Domino's shares suffer despite positive half-year announcement

Written on the 14 February 2018 by David Simmons

Domino's shares suffer despite positive half-year announcement

Shares in Domino's Pizza (ASX: DMP) are down 9 per cent despite half-year results showing a lift in group profits.

Domino's has lifted its first-half net profit by 17.3 per cent to $58.7 million, while revenue for the six months to December 31 has risen 5.2 per cent to $567.6 million.

The company says sales in Australia and New Zealand increased 5.9 per cent during the first five weeks' trade in the second half.

The company also reaffirmed guidance for a full-year net profit to grow about 20 per cent.

Domino's slashed full-year same-store sales guidance for Australia and New Zealand by six to eight per cent, however group CEO Don Meij (pictured) says an expanded store network coupled with focus on store improvement will deliver stronger growth in the second half.

"Our goal is to give existing and new customers more of what they want; menu options, cooking times and a simplified ordering experience that exceeds expectations and the response from our customers demonstrates the importance of this approach," says Meij.

The company will pay shareholders an interim dividend of 58.1 cents, up 20 per cent on the interim dividend paid last half-year.

Domino's ANZ CEO Nick Knight says the results in Australia and New Zealand were not as good as they hoped.

"The result was slightly softer than we anticipated, but we remain committed to exceeding our customers' expectations with a menu and customer experience that listens to, and exceeds, our customers' cravings," says Knight.

The company's experiments with a range of vegan pizzas and its further expansion of a dessert menu has paid off.

"Adding avocado, Extreme Desserts, and our very first Dessert Pizza, typified this approach," says Knight.

"We have the foundations in place for an even stronger performance to deliver a more significant SSS growth increase in H2 compared to H1."

In the first half, the company added 25 new stores, and the company expects to open a record number of stores by 1 July 2018.

In Europe, the company's acquisitions seem to have paid off. In Germany specifically, the company says the early stages of the acquisition of Hallo Pizza is progressing well.

Performance in Japan however was lower than expected, according to Maij, predominately due to depreciation of the Yen vs AUD.

"Our sales have been flat in Japan and we expect an improved performance in the market," says Maij.

Shares in Domino's Pizza are down 9.07 per cent to $45.02 per share at 10.42am AEDT.

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Business News Australia

Author: David Simmons





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