TIDMDOM
RNS Number : 3460Y
Domino's Pizza Group PLC
04 May 2023
4 May 2023 LEI: 213800Q6ZKHAOV48JL75
This announcement contains Inside Information
Domino's Pizza Group PLC ("DPG") - Trading statement
Record Q1 orders and app customers driving growth in sales and
continued market share gains
Encouraging start to Q2 and new GBP20m share buyback
announced
Highlights
-- Continued momentum with like-for-like system sales (excluding
the change in the VAT rate)(1) up 10.7%
-- Robust order count in Q1 for DPG with 18.0m orders, up 2.8%
o Collection orders up 23.0%, with delivery orders continuing to
improve on the previous three quarters, down 4.9%
-- Encouraging start to Q2 with like-for-like system sales
(excluding the change in the VAT rate)(1) up 10.9% and orders up
5.9% in the first 4 weeks in challenging consumer and inflationary
environment
-- Excellent digital progress continues
o 6.8m active app customers(2) , a 27% increase vs. Q1 22(3)
o App orders as a % of online orders was 64.3% vs. 48.5% in Q1
22
-- Continued gains in UK takeaway market share(4) , 7.8% in Q1
23(3) , up from 6.4% in Q1 22, in a challenging market
-- Material improvement in average delivery time as a result of
our franchise partners' focus on service
-- Acceleration in new store openings with 15 year to date, vs.
nine in the same period in FY22
-- New store pipeline is now c.75% larger than the comparable
pipeline in FY22, more than 30 different franchisees have stores in
development
-- One-time investments in ecommerce and ERP projects on track
with the associated opex and capex investments in these projects
largely complete by end of FY23
-- As a result of strong momentum, continued successful
execution of the strategy and confidence in the business, new
GBP20m share buyback programme, effective immediately
-- The Board has continued confidence in meeting the guidance
provided at the FY22 results in March
Elias Diaz Sese, Interim Chief Executive Officer, said:
"We have delivered record first quarter sales and orders thanks
to the immense hard work of our franchise partners and colleagues
in executing our strategy and our relentless focus on giving
customers the best possible quality, value and service. Whilst this
year has started well for Domino's, there continues to be
uncertainty in the economic environment with household budgets
likely to remain under increasing pressure. However, we continue to
be excited about the many opportunities we see for Domino's in 2023
and beyond as we continue to work towards our purpose of delivering
a better future through food people love."
"We are well placed to succeed as we accelerate the execution of
our strategy. We are focused on improving our franchise partners'
profitability and we have made good progress in investing in the
business and driving operational efficiencies. Our digital strategy
continues at pace, and we continue to offer our customers strong
national value campaigns, which are particularly important as they
continue to feel pressures on their household budgets. We are
continuing to grow our collection business and are aligned with our
franchise partners who are making great progress with their focus
on service. Combined with the benefit of new store openings, the
Just Eat platform roll-out and further product innovation, we
remain confident that our resilient, asset-light business model
will deliver market share gains, further financial and strategic
progress, and increased returns for our shareholders."
Q1 trading performance
Our trading in the first quarter was driven by our key areas of
focus for FY23; giving customers' value for money through
compelling national value campaigns and our franchise partners'
focus on service; our digital acceleration, the continued
incremental benefit of being on the Just Eat platform and new store
openings. Excluding the impact of the increase in the VAT rate,
like-for-like system sales, excluding splits, grew by 10.7%. We
have made an encouraging start to Q2 with like-for-like system
sales (excluding the change in the VAT rate) up 10.9% in a
challenging consumer and inflationary environment .
Total system sales were GBP386.6m, up 5.6% on the first quarter
of last year. Like-for-like system sales, excluding splits, were up
4.4%, reflecting the lower rate of VAT in the comparative
quarter.
Q1 23 Q1 22 Change
System sales GBP386.6m GBP365.9m +5.6%
---------- ---------- ---------
LFL system sales growth (exc.splits) +4.4% (2.4)% +6.8ppts
---------- ---------- ---------
VAT rate 20% 12.5% -
---------- ---------- ---------
LFL system sales growth ex VAT
(exc.splits) +10.7% +3.9% +6.8ppts
---------- ---------- ---------
Total Q1 23 orders grew 2.8% to 18.0m. This was despite a strong
comparative quarter, where orders grew 5.5% in Q1 22 driven by the
recovery of collections post Covid restrictions in Q1 21.
First 10 weeks Q1 23 First 4 FY 23 YTD
Q1 23 weeks
Q2 23
Total orders growth +2.5% +2.8% +5.9% 3.5%
--------------- ------ -------- ----------
Growth in collections continued in Q1 and were up 23.0%.
Collection represents the most efficient labour channel, with
delivery effectively outsourced to the customer. This is
particularly important in an environment where there are pressures
on labour availability and wage inflation. The trajectory of
delivery orders continues to improve and were down 4.9% in the
quarter, an improvement on the previous three quarters.
Q1 strategic progress
Alignment with our franchise partners has enabled us to offer
customers compelling value such as the 'Price Slice' deal with
GBP8, GBP10, GBP12 deals for small, medium and large pizzas. This
was a strong contributor to our performance in the quarter. Our
franchise partners have worked tirelessly to deliver improved
service to our customers, and this has resulted in average delivery
times improving by 2 minutes compared to the same quarter last
year.
Our digital progress continues to accelerate. Orders generated
through our app grew 27.7% in Q1, and app orders as a percentage of
online orders were 64.3%, an increase of 15.8ppts on Q1 22. App
downloads were 66% higher and active app customers were 6.8m, an
increase of 27% compared to Q1 22. New customers to Domino's whose
first order was on the app increased 58% compared to Q1 22.
Q1 23 was our first full quarter of enjoying the benefit of
being fully rolled out on the Just Eat platform. We are now focused
on continuing to drive incremental orders and, in FY23, look
forward to a full year benefit of being on the platform.
We have rebuilt our new store opening pipeline with our
franchise partners and have opened 15 new stores in FY 23 with 9
different franchise partners, compared to 9 new stores in the same
period in FY22. We currently have 6 stores under construction and
over 35 with approved planning permission. Our pipeline is c.75%
larger than the comparable pipeline in FY22, more than 30 different
franchisees have stores in development and we continue to expect
new store openings in FY23 to increase the total store estate by
mid-single digits percentage points.
This year we have made good progress with our technology
projects to deliver a new ecommerce platform and ERP system. The
projects are on track and the one-time investment in these projects
will be largely complete by the end of FY23. Operating expenditure
in 2023 is elevated by c.GBP9m of one-time spend related to these
projects which will not repeat in 2024. Capital expenditure in 2023
is similarly elevated by c.GBP5m of one-time spend which also not
repeat in 2024.
Further shareholder returns with new GBP20m share buyback
Our strong momentum, continued successful execution of the
strategy, combined with confidence in the business, means we are
announcing a new GBP20m share buyback with immediate effect.
We have a highly cash-generative, asset-light business model
and, in March 2021, we launched a clear capital allocation
framework. Our first priority is to invest in the business to drive
long-term organic growth. We will continue to maximise shareholder
returns through a sustainable and progressive dividend policy and
to operate a disciplined approach to assessing additional growth
opportunities. Finally, operating within a target leverage range of
1.5x - 2.5x net debt to underlying EBITDA, we aim to maximise
returns with an annual allocation of surplus cash to
shareholders.
Since the launch of the capital allocation framework in March
2021, DPG has returned GBP315m to shareholders through dividends
and share buybacks, including the FY22 final dividend and the new
GBP20m buyback.
German associate
Completion of the disposal of our German associate will occur in
June 2023 and at that point the proceeds generated will be flowed
through our capital allocation framework.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 as it forms part of domestic
law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018, as amended (together, "MAR").
The person responsible for making this notification is Adrian
Bushnell, Company Secretary.
For further information, please contact:
Domino's Pizza Group plc:
Will MacLaren, Head of Investor Relations - 07443 192 118
Brunswick:
Tim Danaher, Emily Gainsford - 020 7404 5959
Financial calendar
Domino's Pizza Group plc will publish its half year results on 1
August 2023.
Notes
(1) An adjustment for the change in VAT rates described for
system sales relates to the impact of changes in the VAT applied on
hot takeaway food where the VAT inclusive price to customers did
not change. The VAT rate in the UK decreased from 20% to 5% on 15
July 2020, increased to 12.5% on 1 October 2021 and reverted back
to 20% on 1 April 2022. System sales are consistently reported on
an exclusive of VAT basis. However, where the inclusive of VAT
price of an order remained the same on a total basis to the
customer, over the period of reduced VAT the exclusive of VAT price
reported in system sales increased. This leads to an increase in
system sales from 15 July 2020 through to 31 September 2021 when
the VAT rate was reduced from 20% to 5%. From 1 October 2021, the
rate increased from 5% to 12.5%. Where the inclusive of VAT price
of an order remained the same on a total basis, this leads to a
decrease in system sales compared to the period from 15 July 2020
and an increase in system sales compared to the period before 15
July 2020. With the increase in VAT from 1 April 2022 back up to
20%, where the inclusive of VAT price remained the same to the
consumer, there has been a negative impact on system sales compared
to the period from 15 July 2020 - 30 September 2021 and 1 October
21 - 31 March 2022, as the exclusive of VAT price of an order
decreased.
As an example, for an order where the inclusive of VAT price is
GBP27:
-- From 15 July 2020 to 31 September 2021, during the period
where VAT was 5%, the reported system sale would be GBP25.71
-- From 1 October 2021 to 31 March 2022, during the period where
VAT was 12.5%, the reported system sale would be GBP24.00
-- From 1 April 2022 onwards, where the VAT rate is 20%, the
reported system sale would be GBP22.50
In Ireland, the VAT rate for hot takeaway food reduced from
13.5% to 9% on 1 November 2020 and remains in place. The Irish
government also confirmed that the temporary VAT rate reduction to
9% in the tourism and hospitality sectors will not be extended,
meaning the VAT rate will revert to 13.5% from 1 September
2023.
(2) Customers who have placed an app order in the last 12
months
(3) Q1 FY23 is 13 weeks to 26 March 2023, Q1 22 is 13 weeks to
27 March 2022
(4) Kantar Worldpanel, bespoke market definition. Covers period
26 December 2022 to 19 March 2023
About Domino's Pizza Group
Domino's Pizza Group plc is the UK's leading pizza brand and a
major player in the Irish market. We hold the master franchise
agreement to own, operate and franchise Domino's stores in the UK
and the Republic of Ireland, and have associate investments in
Germany and Luxembourg. As of 4 May 2023, we had 1,274 stores in
the UK and Ireland.
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