25th Jul 2005 07:00
Domino's Pizza UK & IRL PLC25 July 2005 25 July 2005 DOMINO'S PIZZA UK & IRL plc INTERIM RESULTS FOR THE TWENTY-SIX WEEKS ENDED 3 JULY 2005 Domino's Pizza UK & IRL plc ("Domino's Pizza", the "Company" or the "Group"),the UK and Ireland's leading pizza delivery company, announces its interimresults for the twenty-six weeks ended 3 July 2005. Highlights • Profit before tax, before exceptionals, increased 22.6% to £5.0m (2004: £4.1m) and after exceptionals, increased 34.7% to £5.5m (2004: £4.1m) • Earnings per share: - Basic earnings per share up 38.1% to 7.97p (2004: 5.77p) - Diluted earnings per share up 42.7% to 7.82p (2004: 5.48p) • Interim dividend increased 40.9% to 3.10p per share (2004: 2.20p) • A record 23 new stores opened in the period (2004: 19 stores) resulting in a total of 380 stores at the period end (2004: 337 stores) • Like-for-like sales in 317 mature stores up 8.4% (2004: 4.9% in 268 stores) • System sales increased 19.1% to £97.1m (2004: £81.5m) • E-commerce sales up 64.0% to £6.5m (2004: £4.0m). E-commerce now represents 10.6% of our delivered pizza sales in the UK • Sale of 13 corporate stores for £4.0m, generating an exceptional profit of £0.8m • Cash at bank and in hand of £8.5m (2004: £2.9m) Stephen Hemsley, Chief Executive of Domino's Pizza, commented: "Your Company has continued to make excellent progress in the first twenty-sixweeks of 2005, with record store openings and robust like-for-like sales growth.Strong cash flow, boosted by the sale of most of the remaining corporate storesin June, has enabled us to continue to return cash to shareholders by furthershare buybacks and strong growth in dividends. "As our market share continues to grow within this expanding sector, we lookforward to opening a total of between 800 and 1,000 Domino's Pizza stores in theUK and Ireland, which should enable us to continue to deliver exceptional growthto shareholders." For further information, please contact: Domino's Pizza:Stephen Hemsley - Chief Executive 07876 144342 01908 580604 Lee Ginsberg - Finance Director 07887 734064 01908 580611 Rachel Wattel - PR & Communications Officer 07876 144342 01908 580672 Hogarth Partnership Limited:Chris Matthews, Andrew Jaques, Kate Catchpole 020 7357 9477 Notes to editors: Domino's Pizza Group Limited is a wholly owned subsidiary of Domino's Pizza UK &IRL plc, the shares of which are traded on AIM, a market generated and regulatedby the London Stock Exchange plc (symbol: DOM). Domino's Pizza Group Limited isthe UK's leading pizza delivery company and holds the master franchise to own,operate and franchise Domino's Pizza stores in the UK and Ireland. The first UKstore opened in 1985 and the first Irish store opened in 1991. As at 3 July2005, there were 380 stores in the UK and Ireland. Domino's Pizza is the world leader in pizza delivery and was founded in theUnited States in 1960. There are currently over 7,500 stores open across morethan 50 international markets, employing around 145,000 people. For photography visit www.dominos.uk.com/media or contact Hogarth PR on 020 73579477. CHIEF EXECUTIVE'S STATEMENT Introduction Your Company has continued to make excellent progress in the first twenty-sixweeks of 2005, with record store openings and robust like-for-like sales growth.Strong cash flow, boosted by the sale of most of the remaining corporate storesin June, has enabled us to continue to return cash to shareholders by furthershare buybacks and strong growth in dividends. As we celebrate our 20th anniversary this week, we know that providing ourcustomers with good service, quality pizzas, delivered to their homes andoffices, is the key to our success. These basic principles, delivered by acommitted franchise community and assisted by a strengthened corporate team,should enable us to maintain our momentum for many years to come. Sales System sales, which are the sales of all stores in the Domino's system in the UKand Republic of Ireland, rose by 19.1% to £97.1m (2004: £81.5m) in thetwenty-six weeks ended 3 July 2005. Like-for-like sales in the 317 mature storesgrew by 8.4% (2004: 4.9% in 268 stores). The strong like-for-like sales can, in part, be attributed to the highlysuccessful launch of the Cheese Steak Melt pizza in the second quarter and alsoto relatively weaker comparables in the same period last year. Our e-commercesales also continue to go from strength to strength, up 64.0% over the previousyear. This channel now generates 10.6% of our delivered pizza sales in the UK. Whilst we are pleased with the strong first half like-for-like salesperformance, we are mindful of the strong comparables for the second half of theyear, following the unprecedented success of the Double DecadenceTM pizza in thelast quarter of 2004. Accordingly, whilst we remain confident of solidlike-for-like sales growth in the second half of the year, matching the firsthalf's like-for-like growth will be challenging. Trading Results Group turnover, which includes the sales generated from royalties, fees, foodsales and rental income as well as the turnover of corporately-owned andoperated stores, grew by 16.6% to £40.5m (2004: £34.7m). Group turnover will beimpacted by the disposal of most of the remaining corporate stores. These storescontributed £2.8m to Group turnover in the first half (2004: £3.0m). Group operating profit before exceptional items was up 19.3% to £5.1m from£4.3m. As a result of the rapid growth in profitability and earnings per shareover the last three years, your Company announced in June that the Long TermIncentive Plan (LTIP) performance targets are likely to be achieved earlier thanexpected and will therefore vest after three years instead of the originallyexpected five years. As a result, and following adoption of FRS20, the Companywill now accelerate the £0.6m charge that would have been made in 2006 and 2007.This amount has been included in the profit and loss account for the currentyear, of which £0.3m will be charged in the first half. After taking account ofthis charge, group operating profits were up 12.0% to £4.8m. As your Company continues to roll out new franchised stores and drivelike-for-like sales, we have made additional investments in certain areas of ourcentral infrastructure to ensure the consistent and sustainable development ofour franchisee network. We have made a sizeable step change in the team whichsupports franchisees in their stores and have now regionalised this structure toenable us to better oversee and support the growing network. This will allow usto maintain and improve the already rigorous standards expected of ourfranchisees. The second area of additional staffing is in the store opening and businessdevelopment teams. We are already reaping the rewards of this investment withrecord store openings in the first half of the year. In the first half, thestrengthening of these two areas has added £0.4m to our overhead. These costswere anticipated in the Company's forecasts. As highlighted in the 2004 preliminary results, our franchisees have been undera number of external cost pressures. In order to assist, we introduced aperformance related rebate scheme at the start of the year by which franchiseesnow receive a rebate on the cost of the purchases they make from ourcommissaries, provided they achieve certain percentage sales increases. Thisreplaced a more limited discount scheme, resulting in a cost increase of £0.2mover the comparable period in 2004. Profit before tax was up 34.7% to £5.5m (2004: £4.1m). This includes the profitof £0.8m on the sale of 13 corporate stores in June 2005 and the exceptionalcharge of £0.3m relating to the acceleration of the LTIP charge. Prior to theseexceptional items, profit before tax was up 22.6%. The tax charge has reduced to26.0% from 28.5% as a result of the tax relief available on the exercise ofshare options and the tax relief on the profit from the sale of corporate storesunder the substantial shareholding exemption. As a result, profit after tax wasup 39.5% to £4.1m (2004: £2.9m). Earnings per share and dividend Basic earnings per share were up 38.1% to 7.97 pence (2004: 5.77 pence). Dilutedearnings per share increased by 42.7% to 7.82 pence, from 5.48 pence for thesame period in 2004. Your Board continues to believe that cash flow not required for the growth andexpansion of the business should be returned to shareholders in the form ofincreased dividends and share buybacks. We are therefore pleased to declare anincrease of 40.9% in the interim dividend to 3.10 pence per share (2004: 2.20pence per share). This dividend will be paid on 31 August 2005 to shareholderson the register on 5 August 2005. Cash Flow & Balance Sheet Your Company is in a stronger cash position now than at the beginning of theyear, with operating activities generating net cash of £4.0m (2004: £3.4m).In the first twenty-six weeks of the year, options over 548,000 shares have beenexercised generating a cash inflow of £0.3m (2004: £0.4m). During the period,the Company purchased 400,000 of its shares at a cost of £1.1m (2004: 100,000shares at a cost of £0.2m). Further share buybacks are planned during the courseof the year as your Company continues its commitment to return surplus cash toshareholders. The Group continues to assist franchisees by providing leasing facilities fornew equipment and refits through its wholly owned subsidiary DP Capital Limited.In the first twenty-six weeks of the year, new advances of £0.6m were made whichwere matched by similar repayments resulting in borrowings of £2.6m (2004:£2.7m) at the half year. As at 3 July 2005, the Group had cash-in-hand of £8.5m (2004: £2.9m), whichtaken together with the leasing borrowings noted above and the EBT loan of £6.4m(2004: £5.2m), gave consolidated net borrowings of £0.5m (2004: £5.0m). Afterthe deduction of the cost of the shares held in the EBT, shareholders' fundswere £17.1m (2004: £12.7m), resulting in a gearing ratio of 3.2% (2004: 39.7%). System Expansion & Corporate Stores During the first twenty-six weeks of 2005, a record 23 new stores were opened(2004: 19 stores). There were no store closures in the period (2004: nil). As aresult, the total store count at 3 July 2005 was 380 (2004: 337 stores). Thesestore openings have created approximately 575 new jobs across the UK. The amendment to the Use Classes Order, which saw the introduction of the new A5planning category, came into effect on 21 April 2005. Whilst it will take sometime for the effects of the new planning category to be assessed, the Company issuccessfully working with planners to gain consents and continues its policy ofresponsible growth. The sale of most of the remaining corporate stores underlines the Board'scommitment to focus on building the Domino's brand using our franchise model. Ofthe remaining corporate stores the Company only intends to retain, on a longterm basis, the store attached to its training centre in Milton Keynes. Board Composition John Hodson joined the Board as a Non-Executive Director on 14 February. Ashighlighted at this year's AGM, Gerald Halpern retired as a Non-ExecutiveDirector of the Board. We welcome John to the Board and thank Gerald for hisoutstanding contribution. Outlook The outlook for the remainder of the year is positive, although we are cautiousthat the strong like-for-like system sales in 2004 will be challenging to matchin the second half of the year. Current store openings are excellent and we areconfident that we will fully meet the market's estimate for the year. As ourmarket share continues to grow within this expanding sector, we look forward tooperating a total of between 800 and 1,000 Domino's pizza stores in the UK andIreland, which should enable us to continue to deliver exceptional growth toshareholders for many years to come. STEPHEN HEMSLEYChief Executive GROUP PROFIT AND LOSS ACCOUNT (Unaudited) (Unaudited) 53 weeks 26 weeks to 26 weeks to ended 3 July 27 June 2 January 2005 2004 2005 Notes £000 £000 £000TURNOVERTurnover: group and share ofjoint 41,780 36,214 77,254venture's turnoverLess: share of joint venture'sturnover (1,278) (1,478) (3,039) -------- -------- --------GROUP TURNOVER 40,502 34,736 74,215Cost of sales (23,612) (20,386) (43,815) -------- -------- --------GROSS PROFIT 16,890 14,350 30,400Distribution costs (4,752) (3,760) (8,404)Administration expenses - normal (7,135) (6,383) (12,963)Administration expenses -exceptional LTIP charge (313) - - -------- -------- --------GROUP OPERATING PROFIT 4,690 4,207 9,033 Share of operating profit injoint venture 79 52 105 -------- -------- --------TOTAL OPERATING PROFIT: GROUPAND SHARE OF JOINT VENTURE 4,769 4,259 9,138Profit/(loss) on disposal offixed assets 812 (45) (47) -------- -------- --------PROFIT ON ORDINARY ACTIVITIESBEFORE INTEREST AND TAX 5,581 4,214 9,091Net interest payable and similarcharges (50) (109) (270) -------- -------- --------PROFIT ON ORDINARY ACTIVITIESBEFORE TAXATION 5,531 4,105 8,821Tax on profit on ordinary activities 2 (1,438) (1,170) (2,058) -------- -------- --------PROFIT ON ORDINARY ACTIVITIESAFTER TAXATION 4,093 2,935 6,763 Minority interests - (18) (32) -------- -------- --------PROFIT FOR THE FINANCIAL YEARATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY 4,093 2,917 6,731Dividends on equity shares - (1,158) (2,688) -------- -------- --------RETAINED PROFIT FOR THE PERIOD 4,093 1,759 4,043 ======== ======== ======== Earnings per share - basic 3 7.97p 5.77p 13.23p - diluted 7.82p 5.48p 12.67p There are no recognised gains or losses other than those included in the Profitand Loss Account. GROUP BALANCE SHEET (Unaudited) (Unaudited) 3 July 27 June 2 January 2005 2004 2005 Notes £000 £000 £000 FIXED ASSETSIntangible assets 1,428 1,604 1,520Tangible assets 13,483 13,879 14,595Investment in joint venture 421 372 383 -------- -------- -------- 15,332 15,855 16,498 -------- -------- --------CURRENT ASSETSStocks 2,372 2,172 2,700Debtors 4 13,518 13,780 13,456Cash at bank and in hand 8,496 2,914 4,824 -------- -------- -------- 24,386 18,866 20,980CREDITORS: amounts falling duewithin one year 5 (13,941) (14,353) (15,121) -------- -------- --------NET CURRENT ASSETS 10,445 4,513 5,859 -------- -------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 25,777 20,368 22,357 CREDITORS: amounts falling dueafter more than one year 6 (8,060) (7,032) (8,102) PROVISION FOR LIABILITIES ANDCHARGES- DEFERRED TAXATION (623) (630) (857) -------- -------- -------- 17,094 12,706 13,398 ======== ======== ======== CAPITAL AND RESERVESCalled up share capital 2,748 2,699 2,740Share premium account 4,514 3,601 4,241Own shares held by Employee (6,360) (5,160) (6,360)Benefit TrustCapital Redemption Reserve 60 5 40Profit and loss account 16,132 11,493 12,655 -------- -------- --------Equity shareholders' funds 17,094 12,638 13,316Minority interest - 68 82 -------- -------- -------- 17,094 12,706 13,398 ======== ======== ======== GROUP STATEMENT OF CASH FLOWS (Unaudited) (Unaudited) 53 weeks 26 weeks to 26 weeks to ended 3 July 27 June 2 January 2005 2004 2005 Notes £000 £000 £000 NET CASH INFLOW FROM OPERATINGACTIVITIES 7 4,005 3,392 9,943 -------- -------- --------RETURNS ON INVESTMENTS ANDSERVICING OF FINANCEInterest received 263 70 100Interest paid (195) (91) (308)Interest element of financelease rental payments (2) (4) (7) -------- -------- -------- 66 (25) (215) -------- -------- --------TAXATIONCorporation tax paid (518) (1,028) (2,021) -------- -------- --------CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENTPayments to acquire intangiblefixed assets (381) (85) (200)Payments to acquire tangiblefixed assets (1,255) (2,468) (3,905)Receipts from sales oftangible 407 463 417and intangible fixed assetsReceipts for repayment ofjoint venture loan 27 44 108Payment to acquire financelease assets and advance offranchise loans (576) (367) (946)Receipts from repayment offinance lease and franchise loans 676 495 1,098 -------- -------- -------- (1,102) (1,918) (3,428) -------- -------- --------ACQUISITIONS AND DISPOSALSDisposal/(acquisition) ofsubsidiary undertakingand un-associated business 3,586 (280) (280) -------- -------- --------EQUITY DIVIDEND PAID (1,536) (1,112) (2,235) -------- -------- --------NET CASH INFLOW/(OUTFLOW)BEFORE 4,501 (971) 1,764FINANCING FINANCINGIssue of shares 301 399 1,071New long-term loans 588 1,538 3,299Repayments of long-term loans (610) (1,547) (2,198)Repayment of capital elementof finance leasesand hire purchase contracts (12) (25) (23)Purchase of shares of EmployeeBenefit Trust - - (1,200)Purchase of own shares (1,096) (201) (1,610) -------- -------- -------- (829) 164 (661) -------- -------- --------INCREASE/(DECREASE) IN CASH 3,672 (807) 1,103 ======== ======== ======== NOTES TO THE INTERIM REPORT 1. BASIS OF PREPARATION OF INTERIM FINANCIAL INFORMATIONThe interim financial information has been prepared on the basis of theaccounting policies set out in the group's statutory accounts for thefifty-three weeks ended 2 January 2005. The taxation charge is calculated byapplying the directors' best estimate of the annual tax rate to the profit forthe period. All other accounting polices set out in the accounts for thefifty-three weeks ended 2 January 2005 were applied for the purposes of thisstatement except for the following changes, which are the result of adopting newaccounting standards: FRS 20, share-based payments, requires an expense to be recognised in the profitand loss account based on the intrinsic value of share options granted using anoption-pricing model. The effect of the revised policy does not have asignificant impact on retained earnings, nor does it have a significant impacton the charge recognised in the interim profit and loss account. The increase inthe charge recognised in the interim profit and loss account relates to the factthat the vesting conditions surrounding the LTIP are likely to be achievedearlier than originally expected, and consequently the charge for 2006 and 2007has been accelerated. FRS 21, events after the balance sheet date, require dividends which areproposed after the balance sheet date to be disclosed and not recognised as aliability. Basis of consolidationThe group accounts consolidate the accounts of Domino's Pizza UK & IRL plc andall its subsidiary undertakings drawn up to the nearest Sunday of the month end. 2. taxationThe taxation charge is made up as follows: (Unaudited) (Unaudited) 53 weeks ended 3 July 27 June 2 January 2005 2004 2005 £000 £000 £000 UK & IRL corporation tax:Profit for the period 1,418 1,163 2,162Share of joint venture tax 20 7 14Adjustment in respect of theprevious period - - (345) -------- -------- --------Total current tax 1,438 1,170 1,831 ======== ======== ======== UK deferred taxOrigination and the reverse of timingdifferences in respect of:Profit in the period - - 227 -------- -------- --------Total deferred tax - - 227 -------- -------- --------Tax on profit on ordinary activities 1,438 1,170 2,058 ======== ======== ======== 3. earnings per shareThe calculation of basic earnings per ordinary share is based on earnings of£4,093,000 (2004: £2,917,000) and on 51,379,161 (2004: 50,587,803) ordinaryshares.The diluted earnings per share is based on 52,337,175 (2004: 53,252,178)ordinary shares which takes into account theoretical ordinary shares that wouldhave been issued, based on average market value if all outstanding options wereexercised.4. debtors (Unaudited) (Unaudited) 3 July 27 June 2 January 2005 2004 2005 £000 £000 £000 Trade debtors 2,724 2,709 3,109Amounts owed by joint venture 469 578 497Other debtors 4,213 5,081 4,557Prepayments and accrued income 3,272 2,452 2,353Net investment in finance lease 2,840 2,960 2,940 -------- -------- -------- 13,518 13,780 13,456 ======== ======== ======== Included within debtors is £2,674,000 (2004: £2,836,000) due after more than oneyear. 5. creditors: amounts falling due within one year (Unaudited) (Unaudited) 3 July 27 June 2 January 2005 2004 2005 £000 £000 £000 Other loans 934 884 916Finance lease creditors 13 13 24Trade creditors 2,703 4,197 4,318Corporation tax 1,718 1,183 814Other taxes and social security costs 1,283 1,003 1,217Other creditors 1,684 973 1,909Accruals and deferred income 5,606 4,970 4,386Proposed dividend - 1,130 1,537 -------- -------- -------- 13,941 14,353 15,121 ======== ======== ======== 6. creditors: amounts falling due after more than one year (Unaudited) (Unaudited) 3 July 27 June 2 January 2005 2004 2005 £000 £000 £000 Bank loans 6,360 1,098 6,360Finance lease creditors 17 26 18Other loans 1,683 5,908 1,724 -------- -------- -------- 8,060 7,032 8,102 ======== ======== ======== 7. Notes to the STatement OF CASHFLOWSReconciliation of operating profit to net cash flows from operating activities (Unaudited) (Unaudited) 53 weeks ended 3 July 27 June 2 January 2005 2004 2005 £000 £000 £000 Operating profit 4,769 4,207 9,033Depreciation charge 752 644 1,386Amortisation charge 76 71 133LTIP charge 479 - 333(Increase) in debtors (452) (1,877) (1,505)Decrease/(increase) in stocks 304 (329) (857)(Decrease)/increase in creditors (1,923) 676 1,420 -------- -------- -------- 4,005 3,392 9,943 ======== ======== ======== 8. equity dividends on ordinary sharesThe Directors propose an interim dividend of 3.10p per share of £1,593,000(2004: 2.20p £1,158,000). The liability in respect of the 2005 interim dividendhas not been accrued for at the 3 July 2005, in accordance with FRS 21 Eventsafter the balance sheet date. 9. publication of non-statutory accountsThe financial information contained in this statement does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. Thefinancial information for the full preceding year is based on the statutoryaccounts for the fifty-three weeks ended 2 January 2005. Those accounts, uponwhich the auditors issued an unqualified opinion, have been delivered to theRegistrar of Companies. 10. This report is being sent to all registered shareholders. Copies can alsobe obtained from the Registered Office at Domino's House, Lasborough Road,Kingston, Milton Keynes MK10 OAB. INDEPENDENT REVIEW REPORT TO DOMINO'S PIZZA UK & IRL PLC Introduction We have been instructed by the company to review the financial information forthe twenty-six weeks ended 3 July 2005 which comprises the Consolidated Profitand Loss Account, the Consolidated Balance Sheet, the Consolidated Cash FlowStatement, and Consolidated Statement of Total Recognised Gains and Losses, andthe related notes 1 to 10. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company having regard to guidance contained inBulletin 1999/4 'Review of interim financial information' issued by the AuditingPractices Board. To the fullest extent permitted by the law, we do not accept orassume responsibility to anyone other than the company, for our work, for thisreport, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report as required by the AIM Rulesissued by the London Stock Exchange. Review work performed We conducted our review having regard to the guidance contained in Bulletin 1999/4 'Review of interim financial information' issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries of management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom Auditing Standards and therefore provides a lower level of assurancethan an audit. Accordingly we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the twenty-sixweeks ended 3 July 2005. Ernst & Young LLPLuton22 July 2005 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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