TIDMDOM
RNS Number : 8555S
Domino's Pizza Group PLC
09 November 2023
9 November 2023 LEI: 213800Q6ZKHAOV48JL75
Domino's Pizza Group PLC ("DPG") - Trading statement
Continued sales growth and strong strategic progress
Good start to Q4; continue to expect FY23 underlying EBITDA of
GBP132m - GBP138m
Highlights
-- Continued momentum with Q3 23(1) like-for-like system sales
(exc. splits)(2) up 3.7%, in an uncertain market, as we maintained
our focus on providing customers with a compelling value
proposition
-- Q3 23 total system sales up 5.5% reflecting acceleration in new store openings
-- Total orders of 16.7m, down 1.2% in Q3 23. YTD(3) total orders +1.5%:
o Q3 23 collection orders continued to grow and were up 8.4%
o Q3 23 delivery orders down 6.3% due to softer demand in the
wider delivery market
-- Total orders have returned to growth in Q4 23(4) , +1.2%,
with an improved trajectory in delivery orders, despite a tough
comparison with the strong prior year performance
-- New store openings well ahead of plan with 45 year to date,
vs. 21 at the same point in FY22. As a result, we now expect to
open at least 60 new stores in FY23
o New store openings trading ahead of expectations
o 2024 pipeline continues to grow with over 45 stores now in
development vs. 25 in August 2023
-- Significant digital progress
o 8.7m active app customers(5) , a 55% increase vs. Q3 22
o App orders as a % of online orders was 79.4% vs. 53.1% in Q3
22
-- Uber Eats trial will start in some stores in early FY24
-- GBP70m share buyback began on 29 August with GBP40m
repurchased to date and is expected to be substantially complete by
end of the year
-- The Board continues to expect FY23 underlying EBITDA(6) in the range of GBP132m - GBP138m
Andrew Rennie, Chief Executive Officer, said:
"Having been in the business for 100 days and spent that time
travelling around the UK and Ireland visiting franchisees,
suppliers and colleagues I'm even more excited about the
opportunities ahead for Domino's and our outstanding franchisees. I
look forward to providing an initial outline on these growth
opportunities for the business on 11 December."
"Our franchisees are performing well in an uncertain market, and
we are all benefitting from an aligned system. We remain focused on
giving our customers great tasting food, exceptional service and
great value, every single time. Together, our store openings are
ahead of plan and trading well, collections are continuing to grow,
our digital strategy is powering ahead, and we are bringing
exciting menu innovation to our customers focused on different
parts of the day."
"We've continued to make great strategic progress to drive
sustainable growth. As we look into next year, we see inflation
stabilising and our focus will be on continued customer and order
growth, as well as franchisee profitability. We remain confident
that our resilient, asset-light business model will deliver further
financial and strategic progress, and increased returns for our
shareholders."
Q3 strategic progress
We have continued to make strong progress with our new store
openings following the rebuilding of the pipeline. We have now
opened 45 new stores this year with 20 different franchise partners
compared to 21 at this time in FY22 from 13 different franchise
partners. These stores are in quality locations and are trading
ahead of expectations, with particular strength in new territories
with smaller address counts, giving an opportunity to accelerate
our growth. We now expect to open at least 60 new stores in FY23,
compared to 35 new stores in FY22. Importantly, we already have
over 45 stores in development for FY24 and will enter the year with
a far stronger pipeline than in FY23.
The Domino's app is the key driver of our digital growth
strategy because app customers yield higher sales and have a higher
average order frequency than those who only use the website. In Q3,
app orders as a percentage of online orders were 79.4%, an increase
of 26.3ppts vs. Q3 22. App downloads were 73% higher vs. Q3 22 and
the number of active app customers reached 8.7m, an increase of 55%
compared to Q3 22.
Alignment with our franchise partners has allowed us to offer
our customers compelling value in FY23. In Q3 we continued our 50%
off app deal which also contributed to the growth in app customers.
Our franchise partners made further improvements in service to our
customers with average delivery times improving by one minute
compared to the same quarter last year. We also completed the full
roll-out of GPS across the entire store estate providing
efficiencies to each store and an accurate delivery time for
customers.
We have launched a number of new trials aimed at increasing the
menu choice available to customers at different parts of the day to
drive incremental sales. Our store trials for 'Domishakes,' wraps
and 'Italianos' across multiple franchise groups continue to
perform ahead of expectations, highlighting opportunities for
future growth.
Domino's has now been rolled out on the Just Eat platform for
three full quarters and it continues to be a driver of sales
growth, bringing in incremental customers and orders. Following
Domino's Pizza Inc.'s global agreement with Uber Eats, DPG will
start a trial in some stores in early FY24.
The work on our two important technology projects is progressing
well . The ecommerce platform is on track and is expected to
complete by the end of FY23. The ERP system remains on track for
launch in H1 24. There is no change to our previous guidance on the
investment required for these projects.
Q3 trading performance
Like-for-like system sales, excluding splits, grew by 3.7% and
total system sales were GBP363.7m, up 5.5% on the third quarter of
last year.
Q3 23(1) Q3 22(1) Change YTD 23(3) YTD 22(3) Change
System sales GBP363.7m GBP344.7m +5.5% GBP1,130.1m GBP1,055.1m +7.1%
---------- ---------- ------- ------------ ------------ -------
LFL system sales
growth exc. splits) +3.7% (9.3)% +5.5% (7.4)%
---------- ---------- ------- ------------ ------------ -------
LFL system sales
growth ex VAT
(exc.splits)(7) +3.7% +2.4% +7.7% +2.4%
---------- ---------- ------- ------------ ------------ -------
Total orders in Q3 were down 1.2% to 16.7m. Growth in
collections remained strong in Q3 and were up 8.4%. We continue to
see a good opportunity to grow collections over the coming years as
they remain lower as a percentage of total orders than other
Domino's systems globally. Delivery orders were down 6.3% in Q3
reflecting softer demand in the wider delivery market. Year to
date, total orders are up 1.5% driven by the growth of
collections.
UK & ROI LFL inc. splits (YOY Growth) Total (All Stores)
Sales Volume Price Orders (m) YOY Order
Growth
---------- ----------- -------- ----------- ----------
Total
---------- ----------- -------- ----------- ----------
Q1 3.5% (7.2)% 10.7% 18.0m 2.8%
---------- ----------- -------- ----------- ----------
Q2 7.3% (6.0)% 13.2% 17.4m 2.8%
---------- ----------- -------- ----------- ----------
Q3 2.4% (7.5)% 9.9% 16.7m (1.2)%
---------- ----------- -------- ----------- ----------
YTD 4.4% (6.8)% 11.2% 52.1m 1.5%
---------- ----------- -------- ----------- ----------
Delivery only
---------- ----------- -------- ----------- ----------
Q1 (0.9)% (12.3)% 11.4% 12.1m (4.9)%
---------- ----------- -------- ----------- ----------
Q2 2.9% (9.8)% 12.7% 11.1m (3.9)%
---------- ----------- -------- ----------- ----------
Q3 (1.1)% (10.3)% 9.2% 10.3m (6.3)%
---------- ----------- -------- ----------- ----------
YTD 0.3% (10.8)% 11.1% 33.5m (5.0)%
---------- ----------- -------- ----------- ----------
Collection only
---------- ----------- -------- ----------- ----------
Q1 22.5% 12.4% 10.1% 5.9m 23.0%
---------- ----------- -------- ----------- ----------
Q2 24.0% 6.6% 17.4% 6.3m 17.3%
---------- ----------- -------- ----------- ----------
Q3 14.3% 0.4% 13.8% 6.3m 8.4%
---------- ----------- -------- ----------- ----------
YTD 20.1% 6.2% 13.8% 18.5m 15.8%
---------- ----------- -------- ----------- ----------
Capital allocation
We have a highly cash-generative, asset-light business model
with a clear capital allocation framework. Since launching the
framework in March 2021, we have announced GBP398m of returns to
shareholders, through GBP142m in dividends and GBP256m in share
buybacks.
The GBP20m share buyback announced in May 2023 was completed on
25 August 2023. We have repurchased GBP40m of the GBP70m share
buyback announced in August 2023 and the programme is expected to
be substantially complete by the end of FY23.
Current trading, outlook and guidance
Total orders have returned to growth in Q4, +1.2%(4) , despite
the strong prior year comparator. While the market and consumer
backdrop remains uncertain, we are making strong strategic
progress, and we continue to expect to deliver FY23 underlying
EBITDA in a range of GBP132m - GBP138m.
We remain focused on accelerating our execution, through five
key areas of focus which we outlined at the start of the year:
franchise partner profitability, value for money, digital,
convenience, and technology platform projects. Our asset-light
business model and value proposition mean we are well placed to
succeed in an uncertain trading environment, and we remain
confident that we will make further financial and strategic
progress and deliver increased returns for our shareholders.
Our technical guidance for FY23 is as follows:
-- FY23 is a 53-week year
-- Accounting treatment of technology platform costs to impact EBITDA by c.GBP9m
-- Underlying depreciation & amortisation of between GBP22m to GBP25m
-- Underlying interest (excluding foreign exchange movements) in the range of GBP14m to GBP16m
-- Estimated underlying effective tax rate of c.22% for the full year
-- Capital investment of between GBP20m to GBP23m
-- Net Debt at year-end between GBP230m to GBP250m. The increase
compared to prior guidance of GBP205m - GBP225m reflects the pace
of the GBP70m share buyback programme
Financial calendar
11 December 2023 Investor event
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
A conference call for investors and analysts will be held at
09:30 GMT today.
United Kingdom (Local): +44 20 4587 0498
United Kingdom (Toll-Free): +44 800 358 1035
United States (Local): +1 646 787 9445
United States (Toll-Free): +1 855 979 6654
All other locations: +44 20 4587 0498
Access code: 559625
Notes
1. Q3 23 is 13 weeks to 24 September 2023. Q2 22 is 13 weeks to 25 September 2022.
2. Like-for-like (excluding splits) system sales performance is
calculated for UK & Ireland against a comparable 52-week period
in the prior period for mature stores which were not in territories
split in the current period or comparable period. Mature stores are
defined as those opened prior to 26th December 2021.
3. YTD 23 is the 39 weeks to 24 September 2023. YTD 22 is the 39 weeks to 25 September 2022.
4. First 4 weeks of Q4 23
5. Customers who have placed an app order in the last 12 months.
6. Underlying is defined as statutory performance excluding
discontinued operations, and items classified as non-underlying
which includes significant non-recurring items or items directly
related to merger and acquisition activity and related instruments
as set out in note 4 to the financial information in the H1 23
results statement. For H1 23, Underlying excludes the GBP40.6m
profit on disposal of the German associate.
7. Q1 22 had a lower rate of VAT which is therefore included in
the YTD comparator. 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 reverted to 13.5% on 1 September
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. As of 9 November 2023, we had 1,304
stores in the UK and Ireland.
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