Interim Results

29th Sep 2008 07:00

29 September 2008

JOURNEY GROUP PLC

(the "Group" or the "Company")

Interim results for the six months to 30 June 2008

Journey Group plc, a leading provider of in-flight products, catering and cabin management services to the airline and travel industry, today announces its results for the six months to 30 June 2008.

Financial Highlights:

Group revenues of £48.8 million (2007: £52.4 million)

EBITDA* of £0.7 million (2007: loss of £2.1 million)

Operating profit before share based payments* of breakeven (2007: loss of £3.1 million)

Reorganisation of capital structure

£8.0 million net of expenses raised through placing of ordinary shares

£9.3 million of convertible bonds converted into ordinary shares

Pro-forma net assets at 30 June 2008 increased by £17.3 million to £21.4 million

Net debt reduced significantly

* before exceptional items

Operational Highlights:

Seven year contract won with United Airlines in Los Angeles

Three year renewal of Qantas contract 

Transfer of trading to the AIM market of the London Stock Exchange

Appointment of Gijs de Reuver as a non-executive director

Significant operational improvements have been achieved in both the Products and Services divisions and further improvements are anticipated in the second half

Stephen Yapp, Chairman of Journey Group commented, "Key to the Group's future was the successful reorganisation of our capital structure, which has significantly increased the Group's net assets and reduced its net debt. The significantly improved capital structure will allow for the financing of the United Airlines contract and provide us with the opportunity to review all the strategic options for the Group.

"The renewal of the contract with Qantas for the next three years and winning the United Airlines contract in Los Angeles for seven years, clearly demonstrates that our catering business model meets both the operational and strategic needs of our customers."

For further information please contact:

Journey Group plc Stephen Yapp - Chairman Carl Fry - Interim Chief Financial Officer	Tel: +44 (0) 20 8606 2000
KBC Peel Hunt Ltd (Nominated Adviser and Broker) Oliver Scott David Anderson	Tel: +44(0) 20 7418 8900
Tavistock Communications Jeremy Carey Matt Ridsdale	Tel: +44 (0) 20 7920 3150

CHAIRMAN'S LETTER TO SHAREHOLDERS

INTRODUCTION

The focus this year is on restoring the Group's underlying profitability through its new divisional structure whilst laying the strategic foundations for growth. Our Interim results demonstrate that we have made significant progress in both of these areas.

In particular, we have taken steps during the course of the last six months to simplify the business and to remove onerous supply agreements.

Further, the renewal of the contract with Qantas for the next three years and winning the United Airlines contract in Los Angeles for seven years were notable successes and clearly demonstrate that our catering business model meets both the operational and strategic needs of our customers.

Key to the Group's future was the successful reorganisation of our capital structure, which was conducted in difficult capital market conditions. Following the half year end, approximately £8 million of new equity (net of expenses) was raised through a placing of ordinary shares. These funds will be used to finance the United Airlines contract and to rebalance the Group's stretched working capital position. At the same time the holders of the Group's £9.3 million of convertible bonds agreed to convert their bonds into ordinary shares. Both proposals were approved by shareholders at the EGM in July and were completed at the end of August. 

This capital reorganisation has not only strengthened the Group's financial position by significantly increasing net assets and reducing net debt, it has also provided the Group with the cash resources with which to fund growth. If the equity placing and the capital reorganisation had taken place at 30 June 2008, the Group's pro-forma net assets at that date would have increased by approximately £17.3 million to £21.4 million.

In conjunction with the capital reorganisation the opportunity was taken to transfer the trading of the Company's ordinary shares to the AIM market of the London Stock Exchange PLC. The Board considers AIM to be a more appropriate market for the Company and that it should lead to a reduced administrative burden and lower on-going costs associated with being a public company.

We have started the re-branding of the Group's business both to develop and re-establish brand value within each business. As part of this process we have changed the name of the Company to Journey Group plc, which is more reflective of the Group's activities and preserves for the Products Division the exclusive use of the Watermark name. 

The past nine months have been testing for all those involved in the business. Even so, during this period we have been able to continue to provide an excellent service to our customers and I would like to take this opportunity to thank both our employees and suppliers for their support during this period.

RESULTS

The results for the half year were as follows:

6 months to 30 June	2008	2007
	£m	£m
Revenue	48.8	52.4
EBITDA	0.7	(2.1)
Depreciation and amortization	(0.7)	(1.0)
Operating loss before exceptional items and share based payments	-	(3.1)
Share based payments	(0.3)	-
Exceptional items	(1.1)	(3.9)
Net interest payable	(0.9)	(0.6)
Loss before taxation	(2.3)	(7.6)
Basic loss per share (pence)	4.9	17.1

The results for the half year demonstrate the improvement in profitability. EBITDA (before exceptional items and share based payments) of £0.7 million was achieved compared with a loss of £2.1 million for the comparable period of 2007. At the operating profit level prior to exceptional items and share based payments the Group achieved breakeven compared with a loss of £3.1 million in H1 2007.

Exceptional items of £1.1 million include £0.5 million related to the reorganisation of the Group's capital structure, a £0.3 million bad debt due to the collapse of Silverjet and start-up costs relating to the Los Angeles contract of £0.3 million. Additional exceptional costs will be incurred in the second half in relation to the reorganisation of the Group's capital structure and also in relation to additional start up costs for the Los Angeles contract. Interest increased to £0.9 million, but of this £0.6 million related to the convertible bonds now converted into ordinary shares. There was a net loss before taxation of £2.3 million compared with a loss of £7.6 million in 2007. The basic loss per share improved to 4.9 pence per share from 17.1 pence per share in H1 2007.

Net debt increased by £1.8 million from £13.5 million to £15.3 million. Following the reorganisation of the Group's capital structure, which involved the conversion of £9.3 million of convertible bonds into equity and raising £8.0 million (net of expenses) of new equity, net debt has been reduced significantly.

SERVICES DIVISION

6 months to 30 June		2008	2007
		£m	£m
Revenue		35.6	35.8
Operating (loss)/profit before exceptional items
	Underlying operating loss	(0.2)	(2.7)
	Non-recurring income	0.4	-
		0.2	(2.7)

The first half has been a period of consolidation. The significant losses experienced in 2007 have been largely eliminated with trading in line with expectations. Underlying operating loss before exceptional items improved to show a much reduced loss of £0.2 million. 

The renewal, against stiff competition, of our catering contract with Qantas for a further three years reflected the considerable steps we have taken as an organisation in our continuous improvement programme in four main areas: cost, process control, service delivery and food quality.

Customer service improvements have been realised through the investment in and strengthening of the London Heathrow team. The investment in a culinary expert is already gaining the support of current customers and further reorganisation will see them taking more commercial responsibility for Heathrow. KPI performance exceeds customer expectations.

The renegotiation of a new agreement with our current labour supplier will allow us greater flexibility and control of our future manpower planning and utilisation.

North America has been identified as the main strategic opportunity for the catering business. The signing of the catering contract with United Airlines to service all their flights out of Los Angeles was the first step in realising this strategy. Initial discussions have already been held with other potential customers for Los Angeles and other US locations, demonstrating the appetite for change within this large geographic market.

The Los Angeles operation for United Airlines is progressing well and is on schedule for a commencement date of 2 November 2008. The facility is close to completion and the recruitment and training of the management team is at an advanced stage. The funding for the Los Angeles operation has been secured through a combination of the net proceeds of the placing and asset based financing facilities.

The divisional senior management team has been enhanced by the arrival of an interim General Manager for Heathrow and a VP Operations for North America. Leadership development continues for all senior managers.

The outlook for the second half remains challenging with airlines reviewing flight schedules and service offerings for the winter season in response to the oil price and a deteriorating global economic backdrop. Management's focus continues to be on process and business improvement and the significant changes made over the last 12 months have created a more robust division.

PRODUCTS DIVISION

6 months to 30 June	2008	2007
	£m	£m
Revenue	14.7	17.9
Operating profit before exceptional items	0.3	0.5

Under the leadership of the recently appointed Managing Director, David Young, the Products Division has concentrated on rebuilding the capability and strategic focus of the division. 

Trading conditions have been difficult as airlines struggle with the impact of high fuel prices and reduced passenger demand. Reflecting these conditions, revenue fell by £3.2 million to £14.7 million with operating profit before exceptional items falling to £0.3 million from £0.5 million.

The talent of the Products team has been enhanced with a number of key appointments including a permanent Design and Product Director, a Brands Director for Asia Pacific and a new Supply Chain Operations Director in Hong Kong. We have further plans to continue to strengthen the team in the key areas of design and product development and strategic sourcing.

We have undertaken a division wide rebranding program which reflects the history of the Group whilst recognising the need to update the division's marketing approach for a new trading environment. A new website was launched during the period with new marketing brochures and presentation guidelines. This will be extended to our customer contact opportunities through tradeshows and a quarterly customer newsletter. 

To meet the growth opportunities in the regions and to provide a streamlined service to our customers three new offices were opened in April. The offices in Sydney and Auckland will work closely with our key customers in that region including Qantas, Air New Zealand and Air Tahiti Nui. The Dubai office will provide a strong base for growth with our Middle East customers, including Emirates and Etihad.

The collapse of Silverjet during the period resulted in a bad debt of £0.3 million. The division was a supplier of inflight products to Silverjet and had anticipated annual turnover from Silverjet of approximately £0.5 million. The Group had negligible exposure to the collapse of either Excel Airways or Zoom.

We are seeing a number of airlines deferring all new product development or significantly reducing the specification of products offered to customers inflight. The airlines' push for reduced costs and the continued strength of the Chinese Yuan together with labour rate inflation and changes to taxes and duties in China continue to put pressure on margins and sales opportunities. The remainder of the year will in all likelihood see these conditions continue. 

BOARD APPOINTMENT

We are delighted to welcome Gijs de Reuver as a non-executive director. He has been a partner with Cycladic Capital since 2004, which invests in small and mid sized public companies across Europe. Following the reorganisation of the Group's capital structure, Cycladic became a significant shareholder in the Company with a holding of 13.5% in the ordinary shares. Prior to joining Cycladic Capital, he worked for Houlihan Lokey Howard & Zukin advising companies and creditors on financial restructuring, for Goldman Sachs advising on mergers, acquisitions and financing and for Arthur D. Little as a strategy consultant. Gijs de Reuver holds an MSc in electronics from Delft University of Technology and an MBA from the University of Chicago Graduate School of Business.

OUTLOOK

During the remainder of the year we will continue to build the foundations for strategic growth, principally in the US, whilst completing the work on our business models needed to give the Group the ability to adapt to change quickly. As a result, we anticipate further operational improvements in the second half.

The significantly improved capital structure will allow us the opportunity to review all the strategic options for the Group. 

The airline industry is still undergoing a great deal of change as it adapts to the current economic environment with many airlines taking longer to confirm their winter schedules, thus making the near term future difficult to predict.

Stephen Yapp

Chairman

29 September 2008

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

for the 6 months to 30 June 2008

Note		Before exceptional items to 30 June 2008  £'m	Exceptional items to  30 June 2008  £'m	Total   6 months to  30 June 2008  £'m	Total 6 months to 30 June 2007 £'m	Total  12 months to 31 December 2007 £'m
Revenue	4	48.8	-	48.8	52.4	105.9
Cost of sales		(40.4)	-	(40.4)	(45.8)	(92.9)
Gross profit		8.4	-	8.4	6.6	13.0
Operating and administrative costs (excluding exceptional items)		(8.7)	-	(8.7)	(9.6)	(18.3)
Movement in fair value of derivative financial instruments		-	-	-	(0.1)	(0.3)
Exceptional refinancing costs		-	(0.5)	(0.5)	(1.7)	(1.8)
Exceptional Los Angeles start up costs		-	(0.3)	(0.3)	-	-
Exceptional restructuring costs		-	-	-	(0.3)	(0.3)
Exceptional bad debt		-	(0.3)	(0.3)	-	-
Exceptional asset retirement		-	-	-	(1.9)	(2.1)
Exceptional Impairment of goodwill		-	-	-	-	(20.6)
Total operating and administrative expenses		(8.7)	(1.1)	(9.8)	(13.6)	(43.4)
Operating loss	4	(0.3)	(1.1)	(1.4)	(7.0)	(30.4)
Operating loss before share based payments		-	(1.1)	(1.1)	(7.0)	(30.1)
Share based payments		(0.3)	-	(0.3)	-	(0.3)
Finance costs	6	(0.9)	-	(0.9)	(0.6)	(1.7)
Loss before tax attributable to equity share owners		(1.2)	(1.1)	(2.3)	(7.6)	(32.1)
Tax (expense)/credit		-	-	-	(0.1)	0.1
Loss after tax attributable to equity share owners	4	(1.2)	(1.1)	(2.3)	(7.7)	(32.0)
Loss per share (pence)
Basic	5			(4.9p)	(17.1p)	(69.5p)
Diluted	5			(4.9p)	(17.1p)	(69.5p)

Note - Labour costs of £7.4m reported in the first half of 2007 have been reclassified from operating and administrative costs to costs of sales (full year 2007 - £15.2m). These costs have been reclassified as they are directly attributable costs and the revised presentation is more relevant to understanding the nature of transactions. 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 June 2008

		30 June 2008  £'m	Restated  30 June 2007  £'m	31 December 2007  £'m
Assets
Non-current assets
Property, plant and equipment	7	9.5	9.8	9.4
Goodwill		10.0	30.6	10.0
Intangible assets		0.5	0.6	0.4
		20.0	41.0	19.8
Current assets
Inventories		8.1	5.8	7.2
Trade and other receivables		14.4	16.3	15.9
Prepayments		1.5	2.0	0.6
Current income tax		-	-	0.1
Cash and short-term deposits		2.0	2.0	2.0
Fair value of derivative financial instruments		-	0.2	-
		26.0	26.3	25.8
Total assets		46.0	67.3	45.6
Equity and liabilities
Equity attributable to equity share owners of the parent
Issued share capital		0.5	0.5	0.5
Share premium account		21.6	21.6	21.6
Merger reserve		1.5	7.6	7.6
Equity element of convertible bonds		0.3	0.3	0.3
Foreign currency translation reserve		(0.7)	(0.7)	(0.7)
Retained earnings		(19.1)	0.8	(23.2)
Total equity		4.1	30.1	6.1
Non-current liabilities
Trade and other payables		-	0.4	-
Interest bearing loans and borrowings		4.6	6.5	5.8
Convertible bonds		9.0	7.7	8.4
Deferred income tax liabilities		-	0.1	-
		13.6	14.7	14.2
Current liabilities
Trade and other payables		24.6	20.7	24.0
Interest bearing loans and borrowings		3.7	1.5	1.3
Current income tax		-	0.3	-
		28.3	22.5	25.3
Total liabilities		41.9	37.2	39.5
Total equity and liabilities		46.0	67.3	45.6

UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the 6 months to 30 June 2008

		6 months to 30 June 2008  £'m	6 months to  30 June 2007 £'m	12 months to 31 December 2007  £'m
Net cash flows from operating activities
Loss after tax		(2.3)	(7.7)	(32.0)
Tax expense/(credit)		-	0.1	(0.1)
Depreciation and amortisation		0.7	1.0	1.7
Exceptional impairment of goodwill		-	-	20.6
Exceptional bad debt		0.3	-	-
Exceptional asset retirement		-	1.9	2.1
Share based payment expense		0.3	-	0.3
Finance cost		0.9	0.6	1.7
Movement in fair value of forward exchange rate contracts		-	0.1	0.3
Movement in other non-cash items		-	-	(0.1)
Increase in inventories		(0.9)	(1.5)	(2.7)
Decrease in trade and other receivables		0.4	1.2	3.0
Increase in trade and other payables		0.6	0.5	3.9
Cash outflows used in operations		-	(3.8)	(1.3)
Interest paid		(0.3)	(0.5)	(1.1)
Income taxes paid		-	(0.4)	(0.6)
Net cash outflows used in operating activities		(0.3)	(4.7)	(3.0)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		-	-	0.1
Purchase of property, plant and equipment		(0.7)	(0.4)	(1.1)
Purchase of intangible assets		(0.2)	(0.1)	(0.2)
Acquisition of subsidiary, net of cash acquired		-	(2.3)	(2.3)
Net cash flows used in investing activities		(0.9)	(2.8)	(3.5)
Cash flows from financing activities
Proceeds from issue of convertible bonds		-	8.0	8.0
Proceeds from borrowings		1.5	6.5	6.5
Payment of hire purchase and finance lease obligations		(0.3)	(0.4)	(0.3)
Net cash flows generated from financing activities		1.2	14.1	14.2
Net increase in cash and cash equivalents		-	6.6	7.7
Cash and cash equivalents at beginning of period		2.0	(5.7)	(5.7)
Cash and cash equivalents at end of period		2.0	0.9	2.0

Note - Cash and cash equivalents reported for June 2007 included for the purpose of the cash flow statement, Cash and short term deposits of £2.0m less bank overdrafts of £1.1m. 

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

as at 30 June 2008

Consolidated statement of changes in equity for the 6 months to 30 June 2008

	Issued share capital £'m	Share premium amount £'m	Merger reserve £'m	Equity based financial instruments £'m	Foreign currency translation reserve £'m	Retained earnings £'m	Total equity £'m
At 1 January 2008	0.5	21.6	7.6	0.3	(0.7)	(23.2)	6.1
Loss for the period	-	-	-	-	-	(2.3)	(2.3)
Cost of share based payments	-	-	-	-	-	0.3	0.3
Transfer between Reserves	-	-	(6.1)	-	-	6.1	-
At 30 June 2008	0.5	21.6	1.5	0.3	(0.7)	(19.1)	4.1

The transfer between merger reserve and retained earnings of £6.1m relates to goodwill impairment in 2007 that has now been reclassified. 

Condensed statement of changes in equity for the 6 months to 30 June 2007 (Restated)

	Issued share capital £'m	Share premium amount £'m	Shares to be issued £'m	Merger reserve £'m	Equity based financial instruments £'m	Foreign currency translation reserve  £'m	Retained earnings £'m	Total equity £'m
At 1 January 2007	0.4	21.6	2.1	5.3	-	(0.4)	8.5	37.5
Currency translation differences	-	-	-	-	-	(0.3)	-	(0.3)
Loss for the period	-	-	-	-	-	-	(7.7)	(7.7)
Issue of share capital	0.1	-	(2.1)	2.3	-	-	-	0.3
Equity element of convertible loan	-	-	-	-	0.3	-	-	0.3
At 30 June 2007	0.5	21.6	-	7.6	0.3	(0.7)	0.8	30.1

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED ACCOUNTS

for the 6 months to 30 June 2008

1. CORPORATE INFORMATION

The results for the year to 31 December 2007 do not constitute statutory financial statements. They are an abridged version of the audited full financial statements filed with the Registrar of Companies. The report from the auditors for the 2007 statutory financial statements included reference to a matter of going concern to which the auditors drew attention by way of emphasis without qualifying their report. The interim results are unaudited. As set out in Note 9a) below, on 29 August 2008 a fund raising was completed under which approximately £8.0m net of expenses was raised by means of a placing of ordinary shares.

Journey Group plc is a public limited company incorporated and domiciled in England & Wales. The company's shares were publicly traded on the London Stock Exchange during the reporting period. 

The principal activities of the group are described in note 4.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

i. Basis of preparation

The accounting policies applied in preparing the interim results for the period ended 30 June 2008 are unchanged from those adopted in the financial statements for the year ended 31 December 2007.

ii. Statement of compliance

This financial information has been prepared on the basis of the recognition and measurement requirements of IFRSs in issue that are adopted by the EU and expected to be effective at 31 December 2008. The group has also complied with International Accounting Standard 34 "Interim Financial Reporting".

3. RESTATEMENT OF PRIOR YEAR RESULTS

 

A review of the Group's operational and accounting systems, processes and internal controls was carried out during 2007 that identified a number of items that had not been accounted for appropriately in 2006 and in respect of which prior year restatement adjustments were made in the 2007 interim results. In addition, the 2007 year end close process identified further necessary restatement of the 2006 results that had not been captured at the time of issuing the 2007 interim results. In accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the nature of the errors and the impact on each financial line item affected is stated below:

The effect of the restatement on the financial statements is summarised in the table below:

Consolidated balance sheet	6 months to 30 June 2007 £'m
Decrease in inventories	0.4
Decrease in property, plant and equipment	0.1
Reduction in net assets	0.5
Decrease in retained earnings brought forward	0.5

4. SEGMENTAL REPORTING

Journey Group is organised on a worldwide basis into two primary business segments, namely the Products and Services divisions. These reportable segments are the two strategic divisions for which monthly financial information is provided to the Board.

The Products division provides a broad range of travel supplies predominately to the international travel industry on a global basis. The Services division is a supplier of catering and media services to the international travel industry within the United Kingdom and is also engaged in supply chain management. Both divisions provide marketing, design and consultancy services. 

Information on primary reporting by business segment is shown below.

Segment revenue, expenses and results include transfers and transactions between business segments. Such transactions are accounted for at competitive market prices which would be charged to unaffiliated clients for similar goods. All inter-segment transactions are eliminated on consolidation.

Exceptional items relate to significant non-recurring expenditure of an unusual nature.

Segmental information by business segment for 6 months to 30 June 2008

	Products division 6 months to 30 June 2008 £'m	Services division  6 months to  30 June 2008  £'m	Eliminations 6 months to  30 June 2008  £'m	Total  6 months to 30 June 2008  £'m
Revenue
Travel supplies, catering and media services	13.2	24.4	-	37.6
Supply chain management	-	10.8	-	10.8
Other non recurring income	-	0.4	-	0.4
Net sales to other segments	1.5	-	(1.5)	-
Total revenue	14.7	35.6	(1.5)	48.8
Result
Segment result before exceptional items	0.3	0.2	-	0.5
Exceptional costs	(0.3)	(0.3)	-	(0.6)
Segment result	-	(0.1)	-	(0.1)
Unallocated corporate expenses				(0.8)
Unallocated exceptional refinancing costs				(0.5)
Operating loss				(1.4)
Interest expense				(0.9)
Income tax				-
Loss after tax				(2.3)

Segmental information by business segment for 6 months to 30 June 2007

	Products division 6 months to 30 June 2007  £'m	Services division  6 months to 30 June 2007  £'m	Eliminations  6 months to 30 June 2007  £'m	Total 6 months to  30 June 2007  £'m
Revenue
Travel supplies, catering and media services	17.7	27.2	-	44.9
Supply chain management	-	7.5	-	7.5
Net sales to other segments	0.2	1.1	(1.3)	-
Total revenue	17.9	35.8	(1.3)	52.4
Result
Segment result before exceptional items	0.5	(2.7)	(0.2)	(2.4)
Exceptional restructuring costs	-	(0.3)	-	(0.3)
Segment result	0.5	(3.0)	(0.2)	(2.7)
Unallocated corporate expenses				(0.7)
Unallocated exceptional refinancing cost				(1.7)
Unallocated exceptional asset retirement				(1.9)
Operating loss				(7.0)
Interest expense				(0.6)
Income tax				(0.1)
Loss after tax				(7.7)

5.  LOSS PER SHARE

Basic loss per share is calculated by dividing the net loss for the period attributable to equity share owners (numerator) of the parent by the weighted number of ordinary shares in issue during the period (denominator).

Diluted loss per share is calculated using the same numerator with the denominator adjusted for the dilutive effects of share options and shares to be issued in respect of past acquisitions. As the Group has made a loss for the first 6 months of the year, no adjustment is made to the denominator for the impact of share options and shares to be issued because the potential shares are anti dilutive.

Adjusted loss per share, both basic and diluted, use the denominator described in the appropriate paragraphs above. For both adjusted basic loss per share and adjusted diluted loss per share, the numerator is adjusted to remove the post tax impact of exceptional items from the calculations.

The following represents loss and share data used to calculate basic, diluted and adjusted earnings per share: 

Loss table	Ref	6 months to  30 June 2008  £'m	6 months to 30 June 2007  £'m	12 months to  31 December2007  £'m
Net loss attributable to equity share owners	A	(2.3)	(7.7)	(32.0)
Exceptional items (post tax)		1.1	3.9	24.8
Adjusted net loss attributable to equity share owners	B	(1.2)	(3.8)	(7.2)

Share table	Ref	Weighted average shares  6 months to 30 June 2008 Number	Weighted average shares 6 months to  30 June 2007 Number	Weighted average shares 12 months to  31 December 2007 Number
Weighted average shares for basic loss per share	C	46,732,093	45,200,604	46,004,784
Weighted average shares for diluted loss per share	D	46,732,093	45,200,604	46,004,784

Loss per share table	Formula	Total Loss per share6 months to  30 June 2008Pence	Total Loss per share  6 months to  30 June 2007 Pence	Total Loss per share  12 months to  31 December 2007 Pence
Basic loss per share	A/C	(4.9)	(17.1)	(69.5)
Diluted loss per share	A/D	(4.9)	(17.1)	(69.5)
Adjusted basic loss per share	B/C	(2.6)	(8.4)	(15.6)
Adjusted diluted loss per share	B/D	(2.6)	(8.4)	(15.6)

6. FINANCE COSTS

	6 months to  30 June 2008 £'m	6 months to 30 June 2007 £'m	12 months to  31 December 2007 £'m
Bank loans and overdrafts	0.3	0.5	0.8
Finance charges payable under finance leases and hire purchase contracts	-	-	0.1
Convertible bonds	0.6	0.1	0.8
Total finance costs	0.9	0.6	1.7

7. PROPERTY, PLANT AND EQUIPMENT 

During the period plant and equipment has been purchased amounting to £0.7m (6 months to 30 June 2007: £0.4m). Of this total £0.3m relates to assets under construction which have not attracted any depreciation charge. There were no asset disposals in the period.

8. CAPITAL COMMITMENTS 

Capital commitments contracted for but not provided for at 30 June 2008 amounted to £3.7m (30 June 2007 £nil).

9. EVENTS AFTER THE BALANCE SHEET DATE 

a) Fund raising and conversion of bonds into equity

On 29 August 2008 a fund raising was completed under which approximately £8.0m net of expenses was raised by means a placing of 120,000,000 ordinary shares at a placing price of 7.5p per share. The Directors expect to apply the net proceeds of the placing to finance the United Contract (£4.25m), make loan repayments (£2.0m) and strengthen the balance sheet (£1.75m). On the same date the convertible bonds of £9.3m (originally convertible at a conversion price of 20.0p per £1 principal of convertible bond) were converted into 123,840,460 new ordinary shares at a conversion price of 7.5p per £1 of principal of convertible bond. The Directors believe that the conversion of the bonds is in the best interests of the Group, as it will result in a reduction of indebtedness and remove any obligation of the Group to fully repay the principal amount of the convertible bonds in cash in 2010.

b) Supply chain management activities

The Group and the Service division segmental results included turnover of £10.8m and gross profit of £0.2m that was earned in relation to supply chain management activities. Subsequent to the balance sheet date, these activities have been restructured with the result that the Group will no longer act as a principal in supplying such services, but will instead act in the capacity of an agent. In future the Group will only receive a fee for its services and, accordingly, both turnover and cost of sales will reduce significantly. The impact of the change in business model on profitability is not expected to be significant. The impact on the balance sheet will be that there will be a significant reduction in the inventories, trade debtors, trade and other creditors and cash held within the supply chain management activities; although the effect on net assets is not expected to be significant (the net liabilities of the supply chain management activities were £0.1m at 30 June 2008). At the balance sheet date inventories, trade debtors, trade and other creditors and cash amounted, respectively, to £3.6m, £3.2m, £7.6m and £0.7m. 

c) Renegotiation of supply contract

Following the balance sheet date, the Group settled a dispute with a significant supplier and renegotiated a 5 year contract with that supplier resulting in the expectation of reduced costs and increased flexibility over the next five years. Payments by the Group totalling £0.5m are attributable to such terms and cost savings, and will be capitalised as an intangible asset to be amortised over the life of the contract. Legal and other costs amounting to £0.1m will be written off as an exceptional item in the second half of the year.

INDEPENDENT REVIEW report to JOURNEY Group PLC 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 which comprises the consolidated income statement, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and notes 1 to 9. We have read the other information contained in the half yearly financial report which comprises only the Chairman's Letter to Shareholders and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union. 

Our responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union. 

GRANT THORNTON UK LLP

AUDITOR LONDON

ENDIR FKAKNFBKDFCB

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