Shares in Jet2 owner Dart Group (DTG:AIM) have soared almost 6% to £14.30 after it said it expects market expectations for its full year pre-tax profit to be ‘significantly exceeded’.
In its half-year results the group, which comprises the Jet2.com airline and Jet2holidays tour operator, reported a 16% jump in revenue to £2.6bn and a 3% rise in operating profit to £365m.
Because bookings in its leisure travel division - incorporating the two Jet2 businesses - have continued to tick higher, with just over 10m passengers flown in total over the six months to 30 September, the firm’s board of directors felt confident enough to raise profit expectations.
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Overall revenue in the leisure travel division rose 17% to £2.5bn, helping drive a big increase in net cash flow from operating activities - always important for airlines given the seasonal nature of demand and thus profitability - to £512.5m, up from £442.9m in first half of its 2018 financial year.
In addition, the company has hiked its interim dividend to 3p per share.
SHARE PRICE RISE 'LITTLE SURPRISE'
AJ Bell investment director Russ Mould said it was ‘little surprise’ that Dart’s results have sent its shares soaring, with the firm’s strong performance showing it has been one of the ‘big winners’ from Thomas Cook’s collapse.
However, it’s important shareholders don’t get too carried away as the same industry pressures affecting other airlines and travel groups, including rising fuel and staff costs, also affect Dart Group.
In addition, the firm warned on Brexit going forward, saying whether consumer demand ‘remains buoyant in the medium term is unclear’, as it believes that ‘much will depend on the UK Government securing a pragmatic and balanced Brexit agreement with the EU.’
Whether such a deal is possible is debatable, and Mould added that shareholders ‘may have to strap themselves in for some turbulence’.
GETTING READY FOR SUMMER
But the company is continuing to invest in its products and operations, also reminding shareholders that, as is typical for the business, losses are still expected in the second half as it ploughs money into expanding its flying programme at several of its UK bases ahead of the peak season in summer 2020.
Mould also highlighted that the firm’s ‘forgotten’ distribution and logistics business, Fowler Welch, ‘continues to chug along nicely’, with profitability growing 23% despite a dip in revenue.
But the division still contributes just a tiny amount to overall profit, reporting a £2.7m half year pre-tax profit.
