TIDMJNY
RNS Number : 9021M
Journey Group PLC
02 June 2010
2 June 2009
Journey Group plc
Annual Results
for the year ended 31 December 2009
Journey Group plc ("Journey Group" or the "Group") a leading provider of
in-flight products, catering and media services to the airline and travel
industry today announces its results for the year ended 31 December 2009.
Highlights
· Financial
- EBITDA before non-recurring items, provision write-back and exchange
differences GBP1.2m (2008 - GBP0.6m).
- Loss before tax GBP4.7m (2008 - GBP10.5m)
- Net debt GBP0.5m (2008 - GBP5.7m)
· Operational
- Completion of the in-flight catering joint venture at London Heathrow creating
the second largest in-flight caterer at Heathrow
- Substantial completion of the restructuring in the Products Division
delivering redefined business model and considerable cost savings
- Successful first full year of operations at the Los Angeles facility
delivering EBITDA of GBP0.9m
Stephen Yapp, Chairman commented "During the first quarter of 2010 the Group has
performed in line with expectations. In the Products Division and Media on the
Move Limited the Group has two businesses that are poised to benefit from
recovery over the next two years. Growth is expected in the Los Angeles Division
in the current year and exciting potential opportunities exist to expand into
other US cities. Accordingly, whilst recovery in the Group's markets is only
just beginning and the global economic recovery still tentative, we are
increasingly confident of the Group's future success".
For further information please contact:
Stephen Yapp
Journey Group plc
Tel: +44 (0) 20 8606 2000
info@journeygroup.plc.uk
Carl Fry
Journey Group plc
Tel: +44 (0) 20 8606 2000
info@journeygroup.plc.uk
KBC Peel Hunt Ltd (Nominated Advisor & Broker)
David Anderson / Daniel Harris
Tel: +44 (0) 20 7418 8900
EXECUTIVE CHAIRMAN'S LETTER TO SHAREHOLDERS
Dear Shareholder,
INTRODUCTION
Your Group has continued to build the foundations for creating significant
future shareholder value despite an exceptionally difficult year for the airline
industry.
I reported in my interim report that growth opportunities had been created and
the Group's businesses had been re-positioned with an attractive and competitive
product range and service offering together with a lean cost structure. This
process has taken a number of significant steps forward during the second half
year, including:
· Completion of the in-flight catering joint venture at London Heathrow with
Alpha Flight UK Limited, part of Autogrill S.p.A.
· Further significant progress leading to the substantial completion of the
restructuring in the Products Division.
· A successful first full year of operations at the Los Angeles facility.
For the international airline industry, which is the Group's principal
marketplace, 2009 was one of the most difficult on record. Airlines collectively
incurred substantial losses and are expected to suffer further high levels of
losses during the current year. Mergers between airlines have been announced
recently, including two involving British Airways and United Airlines, who are
both important customers to the Group. Further corporate activity is expected,
including strategic alliances between airlines, as the industry strives to
tackle its deficit and emerge profitably. This uncertain and challenging
environment has impacted the Group during the year with continued pricing
pressure and reduced volumes due to lower passenger and flight numbers.
Nevertheless, the Group has responded well both operationally and strategically.
With the still tentative nature of the global economic recovery I expect
conditions to remain difficult into 2011. The Board has driven significant
strategic change over the last year and in navigating our future direction we
shall always be responsive to the need for further change.
ALPHA-AIRFAYRE LIMITED JOINT VENTURE
At the interim stage I reported that the Group had entered into a letter of
intent with Alpha Flight UK Limited for the purpose of creating an in-flight
catering joint venture at London Heathrow. On 20 November 2009, the Group
announced the completion of the joint venture, which substantially enhanced the
competitive position of the combined business and positioned it as the second
largest in-flight caterer at Heathrow. Whilst adding value to the Group's
portfolio, GBP5.0 million of cash was also released enabling the Group to
improve its working capital position and reduce borrowings. During the first
months of operation the joint venture has begun to deliver on its key
operational improvements.
RESULTS
The results for the year were as follows:
+----------------------------------------------------+--------+---------+
| Year to 31 December | 2009 | 2008 |
| | GBP'm | GBP'm |
+----------------------------------------------------+--------+---------+
| | | |
| Revenue | 74.5 | 91.3 |
+----------------------------------------------------+--------+---------+
| | | |
| EBITDA before non-recurring income, provision | 1.2 | 0.6 |
| write-back and exchange differences | | |
+----------------------------------------------------+--------+---------+
| Non-recurring income | - | 0.9 |
+----------------------------------------------------+--------+---------+
| Provision write-back | - | 0.3 |
+----------------------------------------------------+--------+---------+
| Exchange differences | - | 0.5 |
+----------------------------------------------------+--------+---------+
| EBITDA before exceptional items and share based | 1.2 | 2.3 |
| payments | | |
+----------------------------------------------------+--------+---------+
| Depreciation and amortization | (2.1) | (1.7) |
+----------------------------------------------------+--------+---------+
| Operating (loss)/profit before exceptional items | (0.9) | 0.6 |
| and share based payments | | |
+----------------------------------------------------+--------+---------+
| | | |
| Share of joint venture's net loss | (0.4) | - |
+----------------------------------------------------+--------+---------+
| Share based payments | (0.3) | (0.5) |
+----------------------------------------------------+--------+---------+
| Exceptional items | (2.5) | (9.3) |
+----------------------------------------------------+--------+---------+
| Net interest payable | (0.6) | (1.3) |
+----------------------------------------------------+--------+---------+
| | | |
| Loss before taxation | (4.7) | (10.5) |
+----------------------------------------------------+--------+---------+
| | | |
| Basic loss per share (pence) | 1.6 | 8.1 |
+----------------------------------------------------+--------+---------+
The results reflect the challenging market conditions during the year. EBITDA
before exceptional items and share based payments fell to GBP1.2 million from
GBP2.3 million last year. However, the comparative figure benefitted from
non-recurring income of GBP0.9 million and the write-back of a provision of
GBP0.25 million and also benefitted from net exchange gains of GBP0.5 million
compared with zero this year. Adjusting for these items, EBITDA was
significantly ahead during 2009, which was an achievement given the difficult
conditions and is a testament to the successful restructuring measures taken to
reduce costs and preserve profitability.
There was an operating loss before exceptional items and share based payments of
GBP0.9 million compared with a profit of GBP0.6 million in the previous year.
Exceptional items of GBP2.5 million comprised banking costs of GBP1.0 million,
reorganisation costs of GBP0.7 million, Los Angeles start-up costs of GBP0.6
million, the settlement of a contractual dispute amounting to GBP0.1 million and
other items amounting to GBP0.1 million. The Group's share of the net loss of
the Alpha-Airfayre Limited joint venture amounted to GBP0.4 million. Net
interest payable fell by GBP0.7 million of which GBP0.5 million related to the
elimination of interest on the convertible bonds now converted into ordinary
shares.
There was a net loss before taxation of GBP4.7 million compared with a loss of
GBP10.5 million in the previous year. The basic loss per share was 1.6 pence
compared with a loss of 8.1 pence in the previous year. The improvement was
substantially due to the reduction in losses and the full year impact of the
increase in the number of ordinary shares in issue following the placing of
ordinary shares and conversion of convertible bonds into ordinary shares in the
second half of the previous year.
Net debt fell by GBP5.2 million to GBP0.5 million. However, the current year
included the temporary benefit of GBP1.4 million owing to the Alpha-Airfayre
Limited joint venture under transitional arrangements and excluding this amount
the reduction in net debt would have been GBP3.8 million. The main driver of
this reduction was the cash of GBP5.0 million released by the Alpha-Airfayre
Limited joint venture transaction. At the year end the Company had bank
facilities comprising a multi-option facility and sales finance facilities
amounting to GBP3.25 million along with a net bank guarantee facility of GBP0.1
million. These facilities are repayable on demand and expire on 31 August 2010.
As set out below, the Company is in discussions with potential providers of
finance regarding new financial facilities.
SERVICES DIVISION
+----------------------------------------------------+--------+--------+
| Year to 31 December | 2009 | 2008 |
| | GBP'm | GBP'm |
+----------------------------------------------------+--------+--------+
| | | |
| Revenue | 39.0 | 60.5 |
+----------------------------------------------------+--------+--------+
| EBITDA before non-recurring income, provision | 1.2 | 0.1 |
| write-back and exchange differences | | |
+----------------------------------------------------+--------+--------+
| Non-recurring income | - | 0.9 |
+----------------------------------------------------+--------+--------+
| Provision write-back | - | 0.3 |
+----------------------------------------------------+--------+--------+
| Exchange differences | 0.2 | 0.3 |
+----------------------------------------------------+--------+--------+
| EBITDA before exceptional items and share based | 1.4 | 1.6 |
| payments | | |
+----------------------------------------------------+--------+--------+
| Operating profit before exceptional items | 0.3 | 0.4 |
+----------------------------------------------------+--------+--------+
The Division faced harsh trading conditions during the year, but delivered solid
operating results notwithstanding the reduction in turnover. Of the lower
turnover, GBP11.9 million was due to the change in the business model of the
supply chain management activities to an agency model in 2008 and had minimal
profit impact. Revenues also fell due to lower flight numbers and to the
transfer of the in-flight catering activities into the Alpha-Airfayre Limited
joint venture in November 2009, although this transfer had little profit impact
due to seasonal reasons.
Whilst EBITDA before exceptional items and share based payments fell from GBP1.6
million to GBP1.4 million, the underlying performance was a significant
improvement. The comparative figure benefitted from non-recurring income of
GBP0.9 million, the write-back of a provision of GBP0.25 million and higher
exchange gains of GBP0.1 million. Adjusting for these items, EBITDA was
significantly ahead during 2009. This improved underlying performance was driven
by the in-flight catering activities of Air Fayre Limited, the principal
business within the Division.
The lower flight numbers suffered by Air Fayre Limited were due to cancellations
resulting from the decline in passenger traffic experienced by the Division's
customers operating out of London Heathrow. In anticipation of lower revenues,
early in the year a major restructuring exercise was carried out that resulted
in considerable cost savings. Measures were taken to remove excess direct
labour, a layer of management and to implement more efficient working practices.
Media on the Move Limited had a difficult year due to reduced passenger traffic
and lower media budgets. With the transfer of the in-flight catering activities
to the Alpha-Airfayre Limited joint venture, Media on the Move Limited is the
only remaining business in the Division. Looking into 2010, with some recovery
expected in its markets, an improved performance is expected at Media on the
Move Limited.
LOS ANGELES DIVISION
+----------------------------------------------------+--------+--------+
| Year to 31 December | 2009 | 2008 |
| | GBP'm | GBP'm |
+----------------------------------------------------+--------+--------+
| | | |
| Revenue | 15.1 | 2.5 |
+----------------------------------------------------+--------+--------+
| EBITDA before exceptional items and share based | 0.9 | 0.1 |
| payments | | |
+----------------------------------------------------+--------+--------+
| Operating profit before exceptional items | 0.3 | - |
+----------------------------------------------------+--------+--------+
The Los Angeles facility, which commenced operations in November 2008 to serve
all of United Airlines flights out of Los Angeles LAX airport, had a successful
first full year of operations. It achieved an EBITDA profit before exceptional
items and share based payments of GBP0.9 million. The start-up phase was
completed during the first quarter and following that no additional exceptional
start-up costs were incurred. The facility has consistently delivered a high
standard of service to United Airlines and, in particular, scored highly on
reliability performance by achieving its on time performance goal in every month
of the year. The facility catered 25,568 United flights, an average of 70 a day,
and provided potable water on the same flights without a single safety incident.
The facility served United with 1,672,500 meals during the year.
With the United contract successfully bedded down, the Air Fayre in-flight
catering model has been validated in the USA and has driven interest from other
airlines operating out of Los Angeles LAX airport. The Division's focus has
shifted to securing new customers and opportunities are currently being
addressed that we are optimistic will lead to additional revenues during the
current year.
As noted in my interim report, the USA has been identified as a main strategic
opportunity for the Air Fayre in-flight catering model and the contract with
United Airlines was a first step in realising that strategy. As additional
customers are secured for the Los Angeles facility, the attractiveness of the
business model will be further demonstrated and will create the basis for
expansion into other US cities. The business model is protected in the USA by
patent and, accordingly, provides the Division with the unique ability to
exploit its advantages.
PRODUCTS DIVISION
+----------------------------------------------------+---------+---------+
| Year to 31 December | 2009 | 2008 |
| | GBP'm | GBP'm |
+----------------------------------------------------+---------+---------+
| | | |
| Revenue | 20.4 | 30.9 |
+----------------------------------------------------+---------+---------+
| EBITDA before exchange differences | 0.2 | 1.3 |
+----------------------------------------------------+---------+---------+
| Exchange differences | (0.1) | 0.2 |
+----------------------------------------------------+---------+---------+
| EBITDA before exceptional items and share based | 0.1 | 1.5 |
| payments | | |
+----------------------------------------------------+---------+---------+
| Operating (loss)/profit before exceptional items | (0.1) | 1.4 |
+----------------------------------------------------+---------+---------+
The challenges faced by the international airline industry considerably affected
the Division's financial performance for the year. Revenue fell by a third to
GBP20.4 million. EBITDA before exceptional items and share based payments,
albeit significantly lower, remained in profit at GBP0.1 million and was
achieved as a consequence of the decisive measures taken to reduce costs. Of the
GBP1.4 million reduction in EBITDA, GBP0.3 million was due to a turnaround from
exchange gains to losses between years.
The significant decline in passenger traffic, particularly in the demand for
seats in premium cabins, de-stocking by airlines using existing inventories and
the deferral of a number of new product launches heavily impacted trading
volumes leading to the reduced turnover. These events demonstrated the risk to
the Division's trading performance from its high exposure to the aviation
market. In response, management implemented a major reorganisation to redefine
the Division's business model and realign its goals. A number of unprofitable
accounts and product types were discontinued and new markets have been entered
where the Division is able to apply its existing skills base and experience.
These markets are beginning to generate attractive returns and we expect them to
provide the basis for future growth in 2011 and beyond. Consistent with this
change in model and target markets, headcount at all levels was reduced by over
50 per cent. and this delivered a considerable reduction in costs.
Whilst much of the year was disappointing the last quarter was significant in
the rebuilding process. In Watermark Products important contracts were signed
with Qantas Airways, Virgin Atlantic, British Airways and Air New Zealand. New
business relationships have been formed for supply contracts to the hotel and
retail industries and these markets will be a main focus of growth for the
Division. The MNH Sustainable Cabin Services business continues to challenge the
existing models for sustainable product supply and has entered into long term
agreements with both Virgin Atlantic and Qantas Airways for world leading micro
supply chain management programs.
We expect the current year to remain challenging, although with the substantial
completion of the restructuring it will benefit from a full year of its lower
cost base. The outlook for 2011 is encouraging with recovery expected in the
airline market and growth from new segments particularly in the UK and Europe.
BOARD
We are delighted to have welcomed Joseph Golio and Carl Fry to the Board as
Executive Directors during the year. Joseph is the President of the Los Angeles
Division. He joined the Group in June 2008 and was instrumental in the start up
and delivery of the Los Angeles facility. He is an airline catering industry
veteran and has held a number of key roles within the industry, including
Vice-President & Managing Director of Dobbs International and Senior
Vice-President of North America West Operations for Gate Gourmet. Carl Fry is
the Group's Chief Financial Officer and prior to joining the Board held that
role in an interim capacity since January 2008. He is a Chartered Accountant and
has significant experience of serving on the Boards of both publicly listed and
private companies.
OUTLOOK
As set out above, the Company's bank facilities expire on 31 August 2010. In
applying the going concern basis the Directors have assumed that appropriate new
bank facilities will be available. Discussions are in progress with a number of
potential providers of finance and the Directors consider they have a reasonable
expectation that facilities sufficient for the Group's needs will be secured.
During the first quarter of 2010 the Group has performed in line with
expectations. In the Products Division and Media on the Move Limited the Group
has two businesses that are poised to benefit from recovery over the next two
years. Growth is expected in the Los Angeles Division in the current year and
exciting potential opportunities exist to expand into other US cities.
Accordingly, whilst recovery in the Group's markets is only just beginning and
the global economic recovery still tentative, we are increasingly confident of
the Group's future success.
Stephen Yapp
Executive Chairman
CONSOLIDATED INCOME STATEMENT
for the 12 months to 31 December 2009
+----------------------------+-------------+-------------+-----------+
| | Before | | |
| | exceptional | Exceptional | |
| | items | items | Total |
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+-------------+-------------+-----------+
| Revenue | 74,537 | - | 74,537 |
+----------------------------+-------------+-------------+-----------+
| Cost of sales | (59,435) | - | (59,435) |
+----------------------------+-------------+-------------+-----------+
| | 15,102 | - | 15,102 |
| Gross profit | | | |
+----------------------------+-------------+-------------+-----------+
| Operating and | (16,273) | - | (16,273) |
| administrative costs | | | |
| (excluding exceptional | | | |
| items) | | | |
+----------------------------+-------------+-------------+-----------+
| Exceptional items: | | | |
+----------------------------+-------------+-------------+-----------+
| Banking costs | - | (1,022) | (1,022) |
+----------------------------+-------------+-------------+-----------+
| Reorganisation costs | - | (745) | (745) |
+----------------------------+-------------+-------------+-----------+
| Los Angeles start-up costs | - | (575) | (575) |
+----------------------------+-------------+-------------+-----------+
| Settlement of contract | - | (94) | (94) |
+----------------------------+-------------+-------------+-----------+
| Provision for onerous | - | (41) | (41) |
| contract | | | |
+----------------------------+-------------+-------------+-----------+
| Abortive disposal costs | - | (36) | (36) |
+----------------------------+-------------+-------------+-----------+
| Loss on disposal of | - | (36) | (36) |
| subsidiary | | | |
+----------------------------+-------------+-------------+-----------+
| Total operating and | (16,273) | (2,549) | (18,822) |
| administrative costs | | | |
+----------------------------+-------------+-------------+-----------+
| | (1,171) | (2,549) | (3,720) |
| Operating loss | | | |
+----------------------------+-------------+-------------+-----------+
| Operating loss before | (926) | (2,549) | (3,475) |
| share based payments | | | |
+----------------------------+-------------+-------------+-----------+
| Share based payments | (245) | - | (245) |
+----------------------------+-------------+-------------+-----------+
| Share of joint venture's | (407) | - | (407) |
| net loss | | | |
+----------------------------+-------------+-------------+-----------+
| Finance costs | (613) | - | (613) |
+----------------------------+-------------+-------------+-----------+
| Finance income | 25 | - | 25 |
+----------------------------+-------------+-------------+-----------+
| | (995) | - | (995) |
+----------------------------+-------------+-------------+-----------+
| Loss before tax | (2,166) | (2,549) | (4,715) |
| attributable | | | |
| to equity shareholders | | | |
+----------------------------+-------------+-------------+-----------+
| Income tax credit | 71 | - | 71 |
+----------------------------+-------------+-------------+-----------+
| Loss after tax | (2,095) | (2,549) | (4,644) |
| attributable | | | |
| to equity shareholders | | | |
+----------------------------+-------------+-------------+-----------+
| | | | |
| Loss per share (pence) | | | |
+----------------------------+-------------+-------------+-----------+
| Basic | | | 1.6p |
+----------------------------+-------------+-------------+-----------+
| Diluted | | | 1.6p |
+----------------------------+-------------+-------------+-----------+
CONSOLIDATED INCOME STATEMENT
for the 12 months to 31 December 2008
+----------------------------+-------------+-------------+-----------+
| | Before | | |
| | exceptional | Exceptional | |
| | items | items | Total |
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+-------------+-------------+-----------+
| Revenue | 91,344 | - | 91,344 |
+----------------------------+-------------+-------------+-----------+
| Cost of sales | (75,331) | - | (75,331) |
+----------------------------+-------------+-------------+-----------+
| | | | |
| Gross profit | 16,013 | - | 16,013 |
+----------------------------+-------------+-------------+-----------+
| Operating and | | | |
| administrative costs | (15,898) | - | (15,898) |
| (excluding exceptional | | | |
| items) | | | |
+----------------------------+-------------+-------------+-----------+
| Movement in fair value of | | | |
| derivative financial | (13) | - | (13) |
| instruments | | | |
+----------------------------+-------------+-------------+-----------+
| Exceptional items: | | | |
+----------------------------+-------------+-------------+-----------+
| Fair value charges | - | (5,044) | (5,044) |
| relating to convertible | | | |
| bonds | | | |
+----------------------------+-------------+-------------+-----------+
| Los Angeles start-up costs | - | (2,793) | (2,793) |
+----------------------------+-------------+-------------+-----------+
| Supply contract | - | (576) | (576) |
| termination | | | |
+----------------------------+-------------+-------------+-----------+
| Costs of refinancing | - | (543) | (543) |
+----------------------------+-------------+-------------+-----------+
| Bad debt | - | (300) | (300) |
+----------------------------+-------------+-------------+-----------+
| Reorganisation costs | - | (65) | (65) |
+----------------------------+-------------+-------------+-----------+
| Total operating and | (15,911) | (9,321) | (25,232) |
| administrative costs | | | |
+----------------------------+-------------+-------------+-----------+
| | | | |
| Operating profit/(loss) | 102 | (9,321) | (9,219) |
+----------------------------+-------------+-------------+-----------+
| Operating profit/(loss) | 633 | (9,215) | (8,582) |
| before share based | | | |
| payments | | | |
+----------------------------+-------------+-------------+-----------+
| Share based payments | (531) | (106) | (637) |
+----------------------------+-------------+-------------+-----------+
| Finance costs | (1,280) | - | (1,280) |
+----------------------------+-------------+-------------+-----------+
| Finance income | 9 | - | 9 |
+----------------------------+-------------+-------------+-----------+
| | (1,271) | - | (1,271) |
+----------------------------+-------------+-------------+-----------+
| Loss before tax | | | |
| attributable | (1,169) | (9,321) | (10,490) |
| to equity shareholders | | | |
+----------------------------+-------------+-------------+-----------+
| Income tax credit | 5 | - | 5 |
+----------------------------+-------------+-------------+-----------+
| Loss after tax | | | |
| attributable | (1,164) | (9,321) | (10,485) |
| to equity shareholders | | | |
+----------------------------+-------------+-------------+-----------+
| | | | |
| Loss per share (pence) | | | |
+----------------------------+-------------+-------------+-----------+
| Basic | | | 8.1p |
+----------------------------+-------------+-------------+-----------+
| Diluted | | | 8.1p |
+----------------------------+-------------+-------------+-----------+
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the 12 months to 31 December 2009
+-------------------------------------+----------+----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+-------------------------------------+----------+----------+
| Loss for the year | (4,644) | (10,485) |
+-------------------------------------+----------+----------+
| Other comprehensive loss | | |
+-------------------------------------+----------+----------+
| Exchange differences on translating | (125) | (200) |
| foreign operations | | |
+-------------------------------------+----------+----------+
| Other comprehensive loss, net of | (125) | (200) |
| tax | | |
+-------------------------------------+----------+----------+
| Total comprehensive loss for the | (4,769) | (10,685) |
| year attributable | | |
| to the equity shareholders of the | | |
| parent company | | |
+-------------------------------------+----------+----------+
CONSOLIDATED BALANCE SHEET
as at 31 December 2009
+-----------------------------------+--------------+-----------+
| | 31 December | 31 |
| | 2009 | December |
| | GBP'000 | 2008 |
| | | GBP'000 |
+-----------------------------------+--------------+-----------+
| Assets | | |
+-----------------------------------+--------------+-----------+
| Non-current assets | | |
| Property, plant and equipment | 5,606 | 15,591 |
| Goodwill | 6,106 | 10,010 |
| Intangible assets | 78 | 260 |
| Investment in joint venture | 5,193 | - |
+-----------------------------------+--------------+-----------+
| | 16,983 | 25,861 |
+-----------------------------------+--------------+-----------+
| Current assets | | |
| Inventories | 1,121 | 3,917 |
| Trade and other receivables | 7,639 | 10,462 |
| Prepayments | 690 | 1,370 |
| Current income tax | 149 | 113 |
| Cash and short-term deposits | 1,691 | 1,762 |
+-----------------------------------+--------------+-----------+
| | 11,290 | 17,624 |
+-----------------------------------+--------------+-----------+
| Total assets | 28,273 | 43,485 |
+-----------------------------------+--------------+-----------+
| Equity and liabilities | | |
+-----------------------------------+--------------+-----------+
| Equity attributable to equity | | |
| shareholders of the parent | 2,906 | 2,906 |
| Issued share capital | 36,352 | 36,352 |
| Share premium account | 100 | 100 |
| Shares to be issued | 24 | 24 |
| Capital redemption reserve | 1,521 | 1,521 |
| Merger reserve | (1,028) | (903) |
| Foreign currency translation | (26,702) | (22,543) |
| reserve | | |
| Retained earnings | | |
+-----------------------------------+--------------+-----------+
| Total equity | 13,173 | 17,457 |
+-----------------------------------+--------------+-----------+
| Non-current liabilities | | |
+-----------------------------------+--------------+-----------+
| Interest bearing loans and | 949 | 1,633 |
| borrowings | | |
+-----------------------------------+--------------+-----------+
| | 949 | 1,633 |
+-----------------------------------+--------------+-----------+
| | | |
| Current liabilities | | |
| Trade and other payables | 12,860 | 18,576 |
| Interest bearing loans and | 1,291 | 5,819 |
| borrowings | | |
+-----------------------------------+--------------+-----------+
| | 14,151 | 24,395 |
| | | |
+-----------------------------------+--------------+-----------+
| Total liabilities | 15,100 | 26,028 |
+-----------------------------------+--------------+-----------+
| Total equity and liabilities | 28,273 | 43,485 |
+-----------------------------------+--------------+-----------+
CONSOLIDATED CASH FLOW STATEMENT
for the 12 months to 31 December 2009
+------------------------------------+------------+-----------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------+------------+-----------+
| Net cash flows from operating | | |
| activities | | |
+------------------------------------+------------+-----------+
| Loss after tax | (4,644) | (10,485) |
| Tax credit | (71) | (5) |
| Depreciation and amortisation | 2,103 | 1,664 |
| Share of joint venture's net | 407 | - |
| losses | (193) | - |
| Gain on disposal | 245 | 531 |
| Share based payments expense | 240 | - |
| Fair value charges relating to | - | 5,044 |
| warrants | - | 421 |
| Fair value charges relating to | (25) | (9) |
| convertible bonds | 613 | 1,280 |
| Exceptional supply contract | | |
| termination | - | 13 |
| Finance income | 2,163 | 3,231 |
| Finance costs | 3,106 | 4,710 |
| Movement in fair value of | (3,752) | (5,884) |
| derivative financial | | |
| instruments | | |
| Decrease in inventories | | |
| Decrease in trade and other | | |
| receivables | | |
| Decrease in trade and other | | |
| payables | | |
+------------------------------------+------------+-----------+
| Cash inflows generated from | 192 | 511 |
| operations | | |
+------------------------------------+------------+-----------+
| Interest received | 25 | 9 |
| Interest paid | (596) | (757) |
| Income taxes received/(paid) | 35 | (26) |
+------------------------------------+------------+-----------+
| Net cash flows used in operating | (344) | (263) |
| activities | | |
+------------------------------------+------------+-----------+
| Cash flows from investing | | |
| activities | | |
+------------------------------------+------------+-----------+
| Proceeds from sale of property, | | |
| plant and equipment and intangible | 13 | 33 |
| assets | 5,000 | - |
| Cash arising from joint venture | (269) | (7,446) |
| transaction | (2) | (507) |
| Purchase of property, plant and | | |
| equipment | | |
| Purchase of intangible assets | | |
+------------------------------------+------------+-----------+
| Net cash flows used in investing | 4,742 | (7,920) |
| activities | | |
+------------------------------------+------------+-----------+
| Cash flows from financing | | |
| activities | | |
+------------------------------------+------------+-----------+
| Proceeds from borrowings | - | 2,115 |
| Proceeds from issue of shares | - | 7,920 |
| Payment of bank loan and finance | (5,901) | (1,663) |
| lease obligations | | |
+------------------------------------+------------+-----------+
| Net cash flows generated from | (5,901) | 8,372 |
| financing activities | | |
+------------------------------------+------------+-----------+
| Net (decrease)/ increase in cash | (1,503) | 189 |
| and cash equivalents | 594 | (428) |
| Net foreign exchange difference | 1,762 | 2,001 |
| Cash and cash equivalents at | | |
| beginning of year | | |
+------------------------------------+------------+-----------+
| Cash and cash equivalents at end | 853 | 1,762 |
| of year | | |
+------------------------------------+------------+-----------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 12 months to 31 December 2009
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| | | | | | | Foreign | | |
| | Issued | Share | Shares | Capital | | currency | | |
| | share | premium | to be | redemption | Merger | translation | Retained | Total |
| | capital | account | issued | reserve | reserve | reserve | earnings | equity |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| At 1 | 2,906 | 36,352 | 100 | 24 | 1,521 | (903) | (22,543) | 17,457 |
| January | | | | | | | | |
| 2009 | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| Fair value | - | - | - | - | - | - | 240 | 240 |
| charges | | | | | | | | |
| relating to | | | | | | | | |
| warrants | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| Cost of | - | - | - | - | - | - | 245 | 245 |
| share based | | | | | | | | |
| payments | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| Transactions | - | - | - | - | - | - | 485 | 485 |
| with owners | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| Loss for | - | - | - | - | - | - | (4,644) | (4,644) |
| the year | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| Exchange | - | - | - | - | - | (125) | - | (125) |
| differences | | | | | | | | |
| on | | | | | | | | |
| translating | | | | | | | | |
| foreign | | | | | | | | |
| operations | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| Total | - | - | - | - | - | (125) | (4,644) | (4,769) |
| comprehensive | | | | | | | | |
| loss | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
| At 31 | 2,906 | 36,352 | 100 | 24 | 1,521 | (1,028) | (26,702) | 13,173 |
| December | | | | | | | | |
| 2009 | | | | | | | | |
+---------------+---------+---------+---------+------------+---------+-------------+----------+---------+
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
1. 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 2009 or 2008 but is derived from these financial statements. The
financial statements for the year ended 31 December 2008 have been delivered to
the Registrar of Companies.
The financial statements for the year ended 31 December 2009 which have been
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union, and as issued by the IASB, 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, but did include reference to an emphasis of matter regarding the
Group's ability to continue as a going concern, and did not contain statements
under Section 498(2) or (3) of the Companies Act 2006.
In preparing the financial statements the Directors are required to make
judgements and estimates in applying accounting policies. The most significant
areas where judgements and estimates have been applied are as follows:
Judgements
· In determining the appropriate accounting treatment of the joint venture
transaction entered into during the year the Directors have made certain key
judgements:
- The Directors have given consideration as to whether Alpha-Airfayre Limited
should be viewed as an associated undertaking or a jointly controlled entity.
The Directors' view is that the indicators of joint control as set out within
IAS 31 have been met as there are contractual agreements in place between the
joint venture parties which reserve strategic investing, financing and
operational matters for the joint agreement of both parties. As such the company
is viewed as a jointly controlled entity which falls within the scope of IAS 31.
- IAS 31 currently states that the preferred method of accounting for jointly
controlled entities is proportional consolidation, but the equity method is also
permitted as an alternative. A revised standard based on ED 9 Joint Arrangements
is expected to mandate the use of the equity method, although this standard has
yet to be released. In considering the alternative methods of accounting for the
investment in the Alpha-Airfayre Limited joint venture, the Directors view the
equity method to be the most appropriate.
- In determining the appropriate accounting treatment for the transaction, the
Directors have both considered the requirements of IAS 27 in its current form
and referred to IAS 27 (revised 2008), which is not effective for the current
accounting period. Neither version of the standard addresses the specific case
of a disposal into a jointly controlled entity and, hence, the Directors have
applied IAS 8 hierarchy (IAS 8. 10-12) on the basis that there is no specific
guidance in IAS 27 in its current form and that improved guidance is available
on disposals under IAS 8 (revised 2008), which does reflect the economic
transaction. They have concluded that this is a full disposal of the Group's
interest in the businesses operated by Air Fayre Limited, International Catering
Limited and Elev8 Retail Limited and an acquisition of a 49 per cent. interest
in Alpha-Airfayre Limited. IAS 27 (revised 2008) acknowledges that the disposal
of a subsidiary is a significant economic event in which control is lost. As
such a gain or loss is based on the difference between the fair value of
proceeds (the interest in the new, combined business) and 100 per cent. of the
net carrying amount of assets and goodwill disposed. These principles have been
applied to this transaction as follows:
* the proceeds from disposal are considered to be in substance the 49 per cent.
interest acquired in Alpha- Airfayre Limited, which is recognised at fair value.
* the gain (before transaction costs and certain adjustments) recognised on
disposal represents the excess of these 'proceeds' over the net assets disposed
of (including consolidated goodwill attributable to these businesses)
* the 'proceeds' as determined for the disposal accounting are also treated as
the deemed 'cost' of the investment acquired.
· The Company initially financed the Group's investment in its Los Angeles
facility by intercompany debt to Air Fayre CA Inc. During 2008 the Directors
regarded this debt as being repayable in due course rather than as an equity
investment and, accordingly, the exchange differences that arose during that
year were taken to the income statement rather than to equity. Subsequently, the
Directors considered that the debt was equity in nature and from 1 May 2009 all
exchange differences were taken directly to equity. On 26 November 2009 the
Directors decided to convert US$8,000,000 of the debt into equity and from that
date the remaining US$3,240,000 debt was regarded as being repayable in due
course and the exchange differences on such element were taken to the income
statement. The Directors consider the exchange gains arising to be appropriately
classified within operating and administrative costs rather than finance income.
· In conjunction with consent by the lender to release their charges over the
assets of Air Fayre Limited, International Catering Limited and Elev8 Retail
Limited, enabling the disposal to proceed to the Alpha-Airfayre Limited joint
venture of their operating activities and certain net assets, the lender imposed
monthly bank facility fees. The Directors considered that fees in respect of a
five month period November 2009 to March 2010 should be regarded as the cost of
the lender's consent and have been charged as an exceptional item. At that time
the Directors considered five months to be a reasonable period based on their
expectation of the period required to refinance the Company's bank facility and
avoid further such monthly bank facility fees.
· In assessing the need for a provision in respect of certain threatened and
outstanding litigation, the Directors consider that such litigation will not
result in an outflow of economic resources.
Estimates
· In arriving at the cost of the Group's investment in the Alpha-Airfayre
Limited joint venture, a valuation was prepared by discounting the estimated
value of the put option exercisable in April 2013 under which the Group can sell
its interest to Alpha Flight UK Limited. The Directors considered that this was
the most appropriate valuation method given the contractual nature of the
option, the Directors' intention to exercise it, the existence of a call option
exercisable in March and April 2013 under which Alpha Flight UK Limited can
acquire the Group's interest at a substantially similar price and in light of
the business plans prepared prior to the transaction setting out the future
expectations of the joint venture parties. In preparing the valuation various
assumptions have been made including discount rate and operating results.
· In conducting the annual impairment test of goodwill, various significant
assumptions have been made in arriving at the recoverable amounts of cash
generating units.
· The Group measures the cost of share based payments by reference to the fair
value of the equity instruments at the date on which they are granted. Judgement
is required in determining the most appropriate valuation model and assumptions
are necessary in arriving at the inputs into such models.
· The Group measured the cost of warrants issued to the lender in accordance
with IFRS 2 by reference to the fair value of the warrants at the date on which
they were granted. Judgement was required in determining the most appropriate
valuation model and assumptions were necessary in arriving at the inputs into
such model.
Going concern
The Group incurred a loss after tax attributable to equity shareholders of
GBP4,644,000 for the year to 31 December 2009 and had net borrowings at that
date of GBP549,000. These net borrowings comprised finance leases of
GBP1,402,000 less net cash and cash equivalents of GBP853,000, although such
amount included the temporary benefit of GBP1,398,000 held on behalf of and
hence owing to the Alpha-Airfayre Limited joint venture under certain
transitional arrangements. However, the Company's borrowing facilities, which
presently comprise a multi-option facility and sales finance facilities
totalling GBP3,250,000 and a net guarantee arrangement facility of GBP120,000,
expire on 31 August 2010. In these circumstances, in the absence of additional
cash resources becoming available, the Group's forecasts, taking account of
reasonably possible changes in trading performance, show that during the next 12
months it will not have sufficient financial resources to enable it to continue
in operational existence in its current form. The Directors have concluded that
the combination of these circumstances represent a material uncertainty that
casts significant doubt upon the Group's ability to continue as a going concern.
In assessing the financial requirements of the Group the Directors have prepared
forecasts and have determined the level of financial resources required to
maintain the Group in operational existence in its current form. In light of the
expiry of the Company's existing borrowing facilities on 31 August 2010 and
based on the Directors' assessment of the Group's funding needs, discussions are
taking place with a number of potential providers of finance who have put
forward non-binding term sheets setting out proposed facilities that would be
sufficient in the opinion of the Directors to meet the Group's funding needs.
The granting of these facilities would be subject to due diligence. Whilst such
due diligence has not yet taken place and neither has detailed discussion and
agreement on the terms of such facilities, the Directors consider they have a
reasonable expectation that facilities sufficient for the Group's needs will be
secured.
In considering the going concern position of the Group the Directors have made
the following principle
assumptions:
1) The forecasts as referred to above prepared by the Directors for the
purposes of assessing the financial resources of the Group are accurate in all
material repects.
2) The discussions taking place with providers of finance will lead to
facilities being granted of a level sufficient in the opinion of the Directors
to meet the Group's funding needs for the forseeable future.
On the basis of the foregoing assumptions and having made enquiries and
considering the uncertainties described above, the Directors have a reasonable
expectation that the Group will have adequate financial resources to continue in
operational existence for the foreseeable future and, therefore, that it is
appropriate to continue to adopt the going concern basis in preparing these
financial statements. Failing the foregoing assumptions being met, the Group may
not have adequate financial resources to continue in operational existence for
the foreseeable future and, in such circumstances, it may not be appropriate to
continue to adopt the going concern basis. The financial statements do not
include any of the adjustments that would result if the Group was unable to
continue as a going concern, which would include writing down the carrying value
of assets, including goodwill, to their recoverable amount and providing for any
further liablities that may arise.
2. Segmental reporting
Historically, the Group was organised on a worldwide basis into two primary
business segments, the Products Division and the Services Division. Following
the award of the United Airlines contract and the successful commencement of
operations at the Los Angeles facility in November 2008, Los Angeles has been
treated as a separate division with effect from 1 January 2009. These reportable
segments are the three strategic divisions for which monthly 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 Los Angeles Division is
a supplier of catering to the domestic and international travel industry within
the United States of America. The Services Division was a supplier of catering
to the international travel industry within the United Kingdom until the
transfer of those operations to the joint venture with Alpha Flight UK Limited
on 20 November 2009 and is a supplier of media services to the international
travel industry in the United Kingdom. The Services Division was also engaged in
supply chain management, but since 31 December 2009 this revenue stream ceased.
Both the Products and Services Divisions provide marketing, design and
consultancy services.
Segment revenues, expenses and results include transfers and transactions
between business segments and between geographical 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. Geographical segment revenues are based on the
country of domicile; information is not available to produce geographical
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. Whilst most
assets can be directly attributed to individual segments, the carrying value of
certain assets used jointly by two or more segments is allocated to the segments
on a reasonable basis. Where assets cannot be apportioned, they are classified
as unallocated corporate assets. Geographical segment non-current assets
comprise fixed assets, investment in joint venture 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 is not possible across more than one segment, such
liabilities are classified as unallocated corporate liabilities.
Segment assets and liabilities do not include receivable or payable balances in
respect of income taxes.
Exceptional items relate to significant non-recurring expenditure of an unusual
nature.
The Group has one customer who accounted for revenues of GBP15.2m, which amounts
to more than 10 per cent. of Group revenues. These revenues arise entirely in
the Los Angeles Division.
Segmental information by business segment for 12 months to 31 December 2009
+------------------------+----------+----------+----------+--------------+----------+
| | Products | Services | Los | | |
| | Division | Division | Angeles | Eliminations | Total |
| | GBP'000 | GBP'000 | Division | GBP'000 | GBP'000 |
| | | | GBP'000 | | |
+------------------------+----------+----------+----------+--------------+----------+
| | | | | | |
| Revenue | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Travel supplies, | | | | | |
| catering and media | 20,409 | 38,266 | 15,161 | - | 73,836 |
| services | - | 501 | - | - | 501 |
| Supply chain | - | 200 | - | - | 200 |
| management | | | | | |
| Marketing, design and | | | | | |
| consultancy | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Total revenue | 20,409 | 38,967 | 15,161 | - | 74,537 |
+------------------------+----------+----------+----------+--------------+----------+
| | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Result | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Segment result before | (55) | 296 | 267 | - | 508 |
| exceptional items | | | | | |
| Exceptional costs: | (443) | (302) | - | - | (745) |
| Reorganisation costs | - | - | (575) | - | (575) |
| | (94) | - | - | - | (94) |
| Los Angeles start-up | | | | | |
| costs | | | | | |
| Settlement of | | | | | |
| contract | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Segment result | (592) | (6) | (308) | - | (906) |
+------------------------+----------+----------+----------+--------------+----------+
| Unallocated corporate | | | | | (1,679) |
| costs | | | | | |
| Exceptional costs: | | | | | (1,022) |
| Banking costs | | | | | (36) |
| Abortive disposal | | | | | (41) |
| costs | | | | | (36) |
| Provision for | | | | | |
| onerous contract | | | | | |
| Loss on disposal of | | | | | |
| subsidiary | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Operating loss | | | | | (3,720) |
| Share of joint | | | | | (407) |
| venture's net loss | | | | | (613) |
| Finance costs | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Finance income | | | | | 25 |
+------------------------+----------+----------+----------+--------------+----------+
| Income tax credit | | | | | 71 |
+------------------------+----------+----------+----------+--------------+----------+
| Loss after tax | | | | | 4,644 |
+------------------------+----------+----------+----------+--------------+----------+
| | | | | | |
| Other information | | | | | |
| Segment assets | 5,178 | 5,717 | 6,622 | (2,130) | 15,387 |
| Unallocated corporate | | | | | 12,737 |
| assets | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| | | | | | 28,124 |
| Current income tax | | | | | 149 |
+------------------------+----------+----------+----------+--------------+----------+
| Consolidated assets | | | | | 28,273 |
+------------------------+----------+----------+----------+--------------+----------+
| | | | | | |
| Segment liabilities | (4,703) | (7,621) | (10,235) | 11,007 | (11,552) |
| Unallocated corporate | | | | | (3,548) |
| liabilities | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Consolidated | | | | | (15,100) |
| liabilities | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Capital expenditure | | | | | |
| including intangible | 80 | 122 | 21 | 48 | 271 |
| assets | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Depreciation and | 138 | 1,037 | 633 | 295 | 2,103 |
| amortisation | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
| Other non-cash | 4 | (154) | - | 195 | 45 |
| expenses/(income) | | | | | |
| included within | | | | | |
| segment results | | | | | |
+------------------------+----------+----------+----------+--------------+----------+
Segmental information by geographical region for 12 months to 31 December 2009
+---------------------------+------------+----------+-------------+
| | | | Non-current |
| | | Revenue | assets |
| | | 12 | 12 months |
| | | months | to |
| | | to | 31 December |
| | | 31 | 2009 |
| | | December | GBP'000 |
| | | 2009 | |
| | | GBP'000 | |
+---------------------------+------------+----------+-------------+
| | | | |
+---------------------------+------------+----------+-------------+
| United Kingdom | | 52,926 | 11,564 |
+---------------------------+------------+----------+-------------+
| United States of America | | 16,254 | 5,337 |
+---------------------------+------------+----------+-------------+
| Other | | 5,357 | 82 |
+---------------------------+------------+----------+-------------+
| | | 74,537 | 16,983 |
+---------------------------+------------+----------+-------------+
Segmental information by business segment for 12 months to 31 December 2008
+------------------------+----------+----------+-----------+--------------+----------+
| | Products | Services | Los | | |
| | Division | Division | Angeles | Eliminations | Total |
| | GBP'000 | GBP'000 | Division | GBP'000 | GBP'000 |
| | | | GBP'000 | | |
+------------------------+----------+----------+-----------+--------------+----------+
| | | | | | |
| Revenue | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Travel supplies, | | | | | |
| catering and media | 28,298 | 47,011 | 2,520 | - | 77,829 |
| services | - | 12,415 | - | - | 12,415 |
| Supply chain | - | 200 | - | - | 200 |
| management | - | 900 | - | - | 900 |
| Marketing, design and | 2,647 | - | - | (2,647) | - |
| consultancy | | | | | |
| Other non-recurring | | | | | |
| income | | | | | |
| Net sales to other | | | | | |
| segments | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Total revenue | 30,945 | 60,526 | 2,520 | (2,647) | 91,344 |
+------------------------+----------+----------+-----------+--------------+----------+
| | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Result | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Segment result before | 1,412 | 370 | - | 39 | 1,821 |
| exceptional items | | | | | |
| Exceptional costs: | - | - | (2,793) | - | (2,793) |
| Los Angeles start-up | - | (576) | - | - | (576) |
| costs | (270) | (30) | - | - | (300) |
| Supply contract | (5) | (60) | - | - | (65) |
| termination | | | | | |
| Bad debt | | | | | |
| Reorganisation costs | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Segment result | 1,137 | (296) | (2,793) | 39 | (1,913) |
+------------------------+----------+----------+-----------+--------------+----------+
| Unallocated corporate | | | | | (1,719) |
| costs | | | | | |
| Exceptional costs: | | | | | |
| Fair value charges | | | | | (5,044) |
| relating to | | | | | (543) |
| convertible | | | | | |
| bonds | | | | | |
| Costs of refinancing | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Operating loss | | | | | (9,219) |
| Finance costs | | | | | (1,280) |
+------------------------+----------+----------+-----------+--------------+----------+
| Finance income | | | | | 9 |
+------------------------+----------+----------+-----------+--------------+----------+
| Income tax credit | | | | | 5 |
+------------------------+----------+----------+-----------+--------------+----------+
| Loss after tax | | | | | (10,485) |
+------------------------+----------+----------+-----------+--------------+----------+
| | | | | | |
| Other information | | | | | |
| Segment assets | 6,979 | 15,270 | 7,461 | (149) | 29,561 |
| Unallocated corporate | | | | | 13,811 |
| assets | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| | | | | | 43,372 |
| Current income tax | | | | | 113 |
+------------------------+----------+----------+-----------+--------------+----------+
| Consolidated assets | | | | | 43,485 |
+------------------------+----------+----------+-----------+--------------+----------+
| | | | | | |
| Segment liabilities | (5,593) | (14,819) | (10,759) | 11,129 | (20,042) |
| Unallocated corporate | | | | | (5,986) |
| liabilities | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Consolidated | | | | | (26,028) |
| liabilities | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Capital expenditure | | | | | |
| including intangible | 209 | 1,112 | 6,555 | 77 | 7,953 |
| assets | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Depreciation and | 112 | 1,207 | 110 | 235 | 1,664 |
| amortisation | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
| Other non-cash | | | | | |
| expenses/(income) | 4 | (90) | - | 417 | 331 |
| included within | | | | | |
| segment results | | | | | |
+------------------------+----------+----------+-----------+--------------+----------+
Segmental information by geographical region for 12 months to 31 December 2008
+---------------------------+------------+----------+-------------+
| | | | Non-current |
| | | Revenue | assets |
| | | 12 | 12 months |
| | | months | to |
| | | to | 31 December |
| | | 31 | 2008 |
| | | December | GBP'000 |
| | | 2008 | |
| | | GBP'000 | |
+---------------------------+------------+----------+-------------+
| | | | |
+---------------------------+------------+----------+-------------+
| United Kingdom | | 65,560 | 19,072 |
+---------------------------+------------+----------+-------------+
| United States of America | | 18,994 | 6,664 |
+---------------------------+------------+----------+-------------+
| Other | | 6,790 | 125 |
+---------------------------+------------+----------+-------------+
| | | 91,344 | 25,861 |
+---------------------------+------------+----------+-------------+
3. Exceptional items
+------------------------------------+------------+-----------+
| | | |
| | 12 months | 12 months |
| | to | to |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+------------------------------------+------------+-----------+
| Banking costs | 1,022 | - |
| Reorganisation costs | 745 | 65 |
| Los Angeles start-up costs | 575 | 2,793 |
| Settlement of contract | 94 | - |
| Provision for onerous contract | 41 | - |
| Abortive disposal costs | 36 | - |
| Loss on disposal of subsidiary | 36 | - |
| Fair value charges relating to | - | 5,044 |
| convertible bonds | - | 576 |
| Supply contract termination | - | 543 |
| Costs of refinancing | - | 300 |
| Bad debt | | |
+------------------------------------+------------+-----------+
| Total exceptional items | 2,549 | 9,321 |
+------------------------------------+------------+-----------+
Banking costs
These costs comprised the following:
· Facility fees, legal fees, accountants' fees and fees in respect of banking
advice in connection with the replacement on 27 August 2009 of the Company's
existing bank facilities, which were due to expire on 31 August 2009, with a new
multi-option facility of GBP5,820,500 and a bank guarantee facility of
GBP290,000. The facility fees included GBP240,000 being the fair value of the
warrants over 14,528,624 ordinary shares issued to the lender.
· Fees in respect of a waiver of bank covenants.
· Facility fees, legal fees and accountants' fees in respect of the release by
the lender of charges over the assets of Air Fayre Limited, International
Catering Limited and Elev8 Retail Limited enabling the disposal to proceed of
their operating activities and certain net assets to the Alpha-Airfayre Limited
joint venture.
· Legal fees in connection with the security taken by the lender over the
Company's investment in its US operations.
Reorganisation costs
During 2009 reorganisation costs comprised redundancy costs and consultants fees
in relation to restructuring. During 2008 reorganisation costs related to
redundancy costs.
Los Angeles start-up costs
These costs related to the costs of the start-up of the Group's in-flight
catering operation based in Los Angeles, USA. During 2009 they comprised the
excess running costs incurred in the third to fifth months of operations and
compensation paid to United Airlines in respect of excess costs they incurred at
start-up. During 2008 they comprised the costs of establishing the operation
together with the excess running costs incurred in the initial two months of
operations.
Settlement of contract
This comprised the cost of settlement of a contractual dispute with a customer
in relation to a rebate.
Provision for onerous contract
This comprises a provision in relation to onerous contractual obligations in
respect of office equipment.
Abortive disposal costs
This relates to the costs incurred in respect of the abortive disposal of a
subsidiary company.
Loss on disposal of subsidiary
The loss arose on the disposal of the operating activities and certain net
assets of Air Fayre Limited, International Catering Limited and Elev8 Retail
Limited to the Alpha-Airfayre Limited joint venture.
Fair value charges relating to convertible bonds
These fair value charges, which are non-cash, arose as a consequence of the
conversion of the Company's convertible bonds into ordinary shares as follows:
· GBP 4,838,000 being the market value, calculated at a price of 6.25 pence
per share, of the additional ordinary shares that were issued on conversion of
the bonds that arose from the change in their conversion terms from 20 pence per
share to 7.5 pence per share.
· GBP100,000 being the fair value of the warrants issued in connection with
the change in the conversion terms of the bonds.
· GBP106,000 being the fair value of the additional ordinary shares that would
be issued under the matching awards provisions of the Executive Incentive Share
Plan arising from the change in the conversion terms of the bonds.
Supply contract termination
In July 2008 a dispute was settled with a significant supplier under which a 5
year contract was renegotiated resulting in the expectation of reduced costs and
increased flexibility. Payments totalling GBP500,000 attributable to such terms
and cost savings were initially capitalised as an intangible asset to be
amortised over the life of the contract. Subsequently, the supplier entered
Administration and the unamortized balance of GBP421,000 has been written off.
In addition, legal and other costs amounting to GBP155,000 were incurred and
have been written off.
Costs of refinancing
The Group expensed costs of GBP543,000 relating to changes to its capital
structure, including the placing of 120,000,000 ordinary shares at a placing
price of 7.5 pence to raise GBP9,000,000 before expenses, the conversion of the
Company's convertible bonds of GBP9,288,035 into ordinary shares following a
change in the terms of conversion from 20 pence per share to 7.5 pence per share
and changes to the terms of the Group's borrowing facilities.
Bad debt
The bad debt arose on the Administration of Silverjet.
4. Loss per share
The loss per share is calculated by dividing the loss after tax attributable to
equity shareholders (numerator) by the weighted average number of ordinary
shares in issue during the year (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 in the current year and previous 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.
Adjusted loss per share, both basic and dilutive, use the denominator described
in the appropriate paragraphs above. For both adjusted basic loss per share and
adjusted diluted loss per share, the numerator is adjusted to remove the post
tax impact of exceptional items from the calculations.
The weighted average number of shares in issue during the year was 290,572,553
(2008: 130,010,939). The following represents loss data used to calculate basic,
diluted and adjusted loss per share:
+-----------------------------------+------------+------------+
| | 12 months | 12 months |
| | to | to |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | GBP'000 | GBP'000 |
+-----------------------------------+------------+------------+
| | | |
| Loss table | | |
| Loss after tax attributable to | (4,644) | (10,485) |
| equity shareholders | 2,549 | 9,321 |
| Exceptional items (post tax) | | |
+-----------------------------------+------------+------------+
| Adjusted net loss after tax | (2,095) | (1,164) |
| attributable to equity | | |
| shareholders | | |
+-----------------------------------+------------+------------+
| | | |
| | Loss per | Loss per |
| | share | share |
| | 12 months | 12 months |
| | to | to |
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
| | Pence | Pence |
+-----------------------------------+------------+------------+
| | | |
| Loss per share table | | |
| Basic loss per share | 1.6 | 8.1 |
| Diluted loss per share | 1.6 | 8.1 |
| Adjusted basic loss per share | 0.7 | 0.9 |
| Adjusted diluted loss per share | 0.7 | 0.9 |
+-----------------------------------+------------+------------+
5. Investment in joint venture
+----------------------------------------------------------+-------------+
| | GBP'000 |
+----------------------------------------------------------+-------------+
| Cost | |
+----------------------------------------------------------+-------------+
| Additions at valuation | 5,600 |
+----------------------------------------------------------+-------------+
| At 31 December 2009 | 5,600 |
+----------------------------------------------------------+-------------+
| | |
| Share of post acquisition losses | |
+----------------------------------------------------------+-------------+
| Share of losses for the year after taxation | (407) |
+----------------------------------------------------------+-------------+
| At 31 December 2009 | (407) |
+----------------------------------------------------------+-------------+
| | |
| Net book value | |
+----------------------------------------------------------+-------------+
| At 31 December 2009 | 5,193 |
+----------------------------------------------------------+-------------+
The investment in joint venture comprises a 49 per cent. interest in
Alpha-Airfayre Limited, which was established to combine primarily the Heathrow
in-flight catering operations of the Group and Alpha Flight UK Limited. For the
purposes of the Group's consolidated financial statements this transaction has
been treated as a full disposal of the businesses of Air Fayre Limited,
International Catering Limited and Elev8 retail Limited (represented by their
operating activities and certain net assets) and the acquisition of a 49 per
cent. interest in Alpha-Airfayre Limited.
Under the terms of the transaction, fixed assets totalling GBP7,603,000 together
with net current liabilities of GBP6,100,000 were transferred to Alpha-Airfayre
Limited giving net assets transferred of GBP1,503,000. The net current
liabilities transferred of GBP6,100,000 included an amount due to the Company of
GBP5,000,000, which was repaid immediately following completion of the
transaction. The receipt is shown in the consolidated cash flow statement under
cash flows from investing activities.
The resulting investment in the joint venture was valued by the Directors at
GBP5,600,000. After taking account of the net assets transferred of GBP1,503,000
and the net book value of goodwill that originally arose on the acquisition of
Air Fayre Limited of GBP3,904,000, a gain of GBP193,000 arose. After deducting
transaction costs, accelerated depreciation of GBP50,000 and adjustments to the
net assets of Air Fayre Limited and Elev8 retail Limited consequent on the
transaction, a loss arose of GBP36,000, which has been shown as an exceptional
item. The accelerated depreciation arose on assets not transferred to the joint
venture and which became redundant as a result of the transaction.
The valuation of GBP5,600,000 was determined by reference to the put option
exercisable in April 2013 under which the Group can sell its interest in
Alpha-Airfayre Limited to Alpha Flight UK Limited. The Directors considered that
this was the most appropriate valuation method given the contractual nature of
the option and because of the Directors' intention to excercise it. This
approach is supported by the existence of a call option exercisable in March and
April 2013 under which Alpha Flight UK Limited can acquire the Group's interest
at a substantially similar price. Under the terms of the put option the disposal
consideration is calculated based on a multiple of the earnings before interest,
depreciation and taxation of Alpha-Airfayre Limited for the year ending 31
December 2012 and its net debt at that date. In preparing the valuation the
Directors considered the range of potential operating results of Alpha-Airfayre
Limited identified in the business plans. A discount rate of 20 per cent. was
selected by the Directors to reflect risk factors, including those in relation
to achievement of the operating results on which the valuation was based.
The valuation of GBP5,600,000 of the Group's 49 per cent. interest in the joint
venture is allocated as follows:
+-------------------------------------------------+------------+
| | GBP'000 |
+-------------------------------------------------+------------+
| | |
| Goodwill | 3,333 |
+-------------------------------------------------+------------+
| Other net assets at fair value | 2,267 |
+-------------------------------------------------+------------+
| | 5,600 |
+-------------------------------------------------+------------+
Whilst these elements are not separately recognised in the balance sheet under
the equity method of accounting, this allocation is of relevance for goodwill
impairment considerations. A review was conducted to establish the existence of
other intangible assets and a valuation was carried out on customer contracts
and relationships using the multi-period excess earning method. No value was
ascribed to customer contracts and relationships under that valuation.
The Group's share of tangible fixed assets, current assets, current liabilities,
income and expense was as follows:
+------------------------------------------------+-------------+
| | 31 December |
| | 2009 |
| | GBP'000 |
+------------------------------------------------+-------------+
| | |
| Tangible fixed assets | 5,677 |
| Current assets | 6,477 |
| Non-current assets | (10,293) |
+------------------------------------------------+-------------+
| Share of net assets | 1,861 |
+------------------------------------------------+-------------+
| | |
+------------------------------------------------+-------------+
| Revenue | 4,252 |
| Operating costs | (4,724) |
| Finance charges | (5) |
| Taxation | 70 |
+------------------------------------------------+-------------+
| | (407) |
+------------------------------------------------+-------------+
6. Additional cash flow information
+---------------------+---------+---------+-------------+-----------+----------+
| | 1 | | Exchange | Non-cash | 31 |
| | January | Cash | differences | movements | December |
| | 2009 | flow | GBP'000 | GBP'000 | 2009 |
| | GBP'000 | GBP'000 | | | GBP'000 |
+---------------------+---------+---------+-------------+-----------+----------+
| | | | | | |
| Cash and cash | 1,762 | (1,503) | 594 | - | 853 |
| equivalents | | | | | |
+---------------------+---------+---------+-------------+-----------+----------+
| Increase/(decrease) | 1,762 | (1,503) | 594 | - | 853 |
| in cash | (2,217) | 666 | - | 149 | (1,402) |
| Finance leases | (5,235) | 5,235 | - | - | - |
| Bank loan | | | | | |
+---------------------+---------+---------+-------------+-----------+----------+
| Net debt | (5,690) | 4,398 | 594 | 149 | (549) |
+---------------------+---------+---------+-------------+-----------+----------+
+---------------------+----------+---------+-------------+-----------+----------+
| | 1 | | Exchange | Non-cash | 31 |
| | January | Cash | differences | movements | December |
| | 2008 | flow | GBP'000 | GBP'000 | 2008 |
| | GBP'000 | GBP'000 | | | GBP'000 |
+---------------------+----------+---------+-------------+-----------+----------+
| | | | | | |
| Cash and cash | 2,001 | 189 | (428) | - | 1,762 |
| equivalents | | | | | |
+---------------------+----------+---------+-------------+-----------+----------+
| Increase/(decrease) | 2,001 | 189 | (428) | - | 1,762 |
| in cash | (500) | (1,717) | - | - | (2,217) |
| Finance leases | (8,474) | - | - | 8,474 | - |
| Convertible bonds | (6,500) | 1,265 | - | - | (5,235) |
| Bank loan | | | | | |
+---------------------+----------+---------+-------------+-----------+----------+
| Net debt | (13,473) | (263) | (428) | 8,474 | (5,690) |
+---------------------+----------+---------+-------------+-----------+----------+
Cash and cash equivalents comprise:
+---------------------------+------------+----------+----------+
| | | | |
| | 1 January | 31 | 31 |
| | 2008 | December | December |
| | GBP'000 | 2008 | 2009 |
| | | GBP'000 | GBP'000 |
+---------------------------+------------+----------+----------+
| | | | |
+---------------------------+------------+----------+----------+
| Cash and short term | 2,001 | 1,762 | 1,691 |
| deposits | | | |
+---------------------------+------------+----------+----------+
| Bank overdraft | - | - | (838) |
+---------------------------+------------+----------+----------+
| | 2,001 | 1,762 | 853 |
+---------------------------+------------+----------+----------+
7. Annual accounts
The annual report and accounts will be posted to all shareholders on 2 June 2010
and will be available from the Company's website at www.journeygroup.plc.uk and
its registered office:
The Encompass Centre
International Avenue
Heston
Middlesex
TW5 9NJ
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FBMPTMBMMBAM
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