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."

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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:

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

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

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 - 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