HRG Reports Drop In Profit For Up And Down Fiscal Year

Global travel management company Hogg Robinson Group this week reported a fall in profits for its financial year ending March 31. Underlying pretax profits declined 9 percent from £27.1 million to £24.7 million. Revenue climbed 5.7 percent to £351.3 million, although on a constant currency basis it dipped by 3.7 percent.

Both profit and revenue grew in the first half of the year but fell in the second half as the recession took hold. "With the majority of our revenue from client management and advisory fees, these changes were not as damaging as many might have thought, and our second-half revenue was down by only 8.5 percent at constant exchange rates," said chief executive David Radcliffe in his review of the results.

"We reduced our staffing levels during the latter part of the year once the pattern of client activity became clear and, with some further reductions since year-end, our cost base is now significantly below the March 2008 level and, we believe, appropriate for the foreseeable future. The cost of these changes was £6.9 million, which has been taken as an exceptional charge. With these cost reduction actions now largely complete, we should be able to maintain profitability without damaging our ability to react when market conditions improve."

Europe continued to be responsible for the overwhelming majority of HRG's profitability, with operating profit falling from £34.9 million to £31.9 million. Radcliffe said the United Kingdom and Germany put in particularly robust performances. HRG estimated that it handles 20 percent of all U.K.-originating business travel.

Operating profit for the company's North American operation fell from £1.6 million to £1.3 million, and although revenue grew 9.2 percent to £71.3 million, this was thanks to a 12.3 percent benefit from exchange rate movement.

"After last year's investment in infrastructure and management, it was disappointing to see volumes fall in the second half of the year," said Radcliffe. "However, we believe this performance to be better than the industry overall. The region tends to favor transaction fees and, although we acted to reduce our cost base, the actions proved not to be quick enough. This has now been rectified and we expect to see significant benefits from these cost-reduction actions in the current year."

Globally, Radcliffe said HRG enjoyed an increase in revenue from hotel and ground transportation as a result of the company focusing more fully on total cost of trip. He added that HRG has aligned its meetings management business more closely with regular managed travel. Another bright spot was HRG's expense management business, Spendvision, which saw revenue rise 61 percent and operating profit increase by £1.9 million.

Chairman John Coombe said HRG's largest shareholder is UAE-based partner Dnata, with 23 percent, while Beverweerd Investments, owned by BCD Travel owner John Fentener van Vlissingen, has a stake of 21 percent. HRG's top 10 clients account for 22 percent of revenue, with no single client accounting for more than 5 percent.