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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Journey Grp | LSE:JNY | London | Ordinary Share | GB00B909HR51 | ORD 25P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 241.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
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
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