Interim Results
Domino's Pizza UK & IRL PLC
28 July 2003
For Immediate Release 28 July 2003
DOMINO'S PIZZA UK & IRL plc
INTERIM RESULTS
FOR THE TWENTY-SIX WEEKS ENDED 29 JUNE 2003
Domino's Pizza UK & IRL plc ('Domino's Pizza', symbol: DOM) announces its
interim results for the twenty-six weeks ended 29 June 2003.
Highlights
• Profit before tax increased 68.8% to £2.90m. (2002: £1.72m)
• Earnings per share:
- Basic earnings per share up 58.1% to 3.70p. (2002: 2.34p)
- Diluted earnings per share up 57.7% to 3.47p. (2002: 2.20p)
• Interim dividend increased 69.2% to 1.32p per share. (2002: 0.78p)
• Interest costs covered 33.6 times by operating profits (2002: 9.9 times)
• System sales increased 18.8% to £68.6m. (2002: £57.8m)
• Like for like sales up 6.9%.
• Record store openings with 21 new stores opened in the period (2002: 18
stores) resulting in a total of 290 stores at the period end (2002: 255
stores).
• Approval sought to establish an Employee Benefit Trust, Long Term
Incentive Programme and replacement share option schemes.
Stephen Hemsley, Chief Executive of Domino's Pizza, commented:
'I am pleased to report further significant progress in the first half of the
financial year with record system sales, a record number of store openings and
record profits.
'These results have been achieved by holding fast to the basic principles of the
Domino's Pizza business; to deliver a high quality pizza in the promised time
from great-looking efficient stores that are staffed by dedicated, customer
focused people. We look forward to the future with confidence.'
Contact: Domino's Pizza 01908 580604 / 07909 928016
Stephen Hemsley / Bernadette Eddisford
Buchanan Communications 020 7466 5000
Isabel Petre / Catherine Miles
Notes to editors:
Domino's Pizza is the leading player in the UK and Ireland's fast-growing pizza
delivery market. Domino's Pizza UK & IRL plc is the parent company of Domino's
Pizza Group Ltd which holds the exclusive master franchise 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 29 June 2003, there were
290 stores in the UK and Ireland.
Founded in the United States in 1960, Domino's Pizza is the recognised world
leader in pizza delivery with a network of over 7,000 company-owned and
franchised stores in the more than 50 international markets. Domino's is
committed to leading the pizza delivery industry in product quality and
operational excellence.
CHIEF EXECUTIVE'S STATEMENT
Introduction
I am pleased to report further significant progress in the first half of the
financial year with record system sales, a record number of store openings and
record profits. We have made a good start on the rationalisation of our
corporate store portfolio, generating a strong cash flow that has been used to
significantly reduce borrowings. Our balance sheet at the half-year is,
therefore, strong.
These results have been achieved by holding fast to the basic principles of the
Domino's Pizza brand: to deliver a high quality pizza in the promised time from
great-looking, efficient stores that are staffed by dedicated, customer-focussed
people. It is, therefore, fitting that I begin my report by commending our team
of exceptional franchisees and team members whose enthusiasm and commitment
continues to drive this business forward.
Sales
The growth in system sales in the first half of 2003 saw the Company extend its
market leadership in pizza delivery in terms of both total sales and number of
stores. System sales, which are the sales of all stores in the Domino's system
in the UK and Republic of Ireland, rose by 18.8% to £68.6m (2002: £57.8m) in the
six months ended 29 June 2003. Like-for-like sales in the 235 stores open for
twelve months or more in both years grew by 6.9% (2002:15.8%).
Our e-commerce sales also continue to grow very strongly, up 47.4 % over the
previous year. These channels now generate 4.1 % of total system sales.
Trading Results
Group turnover, which includes the sales generated by the company from
royalties, fees, food sales and rental income as well as the turnover of
corporately-owned and operated stores, grew by 15.9% to £30.4m from £26.2m.
Group operating profit, before an exceptional cost of £0.3m referred to below,
was up 54.9% to £2.91m from £1.88m on system sales 18.8% ahead. If the effect
of the final increase in the royalty were eliminated, underlying profits
increased by 62.2%. This significant increase in profits demonstrates the
leverage we are now achieving on our relatively fixed cost base. The opening of
our third commissary in the second half of last year gives us most of the
infrastructure necessary to support a system of around 500 stores opening at a
rate of 50 stores per year. Further investment will be needed to grow to the
now-anticipated build-out target of 800 stores but this will not be required for
several years and should be comfortably funded out of cash flow.
In line with our policy of focusing the business on system expansion, we are
reducing the number of stores we own and manage corporately. As a result, the
number of corporate stores was reduced from 35 at the year-end to 26 at the
half-year following the sale of ten stores to franchisees and the opening of one
new store. This activity (and the sale of one store by a joint-venture company)
generated a profit of £0.33m which has been treated as exceptional by virtue of
the number of stores that were sold in the period. Further corporate store
sales and openings are anticipated in the second half. We hope to start 2004
with a more geographically-focused core of corporate stores that should generate
shareholders an acceptable return on their investment.
Strong trading and the proceeds from store disposals resulted in strong cash
generation in the first half. This, combined with lower interest rates,
resulted in a 53.9% fall in the net interest expense to £0.09m (2002: £0.19m).
The total interest charge was covered 33.6 times by operating profit (2002: 9.9
times).
Profit before tax was up 68.8% to £2.90m (2002: £1.72m). The tax charge
increased from 31.5% to 35%, principally as a result of the tax treatment of the
profit on the disposal of corporate stores. Profit after tax therefore grew by
60.1% to £1.89m (2002: £1.18m).
Earnings per share and dividend
Basic earnings per share were up 58.1% to 3.70 pence (2002: 2.34 pence).
Diluted earnings per share increased by 57.7% to 3.47 pence from 2.20 pence.
The Board is pleased to declare an increase of 69.2% in the interim dividend to
1.32 pence per share (2002: 0.78 pence per share). The interim dividend is
covered 2.8 times by profit after tax (2002: 3.0 times), which is the same level
of cover established for the previous full year. This increase represents a
continuation of our progressive dividend policy. This dividend will be paid on
28 August 2003 to shareholders on the register on 8 August 2003.
Cash Flow & Balance Sheet
Operating activities generated net cash of £3.1m (2002: £1.6m). At the period
end, the Company had net borrowings of £4.9m (2002: £8.0m) against shareholders
funds of £13.0m (2002: £10.5m), a capital-gearing ratio of 37.5% (2002: 76.4%).
Of the total borrowing £2.2m (2002: £1.7m) related to the very limited recourse
financing of a wholly owned subsidiary, DP Capital Ltd. This subsidiary
provides leasing finance to franchisees for the refit of existing stores and
equipment for new stores.
System Expansion & Re-Imaging
The first half of 2003 saw a record 21 new stores opened (2002: 18 stores),
continuing the promised acceleration in the rate of system expansion. This
equates to almost as many stores as were opened in each of 2000 and 2001. There
were no store closures in this half-year. As a result, the total store count at
29 June 2003 was 290 (30 June 2002: 255 stores). We are, therefore, making good
progress towards reaching our target opening rate of 50 stores per year.
The pipeline of new openings for the second half is strong, with a record number
of new franchisees in training to open stores. Both the quality and volume of
franchise applicants is testament to the strength of the Domino's brand and the
potential for our franchisees to enjoy a good return on their investment.
Accordingly, we were pleased to welcome 13 new franchisees to the system in the
first half of the year bringing the total to 117.
Throughout the period, we continued with a rolling programme of re-imaging to
ensure that the estate of the mature stores is in line with the latest
standards. At the period end, 90% of our stores had been re-imaged and most of
the balance will be completed by the year-end. Such is our commitment to the
very highest image standards that any store not refitted by the year-end will be
scheduled for closure and the territory re-franchised.
Extraordinary General Meeting
We will shortly be posting a circular to shareholders convening an Extraordinary
General Meeting ('EGM') at which they will be asked to approve the establishment
of an Employee Benefits Trust ('EBT'), a Long Term Incentive Programme ('LTIP')
for the benefit of senior executives and a new share option scheme for other
staff that will partially replace the existing scheme and allow further options
to be granted in a more tax (and National Insurance) efficient manner.
After the approval of these schemes, it is expected that a tender offer will be
made by the EBT for share in the Company, details of which will be contained in
a tender offer document to be posted to all shareholders.
Finally, and pursuant to the approval given by shareholders at the Annual
General Meeting for the company to purchase its own shares, shareholders will be
asked to approve the waiver of Rule 9 of the City Code on Takeovers and Mergers.
Without such a waiver any buy-in by the Company of its own shares would
trigger an obligation by our largest shareholder, Nigel Wray, to make a
compulsory bid for the company as his shareholding would exceed 30%.
The commercial purpose of these schemes is to allow us to better recruit,
motivate and retain team members with share incentives, whilst avoiding any
further dilution of shareholder interest in the Company. In the longer term and
as the prudent management of cash flow allows, this structure will allow us to
cover the dilution created by existing options thereby enhancing diluted
earnings per share.
As referred to above, the cost of professional fees incurred in implementing
these proposals are expected to total £0.3m, which have been treated as an
exceptional cost in this period.
Outlook
Current trading continues to be strong. Having established a high level of
store sales, a continuation of the double-digit like for like growth experienced
in recent years, will be more challenging. However, more modest like-for-like
growth experienced, combined with an accelerated rollout of new stores, should
yield robust growth in system sales. When combined with the relatively fixed
cost base, the growth in profits should continue to be strong. This positive
outlook is further enhanced by the prospect of an increasing cash flow, arising
from growing profitability, little additional infrastructure expenditure over
the next couple of years and store sales. It is proposed that most of this cash
flow will be returned to shareholders in the form of enhanced dividends and a
share buy-in programme, initially through the EBT. We therefore look forward to
the future with confidence.
Conclusion and thanks
I would like to end where I started - by paying tribute to all of our people. I
am proud to say that we have one of the most professional and talented teams who
continue to work hard at developing the Domino's Pizza brand. They make it
their priority to look after our customers and continue to maintain high
standards, giving us an all-important edge in a very competitive marketplace.
Stephen Hemsley
Chief Executive
GROUP PROFIT AND LOSS ACCOUNT
(Unaudited) (Unaudited)
26 weeks to 26 weeks to Year ended
29 June 30 June 29 December
2003 2002 2002
Notes £000 £000 £000
TURNOVER
Turnover: group and share of joint venture's 31,665 26,909 54,673
turnover
Less: share of joint venture's turnover (1,274) (693) (1,564)
GROUP TURNOVER 30,391 26,216 53,109
Cost of sales (16,758) (13,906) (28,054)
GROSS PROFIT 13,633 12,310 25,055
Distribution costs (4,098) (4,366) (8,663)
Administration expenses (6,626) (6,066) (11,813)
Administration expenses - exceptional (295) - -
2,614 1,878 4,579
Other operating income/(expenses) - - (75)
GROUP OPERATING PROFIT 2,614 1,878 4,504
Share of operating profit in joint venture 47 37 64
Amortisation of goodwill on joint venture (3) (3) (5)
44 34 59
TOTAL OPERATING PROFIT: GROUP AND
SHARE OF JOINT VENTURE 2,658 1,912 4,563
Profit on disposal of Fixed Assets 333 - -
Net interest payable (89) (193) (324)
PROFIT ON ORDINARY ACTIVITIES BEFORE 2,902 1,719 4,239
TAXATION
Tax on profit on ordinary activities 2 (1,016) (541) (1,404)
PROFIT FOR THE FINANCIAL PERIOD 1,886 1,178 2,835
Dividends on equity shares (674) (395) (1,018)
RETAINED PROFIT FOR THE PERIOD 1,212 783 1,817
Earnings per share - basic 3 3.70p 2.34p 5.60p
- diluted 3.47p 2.20p 5.29p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
(unaudited) (unaudited)
26 weeks 26 weeks Year
to to ended
29 June 30 June 29 December
2003 2002 2002
£000 £000 £000
Profit attributable to the financial period 1,212 783 1,817
Unrealised gain on exchange of properties for interest in joint - - 55
venture
Total gains and losses recognised since the last annual report 1,212 783 1,872
GROUP BALANCE SHEET
(Unaudited) (Unaudited)
29 June 30 June 19 December
2003 2002 2002
Notes £000 £000 £000
FIXED ASSETS
Intangible assets 1,790 2,922 2,386
Tangible assets 12,781 13,755 13,685
Investment in joint venture 288 296 307
14,859 16,973 16,378
CURRENT ASSETS
Stocks 1,731 1,213 1,411
Debtors 4 12,576 10,091 10,702
Cash at bank and in hand 1,607 2,409 3,885
15,914 13,713 15,998
CREDITORS: amounts falling due within one year 5 (12,318) (12,226) (12,919)
NET CURRENT ASSETS 3,596 1,487 3,079
TOTAL ASSETS LESS CURRENT LIABILITIES 18,455 18,460 19,457
CREDITORS: amounts falling due after more than one 6 (4,855) (7,468) (7,152)
year
PROVISION FOR LIABILITIES AND CHARGES
- DEFERRED TAXATION (604) (509) (604)
12,996 10,483 11,701
CAPITAL AND RESERVES
Called up share capital 2,556 2,531 2,546
Share premium account 2,468 2,281 2,395
Profit and loss account 7,972 5,671 6,760
Equity shareholders' funds 12,996 10,483 11,701
GROUP STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited)
26 weeks to 26 weeks to
29 June 30 June 29 December
2003 2002 2002
Notes £000 £000 £000
NET CASH INFLOW FROM OPERATING ACTIVITIES 7 3,061 1,611 5,128
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 46 22 50
Interest paid (70) (173) (343)
Interest element of finance lease rental payments (5) (5) (9)
(29) (156) (302)
TAXATION
Corporation tax paid (598) (399) (950)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire intangible fixed assets (178) (523) (214)
Payments to acquire tangible fixed assets (932) (2,133) (3,291)
Receipts from sales of tangible and intangible fixed 1,482 4 411
assets
Receipts for repayment of joint venture loan 34 12 46
Payment to acquire finance lease assets and advance
of
franchise loans (1,561) (768) (1,247)
Receipts from repayment of finance lease and 697 391 901
franchise loans
(458) (3,017) (3,394)
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertaking and unassociated - - (484)
business
EQUITY DIVIDEND PAID (622) (390) (777)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING 1,354 (2,351) (779)
FINANCING
Issue of shares 83 102 231
New long-term loans 740 2,036 2,719
Repayments of long-term loans (4,427) (567) (1,443)
Repayment of capital element of finance leases
and hire purchase contracts (27) (42) (74)
(3,631) 1,529 1,433
(DECREASE)/INCREASE IN CASH (2,277) (822) 654
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 29 December 2002. 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 29 December 2002 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 to the nearest Sunday of the month end.
2. TAXATION
The taxation charge is made up as follows:
(Unaudited) (Unaudited)
29 June 30 June 29 December
2003 2002 2002
£000 £000 £000
UK corporation tax:
Profit for the period 986 445 1,229
Share of joint venture tax 30 8 13
Adjustment in respect of the previous period - - (21)
Total current tax 1,016 453 1,221
UK deferred tax
Origination and the reverse of timing differences in respect
of:
Profit in the period - 88 183
Total deferred tax - 88 183
Tax on profit on ordinary activities 1,016 541 1,404
3. EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on earnings of
£1,886,000 (2002: £1,178,000) and on 50,991,137 (2002: 50,423,812) ordinary
shares.
The diluted earnings per share is based on 54,302,965 (2002: 53,446,146)
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.
4. DEBTORS
(Unaudited) (Unaudited)
29 June 30 June 29 December
2003 2002 2002
£000 £000 £000
Trade debtors 2,726 2,335 2,394
Amounts owed by joint venture 665 297 699
Other debtors 4,196 3,820 3,661
Prepayments and accrued income 2,552 1,581 2,035
Net investment in finance lease 2,437 2,058 1,913
12,576 10,091 10,702
Included within debtors is £1,650,000 (2002: £1,976,000) due after more than one
year.
5. CREDITORS: amounts falling due within one year
(Unaudited) (Unaudited)
29 June 30 June 29 December
2003 2002 2002
£000 £000 £000
Bank loans 900 2,400 2,400
Other loans 684 491 612
Finance lease creditors 39 60 29
Trade creditors 3,451 3,991 3,956
Corporation tax 919 320 532
Other taxes and social security costs 612 666 719
Other creditors 1,087 866 931
Accruals and deferred income 3,950 3,045 3,116
Proposed dividend 676 387 624
12,318 12,226 12,919
6. CREDITORS: amounts falling due after more than one year
(Unaudited) (Unaudited)
29 June 30 June 29 December
2003 2002 2002
£000 £000 £000
Bank loans 3,325 6,225 5,775
Finance lease creditors - 39 38
Other loans 1,530 1,204 1,339
4,855 7,468 7,152
7. NOTES TO THE STATEMENT OF CASHFLOWS
Reconciliation of operating profit to net cash flows from operating activities
(Unaudited) (Unaudited)
29 June 30 June 29 December
2003 2002 2002
£000 £000 £000
Operating profit 2,967 1,877 4,504
Depreciation Charge 577 555 1,127
Amortisation Charge 117 85 228
Other operating expenditure/income (283) (4) 75
(Increase) in debtors (307) (1,304) (1,047)
(Increase)/Decrease in stocks (320) 48 (151)
Increase in creditors 310 354 392
3,061 1,611 5,128
8. 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 29 December 2002. Those accounts, upon
which the auditors issued an unqualified opinion, have been delivered to the
Registrar of Companies.
9. This report is being sent to all registered shareholders. Copies can
also be obtained from the Registered Office at Domino's House, Lasborough Road,
Kingston, Milton Keynes MK10 OAB.
INDEPENDENT REVIEW REPORT
INTRODUCTION
We have been instructed by the company to review the financial information set
out on pages 6 to 12 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
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 making
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 an 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
weeks ended 29 June 2003.
Ernst & Young LLP
Luton
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 17th May 2024
COMPANIES COVERED:
Latest directors dealings
- 1 day ago Gran Tierra Energy Inc. (CDI)
- 1 day ago Wheaton Precious Metals Corp.NPV (CDI)
- 1 day ago H&T Group
- 1 day ago Centrica
- 1 day ago Vistry Group