I am pleased to report on the Group's trading for the year ended 31 March 2010 - a reasonably satisfactory year for the Group in what were challenging conditions for our Aviation business, Jet2.com. It was, however, an encouraging year for our Distribution business, Fowler Welch-Coolchain. Group turnover fell slightly to £434m(2009 - £439m). Group profitability was impacted by lower margins in Jet2.com, as a result of reduced customer demand. Group profit before tax amounted to £22.2m (2009 - £33.5m) with earnings per share of 11.1p (2009-19.3p). Underlying profit before tax, before specific IAS 39 fair value movements, was £19.1m (2009 - £28.8m). In consideration of the Group's current trading performance, the Board recommends a final dividend of 0.75p per share (2009-0.71p). If approved at the Group's Annual General Meeting to be held on 2 September 2010, this dividend will be payable on 15 October 2010 to shareholders on the Group's register at the close of business on 10 September 2010. The associated ex dividend date will be 8 September 2010.
Capital expenditure for the year ended 31 March 2010 was £32.1m (2009 - £27.9m). This expenditure related principally to long term maintenance spend on aircraft airframes and engines, together with the acquisition of a further Boeing 757-200 aircraft. Net cash flow from operating activities amounted to £73.2m (2009 - £58.4m), driven principally by improved forward bookings in Jet2.com. As at 31 March 2010, the Group's net cash position amounted to £52.2m (2009 - £11.8m), at which point Jet2.com had received circa £100m of advance payments from customers in respect of future flights.
Jet2.com, the Group's leisure airline, experienced weaker customer demand for its passenger services, especially during off-peak and winter months, with flights to skiing destinations being particularly affected. However, early action was taken to reduce capacity and frequency in order to control potential losses. At the same time we continued to develop our services to year round "far sun" destinations, including additional flights to Cyprus, Egypt and the Canary Islands, although this was, of course, in the face of increased capacity from other operators. New destinations added to the Jet2.com network in 2009 were Dalaman, Dubrovnik, Newquay, Tel Aviv and Split, with capacity closely tailored to anticipated demand. Overall 2009/10 seat capacity was 7% below that of the previous year.
Jet2.com is supported by 5 key income streams:
- Seat only sales via the Jet2.com web site, with the unique proposition of "great flight times", "22kg baggage allowance", "allocated seating", and "loyalty points for free flights"; l Jet2holidays.com-the Group's expanding Tour Operator, offering "great value packages that you can trust", using Jet2.com's flights and over 600 directlycontracted hotels. Over 64,000 packages were sold in the year and this is planned to grow substantially going forward;
- The sale of allocations of seats on our flights to othertour operators, together with sales to the travel trade, thereby spreading commercial risk, especially for new routes;
- 750 whole-aircraft charters in the year for a wide range of customers including tour operators, other airlines, sports teams, pilgrims, government & national agencies, corporate customers, orchestras and cruise lines, to over 130 destinations in Europe, the United States, Canada, the United Arab Emirates and Saudi Arabia; and
- Our long-term contract with Royal Mail for whom we operate eight Boeing 737-300 "Quick Change" aircraft on night services, carrying primarily First Class mail. We have flown services for Royal Mail since 1978 and very much value our relationship.
During the year we carried over 3.1 million scheduled and charter passengers.
A key element in support of our planned future development is our in-house IT capability. Our software development team has built our Jet2.com and Jet2holidays.com reservations systems from scratch, working closely with our commercial and operational teams to deliver to exacting specifications. Our Web and IT team of over 40 employees (encompassing site design, database management, software development, operational support and quality assurance) creates and enhances internet based solutions that help us to deliver our great leisure products. We are continually developing and improving these IT business systems to meet our customers' needs in a fast changing market.
We use several leading-edge analytical tools to understand our customers' browsing and purchasing habits and these, together with focus groups and website usability testing, give us detailed insights into how we can better deliver products that are attractive to our customers. An example of this is our growing loyalty scheme, "myJet2". We have over 250,000 loyalty scheme members who earn points for their purchases, redeemable against flights.
Our in-house IT capabilities also greatly benefit the growth of our ancillary retail revenues, which include checked-in bags with a sector-leading weight allowance of 22kg, seat selection including extra leg room, pre-booked meals, great value in-flight service, foreign exchange and commissions on car hire. Together, these ancillary products brought in £21 per passenger in the financial year to 31 March 2010.
Our challenge is to differentiate the Company in the seat-only market. We believe our in-house IT, our caring and friendly service and our unique selling propositions go a good way to achieving this. With the contribution of passengers from Jet2holidays alongside our other income streams, we feel optimistic that, provided we are flexible, continue to innovate and to offer really great value fares, our Aviation business will prosper.
It gives me great pleasure to report on the considerable progress made by our logistics business, Fowler Welch-Coolchain, in the year. The Company specialises in the distribution of chilled and ambient foods and other consumer products on behalf of leading supermarkets and their suppliers.
Following the financial year end, in May 2010, after a long search, the Company completed the freehold purchase of a 500,000 sq. ft., 50,000+ pallet capacity, ambient distribution centre located adjacent to the motorway network in Heywood, Greater Manchester. This acquisition double the Company's distribution footprint. Known as "The Hub" and formerly used by major retailers, this facility is fully racked and ready to go-setting the scene for Fowler Welch-Coolchain to greatly expand its storage and distribution offering in the North West. The Company's existing North West distribution business, which is based at Stockport, Cheshire, is vacating its existing leasehold premises and will be fully operational from the Hub before Christmas 2010. It is also planned to offer temperature-controlled storage and distribution from The Hub following the installation of cold stores in the near future.
IT plays an important role in the success of Fowler Welch-Coolchain and it is pleasing to report on the successful implementation of the Company's Manhattan warehouse management software, which is delivering measurable efficiencies and will imminently also be implemented at the Hub.
Fowler Welch-Coolchain's Distribution business is benefiting from a number of new business wins, together with increased support from existing customers. We are
delighted to be distributing the full range of products sold by Tesco Express convenience stores in the North East from our distribution centre in Washington, Tyne and Wear. Other new customers for this distribution centre include Cumbrian Seafoods, who have awarded Fowler Welch-Coolchain their pick-to-order warehousing and onward distribution requirements. The quality of service and growth in business at this site is really encouraging and rewarding, following our initial freehold investment four years ago and a substantial upgrade of facilities and services over the past 18 months. Our distribution business in Kent and our South Coast operations at Portsmouth and Southampton all out-performed expectations in the year, through new business wins and increased volumes from existing customers.
During the year, considerable internal warehouse development has taken place at our Spalding distribution centre, which is the Company's head office, allowing us to expand here also. Together with new operations for Tesco out of Avonmouth, the start of distribution operations in the Midlands for Mars, the growth of our European operations on behalf of American Airlines and others, and the development of our recently acquired container business, Bawdsey Haulage Limited in Felixstowe, the commercial outlook at Fowler Welch-Coolchain, whilst hugely price competitive, looks encouraging.
Our businesses must maintain their reputation for value for money and customer service. Low costs and flexibility have to be our drivers. This can only be achieved by focus on these key ingredients by each of us throughout the Group. I very much appreciate the support we receive in this respect-for we rely on customer demand to fuel our future growth.
We hope to grow both our businesses in the year ahead, despite the continuing challenging economic climate. Fowler Welch-Coolchain has good business development opportunities throughout its operations and particularly, of course, in the North West.
Given the right conditions, we will also invest in our leisure airline, with continued emphasis on leisure destinations, supported by seat-only and package holiday sales. In the current trading environment, both businesses have started the year reasonably satisfactorily, despite the disruption caused by the volcanic ash. With increasing demand for our Distribution services and a carefully tailored airline flying programme, we are reasonably well placed to deliver improved financial performance in this financial year.
23 July 2010
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