UK and Ireland deliver for Domino's Pizza Group in first half

Domino’s Pizza Group issued its interim results for the 26 weeks ended 1 July on Tuesday, reporting a 12.3% year-on-year improvement in group system sales to £616.6m.

The FTSE 250 company, which holds the master franchise to the American takeaway brand in the United Kingdom, Ireland, Germany, Switzerland, Liechtenstein and Luxembourg, as well as minority interests in the franchises for Iceland, Norway and Sweden, said growth in the period had been driven by its UK operations, with its full-year outlook confirmed.

UK system sales were up 8.3%, with 22 new stores opened in the period, and 5.9% like-for-like growth reported.

Republic of Ireland sales were ahead 2.5%.

Domino’s Pizza Group also reported “strong” local currency international growth, with Switzerland up 13.0%, Iceland ahead 5.5%, Domino's Norway surging 180.5%, and Sweden rising 56.4%.

Underlying profit before tax rose 2.5% year-on-year to £45.7m, with underlying basic earnings per share up 6.8% to 7.8p.

On a statutory basis, profit before tax was down 9.7% to £41.7m, with basic earnings per share falling 6.5% to 7.2p.

Statutory revenue was 22.6% higher at £259.1m.

Non-underlying expenses of £4.0m were reported, which related to merger and acquisition integration, and IT and supply chain transformation cash outflow, the board said.

Net debt stood at £182.1m, with the firm’s net debt-to-last 12 months EBITDA being 1.62x at period end.

The board declared an interim dividend of 4.05p, up 8.0% year-on-year, and following £38.9m of share purchases in the first half.

On the strategic front, Domino’s Pizza Group said it made a number of “digital investments” to support franchisee efficiency and drive customer engagement during the period, with GPS technology now in 603 UK and Republic of Ireland stores.

It said that was leading to “significant” labour efficiencies, with first half franchisee store profitability up 5.3%.

The firm was also planning investment in new e-commerce and app platforms, which it said would improve the customer experience further.

Domino’s Pizza Group also said it had a “strong operational focus” in its acquired businesses, with volume-driven growth up and staff turnover down in London.

In its international acquired businesses, the firm said labour cost issues affected the first half, with actions taken now coming into effect.

The company’s Warrington Supply Chain Centre was now operational, with production ramped to 130 stores.

Full year underlying profit before tax was expected to be in line with current market expectations, the board claimed.

Around 60 new UK stores were planned for 2018, with the company remaining “uncertain” on the timing of several of them, and an unchanged long term target of 1,600 new stores.

Total group capital expenditure for the year would be around £30m, the board said, with its £50m share purchase programme being completed.

“It's been another good trading period for Domino's,” said chief executive officer David Wild.

“In the UK, despite continued consumer uncertainty, we've achieved further like-for-like growth by maintaining our clear focus on product, service and value for customers.

“Our ongoing investments in supply chain infrastructure and our IT platform will support future growth and customer engagement.”

Wild said Domino's was “proud” to be one of the most successful franchise businesses in the UK, adding that it would continue to work with its franchisee partners to promote the brand and the strength of the system.

“Whilst our international businesses continue to make good progress with customers and sales, it has taken us some time to refine the operating model and cost base at store level, particularly in Norway.

“We are confident that the changes we have made will result in a better performance in the second half, and believe that these businesses offer significant long term growth potential as we export our expertise in digital, supply chain and franchisee management.”

The company’s board expected that full year underlying profit before tax would be in line with current market expectations, Wild added.

“Our confidence in the future is underlined by continued growth in the dividend, and our ongoing investment in our own shares through the buyback programme.”