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HOGG ROBINSON | Final Results | RNS








25 May 2011

Hogg Robinson Group plc

('HRG', 'the Company' or 'the Group')

Preliminary Results for the year ended 31 March 2011

Strong results supported by recovery in corporate travel



Summary of results



Years ended 31 March

2011 2010 Change

Revenue 358.0m 326.8m +10%

Underlying earnings (1)

- Operating profit 41.9m 35.2m +19%

- Operating profit margin 11.7% 10.8% +0.9 ppts

- Profit before tax 32.9m 28.4m +16%

- Earnings per share 7.3p 6.3p +16%

Reported earnings

- Operating profit 37.9m 28.0m +35%

- Profit before tax 28.9m 21.2m +36%

- Earnings per share 6.3p 4.4p +43%

Dividend per share 1.5p 1.2p +25%

Net debt 61.1m 77.5m -16.4m

Free cash flow (2) 21.4m 16.2m +5.2m




Financial Highlights

Revenue 10% higher at 358m (up 7% at constant currency)

Underlying profit before tax up 16% to 32.9m

Underlying EPS up 16% to 7.3p

Net debt down 16m to 61m; equivalent to 1.2x underlying EBITDA(1) (2010:
1.7x); net external interest cover 11.2x (2010: 13.9x)

Pension deficit down 12m to 115m

Full refinancing completed, with 190m committed until November 2014 and 30m
repayable by November 2018

Final dividend up by 25% to 1.0p per share; full-year dividend up 25% to 1.5p
per share with dividend cover of 4.9x (2010: 5.3x)



Operational Highlights

Client travel transaction activity up 17% (2010: down 3%)

Client travel spend up 23%, up 20% at constant currency (2010: down 17% at
constant currency)

Revenue per employee up 7% at constant currency

Client retention rate remains above 90% and continued net new business wins

Continuing investment in technology with emphasis on mobile applications

Strong pipeline across multiple client sectors



Notes:

(1) Before amortisation of acquired intangibles and exceptional items

(2) Free cash flow is the change in net debt before acquisitions and disposals,
dividends and the impact of foreign exchange movements

(3) References to client travel activity and client travel spend above and
throughout this document are unaudited



David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:



"I am delighted to report on another good year for HRG, which has been marked
by strong growth in revenue and earnings and supported by a strong recovery in
global business travel. In light of this performance the Board has recommended
a 25% increase in the dividend.

We anticipate the positive momentum that we have seen in our markets to
continue. We will continue to innovate and invest for the longer term, and
expect to make further progress through the course of the year."





Contact Details



Hogg Robinson Group +44 (0)1256 312 600

David Radcliffe, Chief Executive

Julian Steadman, Group Finance Director

Angus Prentice, Head of Investor Relations



Tulchan Communications +44 (0)20 7353 4200

David Allchurch

Stephen Malthouse

Martin Robinson






Notes to Editors



Hogg Robinson Group plc (HRG) (LSE: HRG) was established in 1845 and is an
international corporate travel services company with headquarters located in
Basingstoke, Hampshire, UK. The HRG worldwide network, including contracted
partners, extends to over 120 countries.



HRG's focus on its clients is underpinned by four differentiators - size and
scope, people, technology and flexible service offering. The company has
experienced management and skilled operators together with proprietary
technology which has been developed in-house. HRG offers a range of services
around the globe to deliver value, cost savings, efficiency and innovation,
without compromise.



www.hoggrobinsongroup.com





A presentation for analysts and institutional investors will be held at 0900h
BST today at Tulchan Communications, 85 Fleet Street, London EC4Y 1AE.
(Pre-registration for this event is necessary to comply with security
procedures at Tulchan Communications.) Copies of the presentation with audio
commentary from HRG's presentation team will be available at
www.hoggrobinsongroup.com by 1100h BST today or soon thereafter.





This announcement may contain forward-looking statements with respect to
certain of the plans and current goals and expectations relating to the future
financial conditions, business performance and results of Hogg Robinson Group
Plc (HRG). By their nature, all forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances that are
beyond the control of HRG, including amongst other things, HRG's future
profitability, competition with the markets in which the Company operates and
its ability to retain existing clients and win new clients, changes in economic
conditions generally or in the travel and airline sectors, terrorist and
geopolitical events, legislative and regulatory changes, the ability of its
owned and licensed technology to continue to service developing demands,
changes in taxation regimes, exchange rate fluctuations, and volatility in the
Company's share price. As a result, HRG's actual future financial condition,
business performance and results may differ materially from the plans, goals
and expectations expressed or implied in these forward-looking statements. HRG
undertakes no obligation to publicly update or revise forward-looking
statements, except as may be required by applicable law and regulation
(including the Listing Rules). No statement in this announcement is intended
to be a profit forecast or be relied upon as a guide to future performance.


Chairman's Statement



I am very pleased to be able to report on a year of significant financial
progress for your Company. Revenues are up and profits are well ahead of last
year and as a result we are very confident in recommending an increase in the
dividend for the year of 25%.



The global economy is slowly recovering from the financial crisis of the last
few years and HRG's services are increasingly in demand. Last year's
restructuring within the Group and its impact on the cost base has further
underpinned our results and we look forward now to another year of improved
performance. Our challenge is to continue to provide the very best service to
our clients whilst managing effectively the cost of that service. Success on
these two fronts will deliver a growing business with good financial results
and will give us the ability to reward both staff and shareholders in a way
that reflects the success that comes from delivering client satisfaction.



Our strategy remains to strengthen our position as one of the world's leading
service providers working within the corporate travel market and maintain a
sustainable business which delivers value to all stakeholders. Like all
businesses we face some risks in delivering this strategy, not least coping
with any effects of increasing fuel prices on business travel activity and any
possible effects on the global economy of recent natural disasters and
political upheaval. We have a strong track record of coping well with
short-term disruptions, especially during the last two years, and therefore
retain a positive outlook for business performance in the longer term.



A more detailed review of the business is given by Chief Executive David
Radcliffe in his report and in the Operational Review but I would like to draw
shareholders' attention to the growth in underlying earnings per share this
year of 16% to 7.3p. This has encouraged the Board to propose a final
distribution to shareholders of 1.0p which, together with the interim of 0.5p
represents a payout ratio of 21% of underlying earnings per share. I said in
my report last year that we aspired to a progressive dividend policy and this
year we started to deliver it. We aim to continue to do so with the rate of
increase in dividend being dependant on the increase in earnings and cash flow.



Our principal borrowing facilities were successfully renegotiated in November
2010 for a further four years at competitive rates. However, following the
financial crisis, lenders have sought to increase their margins and we have
been no exception to this trend. As a result, cash generation and debt levels
continue to be a key area of focus for us. Year-end net debt again reflects
the benefit of management actions but shareholders should be aware that average
net debt levels through last year were again somewhat higher than at the year
end.



Last year I drew shareholders' attention to the volatility in the Group's
pension deficit. This year the deficit has fallen by 9% to 115m as a result
of improved asset values and contributions in the year partially offset by
changes in actuarial assumptions about inflation rates. The UK scheme has been
closed to new members since 2003 and we continue to monitor the situation
carefully having regard to the interests of shareholders and past and present
members of the scheme.



Corporate governance is as important to smaller companies as it is to large
ones. At Hogg Robinson Group, we aim to optimise the benefits of good
governance whilst carefully managing the cost of delivering it. Your Board has
complied in full with the spirit of the UK Corporate Governance Code and will
continue to do so. In this regard we plan to have an externally facilitated
review of the Board in the coming year and I will report in due course on the
results of that review.



Sadly, George Battersby, one of our non-executive Board colleagues, passed away
last year. He was a director from the time of the IPO in 2006 and provided
valuable insight and challenge as the Company developed in the spotlight of the
public market. George was a valued colleague who gave great service to the
Company and was a good friend to all of us. He will be sorely missed.



We have a new non-executive director, Paul Williams, who joined the board on 1
April 2011. Paul has held senior executive positions in a number of blue-chip
FTSE 100 companies in his career and we look forward to working with him.



I am also pleased to welcome Kevin Ruffles to the Board as Chief Operating
Officer. Kevin has worked for HRG for 38 years in a number of roles and we
will continue to benefit from his extensive experience.



My final words as always are to thank all those who have contributed to the
Company's success this year. In the face of many challenges, it has been an
excellent year which we should all celebrate. To my Board, executive and staff
colleagues, thank you for all the hard work. I hope you agree it has been
worth it and I look forward with you to another year of commitment and delivery
as we build the value of the Company.






Chief Executive's Statement



Overview

I am delighted to report on another good year for HRG, one marked by strong
growth in revenue and earnings, on the back of a good recovery in activity
levels. For the year ended 31 March 2011, client travel activity increased by
17% and spend by 23%. Our full-year revenue rose by 10% and underlying
operating profit by 19%.



In my statement this time last year, I referred to the fact that, for most of
us involved in the travel industry, the key question was how quickly corporate
travel would recover. According to the World Travel & Tourism Council, global
business travel spend rose by an estimated 7.4% in calendar 2010; the National
Business Travel Association estimate was 6.2%, so the picture is broadly
similar for both.



In our case, we noted the earliest signs of an improvement during the autumn of
2009. Since then, we have seen a steady recovery across all regions, though
the growth in corporate travel activity amongst our clients has been strongest
in Asia Pacific and North America. Europe overall has shown some recovery
though the pace of recovery has varied by country.



In the past year, the industry has had to cope with a number of significant
events ranging from fuel duty rises and severe winter weather to earthquakes,
floods and a volcanic eruption that have disrupted travel and heightened
anxiety for those involved. Our strategy remains centred on delivering value
through excellent service that is tailored to the specific needs of each
client. It is often at times of crisis and severe disruption that our clients
come to appreciate the true meaning of 'travel management' and the high quality
of our service.



Our clients remain focused on optimising their travel expenditure and reducing
costs. Many of their cost-saving changes that were imposed during the
financial crisis are still being applied. It is also fair to say that many
have moved away from the simple mantra of cost reduction to balance
value-adding services with total cost. As a full service provider, our
technology platform has delivered real value in the eyes of our clients. Good
examples of this are the increasing use of online self-booking tools and the
introduction of mobile applications.



Financial results

Revenue of 358m was up 10% as reported, or up 7% at constant exchange rates.
Underlying operating profit, which is before the amortisation of acquired
intangibles and exceptional items, was up by 19% to 41.9m, representing a
margin improvement from 10.8% to 11.7%. Underlying profit before tax was up by
16% to 32.9m, and underlying EPS increased by 16% from 6.3p to 7.3p.



After including the amortisation of acquired intangibles and prior-year
exceptional items, reported operating profit was up by 35%, profit before tax
was up by 36% and EPS increased by 43%.



In recent years, our focus has necessarily been on the reduction of our
operating costs as our clients reduced their travel activity. As activity
recovered, we were careful not to add costs back into the business until we
were confident that the trends were likely to be sustained, and we began adding
capacity in the second half of the year (albeit at a slower rate than we
removed it) to ensure that we could continue to deliver excellent service and
to support our continuing growth. As a result of this disciplined approach,
average revenue per head rose by 7% at constant currency.



As a result of strong management, year-end net debt reduced by 16.4m to 61.1m
and represented 1.2x underlying EBITDA (2010: 1.7x), with net external interest
cover of 11.2x (2010: 13.9x). Reducing net debt has been a key focus of the
group over the last three years and the net debt has now been reduced by 49.3m
from the peak year-end position of 110.4m in 2008.



During the second half of the financial year, we completed a full refinancing
of our 220m credit lines, with 190m committed until November 2014 and 30m
repayable by November 2018. Our terms are very competitive in the current
market, but the higher lenders' margins have contributed to the increase of
1.4m in our net external interest costs in the current year and are expected to
add around 4m for a full year.



The Board is recommending a final dividend of 1.0p per share resulting in a
full-year dividend of 1.5p per share, an increase of 25% on the prior year.
Our dividend is covered 4.9x (2010: 5.3x) by underlying EPS. The final
dividend will be paid on 1 August 2011 to shareholders on the register at the
close of business on 1 July 2011.



Current trading and outlook

We expect that the positive momentum that we have seen will continue. Since
the year end we have continued to trade ahead of last year and expect to make
further progress through the rest of the year.



David Radcliffe

Chief Executive





Operational Review



Market overview

The improvement in market conditions, first seen towards the end of calendar
year 2009, marked the start of a steady recovery in global corporate travel
that has been sustained through 2010 and 2011 to date. For us, that recovery
was seen first in Asia Pacific and has since spread into North America and
Europe, although the recovery for our European business has varied by country.



Generally, macro indicators point to a continuing improvement in market
conditions and, importantly, an increase in business confidence. While no one
data set correlates directly with our business, the general trends in the data
released by the International Monetary Fund, the International Air Transport
Association (IATA) and STR Global correspond with our own experience during the
year.



IMF global growth forecasts for calendar year 2011 have been increased to about
5%, with a similar rate of growth predicted for 2012. The forecasts vary by
region with, for example, China showing a figure close to 10% compared to 2%
for the UK.



Airline passenger numbers have clearly benefited from that turnaround. IATA
figures show that January 2011 volumes were 18% higher than the low point of
early 2009 and 6% higher than the pre-recession peak of early 2008. For
premium traffic, which is often taken as a measure of business confidence,
volumes were almost 20% higher than the low point of mid 2009 but are still
around 10% below their pre-recession levels.



For hotels, recent data from STR Global show a similar recovery. Globally, the
year-on-year growth in monthly revenue per available room averaged
approximately 10% during the year ending March 2011 compared to a decline of
the same magnitude for the previous year. As with the airlines, there are
regional variations with the strongest growth in Asia Pacific.





Client activity

During the year, client travel spend rose by 23% or 20% at constant currency
compared to falls of 12% and 17% respectively in the prior year, while travel
booking activity rose by 17% compared to a fall of 3% in 2010.



Online self booking of simpler travel itineraries continues to appeal
particularly for clients in North America, Australia and certain European
countries, and the proportion of online bookings grew year-on-year.



Following the austerity of the last 18 months, we have seen increasing evidence
of some companies starting to increase activity levels, although there is
continuing focus on cost control and compliance. Clients continue to review
and consolidate service models that drive improvement in quality of service and
provide greater data to their business. The trend for consolidation of
multi-country operations into single-point service locations is increasing as
clients look to strengthen compliance and improve passenger security while
achieving economies of scale. We have responded by further extending our
multi-country servicing capability. Anticipating this consolidation trend, we
invested in telephone call-switching technology and implemented more home
working, which allowed us to further rationalise our branch network with focus
on a smaller number of core 'hub' and 'specialist' locations.



There were several occasions during the year when our clients' travel patterns
were disrupted as a consequence of factors beyond their control. These
included the closing of European airspace as a result of the ash emitted by
Iceland's Eyjafjallajkull volcano, the severe weather conditions in Europe and
North America, the natural disasters that occurred in New Zealand, Australia
and Japan, and the events unfolding in the Middle East and North Africa. All
these events have led to an increased focus on passenger security. They have
also served to highlight the value that our clients place on the breadth and
depth of the travel management service that they receive from HRG as our staff
work tirelessly to help manage difficult situations and to provide alternative
travel itineraries wherever possible.



Our focus on delivering bespoke travel management solutions, which lies at the
heart of our business model, has resulted in our enjoying another successful
year of client retention and new business. Like any global business, we lost
some clients during the year. Nevertheless, we have maintained our managed
client retention rate above 90% and grown our business with net new business
wins.



Amongst many new clients that we welcomed during the year were Aviva, Avon,
Bank of America Merrill Lynch Asia, Direct Energy, Grant Thornton and Noble
Energy. We also secured expanded contracts with existing clients such as
Agilent, Ericsson, Novartis, Rolls Royce, SGS Group, Syngenta and Volkswagen.



We are delighted to have secured contract renewals with, amongst others,
Bilfinger Berger, Bombardier, Diageo, Foreign & Commonwealth Office,
GlaxoSmithKline, KPMG, Ministry of Defence, National Australia Bank, Patheon,
Procter & Gamble, Roche, Schlumberger, UBS, Weatherford and Willis.



Our sales pipeline remains strong across many different sectors. One of our
key strengths is the breadth of our client portfolio, which spans a range of
industries, with no single client accounting for a significant share of client
revenue.





Corporate Travel Management



Europe

Years ended 31 March 2011 2010 Change



Revenue 244.6m 229.6m +6.5%

Operating profit 27.8m 21.9m +5.9m

Underlying operating profit (1) 30.8m 28.1m +2.7m

Underlying margin (1) 12.6% 12.2% +0.4 ppts




(1) Before amortisation of acquired intangibles and exceptional items



Revenue was up by 6.1% at constant currency. Underlying operating profit rose
by 2.7m, including a 0.6m benefit from currency movements. Client travel
spend increased by 18% year-on-year at constant currency and travel activity
rose by 13%.



Our focus on large multinational managed clients means that we are managing our
business increasingly on a pan-European and even global basis rather than
through individual countries, as the trend amongst our larger clients to
consolidate their travel spend through fewer locations continues. We continued
to rationalise our service network in Europe during the year to focus, where
appropriate, on fewer service points or strategic hubs. We continue to look
for further service and cost efficiencies without reducing the quality of our
service. Over 300 of our people now work from home which allows us to further
consolidate our branch network.



Online, self-booking adoption rates continued to grow and now account for 25%
of all European travel bookings, up from 17% last year. The branch network
consolidation, increasing flexibility from telephony call-flow switching, and
the growing number and proportion of our travel consultants working from home
have all helped us to continue to be price competitive whilst maintaining our
margins.



Our UK business produced another robust performance. The inevitable reduction
in travel activity by our Government clients was offset by increases in other
sectors and we achieved an overall increase in travel spend.



In Germany, there was further evidence of clients returning to pre-recession
levels and this allowed a return to normal working patterns following the
reduced working-time initiative introduced by the German Government in March
2009. In October, we initiated service for Volkswagen, a major client won last
financial year.



Our Swiss business showed notable year-on-year growth as key clients increased
their travel significantly. We also began to benefit from trading with several
new clients including Novartis. Here too, last year's reduced working hours
initiative was discontinued.





North America

Years ended 31 March 2011 2010 Change



Revenue 77.5m 69.3m +11.8%

Operating profit/(loss) 9.2m 6.1m +3.1m

Underlying operating profit (1) 9.9m 6.8m +3.1m

Underlying margin (1) 12.8% 9.8% +3.0 ppts




(1) Before amortisation of acquired intangibles and exceptional items



Revenue was up 5.9% at constant currency. Underlying operating profit grew by
3.1m, including a 0.7m gain from currency movements and after a 1.0m one-off
charge related to surplus property. Client travel spend increased by 22%
year-on-year at constant currency and travel activity rose by 24%.



Market conditions in North America improved steadily through the year.
Following the restructuring of HRG's North American operations in recent years
the strong growth in revenue, combined with operational gearing, improved the
underlying operating margin to a level comparable with our European business.



Domestic travel in North America is well suited to online self booking, which
now represents more than half of all corporate air transactions. The North
American travel market remains highly competitive and our investment in
efficient systems enables us to handle large numbers of lower price
transactions.



Our loyalty business in Canada, which manages the redemption of credit card
loyalty points for several banks, had another year of good performance.





Asia Pacific

Years ended 31 March 2011 2010 Change



Revenue 23.4m 16.7m +40.1%

Operating profit/(loss) 0.4m (1.1m) +1.5m

Underlying operating profit/(loss) (1) 0.4m (1.1m) +1.5m

Underlying margin (1) 1.7% -6.6% +8.3 ppts




(1) Before amortisation of acquired intangibles and exceptional items



Revenue was up by 25.7% at constant currency. There was no currency impact on
the 1.5m increase in underlying operating profit. Client travel spend
increased by 31% year-on-year at constant currency and travel activity rose by
37%.



In Australia, our largest market in the region, we benefitted from a strong
recovery in travel spend and activity. The first full year of adoption of our
fully-integrated travel and expense management system for the Queensland
Government contributed to a strong result. We were also very pleased to be
appointed to the panel of preferred suppliers to the Australian Federal
Government during the year and believe that this should offer further growth
opportunities. With online self booking now accounting for around half of all
bookings, we have consolidated our e-fulfilment and e-support teams to support
this trend.



Singapore also saw a strong recovery during the year with many clients
returning to pre-recession levels. This was especially true in the financial
sectors which were the first to show recovery. Singapore is becoming a natural
key hub for client travel consolidation in the region and we opened a new
regional service centre to provide a multi-country service consolidation for
one of our larger Manufacturing clients as the first phase in our plans for
regional consolidation.



HRG's joint ventures in Hong Kong and mainland China also delivered strong
growth. As associates, their results are not included in the table above.





Spendvision

Years ended 31 March 2011 2010 Change



Revenue 12.5m 11.2m +11.6%

Operating profit 0.5m 1.1m -0.6m

Underlying operating profit (1) 0.8m 1.4m -0.6m

Underlying margin (1) 6.4% 12.5% -6.1 ppts




(1) Before amortisation of acquired intangibles and exceptional items



Revenue was up 4.5% at constant currency. Underlying operating profit fell by
0.6m as we continued to invest in product delivery and customer support.



Spendvision provides transaction management solutions including end-to-end
expense management. Its online technology automates expense claims processing
for employees while offering a company enhanced control and visibility of its
indirect expenses. The platform also delivers a payables management system to
banks and their corporate customers, with the ability to improve the
purchase-to-pay (P2P) process. Spendvision's platform is accessed from
customers in nearly 130 countries and is available in 16 languages.



The utilisation of the Visa IntelliLink Spend Management product, a white-label
version of Spendvision's platform, is continuing as issuing banks convert from
Visa's existing system. The worldwide roll-out of the Spendvision platform to
Rio Tinto is also continuing and we have won new UK business in the University
and Local Government sectors, building on our developing position in these
markets.



Spendvision has a strong pipeline of new business opportunities, with
particular focus on banking.





Technology

Travel management in the modern era is heavily reliant on data and analysis,
with technology recognised as a critical success factor. HRG's systems allow
us to offer a wide variety of proprietary applications and products but are
also compatible with third-party offerings. We believe that our long-held
commitment to the development of in-house technology gives us a competitive
advantage over those who are reliant on third-party providers with
off-the-shelf products. Nonetheless, we also retain a full capability to work
with client designated third-party suppliers when necessary.



Our systems provide access to travel itineraries, alternative pricing, policy
compliance, online self-booking tools and security tracking of passengers.
They also allow our staff to access information from multiple sources,
regardless of data source, thereby ensuring that we can provide an efficient,
rapid and cost-effective service.



During the year we released upgrades to all of our major technology products,
including HRG i-SuiteTM, our travel portal which is a customisable gateway and
single source for all our clients' travel information, products, tools and
services, and HRG OnlineTM, our online booking tool, adding a new module that
displays savings on UK rail costs.



We also launched a number of new products:



* HRG Security SuiteTM delivers a whole range of security services from
pre-trip destination intelligence, traveller tracking and security training
to international emergency response services in association with global
security experts, red24. In view of recent geo-political events in certain
regions of the world, this solution is proving attractive to many of our
clients. We are frequently able to alert travellers to situations and
offer alternative arrangements, before their own corporations are aware of
the need.



* Our first point of sale application, linking HRG with suppliers and global
distribution systems using our own technology interface, became live in the
UK.



We commenced development of a white-label version of HRG OnlineTM, which
enables clients to make air, hotel, rail and ground transport reservations
quickly and efficiently. This followed an agreement signed last year with
Travelport which enables it to market a fully-branded version of HRG's booking
tool to its corporate clients. This is a very exciting initiative as it
broadens the reach of one of our principal products and is testament to the
quality of our technology.



Mobile use is a fast-growing aspect of business life, and most business
travellers now carry a smartphone mobile device. HRG's Universal Super
Platform, our proprietary technology platform upon which all our travel-booking
applications sit, is built on the Microsoft BizTalk platform and supports
communication with internal and third-party systems via the internet. We are
developing mobile solutions that add real value to our clients. Last summer,
we announced a mobile technology partnership with Sabre Travel Network enabling
HRG to offer its clients TripCase, a mobile itinerary management application.
Towards the end of the financial year we delivered access to HRG i-SuiteTM and
HRG OnlineTM through a mobile enabled website and application for Microsoft
Windows 7 smartphone, and we plan to roll out delivery for BlackBerry, Android
and Apple iPhone and iPad devices in the near future.



Technology allows companies to manage their travel programmes efficiently while
enhancing the traveller experience. We believe HRG's technology is leading the
way amongst global travel management companies.






Additional Financial Disclosure



Revenue

Reported revenue increased by 9.5% to 358.0m, comprised of an increase of 7.0%
at constant exchange rates and an increase of 2.5% from favourable currency
translation.



Revenue per employee

Reported revenue per employee increased by 9.9% from 61.4k to 67.5k. At
constant exchange rates this was an increase of 7.3%.



Operating expenses

Reported operating expenses increased by 7.1% to 320.1m.



Underlying operating expenses, which are before amortisation of acquired
intangibles and exceptional items, increased by 8.4% from 291.6m to 316.1m,
or by 6.0% at constant exchange rates. This increase is comprised of 6.5% for
staff costs and 5.0% for other expenses.



The increase of 6.5% in staff costs reflects higher costs for staff incentives
and UK pensions.



Underlying operating profit

Underlying operating profit, which is before amortisation of acquired
intangibles and exceptional items, increased by 19.0% from 35.2m to 41.9m,
including a benefit of 1.2m from favourable currency movements. The
underlying operating profit margin, which has not been affected by currency
movements, increased from 10.8% to 11.7%.



Exceptional items

There were no exceptional items reported in the period. A 3.3m charge was
reported in the prior year relating to cost reduction programmes in Europe.



Net finance costs

Net finance costs increased by 2.0m to 9.0m as a result of the November 2010
debt refinancing described below. The increase reflects higher interest costs
and accelerated amortisation of debt issue costs relating to the previous
facilities.



Following the refinancing, higher lenders' margins contributed to the increase
of 1.4m in net external interest costs for the year and are expected to add
around 4m for a full year.



Net external interest costs of 4.6m were covered 11.2 times by EBITDA (2010:
13.9x).



The IAS 19 pension charge, which increased to 3.3m for the year, is expected
to decrease by 0.9m in the year to 31 March 2012.



Taxation

The tax charge for the year represents an overall effective tax rate (ETR) of
31.5% of the reported profit before tax (2010: 32.5%). The current year ETR
includes a 0.5m charge relating to the impact on deferred tax assets of a
reduction in the UK corporation tax rate from 28% to 26%. An additional charge
of 2.1m is reflected in the Consolidated Statement of Comprehensive Income in
respect of deferred tax assets on pension liabilities. We anticipate an ETR of
around 30% in future years.



Return on capital employed

Return on capital employed is calculated by dividing underlying operating
profit plus net share of the results of associates and joint ventures by
average net assets. Average net assets are based on the 12 month ends for the
financial year and exclude net debt, pension deficits and tax provisions.
Average net assets amounted to 216.4m (2010: 209.4m) compared with 162.5m at
the year end (2010: 165.9m). The return for the year was 19.4% (2010: 16.9%).



Cash flow

Free cash flow, which is the change in net debt before acquisitions and
disposals, dividends and the impact of foreign exchange movements on net debt
balances, was 21.4m (2010: 16.2m) with the increase being consistent with the
improved profit for the year.



Working capital increased by 1.8m, primarily due to a reduction in the active
working capital programme described below. The cash outflow related to
borrowings was 6.8m (2010: 2.8m), including 3.6m of fees associated with the
refinancing. Tax paid in cash was 9.3m (2010: 5.1m) and capital expenditure,
which is primarily internal software development and office equipment, was
8.7m (2010: 11.1m). Cash costs for additional pension funding reduced to
6.1m (2010: 7.6m).



In addition to free cash flow, the other major cash flow items are related to
dividends paid to shareholders during the year, which were 3.9m in the current
year compared to 1.2m in the prior year when only an interim dividend was paid
in cash.



Funding and net debt

The Group completed the full refinancing of its credit lines in November 2010.
The Group's principal borrowing is from a 190m multi-currency revolving credit
facility (RCF) that is committed until November 2014. The RCF is used for
loans, letters of credit and guarantees with interest based on LIBOR/EURIBOR
plus a margin and costs. In addition, the Group has secured a 30m fixed rate
loan which is repayable by 2018 and also has retained uncommitted facilities,
amounting to around 24m at the year end, which are used for local flexibility.



The principal banking covenants for the RCF continue to be measured twice each
year, at the end of March and the end of September, against EBITDA. The
covenants require that net debt is less than 3.0 times EBITDA and net external
interest is covered at least 4.0 times by EBITDA. The definition of EBITDA for
covenant purposes is not materially different from the definition used in these
financial statements.



Net debt at year end reduced by 16.4m to 61.1m, and was equivalent to 1.2
times EBITDA (2010: 1.7x). This translates into gearing of 36% (2010: 45%), or
74% (2010: 99%) including the pension deficits and related deferred tax
assets. The Group has an active programme to reduce working capital
requirements at the end of each half-year reporting period. This programme
reduced working capital by approximately 31m at the year end compared to 35m
in March 2010. The average net debt, measured on a weekly basis, reduced by
11m during the year.



Pensions

The Group's pension deficits under IAS 19 have decreased by 11.7m to 114.7m
before tax.



The UK scheme deficit decreased by 11.8m to 104.1m. The scheme assets
increased by 16.8m and the scheme liabilities increased by 5.0m. The major
changes were due to a lower inflation rate assumption (2.7m) and a change in
inflation index from RPI to CPI (4.5m). Annual cash contributions amounted to
15.2% of pensionable salaries plus a deficit reduction payment of 6.6m per
annum. The total charge against profits increased by 1.6m to 5.8m. The next
actuarial valuation will be effective from April 2011 and discussions have
already commenced with Trustees.



The overseas schemes are primarily in Germany and Switzerland, where the
year-end deficit increased by 0.1m to 10.6m.



At the year end, there was a deferred tax asset of 27.0m (2010: 32.4m)
relating to the UK deficit and a liability of 0.9m (2010: 0.4m) relating to
the overseas schemes. The change in UK deferred tax is due to the reduction in
the headline rate of UK corporation tax.



Share price

The closing mid-market price at the year end was 58p (2010: 31.5p). During the
year, the price ranged from 26p to 60.75p per share.








Summary income statement

Years ended 31 March 2011 2010

m m

Revenue 358.0 326.8



EBITDA before exceptional items 51.6 44.5

Depreciation and amortisation (1) (9.7) (9.3)

Underlying operating profit 41.9 35.2

Amortisation of acquired intangibles (4.0) (3.9)

Exceptional items - (3.3)

Share of associates and joint ventures - 0.2

Net finance costs (9.0) (7.0)

Profit before tax 28.9 21.2

Taxation (9.1) (6.9)

Profit for the year 19.8 14.3





Summary balance sheet

As at 31 March 2011 2010

m m

Goodwill and other intangible assets 249.9 253.5

Property, plant, equipment and investments 15.3 17.5

Working capital (99.8) (101.2)

Current tax liabilities (net) (4.7) (8.4)

Deferred tax assets (net) 38.9 47.2

Net debt (61.1) (77.5)

Pension liabilities (pre-tax) (114.7) (126.4)

Provisions and other items (2.8) (4.0)

Net assets 21.0 0.7





Summary cash flow statement

Years ended 31 March 2011 2010

m m

EBITDA before exceptional items 51.6 44.5

Cash flow from exceptional items (0.9) (7.0)

Working capital movements (1.8) 5.7

Interest paid (3.2) (2.8)

Refinancing costs (3.6) -

Tax paid (9.3) (5.1)

Capital expenditure (8.7) (11.1)

Pension funding in excess of EBITDA charge (6.1) (7.6)

Other movements 3.4 (0.4)

Free cash inflow 21.4 16.2

Acquisitions and disposals (0.8) (0.3)

Dividends paid to external shareholders (3.9) (1.2)

Currency translation (0.3) (5.8)

Other movements - (1.1)

Decrease in net debt 16.4 7.8




Excluding amortisation of acquired intangibles




Hogg Robinson Group plc

Consolidated Income Statement

For the year ended 31 March 2011







Years ended 31
March

Notes 2011 2010

m m



Revenue 1 358.0 326.8

Operating expenses 2 (320.1) (298.8)





Operating profit 37.9 28.0



Analysed as:

Underlying operating profit 41.9 35.2

Amortisation of acquired intangibles 8 (4.0) (3.9)

Exceptional items 2 - (3.3)





Operating profit 37.9 28.0





Share of results of associates and joint ventures - 0.2

Finance income 4 0.2 0.2

Finance costs 4 (9.2) (7.2)





Profit before tax 28.9 21.2

Income tax expense 5 (9.1) (6.9)





Profit for the financial year from continuing 19.8 14.3
operations





Profit attributable to:

Equity shareholders of the Company 19.1 13.4

Non-controlling interests 13 0.7 0.9





19.8 14.3








Years ended 31 March

2011 2010

Earnings per share 6 pence pence



Basic 6.3 4.4

Diluted 6.1 4.3







Hogg Robinson Group plc

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2011







Years ended 31
March

Notes 2011 2010

m m



Profit for the financial year 19.8 14.3





Other comprehensive income



Currency translation differences (1.5) (11.8)

Actuarial gain / (loss) on pension schemes 11 8.5 (66.0)

Deferred tax movement on pension liability (2.4) 18.7

Deferred tax movement on pension liability
attributable to

impact of UK rate change (2.1) -

Deferred tax movement on cumulative share-based -

incentives cost 0.3





Other comprehensive income / (loss) for the year, net 2.8 (59.1)
of tax





Total comprehensive income / (loss) for the year 22.6 (44.8)





Total comprehensive income / (loss) attributable to:



Equity shareholders of the Company 21.8 (45.7)

Non-controlling interests 0.8 0.9





22.6 (44.8)









Hogg Robinson Group plc

Consolidated Balance Sheet

As at 31 March 2011







As at 31 March

Notes 2011 2010

m m

Non current assets

Goodwill and other intangible assets 8 249.9 253.5

Property, plant and equipment 9 12.9 14.8

Investments accounted for using the equity method 2.4 2.7

Trade and other receivables 0.1 0.1

Deferred tax assets 40.9 48.8





306.2 319.9





Current assets

Trade and other receivables 114.7 115.4

Financial assets - derivative financial instruments - 0.2

Current tax assets 0.7 1.0

Cash and cash equivalent assets 70.5 58.8





185.9 175.4





Total assets 1 492.1 495.3





Non current liabilities

Financial liabilities - borrowings (128.0) (135.1)

Deferred tax liabilities (2.0) (1.6)

Retirement benefit obligations 11 (114.7) (126.4)

Provisions (4.2) (3.5)





(248.9) (266.6)





Current liabilities

Financial liabilities - borrowings (0.3) (0.4)

Financial liabilities - derivative financial instruments (0.3) -

Current tax liabilities (5.4) (9.4)

Trade and other payables (214.6) (216.7)

Provisions (1.6) (1.5)





(222.2) (228.0)





Total liabilities (471.1) (494.6)





Net assets 21.0 0.7





Capital and reserves

Share capital 3.1 3.1

Share premium 172.2 172.2

Other reserves 12 14.0 13.4

Retained earnings 12 (171.9) (191.4)





Attributable to owners of Hogg Robinson Group plc 17.4 (2.7)



Attributable to non-controlling interests 13 3.6 3.4





Total equity 21.0 0.7









Hogg Robinson Group plc

Consolidated Statement of Changes in Equity

As at 31 March 2011





Attributable to equity holders of the
Company

Share Share Other Retained Non-controlling Total

capital premium reserves earnings Total interests Equity

m m m m m m m



Balance at 1 April 2009 3.1 172.2 24.1 (155.2) 44.2 3.5 47.7







Retained profit for the - - - 13.4 13.4 0.9 14.3
financial year

Other comprehensive income:

Actuarial loss on pension - - - (66.0) (66.0) - (66.0)
schemes

Deferred tax movement on - - - 18.7 18.7 - 18.7
pension liability

Currency translation - - (11.8) - (11.8) - (11.8)
differences





Total comprehensive income - - (11.8) (33.9) (45.7) 0.9 (44.8)





Transactions with owners:

Dividends - - - (1.2) (1.2) (1.0) (2.2)

Shares purchased by - - - (1.1) (1.1) - (1.1)
Employee Benefits Trust

Share-based incentives - - 1.1 - 1.1 - 1.1





Total transactions with owners - - 1.1 (2.3) (1.2) (1.0) (2.2)







Balance at 1 April 2010 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.7







Retained profit for the - - - 19.1 19.1 0.7 19.8
financial year

Other comprehensive income:

Actuarial loss on pension - - - 8.5 8.5 - 8.5
schemes

Deferred tax movement on - - - (2.4) (2.4) - (2.4)
pension liability

Deferred tax movement on
pension liability

attributable to impact - - - (2.1) (2.1) - (2.1)
of UK rate change

Deferred tax movement on
cumulative

share-based incentives - - - 0.3 0.3 - 0.3
cost

Currency translation - - (1.6) - (1.6) 0.1 (1.5)
differences





Total comprehensive income - - (1.6) 23.4 21.8 0.8 22.6





Transactions with owners:

Dividends - - - (3.9) (3.9) (0.6) (4.5)

Share-based incentives - - 2.2 - 2.2 - 2.2





Total transactions with owners - - 2.2 (3.9) (1.7) (0.6) (2.3)









Balance at 31 March 2011 3.1 172.2 14.0 (171.9) 17.4 3.6 21.0









Hogg Robinson Group plc

Consolidated Cash Flow Statement

For the year ended 31 March 2011





Years ended 31
March

Notes 2011 2010

m m

Cash flows from operating activities

Cash generated from operations 14 46.9 36.2

Interest paid (3.6) (3.6)

Tax paid (9.3) (5.1)





Cash flows from operating activities - net 34.0 27.5



Cash flows from investing activities

Acquisition of subsidiaries, net of cash acquired (0.8) -

Acquisition of associates, joint ventures and other - (0.3)
investments

Purchase of property, plant and equipment (3.3) (4.5)

Purchase and internal development of intangible assets 8 (5.4) (6.7)

Proceeds from sale of property, plant and equipment - 0.1

Interest received 0.2 0.3

Dividends received from associates and joint ventures 0.2 0.5





Cash flows from investing activities - net (9.1) (10.6)



Cash flows from financing activities

Repayment of borrowings (176.3) (40.3)

New borrowings 170.8 21.1

Issue costs of new borrowings (3.6) -

Cash effect of currency swaps 0.1 (1.2)

Employee Benefits Trust 12 - (1.1)

Dividends paid to external shareholders (3.9) (1.2)

Dividends paid to non-controlling interests (0.6) (1.0)





Cash flows from financing activities - net (13.5) (23.7)







Net increase / (decrease) in cash and cash equivalents 11.4 (6.8)

Cash and cash equivalents at beginning of the year 58.2 63.3

Exchange rate effects 0.8 1.7





Cash and cash equivalents at end of the year 70.4 58.2







Cash and cash equivalent assets 70.5 58.8

Overdrafts (0.1) (0.6)





70.4 58.2











Additional Financial Information





General information and basis of preparation



The financial information which comprises the Consolidated Income Statement,
the Consolidated Statement of Comprehensive Income, the Consolidated Balance
Sheet, the Consolidated Statement of Changes in Equity and the Consolidated
Cash Flow Statement and related notes does not constitute the Company's
Consolidated Financial Statements for the years ended 31 March 2011 and 2010,
but is derived from those financial statements. The auditors have reported on
the Group's Consolidated Financial Statements for each of the years ended 31
March 2010 and 31 March 2011. Their reports were unqualified, did not draw
attention to any matters by way of emphasis and did not contain statements
under s498(2) or (3) of Companies Act 2006 or equivalent preceding
legislation. The Consolidated Financial Statements for the year ended 31 March
2010 have been delivered to the Registrar of Companies and the Consolidated
Financial Statements for the year ended 31 March 2011 will be filed with the
registrar in due course.



The Consolidated Financial Statements have been prepared in compliance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union, International Financial Reporting Interpretations Committee (IFRIC)
interpretations and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The Consolidated Financial Statements have
been prepared under the historical cost convention, as modified by the use of
valuations for certain financial instruments, share-based payment incentives
and retirement benefits.



Critical accounting policies and forward-looking statements



The preparation of the IFRS financial statements requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the Consolidated Financial Statements and the reported amounts of
revenues and expenses during the year.



The Operational Review should be read in conjunction with the audited
Consolidated Financial Statements. The discussions contain forward-looking
statements that appear in a number of places and include statements regarding
HRG's intentions, beliefs or current expectations concerning, among other
things, results of operations, revenue, financial condition, liquidity, growth,
strategies, new products and the markets in which HRG operates. Readers are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties.



Non-GAAP measures



Underlying operating profit is calculated as operating profit before
amortisation of acquired intangibles and exceptional items



Earnings Before Interest, Taxation, Depreciation and Amortisation (EBITDA) is
calculated as operating profit before exceptional items before net finance
costs, income taxes, depreciation, amortisation and impairment.



The Directors believe that the presentation of underlying operating profit and
EBITDA enhances an investor's understanding of HRG's financial performance.
However, underlying operating profit and EBITDA should not be considered in
isolation or viewed as substitutes for retained profit, cash flow from
operations or other measures of performance as defined by IFRS. Underlying
operating profit and EBITDA as used in this announcement is not necessarily
comparable to other similarly titled captions of other companies due to
potential inconsistencies in the method of calculation and are unaudited line
items but are derived from audited financial information. The Directors use
underlying operating profit and EBITDA to assess HRG's operating performance
and to make decisions about allocating resources among various reporting
segments.






1 Segment information



The chief operating decision maker has been identified as the Executive
Management Team, which reviews the Group's internal reporting in order to
assess performance and allocate resources. The Executive Management Team has
determined the operating segments based on these reports.



The Executive Management Team considers the business from the perspective of
two core activities, Corporate Travel Management, which is analysed into three
distinct geographic segments, and Spendvision. The Group's internal reporting
processes do not distinguish between the numerous sources of income that
comprise revenue for Corporate Travel Management. The performance of the
operating segments is assessed based on a measure of operating profit excluding
items of an exceptional nature. Interest income and expenditure and income tax
expense are not included in the result for each operating segment that is
reviewed by the Executive Management Team. Other information provided, except
as noted below, to the Executive Management Team is measured in a manner
consistent with that in the financial statements.



Total segment assets exclude cash and cash equivalent assets, current tax
assets and deferred tax assets which are managed on a central basis. These are
included as part of the reconciliation to total Consolidated Balance Sheet
assets.





Corporate Travel Management

North Asia

Europe America Pacific Total Spendvision Total

m m m m m m

Year ended 31 March 2011

Revenue from external customers 244.6 77.5 23.4 345.5 12.5 358.0







Underlying operating profit 30.8 9.9 0.4 41.1 0.8 41.9

Amortisation of acquired intangibles (3.0) (0.7) - (3.7) (0.3) (4.0)





Operating profit 27.8 9.2 0.4 37.4 0.5 37.9





Underlying margin 12.6% 12.8% 1.7% 11.9% 6.4% 11.7%





Year ended 31 March 2010

Revenue from external customers 229.6 69.3 16.7 315.6 11.2 326.8







Underlying operating profit 28.1 6.8 (1.1) 33.8 1.4 35.2

Amortisation of acquired intangibles (2.9) (0.7) - (3.6) (0.3) (3.9)





Operating profit before exceptional items 25.2 6.1 (1.1) 30.2 1.1 31.3

Exceptional items (3.3) - - (3.3) - (3.3)





Operating profit 21.9 6.1 (1.1) 26.9 1.1 28.0





Underlying margin 12.2% 9.8% -6.6% 10.7% 12.5% 10.8%








There is no material inter-segment revenue.



External revenue from clients by geographical area (where the client is
located) is not materially different from external revenue from clients by
origin (where the Group's operations are located) disclosed above.



A reconciliation of operating profit to total profit before income tax expense
is provided in the Consolidated Income Statement.










Corporate Travel Management

North Asia

Europe America Pacific Total Spendvision Total

m m m m m m



Total segment assets

31 March 2011 268.2 89.4 15.8 373.4 6.6 380.0

31 March 2010 272.0 95.7 12.1 379.8 6.9 386.7








Reported segments' assets are reconciled to total assets as follows:



31 March 31 March

2011 2010

m m



Total segment assets 380.0 386.7

Cash and cash equivalent assets 70.5 58.8

Current tax assets 0.7 1.0

Deferred tax assets 40.9 48.8





492.1 495.3








Capital expenditure by geographical location:



Corporate Travel Management

North Asia

Europe America Pacific Total Spendvision Total

m m m m m m



Capital expenditure

31 March 2011 6.2 1.6 0.4 8.2 1.0 9.2

31 March 2010 4.6 4.5 0.1 9.2 2.0 11.2









2 Operating expenses





Years ended 31
March

2011 2010

m m

Underlying operating expenses

Staff costs (note 3) 210.4 193.6

Amortisation of intangible assets other than acquired 4.4 4.2
intangible assets

Depreciation of property, plant and equipment 5.3 5.1

Auditors' remuneration for audit services 1.3 1.6

Operating lease rentals - buildings 14.1 14.7

Operating lease rentals - other assets 1.8 1.8

Loss on disposal of property, plant and equipment 0.5 0.1

Currency translation differences 0.2 0.2

Other expenses 78.1 70.3





316.1 291.6





Amortisation of acquired intangibles:

Amortisation of client relationships 3.7 3.6

Amortisation of other acquired intangible assets 0.3 0.3





4.0 3.9





Exceptional items:

Restructuring costs:

- Staff costs (note 3) - 2.6

- Other expenses - 0.7





- 3.3







Total operating expenses 320.1 298.8






Restructuring costs of 3.3m were incurred during the year ended 31 March 2010
and related to planned cost reduction programmes in Europe. They were in
respect of redundancy costs and onerous lease provisions.






3 Staff costs





Years ended 31 March

2011 2011 2011 2010 2010 2010

Before Before

exceptional Exceptional exceptional Exceptional

items items Total items items Total

m m m m m m



Salaries 175.5 - 175.5 163.4 - 163.4

Social security costs 20.6 - 20.6 19.0 - 19.0

Pension costs 9.9 - 9.9 8.4 - 8.4

Redundancy and termination costs 2.2 - 2.2 1.7 2.6 4.3

Share-based incentives 2.2 - 2.2 1.1 - 1.1





210.4 - 210.4 193.6 2.6 196.2





Pension costs comprise:

Defined benefit schemes (note 3.7 - 3.7 2.3 - 2.3
11)

Defined contribution schemes 6.2 - 6.2 6.1 - 6.1





9.9 - 9.9 8.4 - 8.4










Years ended 31
March

2011 2010

number number



Average monthly number of staff employed by the Group including Key 5,307 5,319
Management








4 Finance income and finance costs





Years ended 31 March

2011 2010

m m



Finance income - bank interest 0.2 0.2





Interest on bank overdrafts and loans (4.0) (3.4)

Amortisation of issue costs on bank loans (1.1) (0.6)

Expected return on pension scheme assets less

interest cost on pension scheme liabilities (note 11) (3.3) (3.2)

Other finance charges (0.5) -

Interest on derivative financial instruments (0.3) -





Finance costs (9.2) (7.2)





Net finance costs (9.0) (7.0)









5 Income tax expense





Years ended 31 March

2011 2010

m m

Current tax:

Tax on profits of the financial year 6.6 6.1

Adjustments in respect of previous years (1.6) (0.9)





Total current tax 5.0 5.2





Deferred tax:

Origination and reversal of temporary differences 4.1 1.7

Adjustments in respect of previous years (0.5) -

Impact of UK rate change 0.5 -




Total deferred tax 4.1 1.7





Taxation charge 9.1 6.9








The tax charge is split as follows:



Years ended 31 March

2011 2010

m m



United Kingdom 3.7 3.6

Overseas 5.4 3.3





Taxation charge 9.1 6.9










Years ended 31 March

2011 2010

m m



On recurring business 10.3 8.4

Tax on amortisation of acquired intangibles (1.2) (1.2)

Exceptional items - (0.3)





Taxation charge 9.1 6.9









6 Earnings per share



Earnings per share attributable to equity holders of the Company were as
follows:



Years ended 31 March



2011 2010

pence pence

Earnings per share

Basic 6.3 4.4

Diluted 6.1 4.3




Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to equity holders of the Company by the weighted average number of
Ordinary shares outstanding during the year, excluding those purchased by the
Company's Employee Benefits Trust.



For diluted earnings per share, the weighted average number of Ordinary shares
in issue is adjusted to assume conversion of all dilutive potential Ordinary
shares.



The following amounts have been used in the calculation of earnings per share:



Years ended 31 March

2011 2010

m m

Earnings for the purposes of earnings per share:

Profit for the financial year 19.8 14.3

Less: amount attributable to non-controlling interests (0.7) (0.9)





Total 19.1 13.4








Years ended 31
March

2011 2010

number number

m m

Weighted average number of Ordinary shares in issue

Issued (for basic EPS) 301.0 301.5

Effect of dilutive potential Ordinary shares - share-based 12.9 9.9
incentives





For diluted EPS 313.9 311.4






The weighted average number of issued Ordinary shares is lower in the year
ended 31 March 2011 compared to the year ended 31 March 2010 due to the impact
of the shares purchased by the Employee Benefits Trust.



The Employee Benefits Trust has waived its rights to dividends.





Underlying earnings per share



Underlying earnings per share attributable to equity holders of the Company
were as follows:



Years ended 31 March

2011 2010

pence pence

Underlying earnings per share

Basic 7.3 6.3

Diluted 7.0 6.1







Underlying earnings per share is calculated on the profit attributable to
equity holders of the Company before amortisation of acquired intangibles and
exceptional items after charging taxation associated with those profits of
21.9m (2010: 19.1m).





Years ended 31 March

2011 2010

m m

Earnings for the purposes of underlying earnings per
share:

Profit before tax from continuing operations 28.9 21.2

Add: amortisation of acquired intangibles 4.0 3.9

Add: exceptional items - 3.3





Underlying profit before tax 32.9 28.4

Underlying income tax expense (10.3) (8.4)





Underlying profit for the financial year 22.6 20.0

Less: amounts attributable to non-controlling interests (0.7) (0.9)





Total 21.9 19.1








7 Dividends per share



The dividends to the Company's shareholders in the year ended 31 March 2011
were:



Years ended 31
March

2011 2010

m m



Final dividend in respect of year ended 31 March
2010

0.8p per share (31 March 2009 0.0p per share) 2.4 -

Interim dividend in respect of year ended 31 March
2011

0.5p per share (31 March 2010 0.4p per share) 1.5 1.2





Total dividends to the Company's shareholders (note 3.9 1.2
12)






A final dividend in respect of the year ended 31 March 2011 of 1.0p per
Ordinary share, amounting to a total dividend of 3,014,785, is to be proposed
at the Annual General Meeting on 25 July 2011. The Employee Benefits Trust has
waived its rights to dividends.






8 Goodwill and other intangible assets





Years ended 31 March

2011 2010

m m





Goodwill 221.0 221.8

Other intangible assets 28.9 31.7





249.9 253.5










Computer software

Externally Internally Client

Goodwill acquired generated relationships Total

m m m m m

Cost

At 1 April 2009 252.0 16.9 12.1 38.1 319.1

Additions - 1.6 5.1 - 6.7

Disposals - (2.9) - - (2.9)

Adjustments to deferred (0.2) - - - (0.2)
consideration

Exchange differences (3.6) 0.6 0.7 (0.7) (3.0)





At 31 March 2010 248.2 16.2 17.9 37.4 319.7

Additions - 0.8 4.6 - 5.4

Exchange differences (0.8) - 0.1 0.7 -





At 31 March 2011 247.4 17.0 22.6 38.1 325.1





Accumulated amortisation

At 1 April 2009 26.4 12.0 4.5 18.2 61.1

Amortisation charge for the year - 1.9 2.6 3.6 8.1

Disposals - (2.9) - - (2.9)

Exchange differences - 0.2 (0.1) (0.2) (0.1)





At 31 March 2010 26.4 11.2 7.0 21.6 66.2

Amortisation charge for the year - 1.5 3.2 3.7 8.4

Exchange differences - 0.1 (0.1) 0.6 0.6





At 31 March 2011 26.4 12.8 10.1 25.9 75.2





Carrying amount

At 1 April 2009 225.6 4.9 7.6 19.9 258.0





At 31 March 2010 221.8 5.0 10.9 15.8 253.5





At 31 March 2011 221.0 4.2 12.5 12.2 249.9








The amortisation charge for the year of 8.4m (2010: 8.1m) is comprised of
4.0m (2010: 3.9m) in respect of intangible assets acquired via business
combinations and 4.4m (2010: 4.2m) which relates to amortisation of software
purchased and internally generated by existing businesses.




Impairment of goodwill



The recoverable amount used in the assessment of goodwill for all cash
generating units comprises the higher of value in use and net realisable
value. During the year the Group reviewed its discount rate and long term
growth rates and these have been applied in the assessment. The value in use
has been calculated by discounting at 10% per annum (2010: 8% per annum) the
anticipated pre-tax cash flows. The forecasts are prepared from management
information taking into account historical trading performance and anticipated
changes in future market conditions. The detailed forecasts cover a period of
three years from the balance sheet date; cash flows are projected beyond that
period based on market consensus for GDP growth of 2% (2010: 2%).



Goodwill consists of the following amounts related to cash generating units of
the Group:



Years ended 31 March

2011 2010

m m

Corporate Travel Management

Europe 172.9 171.7

North America 43.6 45.6

Asia Pacific 1.0 1.0





217.5 218.3

Spendvision 3.5 3.5





221.0 221.8






The key assumptions used in the impairment testing were as follows:



Discount rates

Rates of growth in cash generating units beyond 3 years



Discount rate

The discount rate reflects the management's estimate of the post-tax cost of
capital employed for the Group's cash generating units listed above. The same
rate is applied to all cash generating units, and reflects the Group's funding
arrangements where all units have equal access to the Group's treasury
functions and borrowing lines to fund their operations. None of the Group's
cash generating units demonstrate levels of risks that are significantly
different from those experienced by the Group generally, and all have similar
funding profiles and therefore the discount rate applied is deemed to be
justified.



Rates of growth in cash generating units beyond 3 years

Management have reviewed Corporate Travel industry forecasts and consider that
the market consensus for GDP growth of 2% is reasonable for the purposes of the
assessment of goodwill.



Goodwill impairment

Management believes that no reasonable change in the key assumptions would
cause any of the identified cash generating units to become impaired.






9 Property, plant and equipment





Property Plant and equipment Total

m m m

Cost

At 1 April 2009 10.6 46.4 57.0

Additions for the year 0.2 4.3 4.5

Disposals for the year (0.6) (2.2) (2.8)

Exchange differences 0.3 1.3 1.6





At 31 March 2010 10.5 49.8 60.3

Additions for the year 0.8 3.0 3.8

Disposals for the year (0.7) (0.8) (1.5)

Exchange differences - 0.3 0.3





At 31 March 2011 10.6 52.3 62.9





Accumulated depreciation

At 1 April 2009 6.6 35.3 41.9

Depreciation charge for the year 0.9 4.2 5.1

Disposals for the year (0.6) (1.9) (2.5)

Exchange differences 0.3 0.7 1.0





At 31 March 2010 7.2 38.3 45.5

Depreciation charge for the year 0.8 4.5 5.3

Disposals for the year (0.3) (0.7) (1.0)

Exchange differences (0.1) 0.3 0.2





At 31 March 2011 7.6 42.4 50.0





Carrying amount

At 1 April 2009 4.0 11.1 15.1





At 31 March 2010 3.3 11.5 14.8





At 31 March 2011 3.0 9.9 12.9








Property is comprised of leasehold properties and leasehold improvements.
Plant and equipment is comprised of IT and office equipment.



Years ended 31
March

2011 2010

m m



Carrying amount of property, plant and equipment held under finance 0.3 0.3
leases











10 Net debt





Years ended 31 March

2011 2010

m m



Total financial liabilities - borrowings 128.3 135.5

Add back: Unamortised loan issue costs 3.3 0.8

Cash and cash equivalent assets (70.5) (58.8)





Net debt 61.1 77.5








Analysis by currency after currency swaps



Years ended 31 March

2011 2010

m m



Sterling 49.6 48.6

Euro (16.0) (11.6)

Swiss Franc 10.4 11.0

Other European currencies 2.7 4.8

Canadian Dollar 10.0 21.4

US Dollar 1.4 (0.4)

Other currencies 3.0 3.7





61.1 77.5










11 Retirement benefit obligations



Defined benefit pension arrangements



The Group's principal defined benefit pension arrangement is the Hogg Robinson
(1987) Pension Scheme (the UK Scheme). The UK Scheme was available to most UK
employees until it was closed to new members in March 2003, with benefits based
on final pensionable salary. The increase in final pensionable salary since 31
March 2003 is limited to the lower of the increase in the Retail Prices Index
and 5% per annum. The latest actuarial valuation of the scheme was carried out
at 6 April 2008 by an independent qualified actuary.



The Group also operates defined benefit schemes in Norway, Switzerland,
Germany, Italy and France.




The following amounts have been included in the Consolidated Income Statement
in respect of all defined benefit pension arrangements:



Years ended 31 March

2011 2010

m m



Current service charge 4.1 2.8

Curtailment gain (0.4) (0.5)





Charge to operating profit 3.7 2.3





Interest cost on pension scheme liabilities 18.9 16.3

Expected return on pension scheme assets (15.6) (13.1)





Charge to finance costs 3.3 3.2





Total charge to Consolidated Income Statement 7.0 5.5








The following amounts have been recognised as movements in equity:



Years ended 31
March

2011 2010

m m



Actual return on scheme assets 15.2 34.2

Less: expected return on scheme assets (15.6) (13.1)





(0.4) 21.1

Experience gains and losses arising on scheme liabilities 1.9 1.9

Changes in assumptions underlying the present value of

scheme liabilities 7.0 (89.2)

Exchange rate movement - 0.2





Movement in the year 8.5 (66.0)







Cumulative amount recognised in the Consolidated Statement of

Comprehensive Income since the transition date to IFRS, 1 (59.5) (68.0)
April 2003









The key assumptions used for the UK Scheme were:



Years ended 31
March

2011 2010 2009



Rate of increase in salary 4.70% 4.80% 4.00%

Rate of increase in final pensionable salary 3.40% 3.50% 2.70%

Rate of increase in pensions in payment - accrued before 5.00% 5.00% 5.00%
1999

Rate of increase in pensions in payment - accrued after 1999 3.40% 3.50% 2.70%

Discount rate 5.50% 5.50% 6.70%

Inflation - RPI 3.40% 3.50% 2.70%

Inflation - CPI 2.90% N/A N/A



Expected rate of return on plan assets:

Equity instruments 8.00% 8.00% 7.20%

Debt instruments 4.50% 4.50% 6.70%

Property 8.00% 8.00% 7.20%

Other assets 4.90% 4.40% 5.00%






The assumptions for the schemes in Norway, Switzerland, Germany, Italy and
France do not produce materially different results from the assumptions used
for the UK Scheme.



The expected rates of return have been set taking into account current market
returns for each category of asset at the balance sheet dates.



The net present value of the defined benefit obligations of the UK Scheme are
sensitive to both the actuarial assumptions used and to market conditions. If
the discount rate assumption was 0.5% lower the obligations would be expected
to increase by 37.4m and if it was 0.5% higher they would be expected to
decrease by 32.1m. If the inflation assumption was 0.5% lower, the
obligations would be expected to decrease by 13.2m and if it was 0.5% higher
they would be expected to increase by 14.9m.



The impact of the change in inflation index from RPI to CPI can be found in the
Additional Financial Disclosure within the Operational Review.



The mortality assumptions for the UK Scheme are based on PMA/FA92 tables with
'medium cohort' projections and a 1% underpin in the rate of future
improvements in mortality. Life expectancy at the age of 65 is assumed to be:



Years ended 31 March

2011 2010

Current Pensioners

Male 22.8 22.7

Female 26.1 26.0



Future retirements

Male 24.8 24.7

Female 28.2 28.1






The UK liability is based on the assumption that active and deferred members
will take 25% of the value of their pension as a lump sum on retirement.



The net present value of the defined benefit obligations of the UK Scheme are
sensitive to the life expectancy assumption. If there was an increase of one
year to this assumption the obligations would be expected to increase by 9.6m.




The provision included in the Consolidated Balance Sheet arising from
obligations in respect of defined benefit schemes is as follows:



Years ended 31 March

2011 2010

m m



Present value of defined benefit obligations

Unfunded scheme 9.5 9.6

Wholly or partly funded schemes 360.4 350.7





369.9 360.3

Fair value of scheme assets (255.2) (233.9)





114.7 126.4








The net present value of defined benefit obligations has moved as follows:



Years ended 31 March

2011 2010

m m



At beginning of year 360.3 263.0

Current service cost 4.1 2.8

Curtailment gain (0.4) (2.3)

Interest cost 18.9 16.3

Contributions by plan participants 1.5 1.4

Actuarial (gains) / losses (8.9) 87.3

Foreign currency exchange changes 2.8 0.3

Benefits paid (8.4) (8.5)





At end of year 369.9 360.3








The fair value of scheme assets has moved as follows:



Years ended 31 March

2011 2010

m m



At beginning of year 233.9 197.7

Curtailment loss - (1.8)

Expected returns on plan assets 15.6 13.1

Actuarial (losses) / gains (0.4) 21.1

Foreign currency exchange changes 2.8 0.5

Contributions by the employer 10.2 10.4

Contributions by plan participants 1.5 1.4

Benefits paid (8.4) (8.5)





At end of year 255.2 233.9









The assets held in defined benefit schemes were as follows:



Years ended 31 March

2011 2010

m m



Equity instruments 136.3 123.7

Debt instruments 66.8 64.1

Property 37.7 33.2

Other assets 14.4 12.9





255.2 233.9








None of the plan assets are represented by financial instruments of the Group.
None of the plan assets are occupied or used by the Group.



The schedule of contributions for the UK Scheme, agreed with the Trustees at
15.2% of pensionable salaries plus 6.6m per annum with effect from April 2008,
was intended to eliminate the deficit over 10 years from April 2006. During the
year ended 31 March 2011, contributions amounting to 8.5m were made and, based
on this schedule, would remain at this level for the year ending 31 March 2012.
However, a new schedule of contributions for the UK Scheme is expected be
agreed with the Trustees as a result of the triennial valuation which is due to
be completed during 2011 (effective April 2011).



The obligations and assets are split as follows:



Years ended 31 March

2011 2011 2011 2010 2010 2010

UK Overseas Total UK Overseas Total

m m m m m m



Defined benefit obligations (324.3) (45.6) (369.9) (319.3) (41.0) (360.3)

Fair value of plan assets 220.2 35.0 255.2 203.4 30.5 233.9





Deficit (104.1) (10.6) (114.7) (115.9) (10.5) (126.4)








Five year experience



Years ended 31 March

2011 2010 2009 2008 2007

m m m m m



Defined benefit obligations (369.9) (360.3) (263.0) (269.4) (274.8)

Fair value of plan assets 255.2 233.9 197.7 221.3 214.9





Deficit (114.7) (126.4) (65.3) (48.1) (59.9)







Experience gains/(losses)

on plan liabilities 1.9 1.9 2.5 (2.3) (3.6)

on plan assets (0.4) 21.1 (46.3) (18.3) 4.0









Pension funding in excess of the charge to operating profit is shown in the
Consolidated Cash Flow Statement as follows:



Years ended 31 March

2011 2010

m m



Contributions less service cost (note 14) (6.1) (7.6)








12 Reserves



Retained earnings



Years ended 31
March

2011 2010

m m



At 1 April (191.4) (155.2)

Retained profit for the financial year 19.8 14.3

Dividends (note 7) (3.9) (1.2)

Non-controlling interests (0.7) (0.9)

Shares purchased by Employee Benefits Trust - (1.1)

Actuarial gain / (loss) on pension schemes 8.5 (66.0)

Deferred tax movement on pension liability and share-based (4.2) 18.7
incentives





At 31 March (171.9) (191.4)








Other reserves



Share-based Exchange Other

incentives reserve reserves

m m m



Balance at 1 April 2009 2.1 22.0 24.1



Other comprehensive income:

Currency translation differences - (11.8) (11.8)



Transactions with owners:

Share-based incentives 1.1 - 1.1





Balance at 1 April 2010 3.2 10.2 13.4



Other comprehensive income:

Currency translation differences - (1.6) (1.6)



Transactions with owners:

Share-based incentives 2.2 - 2.2





Balance at 31 March 2011 5.4 8.6 14.0









13 Non-controlling interests





Years ended 31 March

2011 2010

m m



At 1 April 3.4 3.5

Exchange differences 0.1 -

Dividends paid (0.6) (1.0)

Share of profit after tax 0.7 0.9





At 31 March 3.6 3.4








14 Cash generated from operations





Years ended 31
March

2011 2010

m m



Profit before tax from continuing operations 28.9 21.2



Adjustments for:

Depreciation and amortisation (note 8 and 9) 13.7 13.2

Net increase in provisions 3.1 4.4

Share of results of associates and joint ventures - (0.2)

Net finance costs (note 4) 9.0 7.0

Pension curtailment credit (0.4) (0.5)

Other timing differences 3.3 1.4





57.6 46.5

Cash expenditure charged to provisions (2.8) (8.4)

Change in trade and other receivables 1.3 (10.5)

Change in trade and other payables (3.1) 16.2

Pension funding in excess of charge to operating profit (6.1) (7.6)
(note 11)





Cash generated from operations 46.9 36.2












END



Hogg Robinson Group plc (HRG) is a holding company. The Company is engaged in the provision of corporate travel, expense and data management services. HRG targets the international and national managed sector, where clients require a range of globally integrated and tailored services underpinned by technology solutions and products. The company operates in two segments: Corporate Travel Management and Spendvision. Corporate travel management is the provision of support services to enable businesses to maximize traveler welfare, whilst fulfilling their global business travel needs. Spendvision is a global provider of total transaction management solutions, is a wholly owned subsidiary of HRG. Expense management is the delivery of systems and support services to enable businesses to streamline the processes, by which they control and administer staff business expenses. more »

Share Price (Full)
43.75p
Change
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P/E (fwd)
6.1
Yield (fwd)
5.4
Mkt Cap (£m)
141.9