TIDMJNY
RNS Number : 5050A
Journey Group PLC
21 March 2013
21 March 2013
Embargoed 0700hrs
Journey Group plc
Annual Results
for the year ended 31 December 2012
Journey Group plc (the "Group") a leading provider of catering
services and in-flight products to the international airline and
travel industries today announces its results for the year ended 31
December 2012.
A focus on growth has led to a considerable improvement in
profitability and the recommendation to resume payment of a final
dividend
-- Adjusted profit before tax up 212% to GBP1,153,000 (2011: GBP369,000)
-- Adjusted basic earnings per share more than doubled to 0.23p (2011: 0.10p)
-- Net cash increased by GBP1,056,000 to GBP3,111,000 (2011: GBP2,055,000)
-- Capital reduction completed leading to substantial retained earnings and dividend capacity
-- Proposed final dividend of 0.1p per share
-- Award by United Airlines of former Continental traffic and
JetBlue Airways contract win position the US Division and the Group
for significant growth in 2013
Stephen Yapp, Executive Chairman commented
"2012 was a successful year for the Group during which it
strengthened its financial position and took significant steps in
delivering both its strategic and growth objectives.
Having demonstrated its flexibility and scalability with its
recent contract wins, the US Division is now poised to seek out new
opportunities which will enable it to leverage its unique business
model. With the Group's strong financial position it is well placed
to exploit these opportunities as they arise and it is against this
backdrop that your Board continues to be confident in continuing to
deliver shareholder value and to recommend the payment of a final
dividend of 0.1p per share."
For further information please contact:
Stephen Yapp
Carl Fry
Journey Group plc
Tel: +44 (0) 20 8606 2000
info@journeygroup.plc.uk
N+1 Singer (Nominated Advisor & Broker)
Jonny Franklin-Adams
Matt Thomas
Tel: +44 (0) 20 7496 3000
EXECUTIVE CHAIRMAN'S LETTER TO SHAREHOLDERS
Dear Shareholder
INTRODUCTION
I am delighted to report to shareholders that the Group's
financial results improved considerably in 2012 delivering our
first significant profit before tax in some years, a further
substantial improvement in the net cash position and as a result we
are now proposing that a final dividend be paid. The Group has also
positioned itself for continued significant growth, during 2013,
primarily driven by the US Division.
The principal highlights of the year were:
-- Adjusted profit before tax up 212% to GBP1,153,000
-- Adjusted basic earnings per share more than doubled to 0.23
pence versus 0.10 pence last year
-- Net cash increased by GBP1,056,000 to GBP3,111,000
-- Capital reduction completed leading to substantial retained earnings and dividend capacity
-- Return to the dividend list with a proposed final dividend of 0.1 pence per share
-- Award by United Airlines of former Continental traffic and
JetBlue Airways contract win position the US Division and the Group
for significant growth in 2013
MARKET CONDITIONS
The Group's principal market, the airline industry, showed some
recovery over the slowdown reported in the first half of the year,
although many carriers continue to experience significant financial
issues. Passenger traffic grew by 5.3% during the year despite the
prevailing difficult economic conditions. Whilst this was slightly
lower than the 5.9% growth last year, it was in line with the
long-term trend of approximately 5%. In the regions most served by
the Group, growth in passenger traffic was mixed with Asia-Pacific
up 6.0% and Europe up 5.1%, but North America up only 1.1%.
Airlines also managed their capacity well with load factors
improved to 79.1% from 78.1% last year. The consolidation of the
airline industry took further steps forward, particularly in the
USA with the recently announced merger between American Airlines
and US Airways.
The world's major economies in the developed world are currently
exhibiting greater stability and in the developing nations some
growth is returning, which over the course of 2013 is likely to
lead to increasing confidence. Passenger traffic growth in 2013 is
expected to be in line with the long term average of 5% and load
factors are likely to continue to be prudently managed. Further
industry consolidation is probable and the benefits of earlier
mergers will progressively be realised. Whilst the prospective
conditions for 2013 do not represent an ideal industry back-drop,
the trends are positive and we believe they will progressively lead
to greater activity by airlines in seeking the sort of cost
effective and high quality of service solutions the Group can
offer.
RESULTS
The results for the year were as follows:
Year to 31 December 2012 2011
GBP'000 GBP'000
----------------------------------------- -------- ---------
Continuing operations
Revenue 41,724 42,639
----------------------------------------- -------- ---------
EBITDA before exchange differences 2,154 1,399
Exchange differences (67) 27
----------------------------------------- -------- ---------
EBITDA before share based payments 2,087 1,426
Depreciation and amortisation (764) (768)
----------------------------------------- -------- ---------
Operating profit before share based
payments 1,323 658
Finance charges (170) (289)
----------------------------------------- -------- ---------
Adjusted profit before tax 1,153 369
Share based payments (167) (506)
Profit/(loss) before tax from continuing
operations 986 (137)
Income tax credit/(expense) 652 (59)
----------------------------------------- -------- ---------
Profit/(loss) after tax from continuing
operations 1,638 (196)
Discontinued operations
Loss from discontinued operations - (1,072)
----------------------------------------- -------- ---------
Profit/(loss) attributable to equity
shareholders 1,638 (1,268)
----------------------------------------- -------- ---------
Basic earnings/(loss) per share from
continuing operations 0.53p (0.07p)
Adjusted basic earnings per share from
continuing operations 0.23p 0.10p
Basic earnings/(loss) per share from
continuing and discontinued operations 0.53p (0.43p)
----------------------------------------- -------- ---------
Led by the US Division, the Group's financial results improved
considerably in 2012 with, for the first time in some years, a
significant profit before tax and a further substantial improvement
in the net cash position.
Whilst revenues fell marginally by 2% to GBP41,724,000, EBITDA
before exchange differences grew by 54% to GBP2,154,000. This drove
growth of 101% in operating profit before share based payments to
GBP1,323,000 and led to a 212% step up in adjusted profit before
tax to GBP1,153,000.As referred to below, operating profit was
impacted by items of a non-recurring nature, but these items
largely offset each other. On a statutory basis, there was a profit
before tax of GBP986,000, which was arrived at after charging share
based payments of GBP167,000. This charge relates to the Company's
management incentive scheme for its Executive Directors. There will
be no further charges to income under this scheme as the awards are
now fully vested.
There was an income tax credit of GBP652,000. Following an
increase in the profitability and improved prospects of the US
Division, a deferred tax asset has been recognised primarily in
respect of US tax losses less accelerated tax depreciation
resulting in a deferred tax credit in respect of previous years of
GBP1,082,000. Excluding this credit the income tax expense for the
year would have been GBP430,000.
Adjusted basic earnings per share amounted to 0.23 pence
compared with 0.10 pence last year. The Board considers that
adjusted profit before tax and adjusted earnings per share provide
a better guide to the underlying performance of the Group. Basic
earnings per share amounted to 0.53 pence compared with a loss of
0.07 pence in the previous year. The profit attributable to equity
shareholders was GBP1,638,000.
Net cash amounted to GBP3,111,000, comprising cash of
GBP3,357,000 less debt under finance leases of GBP246,000, compared
with net funds of GBP2,055,000 at 31 December 2011, an increase of
GBP1,056,000. This increase, along with that of the prior year,
underline the strong cash generative nature of the Group's
business. The higher net cash was primarily driven by cash flow
generated from operating activities of GBP1,818,000, which was a
significant improvement over GBP996,000 in the prior year, less
capital expenditure of GBP732,000. The largest element of this
expenditure related to the purchase of additional trucks to service
growth in the US Division.
US DIVISION
Year to 31 December 2012 2011
GBP'000 GBP'000
------------------------------------ -------- --------
Revenue 17,348 15,170
------------------------------------ -------- --------
EBITDA before share based payments 1,758 1,492
------------------------------------ -------- --------
Operating profit before share based
payments 1,095 853
------------------------------------ -------- --------
The US Division had a strong year with significant growth and
has positioned itself for further considerable growth during 2013.
It continued to deliver operational excellence to United Airlines
by providing it with a consistent level of high quality on time
service through a difficult period of monthly schedule changes
arising from the integration of the original United Airlines fleet
with that of Continental following their merger.
During the second half of the year, the US Division was
delighted to win two significant new contracts. United Airlines
awarded the US Division the former Continental traffic in Los
Angeles to bring the number of flights served up to between 90
flights a day in low season and 115 flights a day in high season.
Shortly following this win, JetBlue Airways awarded the US Division
its traffic out of Long Beach International Airport, increasing the
number of flights a day serviced out the Los Angeles facility to
between 120 a day in low season and 145 in high season. The
Continental transition took place at the beginning of November and
the JetBlue transition in mid November. These transitions went
extremely well despite having to deal with the effects of winter
storms, including hurricane Sandy, which disrupted operations
throughout this period. Both airlines commended the Los Angeles
facility team for their successful execution. An additional 15
thousand square feet of warehouse space was secured to provide
capacity to service the existing and future growth. During the year
the facility provided United Airlines with 1,731,944 meals and
serviced 24,476 flights.
Revenue increased by 14% to GBP17,348,000, being mostly driven
by increased food sales arising from a higher proportion of caterer
sourced food, but also with a significant contribution from the
start-ups of the former Continental traffic and JetBlue in the
final two months of the year. EBITDA before share based payments
rose 18% to GBP1,758,000, which was due to a combination of trading
factors. Whilst the additional traffic drove higher gross profit,
it was offset by start-up driver training costs and non-recurring
excess direct labour costs arising from the Continental transition
plan. With the charge for depreciation only modestly higher
compared with the prior year, operating profit before share based
payments rose 28% to GBP1,095,000.
United Airlines is the largest carrier operating out of Los
Angeles International Airport (LAX), which is the third largest
airport in the USA in terms of passenger numbers and the sixth
largest in the world. Having secured the former Continental
traffic, the US Division has strengthened its position as one of
the leading caterers serving LAX. The US Division's patented
business model continues to deliver superior financial returns than
those of the traditional kitchen based service model, whilst
offering an innovative approach to customer service. With this in
mind and with the strong financial position and borrowing capacity
of the Group, new opportunities are being sought and pursued to
leverage the US Division's unique business model. Looking forward
to 2013, the US Division will benefit from a full year of the
additional former Continental traffic and the JetBlue traffic,
which underwrites the Board's expectation of significant
growth.
PRODUCTS DIVISION
Year to 31 December 2012 2011
GBP'000 GBP'000
------------------------------------ -------- --------
Revenue 24,376 27,469
------------------------------------ -------- --------
EBITDA before exchange differences 928 669
Exchange differences (30) 38
------------------------------------ -------- --------
EBITDA before share based payments 898 707
------------------------------------ -------- --------
Operating profit before share based
payments 797 634
------------------------------------ -------- --------
The Products Division had a busy year during which it took steps
to re-position its activities to focus on higher gross margin
business and create a more stable earnings base. Whilst this
strategy has led to some business not being retained that will
impact 2013, the underlying gross margin percentage has improved
significantly and already a measure of success has been achieved in
developing more robust product offerings in both Watermark and MNH
Sustainable Cabin Services.
Revenues fell by 11% to GBP24,376,000, which was mainly
accounted for by significantly lower volumes over the launch
quantities in the prior year of a major new contract. EBITDA before
exchange differences increased by 39% to GBP928,000, but this
increase was due to the net effect of the release of accruals and
inventory provisions that were necessary at the end of the prior
year offset by a bad debt. Excluding these non-recurring items, on
an underlying basis operating profit fell reflecting higher
overheads partially offset by higher gross profit. The accruals and
inventory provisions arose primarily in the previous year mainly as
a consequence of uncertainties relating to contract terms and
renewals that have since been resolved and, accordingly, are no
longer considered necessary.
During the year, Watermark's attention was focused mainly on
improving gross margins on existing accounts and developing its
meal service product lines where contract lifecycles are longer
than for amenity kits. Measures were taken to improve pricing and
achieve supply chain savings with notable success. Minimum
acceptable margins were achieved on some contracts whilst margins
were grown on others. As already noted, this was at the expense of
some business not being retained on contract renewal, but this
freed capacity to allow management to concentrate on existing and
prospective accounts with higher margins and greater growth
potential. Sales of meal service products now form a significant
part of Watermark's revenues and some attractive opportunities have
been identified and progressed to develop this product line further
in 2013. During 2013, Watermark will also continue its focus of
improving gross margins as well as concentrating on key contract
renewals.
MNH Sustainable Cabin Services continued to develop its
specialism in headset and amenity kit supply chain solutions as
well as in other 3PL product lines. In headsets and amenity kits
there is increasing interest in its unique price per seat model,
which delivers to customers a more attractive variable as well as
lower cost structure by combining recycled and new product. An
important strategic partnership has been established with a leading
headset manufacturer, which positions MNH to provide a competitive
offering in respect of certain significant new contract
opportunities. In 2013, MNH will also be focusing on a key contract
renewal.
CENTRAL COSTS
Year to 31 December 2012 2011
GBP'000 GBP'000
------------------------------------------- -------- --------
Central costs before exchange differences (532) (818)
Exchange differences (37) (11)
------------------------------------------- -------- --------
Central costs before share based payments (569) (829)
------------------------------------------- -------- --------
The 31% reduction in central costs before share based payments
to GBP569,000 mainly reflected the write-back of historic accruals
relating to uncertainties that have been resolved or reduced and to
cost savings arising from close control over costs.
REDUCTION OF CAPITAL
As I noted in my interim letter to shareholders, during the year
the Company completed a reduction of capital, which became
effective on 26 July 2012. The Company's share premium account and
capital redemption reserve were cancelled and its deficit on
retained earnings on 26 July 2012 was eliminated. At the year end
the Company's retained earnings stood at GBP10,381,000 giving
significant distributable reserves.
DIVIDEND POLICY
In recognition of the considerable progress made in re-building
profitability, positive cash flow and establishing a significant
net cash position, the Board has decided to recommence the payment
of dividends and has recommended a final dividend for the year of
0.1p per share, which is covered 2.3 timesby adjusted earnings per
share. If approved by shareholders, the ex-dividend date will be 22
May 2013 and the dividend will be paid on 25 June 2013 to
shareholders who are on the register as at the close of business on
24 May 2013. The Board intends to pursue a progressive dividend
policy reflecting growth in earnings, but with a conservative
dividend cover in order to maintain the financial capacity to
continue to fund growth. Currently, the Board intends to pay
dividends as a single final dividend.
BOARD
To facilitate the Group's focus on growth in both of its
Divisions, David Young has relinquished his day to day operational
responsibilities in Watermark and hastransitioned his role to Chief
Commercial Officer for the Group. This change provides both
Divisions with enhanced sales and marketing capability at a senior
level and allows greater opportunity to exploit the cross-selling
opportunities available across the Group's airline customer base. I
have assumed management responsibility for the Products
Division.
During November 2012, Dimitri Goulandris decided to step down
from the Board after almost four years as a Non-executive Director.
During that period he served on both the Remuneration and Audit
Committees and was, until he left the Board, the Chairman of the
Remuneration Committee. On behalf of the Board I would like to
thank Dimitri for his contribution during a period that has seen a
considerable improvement in the Group's fortunes.
As noted in my interim letter to shareholders, Max Lesser was
appointed as a Non-executive Director during the year. His
appointment extends the Board's skill set and creates a better
balance in pursuing shareholder value. Max has been appointed to
the Remuneration Committee as its Chairman.
STAFF
On behalf of the Board I would like to pay tribute to the
Group's staff for their continued energy and commitment over this
past successful year. The Group now has a strong team that has
developed its industry expertise and has both the determination and
ability to meet the challenges of its future growth objectives.
OUTLOOK
2012 was a successful year for the Group during which it
strengthened its financial position and took significant steps in
delivering both its strategic and growth objectives. Whilst
challenges lie ahead with some contract renewals in the Products
Division, there are a number of significant new opportunities that
are being pursued that could deliver attractive growth and a more
secure revenue base.
Having demonstrated its flexibility and scalability with its
recent contract wins, the US Division is now poised to seek out new
opportunities which will enable it to leverage its unique business
model. With the Group's strong financial position it is well placed
to exploit these opportunities as they arise and it is against this
backdrop that your Board continues to be confident in continuing to
deliver shareholder value and to recommend the payment of a final
dividend of 0.1p per share.
Stephen Yapp
Executive Chairman
CONSOLIDATED INCOME STATEMENT
2012 2011
For the 12 months to 31 December GBP'000 GBP'000
------------------------------------------- --------- ---------
Continuing operations
Revenue 41,724 42,639
Cost of sales (31,049) (32,907)
----------------------------------------------- --------- ---------
Gross profit 10,675 9,732
Operating and administrative costs (9,519) (9,580)
----------------------------------------------- --------- ---------
Operating profit 1,156 152
----------------------------------------------- --------- ---------
Operating profit before share based
payments 1,323 658
Share based payments (167) (506)
----------------------------------------------- --------- ---------
Finance costs (170) (289)
----------------------------------------------- --------- ---------
Profit/(loss) before tax from continuing
operations 986 (137)
Income tax credit/(expense) 652 (59)
----------------------------------------------- --------- ---------
Profit/(loss) after tax from continuing
operations 1,638 (196)
Discontinued operations
Loss from discontinued operations - (1,072)
----------------------------------------------- --------- ---------
Profit/(loss) attributable to equity
shareholders 1,638 (1,268)
----------------------------------------------- --------- ---------
Earnings/(loss) per share from
continuing and discontinued operations
Basic 0.53p (0.43p)
Diluted 0.47p (0.43p)
Earnings/(loss) per share from
continuing operations
Basic 0.53p (0.07p)
Diluted 0.47p (0.07p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2012 2011
For the 12 months to 31 December GBP'000 GBP'000
----------------------------------------- -------- ---------
Profit/(loss) attributable to equity
shareholders 1,638 (1,268)
Other comprehensive income
Exchange differences on translating
foreign operations (255) 58
Exchange difference on dissolution
of overseas subsidiary 24 -
--------------------------------------------- -------- ---------
Other comprehensive income, net
of tax (231) 58
--------------------------------------------- -------- ---------
Total comprehensive income attributable
to the equity shareholders 1,407 (1,210)
--------------------------------------------- -------- ---------
CONSOLIDATED BALANCE SHEET
2012 2011
As at 31 December GBP'000 GBP'000
------------------------------------------- --------- ----------
Assets
Non-current assets
Property, plant and equipment 4,188 4,588
Goodwill 3,960 3,960
Intangible assets 71 7
Deferred tax 764 -
----------------------------------------------- --------- ----------
8,983 8,555
Current assets
Inventories 1,353 1,364
Trade and other receivables 3,694 3,450
Prepayments 343 238
Current income tax 13 69
Cash and short-term deposits 3,357 2,591
----------------------------------------------- --------- ----------
8,760 7,712
---------------------------------------------- --------- ----------
Total assets 17,743 16,267
----------------------------------------------- --------- ----------
Equity and liabilities
Equity attributable to equity shareholders
of the parent
Issued share capital 3,098 3,098
Share premium account - 36,497
Shares to be issued - 100
Capital redemption reserve - 24
Merger reserve 1,521 1,521
Foreign currency translation reserve (1,174) (943)
Retained earnings 7,869 (30,557)
----------------------------------------------- --------- ----------
Total equity 11,314 9,740
Non-current liabilities
Interest bearing loans and borrowings 182 12
----------------------------------------------- --------- ----------
Current liabilities
Trade and other payables 6,183 5,991
Interest bearing loans and borrowings 64 524
----------------------------------------------- --------- ----------
6,247 6,515
---------------------------------------------- --------- ----------
Total liabilities 6,429 6,527
Total equity and liabilities 17,743 16,267
----------------------------------------------- --------- ----------
CONSOLIDATED CASH FLOW STATEMENT
2012 2011
For the 12 months to 31 December GBP'000 GBP'000
------------------------------------------- --- -------- ---------
Net cash flows from operating activities
Continuing operations
Profit/(loss) after tax from continuing
operations 1,638 (196)
Depreciation and amortisation 764 768
Share based payments 167 506
Finance costs 170 289
Income tax (credit)/expense (652) 59
Decrease in inventories 11 443
(Increase)/decrease in trade and
other receivables (259) 1,118
Increase/(decrease) in trade and
other payables 192 (1,607)
------------------------------------------------ -------- ---------
Cash flows generated from continuing
operations 2,031 1,380
Discontinued operations
Cash used in discontinued operations - (48)
------------------------------------------------ -------- ---------
Cash flows generated from operations 2,031 1,332
Interest paid (137) (289)
Income taxes paid (76) (47)
------------------------------------------------ -------- ---------
Net cash flows generated from operating
activities 1,818 996
------------------------------------------------ -------- ---------
Cash flows from investing activities
Continuing operations
Disposal of subsidiary company - 1,070
Purchase of property, plant and
equipment (655) (199)
Purchase of intangible assets (77) (3)
Disposal of property, plant and
equipment 8 -
------------------------------------------------ -------- ---------
Net cash flows (used in)/generated
from investing activities (724) 868
------------------------------------------------ -------- ---------
Cash flows from financing activities
Continuing operations
Proceeds from issue of ordinary
shares - 337
Proceeds from finance lease obligations 310 -
Payment of loan and finance lease
obligations (600) (1,943)
------------------------------------------------ -------- ---------
Net cash flows used in financing
activities (290) (1,606)
------------------------------------------------ -------- ---------
Net increase in cash and cash equivalents 804 258
Net foreign exchange difference (38) 43
Cash and cash equivalents at beginning
of year 2,591 2,290
------------------------------------------------ -------- ---------
Cash and cash equivalents at end
of year 3,357 2,591
------------------------------------------------ -------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Issued Share Shares Capital currency
share premium to redemption Merger translation Retained Total
capital account be reserve reserve reserve earnings equity*
GBP'000 GBP'000 issued GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
At 1 January
2011 2,906 36,352 100 24 1,521 (1,001) (29,795) 10,107
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Issue of ordinary
shares 192 145 - - - - - 337
Share based
payments - - - - - - 506 506
Transactions
with owners 192 145 - - - - 506 843
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Loss attributable
to equity shareholders
Other comprehensive
income: - - - - - - (1,268) (1,268)
Exchange differences
on translating
foreign operations - - - - - 58 - 58
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Total comprehensive
loss - - - - - 58 (1,268) (1,210)
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
At 31 December
2011 3,098 36,497 100 24 1,521 (943) (30,557) 9,740
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Reduction of
capital - (36,497) - (24) - - 36,521 -
Expiry of warrants - - (100) - - - 100 -
Share based
payments - - - - - - 167 167
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Transactions
with owners - (36,497) (100) (24) - - 36,788 167
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Profit attributable
to equity shareholders
Other comprehensive
income:
Exchange differences
on translating - - - - - - 1,638 1,638
foreign operations
Exchange difference
on dissolution - - - - - (255) - (255)
of overseas
subsidiary - - - - - 24 - 24
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
Total comprehensive
income - - - - - (231) 1,638 1,407
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
At 31 December
2012 3,098 - - - 1,521 (1,174) 7,869 11,314
----------------------- --------- --------- --------- ------------ --------- ------------ ---------- ---------
* Total equity is all attributable to shareholders of the
parent
NOTES TO THE PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31
DECEMBER 2012
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 2012 or 2011, but is
derived from these financial statements. The financial statements
for the year ended 31 December 2011 have been delivered to the
Registrar of Companies.
The financial statements for the year ended 31 December 2012
have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The Group has
also complied with International Financial Reporting Standards as
issued by the IASB. The financial statements for the year ended 31
December 2012 will be forwarded to the Registrar of Companies
following the Company's Annual General Meeting. The Auditors have
reported on these financial statements; their reports were
unqualified and did not contain statements under Section 498(2) or
(3) of the Companies Act 2006.
Significant judgements and estimates
In preparing the financial statements the Directors are required
to make judgements and estimates in applying accounting policies.
The most significant areas where judgements and estimates have been
made are as follows:
Judgements
-- In previous years no provision was made for deferred tax on
the operations of the US Division. As set out in Note 4, provision
has now been made in respect of such deferred tax leading to the
recognition of a deferred tax asset of GBP704,000 and a deferred
income tax credit in respect of previous years of GBP1,082,000.
Judgement was required in determining whether provision should be
made for such deferred tax asset and whether such asset would be
recoverable.
Estimates
-- In conducting the annual impairment test of goodwill, various
significant assumptions have been made in arriving at the
recoverable amounts of cash generating units.
-- In arriving at the credit to income in respect of obsolete
and slow moving inventories of GBP151,000, significant estimates
were made in determining the extent to which inventories were
considered to be no longer slow moving.
Going concern
The Directors have reviewed the Group's budgets and forecasts
for the coming 12 months, which have been prepared with appropriate
regard to the current macroeconomic environment and the conditions
in the principal markets served by the Group. As a result, and
taking into consideration the Group's financial position, including
its net funds and borrowing facilities, and its principal risks and
uncertainties, at the time of approving these financial statements,
the Directors consider that the Group has sufficient financial
resources to continue in operational existence for the foreseeable
future and, therefore, that it is appropriate to adopt the going
concern basis in preparing these financial statements.
2. Segmental reporting
The Group is organised into two primary segments, the Products
and the US Divisions. These reportable segments are the strategic
divisions for which financial information is provided to the chief
operating decision maker. The Products Division provides a broad
range of travel supplies predominately to the international travel
industry on a global basis. Although MNH Sustainable Cabin Services
and Watermark are monitored by the chief operating decision maker,
they are aggregated due to their products and customers being
similar. The US Division is a supplier of catering and beverages to
the domestic and international travel industry within the United
States of America.
Segment revenues, expenses and results include transfers and
transactions between segments. Such transactions are accounted for
at competitive market prices which would be charged to unaffiliated
clients for similar goods. All inter-segment transactions are
eliminated on consolidation. Segment revenues are based on the
country of domicile; information is not available to produce
segment revenues based on sales by destination.
Segment assets include all operating assets used by a segment
and consist principally of operating cash, receivables,
prepayments, inventories, goodwill and property, plant and
equipment, net of allowances and provisions. Where allocation of
assets across segments is not possible, they are classified as
unallocated corporate assets. Segment non-current assets comprise
fixed assets and goodwill and are based on the location of the
assets and operations. Segment liabilities include all operating
liabilities and consist principally of finance leases, accounts
payable, social security and other taxes, and accrued liabilities.
Where allocation of liabilities across segments is not possible,
such liabilities are classified as unallocated corporate
liabilities. Segment assets and liabilities do not include
receivable or payable balances in respect of income taxes.
The Group had three customers (2011: two customers), who
accounted for revenues of GBP25.3 million (2011: GBP22.3 million),
which amounts to more than 10% of Group revenues. Of these revenues
GBP16.1 million (2011: GBP14.7 million) arose in the US Division
and GBP4.6 million and GBP4.6 million (2011: GBP7.6 million) arose
in the Products Division.
Information by geographical region for 2012
Non-current
Revenue assets
GBP'000 GBP'000
------------------------- --------- -----------
United Kingdom 10,046 4,144
United States of America 22,002 3,939
Other 9,676 136
------------------------- --------- -----------
41,724 8,219
Deferred tax - 764
------------------------- --------- -----------
41,724 8,983
------------------------- --------- -----------
Information by geographical region for 2011
Non-current
Revenue assets
GBP'000 GBP'000
------------------------- --------- -----------
United Kingdom 9,087 4,096
United States of America 22,947 4,412
Other 10,605 47
------------------------- --------- -----------
42,639 8,555
------------------------- --------- -----------
Information by business segment for 2012
Products US
Division Division Total
GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- ---------
Revenue
Continuing operations
Travel supplies and catering
services 24,376 17,348 41,724
---------------------------------- --------- --------- ---------
Result
Continuing operations
Segment result 797 1,095 1,892
---------------------------------- --------- ---------
Unallocated corporate costs (569)
Share based payments (167)
---------
Operating profit 1,156
Finance costs (170)
Income tax credit 652
---------
Profit attributable to equity
shareholders 1,638
---------
Segment assets 5,386 7,075 12,461
Unallocated corporate assets 4,505
---------
16,966
Current and deferred income
taxes 777
---------
Consolidated assets 17,743
---------
Segment liabilities (3,092) (2,282) (5,374)
Unallocated corporate liabilities
and eliminations (1,055)
---------
Consolidated liabilities (6,429)
---------
Capital expenditure including
intangible assets 179 553 732
---------------------------------- --------- --------- ---------
Depreciation and amortisation (101) (663) (764)
---------------------------------- --------- --------- ---------
Information by business segment for 2011
Products US
Division Division Total
GBP'000 GBP'000 GBP'000
----------------------------------- --------- --------- ---------
Revenue
Continuing operations
Travel supplies and catering
services 27,469 15,170 42,639
----------------------------------- --------- --------- ---------
Result
Continuing operations
Segment result 634 853 1,487
----------------------------------- --------- ---------
Unallocated corporate costs (829)
Share based payments (506)
---------
Operating profit 152
Finance costs (289)
Income tax expense (59)
---------
Loss after tax from continuing
operations (196)
Discontinued operations
Loss from discontinued operations (1,072)
---------
Loss attributable to equity
shareholders (1,268)
---------
Segment assets 5,229 6,051 11,280
Unallocated corporate assets 4,918
---------
16,198
Current income tax 69
---------
Consolidated assets 16,267
---------
Segment liabilities (3,716) (3,496) (7,212)
Unallocated corporate liabilities
and eliminations 685
---------
Consolidated liabilities (6,527)
---------
Capital expenditure including
intangible assets 129 73 202
----------------------------------- --------- --------- ---------
Depreciation and amortisation (73) (639) (712)
Unallocated corporate depreciation (56)
----------------------------------- --------- --------- ---------
(768)
----------------------------------- --------- --------- ---------
3. Inventories
During the year, GBP151,000 was credited (2011: charge of
GBP308,000) to the income statement in respect of a reduction in
obsolete and slow moving inventories. The inventory provisions
arose primarily in the previous year as a consequence of
uncertainties relating to contract terms and renewals that have
since been resolved.
4. Income tax
The major components of income tax (credit)/expense were as
follows:
2012 2011
GBP'000 GBP'000
------------------------------------- --------- --------
Current income tax:
Overseas taxation 59 59
------------------------------------- --------- --------
Deferred income tax:
Current year 371 -
Adjustment in respect of previous (1,082) -
years
------------------------------------- --------- --------
(711) -
------------------------------------- --------- --------
Income tax (credit)/expense (652) 59
------------------------------------- --------- --------
Following an increase in the profitability and improved
prospects for the Group's US operations, a deferred tax asset of
GBP704,000 has been recognised primarily in respect of US Federal
and State tax losses less accelerated tax depreciation and a
deferred income tax credit in respect of previous years of
GBP1,082,000. This is a reassessment of the recognition of a
deferred tax asset in respect of tax losses, in the current
year.
The reconciliation of the income tax expense/(credit) to the
profit/(loss) before tax at the statutory income tax rate to the
income tax (credit)/expense at the Group's effective income tax
rate is as follows:
2012 2011
GBP'000 GBP'000
---------------------------------------- -------- ---------
Profit/(loss) before tax 986 (137)
UK corporation tax rate 24.5% 26.5%
---------------------------------------- -------- ---------
Income tax expense/(credit) at UK
corporation tax rate 242 (36)
US deferred taxation (1,082) -
Other expenses not deductible for
taxation purposes 39 75
Unutilised current year losses carried
forward 59 72
Movement in unprovided deferred tax (45) 183
Tax on overseas earnings at other
rates 144 76
Utilisation of brought forward tax
losses (9) (227)
Prior year interest now deductible - (123)
US state and minimum federal taxes - 39
---------------------------------------- -------- ---------
(652) 59
---------------------------------------- -------- ---------
Effective tax rate - -
Adjusted effective tax rate 37.3% 16.0%
---------------------------------------- -------- ---------
The adjusted effective tax rate has been calculated on profit
before tax after adding back share based payments and excluding
from income tax expense the deferred tax credit of GBP1,082,000
arising in respect of previous years from the Group's US
operations.
The movement on the deferred tax asset was as follows:
Accelerated
Tax tax Other
losses depreciation timing Total
GBP'000 GBP'000 differences GBP'000
GBP'000
------------------------ --------- ------------- ------------- ---------
Beginning of year - - - -
Transfer from current
income tax 65 8 - 73
Credit to the income
statement 929 (367) 149 711
Exchange adjustment (26) 10 (4) (20)
------------------------ --------- ------------- ------------- ---------
End of year 968 (349) 145 764
------------------------ --------- ------------- ------------- ---------
The Group has estimated UK tax losses of GBP8.6 million (2011:
GBP8.4 million) that are available indefinitely for offset against
future taxable profits arising from the same trades of the
companies in which the losses arose. The Group has also estimated
non-trade UK tax losses of GBP3.9 million (2011: GBP3.8 million)
that are available indefinitely for offset against future
non-trading gains. Deferred tax assets have not been recognised in
respect of these UK tax losses as there is insufficient certainty
of future taxable profits against which to utilise them. The Group
also had estimated US tax losses for Federal and State purposes of,
respectively, GBP2.3 million (2011: GBP3.5 million) and GBP2.2
million (2011: GBP3.5 million) that are available for offset
against future taxable profits arising from the same trades of the
company in which the losses arose.
5. Earnings per share
The basic earnings/(loss) per share from continuing and
discontinued operations is calculated by dividing the profit/(loss)
attributable to equity shareholders (numerator) by the weighted
average number of ordinary shares in issue during the year
(denominator). The basic earnings/(loss) per share from continuing
operations is calculated by dividing the profit/(loss) after tax
from continuing operations (numerator) by the weighted average
number of ordinary shares in issue during the year (denominator).
The basic loss per share from discontinued operations is calculated
by dividing the loss from discontinued operations (numerator) by
the weighted average number of ordinary shares in issue during the
year (denominator).
The diluted earnings/(loss) per share is calculated using the
same numerator with the denominator adjusted for the dilutive
effects of share options and warrants. As the Group made a loss in
2011, no adjustment was made to the denominator for the impact of
share options and warrants because the potential shares were
anti-dilutive.
The adjusted earnings per share from continuing operations uses
the denominator described in the appropriate paragraph above with
the numerator adjusted to remove the post tax impact of share based
payments and the deferred tax credit arising in respect of tax
losses from previous years from the Group's US operations.
2012 2011
Profit/(loss) table GBP'000 GBP'000
------------------------------------------ -------- --------
Profit/(loss) attributable to equity
shareholders 1,638 (1,268)
Loss from discontinued operations - 1,072
------------------------------------------ -------- --------
Profit/(loss) after tax from continuing
operations 1,638 (196)
Share based payments 167 506
US deferred tax credit (1,082) -
------------------------------------------ -------- --------
Adjusted profit after tax from continuing
operations 723 310
------------------------------------------ -------- --------
Weighted average number of shares 2012 2011
in issue
-------------------------------------- ------------- -------------
For basic earnings/(loss) per share 309,780,243 298,203,887
-------------------------------------- ------------- -------------
For diluted earnings/(loss) per share 344,966,068 298,203,887
-------------------------------------- ------------- -------------
2012 2011
Earnings/(loss) per share table GBP'000 GBP'000
------------------------------------ -------- ---------
Basic earnings/(loss) per share
From continuing and discontinued 0.53 (0.43)
operations
From continuing operations 0.53 (0.07)
From discontinued operations - (0.36)
Adjusted from continuing operations 0.23 0.10
Diluted earnings/(loss) per share
From continuing and discontinued 0.47 (0.43)
operations
From continuing operations 0.47 (0.07)
From discontinued operations - (0.36)
Adjusted from continuing operations 0.21 0.10
------------------------------------ -------- ---------
6. Dividends
At 31 December 2012, there were no unrecognised dividends (2011:
GBPnil). No interim dividend was declared in respect of the year
ended 31 December 2012. A final dividend of 0.1 pence per share has
been proposed in respect of the year ended 31 December 2012. It
will be paid on 25 June 2013 to shareholders who are on the
register as at the close of business on 24 May 2013.
7. Additional cash flow information
1 January Exchange 31 December
2012 Cash flow differences 2012
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ----------- ------------- -------------
Cash and cash equivalents 2,591 804 (38) 3,357
Finance leases (536) 290 - (246)
--------------------------- ----------- ----------- ------------- -------------
Net funds 2,055 1,094 (38) 3,111
--------------------------- ----------- ----------- ------------- -------------
1 January Exchange 31 December
2011 Cash flow differences 2011
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ----------- ------------- -------------
Cash and cash equivalents 2,290 258 43 2,591
Finance leases (979) 443 - (536)
Bank loan (1,500) 1,500 - -
Net (debt)/funds (189) 2,201 43 2,055
--------------------------- ----------- ----------- ------------- -------------
8. Annual accounts
The annual report and accounts will be posted to all
shareholders shortly 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 JMMRTMBITBRJ
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