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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
August 6, 2019

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