Final Results

Dart Group PLC 19 June 2003 For Immediate Release 19 June 2003 DART GROUP PLC PRELIMINARY RESULTS FOR YEAR ENDED 31 MARCH 2003 Dart Group PLC, the aviation services and distribution group, announces its preliminary results for the year ended 31 March 2003. CHAIRMAN'S STATEMENT I am pleased to report on the Group's trading for the year ended 31 March 2003. Profit before tax, excluding Jet2 operations and goodwill amortisation, amounted to £10.0m (2002 - £10.0m). Total turnover was £198.2m (2002 - £194.2m). Jet2, the Group's low cost airline, operating from Leeds Bradford International Airport, did not commence flying until 12 February. As a result, minimal chargeable revenue accrued in the 2003 financial year, whilst the initial set up costs resulted in an operating loss in Jet2 of £2.0m (2002 - £Nil). This is in line with our statement released on 23 October 2002. Earnings per share before the amortisation of goodwill were 15.78p (2002 - 19.87p). The Board is recommending an unchanged final dividend of 4.26p, taking the total dividend for the year to 6.11p (2002 - 6.11p). The dividend, if approved, will be payable on 22 August 2003 to shareholders on the register on 27 June 2003. Capital expenditure amounted to £36.4m (2002 - £26.9m) and mainly related to the expansion of the Group's Boeing 737-300 aircraft fleet. Net borrowings at 31 March 2003 amounted to £28.2m (2002 - £22.5m), which represented gearing of 76% (2002 - 66%). The majority of the Group's debt is denominated in US Dollars reflecting the Group's policy of matching long-term US Dollar assets, namely Boeing 737-300 aircraft, with US Dollar liabilities. Interest cover remained a healthy 8.5 times. During the financial year the Group purchased six Boeing 737-300 aircraft (the sixth aircraft being delivered post year end), four for use by Jet2, and two for conversion to a Freighter and a Quick Change (allowing the aircraft to be rapidly converted between passenger and freighter roles). On 4 June 2003, the Group announced that it had entered into an agreement with receivers appointed by HSBC Bank Plc (Sydney Branch) to purchase a further six Boeing 737-300 aircraft, two of which have now been delivered. The remainder will also be delivered during the first half of the current financial year and will be used to both expand Jet2 and to be converted to Freighter or Quick Change configuration in order to service the Group's contract freighter and passenger operations. The Group is committed to building its business-to-business services, providing air transportation on behalf of express parcel companies, postal authorities, freight forwarders and passenger charterers in the Aviation Division and temperature-controlled road distribution services primarily on behalf of UK supermarkets in our Distribution Division. We believe, however, that the Jet2 retail scheduled passenger business may offer more opportunity for profitable growth in the foreseeable future. The low cost passenger market is, however, very competitive and much hard work lies ahead in order to be successful in this new business. Aviation Services Following the recent agreement to acquire six further Boeing 737-300 aircraft, the Group will own 14 of the type. Channel Express (Air Services) currently operates two Quick Change aircraft which fly for Royal Mail at night and operate passenger charters during the day. The Quick Change concept gives higher aircraft utilisation, facilitating the provision of cost-effective services to both passenger charterers and to overnight express parcel and mail operators. Two further aircraft will shortly be converted, one to a Freighter and one to Quick Change. We see a considerable future demand for the Boeing 737-300 in the European express parcel and mail markets and are in discussions with several customers for the provision of both freighter and passenger charter services. Channel Express (Air Services) also operates four Airbus A300 'Eurofreighters' (two of which are owned by the Group) on behalf of express parcel companies within Europe and five Fokker F27s on behalf of Royal Mail and newspaper publishers and on its own scheduled cargo services to the Channel Islands. In May 2003, our last Lockheed Electra was retired. The type had been in service with us since 1988 and had made a significant contribution to profits. The Electra is being replaced with Boeing 737-300s. The new type has also given Channel Express Parts Trading the opportunity to widen its activities. In the current economic climate the parts support business is difficult but our parts operation remains profitable and a continuing future opportunity. Jet2, a trading name of Channel Express (Air Services), commenced low cost services to Amsterdam from Leeds Bradford International Airport on 12 February. Since May, Jet2 has also been serving Alicante, Barcelona, Malaga, Milan, Nice and Palma. Every effort has been made to run the Jet2 operation as cost-effectively as possible, utilising existing Channel Express resources. Since taking the decision to enter this market, competition in the North of England has increased considerably. In addition to services from East Midlands and Liverpool airports, further competing services are now offered or planned from Newcastle, Manchester and Teeside. The ability to succeed in this environment depends on our having the lowest possible operating costs, which we strive to augment with a friendly service. Whilst trading to-date is on budget, at this stage it is too early to predict with confidence the financial outcome for Jet2 this year. I am delighted to report a year of profitable growth from the Group's freight forwarder, Benair Freight International. Progress was seen in both the niche tropical and ornamental fish importing business and in international freight forwarding. Distribution The Group's two main produce and horticulture distribution companies, Fowler Welch and Coolchain, were amalgamated into one operating entity, Fowler Welch - Coolchain Ltd on 1 April 2003. The combined name retains both staff and customer loyalty to the operations and brands. Our supermarket customers expect the highest operational standard at the most competitive cost. In return they are rationalising their logistics suppliers, offering increased volumes to their chosen contractors. To meet the challenge, Fowler Welch - Coolchain has ceased its operations at Paddock Wood, Kent, ceased produce packing at Teynham, Kent, to enable that site to accommodate business transferred from Paddock Wood and closed its produce and horticulture distribution operations at Portsmouth, relocating to smaller premises in the local growing area at Littlehampton, West Sussex. Unfortunately, this rationalisation has meant redundancies at all levels, but the result is an integrated operation more capable of reacting to its customers' needs. Fowler Welch - Coolchain's commercial and operating headquarters are at the Division's 20 acre site in Spalding, Lincolnshire, where the company is headed by the Managing Director, David Inglis, supported by the former Managing Director of Coolchain, David Cottam, in the role of National Operations Director. Our customers now have one point of contact for all commercial and operational needs and have welcomed the re-organisation of the past year. We aim to position Fowler Welch - Coolchain as the preferred supplier of national temperature-controlled distribution services to the supermarkets. The activities of the Group's two operating divisions - Aviation Services and Distribution - are more fully described in the Review of Operations that follows this statement. Our Staff I would like to sincerely thank all my colleagues within both divisions for their support and hard work over a year in which we have seen much change. I am very grateful for the resilience and determination everyone has shown in a demanding trading environment. Outlook The combination of our Aviation Services and Distribution operations considerably enhances the Group's overall strength. However, the business-to-business trading environment is challenging with continuing pricing pressures in our contract distribution and aviation services activities and higher national insurance contributions and general insurance costs which we cannot pass on. It is hoped that Jet2 with its wide customer base will enable us to restore profits growth. There is obviously some way to go before the success of this strategy can be judged. Therefore, at this stage, whilst trading is in line with budget, the outlook for the year remains uncertain. Philip Meeson Chairman 19 June 2003 For further information about Dart Group PLC and its subsidiary companies please visit our website, www.dartgroup.co.uk REVIEW OF OPERATIONS Aviation Services The Group purchased its first two Boeing 737-300 Quick Change aircraft from Lufthansa in 2001. It has now taken the opportunity to expand its aircraft fleet in a period of soft aircraft prices. With the addition of the six Boeing 737-300 aircraft which the Group has agreed to purchase, Channel Express (Air Services) will operate 14 of the type. Currently four are flying Jet2 low cost services, whilst two Quick Change aircraft are flying for Royal Mail at night and serve the passenger charter market during the day. These aircraft can be converted between their freight and passenger roles in approximately 40 minutes. The ability to serve both markets allows increased utilisation and delivers an efficient and competitive service. The Quick Change aircraft are based at Edinburgh and Stansted airports. The Company also leases an additional Boeing 737-300 to operate an intensive passenger charter contract from Prestwick Airport. The Group has entered into a contract to convert up to 12 further Boeing 737-300s to either Freighter or Quick Change configuration over the next six years. The first aircraft, a Freighter, is due to be re-delivered to us in August 2003 with the second, a Quick Change, at the end of November 2003. Thereafter, we expect to convert further aircraft as demand justifies. We believe that the Boeing 737-300 will be the 17 tonne payload freighter of choice for express parcel and mail air services in the future. Channel Express (Air Services) also operates four 45 tonne payload Airbus A300-B4 'Eurofreighters' on behalf of leading express parcel delivery companies and five 6.5 tonne payload Fokker F27s for Royal Mail, newspaper publishers and on its own scheduled services to the Channel Islands. Two Airbus A300s are owned by the Group and two are leased-in under a flexible structure which allows the company to match its commitment to its contractual arrangements with its customers. The A300-B4 Eurofreighter provides a reliable cost-effective service. We expect to add a further leased aircraft to the fleet during the current financial year. The Group's Fokker F27s have for many years served Royal Mail's air network, flying dedicated services over the longer distances within the UK to enable first class mail to be delivered the next day. Royal Mail recently announced that more mail would be transported by road and air in the future as mail train services are ceased. We are not yet aware of Royal Mail's final requirement for aircraft but very much hope that we will be invited to meet their increased needs both with Fokker F27s and converted Boeing 737-300s. Whilst the Group's traditional contract aviation operations will remain a significant and hopefully expanding business there is considerable dependence on a relatively small number of customers. We have, therefore, for some time, been looking to widen our operations to the retail sector. The availability of Boeing 737-300 aircraft at attractive prices and the growing demand for low cost 'no frills' passenger services combined to prompt Channel Express (Air Services), trading as Jet2, to utilise its existing infrastructure to offer such services from Leeds Bradford. It is estimated that over nine million people live within one and a half hour's drive time from Leeds Bradford and the airport, which has excellent facilities, was keen to attract a low cost airline to serve the region. In order to undertake this new business, the Group has recruited a number of scheduled passenger service professionals. The Jet2 routes selected from Leeds Bradford - Alicante, Amsterdam, Barcelona, Malaga, Milan, Nice and Palma - are predominantly leisure destinations which surveys indicated would be well supported by the region. The inaugural flight took place on 12 February to Amsterdam which is served twice daily with, from 1 May, each other destination being served daily except Alicante (six times per week) and Nice (three times per week). The services have been publicised by poster, bus, national and regional newspaper and radio advertising. Reservations are made on-line at www.jet2.com or through the contracted call centre. Whilst the operational infrastructure is provided by Channel Express (Air Services), the Jet2 management team is based at Leeds Bradford with many aircrew, engineers and cabin staff having been recruited locally. Jet2 aims to provide a friendly reliable service at the lowest possible cost. Services will be operated both to primary and secondary airports, the criteria for route selection being customer demand and the ability to deliver competitive low cost flights. To date both yield and average load factor are on budget. We regard this as a satisfactory start to the operation. Since the decision was taken to commence services from Leeds Bradford, competitive services are now being offered from Manchester and Newcastle with further services planned from Teeside. Obviously the increasing competition is concerning, but we believe that our cost base is low enough to enable us to profitably develop the business. It is currently planned to increase the number of aircraft based at Leeds Bradford for the summer of 2004. Flights to Prague and Faro are commencing on 4 September and Geneva will be served for skiing during the winter season. Channel Express Parts Trading, the Company's aircraft parts operation that supports both the Group's and other customers' aircraft, has had a challenging year but has managed to remain profitable in a difficult market. Previously Parts Trading specialised in supporting Airbus A300 aircraft from its comprehensive stock of parts which have been built up through the acquisition and dismantling of six A300s. The introduction of the Boeing 737-300 has given Parts Trading new opportunities to support the type and a suitable stock is being selectively acquired. The operation has succeeded in widening its customer base for both Airbus and Boeing parts and we believe that the current financial year will see the resumption of growth in this business. Benair Freight International, the Group's air, sea and road freight forwarder, with offices at London Heathrow, Manchester, East Midlands and Newcastle airports, has had a successful year. The company has won a number of new accounts and has improved its trading with its overseas partners. Every effort will be made to continue this growth this year. Distribution The Group's Distribution Division comprises Fowler Welch - Coolchain Ltd, which specialises in the distribution of fresh produce, horticulture and chilled foods, primarily for leading UK supermarkets and Channel Express (CI) Ltd, a Guernsey company, which transports flowers and produce from Guernsey and Jersey to the UK mainland with vehicles returning with temperature-controlled and general freight. Fowler Welch, based in Spalding, Lincolnshire, and Coolchain, whose operating centre is at Teynham, Kent, were acquired by the Group in 1994 and 1999 respectively to expand the Division's temperature-controlled fresh produce distribution business. Both companies had individually won considerable produce consolidation and distribution business with suppliers to the leading UK supermarkets on a shared user basis. Whilst the Division's customer base was comprised mainly of those regional suppliers to the supermarkets, Fowler Welch and Coolchain were run separately with their own management teams, but with an increasingly integrated distribution operation. Recently, however, the supermarket companies themselves have taken control of their logistics supply chains, negotiating 'factory gate' pricing structures with their suppliers. Consequently, the Division's customers have increasingly become the supermarkets, who have appointed selected logistics service providers, such as Fowler Welch and Coolchain, to handle their total produce distribution needs, negotiating reduced pricing in return for larger volumes. In this new environment it was clear that in order to remain competitive Fowler Welch and Coolchain needed to become a single organisation, both commercially and operationally. At the same time, the distribution infrastructure needed to be rationalised to enable the combined operation to offer the most cost-effective service. On 1 April, 2003 Fowler Welch - Coolchain Ltd became the UK produce distribution operating and legal entity. The company is headed by David Inglis, Managing Director, and David Cottam, National Operations Director. The Division's Finance Director is John Butler. Due to the changes in the business structure, it was decided to rationalise the southern operation by closing the former Coolchain site at Paddock Wood, Kent, and concentrating the Kent operation at Teynham. To facilitate this, fruit packing operations at Teynham ceased with other local providers taking over this business. Simultaneously, the Coolchain site at Portsmouth, which primarily handled Channel Islands and local south coast produce and flower distribution, was closed in March. As a result of the careful planning and hard work of the management and staff of the Distribution Division these major changes to the companies' distribution system and infrastructure were accomplished seamlessly and with minimum disruption to the service levels provided to customers. Much credit is due to the Division's team. Fowler Welch - Coolchain's southern distribution needs are now handled from smaller premises at Littlehampton whilst alternative arrangements have been made by Channel Express (CI) for the distribution of the reduced volumes of Channel Islands' produce and horticulture now handled. Regrettably the rationalisation led to redundancies at all levels within the business, however, the result is a much streamlined operation, with clearer and faster decision making processes and an integrated distribution network. In order to continue building on the substantial progress made during the year, systems are being put in place to take advantage of the enlarged division's buying power and to improve procedures in a number of areas such as consolidation centre operations, driver recruitment and training, vehicle utilisation and health and safety. The project to implement a common computerised operating system throughout the Division has now been completed and efforts are ongoing to utilise the improved information emanating from this system, to drive cost out of the network. The overall result has proven to be improved customer satisfaction and a more reliable customer-focused distribution system, able to meet the very demanding supermarkets' requirement for a service at very competitive pricing. Fowler Welch - Coolchain has continued to win new business and is, through its close relationships with its supermarket customers, being offered new distribution opportunities in areas such as chilled foods and also to serve more regions in the UK. Every effort is also being made to work closely with customers and their suppliers to ensure that vehicles run as economically as possible and are fully loaded both on outward and return journeys. Efforts are also being made to develop the company's international business which is primarily concentrated on the delivery of horticulture and produce from Holland to the UK. There is no doubt that Fowler Welch - Coolchain has considerable potential for future growth in its distribution business. However, margins are tight and costs have to be kept under continuous review and control to achieve a near reasonable return. Channel Express (CI), based in Guernsey, has traditionally provided temperature-controlled services to the UK mainland for Guernsey flower growers and Jersey produce growers serving both wholesale markets and supermarkets. Vehicles return to the Islands with chilled foods and other supplies. The company also contracts Channel Express (Air Services) to operate daily scheduled cargo services to the Islands carrying, on a shared-user basis, express parcels and other urgent goods. Whilst the Islands' growers have suffered from international competition and the demise of the UK wholesale markets in favour of the supermarkets, who have preferred to deal with year-round suppliers especially in the horticultural sector, a thriving postal export business for flowers, health foods, plants and other products has developed taking advantage of the Islands' tax regimes. Channel Express has continued to benefit from these developing businesses. The company's distribution of flowers in the UK has now been rationalised with fewer markets being served direct from the Islands but with service levels being maintained through arrangements with other transport companies. Our Channel Islands business has always been a valuable part of the Group's activities. The recent re-organisation of the UK mainland distribution operation has brought cost benefits to Channel Express (CI) which will enable it to remain very competitive in its market. For further information contact: Dart Group PLC Tel: 01202 597676 Philip Meeson, Group Chairman and Chief Executive Mobile: 07785 258666 Mike Forder, Group Finance Director Mobile: 07721 865850 Group Profit And Loss Account for the year ended 31 March 2003 Notes 2003 2002 £'000 £'000 Turnover Continuing operations, excluding Jet2 197,464 194,242 Jet2 operations 712 - Total continuing operations 1 198,176 194,242 Net Operating Expenses Continuing, excluding Jet2 operations and goodwill amortisation (186,592) (183,233) Jet2 operations (2,762) - Goodwill amortisation (497) (497) Total continuing operations (189,851) (183,730) Operating Profit/(Loss) Continuing, excluding Jet2 operations and goodwill amortisation 10,872 11,009 Jet2 operations (2,050) - Goodwill amortisation (497) (497) Total continuing operations 8,325 10,512 Profit on Disposal of Fixed Assets 82 232 Net Interest Payable (989) (1,257) Profit on ordinary activities before taxation 7,418 9,487 Taxation (2,499) (3,179) Profit on ordinary activities after taxation 4,919 6,308 Dividends (2,094) (2,094) Retained profit for the year 2,825 4,214 Earnings per share - basic 4 14.33p 18.41p - basic, excluding the amortisation of goodwill 4 15.78p 19.87p - diluted 4 14.27p 18.25p Statement of Total Recognised Gains and Losses 2003 2002 £'000 £'000 Profit on ordinary activities after taxation 4,919 6,308 Exchange gain/(loss) on foreign equity investment 8 (18) 4,927 6,290 Balance Sheets at 31 March 2003 Group Company 2003 2002 2003 2002 Note £'000 £'000 £'000 £'000 Fixed assets Intangible assets 8,277 8,774 - - Tangible assets 73,484 54,790 66,264 43,271 Investments - - 18,279 18,279 81,761 63,564 84,543 61,550 Current assets Stock 2,452 2,507 - - Debtors 31,043 29,817 5,783 7,639 Cash at bank and in hand 6,940 1,356 3 4 40,435 33,680 5,786 7,643 Current liabilities Creditors: amounts falling due within one year (48,496) (39,546) (42,082) (35,754) Net current assets/liabilities (8,061) (5,866) (36,296) (28,111) Total assets less current liabilities 73,700 57,698 48,247 33,439 Creditors: amounts falling due after more than one year (30,444) (18,970) (30,364) (17,630) Provision for liabilities and charges (6,112) (4,432) (5,778) (3,987) (36,556) (23,402) (36,142) (21,617) Net assets 37,144 34,296 12,105 11,822 Capital and reserves Called up share capital 1,716 1,716 1,716 1,716 Share premium account 7,674 7,659 7,674 7,659 Profit and loss account 27,754 24,921 2,715 2,447 Shareholders' funds - equity interests 2 37,144 34,296 12,105 11,822 Group Cash Flow Statement for the year ended 31 March 2003 2003 2002 Note £'000 £'000 Net cash inflow from operating activities 3 33,713 21,566 Returns on investment and servicing of finance (989) (1,257) Taxation (2,283) (2,343) Capital expenditure and financial investment (36,209) (36,205) Equity dividends paid (2,094) (2,052) Cash outflow before financing (7,862) (20,291) Financing 13,734 13,805 Increase/(decrease) in cash in the year 5,872 (6,486) Reconciliation of net cash flow to movement in net debt Note 2003 2002 £'000 £'000 Increase/(decrease) in cash in the year 5,872 (6,486) Cash inflow from increase in net debt in the year (13,719) (13,691) Change in net debt resulting from cash flows (7,847) (20,177) Exchange differences 2,183 - Net debt at 1 April (22,503) (2,326) Net debt at 31 March (28,167) (22,503) 1. Turnover 2003 2002 £'000 £'000 Distribution 119,154 120,313 Aviation Services (including Jet2) 79,022 73,929 198,176 194,242 Turnover arising within: The United Kingdom and the Channel Islands 192,072 188,671 Mainland Europe 5,077 4,143 The Far East 1,027 1,428 198,176 194,242 Turnover to third parties by destination is not materially different to that by source and relates to continuing activities. Analyses of profit before taxation and net assets between the different segments of the Group are not given as, in the opinion of the directors, such analyses would be seriously prejudicial to the commercial interests of the Group. 2. Reconciliation of movements in shareholders' funds Group Company 2003 2002 2003 2002 £'000 £'000 £'000 £'000 Profit for the year 4,919 6,308 2,357 2,688 Dividends (2,094) (2,094) (2,094) (2,094) 2,825 4,214 263 594 Currency translation differences 8 (18) 5 - Issue of shares under share option schemes 15 114 15 114 Net addition to shareholders' funds 2,848 4,310 283 708 Opening shareholders' funds 34,296 29,986 11,822 11,114 Closing shareholders' funds 37,144 34,296 12,105 11,822 3. Reconciliation of operating profit to net cash flow from operating activities 2003 2002 £'000 £'000 Operating Profit 8,325 10,512 Depreciation 15,341 12,527 Amortisation of goodwill 497 497 Decrease/(increase) in stock 55 (751) (Increase)/decrease in debtors (1,164) 148 Increase/(decrease) in creditors 10,651 (1,349) Exchange differences 8 (18) Net cash inflow from operating activities 33,713 21,566 4. Earnings per share The calculation of basic earnings per share is based on earnings for the year ended 31 March 2003 of £4,919,000 (2002 - £6,308,000) and on 34,323,441 shares (2002 - 34,255,405) being the weighted average number of shares in issue for the year. The calculation of basic earnings per share, excluding the amortisation of goodwill, is based on earnings of £5,416,000, as calculated below, for the year ended 31 March 2003 (2002 - £6,805,000) and on 34,323,441 shares (2002 - 34,255,405) being the weighted average number of shares in issue for the year. 2003 2002 £'000 £'000 Profit on ordinary activities after taxation 4,919 6,308 Amortisation of goodwill 497 497 5,416 6,805 The diluted earnings per share is based on earnings for the year ended 31 March 2003 of £4,919,000 (2002 - £6,308,000) and on 34,464,530 ordinary shares (2002 - 34,571,105) calculated as follows: 2003 2002 000's 000's Basic weighted average number of shares 34,323 34,255 Dilutive potential ordinary share: Employee share options 142 316 34,465 34,571 5. The financial information for the years ended 31 March 2002 and 2003 does not constitute statutory accounts, as defined in Section 240 of the Companies Act 1985, but is based on the statutory accounts for the years then ended. Statutory accounts for the year ended 31 March 2002, on which the auditors issued an unqualified opinion pursuant to Section 235 of the Companies Act 1985, have been filed with the Registrar of Companies. Statutory accounts for the year ended 31 March 2003, on which the auditors issued an unqualified opinion pursuant to Section 235 of the Companies Act 1985, will be filed with the Registrar of Companies in due course. 6. The proposed final dividend of 4.26 pence per share will, if approved, be payable on 22 August 2003 to shareholders on the Company's register at the close of business on 27 June 2003. 7. The 2003 Annual Report and Accounts (together with the Auditors Report) will be posted to shareholders on 11 July 2003. The Annual General Meeting will be held on 7 August 2003. This information is provided by RNS The company news service from the London Stock Exchange

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