7th Aug 2018 13:43
LONDON (Alliance News) - Domino's Pizza Group PLC on Tuesday reported 23% jump in first half revenue, helped by a good international performance, but said that costs associated with the same international arm sent its pretax profit down 9.7%.
Shares in the company were trading down 9.3% at 288.40 pence each, the worst performer in the FTSE 250 index.
The company, which operates UK and European franchises of the US's Domino's Pizza Inc, posted revenue of GBP259.1 million for the six months to July 1, up from GBP211.3 million recorded a year ago.
Revenue in the UK & Ireland, the pizza chain's core market, increased by 13% to GBP212.4 million, while the Domino's international business saw revenue jump by 96% to GBP46.7 million from GBP23.8 million.
The increase in revenue, however, was not enough to offset higher costs associated with Domino's international operations, which resulted in a slump n the retailer's profit.
Pretax profit fell to GBP41.7 from GBP46.2 reported a year ago as higher wages in Norway increased administrative costs to GBP52.7 million from GBP30.6 million a year ago.
The company's international arm made an adjusted operating loss of GBP1.8 million, with growing underlying profits in Iceland and Germany offset by losses in Switzerland, Norway and Sweden, Domino's said.
"Whilst our international businesses continue to make good progress with customers and sales, it has taken us some time to refine the operating model and cost base at store level, particularly in Norway," Domino's explained.
"We are confident that the changes we have made will result in a better performance in the second half, and believe that these businesses offer significant long term growth potential as we export our expertise in digital, supply chain and franchisee management."
On an adjusted basis, group pretax profit increased 2.5% to GBP45.7 million from GBP44.6 million. The adjusted profit strips out net non-underlying costs of GBP4.0 million, which included GBP2.1 million for converting the company's recent acquisition in Norway and GBP1.9 million from UK supply chain restructuring.
Domino's total sales were up 13% year-on-year to GBP616.6 million from GBP546.5 million, with UK & Ireland sales increasing by 8.1% to GBP565.1 million. On a like-for-like basis, UK sales increased by 5.9%.
In the UK, Domino's said that the trading environment "continues to be uncertain". The chain opened 22 new stores in the first-half taking the total number to 1,067. Domino's said it expects to open 60 more stores in the UK in 2018, reducing its previous estimate from 65 to 75.
Total sales from the company's international operations more than doubled year-on-year to GBP51.5 million in the interim period.
Norway continued to lead the growth with sales nearly tripling. Sweden followed with a sales increase of 56%, while Switzerland and Iceland recorded 13% and 5.5% growth in sales, respectively.
Domino's acquired Norwegian rival Dolly Dimple's in March 2017 as it planned to integrate it with the stores it already owned in the Nordic country. The company operates 49 stores in Norway of which 34 under the Domino's brand.
The company launched in Sweden in November 2016 and now operates six stores. In Germany Domino's operates through its joint venture Daytona JV Ltd, which bought Hallo Pizza GmbH in October.
The company lifted its interim dividend by 8.0% to 4.05 pence per share from 3.75p paid a year ago.
Looking ahead, Domino's expects adjusted profit for 2018 to be in line with market estimates of between GBP95.9 million and GBP101.4 million.
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