Dominos expands share buyback plan

Domino’s Pizza (DOM) announced plans to expand its share buyback programme on results day, as it revealed that underlying cash profits had grown by almost a quarter to £63.9m in the first half of the year. 

The group added an additional £35m to its existing £45m share buyback plan - which, on top of dividends, makes £136m worth of surplus capital heading back to shareholders this year.

Management is evidently feeling bolder after a strong first half, as the pizza delivery company enjoyed stronger takeaway habits during lockdown, on top of a sales surge from the Euros football tournament last month. Total orders grew 3.5 per cent compared to the same period last year, driven by 27 per cent growth in collection orders. The latter is still trading at around a quarter below pre-pandemic levels, so there is likely more growth to come.  

Domino’s online service progressed well too, with UK digital sales up 25 per cent and representing 93 per cent of all system sales in the country. 

The group did not offer any update on the ongoing dispute with its franchisees, who have contested its current profit share system. But six franchisees opened 13 new stores in the first half, and overall franchisees’ average adjusted cash profit (Ebitda) per store grew by 80 per cent to £154,000. 

While Domino’s concedes that it will operate “within a shifting and uncertain landscape” as lockdown restrictions lift, broker Peel Hunt expects adjusted pre-tax profits and EPS to reach £115m and 20.5p in the 2021 full year, up from £101m and 18.1p in 2020. But tensions with franchisees still cast a shadow over the group’s model, and a scheduled increase in VAT looms in October. Hold.