Final Results
Domino's Pizza UK & IRL PLC
20 February 2007
20 February 2007
DOMINO'S PIZZA UK & IRL plc
PRELIMINARY RESULTS
FOR THE FIFTY-TWO WEEKS ENDED 31 DECEMBER 2006
Domino's Pizza UK & IRL plc ('Domino's Pizza' or the 'Company'), the UK and
Ireland's leading pizza delivery company, announces its preliminary results for
the fifty-two weeks ended 31 December 2006.
Highlights
• System sales increased 19.7% to £240.1m (2005: £200.7m)
• Profit before tax increased 28.0% to £14.3m (2005: £11.2m)
• Earnings per share:
- Basic earnings per share up 27.9% to 20.78p (2005: 16.25p)
- Diluted earnings per share up 31.9% to 20.40p (2005: 15.47p)
• Total dividend increased 35.2% to 9.80p per share (2005: 7.25p)
• 46 new stores opened in the year (2005: 50 stores) and two closed
(2005: nil) resulting in a total of 451 stores at the year end (2005: 407
stores)
• Like-for-like sales in 357 mature stores up 9.7% (2005: 7.1% in 317
stores). First six weeks in 2007 up 14.3% (first six weeks of 2006: 10.3%)
• E-commerce sales up 43.8% to £20.1m (2005: £13.9m)
• Net cash at bank and in hand of £4.3m (2005: £5.9m) after returning
£10.2m cash to shareholders in share buybacks (2005: £8.2m). £25.8m of cash
has been returned to shareholders over the past two years via share buybacks
of £18.4m and dividends of £7.4m
• Proposed three for one share split to improve marketability and liquidity
Stephen Hemsley, Chief Executive of Domino's Pizza, commented:
'I am very pleased to report that your Company recorded another year of
excellent progress in 2006, further strengthening our leadership of the
fast-growing home delivery pizza market.
'The significant growth in sales, fuelled by strong like-for-like increases and
new store openings, combined with our relatively fixed cost base, has resulted
in profits once again reaching record levels. Operating cash flow was also very
strong and the capital needs of the business in 2006 were limited. This allowed
us to continue a strategy of returning surplus cash to shareholders and this was
reflected in another year of record dividends and a continuing share buyback
programme.
'Trading in the first six weeks of 2007 has got off to an excellent start with
like-for-like sales up 14.3% (2006:10.3%). We are encouraged by this performance
given the demanding comparatives of the previous year. E-commerce has continued
to grow strongly with an increase of 36.2% and we believe that the launch of our
e-commerce platforms in the Republic of Ireland will fuel the pace of online
sales growth. Our 2007 new store opening programme has got off to a good start,
but we are mindful that the planning related issues remain a significant
restraining factor in our drive to open 50 new stores per annum.'
For further information, please contact:
Stephen Hemsley - Chief Executive 07876 144342
01908 580604
Lee Ginsberg - Finance Director 07876 144342
01908 580611
Chris Moore - Deputy Chief Executive 07876 144342
01908 580604
Rachel Wattel - PR & Communications Controller 07876 144342
01908 580672
Chris Matthews, Fiona Noblet, Anthony Arthur - 020 7357 9477
The Hogarth Partnership Limited
Notes to Editors:
Domino's Pizza Group Limited is the leading operator in the UK and Ireland's
fast-growing pizza delivery market and is a subsidiary of AIM-listed Domino's
Pizza UK & IRL plc (symbol: DOM). Domino's Pizza Group Ltd holds the exclusive
licence to own, operate and franchise Domino's Pizza stores in the UK and
Ireland. The first UK store opened in 1985 and the first Irish store opened in
1991.
As at 31 December 2006, there were 451 stores in the UK and Ireland. Of these,
361 stores are in England, 34 are in Scotland, 15 are in Wales, 11 are in
Northern Ireland and 30 are in the Republic of Ireland.
As part of a commitment to delivering more to the communities served by its
stores, Domino's Pizza Group Limited is proud to support Special Olympics GB and
Special Olympics Ireland.
Founded in 1960, the Domino's Pizza brand is the recognised world leader in
pizza delivery. Through its primarily franchised system, Domino's operates a
global network of over 8,000 stores in more than 55 countries.
For photography visit www.dominos.uk.com/media or contact The Hogarth
Partnership Limited on 020 7357 9477.
Chairman's Statement
2006 was a record breaking year for Domino's Pizza. System sales, store count
and e-commerce all reached record levels, further establishing our leadership of
the pizza delivery market in the UK and Ireland. These exceptional results also
underlined our success within the Domino's system worldwide, with nine out of
the top ten highest international store sales coming from our UK and Irish
markets in 2006.
Whilst we are very pleased with these results, I am most impressed with the
relentless focus to detail that drives our success. It would be easy to assume
that after 20 years of delivering hot, fresh pizzas we would have learned
everything there is to know about our business. But what is so exciting about
this company is that it is always striving to do better. A great example is the
new focus we gave to getting our pizza 'out-the-door' in the minimum amount of
time, using 'real-time' technology'- an industry first.
'Out-the-door' is the time we measure from the moment we receive the order, to
the time it takes to leave the store. We recognized that driving down the
'out-the-door' time had a direct impact on sales, as stores with the lowest
'out-the-door' times had the highest like-for-like sales growth in 2006. These
stores also had the fastest level of repeat ordering, which will be a key driver
of like-for-like sales increases over the coming years.
By displaying in 'real-time' the average speed of the pizza making and baking
process, we were able to improve the number of orders leaving the store in under
15 minutes by 34%. The 'real-time' display screens show national average times
for the whole system, as well as for individual stores. The competitive spirit
that using 'real-time' has encouraged is so impressive that we are already
approaching the out-the-door time goal we had set for 2010.
Speed of service was a running theme for Domino's in 2006 and we were immensely
proud that our franchisee, Pali Grewal, achieved the best international time in
the World's Fastest Pizza Maker competition. This reflects our commitment to
driving high standards of product and service through training and competition.
Another award-winning first for Domino's in 2006 came when franchisee Antony
Tagliamonti became the youngest ever winner of the British Franchise Association
'Franchisee of the Year Award'. Having started at Domino's as a delivery driver,
Antony, aged just 27, now owns four stores. It is this kind of home-grown talent
and success which is vital to the future growth of our franchise community.
We were also honoured to receive two awards from the Pizza, Pasta and Italian
Food Association, including Chain Pizza Delivery Operator of the Year for the
second time and Overall Operator of the Year title, presented to our Chief
Executive Stephen Hemsley.
The expansion of Domino's in the UK and Ireland continues a pace, but as we push
our national growth, our stores are still run like local businesses. We know
that our stores' commitment to the communities we serve is at the heart of their
success and in 2006 we strengthened this commitment by launching an association
with our new charities of choice, Special Olympics Great Britain and Special
Olympics Ireland.
These achievements would never have been possible without the talent, spirit and
relentless focus of our team members; from our Board of Directors, managers and
their teams to our franchisees and the men and women who are out there
delivering hot, fresh pizzas on cold, rainy nights. Yet we know that none of our
successes would be possible if it were not for the confidence that you, our
shareholders, have placed in us. For your trust in us and for your continued
support I thank you most sincerely.
Colin Halpern
Chairman
Chief Executive's Statement
Introduction
I am very pleased to report that your Company recorded another year of excellent
progress in 2006, further strengthening our leadership of the fast-growing home
delivery pizza market.
The significant growth in sales, fuelled by strong like-for-like increases and
new store openings, combined with our relatively fixed cost base, has resulted
in profits once again reaching record levels. Operating cash flow was also very
strong and the capital needs of the business in 2006 were limited. This allowed
us to continue a strategy of returning surplus cash to shareholders and this was
reflected in another year of record dividends and a continuing share buyback
programme.
Although the 46 new store openings in the year are short of our target of 50,
the average sales levels achieved by those that were opened were up over 20% on
2005, making them the most successful on record. This positive performance was
made possible by some significant enhancements to the marketing and operational
support we provide to new stores. It also reflects our belief that high quality,
sustainable expansion must always take priority over simply achieving an
impressive but short-lived volume of store openings.
The increasing popularity of home delivered food continues to present Domino's
Pizza with an exciting growth opportunity in the UK and Ireland. As a result, I
remain confident that our franchise system will ultimately operate 1,000 stores
in these territories.
System Sales
In 2006, system sales, which are the sales of all stores in the Domino's system
in the UK and Republic of Ireland, rose by 19.7% to £240.1m (2005: 15.1%).
Like-for-like sales in the 357 stores open for more than twelve months in both
periods grew by 9.7% (2005: 7.1% in 317 stores). This is the highest like for
like sales growth over the past four years and is particularly pleasing given
the increase in the number of stores falling into this population. It brings the
average annual like-for-like growth over the last five years to 8.4%.
To further reinforce our leading position in the home delivery pizza market we
agreed with our franchisees to increase the contribution they make to the Nat
ional Advertising Fund. This has provided us with a greater opportunity for more
integrated marketing campaigns that included a mix of targeted direct mail,
online activity, local store marketing, PR and TV. At the heart of these
campaigns was further new product launches which gave us the required news value
to drive sales right across the menu. Of particular note was the launch in the
fourth quarter of the MeltDown, our spiciest pizza ever.
E-commerce continues to be our fastest-growing channel to market. In 2006 total
sales via these platforms reached £20.1m (2005: £13.9m), an increase of 43.8%.
E-commerce accounts for almost 13% of our delivered pizzas sold in the UK.
Improvements to our website capacity (www.dominos.co.uk) have made it faster and
easier for customers to order and they now benefit from local deals which have
previously not been available on the web.
Online ordering went live in the Republic of Ireland (www.dominos.ie) in
February 2007 and initial results are encouraging and highlight that this market
has the potential to grow our online sales still further.
Expansion
In 2006 we opened 46 new stores (2005: 50) and closed two stores (2005: nil)
bringing the year-end store count to 451 stores (2005: 407). As mentioned in my
introduction, this is short of our target of 50 stores each year. Whilst our
ability to identify new sites has greatly improved as a result of a strengthened
team, and demand for new stores from potential and existing franchisees remains
very high with over 4,000 enquiries from candidates in 2006 (up 28%), our
expansion programme is often subject to inconsistent and lengthy planning
decisions. We are addressing this ongoing challenge by further investing in our
property acquisitions team to ensure that we have sufficient properties in the
pipeline to secure our store opening target.
Last year we continued to work towards our goal of increasing the number of
stores operated by each franchisee and this ratio currently stands at three
stores per franchisee (2005: 2.7 stores). There has been a net decrease in the
number of franchisees from 157 in 2005 to 150 in 2006. This is in line with our
strategy of encouraging multi-unit operators to create a franchise community of
a size that can be efficiently managed and supported by a modestly increased
corporate team. The increased store to franchisee ratio also serves to further
drive the benefits of the operational gearing.
Towards the end of 2006 we successfully negotiated the extension of the
development clause of our Master Franchise Agreement. This allows us to maintain
our current royalty discount until 2016, provided we grow our store count by a
minimum of 27 new stores per annum from a base of 450 stores. We have the right
to further renewals thereafter.
In January 2007, the Company was pleased to announce the promotion of Chris
Moore from Chief Operating Officer to Deputy Chief Executive. Chris recently
assumed board-level responsibility for the company's three commissaries, in
addition to marketing and operations and this promotion reflects his extended
remit.
During 2007, we plan to acquire the freehold land and begin construction of a
new commissary and Head Office facility in Milton Keynes to service our growing
number of stores. Completion of this new facility is expected towards the end of
2008. We also intend to significantly expand our existing commissary in Penrith
during 2007. Anticipated capital expenditure on these projects will be in the
region of £15m. This expenditure will be incurred over 2007 and 2008 and it is
likely that this will be debt financed.
Trading Results
Group turnover, which includes the sales generated by the Group from royalties,
fees on new store openings, food sales, finance lease and rental income, as well
as the turnover of corporately owned and operated stores, grew by 16.3% to
£95.0m (2005: £81.7m). This rate of growth is marginally slower than the system
sales growth rate due to lower revenues from corporate stores, following the
sale of 14 stores during the first half of 2005 and a further three in 2006.
EBITDA for the year was £16.2m (2005: £12.9m) up 25.9% on the previous year.
This increase is higher than the rate of the system sales increase due to the
limited growth in overheads needed to support the system.
Group operating profit, including our share of operating profit in joint
ventures, but before exceptional items and the accelerated Long Term Incentive
Plan (LTIP) charge in 2005 was up 29.8% to £14.3m from £11.0m. As highlighted
previously, the Group has taken the decision not to invest in corporately owned
stores. During the year, the Group continued its strategy of exiting these
stores and sold three stores and closed one. Exceptional costs of £0.5m relating
to this activity were incurred during the year. Excluding the above, Group
operating profit for the year was up 32.9% to £13.8m (2006: £10.4m)
Profit on ordinary activities before interest and tax grew by 28.0% to £14.4m
(2005: £11.3m). This includes the profit on the sale of corporate stores of
£0.2m (2005: £0.9m) as well as the release of property and legal provisions of
£0.4m, raised at the time of the sale of corporate stores last year, which are
no longer required, (2005: £nil).
Net interest paid ended at £0.1m (2005: £0.1m). The tax charge for the year was
27.0% (2005: 26.2%) and is lower than the statutory tax rate of 30%, primarily
due to the relief available on the exercise of employee share options, as well
as the impact of the lower corporation taxation rate applicable in our Irish
subsidiary company.
Profit after tax and minority interest was up 27.4% to £10.5m (2005: £8.3m)
Earnings per Share and Dividend
Basic earnings per share were up 27.9% to 20.78 pence from 16.25 pence. Diluted
earnings per share increased by 31.9% to 20.40 pence from 15.47 pence.
In line with our strategy of returning cash surplus to the requirements of the
business to shareholders, the Board is pleased to recommend a further
significant increase in the dividend payment which, if approved by shareholders,
will give a final dividend of 5.65 pence per share (2005: 4.15 pence per share).
This would give a total dividend for the year of 9.80 pence per share (2005:
7.25 pence per share), a 35.2% increase. The full year dividend is 2.1 times
covered by profits after tax (2005: 2.2 times).
Subject to shareholders' approval the final dividend will be payable on 4 May
2007 to shareholders on the register on 10 April 2007.
Proposed Share Split
The directors, having consulted with the Company's brokers, consider that having
a larger number of ordinary shares with a lower market value than at present
will serve to improve the marketability and liquidity of the Company's shares.
They are therefore announcing today the proposed sub division of the Company's
share capital (the 'Share Split').
An ordinary resolution to subdivide each issued and unissued ordinary share of
5p each in the capital of the Company ('Existing Ordinary Shares') into three
new ordinary shares of 1.67p each ('New Ordinary Shares') will be proposed at
the next Annual General Meeting ('AGM') of the Company which is to be held on 26
April 2007. Further details about the background of the Share Split will be
contained in the explanatory notes that will accompany the notice of the AGM.
This change will only become effective if approved by shareholders of the
forthcoming AGM. The final dividend will therefore be paid by reference to the
Existing Ordinary Shares.
Cash Flow and Balance Sheet
Net cash inflow from operating activities reached £19.0m, up from £12.7m in
2005. This increase was attributable mainly to the higher operating profits as
well as an improvement in working capital.
During the year, outflows of £0.1m of interest, £3.8m of taxes and £2.3m of
capital expenditure and financial investment were incurred. Further outflows
related to the utilisation of the prior year's corporate store disposal
provisions of £0.2m and £0.1m for the purchase of minority share interests and
dividends of £4.2m.
Overall, the net cash inflow before financing was £8.3m. This strong cash
generation has allowed us to return a further £10.2m to shareholders through
share buybacks during the year. We have now returned £25.8m of cash to
shareholders over the past two years via share buybacks of £18.4m and dividends
of £7.4m.
In the year, options over 0.4m shares were exercised generating an inflow of
£0.4m (2005: £0.5m).
During the year, DP Capital continued to provide leasing support to franchisees
for the fit-out of new stores and the refit of existing stores, with new
advances of £1.0m (2005: £1.2m). After repayments, the balance outstanding at
the year end on these leases was £2.6m (2005: £2.9m). These facilities are
financed by a limited recourse loan facility and the amount drawn down at the
end of the year stood at £2.3m (2005: £2.5m).
At the year end, the Group had cash at bank and in hand of £10.3m (2005: £5.9m)
and consolidated debt of £15.8m (2005: £10.0m) all of which related to the loans
in the Employment Benefit Trust ('EBT'), bank overdraft and DP Capital. Net
borrowings at the year end therefore stood at £5.6m (2005: £4.1m) representing
65.2% (2005: 34.5%) of shareholders' funds.
The Group will be adopting IFRS for the 2007 financial year. As previously
highlighted, a preliminary assessment has indicated that the adoption of IFRS is
not expected to have any significant impact on the Group's reported results. A
restated opening balance sheet at the date of transition to IFRS, January 2006,
together with restated comparatives for both the full year and the half year
2006 and reconciliations of the changes will be made available at the time of
our interim announcement.
Corporate Stores, Joint Ventures and Subsidiaries
As stated at the preliminary results stage last year, your Company remains
focussed on withdrawing entirely from the operation of corporate stores,
favouring instead joint ventures or subsidiaries set up with carefully-selected
and experienced partners. We have an equity interest in six (2005: five) joint
ventures and subsidiaries which totals £0.7m (2005: £0.6m) involving a total of
32 stores (2005: 26 stores).
In 2006, joint ventures contributed £0.2m to operating profits in 2006 (2005:
£0.2m).
The Market
The UK eating out market is estimated by Mintel to be worth £29bn in 2006, with
£1.3bn of this attributed to the home delivered food segment. Whilst this
proportion is small, home delivered food is the fastest-growing segment. It is
estimated that there are 3,000 stores offering some form of pizza delivery in
the UK. Domino's Pizza is estimated to handle one in seven of the UK's home
delivered meals and one in three of home delivered pizzas.
It is predicted that the home delivered food segment will grow to £1.96 billion
over the next five years, a compound growth rate of 7% per annum. This presents
your Company with a very favourable background for future growth in both store
count and like-for-like sales increases. A number of factors are influencing the
shape of the market including the increase in in-home entertainment occasions,
greater broadband internet use, an increased number of working women and one
person households, the continuance of the cash-rich, time poor society and a
predicted increase of 11% in real personal disposable income by 2011.
Food quality continues to be of prime importance to customers. A cornerstone of
the Domino's Pizza brand is the use of fresh ingredients and hand making our
pizzas from fresh dough. In 2006, the Food Standards Agency developed its
nutrient profiling model which aims to determine which foods are high in fat,
salt and sugar ('HFSS'). We took this model and applied it to our 36
best-selling pizzas. Based on our analysis, 18 of those pizzas are non-HFSS,
reinforcing the very wide-ranging choice on offer in our stores. The position of
Domino's Pizza within the lifestyles of consumers remains as an occasional treat
or meal replacement enjoyed approximately once every five weeks and we therefore
feel that our current menu provides our customers with sufficient choice. We
will however continue to actively pursue healthier alternatives that also meet
our standards in both quality and taste.
Throughout 2006 we closely monitored the Ofcom ruling which in November used the
Food Standards Agency's nutrient profiling model to determine which HFSS food
and drink products should not be advertised to children on TV. Domino's Pizza
has always been consistent about its policy of never marketing directly to
children, nevertheless based on the current Ofcom guidelines, we may no longer
be able to sponsor the Simpsons on Sky One beyond June 2007. With brand
awareness now at 98% and the continuing change in consumer lifestyles, we
continue to explore innovative new ways to engage with 18-34 year old consumers
in an ever increasingly fragmented media market, including direct mail and
online platforms. We are very pleased with the results from some of these new
approaches which have already been deployed.
Current Trading and Outlook
Trading in the first six weeks of 2007 has got off to an excellent start with
like-for-like sales up 14.3% (2006:10.3%). We are encouraged by this performance
given the demanding comparatives of the previous year. E-commerce has continued
to grow strongly with an increase of 36.2% and we believe that the launch of our
e-commerce platforms in the Republic of Ireland will fuel the pace of online
sales growth. Our 2007 new store opening programme has got off to a good start
but we are mindful that the planning related issues remain a significant
restraining factor in our drive to open 50 new stores per annum.
Conclusion & Thanks
At Domino's Pizza we strive to set the pace for the rest of the home delivery
food industry. In order to do so we must achieve very high standards and meet
ambitious growth targets. Neither would be possible without the dedication and
experience of our 300-strong corporate team, our 150 franchisees and their
10,000 in-store team members who continue to drive our vision forward and make
success a reality every day. Once again, my thanks and admiration, go out to all
of them.
Stephen Hemsley
Chief Executive
Group profit and loss account
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
Notes £000 £000
Turnover from continuing operations
Turnover: group and share of
joint ventures' turnover 98,937 85,004
Less: share of joint ventures' turnover (3,972) (3,344)
-------- --------
Group turnover from continuing operations 94,965 81,660
Cost of sales (57,811) (48,778)
-------- --------
Gross profit 37,154 32,882
Distribution costs (8,177) (8,538)
-------- --------
Administrative expenses - pre accelerated LTIP (14,860) (13,504)
charge
Accelerated LTIP charge - (626)
-------- --------
Administrative expenses (14,860) (14,130)
-------- --------
Group operating profit pre exceptionals and share 14,117 10,214
of joint ventures
-------- --------
Share of operating profit in joint ventures 184 179
Amortisation of goodwill in joint ventures (13) (15)
-------- --------
171 164
-------- --------
Total operating profit pre exceptionals 14,288 10,378
Operating exceptionals 2 (499) -
-------- --------
Total group operating profit from continuing 13,789 10,378
operations
Profit on sale of fixed assets 2 159 206
Profit on sale of subsidiary undertakings 2 454 670
-------- --------
Profit on ordinary activities before interest and
taxation 14,402 11,254
Interest receivable 397 273
Interest payable and similar charges (507) (358)
-------- --------
Profit on ordinary activities before taxation 14,292 11,169
Tax on profit on ordinary activities (3,865) (2,922)
-------- --------
Profit on ordinary activities after taxation 10,427 8,247
Minority interests 88 8
-------- --------
Profit for the financial year attributable to
members of the parent company 10,515 8,255
======== ========
Earnings per share - basic - continuing operations 4 20.78p 16.25p
- diluted - continuing operations 4 20.40p 15.47p
Group balance sheet
At At
31 December 1 January
2006 2006
Notes £000 £000
Fixed assets
Intangible assets 2,159 1,326
Tangible assets 13,780 13,593
Investments in joint ventures:
Share of gross assets 2,018 1,477
Share of gross liabilities (1,429) (1,026)
-------- --------
589 451
-------- --------
Total fixed assets 16,528 15,370
-------- --------
Current assets
Stocks 1,838 2,186
Debtors:
amounts falling due within one year 10,304 10,753
amounts falling due after more than one year 1,940 2,168
-------- --------
12,244 12,921
Cash at bank and in hand 10,262 5,885
-------- --------
Total current assets 24,344 20,992
-------- --------
Creditors: amounts falling due within one year (22,607) (13,742)
-------- --------
Net current assets 1,737 7,250
-------- --------
Total assets less current liabilities 18,265 22,620
-------- --------
Creditors: amounts falling due after more than one
year (9,009) (9,085)
Provision for liabilities (652) (1,447)
-------- --------
8,604 12,088
======== ========
Capital and reserves
Called up share capital 6 2,574 2,645
Share premium account 6 4,765 4,677
Capital redemption reserve 6 261 171
Treasury shares held by Employee Benefit Trust 6 (4,216) (7,500)
Profit and loss account 6 5,172 12,013
-------- --------
Equity shareholders' funds 8,556 12,006
Minority interest 48 82
-------- --------
8,604 12,088
======== ========
Group statement of cash flows
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
Notes £000 £000
Net cash inflow from operating activities 5(a) 18,989 12,674
-------- --------
Returns on investments and servicing of finance
Interest received 389 273
Interest paid (455) (307)
Interest element of finance lease payments (4) (4)
Dividends received from joint ventures 21 -
-------- --------
(49) (38)
-------- --------
Taxation
Corporation tax paid (3,755) (1,549)
-------- --------
Capital expenditure and financial investment
Payments to acquire intangible fixed assets (898) (395)
Payments to acquire tangible fixed assets (2,262) (2,246)
Receipts from sales of tangible and intangible fixed
assets 453 576
Receipts from repayment of joint venture loan 105 60
Payments to acquire finance lease assets and advance
of franchisee loans (1,026) (1,166)
Receipts from repayment of finance leases and
franchisee loans 1,349 1,172
-------- --------
(2,279) (1,999)
-------- --------
Acquisitions and disposals
Sale of subsidiary undertakings - 3,354
Utilisation of provisions related to disposal of
subsidiary undertakings (221) (309)
Cash balances disposed of with subsidiary
undertakings - (5)
Sale of minority interest 30 90
Purchase of minority interest (133) (82)
-------- --------
(324) 3,048
-------- --------
Equity dividends paid 3 (4,234) (3,169)
-------- --------
Net cash inflow before financing 8,348 8,967
-------- --------
Financing
Issue of ordinary share capital 403 472
New long-term loans 1,244 2,146
Repayments of long-term loans (1,445) (1,146)
Repayment of capital element of finance leases and
hire purchase contracts (12) (16)
Purchase of shares by Employee Benefit Trust - (1,140)
Purchase of own shares (10,161) (8,222)
-------- --------
(9,971) (7,906)
-------- --------
(Decrease)/Increase in cash 5(b) (1,623) 1,061
======== ========
Notes to the accounts
At 31 December 2006
1. Accounting Policies
Basis of preparation
This preliminary announcement has been prepared on the basis of the accounting
policies set out in the Group's financial statements for the fifty-two weeks
ended 1 January 2006.
2. Exceptional Items
Recognised as part of operating profit
Following the sale of DPGS Limited and Triple A Pizza Limited in 2005 (noted
below), the Group has taken the decision not to invest in or trade in
corporately owned stores. During the year three corporately owned stores were
sold and one closed. A further store, owned and operated by a franchisee, was
also closed during the year.
The Group incurred the following exceptional charges relating to the store
closures and stores sold during the year:
52 weeks ended
31 December
2006
£000
Onerous lease and dilapidation provisions 76
Restructuring and reorganisation costs 252
Assets written off 52
Lease finance and other bad debts provided for 119
----
499
====
Except for the assets written off, for stores closed, the charges should be
deductible for corporation taxation purposes. Except for the restructuring and
reorganisation costs, these charges had no impact on the cash flow of the Group
during the year (see note 5(a)).
Recognised below operating profit
During the 2005 financial year the Group sold two subsidiary undertakings, DPGS
Limited and Triple A Pizza Limited (which included 12 corporate stores at the
date of the transaction). The main elements of the transaction were as follows:
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
£000 £000
Cash consideration received - 3,650
Net assets disposed of - (1,495)
Disposal costs - (296)
Provisions 454 (1,189)
-------- --------
Profit on disposal of subsidiary undertakings 454 670
-------- --------
These subsidiary undertakings were sold to Dough Trading Limited a company
controlled by Marc Halpern. In addition to the sale of DPGS Limited and Triple A
Pizza Limited, the Group sold one corporate store to Dough Trading Limited for a
cash consideration of £350,000 resulting in a profit on sale of £144,000.
During the year partial resolution relating to the conditions for the property
provisions made in relation to the sale of the subsidiaries in the prior year,
was reached and as a result £454,000 of the provisions created in the prior year
have been released. These provisions were treated as timing differences in 2005
hence the reversal will not be chargeable to corporation tax in 2006.
In addition the Group sold three corporate stores resulting in a profit of
£115,000 (2005: £62,000). The gain in respect of these disposals will be
chargeable to corporation tax at the statutory rate of 30%.
During the year the Group's share of profit realised on the disposal of a joint
venture store was £44,000.
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
£000 £000
Profit on sale of fixed assets
Sale of three (2005: two) corporate stores
resulting in a profit of 115 206
Group's share of profit on disposal of joint
venture store 44 -
------- --------
159 206
======= ========
3. Dividends paid and proposed
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
£000 £000
Declared and paid during the year:
Final dividend for 2005 4.15p (2004: 3.05p) 2,115 1,531
Interim dividend for 2006 4.15p (2005: 3.10p) 2,119 1,638
-------- --------
4,234 3,169
======== ========
Proposed for approval at AGM (not recognised as a liability
as at 31December 2006 and at 1January 2006)
Final dividend for 2006 5.65p (2005: 4.15p) 2,792 2,031
======== ========
4. Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on earnings of
£10,515,000 (2005: £8,255,000) and on 50,614,710 (2005: 50,810,785) ordinary
shares.
The diluted earnings per share is based on earnings of £10,515,000 (2005:
£8,255,000) and on 51,556,922 (2005: 53,368,778) ordinary shares. The difference
relates to share options, which takes into account theoretical ordinary shares
that would have been issued, based on average market value of all outstanding
options likely to be exercised and the impact of reversionary interests where
the performance conditions have been met.
Reconciliation of basic and diluted earnings per share
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
No. No.
Ordinary shares - basic earnings per share 50,614,710 50,810,785
Unexercised share options - average market value 732,027 832,056
Reversionary interests 210,185 1,725,937
---------- ----------
Ordinary shares - diluted earnings per share 51,556,922 53,368,778
========== ==========
Reversionary interests granted over 2,075,000 shares and share options granted
over 785,972 shares have not yet vested at 31 December 2006. The performance
conditions for these reversionary interests and share options have not been met
in the current year and therefore the dilutive effect of the number of shares
which would have vested at the year end have not been included in the diluted
earnings per share calculation.
5. Notes to the statement of cash flows
(a) Reconciliation of operating profit to net cash inflow from operating
activities
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
£000 £000
Operating profit (after operating exceptionals - see
below) 13,618 10,214
Depreciation charge 1,671 1,508
Amortisation charge 161 131
Share option and accelerated LTIP charge 344 963
Decrease in stocks 349 489
Decrease in debtors 82 337
Increase/(decrease) in creditors 2,764 (968)
-------- --------
18,989 12,674
======== ========
Operating exceptionals - non cash flow items 247 -
- cash flow items 252 -
-------- --------
499 -
======== ========
(b)Reconciliation of net cash flow to movement in net debt
52 weeks 52 weeks
ended ended
31 December 1 January
2006 2006
£000 £000
Decrease in cash before sale of subsidiary
undertakings (1,623) (2,589)
Proceeds from the sale of subsidiary undertakings - 3,650
-------- --------
(Decrease)/increase in cash including sale of
subsidiary undertakings (1,623) 1,061
Cash outflow from increase in loans (1,244) (2,146)
Repayment of long-term loans 1,445 1,146
Repayments of capital element of finance leases and
hire purchase contracts 12 16
-------- --------
Change in net debt resulting from cash flows (1,410) 77
Other (31) -
-------- --------
Movement in net debt (1,441) 77
Net debt at 1 January 2006 (4,141) (4,218)
-------- --------
Net debt at 31 December 2006 (5,582) (4,141)
======== ========
6. Reconciliation of Shareholders Funds and Movement on Reserves
Share Share Capital Treasury Profit & Total
Capital Premium Redemption Shares held Loss Shareholders'
Account Reserve by EBT Account Funds
£000 £000 £000 £000 £000 £000
At 1 January 2006 2,645 4,677 171 (7,500) 12,013 12,006
Proceeds from share
issue 19 384 - - - 403
Share buybacks (90) (296) 90 - (10,161) (10,457)
Treasury shares held
by EBT - - - 3,284 (3,284) -
Profit for the year - - - - 10,515 10,515
Exchange difference
on translation of net
assets of subsidiary - - - - (21) (21)
undertaking
Share option and LTIP
charge - - - - 344 344
Dividends - - - - (4,234) (4,234)
------ ------ ------ ------ ------ ------
At 31 December 2006 2,574 4,765 261 (4,216) 5,172 8,556
====== ====== ====== ====== ====== ======
7. Financial Information
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the 52 weeks ending 31 December 2006. The
financial information for the 52 weeks ended 1 January 2006 is derived from the
statutory accounts for that year, which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was unqualified
and did not contain a statement under section 237 (2) or (3) of the Companies
Act 1985. The statutory accounts for the 52 weeks ended 31 December 2006 will be
finalised on the basis of the financial information presented by the Directors
in this preliminary announcement and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 9 hours ago Judges Scientific
- 9 hours ago Phoenix Group Holdings
- 9 hours ago NAHL Group
- 9 hours ago Manchester & London Investment Trust
- 10 hours ago Imperial Brands