2007/082006/072005/062004/052003/042002/03Key Documents

Dart Group PLC Company Reports

Chairman's Statement

I am pleased to report that the Group has seen a small improvement in trading performance for the year ended 31 March 2015, as underlying operating profit increased by 3% to £50.6m (2014: £49.2m). Underlying profit before tax has risen by 36% to £57.2m (2014: £42.1m). However, after accounting for an exceptional provision of £17.0m, in relation to possible passenger compensation claims for historical flight delays under Regulation (EC) No 261/2004, Group profit before tax fell by 5% to £40.2m (2014: £42.1m). Whilst underlying basic earnings per share increased by 29% to 31.72p (2014: 24.68p), after accounting for the exceptional provision, basic earnings per share reduced by 9% to 22.42p.

In consideration of the Group’s improved underlying trading performance, the Board is recommending a final dividend of 2.25p per share (2014: 2.14p) which will bring the total proposed dividend to 3.00p per share for the year to 31 March 2015 (2014: 2.74p), an increase of 9%. The final dividend, which is subject to shareholder approval at the Company’s Annual General Meeting on 3 September 2015, will be payable on 16 October 2015 to shareholders on the register at the close of business on 11 September 2015.

The increase in underlying Group operating profit reflects improved trading and continued investment in our Leisure Travel business which combines both our package holiday (Jet2holidays) and flight-only (Jet2.com) products. This was despite the slower trading at the start of the financial year, as reported in our Preliminary Results Announcement of 26 June 2014.

Our Leisure Travel business took a total of 3.0m departing package holiday and flight-only customers to sun, city and ski destinations during the year, an increase of 8%. The growing demand for our package holiday product led to those customers making up 33% of the total (2014: 30%), resulting in both increased Leisure Travel revenues and aircraft load factors. As a result, turnover in our Leisure Travel business increased by 14% to £1,101.5m (2014: £967.0m) whilst underlying operating profit increased by 3% to £46.9m (2014: £45.6m).

Our Distribution & Logistics business, Fowler Welch, achieved a profit before tax of £3.3m (2014: £3.3m) after £0.4m of start up losses from its new joint venture at Teynham, Kent, which commenced operation in May 2014, storing, ripening and packing stone-fruit and exotic and organic fruits. The Group generated net cash flow from operating activities of £116.1m (2014: £130.8m) out of which capital expenditure of £76.4m (2014: £83.5m) was incurred, primarily on longterm maintenance spend on aircraft and their engines and the purchase of two Boeing 737-800 aircraft for summer 2015 flying. The Group’s capital investment was funded by internally generated EBITDA.

As at 31 March 2015, the Group’s cash balances and money market deposits had increased by £39.1m (2014: £42.8m) to £302.8m (2014: £263.7m) which included advance payments from Leisure Travel customers of £318.7m (2014: £285.8m) in respect of their future holidays and flights.

Leisure Travel

Our Leisure Travel business takes both our package holiday and flight-only customers to high volume leisure destinations in the Mediterranean, the Canary Islands and to European Leisure Cities. We fly to 55 destination airports, serving 364 holiday resorts from our 7 Northern UK departure bases. Our customer volumes allow us to serve many destinations daily and others several times a week during the spring, summer and autumn months, offering a great choice of variable duration holidays at attractive prices. Whether our customers have arranged their own accommodation, or buy a complete package holiday from us, we recognise that this is one of the most important family experiences of the year and we do our best to ensure that we deliver a holiday that can be both eagerly anticipated and fondly remembered.

The business has contractual relationships with over 2,400 hotels, committing to room allocations from as few as 4 beds a night, to over 300. We often place substantial deposits to ensure we have a dependable and competitive room offering in the most attractive hotels. Our buying power ensures we have a wide range of great value 2 and 3-star to 5-star hotel products for both families on a budget and those wanting more pampering. We employ substantial numbers of representatives in resort to look after our customers, backed up by 24-hour customer helplines giving practical assistance in the event of problems. Together with our airport-to-hotel coach transfer services, everything is organised to make our customers’ holiday easy and carefree.

To support our package holidays growth, our commercial centre in Leeds employs nearly 700 commercial, marketing, revenue, IT and finance colleagues, including our 200+ strong call centre for sales and customer support. Our package holiday business, especially, gives us the opportunity to concentrate our efforts and enthusiasm into delivering a product that delights our customers. A great holiday experience engenders loyalty and many repeat bookings are made shortly after our customers return.

In response to the recent tragic events in Tunisia, we organised a rapid rescue operation to contact and repatriate nearly 700 of our package holidaymakers, who wished to return to the UK. The continuing tensions in Greece have also demanded our attention and presence. Senior staff were on site in Tunisia and Greece within hours of events unfolding, to ensure our customers’ needs were met, backed up by our Leeds based emergency response organisation and teams. In this age of political and economic uncertainty more consumers are becoming aware of the wider benefits of a package holiday – where the tour operator has the responsibility for their wellbeing.

During the year, our airline operation expanded the fleet to 59 aircraft for summer 2015 flying (summer 2014: 55 aircraft) with commensurate increases in pilots, engineers and cabin crew. And, in May 2014 we were delighted to inaugurate our new flight simulator and training centre in Bradford. The centre provides a bespoke training facility for those pilots, engineers and cabin crew and will equip us with well trained colleagues as we continue to grow over the coming years.

Jet2holidays is now the UK’s third largest ATOL licensed package holidays tour operator. Whilst our flight-only product remains very important, we believe our growing package holiday business has tremendous future potential. The package holiday is a very popular product, among young and old and families alike. Organising enjoyable and dependable holidays for our customers gives us the opportunity to personally delight them and for us to reap commensurate rewards in the future.

Distribution & Logistics

Our distribution business, Fowler Welch, is one of the UK’s leading providers of distribution and logistics services to the food industry supply chain, serving retailers, processers, growers and importers through its distribution network. The business operates from eight prime UK distribution sites, with major temperature-controlled operations in the key produce growing and importing areas of Spalding in Lincolnshire, Teynham and Paddock Wood in Kent, and Hilsea near Portsmouth. Ambient (non-temperature-controlled) consolidation and distribution services are provided at Desborough, Northamptonshire and at Heywood near Bury, Greater Manchester. It also operates two regional distribution sites at Washington, Tyne and Wear and at Newton Abbot, Devon.

Fowler Welch has a strong and experienced management team and a skilled workforce that prides itself on its high standards of customer service, critical in an arena where “just in time” optimum levels of on-shelf stock availability at retailers’ stores are essential to satisfy and retain supermarket customers and their suppliers.

Increasingly, key customers are looking for creative, added value innovation from their service providers that can help their own supply chains to become more efficient. In May 2014, Fowler Welch commenced a joint venture operation at its Teynham facility in Kent, to provide a full range of fruit ripening and packing services to the produce sector for locally grown and imported fruits. The operation uses the latest technology and market-leading grading, sorting and packing equipment to ensure that cost efficient, high quality standards are achieved for its customers. The packed product is then delivered through the Fowler Welch distribution network. This extension of the range of services available to Fowler Welch customers is a key strategic step.

We remain encouraged by the many business opportunities available to Fowler Welch. Though the marketplace remains extremely competitive, we believe that through its pricecompetitive, operational expertise, its dedication to achieving high service levels, and its ability to present customers with added value, innovative solutions, the outlook for Fowler Welch is encouraging.

Outlook

Both our Leisure Travel and Distribution & Logistics businesses have got off to a good start to the new financial year, with strong demand for holidays and distribution business wins. Notwithstanding the tragedy in Tunisia and uncertainties in Greece, we are optimistic that Group performance for the financial year to 31 March 2016 will exceed current market expectations. Looking further ahead, we note the considerable increase in capacity planned by several low cost airlines over the next few years. We believe the continued expansion of our package holiday product, together with the development of our directly contracted sun and city hotel portfolio differentiates our Leisure Travel business, giving us confidence for our continued profitable growth.

Philip Meeson
Chairman

27 July 2015