25 March 2015

Embargoed 0700hrs

Journey Group plc

Annual Results

for the year ended 31 December 2014

Journey Group plc ("Journey Group" or the "Group"), a leading provider of catering services and in-flight products to the international airline and travel industries, today announces its results for the year ended 31 December 2014.

Financial Highlights:

·       Revenue of £39.1m (2013: £40.3m), with 2% growth in US dollar terms to $64.3m (2013: $62.9m).  

·       Profit before tax from continuing operations up 10% to £2.02 million  (2013: £1.83m).

·       Basic earnings per share from continuing operations of 11.54p (2013: 8.29p).

·       Net cash at 31 December 2014 of £4,279,000 (2013: £4,410,000).

·       Final dividend increased 10% to 1.65p per share, making total dividend of 3.025p per share (2013: 2.75p).

Operational Highlights:

·       Launched a fifth international flight with United Airlines in the fourth quarter .

·       Increased number of customer contracts and broadened product & service offerings.

Stephen Yapp, Executive Chairman commented:

"2014 has seen another strong performance in the U.S. with continued profit progression and cash generation. Our strategy of focusing and driving growth through the U.S. Air Fayre division is beginning to deliver near term opportunities, in replicating our successful business model across the U.S.

It's against this backdrop that your Board remains confident in our ability to deliver continued shareholder value".

For further information please contact: 

Stephen Yapp

Alison Whittenbury

Journey Group plc 

Tel: +44 (0) 20 8744 7080

info@journeygroup.plc.uk 

N+1 Singer (Nominated Advisor & Broker)

Jonny Franklin-Adams

Emily Watts

Tel: +44 (0) 20 7496 3000

EXECUTIVE CHAIRMAN'S LETTER TO SHAREHOLDERS

INTRODUCTION

Journey Group has had a successful 2014 delivering a third year of profit progression whilst maintaining a strong net cash position and strategically extending its customer relationships. The results were in line with expectations despite the currency impact due to the adverse US dollar rate fluctuations during the year.

Financial Highlights:

·       Revenue of £39.1m (2013: £40.3m), with 2% growth in US dollar terms to $64.3m (2013: $62.9m).  

·       Profit before tax from continuing operations up 10% to £2.02 million  (2013: £1.83m).

·       Basic earnings per share from continuing operations of 11.54p (2013: 8.29p).

·       Net cash at 31 December 2014 of £4,279,000 (2013: £4,410,000).

·       Final dividend increased 10% to 1.65p per share, making total dividend of 3.025p per share (2013: 2.75p).

Operational Highlights:

·       Launched a fifth international flight with United Airlines in the fourth quarter .

·       Increased number of customer contracts and broadened product & service offerings.

MARKET CONDITIONS

As expected, 2014 continued the growth trend for the global airline industry which generated net profits of $19.9bn exceeding the initial forecasts from IATA (which represents some 240 airlines accounting for 84% of total air traffic). Forecasts for 2015 show profits rising further to $25bn with improved margins.  This mirrors the confidence of airline CFOs in the growth of passenger numbers whilst IATA reports that the heads of cargo expect cargo growth at the fastest rate since 2010. Recently some of the largest US airlines, the Group's key market, have posted results with margins not seen since 9/11.  It is against this improving industry backdrop that Journey Group is encouraged by the prospects for the Group's services.

RESULTS

The results for the year were as follows:

The Group delivered a substantial improvement in profitability, with Profit Before Tax growing 16%, in US dollar terms. However, due to the weakening of sterling against the US dollar, growth in Profit Before Tax in sterling was reduced to 10%. A substantial majority of the Group's revenues (and costs) are US dollar based and represents the principal operating currency.

The Board has therefore come to the view that in future, reporting will be denominated in US dollars. For comparison purposes 2014 has been stated in both sterling and US dollars. 

In US Dollars:

Revenue grew by 2% which related to growth in the US Division. EBITDA increased significantly by 13% to $4,755,000 with the EBITDA margin improving to 7.4% from 6.7% in the previous year. Depreciation and amortisation rose 8.8% to $1,371,000 mainly due to additional trucks purchased to service the new contract with JetBlue out of LAX.  The net result was a strong growth in operating profit of 14.6% to $3,384,000. Profit Before Tax from continuing operations improved by 16% to $3,319,000, up from $2,856,000 in the previous year.

In Sterling:

In reported sterling terms revenue decreased by 3%. EBITDA increased by 7% when reported in sterling, to £2,894,000. Depreciation and amortisation rose 3.7% to £835,000 and operating profits of £2,059,000 reflected  9% growth on the prior year. Finance costs fell 37% due to the termination of an invoice discount facility in May 2013, offset by an increase in lease interest relating to the new trucks purchased under a finance lease. Profit Before Tax from continuing operations improved by 10% to £2,019,000 compared to £1,828,000 for the previous year.

The income tax expense was £485,000 compared to a charge of £777,000 in the previous year. The effective tax rate has been significantly reduced to 24.0%, from 42.5% in the previous year (which substantially reflected the rate of tax in the US of 40%). This tax reduction stems from reduced profits chargeable to tax in the US Division as a result of renewed intra-group patent royalty arrangements, some of which related to 2013 and the Directors expect the future normalised tax rate to be in the order of 32%.

Basic earnings per share from continuing operations was 11.54 pence compared with 8.29 pence last year, an increase of 39% reflecting both the increase in operating profits and the reduction in tax charges.

Net cash amounted to £4,279,000 comprising cash of £5,379,000 offset by finance leases of £1,100,000. This compares to a previous year net cash figure of £4,410,000 (cash of £5,207,000 and finance lease debt of £797,000). Net cash decreased by £131,000, being the net effect of several significant cash inflows and outflows. Cash inflows were generated from operating activities of £2,462,000, plus deferred disposal proceeds of £518,000 (MNH disposal in December 2013) and the cash received from the exercise of warrants of £250,000. The significant cash outflows included £1,183,000 returned to shareholders through share buy backs and dividends, cash settlement related to the exercise of share options and the related tax liabilities of £1,027,000, capital expenditure of £219,000, mainly related to truck purchases in the US Division and corporation tax paid of £444,000. In order to reduce administrative costs, your Board has decided to move to a single final dividend payment from 2015 onwards, maintaining the policy of a progressive dividend policy for the year as a whole.

DIVIDENDS

The Group paid an interim dividend of 1.375 pence per share in November 2014 and the Board is recommending a final dividend for the year of 1.65 pence per share, bringing the total to 3.025 pence for the year and representing a 10% increase over the previous year. The total dividend is covered 3.8 times by basic earnings per share from continuing operations. If approved by shareholders, the ex-dividend date will be 2 April 2015 and the dividend will be paid on 1 May 2015 to shareholders who are on the register as at the close of business on 7 April 2015. As noted above, your Board has decided to move to a single final dividend in future.

US DIVISION

The US Division had a good year continuing to deliver operational excellence across all customers and achieving budget in spite of the adverse weather conditions across the USA which caused significant delays and cancellations for all of our customers during the first quarter of the year.

The unique business model process which provides a complete chill chain from manufacturing to delivery on-board the aircraft has enabled Air Fayre to service multiple airports from one location. It now services Los Angeles International and Long Beach International as well as outlying regional airports throughout Southern California. In 2014, the Los Angeles operation provided more than 2,180,000 meals and serviced over 90,000 flights with excellent service and outstanding reliability. 

The Air Fayre team worked together with United Airlines in the first part of 2014 as they changed their processes and married policies and procedures to complete the final stages of its merger with Continental Airlines. In the last quarter of 2014, United Airlines added its fifth international flight out of LAX servicing Melbourne Australia.

Mid way through the year, Air Fayre was also awarded a further JetBlue service contract operating out of LAX and launched the airline's premium "Mint Service", a unique tapas-based offering. This has been very well received by JetBlue customers and demonstrates the broadened service offering now being provided by Air Fayre.

Revenue increased by 3% to $41,717,000. EBITDA is shown to have decreased by 20% which is due to increased patent royalty charges from within the Group. The royalty charge in 2014 increased to $1,643,000 (2013; $341,000). The charge for depreciation increased by 8% to $1,286,000, which was mostly due to the additional trucks purchased to service the new contract with JetBlue. Operating profit decreased by 32% to $1,992,000, again due to the increased group royalty charges this year.

PRODUCTS DIVISION

The Products Division has had a good second half of the year bringing it in line with expectations and continues to reshape itself alongside its market place.

Revenue was flat in underlying US dollar terms, at $22,536,000. However, in reported sterling figures, there was a decrease of 5%. Gross margin decreased marginally to 23%, from 24% previously, due to recent lower margin contracts. EBITDA fell by $201,000 or 27% to $540,000. The resulting operating profit decreased by 32% to $455,000.

CENTRAL COSTS

There has been a reduction in underlying central costs after the departure of directors, David Young and Carl Fry during 2014. Additionally, a higher rate of divisional charges together with increased patent royalty fees has resulted in increased income for 2014, leaving head office in a net income position of £584,000 compared to a net cost position previously of £417,000.

BOARD CHANGES

As previously announced, during the year Alison Whittenbury joined the Board as Chief Financial Officer succeeding Carl Fry who stepped down from the role in July and David Young resigned from the Board in April. 

In January 2015, Christopher Mills joined the Board as a non-executive director replacing Max Lesser. Christopher is the Chief Executive of Harwood Capital LLP, the largest shareholder of Journey Group Plc and his wealth of public company experience will be valuable as we continue to implement our strategy for growth. On behalf of the Board, I would like to thank Max for his contribution to the Group's development and success over the last two years.

TEAM

The results achieved over this and recent years are a testament to our excellent management team and people, many of whom are industry experts in their respective fields. I would like to thank all of our people for their ongoing commitment and hard work which provides the Group's customers with outstanding customer service and enables the Group to meet the challenges of growth.

OUTLOOK  

2014 has seen another year of strong performance in the US with continued profit progression and cash generation. Our strategy of focusing and driving growth through the US Air Fayre division is beginning to deliver near term opportunities, in replicating our successful business model across the US.

It's against this backdrop that your Board remains confident in our ability to deliver continued shareholder value.

Stephen Yapp

Executive Chairman

24 March 2015

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

* Total equity is all attributable to shareholders of the parent

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The consolidated financial statements of Journey Group plc and its subsidiary companies (the "Group") for the year ended 31 December 2014 were authorised for issue in accordance with a resolution of the Directors on 24 March 2015 and the balance sheet was signed on the Board's behalf by Stephen Yapp. Journey Group plc is a public limited company incorporated and domiciled in England & Wales. The Company's shares are publicly traded on the AIM market of the London Stock Exchange.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

i. Basis of preparation and statement of compliance

The financial information contained in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2014 or 2013, but is derived from these financial statements. The financial statements for the year ended 31 December 2013 have been delivered to the Registrar of Companies

Journey Group plc has prepared its consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). The financial statements have been prepared on an historical cost basis. The consolidated financial statements are presented in sterling and are rounded to the nearest thousand (£'000) except where otherwise indicated. The financial statements for the year ended 31 December 2014 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these financial statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006

Significant judgements and estimates

In preparing the financial statements the Directors are required to make judgements and estimates in applying accounting policies. The Directors did not consider any significant judgements have been made. The most significant area where estimates have been made is as follows:

Estimates

·      In conducting the annual impairment test of goodwill, various significant assumptions have been made in arriving at the recoverable amounts of cash generating units.

Going concern

The Directors have reviewed the Group's budgets and forecasts for the coming 12 months, which have been prepared with appropriate regard to the current macroeconomic environment and the conditions in the principal markets served by the Group. As a result, and taking into consideration the Group's financial position, including its net funds, and its principal risks and uncertainties, at the time of approving these financial statements, the Directors consider that the Group has sufficient financial resources to continue in operational existence for the foreseeable future and, therefore, that it is appropriate to adopt the going concern basis in preparing these financial statements.

3. SEGMENTAL REPORTING

The Group is organised into two primary segments, the Products and the US Divisions. These reportable segments are the strategic divisions for which financial information is provided to the chief operating decision maker. 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 and beverages to the domestic and international travel industry within the United States of America.

Segment revenues, expenses and results include transfers and transactions between 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. 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.

Segment 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 of assets across segments is not possible, they are classified as unallocated corporate assets. Segment non-current assets comprise fixed assets and goodwill and are based on the location of the assets and operations. Segment liabilities include all operating liabilities and consist principally of finance leases, accounts payable, social security and other taxes, and accrued liabilities. Where allocation of liabilities across segments is not possible, such liabilities are classified as unallocated corporate liabilities. Segment assets and liabilities do not include receivable or payable balances in respect of income taxes.

The Group had two customers (2013: one customer), who accounted for revenues of £26.5 million (2013: £22.8 million), which amounts to more than 10% of Group revenues. Of these revenues £21.5 million (2013: £22.8 million) arose in the US Division and £5.0 million (2013: £nil) arose in the Products Division.

Information by geographical region for 2014

Information by geographical region for 2013

Information by business segment for 2014

Information by business segment for 2013

4. EXPENSES AND FINANCE COSTS

Cost of sales and operating and administrative costs

Finance costs

5. INCOME TAX

The major components of income tax expense were as follows:

The reconciliation of the income tax expense based on the profit before tax at the statutory income tax rate to the income tax expense at the Group's effective income tax rate is as follows:

The movement on the deferred tax asset was as follows:

The Group has estimated UK tax losses of £8.3 million (2013: £8.3 million) that are available indefinitely for offset against future taxable profits arising from the same trades of the companies in which the losses arose. The Group has also estimated non-trade UK tax losses of £3.5 million (2013: £3.5 million) that are available indefinitely for offset against future non-trading gains. Deferred tax assets have not been recognised in respect of these UK tax losses as there is insufficient certainty of future taxable profits against which to utilise them.

6. DISCONTINUED OPERATIONS

In the prior year, the Group disposed of its investment in MNH Sustainable Cabin Services Ltd on 29 November 2013 to MNH Grp Ltd and, accordingly, the results of its operations have been treated as discontinued operations. Revenue and expenses of MNH Sustainable Cabin Services Ltd 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:

The prior year exceptional loss on disposal comprised total consideration of £900,000 less goodwill of £1,442,000, net assets sold of £443,000, directly attributable disposal costs of £59,000 and transfer from foreign currency translation reserve of £20,000. At 31 December 2013 there was outstanding deferred consideration of £400,000 plus a further £118,000 due to the Group in respect of the settlement of former inter-company balances and terms agreed with the purchaser in relation to debt and working capital.

7. 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 year (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 year (denominator). The basic loss per share from discontinued operations is calculated by dividing the loss from discontinued operations (numerator) by the weighted average number of ordinary shares in issue during the year (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 weighted average diluted number of shares in issue in the previous year includes warrants outstanding over 999,277 ordinary shares and 855,935 ordinary shares that would have been issuable under the management incentive scheme  had all participants exercised their options based on the share price at the year end date of 145.50 pence. All these warrants and share options have been exercised during the current year.

8. DIVIDENDS PAID AND PROPOSED

A final dividend of 1.5 pence per share in respect of the year ended 31 December 2013 amounting to £199,480 was paid on 27 June 2014. An interim dividend of 1.375 pence per share in respect of the year ended 31 December 2014 amounting to £182,856 was paid on 3 November 2014. A final dividend of 1.65 pence per share has been recommended by the Board in respect of the year ended 31 December 2014 amounting to £223,307 based on the issued share capital at 31 December 2014. If approved by shareholders, it will be paid on 1 May 2015 to shareholders who are on the register as at the close of business on 7 April 2015.

9. GOODWILL AND INTANGIBLE ASSETS

Part of these software products assets form security under the terms of an unlimited debenture.

Purchased goodwill is not amortised and is tested annually for impairment. The disposal of goodwill during 2013 relates to the disposal of MNH Sustainable Cabin Services Ltd.

10. INVENTORIES

During the year, £15,000 was credited (2013: credit of £40,000) to the income statement in respect of a reduction in obsolete and slow moving inventories.

Part of these assets form security under the terms of an unlimited debenture.

11. SHARE CAPITAL AND RESERVES

Share capital

The Company had warrants as at 31 December 2013 outstanding over 999,277 ordinary shares of 25 pence each with a subscription price of 25 pence per share. During the year all of these warrants were exercised for a total subscription price of £249,819. During the previous year the Company consolidated its ordinary share capital on the basis of 1 new ordinary share of 25 pence each for every 25 existing ordinary shares of 1 pence each.

12. RELATED PARTY DISCLOSURE

Compensation of key management personnel (including directors):

On 29 November 2013 the Company disposed of its investment in MNH Sustainable Cabin Services Ltd to MNH Grp Ltd, a company in which Mr Stephen Yapp is a director and shareholder. During the year, income amounting to £113,000 (2013: £nil) has been received from MNH Sustainable Cabin Services Ltd in respect of products supplied. At 31 December 2014 there was no outstanding balance owed by MNH Sustainable Cabin Services Ltd to the Group. At 31 December 2013 there was outstanding deferred consideration of £400,000 plus a further £118,000 due to the Group in respect of the settlement of former intercompany balances and terms agreed with the purchasers in relation to debt and working capital.

During the year a subsidiary company provided services to Altitude plc, a company in which Mr Stephen Yapp is a director, amounting to £27,000. At 31 December 2014, there was outstanding receivable of £nil (2013: £8,000).

During the year Mr Stephen Yapp, Mr Graham Bird and Mr Dimitri Goulandris who are Directors of the Company, received dividends in respect of their holdings in the ordinary shares of the Company amounting to, respectively, £7,695, £245 and £8,583 (2013: £10,307, £189 and £12,183).

13. ADDITIONAL CASH FLOW INFORMATION

14  ANNUAL ACCOUNTS

The annual report and financial statements will be available from the Company's website at www.journeygroup.plc.uk and its registered office:

 Building One,

 The Square,

 Southall Lane,

 Southall

 UB2 5NH

END