REG - Domino's Pizza Grp - Interim Results <Origin Href="QuoteRef">DOM.L</Origin> - Part 2
25/07/2017 07:06
- Part 2: For the preceding part double click ID:nRSY9508La
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
This interim report has been prepared in accordance with IAS 34 'Interim Financial Reporting'. The financial information
contained in this interim report does not constitute statutory accounts as defined by Section 435 of the Companies Act
2006.
The interim results for the 26 weeks ended 25 June 2017 and the comparatives to 26 June 2016 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 52 weeks ended 25 December 2016 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 has been prepared on the going concern basis. This is considered appropriate, given the
financial resources of the Group including the current position of the banking facilities, together with long-term
contracts with its master franchisor, its franchisees and its key suppliers.
The interim financial information is presented in sterling and all values are rounded to the nearest thousand pounds
(£000), except when otherwise indicated. The financial statements are prepared using the historic cost basis with the
exception of the available-for-sale financial assets and put non-controlling interests liability which are measured at fair
value in accordance with IFRS 13 Fair Value Measurement.
Amounts reclassified
As at 26 June 2016 a loan of £10,592,000 to an associate within Investments in associates and joint ventures has been
reclassified to Amounts owed by associates and joint ventures within non-current trade and other receivables to better
represent the nature of the asset. Within investing activities on the cash flow statement, investment in joint ventures has
reduced by £10,592,000 with a corresponding increase in loans to associates and joint ventures. The amount was reported
within non-current trade and other receivables as at 25 December 2016, hence no reclassification is required.
Discontinued operations
In the Group's financial statements, the results and cash flows of discontinued operations are presented separately from
those of continuing operations. An operation is classified as discontinued if it is a component of the Group that (i) has
been disposed of, or meets the criteria to be classified as held for sale, and (ii) represents a separate major line of
business or geographic area of operations or will be disposed of as part of a single coordinated plan to dispose of a
separate major line of business or geographic area of operations. The discontinued operations results and cash flows relate
to the formation of a German venture, Daytona JV Limited, in which the Group then acquired a 33.3% interest and the sale or
closure of the Group's directly managed German stores.
Changes in accounting policy
The consolidated accounts for the 52 weeks ended 25 December 2016 were prepared in accordance with IFRS as adopted by the
EU. The accounting policies applied by the Group are consistent with those disclosed in the Group's Annual Report and
Accounts for the 52 weeks ended 25 December 2016. There are no new standards and interpretations effective for the first
time in 2017 that have a material impact on this interim report.
New standards
The full financial and disclosure impact of IFRS 15 "Revenue from Contracts with Customers" is still being finalised ahead
of the year end, the standard being effective from 1 January 2018.
NOTES TO THE GROUP INTERIM REPORT
3. SEGMENT INFORMATION
For management purposes, the Group changed how it viewed its segments due to acquisitions made in the period. The Group is
now organised into two geographical business units based on the operating models of the regions: the United Kingdom and
Ireland operating in more mature markets with a sub-franchisee model and no corporate stores, and International whose
markets are at an earlier stage of development and which operate predominately as corporate stores. The International
segment includes Switzerland, Germany, Iceland, Norway and Sweden. These are considered to be the Group's operating
segments as the information provided to the chief operating decision makers, who are considered to be the Executive
Directors of the Board, is based on these territories. Revenue included in each includes all sales (royalties, Supply Chain
Centre sales, rental income and finance lease income) made to franchise stores and by corporate stores located in that
segment.
Operating Segments
(Unaudited) 26 weeks ended 25 June 2017 (Unaudited) 26 weeks ended 26 June 2016 52 weeks ended 25 December 2016
International UK and Ireland Total International UK and Ireland Total International UK and Ireland Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Segment revenue
Sales to external customers* 23,810 187,449 211,259 7,178 169,213 176,391 15,550 345,027 360,577
Results
Segment result (662) 43,361 42,699 (634) 40,403 39,769 (1,300) 84,432 83,132
Non-underlying items (254) (751) (1,005) - - - - - -
Underlying share of profit of associates 328 1,244 1,572 223 875 1,098 964 2,095 3,059
Non-underlying share of loss of associates (473) - (473) - - - (3,144) - (3,144)
Group operating profit (1,061) 43,854 42,793 (411) 41,278 40,867 (3,480) 86,527 83,047
Net gain on step acquisition of foreign operation 5,833 - -
Net finance (expense)/income (2,397) 3 (524)
Profit before taxation 46,229 40,870 82,523
Taxation (8,575) (7,837) (17,369)
Profit for the period from discontinued operations - 6,739 6,662
Profit after taxation and discontinued operations 37,654 39,772 71,816
Assets
Segment assets 96,664 166,296 262,960 22,521 112,290 134,811 24,376 135,691 160,067
Equity accounted investments 13,026 12,462 25,488 37,006 8,499 45,505 46,818 11,933 58,751
Unallocated assets - - 40,332 - - 24,664 - - 29,224
Assets relating to discontinued operations - - 8,874 - - 7,527 - - 8,329
Total assets 109,690 181,194 337,654 59,527 120,789 212,507 71,194 147,624 256,371
Liabilities
Segment liabilities 64,848 63,567 128,415 2,237 61,977 64,214 3,873 69,121 72,994
Unallocated liabilities - - 106,380 - - 34,887 - - 73,292
Liabilities relating to discontinued operations - - 3,289 - - 5,433 - - 2,927
Total liabilities 64,848 63,567 238,084 2,237 61,977 104,534 3,873 69,121 149,213
Net assets 44,842 117,627 99,570 57,290 58,812 107,973 67,321 78,503 107,158
*Sales to external customers are made up of sales from corporate stores to the public and sales to non-corporate stores.
NOTES TO THE GROUP INTERIM REPORT
4. NON-UNDERLYING ITEMS
The Group uses adjusted figures as key performance measures in addition to those reported under IFRS, as management believe
these measures enable them to assess the underlying trading performance of the business. Adjusted figures exclude
non-underlying items which comprise non-recurring items and other adjusting items.
(Unaudited) 26 weeks ended 25 June 2017 (Unaudited) 26 weeks ended 26 June 2016 52 weeks ended 25 December 2016
Before non-underlying items Non-underlying items Total Before non-underlying items Non-underlying items Total Before non-underlying items Non-underlying items Total
Continuing operations £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 211,259 - 211,259 176,391 - 176,391 360,577 - 360,577
Cost of sales (125,804) - (125,804) (105,612) - (105,612) (215,719) - (215,719)
Gross profit 85,455 - 85,455 70,779 - 70,779 144,858 - 144,858
Other operating costs (i) (42,756) (1,005) (43,761) (31,010) - (31,010) (61,726) - (61,726)
42,699 (1,005) 41,694 39,769 - 39,769 83,132 - 83,132
Share of post-tax profits of associates and joint ventures (ii) 1,572 (473) 1,099 1,098 - 1,098 3,059 (3,144) (85)
Operating profit 44,271 (1,478) 42,793 40,867 - 40,867 86,191 (3,144) 83,047
Net gain on step acquisition of foreign operation (iii) - 5,833 5,833 - - - - - -
Profit before interest and taxation 44,271 4,355 48,626 40,867 - 40,867 86,191 (3,144) 83,047
Finance income 217 - 217 177 - 177 726 - 726
Finance expense (iv) 112 (2,726) (2,614) (174) - (174) (1,250) - (1,250)
Profit before taxation 44,600 1,629 46,229 40,870 - 40,870 85,667 (3,144) 82,523
Taxation (v) (8,720) 145 (8,575) (7,837) - (7,837) (17,369) - (17,369)
Profit for the period from continuing operations 35,880 1,774 37,654 33,033 - 33,033 68,298 (3,144) 65,154
Discontinued operations
Profit for the period from discontinued operations - - - 6,739 - 6,739 6,662 - 6,662
Profit for the period 35,880 1,774 37,654 39,772 - 39,772 74,960 (3,144) 71,816
Profit attributable to:
- Equity holders of the parent 35,787 2,012 37,799 39,772 - 39,772 74,960 (3,144) 71,816
- Non-controlling interests 93 (238) (145) - - - - - -
Profit for the period 35,880 1,774 37,654 39,772 - 39,772 74,960 (3,144) 71,816
NOTES TO THE GROUP INTERIM REPORT
4. NON-UNDERLYING ITEMS (continued)
(i) Non-underlying operating costs
Acquisition costs of £254,000 relate to legal and professional fees incurred on acquisition of controlling shareholdings in
Icelandic, Norwegian and Swedish associated undertakings. Refer to note 12 for details.
Impairment of Property, Plant and Equipment of £751,000 relates to impairment to recoverable value for assets no longer
used for operating purposes.
(ii) Non-underlying operating costs - joint ventures
Acquisition and store network conversion costs of £473,000 relate to the rebranding and associated costs in order to
execute the conversion of the Joey's Pizza stores to comply with Domino's international brand standards in relation to
support for franchisee store fit-outs and other costs.
These costs are considered non-underlying as they are one-off charges that would not give an accurate reflection of the
Group's profit were they to be included in underlying profit.
(iii) Non-underlying net gain on step acquisition of foreign operation
On the step acquisition of the Icelandic, Norwegian and Swedish associated undertakings the disposal of the equity
investments at fair value resulted in a charge of £727,000. Amounts recycled from the translation reserve amounted to a
gain of £6,560,000.
(iv) Non-underlying finance expenses
On acquisition and consolidation of Pizza Pizza EHF and Pizza Pizza Norway AS and the subsequent hive out of PPS Foods AB
the put options held by the non-controlling shareholders over their shares were recognised at the present value of the
gross obligation. The underlying assets are denominated in foreign currencies, and the foreign exchange movement in the
period has given rise to an increase in liability of £2,124,000.
Non-underlying foreign exchange losses of £602,000 relating to the acquisition of Pizza Pizza EHF were incurred during the
period.
(v) Non-underlying Tax
The tax credit relates to the non-underlying foreign exchange losses within finance expenses (refer to section (iv)).
5. FINANCE INCOME AND EXPENSE
(Unaudited) (Unaudited)
26 weeks 26 weeks 52 weeks
ended 25 June 2017 ended 26 June 2016 ended 25 December 2016
£000 £000 £000
Finance income
Bank interest receivable 7 15 139
Interest on loans to associates and joint ventures 187 144 312
Other interest 23 18 74
Foreign exchange - - 187
Unwinding of discount - - 14
217 177 726
Finance expense
Bank revolving credit facility interest payable (698) (88) (1,002)
Other interest payable (21) (45) (229)
Foreign exchange (1,895) (10) -
Unwinding discount - (31) (19)
(2,614) (174) (1,250)
Net financing costs (2,397) 3 (524)
NOTES TO THE GROUP INTERIM REPORT
5. FINANCE INCOME AND EXPENSE (continued)
Finance income primarily relates to interest received on loans to joint ventures. Finance expense comprises; interest paid
on the RCF of £698,000; Other Interest payable of £21,000; foreign exchange losses of £2,124,000 on revaluation of the
Nordic put non-controlling interests liability; £602,000 relating to the acquisition of Pizza Pizza EHF; £699,000 on
non-sterling RCF drawdowns and other foreign exchange losses of £38,000, partially offset by a foreign exchange gain of
£1,568,000 on revaluation of loans to associates.
6. INCOME TAX
(Unaudited)
26 weeks 52 weeks
ended ended
26 June 25 December
(Unaudited) 26 weeks ended 25 June 2017 2016 2016
Before non-underlying items Non-underlying items Total Total Total
£000 £000 £000 £000 £000
Continuing operations
Current income tax
Current income tax charge 8,719 (145) 8,574 7,183 16,466
Deferred income tax
Origination and reversal of temporary differences 1 - 1 654 598
Effect of change in tax rate - - - - 296
Adjustments in respect of prior periods - - - - 9
Tax charge in the income statement 8,720 (145) 8,575 7,837 17,369
Discontinued operations
Current income tax
Current income tax charge - 87 87 2,345 2,266
Deferred income tax
Origination and reversal of temporary differences - - - 203 390
Effect of change in tax rate - - - - 130
Adjustments in respect of prior periods - - - - (39)
- 87 87 2,548 2,747
Continuing and discontinued operations
Current income tax
Current income tax charge 8,719 (58) 8,661 9,528 18,732
Deferred income tax
Origination and reversal of temporary differences 1 - 1 857 988
Effect of change in tax rate - - - - 426
Adjustments in respect of prior periods - - - - (30)
8,720 (58) 8,662 10,385 20,116
8,662
10,385
20,116
There were no non-underlying items in the comparative periods of 26 weeks ended 26 June 2016 or 52 weeks ended 25 December
2016.
The calculation of the Group's tax position necessarily involves a degree of estimation and judgement in respect of certain
items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority.
The final resolution of certain these items may give rise to material income statement and or cash flow variance.
NOTES TO THE GROUP INTERIM REPORT
7. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing profit for the period attributable to ordinary equity holders
of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share are calculated by dividing the profit attributable to owners of the parent by the weighted
average number of ordinary shares outstanding during the period 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
(Unaudited) (Unaudited)
26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December
2017 2016 2016
£000 £000 £000
Continuing operations
Underlying profit attributable to owners of the parent (note 4) 35,787 33,033 68,298
Continuing and discontinued operations
Continuing operations profit attributable to the owners of the parent 37,799 33,033 65,154
Discontinued operations profit attributable to the owners of the parent - 6,739 6,662
Total profit attributable to owners of the parent 37,799 39,772 71,816
Weighted average number of shares
(Unaudited) (Unaudited)
At At At
25 June 26 June 25 December
2017 2016 2016
(restated)
No. No. No.
Reconciliation of basic and diluted weighted average number of shares:
Basic weighted average number of shares (excluding treasury shares) 490,687,750 497,925,282 496,496,866
Dilutive effect of share options and awards 5,895,623 7,783,731 7,453,287
Diluted weighted average number of shares 496,583,373 505,709,013 503,950,153
The performance conditions for share options granted over 2,718,670 (26 June 2016 (restated): 2,173,056; 25 December 2016:
2,380,181) shares have not been met in the current financial period and therefore the dilutive effect of that number of
shares that would have been issued at the period end have not been included in the diluted earnings per share calculation.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and
the date of completion of these interim financial statements.
On 27 June 2016 the Company sub-divided each of its ordinary shares of 1.5625 pence each into 3 new ordinary shares of
25/48ths of a penny each. Comparatives have been adjusted to show a comparable position.
NOTES TO THE GROUP INTERIM REPORT
7. EARNINGS PER SHARE (continued)
Earnings per share
(Unaudited) (Unaudited)
26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December
2017 2016 2016
(restated)
Underlying earnings per share
Basic earnings per share 7.3p 6.6p 13.8p
Diluted earnings per share 7.2p 6.5p 13.6p
Continuing operations
Basic earnings per share 7.7p 6.6p 13.1p
Diluted earnings per share 7.6p 6.5p 12.9p
Discontinued operations
Basic earnings per share - 1.4p 1.3p
Diluted earnings per share - 1.3p 1.3p
Continuing and discontinued operations
Basic earnings per share 7.7p 8.0p 14.5p
Diluted earnings per share 7.6p 7.9p 14.3p
8. DIVIDENDS PAID AND PROPOSED
(Unaudited) (Unaudited)
26 weeks 26 weeks 52 weeks
ended ended ended
25 June 26 June 25 December
2017 2016 2016
£000 £000 £000
Declared and paid during the period:
Final dividend for 2015: 3.92p - 19,533 19,533
Interim dividend for 2016: 3.50p - - 17,430
Final dividend for 2016: 4.50p 22,014 - -
22,014 19,533 36,963
The directors have declared an interim dividend of 3.75p per share with a cost of £18,450,000. This dividend will be paid
on 1 September 2017 to those members on the register at the close of business on 4 August 2017.
9. INTANGIBLE ASSETS
During the 26 weeks ended 25 June 2017, the Group acquired £24,927,000 of Goodwill as part of the acquisitions in Iceland,
Norway and Sweden. Other intangibles of £42,517,000 were acquired as part of these acquisitions. Further details of the
acquisitions are shown in note 12.
10. PROPERTY, PLANT AND EQUIPMENT
During the 26 weeks ended 25 June 2017, the Group acquired £9,343,000 in property, plant and equipment as part of the
acquisitions in Iceland, Norway and Sweden. In addition, the Group acquired assets with a cost of £15,785,000 (26 June
2016: £4,205,000; 25 December 2016: £14,408,000). The expenditure predominately relates the new supply chain centre in
Warrington.
Impairment of Property, Plant and Equipment of £751,000 relates to impairment to recoverable value for assets no longer
used for operating purposes.
NOTES TO THE GROUP INTERIM REPORT
11. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
(Unaudited) (Unaudited)
At At At
25 June 26 June 25 December
2017 2016(restated) 2016
£000 £000 £000
Investments in associates 19,396 39,198 52,478
Investments in joint ventures 6,092 6,307 6,273
25,488 45,505 58,751
On 19 April 2017 the Group acquired control of its associates, Pizza Pizza EHF and Pizza Pizza Norway AS. On this date the
investments were deemed to be disposed of as part of the step acquisition and subsidiaries are consolidated into the
Group.
Refer to note 2 for details of the restatement at 26 June 2016.
12. BUSINESS COMBINATIONS
The acquisitions in the period have been accounted for as business combinations. The provisional fair value amounts
recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below:
Pizza Pizza EHF Pizza Pizza Norway AS Dolly Dimple's Norge AS Total
£000 £000 £000 £000
Consideration Transferred
Cash 1,278 13,673 5,729 20,680
Total 1,278 13,673 5,729 20,680
Fair value of net assets acquired (provisional)
Property, plant and equipment 4,663 3,397 1,283 9,343
Intangible assets 22,145 18,689 1,683 42,517
Inventories 603 410 226 1,239
Trade and other receivables 4,097 952 1,079 6,128
Deferred tax assets - - 1,394 1,394
Assets held for sale - 160 - 160
Cash and cash equivalents 14,651 939 3,053 18,643
Total assets acquired 46,159 24,547 8,718 79,424
Trade and other payables (4,735) (2,904) (2,808) (10,447)
Loans (1,566) (6,782) - (8,348)
Provisions - - (2,263) (2,263)
Deferred Tax Liabilities (4,429) (4,294) (418) (9,141)
Total liabilities acquired (10,730) (13,980) (5,489) (30,199)
Net identifiable assets acquired at fair value 35,429 10,567 3,229 49,225
Goodwill arising on acquisition
Consideration transferred 1,278 13,673 5,729 20,680
Transfer of equity investment at fair value at date of acquisition 29,218 3,830 - 33,048
Non-controlling interests 17,360 3,064 - 20,424
Fair value of net assets acquired (provisional) (35,429) (10,567) (3,229) (49,225)
Goodwill 12,427 10,000 2,500 24,927
Transaction costs relating to the acquisitions detailed in this section are detailed in note 4(i).
NOTES TO THE GROUP INTERIM REPORT
12. BUSINESS COMBINATIONS (continued)
Pizza Pizza EHF
On 19 April 2017 the Group acquired 2% of the share capital of its associated undertaking Pizza Pizza EHF, taking the
Group's shareholding to 51% and in doing so gaining control of the Icelandic based Domino's master franchise holder.
The acquisition balance sheet has been adjusted to reflect provisional fair value adjustments. Adjustments to the
completion balance sheet primarily relate to intangible assets of the master franchise agreement acquired with Pizza Pizza
EHF and recognition of necessary provisions. The master franchise agreement has been valued using the Multi-Period Excess
Earnings Method income approach taking into account forecast revenue and EBITDA margin and a discount rate applied.
Adjustment to taxes relate to additional tax provisions and deferred tax on the fair value adjustments. Non-controlling
interests has been valued as a proportion of identifiable net assets.
The goodwill recognised above includes certain intangible assets that cannot be separately identified and measured due to
their nature. This includes control over the acquired business, the skills and experience of the assembled workforce and
the future growth opportunities the business provides to the Group's operations. The goodwill recognised is not deductible
for tax purposes.
Since the acquisition date, Pizza Pizza EHF contributed £952,000 to operating profit. If the acquisition of Pizza Pizza EHF
had taken place on 26 December 2016, the Group adjusted operating profit would have been £45,070,000 and revenue for
continuing operations would have been £222,809,000.
Pizza Pizza Norway AS
On 19 April 2017 the Group acquired an additional 51% of the share capital of its associated undertaking Pizza Pizza Norway
AS, taking the Group's shareholding to 71% and in doing so gaining control of the Norway and Sweden based Domino's master
franchise holder. This allowed access to two fast growing markets and facilitated the subsequent acquisition of Dolly
Dimple's.
The acquisition balance sheet has been adjusted to reflect provisional fair value adjustments.
Adjustments to the completion balance sheet primarily relate to intangible assets of the master franchise agreement
acquired with Pizza Pizza Norway AS for Norway and Sweden and recognition of necessary provisions. The master franchise
agreement has been valued using a Cost approach taking into account forecast revenue and a discount rate applied.
Adjustment to taxes relate to additional tax provisions and deferred tax on the fair value adjustments. Non-controlling
interests has been valued as a proportion of identifiable net assets.
The goodwill recognised above includes certain intangible assets that cannot be separately identified and measured due to
their nature. This includes control over the acquired business, the skills and experience of the assembled workforce and
the future growth opportunities the business provides to the Group's operations. The goodwill recognised is not deductible
for tax purposes.
Since the acquisition date, Pizza Pizza Norway AS contributed an operating loss of £1,148,000. If the acquisition of Pizza
Pizza Norway AS had taken place on 26 December 2016, the Group adjusted operating profit would have been £43,523,000 and
revenue for continuing operations would have been £215,505,000.
Dolly Dimple's Norge AS
On 2 May 2017 the Group acquired 100% of the share capital of Dolly Dimple's Norge AS, a leading Norwegian based pizza
chain operator with 42 stores. The stores will be converted to Domino's stores and provides scale to the operations in
Norway.
The acquisition balance sheet has been adjusted to reflect provisional fair value adjustments.
Adjustments to the completion balance sheet primarily relate to intangible assets of the store franchise network and brand
acquired with Dolly Dimple's Norge AS, revaluation of property, plant and equipment in accordance with IFRS 13 and
recognition of provisions relating to out of market leases and other necessary provisions. The store franchise network has
been valued using the Multi-Period Excess Earnings Method income approach taking into account forecast revenue and EBITDA
margin and a discount rate applied. The brand has been valued using the Cost approach. Adjustment to taxes relate to
additional tax provisions and deferred tax on the fair value adjustments. Non-controlling interests has been valued as a
proportion of identifiable net assets.
NOTES TO THE GROUP INTERIM REPORT
12. BUSINESS COMBINATIONS (continued)
The goodwill recognised above includes certain intangible assets that cannot be separately identified and measured due to
their nature. This includes control over the acquired business, the skills and experience of the assembled workforce and
the future growth opportunities the business provides to the Group's operations. The goodwill recognised is not deductible
for tax purposes.
Since the acquisition date, Dolly Dimple's Norge AS contributed £30,000 to operating profit. If the acquisition of Dolly
Dimple's Norge AS had taken place on 26 December 2016, the Group adjusted operating profit would have been £43,443,000 and
revenue for continuing operations would have been £217,423,000.
PPS Foods AB
On 27 April 2017 the shares of the Group subsidiary PPS Foods AB, the Sweden based Domino's master franchise holder, were
transferred at market value from Pizza Pizza Norway AS to the shareholders of Pizza Pizza Norway AS in proportion of
existing shareholding. This resulted in an additional payment of £1,664,000 from the non-controlling interests. The Group
therefore retains control and the same ownership interest in the company after the transfer in proportion to existing
shareholdings.
13. FINANCIAL LIABILITIES
Bank revolving facility
On 8 July 2016, the Group entered into a 5 year £175m multicurrency revolving credit facility with Barclays Bank plc, HSBC
Holdings plc and The Royal Bank of Scotland Group Plc. This facility has been extended by a further year to 2022 on 8 July
2017.
Interest charged on the revolving credit facility ranges from 0.75% to 1.50% per annum above LIBOR. In addition a
utilisation fee is charged on the facility if over one-third of the facility is utilised at 15% of the margin rate, and 30%
if over two-thirds of the facility is utilised. The facility expires on 18 July 2022. A commitment fee of 35% of the drawn
margin is payable on un-drawn amount.
Arrangement fees of £1,283,000 (26 June 2016: £81,000; 25 December 2016: £1,432,532) directly incurred in relation to
facility are included in the carrying value of the facility and are being amortised over the term of the facility.
The facility is secured by an unlimited cross-guarantee between the Company and certain subsidiaries.
In addition, following the acquisitions in Norway and Iceland the Group has further debt facilities available. Prior to
acquisition, Pizza Pizza Norway AS agreed a facility with Nordea for 50m NOK with an accompanying 4m NOK overdraft; this is
guaranteed by the Company. Pizza Pizza EHF has a facility with Islandsbanki and an accompanying overdraft of 96m ISK.
Other Loans
Other loans include loans entered into to acquire assets which are then leased onto franchisees under finance lease
agreements. The balance drawn down on this facility and held within "other loans" as at 25 June 2017 is £636,103 (26 June
2016: £1,378,000; 25 December 2016: £857,000).
NOTES TO THE GROUP INTERIM REPORT
14. FINANCIAL INSTRUMENTS
IFRS 13 requires the classification of financial instruments measured at fair value to be determined by reference to the
source of inputs used to derive fair value.
The following financial Instruments are held at fair value:
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Carrying value at Fair value at Carrying value at Fair value at Carrying value at Fair value at
25 June 25 June 26 June 26 June 25 December 25 December
2017 2017 2016 2016 2016 2016
£000 £000 £000 £000 £000 £000
Financial assets
Available-for-sale financial assets 8,505 8,505 7,489 7,489 8,050 8,050
Other financial liabilities
Put non-controlling interests liability (36,896) (36,896) - - - -
Available-for-sale financial assets
Within Available-for-sale financial assets is £8,505,000 (E9,689,000) in relation to deferred consideration of E25,000,000
payable by Domino's Pizza Enterprises Limited (referred to as the "Market Access Fee") in respect of Domino's Pizza Group
plc divesting its interests in operating Domino's Pizza Stores in Germany and its exclusive access to the German market,
held through its shareholding in DP Cyco Limited and which becomes payable from 2017. The deferred consideration is payable
by instalments from 2017, the payment of each instalment being determined by reference to the German business achieving
defined levels of EBITDA.
The inputs used to calculate the fair value of the market access fee fall within Level 3 of the IFRS 13 hierarchy. Level 3
fair value measurements use unobservable inputs for the asset (or liability).
The fair value of the financial asset recognised is calculated by discounting all future cash flows by the appropriate
discount rate for the German associated company. The payments are calculated applying an income approach valuation
methodology, considering different scenarios of projected EBITDA, weighted by the probability of each scenario. The fair
value is based on a mid-point in the range of probable fair value outcomes of E8,200,000 to E10,200,000 based on a range of
EBITDA forecasts.
Description of significant unobservable inputs to valuation:
Significant unobservable inputs Range Sensitivity of the input to the fair value
WACC 8.5% to 9.5% 0.5% increase (or decrease) in the WACC would result in a decrease (increase) in fair value by E200,000.
Put non-controlling interests liability
On acquisition of Pizza Pizza EHF and Pizza Pizza Norway AS, and the subsequent hive out of PPS Foods AB, a liability at
the present value of the gross amount of the put options held by the non-controlling interests over the remaining
shareholding has been recognised on consolidation amounting to £34,772,000 and by the 25 June 2017 has been revalued to
£36,896,000.
The inputs used to calculate the fair value of the put options fall within level 3 of the IFRS 13 hierarchy. Level 3 fair
value measurements use unobservable inputs for the asset (or liability). These inputs include the expected performance of
the business during the exercise period.
The value of the financial liabilities are the discounted value of the gross liabilities for the put options based on the
expected value of the consideration on exercise of the options. The put option liability is based on a forecast EBITDA
multiple of the respective businesses during the exercise period. The options are exercisable from 1 July 2019 until 30
June 2020.
NOTES TO THE GROUP INTERIM REPORT
15. SHARE-BASED PAYMENTS
The expense recognised for share-based payments in respect of employee services received during the 26 weeks to 25 June
2017 is £1,744,000 (26 June 2016: £1,040,000; 25 December 2016: £2,264,000). This all arises on equity settled share-based
payment transactions.
16. SHARE PURCHASES/BUYBACKS
(Unaudited) (Unaudited)
26 weeks ended25 June 2017 26 weeks ended26 June 2016 52 weeks ended25 December 2016
Shares Consideration including fees Shares Consideration including fees Shares Consideration including fees
(restated)
No. £000 No. £000 No. £000
Shares bought back into treasury by the Group - - 2,932,590 10,072 2,932,590 10,072
Shares bought back and cancelled by the Group 2,679,384 10,072 1,582,725 5,257 6,144,714 22,346
Shares bought back into treasury by the employee benefit trust 2,940,000 9,833 - - - -
5,619,384 19,905 4,516,315 15,329 9,077,304 32,418
On 27 June 2016 the Company sub-divided each of its ordinary shares of 1.5625 pence each into 3 new ordinary shares of
25/48ths of a penny each. Comparatives have been adjusted to show a comparable position.
The shares bought back in the period totalling £10,072,000 were to satisfy the £10,000,000 share buyback obligation
provided for at 25 December 2016.
17. OTHER RESERVES AND NON-CONTROLLING INTERESTS
As explained in note 14, on acquisition of Pizza Pizza EHF and Pizza Pizza Norway AS, and the subsequent hive out of PPS
Foods AB, a liability at the present value of the gross amount of the put options held by the non-controlling interests
over the remaining shareholding has been recognised on consolidation amounting to £34,772,000.
On acquisition of Pizza Pizza EHF
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