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Holidaymakers Help Dart to Remarkable Results

The Week: With the profitable summer months ahead, Jet2 is boosting business at Dart Group, says Morningstar columnist Rodney Hobson, and Dunelm updates for second time in a month

Rodney Hobson 12 July, 2019 | 10:21AM

jet2

Leisure travel and logistics group Dart (DTG) produced remarkably good figures for the year to 31 March. Revenue was up 32%, pre-tax profits 36%.

Sharp Dart

The success is largely attributable to the growing demand in the leisure travel side Jet2, which operates an airline and package holidays. Shareholders should not worry too much that operating losses actually increased in the second half as Dart invested in additional aircraft and marketing. All holiday companies make their profits in the summer months, which is why others in the sector have a September financial year end. Dart should consider switching its accounting period.

There are some concerns, however. Extra costs were incurred in recruiting and retaining staff for the expanded summer flying programme and cost pressures, including fuel, will continue. Meanwhile, wary consumers are delaying booking, which means they have to be enticed with price reductions.

The other half of the group - distribution and logistics - continues to attract business from new and existing customers.

The final dividend is raised from 6p to 7.4p, making a total of 10.2p, a 36% improvement. The shares responded with a gain of 4.5% to reach 880p but that is still well short of the recent peak of 958p, reached in May after a mild profits upgrade, or the all-time peak of just over 1,000p last September.

The yield is admittedly a measly 1.2% but the dividend is covered more than nine times, leaving ample room to invest further in the business while holding out the prospect of more sharp increases in the dividend. Well worth a look for those interested in smaller companies.

Well Dun

It seems like only a couple of weeks ago that Dunelm (DNLM) put out its last upbeat trading statement. Hang on a minute, it was. On 20 June the homewares retailer promised profits of £124 to 126 million for the year to 29 June; now it says the figure is at the top of that range.

Growth in revenue during the fourth quarter was admittedly helped by favourable weather this time and weak comparatives last time, but even so like-for-like growth of 12% in the stores and a 37% leap in online sales was some going, and marked an acceleration compared with the first nine months.

Higher sales meant less stuff had to be flogged off cheaply, which in turn meant better margins, which were also boosted by the consigning of the unfortunate Worldstores acquisition to the history books.

Chief executive Nick Wilkinson is cautious about the uncertain political climate and the impact it may have on consumer spending but he remains confident about the group's longer-term prospects. I wouldn’t argue with that.

The shares had got a bit ahead of themselves, shooting up from 480p just before Christmas to 981p on the day of the previous update,  but they have slipped back for no good reason to 870p since. Any investor who cursed missing the opportunity earlier this year has another opportunity to buy.

Purple patch

I suggested last week that estate agent Purplebricks (PURP) might need a rights issue before its current financial year to 30 April is over because of the rate at which it burned cash in the past 12 months. The company’s head of industrial relations Adam Kay promptly (and courteously) drew my attention to this comment by new chief executive Vic Darvey in the results announcement: “Withdrawing from the Australian and US markets will significantly reduce operational losses and we expect to remain in a position of positive cash generation across the UK and Canada combined this year.”

I felt I should draw readers’ attention to this in the interests of balance. The shares are in fact 10% higher than their close last Friday. I retain my concerns but, as always, investors should read the statement and form their own judgement.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Dart Group PLC803.00 GBX-0.50
Dunelm Group PLC856.00 GBX-0.93
Purplebricks Group PLC119.40 GBX-0.50

About Author

Rodney Hobson

Rodney Hobson  is a columnist for Morningstar.co.uk and author of several investing books, including The Dividend Investor and How to Build a Share Portfolio.

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