Changing face of distributing business travel

These are exciting times for Hogg Robinson (HRG). The distribution of airline bookings for business travel is undergoing fundamental change and technology developed by HRG is at the forefront of this evolution. The disruptive stance taken by HRG and its investment in technology is now attracting significant interest. 42 new contracts since April support our PBT growth forecasts in FY19 and FY20 of 21% and 18%. With HRG trading on a FY19 rating of 8x and offering a yield of 4x we re-iterate our b

Termination of coverage

Edison Investment Research is terminating coverage on Hogg Robinson Group (HRG). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

A technology company in travel management

HRG is, effectively, a technology company and that is not reflected in its FY18 PE rating of 9x. HRG’s lean operational platform and in-house software means that it can take advantage of the rapid transformation taking place in the travel management sector. The increased investment in both its divisions, Travel Management and Fraedom, underlines the ambition and growth opportunities. We have upgraded our 3yr CAGR in PBT to 9% (previously 7%), having introduced estimates for FY20 and expect a div

On a journey

Hogg Robinson (HRG) has combined a strong set of financials with a declaration of medium-term growth initiatives in both travel management and FinTech. Importantly, their implementation should be facilitated by the success of management’s largely completed restructuring and deleveraging programme. While there will be a short-term cost (we are reducing our current-year PBT forecast by 17%), this is wholly related to stated opex investment rather than any business deterioration (our revenue foreca

On the front foot

Hogg Robinson Group (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

Options to improve shareholder value

The ‘strategic review’, the result of which is expected to be released in 2Q2017, highlights a number of options available to HRG and the strength of its current position. HRG could increase the level of investment in Fraedom or Management Travel, crystallise the value of Fraedom through a sale/IPO, increase contributions to the pension scheme, increase the level of dividend, engage in M&A or even a combination of the above. As such, HRG is now at an interesting stage in its development with the

Doing things smarter

Hogg Robinson (HRG) continues to please with 12% growth in trading profit in the half to September. Currency boost apart, there was a further solid underlying advance (7%) by its main activity, travel management, despite 4% lower revenue in testing conditions. Increasing payoff from restructuring and technology-driven efficiencies reinforces confidence in HRG’s ability “to do things smarter” and in our forecasts, which are maintained on a constant currency basis but increased now owing to FX. Ca

Fraedom to grow

Hogg Robinson Group (HRG) recently provided insight into its technology business, Fraedom, which offers payments, expenses and travel software tools. We explore Fraedom in more depth, looking at the growth strategy, competitive positioning and financial prospects for this part of HRG’s business. This well-established, profitable business looks set to contribute to the group’s growth over the medium term.

Tried and tested

IMS confirmation of Q1 trading resilience is backed up by reassurance that Hogg Robinson (HRG) is in good shape to weather potential Brexit uncertainty. Strong finances, a fast-developing Fraedom technology business and increasing benefits from corporate restructuring should mitigate market pressures, while in a downturn HRG has been seen to benefit from a corporate desire to use professionals to cut travel costs. We reiterate that low net debt (FY17e net debt/EBITDA of just 0.5x) allows for pro

A beneficiary of Brexit

Following Brexit we see two new potential catalysts for HRG; FX translation and increased demand for its outsourcing services should UK economic activity slow. With an estimated 58% of revenues generated overseas we calculate that following the decline in sterling and by using current FX rates, HRG’s FY17 EBIT could be 7% higher than our current estimates resulting in EBIT growth of 12%. When combined with an ‘in-line’ 1QFY17 trading update the shares, which have actually declined since June 23

Shaping up

Hogg Robinson’s (HRG’s) 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 shareh

Four catalysts for share price appreciation

Despite trading on a FY16E PE rating of 10x, offering a dividend yield of 3.7%, deleveraging and growing PBT by 5% the shares are virtually unchanged over the last 12 months. Ahead of the prelims on May 24th we outline four catalysts for share price appreciation, deleveraging raises the potential for a special dividend, peer group valuation, reduced non-cash, charge on pension liabilities, and new management. We initiate with a buy recommendation and a price target of 80p, representing 20% upsid

Business as usual

A 10% rise in half-year trading profit backs up clear H215 recovery. Hogg Robinson (HRG) is delivering positive signs of meeting key objectives, ie reduced cost base (annualised savings of £7m) and net debt (-5% y-o-y), as well as growth in its managed travel business. Meanwhile, its enhanced technology offering, boosted by the new Fraedom brand, is being well received. However, the current uncertain environment of the travel industry suggests caution. We are slightly shading our expectations of

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