Interim Results 2011

27 September 2011

Embargoed, 0700hrs

Journey Group plc

Interim Results

for the six months ended 30 June 2011

Journey Group plc a leading provider of in-flight products and catering services to the international airline and travel industries today announces its results for the six months ended 30 June 2011.

Highlights

·; Return to profitability - with an adjusted profit before taxation from continuing operations of £74,000 (H1 2010: loss of £492,000).

·; Eliminated debt - with net debt moving into net funds of £30,000 (31 December 2010: net debt £189,000).

·; Increased borrowing facility - new 2 year committed borrowing facility of up to £2,450,000.

·; New markets - Products Division has re-entered the US market with a substantial contract win with Delta Airlines Inc.

·; US Division - Los Angeles continues to meet and exceed its service standards, maintaining for the half year its best world-wide catering status with United Airlines.

Stephen Yapp, Chairman commented

"With the turnaround complete the Group is focussed on growth. It is well placed, with significant funds as well as material borrowing facilities. International airlines are taking our catering business model increasingly more seriously, which bodes well for our US Division. The international airline sector continues its recovery which will assist the Products Division in extending its recent success in this sector.

Trading in the second half of this year continues to be encouraging and your Board looks forward with confidence."

For further information please contact:

Stephen Yapp

Journey Group plc

Tel: +44 (0) 20 8606 2000

[email protected]

Carl Fry

Journey Group plc

Tel: +44 (0) 20 8606 2000

[email protected]

Singer Capital Markets Limited (Nominated Advisor & Broker)

Jonathan Marren

Tel: +44 (0) 20 3205 7500

CHAIRMAN'S LETTER TO SHAREHOLDERS

Dear Shareholder

INTRODUCTION

For your Group, 2011 is about completing the turnaround and putting down the foundations for growth.

During the first half of the year we have made considerable progress:

·; Return to profitability - with an adjusted profit before taxation from continuing operations of £74,000 (H1 2010: loss of £492,000).

·; Eliminated debt - with net debt moving into net funds of £30,000 (31 December 2010: net debt £189,000).

·; Increased borrowing facility - new 2 year committed borrowing facility of up to £2,450,000.

·; New markets - Products Division has re-entered the US market with a substantial contract win with Delta Airlines Inc.

·; US Division - Los Angeles continues to meet and exceed its service standards, maintaining for the half year its best world-wide catering status with United Airlines.

In addition, shortly following the half year end a significant further step in the Group's strategic development was made with the disposal of Media on the Move Limited ("Media") for £1,175,000 in cash.

Market conditions in the international airline industry continued to improve for passenger traffic with YTD growth to July 2011 of 6.4% and load factors in July 0.5% better. Passenger traffic growth in the zones served mostly by the Group was mixed with North America at 3.5%, Asia Pacific at 4.5% but Europe at 10.1%. Freight levels were only better YTD to July 2011 by 1.0% and for the month worse by 0.4%. Whilst the positive rates of growth are reflective of the earlier more optimistic world economic outlook, the difficulties now re-emerging in the world economy lead to the expectation of a weaker end to the year for both passenger traffic and freight.

STRATEGIC DEVELOPMENT

In line with the Group's strategy to focus its resources on the business segments offering it the greatest potential for growth, the decision was taken to dispose of Media in July 2011. The proceeds amounted to £1,175,000 in cash subject to an adjustment in respect of normal working capital and net cash that is expected to deliver additional cash proceeds of approximately £13,000. Of the consideration, £940,000 was received on completion in early H2 and the remainder is expected to be received in October 2011. For the half year, Media's turnover and profit before taxation amounted, respectively, to £1,265,000 and £50,000. As a consequence of the carrying value of goodwill in relation to Media, a provision for loss on disposal of £999,000 has been recognised. This charge, Media's operating results and the costs of disposal of £112,000 have been treated in these financial statements as discontinued operations.

Going forwards, the Group is now more streamlined with its two core Divisions of US and Products with both offering the potential for significant growth. International airlines are taking our catering business model increasingly more seriously and, accordingly, the US Division is focussed on its prospects for establishing new facilities in other US cities as well as on the fill-out of its significant existing capacity. The Products Division is looking to extend its recent success within the international airline sector as that industry continues its recovery as well as to broaden the markets it serves. In addition, it is also seeking to develop its recycling activities as the demand for environmental efficiencies grows.

FUNDING

In my 2010 annual letter to shareholders I said that it was the Group's intention to refinance the remaining £1,500,000 Taurouge II SARL debt with a lower cost facility that would also remove the restrictions on the US Division raising debt and so provide the basis for significant debt capacity as growth opportunities are secured. In line with this objective, a new two year committed borrowing facility with Royal Bank of Scotland plc was entered in May 2011 of up to a maximum of £2,450,000. Whilst lowering borrowing costs and removing the borrowing restrictions in the USA, this facility also provides significant additional debt capacity over the previous £1,500,000 facility against which £400,000 had to be held as a security deposit in cash.

Following the half year end, exercise notices were received in respect of warrants over 14,528,624 ordinary shares at an exercise price of 2 pence each resulting in additional cash resources of £290,572. Such additional shares have been issued thereby increasing the Company's issued share capital to 305,101,177 ordinary shares.

RESULTS

The results for the half year were as follows:

The Group's financial results improved considerably over H1 2010 with a significant increase in turnover and a return to profitability driven by a substantial recovery in the Products Division. Revenues from continuing operations increased by 26% to £20,119,000 and EBITDA before exchange differences from continuing operations increased 57% to £618,000. Adjusted profit before taxation from continuing operations amounted to £74,000 compared with a loss of £492,000 in H1 2010. Adjusted earnings per share from continuing operations amounted to 0.02 pence compared with a loss of 0.17 pence in H1 2010. The Board considers that adjusted profit before taxation and adjusted earnings per share provide a better guide to the underlying performance of the Group.

On a statutory basis, there was a loss before taxation from continuing operations of £302,000, which was arrived at after charging share based payments of £376,000. The share based payment charge arose as a consequence of the adoption during the period of the new share incentive scheme for the Company's Executive Directors and is a non-cash fair value charge. The charge comprised £84,000 in relation to vesting in H1 2011 and £292,000 in respect of prior period vesting. Future charges are expected to be £84,000 in each of H2 2011 and H1 and H2 2012. There was a loss from discontinued operations of £1,064,000, which included a provision for loss on disposal of £999,000 and disposal costs of £112,000 in relation to Media. The loss after taxation amounted to £1,372,000.

Net funds at the half year end amounted to £30,000, comprising net cash of £740,000 less debt under finance leases of £710,000, compared with net debt of £189,000 at 31 December 2010. Following the disposal in early H2 of Media, which led to a net cash inflow of £1,076,000, and the exercise of warrants, with subscription proceeds of £290,572, the Group's net funds position improved materially. This together with the Group's existing borrowing facilities creates the financial basis from which to pursue our growth prospects in the USA.

US DIVISION

The US Division produced a robust performance in a climate of significant economic uncertainty and very high fuel prices in the USA. Turnover modestly declined in line with flight numbers falling to 12,480 from 12,869 in H1 2010 as United Airlines reduced schedules to improve load factors and offset high fuel prices. EBITDA was also only modestly lower with labour costs savings achieved through the control procedures and efficiencies of the Division's catering business model. The facility continued to meet or exceed its performance goals relating to reliability (on time performance) and food quality as perceived by passenger ratings.

The Division is now focussing on a number of significant new business opportunities, including prospects for establishing new facilities in other US cities as well as on the fill-out of its significant existing capacity. The remainder of the current year is expected to deliver a stable performance in line with expectations.

PRODUCTS DIVISION

The Products Division produced a substantial recovery driven by new contract wins and the impact of costs savings from prior year restructuring. Turnover increased by 53% to £12,821,000 and EBITDA before exchange differences improved considerably to £244,000 from a loss of £250,000 in H1 2010. This performance is all the more creditable given the continued highly competitive market and pressure on margins.

The most significant contributor to the turnaround was a new contract win by Watermark to design and supply Delta Airlines Inc, the world's second largest airline, with a new range of meal service items for its International and Domestic Business Class cabins. The new range was launched in August 2011 and the supply of the launch quantities has had a considerably positive impact on the half year. This new contract signals a return to the USA market for Watermark and is complementary to the Group's broader objectives in this region. Other new contracts were won with Jetstar, Virgin Australia, Tui/Thomson and Prestige Cruises.

The Delta meal service contract and other key wins support Watermark's strategy of broadening its customer base, extending its geographical reach and adding to the end markets it serves. Increasing emphasis is being placed on design and sourcing capabilities and through these the ability to enter new markets utilising Watermark's rich design and product development capability and history. We are also broadening our sourcing reach beyond China with a significant commitment to expand our purchasing into other key regions.

The MNH business traded well in a tough market with sluggish passenger numbers producing a performance close to expectations. MNH's unique recycling partnership approach delivers sustained client value and financial savings through operational and environmental efficiencies and is an attractive proposition for an increasingly cost conscious airline sector. In addition, utilising its supply chain accountability and flexible approach, managed product supply contracts have been developed and continue to grow within the travel sector. As a consequence of sustained initiatives to divert waste from landfill, via separation and secondary use initiatives, zero landfill has been achieved at MNH's UK operations; the culmination of a 5 year goal.

CENTRAL COSTS

The increase in central costs mainly relates to the phasing of costs, a product marketing contract coming to an end in 2010 and the cessation of charges to the Alpha Airfayre joint venture which was sold in the latter part of 2010. Overall for the year, it is expected that underlying central costs will be broadly in line with the 2010 levels.

BOARD AND ADVISERS

In light of the Group's improved position, it was decided to change the constitution of the Board. Daniel Bernstein and David Jennings stepped down from their NED roles at the AGM. I would like to thank them for their valued contribution in positioning the Group to where it is today.

Graham Bird has agreed to assume responsibility as Chairman of the Audit Committee and Dimitri Goulandris has agreed to become Chairman of the Remuneration Committee.

As recently announced, Singer Capital Markets Limited has been appointed as Nominated Adviser and Broker to the Company and the Board looks forward to working with them in the development of the Group's business.

OUTLOOK

With the turnaround complete the Group, through its two core divisions, is focussed on growth. It is well placed, with significant funds as well as material borrowing facilities. Both Divisions offer the potential for significant growth. International airlines are taking our catering business model increasingly more seriously, which bodes well for our US Division. The international airline sector continues its recovery which will assist the Products Division in extending its recent success in this sector.

Trading in the second half of this year continues to be encouraging and your Board looks forward with confidence.

Stephen Yapp

Executive Chairman

27 September 2011

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

for the 6 months to 30 June 2011

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the 6 months to 30 June 2011

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

as at 30 June 2011

UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT

for the 6 months to 30 June 2011

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the 6 months to 30 June 2011

Condensed consolidated statement of changes in equity for the 6 months to 30 June 2011

Condensed consolidated statement of changes in equity for the 6 months to 30 June 2010

Condensed consolidated statement of changes in equity for the 12 months to 31 December 2010

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED ACCOUNTS

for the 6 months to 30 June 2011

1. CORPORATE INFORMATION

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

The comparative figures for the year ended 31 December 2010 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report, which did not contain statements under sections 498(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act 2006. The interim results are unaudited.

The principal activities of the Group are described in Note 3.

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 2011 are unchanged from those adopted in the financial statements for the year ended 31 December 2010.

ii. Statement of compliance

These interim consolidated financial statements are for the six months ended 30 June 2011. They have been prepared in accordance with IFRSs as adopted by the European Union and IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010.

3. SEGMENTAL REPORTING

The Group was previously organised into three primary business segments, the Products, Services and US Divisions. Following the disposal of Media on the Move Limited, which has been treated in these results as a discontinued operation, the results of the remaining activities of the Services Division are not material enough to be reported as a separate segment and have been included in unallocated costs. The remaining reportable segments i.e Products and US Divisions are the two strategic divisions for which monthly financial information is provided to the Chief Operating Decision Maker. Previously, the US Division was referred to as the Los Angeles Division.

The Products Division provides a broad range of travel supplies predominately to the international travel industry on a global basis. The US Division is a supplier of catering to the domestic and international travel industry within the United States of America.

Segment revenues, 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 results for the period ended 30 June 2010 have been restated as follows:

·; In relation to the periods ended 31 December 2010 and 30 June 2011, the basis on which corporate costs have been allocated has been amended in order to charge those costs relating to management of the Group's businesses to the Group's two business segments. Accordingly, the comparative figures for the period ended 30 June 2010 have been restated on a consistent basis. The segmental results of period ended 30 June 2010 of Products Division and the US Division have been reduced, respectively, by £100,000 and £88,000 and unallocated corporate costs have been reduced by £188,000.

·; In relation to the periods ended 31 December 2010 and 30 June 2011, intergroup royalty charges were made to the US Division for the use of the Air Fayre business model. Accordingly, the comparative figures for the period ended 30 June 2010 have been restated on a consistent basis. The segmental results of US Division have been reduced by £75,000 and unallocated costs have been reduced by £75,000.

Segmental assets include all operating assets used by a segment and consist principally of operating cash, receivables, prepayments, inventories, goodwill and property, plant and equipment, net of allowances and provisions. Where allocation across segments is not possible, they are classified as unallocated corporate assets.

Segmental information by business segment for 6 months to 30 June 2011

Segmental information by business segment for 6 months to 30 June 2010 (restated)

Segmental information by business segment for 12 months to 31 December 2010 (restated)

4. EXCEPTIONAL ITEMS

There were no exceptional items during the period relating to continuing operations. Details of exceptional costs relating to discontinued operations are set out in Note 5.

Exceptional items incurred during previous periods were as follows:

·; During the period ended 30 June 2010, banking costs related to bank facility fees in respect of the overdraft facility that are significantly in excess of reasonably normal levels. During the year ended 31 December 2010, banking costs comprised bank facility fees in respect of the overdraft facility that are significantly in excess of reasonably normal levels of £368,000 and costs incurred in relation to the Taurouge II SARL facility completed on 3 September 2010. Such costs comprised facility and professional fees amounting to £380,000 and the fair value of warrants of £846,000 issued in connection with the transaction.

·; The re-organisation costs primarily related to redundancies.

·; The investment in joint venture was written down to its recoverable value.

·; The loss on disposal of investment in joint venture comprised the impairment provision of £1,232,000 charged during the period ended 30 June 2010 offset by a profit on disposal of £108,000.

·; The recovery of PAYE and National Insurance related to amounts over-paid in previous years.

·; The adjustment to the executive incentive share plan award related to a fair value credit in respect of an adjustment to the number of shares issuable under such plan.

5. DISCONTINUED OPERATIONS

On 7 July 2011 the Company disposed of its investment in Media on the Move Limited and, accordingly, the results of its activities have been treated as discontinued operations. Revenue and expenses of Media on the Move Limited have been removed from the results of continuing operations and are shown as a single line item on the face of the income statement as discontinued operations. The operating results of the discontinued operations were as follows:

Exceptional items during the period were as follows:

·; The disposal was completed on 7 July 2011 indicating a required provision for loss on disposal of £999,000 for impairment of goodwill at 30 June 2011.

·; Disposal costs of £112,000 comprised cost directly attributable to the disposal.

6. LOSS PER SHARE

The basic loss per share from continuing and discontinued operations is calculated by dividing the loss attributable to equity shareholders (numerator) by the weighted average number of ordinary shares in issue during the period (denominator). The basic loss per share from continuing operations is calculated by dividing the loss after tax from continuing operations (numerator) by the weighted average number of ordinary shares in issue during the period (denominator).

The 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. 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.

The adjusted basic loss per share uses the denominator described above with the numerator adjusted to remove the post tax impact of exceptional items and share based payments.

The following represents the profit/(loss) and share data used to calculate basic, diluted and adjusted earnings per share:

7. FINANCE COSTS

8. SHARE OPTIONS

On 30 March 2011, the Board approved a new share incentive scheme (the "Scheme") in which each of the Company's existing four Executive Directors participate. Awards under the Scheme will take the form of share options granted over ordinary shares of 1 pence each in the Company. Options will be exercisable at an aggregate price of £1.00. The number of shares an Executive Director may receive on the exercise of his option will be determined by reference to the number of shares which would when multiplied by the share price at that time (calculated using an average over the thirty preceding trading days) equal the value attributable to him under the rules of the Scheme. Alternatively, at the Company's discretion the value attributable to an Executive Director may be paid in cash.

The principle behind the Scheme is that the Executive Directors are rewarded for shareholder value creation based on total shareholder returns measured over a starting share price of 2.92 pence. The Executive Directors' aggregate share of the value creation starts at 7.5% of the value created if the share price is 4.5 pence and rises on a straight line basis to 20% of value created if the share price is 10.8 pence or higher. Value creation is calculated on fully diluted shares excluding the Company's existing share option schemes, where the exercise prices of options issued under those schemes are well in excess of the current share price, and the Executive share incentive plan, where there is a performance condition that the Company's share price must reach 27 pence before any shares vest. No value is attributed to the Executive Directors until the share price reaches 4.5 pence and no further value is attributed above a share price of 15 pence. The individual allocation of the Executive Directors' aggregate share of the value creation is Stephen Yapp 40%, Carl Fry 20%, David Young 20% and Joe Golio 20%.

The Scheme includes vesting conditions under which one third of the options vested on 30 June 2010 and the remainder vest on a straight line basis over the period to 31 December 2012 subject to continued employment. Executive Directors can exercise their options between 1 January 2013 and 31 December 2014. All options vest immediately on a change in control or on the disposal of a substantial proportion of the Group's business and assets, in which event all Executive Directors will be able to exercise their options. Vesting for Executive Directors who leave employment as a consequence of the disposal of the part of the Group in which they are employed will continue for 12 months from the date of leaving. Any such Executive Director can exercise their options during the period 1 January 2013 to 31 December 2014. Executive Directors who leave employment on or before 31 December 2012 must exercise their options by the later of 12 months from the date of leaving and 31 March 2013, but not before 1 January 2013. Executive Directors who leave employment after 31 December 2012 must exercise their options within 12 months from the date of leaving, but not later than 31 December 2014.

The fair value of the awards under the Scheme amounted to £627,215 of which £376,329 was charged as an expense during the half year in accordance with the vesting conditions. The fair value of the awards was estimated at the date of grant using a binomial model. The following table gives the assumptions used to value the awards made:

The expected volatility is based on the assumption that historical volatility is indicative of future trends, which may not necessarily be the actual outcome.

9. PROPERTY, PLANT AND EQUIPMENT

During the period plant and equipment has been purchased amounting to £73,000 (6 months to 30 June 2010: £56,000). There were no asset disposals in the reporting period. Capital commitments contracted for but not provided for at 30 June 2011 amounted to nil (30 June 2010: nil).

10. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE

On 7 July 2011 the Company disposed of its investment in Media on the Move Limited. Accordingly, the assets, excluding cash, and liabilities of Media on the Move Limited have been classified as held for sale and stated at fair value less costs to sell. A loss of £1,111,000 arose, which is included in the net loss from discontinued operations (see Note 5).

The carrying amounts of assets and liabilities in Media on the Move Limited are as follows:

11. NET DEBT

12. CASH AND CASH EQUIVALENTS

13. INTERIM RESULTS

In accordance with AIM Rules 20 and 26, copies of the Interim Results will be available at the Company's website www.journeygroup.plc.uk.

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 2011 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, condensed consolidated cash flow statement, condensed consolidated statement of changes in equity and notes 1 to 12. 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. The Directors are responsible for preparing the interim report in accordance with the AIM Rules.

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 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union, and the AIM Rules.

GRANT THORNTON UK LLP

REGISTERED AUDITORS

CHARTERED ACCOUNTANTS

LONDON