Half-year revenues for business-travel specialist Hogg Robinson (HRG) were flat on the previous year at constant currencies as more of its customers migrated to online booking. Around half the group's clients have now transitioned to DIY travel arrangements. While the trend is putting pressure on the top line, it is buoying profit margins as the hefty costs associated with traditional travel distribution channels dissipate. Indeed, the group's underlying operating margin increased by 1.5 percentage points to 12.3 per cent, underpinning a 10 per cent increase in profits to £19.2m - though this was partly attributable to cost control.
Hogg's Fraedom business, which targets the unmanaged and individual travel sector, delivered a 10 per cent increase in revenues and a 17 per cent increase in underlying operating profit. Management believes the business should benefit from pressure by large corporations and government departments to streamline their transaction processing procedures.
The balance sheet is looking a little healthier, with net debt of £56.5m sitting at the upper end of the targeted range of 0.7-1.0 times cash profits. An increase in the underlying discount rate also meant the group’s pension deficit fell by £25.9m to £233m.
Peel Hunt expects adjusted EPS of 7.2p for the March 2016 year-end, against 6.4p in FY2015.
| HOGG ROBINSON (HRG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 72.5p | MARKET VALUE: | £236m | |
| TOUCH: | 70-72.5p | 12-MONTH HIGH: | 73p | LOW: 40p |
| DIVIDEND YIELD: | 3.3% | PE RATIO: | 14 | |
| NET ASSET VALUE: | * | NET DEBT: | £56.5m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 162 | 9.2 | 1.9 | 0.63 |
| 2015 | 156 | 11.6 | 2.6 | 0.68 |
| % change | -4 | +26 | +37 | +8 |
Ex-div: 3 Dec Payment: 4 Jan *Negative shareholder equity. Includes intangible assets of £235m, or 72p a share. | ||||
