REG - Domino's Pizza Grp - Half year results
06/08/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240806:nRSF2657Za&default-theme=true
RNS Number : 2657Z Domino's Pizza Group PLC 06 August 2024
6 August
2024
LEI: 213800Q6ZKHAOV48JL75
Domino's Pizza Group Plc - Half year results for the 26 weeks ended 30 June
2024
Positive trading momentum in Q2
London corporate stores disposal complete and new £20m share buyback
H1 24(1) H1 23(1) % change
System sales(2) £767.7m £766.4m +0.2%
Total orders 35.1m 35.4m (0.9)%
Group revenue £326.8m £332.9m (1.8)%
Underlying*(,3) EBITDA £69.0m £68.7m +0.4%
Underlying*(,3) profit before tax £51.3m £50.9m +0.8%
Statutory profit before tax £59.4m £91.5m (35.2)%
Underlying*(,3) basic EPS 9.8p 9.5p +3.2%
Statutory basic EPS 10.7p 19.3p (44.6)%
Interim dividend per share 3.5p 3.3p +6.1%
* Underlying excludes a profit of £40.6m in H1 23 from the disposal of the
German associate and a £11.2m profit on disposal of corporate stores,
Shorecal acquisition costs of £2.2m and amortisation of intangible assets of
£1.0m in H1 24. For EPS, this also excludes the non-underlying tax charge of
£4.5m.
Commenting on the results, Andrew Rennie, CEO said:
"Following a slow start to the year, we now have good momentum in the business
with our strategic initiatives gaining traction and our trading performance
accelerating steadily against strong comparatives from last year. In Q2 we
grew orders, with a notable improvement from the middle of May and importantly
have halted the trend of declining delivery orders. These are now returning to
growth and this momentum has continued through June and July, helped by a good
performance through the Men's Euro Football tournament."
"We're executing well in an uncertain market thanks to our unrelenting focus
on brilliant value, quality and service for our customers. Our average
delivery time is now 24 minutes, which creates even better value for our
customers. We have continued to support the growth of the system through
passing on food cost deflation to our franchise partners."
"In our core UK & Ireland business, we see significant opportunity for
further growth through opening new stores, an exciting new loyalty trial to
drive frequency and a focus on value and service, especially in the delivery
channel. There is alignment with our franchise partners and tangible energy
across the system to capitalise on this opportunity."
"We continue to operate a capital light business and are moving towards our
goal of building a larger and more profitable business for our shareholders,
franchise partners and colleagues."
Financial highlights
· Group revenue down 1.8% with lower supply chain revenue offset by
increased corporate store revenue following the acquisition of Shorecal
· Underlying EBITDA up 0.4% at £69.0m. Excluding the £2.3m gain on
sale of freehold property in H1 23, Underlying EBITDA is up 3.9%
· Underlying profit before tax up 0.8% to £51.3m, with higher interest
costs offset by lower amortisation
· Statutory profit before tax of £59.4m after including £8.1m of
non-underlying items
· Interim dividend of 3.5p per share, up 6.1%
· Net Debt(4) of £285.4m and a leverage ratio of 2.16x, within our
target Net Debt / EBITDA leverage range of 1.5x - 2.5x
· Issuance of new £100m 5.97% USPP notes due in 2034. Supports reduced
utilisation of RCF, which has a higher interest rate, and extends the debt
maturity profile
· New £20m buyback programme reflecting confidence in future prospects
· In line with strategy to recycle capital, disposal of London
corporate store estate now complete. 30(5) stores sold to five different
franchise partners for a total consideration of £35.1m, of which £17.3m was
received by 30 June 2024
Operational and strategic highlights
· H1 24 total orders of 35.1m, down 0.9% vs. H1 23, with collection
orders up 2.4% and delivery orders down 2.6%. On a comparable basis(6), total
orders were down 0.1%
· Improved trading momentum in Q2 24, highlighting the growing traction
of our strategic initiatives
o On a comparable basis(6) Q2 24 total orders up 0.6% and up 0.1% on a
reported basis
o On a comparable basis(6) Q2 24 delivery orders up 1.1% after ten
consecutive quarters of declining volumes. Delivery orders flat on a reported
basis in Q2 24
· Sustainable growth in H1 24 franchisee EBITDA per store, £81k, +6.6%
vs. H1 23, despite impact of large minimum wage increase
· 22 new store openings vs. 29 in H1 23. Acceleration in H2 24 openings
with 4 so far vs. 1 in the same period last year, pipeline remains strong,
with 38 stores in construction or planning approved. In a slower planning
environment, we are still expecting to exceed FY23 store openings with a
target of 70 new stores in FY24
· Outstanding service improvements with Q2 24 average delivery times of
24 minutes, a one-minute improvement on Q1 24, as a result of intense
operational focus from our franchise partners
· Continued digital progress with growth in app customers and orders
o 9.5m active app customers, up 17% vs H1 23 with app orders as a percentage
of online orders at 77.6% (+2.4ppts vs.Q2 23)
o Following encouraging results in first loyalty test phase, now moving to
second phase of loyalty trial with c.630k customers
· Decision taken to permanently roll out on the Uber Eats platform
following extensive data-led trial which attracted incremental customers and
orders
Current trading, outlook and guidance
The growing traction of our strategic initiatives drove improved trading
momentum from the middle of May, through June and July. Q2 orders were back in
growth and also benefitted from the return to growth in delivery orders
following ten consecutive quarters of decline. Total orders in July were up
5.8%(6) on a comparable basis, with a good contribution from the Euros.
In March 2024 we guided that FY24 Underlying EBITDA would be in line with
market expectations, and that we did not expect Shorecal to make a significant
contribution to FY24's performance. As announced, the Shorecal acquisition
completed sooner than originally anticipated and investment costs are lower
than planned. Consequently, we now expect Shorecal to contribute c.£5m to
FY24 Underlying EBITDA.
Whilst we anticipated some food cost deflation in FY24, we are now planning to
pass on a greater level in H2 to our franchise partners as we continue to
deliver value offers for customers, underpin the strength of the system and
drive long-term growth. We expect our recent momentum to continue. However,
given the slower start to H1 and the greater pass-through of food costs to
franchise partners, we now expect FY24 Underlying EBITDA, including the
contribution from Shorecal, to be towards the lower end of the current range
of market expectations(7).
Despite the uncertain market, we are confident we will maintain our trading
momentum into H2 24 as we continue to execute on our strategic initiatives and
expect to deliver growth in both order count and like-for-like sales in FY24.
Our technical guidance for FY24 is as follows:
· No benefit to underlying profit from the sale of property (£2.3m
benefit in H1 23)
· Shorecal expected to contribute c.£5m to Underlying EBITDA
· Underlying depreciation & amortisation of between £18m to £20m
· Underlying interest costs (excluding foreign exchange movements) in
the range of £17m to £20m
· Estimated underlying effective tax rate of c.24.5% for the full year
· Capital investment of c.£20m
· Net Debt at year-end between £250m and £270m
Contacts
For Domino's Pizza Group plc:
Investor Relations
Will MacLaren, Head of Investor Relations +44 (0) 7443 192 118
Media:
Tim Danaher, Abbie Sampson - Brunswick +44 (0) 207 404 5959
Results meeting
A results meeting and Q&A for investors and analysts will be held at 09:30
BST today. The webcast and presentation can be accessed by here
(https://www.investis-live.com/dominos/669935edea3e932b00038aad/nfgbc) and
will also be available on the Results, Reports and Presentations page of our
corporate website.
In addition, we will replay the webcast and Q&A at 16:00 BST today for
North American based investors not able to join the live presentation at 09:30
BST this morning. Please click here
(https://www.investis-live.com/dominos/669935edea3e932b00038aad/nfgbc) to
register.
About Domino's Pizza Group ("DPG")
Domino's Pizza Group plc is the UK's leading pizza brand and a major player in
the Irish market. We hold the master franchise agreement to own, operate and
franchise Domino's stores in the UK and the Republic of Ireland. As of 5
August 2024, we had 1,344 stores in the UK and Ireland.
Cautionary statement
Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and assumptions and are
subject to a number of risks and uncertainties that could cause actual events
or results to differ materially from any expected future events or results
expressed or implied in these forward-looking statements. Persons receiving
this announcement should not place undue reliance on forward-looking
statements. Unless otherwise required by applicable law, regulation or
accounting standard, Domino's does not undertake to update or revise any
forward-looking statements, whether as a result of new information, future
developments or otherwise.
Notes
1. H1 24 is 26 weeks ended 30 June 2024. H1 23 is 26
weeks ended 25 June 2023.
2. System sales represent the sum of all sales made by
both franchised and corporate stores to consumers in UK & Ireland. These
are excluding VAT.
3. Underlying is defined as statutory performance
excluding discontinued operations, and items classified as non-underlying
which includes significant irregular costs, significant impairments of assets,
together with fair value movements and other costs associated with
acquisitions and disposals as set out in note 4 to the financial information.
Underlying excludes a profit of £40.6m in H1 23 from the disposal of the
German associate and a £11.2m profit on disposal of corporate stores,
Shorecal acquisition costs of £2.2m and amortisation of intangible assets of
£1.0m in H1 24. For EPS, this also excludes the non-underlying tax charge of
£4.5m.
4. Net Debt is defined as the bank revolving
facilities, private placement facilities, cash and cash equivalents and other
loans, including balances held in disposal groups held for sale.
5. 30 London corporate stores sold to five different
franchise partners. One London corporate store was closed due to a compulsory
purchase order issued by the local council.
6. FY23 was a 53-week year, so the comparator weeks
between H1 23 and H1 24 are different. H1 23 included Boxing Day and New
Year's Eve, whereas these two important trading days did not fall into H1 24.
The comparable basis adjusts for this difference, by comparing week 1-13 in Q1
24 with weeks 2-14 in Q1 23, and weeks 14-26 in Q2 24 with weeks 15-27 in Q2
23.
7. Current mean of FY24 Underlying EBITDA
expectations: range of £144.3m - £149.2m, with a mean of £147.1m. Based on
8 analysts' forecasts.
Performance summary
H1 24 system sales were up 0.2% to £767.7m and on a comparable basis, H1 24
like-for-like sales, excluding splits and VAT, were down 0.5% against tough
comparators in the prior year. As previously reported, Q1 24 and April were
challenging driven by a slower delivery market and by the tactical holdback of
marketing spend, particularly in January. Q2 orders were back in growth
highlighting the growing traction of our strategic initiatives.
H1 24 Underlying EBITDA was £69.0m, up 0.4% compared to H1 23, with lower
supply chain EBITDA, due to the pass-through of food costs, more than offset
by the contribution from Shorecal and lower technology platform costs.
Underlying profit before tax was £51.3m, up 0.8% compared to H1 23 as lower
amortisation charge of £1.3m was largely offset by increased finance costs.
Statutory profit before tax was £59.4m after £8.1m of non-underlying items,
of which £11.2m relates to the profit on disposal of corporate stores offset
by £2.2m of acquisition costs and £1.0m amortisation of acquired intangible
assets.
Free cash flow generated by the business was £30.5m in H1 24, a decrease from
£56.2m in H1 23 driven by a working capital outflow, which is mostly expected
to reverse in H2 24, and increased taxation.
Net Debt increased by £52.6m from the start of FY24 to £285.4m due to the
acquisition of Shorecal and the investment in DP Poland Plc with Net
Debt/EBITDA leverage of 2.16x (excluding IFRS 16) within our target Net Debt /
EBITDA leverage range of 1.5x - 2.5x.
The performance of the business means that, in line with our capital
allocation framework, we will pay an interim dividend of 3.5p, a 6.1% increase
compared to the prior year.
As a result of our confidence in future prospects, a new £20m share buyback
programme will commence with immediate effect.
Good strategic progress in the core UK & Ireland business
In March 2024, we outlined our goal to further sharpen our execution across
all areas of the business to give our customers better service and better
value. We laid out four strategic priorities to achieve this and are pleased
that we have made progress against each one.
1. Franchisee profitability
We were clear at the start of FY24 that a priority this year was to work with
our franchise partners to help improve their store profitability. Despite some
inflationary pressures, particularly in labour costs, our franchise partners
were able to further increase their profitability in H1 24. Based on the
unaudited data submitted to us by our franchise partners, average store EBITDA
for all UK stores in H1 24 was approximately £81k, equivalent to a 14% EBITDA
margin. This is a 6.6% increase on H1 23 when average store EBITDA was £76k
with a 13% EBITDA margin and a 15.7% increase on H1 19.
Since reaching our resolution with our franchise partners in December 2021,
when we set out how we would work together with aligned objectives, we have
both made material progress. DPG has invested over £20m in upgrading the
technology infrastructure as well as providing new store incentives and drive
the growth of the system. We have fully rolled out on Just Eat and Uber Eats,
service has materially improved and great value has been delivered to
customers through successful national value campaigns to drive our sales
growth. This alignment and momentum has also driven improved franchise partner
and DPG profitability.
As we approach the end of the three-year memorandum of understanding we are
more aligned than ever with our franchise partners and are working
constructively with them to put in place a new long-term agreement. We look
forward to providing an update in due course.
2. Value for money
Offering customers value for money is essential in the current environment. We
define 'value' as the quality of the product, combined with the service and
image, divided by price. In H1 24 we partnered with our franchise partners to
offer a range of compelling offers across the period with a combination of £8
/ £10 / £12 deals for small, medium and large pizzas as well as 50% off the
app and 40% off the web deals. In April 2024 we launched our £4 lunch offer
providing an incremental opportunity to target different parts of the day.
Early results have been encouraging.
Our customer service stepped up again in H1 24 with continued improvements
through the period. Average delivery times in Q2 24 reduced by one minute from
Q1 24 to 24 minutes and the percentage of deliveries on time improved relative
to H1 23. Our franchise partners are benefiting from the full roll out of our
enhanced GPS solution to all stores in FY23 as well as extensive national
training programmes. GPS helps stores manage labour through more efficient
driver route planning and better co-ordination with the store. It also enables
customers to see exactly where their order is and provides an accurate
delivery time.
Offering new products to our customers is essential and we made excellent
progress with innovation in H1 24. The highlight of the period was our
Domino's cookie with Cadbury's Crème egg which sold out within two weeks of
launch, but we were able to bring it back by popular demand for Easter,
generating high incremental sales of desserts. Our £4 lunch range now
includes pizzas, wraps, fries and smaller portions of chicken or cookies. We
have designed our 'Cheeky Little Pizzas' to be under 600 calories and wraps to
be under 450 calories, meeting consumer needs for lighter options at lunch. We
also launched our Ultimate Carbonara and Ultimate Lasagne pizzas which
contributed to sales in February and March, as well as our Ultimate Cheesy
Garlic bread which was so well received it is now permanently on the menu. Our
innovation pipeline continues to build under our outstanding innovation team
and we look forward to bringing these great products to our customers.
3. Digital
The Domino's app continues to be the key driver of our digital growth strategy
because app customers yield higher sales and have a higher average order
frequency than those who only use the website. The app is expected to be a
material contributor to future system sales growth, and driving more orders
through the app is a key focus in FY24. Orders placed on our app, as a
percentage of total online orders, were 77.6% in H1 24, an increase of 2.4ppts
vs. Q2 23 and the number of active app customers was 9.5m, an increase of 17%
compared to H1 23.
The primary opportunity for DPG is increasing our customers' average order
frequency over time. Currently, our customers order on average 4.3 times a
year. We are focused on leveraging our c.13.5m customer base and combined with
advancements in our technology platform, we are now able to interact with our
customers and tailor offers in a far more targeted and compelling way.
We have made good progress in our approach to introducing a loyalty programme.
With an active customer base of c.13.5m customers it is important that this is
executed in a disciplined, structured, and profitable way. As previously
communicated, we undertook the first phase of our testing in Q1 24 with a
small set of customers. Following encouraging results, we are now moving to
the second, more advanced, trial stage with c.630k customers. Pending the
success of this stage, we will assess the optimal structure for a loyalty
programme for a potential 2025 launch.
4. Convenience
New store openings are a core driver of growth and we are clearly
under-penetrated compared to competitors in the UK and also other Domino's
systems. At the start of the year, we undertook a detailed review of the
growth potential in the UK and Ireland. Using this updated analysis, we have
identified opportunities across new territories as well as splitting existing
geographies. More importantly, our franchise partners are hungry for growth
and have exceptional second-generation talent who want to grow their
businesses. There is a significant opportunity to build our scale further and
we have targets to have in excess of 1,600 stores by 2028 and 2,000 stores by
2033 in the UK and Ireland.
In H1 24 we opened 22 new stores with 15 different franchise partners. We will
continue to open stores in virgin territories and to focus on splits where
appropriate but there is also a heightened focus on smaller address count
territories. These have limited competition, and our strong national brand is
a significant competitive advantage. In H1 24, 11 of the new store openings
were in virgin territories and are trading ahead of expectations. The overall
pipeline is strong for FY24 with a further 38 stores in construction or
planning approved. In a slower planning environment, we are still expecting to
exceed FY23 store openings with a target of 70 new stores this year.
In January 2024 DPG started a trial on Uber Eats across UK and Ireland. The
data-led trial enabled customers to order Domino's Pizza via the Uber Eats
platform, but the pizzas are delivered by our own Domino's delivery drivers.
Following the successful trial which delivered incremental customers and
orders, we have decided to roll out on Uber Eats on a permanent basis across
UK & Ireland. Presence on Uber Eats complements our existing partnership
with Just Eat. Presence on both platforms is additive with Uber performing
well in London, the South and major city centre locations.
Additional growth opportunities
Alongside investment in the core UK & Ireland business, which remains our
top priority, we have continued to focus on reallocation of capital within the
corporate estate and joint ventures to improve returns and also to assess
additional growth opportunities.
We have now completed the disposal of our corporate stores in London to a
select number of new and existing franchise partners for a total consideration
of £35.1m. We also acquired full control of Shorecal on 10 April 2024 which
will unlock a significant opportunity for us in Ireland and we are now in an
even stronger position to accelerate our growth, open new stores, and provide
great service and great tasting products to our customers. Finally, in April
2024, we completed a £11m investment in DP Poland plc ("DPP") and as a
result, DPG owns approximately 12.1% of DPP's issued share capital. This
represented a unique opportunity to re-enter international markets in a
disciplined, capital-light manner with a high-performing business, operated by
an experienced management team.
We will continue to assess value-enhancing opportunities to drive earnings
growth and build a larger and more cash-generative business. We have a strong
pipeline of opportunities which we are evaluating in a disciplined way at
pace.
Capital allocation
As we accelerate our growth, we have continued to apply our four-point capital
allocation framework, introduced in March 2021, to deploy the cash generated
by the business. Investment to drive core growth in the business remains our
number one priority and we invested £7.1m in H1 24. This included the
development of our supply chain centre in Ireland and investment in our
digital and technology infrastructure.
In line with our commitment to pay a sustainable and progressive dividend, we
have declared an interim dividend of 3.5p per share, an increase of 6.1% on
the prior year.
The third pillar of our capital allocation framework is investing in
additional growth opportunities, as outlined above.
Finally, operating within a normalised leverage range of 1.5x - 2.5x net debt
to Underlying EBITDA, we remain committed to returning any surplus cash to
shareholders. As a result of confidence in future prospects, we have announced
a new £20m buyback, effective immediately. Since March 2021, we have
announced £461m of shareholder returns comprising £185m in dividends and
£276m in share buybacks.
Delivering our sustainable future
In the first half of 2024, we made significant strides in our sustainability
journey at Domino's, achieving several firsts for the Group. We published our
inaugural sustainability report outlining our short to mid-term ambitions and
our 2023 progress. Our first nutrition policy was developed, underpinning our
efforts to offer a more balanced range of choices and provide clear
nutritional information to customers. We also began executing our first Carbon
Reduction glide path, addressing scopes one, two, and three emissions.
Renewable energy played a key role in our progress, as we went live with newly
installed solar panels across three supply chain centres.
In another milestone, we celebrated our first female Home-Grown Hero, Lucy
Harman, a former store manager, who opened her own store in Hayling Island.
These accomplishments represent important steps forward in our ongoing
commitment to sustainability and achieving our corporate purpose of delivering
a better future through food people love.
H1 24 trading review
System sales represent all sales made by both franchised and corporate stores
to consumers. Total system sales were £767.7m, up 0.2% on H1 23. On a
comparable basis, like-for-like system sales across UK & Ireland were down
0.5%, excluding split stores and the different VAT rate in Ireland. The
quarterly analysis of this performance is in the table below.
Q1 Q2 H1 Q1 Q2 H1
UK & ROI 2024 2024 2024 2023 2023 2023
Reported LFL exc. splits(1) and exc. VAT(2) (2.1)% (0.8)% (1.5)% 10.7% 8.6% 9.7%
LFL exc. splits(1) and exc. VAT(2) on a comparable basis(3) (0.5)% (0.5)% (0.5)% - - -
1. Like-for-like (excluding splits) system sales
performance is calculated for UK & Ireland against a comparable 52-week
period in the prior period for mature stores which were not in territories
split in the current period or comparable period. Mature stores are defined as
those opened prior to 26th December 2022.
2. In Ireland, the VAT rate for hot takeaway food
reduced from 13.5% to 9% on 1 November 2020 and reverted to 13.5% on 1
September 2023.
3. FY23 was a 53-week year, so the comparator weeks
between H1 23 and H1 24 are different. H1 23 included Boxing Day and New
Year's Eve, whereas these two important trading days did not fall into H1 24.
The comparable basis adjusts for this difference, by comparing week 1-13 in Q1
24 with weeks 2-14 in Q1 23, and weeks 14-26 in Q2 24 with weeks 15-27 in Q2
23.
Total orders in H1 24 declined by 0.9%. This was driven by a 2.4% growth in
collection orders, offset by a 2.6% decline in delivery orders. Importantly,
we saw a meaningful improvement in delivery orders in Q2 24, where orders
returned to growth on a comparable basis after ten consecutive quarters of
decline. This was driven by close collaboration with our franchise partners to
drive greater value in the channel and by offering customers even better
service. Collections continued to show growth throughout H1 24. Collection
represents the most efficient labour channel, with delivery effectively
outsourced to the customer.
UK & ROI Total(4) Total (All Stores)
System Volume Price Orders (m) YOY Order Growth on a reported basis YOY Order Growth on a comparable basis
sales
Total
Q1 (0.4)% (3.1)% 2.7% 17.7m (1.8)% (0.8)%
Q2 0.7% (1.9)% 2.6% 17.4m +0.1% +0.6%
H1 0.2% (2.5)% 2.7% 35.1m (0.9)% (0.1)%
Delivery only
Q1 (1.8)% (4.3)% 2.5% 11.5m (5.0)% (3.9)%
Q2 0.9% (1.6)% 2.5% 11.1m 0.0% +1.1%
H1 (0.5)% (3.0)% 2.5% 22.6m (2.6)% (1.5)%
Collection only
Q1 4.5% 0.8% 3.7% 6.2m +4.7% +5.5%
Q2 0.2% (2.6)% 2.8% 6.3m +0.2% (0.3)%
H1 2.3% (0.9)% 3.2% 12.5m +2.4% +2.5%
4. Total system sales, volume and price shown on a
reported basis. In prior years, this table has been shown on a LFL basis.
Going forwards this will now be shown a on total sales and orders basis.
Financial review
· Underlying EBIT of £60.1m, an increase of £1.6m vs. H1 23,
predominantly driven by £1.3m of lower amortisation costs.
· Statutory profit after tax of £42.3m, down from £80.2m in H1 23
largely due to the prior period including a £40.6m gain on disposal of the
German associate in non-underlying results
· Underlying free cash flow decreased by £25.7m to an inflow of
£30.5m, due to a decrease in working capital of £10.7m and higher
corporation tax payments of £15.2m.
· Overall net debt increased by £52.6m as a result of the £48.7m
acquisition of Shorecal and the £11.4m investment in DP Poland, partially
offset by the £17.3m proceeds from the disposal of 14 London corporate
stores.
· Interim dividend of 3.5p per share to be paid on 27 September 2024 to
shareholders on the register as at 16 August 2024.
26 weeks ended 26 weeks ended
30 June 2024
25 June 2023
£m
£m
Group Revenue 326.8 332.9
Underlying EBIT before contribution of investments 58.9 56.8
Contribution of investments 1.2 1.7
Underlying EBIT 60.1 58.5
Underlying net finance costs (8.8) (7.6)
Underlying profit before tax 51.3 50.9
Underlying tax charge (12.6) (11.3)
Underlying profit after tax 38.7 39.6
Non-underlying items 3.6 40.6
Statutory profit after tax 42.3 80.2
EBITDA reconciliation
Underlying EBITDA 69.0 68.7
Depreciation, amortisation and impairment (8.9) (10.2)
Underlying EBIT 60.1 58.5
Underlying EBITDA increased by £0.3m to £69.0m. Depreciation and
amortisation reduced by £1.3m, which led to an overall increase in Underlying
EBIT of £1.6m, from £58.5m to £60.1m. Statutory profit after tax decreased
to £42.3m from £80.2m, primarily due to the profit on disposal of the
investment in the German associate which was treated as a non-underlying item
in FY23.
Reported Revenue
Our key metric for measuring the revenue performance of the Group is system
sales, rather than our Group revenue. System sales are the total sales to end
customers through our network of stores, for both franchise partners and
corporate stores. Our Group revenue consists of food and non-food sales to
franchise partners, royalties paid by franchise partners, contributions into
the National Advertising Fund ('NAF') and ecommerce funds, rental income and
end-customer sales in our corporate stores.
Within our Group revenue, the volatility of food wholesale prices, together
with the combination of different revenue items, means that analysis of margin
generated by the Group is less comparable than an analysis based on system
sales. We consider that system sales provide a useful alternative analysis
over time of the health and growth of the business.
Reported system sales in the period were £767.7m, up 0.2% from H1 23.
26 weeks ended 26 weeks ended
30 June 2024
25 June 2023
£m
£m
Supply chain revenue 217.6 235.7
Royalty, rental & other revenue 40.6 41.9
Corporate stores revenue 26.2 16.4
NAF & ecommerce 42.4 38.9
Total 326.8 332.9
Reported revenue decreased by £6.1m to £326.8m, primarily driven by a
decrease in supply chain revenue as a result of reduction in food costs, which
are passed through to our franchise partners.
Royalty, rental and other revenues primarily relate to the royalty revenue we
receive from our franchise partners based on a percentage of system sales and
rental income. This decreased by £1.3m driven by rental and other revenues.
Revenue for our directly operated corporate stores increased by £9.8m due to
the acquisition of Shorecal on 10 April 2024. NAF and ecommerce revenue was up
£3.5m due to increased spend in the period, as revenue is recognised based on
costs incurred at nil profit.
Underlying earnings before interest and taxation
Underlying EBITDA remained broadly flat, increasing by £0.3m to £69.0m, as
the benefit from the acquisition of Shorecal of £2.1m and reduced technology
costs of £1.8m were offset with reduced profit from trading of £1.5m,
largely as a result of food price decreases, and due to a profit of £2.3m
recognised in H1 23 relating to a sale of freehold property.
Underlying EBIT increased by £1.6m to £60.1m, as a result of decreased
amortisation relating to the old eCommerce platform.
Technology platform costs
H1 FY24 EBITDA Amortisation and impairment Profit Capital expenditure £m
£m
£m
before
tax
£m
ERP (3.5) - (3.5) -
eCommerce platform - (0.7) (0.7) -
Total (3.5) (0.7) (4.2) -
H1 FY23 EBITDA Amortisation and impairment Profit Capital expenditure £m
£m
£m
before
tax
£m
ERP (3.7) (0.7) (4.4) -
eCommerce platform (1.6) (0.3) (1.9) (2.9)
Total (5.3) (1.0) (6.3) (2.9)
During the half, we continued to develop and implement two new cloud-based IT
systems, an ecommerce platform and an ERP system.
These projects will enable us to capture growth in the future and drive
further efficiencies. The ecommerce platform costs are part of the growth
investment framework agreed with our franchise partners in December 2021.
The total costs recognised in underlying profit before tax relating to these
projects was £4.2m.
Within EBITDA, costs of £3.5m have been recognised which relate to the ERP.
These represent costs spent on development of these assets, which are expensed
through the income statement rather than capitalised as intangible assets, as
they relate to cloud platforms. This represents the full spend on the project
in the year to date.
Within amortisation, a total cost of £0.7m which relates to the ecommerce
platform.
The deployment of ERP will now run until FY25 as we will pause the roll-out
towards the end of FY24 during our peak trading season.
Interest
Net underlying finance costs in the period were £8.8m, an increase of £1.2m.
The increase in finance costs is as a result of increased net debt which is
outlined further below. During the period the Group increased its debt
facilities with an additional £100m in Private Placement Loan Notes due in
2034 at a fixed rate of 5.97%. The Group now has combined debt facilities
available of £500m (H1 23: £400m).
Taxation
The underlying effective tax rate for 2024 was 24.6% (H1 23: 22.2%) The
increase in the effective tax rate is due to an increased tax charge relating
to transfer pricing between our UK and Irish subsidiaries, together with the
prior year reflecting a lower rate of UK corporation tax which increased to
25% effective April 2023.
Profit after tax and non-underlying items
Underlying profit after tax was £38.7m, a decrease from £39.6m in H1 23
mainly due to a £1.2m increase in net finance costs and a £1.3m increase in
taxation as outlined above.
Statutory profit after tax was £42.3m, a decrease of £37.9m. In H1 24, a
non-underlying profit after tax of £3.6m has been recognised. This includes a
£11.2m profit on disposal of the corporate stores offset with Shorecal
acquisition costs of £2.2m, amortisation on reacquired rights of £1.0m and
taxation of £4.5m.
In H1 23, the Group incurred a £40.6m profit on disposal of the investment in
the German associate which was classified under non-underlying.
Earnings per share
Underlying basic EPS increased to 9.8p as a result of the lower number of
weighted average shares due to the share buyback programme. Statutory EPS
decreased to 10.7p from 19.3p, largely due to the profit on disposal of the
German associate in H1 23.
Free cash flow and Net debt
26 weeks ended 26 weeks ended
30 June 2024
25 June 2023
£m
£m
Underlying EBITDA 69.0 68.7
Add back non-cash items
- Contribution of investments (1.2) (1.7)
- Other non-cash items 0.7 (1.0)
Working capital (10.7) 10.2
IFRS 16 - net lease payments (3.3) (3.1)
Dividends received 1.2 1.8
Net interest (7.8) (7.1)
Corporation tax (15.2) (11.6)
Free cash flow before non-underlying cash items 32.7 56.2
Non-underlying cash (2.2) -
Free cash flow 30.5 56.2
Capex (7.1) (11.3)
Repayment from German associate - 9.3
Acquisitions and disposals (42.5) 70.6
Disposal of property, plant and equipment - 4.4
Dividends (28.1) (28.3)
Share transactions - Buybacks (6.2) (17.1)
Share transactions - EBT share purchase 0.3 (1.9)
Movement in net debt (53.1) 81.9
Opening net debt (232.8) (253.3)
Movement in capitalised facility arrangement fee 0.4 (0.3)
Forex on net debt 0.1 0.3
Closing net debt (285.4) (171.4)
Last 12 months net debt/Underlying EBITDA ratio (excl. IFRS 16) 2.16x 1.33x
Net debt increased by £52.6m during the period to £285.4m, with free cash
flow generated of £30.5m and £17.3m received from the disposal of 14 London
corporate stores. This was offset with £48.7m cash paid on the acquisition of
Shorecal and £11.4m on the Investment in DP Poland. Capital expenditure of
£7.1m was incurred and returns to shareholders through dividends of £28.1m
and share buybacks of £6.2m.
Free cash flow of £30.5m is a decrease of £25.7m on H1 23. Underlying EBITDA
was £69.0m, an increase of £0.3m as outlined above.
There was a working capital outflow of £10.7m (H1 23: inflow of £10.2m).
This predominantly relates to decreases in overall accruals and accrued income
of £8.3m, an increase in the NAF debtor of £2.6m, an outflow of £0.8m
relating to Shorecal and an outflow of £2.6m relating to timing of payroll
taxes and corporate stores payroll. This was offset by decreases in inventory
of £3.0m due to seasonal levels from year end. These movements largely offset
the working capital outflow reported in FY23 and are expected to mostly
reverse in H2 24.
Net IFRS 16 lease payments increased by £0.2m to £3.3m. Dividends received
of £1.2m include £1.0m from our associates and joint ventures and £0.2m
from our investment in Shorecal prior to acquisition.
Net interest payments of £7.8m increased from £7.1m as a result of increased
net debt due to the reasons outlined above.
Non-underlying payments of £2.2m were made during the year, which
predominately relate to transaction costs on the acquisition of Shorecal.
Capital expenditure decreased to £7.1m. Of this amount, £1.2m relates to
development and expansion of our supply chain centre in Ireland and £2.7m
relates to total investment in digital and ecommerce development.
Acquisitions and disposals of £42.5m includes £48.7m on the acquisition of
Shorecal, of which £16.3m relates to the repayment of debt on acquisition.
The Group invested £11.4m for a 12% investment in DP Poland plc. This is
offset by the £17.3m in proceeds received on the disposal of 14 London
corporate stores. In H1 23, the Group received £79.9m for the disposal of
the German associate, of which £70.6m related to the disposal of the
investment and £9.3m related to the repayment of a loan.
Dividends paid of £28.1m relates to the final FY23 dividend paid in May 2024.
In addition, the remaining £6.2m outstanding balance of the £70m share
buyback programme announced in August 2023 was completed in H1 24.
Capital employed and balance sheet
At 30 June At 31 December 2023
£m
2024
£m
Intangible assets 103.3 28.8
Property, plant and equipment 99.2 97.6
Investments, associates and joint ventures 37.3 35.5
Deferred consideration - 0.3
Right-of-use assets 20.6 19.3
Net lease liabilities (22.4) (21.6)
Provisions (4.7) (3.8)
Working capital (38.0) (44.9)
Net debt (285.4) (232.8)
Tax (12.1) (6.3)
Share buyback obligations - (6.1)
Held within assets and liabilities held for sale 6.9 -
Net liabilities (95.3) (134.0)
Intangible assets increased by £74.5m to £103.3m, which includes additions
of £86.3m relating to the acquisition of Shorecal of which £63.9m relates to
Goodwill and £22.4m in reacquired rights. Goodwill of £5.9m was disposed of
as part of the London Corporate stores disposal with an additional £5.8m
reclassified as assets held for sale.
Property, plant and equipment increased by £1.6m to £99.2m of which £2.9m
was acquired on the acquisition of Shorecal. Property, plant and equipment
with a carrying value of £0.8m were disposed of as part of the London
Corporate stores disposal with an additional £1.5m reclassified as held for
sale. Other additions of £4.3m were largely offset with depreciation of
£3.0m incurred during the period.
Investments, associates and joint ventures increased by £1.8m, as the
acquisition of the 12% share in DP Poland of £11.9m was largely offset with
the derecognition of the Shorecal investment of £10.0m, with £0.4m increases
in other JV and associate balances. The investment in DP Poland is treated as
a fair value through other comprehensive income investment, and the initial
cost of £11.4m was revalued upwards by £0.5m in the period, with the
movement recognised in reserves.
Right-of-use assets of £20.6m represent the lease assets for our corporate
stores both in the UK and Ireland, warehouses and equipment leases recognised
under IFRS 16 in the current period. The net lease liability is £22.4m. The
lease portfolio has increased as a result of the acquisition of Shorecal which
has been partially offset by the disposal of the London Corporate stores.
The net working capital liability has decreased from £44.9m to £38.0m as a
result of the factors outlined in the cash flow section above.
Assets and liabilities held for sale of £6.9m relate to the remaining
corporate stores which have been sold in July 2024. This is expected to
generate an additional profit on disposal before tax, net of closure costs, of
£8m-£10m.
Total equity has increased by £38.7m, to a net liability position of £95.3m,
largely due to the profit after tax generated of £42.3m, the share premium
recognised on the Shorecal acquisition share issue of £22.3m, offset with
dividend payments.
Treasury management
The Group holds £500m in debt facilities, of which £200m relates to an
unsecured multi-currency revolving credit facility and £300m relates to US
Private placement loan notes. The revolving credit facility expires in July
2027, and of the US Private Placement loan notes, £200m mature in July 2027
and £100m matures in June 2034.
During the current year the Group entered into new £100m sterling-denominated
US Private Placement Loan notes that mature on 20 June 2034. The loans notes
incur interest at a fixed rate of 5.97% which is payable every 6 months. The
financial covenants under the new arrangement are in line with the current
debt facilities as shown below.
The £200m private placement loan notes incur interest at a fixed rate at
4.26%. Interest is paid every six months.
The unsecured multi-currency revolving credit facility incurs interest at a
margin over SONIA of between 185bps and 285bps depending on leverage, plus a
utilisation fee of between 0bps and 30bps of the aggregate amount of the
outstanding loans. The total undrawn facility as at 30 June 2024 was £186.0m.
The financial covenants under all financing agreements are consistent. These
covenants relate to measurement of adjusted EBITDAR against consolidated net
finance charges (interest cover) and adjusted EBITDA to net debt (leverage
ratio) measured semi-annually on a trailing 12-month basis at half year and
year end. The interest cover covenant under the terms of both agreements
cannot be less than 1.5:1, and leverage ratio cannot be more than 3:1. Figures
used in the calculation of both covenants exclude the impact of IFRS 16.
As at 30 June 2024 the Group has Net debt of £285.4m, and the last 12 months
Net debt/EBITDA ratio excluding the impact of IFRS 16 increase to 2.16x from
1.77x, largely as a result of the initial cash outflow on the acquisition of
Shorecal.
Underpinning treasury management is a robust Treasury Policy and Strategy that
aims to minimise financial risk. Foreign exchange movement arising from
transactional activity is reduced by either agreeing fixed currency rates with
suppliers or pre-purchasing the currency spend.
Group income statement
26 weeks ended 30 June 2024
Note 26 weeks ended 30 June 2024 26 weeks ended 25 June 2023 53 weeks ended 31 December 2023
£m
£m
£m
Underlying Non-underlying* Total Underlying Non-underlying* Total Underlying Non-underlying* Total
Revenue 3 326.8 - 326.8 332.9 - 332.9 679.8 - 679.8
Cost of sales (169.9) - (169.9) (179.7) - (179.7) (363.6) - (363.6)
Gross profit 156.9 - 156.9 153.2 - 153.2 316.2 - 316.2
Distribution costs (20.6) - (20.6) (19.0) - (19.0) (42.6) - (42.6)
Administrative costs 4 (77.4) (3.1) (80.5) (79.7) - (79.7) (161.7) - (161.7)
Share of post-tax profits of associates and joint ventures 1.2 - 1.2 1.7 - 1.7 2.0 - 2.0
Other income 4 - 11.2 11.2 2.3 40.6 42.9 2.3 40.6 42.9
Profit before interest and taxation 60.1 8.1 68.2 58.5 40.6 99.1 116.2 40.6 156.8
Finance income 5 7.1 - 7.1 6.6 - 6.6 13.7 - 13.7
Finance costs 6 (15.9) - (15.9) (14.2) - (14.2) (28.2) - (28.2)
Profit before taxation 51.3 8.1 59.4 50.9 40.6 91.5 101.7 40.6 142.3
Taxation 7 (12.6) (4.5) (17.1) (11.3) - (11.3) (26.0) (1.3) (27.3)
Profit for the period 38.7 3.6 42.3 39.6 40.6 80.2 75.7 39.3 115.0
Earnings per share
- Basic (pence) 8 9.8 10.7 9.5 19.3 18.4 28.0
- Diluted (pence) 8 9.7 10.6 9.5 19.2 18.4 27.9
*Non-underlying items are disclosed in note 4.
Group statement of comprehensive income
26 weeks ended 30 June 2024
Note 26 weeks ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December
2024 2023 2023
£m £m £m
Profit for the period 42.3 80.2 115.0
Other comprehensive (expense)/income:
Items that will not subsequently be reclassified to profit or loss
- Gain on investment held through other comprehensive income 17 0.5 - -
- Taxation on investment held through other comprehensive income (0.1) - -
Items that may be subsequently reclassified to profit or loss
- Exchange loss on retranslation of foreign operations (0.4) (0.7) (0.6)
- Transferred to income statement on disposal 14 - (2.5) (2.5)
Other comprehensive expense for the period, net of tax - (3.2) (3.1)
Total comprehensive income for the period 42.3 77.0 111.9
Group balance sheet
At 30 June 2024
Note 26 weeks ended 26 weeks ended 53 weeks ended
30 June 25 June 31 December
2024 2023 2023
£m £m £m
Non-current assets
Intangible assets 10 103.3 29.7 28.8
Property, plant and equipment 10 99.2 96.8 97.6
Right-of-use assets 11 20.6 19.1 19.3
Lease receivables 11 186.2 187.6 192.9
Trade and other receivables 4.9 3.5 3.7
Investments 17 11.9 10.2 10.3
Investments in associates and joint ventures 12 25.4 26.1 25.2
451.5 373.0 377.8
Current assets
Lease receivables 11 16.0 15.3 15.8
Inventories 8.4 8.0 11.4
Trade and other receivables 53.4 42.4 51.6
Deferred consideration receivable - 0.3 0.3
Current tax assets 3.4 2.3 3.5
Cash and cash equivalents 21 25.9 37.0 52.1
Assets held for sale 15 11.9 - -
119.0 105.3 134.7
Total assets 570.5 478.3 512.5
Current liabilities
Lease liabilities 11 (22.1) (20.4) (21.1)
Trade and other payables (104.6) (99.2) (111.4)
Current tax liabilities (4.4) - (2.8)
Provisions (2.3) (14.0) (2.0)
Financial liabilities - share buyback obligation - (11.9) (6.1)
Liabilities held for sale 15 (5.0) - -
(138.4) (145.5) (143.4)
Non-current liabilities
Lease liabilities 11 (202.5) (203.8) (209.2)
Trade and other payables (0.1) (0.2) (0.2)
Financial liabilities 16 (311.3) (208.4) (284.9)
Deferred tax liabilities (11.1) (4.1) (7.0)
Provisions (2.4) (1.3) (1.8)
(527.4) (417.8) (503.1)
Total liabilities (665.8) (563.3) (646.5)
Net liabilities (95.3) (85.0) (134.0)
Shareholders' equity
Called up share capital 2.1 2.2 2.1
Share premium account 71.9 49.6 49.6
Capital redemption reserve 0.5 0.5 0.5
Capital reserve - own shares (11.9) (10.5) (12.5)
Currency translation reserve (3.0) (2.7) (2.6)
Other reserve 0.4 - -
Accumulated losses (155.3) (124.1) (171.1)
Total equity (95.3) (85.0) (134.0)
Group statement of changes in equity
26 weeks ended 30 June 2024
Note Capital
Share Capital Reserve Currency Total
Share premium redemption - own translation Other reserve Accumulated shareholders'
capital account reserve shares reserve £m losses equity
£m £m £m £m £m £m £m
At 25 December 2022 2.2 49.6 0.5 (9.0) 0.5 - (156.6) (112.8)
Profit for the period - - - - - - 80.2 80.2
Other comprehensive expense
- exchange differences - - - - (0.7) - - (0.7)
- transferred to income statement on Disposal - - - - (2.5) - - (2.5)
Total comprehensive income/(expense) for the period - - - - (3.2) - 80.2 77.0
Proceeds from share issues - - - - - - - -
Impairment of share issues - - - 0.4 - - (0.4) -
Share buybacks - - - (1.9) - - (17.1) (19.0)
Share buyback obligation satisfied - - - - - - 8.9 8.9
Share buyback obligation outstanding - - - - - - (11.9) (11.9)
Share options and LTIP charge 18 - - - - - - 1.4 1.4
Tax on employee share options - - - - - - (0.3) (0.3)
Equity dividends paid 9 - - - - - - (28.3) (28.3)
At 25 June 2023 2.2 49.6 0.5 (10.5) (2.7) - (124.1) (85.0)
Profit for the period - - - - - - 34.8 34.8
Other comprehensive income
- exchange differences - - - - 0.1 - - 0.1
Total comprehensive income for the period - - - - 0.1 - 34.8 34.9
Proceeds from share issues - - - 0.5 - - - 0.5
Impairment of share issues - - - 0.6 - - (0.6) -
Share buybacks (0.1) - - (3.1) - - (76.1) (79.3)
Share buyback obligation satisfied - - - - - - 11.9 11.9
Share buyback obligations outstanding - - - - - - (6.1) (6.1)
Share options and LTIP charge 18 - - - - - - 2.4 2.4
Tax on employee share options - - - - - - 0.3 0.3
Equity dividends paid 9 - - - - - - (13.6) (13.6)
At 31 December 2023 2.1 49.6 0.5 (12.5) (2.6) - (171.1) (134.0)
Profit for the period - - - - - - 42.3 42.3
Other comprehensive income/(expense)
- exchange differences - - - - (0.4) - - (0.4)
- gain on investment held through other 17 - - - - - 0.5 - 0.5
comprehensive income
- taxation on investment held through other 7 - - - - - (0.1) - (0.1)
comprehensive income
Total comprehensive income/(expense) for the period - - - - (0.4) 0.4 42.3 42.3
Proceeds from share issues - - - 0.3 - - - 0.3
Share issued on acquisition of subsidiaries 13 - 22.3 - - - - - 22.3
Impairment of share issues - - - 0.3 - - (0.3) -
Share buybacks - - - - - - (6.2) (6.2)
Share buyback obligation satisfied - - - - - - 6.1 6.1
Share options and LTIP charge 18 - - - - - - 2.0 2.0
Tax on employee share options - - - - - - - -
Equity dividends paid 9 - - - - - - (28.1) (28.1)
At 30 June 2024 2.1 71.9 0.5 (11.9) (3.0) 0.4 (155.3) (95.3)
Group cash flow statement
26 weeks ended 30 June 2024
Note 26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Cash flows from operating activities
Profit before interest and taxation 68.2 99.1 156.8
Amortisation and depreciation 3 9.9 10.2 21.9
Share of post-tax profits of associates and joint ventures 12 (1.2) (1.7) (2.0)
Profit on disposal of property, plant and equipment - (2.3) (2.3)
Profit on disposal of trade and assets 14 (11.6) - -
Profit on disposal of associate investment 14 - (40.6) (40.6)
Share option and LTIP charge 18 2.0 1.4 3.8
Decrease in provisions (1.3) (0.1) (11.4)
Decrease in inventories 3.0 3.6 0.2
(Increase)/decrease in receivables (1.0) 3.9 (5.2)
(Decrease)/increase in payables (12.5) 2.7 15.2
Cash generated from operations 55.5 76.2 136.4
Corporation tax paid (15.2) (11.6) (22.9)
Net cash generated by operating activities 40.3 64.6 113.5
Cash flows from investing activities
Purchase of property, plant and equipment 10 (4.1) (6.0) (9.8)
Purchase of intangible assets 10 (3.0) (5.3) (11.0)
Proceeds from sale of property, plant and equipment - 4.4 4.4
Proceeds from sale of trade and assets 14 17.3 - -
Acquisition of subsidiaries, net of cash received 13 (32.5) - -
Consideration received on disposal of associate investment 14 - 70.6 70.6
Receipt of principal element on lease receivables 8.2 7.5 15.0
Receipt of interest element on lease receivables 6.6 6.1 12.6
Interest received 0.5 0.2 0.6
Purchase of investments 17 (11.4) - -
Other 21 1.4 11.1 12.3
Net cash (used)/generated by investing activities (17.0) 88.6 94.7
Cash inflow before financing 23.3 153.2 208.2
Cash flows from financing activities
Interest paid (8.3) (7.3) (13.7)
Share purchases 21 (6.2) (19.0) (98.3)
Consideration received on exercise of share options - employee benefit trust 0.3 - 0.5
New bank loans and facilities drawn down 278.1 28.0 113.0
Repayment of borrowings (267.2) (103.2) (112.2)
Repayment of principal element on lease liabilities (11.0) (10.0) (20.1)
Repayment of interest element on lease liabilities (7.1) (6.7) (13.8)
Equity dividends paid 9 (28.1) (28.3) (41.9)
Net cash used by financing activities (49.5) (146.5) (186.5)
Net (decrease)/increase in cash and cash equivalents (26.2) 6.7 21.7
Cash and cash equivalents at beginning of period 52.1 30.4 30.4
Foreign exchange loss on cash and cash equivalents - (0.1) -
Cash and cash equivalents at end of period 21 25.9 37.0 52.1
Notes to the interim financial statements
26 weeks ended 30 June 2024
1. General information
Domino's Pizza Group plc ('the Company') is a public limited company
incorporated in the United Kingdom under the Companies Act 2006 (registration
number 03853545). The Company is domiciled in the United Kingdom and its
registered address is 1 Thornbury, West Ashland, Milton Keynes, MK6 4BB. The
Company's ordinary shares are listed on the Official List of the FCA and
traded on the Main Market of the London Stock Exchange. Further copies of the
interim report and Annual Report and Accounts may be obtained from the address
above.
2. Basis of preparation
The condensed consolidated interim financial statements (the 'interim
financial statements') have been prepared in accordance with the UK-adopted
International Accounting Standard 34, 'Interim Financial Reporting' and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. The financial information contained in this
interim report does not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006.
The interim results for the 26 weeks ended 30 June 2024 and the comparatives
to 25 June 2023 are unaudited but have been reviewed by the auditors. A copy
of their review report has been included at the end of this report.
The financial information for the 53 weeks ended 31 December 2023 has been
extracted from the Group financial statements for that period. These published
financial statements were reported on by the auditors without qualification or
an emphasis of matter reference and did not include a statement under section
498(2) or (3) of the Companies Act 2006 and have been delivered to the
Registrar of Companies.
The interim financial information is presented in sterling and all values are
rounded to the nearest tenth of million pounds (£0.1m), except when otherwise
indicated. The accounting policies are consistent with those of the previous
financial year and corresponding interim reporting period, except for the
estimation of income tax (see note 7). The financial statements are prepared
using the historical cost basis with the exception of the derivative financial
assets and contingent consideration which are measured at fair value in
accordance with IFRS 13 Fair Value Measurement.
Going concern
The interim financial information has been prepared on a going concern basis.
This is considered appropriate, given the financial resources of the Group
including the current position of banking facilities, together with long-term
contracts with its master franchisor, its franchisees and its key suppliers.
The Directors of the Group have performed an assessment of the overall
position and future forecasts (including the 12 month period from the date of
this report) for the purpose of going concern. The overall Group has seen
steady performance in the first half of 2024.
The Directors of the Group have considered the future position based on
current trading and a number of potential downside scenarios which may occur,
either through reduced consumer spending, reduced store growth, supply chain
disruptions, general economic uncertainty and other risks. This assessment has
considered the overall level of Group borrowings and covenant requirements,
the flexibility of the Group to react to changing market conditions and
ability to appropriately manage any business risks. The Group has £500m of
banking facilities and a net debt position of £285.4m. The facilities have
leverage and interest cover covenants, with which the Group have complied.
The scenarios modelled are based on our current forecast projections out to
the end of 2025 and have taken into account the following risks: a downside
impact of economic uncertainty and other sales risks over the forecast period,
reflected in sales performance, with a c.5% reduction in LFL sales compared to
budget; the impact of a reduction of new store openings to half of their
forecast level; a further reduction of between 2.5%-3.0% in sales to account
for the potential impact of the public health debate; future potential
disruptions to supply chain through loss of one of our supply chain centres
impacting our ability to supply stores for a period of two weeks; additional
costs as a result of increase in utility costs; the impact of a temporary loss
of availability of our eCommerce platform during peak trading periods; and a
significant unexpected increase in the impact of climate change on our
delivery costs. We have also considered a second 'severe but plausible'
scenario, which in addition to the above-mentioned risks, also includes the
risks of: a disruption to one of our key suppliers impacting our supply chain
over a period of four weeks whilst alternate sourcing is secured; and the
impact of fines from a potential wider data breach.
In each of the scenarios modelled, there remains significant headroom
available on net debt. Under the first scenario there remains sufficient
headroom under the covenant requirements of the facilities.
If all the risks under the first scenario were to occur simultaneously with
the additional risks in the second scenario, before any mitigating actions,
the Group would breach its leverage covenants. The Board has a mitigating
action available in the form of delays in dividends to shareholders and share
buybacks which would prevent a breach of leverage covenants. Based on this
assessment, the Directors have formed a judgement that there is a reasonable
expectation the Group will have adequate resources to continue in operational
existence for the foreseeable future.
Accounting policies and new standards
The consolidated accounts for the 26 weeks ended 30 June 2024 were prepared in
accordance with UK adopted International Accounting Standard 34, 'Interim
Financial Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. The accounting
policies applied by the Group are consistent with those disclosed in the
Group's Annual Report and Accounts for the 53 weeks ended 31 December 2023,
except for the estimation of income tax. There were no new standards and
interpretations effective for the first time for the reporting period that
have a material impact on the Group financial statements.
3. Segmental information
For management purposes, the Group has been organised into two geographic
business units based on the operating models of the regions; the UK &
Ireland operating more mature markets with a franchise model, limited
corporate stores and investments held in our franchisees, compared to
International which operated predominantly as corporate stores. The
International segment included the German associate, legacy Germany and
Switzerland holding companies.
These are considered the Group's operating segments as the information
provided to the Executive Directors of the Board, who are considered to be the
chief operating decision makers, is based on these territories. The chief
operating decision makers review the segmental underlying EBIT and EBITDA
results and the non-underlying items separately. Revenue included in each
segment includes all sales made to franchise stores (royalties, sales to
franchisees and rental income) and by corporate stores located in that
segment.
Unallocated assets include cash and cash equivalents and taxation assets.
Unallocated liabilities include the bank revolving facility and taxation
liabilities.
The above operating segments represent the information currently provided to
the Executive Directors. Following the announcement of the growth framework in
December 2023, the operating segments will be assessed in the second half of
FY24 to reflect any changes in the structure of information provided to the
Executive Directors as a result of potential further growth opportunities.
Segment assets and liabilities
At 30 June 2024 At 25 June 2023 At 31 December 2023
£m £m £m
Current tax assets 3.4 2.3 3.5
Cash and cash equivalents 25.9 37.0 52.1
Unallocated assets 29.3 39.3 55.6
Current tax liabilities 4.4 - 2.8
Deferred tax liabilities 11.1 4.1 7.0
Debt facilities 311.3 208.4 284.9
Unallocated liabilities 326.8 212.5 294.7
26 weeks ended 30 June 2024 26 weeks ended 25 June 2023 53 weeks ended 31 December 2023
UK & Ireland International Total UK & Ireland International Total UK & Ireland International Total
£m
£m
£m
£m
£m
£m
£m £m £m
Segment assets
Segment current assets 89.7 - 89.7 66.0 - 66.0 79.1 - 79.1
Segment non-current assets 414.2 - 414.2 336.7 - 336.7 342.3 - 342.3
Investment in associates and joint ventures 25.4 - 25.4 26.1 - 26.1 25.2 - 25.2
Investments 11.9 - 11.9 10.2 - 10.2 10.3 - 10.3
Unallocated assets 29.3 39.3 55.6
Total assets 570.5 478.3 512.5
Segment liabilities
Liabilities 339.0 - 339.0 350.1 0.7 350.8 351.8 - 351.8
Unallocated liabilities 326.8 212.5 294.7
Total liabilities 665.8 563.3 646.5
Segmental performance for the 26 weeks 30 June 2024
UK & Ireland International Total underlying Non-underlying Total reported
£m
£m
£m
£m
£m
Revenue
Sales to external customers 326.8 - 326.8 - 326.8
Segment revenue 326.8 - 326.8 - 326.8
Results
Underlying result before associates and joint ventures 58.9 - 58.9 (3.1) 55.8
Share of profit of associates and joint ventures 1.2 - 1.2 - 1.2
Other income - - - 11.2 11.2
Profit before interest and taxation 60.1 - 60.1 8.1 68.2
Net finance costs (8.8) - (8.8) - (8.8)
Profit before taxation 51.3 - 51.3 8.1 59.4
Taxation (12.6) - (12.6) (4.5) (17.1)
Profit for the year 38.7 - 38.7 3.6 42.3
Effective tax rate 24.6% - 24.6% - 28.8%
Other segment information
Depreciation 5.6 - 5.6 - 5.6
Amortisation 3.3 - 3.3 1.0 4.3
Total depreciation and amortisation 8.9 - 8.9 1.0 9.9
EBITDA 69.0 - 69.0 9.1 78.1
Underlying EBITDA 69.0 - 69.0 - 69.0
Capital expenditure 7.1 - 7.1 - 7.1
Share-based payment charge 2.0 - 2.0 - 2.0
Revenue disclosures
Royalties, franchise fees and change of hands fees 39.8 - 39.8 - 39.8
Sales to franchisees 217.6 - 217.6 - 217.6
Corporate store income 26.2 - 26.2 - 26.2
Rental income on leasehold and freehold property 0.8 - 0.8 - 0.8
National Advertising and eCommerce income 42.4 - 42.4 - 42.4
Total segment revenue 326.8 - 326.8 - 326.8
Segmental performance for the 26 weeks ended 25 June 2023
UK & Ireland International Total underlying Non-underlying Total reported
£m
£m
£m
£m
£m
Revenue
Sales to external customers 332.9 - 332.9 - 332.9
Segment revenue 332.9 - 332.9 - 332.9
Results
Underlying result before associates and joint ventures 56.8 - 56.8 - 56.8
Share of profit of associates and joint ventures 1.7 - 1.7 - 1.7
Other income - - - 40.6 40.6
Profit before interest and taxation 58.5 - 58.5 40.6 99.1
Net finance costs (7.6) - (7.6) - (7.6)
Profit before taxation 50.9 - 50.9 40.6 91.5
Taxation (11.3) - (11.3) - (11.3)
Profit for the year 39.6 - 39.6 40.6 80.2
Effective tax rate 22.2% - 22.2% - 12.3%
Other segment information
Depreciation 5.1 - 5.1 - 5.1
Amortisation 5.1 - 5.1 - 5.1
Total depreciation and amortisation 10.2 - 10.2 - 10.2
EBITDA 68.7 - 68.7 40.6 109.3
Underlying EBITDA 68.7 - 68.7 - 68.7
Capital expenditure 11.3 - 11.3 - 11.3
Share-based payment charge 1.4 - 1.4 - 1.4
Revenue disclosures
Royalties, franchise fees and change of hands fees 40.8 - 40.8 - 40.8
Sales to franchisees 235.7 - 235.7 - 235.7
Corporate store income 16.4 - 16.4 - 16.4
Rental income on leasehold and freehold property 1.1 - 1.1 - 1.1
National Advertising and eCommerce income 38.9 - 38.9 - 38.9
Total segment revenue 332.9 - 332.9 - 332.9
Segmental performance for the 53 weeks ended 31 December 2023
UK & Ireland International Total underlying Non-underlying Total reported
£m
£m
£m
£m
£m
Revenue
Sales to external customers 679.8 - 679.8 - 679.8
Segment revenue 679.8 - 679.8 - 679.8
Results
Underlying result before associates and joint ventures 111.9 - 111.9 - 111.9
Share of profit of associates and joint ventures 2.0 - 2.0 - 2.0
Other income 2.3 - 2.3 40.6 42.9
Profit before interest and taxation 116.2 - 116.2 40.6 156.8
Net finance costs (14.5) - (14.5) - (14.5)
Profit before taxation 101.7 - 101.7 40.6 142.3
Taxation (26.0) - (26.0) (1.3) (27.3)
Profit for the year 75.7 - 75.7 39.3 115.0
Effective tax rate 25.6% - 25.6% - 19.2%
Other segment information
Depreciation 11.2 - 11.2 - 11.2
Amortisation 10.7 - 10.7 - 10.7
Total depreciation and amortisation 21.9 - 21.9 - 21.9
EBITDA 138.1 - 138.1 40.6 178.7
Underlying EBITDA 138.1 - 138.1 - 138.1
Capital expenditure 20.8 - 20.8 - 20.8
Share-based payment charge 3.8 - 3.8 - 3.8
Revenue disclosures
Royalties, franchise fees and change of hands fees 83.4 - 83.4 - 83.4
Sales to franchisees 479.1 - 479.1 - 479.1
Corporate store income 33.1 - 33.1 - 33.1
Rental income on leasehold and freehold property 2.2 - 2.2 - 2.2
National Advertising and eCommerce income 82.0 - 82.0 - 82.0
Total segment revenue 679.8 - 679.8 - 679.8
4. Reconciliation of non-GAAP measures
Non-underlying items included in the financial statements
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Underlying profit for the period 38.7 39.6 75.7
Non-underlying profit for the period 3.6 40.6 39.3
Profit for the period 42.3 80.2 115.0
Non-underlying items
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
Note £m £m £m
Included in administrative costs
- Reversionary scheme, net of costs a) 0.1 - -
- Shorecal acquisition costs b) (2.2) - -
- Reacquired rights amortisation c) (1.0) - -
(3.1) - -
Included in other income
- Disposal of corporate stores d) 11.2 - -
- Profit on disposal of German associate e) - 40.6 40.6
11.2 40.6 40.6
Included in profit before taxation 8.1 40.6 40.6
- Taxation f) (4.5) - (1.3)
Included in profit for the year 3.6 40.6 39.3
a) Reversionary share scheme
The Group received £0.2m in relation to the historical share-based payment
compensation arrangements. Costs of £0.1m were incurred during the period.
These receipts from participants and related legal and professional costs are
recognised in non-underlying results, consistent with the treatment of
reversionary scheme costs and provisions recognised in previous years.
b) Shorecal Limited acquisition costs
The Group incurred costs of £2.2m associated with the acquisition of Shorecal
Limited. For further details on the acquisition refer to note 13. These costs
are recognised in non-underlying as they relate directly to the acquisition
and are significant enough to distort the underlying performance of the Group.
c) Reacquired rights amortisation
The Group incurred a charge of £1.0m in relation to the amortisation of
reacquired rights recognised upon the acquisition of Shorecal Limited. This
relates to the valuation of the Standard Franchise Agreements which were in
place before the acquisition, previously issued by the Group to Shorecal
Limited when this was an independently controlled franchisee. These are
amortised over the remaining life of the franchise agreements, which is on
average 5 years.
The amortisation is recognised in non-underlying results as we consider the
recognition of the asset and amortisation period does not represent the
substance of the agreements. As these are reacquired rights, under the
accounting standard these must be amortised over the remaining period of the
agreement considering renewal options, which is not consistent with the
substance of the asset. The Group recognised no significant profit on initial
issuance of the franchise agreements before acquisition and will not incur any
cost to renew at the end of the term.
We therefore consider the amortisation and reduction in value of this asset
does not represent the underlying value of the agreements. For this reason,
the amortisation is recognised in non-underlying results as would materially
distort the performance of the acquired subsidiary and the Group's underlying
trading performance.
d) Disposal of corporate stores
The Group disposed of 14 of its London corporate stores during the period,
generating a profit on disposal of £11.2m, which includes £0.4m in
transactions costs. For further details refer to note 14. This is treated as a
non-underlying profit as is consistent with the treatment of the previous
impairment to the Corporate Stores recognised in FY 2019.
e) Profit on disposal of German associate
In the prior year, the Group disposed of its 33.3% interest in Daytona JV
Limited. Proceeds of £79.9m were received, of which £70.6m related to the
investment in Daytona JV Limited and £9.3m related to the repayment of the
loan. This generated a profit on disposal of £40.6m. The profits arising from
the disposal were treated as non-taxable on the basis the disposal fell under
the Substantial Shareholding Exemption
f) Taxation
During the current period, the group incurred a £4.5m tax charge which
primarily relates to the disposal of the London corporate stores detailed in
note d above. During the prior period, the group incurred a tax charge of
£1.3m primarily relating to the historical share-based compensation schemes
following the £11.9m settlement made during the prior year.
5. Finance income
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Other interest receivable 0.4 0.4 0.8
Interest on loans to associates and joint ventures - 0.1 0.1
Interest receivable on leases 6.6 6.1 12.7
Discount unwind 0.1 - 0.1
Total finance income 7.1 6.6 13.7
6. Finance costs
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Debt facilities interest payable 8.5 7.4 14.4
Other interest payable 0.1 - -
Interest payable on leases 7.1 6.7 13.8
Foreign exchange 0.2 0.1 -
Total finance costs 15.9 14.2 28.2
7. Taxation
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Tax charged in the income statement
Current income tax
UK corporation tax:
- current period 16.5 10.5 21.6
- adjustment in respect of prior periods (0.1) (0.3) 4.6
16.4 10.2 26.2
Income tax on overseas operations 0.2 0.6 (2.5)
Total current income tax charge 16.6 10.8 23.7
Deferred tax
Origination and reversal of temporary differences 0.5 0.4 2.6
Effect of change in tax rate - - 0.2
Adjustment in respect of prior periods - 0.1 0.8
Total deferred tax 0.5 0.5 3.6
Tax charge in the income statement 17.1 11.3 27.3
The tax charge in the income statement is disclosed as follows:
Taxation 17.1 11.3 27.3
Tax charged in the statement of other comprehensive income
Deferred tax:
- Origination and reversal of temporary differences 0.1 - -
Tax charge in the statement of other comprehensive income 0.1 - -
The tax charge in the statement of other comprehensive income is disclosed as
follows:
- Taxation on investment held through other comprehensive income 0.1 - -
Tax relating to items charged to equity
Reduction in current tax liability as a result of the exercise - (0.1) -
of share options
Origination and reversal of temporary differences in relation - (0.2) -
to unexercised share options
Tax charge in the Group statement of changes in equity - (0.3) -
The total effective tax rate is 28.8% (H1 23: 12.3%; FY 23: 19.2%).
Tax charged for the 26 weeks ended 30 June 2024 has been calculated by
applying the effective rate of tax per jurisdiction to the underlying profit
which is expected to apply to the Group for the period ending 29 December 2024
using rates substantively enacted by 30 June 2024 as required by IAS 34
'Interim Financial Reporting'. Items of an exceptional nature have been
assessed independently.
8. Earnings per share
Basic earnings per share amounts are calculated by dividing profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of Ordinary shares outstanding during the year.
Diluted earnings per share is calculated by dividing the profit attributable
to ordinary equity holders of the parent by the weighted average number of
Ordinary shares outstanding during the year plus the weighted average number
of Ordinary shares that would have been issued on the conversion of all
dilutive potential Ordinary shares into Ordinary shares.
Earnings
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Profit after tax for the period 42.3 80.2 115.0
Non-underlying items (3.6) (40.6) (39.3)
Underlying profit after tax 38.7 39.6 75.7
At At At
30 June 2024 25 June 2023 31 December 2023
Number Number Number
Basic weighted average number of shares (excluding treasury shares) 395,803,838 414,902,310 410,406,240
Dilutive effect of share options and awards 2,644,857 2,526,493 1,915,682
Diluted weighted average number of shares 398,448,695 417,428,803 412,321,922
The performance conditions relating to share options granted over 5,897,866
shares (H1 23: 278,427; FY 23: 5,131,078) have not been met in the current
financial period and therefore the dilutive effect of the number of shares
which would have been issued at the period end has not been included in the
diluted earnings per share calculation.
There were 1,750,708 share options excluded from the diluted earnings per
share calculation because they would be antidilutive (H1 23: nil; FY 23:
1,791,468).
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
Earnings per share
Basic earnings per share 10.7p 19.3p 28.0p
Diluted earnings per share 10.6p 19.2p 27.9p
Underlying earnings per share
Basic earnings per share 9.8p 9.5p 18.4p
Diluted earnings per share 9.7p 9.5p 18.4p
9. Dividends
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Declared and paid during the period:
Final dividend for 2023: 7.2p (2022: 6.8p) 28.1 28.3 28.3
Interim dividend for 2023: 3.3p - - 13.6
Dividends declared and paid 28.1 28.3 41.9
The Directors have declared an interim dividend of 3.5p per share. This
dividend will be paid on 27 September 2024 to those members on the register at
the close of business on 16 August 2024.
10. Intangible assets and property, plant and equipment
During the 26 weeks ended 30 June 2024, the Group acquired assets with a cost
of £8.7m (cash outflow of £7.1m).
The Group disposed of 14 London corporate stores which included intangible
assets of £5.9m and property, plant and equipment of £0.8m. Assets with a
carrying value of £7.5m have been transferred to assets held for sale. Refer
to notes 14 and 15 for more details.
Through the acquisition of Shorecal, the Group acquired provisional property,
plant and equipment of £2.9m. The Group also acquired provisional intangible
assets of £86.3m of which £63.9m relates to Goodwill and £22.4m relates to
reacquired rights in respect of franchise agreements.
The reacquired rights of £22.4m represent the value of the Standard Franchise
Agreements previously issued by the Group and reacquired on acquisition. The
valuation of these reacquired rights is an accounting estimate which was
provisionally valued using multiple period excess earnings method over the
remaining contractual term of the franchise agreements. These assets will be
amortised over the period of the franchise agreements, which is on average 5
years, with amortisation recognised in non-underlying results.
Refer to note 13 for additional information.
As at 30 June 2024, amounts contracted for but not provided for in the
financial statements for the acquisition of property, plant and equipment
amounted to £0.5m (2023: £0.2m) and for intangible assets amount to £0.8m
(2023: £1.1m) for the Group.
11. Right-of-use assets, lease receivables and lease liabilities
Right-of-use assets
At At At
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Property 12.7 9.7 9.7
Equipment 7.9 9.4 9.6
20.6 19.1 19.3
Amounts recognised in the income statement
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Depreciation - Property 0.4 0.4 0.9
Depreciation - Equipment 2.2 2.3 4.4
2.6 2.7 5.3
Lease receivables
At At At
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Property 202.2 202.9 208.7
202.2 202.9 208.7
Lease liabilities
At At At
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Property 216.2 214.3 220.5
Equipment 8.4 9.9 10.1
224.6 224.2 230.6
12 Investment in associates and joint ventures
At At At
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Investments in associates 20.9 21.5 20.8
Investments in joint ventures 4.5 4.6 4.4
Total investments in associates and joint ventures 25.4 26.1 25.2
During the period, our Investment in Full House Restaurant Holdings,
contributed profits of £1.3m, along with paying a dividend of £1.0m, and our
investment in Domino's Pizza West Country contributed profits of £0.1m. The
Northern Ireland JV contributed losses of £0.2m.
13. Business combinations
On the 10th of April 2024, the Group acquired the remaining 85% share capital
of Shorecal Limited, a private company registered in the Republic of Ireland
that operates Domino's franchise stores in Ireland, taking its ownership to
100%. A total consideration of £54.8m was transferred which includes net cash
consideration of £32.5m and share consideration of £22.3m which relates to a
share issue of 6,700,909 shares in the Company.
The acquisition enables the Group to accelerate Shorecal's growth across ROI
and Northern Ireland, materially increasing the store count and leverage
capacity in the Irish supply chain centre.
The provisional acquisition balance sheet was adjusted to reflect the fair
value of the assets and liabilities. Adjustments to the balance sheet
primarily relate to recognition of intangible assets for the reacquired rights
relating to the franchise agreements, remeasurement of right of use assets and
lease liabilities, and contingent liabilities and provisions.
The reacquired rights of £22.4m were valued using multiple period excess
earnings method over the remaining contractual term of the franchise
agreements. These assets will be amortised over the period of the franchise
agreements, with amortisation recognised in non-underlying results.
Contingent liabilities of £1.7m have been recognised in relation to
historical tax exposures of the Shorecal group, including litigation with
Revenue Ireland which has yet to be settled. Progress towards a settlement is
being made, however there remains uncertainty over the settlement amount and
therefore cannot be reliably measured. Provisions recognised of £1.6m relate
to dilapidations provisions for the acquired leases.
Financial liabilities of £16.3m, representing external debt held
pre-acquisition, were settled by the Group subsequent to the acquisition date.
The resulting goodwill of £63.9m recognised represents intangible assets that
do not qualify for separate recognition, such as the extensive assembled
workforce, and synergies resulting from the Group's purchase of this
franchisee group, and the future growth potential of the Group.
Immediately prior to the acquisition, the Group held a 15% interest in
Shorecal with a fair value of £10.0m on the acquisition date.
Since the acquisition, Shorecal has contributed £10.3m of Group revenue and
profit before tax of £0.7m. Had the acquisition taken place at the start of
the reporting period, the Group would have had revenue of £337.3m and profit
before tax of £60.0m. Since acquisition, an exchange rate loss of £0.9m
arose on Goodwill.
£m
Cash paid on acquisition 37.3
Cash acquired (4.8)
Net cash consideration 32.5
Non-cash consideration - Share issue 22.3
Total consideration transferred 54.8
Fair value of net assets acquired
Property, plant and equipment 2.9
Intangible assets 22.4
Right-of-use-assets 6.3
Deferred tax assets 0.5
Trade and other receivables 2.0
Inventories 0.2
Total assets acquired 34.3
Current tax liabilities (0.3)
Deferred tax liabilities (3.7)
Financial liabilities (16.3)
Provisions (1.6)
Lease liabilities (6.3)
Contingent liabilities (1.7)
Trade and other payables (3.5)
Total liabilities acquired 33.4
Net identifiable assets acquired at fair value 0.9
Goodwill arising on acquisition
Consideration transferred 54.8
Previously held investment in Shorecal 10.0
Non-controlling interest -
Fair value of net assets acquired (0.9)
Goodwill 63.9
14. Disposals
Sale of corporate stores
During the period, the Group disposed of 14 of its London corporate stores,
generating a profit on disposal of £11.2m. The remaining stores have been
recognized as assets and liabilities held for sale. Refer to note 15 for
further details.
£m
Cash received on disposal 17.3
Net assets disposed (see below) (5.7)
Profit on disposal before transaction costs 11.6
Costs associated with disposal (0.4)
Total profit on disposal 11.2
Goodwill 5.9
Property, plant and equipment 0.8
Inventories 0.1
Right-of-use assets 2.7
Deferred tax assets 0.1
Lease liabilities (3.4)
Provisions (0.5)
Net assets disposed 5.7
Investment in Daytona JV Limited
In the prior year, the Group disposed of its 33.3% interest in Daytona JV
Limited. The Group received £79.9m, of which £70.6m related to the
investment in Daytona JV limited and £9.3m related to the repayment of the
loan. Included in the cash received on disposal was a £1.8m gain on a forward
foreign currency contract that was entered into to provide certainty to the
Group over cash flows received on disposal. The profit on disposal is analysed
as follows:
Daytona JV
Limited
£m
Cash received on disposal 70.6
Carrying amount of investment disposed (32.4)
Currency translation gain transferred from translation reserve 2.5
Profit on disposal before professional fees 40.7
Professional fees relating to the disposal (0.1)
Total profit on disposal of investment 40.6
The profits arising from the disposal were treated as non-taxable on the basis
the disposal fell under the Substantial Shareholding Exemption.
15. Assets and liabilities held for sale
During the period, the Group proceeded with the sale of its 31 London
corporate stores, of which 14 were sold by 30 June 2024. The table below
comprises the assets and liabilities of the stores that had not been sold as
at 30 June 2024. The assets and liabilities held for sale are included in the
'UK & Ireland' operating segment. The sale of these stores completed in
July 2024. Refer to note 22 for details.
£m
Goodwill 5.8
Intangible assets 0.2
Property, plant and equipment 1.5
Right-of-use assets 4.2
Deferred tax assets 0.2
Lease liabilities (4.3)
Provisions (0.7)
Net assets disposed 6.9
16. Financial liabilities
Debt facilities
As at 30 June 2024 the Group had a total of £500m (H1 23: £400m; FY 23:
£400m) of banking facilities, of which £186.0m (H1 23: £189.1m; FY 23:
£112.9m) was undrawn. The £500m of banking facilities is made up of a £200m
revolving credit facility and £300m of USPP loan notes.
Bank revolving facility
The £200m revolving credit facility expires on 27 July 2027. Arrangement fees
of £1.1m (H1 23: £1.5m; FY 23: £1.3m) directly incurred in relation to the
RCF are included in the carrying values of the facility and are being
amortised over the extended term of the facility.
Interest charged on the revolving credit facility ranges from 1.85% per annum
above SONIA (or equivalent) when the Group's leverage is less than 1:1 up to
2.85% per annum above SONIA for leverage above 2.5:1. A further utilisation
fee is charged if over one-third is utilised at 0.15% which rises to 0.30% of
the outstanding loans if over two-thirds is drawn. In addition, a commitment
fee is calculated on undrawn amounts based on 35% of the current applicable
margin.
The RCF is secured by an unlimited cross guarantee between Domino's Pizza
Group plc, DPG Holdings Limited, Domino's Pizza UK & Ireland Limited, DP
Realty Limited, DP Pizza Limited, Sell More Pizza Limited, Sheermans SS
Limited, Sheermans Limited, Shorecal Limited, Karshan Limited, K&M Pizzas
Limited and Sarcon No 214 Limited.
An ancillary overdraft and pooling arrangement was in place with Barclays Bank
Plc for £20.0m covering, Domino's Pizza Group plc, DPG Holdings Limited,
Domino's Pizza UK & Ireland Limited, DP Realty Limited, DP Pizza Limited,
Sell More Pizza Limited, Sheermans SS Limited and Sheermans Limited. The
overdraft facility amount is included and part of the £200m revolving credit
facility. Interest is charged for the overdraft at the same margin as
applicable to the revolving credit facility above SONIA.
Private placement loan notes
The USPP loan notes issued in 2022 mature on 27th July 2027 and arrangement
fees of £0.8m (FY 23: £1.1m) directly incurred in relation to the USPP are
included in the carrying values of the facility and are being amortised over
the term of the notes. Interest is charged at 4.26% per annum.
On 20 June 2024, the Group issued an additional £100m of US Private Placement
(USPP) loan notes, incurring arrangement fees of £0.7m.
The USPP loan notes issued in June 2024 mature on 20(th) June 2034 and
arrangement fees of £0.7m directly incurred in relation to the issuance are
included in the carrying values of the facility and are being amortised over
the term on the notes. Interest is charged at 5.97% per annum.
Both USPP loan notes are secured by an unlimited cross guarantee between the
same legal entities that are guaranteeing the revolving credit facility.
17. Financial instruments
Investments
In April 2024, the Group acquired 12.1% of the issued ordinary share capital
of DP Poland plc, an AIM-listed company based in the UK, for a cost of
£11.4m, which includes transaction costs of £0.4m. An election has been made
for the equity instrument to be designated as fair value through other
comprehensive income. The inputs used to calculate the fair value of the
investment fall within Level 1 of the IFRS 13 hierarchy. Level 1 fair value
measurements use quoted prices in active markets, being the share price of DP
Poland plc. The fair value of the investment at 30 June 2024 is £11.9m
resulting in a fair value gain of £0.5m which has been recognised in other
comprehensive income.
The Group also entered an option agreement to purchase additional shares in DP
Poland plc at a future date from another shareholder up to a maximum total
position of 29.99% of the investment. This option is not recognised on the
balance sheet as currently has no fair value. The Directors have considered
the option in reaching the assessment that our 12.1% investment does not
represent significant influence over DP Poland plc, and do not consider this
provides substantive rights or benefits that would lead to treatment of the
investment as an associate.
During the period, the Group acquired the remaining 85% of Shorecal Limited,
bringing its total ownership to 100%. As such, the 15% investment in Shorecal
that was previously recognised as an investment has been derecognised at its
fair value.
18. Share-based payments
The expense recognised for share-based payments in respect of employee
services received during the 26 weeks ended 30 June 2024 was £2.0m (H1 23:
£1.4m; FY 23: £3.8m). This all arises on equity-settled share-based payment
transactions.
19. Related party transactions
During the period the Group entered into transactions, in the ordinary course
of business, with related parties. Transactions entered into, and trading
balances outstanding with related parties, are as follows:
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024 25 June 2023 31 December 2023
£m £m £m
Associates and Joint ventures
Sales to related parties 25.4 26.1 54.3
Amounts owed by related parties 3.6 2.4 3.1
20. Analysis of Net Debt
At At At
30 June 2024
25 June 2023
31 December 2023
£m £m £m
Cash and cash equivalents 25.9 37.0 52.1
Debt facilities (314.0) (210.9) (287.1)
Capitalised facility arrangement fees 2.7 2.5 2.2
Net Debt (285.4) (171.4) (232.8)
The Group's lease liabilities are not included in the Group's definition of
Net Debt. Lease liabilities are measured at the present value of future lease
payments, including variable lease payments and the exercise price of purchase
options where it is reasonably certain that the option will be exercised,
discounted using the interest rate implicit in the lease, if readily
determinable, or alternatively the Group's incremental borrowing rate as a
lessee.
21. Additional cash flow information
Other cash flows from investing activities
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024
25 June 2023
31 December 2022
£m £m £m
Dividends received from associates and joint ventures 1.0 1.0 2.2
Dividends received from investments 0.2 0.8 0.8
Deferred consideration received from subsidiary disposal 0.2 - -
Decrease in loans to associates and joint ventures - 9.3 9.3
1.4 11.1 12.3
Share transactions in cash flows from financing activities
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024
25 June 2023
31 December 2023
£m £m £m
Purchase of own shares - share buyback (6.2) (17.1) (93.3)
Purchase of own shares - employee benefit trust - (1.9) (5.0)
Consideration received on exercise of share options -
employee benefit trust 0.3 - 0.5
(5.9) (19.0) (97.8)
Reconciliation of free cash flow
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024
25 June 2023
31 December 2023
£m £m £m
Cash generated from operating activities 40.3 64.6 113.5
Net interest paid (7.8) (7.1) (13.1)
Receipt of principal element on lease receivables 8.2 7.5 15.0
Receipt of interest element on lease receivables 6.6 6.1 12.6
Repayment of principal element on lease liabilities (11.0) (10.0) (20.1)
Repayment of interest element on lease liabilities (7.1) (6.7) (13.8)
Dividends received 1.2 1.8 3.0
Other 0.1 - (0.1)
30.5 56.2 97.0
Cash and cash equivalents
26 weeks ended 26 weeks ended 53 weeks ended
30 June 2024
25 June 2023
31 December 2023
£m £m £m
Cash at bank and in hand 25.9 37.0 52.1
Total cash at bank and in hand 25.9 37.0 52.1
Reconciliation of financing activities
At Net cash flow Exchange Non-cash At
01 January 2024 £m differences movements 30 June 2024
£m £m £m £m
Debt facilities (284.9) (27.2) 0.4 0.4 (311.3)
Lease liabilities (230.3) 18.1 0.4 (12.8) (224.6)
(515.2) (9.1) 0.8 (12.4) (535.9)
At Net cash flow Exchange Non-cash At
26 December 2022 £m differences movements 25 June 2023
£m £m £m £m
Debt facilities (283.7) 75.2 0.4 (0.3) (208.4)
Lease liabilities (223.4) 16.7 (0.4) (17.1) (224.2)
(507.1) 91.9 - (17.4) (432.6)
At Net cash flow Exchange Non-cash At
26 December 2022 £m differences movements 31 December 2023
£m £m £m £m
Debt facilities (283.7) (0.8) 0.2 (0.6) (284.9)
Lease liabilities (223.4) 33.9 0.1 (40.9) (230.3)
(507.1) 33.1 0.3 (41.5) (515.2)
22. Post balance sheet events
In July 2024 the Group disposed of the remaining London corporate stores
receiving cash consideration of £15.8m, with an additional £2.0m deferred
consideration payable in 2026. This is expected to generate an additional
profit on disposal before tax, net of closure costs, of £8m-£10m.
23. Principal risks and uncertainties
Details of the principal risks and uncertainties facing the Group, with the
potential to materially impact the successful delivery of our strategy, were
set out on pages 46 to 51 of the Domino's Pizza Group plc Annual Report and
Accounts 2023. These risks are summarised as follows: competitive pressures;
franchisee relationships / operations; supply chain disruption (to either a
key supplier or at one of our SCCs); food safety; loss of business critical
systems; loss of personal / corporate data; failure to deliver on our ESG
commitments; failure to meet public health expectations; and people-related
risks. The Executive Risk Committee, which has been enhanced in 2024, has
continued to support an effective risk monitoring process and has considered
both the principal and any emerging risks and uncertainties during the first
26 weeks of 2024.
The Directors believe that the principal risks being faced over the remainder
of the financial year are not substantially different to those disclosed in
the 2023 Annual Report.
In particular, in the period, we have seen continued pressure on the
cost-of-living for our consumer. As a result we are focusing more on providing
value in our delivery channel; and the testing of our new loyalty programme
should also help us ultimately improve the order frequency from those who love
our products.
Maintaining a strong relationship with our franchisees is fundamental to our
continued performance and growth and we are working constructively with our
franchisees on the growth framework for the future; and to meet our new store
opening plans for 2024 and beyond.
We will also continue to monitor any impacts from the change in government on
our business model.
Further information on the improvements made in mitigating our principal risks
and uncertainties will be provided in our next Annual Report.
Alternative Performance Measures and Glossary
The performance of the Group is assessed using a number of Alternative
Performance Measures ('APMs'). The Group's results are presented both before
and after non-underlying items. Underlying profitability measures are
presented excluding non-underlying items as we believe this provides both
management and investors with useful additional information about the Group's
performance and aids a more effective comparison of the Group's trading
performance from one period to the next and with similar businesses.
Underlying profitability measures are reconciled to unadjusted IFRS results on
the face of the income statement with details of non-underlying items provided
in note 4.
In addition, the Group's results are described using certain other measures
that are not defined under IFRS and are therefore considered to be APMs. These
measures are used by management to monitor on-going business performance
against both shorter term budgets and forecast but also against the Group's
longer term strategic plans. The definition of each APM presented in this
report and, also, where a reconciliation to the nearest measure prepared in
accordance with IFRS can be found is shown below:
Item Definition Location of reconciliation to GAAP measure
Overall terminology
Non-underlying items Non-underlying items relate to significant irregular costs, significant Group income statement, note 4
impairments of assets, together with fair value movements and other costs
associated with acquisitions or disposals.
Profit measures
Group operating profit before tax excluding non-underlying items Group operating profit before tax excluding non-underlying items Group income statement, note 3
Net interest before non-underlying items Group finance costs excluding non-underlying items Group income statement, note 3
Underlying profit before taxation Group profit before tax excluding non-underlying items Group income statement, note 3
Underlying profit for the period Group profit after taxation excluding non-underlying items Group income statement
Earnings before Interest and Tax (EBIT) EBIT is directly comparable to underlying operating profit Not applicable
Underlying basic EPS Group EPS excluding non-underlying items Note 8
Last 12 months (LTM) EBITDA LTM EBITDA for the period from 26 June 2023 to 30 June 2024 based on Not applicable
underlying activities including share of profits from associates and joint
ventures.
Revenue measures
System sales System sales represent the sum of all sales made by both franchised and Not applicable
corporate stores to consumers.
Like-for-like (LFL) sales growth excluding splits LFL sales performance is calculated against a comparable 26 week period in the Not applicable
prior year for mature stores opened which were not in territories split in the
year or comparable period. Mature stores are defined as those open prior to
26(th) December 2022.
Cash flow measures
Net Debt Group cash less bank revolving credit facility and other Note 20
Free cash flow Free cash flow comprises cash generated from operations less dividends Not applicable
received, net interest cash flows and corporation tax. Free cash flow before
non-underlying cash items represents the free cash flow before the inclusion
of the cash impact of items recognised as non-underlying.
Other non-financial definitions
Item Definition
eCommerce fund The fund used to recharge costs for the development and maintenance of our
eCommerce platform with franchisees
German associate Represents our 33% associate investment in the trading operations of Domino's
Pizza Germany (also referred to as Daytona JV) that was disposed of in the
period.
International Represents our former businesses and investments in Norway, Sweden, Iceland,
Germany and Switzerland .
London corporate stores Relates to the London based corporate stores held following the acquisition of
Sell More Pizza Limited and subsequent corporate store openings and closures
NAF National Advertising Fund
NI JV Represents our 46% associate investment in the trading of operations of Victa
DP Ltd (also referred to as Northern Ireland JV).
Shorecal Represents our 100% interest in the trading operations of Shorecal Limited,
which operates stores in the Republic of Ireland and Northern Ireland.
Responsibility statement
Each of the Directors, whose names and functions appear below, confirm to the
best of their knowledge that the condensed consolidated interim financial
statements have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and that the interim management report includes a fair
review of the information required namely:
· DTR 4.2.7 (R): an indication of important events that have occurred
during the 26 week period ended 30 June 2024 and their impact on the condensed
consolidated interim financial statements; and a description of the principal
risks and uncertainties for the remaining 26 weeks of the financial year; and
· DTR 4.2.8 (R): any related party transactions that have taken place
in the 26 week period ended 30 June 2024 that have materially affected the
financial position or performance of the enterprise during that period; and
any changes in the related party transactions described in the last Annual
Report that could do so.
The Directors of Domino's Pizza Group plc as at the date of this announcement
are as set out below:
Matthew Shattock*, Chairman
Ian Bull*, Senior Independent Director
Andrew Rennie, Chief Executive Officer
Edward Jamieson, Chief Financial Officer
Natalia Barsegiyan*
Tracy Corrigan*
Elias Diaz Sese*
Lynn Fordham*
Mitesh Patel*
*Non-executive Directors
A list of the current Directors is maintained on the Domino's Pizza Group plc
website at: corporate.dominos.co.uk.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from the legislation in other jurisdictions.
This responsibility statement was approved by the Board of Directors on 5
August 2024 and is signed on its behalf by Andrew Rennie, Chief Executive
Officer.
By order of the Board
Andrew Rennie
Chief Executive Officer
5 August 2024
Independent review report to Domino's Pizza Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Domino's Pizza Group plc's condensed consolidated interim
financial statements (the "interim financial statements") in the interim
report of Domino's Pizza Group plc for the 26 week period ended 30 June 2024
(the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the group balance sheet as at 30 June 2024;
· the group income statement and group statement of
comprehensive income for the period then ended;
· the group cash flow statement for the period then ended;
· the group statement of changes in equity for the period
then ended; and
· the explanatory notes to the interim financial
statements.
The interim financial statements included in the interim report of Domino's
Pizza Group plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority. In preparing the interim report, including the interim
financial statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the interim report based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Birmingham
5 August 2024
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BCGDIDSGDGSURecent news on Domino's Pizza
See all newsREG - Domino's Pizza Grp - Total Voting Rights
AnnouncementREG - Domino's Pizza Grp - Result of AGM
AnnouncementREG - Domino's Pizza Grp - Q1 Trading statement
AnnouncementREG - Domino's Pizza Grp - Holding(s) in Company
AnnouncementREG - Domino's Pizza Grp - Holding(s) in Company
Announcement