Domino’s Pizza Group has reported an 11.3% rise in like-for-like sales in the UK in the 26 weeks to 29 June, with an improved performance in Switzerland, while Germany “continues to be challenging” with like-for-likes down 1.7%.
Overall system sales grew 14.9% to £375m and pre-tax profits rose 10.1% to £24.5m.
The company said it continued to see strong operating margin, which grew to 21.7% (2013: 21.2%) excluding the business in Germany and Switzerland. Excluding these two countries, operating profit rose 15.3% to £29.8m, and including them it grew from £10.1m to £24.3m.
Like-for-like sales in the period grew 3.2% in Ireland, 2.9% in Switzerland but declined by 1.7% in Germany.
Total of 11 new stores opened in the period with one closure resulting in a total of 868 stores as at 29 June (2013: 825). The company created nearly 300 new jobs in stores, which is expected to rise to over 1,300 by the end of the year.
The company also announced that after 15 years, Nigel Wray was stepping down as non-executive director with immediate effect following expiry of his fifth term and John Hodson, having completed nine years as an Independent non-executive director, was also stepping down.
At the same time, Syl Saller has informed the board that she is unable to serve a second three year term, when her first ends in September 2014 due to her other commitments.
Chairman Stephen Helmsley said: “All three colleagues have provided good service and wise counsel and I wish to place my appreciation for their contributions on record. I shall assume the chairmanship of the Nomination Committee in succession to Syl and we expect to announce shortly the appointment of a new Independent non executive director who will chair the Remuneration Committee.
“Finally we welcome Paul Waters who joins as interim company secretary in place of Mark Millar, who leaves to join the AA.”
Domino’s interim dividend increased by 10% to 7.81p per share (2013: 7.10p). The firm said that strong net cash generated from operating activities of £28.7m (2013: £15.5m) resulted in net debt of £3.7m (2013: £27.9m) and a resumption in the share buyback programme.
Basic earnings per share were up by 7.4% to 11.6p and diluted earnings per share were up by 7.5% to 11.5p.
The group said that e-commerce continues to fuel much of its UK growth as it “seeks to find new ways to make it as easy as possible for customers to order our pizzas”.
Sales through these channels now represent 69.7% of delivered sales and mobile now makes up 38.3% of this, up from 27.5% in the first half of 2013. The company anticipates that mobile will become its most popular ordering channel in 2015.
It said: “We are continuing to divert more of our marketing funds to digital, spending 48% of our media budget during the half, up from 39% in H1 2013, on digital based marketing. We are exploiting the trend of second and third screen viewing by consumers who are watching TV whilst interacting with one or two other devices, and won an award for our sponsorship last year of the X Factor App.
“Customers are increasingly influenced by social media and in a recent survey 15% cited it as their prompt to order. We are exploring novel campaigns that attract attention in this space. Examples have been Melting Man, edi-box April Fool’s spoof and delivering a Pizza to a customer on a train. Each of these reached millions of Twitter followers.”
The company is also investing in a new website with improved photography, better deal communication, screen size optimisation and easier ordering and payment. It expects this to be live by September this year and will cover all channels including its Apps. The group said it continued to open new stores in virgin territories and by splitting existing ones to optimise service for customers and maximise sales for each location.
In the first half, eight new stores were opened and, as usual, the company said it expects store openings for the year to be strongly second-half weighted.
It said: “The pipeline is good and we still anticipate 40-50 openings for the full year. Our average weekly sales from new outlets is up by 12.4% compared to last year.”
Wild said: “The first half of 2014 has been a solid period of progress for the Group. Continued strong sales growth has confirmed the significant opportunity that remains for Domino’s in our core UK market and we have a number of ongoing plans to continue maximising this potential.
“Equally, the UK performance illustrates the opportunity for the Domino’s brand in other markets, as further evidenced by its success elsewhere in the world. Conditions in Germany have proved to be challenging, but I remain determined that we follow our agreed strategy and develop a viable business model.
“The cash generation in the first half has meant that the Board now plan to resume its share buyback programme.”
Chief executive David Wild said: “I am pleased to report a strong first half performance for Domino’s led by the sales results in our core market. We have now seen three successive quarters of double digit like-for-like sales growth in the UK.
“I am especially pleased at the continued success of our e- and m- commerce platforms showing how customers enjoy and appreciate the benefit of ordering on-line. We are investing further to drive this even harder.
“Outside the UK, the ROI has continued its solid recovery and we have seen an improvement in Switzerland after a slow start to the year. Germany continues to be challenging, but we remain committed to our plans.
“Looking forward, we plan to open 40-50 stores in the UK this year as previously reported. I remain very excited by the Domino’s business and I am enjoying working with our franchisees and my team to build on our success.”
