27th Feb 2014 10:16
LONDON (Alliance News) - Domino's Pizza Group PLC Thursday reported lower pretax profit for its last financial year due to the costs of restructuring its German business, but excluding these, profits rose as it continued to grow quickly and report higher sales from existing stores, particularly in the UK.
The company reported a pretax profit of GBP21.6 million for the 52 weeks to December 29, down from GBP42.4 million for a 53 week period a year earlier, as it booked GBP26.0 million in exceptional costs, up from GBP4.0 million in 2012.
The vast majority of the costs were for the restructuring of its German business. It got off to a slow start in Germany and decided to move to a franchise-only business after its own stores performed poorly in the country. It also slowed its store opened programme, streamlined support costs and went for a premium pricing model with aggressive promotions.
"We expect that losses in Germany will continue for several years until we establish sound and replicable store level economics and achieve a critical mass of stores sufficient to support the overhead. Thereafter we hope the growth in contribution from Germany will be significant and replicate the progress made in the UK," it said in a statement.
Excluding the exceptional costs, Domino's reported another year of strong growth as it sold 65.5 million pizza's across its operations in 2013.
Pretax profit excluding the exceptional costs rose to GBP47.6 million, from GBP46.7 million, and were up 11.6% in its UK and Irish businesses, as revenues rose to GBP268.9 million, from GBP240.5 million. System sales, which are total sales made by all the company's franchisee and corporate stores across the four countries in which it operates, rose 14.0% to GBP668.8 million.
It opened 57 new stores during the year and closed four, meaning it has 858 stores across its UK, Ireland, Germany and Switzerland portfolio at the end of the year.
Growth was also driven by sales from existing stores. Like-for-like sales were up 7.0% in the UK, 6.0% in euro terms in Ireland, and were up 5.4% in Switzerland.
"It's been another strong year for Domino's and I am particularly delighted by the sales performance in our core UK business, which has continued into 2014, confirming the strength of our offer for both new and existing customers. The recovery in the Republic of Ireland is also pleasing. Whilst we have learnt some hard lessons in Germany, we now have a clear way forward and must focus on the delivery of this change in direction," Chief Executive David Wild said.
"We remain focused on delivering our strategy into 2014 and beyond and I am excited by the numerous initiatives I see in all areas of the business," he added.
It said its like-for-like sales growth had accelerated in the UK business in the first few weeks of 2014. In the first seven weeks of the new financial year, like-for-like sales were up 14.6% in the UK, 4.6% in Ireland, 3.8% in Germany, although they were down 0.4% in Switzerland.
Domino's raised its final dividend for the 2013 financial year to 8.80 pence, from 7.90p, bringing the total dividend to 15.90p, from 14.50p.
Its shares were up 0.7% to 560.50 pence Thursday morning, having hit a more than three-month high earlier in the session.
By Steve McGrath; [email protected]; @stevemcgrath1
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