Hogg Robinson Group: On The Front Foot
Edison | Feb 21, 2017 08:23AM ET
Hogg Robinson Group Plc (LON:HRG) has again delivered, with management confident that it should continue to brave headwinds to meet full-year expectations. Moreover, work on key initiatives continues apace, notably growth in managed travel and technology (Fraedom) as well as restructuring and cash generation. The financial position is “robust” (net debt/EBITDA of just 0.5x over the 12 months to September), allowing potentially lucrative investment and a progressive dividend policy (FY17e cover of almost 3x).
HRG is on course to meet current-year earnings expectations. While recent revenue and client travel transactions are not disclosed as previously, there should be no surprise at the reported second-half weakening in Travel Management, the company’s main profit source; our forecast is 7% lower constant currency revenue in H2 (down 4% in H1). Although partly a function of the trend to online self-booking by clients (49% to 51% in H1), revenue softness shows challenging conditions (we assume especially still in Australia and Norway), as well as aggressive competitor pricing. Confirmation of satisfactory restructuring progress suggests that HRG continues to cope with such weakness, as evident in impressive H1 margin gain.
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