24th June 2011
DART GROUP PLC -
PRELIMINARY UNAUDITED RESULTS FOR YEAR ENDED 31 MARCH 2011
Chairman’s Statement
I am pleased to report on
the Group’s trading for the year ended 31 March 2011. Group turnover increased to £543m (2010:
£435m) and profit before tax amounted to £26.2m (2010: £22.2m) with earnings
per share of 12.2p (2010: 11.1p).
Underlying profit before tax and before specific IAS 39 fair value
movements was £25.9m (2010: £19.1m).
In consideration of the
Group’s current trading performance, the Board recommends a final dividend of
0.83p per share (2010: 0.75p). If
approved at the Group's Annual General Meeting to be held on 8 September 2011, this
dividend will be payable on 21 October 2011 to shareholders on the Group's
register at the close of business on 16 September 2011. The associated ex-dividend date will be 14
September 2011.
Profitability increased
in Aviation, primarily due to
increasing load factors, but decreased in Distribution, due to start-up costs
at its new North West distribution centre and the rationalisation of its
container operations.
Capital expenditure for the year was £68.0m (2010:
£32.1m). This expenditure related principally to long term maintenance spend
on aircraft airframes and engines and the freehold acquisition of the
distribution centre at Heywood, near Manchester, “the Hub”. Net cash flow from operating activities
amounted to £113.8m (2010: £73.2m), driven principally by improved forward
bookings at Jet2.com and Jet2holidays, the Group’s
ATOL bonded tour operator.
As at 31 March 2011, the cash position amounted to £106.8m
(2010: £52.2m), including money market deposits, at which point Jet2.com
had received circa £135m of advance payments from customers in respect
of future flights.
Aviation
Our strategy is to understand and meet the holiday needs of
our Northern based customers. We fly
carefully scheduled flights to high volume leisure destinations, offering
“friendly low fares” to seat only customers and “package holidays you can
trust” to Jet2holidays’ customers.
Both products meet the demand for real value in these
difficult and uncertain economic times.
Higher utility prices, the rising cost of food and fuel, and employment
uncertainty, are all taking their toll on leisure spend. Both our seat only and package holiday
products are absolutely geared to meet the holiday needs of value seeking
customers.
To ensure we continue to deliver the right product, we are
working hard to build our customer data capture and analysis capabilities
which, coupled with our substantial in-house IT development expertise, means
that we can progressively improve the tailoring of our leisure products, both
seat only and packages, to meet our customers’ needs, both present and
future. Customer demand will lead our
strategy - understanding the needs of our customers is key and we believe we
are making great progress along this exciting and interesting path.
Aviation revenues rose by 28% as a result of increased
passenger volumes and the growth of Jet2holidays. This revenue growth
was achieved despite the disruption to Jet2.com’s flying programme caused
by the eruption of volcano Eyjafjallajӧkull in April and May 2010, which
resulted in the cancellation of over 400 flights. The overall profit impact as a result of this
disruption is estimated at £3m, comprising refunded flight revenues,
compensation claims and the repatriation of customers who were stranded
overseas, together with an estimate of lost revenues, offset by variable
operating cost savings on cancelled flights.
In January 2011, we reluctantly took the decision to cease services to
Sharm El Sheikh, Hurghada and Tunisia due to political unrest, re-directing the
capacity to Western Mediterranean resorts.
During the financial year the company flew 135 routes from
its Northern bases to 51 destinations.
Our unique proposition of “great flight times”, “22 kg baggage
allowance”, “allocated seating” and “loyalty points for free flights” helped us
to raise our overall load factor to 85% (2010: 80%). In March 2011 we commenced operations from
our eighth Northern base, Glasgow, with services to nine popular sun
destinations. This contributed to a 26%
overall increase in network seat capacity for summer 2011.
We are particularly pleased to report the progress of Jet2holidays
which is gaining encouraging sales momentum.
We carried nearly 98,000 of our own package holiday customers on our
flights during the past year, and we are now working to double that number for
the current financial year.
Our packages encompass the flight, transfer and
accommodation, with “3 star” and “4 star”, “half board” and “all inclusive”
packages being the top sellers. The
company now has over 800 directly contracted hotels in leading Eastern and
Western Mediterranean resorts. We are
determined to develop these relationships further in order to deliver our “best
value” product. There are major
opportunities to cross sell between our flight only and package holiday
customers and we look forward to the continued growth of both.
Tremendous progress continues to be made with the
development of our in-house sales and reservation systems for both Jet2.com
and Jet2holidays. Our industry leading IT team has enabled us
to build a fast and very customer friendly sales platform for both our flight
only and package products. Our revenue
and IT teams work closely together to deliver additional customer focussed
services including choice of seating, meals, onboard entertainment and car
hire. Together, these yielded £25.39 in
additional retail revenue per passenger during the last financial year (2010:
£21.12). Both Jet2.com and Jet2holidays
revenues will benefit from our continued IT innovations and associated retail
product developments.
As we build our customer focussed leisure brand, information
on all customer purchases and trends is constantly being gathered from
bookings, questionnaires, surveys and focus groups. This is collated by our data management team
and forms the basis of our continually evolving future strategy. Overall we believe we have the right formula
of innovation and differentiation for continued development and success in a
tough and competitive trading environment.
Distribution
The Group’s leading logistics business Fowler Welch, which
specialises in the distribution of chilled and ambient foods on behalf of
leading supermarkets and their suppliers, has experienced challenges during a
year of considerable growth and development. Our new 50,000 pallet capacity Heywood
distribution centre, the Hub, which is located near Bury on the M62, north of
Manchester, was opened with its enhanced facilities, IT infrastructure and
layout alterations, all being ready for business prior to Christmas. However, a combination of factors led to
operational challenges and higher than anticipated operating costs in the
initial months to ensure that customer service was protected. These early development issues have now been
resolved. The Hub is now set to become
the focal point for our ambient business with a strong sales pipeline and
improving financial performance. There
are very significant opportunities for growth at this site over the coming
years.
Overall our distribution revenues grew by 18% year on year,
as a result of both new business wins and additional volumes, although
operating margins have suffered from increased costs. Our Washington, Kent, South Coast and
European operations each performed satisfactorily, although margins remained
under pressure. Our main Spalding
distribution centre had a more challenging period of trading and a weaker
financial performance. Fowler
Welch was careful to protect customer service at the expense of
contribution in a challenging period of trading. The outcome of this has been the securing of
additional business, as a direct result of the achievement of generally
satisfactory service levels, especially during the very severe weather
disruption during the Christmas trading period.
Fowler Welch (Containers) Limited (formally Bawdsey Haulage) experienced
difficult trading conditions in the container market, which led to the review
and subsequent closure of our container operation in Felixstowe, whilst
retaining a significant presence in the container market at our Kent, Spalding
and Alconbury sites. Although reduced in
scale, Fowler Welch (Containers) will retain the ability to provide a
full service to its customers.
Following the success of our Tesco Express store
distribution operations from Washington in the North East, we are delighted to
have secured the business to develop a similar distribution operation to
service Tesco’s smaller stores in the South West. A newly leased site in Newton Abbot, Devon,
will come on stream in the first half of this financial year to service Devon
and Cornwall. We expect this to be the
basis of further business expansion in the South West.
Considerable progress is being made in developing IT
infrastructure across the business. The
efficient Manhattan warehouse system has been fully implemented, yielding
significant operational improvements.
Further work is now being carried out to choose a solution to upgrade
our transport management capabilities in this financial year, thereby giving
greater transparency for managing fleet resources and enhancing the service we
offer to our customers. The investment
in fleet telemetry and management, coupled with the continual selection of
increasingly efficient vehicles and the expansion of our double-deck trailer
fleet, will generate both fuel savings and operating efficiencies and further
improve our carbon footprint.
Over the past few years, the company has significantly
expanded its operations, widening its customer base and building a considerable
position in the ambient distribution market, alongside its leading chilled
distribution operations. We are now
taking the opportunity to strengthen the senior management team in order that
we fully capitalise on the potential of our distribution infrastructure,
network, expertise and our reputation.
Our Staff
I believe we all understand and appreciate the financial
challenges being experienced by our customers.
To succeed in these difficult times, we have to deliver the best
possible service at the lowest possible price.
Fowler Welch, Jet2.com and Jet2holidays each depends
on our customers’ satisfaction for continuing and, hopefully, increasing
business. I count on everyone’s support
in delivering this together in the coming months.
Outlook
We hope to grow both our businesses in the year ahead,
despite the continuing uncertain economic climate. Fowler Welch
has significant business development opportunities throughout its operations
and particularly, of course, in the North West.
We have expanded our leisure airline for summer 2011 with four
additional aircraft, a new base at Glasgow and a growing package holiday
programme.
Both businesses have started the year reasonably
satisfactorily, although we expect these challenging economic conditions to
continue to impact on yields in the Aviation sector for the foreseeable future.
Philip Meeson
Chairman
23 June 2011
