JNY Journey Grp

 

TIDMJNY 
 
RNS Number : 8736C 
Journey Group PLC 
20 November 2009 
 

 
 
Journey Group plc 
 
 
Announcement of joint venture 
 
 
 
 
Journey Group plc (the "Company" or "Journey") is pleased to announce that Air 
Fayre Limited ("Air Fayre"), its wholly-owned subsidiary, has entered into a 
joint venture with Alpha Flight UK Limited ("Alpha UK") to merge their 
respective in-flight catering operations serving the international airline 
industry at London's Heathrow airport. Alpha UK is part of Autogrill S.p.A., one 
of the world's largest providers of food & beverage and retail services for 
travellers. 
 
 
The new business, known as Alpha-Airfayre Limited ("AAL"), will serve 18 
international airlines with approximately 30,000 meals per day from the two 
existing operating units contributed by the parties. AAL will have an estimated 
annual turnover of GBP73 million. In the short term both operations will remain 
largely unchanged. A leadership team drawn from both parties has been appointed 
to direct and manage the joint operations. All other activities currently 
undertaken by both parties, including Journey's Los Angeles operations, are 
outside of the scope of this agreement. 
 
 
Alpha UK holds an interest of 51% in AAL. Air Fayre holds an interest of 49% in 
AAL together with an option to acquire a further 1% interest from Alpha UK such 
that, if exercised, both parties would hold an interest of 50%. The option is 
exercisable, for a consideration based on earnings before interest depreciation 
and taxation and the net debt of AAL at that date, with effect from 1 January 
2011 if Air Fayre reasonably believes that its business interests are not 
adequately served through a minority shareholding. Both parties have equal board 
representation, although in the event of a deadlock an Alpha UK appointee will 
have a casting vote. There is an extensive schedule of reserved matters relating 
to the conduct and management of AAL requiring the agreement of both parties. 
 
 
For the year ended 31 December 2008, Air Fayre's turnover amounted to GBP33.6 
million, upon which it incurred an operating loss before exceptional items of 
GBP2.9 million and after exceptional items of GBP3.6 million. For the same 
period the turnover of Alpha UK relating to its Heathrow in-flight catering 
activities amounted to GBP28.3 million. Under the terms of the joint venture, 
both parties have contributed their trading activities and certain operating 
assets comprising fixed assets and working capital items subject to certain 
restrictions and limitations. Air Fayre has contributed net assets to AAL 
amounting GBP1.5 million, including an intercompany liability of GBP5.0 million 
payable to the Company. This liability was settled in cash on completion 
resulting in a cash inflow to Journey. These funds will be applied for working 
capital purposes and will enable Journey to operate with a reduced banking 
facility. Alpha UK has contributed net assets to AAL amounting to GBP3.1 
million. 
 
 
The terms of the joint venture provide that except under certain circumstances 
neither party may dispose of their interest in AAL prior to 31 December 2010 and 
also provide for pre-emption arrangements from that date. 
 
 
The terms of the joint venture provide for call and put options arrangements 
that are exercisable during the 30 day period commencing 31 March 2013. Under 
these arrangements, Alpha UK may call on Air Fayre to acquire its holding in AAL 
and Air Fayre may put on Alpha UK to dispose of its holding in AAL. In each case 
the consideration will be calculated with reference to earnings before interest 
depreciation and taxation for the year ending 31 December 2012 and the net debt 
of AAL at that date. 
 
 
The joint venture agreement also includes terms under which, if during the years 
ending 31 December 2010 and 31 December 2011, Alpha UK determines that it is in 
the best interests of the joint venture to enter into an agreement with a third 
party doing business or seeking to do business at London's Heathrow airport, Air 
Fayre and Alpha UK will seek to agree terms for proceeding with the new 
opportunity. In the event that agreement cannot be reached, Air Fayre will be 
obliged to transfer its interest in the joint venture to Alpha UK for an agreed 
consideration less any amount owing by the Company or its subsidiaries to Alpha 
UK or Alpha-Airfayre Limited. 
 
 
The Company also announces that it has been agreed with the Company's bankers, 
Barclays Bank plc, that the amount available under the Company's multi-option 
facility be further reduced from GBP4,750,000 to GBP3,750,000 and that 
additional facility fees would become payable. With the benefit of greater 
certainty provided by the joint venture, the Company is actively taking steps to 
secure new bank facilities on more attractive terms. 
 
 
Stephen Yapp, Executive Chairman of Journey Group plc said: 
 
 
"We are delighted to be able to announce this merger as it will bring together 
the best aspects of two individual and unique businesses. The combined 
operations at London Heathrow airport will provide our customers with even more 
choice and expertise whilst at the same time continuing to deliver exceptionally 
high standards of service, for which both companies are well known. For our 
employees we will be able to offer variety, career progression and the 
opportunity to be part of a larger organisation." 
 
 
Ken Adamson, Managing Director of Alpha Flight Services, UK said: 
 
 
"The Joint Venture at Heathrow airport with Air Fayre forms a key and exciting 
part of Alpha's overall UK and Ireland strategy, which is all about focusing on 
what is important to our customers. At London Heathrow, our customers want 
highly cost effective logistics operations combined with the experience and 
capability to both serve their often complex requirements, and consistently 
produce the finest authentic cuisine. The complementary strengths of Alpha 
Flight and Air Fayre promise to deliver a unique and exciting proposition for 
both our current and new customers." 
 
 
 
 
For further information please contact: 
 
 
+---------------------------------------------+----------------------------+ 
| Journey Group plc                           | Tel:    +44 (0) 20 8606    | 
|                                             | 2000                       | 
+---------------------------------------------+----------------------------+ 
| Stephen Yapp, Chairman                      |                            | 
+---------------------------------------------+----------------------------+ 
| Carl Fry, Interim Chief Financial Officer   |                            | 
+---------------------------------------------+----------------------------+ 
|                                             |                            | 
+---------------------------------------------+----------------------------+ 
| KBC Peel Hunt Ltd (Nominated Adviser &      | Tel:    +44 (0) 20 7418    | 
| Broker)                                     | 8900                       | 
+---------------------------------------------+----------------------------+ 
| David Anderson                              |                            | 
+---------------------------------------------+----------------------------+ 
| Daniel Harris                               |                            | 
+---------------------------------------------+----------------------------+ 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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