Despite declining travel activity among clients and therefore lower revenues, Hogg Robinson Group reported improved results for its fiscal year ended 31 March, "in line with expectations," citing cost-reduction efforts, strong performance in North America and encouraging business travel trends, especially in Asia-Pacific.
Chief executive David Radcliffe said HRG expects client travel volumes to rebound this year "as businesses generally begin to benefit from the economic recovery. Toward the end of the [fiscal] year, we did see the first early signs of an upturn, first in Asia-Pacific and more recently in North America and Europe." Despite European airspace closures resulting from volcanic ash, he added, "client revenues for April and May are expected to be similar to 2009."
But during the past year, "if anything, we saw even greater resolve by our clients, compared to last year, as they sought to reduce further their cost of travel," Radcliffe said. "Clients proved willing to commit to changes in their travel policies and itineraries that previously they would have rejected." Overall, HRG's client travel spending was down 12 percent year over year, pushing down by 7 percent the company's total revenues.
In Europe, HRG reported 11 percent lower revenue and an underlying operating profit down £3.9 million (US$5.9 million), to £28.1 million (US$42.3 million). The company noted that because clients reduced travel--with some enacting "travel embargoes"--HRG "reduced operating costs to match."
"Our U.K. business returned another steady performance in the face of challenging conditions, despite lower revenue particularly amongst banking and finance clients," according to an HRG statement. In Germany, "the second half showed a strong recovery, with increasing evidence of clients starting to return to pre-recession levels of travel activity." As HRG "increasingly" focuses on multinational clients, it continues to "evaluate our network of branch offices throughout Europe, particularly those serving small and medium enterprise clients in the Nordic region."
Asia-Pacificprovided greater revenue (up 4.4 percent), but a marginally larger underlying operating loss of £600,000 (US$900,000). HRG noted that its contract with Australia's Queensland government--which it won in 2008--"was implemented successfully with mandated rollout to key departments." It also reported "strong recovery" among Singapore-based clients, with "activity levels returning to pre-recession levels." Banking and finance clients, HRG added, "have been the first to show volume recovery." Meanwhile, Singapore "is fast establishing itself as a key hub for client travel consolidation programs, with experienced staff, good language skills and a pro-business environment all acting as catalysts. We are encouraged to note an increasing demand amongst our North American clients for consolidated travel service offerings across the Asia-Pacific region. We are beginning to implement a multi-country service consolidation in Singapore for one of our larger manufacturing sector clients, having overcome the inevitable complexities resulting from multiple language, cultures and GDS sources."
In North America, HRG reported both higher revenue (up 2.5 percent) and improved underlying operating profit, up from £6.1 million (US$9.2 million) to £6.8 million (US$10.2 million). The company cited a reduction in office locations, "more and flexible telephony and transaction-processing systems," and a higher proportion of at-home travel consultants. Across the region, client online bookings increased to 41 percent from 29 percent a year earlier, "providing further evidence of the change of business mix in this highly competitive market, which tends to favor transaction fees," according to the company.
Among existing clients, Radcliffe noted several travel management trends, including stronger travel policy compliance "through travel authorization processes, pretrip authorization reporting, closer control of hotel booking, etc."; more requests for better data analysis; "tighter control of meetings management"; growing adoption of online booking; and "an increased use of regional service centers rather than national ones, enabling us to offer lower cost-of-service options."
Meanwhile, HRG reported several new client wins, including Bertelsmann, Discovery Communications, Evonik, Novartis, Volkswagen and Wells Fargo, and said its "sales pipeline also remains strong."
Spendvision Moving 'Away' From Corp. Travel Management
For the first time, HRG broke out results for its Spendvision expense management unit, which for the fiscal year generated a 14 percent increase in revenue, to £11.2 million (US$16.9 million), but more than a 50 percent cut in underlying operating profit, to £1.4 million (US$2.1 million).
"That's a business that is probably going to grow more away from corporate travel management," said HRG group finance director Julian Steadman. "In the year just ended, we have invested heavily in infrastructure to support growth plans, largely with a number of fairly well-known financial institutionswe are working with at the moment."
In 2009, HRG announced that Spendvision partnered with Visaon IntelliLink Spend Management, a white-label version of Spendvision's platform. Also in the past year, HRG opened a Spendvision office in Singapore and formed a joint venture in Japan.
Overall, HRG produced a net profit of £14.3 million (US$21.5 million), marking a year-over-year improvement of £5.2 million (US$7.8 million). Operating profit grew by 11 percent, and underlying operating profit margin rose to 10.8 percent from 9.8 percent.