Domino’s Pizza Enterprises (DMP) has boosted its final dividend from 27.2 cents a share to 38.8 cents a share after reporting a 28.7% jump in net profit for the year to June 30 of $82.4 million.
The hike in the final dividend took the full year payout to a record 73.5 cents a share, up 41% on 2014-15.
And it also revealed more ambitious expansion plans for the coming year as it seeks to keep its growth momentum driving revenues and earnings.
Domino’s says it plans to open as many as 200 new stores over the next year around the world after adding 448 in 2015-16 through organic growth and acquisitions. Around 65 of those new stores are planned for Australia.
Revenue was up 32% to $930.2 million over the year, to June, thanks to those new stores, many of which came from acquisitions of Pizza Sprint in France, and Joey’s Pizza in Germany, and stores from Domino’s Pizza Germany.
Domino’s said momentum was continuing into the 2016-17 financial year, with the strongest start so far to a new year in terms of store openings and group same store sales.
Domino’s chief executive Don Meij said yesterday he expects the growth rate to slow slightly this year, with earnings forecast to rise around 25% and net profit by around 30%.
That’s why the shares fell more than 6% at one stage yesterday before some of the losses were made and the shares ended the day down 3.7% at $74.11. There’s no pleasing some brokers and analysts. Up to yesterday, the shares were up just over 33% for far in 2016.
The result highlighted why Domino’s major competitors, Pizza Hut and Eagle Boys are struggling. In fact Eagle Boys went bust this year.
Total network sales rose 32.7% to $1.96 billion, boosted by the 484 new stores from those acquisitions and organic company expansion investment.
Pizza industry sales are estimated to be growing around 2% a year, but Domino’s same-store sales in Australia and New Zealand jumped 14.8% in the year to June and in doing so, obviously chewed up the market share, revenue and earnings of its rivals. Guidance was for same store growth in 2015-16 of 11% to 13%.
Domino’s same-store sales in Europe rose 8.2%, compared with forecast growth between 8% to 10%, while Japan continues to struggle, with same-store sales slipping 2.1% (in line with forecasts) as consumer spending remains sluggish and deflation continues to strange the economy.
Domino’s has used new technology to enable customers to order online through desktops, tablets and smartphone apps, and it continually updates these technologies, one of which, currently allows customers to tell Domino’s when they are leaving to pick up their pizzas.
When the message is received, cooking the pizza is started. But the cleverness of this app, called ‘on time cooking’ is that it transfers the costs of delivery back on to the customer and frees up Domino’s delivery chain and reduces or helps put a lid on costs.
Some analysts had a higher profit in their forecasts, but the costs associated with the acquisition of pizza chains in France and Germany during the year, ate into these estimates.
Excluding costs associated with the purchase of Sprint Pizza in France and Joey’s Pizza in Germany, underlying net profit rose 43.6% to $92 million, exceeding guidance for growth of 35% and beating market consensus forecasts by $1 million. That’s the sort of performance the market was looking for and analysts will be looking for those acquisition costs to disappear in 2016-17.
Underlying earnings before interest, tax, depreciation and amortisation rose 40.9% to $180 million, above guidance for around $172 million.
