Jet2 parent company Dart Group is expecting to “exceed market profit expectations” for the full-year despite a dip in its leisure travel division’s operating profit margin for H1.
It has highlighted Brexit and other “headwinds” as factors in hindering its ability to give a clear outlook for the full-year.
Dart Group comprises Jet2.com and Jet2holidays, as well as logistics arm, Fowler Welch.
For the half year ended 30 September, group operating profit increased by 3% to £365 million (2018: £354.4 million) and group profit before foreign exchange revaluation and taxation increased by 3% to £349.8 million (2018: £340.2 million).
For the leisure travel division, while revenue growth was strong (17% up to £2,528.8 million), operating profit margin reduced to 14% (2018: 16%).
Operating profit for this division was £361.5 million, up from £351.4 million.
Dart Group put this down to “cost headwinds”: fuel; the weakness of sterling against the euro and US dollar; and real wage increases were not fully passed on to the customer.
Resultant operating profit increased 3% to £361.5 million.
The company said the “modest increase in overall group profitability” reflected a later customer booking pattern in its leisure travel business, with customer demand “strengthening throughout the summer season”.
Dart Group executive chair Philip Meeson said: “As is typical for the business, losses are still to be expected in the second half, as we continue to invest in additional aircraft and their associated infrastructure, together with the increasing cost of retaining and attracting colleagues in readiness for further flying programme expansion at several of our UK operating bases in the summer 2020 season.
“At the reporting date, the group had received payments in advance of travel from its leisure travel customers amounting to £643.5 million (2018: £520.7 million)… the group continues to comfortably exceed the UK Civil Aviation Authority’s ’liquidity threshold test’.”
With regard the travel and leisure division specifically, Meeson said overall passenger volumes for summer 2019 had been “pleasing”.
Flight-only product saw an 8% growth in passengers to 4.75 million, while demand for Jet2’s package holidays strengthened to 2.71 million customers from 2.31 million.
They represented 53% of overall flown customers.
Dart Group said it would continue to develop its holiday-focused flying programme into summer 2020.
Meeson gave his outlook for the group: “With leisure travel bookings continuing to strengthen and notwithstanding the important post-Christmas booking period that is still to come, the board now expects current market expectations for group profit before FX revaluation and taxation for the year ending 31 March 2020 to be significantly exceeded.
“Looking further ahead, whether the currently encouraging consumer demand for our products remains buoyant in the medium term is unclear as we believe that much will depend on the UK government securing a pragmatic and balanced Brexit agreement with the EU.
“In addition, the travel industry in general continues to be subject to a range of cost pressures in relation to fuel, foreign exchange, carbon and other operating charges.
“These, together with the necessary continued investment in our own products and operations, including that required to attract and retain colleagues, are headwinds that our leisure travel business faces.
“Our strategy for the long-term remains consistent – to grow both our flight-only and package holiday products.
“With our customer-focused approach and clear market positioning, we continue to have confidence in the resilience of both our leisure travel and distribution and logistics businesses.”
In view of the outlook for the full year, the Dart Group board has decided to pay an increased interim dividend of 3p per share.
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