Hogg Robinson’s (LON:HRG) development of software-as-a-service (Fraedom) is paying off impressively with “excellent” performance in the year to March. A near-doubling in technology trading profit more than made up for relative softness in travel management and looks set to continue to drive HRG’s growth in addition to likely increasing benefits from corporate restructuring. Bumper cash generation (FY16 net debt/EBITDA of just 0.6x) offers ample scope for profitable investment and returns to shareholders.
H2: Technology to the fore
After H1 +10% constant currency trading profit, boosted by recovery, a broadly unchanged outturn in H2 should not disappoint, given a more demanding comparative and persistent market pressures. Indeed, travel management’s profit shortfall was just 7% on 4% lower revenue thanks to initial efficiency measures (£4m cost saving in the full year). However, this was offset by a step-change in Fraedom profit (up threefold), driven by 15% higher revenue, largely from banking clients. Cash generation was again strong despite subdued trading (net debt down c 40% in the half, including a c £9m one-off pension receipt), while there was a slight decline in the underlying pension deficit owing to a rise in discount rate.
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