Domino's Pizza is proving itself to be particularly resilient, seeing off concerns over the recession and recent warm weather to outstrip strong comparatives from last year and deliver 7 per cent like-for-like sales growth across its growing estate.
Although the recent very hot weather caused 'some softness' in demand, the effect was short lived as the novelty of barbecuing wore off quickly and people reached for the telephone, or logged on to Domino's increasingly important web sales channel. Online sales now accounts for 26 per cent of the company's UK sales. Indeed management predicted that full year results will now beat analysts' expectations.
This conviction is based on the continuing strength of demand, improved efficiencies at centralised depots and cheaper input costs which have improved margins. Also the £20m put into a central advertising fund by the Domino's franchisees is going further this year now that advertising rates have cratered.
A major capital expenditure drive to provide the infrastructure to support 1,000 stores by 2017 is well underway and 23 new stores were opened in the first half taking the total to 576. Funding has largely been internal reflecting Domino's strong cash generation. Operating cash flow was £11.3m in the first half, up from £4.5m at the same stage last year, and net borrowings are only up by £4.5m over the past 12 months despite the company incurring £21.6m of expansionary capital expenditure in this time.
DOMINO'S PIZZA (DOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 230p | MARKET VALUE: | £ 374m | |
| TOUCH: | 228.5-230p | 12-MONTH HIGH: | 240p | LOW: 156.25p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 10.9p | NET DEBT: | 102% | |
| Half-year to 28 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2008 | 66.2 | 9.7 | 4.45 | 2.7 |
| 2009 | 73.7 | 13.1 | 5.98 | 3.5 |
| % change | +11 | +35 | +34 | +30 |
Ex-div:29 Jul Payment:28 Aug | ||||
Analyst Keith Ashworth-Lord of WH Ireland has edged up his full year pre-tax and EPS forecasts to £26.4m and 12p, respectively (2008: £23.4m and 10.9p). For the following year the brokers has upgraded its pre-tax profit estimates by 4 per cent to £31.1m, giving EPS of 14.2p.
