Chairman's Statement
I am pleased to report on the Group's trading for the year ended 31 March 2007.
Profit before tax, goodwill amortisation and exceptional items amounted to £16.6m (2006 - £14.5m restated). Profit before tax and after goodwill amortisation and exceptional items amounted to £18.1m (2006 - £14.8m restated). Turnover was £352.0m (2006 - £310.6m). Earnings per share before the amortisation of goodwill and exceptional items were 8.78p (2006 - 7.11p restated), whilst basic earnings per share were 9.73p (2006 - 7.95p restated). The Board is recommending a final dividend of 1.430p (2006 - 1.295p), taking the total dividend for the year to 2.08p (2006 - 1.86p), an increase of 12%. The dividend, if approved, will be payable on 24 August 2007 to shareholders on the register on 6 July 2007. The lower tax charge of 25% is as a result of the largely tax free gain on the Channel Islands' business disposal together with a number of prior year tax credits, both of which are unlikely to re-occur in the future.
In total, capital expenditure amounted to £71.8m (2006 - £48.7m), and mainly related to the acquisition of five Boeing 757-200 aircraft, spare engines and the Group's spending on capitalised aircraft maintenance. As at 31 March 2007 the Group's net debt amounted to £14.1m (2006 - £5.5m). Gearing as at 31 March 2007 was 20% (2006 - 9%).
In excess of 72% of the expected 2007/08 Jet2.com fuel requirements have been hedged for the year ending 31 March 2008, together with 100% of the forecast US$ requirements. Neither Jet2.com's contract charter operations nor Fowler Welch-Coolchain currently has any material exposure to oil price risk as this is substantially covered in their commercial contracts.
The Group completed the sale of its non-core Channel Islands' distribution business on 3 July 2006. The exceptional credit of £2.2m relates to the surplus of proceeds over book cost.
Jet2.com
Jet2.com, the Group's low-cost airline, expanded its operations from each of its six Northern UK bases during the year. The move of the administration and operational offices to Leeds Bradford International Airport was substantially completed and the Group's owned fleet increased to 29 aircraft with the addition of the five Boeing 757-200 aircraft. Leased-in aircraft have also been operated to meet seasonal demand.
Jet2.com's aim is to be the leading supplier of scheduled leisure flights from the North and the brand is aggressively promoted to achieve the public's recognition, via on-line advertising, press, posters, TV and radio. During the year the number of destinations served increased to 38 for summer 2007 (2006: 31). Passengers carried are forecast to rise to 4.3m compared to 3.0m in the year ended 31 March 2007. The company also operates night-time mail flights on behalf of Royal Mail and many series and individual charter flights for a diverse customer base.
In the autumn of 2006 the company commenced services to The Canary Islands from Leeds Bradford, Manchester, Newcastle, Belfast and Blackpool utilising Boeing 757 aircraft. During the winter of 2007/08 up to 27 services a week will be flown to Tenerife, Gran Canaria and Lanzarote. It is also planned to introduce other year-round sun destinations. The company's policy is to offer the lowest possible fares throughout its network. The revenue from these is supplemented with value-added ancillary revenue streams such as commission on sales of insurance, hotels and car hire together with the profits on sales of in-flight food, drink and gifts. The associated revenues per passenger for the current year are forecast to increase considerably over that achieved in the last financial year.
In February 2007, Jet2holidays.com was launched to offer flexible duration flight, transfers and hotel packages linked, primarily, to our scheduled services. Whilst this is a highly competitive market, we believe that by packaging attractive hotels with our low fares we can give our leisure customers great value holidays. The concept is currently being marketed on a limited basis whilst the mechanics of the process are developed. However, we are pleased that customer feedback to date has been good and we look forward to putting full promotional spend behind the product for the next year.
Jet2.com aims to expand its business by serving traditional leisure markets at highly competitive prices and developing a range of longer distance low-cost services that meet the aspirations of leisure travellers. Obviously routes take time to develop and costs are incurred in building volumes and taking market share. We will be continuing investment in new routes over the coming year so profit growth in this area of our business is likely to be flat.
Fowler Welch-Coolchain
The Group's logistics company, Fowler Welch-Coolchain, made considerable progress in the last financial year with new business wins, increased sales and improved profits. The company primarily provides an integrated supply chain solution to supermarkets and their suppliers as well as food manufacturers, growers and importers. Capabilities include both chilled and ambient (non temperature-controlled) distribution together with warehousing and pick-to-order services. The company's warehousing and picking operations, which feed the distribution network, continue to expand with substantial new business wins at both Kent and Spalding sites during the year. Volume is important to the business to increase the load fill of the distribution vehicles.
On 28 April 2006, Fowler Welch-Coolchain acquired the business and assets of R F Fielding Cheshire Ltd (In Administration), for a de minimis sum. This business specialises in ambient distribution from its base in North West England. Employee numbers amounted to 226 and the business utilised 79 tractor units and 133 trailers. It is operated from a 187,500 sq.ft. leased premises in Stockport. Not only has this acquisition provided a foothold in this larger market, it has also improved the utilisation of the transport fleet via network synergies.
A 40,000 sq.ft. freehold facility on an 8 acre site was acquired in Washington, Tyne and Wear, on 4 September 2006. This facility replaced the company's existing premises in Gateshead and is being fitted out for temperature-controlled storage and distribution. It will provide the North East England platform for growth in both the company's chilled and ambient business.
It is Fowler Welch-Coolchain's strategy to invest and grow its chilled and ambient distribution businesses and warehousing by a combination of organic growth and selective acquisition.
Our Staff
The relocation of Dart Group's and Jet2.com's operational and administrative headquarters to Leeds Bradford International Airport has now been substantially completed and I am extremely grateful to the majority of the key staff who have made the move and ensured that the companies' operations have continued seamlessly.
We will be sorry to lose our Group Finance Director, Mike Forder, in July and thank him for his substantial contribution to the Group's development.
However, we are very pleased to welcome his successor, Andrew Merrick, FCMA, who joins us on 2 July from Bradford and Bingley PLC where he was Director of Finance. Before, from 1988 to 1997, Andrew had a successful career at Thomas Cook Group where he undertook a number of operational finance roles. Prior to this Andrew worked for the international division of Midland Bank Limited. Andrew will bring valuable banking and travel industry experience to the Group.
It is important to acknowledge the dedication and hard work of each of the Group's operational and administrative staff in both Fowler Welch-Coolchain and Jet2.com. Both businesses are customer-focused and operationally demanding at all hours of the day. We are grateful to all and look forward to continuing to grow our business together.
Outlook
We expect to grow both our businesses organically in the year ahead, with also the possibility of selective acquisitions in Fowler Welch-Coolchain when there are sensibly priced opportunities.
In the competitive scheduled low-cost travel market, which is becoming progressively later booking and therefore more difficult to predict, whilst our 235 seat Boeing 757s differentiate our product and capabilities from several of our competitors, new routes take time and money to develop to profitability. However, the consolidation of the major tour operators, who currently have large capacity to many of the destinations we also serve, should give real opportunities both for our scheduled business and Jet2holidays.com. Therefore, overall, whilst I believe it is unlikely that the Group's profits will increase this year, growth should resume thereafter.
PHILIP MEESON
CHAIRMAN