A profit warning was issued today by Hogg Robinson Group amid increased competition, lower transaction fees and increased levels of self-booking of business travel across Europe.
The company also reported further softness in the SME corporate travel sector and higher staff costs as part of a contract with the Canadian government in the period from April 1.
HRG said all of these factors “have resulted in downward pressure on our top line, and earnings below our expectations during the financial year to date”.
Client spend for the three months to June 30 was down 3% year on year, while travel activity was higher by 5%. Revenue fell by 6%.
In an interim management statement ahead of its annual general meeting tomorrow, the company said: “As a result of the lower-than-expected revenues during the first three months, together with the higher costs we maintained as the government of Canada contract ramped up, our profitability for the first half of this year is likely to be significantly lower than in the six months to September, 30, 2013.”
HRG said it remained focused on maintaining a cost base that is “appropriate to the market backdrop” while ensuring that client service is not compromised.
“We continue to see cost-saving opportunities in the business and are accelerating our plans to reduce operating costs to match our revised expectations of client activity and business mix,” the group added.
“At this early stage in the year, the actions we are taking to balance costs should materially improve the group’s overall performance in the second half, but it is unlikely the anticipated shortfall in trading in this first half can be recovered in full.
“We therefore now believe that trading for the full year is likely to deliver an outcome slightly below current market expectations.”
Chief executive David Radcliffe said: “During the remainder of the year we will address the balance of costs versus revenues.
“It is unlikely that the associated benefits will fully offset the fall in first-half earnings, but we expect the full-year earnings impact to be significantly less than in the first-half.
“At the same time, we will continue to execute against our strategic priorities designed to grow our business in both our managed travel and technology sectors, and optimise our financial performance through the economic cycles.”
HRG said its financial position remains “robust” and cash generation across the group has remained strong.