Hogg Robinson Group CEO David Radcliffe late last week claimed that improved financial results in North America vindicate the travel management company's U.S. strategy and criticized some major competitors.
HRG's revenue in North America rose from £32.5 million in the six months ending Sept. 30, 2008, to £34.5 million in the same period this year, although it fell 6.8 percent if favorable currency movements are excluded. An operating loss of £0.1 million in the same period in 2008 was converted to a profit of £2.1 million. Worldwide, revenue fell 15 percent in constant currency terms, while underlying pre-profit tax fell from £7.8 million to £7.5 million. That excluded £2.3 million of exceptional items, mainly for redundancies and other restructuring costs.
A financial statement from the company attributed the improved performance in North America to cost reductions and better productivity from front-, mid- and back-office systems. Meanwhile, Radcliffe accused other larger rivals of signing customers for reduced transaction fees to improve incentive income from suppliers.
"A couple of our major competitors are buying business at any price," Radcliffe told
BTN. "There are two types of TMC: those which are paid for the value they add and others which are more on a transaction-fulfillment model. Some competitors are doing that because they need to grab volume, but we have benefited from not having our business driven by supplier revenues."
Radcliffe said, "The fact we've signed more business than we have lost proves our business model works."
HRG has a far smaller national network in the United States than rival multinational TMCs, but Radcliffe claimed clients are happy with its "virtual business" and not having transactions fulfilled by locally based offices. He therefore ruled out purchasing more U.S. TMCs in the near future. "We are not in active acquisition mode," he said. "There is no need. We've got the shape we want."
Radcliffe also compared the financial stability of HRG favorably with that of its rivals. "We are the only one of the big four that has not had to shore up its balance sheet since the recession started," he said. Doubts have lingered over HRG's ownership, owing to the underperformance of its share price since returning to the stock market three years ago and the large ownership stake built by the holding company of John Fentener van Vlissingen, the owner of rival TMC BCD Travel
(BTNonline, Jan. 6) . However, Dubai-based long-term partner Dnata acquired an even larger holding in HRG in June 2008. As a result, said Radcliffe, "it is not a question that comes up on my radar very often now."
Elsewhere in the world, HRG saw revenue in Europe fall 13.9 percent to £110.3 million and operating profit slump from £11.4 million to £5.0 million. Figures for the group's Asia/Pacific business were flat, but HRG believes the region could lead the way out of the recession for business travel. "We have seen recent signs of relaxation of some clients' travel policies and are hopeful that the Asia/Pacific region will be the first region of HRG's network to return to more normal levels of activity," the group said.
Globally, HRG said it is seeing early signs of stabilization, but "we remain cautious about any rapid recovery in corporate travel."