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Hogg Robinson's delayed profits

Hogg Robinson is being held back by an increase in online travel booking.
May 21, 2015

Travel booking and expense management specialist Hogg Robinson (HRG) faces two major challenges - a weak European economy and an increasing shift towards DIY business bookings. Stronger trading in North America and the UK was not enough to offset these factors, which were largely responsible for a 9 per cent contraction in full-year operating profits to £35.2m.

IC TIP: Sell at 53p

Underlying operating profits for the group's European travel management business fell 15 per cent to £39.3m as weak macro-economic conditions depressed rates of corporate travel. Unsurprisingly, its UK and North American businesses fared slightly better, though losses linked to a Canadian government contract reduced underlying operating profits for the latter geographic segment by 3 per cent to £10.1m. Low business confidence in Australia also fed through into a £1.5m operating loss for Hogg Robinson's Asia Pacific business.

The trend towards online bookings continued last year, a five percentage point increase brought the online client rate to 47 per cent. However, management are still in the process of restructuring the group's cost base to account for this increasing trend. Chief executive David Radcliffe said it may take between two and three years before the balance between its cost base and these lower-margin transactions is achieved.

Broker Peel Hunt expects cash profits of £55.8m, up from £53.4m for the 2015 year-end.

HOGG ROBINSON (HRG)

ORD PRICE:53pMARKET VALUE:£170m
TOUCH:52-53p12-MONTH HIGH:78pLOW: 39p
DIVIDEND YIELD:4.4%PE RATIO:8
NET ASSET VALUE:*NET DEBT:£54.7m

Year to 31 MarchTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201135828.96.31.50
201237434.17.42.00
201334330.96.92.10
201434125.35.32.21
201533023.24.62.32
% change-3-8-13+5

Ex-div: 25 Jun

Payment: 28 Jul

*Negative shareholder equity