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Dart lifts off, but the future is cloudy

The airline and packaged holiday provider saw sales rise after it substantially increased its airline capacity
July 12, 2018

The collapse of Monarch airlines last year has proved to be good news for Dart (DTG). In fact, the subsequent gap in the market has allowed the group to increase seat capacity by 45 per cent to 11.3m, while load factor rose to 92.2 per cent, compared with 91.5 per cent this time last year. But added capacity in a tough European airline sector makes price increases difficult. Average airline ticket yield fell 15 per cent to £73.65 due to "very competitive pricing" elsewhere, although lower ticket prices were also used to entice travellers into taking new routes from Birmingham and London Stansted airport.

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Thankfully, strong demand, coupled with additional seats, did boost profits over the year. Around 48 per cent more customers purchased a flight through Dart’s airline, Jet2.com, hitting 5.37m, while 45 per cent more bought packaged holidays through Jet2holidays, hitting 2.5m. At a group level, operating profit improved by nearly a third to £131m, although margins contracted from 6 per cent last year to 5.5 per cent in the reported period. That's likely because net operating expenses increased by 39 per cent to keep up with added capacity, while the sales mix was less weighted to higher-margin products.

Despite sales growth of 3 per cent to £169m, distribution and logistics business Fowler Welch saw pre-tax profit fall by £0.1m to £4.4m. Demand from retailers was varied, with shorter production runs leading to cost pressures at fruit ripening and packing joint venture Integrated Service Solutions.

Nevertheless, these results prompted analysts at Canaccord Genuity to upgrade their forecasts by around 50 per cent. They now expect pre-tax profit of £178m for the year to March 2019, giving EPS of 97.5p, compared with £114m and 63p in FY2018.

DART (DTG)   
ORD PRICE:1,001pMARKET VALUE:£1.49bn
TOUCH:1,000-1,004p12-MONTH HIGH:1,030pLOW: 485p
DIVIDEND YIELD:0.7%PE RATIO:13
NET ASSET VALUE:356pNET CASH:£202m
Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.1242.124.72.74
20151.2540.222.43.00
20161.4110460.24.00
20171.7390.151.85.27
20182.3913574.67.50
% change+38+49+44+42
Ex-div:20 Sep   
Payment:26 Oct