Hogg Robinson changes direction

The Investment Column

Hogg Robinson, the business travel to financial services group, has been through something of a metamorphosis since it floated just ahead of Black Monday 10 years ago, but the shares have never again come close to the 350p launch price.

That is until last autumn, when the arrival on the share register of corporate vultures Julian Treger and Brian Myerson with plans to break up the group and buy back shares sent the price soaring. Those proposals were vigorously resisted at the time by the chairman, Brian Perry, a 40- year veteran of the group, but that policy has now been stood on its head, prompted in part no doubt by the June board appointment of Neville Bain.

The former Coats Viyella chief executive, who will take over as chairman in September, yesterday announced the sale of the transport division and paved the way for a buyback of up to 15 per cent of the shares which could put as much as pounds 27m into the hands of shareholders.

Mr Perry denies that Messrs Treger and Myerson had a hand in the change of tack. But even if they did not, shareholder confidence took a severe knock in January when a warning that the strong pound and competitive pressures would hit profits emerged within days of a director's share sale.

As it turned out, yesterday's announcement of underlying pre-tax profits raised from pounds 26.3m to pounds 28.1m in the year to March was better than forecasts cut after the January announcement. The market also responded well to Mr Bain's development plans and news that David Radcliffe, currently heading the travel division, was to take on the group chief executive's job.

Certainly there will be more pain to come. The sale of Weys, a Dutch transport business which lost pounds 1.3m last year, led to a pounds 3.5m exceptional charge in these figures. There is likely to be a bigger one if the rest of the transport operation, which ranges from a European trailer business to the Ministry of Defence freight contract for the Falklands, sells for the expected price of somewhat over pounds 20m. If suggestions that Hogg is talking to management about a buy-out are borne out, the pounds 42,000 option profit made in January by Clive Holmes, the division's managing director, could come in handy if he is involved.

Meanwhile, there is likely to be a further hit from sterling this year against Bennett, the Scandinavian travel operation acquired for pounds 58.5m two years ago. But the business looks sound and there was a 21 per cent profit rise in the original UK operations. Financial services also looks a decent operation, which should benefit from increased trends to outsourcing. Including transport, Charterhouse Tilney reckons profits could rise to pounds 29.5m this year, putting the shares, up 9p at 205.5p, on a forward multiple of nine. Good value.