While most consumer stocks have been lamenting the dreadful weather so far this summer, it's a different story at Domino's Pizza. Its drivers battled the elements to deliver a 5.2 per cent increase in like-for-like sales, justifying our recent decision to keep buying shares in the highly rated fast-food group.
Admittedly, Domino's received a helping hand from the European Championships, but new products and promotions were also key, as well as investment in its online ordering capability which now accounts for over half of delivered sales. Marketing spend is also being shifted from expensive TV sponsorship to more efficient digital communication.
The benefits of its ever-increasing scale are becoming all the more apparent, too, translating into operational gearing that saw underlying pre-tax profit growth outpacing sales growth at 15.2 per cent. That figure excludes a drag from its nascent German business, which is expected to lose a total of £2.5m this year. But management is encouraged by trading at the 10 stores opened there so far, and expects a further eight to be opened before the year-end, with a number of UK franchisees lined up to continue the roll-out.
Broker Numis Securities expects underlying full-year pre-tax profit of £46.5m and EPS of 21p (2011: £42.2m/19.2p).
DOMINO'S PIZZA GROUP (DOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 511p | MARKET VALUE: | £834m | |
| TOUCH: | 510-511p | 12-MONTH HIGH: | 527p | LOW: 383p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 28 | |
| NET ASSET VALUE: | 38p* | NET DEBT: | 26% | |
| Half-year to 24 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 102 | 19.0 | 8.16 | 5.5 |
| 2012 | 113 | 21.5 | 9.67 | 6.6 |
| % change | +11 | +13 | +19 | +20 |
Ex-div: 1 Aug Payment: 6 Sep *Includes intangible assets of £16.7m, or 10p a share | ||||
