One-On-One: HRG CEO David Radcliffe Reaffirms Strategy, Performance

HRG CEO David Radcliffe this month spoke with Business Travel News editor-in-chief David Meyer and travel management editor Seth Harris about the company's strategy as a public company in light of its disappointing stock price performance, corporate travel demand related to the economic slowdown and its U.S. growth tactics.

BTN: How is the strategy of listing on the London Stock Exchange working?

David Radcliffe: The long-term strategy of going public is working. There is no question about that. I think it was the right thing to do then, and I still think it's the right thing to do longer-term. We've got some work to do with getting our message across. We are a good company. We are not in bad shape at all, but I don't think we've done a good job in getting our message across to the investors as to what we are and to what the shape of our business is.

BTN: Is it mostly about more effectively communicating with the investment community?

Radcliffe: I believe so. If you actually look at the underlying performance of the company and at the last trading statement and what that did, it was unfortunate mainly because of its timing. If you look at what the company is doing and add back in the effect of one-offs we benefited from last year, we haven't gone backwards. There aren't too many companies in a year like this one that can say that. We're not in bad shape, but when we issued our trading statement, the investment community just went, "Oh no. It's a surprise and that just proves we don't understand this company." We firmly believe that the majority of it is communications because our results are not bad. We have always delivered and we've had a good history of doing that.

BTN: Are you concerned about being a takeover target?

Radcliffe: Yeah, but that doesn't matter whether you are public or private. When you are private, whoever owns you can wake up one morning and change their mind about whether they want to own you, or they can wake up ill and have to consolidate or liquidate all their investments. The bottom line is we are a service company. As a public limited company, we are here to maximize value for our shareholders, and as a service company we are here to maximize value for our clients. Where you get the correlation is that anyone making a bid for us better make sure that they have got it right and the people that are the company—because without the people, a service company is nothing—are right behind what you are trying to do. To us, of course a bid can also be likely, but that was the same when we were private and it's the same for any company.

BTN: As a public company there are measures you can take to defend against a takeover. Are there measures you are taking?

Radcliffe: If there are, I certainly won't be commenting on them.

BTN: People in the marketplace say there are a lot more accounts in play earlier in the year. Have you been noticing that as well?

Radcliffe: Fortunately, I haven't seen too many of our clients in play, but there are a lot of other ones out there. Whether it's driven by the macro circumstance of clients wanting to get the best deal or whether it's coincidence that a lot of contracts are running out, I don't know. I haven't seen any macro studies. My speculation is that we are in a cost environment at the moment. Clients will listen to ideas to save money and add value far more than when times are good. When I look back to the early '90s and late '80s, there was a very similar trend. Companies are looking to grow now more by cost attrition as well as by clever ideas than they are by selling.

BTN: Is that good news for buyers?

Radcliffe: Absolutely. Now is the time to look at different technology and doing things differently with your expenditure and I know a lot of good people are doing that.

BTN: We've heard from various sources that HRG is going after accounts quite aggressively in the United States. Is that your strategy?

Radcliffe: I'm sure various sources out there would say that they've been winning business as well. The difference between us and our competitors is that we metaphorically get undressed twice a year, so you could see whether we are or we aren't in our set of numbers. Certainly, there has been no evidence in that in past numbers. If you meant aggressively with good technology and good people then I totally agree, but I'd rather suspect you are talking about aggressively on price. My answer to that is: Well, they would say that, wouldn't they?

BTN: What are your expectations for business travel demand in Europe and the United Kingdom?

Radcliffe: It varies across Europe. There is a slowdown here. I wouldn't say there is zero growth. Certainly, in the financial sector there is no question there is a slowdown. Having said that, there is very early talk that it could have bottomed out already. A slowdown, yes, but it hasn't halted.

BTN: In the United States and Europe, generally speaking, would you say that things aren't going to be as dire as originally thought?

Radcliffe: Talking generally, there is a lot of opportunity in these markets still. A good TMC views these conditions at the moment as opportunistic because our role is to save clients money and get them greater value for the same sort of expenditure. At the same time that we're doing that, you have a market in totality which is slowing down and suppliers need to come up with innovative ideas to keep their marketshare and even to grow it. You put those two together and that does mean there are a lot of opportunities. Unfortunately, a lot of people in our industry tend to start going down the doom and gloom route. If you have a company not prepared to change and not make investments in technology and not prepared to look at things differently for clients, then it's not a market you want to face for the next couple of years. If you are one that has, then I actually think it's not a bad place to be for the next two or three years.

BTN: With the current strength of the pound against the dollar, is there additional interest for HRG to pursue acquisitions of U.S. TMCs?

Radcliffe: It doesn't necessarily need to be in North America. We are known as an acquisitive company and we are doing pretty well on our core growth at the moment as well. If the right acquisition presented itself, of course we'd look at it, but not necessarily just in America. One of the things we said a couple of years ago is coming so true for us: What you need in America is a good footprint in the right places linked to quality technology. Going back to the thing our competitors say about us apparently, the clients aren't idiots. Even if we were being price-aggressive, which we're not, but even if we were, clients wouldn't move just for that. You have to have everything else that backs it up. In America, we're doing very well at that moment. Does that mean we won't make an acquisition? No, but does that mean that we need to chase them? No, we don't.

BTN: How does the North American affiliate program fit into your overall global network?

Radcliffe: We wouldn't have done the affiliate program if we didn't want to test the market. It wasn't something in the beginning that I looked at and thought, "Wow, we must do this." There has been such a load of inquiries over the past few years, we'd be silly to ignore it. There are still some very good players left in America that want to play internationally, that don't want to sell, but want the strength of a reputable brand. All of these guys have only survived because they're quality and that plays in very well to us.

BTN: Is the affiliate program a platform for acquisitive growth?

Radcliffe: I'm not going to comment on the affiliate program specifically, but within our global partnership virtually 99 percent have signed away pre-emption rights. If they do want to sell, then we are their first port-of-call.