24 May 2016
Hogg Robinson Group plc
Preliminary Results for the year ended 31 March 2016
Increased profits in line with expectations
Summary of results
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Years ended 31 March
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2016
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2015
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Change
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Revenue
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£318.3m
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£330.1m
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(4%)
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Reported earnings
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- Operating profit
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£39.3m
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£35.2m
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+12%
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- Profit before tax
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£26.7m
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£23.2m
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+15%
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- Earnings per share
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5.8p
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4.6p
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+26%
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Underlying earnings (1)
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- Operating profit
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£44.8m
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£42.5m
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+5%
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- Operating profit margin
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14.1%
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12.9%
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+1.2pp
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- Profit before tax
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£32.2m
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£30.5m
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+6%
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- Earnings per share
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7.2p
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6.6p
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+9%
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Dividend per share
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2.51p
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2.32p
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+8%
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Net debt (2)
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(£33.6m)
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(£54.7m)
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+£21.1m
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Free cash inflow (3)
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£28.9m
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£17.9m
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+£11.0m
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Highlights
§ Reported profit before tax up 15%, driven mainly by revenue growth in
Fraedom(4) and cost restructuring actions in Travel Management; underlying profit before tax up 6% and underlying
operating profit up 5% with margin increased to 14.1%
§ Revenue down 2% on a constant currency basis, down 4% as reported,
with most of the decline driven by Europe and Asia Pacific
§ Fraedom revenue up 13% and underlying operating profit ahead 75%,
both at constant currency
§ In line with strategy, net debt has further reduced by 39% to £33.6m,
equivalent to 0.6 times last 12 months EBITDA(5) (2015: 1.0 times)
§ Cost restructuring actions in FY16 yielded £4m cost saving during the
financial year (annualised savings of £8m from FY17)
§ Final dividend up 8% to 1.83p per share; full-year dividend up 8% to
2.51p per share with underlying dividend cover of 2.9 times (2015: 2.8 times)
Outlook
§ Similar conditions to last year in the UK and North American travel
markets during FY17; variable conditions in Continental Europe with continuing softness in Asia Pacific
§ Anticipate revenue in our Travel Management division will remain
under pressure as aggressive competitor pricing continues alongside the ongoing move by our clients to online booking
§ Further revenue and earnings growth from Fraedom
§ Net debt to EBITDA below target range creates increased financial
flexibility
§ Board has confidence for the year ahead with the Company focused on
making further earnings progress
Notes:
(1) Before amortisation of acquired intangibles and exceptional items
(2) Debt reduction benefited from net cash inflow in the period of £12m, as well as from a
one-off net receipt due to the settlement of a claim in respect of the UK pension scheme
(3) Free cash flow is the change in net debt before Employee
Benefit Trust share purchases, dividends and the impact of foreign exchange movements
(4) All references to Fraedom in this results statement only relate to the payments and expense
operations of the business, previously known as Spendvision
(5) Earnings before interest, tax, depreciation and amortisation (EBITDA)
(6) References to client travel activity and client travel spend throughout this document are
unaudited
David Radcliffe, Chief Executive of Hogg Robinson Group plc, said:
"Hogg Robinson Group made good progress during the year. Our Travel Management business,
HRG, which helps clients optimise their travel spend, continues to leverage its technology and service delivery platform to offer
clients a better travel experience whilst also maintaining our profitability. At the same time, Fraedom, our exciting
technology business, is growing strongly, capturing the demand for disruptive technology in the SaaS areas of payments, expense
and travel management.
"Looking forward, the Board has confidence for the year ahead with the Company focused on making
further earnings progress. With net debt to EBITDA below our target range, we now have the opportunity to refresh our view
on appropriate capital structure, taking into account the potential benefits of increased investment in the business and whether
there is scope to enhance returns to shareholders."
Contact Details
Hogg Robinson Group
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+44 (0)1256 312 600
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David Radcliffe, Chief Executive
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Michele Maher, Chief Financial Officer
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Angus Prentice, Head of Investor Relations
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Tulchan Communications
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+44 (0)20 7353 4200
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Stephen Malthouse
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Latika Shah
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Notes to Editors
Hogg Robinson Group plc is an international corporate services
company. Established in 1845 and headquartered in Basingstoke, Hampshire, UK, the Company specialises in travel, expense,
payments and data management underpinned by proprietary technology. With a worldwide network that comprises over 120
countries, the Company provides unparalleled global expertise and local knowledge in Europe, North America, Asia Pacific, Africa, Latin America and MEWA.
www.hoggrobinson.com
A presentation for analysts and institutional investors will be held at 0900h BST today at
Tulchan Communications, 85 Fleet Street, London EC4Y 1AE. A conference call facility and live webcast will also be
available for analysts and institutional investors unable to attend in person. Pre-registration for this event is necessary
to comply with security procedures at the venue. To register your interest in attending the presentation, or to obtain
conference call details and access to the live webcast, please contact Tulchan Communications on +44 (0)20 7353 4200. A
replay recording of the presentation via audio webcast and podcast with audio commentary from the Company's presentation team
will be available at www.hoggrobinson.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. 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 the Company, including amongst other things, the Company'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, the
Company'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. The Company 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
It is a pleasure for me to be making my first statement to you as Chairman of Hogg Robinson
Group. I was pleased to accept the role and have enjoyed my first few months with the Company. Hogg Robinson Group
can trace its roots back to 1845. Since that time, the Company has evolved successfully and, in recent years, developed
into an international B2B service company focused on offering travel, expense, payments and data management to its clients around
the world.
Having joined the Board of Hogg Robinson Group in January and assumed the Chairman role in
April, I have devoted much of the last few months to further my understanding of the Company's business. I have been
encouraged by the considerable knowledge and depth of experience of employees across the Group as well as being impressed by
their energy and enthusiasm. It is clear from my conversations with those outside Hogg Robinson Group that the Company is
well known and respected in its markets, and has a well-deserved reputation for delivering value for money, quality service and
technology solutions.
Hogg Robinson Group's financial track record speaks for itself. I have been impressed by
the Company's resilient financial performance during recent years against a challenging macroeconomic backdrop that has almost
become the accepted norm. This is a sound and stable business that has delivered underlying operating margin growth in all
but one of the past seven years, a record many other companies would be proud to have. In FY16, the Company reported profit
before tax up by 15% to £27m, free cash generation of £29m and a 39% decrease in net debt to £34m. As a result of these
good cash flows, we have reduced our leverage from 1.0 times net debt / EBITDA to 0.6 times at the financial year end. A
very credible performance, in my opinion. Based on our performance for the year, and confidence in our proven strategy and
business model, we propose an increase in the total dividend per share of 8%, which maintains our commitment to a progressive
dividend policy.
Hogg Robinson Group's core travel management business operates in an industry that is becoming
increasingly commoditised and technology dependent. I am reassured by the fact that most of the Group's applications and
solutions are proprietary, and excited by the growth prospects of Fraedom, Hogg Robinson Group's technology business. As
the Company faces the structural changes taking place in the industry, Hogg Robinson Group is well placed to embrace those
developments which we expect will continue to generate attractive returns for our shareholders.
In addition to the operational qualities of the business, I am also reassured by the Company's
corporate governance and controls. The Board of Directors lies at the heart of corporate governance while offering
direction and guidance in matters of finance, risk management and internal controls. At Hogg Robinson Group, we have a good
range of experience and skill across the various executive and non-executive members of the Board. Particular thanks to my
predecessor, John Coombe, who served as Hogg Robinson Group's Chairman for ten years. A number of other Board changes took
place during the year. Michele Maher, who joined the Company in 1995, took over as Chief Financial Officer in June 2015
following the departure of Philip Harrison. Bill Brindle, our Chief Information Officer, who joined in 1998, became an
executive director at the start of 2016. I would also like to welcome John Krumins who has joined us as a non-executive
director very recently. The depth and experience of all the executive and non-executive members of your Board is reassuring
and I am sure each person will continue to play an active role in guiding the Company in the future.
Finally, let me on behalf of the Board thank the senior management and staff at every level for
the passion and hard work they have delivered during the year, which manifests in the provision of the very best in client
service and Company performance. The ongoing success of Hogg Robinson Group is founded on their experience, innovation and
commitment. I am confident that together we can continue to build value for clients, employees and shareholders.
Nigel Northridge
Chairman
Chief Executive's Statement
Overview and strategy
I am pleased to report on a year of good financial performance. A year ago, I described
FY15 as being one of the most challenging periods for the Company in recent years. While the financial year ended 31 March
2016 was not without its own challenges, not least those driven by generally fragile macroeconomic conditions, we delivered
increased profits in line with expectations. These are exciting times for our Company, albeit as previously predicted, we
continued to experience downward pressure on our revenue as aggressive competitive pricing continued alongside the ongoing move
by our clients to online booking. We won good quality new business and maintained our high client retention rate
record. We also made steady progress with our plans to reshape and restructure the business, and will continue to work to
lower the Group's cost base and drive operational efficiency initiatives throughout our operations. Free cash generation
remained strong and this contributed to a 39% reduction in net debt. Our technology business, Fraedom, had a strong year,
reporting a 13% increase in revenue and a 75% rise in underlying operating profit, both at constant currency. Underlying
operating profit was up 5% for the Company as a whole, despite revenue down 2%, both at constant currency.
Going forward, we will continue to focus on providing innovative solutions to our clients backed
by high quality service. Our strategy for growing our core managed travel business continues to focus on developing
relationships with new and existing clients where we are able to demonstrate our expertise and experience in the arrangement and
cost-effective management of complex travel, and in helping to optimise the value of their travel while reducing overall
expenditure. We will continue to provide cost-saving, technology-led travel solutions via Fraedom, while accelerating the
growth of this business and responding to the considerable market appetite for disruptive technology in the areas of payments,
expense and travel.
Work on restructuring the Group's operations continued during the year as we sought to 'get
ahead of the curve' through greater efficiency and lower operating costs. Over the past several years, we have steadily
consolidated the Group's network and moved to a structure whereby clients are increasingly serviced by HRG staff located in hub
locations or by those working from home. These changes, together with many other initiatives including optimising call
centre and online services, are all designed to improve the Group's competitiveness as we shape our business to match the
evolving needs of our clients and the rapidly changing dynamics of our industry.
During the year, we started the process of sizing a significant transformation programme for our
mid-back office systems and processes. This long-term investment programme seeks to modernise our core mid-back office
application set and harmonise technology platforms across the Group, simplifying and standardising processes across markets and
improving data quality. A common mid-back office environment, which facilitates process and technology convergence for our
operations, would enable further optimisation of the HRG operating model, both from a shared-service perspective and IT support
model. We anticipate this programme will cost in the region of £9m to £11m over five years and deliver savings by year
four. When completed, this project has been designed to bring European systems and processes together giving us greater
efficiencies across international boundaries.
Across our Travel Management operations, market conditions remained broadly similar to the prior
year. We should be mindful that all of our regions exist to serve our global capability and do not operate for the sake of
separate regional profitability. In particular, this is true of our business in Asia Pacific. We saw growth in travel
booking activity in Europe as a whole, driven by the UK and France. The Nordics also contributed positively, with the
exception of Norway which remains relatively weak due to the lower oil price environment. Market conditions in North
America were stable, showing little year-on-year change. Asia Pacific remained weak, particularly in Australia, our largest
market in the region. Overall, and as predicted, strong competitor pricing continued, and together with the effect of
further growth in online booking on client fee income, resulted in continued downward pressure on the top line. Overall,
Travel Management revenue fell by 3% at constant currency. Underlying operating profit in Travel Management was down 1% at
constant currency, with growth in North America, in particular, and Europe more than offset by a poor result in Asia Pacific,
where the effect of client losses during the second half of last year and the current year was felt.
FY16 proved to be another active year in terms of new business. Our key focus areas for
top-line growth in managed travel are Energy & Marine, Meetings, Groups & Events (MGE) and Government, where travel
itineraries are often complex and clients rely on our expertise and experience. Notable amongst new and additional business
wins during the year were ABB, Agilent, Allianz, AmerisourceBergen, the Government of Canada, Intuit, Kentz (SNC-Lavalin) and
RBS. We are also delighted to have retained the Ministry of Defence as a client in the UK. Sadly, like any global
business, we lost some clients during the period including Ericsson, Engie (formerly GDF Suez), Lenovo and Novartis.
However, we are pleased to have maintained our consistently high client retention rate through our offering of value added
solutions, linked to quality customer service.
Fraedom continued to perform well and in line with our expectations. Revenue and earnings
were comfortably ahead of prior year and we are particularly pleased to see growing evidence of large corporations and
governments being attracted to the innovative and 'disruptive' technology solutions available through Fraedom as they seek to
improve their payments and transaction processing procedures and systems. We are currently evaluating the effect of past
marketing investment with a view to considering what further investment might generate for our growth story.
The core of Hogg Robinson Group continues to be the provision of business travel services,
delivered via HRG, the Group's Travel Management division, where the focus is on delivering good value to clients through
superior service designed to meet their unique requirements. HRG operates in an industry that is changing rapidly.
There is an ever-increasing demand from clients for data and analysis to help influence decisions on the control and reduction of
travel expenditure, and for technology to improve the traveller experience.
At the same time, a majority of our clients are also seeking to reduce the cost of travel
management services. As expected, cost-saving technology is playing an important role with online, self-booking tools,
including our own HRG OnlineTM, now used by many of our clients as a cost-effective way to make travel bookings,
particularly on simpler itineraries. Although the rate of growth slowed compared to last year, client adoption of this
booking method rose during the period. Approximately 50% of all client travel bookings were self-booked online, up from
about 47% last year.
Our strategic priorities are as follows:
§ HRG - Travel Management - To grow our
managed travel business by increasing our business from existing clients with new service offerings, entering new markets and
winning new business by leveraging our technology and service delivery
§ Fraedom - Technology - To develop a
technology business specialising in providing SaaS solutions for payments, expense and travel to existing and new clients, either
direct or through third party travel and payment providers
The breadth of the Group's services has broadened in recent years to include travel, expense,
payments and data management underpinned by proprietary technology. Our ability to combine excellent managed travel
services with superior technology solutions provides the Group with a good balance of resilience and growth. Last year, we
brought our payments, expense and travel technology under one umbrella, Fraedom. Much progress was made in the current year
to consolidate the business and I commend Fraedom's management and staff for the successful outcomes that this move is already
delivering. In addition to the revenue and earnings growth I referred to earlier, Fraedom achieved an underlying operating
margin during the financial year of 23%.
In FY16, we incurred exceptional costs relating to restructuring of £3.8m as we closed offices
in Germany, Sweden, and Switzerland while also downsizing in other areas. These actions, together with the reorganisation
of several finance and administrative functions, saved £4m in the year and will realise annual cost savings of £8m in FY17 and
beyond. FY16 is year one of our three-year restructuring programme and we expect to yield savings
across the programme of circa £20m with exceptional costs of about £8m. The programme initiatives include operational and
overhead restructuring as well as reductions in our property footprint.
One of our financial priorities in recent years has been to reduce net debt and we have stated a
medium-term target range of 0.7-1.0 times net debt / EBITDA. Cash generation continued to be good in the period and we also
received a one-off benefit due to the settlement of a claim in respect of the UK pension scheme. Together with tight cost
control, this resulted in the Group's year end net debt reducing by 39% from £54.7m to £33.6m. Our net debt is now
equivalent to 0.6 times EBITDA for the last 12 months (2015: 1.0 times). This position provides the Company with a welcome
degree of financial flexibility. Having achieved our deleveraging target, as we continue to generate free cash flow, the
Board will assess the appropriate capital structure for the Company and the investment required in our business over the next
three years. The review will also assess whether there is any potential to enhance returns to shareholders.
Summary and Outlook
Given the current macroeconomic environment, we are pleased with the Company's financial
performance during the year, which was in line with expectations. Ongoing restructuring work progressed well and this will
help improve the Group's long-term competitiveness. We won some exciting new business during the period, some of which has
yet to trade, and we warmly welcome these new clients and thank existing ones for their ongoing support.
Since the year end, the Group has continued to trade in line with our expectations, albeit
economic and political uncertainties continue to exist in several of our key travel markets. We expect trading conditions
to remain much the same in the UK and North American travel markets during FY17, and to continue to vary across Continental
Europe with continuing softness in Asia Pacific. We anticipate revenue in our Travel Management division will remain under
pressure as aggressive competitive pricing continues alongside the ongoing move by our clients to online booking. However,
we have confidence in our proven strategy and business model, which are core to driving earnings growth. This position,
coupled with our increased financial flexibility, a healthy pipeline of new business, and the prospect of further revenue and
earnings growth in Fraedom, give the Board confidence for the year ahead with the Company focused on making further earnings
progress.
David Radcliffe
Chief Executive
Operational Review
HRG - Travel Management (TM)
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Years ended 31 March
|
2016
|
2015
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Change
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|
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|
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Revenue
|
£292.7m
|
£307.7m
|
(4.9%)
|
|
Share of Group revenue
|
92.0%
|
93.2%
|
(1.2pp)
|
|
Operating profit
|
£33.9m
|
£32.8m
|
+3.4%
|
|
Underlying operating profit (1)
|
£38.9m
|
£39.3m
|
(1.0%)
|
|
Share of Group underlying operating profit
|
86.8%
|
92.5%
|
(5.7pp)
|
|
Underlying margin (1)
|
13.3%
|
12.8%
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+0.5pp
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§ Revenue lower due to price competition and ongoing adoption of
online
§ Proportion of online self-booked travel up from 47% to 50%
§ New business wins in strategic focus areas
§ Margin increased
(1) Before amortisation of acquired intangibles and exceptional items
Client activity
Client travel transaction activity was broadly unchanged year-on-year, while client travel spend
declined by 4% at constant currency. In terms of mix of travel bookings, air accounted for 46% of all transactions,
marginally down on prior year, while hotel and rail bookings showed small increases to 28% and 18%, respectively.
Cost control is a continuing area of focus for all clients as macroeconomic trends impact
earnings. Clients target savings and efficiencies from travel budgets in two areas: the cost of travel management services
and the control and reduction of travel expenditure.
Travel and related expenditure is often the greatest area of opportunity for companies to reduce
their costs. Compliance and control of travel policies are fundamental to ensuring the most cost effective use of travel
budgets and clients focus on influencing travellers to make the appropriate choices in a market place with increasing
complexity. Understanding how to control and manage this complexity is a challenge for many companies and HRG excels in
providing a growing number of value added services and solutions. This ranges from comprehensive management information,
analytics, actionable reporting and security tracking through to web-based policy management solutions.
There is also a growing focus on improving the traveller experience. As travel content via
the internet becomes ubiquitous, travellers familiar with managing their personal travel seek and expect the same experience when
booking corporate travel. Supporting this trend is often central to an organisation's travel management strategy in order
to engage the user and maximise compliance to the programme. This is best achieved by introducing more traveller-facing
technology into the corporate travel process. Currently, the fastest growing component of this is the use of mobile
solutions (Apps) for the provision of itinerary information to keep travellers informed during travel. The appetite for
further service enhancements available through mobile devices, including booking travel and accommodation, is also gathering
momentum.
The cost of travel services is influenced by service fees and the adoption of self-service
technology. HRG continues to support clients through the introduction of online booking tools. In the long term, as
costs are adjusted, this generally means lower revenues but also higher margins. The rate of growth in online adoption has
slowed compared to the prior year, showing an increase from 47% to 50% of transactions for the full year.
Programme management and technology solutions provide additional revenue opportunities for the
Group, helping to offset the effect on our revenue of clients moving online and competitive pricing pressure, while encouraging
the development of more strategic and higher margin relationships with many of our clients.
Our focus on delivering bespoke travel management solutions, which lies at the heart of our
business model, has resulted in another successful year of client retention and new business. Like any global business, we
lost some clients during the year including Ericsson, Engie (formerly GDF Suez), Lenovo and Novartis. Nevertheless, due to
our offering of value-added solutions, linked to quality client service, we have maintained our consistently high client
retention rate.
Amongst many new clients that we welcomed during the year were AmerisourceBergen, Arriva, the
International Committee of the Red Cross, International Union for Conservation of Nature and Natural Resources (IUCN), Intuit,
Norges Bank Investment Management, responsible for the management of the Government Pension Fund of Norway, RBS and
Swedbank. We also secured expanded contracts with existing clients such as ABB, Agilent, Allianz, the Government of Canada
and Kentz (SNC-Lavalin). Notable amongst clients renewing their contracts with the Group during the year were 21st Century
Fox, ABB, Deutsche Bank, the UK's Ministry of Defence, Nordea and Unilever. Our client portfolio remains well diversified
thereby ensuring that the Group is not overly exposed to any individual client or sector. No single client accounts for
more than 4% of client revenue.
HRG regional strategy
As mentioned in the Chief Executive's summary, we should be mindful that all of our regions
exist to serve our global capability and do not operate for the sake of separate regional profitability. In particular,
this is true of our business in Asia Pacific.
Europe
|
Years ended 31 March
|
2016
|
2015
|
Change
|
|
|
|
|
|
|
Revenue
|
£201.9m
|
£211.5m
|
(4.5%)
|
|
Share of TM revenue
|
69.0%
|
68.7%
|
+0.3pp
|
|
Operating profit
|
£26.3m
|
£24.9m
|
+5.6%
|
|
Underlying operating profit (1)
|
£30.3m
|
£30.4m
|
(0.3%)
|
|
Share of TM underlying operating profit
|
77.9%
|
77.4%
|
+0.5pp
|
|
Underlying margin (1)
|
15.0%
|
14.4%
|
+0.6pp
|
(1) Before amortisation of acquired intangibles and exceptional items
§ Further rationalisation of service network to core hub
locations
§ Online self-booking of travel up from 43% to 46%
§ Margin increased
Revenue in Europe declined by 2% at constant currency. Underlying operating profit was up
by 1% at constant currency. Client travel spend was 2% lower year-on-year at constant currency and travel activity was up
2%.
The UK corporate travel market continued to show good momentum during the year. Travel
booking activity amongst our clients rose year-on-year by 2% while spend was down by 3% at constant currency, primarily due to
the different business mix between new and lost business. Amongst a number of exciting business wins, we are pleased to
welcome new clients Arriva and RBS. The accelerated growth in rail, compared to air and hotel tickets booked, that was
evident in prior years, stabilised with the proportions of air, hotel and rail transactions broadly unchanged year-on-year.
Corporate and government clients continued to be attracted to the lower transaction fees associated with online, self-booking of
travel: 60% of all client travel bookings in the UK are now self-booked, up from 55% last year, although online adoption levels
remained static during the second half of the year. Our strategy of focusing on driving MGE business is bearing
fruit. We benefited from both increased expenditure and activity from a number of existing clients. As in other
territories, we continued to reduce operating costs and drive efficiency actions in many areas of our UK operations.
Specific restructuring initiatives included the introduction of flexible working contracts, home working, property reviews and
the re-alignment of sales and client management operations. A number of these remain ongoing.
Managed client travel activity levels showed steady year-on-year improvement in Sweden, Finland
and Denmark driven by growth in underlying business, but were offset by a decline in Norway resulting from downtrading by Energy
& Marine clients affected by the lower oil price environment. We will continue to monitor this closely to ensure that
our operating costs remain appropriate. Across our Nordic operations as a whole, client travel booking activity was
unchanged year-on-year while spend fell 2% at constant exchange rates. MGE revenue was up on prior year as a consequence of
our increased focus on this market, resulting in more projects and an increased order book at the year end. As part of our
Government initiative, we were pleased to welcome Norges Bank Investment Management, responsible for the management of the
Government Pension Fund of Norway, as a new client during the period. The Nordic SME market remained weak, with lower
volumes in all markets leading to a corresponding decline in associated revenue. We reduced headcount in our Malmo and
Gothenburg offices during the year as part of our ongoing efficiency and productivity measures, and will continue to monitor
staffing levels to match anticipated levels of travel activity and business mix.
Although the German economy showed signs of recovery and stabilisation during the year, the
benefit to HRG of higher travel activity shown by many of our clients was unfortunately more than offset by the rollover effect
of some client losses during the second half of last financial year. We did benefit, however, from additional business
awarded by Allianz early in this year. We also extended our remit with ABB and this will benefit trading in FY17.
Overall, across our German operations, client travel booking activity (down 2%) and spend (down 3%) were slightly down
year-on-year, as was our revenue. In MGE, we won new business from clients including Amgen, Merck and Samsung and contract
extensions from Agilent, Daiichi and TKK amongst others. One of the larger MGE projects during the year involved handling
the travel logistics and hotel accommodation for more than 9,000 people as part of an existing client's 125-year anniversary
celebrations. Online adoption continues to grow with online rates associated with new business wins significantly higher
compared to lost business. We closed a number of branch locations during the year as part of our ongoing aim to further
consolidate our service network and reduce headcount. We are beginning to see a positive impact from these and other
restructuring actions, some of which are ongoing.
Rollover client losses from the prior year, competitive pricing pressure and the de-stabilising
effect on Swiss businesses of the lifting of the Swiss franc-euro cap early in 2015 made Switzerland a challenging market for HRG
this year. Client travel activity (down 2%) and spend (down 8%) fell compared to the prior year as many clients traded
down. A number of clients introduced travel restrictions on their staff towards the end of our financial year and our
financial performance in this country was adversely affected as a result. On the new business front, we welcomed the
International Committee of the Red Cross (ICRC) and the International Union for Conservation of Nature and Natural Resources
(IUCN) as new clients to our Government area of business. MGE revenue grew strongly year-on-year. As part of our
ongoing cost efficiency programme, we have restructured how we do business in parts of Switzerland. Specifically, we
introduced home working and closed our offices in Lausanne and Winterthur. We are confident that the actions we are taking
will benefit this business in the future.
Client adoption of online self-booking in Europe continued to grow during the year, accounting
for 46% of all bookings made in the region, up from 43% last year.
North America
|
Years ended 31 March
|
2016
|
2015
|
Change
|
|
|
|
|
|
|
Revenue
|
£74.0m
|
£74.9m
|
(1.2%)
|
|
Share of TM revenue
|
25.3%
|
24.3%
|
+1.0pp
|
|
Operating profit
|
£10.3m
|
£9.4m
|
+9.6%
|
|
Underlying operating profit (1)
|
£10.9m
|
£10.1m
|
+7.9%
|
|
Share of TM underlying operating profit
|
28.0%
|
25.7%
|
+2.3pp
|
|
Underlying margin (1)
|
14.7%
|
13.5%
|
+1.2pp
|
(1) Before amortisation of acquired intangibles and exceptional items
§ Good earnings growth
§ Online self-booking of travel up from 58% to 59%
Revenue in North America was down by 1% at constant currency. Underlying operating profit
rose by 8% at constant currency. Client spend dropped 4% at constant currency and travel transaction activity was slightly
lower by 1%.
For FY16, the business travel market in North America remained stable compared to the prior
year. There were variations by industry: financial sector clients have generally shown a modest increase in travel booking
activity while clients impacted by the lower oil prices reduced their travel expenditure. New client activity includes the
wins of AmerisourceBergen, a drug wholesale company, and Intuit, a financial software company, and additional business awarded by
the Government of Canada and Kentz (SNC-Lavalin), one of the world's leading engineering and construction
companies.
In our loyalty business, client stability and retention remains good. We renewed our
contract with Orbitz and expanded our business with Loyalty Edge. The new business pipeline continues to look positive and
we are currently exploring ways to develop our already-strong value proposition to offer true market differentiation in this
attractive business area.
We completed the closure of our Stamford office during the year and reduced our office space in
Charlotte. There are several ongoing restructuring initiatives aimed at reducing costs while driving operating
efficiencies, including standardising workflows and data processes, to ensure that our cost base remains appropriate for the
scale of our business.
Online self-booking of travel by clients accounted for 59% of all bookings compared to 58% last
year.
Asia Pacific
|
Years ended 31 March
|
2016
|
2015
|
Change
|
|
|
|
|
|
|
Revenue
|
£16.8m
|
£21.3m
|
(21.1%)
|
|
Share of TM revenue
|
5.7%
|
6.9%
|
(1.2pp)
|
|
Operating loss
|
(£2.7m)
|
(£1.5m)
|
(£1.2m)
|
|
Underlying operating loss (1)
|
(£2.3m)
|
(£1.2m)
|
(£1.1m)
|
|
Share of TM underlying operating (loss)/profit
|
(5.9%)
|
(3.1%)
|
(2.8pp)
|
|
Underlying margin (1)
|
(13.7%)
|
(5.6%)
|
(8.1pp)
|
(1) Before amortisation of acquired intangibles and exceptional items
§ Poor performance in Australia due to weak economy and lost
clients
At constant currency, revenue in Asia Pacific was lower by 18%. Underlying operating loss
increased by £1.1m after a £0.3m currency benefit. Client spend declined 18% year-on-year at constant currency and travel
transaction activity fell sharply by 22%.
Australia is the Group's largest market in the Asia Pacific region. Trading conditions
throughout the financial year were challenging and generally weak, and broadly similar to last year, as the Australian economy
continued to struggle. Travel booking activity decreased by 28% compared to prior year and travel spend was lower by 19% at
constant currency. We felt the effect of clients lost during the second half of last year but we were also impacted by
current year lost clients. As noted previously, we have been disappointed with the financial performance of our Australian
business. During the past year, we made changes to the management and service offering. Through HRG, we continue to
provide our classic quality travel management services, particularly to our multinational clients. However, Fraedom will
play a more prominent role in providing simpler, technology-based travel solutions, which are well suited to the sizeable SME
market where point-to-point domestic travel is the norm. Australia has one of the most mature online markets in the HRG
network at 67%, up from 65% last year, as well as an appetite for travel technologies, integrated expense products and innovative
payment solutions. The changes we are making to our operations in this country are designed to take advantage of these
developments and we expect to see our financial performance improve in the future because of these changes. Early signs of
our new approach in this country are encouraging.
Travel booking activity amongst HRG's clients in Singapore fell 4% compared to last year while
travel spend decreased by 8% at constant currency. Amidst an ongoing sluggish economic backdrop, most clients continued to
seek incremental cost savings and we helped many implement travel policy changes designed to steer staff travellers towards
lowest fare carriers and restrictive fares. Several cost-saving initiatives were introduced during the period across our
Singapore operations, including greater use of technology, and we are beginning to see the benefits in terms of increased staff
productivity and lower operating costs.
Client travel activity (down 17%) and spend (down 29%) in Hong Kong fell sharply compared to
prior year, with many clients trading down. The decline was compounded by some client losses. We saw a similar
picture in our joint venture in mainland China where market conditions were generally poor amidst concerns about the growth
prospects of the Chinese economy. In both Hong Kong and mainland China, we experienced strong competitor pricing
pressure. Our MGE business in both territories continues to perform steadily.
Online self-booking of travel in the Asia Pacific region accounts for 45% (2015: 47%) of all
bookings.
Fraedom - Technology
|
Years ended 31 March
|
2016
|
2015
|
Change
|
|
|
|
|
|
|
Revenue
|
£25.6m
|
£22.4m
|
+14.3%
|
|
Share of Group revenue
|
8.0%
|
6.8%
|
+1.2pp
|
|
Operating profit
|
£5.4m
|
£2.4m
|
+125.0%
|
|
Underlying operating profit (1)
|
£5.9m
|
£3.2m
|
+84.4%
|
|
Share of Group underlying operating profit
|
13.2%
|
7.5%
|
+5.7pp
|
|
Underlying margin (1)
|
23.0%
|
14.3%
|
+8.7pp
|
(1) Before amortisation of acquired intangibles and exceptional items
§ Strong revenue and earnings growth
Revenue in the period for Fraedom was up 13% at constant currency. Underlying operating
profit rose by 75% at constant currency, the growth driven by the increase in revenue.
Revenue growth was largely driven by business from banking clients and the number of end users
increased by 13% compared to last year. During the course of the financial year, the Fraedom platform managed transactions
totalling £25.1bn in value (2015: £21.2bn).
Fraedom is positioning itself as the leader in 'mobile first' transaction management technology,
designed to help customers reduce the costs associated with paying suppliers, managing travel and expenses, and providing robust
reporting across all spend types. In 2016, Fraedom joined forces with a US-based company specialising in Optical Character
Recognition technology to deliver an automated receipt-scanning service to complement the Payments, Expense and Travel strategy.
Fraedom invested £6.1m in R&D, an increase of 11% on last year, in its aim to deliver a 'touchless transaction'
experience across its entire user base. FraedomGo, a software application which enables users to upload expense receipts
using a mobile device while travelling, thereby saving administration time back in the office, was launched during the financial
year and we also refreshed the user interface on our Payment and Expense technology platform.
We won a number of exciting new direct clients during the year including the Bank of England and
Old Mutual Wealth in Europe, the Public Health Accreditation Board and the Independent Electricity System Operator in North
America, and IAG Insurance Group and QBE Management Services in Asia.
In the last 12 months, the Fraedom partnership team has made considerable progress extending
contracts with and, in many cases, adding additional services to, a number of banking clients including Visa, SunTrust Bank, NAB,
Lloyds and ANZ. All these clients are working with Fraedom teams to embrace the new user interface and mobile first
approach.
The Fraedom brand, which was launched in FY15, now reflects the new brand strategy and the focus
on payments, expense and travel management technology. During the year, we extended our office space in Auckland to allow
for expansion as we accelerate development in virtual card technology.
Financial Review
Overview
Revenue of £318.3m was down 3.6% as reported, comprised of a decrease of 1.7% at constant
exchange rates and a 1.9% reduction through adverse currency movements. Underlying operating profit, which is before
amortisation of acquired intangibles and exceptional items, increased by 5.4% from £42.5m to £44.8m, or by 4.7% at constant
exchange rates, and represented a margin increase from 12.9% to 14.1%. Underlying profit before tax was up by 5.6% to
£32.2m and underlying EPS up by 9.1% from 6.6p to 7.2p.
Reported operating profit increased by 11.6% to £39.3m. Reported profit before tax was up
by 15% from £23.2m to £26.7m and EPS by 26% from 4.6p to 5.8p.
Year end net debt reduced by 39% or £21.1m to £33.6m, equivalent to 0.6 times EBITDA for the
last 12 months (2015: 1.0 times). This translates into a gearing of 17.0% (2015: 28.5%). We continue to operate well
within our banking covenants.
The reduction in net debt benefited from a one-off net receipt by the Group in respect of a
claim in connection with the UK pension scheme (see note 2). During the year, the High Court granted rectification of a
deed of amendment dated 8 September 1999 in respect of the UK pension scheme due to a mistake that had been made in the original
drafting of that deed. As a result of the High Court confirming the correct basis for the rate of increase for any period
of deferment for pensionable service between 8 September 1999 and 28 September 2006, a past service cost of £10.5m together with
associated legal costs of £2.3m has been incurred. This amount is materially offset by the net monies received as a result
of the settlement of a claim in respect of this mistake. The net charge to the income statement is £1.0m and this is
included within exceptional items. Excluding the net monies received in relation to the pension rectification during the
year, net debt reduced by £12.0m.
We have noted in the past that inflation and discount rates are volatile and together with the
interest rate environment will significantly impact the accounting valuation of pension liabilities. On an accounting
basis, the Group-wide pre-tax pension deficits have decreased by £0.3m to £258.3m (of which £237.6m relates to the UK scheme) due
to an increase in the discount rate partially offset by the pension rectification past service cost and a reduction in the fair
value of plan assets. On a post-tax basis, our Group pension deficits at the year end were £214.4m. In line with our
latest UK triennial valuation and agreed ten-year recovery plan with the Trustees, the annual deficit reduction payment for the
current financial year was £7.3m.
The Group has a progressive dividend policy and the Board is recommending an 8% increase in the
final dividend to 1.83p per share, resulting in a full-year dividend of 2.51p per share, an increase of 8% on the prior
year. Our dividend is covered 2.9 times (2015: 2.8 times) by underlying EPS. The final dividend will be paid on 29
July 2016 to shareholders on the register at the close of business on 1 July 2016.
Operating expenses
Reported operating expenses reduced by 5.4% to £279.0m.
Underlying operating expenses, which are before amortisation of acquired intangibles and
exceptional items, reduced by 4.9% to £273.5m. At constant exchange rates, this represented a decrease of 2.7%.
Staff cost savings of £3.7m have arisen as a result of the planned FY16 restructuring actions
across the Group.
Underlying operating profit
Underlying operating profit, which is before amortisation of acquired intangibles and
exceptional items, increased by 5.4% from £42.5m to £44.8m, or by 4.7% at constant exchange rates. Underlying operating
profit margin increased from 12.9% to 14.1%.
Exceptional items
Total exceptional costs of £4.8m have been incurred in the year, representing £3.8m of
restructuring costs and £1.0m relating to pension rectification. The restructuring costs of £3.8m (2015: £6.3m) were
incurred in relation to redundancy and property exit costs within Travel Management and Fraedom as part of our planned cost
restructuring programme. The pension rectification charge of £1.0m reflects a £10.5m past service
cost and £2.3m legal fees offset by settlement monies received.
Net finance costs
Net finance costs increased by £0.5m to £13.6m, reflecting an increase in the finance costs
relating to retirement benefit obligations.
Taxation
The tax charge for the year represents an overall effective tax rate (ETR) of 28% of the
reported profit before tax (2015: 32%). The underlying ETR was 26%. We anticipate an underlying ETR of around 28% in
future years.
EPS
Underlying EPS rose by 9% from 6.6p to 7.2p. Basic EPS rose by 26% from 4.6p to
5.8p.
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 each of the 12 month
ends for the financial year and exclude net debt, pension deficits and tax provisions. Average net assets amounted to
£213.5m (2015: £211.5m) compared with £193.4m at the year end (2015: £192.8m). The return for the year was 21.5% (2015:
20.6%).
Cash flow
Free cash inflow, which is the change in net debt before Employee Benefit Trust share purchases,
dividends and the impact of foreign exchange movements on net debt balances, was £28.9m (2015: £17.9m).
Cash outflow in respect of working capital excluding exceptional items was £5.7m (2015: £1.2m).
The net cash outflow related to interest was £4.9m (2015: £5.0m). Dividends received from equity accounted
investments were £0.7m (2015: £0.7m). Tax paid in cash was £5.4m (2015: £4.0m) and capital expenditure, which is primarily
internal software development and office equipment, was £8.3m (2015: £11.3m). Cash costs for pension deficit reduction were
£7.3m (2015: £4.5m). Of the £4.7m cash inflow in respect of exceptional items (2015: £8.3m outflow), £4.4m related to cash
outflow from exceptional items and the balance related to cash inflow from the pension rectification settlement.
In addition to free cash flow, other cash flow items are related to share purchases of £1.3m
made by the Employee Benefit Trust (2015: £nil), £7.7m of dividends paid to shareholders during the year (2015: £7.1m) and £1.2m
of favourable foreign exchange related movements (2015: £0.2m adverse).
Funding and net debt
The principal banking facility is a £150m multi-currency revolving credit facility (RCF) that is
committed until May 2018. The RCF is used for loans, letters of credit and guarantees, with interest based on the
inter-bank lending rate for the appropriate currency plus a margin. At the year end, £46.5m of the facility has been
utilised and the Group has fixed interest on £20m of this until February 2017. In addition, the Group has a £30m fixed rate
loan, repayable by 2018, and additional uncommitted facilities amounting to around £17m at the year end.
Net external interest costs of £4.9m were covered 11.3 times by EBITDA (2015: 10.7
times).
The principal covenants continue to be measured semi-annually, 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, both on a rolling 12-month basis. The definition of EBITDA for covenant purposes
is not materially different from the definition used in these financial statements.
Pensions
The Group-wide pension deficits under IAS 19 have decreased by £0.3m to £258.3m before
tax.
The UK scheme deficit decreased by £2.4m to £237.6m, primarily driven by a 0.2 percentage point
increase in the discount rate to 3.5% reducing the liability by £22.5m partially offset by an exceptional £10.5m past service
cost arising from the rectification of the 1999 deed of amendment relating to the UK pension scheme referred to above, and a
reduction of £6.3m in the fair value of plan assets. For several years, the UK defined benefit scheme has been closed to
new entrants and has capped increases in pensionable salary. Following a consultation process with active members, the UK
defined benefit section was closed to future accrual on 13 June 2013 and replaced with a defined contribution section.
The overseas schemes are primarily in Germany and Switzerland, where the deficit increased by
£2.1m to £20.7m.
At the year end, there was a deferred tax asset of £42.8m (2015: £48.0m) relating to the UK
deficit and an asset of £1.1m (2015: £0.8m) relating to the overseas schemes.
Share price
The closing mid-market price at the year end was 62p (2015: 47p). During the year, the
price ranged from 44.5p to 76.0p per share.
|
Summary income statement
|
|
|
|
Years ended 31 March
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Revenue
|
318.3
|
330.1
|
|
|
|
|
|
EBITDA before exceptional items
|
55.5
|
53.4
|
|
Depreciation and amortisation (1)
|
(10.7)
|
(10.9)
|
|
Underlying operating profit
|
44.8
|
42.5
|
|
Amortisation of acquired intangibles
|
(0.7)
|
(1.0)
|
|
Exceptional items
|
(4.8)
|
(6.3)
|
|
Operating profit
|
39.3
|
35.2
|
|
Share of associates and joint ventures
|
1.0
|
1.1
|
|
Net finance costs
|
(13.6)
|
(13.1)
|
|
Profit before tax
|
26.7
|
23.2
|
|
Taxation
|
(7.4)
|
(7.5)
|
|
Profit for the period
|
19.3
|
15.7
|
|
|
|
|
|
Summary balance sheet
|
|
|
|
As at 31 March
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Goodwill and other intangible assets
|
242.1
|
236.8
|
|
Property, plant, equipment and investments
|
12.5
|
13.1
|
|
Working capital
|
(46.8)
|
(52.4)
|
|
Current tax liabilities (net)
|
(6.1)
|
(6.2)
|
|
Deferred tax assets (net)
|
44.7
|
53.9
|
|
Net debt
|
(33.6)
|
(54.7)
|
|
Pension liabilities (pre-tax)
|
(258.3)
|
(258.6)
|
|
Provisions and other items
|
(4.4)
|
(4.7)
|
|
Net liabilities
|
(49.9)
|
(72.8)
|
|
|
|
|
|
Summary cash flow statement
|
|
|
|
Years ended 31 March
|
2016
|
2015
|
|
|
£m
|
£m
|
|
EBITDA before exceptional items
|
55.5
|
53.4
|
|
Cash inflow/(outflow) from exceptional items
|
4.7
|
(8.3)
|
|
Working capital movements (excluding exceptional items)
|
(5.7)
|
(1.2)
|
|
Net interest paid
|
(4.9)
|
(5.0)
|
|
Dividends received from equity accounted investments
|
0.7
|
0.7
|
|
Tax paid
|
(5.4)
|
(4.0)
|
|
Net capital expenditure
|
(8.3)
|
(11.3)
|
|
Pension funding in excess of EBITDA charge
|
(7.3)
|
(4.5)
|
|
Other movements
|
(0.4)
|
(1.9)
|
|
Free cash inflow
|
28.9
|
17.9
|
|
Employee Benefit Trust share purchases
|
(1.3)
|
-
|
|
Dividends paid to external shareholders
|
(7.7)
|
(7.1)
|
|
Currency translation and other
|
1.2
|
(0.2)
|
|
Reduction in net debt
|
21.1
|
10.6
|
(1) Excluding amortisation of acquired
intangibles
Hogg Robinson Group plc
Consolidated Income Statement
For the year ended 31 March 2016
|
|
|
Years ended 31 March
|
|
|
|
|
|
|
|
Notes
|
2016
|
2015
|
|
|
|
£m
|
£m
|
|
|
|
|
|
|
Revenue
|
1
|
318.3
|
330.1
|
|
Operating expenses
|
2
|
(279.0)
|
(294.9)
|
|
Operating profit
|
|
39.3
|
35.2
|
|
|
|
|
|
|
Analysed as:
|
|
|
|
|
Underlying operating profit
|
|
44.8
|
42.5
|
|
Amortisation of acquired intangibles
|
|
(0.7)
|
(1.0)
|
|
Exceptional items
|
2
|
(4.8)
|
(6.3)
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
39.3
|
35.2
|
|
|
|
|
|
|
|
|
|
|
|
Share of results of associates and joint ventures
|
|
1.0
|
1.1
|
|
Finance income
|
4
|
0.1
|
0.1
|
|
Finance costs
|
4
|
(13.7)
|
(13.2)
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
|
26.7
|
23.2
|
|
Income tax expense
|
5
|
(7.4)
|
(7.5)
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial year
|
|
19.3
|
15.7
|
|
|
|
|
|
|
|
|
|
|
|
Profit attributable to:
|
|
|
|
|
Owners of the Company
|
|
18.7
|
14.7
|
|
Non-controlling interests
|
|
0.6
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.3
|
15.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended 31 March
|
|
|
|
|
|
|
|
|
2016
|
2015
|
|
Earnings per share
|
|
pence
|
pence
|
|
|
|
|
|
|
Basic
|
6
|
5.8
|
4.6
|
|
Diluted
|
6
|
5.6
|
4.5
|
Hogg Robinson Group plc
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2016
|
|
Year ended 31 March
|
|
Year ended 31 March
|
|
|
Other
|
Retained
|
|
|
Other
|
Retained
|
|
|
|
reserves
|
deficit
|
2016
|
|
reserves
|
deficit
|
2015
|
|
|
£m
|
£m
|
£m
|
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial year
|
-
|
19.3
|
19.3
|
|
-
|
15.7
|
15.7
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that will not be subsequently reclassified to profit and loss
|
|
|
|
|
|
|
|
Remeasurements on defined benefit pension schemes
|
-
|
13.1
|
13.1
|
|
-
|
(77.8)
|
(77.8)
|
|
Deferred tax movement on pension liability
|
-
|
(2.5)
|
(2.5)
|
|
-
|
15.6
|
15.6
|
|
Deferred tax movement on pension liability attributable to impact of UK rate
change
|
-
|
(4.6)
|
(4.6)
|
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Items that may be subsequently reclassified to profit or loss
|
|
|
|
|
|
|
|
|
Currency translation differences
|
6.0
|
-
|
6.0
|
|
1.8
|
-
|
1.8
|
|
Amounts charged to hedging reserve
|
0.2
|
-
|
0.2
|
|
0.2
|
-
|
0.2
|
|
Recycling of cash flow hedge
|
-
|
-
|
-
|
|
(0.4)
|
-
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/ (expense) for the year, net of tax
|
6.2
|
6.0
|
12.2
|
|
1.6
|
(62.2)
|
(60.6)
|
|
Total comprehensive income / (expense) for the year
|
6.2
|
25.3
|
31.5
|
|
1.6
|
(46.5)
|
(44.9)
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income / (expense) attributable to:
|
|
|
|
|
|
|
Owners of the Company
|
6.1
|
24.7
|
30.8
|
|
1.8
|
(47.5)
|
(45.7)
|
|
Non-controlling interests
|
0.1
|
0.6
|
0.7
|
|
(0.2)
|
1.0
|
0.8
|
|
|
6.2
|
25.3
|
31.5
|
|
1.6
|
(46.5)
|
(44.9)
|
Hogg Robinson Group plc
Consolidated Balance Sheet
As at 31 March 2016
|
|
|
As at 31 March
|
|
|
Notes
|
2016
|
2015
|
|
|
|
£m
|
£m
|
|
Non-current assets
|
|
|
|
|
Goodwill and other intangible assets
|
8
|
242.1
|
236.8
|
|
Property, plant and equipment
|
9
|
8.8
|
9.8
|
|
Investments accounted for using the equity method
|
|
3.7
|
3.3
|
|
Deferred tax assets
|
|
50.8
|
54.6
|
|
|
|
|
|
|
|
|
305.4
|
304.5
|
|
Current assets
|
|
|
|
|
Trade and other receivables
|
|
93.3
|
105.5
|
|
Financial assets - derivative financial instruments
|
|
0.2
|
-
|
|
Current tax assets
|
|
1.7
|
1.9
|
|
Cash and cash equivalent assets
|
|
43.8
|
38.4
|
|
|
|
139.0
|
145.8
|
|
Total assets
|
1
|
444.4
|
450.3
|
|
Non-current liabilities
|
|
|
|
|
Financial liabilities - borrowings
|
|
(66.4)
|
(91.5)
|
|
Financial liabilities - derivative financial instruments
|
|
-
|
(0.4)
|
|
Deferred tax liabilities
|
|
(6.1)
|
(0.7)
|
|
Trade and other payables
|
|
(1.5)
|
(1.5)
|
|
Retirement benefit obligations
|
12
|
(258.3)
|
(258.6)
|
|
Provisions
|
11
|
(2.5)
|
(2.7)
|
|
|
|
(334.8)
|
(355.4)
|
|
Current liabilities
|
|
|
|
|
Financial liabilities - borrowings
|
|
(10.0)
|
(0.1)
|
|
Financial liabilities - derivative financial instruments
|
|
(0.8)
|
(0.4)
|
|
Current tax liabilities
|
|
(7.8)
|
(8.1)
|
|
Trade and other payables
|
|
(138.6)
|
(156.4)
|
|
Provisions
|
11
|
(2.3)
|
(2.7)
|
|
|
|
(159.5)
|
(167.7)
|
|
Total liabilities
|
|
(494.3)
|
(523.1)
|
|
Net liabilities
|
|
(49.9)
|
(72.8)
|
|
Equity
|
|
|
|
|
Share capital
|
|
3.3
|
3.2
|
|
Share premium
|
|
179.3
|
179.3
|
|
Other reserves
|
|
10.2
|
4.1
|
|
Retained deficit
|
|
(243.3)
|
(260.3)
|
|
|
|
|
|
|
Attributable to owners of Hogg Robinson Group plc
|
|
(50.5)
|
(73.7)
|
|
Attributable to non-controlling interests
|
|
0.6
|
0.9
|
|
Total equity
|
|
(49.9)
|
(72.8)
|
Hogg Robinson Group plc
Consolidated Statement of Changes in Equity
For the year ended 31 March 2016
|
|
Attributable to equity holders of the Company
|
|
|
|
|
|
Share
|
Share
|
Other
|
Retained
|
|
Non-controlling
|
Total
|
|
|
capital
|
premium
|
reserves
|
deficit
|
Total
|
interests
|
Equity
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2015
|
3.2
|
179.3
|
4.1
|
(260.3)
|
(73.7)
|
0.9
|
(72.8)
|
|
Retained profit for the year
|
-
|
-
|
-
|
18.7
|
18.7
|
0.6
|
19.3
|
|
Total other comprehensive income
|
-
|
-
|
6.1
|
6.0
|
12.1
|
0.1
|
12.2
|
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
(7.7)
|
(7.7)
|
(1.0)
|
(8.7)
|
|
Shares purchased by Employee Benefit Trust
|
|
|
|
(1.3)
|
(1.3)
|
-
|
(1.3)
|
|
Share-based incentives - charge for year
|
-
|
-
|
-
|
1.3
|
1.3
|
-
|
1.3
|
|
New shares issues to satisfy share-based incentives
|
0.1
|
-
|
-
|
-
|
0.1
|
-
|
0.1
|
|
Total transactions with owners
|
0.1
|
-
|
-
|
(7.7)
|
(7.6)
|
(1.0)
|
(8.6)
|
|
Balance at 31 March 2016
|
3.3
|
179.3
|
10.2
|
(243.3)
|
(50.5)
|
0.6
|
(49.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to equity holders of the Company
|
|
|
|
|
|
Share
|
Share
|
Other
|
Retained
|
|
Non-controlling
|
Total
|
|
|
capital
|
premium
|
reserves
|
deficit
|
Total
|
interests
|
Equity
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2014
|
3.2
|
179.3
|
2.3
|
(206.5)
|
(21.7)
|
0.8
|
(20.9)
|
|
Retained profit for the year
|
-
|
-
|
-
|
14.7
|
14.7
|
1.0
|
15.7
|
|
Total other comprehensive income
|
-
|
-
|
1.8
|
(62.2)
|
(60.4)
|
(0.2)
|
(60.6)
|
|
Transactions with owners:
|
|
|
|
|
|
|
|
|
Dividends
|
-
|
-
|
-
|
(7.1)
|
(7.1)
|
(0.7)
|
(7.8)
|
|
Share-based incentives - charge for year
|
-
|
-
|
-
|
0.8
|
0.8
|
-
|
0.8
|
|
Total transactions with owners
|
-
|
-
|
-
|
(6.3)
|
(6.3)
|
(0.7)
|
(7.0)
|
|
Balance at 31 March 2015
|
3.2
|
179.3
|
4.1
|
(260.3)
|
(73.7)
|
0.9
|
(72.8)
|
Hogg Robinson Group plc
Consolidated Cash Flow Statement
For the year ended 31 March 2016
|
|
|
Years ended 31 March
|
|
|
Notes
|
2016
|
2015
|
|
|
|
£m
|
£m
|
|
Cash flows from operating activities
|
|
|
|
|
Cash generated from operations
|
14
|
48.1
|
39.9
|
|
Interest paid
|
|
(5.0)
|
(5.1)
|
|
Tax paid
|
|
(5.4)
|
(4.0)
|
|
|
|
|
|
|
Cash flows generated from operating activities - net
|
|
37.7
|
30.8
|
|
Cash flows from investing activities
|
|
|
|
|
Purchase of property, plant and equipment
|
|
(2.1)
|
(3.0)
|
|
Purchase and internal development of intangible assets
|
8
|
(6.3)
|
(8.4)
|
|
Proceeds from sale of property, plant and equipment
|
|
0.1
|
0.1
|
|
Interest received
|
|
0.1
|
0.1
|
|
Dividends received from associates and joint ventures
|
|
0.7
|
0.7
|
|
|
|
|
|
|
Cash flows used in investing activities - net
|
|
(7.5)
|
(10.5)
|
|
Cash flows from financing activities
|
|
|
|
|
Repayment of borrowings
|
|
(25.0)
|
(38.7)
|
|
New borrowings
|
|
9.0
|
22.0
|
|
Cash effect of currency swaps
|
|
(0.5)
|
2.9
|
|
Purchase of own shares by the Employee Benefit Trust
|
|
(1.3)
|
-
|
|
Dividends paid to external shareholders
|
|
(7.7)
|
(7.1)
|
|
Dividends paid to non-controlling interests
|
|
(1.0)
|
(0.7)
|
|
Dividends paid to former related parties
|
|
-
|
(0.4)
|
|
|
|
|
|
|
Cash flows used in financing activities - net
|
|
(26.5)
|
(22.0)
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
3.7
|
(1.7)
|
|
Cash and cash equivalents at beginning of the year
|
|
38.4
|
42.3
|
|
Exchange rate effects
|
|
1.6
|
(2.2)
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
43.7
|
38.4
|
|
|
|
|
|
|
Cash and cash equivalent assets
|
|
43.8
|
38.4
|
|
Overdrafts
|
|
(0.1)
|
-
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
43.7
|
38.4
|
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 2016 and 2015, 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 2016 and 31 March 2015. 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
2015 have been delivered to the Registrar of Companies and the Consolidated Financial Statements for the year ended 31 March 2016
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 endorsed and adopted for use by the European Union, IFRIS Interpretations Committee (IFRS
IC) 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 the Group'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 the Group 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 the Group'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 the
Group'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, Travel Management, which is analysed into three distinct geographic segments and includes Fraedom Travel, and
Technology, which includes Fraedom Payments and Expense operations, previously known as Spendvision. The Group's internal
reporting processes do not distinguish between the numerous sources of income that comprise revenue for 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.
|
|
Travel Management
|
|
Technology
|
|
|
|
|
|
North
|
Asia
|
|
|
|
|
|
|
|
Europe
|
America
|
Pacific
|
Total
|
|
Fraedom
|
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
|
£m
|
|
Year ended 31 March 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
201.9
|
74.0
|
16.8
|
292.7
|
|
25.6
|
|
318.3
|
|
|
|
|
|
|
|
|
|
|
|
Underlying operating profit / (loss)
|
30.3
|
10.9
|
(2.3)
|
38.9
|
|
5.9
|
|
44.8
|
|
Amortisation of acquired intangibles
|
(0.1)
|
(0.3)
|
-
|
(0.4)
|
|
(0.3)
|
|
(0.7)
|
|
Operating profit / (loss) before exceptional items
|
30.2
|
10.6
|
(2.3)
|
38.5
|
|
5.6
|
|
44.1
|
|
Exceptional items
|
(3.9)
|
(0.3)
|
(0.4)
|
(4.6)
|
|
(0.2)
|
|
(4.8)
|
|
Operating profit / (loss)
|
26.3
|
10.3
|
(2.7)
|
33.9
|
|
5.4
|
|
39.3
|
|
Underlying margin
|
15.0%
|
14.7%
|
-13.7%
|
13.3%
|
|
23.0%
|
|
14.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from external customers
|
211.5
|
74.9
|
21.3
|
307.7
|
|
22.4
|
|
330.1
|
|
|
|
|
|
|
|
|
|
|
|
Underlying operating profit / (loss)
|
30.4
|
10.1
|
(1.2)
|
39.3
|
|
3.2
|
|
42.5
|
|
Amortisation of acquired intangibles
|
-
|
(0.7)
|
-
|
(0.7)
|
|
(0.3)
|
|
(1.0)
|
|
Operating profit / (loss) before exceptional items
|
30.4
|
9.4
|
(1.2)
|
38.6
|
|
2.9
|
|
41.5
|
|
Exceptional items
|
(5.5)
|
-
|
(0.3)
|
(5.8)
|
|
(0.5)
|
|
(6.3)
|
|
Operating profit / (loss)
|
24.9
|
9.4
|
(1.5)
|
32.8
|
|
2.4
|
|
35.2
|
|
Underlying margin
|
14.4%
|
13.5%
|
-5.6%
|
12.8%
|
|
14.3%
|
|
12.9%
|
There is no material inter-segment revenue.
External revenue from clients by origin (where the Group's operations are located) is not
materially different from external revenue from clients by geographical area (where the client is located) disclosed
above.
A reconciliation of operating profit to total profit before income tax expense is provided in
the Consolidated Income Statement.
|
|
Travel Management
|
|
Technology
|
|
|
|
|
|
North
|
Asia
|
|
|
|
|
|
|
|
Europe
|
America
|
Pacific
|
Total
|
|
Fraedom
|
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
|
£m
|
|
Total segment assets
|
|
|
|
|
|
|
|
|
|
31 March 2016
|
245.0
|
81.1
|
9.7
|
335.8
|
|
12.3
|
|
348.1
|
|
31 March 2015
|
249.2
|
84.0
|
11.9
|
345.1
|
|
10.3
|
|
355.4
|
Reported segments' assets are reconciled to total assets as follows:
|
|
|
|
|
|
31 March
|
|
31 March
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
|
|
|
|
£m
|
|
£m
|
|
|
|
|
|
|
|
|
|
|
Total segment assets
|
|
348.1
|
|
355.4
|
|
Cash and cash equivalent assets
|
43.8
|
|
38.4
|
|
Current tax assets
|
|
|
1.7
|
|
1.9
|
|
Deferred tax assets
|
|
50.8
|
|
54.6
|
|
|
|
|
|
|
444.4
|
|
450.3
|
Capital expenditure by geographical location:
|
|
Travel Management
|
|
Technology
|
|
|
|
|
|
North
|
Asia
|
|
|
|
|
|
|
|
Europe
|
America
|
Pacific
|
Total
|
|
Fraedom
|
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
£m
|
|
£m
|
|
Capital expenditure
|
|
|
|
|
|
|
|
|
|
31 March 2016
|
4.9
|
0.2
|
0.2
|
5.3
|
|
3.7
|
|
9.0
|
|
31 March 2015
|
4.5
|
3.1
|
0.3
|
7.9
|
|
3.8
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
2 Operating expenses
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Underlying operating expenses
|
|
|
|
Staff costs (note 3)
|
184.5
|
193.1
|
|
Amortisation of intangible assets other than acquired intangible assets
|
6.8
|
7.0
|
|
Depreciation of property, plant and equipment
|
3.9
|
3.9
|
|
Auditors' remuneration for audit services
|
1.0
|
1.0
|
|
Operating lease rentals - buildings
|
10.8
|
12.1
|
|
Operating lease rentals - other assets
|
0.5
|
1.1
|
|
Currency translation differences
|
0.3
|
0.1
|
|
Other expenses
|
65.7
|
69.3
|
|
|
273.5
|
287.6
|
|
Amortisation of acquired intangibles:
|
|
|
|
Amortisation of client relationships
|
0.4
|
0.7
|
|
Amortisation of other acquired intangible assets
|
0.3
|
0.3
|
|
|
0.7
|
1.0
|
|
Exceptional items:
|
|
|
|
Restructuring costs:
|
|
|
|
- Staff costs (note 3)
|
3.7
|
5.9
|
|
- Other expenses
|
0.1
|
0.4
|
|
|
3.8
|
6.3
|
|
Pension rectification:
|
|
|
|
- Past service cost (note 12)
|
10.5
|
-
|
|
- Legal fees
|
2.3
|
-
|
|
- Settlement
|
(11.8)
|
-
|
|
|
1.0
|
-
|
|
|
4.8
|
6.3
|
|
|
|
|
|
Total operating expenses
|
279.0
|
294.9
|
EXCEPTIONAL ITEMS
Total exceptional costs of £4.8m have been incurred in the year, representing £3.8m of
restructuring costs and £1.0m relating to pension rectification. The restructuring costs of £3.8m (2015: £6.3m) were
incurred in relation to redundancy and property exit costs within Travel Management and Fraedom as part of our planned cost
restructuring programme.
During the year, the High Court granted rectification of a deed of amendment dated 8 September
1999 in respect of the UK pension scheme due to a mistake that had been made in the original drafting of that deed of amendment.
As a result of the High Court confirming the correct rate of increase for any period of deferment for pensionable service between
8 September 1999 and 28 September 2006, a past service cost of £10.5m (note 12) together with associated legal costs of £2.3m has
been incurred. This amount is materially offset by the settlement of a claim in respect of this mistake.
SERVICES PROVIDED BY THE COMPANY'S AUDITORS
The cost of services provided by the Company's auditors, PricewaterhouseCoopers LLP (PwC), and
its associates is set out below:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Charged to operating expenses:
|
|
|
|
Fees paid to the Company's auditor for the audit of the Parent Company and Consolidated
Financial Statements
|
0.3
|
0.3
|
|
Fees payable to the Company's auditor and its associates for other services:
|
|
|
|
Audit of the Company's subsidiaries pursuant to legislation
|
0.7
|
0.7
|
|
Auditors' remuneration for audit services
|
1.0
|
1.0
|
|
Audit related assurance service
|
0.1
|
0.1
|
|
Tax compliance services
|
0.1
|
0.1
|
|
|
1.2
|
1.2
|
In addition to the above services, the Company's auditors acted as auditors to the Hogg Robinson
(1987) Pension Scheme. The appointment of auditors to the Group's pension scheme and the fees paid in respect of that audit
are agreed by the trustees of the scheme, who act independently from the management of the Group. The aggregate fees paid
to the Group's auditors for audit services to the pension scheme during the year were less than £0.1m (2015: less than
£0.1m).
3 Staff costs
|
|
Years ended 31 March
|
|
|
2016
|
2016
|
2016
|
2015
|
|
|
Before
|
|
|
|
|
|
exceptional
|
Exceptional
|
|
|
|
|
items
|
items
|
|
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Wages and salaries
|
157.0
|
-
|
157.0
|
164.6
|
|
Social security costs
|
17.3
|
-
|
17.3
|
18.3
|
|
Other pension costs
|
8.7
|
10.5
|
19.2
|
8.3
|
|
Redundancy and termination costs
|
0.2
|
3.7
|
3.9
|
7.0
|
|
Share-based incentives
|
1.3
|
-
|
1.3
|
0.8
|
|
|
184.5
|
14.2
|
198.7
|
199.0
|
|
|
|
|
|
|
|
Other pension costs comprise:
|
|
|
|
|
|
Defined benefit schemes (note 12):
|
|
|
|
|
|
- Current service charge and administration expenses
|
2.1
|
-
|
2.1
|
2.3
|
|
- Curtailment gain
|
-
|
-
|
-
|
(1.0)
|
|
- Past service cost
|
-
|
10.5
|
10.5
|
-
|
|
Defined contribution schemes
|
6.6
|
-
|
6.6
|
7.0
|
|
|
8.7
|
10.5
|
19.2
|
8.3
|
|
|
|
|
Years ended 31 March
|
|
|
|
|
2016
|
2015
|
|
|
|
|
number
|
number
|
|
Average monthly number of staff employed by the Group including Key Management
|
4,939
|
5,148
|
4 Finance income and finance costs
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
|
|
|
|
Finance income - bank interest
|
0.1
|
0.1
|
|
Interest on bank overdrafts and loans
|
(4.3)
|
(4.4)
|
|
Amortisation of issue costs on bank loans
|
(0.6)
|
(0.6)
|
|
Net interest expense on retirement obligations
|
(8.1)
|
(7.5)
|
|
Other finance charges
|
(0.7)
|
(0.7)
|
|
Foreign exchange loss
|
-
|
(0.4)
|
|
Recycle of cash flow hedge from hedging reserve
|
-
|
0.4
|
|
Finance costs
|
(13.7)
|
(13.2)
|
|
Net finance costs
|
(13.6)
|
(13.1)
|
5 Income tax expense
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Current tax:
|
|
|
|
Tax on profits of the financial year
|
7.0
|
4.4
|
|
Adjustments in respect of previous years
|
(2.3)
|
(0.1)
|
|
Total current tax
|
4.7
|
4.3
|
|
Deferred tax:
|
|
|
|
Origination and reversal of temporary differences
|
0.3
|
1.3
|
|
Adjustments in respect of previous years
|
2.2
|
1.9
|
|
Impact of UK rate change
|
0.2
|
-
|
|
Total deferred tax
|
2.7
|
3.2
|
|
Taxation charge
|
7.4
|
7.5
|
The tax charge is split as follows:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
United Kingdom
|
1.5
|
2.8
|
|
Overseas
|
5.9
|
4.7
|
|
Taxation charge
|
7.4
|
7.5
|
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
On underlying business
|
8.4
|
8.3
|
|
Tax on amortisation of acquired intangibles
|
(0.2)
|
(0.4)
|
|
Exceptional items
|
(0.8)
|
(0.4)
|
|
Taxation charge
|
7.4
|
7.5
|
The tax assessed for the year differs from the standard rate of corporation tax in the UK of 20%
(2015: 21%) as explained below:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Profit before tax:
|
|
|
|
Continuing operations
|
26.7
|
23.2
|
|
Profit before tax multiplied by the standard rate
of corporation tax in the UK of 20% (2015: 21%)
|
5.3
|
4.9
|
|
Effects of:
|
|
|
|
Impact of UK rate change on net deferred tax assets
|
0.2
|
-
|
|
Utilisation of unrecognised losses
|
(1.0)
|
(2.4)
|
|
Non recognition of deferred tax assets - losses
|
0.3
|
1.5
|
|
Expenses not deductible for tax purposes
|
0.5
|
1.0
|
|
Overseas tax rate differential
|
1.8
|
1.2
|
|
Adjustments in respect of previous years
|
(0.1)
|
1.8
|
|
Other
|
0.4
|
(0.5)
|
|
Taxation charge
|
7.4
|
7.5
|
A deferred tax liability of £8.2m has been recognised in the year as an adjustment in respect of
prior years to reflect a temporary timing difference in respect of tax amortisable goodwill generated from historic US
acquisitions made by the Group. As a consequence, an offsetting deferred tax asset has also been recognised on brought forward
losses of £4.5m. The net impact on the current year tax charge in respect of prior periods is £3.7m. This temporary difference
and the corresponding deferred tax liability will remain until a reversal occurs, either on the goodwill's impairment or if the
US business is sold.
The Group makes maximum use of all brought forward losses and other available reliefs in
mitigating current tax payable.
6 Earnings per share
Earnings per share attributable to equity holders of the Company were as follows:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
pence
|
pence
|
|
Earnings per share
|
|
|
|
Basic
|
5.8
|
4.6
|
|
Diluted
|
5.6
|
4.5
|
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Earnings for the purposes of earnings per share:
|
|
|
|
Profit for the financial year
|
19.3
|
15.7
|
|
Less: amount attributable to non-controlling interests
|
(0.6)
|
(1.0)
|
|
Total
|
18.7
|
14.7
|
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 Benefit 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
|
|
|
2016
|
2015
|
|
|
number
|
number
|
|
|
m
|
m
|
|
Weighted average number of Ordinary shares in issue
|
|
|
|
Issued (for basic EPS)
|
324.2
|
322.7
|
|
Effect of dilutive potential Ordinary shares - share-based incentives
|
7.7
|
6.4
|
|
For diluted EPS
|
331.9
|
329.1
|
Underlying earnings per share
Underlying earnings per share attributable to equity holders of the Company were as
follows:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
pence
|
pence
|
|
Underlying earnings per share
|
|
|
|
Basic
|
7.2
|
6.6
|
|
Diluted
|
7.0
|
6.4
|
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.
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Earnings for the purposes of underlying earnings per share:
|
|
|
|
Profit before tax from continuing operations
|
26.7
|
23.2
|
|
Add: amortisation of acquired intangibles
|
0.7
|
1.0
|
|
Add: exceptional items
|
4.8
|
6.3
|
|
Underlying profit before tax
|
32.2
|
30.5
|
|
Underlying income tax expense
|
(8.4)
|
(8.3)
|
|
Underlying profit for the financial year
|
23.8
|
22.2
|
|
Less: amounts attributable to non-controlling interests
|
(0.6)
|
(1.0)
|
|
Total
|
23.2
|
21.2
|
Underlying earnings are earnings before amortisation of acquired intangibles, exceptional items
and related income tax expense.
7 Dividends per share
The dividends to the Company's shareholders in the year ended 31 March 2016 were:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Final dividend in respect of year ended 31 March 2015
|
|
|
|
1.69p per share (31 March 2014: 1.58p per share)
|
5.5
|
5.1
|
|
Interim dividend in respect of year ended 31 March 2016
|
|
|
|
0.68p per share (31 March 2015: 0.63p per share)
|
2.2
|
2.0
|
|
Total dividends to the Company's shareholders
|
7.7
|
7.1
|
A final dividend in respect of the year ended 31 March 2016 of 1.83p per Ordinary share, amounting
to a final dividend of £5,922,771 is to be proposed at the Annual General Meeting on 22 July 2016. The Employee Benefit
Trust has waived its rights to dividends.
8 Goodwill and other intangible assets
|
|
|
Years ended 31 March
|
|
|
|
2016
|
2015
|
|
|
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
223.0
|
216.5
|
|
Other intangible assets
|
|
19.1
|
20.3
|
|
|
|
|
|
|
|
|
242.1
|
236.8
|
|
|
|
Computer software
|
|
|
|
|
|
Externally
|
Internally
|
Client
|
|
|
|
Goodwill
|
acquired
|
generated
|
relationships
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Cost
|
|
|
|
|
|
|
At 1 April 2014
|
244.3
|
18.7
|
40.2
|
36.7
|
339.9
|
|
Additions
|
-
|
0.6
|
7.8
|
-
|
8.4
|
|
Disposals
|
-
|
(0.5)
|
-
|
-
|
(0.5)
|
|
Exchange differences
|
(1.4)
|
(0.2)
|
(0.5)
|
(0.6)
|
(2.7)
|
|
At 31 March 2015
|
242.9
|
18.6
|
47.5
|
36.1
|
345.1
|
|
Additions
|
-
|
0.5
|
5.8
|
-
|
6.3
|
|
Disposals
|
-
|
(0.3)
|
-
|
-
|
(0.3)
|
|
Exchange differences
|
6.5
|
0.4
|
0.2
|
2.1
|
9.2
|
|
At 31 March 2016
|
249.4
|
19.2
|
53.5
|
38.2
|
360.3
|
|
Accumulated amortisation and impairment losses
|
|
|
|
|
|
At 1 April 2014
|
26.4
|
15.9
|
24.1
|
35.5
|
101.9
|
|
Amortisation charge for the year
|
-
|
1.5
|
5.8
|
0.7
|
8.0
|
|
Disposals
|
-
|
(0.5)
|
-
|
-
|
(0.5)
|
|
Exchange differences
|
-
|
(0.2)
|
(0.2)
|
(0.7)
|
(1.1)
|
|
At 31 March 2015
|
26.4
|
16.7
|
29.7
|
35.5
|
108.3
|
|
Amortisation charge for the year
|
-
|
1.1
|
6.0
|
0.4
|
7.5
|
|
Disposals
|
-
|
(0.3)
|
-
|
-
|
(0.3)
|
|
Exchange differences
|
-
|
0.4
|
0.2
|
2.1
|
2.7
|
|
At 31 March 2016
|
26.4
|
17.9
|
35.9
|
38.0
|
118.2
|
|
Carrying amount
|
|
|
|
|
|
|
At 1 April 2014
|
217.9
|
2.8
|
16.1
|
1.2
|
238.0
|
|
At 31 March 2015
|
216.5
|
1.9
|
17.8
|
0.6
|
236.8
|
|
At 31 March 2016
|
223.0
|
1.3
|
17.6
|
0.2
|
242.1
|
|
|
|
|
|
|
|
The amortisation charge for the year of £7.5m (2015: £8.0m) is comprised of £0.7m (2015: £1.0m)
in respect of intangible assets acquired via business combinations and £6.8m (2015: £7.0m) which relates to amortisation of
software purchased and internally generated by existing businesses. There are no assets in the course of construction included
within internally generated assets at 31 March 2016 (2015: £nil).
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 11% per annum (2015: 11% 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% for Travel Management (2015: 2%) and 5% for Technology (2015: 5%).
Goodwill consists of the following amounts related to cash generating units of the
Group:
|
|
|
Years ended 31 March
|
|
|
|
2016
|
2015
|
|
|
|
£m
|
£m
|
|
Travel Management
|
|
|
|
|
Europe
|
|
167.9
|
162.5
|
|
North America
|
|
47.7
|
46.6
|
|
Asia Pacific
|
|
1.9
|
1.9
|
|
|
|
217.5
|
211.0
|
|
Technology
|
|
5.5
|
5.5
|
|
|
|
223.0
|
216.5
|
The key assumptions used in the impairment testing were as follows:
· Discount rates
· Rates of growth in cash generating units
beyond 3 years
· Cash flow
Discount rate
The discount rate reflects management's estimate of the pre-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 and cash flow
Management have reviewed corporate travel industry and payment industry forecasts and consider
that the market consensus for GDP growth of 2% for Travel Management and 5% for Technology 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 2014
|
8.9
|
39.8
|
48.7
|
|
Additions for the year
|
0.2
|
3.1
|
3.3
|
|
Disposals for the year
|
(0.2)
|
(0.8)
|
(1.0)
|
|
Exchange differences
|
0.2
|
(0.5)
|
(0.3)
|
|
|
|
|
|
|
At 31 March 2015
|
9.1
|
41.6
|
50.7
|
|
Additions for the year
|
0.3
|
2.4
|
2.7
|
|
Disposals for the year
|
(0.4)
|
(1.6)
|
(2.0)
|
|
Exchange differences
|
0.1
|
1.6
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2016
|
9.1
|
44.0
|
53.1
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
At 1 April 2014
|
7.0
|
31.2
|
38.2
|
|
Depreciation charge for the year
|
0.5
|
3.4
|
3.9
|
|
Disposals for the year
|
(0.2)
|
(0.7)
|
(0.9)
|
|
Exchange differences
|
0.2
|
(0.5)
|
(0.3)
|
|
|
|
|
|
|
At 31 March 2015
|
7.5
|
33.4
|
40.9
|
|
Depreciation charge for the year
|
0.4
|
3.5
|
3.9
|
|
Disposals for the year
|
(0.4)
|
(1.6)
|
(2.0)
|
|
Exchange differences
|
0.1
|
1.4
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2016
|
7.6
|
36.7
|
44.3
|
|
|
|
|
|
|
Carrying amount
|
|
|
|
|
At 1 April 2014
|
1.9
|
8.6
|
10.5
|
|
At 31 March 2015
|
1.6
|
8.2
|
9.8
|
|
At 31 March 2016
|
1.5
|
7.3
|
8.8
|
Property is comprised of leasehold properties and leasehold improvements. Plant and
equipment is comprised of IT and office equipment.
|
|
|
Years ended 31 March
|
|
|
|
2016
|
2015
|
|
|
|
£m
|
£m
|
|
Carrying amount of property, plant and equipment held under finance leases
|
0.9
|
1.3
|
|
|
|
|
|
|
|
|
|
|
10 Net debt
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
|
|
|
|
Total financial liabilities - borrowings
|
76.4
|
91.6
|
|
Add back: Unamortised loan issue costs
|
1.0
|
1.5
|
|
Cash and cash equivalent assets
|
(43.8)
|
(38.4)
|
|
Net debt
|
33.6
|
54.7
|
Analysis by currency after currency swaps
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Sterling
|
53.9
|
68.2
|
|
Euro
|
(6.4)
|
(7.2)
|
|
Swiss Franc
|
(2.5)
|
(2.0)
|
|
Other European currencies
|
(6.2)
|
(5.8)
|
|
Canadian Dollar
|
3.1
|
9.0
|
|
US Dollar
|
(5.6)
|
(4.2)
|
|
Other currencies
|
(2.7)
|
(3.3)
|
|
|
33.6
|
54.7
|
11 Provisions
|
|
Restructuring
|
Other
|
Total
|
|
|
£m
|
£m
|
£m
|
|
At 1 April 2014
|
4.1
|
2.9
|
7.0
|
|
Additional provisions made in the year charged in the Consolidated Income
Statement
|
7.7
|
0.1
|
7.8
|
|
Amounts used during the year
|
(8.5)
|
(0.3)
|
(8.8)
|
|
Unused provisions reversed
|
(0.2)
|
(0.1)
|
(0.3)
|
|
Exchange differences
|
(0.4)
|
0.1
|
(0.3)
|
|
At 31 March 2015
|
2.7
|
2.7
|
5.4
|
|
Additional provisions made in the year charged in the Consolidated Income
Statement
|
4.1
|
0.1
|
4.2
|
|
Additional provisions made in the year in respect of property dilapidations included in
property plant and equipment
|
-
|
0.2
|
0.2
|
|
Amounts used during the year
|
(4.6)
|
(0.2)
|
(4.8)
|
|
Unused provisions reversed
|
(0.1)
|
(0.3)
|
(0.4)
|
|
Exchange differences
|
0.2
|
-
|
0.2
|
|
At 31 March 2016
|
2.3
|
2.5
|
4.8
|
Restructuring provisions represent redundancy and office closure costs in a number of Group
companies and are disclosed as current liabilities because they are likely to give rise to payment within one year of the balance
sheet date. At 31 March 2016, £2.2m (2015: £2.5m) was held against restructuring provisions in respect of exceptional
items.
Other includes provisions for onerous contracts, property dilapidations and litigation, which
are likely to give rise to payment after more than one year of the balance sheet date, ranging from 2 to 9 years.
A provision for onerous contracts has been recognised for contracts where the expected benefits
derived by the Group are lower than the unavoidable costs of meeting the Group's obligations under the contract.
Provision has been made for the present value of property lease commitments in respect of
properties surplus to operational requirements. Allowance has been made for anticipated sublet rental income, and costs to
restore premises to their original condition upon vacating them where such an obligation exists under the lease.
12 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 is registered and subject to the statutory scheme-specific funding requirements outlined in
UK legislation, including the payment of levies to the Pension Protection Fund as set out in the Pension Act 2004. The scheme is
established under trust and the responsibility for its governance lies jointly with the trustees and the Group.
The UK Scheme 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 predominantly limited to the lower of the increase
in inflation and 5% per annum. The latest actuarial valuation of the scheme was carried out as at 31 March 2014 by an independent
qualified actuary.
Following a consultation process with active members, the UK defined benefit section was closed
to future accrual on 30 June 2013 and replaced with a defined contribution section.
The Group also operates defined benefit schemes in Switzerland, Germany, Italy and France.
The defined benefit scheme in Norway was closed during the year.
The following amounts have been included in the Consolidated Income Statement in respect of all
defined benefit pension arrangements:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Current service charge
|
2.1
|
2.3
|
|
Curtailment gain
|
-
|
(1.0)
|
|
Charge to underlying operating profit
|
2.1
|
1.3
|
|
Charge to exceptional items - pension rectification (note 2)
|
10.5
|
-
|
|
Charge to operating profit
|
12.6
|
1.3
|
|
Interest cost on pension scheme liabilities
|
17.1
|
19.0
|
|
Interest return on pension scheme assets
|
(9.0)
|
(11.5)
|
|
Charge to finance costs
|
8.1
|
7.5
|
|
|
|
|
|
Total charge to Consolidated Income Statement
|
20.7
|
8.8
|
The past service cost of £10.5m arose in the UK as a result of the correction of a mistake in the
drafting of a deed of amendment. Further detail is provided in note 2.
The following amounts have been recognised as movements in equity:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Actual (loss)/ return on scheme assets
|
(3.4)
|
26.8
|
|
Less: amounts included in interest income
|
(9.0)
|
(11.5)
|
|
|
(12.4)
|
15.3
|
|
Experience gains and losses arising on scheme liabilities
|
1.5
|
5.3
|
|
Changes in assumptions underlying the present value of scheme liabilities:
|
|
|
|
- Demographic
|
2.8
|
(6.5)
|
|
- Financial
|
21.2
|
(91.9)
|
|
|
13.1
|
(77.8)
|
|
Exchange rate movement
|
(1.6)
|
1.6
|
|
Movement in the year
|
11.5
|
(76.2)
|
|
Cumulative amount recognised in the Consolidated Statement of
|
|
|
|
Comprehensive Income since the transition date to IFRS, 1 April
2003
|
(201.4)
|
(212.9)
|
The key assumptions used for the UK Scheme were:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
2014
|
|
|
|
|
|
|
Rate of increase in final pensionable salary
|
2.60%
|
2.60%
|
3.50%
|
|
Rate of increase in pensions in payment - accrued before 1999
|
5.00%
|
5.00%
|
5.00%
|
|
Rate of increase in pensions in payment - accrued after 1999
|
3.10%
|
3.10%
|
3.50%
|
|
Discount rate
|
3.50%
|
3.30%
|
4.40%
|
|
Inflation - RPI
|
3.10%
|
3.10%
|
3.50%
|
|
Inflation - CPI
|
2.40%
|
2.40%
|
2.80%
|
The assumptions for the schemes in Switzerland, Germany, Italy and France do not produce
materially different results from the assumptions used for the UK Scheme.
The net present value of the defined benefit obligations of the UK Scheme is sensitive to both
the actuarial assumptions used and to market conditions. If the discount rate assumption was 0.1% lower, the obligations would be
expected to increase by £10.9m and if it was 0.1% higher, they would be expected to decrease by £10.6m. If the inflation
assumption was 0.1% lower, the obligations would be expected to decrease by £5.1m and if it was 0.1% higher, they would be
expected to increase by £5.2m.
The mortality assumptions for the UK Scheme are based on SAPS / CM1(2013) tables with 'medium
cohort' projections and a 1.25% underpin in the rate of future improvements in mortality. Life expectancy at the age of 65 is
assumed to be:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
Current pensioners
|
|
|
|
Male
|
24.0
|
23.9
|
|
Female
|
26.4
|
26.3
|
|
|
|
|
|
Future retirements
|
|
|
|
Male
|
25.9
|
25.8
|
|
Female
|
28.4
|
28.3
|
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 £20.5m.
The provision included in the Consolidated Balance Sheet arising from obligations in respect of
defined benefit schemes is as follows:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Present value of defined benefit obligations
|
|
|
|
Unfunded scheme
|
15.8
|
15.0
|
|
Wholly or partly funded schemes
|
539.1
|
548.8
|
|
|
554.9
|
563.8
|
|
Fair value of scheme assets
|
(296.6)
|
(305.2)
|
|
|
258.3
|
258.6
|
The net present value of defined benefit obligations has moved as follows:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
|
|
|
|
At beginning of year
|
563.8
|
462.3
|
|
Current service cost
|
2.1
|
2.3
|
|
Curtailment gain
|
-
|
(1.0)
|
|
Past service cost - pension rectification
|
10.5
|
-
|
|
Interest cost
|
17.1
|
19.0
|
|
Contributions by plan participants
|
0.6
|
0.7
|
|
Actuarial losses
|
(25.5)
|
93.1
|
|
Foreign currency exchange changes
|
3.0
|
(0.9)
|
|
Benefits paid
|
(16.7)
|
(11.7)
|
|
|
|
|
|
At end of year
|
554.9
|
563.8
|
The fair value of scheme assets has moved as follows:
|
|
Years ended 31 March
|
|
|
|
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
|
|
|
|
At beginning of year
|
305.2
|
281.9
|
|
Interest income
|
9.0
|
11.5
|
|
Actual return on assets excluding amounts included in interest income
|
(12.4)
|
15.3
|
|
Foreign currency exchange changes
|
1.5
|
0.7
|
|
Contributions by the employer
|
9.4
|
6.8
|
|
Contributions by plan participants
|
0.6
|
0.7
|
|
Benefits paid
|
(16.7)
|
(11.7)
|
|
|
|
|
|
At end of year
|
296.6
|
305.2
|
The assets held in defined benefit schemes were as follows:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
|
|
|
|
Equity instruments
|
104.0
|
168.5
|
|
Debt instruments
|
109.6
|
95.4
|
|
Property
|
35.0
|
32.8
|
|
Other assets
|
48.0
|
8.5
|
|
|
|
|
|
|
296.6
|
305.2
|
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 majority £253.2m of the Scheme's assets are held in active markets with quoted
market prices, the remaining £43.4m is invested in small company shares held in private equity funds and illiquid
funds.
For several years, the UK defined benefit scheme has been closed to new entrants, has capped
increases in pensionable salary and was closed to future accrual from 30 June 2013 following a consultation process with active
members. Following the most recent triennial valuation, effective April 2014, the Trustees agreed deficit reduction payments
totalling £7.2m for the year ending 31 March 2016. The weighted average duration of the defined benefit obligation is 22
years.
Through its defined benefit schemes the Group is exposed to a number of risks, the most
significant of which are detailed below:
Asset volatility - The scheme liabilities are calculated using a discount rate set with
reference to corporate bond yields, if plan assets underperform this yield this will create a deficit. In mitigation, the schemes
hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term but which may result
in volatility and risk in the short-term. To avoid undue concentration of asset volatility risk in any one asset class, certain
assets are held in a matching portfolio, consisting of corporate bonds and index-linked gilts, designed to mirror movements in
corresponding liabilities.
Interest rate risk - liabilities are sensitive to movements in interest rates, a decrease in
corporate bond yields will increase plan liabilities, although this will be partly offset by an increase in the plans' bond
holdings.
Inflation risk - liabilities are sensitive to movements in inflation, with higher inflation
leading to an increase in the valuation of liabilities (within the limits set by the scheme).
Life expectancy - liabilities are sensitive to life expectancy, with increases in life
expectancy leading to an increase in the valuation of liabilities.
The obligations and assets are split as follows:
|
|
Years ended 31 March
|
|
|
2016
|
2016
|
2016
|
2015
|
2015
|
2015
|
|
|
UK
|
Overseas
|
Total
|
UK
|
Overseas
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
Defined benefit obligations
|
(497.4)
|
(57.5)
|
(554.9)
|
(506.1)
|
(57.7)
|
(563.8)
|
|
Fair value of plan assets
|
259.8
|
36.8
|
296.6
|
266.1
|
39.1
|
305.2
|
|
|
|
|
|
|
|
|
|
Deficit
|
(237.6)
|
(20.7)
|
(258.3)
|
(240.0)
|
(18.6)
|
(258.6)
|
Five year experience
|
|
|
Years ended 31 March
|
|
|
|
2016
|
2015
|
2014
|
2013
|
2012
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
|
Defined benefit obligations
|
|
(554.9)
|
(563.8)
|
(462.3)
|
(423.4)
|
(381.1)
|
|
Fair value of plan assets
|
|
296.6
|
305.2
|
281.9
|
264.0
|
235.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
(258.3)
|
(258.6)
|
(180.4)
|
(159.4)
|
(145.8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains/(losses)
|
|
|
|
|
|
|
|
on plan liabilities
|
|
1.5
|
5.3
|
(0.1)
|
(0.2)
|
(0.7)
|
|
on plan assets
|
|
(12.4)
|
15.3
|
8.0
|
14.5
|
(7.0)
|
Pension funding in excess of the charge to operating profit is shown in the Consolidated Cash
Flow Statement as follows:
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
Contributions less service cost
|
(7.3)
|
(4.5)
|
13 Contingent liabilities
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 the Directors continue to believe, on the basis of legal advice received, that any future impact on the net assets
of the Group would not be material.
14 Cash generated from operations
|
|
Years ended 31 March
|
|
|
2016
|
2015
|
|
|
£m
|
£m
|
|
|
|
|
|
Profit before tax from continuing operations
|
26.7
|
23.2
|
|
|
|
|
|
Adjustments for:
|
|
|
|
Depreciation and amortisation (note 8 and 9)
|
11.4
|
11.9
|
|
Net increase in provisions
|
3.8
|
7.5
|
|
Share of results of associates and joint ventures
|
(1.0)
|
(1.1)
|
|
Net finance costs (note 4)
|
13.6
|
13.1
|
|
Pension curtailment credit
|
-
|
(1.0)
|
|
Pension past service cost
|
10.5
|
-
|
|
Other timing differences
|
1.3
|
0.8
|
|
|
66.3
|
54.4
|
|
Cash expenditure charged to provisions (note 11)
|
(4.8)
|
(8.8)
|
|
Change in trade and other receivables
|
14.9
|
(4.5)
|
|
Change in trade and other payables
|
(21.0)
|
3.3
|
|
Pension funding in excess of charge to operating profit
|
(7.3)
|
(4.5)
|
|
Cash generated from operations
|
48.1
|
39.9
|