Interim Results 2014

23 September 2014

Embargoed 0700hrs

Journey Group plc

Interim Results

for the six months ended 30 June 2014

Journey Group plc (the "Group"), a leading provider of catering services and in-flight products to the international airline and travel industries, today announces its unaudited interim results for the six months ended 30 June 2014.

A solid performance and continued confidence in future growth

Financial Highlights:

· Revenue growth of 5% on an underlying US dollar basis

· US Division EBITDA increased by 5% to $2.08m

· Profit before tax from continuing operations of £596,000 (H1 2013: £690,000)

· Basic earnings per share from continuing operations of 1.95p (H1 2013: 2.62p)

· Net cash at 30 June 2014 of £3,570,000 and at 31 August 2014 of £3,796,000

· Interim dividend of 1.375p per share

Operational Highlights:

· US Division was awarded and successfully launched the JetBlue Airways catering contract in Los Angeles and for their premium Mint Service in both Los Angeles and Long Beach

· Watermark re-positioning largely completed

Stephen Yapp, Executive Chairman commented:

"The results reflect a solid first half in line with our expectations. Looking forward, the Group remains focused on momentum and near term growth in its key US Division supported by the North American airline market which continues to show growth in passenger numbers and improving profitability.

It is against this back drop that your Board looks forward with continued confidence". 

For further information please contact: 

Stephen Yapp

Alison Whittenbury

Journey Group plc

Tel: +44 (0) 20 8744 7080

[email protected] 

N+1 Singer (Nominated Advisor & Broker)

Jonny Franklin-Adams

Emily Watts

Tel: +44 (0) 20 7496 3000

EXECUTIVE CHAIRMAN'S LETTER TO SHAREHOLDERS

INTRODUCTION

In the first half of 2014 the Group continued to make good strategic and financial progress maintaining the profitability, stability and strong cash generation that have been achieved in recent periods. Notwithstanding the impact that the weaker US$ has had on the sterling figures reported by the Group, performance has been in line with expectations.

The key highlights for the half year were as follows:

Financial Highlights:

· Revenue growth of 5% on an underlying US dollar basis

· US Division EBITDA increased by 5% to $2.08m

· Profit before tax from continuing operations of £596,000 (H1 2013: £690,000)

· Basic earnings per share from continuing operations of 1.95p (H1 2013: 2.62p)

· Net cash at 30 June 2014 of £3,570,000 and at 31 August 2014 of £3,797,000

· Interim dividend of 1.375p per share

Operational Highlights:

· US Division was awarded and successfully launched the JetBlue Airways catering contract in Los Angeles and for their premium Mint Service in both Los Angeles and Long Beach

· Watermark re-positioning largely completed

MARKET CONDITIONS

Following healthy growth in 2013, IATA, (which represents some 240 airlines accounting for 84% of total air traffic) is forecasting further growth in the global airline industry's net profits to $18 billion (£10.7 billion) in 2014. This reflects a modest downward revision to its $18.7 billion March forecast but remains substantially ahead of the estimated $12.9 billion in 2013. The trade body predicts that load factors are expected to exceed 80% for the first time during 2014.

Encouragingly for Journey Group, airlines in our core U.S. market now hold the top spots recently held by European and Asian companies in the global industry by operating income and market value according to data compiled by Bloomberg.

RESULTS

The results for the half year were as follows:

The Group had a solid first half trading, although there has been a negative impact on the reported results, due to the weakening of the US$. With substantially all of the Group's revenues being US dollar based, any large swings in exchange rates do have a significant impact on the reported sterling results.

Overall revenue increased by 5% in US$ terms reflecting growth in the US Division of 6%, however reported revenues decreased by 2% to £18,758,000. Watermark revenue increased modestly on an underlying US dollar basis.

Whilst the overall reported EBITDA from continuing operations decreased by almost 13%, the underlying US dollar profitability decreased by just 5%, reflecting the growth in the US Division being offset by Watermark's reduced profitability. Additionally, the Group incurred non-recurring costs relating to departing Directors, Carl Fry and David Young as reported in the 2013 Annual Report. These one-off costs were largely offset by the release of provisions no longer required.

Both Operating profit and Profit before tax show a decrease from 2013, reflecting the same trend as EBITDA. Tax charges remain consistent with the previous year, giving a Profit from continuing operations after tax of

£257,000. The discontinued operations relate to the disposal, in November 2013, of MNH Sustainable Cabin Services Ltd. The Basic earnings per share, from continuing operations, amounted to 1.95 pence compared with 2.62 pence last year.

Net cash as at 30 June 2014 amounted to £3,570,000 comprising cash of £4,482,000 less debt under finance leases of £912,000. This compares with net cash at 31 December 2013 of £4,410,000 and at 30 June 2013 of £2,537,000. The £840,000 reduction in net cash in H1 reflects the share buy back programme, as announced previously and payments made to the departing Board members relating to the long term incentive plan for which the Company elected to pay cash in lieu of issuing new shares, partly offset by an underlying improvement in working capital.

US DIVISION

The US Division delivered a solid financial performance in the first half trading in line with expectations, catering some 44,000 flights serving over 1 million meals, whilst working through the difficulties of severe weather throughout the USA which caused significant delays and cancellations during the first quarter.

Air Fayre has worked closely with United Airlines as the airline continues to change its processes post merger in an effort to marry policies and procedures into a single service airline by the end of the year. In 2013 Air Fayre benefitted from this, adding the former Continental flights to its programme and during the final quarter of 2014, it is expected that United will add an additional daily international flight bringing the total number of international flights serviced to five a day.

Earlier this year, Air Fayre extended its relationship with JetBlue through the award of the catering contract at Los Angeles International Airport ("LAX"). One of the first activities undertaken was the launch of JetBlue's premium Mint service which offers a unique tapas-style dining experience. Air Fayre was selected for its quality products and expertise in delivering this type of service, further demonstrating growing interest in our patented logistics model.

Revenue rose 6% in US$ terms from $19,096,000 to $20,287,000, but the reported sterling figures show a 2% decrease in revenue from £12,375,000 to £12,152,000. The actual increase in underlying US$ revenues reflects the new JetBlue Airways business.

EBITDA increased by 5% in US$ terms from $1,982,000 to $2,080,000. However, the reported sterling figures show a 3% decrease from £1,288,000 to £1,245,000. At the 2013 average exchange rate of 1.543, the reported EBITDA for H1 2014, would have been £1,348,000. This demonstrates an underlying exchange rate impact of £103,000.

Operating profit before share based payments increased 4% in US$ terms, but in sterling terms this translated to a decrease in profits of 4%, from £907,000 to £873,000. Using the 2013 rate, operating profit for H1 2014, would have been £945,000. This demonstrates an underlying exchange rate impact of £72,000.

PRODUCTS DIVISION

The Products Division "Watermark" showed a modest increase in revenue on an underlying US$ basis. However, gross margin declined reflecting a shift in emphasis and associated pricing model between design-based product and more generic items.

During H1, we continued our focus on implementing strategies to reshape the business. This strategy has already seen some success with the renewal of the Air Tahiti Nui contract for a further three years, as well as a contract award from Virgin Australia. The operations team continues to broaden the supply chain reach beyond China.

Revenue rose 4% in US$ terms to $11,039,000, but due to the weakening of the US$, the reported sterling figures show a decrease in revenue of 4% from £6,854,000 to £6,606,000.

EBITDA decreased significantly resulting from both the aforementioned decline in gross margin and the impact of $ exchange rates.

BOARD CHANGES

As announced in March 2014, David Young and Carl Fry resigned from The Board, effective 30th April 2014 and 1st July 2014, respectively. Alison Whittenbury was appointed to The Board on 1st July 2014 assuming the role of group finance director.

DIVIDEND POLICY

This year's interim dividend will be 1.375p per share, totalling £189,731, representing 50% of the 2013 full year dividend per share. This will be paid on 3rd November 2014 to shareholders on the register as at the close of business on 3rd October 2014.

OUTLOOK

The results reflect a solid first half in line with our expectations. Looking forward, the Group remains focused on momentum and near term growth in its key US Division, supported by the North American airline market which continues to show growth in passenger numbers and improving profitability.

It is against this back drop that your Board looks forward with continued confidence.

Stephen Yapp

Executive Chairman

22 September 2014

UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

UNAUDITED CONDENSED CONSOLIDATED CASHFLOW STATEMENT

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Condensed consolidated statement of changes in equity for the 6 months to 30 June 2014

Condensed consolidated statement of changes in equity for the 6 months to 30 June 2013

Condensed consolidated statement of changes in equity for the 12 months to 31 December 2013

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED ACCOUNTS

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 2013 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 2014 are unchanged from those adopted in the financial statements for the year ended 31 December 2013.

ii. Statement of compliance

These interim consolidated financial statements are for the six months ended 30 June 2014. 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 2013.

3. SEGMENTAL REPORTING

The Group is organised into two primary business segments, the US and Products Divisions. These reportable segments are the strategic divisions for which financial information is provided to the chief operating decision maker.

The US Division is a supplier of catering and beverages to the domestic and international travel industry within the United States of America. The Products Division provides a broad range of travel supplies predominately to the international travel industry on a global basis. Segment revenues are based on the country of domicile of the customer; information is not available to produce segment revenues based on sales by destination.

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 2014

Segmental information by business segment for 6 months to 30 June 2013

Segmental information by business segment for 12 months to 31 December 2013

4. FINANCE COSTS

5. EARNINGS PER SHARE

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

The diluted earnings per share is calculated using the same numerator with the denominator adjusted for the dilutive effects of share options and warrants. The dilutive effect of share options for the six months period to 30 June 2014 reflects the number of ordinary shares that would have been issuable at that date under the management incentive scheme.

6. PROPERTY, PLANT AND EQUIPMENT

During the period plant and equipment has been purchased amounting to £116,000 (6 months to 30 June 2013: £8,000). There were no asset disposals in the reporting period. Capital commitments contracted for but not provided for at 30 June 2014 amounted to £nil (30 June 2013: £nil).

7. NET CASH

8. INTERIM REPORT

The Interim Report will be posted to all shareholders shortly and, in accordance with AIM Rules 20 and 26, copies of the Interim Report will be available at the Company's website www.journeygroup.plc.uk.

INDEPENDENT REVIEW REPORT TO JOURNEY GROUP PLC

Introduction

We have reviewed the condensed set of financial statements in the half-yearly financial report of Journey Group plc for the six months ended 30 June 2014 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 7. We have read the other information contained in the half-yearly financial report which comprises only the Executive 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's members, as a body, in accordance with 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's members those matters we are required to state to them in an independent 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 and the Company's members, 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 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'. 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 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

GRANT THORNTON UK LLP

REGISTERED AUDITORS

CHARTERED ACCOUNTANTS

LONDON

22 September 2014