30 November 2010 Hogg Robinson Group plc (`HRG', `the Company' or `the Group') Results for the six months ended 30 September 2010 Excellent first-half results Good growth prospects Summary of results Six months ended 30 September 2010 2009 Change Revenue £169.2m £155.3m +9% Underlying earnings (1) - Operating profit £19.5m £11.3m +73% - Operating profit margin 11.5% 7.3% +4.2 ppts - Profit before tax £15.3m £7.5m +104% - Earnings per share 3.3p 1.6p +106% Reported earnings - Operating profit £17.5m £7.1m +147% - Profit before tax £13.3m £3.3m +303% - Earnings per share 2.8p 0.6p +367% Interim dividend per share 0.5p 0.4p +25% Net debt £85.8m £96.0m -£10.2m Free cash outflow(2) (£6.1m) (£8.7m) +£2.6m Financial Highlights * Revenue up 9% at £169.2m (up 6% at constant currency) with growth across all travel regions * Underlying operating profit margin up from 7.3% to 11.5% due to operational gearing * Underlying EPS up by 106% to 3.3p * Free cash flow (2) improvement of £2.6m * Net debt down £10.2m from September 2009 at £85.8m; equivalent to 1.6x underlying EBITDA(1) (2009: 2.3x) * Re-financing of £220m committed credit lines completed, of which £190m committed until November 2014 and £30m until November 2018 * Interim dividend up 25% to 0.5p per share (2009: 0.4p per share) Operational Highlights * Client travel spend up 22% (up 18% at constant currency) * Client retention rate remains above 90% * HRG's technology supports increased demand by clients for online bookings * Net new business wins (including Aviva, Avon and Grant Thornton) and new sales pipeline provides further support for growth * Continued focus by clients on cost control and value for money plays to HRG's consultative strategy * Disruptions as a result of volcanic ash and strikes generated more work for HRG as we managed repatriation and other contingency plans, offsetting travel disruption David Radcliffe, Chief Executive of Hogg Robinson Group plc, said: "This is a very good set of results with operating profit up by more than 70% and EPS more than double. Our strategy and business model have delivered over the last two years. We have a proven management team, a disciplined approach to cost control and a relentless focus on our customers. As a result, we are well placed to leverage our global infrastructure and to take advantage of the improving climate and growth prospects available to us. "Uncertainty about the global economy will continue but we are encouraged by the current signs of recovery in corporate travel and the Board believes that we will be slightly ahead of our previous expectations for the full year." Notes: (1) Before amortisation of acquired intangibles and exceptional items (2) Free cash flow is the change in net debt before acquisitions and disposals, dividends and the impact of foreign exchange movements For further information contact: Hogg Robinson Group +44 (0)1256 312 600 David Radcliffe, Chief Executive Julian Steadman, Group Finance Director Angus Prentice, Head of Investor Relations Tulchan Communications +44 (0)20 7353 4200 David Allchurch Martin Robinson A presentation for analysts and institutional investors will be held at 0900h GMT today at Tulchan Communications, 85 Fleet Street, London EC4Y 1AE. Copies of the presentation with audio commentary from HRG's presentation team will be available at www.hoggrobinsongroup.com by 1100h GMT today or soon thereafter. Notes to Editors Hogg Robinson Group plc (HRG) (LSE: HRG) was established in 1845 and is an international corporate travel services company with headquarters located in Basingstoke, Hampshire, UK. The HRG worldwide network, including contracted partners, extends to 120 countries. HRG's focus on its clients is underpinned by three differentiators - people, technology and breadth of service. The Company has experienced management and skilled operators together with proprietary technology which has been developed in-house. HRG offers a range of services around the globe to deliver value, cost savings, efficiency and innovation, without compromise. www.hoggrobinsongroup.com This announcement may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial conditions, business performance and results of Hogg Robinson Group Plc (HRG). By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of HRG, including amongst other things, HRG's future profitability, competition with the markets in which the Company operates and its ability to retain existing clients and win new clients, changes in economic conditions generally or in the travel and airline sectors, terrorist and geopolitical events, legislative and regulatory changes, the ability of its owned and licensed technology to continue to service developing demands, changes in taxation regimes, exchange rate fluctuations, and volatility in the Company's share price. As a result, HRG's actual future financial condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements. HRG undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules). No statement in this announcement is intended to be a profit forecast or be relied upon as a guide to future performance. Chief Executive's Statement Overview I am pleased to announce a strong set of results for the six months ended 30 September 2010. HRG has continued to make excellent progress during this period, showing good performance across all key measures. At the heart of our strategy is a focus on delivering value through first-class service that is tailored to the specific needs of each client. This approach underpins our reputation as one of the world's leading international corporate travel services companies and will help sustain a business which delivers value to all stakeholders. Both client spending and travel bookings were up 18% in real terms during the first six months of our financial year compared to the prior year, reflecting strengthening confidence amongst many of our clients. This was first seen in Asia Pacific and has since followed into North America and Europe. Set against recent data published by, amongst others, the International Monetary Fund (IMF), the International Air Transport Association (IATA) and STR Global, we now have firm evidence of an emerging recovery in corporate travel. Over the past two years, our focus has necessarily been the reduction of our operating costs, but we were careful to retain enough flexibility for when the economic climate started to improve. Despite increasing activity by our clients during the first six months of this financial year, we resisted any increase in our cost base until we were certain that the increased activity would be sustained. In simple terms, we managed more activity than last year, and with fewer staff. As a result, average revenue per head was 10% higher at constant currency during the period. We will continue to manage this closely to ensure that our cost base remains consistent with our strategy of delivering value through first-class service. Although our clients are starting to travel more, many of the changes that they adopted during the recession have continued. Clients remain cost conscious, though the priority now is on seeking travel solutions that offer good value rather than those focused just simply on reducing overall travel spend. The increasing use of lower-cost online self-booking tools is part of that and HRG's own technology, together with the fact that we are able to work with third-party technologies, is playing an important part in enabling that shift. We have maintained our enviable client retention rate and have once again won more business than we lost. Amongst several new clients secured during the first half were Aviva, Avon and Grant Thornton. We were very sorry to have to report the death, on 30 August 2010, of George Battersby, who had been a non executive director since the IPO in 2006. George made a really significant contribution to the Company in his time on the Board and we will miss his insight and guidance. Financial results Revenue of £169.2m was up 9.0% as reported, or up 5.8% at constant exchange rates. Underlying operating profit, which is stated before charging the amortisation of acquired intangibles and exceptional items, was up by 73% to £ 19.5m, and represents a margin improvement of 4.2 ppts to 11.5%. The operating profit includes a contribution of £0.8m from favourable movements in exchange rates. After taking account of net interest costs, underlying profit before tax was up by 104% to £15.3m and underlying EPS increased by 106% from 1.6p to 3.3p. After reflecting the amortisation of acquired intangibles and last year's exceptional items, reported operating profit was up by 147% to £17.5m; profit before tax was up by 303% to £13.3m; EPS increased by 367% from 0.6p to 2.8p. We have again chosen to manage our working capital requirements down at the end of September 2010, albeit to a lesser extent than at the end of March 2010. As in previous years, the first half of our financial year has required higher working capital which is expected to reduce in the second half of the year. Free cash flow improved by £2.6m, to a net outflow of £6.1m. Net debt reduced by £10.2m to £85.8m, representing 1.6x underlying EBITDA for the last 12 months (2009: 2.3x). Interest cover also improved to 15.2x underlying EBITDA for the last 12 months (2009: 8.3x). We have also recently completed the re-financing of our £220m committed credit lines, of which £190m is committed until November 2014 and £30m is committed until November 2018. As expected, as a result of the current market, this refinancing will add approximately £4m per annum to our borrowing costs. There are some drawbacks associated with the low interest environment that we are currently enjoying. One of those is the accounting valuation of pension liabilities, which increases as interest rates fall, even in schemes like ours which have been closed to new entrants for several years and have benefit caps in place. For HRG, although cash contributions have remained unchanged, the Group-wide pre-tax pension deficits have increased by £28.7m since the year end to £155.1m as the net effect of a lower inflation rate and a lower discount rate on the valuation of the liabilities was only partially offset by positive investment performance. Inflation and discount rates are volatile and can vary significantly as market conditions change and it is worth noting that the use of current rates would reduce the deficit by approximately £40m. In line with our progressive dividend policy, the Board has declared an interim dividend of 0.5p per share, up 25% on the interim payout a year ago. This dividend will be paid on 6 January 2011 to shareholders on the register at the close of business on 10 December 2010. The Board We were pleased to announce the promotion of Kevin Ruffles, Regional President, Europe & Asia Pacific, to the newly created position of Chief Operating Officer and his appointment to the Board of HRG as an executive director with effect from 1 October 2010. Pending the appointment of an additional non executive director, the Board has adopted voting procedures to ensure that it continues to comply with the spirit of the UK Corporate Governance Code. Current trading and outlook There are encouraging signs that the positive momentum from the first half will continue, and we have clearly demonstrated that we can manage the cost base. The second half of the financial year has started well, although we do face more challenging revenue comparatives. We are continuing to manage the business for the longer term and have already begun to invest in additional staff to maintain service levels and to create the capacity to support further growth. Whilst recognising the global economic uncertainties and more demanding comparatives in the second half, the Board believes that the outcome for the year as a whole will be slightly ahead of our previous expectations. David Radcliffe Chief Executive Operational Review Market overview Following the first signs of a recovery towards the end of calendar 2009, market conditions have generally continued to improve through 2010. Recent data indicate that the initial post-recession recovery has been followed by continuing growth, albeit at a more modest level. Macro indicators point to an increasing level of confidence in the economic recovery. The IMF has upgraded its estimate of year-on-year global economic growth for 2010, and believes that a similar rate of growth will continue into 2011. Within the travel sector, IATA now predicts that airlines will show an aggregate net profit of $8.9 billion in 2010, after a $9.9 billion loss in 2009. The improving trend in passenger air traffic numbers, which was first seen in the summer of 2009, has continued into 2010 and been interrupted only briefly by the impact of the Icelandic volcano in April. For the six months to the end of September, IATA figures reveal that the overall annual growth rate in passenger traffic, which includes leisure travel, was just under 9% and passenger numbers are now back above their pre-recession level of early 2008. In the most recent published data, premium traffic, which is often used as a barometer of business confidence, showed an increase of over 10% year-on-year for the last reported quarter. Figures from STR Global provide a similar picture of recovery. The year-on-year monthly global hotel RevPAR growth rate has averaged at approximately 10% during the six months to the end of September. Although our business does not correlate closely with any one particular set of data, the IMF, IATA and STR Global figures serve to underscore a generally positive trend and our business is responding in the same way. Client activity Not surprisingly, many companies have changed their travel programmes over the last two years and we have seen a drive towards greater policy compliance and cost control. This has made clients more receptive to alternative ways of maximising the value of their travel spend. These changes include different travel itineraries and the adoption of consolidated service configurations and, coupled with increased demand for data and analysis, has further improved our value proposition. Other trends are also emerging. There has been a move towards online, self-booking of simpler travel itineraries, most noticeably in North America, Australia and selected European countries. Pressure by suppliers has also forced many clients to review their supplier contracts and we have seen greater reliance on HRG for support, consultation and analysis. There is now closer scrutiny and control of hotel bookings as companies recognise the opportunities for better control of this expenditure. We are encouraged by these developments, all of which offer additional revenue opportunities for HRG. During our first half year, we have seen the strongest growth in revenue from clients in the Pharmaceuticals & Healthcare and Manufacturing sectors while, understandably, there has been a modest decline in revenue from our Government contracts, though these only account for around 10% of client revenue. Our value proposition, delivered through first-class service, continues to pay dividends in terms of client retention and new business. Once again, we delivered net new business wins during the first half and our client retention rate remained above 90%. We were pleased to welcome several new clients during the period including Aviva, Avon, Grant Thornton, HCL Axon, Institute of International Education and Stora Enso. In addition, we have secured expanded contracts with existing clients such as Agilent, Ericsson, Rolls Royce, SGS, Syngenta and Volkswagen. Notable amongst many clients renewing their contracts with HRG were ABB, Bilfinger Berger, Bombardier, GlaxoSmithKline, National Australia Bank, PepsiCo, Roche, Takeda, Weatherford and Willis. These successes are further evidence of the enormous diversity of HRG's client base, in terms of both sector and geography, which represents one of HRG's key strengths. Corporate Travel Management Europe Six months ended 30 September 2010 2009 Change Revenue £115.1m £109.1m +5.5% Operating profit £12.1m £5.1m +£7.0m Underlying operating profit (1) £13.6m £8.9m +£4.7m Underlying margin (1) 11.8% 8.2% +3.6 ppts (1) Before amortisation of acquired intangibles and exceptional items Revenue was up by 5.1% at constant currency. Underlying operating profit rose by £4.7m, including a £0.2m benefit from currency movements. Client travel spend rose by 14% year-on-year in real terms and travel activity was up 12%. Importantly, in our key markets of the UK, Germany and Switzerland we performed well. Combined with the benefits from the mainland European branch consolidation that began three years ago, we were able to deliver strong growth in profits and margin. The recent changes in our European service network have enabled us to absorb the increase in activity more efficiently, helped by an increase in online bookings. The branch network consolidation, increased flexibility of telephone call-flow switching and an increase in travel consultants working from home have all contributed to the margin improvement. Increasingly, we expect to provide service to our clients through fewer strategic hubs. In addition to increases in corporate travel, HRG's sports-related business in Germany benefited from the success of the national team in the football World Cup as well as a strong performance by the Bundesliga teams in the Champions League. Another key development was the initiation of service for Volkswagen, which enhances HRG's position in the German market. The general economic recovery in business has meant a return to normal working patterns, following last year's reduced working-time initiative introduced by the German Government. Our Swiss business also grew well, as existing clients began to increase their travel activity and new clients, including Novartis, began to trade with us. As in Germany, this was accompanied by a return to normal working patterns. North America Six months ended 30 September 2010 2009 Change Revenue £38.0m £32.2m +18.0% Operating profit £5.2m £2.0m +£3.2m Underlying operating profit (1) £5.6m £2.3m +£3.3m Underlying margin (1) 14.7% 7.1% +7.6 ppts (1) Before amortisation of acquired intangibles and exceptional items Revenue was up by 9.4% at constant currency. Underlying operating profit rose by £3.3m, including a £0.5m boost from currency movements. The underlying operating profit margin more than doubled to 14.7% as a result of the sharp increase in revenue and the benefits of operational gearing on the realigned cost base. Client travel spend rose by 28% in real terms and travel activity was up 33%. There has been a progressive recovery in the North American market since our full-year report in May. The trend towards online self-booking by corporate clients has continued and now represents almost half of all travel bookings. Our investment over the past few years to reduce our cost base and improve productivity is helping us manage these trends in this competitive market. Work to streamline our front, middle and back-office operations and further reduce our operating costs via a number of specific initiatives is ongoing. Our loyalty business in Canada, which manages the redemption of credit card loyalty points for several banks, performed very well, with cardholders choosing to redeem their points, rather than cash, for travel rewards. Asia Pacific Six months ended 30 September 2010 2009 Change Revenue £10.1m £8.3m +21.7% Operating loss (£0.1m) (£0.5m) +£0.4m Underlying operating loss (1) (£0.1m) (£0.5m) +£0.4m Underlying margin (1) -1.0% -6.0% +5.0 ppts (1) Before amortisation of acquired intangibles and exceptional items Revenue was up by 7.4% at constant currency with good growth across the region. Client travel spend rose by 28% year-on-year at constant currency and travel activity was up 25%. In Australia, our largest market in the region, clients are becoming more optimistic about the economic recovery. The roll-out of HRG's fully-integrated travel management system for the Queensland Government progressed well during the period, and our appointment to the panel of preferred suppliers for the Australian Federal Government should offer further growth opportunities. As in other regions, we are seeing a general trend towards more online self-booking and this now represents around half of all travel bookings. Singapore also performed well and, as a result, we have added office space and are recruiting additional staff to support this growth. Singapore is becoming a key hub for travel consolidation in the region and we have recently opened a new regional service centre to provide a multi-country service consolidation for one of our larger clients. Our joint ventures in Hong Kong and mainland China both grew nicely but, as associates, their results are not included in the table above. Spendvision Six months ended 30 September 2010 2009 Change Revenue £6.0m £5.7m +5.3% Operating profit £0.3m £0.5m -£0.2m Underlying operating profit (1) £0.4m £0.6m -£0.2m Underlying margin (1) 6.7% 10.5% -3.8 ppts (1) Before amortisation of acquired intangibles and exceptional items Revenue was down 3.5% at constant currency. Underlying operating profit fell by £0.2m, with little impact from currency movements, due to continuing investment in product delivery and customer support. These investments are an essential part of our growth plans for Spendvision. The rollout of the Visa IntelliLink Spend Management product, a white-label version of the Spendvision platform, is continuing and is expected to be installed in all Visa commercial card issuing banks around the world by the end of 2011. As part of the Visa contract, we signed an agreement with Barclaycard for the implementation of card management and payment applications. We also signed a contract with Rio Tinto for worldwide implementation of Spendvision expense management. Technology Throughout the recession, HRG's technology became more important to clients as they sought to manage their travel expenditure, and many changes in practice have been retained as conditions have improved. HRG's technology is both flexible and independent, with a clear focus of addressing client needs in a dynamic market. During the first half of the financial year, we released upgrades to all our major technology products. Client adoption of HRG's i-SuiteTM, offering clients a gateway to both HRG and third-party products, continues to grow rapidly, with more than 500,000 users now having access. We began development during the period of a white label version of HRG OnlineTM, our internally-developed, proprietary online booking tool, following a deal signed with Travelport at the end of last financial year. Recognising the value of the application, the agreement enables Travelport to market a fully-branded version of the tool to its corporate client base, thus extending the reach of HRG corporate technology beyond its own in-house use. In July, we announced a mobile technology partnership with Sabre Travel Network which enables us to offer Tripcase, a mobile itinerary management application, to our clients. In addition to location-based messaging capabilities, this pioneering solution includes full integration of travel plans, which allows HRG to enhance the traveller experience through the provision of timely and relevant information delivered to a mobile device. In August, we launched our innovative HRG Security SuiteTM at the Houston conference of the National Business Travellers Association (NBTA). Managing traveller safety and security is a key part of any corporate travel programme and HRG Security SuiteTM delivers a full range of security services from pre-trip destination intelligence, traveller tracking and security training, to international emergency response services in association with global security experts, red24. In September, we launched a new cost saving function for corporate rail travel. The new feature, unveiled within HRG OnlineTM version 8.6, enables clients to view savings on ticket costs and manage UK rail spend more effectively. Following an agreement reached last year with a global provider of broadband and wireline/wireless communications, we have begun to consolidate our IP WAN (voice and data traffic) as part of our unified communications strategy, with successful deployment in Germany, the USA and Canada during the period. We will continue to develop flexible technology, for access from any location or mobile device, as part of our vision for leadership amongst global travel management companies. Additional Financial Disclosures Revenue Reported revenue increased by 9.0% to £169.2m, comprised of an increase of 5.8% at constant exchange rates and an increase of 3.2% from favourable currency movements. Revenue per Employee Reported revenue per employee increased by 13.9%, from £28.7k to £32.7k. At constant exchange rates, the increase was 10.5%. Operating expenses Reported operating expenses increased by 2.4% to £151.7m. Underlying operating expenses, before amortisation of acquired intangibles and exceptional items, increased by 4.0% from £144.0m to £149.7m. This represents an increase of 1.0% at constant exchange rates, comprising 0.9% for staff costs and 1.2% for other expenses. The increase of 0.9% in staff costs compares to a reduction of 4.3% in average staff numbers, and reflects higher costs for staff incentives and UK pensions. Underlying operating profit Underlying operating profit, before amortisation of acquired intangibles and exceptional items, increased by 73%, from £11.3m to £19.5m, and included a benefit of £0.8m from favourable currency movements. The underlying operating profit margin, which is not affected by currency movements, increased from 7.3% to 11.5%. Exceptional items There were no exceptional items reported in the period. The £2.3m of cost in the prior year related to planned cost reduction programmes in Europe. Net finance costs Net finance costs increased from £3.8m to £4.3m, reflecting the accelerated amortisation of bank fees ahead of the renewal of the Group's funding arrangements, and higher pension accounting charges. Net external interest decreased by £0.3m, due to lower average borrowing and a modest reduction in interest rates. For the 12 months to September 2010, net external interest costs were covered 15.2 times by EBITDA (2009: 8.3x). Taxation The £4.1m charge for the current year represents the expected full-year effective tax rate of 31%, and compares to an effective tax rate of 33% in the prior year. The current rate of 31% includes a £0.2m charge relating to the impact of a reduction in the UK corporation tax rate from 28% to 27%. An additional charge of £1.4m is reflected in the Consolidated Statement of Comprehensive Income in respect of deferred tax assets on pension liabilities. Cash flow Free cash flow, which includes all cash flow except acquisitions and disposals, dividends and the impact of foreign exchange movements on debt balances, improved by £2.6m from an outflow of £8.7m to an outflow of £6.1m, and was primarily due to improved trading offset by increased working capital outflows. In addition to free cash flow, the final dividend of £2.4m in respect of the year ended March 2010 was paid to shareholders during the period. There was no final dividend payment in the prior year. Funding and net debt The Group has recently completed the re-financing of its £220m committed credit lines. The principal borrowing is a £190m multi-currency revolving credit facility (RCF) that is committed until November 2014. The facilities are used for loans, letters of credit and guarantees, with interest based on LIBOR/ EURIBOR plus a margin and costs. In addition, we have secured a £30m fixed rate loan that is repayable by 2018 and have also retained uncommitted facilities, amounting to around £23m at 30 September 2010, which are used for local flexibility. The principal covenants will continue to be measured twice each year, at the end of March and the end of September, against EBITDA. The covenants require that net debt is less than 3.0 times EBITDA and net external interest is covered at least 4.0 times by EBITDA. The definition of EBITDA for covenant purposes is not materially different to the definition used in these financial statements. Net debt of £85.8m is £10.2m lower than the level at 30 September 2009 and compares to £77.5m at 31 March 2010. This translates into gearing of 46% (31 March 2010: 45%), or 123% (31 March 2010: 99%) including the pension deficits and related deferred tax assets. The Group has an active programme to reduce working capital requirements at the end of each half-year reporting period. This programme reduced working capital by approximately £26m in September 2010, compared to £25m in September 2009 and £35m in March 2010. Pensions The Group pension deficits under IAS19 have increased by £28.7m from 31 March 2010 to £155.1m before tax (£115.3m after tax). The deficit for the principal UK defined benefit scheme increased by £28.8m to £144.7m over the same period, with a lower discount rate adding £39.9m and a lower inflation rate reducing liabilities by £16.2m. For several years, the UK defined benefit scheme has been closed to new entrants and has capped increases in pensionable salary. Cash contributions are set at essentially the same level as agreed at the time of the IPO in 2006, and equate to 15.2% of pensionable salaries plus an additional deficit reduction payment of £6.6m per annum. At 30 September 2010 there was a deferred tax asset of £39.1m (31 March 2010: £ 32.4m) related to the UK deficit and £0.7m (31 March 2010: £0.7m) related to the overseas schemes. Foreign currency The following principal exchange rates have been used in the financial statements: Income Statement Balance Sheet 2010 2009 Change 2010 2009* Change Euro 1.19 1.14 -4% 1.15 1.12 -3% Swiss Franc 1.61 1.73 +7% 1.54 1.60 +4% US Dollar 1.53 1.60 +4% 1.57 1.52 -3% Canadian 1.59 1.79 +11% 1.62 1.54 -5% Dollar * As at 31 March 2010. Going concern The Board believes that the Group has access to adequate resources for the foreseeable future and has continued to prepare the Consolidated Financial Statements on a going concern basis. Summary income statement Six months ended 30 September 2010 2009 £m £m Revenue 169.2 155.3 EBITDA before exceptional items 24.3 15.8 Depreciation and amortisation (1) (4.8) (4.5) Underlying operating profit 19.5 11.3 Amortisation of acquired intangibles (2.0) (1.9) Exceptional items -- (2.3) Operating profit 17.5 7.1 Share of associates and joint ventures 0.1 -- Net finance costs (4.3) (3.8) Profit before tax 13.3 3.3 Taxation (4.1) (1.1) Profit for the period 9.2 2.2 Summary balance sheet 30 September 31 March 2010 2010 £m £m Goodwill and other intangible assets 249.5 253.5 Property, plant, equipment and 16.0 17.5 investments Working capital (80.2) (101.2) Current tax liabilities (net) (8.6) (8.4) Net debt (85.8) (77.5) Pension liabilities (pre-tax) (155.1) (126.4) Deferred tax assets (net) 52.0 47.2 Provisions and other items (4.0) (4.0) Net (liabilities)/assets (16.2) 0.7 Summary cash flow statement Restated Six months ended 30 September 2010 2009 £m £m EBITDA before exceptional items 24.3 15.8 Cash flow from exceptional items (0.9) (4.6) Working capital movements (19.4) (7.4) Interest paid (1.4) (2.0) Tax paid (2.3) (2.2) Capital expenditure (3.9) (4.9) Pension funding in excess of EBITDA (3.0) (3.7) charge Other movements 0.5 0.3 Free cash (outflow) (6.1) (8.7) Acquisitions and disposals (0.3) -- Dividends paid to external shareholders (2.4) -- Currency translation 0.5 (0.9) Other movements -- (1.1) (Increase) in net debt (8.3) (10.7) 1. Excluding amortisation of acquired intangibles The comparatives in the summary cash flow statement have been restated to separately identify cash flow from exceptional items. Hogg Robinson Group plc Consolidated Income Statement For the period ended 30 September 2010 Notes Half year ended 30 September 2010 2009 £m £m Revenue 6 169.2 155.3 Operating expenses 7 (151.7) (148.2) Operating profit 6 17.5 7.1 Analysed as: Underlying operating profit 6 19.5 11.3 Amortisation of acquired intangibles (2.0) (1.9) Exceptional items 7 - (2.3) Operating profit 17.5 7.1 Share of results of associates and joint 0.1 - ventures Finance income 9 0.1 0.1 Finance costs 9 (4.4) (3.9) Profit before tax 13.3 3.3 Income tax expense 10 (4.1) (1.1) Profit for the period from continuing 9.2 2.2 operations Profit attributable to: Equity Shareholders of the Company 11 8.5 1.7 Minority interests 0.7 0.5 9.2 2.2 Note Half-year ended 30 September 2010 2009 pence pence Earnings per share Basic 11 2.8 0.6 Diluted 2.7 0.5 Hogg Robinson Group plc Consolidated Statement of Comprehensive Income For the period ended 30 September 2010 Notes Half year ended 30 September 2010 2009 £m £m Profit for the period 9.2 2.2 Other comprehensive income Currency translation differences 18 (1.2) (8.9) Actuarial loss on pension schemes (30.2) (64.5) Deferred tax movement on pension liability 8.4 18.0 Deferred tax movement on pension liability attributable to change in headline tax rate 10 (1.4) - Other comprehensive loss for the period, net of (24.4) (55.4) tax Total comprehensive loss for the period (15.2) (53.2) Total comprehensive loss attributable to: Equity Shareholders of the Company (15.9) (53.7) Minority interests 0.7 0.5 (15.2) (53.2) Hogg Robinson Group plc Consolidated Balance Sheet As at 30 September 2010 Notes 30 31 March September 2010 2010 £m £m Non current assets Goodwill and other intangible assets 13 249.5 253.5 Property, plant and equipment 14 13.3 14.8 Investments accounted for using the equity 2.7 2.7 method Trade and other receivables 0.1 0.1 Deferred tax assets 53.9 48.8 319.5 319.9 Current assets Trade and other receivables 107.8 115.4 Financial assets - derivative financial 0.1 0.2 instruments Current tax assets 0.1 1.0 Cash and cash equivalent assets 15 53.3 58.8 161.3 175.4 Total assets 480.8 495.3 Non current liabilities Financial liabilities - borrowings 15 (137.7) (135.1) Deferred tax liabilities (1.9) (1.6) Retirement benefit obligations 16 (155.1) (126.4) Provisions (2.9) (3.5) (297.6) (266.6) Current liabilities Financial liabilities - borrowings 15 (1.4) (0.4) Financial liabilities - derivative financial (0.4) - instruments Current tax liabilities (8.7) (9.4) Trade and other payables (188.1) (216.7) Provisions (0.8) (1.5) (199.4) (228.0) Total liabilities (497.0) (494.6) Net (liabilities) / assets (16.2) 0.7 Capital and reserves attributable to equity shareholders Share capital 17 3.1 3.1 Share premium 172.2 172.2 Other reserves 18 13.2 13.4 Retained earnings (208.5) (191.4) (20.0) (2.7) Minority interests 3.8 3.4 Total (deficit) / equity (16.2) 0.7 Hogg Robinson Group plc Consolidated Statement of Changes in Equity As at 30 September 2010 Attributable to owners of the Company Share Share Other Retained Minority Total capital premium reserves earnings Total Interest Equity £m £m £m £m £m £m £m Balance at 1 April 3.1 172.2 24.1 (155.2) 44.2 3.5 47.7 2009 Retained profit for - - - 1.7 1.7 0.5 2.2 the period Other comprehensive income: Actuarial loss on - - - (64.5) (64.5) - (64.5) pension schemes Deferred tax movement - - - 18.0 18.0 - 18.0 on pension liability Currency translation - - (8.9) - (8.9) - (8.9) differences Total comprehensive - - (8.9) (44.8) (53.7) 0.5 (53.2) income Transactions with owners: Dividends - - - - - (0.5) (0.5) Shares purchased by - - - (1.1) (1.1) - (1.1) Employee Benefits Trust Total transactions - - - (1.1) (1.1) (0.5) (1.6) with owners Balance at 30 3.1 172.2 15.2 (201.1) (10.6) 3.5 (7.1) September 2009 Balance at 1 April 3.1 172.2 24.1 (155.2) 44.2 3.5 47.7 2009 Retained profit for - - - 13.4 13.4 0.9 14.3 the year Other comprehensive income: Actuarial loss on - - - (66.0) (66.0) - (66.0) pension schemes Deferred tax movement - - - 18.7 18.7 - 18.7 on pension liability Currency translation - - (11.8) - (11.8) - (11.8) differences Total comprehensive - - (11.8) (33.9) (45.7) 0.9 (44.8) income Transactions with owners: Dividends - - - (1.2) (1.2) (1.0) (2.2) Shares purchased by - - - (1.1) (1.1) - (1.1) Employee Benefits Trust Share-based incentives - - 1.1 - 1.1 - 1.1 Total transactions - - 1.1 (2.3) (1.2) (1.0) (2.2) with owners Balance at 31 March 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.7 2010 Hogg Robinson Group plc Consolidated Statement of Changes in Equity (Continued) As at 30 September 2010 Attributable to owners of the Company Share Share Other Retained Minority Total capital premium reserves earnings Total Interest Equity £m £m £m £m £m £m £m Balance at 1 April 3.1 172.2 13.4 (191.4) (2.7) 3.4 0.7 2010 Retained profit for - - - 8.5 8.5 0.7 9.2 the period Other comprehensive income: Actuarial loss on - - - (30.2) (30.2) - (30.2) pension schemes Deferred tax movement - - - 8.4 8.4 - 8.4 on pension liability Deferred tax movement on pension liability attributable to change in headline - - - (1.4) (1.4) - (1.4) tax rate Currency translation - - (1.2) - (1.2) - (1.2) differences Total comprehensive - - (1.2) (14.7) (15.9) 0.7 (15.2) income Transactions with owners: Dividends - - - (2.4) (2.4) (0.3) (2.7) Share-based incentives - - 1.0 - 1.0 - 1.0 Total transactions - - 1.0 (2.4) (1.4) (0.3) (1.7) with owners Balance at 30 3.1 172.2 13.2 (208.5) (20.0) 3.8 (16.2) September 2010 Hogg Robinson Group plc Consolidated Statement of Cash Flows For the period ended 30 September 2010 Notes Half year ended 30 September 2010 2009 £m £m Cash flows from operating activities Cash generated from operations 19 1.8 0.9 Interest paid (1.5) (2.4) Tax paid (2.3) (2.2) Cash flows from operating activities - net (2.0) (3.7) Cash flows from investing activities Acquisition of subsidiaries, net of cash (0.3) - acquired Purchase of property, plant and equipment (1.1) (2.1) Purchase and internal development of intangible (2.8) (2.9) assets Proceeds from sale of property, plant and - 0.1 equipment Interest received 0.1 0.2 Dividends received from associates and joint - 0.2 ventures Cash flows from investing activities - net (4.1) (4.5) Cash flows from financing activities Repayment of borrowings (3.3) (13.7) New borrowings 6.5 - Cash effect of currency swaps 0.6 0.8 Employee Benefits Trust - (1.1) Dividends paid to external shareholders (2.4) - Dividends paid to minority shareholders (0.3) (0.5) Cash flows from financing activities - net 1.1 (14.5) Net decrease in cash and cash equivalents (5.0) (22.7) Cash and cash equivalents at the beginning of 58.2 63.3 the period Exchange rate effects (1.0) (0.3) Cash and cash equivalents at the end of the 52.2 40.3 period Cash and cash equivalent assets 53.3 41.4 Overdrafts (1.1) (1.1) 52.2 40.3 Hogg Robinson Group plc Notes to the Consolidated Half-Yearly Financial Information For the period ended 30 September 2010 1 General information Hogg Robinson Group plc is a public limited company, incorporated in the UK under the Companies Act 2006. The address of its registered office is Global House, Victoria Street, Basingstoke, Hampshire, RG21 3BT, United Kingdom. The Company is listed on the Official List of the UK Listing Authority and the London Stock Exchange, and its registered number is 3946303. This condensed consolidated half-yearly financial information was approved for issue on 30 November 2010. This condensed consolidated half-yearly financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2010 were approved by the Board of Directors on 26 May 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Chapter 3 of Part 16 of the Companies Act 2006. This condensed consolidated half-yearly financial information has been reviewed, not audited. 2 Basis of preparation This condensed consolidated half-yearly financial information for the half-year ended 30 September 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting, as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with the Annual Report and Financial Statements for the year ended 31 March 2010, which have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The Directors consider that, taking into account the assets and revenue of the Group, the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors adopt the going concern basis for the condensed consolidated half-yearly financial information. 3 Accounting policies The accounting policies adopted are consistent with those of the Annual Consolidated Financial Statements for the year ended 31 March 2010, as described in those statements. The following amended standards and interpretations to existing standards are mandatory for the first time for the financial year beginning 1 April 2010. The adoption of these amendments and interpretations does not have a material impact on the condensed consolidated half-yearly financial information: * IAS 27 (revised), Consolidated and Separate Financial Statements, effective for accounting periods beginning on or after 1 July 2009. The revised standard requires the effect of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. * IFRS 2 (amendments), Group cash-settled share-based payments transactions. The amendments expand on the guidance in the classification of group arrangements. * IFRIC 17, Distributions of Non-cash Assets to Owners, effective for accounting periods beginning on or after 1 July 2009. The interpretation was published in November 2008 and provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The following standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 April 2010 and have not been early adopted. Unless otherwise stated, the Directors anticipate that the adoption of these standards, amendments and interpretations will not have a material impact on the Group: * IAS 24 (revised), Related Party Disclosures, effective from 1 January 2011. This supersedes IAS 24, Related Party Disclosures, issued in 2003. * IFRS 9, Financial Instruments, effective from 1 January 2013, addresses the classification and measurement of financial assets. The impact on the Group of adopting IFRS 9 is yet to be assessed. * IFRIC 14 (amendment), IAS 19 - Prepayments of a minimum funding requirement, effective for accounting periods beginning on or after 1 January 2011. * IFRIC 19, Extinguishing financial liabilities with financial instruments, effective for accounting periods beginning on or after 1 July 2010, clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments in full or partial settlement of the financial liability. The following amendments to standards and interpretations are effective for the financial year beginning 1 April 2010 but are not relevant to the Group: * Amendment to IFRS 1, Additional exemptions for first-time adopters * IFRIC 18, Transfers of assets from customers 4 Risks and uncertainties The principal risks and uncertainties affecting the Group were identified as part of the Business Review, set out on pages 7 to 8 of the Hogg Robinson Group plc Annual Report and Financial Statements 2010, a copy of which is available on the Group's website www.hoggrobinsongroup.com. These remain the relevant risks for the second half of the current financial year and comprise strategic, financial, operational and external risks. 5 Seasonality The Group's revenue and operating profit are affected by the seasonality of corporate travel business, with travel declining during the summer and Christmas holiday periods and, to a lesser extent, during Easter holidays, which are times when many corporate travellers are on holiday. Typically, the Group experiences the highest levels of revenue in the last months of its financial year, principally reflecting increased travel activity by its clients during this period. 6 Operating segments The chief operating decision-maker has been identified as the Executive Management Team, which reviews the Group's internal reporting in order to assess performance and allocate resources. The Executive Management Team has determined the operating segments based on these reports. The Executive Management Team considers the business from the perspective of two core activities, Corporate Travel Management, which is analysed into three distinct geographic segments, and Spendvision. The Group's internal reporting processes do not distinguish between the numerous sources of income that comprise revenue for Corporate Travel Management. The performance of the operating segments is assessed based on a measure of operating profit excluding amortisation of acquired intangible assets and items of an exceptional nature. Finance income and costs and income tax are not included in the result for each operating segment that is reviewed by the Executive Management Team. Other information provided to the Executive Management Team, except as noted below, is measured in a manner consistent with that in the condensed consolidated half-yearly financial information. 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 part of the reconciliation to total Consolidated Balance Sheet assets. Corporate Travel Management North Asia Europe America Pacific Total Spendvision Total £m £m £m £m £m £m Half year ended 30 September 2010 Revenue from external customers 115.1 38.0 10.1 163.2 6.0 169.2 Underlying operating profit 13.6 5.6 (0.1) 19.1 0.4 19.5 Amortisation of acquired (1.5) (0.4) - (1.9) (0.1) (2.0) intangibles Operating profit before 12.1 5.2 (0.1) 17.2 0.3 17.5 exceptional items Exceptional items - - - - - - Operating profit 12.1 5.2 (0.1) 17.2 0.3 17.5 Underlying margin 11.8% 14.7% -1.0% 11.7% 6.7% 11.5% Half year ended 30 September 2009 (restated) Revenue from external customers 109.1 32.2 8.3 149.6 5.7 155.3 Underlying operating profit 8.9 2.3 (0.5) 10.7 0.6 11.3 Amortisation of acquired (1.5) (0.3) - (1.8) (0.1) (1.9) intangibles Operating profit before 7.4 2.0 (0.5) 8.9 0.5 9.4 exceptional items Exceptional items (2.3) - - (2.3) - (2.3) Operating profit 5.1 2.0 (0.5) 6.6 0.5 7.1 Underlying margin 8.2% 7.1% -6.0% 7.2% 10.5% 7.3% The segmental disclosures for the half year ended 30 September 2009 have been restated to reflect Spendvision as a separate operating segment. There is no material inter-segment revenue. A reconciliation of operating profit to total profit before income tax expense is provided on the Consolidated Income Statement. Corporate Travel Management North Asia Europe America Pacific Total Spendvision Total £m £m £m £m £m £m Total segment assets 30 September 2010 263.6 90.3 12.8 366.7 6.8 373.5 31 March 2010 272.0 95.7 12.1 379.8 6.9 386.7 Reportable segments' assets are reconciled to total assets as follows: 30 September 31 March 2010 2010 £m £m Total segment assets 373.5 386.7 Cash and cash equivalent assets 53.3 58.8 Current tax assets 0.1 1.0 Deferred tax assets 53.9 48.8 480.8 495.3 7 Operating expenses Half year ended 30 September 2010 2009 £m £m Underlying operating expenses: Staff costs (note 8) 98.8 95.4 Amortisation of intangible assets, other than acquired intangible assets 2.2 2.1 Depreciation of property, plant and equipment 2.6 2.4 Operating lease rentals - buildings 7.3 7.1 Operating lease rentals - other assets 0.9 0.9 Currency translation differences 0.1 0.2 Other expenses 37.8 35.9 149.7 144.0 Amortisation of acquired intangibles: Amortisation of client relationships 1.9 1.8 Amortisation of other acquired intangible assets 0.1 0.1 2.0 1.9 Exceptional items: Restructuring costs: Staff costs (note 8) - 1.8 Other expenses - 0.5 - 2.3 Total operating expenses 151.7 148.2 Restructuring costs during the half year ended 30 September 2009 related to planned cost reduction programmes in Europe. 8 Staff costs Half year ended 30 September 2010 2010 2010 2009 2009 2009 Before Before exceptional Exceptional exceptional Exceptional items items Total items items Total £m £m £m £m £m £m Salaries 82.7 - 82.7 80.1 - 80.1 Social security costs 9.4 - 9.4 9.9 - 9.9 Pension costs 5.1 - 5.1 4.5 - 4.5 Redundancy and 0.6 - 0.6 0.9 1.8 2.7 termination costs Share-based incentives 1.0 - 1.0 - - - 98.8 - 98.8 95.4 1.8 97.2 Pension costs comprise: Defined benefit schemes 2.0 - 2.0 1.3 - 1.3 Defined contribution 3.1 - 3.1 3.2 - 3.2 schemes 5.1 - 5.1 4.5 - 4.5 Half year ended 30 September 2010 2009 number number Average monthly number of staff employed by the 5,183 5,416 Group 9 Finance income and finance costs Half year ended 30 September 2010 2009 £m £m Finance income - bank interest 0.1 0.1 Interest on bank loans and overdrafts (1.5) (1.9) Amortisation of issue costs on bank loans (0.8) (0.3) Expected return on pension scheme assets less interest cost on pension scheme liabilities (1.9) (1.6) Other finance charges (0.2) (0.1) Finance costs (4.4) (3.9) Net finance costs (4.3) (3.8) 10 Income tax expense The tax charge is split as follows: Half year ended 30 September 2010 2009 £m £m United Kingdom 2.0 2.2 Overseas 1.9 (1.1) Change in headline tax rate 0.2 - 4.1 1.1 Half year ended 30 September 2010 2009 £m £m On recurring business 4.1 1.7 Exceptional items - (0.6) 4.1 1.1 Taxes on income in the half-year periods to 30 September are accrued using the tax rate that would be applicable to the expected total annual earnings by country. Tax rate change The UK government is reducing the rate of corporation tax from 28% to 27% with effect from 1 April 2011. Consequently, the Group is required to revalue all of its recognised UK deferred tax assets and liabilities. The revaluation is anticipated to result in a full year deferred tax charge to the Consolidated Income Statement of £0.2m, together with a charge to the Consolidated Statement of Comprehensive Income of £1.4m in respect of deferred tax assets on pension liabilities. The Group is reflecting the full impact of £1.6m in the first half of the year. Further proposals to reduce the UK rate by 1% per annum to 24% by April 2014 have not been substantively enacted at the balance sheet date and, therefore, are not reflected in this condensed consolidated half-yearly financial information. 11 Earnings per share Earnings per share attributable to equity holders of the Company were as follows: Half year ended 30 September 2010 2009 pence pence Earnings per share Basic 2.8 0.6 Diluted 2.7 0.5 Half year ended 30 September 2010 2009 £m £m Earnings for the purposes of earnings per share Profit for the period 9.2 2.2 Less: amount attributable to minority interests (0.7) (0.5) Total 8.5 1.7 Half year ended 30 September 2010 2009 number number m m Weighted average number of Ordinary shares in issue Issued (for basic EPS) 300.7 302.3 Dilutive potential ordinary shares 11.7 9.6 For diluted EPS 312.4 311.9 Underlying earnings per share Underlying earnings per share attributable to equity holders of the Company were as follows: Half year ended 30 September 2010 2009 pence pence Underlying earnings per share Basic 3.3 1.6 Diluted 3.2 1.5 Half year ended 30 September 2010 2009 £m £m Earnings for the purposes of underlying earnings per share Profit before tax from continuing operations 13.3 3.3 Add: amortisation of acquired intangibles 2.0 1.9 Add: exceptional items - 2.3 Underlying profit before tax 15.3 7.5 Underlying income tax expense (4.7) (2.3) Underlying profit for the financial year 10.6 5.2 Less: amounts attributable to minority interests (0.7) (0.5) Total 9.9 4.7 Underlying earnings are earnings before amortisation of acquired intangibles and exceptional items and related income tax expense. 12 Dividends A dividend that related to the year ended 31 March 2010 amounting to 0.8p per ordinary share (£2,405,819) was paid on 2 August 2010. The dividend was paid to shareholders who were on the register at 2 July 2010. The Employee Benefits Trust waived its rights to dividends in respect of 7,035,546 shares held in the Company. The Directors have declared an interim dividend in respect of the six months ended 30 September 2010 of 0.5p payable on 6 January 2011 to shareholders who are on the register at 10 December 2010. This interim dividend, amounting to £ 1.5m has not been recognised as a liability in this half-yearly financial report, in accordance with IAS 10, Events after the Balance Sheet Date. 13 Goodwill and other intangible assets 30 September 31 March 2010 2010 £m £m Goodwill 219.6 221.8 Other intangible assets 29.9 31.7 249.5 253.5 Computer software Externally Internally Client Goodwill acquired generated relationships Total £m £m £m £m £m Cost At 1 April 2009 252.0 16.9 12.1 38.1 319.1 Additions for the year - 1.6 5.1 - 6.7 Disposals for the year - (2.9) - - (2.9) Adjustments to deferred (0.2) - - - (0.2) consideration Exchange differences (3.6) 0.6 0.7 (0.7) (3.0) At 31 March 2010 248.2 16.2 17.9 37.4 319.7 Additions for the period - 0.3 2.5 - 2.8 Reclassification of assets - (0.4) - - (0.4) Exchange differences (2.2) (0.2) - (0.1) (2.5) At 30 September 2010 246.0 15.9 20.4 37.3 319.6 Accumulated amortisation At 1 April 2009 26.4 12.0 4.5 18.2 61.1 Amortisation charge for the - 1.9 2.6 3.6 8.1 year Disposals for the year - (2.9) - - (2.9) Exchange differences - 0.2 (0.1) (0.2) (0.1) At 31 March 2010 26.4 11.2 7.0 21.6 66.2 Reclassification of assets - (0.3) - - (0.3) Amortisation charge for the - 0.8 1.5 1.9 4.2 period At 30 September 2010 26.4 11.7 8.5 23.5 70.1 Carrying amount At 1 April 2009 225.6 4.9 7.6 19.9 258.0 At 31 March 2010 221.8 5.0 10.9 15.8 253.5 At 30 September 2010 219.6 4.2 11.9 13.8 249.5 14 Property, plant and equipment Plant and Properties equipment Total £m £m £m Cost At 1 April 2009 10.6 46.4 57.0 Additions for the year 0.2 4.3 4.5 Disposals for the year (0.6) (2.2) (2.8) Exchange differences 0.3 1.3 1.6 At 31 March 2010 10.5 49.8 60.3 Additions for the period 0.1 1.3 1.4 Reclassification of assets - 0.4 0.4 Disposals for the period - (0.6) (0.6) Exchange differences (0.2) (0.7) (0.9) At 30 September 2010 10.4 50.2 60.6 Accumulated depreciation At 1 April 2009 6.6 35.3 41.9 Depreciation charge for the year 0.9 4.2 5.1 Disposals for the year (0.6) (1.9) (2.5) Exchange differences 0.3 0.7 1.0 At 31 March 2010 7.2 38.3 45.5 Reclassification of assets - 0.3 0.3 Depreciation charge for the period 0.3 2.3 2.6 Disposals for the period - (0.5) (0.5) Exchange differences (0.2) (0.4) (0.6) At 30 September 2010 7.3 40.0 47.3 Carrying amount At 1 April 2009 4.0 11.1 15.1 At 31 March 2010 3.3 11.5 14.8 At 30 September 2010 3.1 10.2 13.3 The Group does not have any material capital commitments in respect of the purchase of property, plant and equipment. 15 Financial liabilities - borrowings 30 September 31 March 2010 2010 £m £m At amortised cost Current (due within one year) Overdrafts 1.1 0.6 Bank loans 0.1 0.2 Unamortised loan issue costs - (0.6) Finance leases 0.2 0.2 Total current 1.4 0.4 Non-current (due after more than one year) Bank loans 137.7 135.2 Unamortised loan issue costs - (0.2) Finance leases - 0.1 Total non-current 137.7 135.1 Total 139.1 135.5 Net debt Total financial liabilities - borrowings 139.1 135.5 Add back: Unamortised loan issue costs - 0.8 Cash and cash equivalent assets (53.3) (58.8) Net debt 85.8 77.5 16 Retirement benefit obligations Defined benefit pension arrangements The Group's principal defined benefit pension arrangement is the Hogg Robinson (1987) Pension Scheme (the UK Scheme). The UK Scheme was available to most UK employees until it was closed to new members in March 2003. Its benefits are based on final pensionable salary. The increase in final pensionable salary since 31 March 2003 is limited to a maximum of the Retail Prices Index and 5% per annum. The latest actuarial valuation of the scheme was carried out at 6 April 2008 by an independent qualified actuary. The Group also operates defined benefit schemes in Norway, Switzerland, Germany and Italy. The amounts recognised on the Consolidated Balance Sheet are determined as follows: 30 September 31 March 2010 2010 £m £m UK scheme: Defined benefit obligations (350.3) (319.3) Fair value of plan assets 205.6 203.4 Deficit - UK Scheme (144.7) (115.9) Deficit - Overseas Schemes (10.4) (10.5) (155.1) (126.4) The amounts recognised in the Consolidated Income Statement in respect of the UK Scheme are as follows: Half year ended 30 September 2010 2009 £m £m Current service charge 1.3 0.7 Expected return on scheme assets (7.1) (6.0) Charge to finance costs 8.7 7.4 Total charge to the Consolidated Income Statement 2.9 2.1 The current service charge is computed based on the actuarial assumptions in place at the beginning of the financial year and translates to 20.6% of pensionable salaries (2009: 10.5%). The key assumptions used for the UK Scheme were: 30 September 31 March 2010 2010 Rate of increase in final pensionable salary 3.00% 3.50% Rate of increase in pensions in payment - accrued 5.00% 5.00% before 1999 Rate of increase in pensions in payment - accrued 3.00% 3.50% after 1999 Discount rate 5.00% 5.50% Inflation 3.00% 3.50% Expected rate of return on plan assets: Equity instruments 7.50% 8.00% Debt instruments 3.50% 4.50% Property 7.50% 8.00% Other assets 3.80% 4.40% 17 Share capital 30 September 2010 number Authorised Ordinary shares of 1p each 513,808,171 Issued, called up and fully paid At 1 April 2010 and 30 September 2010 307,762,884 30 September 2010 £m Issued, called up and fully paid Ordinary shares of 1p each 3.1 18 Other reserves Share-based Exchange Other incentives reserve reserves £m £m £m Balance at 1 April 2009 2.1 22.0 24.1 Other comprehensive income: Currency translation differences - (8.9) (8.9) Balance at 30 September 2009 2.1 13.1 15.2 Balance at 1 April 2009 2.1 22.0 24.1 Other comprehensive income: Currency translation differences - (11.8) (11.8) Transactions with owners: Share-based incentives 1.1 - 1.1 Balance at 31 March 2010 3.2 10.2 13.4 Balance at 1 April 2010 3.2 10.2 13.4 Other comprehensive income: Currency translation differences - (1.2) (1.2) Transactions with owners: Share-based incentives 1.0 - 1.0 Balance at 30 September 2010 4.2 9.0 13.2 19 Cash generated from operations Half year ended 30 September 2010 2009 £m £m Profit before tax from continuing operations 13.3 3.3 Adjustments for: Depreciation and amortisation 6.8 6.4 Net increase in provisions 0.7 3.2 Share of results of associates and joint (0.1) - ventures Net finance costs 4.3 3.8 Other timing differences 1.2 0.1 26.2 16.8 Cash expenditure charged to provisions (2.0) (4.8) Change in trade and other receivables 6.1 3.2 Change in trade and other payables (25.5) (10.6) Pension funding in excess of charge to (3.0) (3.7) operating profit Cash generated from operations 1.8 0.9 20 Related party transactions There have been no material changes in the nature of related party transactions since 31 March 2010 as reported in note 28 of the Group's 31 March 2010 Annual Report and Consolidated Financial Statements. 21 Contingent assets and contingent liabilities No change has taken place in the contingent assets and contingent liabilities as reported in note 26 of the Group's 31 March 2010 Annual Report and Consolidated Financial Statements. Hogg Robinson Group plc Statement of Directors' Responsibilities The Directors confirm that, to the best of their knowledge, this condensed consolidated half-yearly financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the Interim Management Report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely: * an indication of important events that have occurred during the first six months and their impact on the condensed set of consolidated financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and * material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report. The Directors of Hogg Robinson Group plc are as follows: J D Coombe(1) Chairman D J C Radcliffe Chief Executive J A Steadman Group Finance Director K A Ruffles Chief Operating Officer (appointed 1 October 2010) A E Isaac(1) (2) (1) Non-Executive Directors (2) Senior Independent Director By Order of the Board Keith Burgess Company Secretary 30 November 2010 Hogg Robinson Group plc Independent review report to Hogg Robinson Group plc Introduction We have been engaged by the Company to review the condensed set of Consolidated Financial Statements in the half-yearly financial report for the six months ended 30 September 2010, which comprises the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of Consolidated Financial Statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As described in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of Consolidated Financial Statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, `Interim Financial Reporting', as adopted by the European Union. Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of Consolidated Financial Statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, `Review of Interim Financial Information Performed by the Independent Auditor of the Entity', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Consolidated Financial Statements in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. PricewaterhouseCoopers LLP Chartered Accountants London 30 November 2010 Notes: (a) The maintenance and integrity of the Hogg Robinson Group plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the half-yearly financial report since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation and dissemination of the financial information may differ from legislation in other jurisdictions.