REG - Domino's Pizza Grp - Full year results for the year ended 31.12.2023
12/03/2024 07:15
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RNS Number : 4301G Domino's Pizza Group PLC 12 March 2024
12 March
2024
LEI: 213800Q6ZKHAOV48JL75
Domino's Pizza Group Plc - Full year results for the year ended 31 December
2023
Continued sales growth in 2023 drives increased profit, cashflow and
shareholder returns
Acquiring full control of Shorecal to meaningfully accelerate growth in
Ireland(7)
Accelerating organic growth - expect in excess of 70 new stores in 2024,
targeting in excess of 1,600 stores and £2.0bn system sales in 2028 and 2,000
stores, £2.5bn system sales by 2033
53 weeks to 31 December 2023 52 weeks to 24 December 2023 52 weeks to 25 December 2022 % change 52 weeks vs. 52 weeks
(unaudited)
System sales(1) £1,572m £1,541m £1,456m +5.8%
Like-for-Like system sales growth (exc.splits & VAT)(2, 3) - +5.7% +5.3% -
Group revenue £679.8m £667.0m £600.3m +11.1%
Underlying(4,) * EBITDA £138.1m £134.8m £130.1m +3.6%
Underlying* profit before tax £101.7m £99.0m £98.9m +0.1%
Statutory profit after tax £115.0m - £81.6m +40.9%**
Underlying* basic EPS 18.4p 18.0p 18.8p (4.3)%
Statutory basic EPS 28.0p - 18.8p +48.9%**
Full year dividend per share 10.5p - 10.0p +5.0%
FY23 was a 53-week reporting period to 31 December 2023. For the purposes of
comparability, growth rates in this release are given on a 52-week basis.
* Underlying excludes the £40.6m profit on disposal of the German associate
and £1.3m relating to historic share compensation schemes. Further
information within footnote 4.
** The 53-week column are the statutory numbers and the 52-week column are
unaudited alternative performance measures. Like-for-like sales on a 53-week
basis, profit after tax on a 52-week basis, statutory EPS and DPS are not
shown as not meaningful.
Commenting on the results, Andrew Rennie, CEO said:
"Last year we continued to make strong strategic progress with 61 new store
openings whilst offering our customers compelling value. These efforts
delivered an increase in sales and shareholder returns with continued robust
profit growth. I would like to thank our world-class franchisees and
colleagues for their immense hard work and dedication in achieving these
results."
"In December I set out a framework for accelerating sustainable, long-term
growth. Following a great year for store openings in 2023 we are accelerating
our growth and expect to have 1,600 UK & Ireland stores delivering £2.0
billion of system sales by 2028 and 2,000 stores by 2033 delivering £2.5
billion of system sales. Crucially, we have alignment with our franchisees and
there is a strong, motivated second generation talent coming through the
franchisee ranks to help drive this growth."
"Since March 2021, we have taken a disciplined approach to capital allocation
by following a clear framework. We have prioritised investment in the core
business to drive growth and I'm excited that today we're acquiring full
control of Shorecal to accelerate our Irish growth. We see a significant
opportunity to meaningfully increase our Irish store count and deliver
long-term, sustainable returns. We are committed to a progressive dividend
policy and I'm pleased that we have increased the dividend by 5%. DPG is a
highly cash-generative, asset light business and we have been able to announce
£427m of shareholder returns since March 2021, whilst also continuing to
invest in the business. We are rigorously focused on accelerating organic
growth and pursuing value enhancing inorganic growth opportunities, to build a
larger and more cash generative business, at pace but with discipline. We look
forward to providing an update on these opportunities later in the year."
New, upgraded medium and long-term targets
· Core UK & Ireland business remains primary focus for
investment and growth with material increase in store numbers and system sales
· Now expect to have in excess of 1,600 stores in the UK &
Ireland by the end of 2028 and in excess of 2,000 stores in 2033
· Now expect to deliver £2.0bn system sales in the UK &
Ireland by the end of 2028 and in excess of £2.5bn system sales in the UK
& Ireland in 2033
FY23 financial highlights
· Like-for-like system sales (exc. splits and VAT) up 5.7% (FY22:
+5.3%)
· Q4 23 +0.4% against a tough comparator (Q4 22: +13.9%)
· Group revenue up 11.1% (53-week basis: +13.2%), driven by an
increase in system sales volume, acceleration of store openings and the
pass-through of increased food cost
· Underlying EBITDA up 3.6% (53-week basis: +6.1%), which includes
£8.9m of previously guided technology platform costs and no contribution from
Germany (FY22: £2.6m)
· Statutory profit after tax of £115.0m, +40.9%, driven by
proceeds from the disposal of the German associate, generating a profit of
£40.6m recorded in non-underlying results
· Strong free cash flow of £97.0m, up 22.8% vs. FY22
· Proposed final dividend of 7.2p per share, resulting in a total
dividend for FY23 of 10.5p per share, up 5.0% vs. FY22
· £90m returned to shareholders through share buybacks in FY23(5)
FY23 operational and strategic highlights
· Continued gain in UK takeaway market share(6) gains: 7.2% market
share in FY23(,) up from 7.1% in FY22 in a growing market and an uncertain
consumer environment
· Acceleration of store openings with 61 new stores
· Expect to open in excess of 70 new stores in FY24
· Total orders of 70.5m on a 52-week basis, up 1.0% vs. FY22
· Collections grew to 25.3m orders, up 13.3% vs. FY22
· Delivery orders down 4.8% vs. FY22, with improved performance in
Q4 vs. Q3
· Average franchisee store EBITDA up 9% vs. 2019
· Continued digital progress with significant growth in app
customers and orders
· 9.0m active app customers, up 48% vs FY22 with app orders as a
percentage of online orders at 73.8% (+21.6ppts vs.FY22)
· Following strong first full year on Just Eat, we started an Uber
Eats trial in early January 2024 and now live across c.630 stores across the
UK and Ireland
· Meaningful improvement in average delivery time to 25.0 minutes
(FY22: 26.3 minutes) as a result of our franchise partners' focus on service
and GPS roll out across all stores
· Following recent investment in technology, development of new
ecommerce platform delivered on time and on budget, building the foundations
for more effective customer promotions, and potentially, a loyalty programme
· Separately today, in line with the growth framework we laid out
in December 2023, we have announced the acquisition of the outstanding shares
in Shorecal Limited(7) which DPG does not own for c.£62m
· The acquisition is at an attractive multiple of 8x EBITDA and is
expected to be earnings accretive in the first full year of ownership and
significantly accretive in the long-term
· The acquisition will allow DPG to take control of a significant
opportunity to materially increase the store count in the Republic of Ireland
and Northern Ireland
· Shorecal's existing Irish management will remain in role to
accelerate the growth, supported by the experienced, and recently expanded,
DPG team
· DPG is committed to an asset-light business model and our
strategy will centre on acquiring, strengthening and then ultimately
redistributing stores to world-class franchisees
Outlook, current trading and FY24 guidance
We have maintained strong momentum against our key strategic priorities in the
first quarter of FY24 with a rapid deployment of the Uber Eats trial and 7 new
stores opened, with a further 33 with planning consent or under construction.
New store openings will accelerate and we now expect to open in excess of 70
stores in FY24.
We expect to see some food cost deflation in FY24 which, in line with our
model, will be passed through to our franchise partners. In FY23 we
proactively took action to reduce our cost base and this will partially offset
the overall impact of inflation on our cost base in FY24. As a result, we
expect to deliver FY24 Underlying EBITDA in line with current market
expectations(8), and so delivering another year of further profit growth,
despite the continued uncertain consumer environment.
Trading in February 2024 has seen an improved sales and order trajectory
following a slow January, in part because we tactically held back on marketing
spend to support more strategic launches later in 2024. We expect the current
trajectory to continue but, due to performance in January, we expect orders
and like-for-like sales growth to be lower than in Q1 23. We are committed to
offering our customers compelling value and a new £4 lunch offer will be
launching shortly, providing an incremental opportunity to target different
parts of the day. We are confident that our focus on our strategic
priorities will deliver order count and like-for-like sales growth in FY24.
We remain focused on accelerating our execution and delivering sustainable,
profitable growth. Our asset-light business model and value proposition mean
we are well placed to succeed in an uncertain trading environment, and we are
confident that we will make further financial and strategic progress.
We are confident that our business model will continue to deliver meaningful
free cash flow growth over the medium-to-long term and, as well as building a
larger and more cash generative business, we remain committed to returning
surplus cash to shareholders.
Our technical guidance for FY24 is as follows:
· FY23 was a 53-week year
· Accounting treatment of technology platform costs to impact
EBITDA by low single digit millions
· Underlying depreciation & amortisation of between £19m to
£22m
· Underlying interest (excluding foreign exchange movements) in the
range of £16m to £19m
· Estimated underlying effective tax rate of c.24% 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
GMT today. The webcast and presentation can be accessed here
(https://www.investis-live.com/dominos/65ca4f13da722d0c00e78b7c/jwelq) 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 GMT today for
North American based investors not able to join the live presentation at 09:30
GMT this morning. Please click here
(https://www.investis-live.com/dominos/65ca4f13da722d0c00e78b7c/jwelq) to
register.
About Domino's Pizza Group
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 31
December 2023, we had 1,319 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. System sales represent the sum of all sales made by both franchised
and corporate stores to consumers in UK & Ireland. These are excluding
VAT.
2. 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 2021.
3. Q1 22 had a lower rate of VAT which is therefore included in the FY
comparator. An adjustment for the change in VAT rates described for system
sales relates to the impact of changes in the VAT applied on hot takeaway food
where the VAT inclusive price to customers did not change. The VAT rate in the
UK decreased from 20% to 5% on 15 July 2020, increased to 12.5% on 1 October
2021 and reverted back to 20% on 1 April 2022. System sales are consistently
reported on an exclusive of VAT basis. However, where the inclusive of VAT
price of an order remained the same on a total basis to the customer, over the
period of reduced VAT the exclusive of VAT price reported in system sales
increased. This leads to an increase in system sales from 15 July 2020 through
to 31 September 2021 when the VAT rate was reduced from 20% to 5%. From 1
October 2021, the rate increased from 5% to 12.5%. Where the inclusive of VAT
price of an order remained the same on a total basis, this leads to a
decrease in system sales compared to the period from 15 July 2020 and an
increase in system sales compared to the period before 15 July 2020. With the
increase in VAT from 1 April 2022 back up to 20%, where the inclusive of VAT
price remained the same to the consumer, there has been a negative impact on
system sales compared to the period from 15 July 2020 - 30 September 2021 and
1 October 21 - 31 March 2022, as the exclusive of VAT price of an order
decreased.
As an example, for an order where the inclusive of VAT price is £27:
· From 15 July 2020 to 31 September 2021, during the period where
VAT was 5%, the reported system sale would be £25.71
· From 1 October 2021 to 31 March 2022, during the period where VAT
was 12.5%, the reported system sale would be £24.00
· From 1 April 2022 onwards, where the VAT rate is 20%, the
reported system sale would be £22.50
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.
4. Underlying is defined as statutory performance excluding
discontinued operations, and items classified as non-underlying which includes
significant non-recurring items or items directly related to merger and
acquisition activity and related instruments as set out in note 3. For FY23,
Underlying excludes the £40.6m profit on disposal of the German associate as
well as the £1.3m tax charge relating to historical share-based compensation
arrangements.
5. A £20m share buyback programme completed on 25 August 2023. The
£70m share buyback programme started on 29 August 2023 and at 31 December
2023 we had executed £63.9m. The remaining £6.1m of the programme completed
on 12 January 2024.
6. Kantar Worldwide Panel, bespoke market definition. FY23 is 52 weeks
to 24 December 2023, FY22 is 52 weeks to 25 December 2022. Takeaway market
combines both Delivery and Collection. Previously DPG had disclosed quarterly
market share. This gives the annual market share for FY23 and for FY22.
7. See separate RNS. Subject to Ireland competition commission
clearance.
8. Current mean of FY24 Underlying EBITDA expectations is £147.9m
with a range of £139.6m - £153.2m. Based on 8 analysts' forecasts.
FY23 performance summary
We delivered a strong full-year performance in a continued uncertain consumer
environment. Successful execution of our strategy and alignment with our
world-class franchise partners resulted in increased order count and robust
sales growth. In FY23 we were resolutely focused on our five focus areas, and
this resulted in our market share of the UK takeaway market increasing from
7.1% in FY22 to 7.2% in FY23 in a growing market.
Like-for-like system sales, excluding splits and the impact of VAT, were up
5.7% (on a 52-week basis), an increase from +5.3% in FY22. This is due to
working collaboratively with our franchise partners and giving our customers
great service and value.
Underlying EBITDA was up 3.6% compared to FY22 (53-week basis: +6.1%), driven
by an increase in system sales volume, material acceleration of store openings
and the pass-through of food costs to our franchise partners.
Statutory profit after tax was up 40.9% on FY22 as a result of profit from the
disposal of the German associate, generating a profit of £40.6m recorded in
non-underlying results.
Free cash flow generated by the business was £97.0m, an increase from £79.0m
in FY22 driven by increased EBITDA and working capital management.
Net debt decreased by £20.5m from the start of FY23 to £232.8m with Net
debt/EBITDA leverage decreasing to 1.77x (excluding IFRS 16) within our target
Net debt / EBITDA leverage range of 1.5x-2.5x. The receipt of £79.9m from the
disposal of our German associate in June 2023 and good cash generation was
offset by £93.3m of share buybacks.
The continued strong performance of the business means that, in line with our
capital allocation framework, we have proposed a final dividend of 7.2p per
share, giving a full year dividend of 10.5p per share, a 5.0% increase
compared to the prior year.
Accelerating growth
Our priority is to leverage the existing platform to accelerate growth in the
core UK & Ireland business and drive earnings. Following a thorough and
detailed review, we see a significant opportunity to accelerate new store
openings. Using updated analysis, we have identified opportunities across new
territories as well as fortressing existing geographies. More importantly, we
have a franchisee base who are hungry for growth and have exceptional
second-generation talent who want to grow their businesses.
In March 2021, we put in place a target to open 200 new stores in the medium
term. Since that target was put in place, we have opened 133 stores and, with
in excess of 70 stores expected to be opened in 2024, we are now in a position
to upgrade our store target.
We have strong alignment with our franchisees, and we now expect to have in
excess of 1,600 stores in the UK & Ireland by the end of 2028 with the
potential for this to be in excess of 2,000 stores in 2033.
As a result of our store growth and continued focus on our core capabilities
of giving our customers compelling value, great service, and an enhanced
digital experience, we are now able to upgrade our £1.6bn-£1.9bn system
sales target put in place in March 2021.
We now expect to deliver £2.0bn system sales in the UK & Ireland by the
end of 2028, and we see potential for this to be in excess of £2.5bn system
sales in the UK & Ireland in 2033.
Since March 2021, we have built a disciplined track record, announcing £427m
of shareholder returns, whilst also continuing to invest in the business. DPG
is a highly cash generative, asset light business. We are rigorously focused
on accelerating organic growth and pursuing value enhancing inorganic growth
opportunities to build a larger and more cash generative business. We are
confident that this strategy will deliver meaningful free cash flow growth
over the medium-to-long term and remain committed to returning surplus cash to
shareholders.
Alongside investment in the core business, which remains our top priority, we
will continue to focus on reallocation of capital within the corporate estate
and joint ventures to improve returns and will assess additional growth
opportunities, where we have a growing pipeline. We are committed to an
asset-light business model and our strategy will centre on acquiring,
strengthening and then ultimately redistributing stores in the estate.
Core UK & Ireland business
In FY24, we plan to further sharpen our execution across all areas of the
business to give our customers better service and better value. We will
continue with the same core priorities which drove our performance in FY23. We
have narrowed our focus to four areas as the technology platform projects
which we were focused on in FY23 are now largely complete.
1. Franchisee profitability and supply chain
Our franchisees have navigated the challenging conditions faced by everyone in
the industry in the last few years supremely well and are now primed for the
next stage of growth. The operations of our franchisees are strong, but we can
always be better. Together, we worked to materially improve our customer
service in FY23, but we are both focused on driving continued improvement. In
FY24, we intend to leverage investments we have made in areas such as GPS
technology to improve performance and give our customers better service.
Our supply chain is the backbone of our business, and it is the foundation for
us to unlock growth. In the last few years, our supply chain has maintained an
outstanding level of accuracy and availability which has enabled our
franchisees to consistently give our customers what they want and when they
want it. We are resolutely focused on maintaining these exceptional levels of
service.
Within our supply chain we are always looking for ways of operating in a more
efficient manner and have made great strides over the last few years. In areas
such as transport efficiency, removing packaging from the system and the roll
out of cages and dollies, we have delivered efficiencies. Our new ERP system
will enable us to deliver process efficiencies across the system. Our team
will continue to search for efficiencies as well as looking at introducing
more automation into certain parts of the supply chain.
2. Value for Money
Customers will always be our number one priority. Maintaining compelling value
is essential, and we will continue to do this for our customers. As part of
our continued drive to give our customers more choice, our research has shown
that many of our customers would like to see a lighter, cheaper Domino's offer
for lunch. Our stores are open, but our share of lunch is small, so this is a
growth opportunity for us. As a result, we have developed a new lunch menu,
including wraps, which meets consumer needs for a taste of Domino's, which is
easier to eat on the go and at lower price points than their weekend
favourites. We will be launching a new £4 lunch offer in April, supported by
an integrated national media campaign.
The performance of the collections channel in the last few quarters has been
pleasing, and collections have continued to demonstrate strong growth.
However, we do still remain under-penetrated in collections compared to other
Domino's systems around the world, so as we accelerate our store openings, we
see a significant opportunity to increase our collection orders.
Delivery is core to our business, and nobody delivers like Domino's. Having
navigated the introduction of a delivery charge, which is now a market norm,
we are focused on returning deliveries to growth and this goes hand in hand
with our enhanced focus on customer service. Along with our franchise partners
we are focused on improving average delivery times and eliminating deliveries
which are late to our customers.
Offering new products to our customers is essential and we will continue to
innovate. Our innovation pipeline continues to build under our outstanding
innovation team, and our trials performed well in FY23. As we look ahead, our
pipeline is exciting and we look forward to bringing these great products to
our customers.
3. Digital acceleration
Over 70% of our digital orders are now on the app, and we have a significant
opportunity to use this platform to drive growth. The primary opportunity here
is increasing our customers' average order frequency over time. Currently, our
customers order on average less than five times a year. We have attracted a
significant amount of our active customer base onto the app, with numbers
growing materially during FY23. In FY24, we are focused on leveraging this
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
appropriate and compelling way than we were previously able to.
We are now in a position to introduce a loyalty programme, but it is important
that we do this in a disciplined, structured, and profitable way. We will not
rush into this with an active customer base of c.13.5 million. We will take a
three-stage approach to this. We will begin with a simple test in Q1 24 to
assess how offering a free incentive impacts customer order behaviour. Subject
to this test, a second stage, larger scale test would be launched by Q3 24.
Pending the success of this test, we will assess the optimal structure for a
loyalty programme for a potential 2025 launch.
The development of our new ecommerce platform is now complete, which will
enable us to be more agile with our marketing and promotions. To help drive
frequency, we are now in a position to work with our franchisees to give our
customers more choice such as premium toppings and more flexible meal deals.
4. Convenience - accelerate store openings
New store openings will always be a core driver of growth. The pipeline is
strong for FY24, and we are confident that we will open in excess of 70 stores
this year. There is a significant opportunity for growth, and we are clearly
under-penetrated compared to competitors in the UK and also other Domino's
systems.
We will continue to open stores in new virgin territories, continue to focus
on splits where appropriate but also there is a heightened focus on smaller
address count territories. These have limited competition, and our strong
national brand is a significant competitive advantage. Some of the recent
openings in smaller address count areas have produced strong levels of sales.
Capital allocation framework
As we accelerate our growth, we will continue with our four-point approach,
introduced in March 2021, to deploy the cash generated by the business.
Investment to drive core growth in the business will remain our number one
priority. We have announced the distribution of £171m in dividends to our
shareholders since March 2021, and we will maintain our progressive and
sustainable dividend policy.
The third pillar of our capital allocation framework is investing in
additional growth opportunities. Since March 2021, activity in this area has
been limited and we see significant opportunities to drive growth in this
area.
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 and have returned £256m through share buybacks since March 2021.
Additional long-term growth opportunities
We will continue to assess value enhancing opportunities to build a larger and
more cash generative business and we have a growing pipeline of opportunities.
These opportunities will be evaluated and executed selectively over time in a
disciplined manner and will never come at the expense of the core business.
The first area is our approach to the capital we have invested in our
corporate stores and investments. We currently have 31 corporate stores in the
London area, but we also have joint ventures, associates, and investments over
a further c.130 stores across the UK & Ireland. A core part of our capital
allocation framework is the efficient deployment of capital and we are
actively assessing our corporate store estate and joint ventures at pace to
drive shareholder value. In February 2024, an experienced Domino's operator,
Stoffel Thijs, joined DPG as the new Director of Joint Ventures and Corporate
Estates to drive performance in this area.
Another area where we see an opportunity to drive growth in the UK &
Ireland is adding a second brand. We have world class franchisees who are
hungry for growth, a significant customer base, an outstanding national supply
chain and the necessary digital, IT & marketing capability. We also see an
opportunity to create value by investing in other international Domino's
markets. We now have deep experience, with enhanced capability both within the
team and at the Board level, of operating and delivering profitable,
international growth. The addition of a second brand or investment in other
international Domino's markets would only happen if a rigorous and disciplined
set of guardrails were met, and we were certain that we could create long-term
shareholder value.
FY23 trading review
System sales represent all sales made by both franchised and corporate stores
to consumers. Total system sales were £1,541m, up 5.8% on FY22 on a 52-week
basis. Like-for-like system sales across UK & Ireland increased by 4.1%,
excluding split stores, or by 2.9% including splits. Like-for-like system
sales, excluding splits and the different VAT rate in Q1 22, increased by
5.7%.
UK & Ireland on a 52-week basis Q1 23 Q2 23 H1 23 Q3 23 Q4 23 H2 23 FY23
LFL inc. splits +3.5% +7.3% +5.3% +2.4% (1.2)% +0.5% +2.9%
LFL exc. splits +4.4% +8.4% +6.3% +3.7% +0.2% +1.8% +4.1%
2023 UK VAT rate 20% 20% 20% 20%
2022 UK VAT rate 12.5% 20% 20% 20%
LFL inc. splits and ex VAT +9.8% +7.5% +8.6% +2.5% (1.0)% +0.6% +4.5%
LFL exc. splits and ex VAT +10.7% +8.6% +9.7% +3.7% +0.4%* +2.0%* +5.7%
* 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.
The quarterly analysis of this performance, as well as the UK VAT rate for
each period, is in the table above.
Our trading in FY23 was driven by our key areas of focus: giving customers'
value for money through compelling national value campaigns and our franchise
partners' focus on service; our digital acceleration; the continued
incremental benefit of being on the Just Eat platform and the acceleration in
new store openings.
UK & Ireland on a 52-week basis LFL inc. splits (year-on-year growth) Total (all stores)
Sales Volume Price Orders (m) YOY Order Growth
Total
Q1 3.5% (7.2)% 10.7% 18.0m 2.8%
Q2 7.3% (6.0)% 13.2% 17.4m 2.8%
H1 5.3% (6.6)% 11.9% 35.4m 2.8%
Q3 2.4% (7.5)% 9.9% 16.7m (1.2)%
Q4 (1.2)% (5.8)% 4.6% 18.4m (0.3)%
H2 0.5% (6.6)% 7.1% 35.1m (0.7)%
FY 2.9% (6.6)% 9.4% 70.5m 1.0%
Delivery only
Q1 (0.9)% (12.3)% 11.4% 12.1m (4.9)%
Q2 2.9% (9.8)% 12.7% 11.1m (3.9)%
H1 0.9% (11.1)% 12.0% 23.2m (4.4)%
Q3 (1.1)% (10.3)% 9.2% 10.3m (6.3)%
Q4 (3.2)% (7.5)% 4.2% 11.7m (4.1)%
H2 (2.2)% (8.8)% 6.6% 22.0m (5.1)%
FY (0.7)% (9.9)% 9.2% 45.2m (4.8)%
Collection only
Q1 22.5% 12.4% 10.1% 5.9m 23.0%
Q2 24.0% 6.6% 17.4% 6.3m 17.3%
H1 23.3% 9.4% 13.9% 12.2m 20.0%
Q3 14.3% 0.4% 13.8% 6.3m 8.4%
Q4 5.8% (1.0)% 6.9% 6.8m 7.0%
H2 9.8% (0.3)% 10.1% 13.1m 7.6%
FY 15.9% 4.2% 11.7% 25.3m 13.3%
Total orders in the year grew by 1.0%. This was driven by a 13.3% growth in
collection orders, offset by a 4.8% decline in delivery orders.
Collections continued to show strong growth throughout the year. Collection
represents the most efficient labour channel, with delivery effectively
outsourced to the customer. Delivery orders remained under pressure in FY23,
and we are focused on returning them to growth in FY24.
Corporate stores
We directly operate 31 stores in the London area. In FY23, corporate stores'
revenue decreased by £3.7m to £32.5m (53 weeks: £33.1m), primarily as a
result of a smaller number of stores following the sale of five corporate
stores in Q4 22. Corporate stores' EBITDA was £0.9m, £3.1m lower than FY22,
largely due to the comparator period having a VAT benefit in Q1 22 and a
£2.1m gain in FY22 from the disposal of five stores.
German associate
Completion of the disposal of our German associate occurred on 5 June 2023.
£79.9m of proceeds were received, comprising a put option exercise price
of £70.6m and the repayment of a £9.3m loan. Following the exercise of
the put option on 10 November 2022, there was no contribution from the German
associate in FY23 (FY22: £2.6m).
Capital allocation
In FY23, we generated £97.0m of free cash. We invested £20.8m in capital
investment in our core business and have proposed a final dividend of 7.2p,
which combined with the interim dividend of 3.3p represents a 5.0% increase
compared to FY22. We announced a £20m share buyback in May 2023 which
completed in August 2023. In August 2023, we also announced a £70m buyback
following the disposal of the German associate, and this completed in January
2024.
Progress against our focus areas in FY23
We are pleased with the strategic progress we made in 2023 and are resolutely
focused on accelerating the execution of our strategy. As we have previously
outlined, we had five key areas of focus for 2023 to drive this acceleration.
Franchise partner profitability / Organisation
We were clear at the start of FY23 that our priority this year was to work
with our franchise partners to help improve their store profitability, despite
significant inflationary pressures.
Our franchise partners, once again, delivered an outstanding performance in
uncertain market conditions, and we all benefited from a system which is
aligned. In FY23, our franchise partners delivered great value to customers
through successful national campaigns, benefited from the roll out on Just
Eat, delivered material improvements in service, and accelerated our new store
openings.
Despite the significant inflationary pressures, particularly in labour and
food costs, our franchise partners were able to broadly maintain their EBITDA
margins. Based on the unaudited data submitted to us by franchise partners,
average store EBITDA for all UK stores in FY23 was approximately £158k,
equivalent to a 13% EBITDA margin. This compares to £166k or 14% EBITDA
margin achieved in FY22, when adjusted for VAT, and £182k or 16% EBITDA
margin in FY22 unadjusted for VAT.
In FY23, we continued to invest in growth, in line with the framework we
agreed with our franchise partners in December 2021 and working with our
suppliers to look for efficiencies and driving operational efficiencies. We
have continued to support our franchise partners with incentives to accelerate
new store rollouts, the food cost rebate mechanism and a dedicated programme
of national roadshows focused on improving service and quality of product. We
have worked closely with key suppliers to ensure we have optimal stock cover
and to minimise cost inflation where possible for our franchise partners. Our
world-class supply chain continues to deliver outstanding performance. We
maintained 100% availability and 99.9% accuracy in a period of challenging
market conditions.
We reshaped our Executive leadership team to ensure that we are leaner and can
make faster decisions. We also undertook a wider review and restructure of our
organisation to focus on increasing agility, focus and profitability. As part
of the review of the organisation we prioritised talent development to nurture
and develop future leaders of the business. Together with our franchisee
partners, we are now able to act more quickly in response to the changes in
the market that we are seeing.
Value for Money
Alignment with our franchise partners allowed us to offer our customers
compelling value in FY23. We define 'value' as the quality of the product,
combined with the service and image divided by price. Our strong value message
continued to resonate with consumers, and our focus on value for money is
essential in the current environment. We started FY23 with a strong value
offer with our successful 'Price Slice' deal in the UK which had £8, £10 and
£12 price points for small, medium, and large pizzas. In Q2 23, we launched a
50% off app-only deal which gave customers great value and drove more
customers to our app. In Q3 23, we maintained our 50% off app deal which also
contributed to the growth in app customers, and in Q4 23 we continued to offer
customers compelling value.
Customer service performance, including average delivery times and percentage
of deliveries on time, improved significantly in FY23 relative to FY22.
Average delivery times were 25 minutes in FY23 compared to over 26 minutes in
FY22. We also completed the full roll out of our enhanced GPS solution to all
stores in FY23. This will help stores manage labour through more efficient
driver route planning and better co-ordination with the store, as well as
allowing drivers to use their own device. It also enables customers to see
exactly where their order is and provides an accurate delivery time.
We aim to attract and retain new customers through a strong pipeline of new
pizzas, sides, and desserts, and to increase order frequency through
innovation of our core menu. In FY23, we launched Vegan American Hot, to offer
further choice to our vegan and flexitarian customers. This was followed by
the launch of the Ultimate Chicken Mexicana, which was our best-selling
innovation in the last five years. We launched a number of new trials aimed at
increasing the menu choice available to customers at different parts of the
day to drive incremental sales. These included fries, loaded fries and wraps,
and these have performed ahead of expectations.
Digital
The Domino's app is 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.
Orders placed on our app, as a percentage of total online orders, were 73.8%
in FY23, an increase of 21.6ppts vs. FY22. App downloads were 63% higher vs.
FY22, and the number of active app customers reached 9.0m, an increase of 48%
compared to FY22.
The app is expected to be a material contributor to future system sales
growth, and driving more orders through the app will be a key focus in 2024.
Convenience
Alongside our franchisees, we achieved a material acceleration in our new
store openings in FY23 . We opened 61 new stores with 23 different franchise
partners compared to 35 stores in FY22 from 22 different franchise partners.
This acceleration was a result of rebuilding our store-opening pipeline with
our franchise partners and the continued opportunity we see for growing the
store estate in the UK & Ireland. The new stores are all in quality
locations and are trading ahead of expectations, with particular strength in
new territories with smaller address counts, giving an opportunity to
accelerate our growth.
FY23 was the first full year of Domino's being available to order on the Just
Eat platform, and this was a driver of sales growth, bringing in incremental
customers and orders throughout the year. Following Domino's Pizza Inc.'s
global agreement with Uber Eats, in January 2024 DPG started a trial which is
now live in c.630 stores across the UK & Ireland. The data-led trial will
enable some customers to order Domino's Pizza via the Uber Eats platform, but
the pizzas will be delivered by our own Domino's delivery drivers, which is
the same approach as in our relationship with Just Eat. The trial aims to
complement our existing partnership with Just Eat and will enable us to fully
understand if there are benefits for our customers, our franchise partners,
and our business in partnering with two platforms in the UK & Ireland.
Technology platform projects
In FY23, we focused on two important technology projects. First, at the end of
FY21 we began work on a new ecommerce platform to create significant
capabilities for our digital channels, remove constraints for our franchise
partners, and ultimately provide an enhanced experience for our customers.
Development of the ecommerce platform has now been completed on time and on
budget, and cutover of the various channels is in progress. The new platform
will enable us to accelerate delivery and innovation through highly automated
processes that are significantly more cost efficient than our current system.
Importantly, it also results in a more secure and resilient platform to
seamlessly scale for our next stage of growth.
Secondly, we continued the work which started in FY22 on a new ERP system
which will enable us to improve processes across our business and generate
efficiencies in our supply chain. The ERP build is progressing well and
completion remains on track in FY24.
Operating expenditure in FY23 was elevated by £8.9m of one-time spend related
to the implementation of these projects, with the remaining ERP implementation
expenditure expected to be in the low single-digit millions in FY24 as
previously guided.
Delivering our sustainable future
Our corporate purpose is to Deliver a Better Future Through Food People Love.
This ambition is underpinned by our new sustainability strategy called,
'Connect the Dots' which we published in H1 23. Our Connect the Dots strategy
guides our efforts to deliver on our corporate purpose and achieve a range of
sustainability goals across five core themes: our customers, our people, our
environment, our sourcing, and our communities. We are making good progress
against our targets.
In H1 23, we continued the ongoing trial of our 650 calorie Cheeky Little
Pizzas and opened our first lower carbon store in Hammersmith to support our
environmental efforts. In H2 23, we implemented further changes across our
business including preparing our first carbon reduction roadmap, and a new
strategy for offering a wider choice of healthier menu options. We look
forward to updating on these and our other key focus areas in the Group's
first sustainability report which will be published in H1 24.
Financial review
· The 2023 year comprised 53 weeks whereas the 2022 year comprised
52 weeks. In this section, all figures are based on a 52 week versus 52-week
basis unless otherwise stated.
· Underlying EBIT of £113.2m (53 weeks: £116.2m), an increase of
£3.4m vs. FY22 as a result of higher trading and supply chain profit despite
increases of £3.2m in technology platform costs.
· Statutory profit after tax of £115.0m on a 53-week basis, up
from £81.6m primarily as a result of the disposal of the investment in the
German associate which generated a non-underlying profit on disposal of
£40.6m.
· Underlying Free cash flow increased by £18.0m to an inflow of
£97.0m, due to increased EBITDA and working capital, which benefited from the
reversal of outflows incurred in FY22.
· Overall net debt decreased by £20.5m largely as a result of the
£79.9m cash received on the disposal of the investment in the German
associate which was offset by dividends, share buybacks and capital
expenditure.
· Total dividend for FY23 of 10.5p per share, with final dividend
of 7.2p proposed to be paid on 9 May 2024 to shareholders on the register as
at 5 April 2024.
53 weeks ended 52 weeks ended 52 weeks ended
31 December 2023
24 December 2023
25 December 2022
£m
£m
£m
Reported (Unaudited) Reported
Group Revenue 679.8 667.0 600.3
Underlying EBIT before contribution of investments 114.2 111.2 102.2
Contribution of investments 2.0 2.0 5.0
German associate contribution - - 2.6
Underlying EBIT 116.2 113.2 109.8
Underlying net finance costs (14.5) (14.2) (10.9)
Underlying profit before tax 101.7 99.0 98.9
Underlying tax charge (26.0) (25.3) (17.3)
Underlying profit after tax 75.7 73.7 81.6
Non-underlying items 39.3 39.3 -
Statutory profit after tax 115.0 113.0 81.6
EBITDA reconciliation
Underlying EBITDA 138.1 134.8 130.1
Depreciation, amortisation and impairment (21.9) (21.6) (20.3)
Underlying EBIT 116.2 113.2 109.8
We are pleased to have delivered strong financial performance in the year,
despite the £10.8m costs incurred investing in our technology platform
projects. Underlying EBIT increased by £3.4m to £113.2m (53 weeks: £116.2m)
due to higher supply chain profit driven by annualisation on price increases
from the prior year. Statutory profit after tax increased to £115.0m from
£81.6m, primarily due to the profit on disposal of the investment in the
German associate which is treated as a non-underlying item.
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 £1,540.5m (53 weeks: £1,571.7m), up
5.8% due to growth in order count alongside ticket increases.
53 weeks ended 52 weeks ended 52 weeks ended
31 December 2023
24 December 2023
25 December 2022
£m
£m
£m
Reported (Unaudited) Reported
Supply chain revenue 479.1 470.7 411.4
Royalty, rental & other revenue 85.6 83.5 80.5
Corporate stores revenue 33.1 32.5 36.2
NAF & ecommerce 82.0 80.3 72.2
Total 679.8 667.0 600.3
Reported revenue increased by £66.7m to £667.0m (53 weeks: £679.8m), an
increase of 11.1%, primarily driven by increases in supply chain revenue. This
was principally as a result of increased 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 increased by £3.0m (53 weeks: £5.1m) mainly due to
higher system sales.
Revenue for our directly operated corporate stores in London decreased by
£3.7m (53 weeks: £3.1m) due to a lower number of stores as a result of the
disposal of five stores at the end of 2022. NAF and ecommerce revenue was up
£8.1m (53 weeks: £9.8m) 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 EBIT increased by £3.4m (53 weeks: £6.4m) to £113.2m (53 weeks:
£116.2m). This is driven by a £12.8m increase (53 weeks: £15.8m) in
underlying trading, which includes a £1.7m lower contribution from the NI JV,
and a benefit of £2.3m relating to the sale of freehold property. This was
offset with a £3.7m increase in technology platform costs, £2.6m lower
contributions from the German associate following the disposal, £1.3m
increase in depreciation and amortisation and a £1.0m lower EBITDA from
corporate stores. This is further offset with prior period benefits including
a £2.1m benefit from the sale of corporate stores and a £1.0m uplift in the
investment in Shorecal.
The Group's continuing investment in two technology platform projects, the
ecommerce platform replacement and the new ERP system, resulted in a total
cost of £10.8m recognised within EBIT. These costs are explained further
below.
As a result of the Group exercising the option to sell our investment in the
German associate, we ceased accounting for our share of profits from the
exercise date, 10 November 2022. This resulted in no contributions being
accounted for in the period, which is a £2.6m decrease on the prior year.
Technology platform costs
FY23 EBITDA Amortisation and impairment Profit Capital expenditure £m
£m
£m
before
tax
£m
ERP (6.4) (1.4) (7.8) -
ecommerce platform (2.5) (0.5) (3.0) (5.7)
Total (8.9) (1.9) (10.8) (5.7)
FY22 EBITDA Amortisation and impairment Profit Capital expenditure £m
£m
£m
before
tax
£m
ERP (2.7) (0.8) (3.5) -
ecommerce platform (2.5) (1.6) (4.1) (1.9)
Total (5.2) (2.4) (7.6) (1.9)
During the year, 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 were £10.8m.
Within EBITDA, costs of £8.9m have been recognised, of which £6.4m relates
to the ERP, and £2.5m relates to the ecommerce platform. 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. For the ERP, this represents the full spend on the project
in the year.
For the ecommerce platform, this relates to the percentage spent on the
cloud-based element of the project. An additional £5.7 has been recorded in
capital expenditure relating to the ecommerce platform.
Within amortisation, a total cost of £1.9m is recognised. This consists of
£1.4m relating to the ERP for accelerated depreciation of the current
platform, and £0.5m relating to the ecommerce platform.
The ecommerce platform is largely developed with ongoing expenditure expected
to complete at the end of Q1 24. The ERP system is on track for completion in
2024.
Interest
Net underlying finance costs in the period were £14.2m (53 weeks: £14.5m),
an increase of £3.3m (53 weeks: £3.6m). In July 2022, the Group successfully
refinanced the existing revolving credit facility with a facility limit of
£200m and issued £200m Private Placement Loan Notes at a fixed rate of
4.26%. The increase in variable rates under the revolving credit facility and
the impact of the refinancing in 2022 largely contributed to the increase in
net finance costs.
Taxation
The underlying effective tax rate for 2023 was 25.6% (2022:17.5%). An
additional tax charge of £1.5m has been recorded relating to transfer pricing
between our UK and Irish subsidiaries relating to historical periods. This
impacts the effective tax rate by 1.5%. Excluding this, the underlying
effective tax rate would be 24.1% which is lower than the UK statutory rate of
25% effective April 2023, due to the contribution of joint ventures,
associates, and investments.
Profit after tax and non-underlying items
Underlying profit after tax was £73.7m (53 weeks: £75.7m), a decrease from
£81.6m in 2022 mainly due to an £8.0m increase in taxation (53 weeks:
£8.7m) and £3.3m increase in net finance costs (53 weeks: £3.6m) discussed
above.
Statutory profit after tax was £115.0m, an increase of £33.4m, which
includes £40.6m profit on disposal of the investment in the German associate
which has been classified under non-underlying during the period. Proceeds of
£70.6m were received for the investment with a book value of £32.4m, which
together with a currency translation gain of £2.5m and professional fees of
£0.1m resulted in the profit on disposal of £40.6m.
Earnings per share
Underlying basic EPS decreased to 18.4p on a 53-week basis, which is due to a
decrease in underlying profit after tax. This was partially offset with a
lower number of weighted average shares due to the share buyback programmes.
Statutory EPS increased to 28.0p from 18.8p, largely due to the profit on
disposal of the investment in the German associate.
Free cash flow and Net debt
53 weeks ended 52 weeks ended
31 December 2023
25 December 2022
£m
£m
Underlying EBITDA 138.1 130.1
Add back non-cash items
- Contribution of investments (2.0) (7.6)
- Other non-cash items 1.9 (1.3)
Working capital 10.2 (17.5)
IFRS 16 - net lease payments (6.3) (6.3)
Dividends received 3.0 5.1
Net interest (13.1) (4.8)
Corporation tax (22.9) (18.7)
Free cash flow before non-underlying cash items 108.9 79.0
Non-underlying cash (11.9) -
Free cash flow 97.0 79.0
Capex (20.8) (19.7)
Repayment from German associate 9.3 1.7
Market access fee proceeds - 8.6
Disposals 70.6 7.0
Disposal of property, plant and equipment 4.4 -
Dividends (41.9) (43.8)
Share transactions - Buybacks (93.3) (77.5)
Share transactions - EBT share purchase (4.5) (7.4)
Movement in net debt 20.8 (52.1)
Opening net debt (253.3) (199.7)
Movement in capitalised facility arrangement fee (0.6) (1.1)
Forex on net debt 0.3 (0.4)
Closing net debt (232.8) (253.3)
Last 12 months net debt/Underlying EBITDA ratio (excl. IFRS 16) 1.77x 2.06x
Net debt decreased by £20.5m during the period to £232.8m, with free cash
flow generated of £97.0m and £79.9m received from the disposal of the
investment in the German associate, of which £9.3m related to the loan
repayment. This was offset with capital expenditure of £20.8m and returns to
shareholders through dividends of £41.9m and share buybacks of £93.3m.
Free cash flow was £97.0m, an increase of £18.0m on the previous year.
Underlying EBITDA was £138.1m, an increase of £8.0m due to higher supply
chain profit driven by annualisation on price increases from the prior year.
There was a working capital inflow of £10.2m (2022: outflow of £17.5m). This
predominantly relates to a £1.3m relates to a decrease in debtors, a £5.6m
inflow relating to the timing of creditor payments at year end, and an inflow
of £9.6m due to higher accruals balances. This was offset with an outflow of
£4.5m due to the unwind of the timing of cash receipts and payments for
online sales following the strong performance in the final week of FY22 as
well as an outflow of £3.1m due to a decrease in the NAF creditor. These
movements largely offset the working capital outflow reported in 2022.
Net IFRS 16 lease payments remained constant with the prior year at £6.3m.
Dividends received of £3.0m include £2.2m from our associates and joint
ventures and £0.8m from our investment in Shorecal.
Net interest payments of £13.1m increased from £4.8m as a result of
increased interest charges on the new debt facilities put in place in July
2022 and timing of the six-monthly interest payments on the private placement
loans, the first two payments of which were paid in January 2023 and July
2023.
A non-underlying payment of £11.9m was made during the year which relates to
historical share-based compensation arrangement with grant dates dating from
2003-2010.
Capital expenditure increased to £20.8m from £19.7m. Of this amount £9.6m
relates to total investment in ecommerce, £3.7m relates to development and
expansion of our supply chain centre in Ireland and £1.8m relates to the
installation of solar panels at our supply chain centres.
In June 2023, the Group received £79.9m for the disposal of the German
associate, of which £70.6m relates to the disposal of the investment and
£9.3m relates to the repayment of a loan.
Disposal of property, plant and equipment of £4.4m relates to the disposal of
freehold property in March 2023.
Of the £41.9m dividends paid in the year, £28.3m relates to the final FY22
dividend paid in May 2023, and £13.6m relates to the FY23 interim dividend
paid in September 2023.
The share buyback cash outflow of £93.3m includes the remaining £8.9m of the
£20.0m share buyback programme announced in November 2022, £20.0m of the May
2023 programme and £63.9m of the £70.0m buyback announced in August 2023
together with £0.5m of stamp duty. The remaining £6.1m outstanding balance
of the August 2023 programme was subsequently completed in January 2024.
Capital employed and balance sheet
At 31 December 2023 At 25 December 2022
£m
£m
Intangible assets 28.8 30.0
Property, plant and equipment 97.6 96.5
Investments, associates and joint ventures 35.5 36.7
Deferred consideration 0.3 0.3
Right-of-use assets 19.3 21.3
Net lease liabilities (21.6) (23.4)
Provisions (3.8) (15.3)
Working capital (44.9) (27.9)
Net debt (232.8) (253.3)
Tax (6.3) (1.7)
Share buyback obligations (6.1) (8.9)
Held within assets and liabilities held for sale - 32.9
Net liabilities (134.0) (112.8)
Intangible assets decreased by £1.2m to £28.8m, as additions of £9.2m on
software assets were offset with amortisation of £10.7m.
Property, plant and equipment increased by £1.1m to £97.6m due to additions
of £9.0m largely for our supply chain centre in Ireland and the installation
of solar panels across our supply chain centres. This spend was offset against
depreciation of £5.9m and the disposal of freehold property with a net book
value of £1.9m during the period.
Investments, associates and joint ventures decreased by £1.2m as a result of
£1.7m lower contributions from the NI JV offset with the dividends received.
Right-of-use assets of £19.3m represent the lease assets for our corporate
stores, warehouses and equipment leases recognised under IFRS 16 in the
current period. The net lease liability is £21.6m (2022: £23.4m). There have
been no significant changes in the lease portfolio during the period.
Working capital increased by £17.0m to a net working capital liability of
£44.9m. The decrease is greater than the movement in free cash flow as a
result of the loan to the German associate being settled during the period
which is shown in the disposals line in the cash flow statement.
Net debt decreased to £232.8m for the reasons set out in the free cash flow
section above.
A share buyback obligation of £6.1m relates to the remaining amount committed
under the £70m share buyback programme announced in August 2023.
During current period, the German associate was sold for a consideration of
£70.6m, this was treated as an asset held for sale in 2022.
Total equity has decreased by £21.2m, to a net liability position of
£134.0m, largely due to the profit on disposal of the German associate offset
with dividend payments and share buybacks. There are sufficient distributable
reserves in the standalone accounts of Domino's Pizza Group plc for the
proposed dividend payment.
Treasury management
The Group holds £400m in debt facilities of which £200m relates to an
unsecured multi-currency revolving credit facility, expiring in July 2027, and
£200m sterling-denominated US Private Placement loan notes that mature in
July 2027.
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 31 December 2023 was
£112.9m.
The private placement loan notes incur interest at a fixed rate at 4.26%.
Interest is paid every six months.
The financial covenants under both 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.
We ended the year with Net debt of £232.8m, and the last 12 months Net
debt/EBITDA ratio excluding the impact of IFRS 16 decreased to 1.77x from
2.06x, as a result of increased EBITDA performance in the year and a lower Net
debt level.
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
53 weeks ended 31 December 2023
Note 53 weeks ended 31 December 2023 52 weeks ended 25 December 2022
£m
£m
Underlying Non-underlying* Total Underlying Non-underlying* Total
Revenue 2 679.8 - 679.8 600.3 - 600.3
Cost of sales (363.6) - (363.6) (326.8) - (326.8)
Gross profit 316.2 - 316.2 273.5 - 273.5
Distribution costs (42.6) - (42.6) (39.5) - (39.5)
Administrative costs (161.7) - (161.7) (131.8) - (131.8)
Share of post-tax profit of associates and joint ventures 2.0 - 2.0 6.6 - 6.6
Other income 2.3 40.6 42.9 1.0 - 1.0
Profit/(loss) before interest and taxation 116.2 40.6 156.8 109.8 - 109.8
Finance income 13.7 - 13.7 13.1 - 13.1
Finance costs (28.2) - (28.2) (24.0) - (24.0)
Profit/(loss) before taxation 101.7 40.6 142.3 98.9 - 98.9
Taxation 7 (26.0) (1.3) (27.3) (17.3) - (17.3)
Profit/(loss) for the period 75.7 39.3 115.0 81.6 - 81.6
* Non-underlying items are disclosed in note 3
Earnings per share
- Basic (pence) 8 18.4 28.0 18.8 18.8
- Diluted (pence) 8 18.4 27.9 18.7 18.7
Group statement of comprehensive income
Note 53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Profit for the period 115.0 81.6
Other comprehensive (expense)/income:
Items that may be subsequently reclassified to profit or loss:
- Exchange (loss)/gain on retranslation of foreign operations (0.6) 1.5
- Transferred to income statement on disposal 13 (2.5) -
Other comprehensive (expense)/income for the period, net of tax (3.1) 1.5
Total comprehensive income for the period 111.9 83.1
53 weeks ended 31 December 2023
Group balance sheet
As at 31 December 2023
Note At At
31 December 25 December
2023 2022
£m £m
Non-current assets
Intangible assets 10 28.8 30.0
Property, plant and equipment 97.6 96.5
Right-of-use assets 19.3 21.3
Lease receivables 192.9 185.6
Trade and other receivables 3.7 3.4
Investments 10.3 11.3
Investments in associates and joint ventures 11 25.2 25.4
377.8 373.5
Current assets
Lease receivables 15.8 14.4
Inventories 11.4 11.6
Trade and other receivables 51.6 55.9
Deferred consideration receivable 0.3 0.3
Current tax assets 3.5 1.7
Cash and cash equivalents 52.1 30.4
Assets held for sale 14 - 32.9
134.7 147.2
Total assets 512.5 520.7
Current liabilities
Lease liabilities (21.1) (20.0)
Trade and other payables (111.4) (98.6)
Current tax liabilities (2.8) -
Provisions (2.0) (1.0)
Financial liabilities - share buyback obligation (6.1) (8.9)
(143.4) (128.5)
Non-current liabilities
Lease liabilities (209.2) (203.4)
Trade and other payables (0.2) (0.2)
Financial liabilities 12 (284.9) (283.7)
Deferred tax liabilities (7.0) (3.4)
Provisions (1.8) (14.3)
(503.1) (505.0)
Total liabilities (646.5) (633.5)
Net liabilities (134.0) (112.8)
Note At At
31 December 25 December
2023 2022
£m £m
Shareholders' equity
Called up share capital 2.1 2.2
Share premium account 49.6 49.6
Capital redemption reserve 0.5 0.5
Capital reserve - own shares (12.5) (9.0)
Currency translation reserve (2.6) 0.5
Accumulated losses (171.1) (156.6)
Total equity (134.0) (112.8)
Andrew Rennie
Director
11 March 2024
Group statement of changes in equity
53 weeks ended 31 December 2023
Share Share premium account Capital redemption reserve Currency translation reserve Accumulated losses Total shareholders' equity
£m
£m
£m
£m
£m
capital Capital reserve
£m
- own shares
£m
At 26 December 2021 2.3 49.6 0.5 (4.6) (1.0) (105.4) (58.6)
Profit for the period - - - - - 81.6 81.6
Other comprehensive income - exchange differences - - - - 1.5 - 1.5
Total comprehensive income for the period - - - - 1.5 81.6 83.1
Proceeds from share issues - - - 1.6 - - 1.6
Impairment of share issues(*) - - - 3.0 - (3.0) -
Share buybacks (0.1) - - (9.0) - (77.5) (86.6)
Share buyback obligations outstanding - - - - - (8.9) (8.9)
Share options and LTIP charge - - - - - 1.2 1.2
Tax on employee share options - - - - - (0.8) (0.8)
Equity dividends paid - - - - - (43.8) (43.8)
At 25 December 2022 2.2 49.6 0.5 (9.0) 0.5 (156.6) (112.8)
Profit for the period - - - - - 115.0 115.0
Other comprehensive expense - exchange differences - - - - (0.6) - (0.6)
Transferred to income statement on disposal - - - - (2.5) - (2.5)
Total comprehensive income for the period - - - - (3.1) 115.0 111.9
Proceeds from share issues - - - 0.5 - - 0.5
Impairment of share issues(*) - - - 1.0 - (1.0) -
Share buybacks (0.1) - - (5.0) - (93.2) (98.3)
Share buyback obligations satisfied - - - - - 8.9 8.9
Share buyback obligations outstanding - - - - - (6.1) (6.1)
Share options and LTIP charge - - - - - 3.8 3.8
Tax on employee share options - - - - - - -
Equity dividends paid - - - - - (41.9) (41.9)
At 31 December 2023 2.1 49.6 0.5 (12.5) (2.6) (171.1) (134.0)
*Impairment of share issues represents the difference between share allotments
made pursuant to the Sharesave schemes and the Long Term Incentive Plan, and
the original cost at which the shares were acquired as treasury shares into
Capital reserve - own shares.
Group cash flow statement
53 weeks ended 31 December 2023
Note 53 weeks ended 52 weeks ended
31 December 25 December
2023 2022*
£m £m
Cash flows from operating activities
Profit before interest and taxation 2 156.8 109.8
Amortisation and depreciation 21.9 18.7
Impairment - 1.6
Profit on disposal of PPE (2.3) -
Share of post-tax profits of associates and joint ventures 11 (2.0) (6.6)
Profit on disposal of subsidiary 13 - (2.1)
Profit on disposal of associate investment 13 (40.6) -
Net gain on financial instruments at fair value through profit or loss - (1.0)
Decrease in provisions (11.4) (0.3)
Share option and LTIP charge 3.8 1.2
Decrease/(increase) in inventories 0.2 (0.6)
Increase in receivables (5.2) (13.3)
Increase/(decrease) in payables 15.2 (3.6)
Cash generated from operations 136.4 103.8
UK corporation tax paid (22.9) (18.7)
Net cash generated by operating activities 113.5 85.1
Cash flows from investing activities
Purchase of property, plant and equipment (9.8) (10.5)
Purchase of intangible assets (11.0) (9.2)
Proceeds from sale of PPE 4.4 -
Net consideration received on disposal of subsidiaries 13 - 3.7
Consideration received on disposal of associate investment 13 70.6 -
Consideration received on disposal of joint ventures - 3.3
Receipt from other financial assets - 8.6
Receipt of principal element on lease receivables 15.0 14.3
Receipts of interest element on lease receivables 12.6 12.4
Interest received 0.6 0.1
Other 15 12.3 6.8
Net cash generated by investing activities 94.7 29.5
Note 53 weeks ended 52 weeks ended
31 December 25 December
2023 2022*
£m £m
Cash inflow before financing 208.2 114.6
Cash flows from financing activities
Interest paid (13.7) (4.9)
Share purchases (98.3) (86.5)
Consideration received on exercise of share options - employee benefit trust 0.5 1.6
New bank loans and facilities draw down 113.0 365.8
Facility arrangement fees - (3.2)
Repayment of borrowings (112.2) (323.4)
Repayment of principal element on lease liabilities (20.1) (19.3)
Repayment of interest element on lease liabilities (13.8) (13.7)
Equity dividends paid (41.9) (43.8)
Net cash used by financing activities (186.5) (127.4)
Net increase/(decrease) in cash and cash equivalents 21.7 (12.8)
Cash and cash equivalents at beginning of period 30.4 42.8
Foreign exchange (loss)/gain on cash and cash equivalents - 0.4
Cash and cash equivalents at end of period 52.1 30.4
The cash flow statement has been prepared on a consolidated basis.
*For the 52 weeks ended 25 December 2022, the disclosure of the repayment on
lease liabilities and receipts on lease receivables has been re-presented to
reflect separately the principal and interest elements.
Notes to the Group financial statements
53 weeks ended 31 December 2023
1. Accounting policies
Basis of preparation
The financial information set out in this document does not constitute
statutory accounts for Domino's Pizza Group plc for the period ended 31
December 2023, but is extracted from the 2023 Annual Report.
The Annual Report for 2023 will be delivered to the Registrar of Companies in
due course. The auditors' report on those accounts was unqualified and
neither drew attention to any matters by way of emphasis nor contained a
statement under either Section 498(2) of Companies Act 2006 (accounting
records or returns inadequate or accounts not agreeing with records and
returns), or section 498(3) of Companies Act 2006 (failure to obtain necessary
information and explanations).
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted in the UK, as
they apply to the financial statements of the Group for the 53 week period
ended 31 December 2023, and applied in accordance with the Companies Act 2006.
The Group financial statements are presented in sterling and are prepared
using the historical cost basis with the exception of the other financial
assets, investments held at fair value through profit or loss and contingent
consideration which are measured at fair value in accordance with IFRS 13 Fair
Value Measurement.
For the 52 weeks ended 25 December 2022, the disclosure of the repayments on
lease liabilities and receipts on lease receivables has been re-presented to
reflect separately the principal and interest elements.
Going concern
The Group financial statements have been prepared on a going concern basis as
the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
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 purposes of going concern.
The overall performance of the Group has been strong throughout the year in
the UK and Ireland, with continued system sales growth. Sales growth is
primarily driven by increases in food costs which have been passed through to
our franchisees. Benefits from sales growth have been offset with interest
charges due to the impact of the debt refinancing in 2022 and the increase in
the effective tax rate as a result of the increase in the UK Statutory rate to
25%.
In line with the capital distribution policy, the Group has distributed excess
cash to shareholders during the period which has resulted in an increased net
liability position of the Group on a consolidated basis, which has increased
to £134.0m from £112.8m.
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, in line with the
analysis performed for the viability statement.
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 a £200m multi-currency syndicated revolving credit facility
entered into on 27 July 2022 and £200m private placement loan notes entered
into on 27 July 2022, which expire in 2027. The Group has a net debt position
of £232.8m. The facility has leverage and interest cover covenants, with
which the Group have complied.
The scenarios modelled are based on our current forecast projections and in
the first scenario have taken account of the following risks:
- A downside impact of economic uncertainty and other
sales-related risks over the forecast period, reflected in sales performance,
with a c.5.0% reduction in LFL system 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 for 24 hours during peak trading periods.
- 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 alternative sourcing is secured.
- The impact of fines from a potential data breach in 2025.
In each of the scenarios modelled, there remains significant headroom on the
revolving credit facility. Under the first scenario, there remains sufficient
headroom under the covenant requirements of the facility.
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 significant
mitigating actions available in the form of delays in distributions to
shareholders 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.
Reverse stress testing has been performed separately based on our main
profitability driver, system sales, which is a materially worse scenario than
the combinations described in the scenarios above. This test concluded that
the Group's currently agreed covenants could only be breached if a highly
unlikely combination of scenarios resulted in a material annual reduction in
system sales greater than 24%, which is not considered plausible.
Accounting policies and new standards
The accounting policies applied by the Group are consistent with those
disclosed in the Group's Annual Report. These policies are consistent with the
Accounts for the 52 weeks ended 25 December 2022, except for new standards and
interpretations effective for the first time for the reporting period.
2. 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 includes 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.
At At
31 December 25 December
2023 2022
£m £m
Current tax asset 3.5 1.7
Cash and cash equivalents 52.1 30.4
Unallocated assets 55.6 32.1
Current tax liabilities 2.8 -
Deferred tax liabilities 7.0 3.4
Debt facilities 284.9 283.7
Unallocated liabilities 294.7 287.1
Segment assets and liabilities
At 31 December 2023 At 25 December 2022
UK & Ireland International Total UK & Ireland International Total
£m
£m
£m
£m
£m
£m
Segment assets
Segment current assets 79.1 - 79.1 82.2 32.9 115.1
Segment non-current assets 342.3 - 342.3 336.8 - 336.8
Investment in associates and joint ventures 25.2 - 25.2 25.4 - 25.4
Investments 10.3 - 10.3 11.3 - 11.3
Unallocated assets 55.6 32.1
Total assets 512.5 520.7
Segment liabilities
Liabilities 351.8 - 351.8 346.4 - 346.4
Unallocated liabilities 294.7 287.1
Total liabilities 646.5 633.5
Segmental performance 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 period 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
Major customers and revenue by destination
Revenue from two franchisees individually totalled £128.7m (2022: £110.6m)
and £125.7m (2022: £110.3m), within sales reported in the UK & Ireland
segment.
Analysed by origin, revenue was £640.8m (2022: £567.4m) in the UK and
£39.0m (2022: £32.9m) in Ireland.
Segmental performance 2022
UK & Ireland International Total underlying Non-underlying Total reported
£m
£m
£m
£m
£m
Revenue
Sales to external customers 600.3 - 600.3 - 600.3
Segment revenue 600.3 - 600.3 - 600.3
Results
Underlying result before associates and joint ventures 102.2 - 102.2 - 102.2
Revaluation of investment 1.0 - 1.0 - 1.0
Share of profit of associates and joint ventures 4.0 2.6 6.6 - 6.6
Profit before interest and taxation 107.2 2.6 109.8 - 109.8
Net finance costs (10.9) - (10.9) - (10.9)
Profit before taxation 96.3 2.6 98.9 - 98.9
Taxation (17.3) - (17.3) - (17.3)
Profit for the period 79.0 2.6 81.6 - 81.6
Effective tax rate 18.0% - 17.5% - 17.5%
Other segment information
Depreciation 10.9 - 10.9 - 10.9
Amortisation 7.8 - 7.8 - 7.8
Impairment 1.6 - 1.6 - 1.6
Total depreciation, amortisation and impairment 20.3 - 20.3 - 20.3
EBITDA 127.5 2.6 130.1 - 130.1
Underlying EBITDA 127.5 2.6 130.1 - 130.1
Capital expenditure 19.7 - 19.7 - 19.7
Share-based payment charge 1.2 - 1.2 - 1.2
Revenue disclosures
Royalties, franchise fees and change of hands fees 78.9 - 78.9 - 78.9
Sales to franchisees 411.4 - 411.4 - 411.4
Corporate store income 36.2 - 36.2 - 36.2
Rental income on leasehold and freehold property 1.6 - 1.6 - 1.6
National Advertising and eCommerce income 72.2 - 72.2 - 72.2
Total segment revenue 600.3 - 600.3 - 600.3
3. Items excluded from non-GAAP measures:
Non-underlying items included in financial statements
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Underlying profit for the period 75.7 81.6
Non-underlying profit for the period 39.3 -
Profit for the period 115.0 81.6
Non-underlying items
Note 53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Included in other income
Profit on disposal of German associate a) 40.6 -
Taxation
Reversionary share tax charge b) (1.3) -
Profit for the period 39.3 -
a) Profit on disposal of German associate
In June 2023, 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 have been treated as non-taxable on the basis the disposal falls
under the Substantial Shareholding Exemption.
b) Reversionary share tax charge
The tax charge primarily relates to the historical share-based compensation
schemes following the £11.9m settlement made during the year.
4. Group profit before interest and tax
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Depreciation of property, plant and equipment 5.9 5.0
Amortisation of intangible assets 10.7 7.8
Depreciation on right-of-use assets 5.3 5.9
Total depreciation and amortisation expense 21.9 18.7
Impairment loss recognised on property, plant and equipment - 0.1
Impairment loss recognised on intangible assets - 1.5
Total impairment loss recognised - 1.6
Net foreign currency gain - (0.1)
Cost of inventories recognised as an expense 273.4 240.2
Profit on disposal of subsidiaries - (2.1)
Profit on disposal of associate investment (40.6) -
Gain on changes in fair value of financial instruments - (1.0)
5. Finance income
53 weeks ended 52 weeks ended
31 December 2023 25 December 2022
£m £m
Other interest receivable 0.8 0.1
Interest on loans to associates and joint ventures 0.1 0.3
Interest receivable on leases 12.7 12.4
Discount unwind 0.1 -
Foreign exchange - 0.3
Total finance income 13.7 13.1
6. Finance costs
53 weeks ended 52 weeks ended
31 December 2023 25 December 2022
£m £m
Debt facilities interest payable 14.4 10.3
Interest payable on leases 13.8 13.7
Total finance costs 28.2 24.0
Finance costs relate to financial liabilities at amortised cost.
7. Taxation
Tax on profit from continuing activities
53 weeks ended 52 weeks ended
31 December 2023 25 December 2022
£m £m
Tax charged/(credited) in the income statement
Current income tax:
UK corporation tax:
- current period 21.6 16.6
- adjustment in respect of prior periods 4.6 (0.1)
26.2 16.5
Income tax on overseas operations (2.5) 0.9
Total current income tax charge 23.7 17.4
Deferred tax:
Origination and reversal of temporary differences 2.6 (0.3)
Effect of change in tax rate 0.2 -
Adjustment in respect of prior periods 0.8 0.2
Total deferred tax 3.6 (0.1)
Tax charge in the income statement 27.3 17.3
The tax charge in the income statement is disclosed as follows:
Income tax charge 27.3 17.3
Tax relating to items credited/(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 - (0.9)
to unexercised share options
Tax charge t in the Group statement of changes in equity - (0.8)
There is no tax impact in relation to the foreign exchange differences in the
statement of comprehensive income.
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
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Profit after tax: 115.0 81.6
Non-underlying items (39.3) -
Underlying profit after tax 75.7 81.6
Weighted average number of shares
2023 2022
Number Number
Basic weighted average number of shares (excluding treasury shares) 410,406,240 434,211,333
Dilutive effect of share options and awards 1,915,682 1,826,246
Diluted weighted average number of shares 412,321,922 436,037,579
The performance conditions relating to share options granted over 5,131,078
shares (2022: 1,040,013) 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 1,791,468 share options excluded from the diluted earnings per
share calculation because they would be anti-dilutive (2022: nil).
Earnings per share
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Statutory earnings per share
Basic earnings per share 28.0p 18.8p
Diluted earnings per share 27.9p 18.7p
Underlying earnings per share:
Basic earnings per share 18.4p 18.8p
Diluted earnings per share 18.4p 18.7p
9. Dividends paid and proposed
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Declared and paid during the period:
Equity dividends on Ordinary shares:
Final dividend for 2022: 6.8p (2021: 6.8) 28.3 30.0
Interim dividend for 2023: 3.3p (2022: 3.2p) 13.6 13.8
Dividends paid 41.9 43.8
Proposed for approval by shareholders at the AGM
(not recognised as a liability at 31 December 2023 or 25 December 2022)
Final dividend for 2023: 7.2p (2022: 6.8p) 28.4 28.6
Total dividend for FY23 of 10.5p per share, with final dividend of 7.2p
proposed to be paid on 9 May 2024. The ex-dividend date is 4 April 2024, and
the record date is 5 April 2024.
10. Intangible assets
Goodwill Franchise fees Software Other Total
£m £m £m £m £m
Cost or valuation
At 26 December 2021 31.9 8.3 59.2 0.8 100.2
Additions - - 10.3 - 10.3
Disposals (3.8) (2.8) - - (6.6)
At 25 December 2022 28.1 5.5 69.5 0.8 103.9
Additions - - 9.2 0.3 9.5
At 31 December 2023 28.1 5.5 78.7 1.1 113.4
Accumulated amortisation and impairment
At 26 December 2021 18.6 5.4 43.7 0.4 68.1
Provided during the year - 1.1 6.7 - 7.8
Impairment - - 1.5 - 1.5
Disposals (2.2) (1.3) - - (3.5)
At 25 December 2022 16.4 5.2 51.9 0.4 73.9
Provided during the year - 0.2 10.5 - 10.7
At 31 December 2023 16.4 5.4 62.4 0.4 84.6
Net book value at 31 December 2023 11.7 0.1 16.3 0.7 28.8
Net book value at 25 December 2022 11.7 0.3 17.6 0.4 30.0
The intangible assets relating to online sales have a net book value at the
end of the period of £13.9m (2022: £11.7m).
At 31 December 2023 the net book value of internally generated intangibles
included within software was £9.9m (2022: £7.4m). Internally generated
intangibles included within software additions during the year was £7.5m
(2022: £5.1m).
During prior periods, the Group made a number of acquisitions, recognising
intangible assets at fair value and goodwill at cost. This included the
corporate stores SFAs. In the prior period the SFAs for Have More Fun (London)
Limited were disposed of, refer to note 13.
The carrying amount of goodwill and indefinite life intangibles has been
allocated as follows:
At 31 December 2023 At 25 December 2022
£m £m
Goodwill
UK corporate stores 11.7 11.7
Impairment Review
The Group is obliged to test goodwill and indefinite life intangibles annually
for impairment, or more frequently if there are indications that goodwill and
indefinite life intangibles might be impaired.
In performing these impairment tests, management is required to compare the
carrying value of the assets of a Cash Generating Unit ('CGU'), including
goodwill and indefinite life intangibles, with their estimated recoverable
amount. The recoverable amounts of an asset being the higher of its fair value
less costs to sell and value in use. Management consider the different nature
of the Group's operations to determine the appropriate methods for assessing
the recoverable amounts of the assets of a CGU. When testing goodwill for
impairment, the goodwill is allocated to the CGU or group of CGUs that were
expected to benefit from the synergies of the business combination from which
it first arose.
UK Corporate stores - Impairment Review
An impairment review has been performed over the goodwill and intangible
assets attributable to the Group's UK corporate store business, within the UK
& Ireland operating segment. The impairment review has been based on the
value in use of the overall UK corporate store group of CGUs, which comprises
of the Sell More Pizza business which was acquired in 2017.
In assessing value in use, the impairment review draws on the Group's
five-year plan. During 2023 the corporate store business performed broadly in
line with expectations. This is forecast to decrease in 2024 due to
inflationary costs, which has been included in the impairment review. Other
key assumptions in the cash flow projections are those regarding revenue
growth and EBITDA margins, which include food cost inflation, labour inflation
and expected productivity gains. In accordance with IAS 36, future new store
openings are only included in the projections for impairment purposes if they
are committed to at the point of carrying out the review. Capital expenditure
is forecast in the projections for store refits and other capital expenditure
outside of store openings. This considers the impact of any necessary changes
to make the business model more sustainable, including eBikes and energy
efficiency measures.
Long-term growth rates are set no higher than the long-term economic growth
projections of the UK, which is where the business operates. Management
applies pre-tax discount rates in the value in use estimation that reflect
current market assessments of the time value of money and the risks specific
to the CGUs and businesses under review. The discount rates and long-term
growth rates applied in the annual impairment reviews conducted in the current
and prior year, are as follows:
Long-term Growth Rate Discount Rate
2023 2022 2023 2022
UK Corporate Stores 2.0% 2.0% 11.3% 12.7%
For the year ended 31 December 2023 no impairment has been recognised against
the goodwill allocated to the corporate stores (2022: £nil).
The forecast for the London corporate stores assumes no store openings over
the forecast period and includes revenue growth assumptions between 2% and 6%
over the remaining term of the five-year period. All revenue growth is on a
like-for-like basis. Growth in future years is based on the long-term growth
rate of 2.0%. The key assumption within the forecast is the long-term revenue
growth, plus inflationary increases in costs, as well as the ability to drive
down costs through operational efficiencies and tighter control over operating
costs.
The valuation based on the current five-year plan results in a recoverable
amount of £16.1m, with the asset base being £14.1m, headroom of £2.0m is
available. During the prior period the Group sold 5 corporate stores for a
profit on disposal of £2.1m (refer to note 13). The fair value of the
consideration received was greater than the recoverable amount. This further
substantiates the Group's view that there is no impairment to be recognised.
Sensitivity analysis has been performed to highlight the impact of assumptions
and key sensitivities in isolation and in combination:
● A 100bps decrease in revenue growth would reduce the headroom to
£0.6m.
● A 100bps increase in food cost percentage would result in an
impairment of £2.1m.
● A 100bps increase in the forecast food cost and a 100bps increase in
the forecast labour cost would result in an impairment of £0.6m.
● A 100bps increase in the discount rate reduces headroom to £0.2m.
Given the maturity of the business and the improvements in cost control and
operational efficiencies we have seen since acquisition we believe that
further cost control and efficiencies are achievable. Based on the forecast
revenue, EBITDA margins would have to decrease from 4.35%, by more than 49bps,
to 3.86% throughout the forecast to trigger an impairment.
Master franchise fees
Master franchise fees consist of costs relating to the MFA for UK and Ireland.
Each MFA is treated as having an indefinite life. The MFAs are tested annually
for impairment in accordance with IAS 36. The assumptions underlying the tests
on the UK & Ireland MFAs are not disclosed as the carrying value is not
material.
Standard Franchise Agreements
The SFAs were recognised at fair value on acquisition of the UK corporate
store portfolio in 2017 and 2018 and, as reacquired assets, are being
amortised over their remaining contractual life. The net book value of SFAs at
31 December 2023 is £0.4m (2022: £0.6m). The SFAs attributable to the UK
corporate stores business are tested for impairment in tandem with the
goodwill and other intangible assets attributable to that business, as
described above.
The amortisation of intangible assets is included within administration
expenses in the income statement.
11. Investments in associates and joint ventures
Joint ventures Associates
£m £m
Balance at 26 December 2021 4.7 48.0
Underlying profit for the period 0.1 6.5
Dividends received (0.2) (2.2)
Transfer to assets held for sale - (32.9)
Foreign exchange movements - 1.4
Balance at 25 December 2022 4.6 20.8
Underlying profit for the period 0.1 1.9
Dividends received (0.3) (1.9)
Balance at 31 December 2023 4.4 20.8
Investments in associates
The Group has a 49% interest in Full House Restaurant Holdings Limited ('Full
House'), a private company that manages pizza delivery stores in the UK.
The Group has a 46% interest in Victa DP Limited (Victa). The investment has
been treated as an associate as the Group holds significant influence through
the voting rights gained through the equity investment, and representation on
the Board. The investment is treated as an associate under IAS 28, however is
referred to as the 'Northern Ireland Joint Venture' or 'NI JV' through the
report as it is considered commercially to be a joint venture.
The Victa DP investment has a significant external finance facility of
£22.6m, and at the balance sheet date was in breach of covenants under this
agreement following the lower than forecast performance and increased interest
charges. The principal repayments under the facility continue to be made, and
the company continues to trade profitably excluding any impairment charges.
Investments in joint ventures
During the year the Group held a 50% UK joint venture in Domino's Pizza West
Country Limited ('West Country'). West Country is accounted for as a joint
venture using the equity method in the consolidated financial statements as
the Group has joint control through voting rights and share ownership as well
as being party to a joint venture agreement, which ensures that strategic,
financial and operational decisions relating to the joint venture activities
require the unanimous consent of the two joint venture partners.
12. Financial liabilities
At 31 December 2023 At 25 December 2022
£m £m
Current
Share buyback obligations 6.1 8.9
6.1 8.9
Non-current
Bank revolving facility 85.8 84.9
US Private Placement Loan Notes 199.1 198.8
284.9 283.7
Share buyback obligation
The Group entered into an irrevocable non-discretionary programme with Numis
Securities Limited to purchase up to a maximum of £70.0m (2022: £20.0m) of
shares from 29 August 2023. Since this programme commenced, 17,152,705 (2022:
4,020,084) shares for consideration of £63.9m (2022: £11.6m) were purchased.
The remaining share buybacks and unpaid amounts outstanding at 31 December
2023 are recognised as a financial liability of £6.1m (2022: £8.9m).
Debt facilities
At 31 December 2023, the Group had a total of £400m (2022: £400m) of debt
facilities, of which £112.9m (2022: £113.4m) was undrawn. The facilities
include a £200m multi-currency revolving credit facility (RCF) and £200m of
US private placement loan notes (USPP). Arrangement fees of £1.9m and £1.3m
were incurred on the RCF and USPP respectively.
Private placement loan notes
The Private Placement notes mature on 27th July 2027 and arrangement fees of
£0.9m (2022: £1.2m) 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 charged on the US Private Placement notes is at 4.26% per annum.
Bank revolving facility
The revolving credit facility expires on 27 July 2027. Arrangement fees of
£1.3m (2022: £1.7m) 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 and Sheermans Limited.
An ancillary overdraft and pooling arrangement was in place with Barclays Bank
Plc for £20.0m covering the Companies, 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.
Interest is charged for the overdraft at the same margin as applicable to the
revolving credit facility above SONIA.
13. Disposals
Investment in Daytona JV Limited
In June 2023, 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 is 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 have been treated as non-taxable on the
basis the disposal falls under the Substantial Shareholding Exemption.
Corporate Stores - Have More Fun (London) Limited
On 30 November 2022, the Group disposed of its 100% interest in Have More Fun
(London) Limited, which operated in England, with net consideration received
from the buyers of £4.9m. The final working capital adjustment is being
finalised, and an additional £0.3m is receivable from the purchaser. The
profit on disposal of the Group's interest in Have More Fun (London) Limited
is analysed as follows:
£m
Cash received on disposal 5.2
Cash disposed (0.3)
Net cash received on disposal 4.9
Consideration receivable post disposal 0.3
Net assets disposed excluding cash (see below) (2.8)
Profit on disposal before professional fees 2.4
Costs associated with disposal (0.3)
Total profit on disposal 2.1
Property, plant and equipment 0.2
Intangible assets 3.1
Right-of-use assets 1.6
Inventories, trade receivables and trade and other payables (0.2)
Lease liabilities (1.5)
Deferred tax liabilities (0.4)
Net assets disposed excluding cash 2.8
14. Assets held for sale
At 31 December 2023 At 25 December 2022
£m £m
Assets held for sale - 32.9
Assets held for sale included the Group's 33.3% investment in Daytona JV
Limited ('Daytona'), a UK incorporated company which owns the MFA for Domino's
Germany. The Group's interest was subject to a put and call option which was
exercised in the prior year. During the year, the Group completed the sale of
its investment in Daytona.
For further details refer to note 13.
15. Additional cash flow information
Note 53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Cash flows from investing activities
Dividends received from investments 0.8 2.2
Dividends received from associates and joint ventures 11 2.2 2.9
Decrease in loans to associates and joint ventures 9.3 1.7
12.3 6.8
Reconciliation of financing activities
At 26 December 2022 Cash flow Exchange differences Non-cash movements At 31 December 2023
£m £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)
At 27 December 2021 Cash flow Exchange differences Non-cash movements At 25 December 2022
£m £m £m £m £m
Debt facilities (242.5) (39.3) (0.8) (1.1) (283.7)
Lease liabilities (222.6) 33.0 (0.5) (33.3) (223.4)
(465.1) (6.3) (1.3) (34.4) (507.1)
Share transactions
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022
£m £m
Purchase of own shares - share buyback (93.3) (77.5)
Purchase of own shares - employee benefit trust (5.0) (9.0)
Share transactions (98.3) (86.5)
Reconcilliation of free cash flow
53 weeks ended 52 weeks ended
31 December 25 December
2023 2022*
£m £m
Cash generated from operating activities 113.5 85.1
Net interest paid (13.1) (4.8)
Receipts of principal element on lease receivables 15.0 14.3
Receipts of interest element on lease receivables 12.6 12.4
Repayment of principal element on lease liabilities (20.1) (19.3)
Repayment of interest element on lease liabilities (13.8) (13.7)
Dividends 3.0 5.1
Other (0.1) (0.1)
97.0 79.0
*For the 52 weeks ended 25 December 2022, the disclosure of the repayment on
lease liabilities and receipts on lease receivables has been re-presented to
reflect separately the principal and interest elements.
16. Post balance sheet events
On 11 March 2024, the Group entered into a binding Sale and Purchase Agreement
for the purchase of the remaining 85% of Shorecal Ltd, a company registered in
Ireland. The consideration for the acquisition is expected to be €73m
(£62m) subject to completion adjustments, and the Group will repay existing
debt of €19.9m (£17.3m). At completion, 61% of the Consideration will be
payable to the Sellers in cash, with the remaining 39% to be satisfied by an
issuance of shares in the Company (the "Consideration Shares") to the Sellers.
The number of Consideration Shares to be issued will be based on the VWAP of
the Company's shares for the trailing 3-month period. A subsidiary of the
Company already owns a 15% shareholding in Shorecal, and therefore, the
Transaction will result in DPG acquiring a 100% shareholding in Shorecal. The
Transaction is subject to competition approval in Ireland and is expected to
complete by 31 May 2024.
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