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

Dart Group PLC Company Reports

Chairman's Statement

I am pleased to report the Group’s strong trading for the year ended 31 March 2016. Operating profit increased by 109% to £105.0m (2015 Underlying: £50.2m) and profit before tax by 82% to £104.2m (2015 Underlying: £57.2m). Growth in basic earnings per share was 90% to 60.22p (2015 Underlying: 31.72p).

In consideration of the Group’s encouraging results, the Board is recommending a final dividend of 3.10p per share (2015: 2.25p) which will bring the total proposed dividend to 4.00p per share for the year (2015: 3.00p), an increase of 33%. This final dividend is subject to shareholders’ approval at the Company’s Annual General Meeting on 8 September 2016 and will be payable on 21 October 2016 to shareholders on the register at the close of business on 16 September 2016.

The increase in profitability reflects the strength of the Group’s Leisure Travel business, which combines both Jet2.com, our leisure airline and Jet2holidays, our package holidays provider, together with an improved performance from Fowler Welch, our Distribution and Logistics business.

Revenue in our Leisure Travel business increased by 15% to £1,261.4m (2015: £1,101.5m) and operating profit improved by 112% to £99.6m (2015 Underlying: £46.9m) as over 3.0m departing customers took a flight or package holiday to our sun, city and ski destinations during the year.

Jet2.com flew a total of 6.07m passenger sectors (2015: 6.05m) and achieved an average load factor of 92.5% (2015: 91.2%) alongside an increase in average net ticket yield of 14%. Jet2holidays took 1.22m customers (2015: 1.00m) on holiday, an increase of 22%, representing 40% of departing customers (2015: 33%).

To meet our programme of aircraft fleet replacement and our planned Leisure Travel business growth, on 3 September 2015 we were delighted to announce an agreement with Boeing to purchase 27 new Boeing 737-800NG aircraft, and subsequently in December 2015, an agreement to purchase a further three new aircraft. These aircraft will be delivered between September 2016 and April 2018.

Fowler Welch improved its profit before tax by £2.1m to £5.4m (2015: £3.3m) on reduced revenues of £144.0m (2015: £151.7m) as lower fuel costs were passed on to customers. The Group generated increased net cash flow from operating activities of £243.9m (2015: £116.1m). Total capital expenditure of £213.5m (2015: £76.4m) included the purchase of three used Boeing 737-800NG aircraft, one for summer 2015 and two for summer 2016, deposits and pre-delivery payments for the new Boeing aircraft order, and continued investment in the longterm maintenance of our existing fleet of aircraft and engines. The new aircraft pre-delivery payments have been substantially financed.

As at 31 March 2016, the Group’s cash and money market deposit balances had increased by £109.2m (2015: £39.1m) to £412.0m (2015: £302.8m) and included advance payments from Leisure Travel customers of £385.8m (2015: £318.7m), in respect of their future holidays and flights.

Leisure Travel

We take people on holiday! Our Leisure Travel business specialises in scheduled flights by our airline Jet2.com to holiday destinations in the Mediterranean, the Canary Islands and to European Leisure Cities and the provision of ATOL licensed package holidays by our tour operator Jet2holidays.

Our core principles are to be family friendly, offer value for money and give great customer service. For those customers who have arranged their own accommodation, our flights offer competitive fares, convenient flight times, allocated seating and a 22kg baggage allowance. Our package holidays, however, give us the opportunity to deliver an ‘end-to-end’ experience to which we add value through innovation and customer service. Importantly, our customer volumes allow us to serve many destinations daily and others several times a week during the spring, summer and autumn months, and enable us to offer a great choice of variable duration holidays at affordable prices.

Real package holidays take considerable organisation and attention to detail. Jet2holidays employs over 900 colleagues contracting and administering hotels, managing the finances and providing operational support. The business has contractual relationships with over 2,700 hotels, encompassing a wide range of great value 2 to 5-star hotel products, catering for young & old and families alike. Many have adjacent waterparks and other great attractions included in the package, adding enjoyment and interest to the overall holiday experience.

Nearly 40% of our package holidays were sold on an allinclusive basis. The all-inclusive package offers a ‘Defined Price’ for the whole holiday experience, including flights, transfers, meals, alcohol for the adults and ice lollies for the kids. This is a resilient, great value offering for families on a tight budget and is particularly attractive for challenging economic times. And to ensure that each of our customers has a happy holiday experience we employ nearly 300 representatives in holiday resorts, backed up by 24-hour customer helplines, to give practical assistance in all eventualities.

The last day of a holiday can often be stressful and with this in mind the business has introduced its “Resort Flight Check-In” service at many hotels. This allows Jet2holidays customers to check in their baggage for their return flight home at their hotel, allowing them to enjoy their final day, bag and hassle free. On 7 July 2016 we were very pleased to announce that from April 2017 we will be offering our flights and package holidays from Birmingham Airport – our eighth UK aircraft base. We know that there is strong demand for our services in the Midlands. During the financial year, Jet2.com operated 59 aircraft from our then seven Northern UK airport bases to 61 destinations, serving 379 holiday resorts and added three new destinations, Antalya, Kefalonia and Malta. The fleet has grown to 63 aircraft for summer 2016, with a commensurate increase in pilots, engineers and cabin crew. To ensure we have well trained colleagues to support continued growth, our flight simulator and training centre in Bradford has recently taken delivery of a fourth flight simulator.

We are fully focused on our package holidays offering and its inherent higher margin and are encouraged that sales continue to grow, outstripping the market, as our reputation for providing ‘package holidays you can trust’ develops. We ensure that the customer is at the heart of everything we do as we strive to provide wonderful holidays through sustained investment in product, brand and customer service. We believe we have a great future in the Leisure Travel marketplace.

Distribution & Logistics

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 across its network of nine sites, encompassing circa 900k square foot of warehouse space.

Our major temperature-controlled operations are in the key produce growing and importing areas of Spalding in Lincolnshire, Teynham and Paddock Wood in Kent and Hilsea near Portsmouth, with two further regional distribution sites located at Washington, Tyne and Wear and at Newton Abbot, Devon. Ambient (non-temperature-controlled) consolidation and distribution services are provided at Heywood near Bury and Desborough, Northamptonshire.

In May 2014, Fowler Welch, together with our partner Direct Produce Supplies Limited, a leading supplier of fruits to multiple retailers, commenced a joint venture business, “Integrated Service Solutions” (ISS) at our Teynham facility in Kent. This provides a full range of fruit ripening and packing services to the produce sector. I am very pleased to report that the business is now contributing positively towards overall Group profitability and feeding considerable volumes of packed fruits into our distribution system.

To meet the growing operational needs of ISS and to provide more distribution space at Teynham, which serves local Kent growers and is located close to the port of Dover and the Channel Tunnel – main arteries for fruit and produce imported into the UK, an extension of the facility was completed on 9 July 2016, adding over 50k square foot of much needed capacity.

On 6 June 2016 Fowler Welch agreed a contract with Dairy Crest Limited, to take over its Nuneaton based UK distribution. On this date, the Dairy Crest fleet of 51 tractor units, along with associated distribution colleagues transferred to Fowler Welch. This provides an important additional revenue stream, which will be developed by the integration of the Dairy Crest and Fowler Welch fleets and the achievement of supply chain efficiencies.

The improvement in profitability and operating margins achieved in the year are expected to continue. By developing its revenue streams and delivering value adding, innovative supply chain services, we believe the outlook for Fowler Welch is encouraging.

Outlook

We have a resilient Leisure Travel business. Our strategy is to grow both our flight-only and package holidays products. However, pleasingly, the sales of our higher margin package holidays continue to outperform the market and to provide an increasingly larger proportion of the departing passengers on our flights. At the end of the financial year, package holidays represented 40% of our departing passengers (2015: 33%) and this trend is continuing in this new financial year. The provision of real package holidays is not easily replicated by non-specialists. As discussed earlier in this statement, the Group dedicates significant resources to deliver an innovative and industry leading product. These holidays, especially all-inclusive packages, which give families certainty of price, have proven particularly successful in challenging economic times.

The current financial year has started well in both our Leisure Travel and Distribution businesses. Although we were disappointed at the result of the recently held referendum on whether the UK should remain in the EU, we are confident that our customers will need our specialist food distribution services and will be keen to travel from our rainy islands to the sun spots of the Mediterranean, the Canary Islands and to European Leisure Cities.

Philip Meeson
Chairman

14 July 2016