Dart Group preliminary results

17-Jul-2013

PRELIMINARY UNAUDITED RESULTS FOR YEAR ENDED 31 MARCH 2013

Dart Group PLC (the "Group"), the Leisure Airline, Package Holidays and Distribution & Logistics Group, announces its preliminary results for the year ended 31 March 2013. These results are presented under International Financial Reporting Standards ("IFRS").

CHAIRMAN'S STATEMENT

I am pleased to report on the Group's trading for the year ended 31 March 2013. Turnover grew by 27% to £869m (2012: £683m) and profit before tax amounted to £40.5m (2012: £28.1m). Earnings per share increased 36% to 21.73p (2012: 16.01p).

The Board maintains a conservative approach to dividend policy, ensuring that funds are retained to support further business growth, whilst recognising the need to provide a return to shareholders. With this in mind, and in consideration of the Group's improved trading performance, the Board recommends a final dividend of 1.33p per share (2012: 0.89p). If approved at the Annual General Meeting, to be held on 5 September 2013, this dividend will be payable on 18 October 2013 to shareholders on the register at the close of business on 13 September 2013. The associated ex dividend date will be 11 September 2013.

The significant growth in turnover particularly reflects the expansion of Jet2holidays, the Group's package holiday business, which increased its holiday customers by 93% to 417,390 (2012: 216,520) in the year. The business continues to gain momentum, recording a profit before tax of £6.8m (2012: £2.5m) on the back of an increase in turnover to £244.8m (2012: £114.5m). Profits in Jet2.com, the leisure airline business, increased to £29.3m (2012: £21.7m) as overall demand for seats, boosted by demand from Jet2holidays, resulted in higher load factors and increased yields. Our important and long-established Distribution & Logistics business, Fowler Welch, improved operating margins and achieved a profit before tax of £4.4m (2012: £3.9m).

Capital expenditure for the year was £79.7m (2012: £47.3m), which related principally to the acquisition of seven aircraft, including two Boeing 737-800s, for following year fleet growth and longterm maintenance spend on aircraft and engines. Net cash flow from operating activities amounted to £150.3m (2012: £94.5m), primarily reflecting growth in Jet2.com and Jet2holidays forward bookings, which grew in line with planned capacity increases for the year ending 31 March 2014.

As at 31 March 2013, the Group's cash balances, including money market deposits, were £220.9m (2012: £152.0m), at which point Jet2.com and Jet2holidays had received circa £253m (2012: £180m) of advance payments from customers in respect of their future flights and holidays. The Group manages its cash very carefully, not least because of the restrictions placed on it by the UK Civil Aviation Authority, which requires the Group to maintain certain levels of "available liquidity", which is defined as free cash plus available facilities.

In addition, the Group's cash and money market deposits include cash which is restricted by its merchant acquirers as collateral against a proportion of forward bookings paid for by credit or debit card. These balances are considered to be restricted until the respective customers have travelled.

On 29 April 2013, we were pleased to welcome Gary Brown to the position of Group Chief Financial Officer and then to appoint Gary to the Board of Dart Group PLC on 17 June 2013. Prior to joining the Group, Gary had been Global Chief Financial Officer at Umbro PLC and had held a number of senior positions in the retail and consumer goods sector.

Our previous Finance Director, Andrew Merrick, left us on 11 April 2013 after six years with the Group. We wish him well for the future and thank him for his valued contributions.

Leisure Airline & Package Holidays

We continue to make good progress in both our leisure airline and package holidays businesses. Whether customers choose to buy an airline seat only, or a fully inclusive package holiday, we do our best to give them great service from the moment they book. Our staff are "happy to help" and conscious that they are an important part of the often long anticipated and eagerly awaited holiday experience.

In the summer of 2012 Jet2.com, our leisure airline, flew from our eight Northern bases to 51 Mediterranean, Canary Island and leisure City destinations. The Company operated 45 passenger aircraft of which 37 were owned by the Group. A further 5 aircraft were purchased during the year, and 2 purchased since the reporting date, to meet planned expansion for summer 2013.

We offer two distinct products: seat-only, which is almost exclusively sold through the Jet2.com website and package holidays, which are sold through the Jet2holidays website, travel agents and our own call centre. Demand is stimulated by extensive online and direct marketing - particularly TV. The Group is now the UK's third largest ATOL (Air Travel Organisers' Licencing) holder. Our ATOL determines the number of package holidays we are licensed to sell annually by the UK Civil Aviation Authority.

At Jet2.com our seat-only product offers friendly low fares with convenient flight times, allocated seating and a 22 kilo baggage allowance. At check-in we aim to have a speedy experience with no queues and often there are customer helpers to assist. When on board, our cabin staff are intent on ensuring that the holiday starts and finishes with a relaxed and friendly flight. At many destinations our own staff will be present to greet customers and ensure their holiday gets off to a great start.

If the customer has chosen a Jet2holiday, they will normally be flown to the resort in a Jet2.com operated aircraft, so ensuring that we control the quality of the flight product. Then they will be transported to their hotel in Jet2holidays contracted busses, many of which are branded in our colours. With over 1,500 3-5 star hotels to choose from, often with adjacent water parks and other great attractions, and with a range of options from bed and breakfast to all inclusive there is an offer to suit most tastes. In the year to 31 March 2013 we took over 417,000 customers on package holidays, and current booking rates indicate that we will double that in the current financial year. Our core principles are to be family friendly, offer great value for money and give best in class customer service.

On 1 January 2013, I was delighted to appoint Stephen Heapy, then Chief Commercial Officer to the position of Chief Executive of Jet2.com and Jet2holidays and, on 17 June 2013, to the board of Dart Group PLC. Steve joined us in November 2009 from Libra Travel, where he held the position of Product, Commercial and Operations Director and prior to that he was the Managing Director of Thomas Cook's scheduled business. Since joining, Steve has driven the successful growth of our holiday business and now through his leadership of both the seat-only and package holiday products he is in the position to ensure our businesses, together, give the best possible products and value. We are confident that under Steve's leadership, and with our enthusiastic and growing team, we will deliver a really wonderful holiday experience for our customers.

On 6 June 2013, we were very pleased to announce that we had been notified by Royal Mail that, subject to contract, Jet2.com has retained contracts for six out of the eight Postal Air Network routes currently operated. The Group has been operating flights for Royal Mail through its subsidiaries since 1980, helping them to ensure First Class mail achieves next day delivery throughout the UK. The current contracts with Royal Mail are due to terminate in 2014.

As notified in the Company's results for the year ended 31 March 2012, Jet2.com was invited to retender, along with a number of other airlines, for Royal Mail's revised network from 2014. As a result of the competitive retender process, there has been an expected reduction in the contribution from this business that will be enjoyed by the Group going forward. However, retaining approximately 75% of its Royal Mail business represents a positive outcome for the Group and is regarded as a reflection of the very high service levels maintained over many years.

In our leisure airline and package holiday businesses we believe that by providing great value for money and best in class service and concentrating on the Mediterranean, Canary Islands and European leisure cities from our Northern catchment area, we will both retain existing Jet2.com and Jet2holidays customers and attract many new ones, thereby continuing our profitable growth.

Distribution and Logistics

The Group's distribution business, Fowler Welch is one of the UK's leading providers of distribution and logistics services across the food supply chain, serving retailers, growers, importers and manufacturers through its network of 11 distribution sites, encompassing circa 1m square feet of warehouse space. The Company's main distribution centres are in key produce, growing and importing areas - Spalding in Lincolnshire, Teynham in Kent and Hilsea in Portsmouth. Our very significant ambient (non temperature controlled) distribution centre is at Heywood near Bury, Greater Manchester and there are two regional sites in Washington, Tyne and Wear and Newton Abbott, Devon.

I am pleased to report the significant progress that has been made at our Heywood distribution centre, which was purchased by the Group in May 2010. This operation is now materially contributing towards the Company's profits. We were also delighted to sign a new long-term lease for our Hilsea, Portsmouth site, which has enabled us to make appropriate investment to improve this facility, in order to meet the high standards required by our customers. Fowler Welch operates over 450 distribution vehicles, which are supplemented to meet seasonal demand.

The Company prides itself on its high standards of customer service, much of which is in the demanding temperature controlled food sector. However, increasingly Fowler Welch is also developing its ambient business, leveraging its operating disciplines to offer the same high standards of service in this sector too.

The current opportunity for Fowler Welch is to grow its business through the development of its existing infrastructure and to attract customers through its price competitive, operational expertise, delivered by dedicated professionals. Everything is in place to achieve careful but determined growth. Our sales force has been significantly enhanced and there is an encouraging pipeline of prospective new customers, along with further opportunities for business growth from existing customers. This will mean some additional infrastructure spend as enhancements are made to our existing distribution sites. With its strong management team and highly professional workforce, we believe that the Company is really well positioned to take advantage of exciting opportunities in its sectors.

Outlook

Each of our businesses have great opportunities in their respective marketplaces together with strong and energetic management in place. Jet2holidays is set for further growth in the current year, with forward bookings at encouraging levels. We have expanded Jet2.com's flying programme by 12% for summer 2013, although margins will continue to remain challenging in this sector. Fowler Welch will continue to focus on developing a strong pipeline of future revenue opportunities whilst improving its operational efficiency as a result of system developments.

We are encouraged both by our business opportunities and the start we have made to the current year but as always, in the current economic environment, we remain cautiously optimistic in respect of profit growth.