Interim Results

Domino's Pizza UK & IRL PLC 20 July 2000 DOMINO'S PIZZA UK & IRL plc INTERIM RESULTS FOR THE TWENTY-SIX WEEKS ENDED 25 JUNE 2000 Domino's Pizza UK & IRL plc ('Domino's Pizza') announces its interim results for the twenty-six weeks ended 25 June 2000. Highlights - System sales increased 15% to £34.9m (1999: £30.3m) - Group turnover up 20.6% to £14.5m (1999: £12.0m) - Operating profit rose by 23.4% to £1.05m (1999: £0.85m after adjusting for an exceptional charge of £0.4m). Unadjusted operating profit increased by 131%. - Profit before tax increased by 37.5% to £1.02m (1999: £0.74m) on an adjusted basis and 193% before adjustment. - Earnings per share - Basic unadjusted up 188% to 1.47p (1999: 0.51p) - Basic adjusted up 1% to 1.47p (1999: 1.46p) on increase in number of shares in issue from 41.5m to 50.0m following flotation. - Number of stores up to 206 from 182 at the interim stage last year - Success of e-commerce strategy - now representing 3% of weekly sales Colin Halpern, Chairman of Domino's Pizza commented: 'I am delighted to report on a successful start to the year. Domino's Pizza in the UK and Ireland is already close to surpassing several goals we didn't plan to reach before the end of this year. We have already exceeded our goal of having 24 corporate stores and we are on course to exceed our store opening goal well before year-end. Our e- commerce strategy and our advanced technology have proven highly successful, with e-ordering now representing 3% of our weekly sales. We look forward to adding to this level of success during the second half of the year and strengthening our leading market position. ' Contact: Domino's Pizza 01908 580672 Stephen Hemsley Bernadette Eddisford 07909 928016 Buchanan Communications 020 7466 5000 Richard Oldworth / Isabel Petre Notes to editors: - Domino's Pizza Group Limited is a wholly owned subsidiary of Domino's Pizza UK & IRL plc, which is quoted on the Alternative Investment Market of the London Stock Exchange (Symbol: DOM). Domino's Pizza Group Limited is the UK's leading pizza delivery brand by sales and holds the master franchise to own, operate and franchise Domino's Pizza stores in the UK and Ireland. The first UK store opened in 1985 and there are currently 206 stores in the UK and Ireland. Domino's Pizza is world leader in pizza delivery and was founded in the United States in 1960. There are currently more than 6600 stores open across 65 international markets employing approximately 120,000 people. CHAIRMAN'S STATEMENT INTRODUCTION The biggest challenge faced when one is out in front is resisting the temptation to look back. Looking at what's behind slows one down and gives the competition a chance to catch up. That's the challenge we face every day at Domino's - coming up with new goals to meet and exceed - and keeping our eyes focused on the road ahead. So far in 2000 we're close to surpassing several goals we didn't expect to reach before the year-end. We have already exceeded our goal of having 24 corporate stores before 2000 is over, and we are on course to exceed our franchised store-opening goal well before year-end. Our competitors haven't come close to matching our e- commerce initiatives and our technology continues to become more advanced every day. With that continuously advancing technology, our most important goal becomes easier to reach: a fresh, piping-hot pizza to arrive at every customer's door, just the way they ordered it, in 30 minutes or less. We know we have to continue to drive system sales and build more stores at an ever-faster rate. We know we have to keep attracting the best franchisees - and make sure they earn a good-sized slice of our success. We also have to continue to be the kind of company that people want to work for and grow with. Finally, we have to keep adding technology that will keep enhancing the Domino's experience for all our customers. These are the goals before us. We're not looking back - our eyes are on the road ahead. And new goals to meet and exceed lie just over the next hill. Thank you for taking this journey with us, and for always looking straight ahead. RESULTS Group turnover, which includes royalty income, food sales and sales made by corporate stores were 20.6% ahead at £14.5m (£12.0m). Operating profit rose by 23.4% to £1.05m (1999: £0.85m after the add-back of an exceptional item of £0.4m) and 131% if no adjustment is made for the 1999 exceptional item. Profit before tax increased by 37.5% to £1.02m (1999: £0.74m) on an adjusted basis and 193% without adjustment. Basic earnings per share increased 1% to 1.47 pence per share (based on 50,000,000 shares in issue) from 1.46 pence per share (based on 41,565,443 shares in issue). The modest increase reflects the impact of the new shares issued on flotation last November. On an unadjusted basis basic earnings per share increased 188% to 1.47 pence per share from 0.51 pence per share. The board has declared a maiden interim dividend, since floatation, of 0.37 pence per share. This will be paid on 1st September to shareholders on the register on 4th August 2000. SALES System sales in the first twenty-six weeks of 2000 at £34.9m were 15.1% ahead of the previous year (£30.3m). Like-for-like sales for the 165 stores that had been open for a full year at the start of each comparative period were 1.8% ahead at £6,931 (1999: £6,808). As announced at our AGM in April, like-for-like sales at the start of the year were almost up to the level achieved in the strong start to 1999. The second quarter has seen good progress with the period finishing strongly, benefiting from the Euro 2000 football competition. SYSTEM EXPANSION In the first twenty-six weeks of the year, 13 stores have been constructed, of which eight opened for trading (1999: nine opened and trading). The remaining five stores have either opened since the period end or will open shortly. Two experimental stores were closed as planned (1999: two closed). One delivery store was temporarily closed pending a change of franchisee (1999: Nil). At 25 June 2000 we had 200 delivery stores (1999 interim: 174 stores) and 6 experimental stores trading (1999 interim: 8 stores). We remain confident that the budgeted store openings for the year of 26 will be exceeded. CORPORATE STORES We started the year with 13 corporate stores owned and operated by the Group (1999 interim: 7 stores) plus a further three stores owned by the Group but operated by franchisees (1999 interim: 4 stores). In the first twenty- six weeks of the year we had a record level of activity during which we opened one new store, acquired five stores, assumed the operation of one store and disposed of two stores from our original portfolio. This trading activity, which is part of the normal course of business in a franchise business such as ours, generated a surplus of £225,000 (1999: £29,000). Since the end of the interim period we have acquired a company that owns a further eight stores. We therefore currently have a portfolio of 27 corporate stores owned and operated by the Group plus a further store owned by the Group but operated by a franchisee. This already exceeds our budget for the year. Further acquisitions and new openings are planned in the second half. We are confident that these stores will contribute in the current year, but more significantly, comfortably replace the effects of the increasing royalty due Domino's Pizza in the US between 2001 and 2003. E-COMMERCE Our e-commerce initiatives continue to grow at a rapid pace. Since launching interactive TV ordering in the autumn and nation-wide internet ordering at Christmas 1999, total orders have exceeded £1m and now regularly represent 3% of our weekly sales. Encouragingly the average order size continues to grow and now exceeds the value of telephone orders by 35%. We believe that the most powerful e-commerce medium for Domino's will be interactive television. Our early success on the 'Open'... platform has encouraged us to secure our 'first movers' advantage in this area and we have now completed negotiations with every national interactive TV platform in the UK. Roll-out of this extended service will commence shortly. Further enhancements to our internet ordering service will also be made in the second half. PEOPLE In our November 1999 prospectus we indicated that Gerry Halpern, our Chief Executive, would retire on 31 December 2000 and that his replacement would be appointed during the course of this year. I am pleased to report that we are making good progress in selecting Gerry's successor and expect to make an announcement before the end of September. We have a team of dedicated and committed people continually striving to meet ever more demanding targets in an increasingly competitive environment. I would like to personally thank all our staff, our dedicated group of franchisees and our growing band of committed and supportive suppliers for all their help in keeping us out in front. Colin Halpern Chairman 20 July 2000 GROUP PROFIT AND LOSS ACCOUNT (Unaudited Proforma Proforma Twenty- Twenty- Fifty-two six six weeks weeks weeks to to to 25 June 27 June 26 Decem ber 2000 1999 1999 Notes £000 £000 £000 TURNOVER Turnover: group and share of 14,905 12,528 26,758 joint venture's turnover Less: share of joint venture's (411) (506) (1,148) turnover GROUP TURNOVER 14,494 12,022 25,610 Cost of sales (8,069) (7,210) (15,024) GROSS PROFIT 6,425 4,812 10,586 Distribution costs (2,156) (1,532) (3,340) Administration expenses (3,220) (2,526) (5,475) (excluding exceptionals) Administrative expenses - (395) (433) (exceptional) 1,049 359 1,338 Other operating income - 96 236 OPERATING PROFIT 1,049 455 1,574 Share of operating profit in 23 - 51 joint venture TOTAL OPERATING PROFIT: GROUP AND SHARE OFJOINT VENTURE 1,072 455 1,625 Loss on disposal of tangible - - (62) and intangible fixed assets Net interest payable (49) (106) (210) PROFIT ON ORDINARY ACTIVITIES 1,023 349 1,353 BEFORE TAXATION Tax on profit on ordinary (286) (136) (526) activities PROFIT FOR THE FINANCIAL PERIOD 737 213 827 Dividends 185 185 333 RETAINED PROFIT FOR THE PERIOD 552 28 496 Earnings per share basic 2 1.47 0.51 1.91 diluted 1.41 0.51 1.88 Adjusted for exceptional items adjusted basic 1.47 1.46 3.06 adjusted diluted 1.41 1.45 3.01 There are no recognised gains and losses other than those included in the profit and loss account. GROUP BALANCE SHEET Unaudited Proforma 25 June 27 June 26 Dec 2000 1999 1999 Notes £000 £000 £000 FIXED ASSETS Intangible assets 714 589 594 Tangible assets 8,310 6,527 7,328 Investment in joint venture 244 205 221 Investment properties 802 202 373 1,046 407 594 10,070 7,523 8,516 CURRENT ASSETS Stocks 901 710 772 Debtors 3 5,010 3,967 4,012 Cash at bank and in hand 3,254 549 4,581 9,165 5,226 9,365 CREDITORS: amounts falling due 4 (5,184) (5,698) (5,852) within one year NET CURRENT ASSETS/(LIABILITIES) 3,981 (472) 3,513 TOTAL ASSETS LESS CURRENT 14,051 7,051 12,029 LIABILITIES CREDITORS: amounts falling due 5 (6,087) (3,334) (4,617) after more than one year 7,964 3,717 7,412 CAPITAL AND RESERVES Called up share capital 2,500 1,200 2,500 Share premium account 2,102 - 2,102 Profit and loss account 3,362 2,517 2,810 GROUP STATEMENT OF CASH FLOWS Unaudited Proforma Twenty- Twenty Fifty- six -six two weeks weeks weeks to to to 25 Jun 27 June 26 Dec 2000 1999 1999 Notes £000 £000 £000 NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (876) 192 2,4896 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 25 33 56 Interest paid (63) (123) (205) Interest element of finance lease rental (11) (16) (30) payments (49) (106) (179) TAXATION Corporation tax paid (130) (38) (700) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Payments to acquire intangible fixed (91) - (40) assets Payments to acquire tangible fixed (1,375) (660)(1,850) assets Payments to acquire investment (429) (4) (175) properties Receipts from sales of tangible and 317 115 167 intangible fixed assets (1,578) (549) (1,898) EQUITY DIVIDEND PAID (140) (231) (435) NET CASH OUTFLOW BEFORE FINANCING (2,771) (732) (723) FINANCING Issue of ordinary share capital - - 3,825 Share issue costs - - (598) New long-term loans 1,500 750 4,500 Repayments of long-term loans - (100) (3,000) Repayment of related party loan - (400) (400) Repayment of capital element of finance leases and hire purchase contracts (54) (51) (105) 1,446 199 4,222 INCREASE/(DECREASE) IN CASH (1,327) (533) 3,499 NOTES TO THE INTERIM REPORT 1. BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATION The interim financial information has been prepared on the basis of the accounting policies set out in the group's statutory accounts for the fifty-two weeks ended 26 December 1999. The taxation charge is calculated by applying the directors' best estimate of the annual tax rate to the profit for the period. All other accounting polices set out in the accounts for the fifty-two weeks ended 26 December 1999 were applied for the purposes of this statement. Basis of consolidation The group accounts consolidate the accounts of Domino's Pizza UK & IRL plc and all its subsidiary undertakings drawn up for the twenty-six weeks following the previous year end date. Domino's Pizza UK & IRL plc was incorporated on 5 October 1999. On 24 November 1999 it acquired by way of a share exchange the whole of the issued capital of Domino's Pizza Group Limited. Accordingly, as permitted by Financial Reporting Standard No 6, the combination has been merger accounted for as if the group as currently constituted had been in place throughout the whole of the period covered by these accounts. In order to compare meaningfully the performance of the underlying group the group profit and loss account and balance sheets for the financial year to 26 December 1999 and the interim period to 27 June 1999 have been presented on a proforma basis as though they had always been part of Domino's Pizza UK & IRL plc, despite the fact that this company was only incorporated on 5 October 1999. 2. EARNINGS PER SHARE The calculation of basic earnings per ordinary share is based on earnings of £737,000 (1999 interim: £213,000) and on 50,000,000 (1999 interim: 41,565,443) ordinary shares. The diluted earnings per share is based on 52,423,798 (1999 interim: 42,040,009) ordinary shares which takes into account theoretical ordinary shares that would have been issued, based on average market value if all outstanding options were exercised. An adjusted earnings per share has been provided to eliminate the distortions caused by exceptional items of £395,000 in 1999. This is presented as in the opinion or the directors this allows a better comparison of the underlying performance. 3. DEBTORS Unaudit Proforma ed 25 June 27 June 26 Dec 2000 1999 1999 £000 £000 £000 Trade debtors 2,506 2,084 2,486 Amounts owed by joint venture 345 345 345 Other debtors 1,579 1,221 870 Prepayments and accrued income 580 317 311 5,010 3,967 4,012 NOTES TO THE INTERIM REPORT 4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Unaudited Proforma 25 June 27 June 26 Dec 2000 1999 1999 £000 £000 £000 Bank loans - 450 - Finance lease creditors 96 119 120 Trade creditors 2,424 2,678 3,261 Amounts owed to parent undertaking 1 44 1 Corporation tax 467 525 311 Other taxes and social security costs 562 365 578 Other creditors 84 234 247 Accruals and deferred income 1,360 1,098 1,188 Dividend payable 190 185 146 5,184 5,698 5,852 5. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Unaudite Proforma 25 June 27 June 26 Dec 2000 1999 1999 £000 £000 £000 Bank loans 6,000 3,200 4,500 Finance lease creditors 87 134 117 6,087 3,334 4,617 6. NOTES TO THE STATEMENT OF CASH FLOWS: RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES (Unaudited) Proforma Twenty- Twenty- Fifty- six six two weeks weeks weeks to to to 25 June 27 June 26 Dec 2000 1999 1999 £000 £000 £000 Operating profit 820 426 1,552 Depreciation charge 325 274 586 Amortisation charge 24 27 54 Increase in debtors (1,038) (564) (547) Increase in stocks (130) (41) (103) Increase in creditors (877) 70 947 (876) 192 2,489 7. PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information contained in this statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the fifty-two weeks ended 26 December 1999. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. INDEPENDENT REVIEW REPORT INTRODUCTION We have been instructed by the company to review the financial information set out on pages 3 to 8 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies. DIRECTORS' RESPONSIBILITIES The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the Financial Services Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. REVIEW WORK PERFORMED We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of marking enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than as audit. Accordingly we do not express an audit opinion on the financial information. REVIEW CONCLUSION On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the twenty-six ended 25 June 2000. Ernst & Young Luton

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