DOMINO'S TAKES STAKE IN JAPAN SISTER COMPANY

Written on the 13 August 2013

DOMINO'S TAKES STAKE IN JAPAN SISTER COMPANY

DOMINO’S Pizza Enterprises (ASX:DMP) will take a majority stake in Domino’s Pizza Japan as the Brisbane-based company looks to continue its strong growth story.

DMP has entered an agreement with Bain Capital to buy 75 per cent of its Japanese stable mate for 21 billion yen (AU$236 million), which it will fund partly through a $156 million capital raising venture.

Domino’s CEO and managing director Don Meij says Japan is a strategic location for future expansion.

“[Japan provides] access to a large market which is well suited to significant new store rollouts and the relocation of stores to higher traffic locations with improved image and formats,” says Meij (pictured).

Today’s announcement came as DMP revealed its full-year results, including a net profit after tax (NPAT) of $30.4 million, up 13 per cent on the previous year. Total sales were $848.6 million with same store sales growth of 2 per cent, rolling 6.5 per cent from the previous year.

Meij puts the result down to product innovation, not only through its new range of gourmet pizzas, but through the implementation of digital ordering systems.

The company sources more than 50 per cent of sales digitally and plans to increase that to 80 per cent.

“We have made it a strategic priority over the past 12 months to be more accessible to our customers through a comprehensive range of online ordering interfaces, including improved platforms to showcase our product range, all using HTML5 technology, a new iPad and Facebook App,” says Meij.

The company is pushing ahead with its technology upgrade and push towards digital sales, especially in Europe, where the Pulse POS system and HTML5 technology will be rolled out.

“Looking forward to the 2013/14 financial year, we are confidence of continuing the current momentum and we expect to deliver an EBITDA in the region of 15 per cent and to add approximately 70 to 80 new stores to the network during this time,” says Meij.

“We expect to have a record number of organic new store openings, particularly in our three European countries, and we will continue to push ourselves to reach new milestones in this area.”

DMP added 67 new stores to the network in the 12 months to June 30, including 27 stores in Australia and New Zealand and 40 new stores in Europe, taking the year-end store count for the Group to 970.

Domino’s Pizza Japan is the third largest pizza enterprise in Japan with 259 stores, including 216 corporate stores and 43 franchise stores. It operates under a 20-year master franchise agreement from Domino’s Pizza Inc.

The capital raising will take the form of a five for 23 accelerated renounceable pro-rata entitlement offer of shares at an issue price of $10.20 per share.

The institutional offer will aim to raise about $125 million, while the retail side of the offer will make $31 million.

It is fully underwritten by Morgan Stanley Australia Securities Limited.

The Record Date for the Entitlement Offer is Friday, August 16, with the retail entitlement offer expected to close on Friday, September 6.

The Company will pay shareholders a final fully-franked dividend of 15.4 cents per share, bringing the full year dividend to 30.9 cents. The total return to shareholders was 73.7c per share with the addition of a $30 million capital return.

DMP shares traded up 2.62 per cent today, closing at $11.820.


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