3 June 2008
Hogg Robinson Group plc
(`HRG', `the Company' or `the Group')
Preliminary Results for the year ended 31 March 2008
Financial Highlights
* Revenue growth of 6.7% with organic growth of 2.0%
* EBITA(1) of £40.3m in line with recent guidance, broadly unchanged from
prior year after adjusting for the one-off prior year benefit of £3.4m from
the FIFA World CupTM
* Profit before tax £25.2m and EPS (basic) from continuing operations 5.5p
* Continuing strong free cash flow(2) of £16.3m
* Final dividend unchanged at 2.8p per share; brings full year to 4.0p per
share; payout ratio 73% of EPS
Business Highlights
* Net new business wins well ahead of the prior year
* Client retention rate remains above 90%
* Acquisitions performed well
* Mixed performance in Europe; restructuring programme completed:
- Resilient performance from managed travel business
- Some softening in demand in Events and unmanaged (SME) business in fourth
quarter
* Transitional year in North America with investment for the future
* Good performance in Asia Pacific
* Spendvision more than doubled revenue to £6.1m; ownership interest
increased to 58%
(1) Earnings Before Interest, Taxation and Amortisation from continuing
operations before exceptional items, including HRG's after-tax share of results
of associates and joint ventures.
(2) A summary of free cash flow is shown in the Financial Review below.
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"Despite the difficult market conditions, we have been able to report revenue
growth through good client retention and new client signings which provide a
solid foundation for the new financial year. We continue to work hard to
position the business for the future and are clearly focused on improving the
efficiency of service delivery across the Company. The economic climate remains
uncertain but our positive momentum gives us confidence that the year ahead
will be one of growth."
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
A presentation for analysts and institutional investors will be held at 0900h
BST today at the Merrill Lynch Financial Centre, 2 King Edward Street London
EC1A 1HQ. (Pre-registration for this event is necessary to comply with security
procedures at Merrill Lynch.) Copies of the presentation with audio commentary
from HRG's presentation team will be available at
http://investors.hoggrobinsongroup.com/hrg/ir/rp/res/ from 1400h.
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.
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 pleased to present results for our first full year since the Group was
re-listed on the London Stock Exchange. It has been a difficult year for many
companies but, despite the short-term challenges, we have come through with a
good business that is well positioned for the longer term.
Our strategy remains clearly focused on managed travel for corporate clients
and I am delighted to report that, in addition to continuing high levels of
client retention, we also added some significant new clients during the year.
We also continue to have a strong pipeline of prospects for the future. We are
working with our existing clients to provide a range of services which add
value to their travel and related expenditure, and deliver improved operational
efficiencies and cost savings through the use of proprietary technology.
Towards the end of the financial year we recognised some softening of demand in
our Events & Meetings Management (`EMM') activities and unmanaged corporate
(SME) clients, particularly in Europe. These activities only account for around
20-30% of revenues but are much more susceptible to any general economic
slowdown. We identified the downturn too slowly and were disappointed that we
had to lower expectations during March. We have now rebalanced to the right
cost levels, whilst remaining ready to take advantage of any improvement in
market conditions.
Managed travel has historically been more resilient than unmanaged travel in
times of economic uncertainty. However, no business can be immune to the
fallout from the continuing crisis of confidence in financial markets.
Certainly, we began to see some changes in the final quarter of the financial
year and some of our managed clients, particularly those in financial services,
have sought to reduce their overall travel expenditure. However, as we have
shown in the past, we can help clients reduce their travel budgets and at the
same time protect our own financials through the use of a wide range of
services and products designed to reduce costs for our clients.
Our Spendvision expense management business doubled in size during the year,
albeit from a small base, and remains an exciting higher-growth part of our
portfolio in the longer term.
Financial highlights
Group revenue for the year increased by 6.7% to £332m while reported basic
earnings per share increased by 28% to 5.5p. Comparisons with prior-year
earnings are complicated by the inclusion of nearly six months of pre-IPO
activity when the level of interest costs and the number of shares outstanding
were significantly different. We also enjoyed a one-off benefit of £3.4m from
the FIFA World CupTM in the prior year. Looking at our primary measure of
performance during the year, EBITA, our performance was very close to the prior
year after adjusting for the FIFA World CupTM.
The year end net debt was £110m, which was essentially unchanged from the prior
year after allowing for an increase of £6m due to movements in exchange rates.
The Group's total pension deficits reduced by £12m to £48m before tax.
Dividend
The Board is recommending an unchanged final dividend of 2.8p, which will be
payable on 1 August 2008 to shareholders on the register as at 4 July 2008.
This brings the full-year dividend to 4.0p per share which represents 73% of
the reported earnings per share and means that the full-year dividend is
covered 1.4 times by earnings. The payout is slightly higher than the 50-65%
indicated in our dividend policy at the time of the IPO. A scrip dividend
alternative will be offered and the relevant documents are being posted to
shareholders during June.
Shareholders will be pleased to note that the final dividend payment has been
brought forward by two months compared to last year.
Looking ahead, we remain committed to at least maintaining the current
full-year dividend with the intention of adopting a progressive dividend policy
as improved earnings bring the payout back to the 50-65% range indicated at the
time of the IPO.
People
I am delighted to welcome Julian Steadman who joined the Board as Group Finance
Director from Christian Salvesen, replacing John Kennerley in December 2007.
Julian has quickly settled into the role and is already making a significant
and valuable contribution to the business. On behalf of my Board colleagues, I
would like to thank John for his sterling contribution during his time at HRG.
Our people continue to be our greatest asset and, in a business which relies on
delivering excellent service, it is essential that we recruit and retain
excellent talent. In a year of business growth and repositioning, our staff
have adapted well and I would like to thank all of them - around the world -
for their continued hard work, enthusiasm, loyalty and professionalism. Their
dedication and commitment to providing world class service to our clients is an
integral part of our offer and is reflected in the favourable feedback that we
receive regularly from our clients.
Outlook
Market conditions remain challenging and economic uncertainties exist. However,
we enter the new financial year with a strong pipeline of new prospects and
expect to see the benefit from new clients added last year together with our
continuing focus on reducing costs flowing through to earnings. We remain
cautious about our EMM and SME activities in the short term. Overall, supported
by the proven resilience of our managed travel business, we expect to deliver
growth this year.
Chief Executive's Review
Overview
HRG provides services linked to corporate travel and its related expenses. Its
principal target market comprises multinational companies which benefit from
having these expenditures independently managed. HRG owns operations in 25
countries with contracted partners operating under the HRG brand in a further
81 countries.
The financial year ended 31 March 2008 will probably best be remembered for the
substantial increase in the cost of oil and the crisis in the financial
markets. Despite these challenging conditions, we were able to deliver a
creditable performance from our managed business, particularly when measured
against a strong prior year that included a one-off pre-tax benefit of £3.4m
from the FIFA World CupTM. Unfortunately, we failed to see a downturn in EMM
and unmanaged SME quickly enough to take remedial action and, regrettably, this
resulted in our issuing a cautionary trading statement during March.
We were pleased to show continued organic revenue growth whilst maintaining our
high level of client retention. We completed the consolidation of our North
American acquisitions and continue to look at how we can streamline these
operations further. During the year we restructured the European operations
away from the traditional country orientation in order to provide a seamless
international service to our multinational clients and also to lower our cost
base for the future.
Our new structure will drive closer alignment of our service offerings within
Corporate Travel Services, which includes Corporate Travel Management,
Consulting, EMM and Sports. Spendvision, our expense management business,
doubled in scale during the year and continues to represent an exciting growth
opportunity.
In October 2007, we completed the acquisition of the business of Weinberg
Travel BVBA, HRG's existing network partner in Belgium, which has already been
fully integrated into our European operations. Last year's acquisitions in the
USA, the Czech Republic and Poland all performed well during the year. We also
increased our ownership in Spendvision to 58% during the year. Further small
acquisitions will be considered, particularly in markets which handle the
consolidation of travel programmes and where inclusion in the HRG global
network will enhance value.
Looking at the financial performance, revenue increased by 6.7% to £332.2m.
EBITA was down £3.8m to £40.3m, which is close to the prior year performance
after adjusting for the one-off benefit of the FIFA World CupTM in the prior
year.
In the past, we have reported EBITA margin. Going forward, we will be
concentrating on operating profit margin, which is a measure that is more
commonly used. The underlying operating profit margin has reduced from 12.5% to
10.5% as a result of the World Cup impact, margin pressure in Germany and the
Nordic region, coupled with the costs of investment in new client start-ups and
infrastructure improvements in North America.
Exceptional items produced a net gain of £1.2m. We are pleased to have
concluded our arbitration with Kuoni Reisen Holding AG (`Kuoni') which produced
a pre-tax exceptional gain of £4.4m, net of expenses. This has however been
largely offset by two exceptional costs. The first is a £2.4m charge for
estimated unrecoverable cost associated with a long-standing contract in North
America following a review by our new Group Finance Director. The second is a
technical accounting item, namely a £0.8m adjustment to goodwill associated
with recognition of German deferred tax assets on acquisitions in earlier
years.
People
HRG has a unique culture, with an enviable level of employee loyalty and
commitment. Our people make the difference and I would like to thank them
sincerely for their dedication and enthusiasm during a very challenging year.
The year saw a number of management changes which were a necessary part of our
re-shaping of the business.
Tragically, we had the premature death of our senior management colleague Reto
Bacher, who was President of EMM and Sports. His enormous presence and wise
counsel will be sadly missed.
Roger Westwood, Overseas Investments Director, retired from the Executive Board
on 31 March 2008 and Mike Platt, Group Industry Affairs Director, will retire
from the Executive Board on 30 June 2008. Both Roger and Mike have made a
significant contribution to HRG over many years and we thank them sincerely for
their support and contribution.
These roles have been incorporated within the existing team.
Client activity
The net new business wins for the year were well ahead of the prior year and we
enter the year with a pipeline of new prospects that is at least as strong as
last year. We are pleased with our new signings, which include a number of
clients yet to start trading. New clients that we welcomed to HRG and who are
yet to trade a full year include Ericsson, IMG, Interpublic, Lloyds TSB,
Ministry of Defence / Foreign & Commonwealth Office (`MOD/FCO'), Pepsico
Technip, TeliaSonera and Weatherford. At the same time, the retention rate for
existing clients remained above 90%. These figures provide tangible evidence
that clients see the real value that HRG is providing in an increasingly
competitive market. On the new client front, the new financial year has started
well.
The trend to outsource travel management services is well established, although
the client tender process is becoming longer. It is common for a global bid to
take 12 to 18 months from initial submission to implementation. Clients seek to
implement global travel management programmes in different ways, with early
adopters generally preferring to set global travel policies centrally and
implement from a single location. More recently we have seen many clients
seeking to set policies centrally or regionally and then implement on a
regional and even local country basis. HRG's flexible approach to delivering
bespoke solutions and a strong geographic footprint is proving to be a key
driver in winning new business.
Awards
Our high levels of client service have continued to be recognised through
industry awards including:
* Business Travel Agency of the Year to HRG Belgium (Travel Magazine's 2007
Travel Awards)
* Best Business Travel Management Company (Turnover above £50m) to HRG UK
(Buying Business Travel Awards 2008).
Technology
Travel management is a data-rich business and technology is critical to
success. Within our industry, technology serves our clients in a wide variety
of disciplines from accessing information on travel routes and alternative
pricing to self-booking tools and passenger tracking. For HRG, it enables our
staff to access information from several sources simultaneously, thereby
allowing us to deliver a swift and cost-effective service to our clients around
the world on a 24x7 basis. Our decision to develop our own technology has
proved to be a real unique selling point since it provides us with the ability
to offer products and solutions that address our clients' needs rather than
fitting our clients' requirements to a template.
We made some significant advances in technology during the year. The deployment
of our stand-alone, independent technology platform, HRG Universal Super
PlatformTM (`USPTM'), began in Europe and North America. As the name suggests,
this technology provides us with a base from which to link, for example, our
front-end booking process to air, hotel and car suppliers and their services.
During the year, successful pilot schemes, running our own electronic point of
sale (POS) systems off the USPTM, were conducted in London and New York. Using
this technology, we are now able to offer more flexibility to our clients,
delivering travel products and services that are tailored to their specific
needs. This system also helps us work more effectively with our suppliers,
providing HRG with access to powerful new information. For example, we are now
able to offer clients online check-in facilities directly through our system as
well as specific menu pricing and seat assignments from suppliers to customers.
This platform could also enable us to hold inventory for our clients in the
future.
Operating review
The consolidated results are as follows:
Years ended 31 March 2008 2007 Change
Revenue £332.2m £311.4m +6.7%
Operating profit £36.0m £35.4m +£0.6m
Underlying operating profit (1) £34.8m £39.0m -£4.2m
Underlying operating profit 10.5% 12.5% -2.0%
margin (1)
Year end capital employed (2) £188.0m £179.6m +£8.4m
Return on capital employed (2) 18.6% 21.9% -3.3%
(1) before exceptional items
(2) includes goodwill
Europe
Years ended 31 March 2008 2007 Change
Revenue £247.7m £241.0m +2.8%
Operating profit £36.2m £33.7m +£2.5m
Underlying operating profit (1) £32.6m £36.6m -£4.0m
Underlying operating profit 13.2% 15.2% -2.0%
margin (1)
(1) before exceptional items
Overall, our European performance during the year was mixed. Reported revenue
was up by 2.8%, essentially unchanged after allowing for the small positive
impact of acquisitions and changes in exchange rates. Underlying operating
profit was down by £4.0m, but is measured against a prior year that included a
one-off benefit from the FIFA World CupTM. Lower profits from German and Nordic
SME clients was offset by strong performances in the UK and Switzerland and
underscores the resilient nature of our managed client business.
As the credit squeeze dented client confidence towards the end of the year, we
did experience some softening in demand in our EMM and unmanaged SME
activities, particularly in the Nordic region and Germany, and this had an
effect on the full-year result. Although we initially reacted too slowly to
these changes, we have now rebalanced to the right level. We have also
integrated EMM activities with those of managed travel, thereby providing
coordinated contact with our managed client base. However, we remain well
placed to take advantage of any increased demand as economic conditions
improve.
Our European restructuring programme, which is designed to improve our service
to multinational clients, was completed during the year at a total cost of £
1.9m. Savings of £3.3m were delivered in the year.
An important part of this programme was the re-positioning of our operations in
Germany, one of the three largest managed travel markets in Europe, where we
have now appointed a new managing director to drive growth. We also enhanced
our service offering through investment in a new integrated telephony system to
link our major European call centres in Glasgow, Berlin and Stockholm, and also
our low-cost service centre in Budapest. The new system has already improved
call management by optimising capacity, skill set and language across country
boundaries.
The recent acquisitions in the Czech Republic, Poland and Belgium all performed
as expected during the year and we also added new partners in Kosovo,
Luxembourg and Israel to the HRG worldwide network.
In the UK, the implementation of our contract with the MOD/FCO began last
December on a phased basis. As with most large new contracts, start-up costs
impacted profitability in the early months and we look forward to the full
benefit accruing in the future.
In spring 2008, our three Manchester offices were consolidated into one new
state-of-the-art centre in the heart of Manchester's business district.
North America
Years ended 31 March 2008 2007 Change
Revenue £65.3m £56.3m +16.0%
Operating (loss)/profit £(1.3)m £1.8m -£3.1m
Underlying operating profit (1) £1.1m £2.5m -£1.4m
Underlying operating profit 1.7% 4.4% -2.7%
margin (1)
(1) before exceptional items
This was a challenging year for our North American operations as we
re-positioned the business for the future. The reported revenue increase of
16.0% includes 5.4% of organic growth, together with the full-year impact of
Executive Travel Associates (`ETA') and a minimal amount from changes in
exchange rates.
Implementation costs for new clients, together with continued investment in
capacity and infrastructure, contributed to the decline in underlying operating
profit for the year. There is significant pressure on margins in this very
competitive market and we will continue to improve the efficiency of our
service delivery. To that end, work on amalgamating our businesses in the USA
and Canada was completed early in the year and we are continuing to drive
additional productivity now that the new structure is more settled.
We opened a new state-of-the-art service centre in Charlotte during the year
which again included the launch of a new telephony system. In addition to
providing capacity for future growth, this will now enable us to provide a
global `follow the sun' service to our clients by linking our offices in
Singapore, London and Halifax, Canada. An additional benefit is that we are
able to track clients wherever they are in the world. In addition we expanded
our operations in Halifax and New York to handle new business.
ETA, which was acquired in February 2007, also performed well and contributed
an additional £1.9m of operating profit during the year.
Following a review by our new Group Finance Director, we identified some
potentially unrecoverable costs associated with a long-standing contract and
have recognised an exceptional charge of £2.4m. We have made changes to our
financial procedures to improve the control of this contract.
We continued to build brand awareness in North America and this undoubtedly
contributed to the fact that we are now included on invitations to tender for
almost all major contracts in the region. As a result, we have yet to see the
full benefit from several new clients or from regional extensions of existing
clients that were achieved during the year. We built a healthy pipeline of new
business during the year and that momentum has continued. I am pleased to
report that the new financial year has started well.
Asia Pacific
Years ended 31 March 2008 2007 Change
Revenue £19.1m £14.1m +35.8%
Operating profit/(loss) £1.1m £(0.1)m +£1.2m
Underlying operating profit (1) £1.1m -- +£1.1m
Underlying operating profit 5.8% -- +5.8%
margin (1)
(1) before exceptional items
The region performed strongly throughout the year and delivered healthy revenue
growth of 35.8%, equivalent to organic growth of 27.7% after adjusting for
changes in exchange rates. Underlying operating profit increased by £1.1m due
to a strong performance in Australia. Operating profit includes Australia and
Singapore, but excludes the joint ventures in Hong Kong and China.
In Australia we were successful in winning state and federal government
business including signing contracts with the Queensland Government and the
Department of Water and Environment. We are pleased to announce that we have
commenced a pilot phase with the Queensland Government on our fully integrated
travel and expense management system. This system enables a client to handle
the process from travel authorisation to expense reclaim through a single
application environment. Using our USPTM this modular delivery will give
clients the choice of individual or a full suite of products. We also opened
a new service centre in Canberra to manage travel for members of the Australian
Parliament and the federal government.
In Hong Kong we relocated to new offices at the harbour, to provide a better
working environment for our staff. This move has already improved our ability
to recruit staff in a competitive market.
Spendvision
HRG's Spendvision expense management business continued to grow rapidly during
the year and more than doubled its revenue to £6.1m, with operating profit
improving from breakeven to £0.7m. These results are part of the geographic
analysis above. Spendvision's business includes a number of clients who are not
HRG travel clients and remains an exciting long-term opportunity for the Group.
During the year we increased our ownership interest by 7% to 58%.
Financial Review
Overview
Years ended 31 March
2008 2007 Change
Revenue £332.2m £311.4m +6.7%
Underlying earnings from continuing
operations*
- EBITA £40.3m £44.1m -£3.8m
- Profit before tax £24.0m £16.5m +£7.5m
Reported earnings from continuing
operations
- Profit before tax £25.2m £12.9m +£12.3m
- Earnings per share (p) 5.5p 4.3p +27.9%
Return on capital employed 18.6% 21.9% -3.3%
Free cash flow £16.3m £16.1m +£0.2m
Net debt £110.4m £104.4m +£6.0m
* before exceptional items
Revenue
Revenue increased by 6.7% to £332m (2007: £311m) comprised of 2.0% from organic
growth, 2.9% from acquisitions and 1.8% from changes in exchange rates. Looking
at organic growth, Europe was essentially unchanged, North America was up 5.4%
and Asia Pacific was up 27.7%.
EBITA
To date, the Group has reported EBITA (i.e. earnings before interest, taxes and
amortisation, before any exceptional items and including HRG's share of
associates and joint ventures) as one of its primary performance measures.
EBITA for the year decreased by £3.8m, from £44.1m to £40.3m. The prior year
includes a contribution of £3.4m from the FIFA World CupTM which only occurs
every four years. The current year includes £1.9m of restructuring costs,
including the costs associated with replacing the Group Finance Director, which
produced £3.3m in savings during the year. Acquisitions contributed an
additional £2.7m during the year. The impact of favourable movements in
exchange rates was not material. Elsewhere, there were lower profits in
Germany, the Nordic region and North America with higher profits in Asia
Pacific.
Depreciation and amortisation
During the year, the depreciation charge remained unchanged at £4.4m, with
amortisation increasing by £0.7m to £5.4m.
Exceptional items
Exceptional items for the year produced a net benefit of £1.2m, compared
against a net cost of £3.6m in the prior year. The current year includes £4.4m
from the settlement of an arbitration with Kuoni Reisen Holding AG, partially
offset by a £2.4m charge for estimated unrecoverable costs associated with
management of a long-standing contract in North America and £0.8m in respect of
an adjustment to goodwill associated with recognition of German deferred tax
assets on acquisitions in earlier years. This latter item is essentially offset
by a deferred tax credit and therefore has a minimal impact on net earnings for
the year.
The prior year included £9.6m of exceptional costs, including expenditure
related to the IPO (£4.0m), an adjustment to goodwill for German deferred tax
assets (£2.9m) and re-branding (£2.7m). These costs were partially offset by
exceptional pension credits of £6.0m related to the settlement of liabilities
to deferred pensioners in the UK (£5.0m) and Norway (£1.0m).
Net finance costs
Net finance costs were more than halved from £22.9m to £10.9m due to the change
in capital structure following the IPO in October 2006. Of this, the net
finance costs relating to pension accounting under IAS19 were £0.4m for the
year (2007: £2.0m). Net finance costs are covered 3.3 times by reported
operating profit.
Profit before tax
Underlying profit on continuing operations before tax and exceptional items
increased by £7.5m, from £16.5m to £24.0m. The reported profit before tax
increased by £12.3m from £12.9m to £25.2m.
Taxation
The tax charge for the year represents an overall tax rate of 31% of the
reported profit before tax, compared to an overall rate of 24% in the prior
year. These rates reflect the tax on exceptional items together with a number
of non-recurring tax items - for the current year, the impact on deferred tax
balances of lower future tax rates in UK and Germany; for the prior year, the
non-deductible premium paid on preference share redemption and the benefit from
deferred tax recognition following the IPO. Excluding these items, the normal
tax rate for the current year was 33% compared to 36% in the prior year. We
anticipate a tax rate of around 30% in the future.
Discontinued operations
The profits from discontinued operations of £4.9m in the prior year were
predominantly due to the receipt of additional contingent disposal proceeds in
respect of the sale of Benefits and Consulting Services.
Earnings per share
Underlying earnings per share for the year (i.e. excluding all exceptional
items and the results of discontinued operations) increased by 34% from 3.5p to
4.7p, primarily due to a reduction in net finance costs and an increase in the
number of ordinary shares in issue immediately following the October 2006 IPO.
The reported earnings per share for the year increased by 28% from 4.3p to
5.5p, again influenced by a reduction in interest costs and an increase in the
number of ordinary shares in issue immediately following the IPO.
Dividend
Subject to approval at the Annual General Meeting, a final dividend of 2.8p
per share will be paid on 1 August 2008 to shareholders on the register
as at 4 July 2008. This will bring the annual dividend to 4.0p, which
represents a payout of 73% of reported earnings per share and means that it is
covered 1.4 times by reported earnings per share.
Return on capital employed
Return on capital employed is calculated by dividing operating profit before
exceptional items plus share of associates and joint ventures by the year end
net assets. Net assets exclude net debt, pension deficits and tax provisions.
The return for the year was 18.6% (2007: 21.9%).
Cash flow
Free cash flow, which includes all cash flow except special pension
contributions, acquisition spending, cash effect of currency swaps, dividends
and debt repayments, was essentially unchanged at £16.3m (2007: £16.1m).
Capital expenditure on intangible assets and property, plant and equipment was
£7.8m compared to £6.9m in the prior year.
There were no special pension contributions during the year, although the prior
year included £41.0m to finance transfer values for deferred members and to add
a portion of IPO cash proceeds.
The £3.5m of net acquisition and disposal spending in the current year related
to the increased ownership of Spendvision Holdings Limited (£1.4m), the
acquisition of the business of Weinberg Travel BVBA in Belgium (£1.0m) and
payment of deferred consideration relating to the acquisition in the Czech
Republic (£1.9m). The £6.9m of net acquisition and disposal spending in the
prior year included the increased ownership of Spendvision Holdings Limited (£
1.5m) and acquisitions in the Czech Republic (£2.1m), Poland (£1.1m) and the
USA (£3.8m).
Cash flow from financing activities in the current year included £12.9m for
dividends and £12.5m to repay borrowings. In the prior year the issue of
Ordinary shares for the IPO produced gross proceeds of £180.2m, with IPO
expenses of £18.7m and a further £2.5m to arrange new borrowing facilities. The
prior year also included £133.8m for repayment of borrowings, which included
preference shares and accumulated premium totalling £94.5m.
Retirement benefit obligations
The Group's retirement benefit liabilities under the accounting standard IAS 19
`Employee Benefits' have reduced by £11.8m to £48.1m before tax (2007: £59.9m).
The UK scheme deficit reduced by £12.9m, from £51.5m to £38.6m. The scheme
assets increased by £1.6m. The scheme liabilities decreased by £11.3m with
increased life expectancy adding £19.5m and an increase in the discount rate
from 5.3% to 6.3% saving approximately £30.0m.
Annual payments amount to 17% of pensionable salaries plus additional annual
payments of £6.3m that were designed to eliminate the deficit on the scheme by
2016. The total charge against profits decreased by £1.6m to £0.4m (2007: £
2.0m).
The overseas schemes are primarily in Germany and Switzerland, and the year-end
deficit increased by £1.1m to £9.5m (2007: £8.4m), primarily due to changes in
exchange rates.
At the year end, there was a deferred tax asset of £10.8m (2007: £15.9m)
related to the UK deficit and £0.5m (2007: £0.5m) related to the overseas
schemes.
Funding and capital structure
At the year end, net debt was £110.4m (2007: £104.4m) and represented gearing
of 69% (2007: 72%). Excluding the pension deficits and related deferred tax
assets, year-end gearing was 56% (2007: 55%).
Net debt included £53.4m of non-sterling debt (2007: £44.8m) with the change in
year-end exchange rates, including the effect of currency swaps, increasing the
reported balance by £5.7m.
Treasury policies
The financial risks arising from changes in foreign currency and interest rates
are managed centrally by the Group treasury department with policies that are
approved by the board. The Group does not enter into transactions of a
speculative nature.
Foreign currency
The following principal exchange rates have been used in the financial
statements:
Income Statement Balance Sheet
2008 2007 Change 2008 2007 Change
Euro 1.42 1.48 4% 1.25 1.47 18%
Swiss franc 2.32 2.35 1% 1.97 2.39 21%
US dollar 2.01 1.90 (5%) 1.99 1.96 (2%)
Canadian 2.07 2.16 4% 2.04 2.26 11%
dollar
The Group is exposed to translation risk with respect to its non-sterling
earnings. The Group uses non-sterling debt as a partial hedge for this exposure
and, for the year to March 2009, has hedged the remaining balance. The overall
impact of changes in exchange rates on net earnings for the year is minimal.
The Group's transaction exposure is limited, with the majority of its
transactions denominated in the currency of the country of operation. In the
few instances where there is exposure, short-term hedges are taken once the
exposure can be accurately identified.
Liquidity and interest rates
The Group has a £220m multi-currency revolving credit facility that is
committed until September 2011. The facility is used for loans, and the issue
of letters of credit and guarantees. The rate of interest is based on LIBOR
(EURIBOR for Euro-denominated loans), a margin and mandatory costs incurred by
the lenders. During the year, the maximum utilisation of the facility,
including guarantees, was £201m with £184m at year end.
Where appropriate the Group considers the use of interest rate caps to limit
its exposure to interest rates on its core borrowings. At present the interest
rates on core borrowings are not capped.
Going concern
The Group's finances and balance sheet remain sound. The Directors believe that
the Group has adequate resources to continue to operate for the foreseeable
future and have continued to adopt the going concern basis in preparing the
Consolidated Financial Statements.
Share price
The closing mid-market price at the year end was 40p (2007: 96p). During the
year, the price ranged from 40p to 104p per share.
Summary income statement
Years ended 31 March 2008 2007
£m £m
Continuing operations
Revenue 332.2 311.4
Operating profit before exceptional 34.8 39.0
items
Exceptional items 1.2 (3.6)
Operating profit 36.0 35.4
Net share of profit of associates and 0.1 0.4
joint ventures
Net finance costs (10.9) (22.9)
Profit before tax 25.2 12.9
Taxation (7.7) (3.1)
Profit from continuing operations 17.5 9.8
Profit from discontinued operations -- 4.9
Profit for the year 17.5 14.7
Summary balance sheet
As at 31 March 2008 2007
£m £m
Goodwill and other intangible assets 231.4 219.7
Property, plant and equipment, and 15.4 14.2
investments
Working capital (55.3) (53.3)
Current tax liabilities (8.2) (8.4)
Deferred tax assets 28.8 34.0
Net debt (110.4) (104.4)
Retirement benefit obligations (48.1) (59.9)
Other items (3.6) (1.0)
Net assets 50.0 40.9
Summary cash flow statement
Years ended 31 March 2008 2007
£m £m
EBITDA(1) 45.8 44.5
Working capital movements 0.7 0.8
Interest paid (9.8) (13.5)
Tax paid (6.0) (3.0)
Non cash exceptional items (0.7) 0.9
Capital expenditure (7.8) (6.9)
Pension funding in excess of EBITDA (6.5) (6.5)
charge
Other movements 0.6 (0.2)
Free cash flow 16.3 16.1
Net IPO proceeds -- 161.5
Repayment of preference shares -- (89.6)
Exceptional pension contributions -- (41.0)
Acquisitions and disposals (3.5) (6.9)
Dividends paid to external (11.6) --
shareholders
Other movements (1.5) (10.0)
Net cash flow (0.3) 30.1
Foreign exchange (5.7) 4.5
(Increase)/decrease in net debt (6.0) 34.6
(1) EBITDA is EBITA plus depreciation.
Hogg Robinson Group plc
Consolidated Income Statement
For the year ended 31 March 2008
Years ended 31 March
Notes 2008 2007
£'000 £'000
Continuing operations
Revenue 1 332,194 311,388
Operating expenses 2 (296,200) (276,008)
Operating profit 35,994 35,380
Analysed as:
Operating profit before exceptional 34,785 38,999
items
Exceptional items 2 1,209 (3,619)
Operating profit 35,994 35,380
Net share of profit of associates and 138 404
joint ventures
Finance income 3 1,534 1,255
Finance costs 3 (12,439) (24,160)
Profit before tax 25,227 12,879
Income taxes 4 (7,713) (3,087)
Profit for the year from continuing 17,514 9,792
operations
Discontinued operations
Profit for the year from discontinued - 4,870
operations
Profit for the year 17,514 14,662
Attributable to:
Equity holders of the parent 16,673 13,436
Minority interests 8 841 1,226
17,514 14,662
Earnings per share 5 pence pence
Continuing operations, basic 5.5 4.3
Continuing operations, diluted 5.4 4.3
Discontinued operations, basic - 2.4
Discontinued operations, diluted - 2.4
Total, basic 5.5 6.7
Total, diluted 5.4 6.7
Hogg Robinson Group plc
Consolidated Balance Sheet
As at 31 March 2008 As at 31 March
Notes 2008 2007
restated
£'000 £'000
Non current assets
Goodwill and other intangible assets 231,352 219,670
Property, plant and equipment 12,634 10,864
Investments accounted for using the 2,811 3,296
equity method
Trade and other receivables 429 545
Deferred tax assets 31,562 37,775
278,788 272,150
Current assets
Trade and other receivables 123,762 107,938
Financial assets - derivative financial 250 301
instruments
Current tax assets 447 81
Cash and cash equivalent assets 49,637 61,336
174,096 169,656
Total assets 1 452,884 441,806
Non current liabilities
Financial liabilities - borrowings (155,032) (160,392)
Deferred tax liabilities (2,806) (3,795)
Retirement benefit obligations (48,080) (59,932)
Provisions (3,279) -
(209,197) (224,119)
Current liabilities
Financial liabilities - borrowings (3,146) (2,998)
Current tax liabilities (8,664) (8,458)
Financial liabilities - derivative (1,271) (8)
financial instruments
Trade and other payables (179,496) (161,788)
Provisions (1,137) (3,504)
(193,714) (176,756)
Total liabilities (402,911) (400,875)
Net assets 49,973 40,931
Capital and reserves attributable to
equity holders
Share capital 3,068 3,056
Share premium 171,942 171,289
Other reserves 7 5,256 1,253
Retained earnings 7 (132,833) (137,605)
47,433 37,993
Minority interests 8 2,540 2,938
Total equity 49,973 40,931
For details of the restatement for 31 March 2007 refer to note 9.
Hogg Robinson Group plc
Consolidated Cash Flow Statement
For the year ended 31 March 2008
Notes Years ended 31 March
2008 2007
restated
£'000 £'000
Cash flows from operating
activities
Cash generated from 40,064 37,852
operations before special
pension contributions
Pension contributions - (25,000)
following IPO
Other pension - (16,031)
contributions in respect
of deferred pensioners
Interest paid (11,455) (14,988)
Tax paid (6,041) (3,036)
Cash flows from operating 22,568 (21,203)
activities - net
Cash flows from investing
activities
Acquisition of 9 (4,282) (8,782)
subsidiaries, net of cash
acquired
Acquisition of associates, - (1,253)
joint ventures and other
investments
Disposals of subsidiaries 46 3,165
Disposals of associates, 705 -
joint ventures and other
investments
Purchase of property, (4,937) (4,530)
plant and equipment
Purchase of intangible (2,920) (2,573)
assets
Proceeds from sale of 22 167
property, plant and
equipment
Interest received 1,517 1,295
Dividend received from 179 202
associates and joint
ventures
Cash flows from investing (9,670) (12,309)
activities - net
Cash flows from financing
activities
Repayment of borrowings (41,558) (297,897)
New borrowings 29,048 164,051
Issue costs of new (65) (2,549)
borrowings
Cash effect of currency (3,412) 1,654
swaps
Issue of shares - 180,160
Issue of share warrants - 88
Issue costs of shares (110) (18,682)
Purchase of treasury 7 (1,600) -
shares
Dividends paid to external (11,600) -
shareholders
Dividends paid to minority (1,348) (736)
interests
Cash flows generated from (30,645) 26,089
financing activities - net
Net decrease in cash, cash (17,747) (7,423)
equivalents and bank
overdrafts
Net decrease in cash, cash (17,747) (7,423)
equivalents and bank
overdrafts
Cash, cash equivalents and 60,124 68,577
bank overdrafts at
beginning of the year
Exchange rate effects 6,155 (1,030)
Cash, cash equivalents and 48,532 60,124
bank overdrafts at end of
the year
Cash and cash equivalent 49,637 61,336
assets
Overdrafts (1,105) (1,212)
48,532 60,124
Net decrease in cash, cash equivalents and bank overdrafts for the year ended
31 March 2007 have been restated to reflect reclassification of foreign exchange
movements and the cash effect of currency swaps between cash flow from operating
activities, cash flow from financing activities and the reconciliation between
opening and closing cash, cash equivalents and bank overdrafts to more fairly
reflect cash flows from operating activities.
Hogg Robinson Group plc
Consolidated Statement of Recognised Income and Expense
For the year ended 31 March 2008
Notes Years ended 31 March
2008 2007
£'000 £'000
Profit for the year 17,514 14,662
Income and expense recognised directly in
equity
Currency translation differences 7 3,300 (99)
Actuarial gain 5,120 12,516
Deferred tax movement on pension liability (1,587) (3,788)
Net impact of tax rate change on deferred tax assets (1,609) -
/ liabilities
5,224 8,629
Total recognised income and expense 22,738 23,291
Attributable to:
Equity holders of the parent 21,897 22,065
Minority interests 8 841 1,226
22,738 23,291
Additional Financial Information
Basis of preparation
The Consolidated Financial Statements have been prepared in compliance with
International Financial Reporting Standards (`IFRS') as endorsed and adopted
for use by the European Union, International Financial Reporting
Interpretations Committee (`IFRIC') interpretations and with those parts of the
Companies Act 1985 applicable to companies reporting under IFRS.
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.
This Financial Review should be read in conjunction with the audited Group
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
Earnings Before Interest, Taxation and Amortisation (`EBITA') is calculated as
operating profit from continuing operations before exceptional items, including
HRG's share of results of associates and joint ventures but before net finance
costs, income taxes, amortisation and impairment. Earnings Before Interest,
Taxation, Depreciation and Amortisation (`EBITDA') is calculated as operating
profit from continuing operations before exceptional items, including HRG's
share of results of associates and joint ventures but before net finance costs,
income taxes, depreciation, amortisation and impairment. Operating profit
before exceptional items (a GAAP measure) relates to continuing operations
only.
The Directors believe that the presentation of EBITA, EBITDA and operating
profit before exceptional items enhances an investor's understanding of HRG's
financial performance. However, EBITA, EBITDA and operating profit before
exceptional items 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. EBITA and EBITDA as used in this announcement
are 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 EBITA, EBITDA and operating profit before exceptional items to
assess HRG's operating performance and to make decisions about allocating
resources among various geographic segments.
Geographical segmentation
1 Business and geographical segments
Business segmentation
All revenue, operating profit for the year, assets and liabilities, capital
expenditure, depreciation and amortisation from continuing operations is
derived from one primary segment, Business Travel.
Segment information is provided for regions reflecting the principal economic
environments in which the Group operates.
Years ended 31 March
2008 2007
£'000 £'000
restated
External revenue from clients by origin
(where the Group entity is located)
Europe 247,743 241,012
North America 65,310 56,280
AsPac 19,141 14,096
332,194 311,388
External revenue from clients by geographical area
(where the client is located)
Europe 247,076 242,819
North America 65,720 56,159
AsPac 19,398 12,410
332,194 311,388
External revenue has been restated in the year ended 31 March 2007 to reflect
the reclassification of central revenue among the three geographical segments.
In the prior year Consolidated Financial Statements, the Group disclosed a
`Central' segment which included revenue from global marketing agreements and
distribution and system usage agreements with suppliers, and expenses
associated with Group functions. In the current year, a methodology has been
introduced to allocate Group revenue, costs and assets to the geographical
segments to which they relate.
Operating profit / (loss)
Europe 36,208 33,687
North America (1,315) 1,840
AsPac 1,101 (147)
35,994 35,380
Operating profit / (loss) excluding exceptional items
Europe 32,579 36,556
North America 1,105 2,480
AsPac 1,101 (37)
34,785 38,999
Years ended 31 March
2008 2007
£'000 £'000
restated
Total assets by geographical location
Europe 275,032 254,485
North America 80,277 75,422
AsPac 15,929 12,707
371,238 342,614
Cash and cash equivalent assets 49,637 61,336
Current tax assets 447 81
Deferred tax assets 31,562 37,775
452,884 441,806
Years ended 31 March
2008 2007
£'000 £'000
Capital expenditure by geographical location
Europe 5,932 5,307
North America 1,552 1,754
AsPac 813 566
8,297 7,627
AsPac refers to the Asia Pacific region.
IPO refers to the Initial Public Offering in relation to the Group's global
offer and admission to the Official List of the Financial Services Authority
and to trading on the London Stock Exchange during the year ended 31 March
2007.
2 Operating expenses
Years ended 31 March
2008 2007
£'000 £'000
Staff costs 192,674 172,402
Amortisation of client relationships 2,799 2,582
Amortisation of other intangible assets 2,603 2,141
Depreciation of property, plant and equipment 4,361 4,355
Auditors' remuneration for audit services 1,470 1,167
Operating lease rentals - buildings 13,102 12,518
Operating lease rentals - other assets 2,631 2,438
Loss on disposal of property, plant and equipment 139 39
Other expenses 76,421 78,366
296,200 276,008
Years ended 31 March
2008 2007
£'000 £'000
Exceptional items:
Settlement of arbitration, net of costs (4,456) -
Adjustments to goodwill on recognition of deferred 827 2,929
tax assets
Irrecoverable costs of long standing contract 2,420 -
Rebranding costs - 2,672
IPO costs charged in operating results - 4,016
Pension past service credit - defined benefit schemes - (6,298)
Pension past service charge - defined contribution - 300
schemes
Exceptional (credit) / charge (1,209) 3,619
Operating expenses 297,409 272,389
Total operating expenses 296,200 276,008
The settlement of arbitration, net of costs, is with regard to a claim
against Kuoni Reisen Holding AG, former owners of companies acquired by the
Group,for a breach of the relevant sale and purchase agreement. Tax expense
in respect of this was £nil.
An exceptional accrual of £2,420,000 has been made to cover estimated
irrecoverable amounts under a long standing contract in North America.
Rebranding costs were incurred as a result of the Group rebranding itself
under the HRG name during the year ended 31 March 2007.
The pension past service credit on defined benefit schemes in the year
ended 31 March 2007 relates to an actuarial gain on the settlement of
transfer values to deferred members of the UK scheme of £5,019,000 and a
settlement of pension liabilities in Norway of £1,279,000.
3 Finance income and finance costs
Years ended 31 March
2008 2007
£'000 £'000
Finance income 1,534 1,255
Interest on bank overdrafts and loans (11,373) (14,451)
Amortisation of issue costs on bank loans (498) (2,524)
Interest on obligations under finance leases (14) (14)
Premium on preference shares - (4,889)
Expected return on pension scheme assets less
interest cost on pension scheme liabilities (440) (1,985)
Other finance charges (114) (297)
Finance costs (12,439) (24,160)
Net finance costs (10,905) (22,905)
4 Income Taxes
Years ended 31 March
2008 2007
£'000 £'000
Current tax:
Tax on profits of the year 4,326 4,558
Adjustments in respect of previous years 628 (502)
Total current tax 4,954 4,056
Deferred tax:
Origination and reversal of temporary 2,484 4,067
differences
Adjustments in respect of the previous years (38) (2,107)
Net impact of rate change on deferred tax 933 -
assets and liabilities
Adjustments to goodwill on recognition of (620) (2,929)
deferred tax assets
Total deferred tax 2,759 (969)
Taxation charge 7,713 3,087
Years ended 31 March
2008 2007
The tax charge is split as follows: £'000 £'000
United Kingdom 5,562 908
Overseas 2,771 5,108
Adjustment to goodwill on recognition of (620) (2,929)
deferred tax assets
Taxation charge 7,713 3,087
5 Earnings per share
Basic earnings per share (`EPS') is calculated by dividing the earnings
attributable to Shareholders by the weighted average number of Ordinary
shares outstanding during the year, excluding those purchased by the
Company and held as treasury shares.
For diluted earnings per share, the weighted average 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. The average number of shares in issue for the year ended 31 March
2007 takes into account the exercise of warrants and the 25-for-1 bonus
issue of shares which took place in October 2006 in connection with the
IPO.
Years ended 31 March
2008 2007
£'000 £'000
Earnings for the purposes of earnings per
share:
Profit for the year from continuing 17,514 9,792
operations
Less: amount attributable to minority (841) (1,226)
interest
Continuing operations 16,673 8,566
Discontinued operations - 4,870
16,673 13,436
Years ended 31 March
Weighted average number of ordinary shares 2008 2007
in issue number number
000s 000s
Issued (for basic EPS) 304,862 199,216
Dilutive potential Ordinary shares 1,217 185
For diluted EPS 306,079 199,401
6 Dividends per share
The dividends paid to the Company's Shareholders in the year ended 31 March
2008 were:
Years ended 31 March
2008 2007
£'000 £'000
Final dividend in respect of year ended 31 8,558 -
March 2007- 2.8p per share
Interim dividend in respect of year ended 31 3,667 -
March 2008- 1.2p per share
Total dividends (note 7) 12,225 -
Scrip dividends to the value of £625,000 in respect of the interim dividend
for the year ended 31 March 2008 were taken instead of a cash payment.
A dividend in respect of the year ended 31 March 2008 of 2.8p per Ordinary
share, amounting to a total dividend of £8,591,326, is to be proposed at the
Annual General Meeting on 21 July 2008. These Consolidated Financial Statements
do not reflect this dividend payable.
7 Reserves
Retained earnings
Years ended 31 March
2008 2007
£'000 £'000
At 1 April (137,605) (159,769)
Retained profit for the year 17,514 14,662
Dividends paid (note 6) (12,225) -
Minority interest (841) (1,226)
Treasury shares purchased (1,600) -
Actuarial gain 5,120 12,516
Deferred tax movement on pension (3,196) (3,788)
liability
At 31 March (132,833) (137,605)
Other reserves
Share-
Foreign based
exchange incentives
reserve reserve Total
£'000 £'000 £'000
At 1 April 2006 1,208 - 1,208
Currency translation differences (99) - (99)
Share-based incentives - 144 144
At 1 April 2007 1,109 144 1,253
Currency translation differences 3,300 - 3,300
Share-based incentives - 703 703
At 31 March 2008 4,409 847 5,256
8 Minority Interests
As at 31 March
2008 2007
£'000 £'000
At 1 April 2,938 948
Exchange differences 154 (62)
Acquisitions - 1,632
Disposals (45) (70)
Dividends paid (1,348) (736)
Share of profit after tax 841 1,226
At 31 March 2,540 2,938
9 Acquisitions
Years ended 31 March
2008 2007
£'000 £'000
Cash (paid) / received:
HRG Belgium NV (1,009) -
Spendvision Holdings Limited (1,344) (1,508)
Hogg Robinson s.r.o (Czech Republic) (1,920) (2,093)
Hogg Robinson Polska Sp. z.o.o - (1,115)
Ian Flint Associates - (152)
Executive Travel Associates (9) (3,758)
Euro Lloyd MAN Reiseburo GmbH - (841)
Advance Meeting Partners Corporation - (329)
Robustelli World Travel - 452
Cash and deposits of businesses acquired - 562
(4,282) (8,782)
HRG Belgium NV
On 1 October 2007 the Group acquired a 100% interest in the business of
Weinberg Travel BVBA, the Group's existing partner in Belgium. This busines
was acquired by HRG Belgium NV, a Group company. Consideration was £829,000
in cash settled on acquisition and a reduction of £50,000 relating to a
working capital adjustment on completion in December 2007.
Spendvision Holdings Limited
On 13 March 2008 the Group acquired an additional 7% in Spendvision
Holdings Limited for £1,344,000, bringing its total holding to date to
58%.
Significant adjustment to amounts reported in
prior years
Hogg Robinson s.r.o (Czech
Republic)
In the twelve months to 31 March 2008, an adjustment was made in Hogg
Robinson s.r.o (Czech Republic) to increase the net assets by £265,000.
Deferred consideration on the purchase of Hogg Robinson s.r.o was paid
in the year ended 31 March 2008 and was £871,000 higher than originally
anticipated. Goodwill arising on the acquisition has been increased by £
606,000 to reflect these adjustments. The Consolidated Balance Sheet as
at 31 March 2007 has been restated to reflect these adjustments.
Spendvision Holdings Limited
In the year ended 31 March 2008, an adjustment was made in Spendvision
to decrease the net assets by £191,000. Goodwill arising on acquisition
has been increased by £191,000. The Consolidated Balance Sheet at 31
March 2007 has been restated to reflect these adjustments.
10 Contingent liabilities and contingent assets
In 1994 Compagnie Dens Ocean NV (CDO), an indirectly owned subsidiary, received
a claim from the Belgian Customs authorities resulting in a liquidator being
appointed in 1995. Civil litigation is in process with criminal proceedings
being considered pending the final outcome of the civil action. The liquidator
is defending the civil action vigorously and has received strong legal advice
on the strength of CDO's case. The Directors continue to believe, on the basis
of such advice, that any future impact on the net assets of the Group would not
exceed the existing provision.
11 Post balance sheet events
On 25 February 2008 an award was made in respect of certain aspects of an
arbitration which has been initiated by the Group against Kuoni Reisen Holding
AG, the former owners of companies acquired by the Group, for breaches of the
relevant sale and purchase agreement. As a result of that award and actions
resulting from that award, a final settlement was reached with Kuoni Reisen
Holding AG as to the precise amount of damages and the credit for these amounts
is included in the results for the year ended 31 March 2008 as exceptional
items (note 2).
END
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