HRG Reports Revenue Growth, Meetings Slowdown

Hogg Robinson Group this morning reported full-year earnings before interest, tax and amortization of $79.3 million for the 12 months ending March 31, down from $86.8 million the previous year. Operating profit was down in both Europe and North America, but Asia/Pacific moved from break-even to a profit of $2.2 million.

Revenues grew 6.7 percent during the year to $653.8 million, although the company said it experienced a slowdown in its events and meetings management division and in its unmanaged corporate clients in the fiscal fourth quarter, these two segments accounting for 20 to 30 percent of its total revenue. This was especially the case in the Nordic countries and Germany. HRG also reported a reduction in travel volumes by financial services clients, but overall it said the current financial year has started well and it is optimistic about its prospects despite market difficulties. "We believe we are capable of showing profit growth this year," chief executive David Radcliffe told Business Travel News.

In North America, operating profit before exceptional items fell from $4.9 million to $2.2 million. Radcliffe ascribed the decline in profitability to heavy investment in building the group's operations in North America and implementation costs for new clients. HRG also described North America as more "competitive" than the rest of the world. Executive Travel Associates, acquired in February 2007, contributed an operating profit of $1.9 million.

"We are confident we can make progress in North America," said recently appointed group financial director Julian Steadman. "We are off to a good start there already this year." Recent client wins in North America include Lenovo and Wachovia.

Radcliffe claimed that HRG is surviving the economic downturn in the United States more comfortably than its rivals. "A number of our competitors are far more transaction-based and we are not as badly off as them," he said. "Our revenues are up, and that is after taking into account the market slowdown."

HRG also was hit by an exceptional item, for a long-term contract with an unnamed client in North America, for which Steadman has decided to book a $4.7 million charge. "This is a contract we have been running for six years," said Steadman. "I had a look at it and decided that we could not recover costs from the client that initially we thought we could recover. It remains an attractive contract." BTN understands it is not a managed corporate client.

In Europe, operating profits before exceptional items fell from $72.0 million to $64.1 million, largely because the previous year included a one-off profit of $6.7 million from handling travel for the 2006 soccer World Cup. HRG reported particularly brisk business from managed corporate clients in its home U.K. market and Switzerland.

Europe accounted for 75 percent of the group's revenues and North America 20 percent. HRG noted in its operating statement a shift by corporate clients from global to regional or even national contracts with travel management companies.