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Domino's Pizza Group plc

Domino’s Pizza Group PLC Good UK & Ireland performance; International remains challenging

Domino’s Pizza Group PLC (LON:DOM) today announced interim results for the 26 weeks ended 30 June 2019 and provided an update on Board succession.

 26 Weeks Ended30 June 201926 Weeks Ended1 July 2018Change
Group System Sales1£645.8m£616.6m+4.7%
UK & ROI System Sales1£596.0m£565.1m+5.5%
UK Like-for-Like2 System Sales1 excluding impact of split territories+3.9%+5.9% 
Underlying3 Profit before tax£42.3m£45.7m(7.4%)
Underlying3 Basic EPS 7.5p7.8p(3.8%)
Dividend per share4.20p4.05p3.7%
Net debt£238.8m£182.1m 
Statutory Revenue (restated)4,6£295.6m£285.6m+3.5%
Statutory Profit Before Tax £30.5m£41.7m(26.9%)
Statutory Basic EPS5.3p7.2p(26.4%)

All commentary below is on an underlying basis unless otherwise stated

Financial headlines

·      Group system sales up 4.7%

·      Robust UK & Ireland performance:

o  UK like-for-like excluding splits up 3.9% (1.8% including splits), with an improving trend through the half (LFL excluding splits Q1: 3.1%, Q2: 4.8%)

o  ROI like-for-like excluding splits up 6.9% (5.4% including splits)

o  UK & Ireland operating profit £51.6m, up 7.1%

·      International performance remains challenging:

o  International system sales down 3.4%, up 0.4% on a constant currency basis

o  International operating loss £6.4m, versus £1.8m loss in H1 2018

·      Net debt £238.8m, 2.2x Net Debt/EBITDA, impacted by a working capital build of £22m due to Brexit-related stock building and some timing issues which are expected to unwind

·      Interim dividend +3.7% to 4.20p

Strategic headlines and outlook

·      Active discussions with our UK & Ireland franchisees continue; new store openings and some working practices being impacted whilst these are ongoing. We remain committed to finding sustainable, win-win solutions but anticipate that resolution will take time, likely into 2020

·      13 stores opened in H1, of which 7 are in the UK, taking the Group total to 1,272

·      Digital continues to drive customer engagement. Online now accounts for 82% of UK system sales

·      Emily Somers joining as Chief Marketing Officer; Emily was previously Vice President of Marketing and Food Development at McDonalds

·      International visibility remains limited and trading is challenging. Focused on improving operational capabilities and performance

·      Full year Net Debt expected to be between £220m and £230m. No further share purchases expected in the second half

·      David Wild, Group Chief Executive Officer, has informed the Board that he plans to retire. A process to recruit a successor is progressing and a further update is likely later this year.

Commenting on the results, Chief Executive Officer David Wild said:

“Our core UK and Republic of Ireland markets delivered a good performance, with system sales up 5.5% and underlying operating profit up 7.1%. Digital remains a key driver of customer engagement, with online now accounting for 82% of total sales in the UK. Although a small part of our business, we are delivering pleasing operational improvements in our London corporate store estate.”

“The relationship with our UK and Ireland franchisees is very important to the long-term sustainable growth of the system. We are actively involved in detailed discussions and are giving these considerable focus and attention. Whilst dialogue is continuing, new store openings are being delayed and some of our working practices are being impacted. The situation is complex, and we expect resolution will take some time, likely into 2020. We are committed to working with our franchisees to agree sustainable win-win solutions.”

“The performance of our International business is very challenging and trading visibility remains limited. The weakest performance was in Norway, although we also saw increasing losses in Sweden and Switzerland. Iceland profitability was impacted by the weak macro-economic backdrop. We are very focused on improving our operational capability across our International markets and will provide a further update at our full year results.”

1 System sales represent the sum of all sales made by both franchised and corporate stores to consumers

2 Like-for-like sales performance is calculated against a comparable 26 week period in the prior year for stores that have not donated addresses to new stores within the previous 12 months

3 Underlying is defined as statutory performance excluding amounts relating to non-underlying5 items

4 Statutory revenues represent revenues directly attributable to the Group being derived from monies paid by franchisees for foodstuffs together with royalty payments for use of the Domino’s brand, rental income from freehold and leasehold property, revenue relating to advertising and ecommerce funds, and corporate store sales in the UK, Switzerland and the Nordics

Non-underlying items are defined in the Alternative Performance Measures section and reconciled to statutory measures in note 5 to the accounts

2018 revenue, cost of sales and administrative costs have been restated following a review of the treatment of IFRS 15. This is discussed in detail in note 2 to the accounts

The person responsible for making this notification is David Bauernfeind, Chief Financial Officer.

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