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Domino’s Achieves Record Profit Growth; Upgrades Guidance

Domino’s Achieves Record Profit Growth; Upgrades Guidance
Feb 17, 2016 By Matthew Dibb Tags: DMP

The international pizza chain Domino’s Pizza Enterprises Limited (ASX:DMP) released record NPAT growth of 56.7% reflecting strong organic growth in international businesses.

Domino’s lifted its underlying revenue by 29.6% for the first half of 2016 to $445.3 million coupled with underlying EBITDA growth of 44.9% to $87 million, which was achieved on the back of strong operating performance in all markets.

The company reported Group Same Store Sales (SSS) of 10.3% within various geographies such as Australia, New Zealand, Belgium, France, The Netherlands and Japan.

27% EBITDA Growth Acheived in Australia and New Zealand

The pizza-maker’s ANZ business logged underlying H16 EBITDA growth of 27% along with SSS of 13.8%, which were boosted by its ‘$5 Cheaper Everyday’ campaign and the successful implementation of the GPS Drive Tracker technology across all stores.

Domino’s ANZ further enhanced its customer service during the period, as it introduced multi-tasking features to its iPad app along with Smart Watch ordering facilities in Australia. Additionally, the roll out of its ‘20 Minute Delivery Guarantee’ campaign contributed to 23.9% online sales growth year on year.

The company continues on its initiative to eliminate all artificial colours, flavours and preservatives from the menu and remains on track to achieve these targets in two years.

108.1% EBITDA Growth in Europe

Europe continues to deliver unprecedented EBITDA growth of 108.1% in the first half, driven by digital innovation, strong margin growth and record franchisee profitability.

Japanese Sales Impacted

Sales in Japan were affected by a marginally softer Christmas trade, resulting in a 1.2% reduction in SSS. However, EBITDA growth of 54% was achieved due to record store openings and an additional week of trading during the New Year period.

Expansion in France and Germany

The company increased its market share by acquiring 89 Pizza Sprint stores in France, which was completed on 26 January 2016. The first Pizza Sprint stores are set to be transformed into Domino’s stores in early March. This process is expected take 6-9 months.

Furthermore, on 1 February 2016, Domino’s acquired Joey’s Pizza, Germany’s largest pizza chain, in a joint venture agreement. Joey’s Pizza will commence converting its business model to Domino’s in the second half of the 2016 year, which is scheduled to complete within a span of 12 months.

Guidance Upgrade

In retrospect of the positive sales growth along with margin improvement, Dominos upgraded its underlying EBITDA and NPAT growth guidance to be approximately 35% for FY16.

SSS guidance for the ANZ region has been upgraded to be within the range of 11 to 13% and the company expects to achieve 8 to 10% SSS in the Europe region. However, Domino’s expects Japan’s SSS to decline 2% or remain unchanged.

The group’s store count targets remain unaffected, as it aims to inaugurate 4,250 stores by 2025. It expects to achieve 460-500 new store openings by the end of FY16.

The board announced an interim dividend of 34.7 cents, with 70% franking, payable on 15 March 2016. The dividend is up 41.1% on the interim distribution in the previous year.

The upbeat results along with the optimistic outlook sent DMP up 8% as at 11:50 AM (AEDT) to $56.54.

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Matthew Dibb Author: Matthew Dibb Feb 17, 2016

Matthew has an extensive track record in equity markets and derivative advisory. Spanning a career in several investment banks and prviate wealth groups including Macquarie Bank, his specialist knowledge relates to capital market advisory and equity market analytics. Matthew has a diploma in Financial Advisory, Applied Finance and is ADA 1 & 2 accredited.

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