Management can take credit for a decent showing by Hogg Robinson (HRG) at the half-year mark, in the face of trading conditions made less predictable by the Brexit vote. The business travel group has been trimming costs as part of a three-year restructuring programme, evidenced by an 80 basis point increase in the operating margin. There was also a 55 per cent rise in free cash flow to £6.5m, while net debt has been reined in to 0.5 times cash profit.
In the travel management segment, which still accounts for the lion's share of group revenue , transaction activity declined by 6 per cent and client travel spend was down by 11 per cent at constant currencies. The fall-away is explicable in terms of an industry-wide shift towards online booking, although reported revenue benefits from currency translation - a chimera if ever there was one. Again, unit profitability gives cause for encouragement with underlying margins up a full percentage point to 12.7 per cent.
There are some things beyond management's control; the group's pension deficit ballooned to £413m from £258m at the March year-end. The good news is that gilt yields have started to retrace, so we might realistically expect that figure to contract through the second half.
Investec forecasts cash profit of £59.6m for the March 2017 year-end, giving EPS of 7.6p, against £55.5m and 7p in 2016.
| HOGG ROBINSON (HRG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 67p | MARKET VALUE: | £218m | |
| TOUCH: | 65-68p | 12-MONTH HIGH: | 82p | LOW: 59p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 11 | |
| NET ASSET VALUE: | * | NET DEBT: | £31m | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 156 | 11.6 | 2.6 | 0.680 |
| 2016 | 164 | 14.0 | 2.9 | 0.715 |
| % change | +5 | +21 | +12 | +5 |
Ex-div: 8 Dec Payment: 9 Jan *Negative shareholders' funds. Includes intangible assets of £253m, or 78p a share | ||||
