Domino’s set to announce strong financials, suggests analyst

Domino’s adjusted profit before tax is expected to be up 10% to £52.4m, analyst Peel Hunt has predicted.

The pizza delivery company is due to announce its interim results next Tuesday (3 August), with the forecast uplift in PBT potentially a figure that will be exceeded “aided by very strong lfl sales in 2Q in particular”, it said in a note.

“Although the VAT benefit will start to unwind from 4Q, we expect further forecast upgrades. The key to the share price is how much of this is structural and not transitory,” said Peel Hunt. That said it is increasing its target share price from 450p to 475p.

The analyst added that the impact of the VAT reduction on like-for-like sales should be ignored this year and next, but what should not be ignored is that the VAT cut should bring a £120m cash windfall to franchisees this year.

“This is equivalent to the cost of 600 new stores (post-incentives), sufficient to cover the cost of 10 years of expansion, removing any quibbles over new site returns,” said Peel Hunt.

Domino’s Pizza Group reported periods of “exceptional sales” in its previous trading update, for the 13 weeks from 28 December 2020 to 28 March 2021, with like-for-like system sales up 18.5%, with the performance of its delivery business offsetting lower sales for collection.