Credit crunch hits corporate travel

Jun 3 2008

Business travel group Hogg Robinson today said firms were cutting back on foreign travel in signs that the credit crunch is putting paid to extravagant corporate junkets.

The firm, which counts major banking groups such as Lloyds TSB as clients, said financial services firms in particular were reining in their spend on events and travel, while demand from smaller businesses was also in decline.

Hogg Robinson made the comments as it reported annual underlying earnings flat on the previous year, at £40.3 million.

The Basingstoke-headquartered firm warned in March that earnings would come in around 10% less than the previous £45 million analysts had been expecting.

Hogg said today it had been too slow to pick up on the downturn in its events and small business operations.

But the group said it hoped to offer cash-conscious clients a way to save money on corporate travel as the economic slowdown starts to bite.

City firms have already been slashing costs in a bid to offset the impact of the credit crisis, with reports suggesting that a number of investment banks have even been putting the brakes on taxi travel and corporate entertainment.

Hogg Robinson said today: “Certainly, we began to see some changes in the final quarter of the financial year and some of our managed clients, particularly those in financial services, have sought to reduce their overall travel expenditure.

“However, as we have shown in the past, we can help clients reduce their travel budgets and at the same time protect our own financials through the use of a wide range of services and products designed to reduce costs for our clients.”

The group suggested more belt tightening was on the way, saying that “market conditions remain challenging and economic uncertainties exist”.

Hogg posted revenues of £332.2 million for the year ended March 31, up 2% on an organic basis.

It said underlying pre-tax profits rose £7.5 million to £24 million.

The group cautioned in March that full-year results would be impacted by weak trading in its events and small business operation.

It has been cutting costs amid a European restructuring programme to save around £5 million a year, but hopes to step this up across the group to cut costs by an extra £1 million.

Hogg added that its hard-hit events and division account for under a third of group revenues, at between 20% to 30%.

Shares in the group rose 5% as analysts at Citigroup reportedly said that Hogg Robinson may be eyed for potential takeover.

Hogg boasts clients across the City as well as private and public sector giants, such as the Ministry of Defence and Foreign & Commonwealth Office.

The group owns operations in 25 countries and works with contracted partners operating under the Hogg Robinson brand in a further 81 countries.