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Dart Group yields under pressure

The owner of Jet2 believes adjusted profits will come in ahead of expectations for the full year, but is that enough to distract investors from capacity concerns?
Dart Group yields under pressure

Striking the right balance between excess capacity and ticket prices has been a key issue for European airlines this year, especially in light of the recent collapse of Monarch Airlines. At the half-year stage, Dart (DTG) – owner of the Jet2 airline – reported a 17 per cent fall in ticket yield per passenger (essentially how much money the airline makes per person) to £75.95. This reflected a whopping 41 per cent rise in seat capacity, although load factor was flat at 93.2 per cent. Now, prices have begun to rise, on average by around 2 per cent for package holidays, but margins still fell 1.2 percentage points to 12.3 per cent.

IC TIP: Hold at 658p

Executive chairman Phillip Meeson said he expected losses during the second half as the group spends more money on new aircraft, advertising and staff as part of its expansion plans across all operating bases during summer 2018. Two new bases recently opened at London Stansted and Birmingham and, encouragingly, already 57 per cent of the total year-on-year passenger growth of 2.07m has come from these locations. Half of this growth is derived from customers booking package holidays, which helps compensate for lower ticket yields for flight-only customers.

Analysts at Arden partners expect pre-tax profit of £95m in the year to March 2018, giving EPS of 52p, compared with £101m and 59.2p in FY2017.

DART (DTG)   
ORD PRICE:658pMARKET VALUE:£976m
TOUCH:657-659p12-MONTH HIGH:665pLOW: 401p
DIVIDEND YIELD:0.8%PE RATIO:8
NET ASSET VALUE:387pNET CASH:£357m
Half-year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161.2416490.71.38
20171.662131171.50
% change+34+30+30+9
Ex-div:28 Dec   
Payment:5 Feb