Domino’s Pizza Group plc the leading pizza delivery company has reported results for the 53 weeks ended 30 December 2012, showing record profit (up 10.8%), 69 store openings plus 12 acquired in Switzerland.
Financial Highlights
- System sales increased by 12.8% to £598.6m (2011: £530.6m for 52 weeks)
- Record profit before tax, including Germany and Switzerland, of £46.7m, up 10.8% (2011: £42.2m)
- Profit before tax, excluding Germany and Switzerland, increased 14.2% to £49.7m (2011: £43.6m)
- Like-for-like sales growth of 5.0% in 612 UK mature stores (2011: 3.7% in 557 mature stores)
- Earnings per share (pre exceptional items):
– Diluted earnings per share up 14.1% to 21.95p (2011: 19.24p)
– Basic earnings per share up 13.8% to 22.17p (2011: 19.48p)
– Statutory basic earnings per share up 14.4% to 19.04p (2011: 16.65p)
- Final dividend increased by 16.2% to 7.90p per share (2011: 6.80p)
- Record of 69 new stores opened in the period (2011: 62 stores) with two closures (2011: three) resulting in a total of 805 stores in four countries as at 30 December 2012
- Online system sales increased by 46.3% to £268.6m (2011: £183.6m) with online sales accounting for 55.7% of UK delivered sales (2011: 44.3%). Of this, 19.7% of online orders were taken through a mobile device (2011: 10.1%)
- Adjusted net debt to EBITDA of 0.5:1 (2011: 0.4:1), highlighting low financial leverage
Chief Executive Officer, Lance Batchelor, commented:
Despite a very challenging economic environment, our people and our franchisees have delivered another impressive set of results. This performance further demonstrates the resilience of the Domino’s Pizza home delivery market.
We are making encouraging progress in Germany. This market has good demographics for our business and we are seeing improving trading performances from these stores. I look forward to reporting further progress in due course.
We have had a solid start to the first seven weeks of 2013 with like-for-like sales in the UK mature stores up by 1.6% (2012: 3.8%). Clearly the recent spell of poor weather and widespread snow in week three and week four has had an adverse impact on trading. During these two weeks, we had a total of 498 stores closed at some point – almost two-thirds of our UK store network was impacted. Excluding the days these stores were closed, the underlying like-for-like sales run rate was 2.6% which is an encouraging early trend.
Stores in the Republic of Ireland were not affected by the snow and are in positive territory with like-for-like sales in the mature stores up 3.9% over this first seven week reporting period.
I am optimistic about the future and, with the support of our franchisees, we will continue to grow this outstanding business by focusing on opening new stores, testing new store formats and developing new products while always ensuring the customer is at the heart of everything we do”.
Corporate Progress
- Sold 61 million pizzas during 2012 (2011: 56m)
- Platforms now developed for all major mobile operating systems
- Created over 1,500 new jobs in stores and expect a similar number in 2013
- Acquired the master franchise agreement and 12 stores in Domino’s Pizza Switzerland, Liechtenstein and Luxembourg
- Option to acquire the master franchise agreement for Domino’s Pizza in Austria
Chairman’s Statement
I am very pleased to report another strong set of results. In 2012 Domino’s delivered a record profit before tax and exceptional items of £46.7m, up 10.8%, even after the expected start up losses of £3.0m in our relatively new markets of Germany and Switzerland. This was driven by strong like-for-like sales growth in our core UK market and a record number of new store openings across all our territories. The resilience of the Domino’s Pizza model in these more challenging economic times is a credit to the entrepreneurial spirit of our franchisees who continue to find new ways of retaining the loyalty of and growing our customer base.
The strong like-for-like sales growth of 5.0% (2011: 3.7%) in our core UK system sales was driven by a constant focus on the three pillars of Domino’s success: product, service and image. The continued focus on product quality, with a refusal to compromise in the face of ever more rapidly rising commodity prices, is a major reason why customers return. Another is the continuous flow of exciting new products. Service continues to be one of the most important factors as to why customers return to Domino’s for their home delivery pizza and in 2012 we maintained our delivery times and the reliability of our customer service.
While focus on product, service and image drive the top line, our operational gearing continues to drive the bottom line still faster. Of particular note is the success of our recent investment in new commissary capacity, which now produces more dough than its predecessor did and still has significant spare capacity to meet increased demand in the future. We are also seeing economies of scale in procurement, marketing, and in our headquarters and distribution functions. The combined effect has driven this critical ratio of system sales to adjusted net profit, in the core UK and Republic of Ireland markets, up by a further 0.2% to 8.4% in 2012.
The Group never forgets that the franchisee relationship is at the heart of all we do. I am pleased to see so many of our long standing franchisees thriving and still opening new stores as they reach five, 10 or even 20 years in the Domino’s system. They are sometimes challenging, often thought provoking and always fantastic business partners and I salute them.
I am pleased with the progress we are making in Germany. It is still early days of course, but sales growth in the current stores is strong, new stores are opening at encouraging sales levels, franchisees are joining us, and the store opening programme is progressing well. Whilst the cost of putting in place the people and infrastructure needed to develop a new market results in start-up losses, I believe we are on track to achieve profit in Germany by the end of 2015. Switzerland is also a new and exciting market. Prior to our acquisition it had been poorly run for a number of years and this will take time to correct, but it has good potential. We have started the process of refurbishing and relocating the stores to realise that potential and expect to be generating a positive return in 2014.
Your company, DPG, is one of the world’s largest Domino’s master franchisees on many measures: store level sales and profit, total system sales and profit, number of employees within the system, quantity of pizzas sold every year and many operational effectiveness measures. Our UK and Irish commissaries continue to rank among the world’s best, scoring the maximum possible five star ratings. By sales, seven of the world’s top ten Domino’s Pizza stores are DPG stores. This is a wonderful foundation to build on.
Of course underpinning all DPG’s results are our people. 2012 was Lance’s first full year as our CEO and he has settled in well. His deep understanding and experience of mobile web technologies and international business is exactly what we needed as e-commerce platforms become an even more important route to market and our international reach grows. He is also developing a really strong team around him and in particular I welcome onboard Kory Spiroff as our Managing Director for Germany, Jan Hertzberg as our Marketing Director for Germany, and Brian Trier as our Country Manager for Switzerland.
2012 was a year of real progress and achievement. I know Lance and his team are keen to build on this in 2013 and beyond. I would like to thank them and, of course, our franchisees, for another excellent year and look forward to further progress in 2013.
Stephen Hemsley
Chairman
22 February 2013 6