Dart Group up 39% in one hour
12th July 2018 13:03
by Graeme Evans from interactive investor
It's always been a super company and shown great skill at navigating turbulent periods. Graeme Evans explains why Dart shares are up by a third today.
Dart Group, the AIM-listed company better known for its Jet2.com, Jet2holidays and Fowler Welch brands, continues to confound expectations after another stunning update propelled shares up by a third.
It's been a remarkable couple of years for West Yorkshire-based Dart, whose shares are now above £10 for the first time in its long stockmarket history.
In annual results today, the Jet2.com airline and package tour operator Jet2holidays were again the driving force as 2018 group profits soared 49% to £134.6 million. What's more, current bookings have been so strong that results next year should "substantially exceed" market expectations.
All of which has left analysts scrambling to keep up given that shares have now climbed 47% this year. Canaccord Genuity upgraded its target price from 923p to 950p this morning, but that's already behind the current price.
The broker pushed up its earning per share (EPS) forecast by 57% to 97.5p for the current year, with its target price based on an average historic earnings multiple of 13 times.
Past performance is not a guide to future performance
Despite the big jump in his EPS estimate, Canaccord analyst Gert Zonneveld warned of a number of external forces that could yet hinder further progress.
He said: "Our earnings forecasts continue to reflect an element of cautiousness relating to medium-term uncertainties, including fuel prices, dollar and euro cost headwinds, expansion-related costs and pricing competition."
Dart itself also points to the overall uncertain UK economic outlook, particularly related to Brexit and how it may impact on consumer spending,
That's not put a brake on the company's dividend, however, with today’s award up by 42% to 7.5p. Andrew Simms at Arden Partners now thinks the company will pay 9p in the current year — yielding 1.2% — after upgrading his earnings forecasts for 2019 by nearly 60%.
In a note headed "Bullseye!", he singled out the company's focus on customer service as one reason for its success, as demonstrated by numerous recent travel awards and Jet2Holidays becoming the second largest ATOL package tour operator.
He added: "We believe these results and FY19 outlook represent a strong validation of Dart Group's strategy and expansion plans.
"The flexibility of the group's leisure offering and focus on service should continue to differentiate Dart versus the competition and position the company well in the current market."
Past performance is not a guide to future performance
The stats accompanying today's results make for impressive reading, with, Jet2.com seeing a 46% increase in flight-only and package holiday passengers to 10.4 million in the year. The collapse of rival travel firm Monarch last year helped Dart by removing capacity from the market and easing pressure on prices.
The average load factor, including from new operating bases at Birmingham and Stansted airports, increased to 92.2% from 91.5%. The company’s high customer volumes allow it to serve many destinations daily and others several times a week during the spring, summer and autumn months.
Average airline ticket yields were lower at £73.65, reflecting an increase in seat capacity, but the average price of a Jet2holidays package grew 3% to £633.
At distribution business Fowler Welch, which is one of the UK's leading providers of food supply-chain services, revenues grew 3% to £168.6 million but pre-tax profits were slightly lower at £4.4 million.
The Dart company dates back to 1971 with the launch of Carpenter's Air Services to fly flowers from Guernsey. It moved onto the stock market in 1991, when it took the Dart name from the Rolls-Royce engines used to power its planes.
Current executive chairman Philip Meeson, a five-time British aerobatics champion, has been involved with the business since 1983 and oversaw the launch of the Jet2.com low-cost airline brand in 2002.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
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Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.