1st Nov 2007 07:01
Domino's Pizza UK & IRL PLC01 November 2007 November 2007 DOMINO'S PIZZA UK & IRL plc TRADING UPDATE AND ANNOUNCEMENT OF BOARD CHANGES Domino's Pizza UK & IRL plc ("Domino's Pizza" or "the Company") today hosts asite visit for analysts and will give the following update: System sales for the 13 weeks from 2 July to 30 September 2007 ("the period")were up 22.5% to £70.7m (2006: £57.8m). This brings total system sales for the39 weeks to 30 September 2007 to £213.2m (2006: £196.2m), an increase of 23.5%. Like-for-like sales in the 404 mature stores (2006: 357 mature stores) for theperiod were up 14.2% (2006: 10.2%), bringing total like-for-like sales growthfor the 39 weeks to 30 September 2007 to 14.6% (2006: 8.9%). Sales in the period were driven predominantly by the continued focus on serviceexcellence as well as a 'back to basics' marketing campaign that focussed on ourbest-selling pizza, the 'Pepperoni Passion', and highlighted the Company'songoing commitment to sourcing premium quality ingredients. A second campaign inthe period, in support of a new pizza called 'The Scrummy', capitalised onincreased consumer interest in rugby throughout the World Cup. The Company's e-commerce platforms www.dominos.co.uk and www.dominos.ie achievedsales of £7.7m in the period, a year-on-year increase of 60.4%. After 39 weekse-commerce sales reached £21.3m (2006: £14.3m), a growth of 48.8% on last year.This channel now generates 15.0% of our delivered sales in the UK (2006: 12.4%). The Company continued its expansion programme with the opening of 10 new storesin the period (2006: 7), bringing the total of new openings year to date to 30(2006: 26). The store count at 30 September 2007 stood at 480 (2006: 434) and weare now on track to open around 45 stores this year. The current year has seen unprecedented increases in the prices of many rawmaterials. Those that affect us and our franchisees most directly areagricultural products, in particular milk and wheat. To maintain price stability for our franchisees so they may, in turn, pricetheir local menus with certainty, we have always endeavoured to secure annualprice contracts with our suppliers. This approach has served us very well for anumber of years however, in March this year our cheese supplier went intoreceivership. Whilst it was quickly taken over by another large internationalcompany, our fixed price supply contract did not remain in place and we wereforced to renegotiate supply terms in a market environment of rapid priceinflation. As a result, the cost to us of mozzarella cheese has increased by £1,060 pertonne since June. Given that the lead time for our franchisees to change theirmenu pricing is around eight weeks, your Company has chosen to bear most of thisadditional cost so that our franchisees have the opportunity to decide whetheror not to reflect these cost increases in local pricing. With effect from 1stNovember 2007, the pricing to franchisees now fully reflects our increased costsand no further charges are anticipated. This cost of £450,000 will be incurredin the second half of 2007. In the absence of further extreme market volatilitysuch a loss of cash margin is unlikely to recur in future years. Our fixed price contract for the supply of flour is to be reviewed in January2008. We are expecting a substantial cost increase however, as flour is just oneingredient used in the proprietary manufacture of our fresh dough, the effect onour franchisees will be significantly diluted. The likely impact has beencommunicated to franchisees in ample time for them to adjust their local menupricing therefore, we do not anticipate any dilution of our cash margin. The Company continues to generate strong cash flows and the model is proving tobe robust as profitability grows. During the second half of the year we havecontinued our share buyback programme and have purchased 2,250,000 ordinaryshares at a total cost of £5.5m. This brings our year to date buybacks to2,650,000 ordinary shares at a total cost of £6.3m. This has increased ourinterest cost in 2007 by £0.2m and by an estimated £0.4m in 2008. However, thecancellation of these repurchased shares will enhance earnings per share in2008. The Company is pleased to announce plans for management succession. Effectivefrom the start of the 2008 financial year (31 December 2007) Chairman, ColinHalpern, will retire from his executive position and become Non-Executive ViceChairman. His successor will be incumbent Chief Executive Officer, Stephen Hemsley, whowill become Executive Chairman. Deputy Chief Executive Officer, Chris Moore, hasbeen promoted to the role of Chief Executive Officer. Stephen Hemsley commented, "The strong sales momentum and good control of overheads has allowed us toabsorb the one-off cost arising from the extraordinarily rapid increase in thecost of cheese. Whilst absorbing such costs is unwelcome, we must always bemindful of the store-level economics and our long-term relationship withfranchisees who drive our future growth. Despite these costs and the additionalinterest on the share buybacks, I am pleased to reconfirm that your Companyremains comfortably on track to meet the City consensus forecast for the year. "Over the last five years we have been building a management team that iscapable of taking our business to 1,000 stores and beyond. As this process isalmost complete it gives me the opportunity to hand over responsibility for thenext stage of the Company's development to Chris Moore with whom I have workedclosely for almost ten years. His experience, vision for our business and closerelationships with our franchisees will help to ensure we reach and exceed ourambitious plans. "I would like to thank Colin Halpern for his service to the Company and his wisecounsel to myself and my fellow Board members. I am pleased that we willcontinue to benefit from his wealth of industry expertise." Today's visit will include a presentation on Domino's current activities. Thiswill contain no new financial or strategic information. The presentation will beuploaded at 1630h today at: http://ww7.investorrelations.co.uk/dominos/financial/presentations.jsp ENDS For further information, please contact: Domino's Pizza:Lee Ginsberg - Chief Financial Officer 01908 580611Bernadette Ahmed - Corporate Communications Manager 07909 928016 Numis Securities Limited 020 7260 1000David Poutney, James Serjeant Hogarth Partnership Limited:Fiona Noblet, Anthony Arthur 020 7357 9477 Notes to editors: Domino's Pizza UK & IRL plc holds the exclusive master franchise to own, operateand franchise Domino's Pizza stores in the UK and Ireland. The Group is theleading player in the UK and Ireland's fast-growing pizza delivery market. Thefirst UK store opened in 1985 and the first Irish store opened in 1991. There are 480 stores in the UK and Ireland. Of these, 383 stores are in England,36 are in Scotland,17 are in Wales, 12 are in Northern Ireland and 32 are in theRepublic of Ireland. Founded in 1960, Domino's Pizza is the recognised world leader in pizzadelivery. Through its primarily franchised system, Domino's Pizza operates aglobal network of more than 8,000 stores in over 50 countries. For photography visit www.dominos.uk.com/media or contact Hogarth on 00 44 207357 9477. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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