatour final dividend of 2.8p represented 70% of a full-year dividend payout andthat, going forward, our intention was to keep our H1 dividend flat and reflectany growth in the full-year figure in the final payment. This is exactly what wehave done in H1 2007/08, ie no change from an implied H1 2006/07 dividend of1.2p. We have decided also to offer a scrip dividend alternative and anExtraordinary General Meeting has been convened for 11 December 2007 to approvethis. The relevant documents are being posted to shareholders on 21 November2007. Business Overview Revenue H1 2007/08 H1 2006/07 Change £m Restated* up/(down) £m % Europe 109.1 111.2 (1.9)North America 29.8 26.8 11.2AsPac 7.1 6.0 18.3Central 8.4 5.2 61.5 154.4 149.2 3.5 * Prior year revenue restated to reflect the reclassification of part of ourEvents business. EBITA H1 2007/08 H1 2006/07 Change £m £m up/(down) % Europe 18.1 19.9 (9.0)North America 0.7 2.0 (65.0)AsPac 0.5 0.3 66.7Central (6.1) (7.1) 14.1 13.2 15.1 (12.6) HRG provides products and services linked primarily to corporate travel and itsrelated expenses. Its principal target market is large companies which gainbenefits from having these expenditures independently managed. HRG ownsoperations in 25 countries, located predominantly where corporate decisionmakers are based, and contracted partners in a further 76 countries bringing thetotal reach for the HRG worldwide network to 101 countries. The Group's activities for the first six months of the financial year included: • Continuing to offer value to clients via the introduction of additional services (Expense Management, Consulting, Events & Meetings Management and Sports) into our client base • Ongoing focus on high client retention achieved through delivery of first-class service, and by offering clients new and innovative services • Ongoing development of new technology products and services • Commencing our European restructuring programme which is on track and expected to show benefits which will help increase efficiency both within HRG and our clients • Investing in infrastructure and people in North America to accommodate new client wins and ongoing repositioning of our business in the region The expertise of our people is an essential part of our value proposition toclients. We have a programme across all regions to provide our teams with theright knowledge, technology and support to enable us to deliver an extendedrange of value enhancing services. Client Activity Our client retention rate, as measured at 30 September 2007, remains above 90%.We continue to win more business than we lose and this has been achieved througha combination of new business contracts, expansion of client service programmesand contract extensions amongst our existing clients. Our new business wins areexpected to support revenue and EBITA growth in the full year 2007/08. Regions Europe: Overall, after adjustments referred to above, our European operations showedsteady growth during H1 2007/08. We saw further evidence across the region ofclients seeking to consolidate their managed travel expenditure through theaddition of further countries to existing programmes. This provided HRG with newopportunities to offer additional value add services to clients and drive inhigher margin business. The implementation of our European restructuring programme remains on target interms of projected benefits. We had anticipated that the costs of this programmewould be approximately £3m and that most of this expenditure would be incurredduring H1 2007/08. The initial costs are less than expected and the incrementaleffect in H1 2007/08 is a cost increase of approximately £0.8m. We continue toremain hopeful of a net beneficial effect from the European restructuringprogramme in the full year 2007/08 and delivery of an additional EBITA benefitin the range of £5-7m in 2008/09. We do not anticipate the costs of thisrestructuring programme exceeding £3m. North America: Our North American operations showed revenue growth during the period securingnew client wins and several regional extensions to global client contracts. Wecontinued to explore opportunities to sell value added services, includingConsulting and Events & Meetings Management, to our retained clients. Overall,our North American business is experiencing a healthy pipeline of new business,with a substantial increase in the number of new business pitches in H1 2007/08against the first half last financial year. During the first half of this year we continued to invest heavily ininfrastructure and people in North America to facilitate new client business,which resulted in lower first half earnings. In H1 2006/07 we receivednon-recurring benefits associated with the purchase of Seagate Travel Group LLC.This combination led to a reduction in EBITA in H1 2007/08. We expect earningsto improve in the second half of the financial year. The investment ininfrastructure and people has already been beneficial and enabled us to improveproductivity and win new business. We have initiated a second phase review ofall our North American operations which is designed to achieve further operatingefficiencies and to ensure our North American operations are more closelyaligned to our global model. AsPac: Our business in the AsPac region returned a strong performance during the firsthalf of the financial year, with both revenue and EBITA ahead on the same periodlast year. We have been particularly successful at driving up transactionvolumes and reducing unit costs for our existing clients while also securing newclients in the region. We remain confident about the prospects for our AsPacbusiness in the second half of the year. Central: Central includes revenues from global marketing agreements and distribution andsystem usage agreements with suppliers, and Spendvision. It also contains thecosts and expenses associated with technology development and support, and Groupfunctions such as client management, sales, IT, finance, human resources, legaland marketing. Revenue in Central has shown growth due to a number of factors,including additional revenue from Spendvision and the introduction of a newglobal hotel programme. Spendvision continued to make good progress during the first six months of 2007/08. It secured a number of new clients and increased penetration of its expensemanagement technology into client systems. Acquisitions In October 2007, we completed the acquisition of Weinberg Travel BVBA, theGroup's existing partner in Belgium. Outlook HRG delivered an encouraging first half performance, showing on an adjustedbasis growth in revenue and EBITA. We have signed a number of new clients whichwill positively impact our performance in H2 2007/08. These factors give usconfidence for the full-year outturn and beyond. Acquisitions remain a key element of our strategy and, while none were madeduring H1 2007/08, opportunities continue to be explored. We are watching current market developments, including the continued turbulencein the financial markets and the price of oil. Some mainly financial sectorbased clients are looking to us to help design and introduce cost saving travelpolicies as they seek to reduce the impact of these issues on their business. Inaddition, we have seen recently in some countries signs of softening in demandrelating particularly to SME and Events. These form a minority of our overallbusiness and we have, where appropriate, taken action to mitigate any effect onthe Group. So far these market developments have not had any material effect onour performance. In summary, we are encouraged by the Group's performance in the first half and,given that less than 30% of our EBITA has historically fallen in the first halfof our financial year, we remain confident of delivering full-year revenue andEBITA growth in 2007/08. 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 Hogg Robinson Group. By theirnature, all forward-looking statements involve risk and uncertainty because theyrelate to future events and circumstances that are beyond the control of HRG,including amongst other things, HRG's future profitability, competition with themarkets in which the Company operates and its ability to retain existing clientsand win new clients, changes in economic conditions generally or in the traveland airline sectors, terrorist and geopolitical events, legislative andregulatory changes, the ability of its owned and licensed technology to continueto service developing demands, changes in taxation regimes, exchange ratefluctuations, and volatility in the Company's share price. As a result, HRG'sactual future financial condition, business performance and results may differmaterially from the plans, goals and expectations expressed or implied in theseforward-looking statements. HRG undertakes no obligation to publicly update orrevise forward-looking statements, except as may be required by applicable lawand regulation (including the Listing Rules). No statement in this announcementis intended to be a profit forecast or be relied upon as a guide to futureperformance. Interim Management Report Hogg Robinson Group (HRG) is an award winning international corporate servicescompany providing a range of services which add demonstrable value to ourclients' corporate travel and related expenditure. Totally committed to a value offering, our extensive and comprehensive portfolioincludes Corporate Travel Management, Expense Management, Consulting, Events &Meetings Management and Sports. Key events On 27 June 2007, the Group contracted to acquire the business of Weinberg TravelBVBA, the Group's existing partner in Belgium. The purchase of Weinberg TravelBVBA was completed on 1 October 2007. The consideration paid was £834,000. Performance Revenue Revenue for the six months to 30 September 2007 has increased by £5.2m, being3.5% higher compared with the equivalent period in the prior year. We have reported growth in all regions apart from Europe. After adjusting forthe beneficial impact of the FIFA World CupTM in H1 06/07, growth in Europewould have been approximately 1.3% and for the Group approximately 6.0%. Revenue in Central has shown growth of £3.2m due to increased revenue fromSpendvision and the introduction of a new Global Hotel Programme. EBITA The reconciliation of operating profit before exceptional items to EBITDA is setout in the table below: H1 07/08 % of H1 06/07 % of FY 06/07 % of £m revenue £m revenue £m revenue Operating profit before exceptional items 10.7 12.8 39.0Add back amortisation 2.5 2.1 4.7Net share of profit of associates and - 0.2 0.4joint venturesEBITA(1) 13.2 8.5% 15.1 10.1% 44.1 14.2%Add back depreciation 2.0 2.3 4.4EBITDA(2) 15.2 9.8% 17.4 11.7% 48.5 15.6% EBITA for the six months to September 2007 has reduced by £1.9m from £15.1m to£13.2m, being 12.6% down compared to the equivalent period in the prior year. After adjusting for the incremental European restructuring costs of £0.8mincurred in H1 07/08 and the beneficial impact of the FIFA World CupTM in H1 06/07 overall growth would have been approximately 13.8% whilst Europe would havegrown by approximately 10.5%. The North American result is impacted by the investment in infrastructure andlarge contract start up costs which together totalled £0.5m. In addition theresults for H1 06/07 carried the benefit of approximately £1.0m related toGlobal Marketing Agreements resulting from our purchase of Sea Gate Travel GroupLLC. Changes in foreign exchange rates had an insignificant impact on EBITA bycomparison with prior periods. (1) 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. (2) 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. Amortisation of intangible assets Amortisation of intangible assets has increased by £0.4m, from £2.1m to £2.5m,compared with the equivalent period in the prior year. This reflects accumulatedamortisation of technology assets and client relationships for acquiredbusinesses. Exceptional pension credits There were no exceptional pension credits in the six months to September 2007.Exceptional pension credits for the six months to 30 September 2006 amounted to£4.5m. Of this total, £3.9m was the actuarial gain on the settlement ofliabilities to deferred pensioners in the Hogg Robinson (1987) Pension Scheme. Afurther gain of £0.6m arose on settlement of pension liabilities in Norway. Net finance costs Net finance costs have decreased by £10.9m compared with the equivalent periodin the prior year. This arises predominantly due to the change in capitalstructure of the Group following IPO in October 2007. The annualised impact ofthe change in interest rates from the levels prevailing as at 31 March 2007 to30 September 2007 is estimated to be an increase in net finance costsof approximately £0.8m. Taxation The tax charge for the six months to 30 September 2007 reflects the taxattributable to the mix of results by country in the period, totalling £1.4m. Inaddition, deferred tax assets and liabilities have had to be revalued as aresult of reductions in income tax rates in Germany and the UK due tolegislative changes in those countries' tax systems. This has resulted in aone-off deferred tax charge of £1.2m which the Group has booked in the firsthalf of the year. In addition, a charge of £1.6m has been recognised directly inthe Consolidated Statement of Recognised Income and Expenditure in respect ofdeferred tax movement on the pension liability. An effective tax rate for thefull year is anticipated (excluding the effects of the one-off tax rate changes)at approximately 25%, although this may alter slightly if the mix of Groupprofits varies by tax jurisdiction. The one-off tax rate change is forecast toincrease the overall effective tax rate by 4% to approximately 29% for the year. Earnings Adjusted earnings per share from continuing operations after income taxes andminority interests, but before exceptional items, European restructuring costsand share-based incentives is 1.4p per share. Dividends The dividend charge in the period related to the final dividend announced forthe financial year ended 31 March 2007 of 2.8 pence per share. This was approvedat the Annual General Meeting on 4 September 2007 and paid on 1 October 2007. The Directors declared an interim dividend of 1.2 pence per share for the sixmonths ended 30 September 2007. We are offering a scrip dividend alternative andan Extraordinary Ordinary General Meeting has been convened for 11 December 2007to approve this. The relevant documents are being posted to shareholders on 21November 2007. Discontinued operations There were no discontinued operations in the six months to 30 September 2007.Profits from discontinued operations in the six months to September 2006amounted to £4.8m. This included a gain of £4.7m following receipt of additionalcontingent disposal proceeds in respect of the sale of the Benefits andConsulting Services division. Net debt The movement in net debt including exchange rate movements was an outflow of£4.0m compared with the position as at 31 March 2007. Cash flows from continuingoperating activities (before interest, tax, exceptional items, exchange ratemovements, investing and financing activities) were £11.8m compared with anoutflow of £9.7m in the same period in the prior year. Principal risks Throughout the Group, Management regularly review the principal business riskswhich can impact on the achievement of corporate objectives, and the mitigationsnecessary to manage those risks. Typically the nature of these risks arestrategic, operational and financial and those facing the business in theremaining six months of the financial year are considered below. Furtherdiscussion of the Group's risk profile can be found in the Directors' Reportsection of the Annual Report and Financial Statements 2007. There is always a risk that some of the larger contracts in the pipeline do notconvert into revenue within the anticipated timeframes. We mitigate against thisrisk by project managing tightly the whole sales process and by working closelywith client decision makers. Within our industry sector, the market for key staff with the appropriate skillsremains challenging, both from a recruitment and retention perspective. Byinvesting in training and development programmes and constantly appraisingperformance we try to mitigate the potential disruptive impacts on the business. Shocks and disasters are always difficult to guard against and the Group facesrisks from the effects of such things as sudden economic change, terroristactivities, natural disasters and health pandemics. The Group's geographiccoverage helps to mitigate the effect of any one of these having a materialimpact on the business and it also has in place appropriate recovery plans tominimise the consequences. Related parties Related parties are not considered relevant to understanding the Group'scondensed consolidated half-year financial information. Forward-looking statements Certain statements in this half-year report are forward-looking. Although theGroup believes that the expectations reflected in these forward-lookingstatements are reasonable, we give no assurance that these expectations willprove to have been correct. Because these statements involve risks anduncertainties, actual results may differ materially from those expressed orimplied by these forward-looking statements. We undertake no obligation to update any forward-looking statements whether as aresult of new information, future events or otherwise. Hogg Robinson Group plcConsolidated Income StatementFor the period ended 30 September 2007 Notes Half-year ended 30 September 2007 2006 £'000 £'000Continuing operationsRevenue 6 154,434 149,195Operating expenses 7 (143,708) (132,440) Operating profit 6 10,726 16,755 Analysed as:Operating profit before exceptional items 6 10,726 12,821Exceptional items 7 - 3,934 Operating profit 10,726 16,755 Net share of (losses)/profits of associates and joint ventures (54) 231Finance income 585 921Finance costs (6,324) (17,582) Profit before tax 4,933 325Income taxes 8 (2,573) (869) Profit/(loss) for the period from continuing operations 2,360 (544) Discontinued operationsProfit for the period from discontinued operations 9 - 4,766 Profit for the period 2,360 4,222 Attributable to:Equity holders of the parent 10 2,033 3,082Minority interests 327 1,140 Note Half-year ended 30 September 2007 2006 10 pence penceEarnings/(loss) per share Continuing operations, basic 0.7 (1.6) Continuing operations, diluted 0.7 (1.6) Discontinued operations, basic - 4.5 Discontinued operations, diluted - 4.5 Total, basic 0.7 2.9 Total, diluted 0.7 2.9 The notes are an integral part of the condensed consolidated half-year financialinformation. Hogg Robinson Group plcConsolidated Balance SheetAs at 30 September 2007 Notes 31 March 30 September 2007 2007 restated £'000 £'000Non current assets Goodwill and other intangible assets 12 218,470 219,670 Property, plant and equipment 13 11,421 10,864 Investments accounted for using the equity method 2,421 3,296 Trade and other receivables 329 545 Deferred tax assets 28,901 37,775 261,542 272,150 Current assets Trade and other receivables 112,003 107,938 Financial assets - derivative financial instruments 670 301 Current tax assets 168 81 Cash and cash equivalent assets 54,854 61,336 167,695 169,656 Total assets 429,237 441,806 Non current liabilities Financial liabilities - borrowings 14 (154,453) (160,392) Deferred tax liabilities (3,095) (3,795) Retirement benefit obligations 15 (35,018) (59,932) (192,566) (224,119) Current liabilities Financial liabilities - borrowings 14 (6,655) (2,998) Current tax liabilities (7,073) (8,458) Financial liabilities - derivative financial instruments (1,367) (8) Trade and other payables (172,775) (161,788) Provisions (3,560) (3,504) (191,430) (176,756) Total liabilities (383,996) (400,875) Net assets 45,241 40,931 Capital and reserves attributable to equity holdersShare capital 16 3,056 3,056Share premium 17 171,289 171,289Other reserves 17 (1,812) 1,253Retained earnings 17 (129,732) (137,605) 42,801 37,993Minority interests 2,440 2,938 Total equity 45,241 40,931 For details of the restatement for 31 March 2007 refer to note 4. The notes are an integral part of the condensed consolidated half-year financialinformation. Hogg Robinson Group plcConsolidated Cash Flow StatementFor the period ended 30 September 2007 Note Half-year ended 30 September 2007 2006 £000 £000Cash flows from operating activities Cash generated from operations before special pension contributions 18 11,775 (9,749) Pension contributions in respect of deferred pensioners - (12,531) Interest paid (5,799) (8,480) Tax paid (3,666) (1,216) Cash flows from operating activities - net 2,310 (31,976) Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (1,951) (4,104) Acquisition of associates, joint ventures and other investments - (1,265) Disposals 685 3,391 Purchase of property, plant and equipment (2,304) (2,313) Purchase of intangible assets (1,727) (585) Proceeds from sale of property, plant and equipment 8 69 Interest received 558 812 Dividends received from associates 134 - Cash flows from investing activities - net (4,597) (3,995) Cash flows from financing activities Repayment of borrowings (34,570) (2,622) New borrowings 26,109 460 Issue costs of new borrowings (40) - Issue of share warrants - 88 Issue and listing costs of shares - (421) Dividends paid to minority shareholders (851) (380) Cash flows from financing activities - net (9,352) (2,875) Net decrease in cash, cash equivalents and bank overdrafts (11,639) (38,846) Half-year ended 30 September 2007 2006 £'000 £'000 Net decrease in cash, cash equivalents and bank overdrafts (11,639) (38,846)Cash and cash equivalents at the beginning of the period 60,125 68,577Exchange rate effects 1,857 (1,370) Cash and cash equivalents at the end of the period 50,343 28,361 Cash and cash equivalent assets 54,854 28,431Overdrafts (4,511) (70) 50,343 28,361 The notes are an integral part of the condensed consolidated half-year financialinformation. Hogg Robinson Group plcConsolidated Statement of Recognised Income and ExpenseFor the period ended 30 September 2007 Half-year ended 30 September 2007 2006 £'000 £'000 Profit for the period 2,360 4,222 Income and expense recognised directly in equity Currency translation differences (3,405) (969) Actuarial gain/(loss) 22,231 (789) Deferred tax movement on pension liability (6,224) 237 Deferred tax movement on pension liability (1,609) - attributable to country tax rate changes 10,993 (1,521) Total recognised income and expense 13,353 2,701 Attributable to: Equity holders of the parent 13,026 1,561 Minority interests 327 1,140 The notes are an integral part of the condensed consolidated half-year financialinformation. Hogg Robinson Group plcNotes to the condensed consolidated half-year financial informationFor the period ended 30 September 2007 1 General information The Company is a public limited company, incorporated in the UK under theCompanies Act 1985. The address of its registered office is Global House,Victoria Street, Basingstoke, Hampshire, RG21 3BT, United Kingdom. The Company is listed on the Official List of the UK Listing Authority and theLondon Stock Exchange. This condensed consolidated half-year financial information was approved forissue on 20 November 2007. These interim financial results do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. Statutory accounts for theyear ended 31 March 2007 were approved by the Board of Directors on 28 June 2007and delivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified, did not contain an emphasis of matter paragraph anddid not contain any statement under Section 237 of the Companies Act 1985. 2 Basis of preparation This condensed consolidated financial information for the half-year ended 30September 2007 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34, InterimFinancial Reporting, as adopted by the European Union. The half-year condensedconsolidated financial report should be read in conjunction with the AnnualConsolidated Financial Statements for the year ended 31 March 2007, which havebeen prepared in accordance with the IFRSs as adopted by the European Union. 3 Accounting policies The accounting policies adopted are consistent with those of the AnnualConsolidated Financial Statements for the year ended 31 March 2007, as describedin those statements. The following new standards, amendments to standards and interpretations toexisting standards are mandatory for the first time for the financial yearending 31 March 2008. •IAS 1, Presentation of Financial Statements. The Consolidated Financial Statements for the year ended 31 March 2008 will comply with the increased disclosure requirements of IAS 1. •IFRS 7, Financial Instruments: Disclosures. The Consolidated Financial Statements for the year ended 31 March 2008 will include analysis in respect of market, liquidity and credit risk, and comply with the capital disclosures set out in the amendment to IAS 1, Presentation of Financial Statements - Capital Disclosures. •IFRIC 8, Scope of IFRS 2. The Consolidated Financial Statements for the year ended 31 March 2008 will comply with IFRIC 8. This interpretation has not had any impact on the recognition of share-based payments in the Group. •IFRIC 9, Reassessment of Embedded Derivatives. This interpretation has not had a significant impact on the reassessment of embedded derivatives as the Group already assessed if embedded derivatives should be separated using principles consistent with IFRIC 9. •IFRIC 10, Interim Financial Reporting and Impairment. This interpretation has not had any impact on the timing or recognition of impairment losses as the Group already accounted for such amounts using principles consistent with IFRIC 10. The following new standards, amendments to standards and interpretations havebeen issued, but are not effective for the financial year ending 31 March 2008and have not been early adopted. •IFRIC 11, IFRS 2 - Group and Treasury Share Transactions. •IFRIC 12, Service Concession Arrangements. •IFRIC 13, Customer Loyalty Programmes. •IFRIC 14, IAS 19 - The Limit on the Defined Benefit Asset, Minimum Funding Requirements and their Interaction. •IFRS 8, Operating Segments. •IAS 1, Amendment - Presentation of Financial Statements (revised). •IAS 23, Amendment - Borrowing Costs. 4 Material adjustment to amounts reported in prior periods In the six months to 30 September 2007, an adjustment was made in Hogg Robinsons.r.o (Czech Republic) to increase net assets by £265,000. Deferredconsideration on the purchase of Hogg Robinson s.r.o was paid in the six monthsended 30 September 2007 and was £871,000 higher than originally anticipated.Goodwill arising on the acquisition has been increased by £606,000 to reflectthese adjustments. The Consolidated Balance Sheet as at 31 March 2007 has beenrestated to reflect these adjustments. In the six months to 30 September 2007, an adjustment was made in Spendvision todecrease net assets by £191,000. Goodwill arising on acquisition has beenincreased by £191,000. The Consolidated Balance Sheet at 31 March 2007 has beenrestated to reflect these adjustments. 5 Seasonality The Group's revenue and operating profit are affected by the seasonality of thecorporate travel business, with travel declining during the summer and Christmasholiday periods and, to a lesser extent, during Easter holidays, which are timeswhen many corporate travellers are on holiday. Typically, the Group experiencesthe highest levels of revenue in the last quarter of its financial year,principally reflecting increased travel activity by its clients during thisperiod and recognition of revenue due to the finalisation of amounts due inconnection with the annual review of contracts. Historically, less than 30% of full year EBITA has typically been generatedduring the first half of our financial year. 6 Revenue and operating profit Business segmentation All revenue, operating profit for the half-year, assets and liabilities, capitalexpenditure, depreciation and amortisation from continuing operations arederived from one primary segment, Business Travel. Geographical segmentation Segment information is provided for regions reflecting the principal economicenvironment in which the Group operates. External revenue from clients by origin (where the Group is located) Half-year ended 30 September 2007 2006 restated £'000 £'000 Central 8,392 5,187Other Europe 109,094 111,180 Europe 117,486 116,367North America 29,763 26,836AsPac 7,185 5,992 154,434 149,195 Prior year revenue restated to reflect the reclassification of part of ourEvents business. External revenue from clients by geographical area (where the client islocated). Half-year ended 30 September 2007 2006 £'000 £'000 Europe 115,899 115,564North America 31,163 27,639AsPac 7,372 5,992 154,434 149,195 Operating profit excluding exceptional items Half-year ended 30 September 2007 2006 £'000 £'000 Central (5,253) (5,339)Other Europe 14,984 16,086 Europe 9,731 10,747North America 380 1,675AsPac 615 399 10,726 12,821 The figures in the table above, for Central and Other Europe, exclude theexceptional pension credit of £4,473,000 and the adjustment to goodwill onrecognition of tax assets of £539,000 in respect of the six months to 30September 2006. Operating profit Half-year ended 30 September 2007 2006 £'000 £'000 Central (5,253) (1,991)Other Europe 14,984 16,672 Europe 9,731 14,681North America 380 1,675AsPac 615 399 10,726 16,755 AsPac refers to the Asia Pacific region. 7 Operating expenses Operating expenses include the following: Half-year ended 30 September 2007 2006 £'000 £'000 Amortisation of client relationships 1,379 1,325Amortisation of other intangible assets 1,146 717Depreciation of property, plant and equipment 1,984 2,296Share-based incentives 340 -Restructuring cost 1,235 424 Exceptional items: - Adjustment to goodwill on recognition of tax assets - 539- Pension past service credit - defined benefit schemes - (4,473) - (3,934) The restructuring provision includes the costs relating to the European-widerestructuring project. 8 Taxation Tax rate change Both the UK and German governments have enacted reductions to the headline ratesof corporate income tax (UK - 30% to 28% with effect from 1 April 2008; Germany40% to 30% with effect from 1 April 2007 for the Group). Consequently the Groupis required to revalue all of its recognised UK and German deferred tax assets/liabilities. The revaluation will result in a one-off deferred tax charge toprofit and loss of £1,173,000 and a charge to the Consolidated Statement ofRecognised Income and Expenditure of £1,609,000 in respect of deferred taxassets on pension liabilities. The Group is reflecting the full charge in thefirst half of the year. Reference to the then proposed tax rate changes andtheir impact was made in the 31 March 2007 statutory accounts. Tax charge for the half-year ended 30 September 2007 Income tax expense is recognised based on Management's best estimate of theannual income tax rate expected for the full financial year for each country inwhich the Group operates. The tax charge for the six months to 30 September 2007is £1,400,000 before taking account of the one-off deferred tax impact of taxrate changes in the UK and Germany (see above). This change in tax ratesincreases the total tax charge for the period to £2,573,000. The tax charge is split as follows: Half-year ended 30 September 2007 2006 £'000 £'000 United Kingdom 854 (943)Overseas 546 2,351Change in headline tax rates 1,173 -Adjustment to goodwill on recognition of tax assets - (539) 2,573 869 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 and expects to be able to use tax lossesand other assets to a greater extent than anticipated on acquisition, therebyreducing the value of goodwill. In order to comply with the requirements of IAS12, Income Taxes, a charge was reported in operating expenses in the half-yearended 30 September 2006 and also in the full year to 31 March 2007. The Group typically expects not to recognise any additional deferred tax at thehalf-year stage with the opportunity to recognise further assets at the yearend, once further assessments of future profitability have been made.Exceptionally, in the six months to 30 September 2006, a deferred tax asset wasrecognised in respect of the FIFA World Cup profits, translating to a tax creditof £539,000. The Group makes maximum use of all brought forward losses and other availablerelief in mitigating cash tax payable. 9 Discontinued operations The results of the discontinued operations which have been included in theConsolidated Income Statement were as follows: Half-year ended 30 September 2007 2006 £'000 £'000 Profit on disposal of the Benefit and Consulting Services division - 4,657Profit on disposal of TRX Inc - 109 - 4,766 The Benefit and Consulting Services division was sold on 8 July 2005. In the sixmonths ended 30 September 2006 additional contingent disposal proceeds werereceived by the Group. The gains on disposal of discontinued operations in the six months ended 30September 2006 did not give rise to a tax charge. 10 Earnings per share Earnings per share attributable to equity holders of the Company arises fromcontinuing and discontinued operations as follows: Half-year ended 30 September 2007 2006 £'000 £'000 Earnings for the purposes of earnings per shareProfit/(loss) for the period from continuing operations 2,360 (544)Less: amount attributable to minority interests (327) (1,140) Continuing operations 2,033 (1,684)Discontinued operations (note 9) - 4,766 2,033 3,082 Half-year ended 30 September 2007 2006 number number 000s 000sWeighted average number of Ordinary shares in issueIssued (for basic EPS) 305,634 105,412Issuable under share options and performance awards 10,618 -Less: issuable at average market price (9,592) - For diluted EPS 306,660 105,412 11 Dividends A dividend that related to the year to 31 March 2007 and amounted to 2.8p perordinary share (£8,557,752) was paid on 1 October 2007. The dividend was paid toshareholders who were on the register at 31 August 2007. In addition, the Directors declare an interim dividend in respect of the sixmonths ended 30 September 2007 of 1.2p payable on 21 December 2007 toshareholders who will be on the register at 30 November 2007. The Board will beoffering a scrip dividend alternative, pursuant to which shareholders may electto receive the whole or part of their dividend in new ordinary shares creditedas fully paid instead of cash, for the interim dividend. An ExtraordinaryGeneral Meeting has been convened for 11 December 2007 to approve the scripdividend scheme. Relevant documentation will be posted to shareholders on 21November 2007. This interim dividend, amounting to £3,667,608 has not beenrecognised as a liability in this half-year financial report, in accordance withIAS 10, Events after the Balance Sheet Date. 12 Goodwill and other intangible assets 31 March 30 September 2007 2007 restated £'000 £'000 Goodwill 191,480 191,344Other intangible assets 26,990 28,326 218,470 219,670 31 MarchGoodwill 30 September 2007 2007 restated £'000 £'000 At cost At beginning of period 217,760 214,943 Acquisitions - 11,004 Adjustments to goodwill on recognition of tax assets - (2,929) Disposals (32) (39) Exchange differences 168 (5,219) At end of period 217,896 217,760 Accumulated impairment losses At beginning of period 26,416 26,416 At end of period 26,416 26,416 Carrying amount 191,480 191,344 For details of the restatement for 31 March 2007 refer to note 4. Other intangible assets Computer software Client Total Externally Internally relationships restated acquired generated restated £'000 £'000 £'000 £'000At cost At 1 April 2006 9,578 3,022 27,237 39,837 Additions 1,007 1,566 - 2,573 Acquisitions through business combinations 3,426 - 1,121 4,547 Reclassification of assets - - 431 431 Disposals (23) - - (23) Exchange differences (100) - (1,417) (1,517) At 31 March 2007 13,888 4,588 27,372 45,848 Additions 1,319 408 - 1,727 Reclassification of assets (445) (173) - (618) Disposals (5) - - (5) Exchange differences 394 - 188 582 At 30 September 2007 15,151 4,823 27,560 47,534 Accumulated amortisation and impairment At 1 April 2006 6,609 1,280 5,163 13,052 Amortisation charge for the year 1,441 700 2,582 4,723 Disposals (13) - - (13) Exchange differences (17) - (223) (240) At 31 March 2007 8,020 1,980 7,522 17,522 Amortisation charge for the period 723 423 1,379 2,525 Disposals (5) - - (5) Reclassification of assets 129 (43) - 86 Exchange differences 320 - 96 416 At 30 September 2007 9,187 2,360 8,997 20,544 Carrying amount At 1 April 2006 2,969 1,742 22,074 26,785 At 31 March 2007 5,868 2,608 19,850 28,326 At 30 September 2007 5,964 2,463 18,563 26,990 For details of the restatement for 31 March 2007 refer to note 4. 13 Property, plant and equipment IT and office equipment Properties Total restated restated £'000 £'000 £'000 At cost At 1 April 2006 36,721 7,808 44,529 Additions 3,860 1,194 5,054 Acquisitions through business combinations 101 56 157 Disposals (1,180) (5) (1,185) Exchange differences (1,269) (281) (1,550) At 31 March 2007 38,233 8,772 47,005 Additions 1,932 442 2,374 Disposals (6,761) (442) (7,203) Exchange differences 1,227 165 1,392 At 30 September 2007 34,631 8,937 43,568 Accumulated depreciation At 1 April 2006 29,358 4,485 33,843 Depreciation charge for the year 3,632 723 4,355 Disposals (868) (5) (873) Exchange differences (1,046) (138) (1,184) At 31 March 2007 31,076 5,065 36,141 Depreciation charge for the period 1,636 348 1,984 Disposals (6,667) (442) (7,109) Exchange differences 1,020 111 1,131 At 30 September 2007 27,065 5,082 32,147 Carrying amount At 1 April 2006 7,363 3,323 10,686 At 31 March 2007 7,157 3,707 10,864 At 30 September 2007 7,566 3,855 11,421 For details of the restatement for 31 March 2007 refer to note 4. 14 Financial liabilities - borrowings 30 September 31 March 2007 2007 £'000 £'000At amortised cost Current (due within one year)Overdrafts 4,511 1,212Bank loans 2,033 1,685Finance leases 111 101 6,655 2,998 Non-current (due after more than one year)Bank loans 154,188 160,139Finance leases 265 253 154,453 160,392 161,108 163,390 15 Retirement benefit obligations Defined benefit pension arrangements The Group's principal defined benefit pension arrangement is the Hogg Robinson(1987) Pension Scheme ('UK Scheme'). The UK Scheme was available to most UKemployees until it was closed to new members in March 2003. Its benefits arebased on final pensionable salary. The increase in final pensionable salarysince 31 March 2003 is limited to the lower of the increase in the Retail PriceIndex and 5% per annum. The Group also operates defined benefit schemes in Norway, Switzerland andGermany which are not material. The amounts recognised on the Consolidated Balance Sheet are determined asfollows: 30 September 31 March 2007 2007 £'000 £'000 UK scheme: Defined benefit obligations (230,281) (246,655)Fair value of plan assets 203,935 195,175 Deficit - UK Scheme (26,346) (51,480) Deficit - Other Schemes (8,672) (8,452) (35,018) (59,932) The movement in the net pension obligations was a reduction of £24,914,000compared with the position at 31 March 2007. This was primarily the result of anincrease in the discount rate applied in the updated actuarial valuations at 30September 2007 for the UK Scheme, of £22,231,000 which has been recognised inthe Consolidated Statement of Recognised Income and Expense. The amounts recognised in the Consolidated Income Statement in respect of the UKScheme are as follows: Consolidated Income Statement Half-year ended 30 September 2007 2006 £'000 £'000 Current service cost 1,368 1,401Past service credit - (3,887)Expected return on scheme assets (6,195) (5,269)Interest cost 6,538 6,634 Total charge/(credit) to the Consolidated Income Statement 1,711 (1,121) 16 Share capital No changes to issued share capital took place in the six months ended 30September 2007. 17 Reserves Share Other Retained premium reserves earnings £'000 £'000 £'000 At 1 April 2006 3,604 1,208 (159,769)Retained profit - - 4,222Minority interests - - (1,140)Actuarial loss - - (789)Deferred tax movement on pension liability - - 237Currency translation differences - (969) - At 30 September 2006 3,604 239 (157,239) At 1 April 2006 3,604 1,208 (159,769)Rights issue of ordinary shares (1,014) - -Premium on issue of Ordinary shares:Warrant holders 5,378 - -IPO 163,163 - -Non-Executive Directors 158 - -Retained profit - - 14,662Minority interests - - (1,226)Share-based incentives - 144 -Actuarial gain - - 12,516Deferred tax movement on pension liability - - (3,788)Currency translation differences - (99) - At 31 March 2007 171,289 1,253 (137,605) At 1 April 2007 171,289 1,253 (137,605)Retained profit - - 2,360Dividend relating to March 2007 - - (8,558)Minority interests - - (327)Share-based incentives - 340 -Actuarial gain - - 22,231Deferred tax movement on pension liability - - (7,833)Currency translation differences - (3,405) - At 30 September 2007 171,289 (1,812) (129,732) 18 Cash generated from operations Half-year ended 30 September 2007 2006 £'000 £'000 Profit before tax from continuing operations 4,933 325 Profit before tax from discontinued operations - 4,766 4,933 5,091 Adjustments for: Depreciation, amortisation and impairment 4,510 4,341 Net increase in provisions 1,232 522 Effect of exchange rate movements (699) (1,144) Share of results of associates and joint ventures 54 (231) Profit on disposal of discontinued operations - (4,766) Net finance costs 5,739 16,661 Adjustments to goodwill on recognition of tax assets - 539 Pension past service credits - defined benefit schemes - (4,473) Other timing differences 242 9 16,011 16,549 Cash expenditure charged to provisions (1,232) (1,635) Change in trade and other receivables (2,852) (24,418) Change in trade and other payables 3,254 4,289 Pension funding in excess of charge to operating profit (3,247) (6,312) Cash effect of currency swaps (159) 1,778 Cash generated from operations before special pension contributions 11,775 (9,749) 19 Related party transactions There have been no material changes in related party disclosures as against 31March 2007, see note 28 in the Group's 31 March 2007 Annual Report andConsolidated Financial Statements. 20 Contingent assets and contingent liabilities No change has taken place in the contingent assets and contingent liabilities asreported in the Group's 31 March 2007 Annual Report and Consolidated FinancialStatements. 21 Post balance sheet events Details of the interim dividend proposed are given in note 11. On 1 October 2007, the Group completed the purchase of the business of WeinbergTravel BVBA, the Group's existing partner in Belgium. The consideration paid was£834,000. Hogg Robinson Group plcStatement of Directors' responsibilities The Directors confirm that this condensed consolidated half-year financialinformation has been prepared in accordance with IAS 34 as adopted by theEuropean Union, and that the Interim Management Report herein includes a fairreview of the information required by DTR 4.2.7 and DTR 4.2.8. The Directors of Hogg Robinson Group plc are listed in the Hogg Robinson Groupplc Annual Report for 31 March 2007. By order of the Board Keith BurgessCompany Secretary20 November 2007 Hogg Robinson Group plcIndependent review report to Hogg Robinson Group plc Introduction We have been engaged by the Group to review the condensed set of ConsolidatedFinancial Statements in the half-year financial report for the six months ended30 September 2007, which comprises the Consolidated Income Statement,Consolidated Balance Sheet, Statement of Recognised Income and Expense,Consolidated Cash Flow Statement and related notes. We have read the otherinformation contained in the half-year financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of Consolidated Financial Statements. Directors' responsibilities The half-year financial report is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the half-yearfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As described in note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of Consolidated Financial Statements included in this half-yearfinancial report has been prepared in accordance with International AccountingStandard 34, 'Interim Financial Reporting', as adopted by the European Union. Our responsibility Our responsibility is to express to the Group a conclusion on the condensed setof Consolidated Financial Statements in the half-year financial report based onour review. This report, including the conclusion, has been prepared for andonly for the Group for the purpose of the Disclosure and Transparency Rules ofthe Financial Services Authority and for no other purpose. We do not, inproducing this report, accept or assume responsibility for any other purpose orto any other person to whom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity, issued by the AuditingPractices Board for use in the United Kingdom. A review of the interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of Consolidated Financial Statements in the half-yearfinancial report for the six months to 30 September 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsLondon20 November 2007 Notes: (a) The maintenance and integrity of the Hogg Robinson Group plc web site is theresponsibility of the Directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the half-year financialreport since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation anddissemination of the financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock Exchange ENDRelated Shares:
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