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Domino's dispute with franchisees continues as CEO exits

The pizza chain's chief executive took the opportunity afforded by the group's half-year figures to announce that he will retire, with no set date as yet
Domino's dispute with franchisees continues as CEO exits

Domino’s Group (DOM) chief executive David Wild announced, alongside this set of half-year results, that he plans to retire, with an effective date yet to be given. The move comes at a time when the pizza company has struggled with its franchisees – new store openings have been delayed as franchisees demand a greater share of profits before proceeding with new locations. Mr Wild called the situation “complex” and that a resolution isn’t expected until sometime in 2020.

IC TIP: Sell at 239p

Franchisee disputes are not the only area where Domino's has struggled. The decline in pre-tax profits was due in part to the operating losses of £6.4m in the international business, which widened from a £4.1m loss over the whole of 2018, with Norway proving to be the worst affected country. The profit decline was also exacerbated by higher interest costs after net debt increased by £35.6m to £239m. By contrast, operating profit generated in the UK and Ireland improved by 7.1 per cent to £51.6m. The average discount on menu prices remained stable at 39 per cent, but the proportion of orders sold on a discount increased to 89.6 per cent, from 88.1 per cent during the same time last year.

Analysts at Numis expect pre-tax profits of £86.8m during 2019, giving EPS of 14.9p, increasing to £91.5m and 15p in 2020.

DOMINO'S PIZZA GROUP (DOM)  
ORD PRICE:239pMARKET VALUE:£1.11bn
TOUCH:239-240p12-MONTH HIGH:325pLOW: 220p
DIVIDEND YIELD:4.0%PE RATIO:28
NET ASSET VALUE:*NET DEBT:£239m
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201828641.77.24.05
201929630.55.34.20
% change+4-27-26+4
Ex-div:05 Sep   
Payment:07 Oct   
*Negative shareholders' equity, includes intangible assets of £103m, or 22.2p a share