TIDMDOM
RNS Number : 9074F
Domino's Pizza Group PLC
26 February 2015
26 February 2015
DOMINO'S PIZZA GROUP plc
PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 28 DECEMBER 2014
"Growth in online ordering, new store performance and franchisee
profitability drives record results"
Domino's Pizza Group plc ("Domino's" the "Company" or the
"Group"), the leading pizza delivery company, announces its results
for the 52 weeks ended 28 December 2014.
Financial Highlights
-- System sales(1) increased by 14.6% to GBP766.6m (2013: GBP668.8m)
-- Underlying(2) profit before tax, of GBP54.8m, up 15.1% (2013: GBP47.6m)
-- Like-for-like sales(3) growth of 11.3% in 724 UK mature
stores (2013: 7.0% in 670 mature stores)
-- Underlying profit before tax for UK & ROI increased by 14.3% to GBP63.1m (2013: GBP55.2m)
-- Underlying earnings per share:
o Diluted earnings per share up 10.5% to 26.4p (2013: 23.9p)
o Basic earnings per share up 10.8% to 26.6p (2013: 24.0p)
-- Statutory operating profit up at GBP54.0m (2013: GBP20.4m)
-- Statutory basic earnings per share up at 25.9p (2013: 10.7p)
-- Final dividend increased by 10.1% to 9.69p per share (2013:
8.80p) bringing the total dividend for the year to 17.50p per share
up 10.1% (2013: 15.90p)
-- 44 new stores opened in the period (2013: 57 stores) with
eight closures (2013: four) resulting in a total of 894 stores in
four countries as at 28 December 2014
-- UK & ROI online system sales increased by 30.2% to
GBP440.0m (2013: GBP338.0m) with online sales accounting for 69.4%
of UK & ROI delivered sales (2013: 61.5%). Of this, 44.2% of
online orders were taken through a mobile device (2013: 30.9%)
-- Strong balance sheet with an adjusted net cash position(4) of
GBP11.0m (2013: adjusted net debt of GBP13.6m)
Current Trading
Like-for-like sales in the first eight weeks of 2015 are as
follows:
UK (GBP) 9.5%
ROI (EUR) 4.8%
Germany (EUR) 0.1%
Switzerland (CHF) 7.7%
Commenting on the results, Chief Executive Officer, David Wild,
said:
"It has been another strong year for Domino's, particularly in
our core UK market, confirming the strength of our customer offer.
Both UK like-for-like sales and new store performance were
excellent and this has largely been driven by our sector-leading
e-commerce initiatives. Our renewed focus on franchisee
profitability has also provided an impetus to continued growth.
Outside the UK, we are pleased with progress in Ireland and
Switzerland, both of which showed improvement. In Germany, there
remains much work to do, but underlying losses have reduced, in the
second half and we remain optimistic about the opportunity in this
market.
These results are a tribute to the entire Domino's team,
including the franchisees and their colleagues, who work in the
stores and served our customers with more than 75 million pizzas
during 2014. I would like to thank them for their amazing
efforts.
We look forward with continued optimism. We have a great brand
and a strong plan; the year has started promisingly, but there are
tough comparators to beat, so we will not get complacent and will
continue to ensure Domino's remains the Number One pizza brand in
the UK."
1 Total sales made by all franchisee and corporate stores in the
UK, Republic of Ireland, Germany and Switzerland to the public. It
is not revenue attributable to Domino's as it is derived mainly
from stores owned by franchisees
2 Underlying is defined as excluding amounts in relation to
onerous leases, impairments, acquisition of joint ventures,
associates and subsidiaries, and other restructuring and one-off
items, as reconciled on the income statement
3 Like-for-like sales are sales in UK stores that were open
before 2013 compared to the corresponding 52 week period in the
prior year
4 Excludes Domino's Leasing Limited's and the non-controlling
shareholder loan in Germany in 2013
For further information, please contact:
Domino's Pizza:
David Wild, Chief Executive Officer 01908 580604
MHP Communications:
Andrew Leach, Simon Hockridge, Naomi Lane 020 3128 8100
Numis Securities Limited
David Poutney, James Serjeant 020 7260 1000
A presentation to analysts will be held at 09.30 on 26 February
2015 at The Lincoln Centre. To register for attendance please
contact Naomi Lane at MHP Communications on
Naomi.Lane@mhpc.com.
Notes to Editors:
Domino's Pizza Group plc is the leading player in the
fast-growing pizza delivery market and holds the exclusive master
franchise to own, operate and franchise Domino's Pizza stores in
the UK, Republic of Ireland, Germany, Switzerland, Liechtenstein
and Luxembourg. The first UK store opened in Luton in 1985 and the
first Irish store opened in 1991. In April 2011, the Group acquired
a majority stake in the exclusive master franchise to own, operate
and franchise Domino's Pizza stores in Germany. In September 2012,
the Group acquired the master franchise for Switzerland, Luxembourg
and Liechtenstein and an option to acquire the Master Franchise
Agreement in Austria prior to the end of 2014, which was not
exercised. On 26 February 2014, the Group acquired the remaining
non-controlling interest of the German business
As at 28 December 2014, there were 894 stores in the UK,
Republic of Ireland, Germany and Switzerland. Of these, 696 stores
are in England, 56 are in Scotland, 36 are in Wales, 22 are in
Northern Ireland, one is on the Isle of Man, two are mobile units,
48 are in the Republic of Ireland, 22 are in Germany and 11 are in
Switzerland.
Founded in 1960, Domino's Pizza is one of the world's leading
pizza delivery brands. Through its primarily franchised system,
Domino's Pizza operates a global network of more than 11,000
Domino's Pizza stores in over 70 international markets. Domino's
Pizza has a singular focus - the home delivery of pizza, freshly
made to order with high quality ingredients.
Customers in the UK can order online at www.dominos.co.uk, in
the Republic of Ireland at www.dominos.ie, in Germany at
www.dominos.de and in Switzerland www.dominos.ch. In addition,
mobile customers can order by downloading Domino's free iPhone,
iPad and Android apps.
For photography, please visit the media centre at
www.dominos.uk.com, contact the Domino's Press Office on +44
(0)1908 580732, or call MHP on +44 (0)20 3128 8100.
Chairman's statement
This is another set of excellent financial results, having
achieved record sales and profit growth together with strong cash
flow. The Group has delivered very solid underlying profit before
tax of GBP54.8m, representing excellent growth in our core markets
of the UK and Republic of Ireland ("ROI") which are up 14.3%
against last year, but partially offset by losses in Germany of
GBP7.3m.
In 2015, we celebrate 30 years since the Company opened its
first store in the UK, and we are proud to be recognised as one of
the leading territories in the Domino's worldwide system, having
continuously exceeded UK growth expectations and new store openings
year after year.
At the heart of the Group's story in 2014 is some very powerful
growth in our core UK market, where like-for-like sales growth
accelerated to 11.3% (2013: 7.0%), confirming our status as one of
the strongest growth stories on the UK high street. This strong
performance was driven by a broad mix of activities, including
investment into digital sales, innovative new product development
and targeted incentives for franchisees to accelerate their order
counts.
I am delighted to report that ROI has had a sustained recovery.
After the economic crisis, we have now seen eight consecutive
quarters of sales growth and are encouraged by the progress made.
During the year, like-for-like sales were up 4.3% with all regions
showing positive sales growth. Mobile sales have more than doubled
in the last two years and they now represent almost 50% of online
sales.
Our German business has continued to have a difficult year with
like-for-like sales down 4.9%, as we change our operating framework
and focus on developing a store level economic model that is
attractive to franchisees. During the year, we rationalised our
overhead spend, reduced local marketing spend to more appropriate
levels and lowered food costs. We have also focused on our
financial reporting to ensure that we have better oversight of
business performance. Due to poor performance, we closed four
stores, but opened three new stores which are all performing
well.
Switzerland's like-for-like sales were up 4.7% (2013: 5.4%) with
total system sales up 8.0% (2013: -5.0%) in local currency. During
the year, we opened one new store, relocated one store in Zurich,
and strengthened the management team. In the final quarter of 2014,
the business in Switzerland broke even, and is well positioned to
become a valuable contributor to Group profits going forward.
We have decided not to renew our option to acquire the master
franchise agreement for Austria.
Dividend
The Board recommends a final dividend for 2014 of 9.69p (2013:
8.80p) per share. This is a 10.1% increase on the final dividend
for the prior year. Together with the interim dividend of 7.81p per
share paid on 5 September 2014, the total dividend for the year
will be 17.50p per share, representing an increase of 10.1% on the
dividend paid for the prior year (2013: 15.90p). The full year
dividend is 1.5 times covered by underlying profits after tax
(2013: 1.5 times). Subject to receiving shareholder approval at the
Annual General Meeting on 21 April 2015, the final dividend will be
paid on 27 April 2015 to shareholders on the register at the close
of business on 6 March 2015.
Our People
I continue to praise our franchisees, who are at the heart of
everything we do. I am delighted to see so many of our long
standing franchisees thriving with increased profitability, and
continuing to open new stores. Day and night they are out there,
focused on product, service and image, always seeking to ensure
customers get what they want, and I am grateful to them all.
I would also like to thank our employees for their hard work and
dedication to help make us the number one pizza company in every
neighbourhood in which we operate.
Board changes
The Board has undergone significant change in 2014 in pursuit of
creating a Board structure that has the skills and experience to
positively drive the business forward.
Chief Executive Officer, David Wild, joined the Board in
November 2013, initially as a non-executive Director. In January
2014, he was appointed as Interim Chief Executive Officer following
the resignation of Lance Batchelor. David was appointed as Chief
Executive Officer in April 2014.
Chief Financial Officer Sean Wilkins resigned on 20 January 2015
having helped David drive the growth of the business by delivering
a strong increase in our UK like-for-likes. The process for finding
a new Chief Financial Officer is well advanced and the Board looks
forward to updating the market in the near future.
Outlook
2014 was a year of great progress and achievement. During the
year, the UK and ROI sold, on average, over 1.4 million pizzas each
week. With the improving strength of e-commerce, mobile technology
and online penetration, we regularly break internal weekly sales
records, and together with our aim to further expand the number of
UK based stores, the business has never looked in better health. We
therefore look forward to seeing continued Group growth for many
more years to come.
Stephen Hemsley
Chairman
26 February 2015
Chief Executive Officer's statement
I am delighted to present my first Chief Executive Officer's
statement since being appointed in April 2014.
2014 was an excellent year for the Company, building on our
established platforms for growth and benefitting from the economic
recovery in our core UK market. A recognition that franchisee
profitability is a critical component of our success and a renewed
focus to enhance this has been a feature of the way in which the
business has been managed in the past 12 months.
Alongside the focus on franchisee profitability, 2014 has also
been marked by the ongoing rapid growth of e-commerce within the
business as well as the strong performance of the new stores we are
opening across the UK. These areas of growth, on which we will
continue to focus, provide confidence that the momentum can be
maintained into the future.
Strategy
The strategy for our business is simple and clear. We aim to be
the number one pizza company in each neighbourhood in which we
operate, through a commitment to offering the best product, service
and quality to our customers.
We have a very strong network of franchisees who execute the
strategy locally. We support them with:
-- an efficient, low-cost supply chain to help drive down costs;
-- innovative product development;
-- world-class marketing and e-commerce initiatives;
-- audits that maintain standards; and
-- property management, including new store development.
We have a highly developed and successful business in the UK and
ROI. We have the opportunity to develop a strong position in
Germany and Switzerland, where, although our operations are very
immature, we are rapidly gaining experience.
Store Network
The Group opened 44 stores and now operates 894 stores across
our four markets. Our store numbers by country at the end of 2014
were: UK - 813; ROI - 48; Germany - 22; and Switzerland - 11.
We are particularly pleased with the performance of our new UK
stores; in 2014 we opened successfully in smaller territories and
are confident that our model generates a profitable return for
franchisees in lower address count communities. This gives further
confidence that our long-term target of 1,200 UK outlets is
achievable over the coming years.
Technology
High quality information technology is key to running our
business successfully, both in providing efficient systems for
franchisees in the stores and e- and m-commerce, which enables
customers to order our pizzas easily. We have achieved significant
progress in both areas in 2014, with an emphasis on accelerating
our growth in online ordering. Our focus on this strategy has led
to record sales, profits and cash generation in 2014. In the UK in
2014, 53.3% of total orders were made by customers online, up from
47.2% in 2013. Expressed as a total of delivered orders, e-commerce
customers represented 70.6%.
During 2014, we enhanced our mobile app and launched a new
website. The changes, coupled with further diversion of marketing
funds from conventional media into digital, drove significant
growth in our online sales. Customers who shop online have a higher
rate of conversion, buy from us more frequently, spend more per
visit, hold the brand in high regard and are less costly for our
franchisees to service.
By the end of 2014, 8.2m customers had downloaded our app, up
from 3.2m at the start of the year.
One recent example of innovation in technology has been a joint
project with Microsoft to enable gamers to order a pizza from an
Xbox console. This was groundbreaking in the UK and is an example
of the business embracing new channels to make it easier for
customers to buy whilst they are enjoying another activity.
The rapid progress we have made in e-commerce means that we are
already the clear leader amongst quick service restaurant operators
in digital. We plan an aggressive programme of further investment
in 2015 to strengthen our position.
Supply Chain
Our UK supply chain is one of the most sophisticated and
efficient throughout the Domino's worldwide system. We operate two
Supply Chain Centres: our main facility in Milton Keynes, where our
Head Office is based, and a secondary plant in Penrith. Both of
these handled record volumes in 2014, and we are now actively
planning a third unit, which we expect to be located to the west of
Manchester and plan to open in early 2017.
In ROI, we have a Supply Chain Centre in Naas, just outside
Dublin. This services the stores in Northern Ireland, as well as
those in ROI. Our German units are supplied from a Supply Chain
Centre in Berlin, and in Switzerland, we have a long-term contract
with a producer and distributor to service our growing network.
It is critical to our business that we provide excellent service
to stores from these centres and we achieved record service levels
in 2014.
Success in the Supply Chain Centres depends on supplier partners
providing us with consistent quality products. Our philosophy is to
enter long-term relationships, which ensures that they benefit from
our growth. The added bonus from this approach is that we are able
to give our franchisees not only low food costs, but also
medium-term certainty of pricing, enabling them to plan their
businesses and pricing effectively. We are also able to compare
prices and pool supply to guarantee that we are minimising costs in
our smaller markets.
Marketing
We launched our "Greatness" campaign in September 2013. During
2014, this was the focus of our above-the-line investment,
providing an umbrella to our advertising, whether it was strategic
and brand-building or tactical to highlight our national promotion
offers.
As mentioned earlier, more of our National Advertising Fund was
deployed in digital in 2014. The information available from the
data analytics for online spend is a powerful tool in ensuring that
investment is appropriately targeted. Equally, our website is
always up to date with the latest offers and menu choices, which
together with the appetising presentation of the product, makes
selection easier.
Local store marketing continues to be an important component of
our mix, allowing franchisees to respond to individual store or
community opportunities effectively.
Our continued sponsorship of the X-Factor app has been
successful and ensures brand salience during the key weekend
evening slots. The 2014 season was a successful one with a record
2.6m downloads of the app.
Product Development
During 2014, we continued to innovate in pizzas with the
Carnivale range launched in late spring to coincide with the
interest in everything Brazilian during the football World Cup. We
also launched a new Domino's Stuffed Crust product, using cheese
and smoky bacon. In ROI, where Domino's Stuffed Crust has not been
a success, we introduced a pan pizza product, learning from the
impact that this has had in the US.
We also launched some great new sides, most notably nachos, to
reflect our increasing wish to broaden customers' menu options.
Finally, our Q4 launch was hot doughnuts, extending our dessert
offer and providing a unique and popular choice for customers.
UK
The UK business achieved sales growth of 16.0% including 11.3%
like-for-like. This was a strong and pleasing performance, which
reflects not only the strength of the business, but also the
opportunity for further expansion.
During 2014, we opened 40 stores in the UK. These units
performed very well, achieving average weekly unit sales ('AWUS')
of GBP13,555, 6.9% better than those opened the previous year.
Equally encouraging was the performance of the immature stores
opened in 2013. On average their AWUS was GBP13,279, 27.9% better
than the 2012 cohort delivered the previous year.
Part of our success in 2014 can be attributed to recovery in the
UK economy, as well as the benefits of an effective football World
Cup campaign. The sales growth was boosted especially by the
continued stream of family meal bundles and the execution of our
e-commerce programmes described above.
ROI
2014 was another year of recovery within our Irish business. The
country was badly hit by the global economic crisis and the
customers in ROI suffered a dramatic reduction in spending power
and sales dropped sharply as a result. We have now seen two years
of growth and the Dublin market is demonstrably stronger than the
rest of the country.
We have dedicated programmes of activity in marketing and
product development for ROI. This includes sponsorship of "The Big
Big Movie" on RTE and the launch of pan pizza amongst other
initiatives.
Online participation in ROI has been significantly lower than
the UK, but the launch of a specially adapted version of the new UK
website has led to a dramatic improvement in performance. Our
mobile app has proved particularly popular with Irish
customers.
We are optimistic that we will see new store opportunities in
ROI in 2015.
Germany
2014 was a year of change in Germany as we implemented a new
strategy. We opened three new stores and closed four
underperforming outlets. We started the year believing that a
transition from corporate stores to a franchise model was
appropriate. It became clear, however, that until viable store
level economics are established, the losses associated with
operating in this market are unsustainable for franchisees.
Equally, it became evident that UK franchisees, accustomed to a
more liberal and lower-cost labour environment, could not adjust
their model to the German market and three left the network,
leaving just one remaining. At the half-year, we reported a
write-off against accounts receivable relating to under-performing
franchisees of EUR2.5m. This was not repeated in the second
half.
Overheads in Germany were reduced early in the year as we sought
to focus on store level economics rather than rapid expansion.
Additionally, we leveraged capability from the core UK business to
improve effectiveness in the key areas of marketing, supply chain,
IT and finance.
A challenge in Germany has been the historic widening of
delivery areas to boost sales. Whilst this is superficially
attractive, the delivery and local marketing costs associated with
this are punitive and ultimately, pizza quality suffers. We have
now rationalised and are servicing manageable territories and, in
some stores, we have seen a sales impact.
At the end of 2014, there were 22 stores in Germany, of which 11
were corporate and 11 were franchised. We plan a modest opening
programme in 2015 as we continue to focus on creating attractive
store-level economics prior to a significant roll-out.
In preparation for the introduction of the national minimum wage
in Germany, we raised remuneration for colleagues in corporate
stores and have invested significantly in training. More work is
required in this area and labour scheduling continues to be an
opportunity.
Our menus have improved with new pizza toppings being regularly
introduced. We have also launched a range of pasta in line with
other German competitors.
Overall, sales performance in Germany has disappointed, albeit
there was some modest improvement towards the end of the year.
The financial performance continues to be a concern, but losses
narrowed sharply in the second half, compared to 2013 and we expect
this trend to continue into 2015.
Switzerland
The integration of the Swiss master franchise, acquired in
September 2012, continued in 2014. This is a corporate store market
and we have no immediate plans to introduce sub-franchisees.
Switzerland had a slow start to 2014, in part, due to mild
weather which suppressed sales.
From Q2 however, we saw a steady improvement in inter-year sales
growth.
The store network has been improved significantly, with one
major re-model, two relocations, which have raised sales
substantially, and one new store. In 2015, we plan a further two
relocations and four new stores.
Revenue costs associated with the network improvements depressed
profitability by CHF 0.2m and additional depreciation of CHF 0.2m
was charged in the year, but the benefits associated with the
enhancements will continue in the years ahead.
We have introduced a steady stream of new products in
Switzerland, including mazubi pizza, which features a cream spinach
base, developed in collaboration with Migros, Switzerland's most
important retailer. We have also improved our salad quality and
introduced single-serve desserts in the form of brownies, which
were especially popular with the carry-out customers.
A major initiative in the market was the introduction of
e-scooters, which significantly reduce delivery costs and are more
environmentally friendly. The scooters have been well received by
the public officials in Switzerland because they have lower noise
pollution, and we received a grant from the energy department to
support the investment.
During the year, we seconded a very experienced UK operator to
Switzerland to improve store-level execution. Through the
implementation of new scheduling systems, we have shortened
delivery times to customers and reduced store payroll. We also
rationalised Head Office costs. We continue to seek benefits from
closer management of our price lists, leveraging the power of
purchasing from the UK and ensuring we are appropriately
competitive.
We have been disappointed with our digital performance in
Switzerland and plan to replace our current website later in 2015.
Online participation in the market is very low compared to others
and we see opportunity for material up-side in the future from this
change.
Future Prospects
We have entered 2015 with a strong plan and a high degree of
confidence around its successful outcome. The UK business is
performing strongly and consistently ranks highly against other
Domino's countries around the globe. Both the franchisees and my
Head Office colleagues are proud to be the largest non-US market
and are excited about the future growth potential.
David Wild
Chief Executive Officer
26 February 2015
Financial review
The Group's financial statements for the 52 weeks ended 28
December 2014 ("the period") have been prepared in accordance with
International Financial Reporting Standards ('IFRS'), as adopted by
the EU, as were the results for the comparative period last
year.
Financial highlights
Our core market in the UK and ROI delivered an excellent set of
results against strong comparatives in 2013, with system sales
growing by 14.9% (2013: 12.0%) and like-for-like sales growth in
the UK of 11.3% (2013: 7.0%) and in the ROI (in euros) of 4.3%
(2013: 6.0%). We continued our store opening programme in the
period and opened a further 40 stores in the UK.
Online sales now represent 69.4% of all delivered sales (2013:
61.5%), with mobile sales increasing by 95.7% to account for 44% of
the total.
The Group faced high commodity prices going into 2014 which
softened during the course of the year. In particular, milk prices
fell as a result of increased production both across the EU, partly
as a result of the ban on imported goods into Russia, and globally.
The Group also benefitted from the impact of favourable wheat
harvests, which in turn contributed to lower feed and meat prices.
As a result, we were able to pass on food price reductions to our
franchisees in the second half of the year with a positive impact
on franchisee profitability. At H1 2014 we reported an annualised
increase in the average store food basket of 3.4%. For the full
year this reduced to a decrease of 0.6%. We continue to work hard
to optimise the impact of commodity prices on the Group's margins
and franchisee margins by working closely with our suppliers and
ensuring that we utilise our strong relationships with them.
Performance in ROI was consistent, continuing to build on the
recovery shown in the prior year. Stable like-for-like growth
continues to be an area of focus and we are continuing to drive a
successful marketing strategy, leveraging successes in the UK,
especially in the digital arena.
Our business in Germany has had a challenging year, with system
sales growing by 5.6% in local currency to EUR10.9m (2013:
EUR10.4m) and like-for-like sales decreasing 4.9% (2013: increasing
14.7%). This was partly the result of reducing marketing spend to
sustainable levels and rationalising delivery areas for certain
stores. During the year three new stores were opened and four were
closed, leaving a total of 22 stores at the end of 2014. Our focus
in Germany is on establishing viable store level economics, which
will ensure that the model is attractive to both existing and new
franchisees. As we continue to work on this the market remains
challenging for franchisees and by the end of the year we had
increased our corporate store holding from seven to 11 through the
acquisition of the remaining shares in one of our joint ventures.
We intend to take full control of the remaining jointly controlled
store in early 2015 and, in addition, a further corporate store was
acquired from a franchisee in 2015.
Germany's operating loss for 2014 was GBP7.3m (2013: GBP7.0m),
including a further charge against accounts receivable in H1 2014.
The second half of the year showed a significant improvement on the
comparative period in 2013 at a loss of GBP2.6m (2013: loss of
GBP3.8m) as management actions around improving store economics in
the corporate stores combined with reducing central overheads
gained some traction.
In Germany approximately 65% of our food basket is purchased
using volume deals that we have in place for the UK and as such,
food prices in our German business are following a similar pattern
to the UK.
In our Swiss operation sales were slow at the start of the year,
impacted by both the weather and a delay in the store opening
programme. Despite this the business delivered like-for-like sales
growth of 4.7% (2013: 5.4%). Profitability was also affected by
costs associated with our store relocation and refurbishment
programme and the operating loss for the year was GBP1.0m (2013:
GBP0.6m). However, we are pleased to report that the fourth quarter
was break-even, the result of increased sales, improved cost
control in the stores and rationalisation of overhead. We opened
one new store during the year and relocated two stores, meaning
that a total of 11 stores were open at the end of 2014 (2013:
10).
Overall, the Group has delivered a strong set of results for
2014 with significant increases in system sales, Group revenue,
underlying profit before tax and underlying diluted earnings per
share. The table below highlights this growth.
52 weeks ended 52 weeks ended Variance
28 December 29 December
2014 2013
---------------------------- --------------- --------------- -----------------
Group results
---------------------------------------------------------------------------------
System sales GBP766.6m GBP668.8m GBP97.8m 14.6%
---------------------------- --------------- --------------- --------- ------
Group revenue GBP294.4m GBP266.8m GBP27.6m 10.3%
---------------------------- --------------- --------------- --------- ------
Underlying operating
profit GBP55.5m GBP47.9m GBP7.6m 15.7%
---------------------------- --------------- --------------- --------- ------
Underlying PBT GBP54.8m GBP47.6m GBP7.2m 15.1%
---------------------------- --------------- --------------- --------- ------
Underlying diluted
EPS 26.4p 23.9p 2.5p 10.5%
---------------------------- --------------- --------------- --------- ------
Underlying operating
profit % of Group revenue 18.9% 17.8%
---------------------------- --------------- --------------- --------- ------
Underlying PBT % of
system sales 7.1% 7.1%
---------------------------- --------------- --------------- --------- ------
UK & ROI Results
---------------------------------------------------------------------------------
System sales GBP748.2m GBP650.9m GBP97.3m 14.9%
---------------------------- --------------- --------------- --------- ------
UK & ROI revenue GBP279.1m GBP250.7m GBP28.4m 11.3%
---------------------------- --------------- --------------- --------- ------
Underlying operating
profit GBP63.8m GBP55.6m GBP8.2m 14.9%
---------------------------- --------------- --------------- --------- ------
Underlying PBT GBP63.1m GBP55.2m GBP7.9m 14.3%
---------------------------- --------------- --------------- --------- ------
Underlying operating
profit % of UK & ROI
revenue 22.3% 22.2%
---------------------------- --------------- --------------- --------- ------
Underlying PBT % of
system sales 8.4% 8.5%
---------------------------- --------------- --------------- --------- ------
Underlying Group earnings before interest, taxation,
depreciation and amortisation ("underlying EBITDA") were up 14.2%
at GBP61.3m (2013: GBP53.7m), again demonstrating the strong cash
generative nature of the Domino's model. As a result of this strong
performance the Board is proposing to increase the final dividend
by 10.1% to 9.69p (2013: 8.80p) and, together with the interim
dividend of 7.81p (2013: 7.10p), total dividends of 17.50p (2013:
15.90p) will represent an increase of 10.1% on the prior year.
Underlying Group profit before tax was GBP54.8m (2013:
GBP47.6m). Statutory Group profit before tax was GBP53.8m (2013:
GBP21.6m).
At 28 December 2014, the Group had cash and cash equivalents of
GBP33.7m (2013: GBP31.6m), total debt has reduced to GBP22.7m
(2013: 47.2m) as a result of repaying some of our borrowings, and
consolidated adjusted net cash of GBP11.0m (see note 8) (2013: net
debt of GBP13.6m). Adjusted net cash or debt excludes non-recourse
loans and non-controlling shareholder loans in 2013. The Group has
substantial headroom against its banking covenants and is in a very
strong financial position with low levels of financial
leverage.
The ratio of underlying profit before tax as a percentage of
system sales (excluding the loss of the German and the Swiss
operations), a key ratio that highlights the strength of the
underlying operational gearing of the business, remained in line
with prior year at 8.4% (2013: 8.5%). This has been managed by
continuing focus on and tight control of our cost base, close
management of procurement costs and operational efficiencies across
the business.
Group system sales
Group system sales increased by 14.6% to GBP766.6m (2013:
GBP668.8m). The main drivers of this growth were:
-- like-for-like sales growth of 11.3% in 724 UK mature stores
(2013: 7.0% in 670 mature stores);
-- buoyant e-commerce sales in the UK, growing by 30.6% to
GBP425.3m (2013: GBP325.8m), supported by continued investment and
innovation in the online marketing arena;
-- 44 (2013: 57) new store openings across all territories; and
-- successful new product development activity.
Commodity prices
For the full year 2014 the average store food basket saw a
year-on-year decrease of 0.6% over 2013. This was driven by
record-high cheese prices in the last quarter of 2013 carrying over
into the first half of 2014. During the year the food cost
environment turned more benign and we have been able to pass on the
benefit of these price decreases to our franchisees and improve
their profitability. Food costs remain benign going into 2015.
Net interest charge
The net interest charge for the year, including the non-cash
impact of GBP0.5m (2013: GBP0.2m) arising on the unwinding of
discounts in relation to deferred consideration for Domino's
Leasing Limited and the provisions for onerous leases, was GBP1.4m
(2013: GBP0.6m).
Operating profit/ (loss)
The Group operates in the UK, ROI, Germany and Switzerland, the
results of which are disclosed in the segmental reporting note
(note 2):
Table of segmental underlying operating profit/(loss) excluding
share of associates
----------------------------------------------------------------------------
Segment 52 weeks ended 52 weeks ended Variance
28 December 29 December
2014 2013
-------------- ------------------ ----------------- ---------------------
UK GBP57.7m GBP50.4m GBP7.3m 14.5%
-------------- ------------------ ----------------- ----------- --------
ROI GBP5.0m GBP4.5m GBP0.5m 11.1%
-------------- ------------------ ----------------- ----------- --------
Germany GBP(7.3)m GBP(7.0)m GBP(0.3)m (4.2)%
-------------- ------------------ ----------------- ----------- --------
Switzerland GBP(1.0)m GBP(0.6)m GBP(0.4)m (66.6)%
-------------- ------------------ ----------------- ----------- --------
Group GBP54.4m GBP47.3m GBP7.1m 15.0%
-------------- ------------------ ----------------- ----------- --------
The market in the UK has seen further steady growth in
underlying operating profits of 14.5% as a result of a continued
push to open new stores (40 in the year) along with a robust
operational model supporting strong operational gearing.
ROI delivered a consecutive year of steady like-for-like sales
growth which resulted in a positive contribution as set out in the
segmental results.
The operating loss in Germany was similar to last year at
GBP7.3m (2013: GBP7.0m) with performance towards the end of the
financial year improved after benefitting from the results of
management action taken earlier in the year.
Our Swiss operation contributed an operating loss for the year
of GBP1.0m (2013: GBP0.6m), with a break-even fourth quarter and we
are pleased with the progress made in this territory.
Non-GAAP measures: items excluded from underlying operating
profit
The items that are excluded from statutory operating profit to
arrive at underlying operating profit comprise a charge of GBP0.5m
in respect of onerous lease provisions in Germany, a charge of
GBP1.0m in respect of store asset impairments in Germany and the UK
and a credit of GBP0.1m in respect of other restructuring and
one-off items.
Taxation
The effective tax rate on underlying profit before tax is 20.1%
(2013: 21.1%). The rate is lower than the statutory tax rate of
21.5% as a result of the impact of the lower tax rate applicable in
the Group's ROI subsidiary, offset by the level of expenses not
deductible for corporation tax purposes.
Group earnings per share
Underlying basic earnings per share for 2014 of 26.6p was up
10.8% on the prior year (2013: 24.0p). Underlying diluted earnings
per share for 2014 of 26.4p was up 10.5% on the prior year (2013:
23.9p).
Basic earnings per share for 2014 of 25.9p was up 142% on the
prior year (2013: 10.7p). Diluted earnings per share for 2014 of
25.8p was up 141% on the prior year (2013: 10.7p)
Cash flow and net debt
The Group has a consistent record of delivering strong cash
flows and in 2014 this was again the case. Underlying Group EBITDA
increased by 14.2% to GBP61.3m (2013: GBP53.7m). Net cash generated
from operating activities was GBP60.4m (2013: GBP40.7m).
During the year, outflows of GBP8.1m (2013: GBP8.5m) of
corporation taxes and GBP2.8m (2013: GBP4.2m) of capital
expenditure and financial investment were incurred. Included in the
capital expenditure and financial investment was GBP1.2m (2013:
GBP1.4m) relating to payments to Commerzbank under the arrangements
of the acquisition of Domino's Leasing Limited.
Overall net cash inflow before financing was GBP57.6m (2013:
GBP36.5m). During the year we have distributed a further GBP29.7m
(2013: GBP24.6m) to shareholders through share buybacks of GBP2.2m
(2013: nil) and GBP27.5m in dividends (2013: GBP24.6m).
In the period, options over 0.5m (2013: 0.8m) new shares were
exercised generating an inflow of GBP2.0m (2013: GBP2.2m).
DP Capital Limited continued to provide leasing support to
franchisees for their in-store equipment as well as the refit of
existing stores, with new advances of GBP2.0m (2013: GBP0.9m).
After repayments, the balance outstanding at the end of the period
on these leases was GBP2.2m (2013: GBP2.6m). These facilities are
financed by a limited recourse facility and the amount drawn down
at the end of the year stood at GBP2.3m (2013: GBP2.2m).
The Group is now in an adjusted net cash position of GBP11.0m
(2013: net debt of GBP13.6m). The Group monitors the ratio of
adjusted net debt to earnings before interest, taxation,
depreciation and amortisation (EBITDA) on a quarterly basis as this
is one of the financial covenants for the GBP30m five-year
facility. The Group includes within net debt, interest bearing
loans and borrowings, bank revolving facilities, less cash and cash
equivalents and excludes non-recourse loans and the Domino's Pizza
Germany non-controlling interest loans, which was repaid during
2014.
Banking facilities
At 28 December 2014 the Group had a total of GBP50.0m of banking
facilities of which GBP27.3m was undrawn. The main facilities were
a GBP30m five year facility with an interest margin of LIBOR plus
135 bps and a GBP15m term loan expiring on 31 January 2015 with an
interest margin of LIBOR plus 110 bps. The term loan was repaid in
full in January 2015.
The Directors are comfortable that the Group will continue to
have sufficient liquidity and headroom going forward.
Capital employed
Non-current assets reduced slightly during the year from
GBP94.9m to GBP90.5m, due to a decrease in long-term
receivables.
Current assets increased from GBP71.5m to GBP74.6m. This was
predominantly due to an increase in cash and cash equivalents of
GBP2.1m.
Current liabilities increased from GBP61.4m to GBP78.6m, due to
the increase of the Group's short-term facilities of GBP2.1m,
repaid in full (GBP15.0m) in early 2015 as discussed above, and due
to an increase in trade and other payables of GBP11.9m.
Non-current liabilities reduced from GBP44.9m to GBP13.2m, due
to the reduction in the drawn amount of the revolving credit
facility.
On 26 February 2014 the Group purchased the remaining 25%
shareholding in relation to the German business from our
non-controlling interest partner, Briskas Limited, for
consideration of 880,000 shares (issued contingently in the
original acquisition) and an option of 3,000,000 shares in Domino's
at 577.7 pence per share.
Treasury management
The Group's main treasury risks relate to the availability of
funds to meet its future requirements and fluctuations in interest
rates and currency exchange rates. The treasury policy of the Group
is determined and monitored by the Board.
The Group monitors its cash resources through short, medium and
long-term cash forecasting. Surplus cash is pooled into an interest
bearing account. The Group monitors its overall level of financial
gearing monthly, with our short, and medium-term forecasts showing
underlying levels of gearing well within our targets and banking
covenants, as discussed above.
In addition, the Group has invested in operations outside the UK
and also buys and sells goods and services in currencies other than
sterling. As a result, the Group is affected by movements in
exchange rates, the Euro in particular. It is the Group's policy to
mitigate these effects by agreeing fixed Euro rates with its
suppliers wherever possible.
Conclusion
In 2014 the Group achieved record sales and profits together
with strong cash flows. As always, our people and franchisees have
worked hard to deliver these excellent results. This performance
demonstrates the robustness of the Domino's business model and the
continued growth in the pizza home delivery market.
In the UK, the business continues to enjoy exceptional growth in
system sales and operating profit and, in ROI our stores continue
to show a sustained recovery. Our German business has gone through
another challenging year, but we have significantly reduced losses
in H2 and are now focussed on creating a store model that is
attractive to franchisees. In Switzerland we have continued to make
good progress in 2014, finishing with a break-even performance in
the last quarter.
We are well positioned to continue our expansion and implement
our plans for the future growth of the Group, backed by our strong
balance sheet and low financial gearing. During 2015 we will
continue to:
-- focus on our customers by providing excellent value and
choice through continued new product innovation and service
-- maintain high standards of operational efficiency and execution
-- carefully control our costs and seek to mitigate and minimise
the impact of inflationary input costs, thereby driving operational
gearing benefits
-- grow our store portfolio in line with our long term plans
-- build a business capable of delivering long-term, sustainable
growth in cash flows to drive shareholder value, which will be
returned to shareholders through share buybacks and dividends.
GROUP INCOME STATEMENT
52 weeks 52 weeks
ended ended
28 December 29 December
2014 2013
restated
Notes GBP000 GBP000
Revenue 294,378 266,819
Cost of sales (184,645) (169,871)
---- ----
Gross profit 109,733 96,948
Distribution costs (16,465) (15,704)
Administrative costs 4 (40,289) (61,490)
---- ----
52,979 19,754
Share of post tax profits of associates
and joint ventures 1,047 642
---- ----
Operating profit 54,026 20,396
Other gains and losses 1,147 1,745
---- ----
Profit before interest and taxation 55,173 22,141
Finance income 620 789
Finance expense (1,996) (1,340)
---- ----
Profit before taxation 53,797 21,590
Taxation 5 (11,059) (9,467)
---- ----
Profit for the period 42,738 12,123
---- ----
Profit for the period attributable
to:
Owners of the parent 42,938 17,568
Non-controlling interests (200) (5,445)
---- ----
42,738 12,123
---- ----
Earnings per share
- Basic (pence) 6 25.9 10.7
- Diluted (pence) 6 25.8 10.7
Non-GAAP measure: underlying profit
before tax
Profit before tax 53,797 21,590
Onerous lease provision 492 949
Impairments 1,036 19,599
Amounts in connection with acquisition of
joint ventures, associates and subsidiaries - 110
Other restructuring and one-off
items (102) 6,862
---- ----
Amounts included in operating profit 1,426 27,520
Other gains and losses (1,147) (1,745)
Discount unwind on items included
in finance expense 722 236
---- ----
Underlying profit before tax 54,798 47,601
---- ----
Underlying operating profit 55,452 47,916
---- ----
Underlying earnings per share
- Basic (pence) 6 26.6 24.0
- Diluted (pence) 6 26.4 23.9
-------------------------------------------------- ---------------- ------------- -------------
GROUP STATEMENT OF COMPREHENSIVE INCOME
52 weeks 52 weeks
Ended Ended
28 December 29 December
2014 2013
GBP000 GBP000
Profit for the period 42,738 12,123
Other comprehensive income:
Exchange differences on retranslation
of foreign operations (188) 818
---- ----
Other comprehensive income for the
period, net of tax to be reclassified
to profit or loss in subsequent periods (188) 818
---- ----
Total comprehensive income for the
period 42,550 12,941
---- ----
Total comprehensive income for the
year attributable to:
Owners of the parent 42,750 18,386
Non-controlling interests (200) (5,445)
---- ----
42,550 12,941
---- ----
GROUP BALANCE SHEET
At At
28 December 29 December
2014 2013
GBP'000 GBP'000
Non-current assets
Intangible assets 10,561 11,227
Property, plant and equipment 57,374 57,508
Prepaid operating lease charges 1,072 1,286
Trade and other receivables 4,579 7,756
Net investment in finance leases 1,285 1,528
Investments in associates and
joint ventures 7,170 6,158
Deferred tax asset 8,507 9,417
---- ----
90,548 94,880
Current assets
Inventories 4,826 4,249
Trade and other receivables 34,982 34,366
Net investment in finance leases 900 1,108
Prepaid operating lease charges 198 228
Cash and cash equivalents 33,743 31,597
---- ----
74,649 71,548
---- ----
Total assets 165,197 166,428
---- ----
Current liabilities
Trade and other payables (52,071) (40,202)
Deferred income (283) (293)
Financial liabilities (16,054) (13,960)
Deferred and contingent consideration (3,841) (1,532)
Current tax liabilities (5,072) (3,323)
Provisions (1,270) (2,084)
---- ----
(78,591) (61,394)
Non-current liabilities
Financial liabilities (6,731) (33,291)
Deferred income (1,899) (2,229)
Deferred and contingent consideration (2,483) (6,923)
Deferred tax liabilities (95) (167)
Provisions (2,000) (2,270)
---- ----
Total liabilities (91,799) (106,274)
---- ----
---- ----
Net assets 73,398 60,154
---- ----
Shareholders' equity
Called up share capital 2,592 2,570
Share premium account 25,597 20,156
Capital redemption reserve 425 425
Capital reserve - own shares (2,238) (1)
Currency translation reserve 572 760
Other reserve - 3,432
Retained earnings 46,450 37,236
---- ----
Equity shareholders' funds 73,398 64,578
Non-controlling interests - (4,424)
---- ----
Total equity 73,398 60,154
---- ----
GROUP STATEMENT OF CHANGES IN EQUITY
Share Capital Capital Currency Equity Non-
Share Premium Redemption Reserve- Translation Other Retained Shareholder's Controlling Total
Capital Account Reserve Own Reserve Reserve Earnings Funds Interests Equity
Shares
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 30 December
2012 2,557 17,932 425 (9) (58) 3,432 45,028 69,307 1,021 70,328
-------------------- -------- -------- ----------- --------- ------------ -------- --------- ---------------- ------------ ---------
Profit for
the Period - - - - - - 17,568 17,568 (5,445) 12,123
Other comprehensive
income - exchange
differences - - - - 818 - - 818 - 818
-------------------- -------- -------- ----------- --------- ------------ -------- --------- ---------------- ------------ ---------
Total comprehensive
income for
the period - - - - 818 - 17,568 18,386 (5,445) 12,941
Proceeds from
share issues 13 2,224 - - - - - 2,237 - 2,237
Share transaction
charges - - - - - (22) (22) - (22)
Vesting of
LTIP grants - - - 8 - - (1,718) (1,710) - (1,710)
Tax on employee
share options - - - - - - 376 376 - 376
Share options
and LTIP charge - - - - - - 613 613 - 613
Equity dividends
paid - - - - - - (24,609) (24,609) - (24,609)
-- --- ---- --- ---- --- -- --- --- --
At 29 December
2013 2,570 20,156 425 (1) 760 3,432 37,236 64,578 (4,424) 60,154
Profit for
the Period - - - - - - 42,938 42,938 (200) 42,738
Other comprehensive
income - exchange
differences - - - - (188) - - (188) - (188)
-------------------- -------- -------- ----------- --------- ------------ -------- --------- ---------------- ------------ ---------
Total comprehensive
income for
the period - - - - (188) - 42,938 42,750 (200) 42,550
Proceeds from
share issues 8 2,023 - - - - - 2,031 - 2,031
Issue of ordinary
shares on
acquisition
of non-controlling
interest 14 3,418 - - - (3,432) - - - -
Purchase of
own shares - - - (2,237) - - (2,237) - (2,237)
Share transaction
charges - - - - - - (142) (142) - (142)
Vesting of
LTIP grants - - - - - - (2,769) (2,769) - (2,769)
Tax on employee
share options - - - - - - 392 392 - 392
Share options
and LTIP charge - - - - - - 899 899 - 899
Equity dividends
paid - - - - - - (27,480) (27,480) - (27,480)
Acquisition
of non-controlling
interest - - - - - - (4,624) (4,624) 4,624 -
-- --- ---- --- ---- --- -- --- --- --
At 28 December
2014 2,592 25,597 425 (2,238) 572 - 46,450 73,398 - 73,398
-- --- ---- --- ---- --- -- --- --- --
GROUP CASH FLOW STATEMENT 52 weeks 52 weeks
ended ended
28 December 29 December
2014 2013
Cash flows from operating activities Notes GBP000 GBP000
Profit before taxation 53,797 21,590
Net finance costs 1,375 551
Share of post tax profits of associates (1,047) (642)
Amortisation and depreciation 5,824 5,798
Impairment 3 1,036 19,599
(Profit) / Loss on disposal of non-current
assets (1,147) (109)
Profit on disposal of investments - (1,745)
Share option and LTIP charge 899 613
Other non cash movements - 326
Decrease/ (increase) in inventories (616) 3,089
Decrease/ (increase) in receivables (1,626) 1,702
(Decrease)/increase in payables 11,447 (3,527)
Increase in deferred income (339) 52
Increase in provisions (1,100) 2,021
---- ----
Cash generated from operations 68,503 49,318
UK corporation tax (7,499) (8,330)
Overseas corporation tax paid (612) (255)
---- ----
Net cash generated by operating
activities 60,392 40,733
Cash flows from investing activities
Interest received 186 154
Dividends received from associates 45 62
Decrease/ (increase) in loans to
associates and joint ventures 582 404
Increase in loans to franchisees 3,275 529
Refinancing of loans to franchisees - 1,366
Payments to acquire finance lease
assets (741) (1,308)
Receipts from repayment of franchisee
finance leases 1,121 4,214
Purchase of property, plant and
equipment (4,412) (8,145)
Deferred consideration for Domino's
leasing (1,208) (1,395)
Purchase of other non-current assets (2,559) (2,835)
Cash proceeds on the disposal of
interest in associate - 2,377
Receipts from the sale of other
non-current assets 1,086 332
Investment in joint ventures - -
Purchase of non-controlling interest (132) -
---- ----
Net cash used by investing activities (2,757) (4,245)
---- ----
Cash inflow before financing 57,635 36,488
Cash flow from financing activities
Interest paid (807) (875)
Issue of ordinary share capital 2,032 2,237
Purchase of own shares (2,237) -
Payments under LTIP schemes (2,914) (1,718)
New bank loans and facilities draw
down 31,912 1,826
Repayment of borrowings (56,253) (4,191)
Equity dividends paid (27,480) (24,609)
---- ----
Net cash used by financing activities (55,747) (27,330)
---- ----
---- ----
Net increase / (decrease) in cash
and cash equivalents 1,888 9,158
Cash and cash equivalents at beginning
of period 31,597 21,975
Foreign exchange gain / (loss) on
cash and cash equivalents 258 464
---- ----
Cash and cash equivalents at end
of period 33,743 31,597
---- ----
NOTES TO THE GROUP FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of preparation
The preliminary results for the 52 weeks ended 28 December 2014
have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union and are
in line with the accounting policies set out in the interim
financial statements for the 26 weeks ended 29 June 2014. Sales and
cost of sales have been re-presented for the 52 weeks ended 29
December 2013 for the Switzerland segment to more accurately
present the classification of internal sales. This has resulted in
an adjustment between revenue and cost of sales for GBP2,083,000
and does not have a profit impact on either the operating results
of the segment or the group as a whole.
The financial information in the preliminary statement of the
results does not constitute statutory accounts within the meaning
of Section 435 of the Companies Act 2006 (the Act). The financial
information for the 52 weeks ended 28 December 2014 has been
extracted from the statutory accounts on which an unqualified audit
opinion has been issued. Statutory accounts for the 52 weeks ended
28 December 2014 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
The financial statements, and this preliminary statement, of
Domino's Pizza Group plc for the 52 weeks ended 28 December 2014
were authorised for issue by the Board of Directors on 26 February
2015 and the balance sheet was signed on behalf of the Board by
David Wild, Chief Executive Officer.
The statutory accounts have been delivered to the Registrar of
Companies in respect of the 52 weeks ended 29 December 2013 and the
Auditors of the Company made a report thereon under section 235 of
the Act. That report was an unqualified report and did not contain
a statement under section 498(2) or (3) of the Act.
2. SEGMENTAL INFORMATION
For management purposes, the Group is organised into four
geographical business units, the United Kingdom, Ireland, Germany
and Switzerland, based on the territories governed by the Master
Franchise Agreement ("MFA"). These are considered to be the Group's
operating segments as the information provided to the chief
operating decision makers, who are considered to be the Executive
Directors of the Board, is based on these territories. Revenue
included in each includes all sales (royalties, Supply Chain Centre
sales, rental income and finance lease income) made to franchise
stores located in that segment. Segment results for the Ireland
segment include both the Republic of Ireland and Northern Ireland
as both of these territories are served by the same Supply Chain
Centre.
Sales and cost of sales have been re-presented for the 52 weeks
ended 29 December 2013 for the Switzerland segment to more
accurately present the classification of internal sales. This has
resulted in an adjustment between revenue and cost of sales for
GBP2,083,000 and does not have a profit impact on either the
operating results of the segment or the group as a whole.
Operating 52 weeks ended 28 December 2014 52 weeks ended 29 December
segments 2013 restated
United United
Switzerland Germany Ireland Kingdom Total Switzerland Germany Ireland Kingdom Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Segment
revenue
Sales to
external
customers 9,590 5,687 21,461 257,640 294,378 9,199 6,948 20,847 229,825 266,819
--- --- --- --- --- --- --- --- --- ---
Results
Segment
result (1,019) (7,348) 5,034 57,738 54,405 (638) (7,002) 4,541 50,373 47,274
Exceptional
items - (957) (863) 394 (1,426) 42 (26,466) (154) (942) (27,520)
Share of
profit
of
associates - - - 1,047 1,047 - - - 642 642
--- --- --- --- --- --- --- --- --- ---
Group
operating
profit (1,019) (8,305) 4,171 59,179 54,026 (596) (33,468) 4,387 50,073 20,396
Other gains
and
losses 949 - - 198 1,147 - - - 1,745 1,745
--- --- --- --- --- --- --- --- --- ---
(70) (8,305) 4,171 59,377 55,173 (596) (33,468) 4,387 51,818 22,141
Net finance
costs (1,376) (551)
--- ---
Profit
before
tax 53,797 21,590
--- ---
Assets
Segment
current
assets 782 1,812 1,271 37,041 40,906 3,736 3,953 1,213 31,049 39,951
Segment
non-current
assets 7,295 128 2,124 65,324 74,871 5,910 1,480 2,308 69,607 79,305
Equity
accounted
investments 7,170 7,170 6,158 6,158
Unallocated
assets 42,250 41,014
--- --- --- --- --- --- --- --- --- ---
Total assets 8,077 1,940 3,395 109,535 165,197 9,646 5,433 3,521 106,814 166,428
--- --- --- --- --- --- --- --- --- ---
Liabilities
Segment
liabilities 1,532 4,692 1,706 51,931 59,861 5,976 6,586 823 39,259 52,644
Unallocated
liabilities 31,938 53,630
--- --- --- --- --- --- --- --- --- ---
Total
liabilities 1,532 4,692 1,706 51,931 91,799 5,976 6,586 823 39,259 106,274
--- --- --- --- --- --- --- --- --- ---
3. Items excluded from non-GAAP measure: underlying profit before tax
(a) Included within operating profit
52 weeks 52 weeks
Ended Ended
28 December 29 December
2014 2013
GBP000 GBP000
Onerous leases 492 949
Master Franchise Agreement ("MFA") and related
costs - 9,267
Corporate stores - 4,945
Goodwill - 2,928
Property, plant and equipment 1,036 2,164
Website and domain costs - 295
Impairments 1,036 19,599
Acquisition costs and restructuring costs
relating to Domino's Switzerland - (42)
Acquisition costs and on-off costs relating
to new UK joint ventures - 152
Amounts in connection with acquisition of
joint ventures, associates and subsidiaries - 110
Transition of German corporate stores - 1,981
Amounts receivable in Germany - 3,438
Restructuring and reorganisation costs 1,119
Domino's Leasing deferred consideration (102) 6,324
Other restructuring and one-off items (102) 6,862
---- ----
1,426 27,520
---- ----
Onerous Lease Provision
An onerous lease charge of GBP0.5m (2013: GBP0.9m) was made in
respect of unused properties in Germany relating to last year's
restructuring activities, and an unsuccessful concept store the
UK.
Impairments
Impairments of GBP1.0m relate to store assets in Germany
following restructuring activities that carried on into the first
half of the year, and an unsuccessful new format (Extra stores) in
the UK.
In 2013, the performance of the German business fell below
expectations and management announced a change in strategy for the
German business opening fewer stores than initially expected and
reducing its expectations for sales and profit growth. As a result,
management prepared updated financial budgets for the next five
years and used these to calculate medium and long term discounted
cash flows for the German business using a long term average growth
rate for Germany of 1.4% and a discount rate of 13%. Following
these calculations, the Group recognised a number of impairment
charges related to the German business:
-- A charge of GBP9,267,000 in relation to the value in use of
the German Master Franchise Agreement
-- A charge of GBP4,945,000 in relation to the carrying value of
property, plant and equipment of the 15 corporate stores
-- A charge of GBP2,164,000 in relation to the carrying value of
property, plant and equipment in the Supply Chain Centre and
Düsseldorf head office
-- A charge of GBP295,000 in relation to the carrying value of
capitalised website and development costs
Additionally, the Group is obliged test Goodwill for impairment
on an annual basis, due to goodwill being deemed to have an
indefinite useful life. In 2013, management deemed that the
goodwill was fully impaired and recognised a charge of
GBP2,928,000. A detailed analysis of the calculation and related
assumptions was disclosed in the 2013 annual report.
Amounts in Connection with Acquisition of Joint Ventures,
Associates and Subsidiaries
Costs of GBP0.1m were incurred in 2013 in relation to the
acquisition and transfer of stores into two UK joint ventures with
third party franchisees.
Other Restructuring and one-off items
The charge recognised in 2013 of GBP6.9m included transition of
German corporate stores to franchisees, German bad debt write off
and costs to restructure the UK and German businesses. The GBP0.1m
credit in 2014 represents the release of the unused provision for
German restructuring costs recognised in 2013.
(b) Included below operating profit
Other gains and losses
This includes a GBP0.9m credit in relation to the release of
contingent consideration in respect of Domino's Pizza Switzerland
following final settlement with the vendor and a GBP0.2m credit in
respect of the sale of store assets. In 2013, a profit of GBP1.7m
was recognised on the sale of Dominoid Limited.
Discount unwind on items included in finance expense
A charge of GBP0.7m has been recognised in respect of discount
unwind on items included in finance expense (2013: GBP0.2m).
Change in tax rates
In 2013, the Group incurred a non underlying tax charge of
GBP1.6m in relation to an adjustment to deferred tax following a
change in tax law. The impact of these tax rate changes has been
classified as non- underlying due to its material impact on the
Group's tax charge for the period.
This charge is reduced by GBPnil (2013: GBP2.3m) to become a
credit of GBPnil (2013: GBP0.6m) due to the tax impact of other non
underlying items disclosed above.
4. TAXATION
(a) Tax on profit on ordinary activities
Tax charged in the income statement
52 weeks 52 weeks
ended ended
28 December 29 December
2014 2013
GBP000 GBP000
Current income tax:
UK corporation tax
- current period 9,780 7,646
- adjustment in respect of prior periods (160) (440)
---- ----
9,628 7,206
Income tax of overseas operations on
profits for the period 415 375
---- ----
Total current income tax 10,043 7,581
---- ----
Deferred tax:
Origination and reversal of temporary
differences 1,802 97
Effect of change in tax rate - 1,628
Adjustment in respect of prior periods (786) 161
---- ----
Total deferred tax 1,016 1,886
---- ----
---- ----
Tax charge in the income statement 11,059 9,467
---- ----
The tax charge in the income statement
is disclosed as follows:
Income tax expense on continuing operations 11,059 9,467
---- ----
Tax relating to items credited / (charged)
to equity:
Reduction in current tax liability as
a result of the exercise of share options 214 662
Origination and reversal of temporary
differences in relation to unexercised
share options 178 (286)
---- ----
Tax credit in the Group statement of
changes in equity 392 376
---- ----
There is no tax impact in relation to the foreign exchange
differences in the statement of comprehensive income.
(b) Reconciliation of the total tax charge
The tax expense in the income statement for the 52 weeks ended
28 December 2014 is lower than the statutory corporation tax rate
of 21.5% (2013: 23.3%). The differences are reconciled below:
52 weeks 52 weeks
ended ended
28 December 29 December
2014 2013
GBP000 GBP000
Profit before taxation 53,797 21,590
---- ----
Accounting profit multiplied by the UK statutory
rate of corporation tax of 23.3% (2012: 24.5%) 11,566 5,030
Expenses not deductible for tax purposes 633 3,199
Accounting depreciation not eligible for
tax purposes 310 196
Adjustments relating to prior years (909) (277)
Difference between current and deferred tax
rates (232) 1,628
Other 18 1
Tax rate differences (327) (310)
---- ----
Total tax expense reported in the income
statement 11,059 9,467
---- ----
Effective tax rate (%) 20.6 43.8
---- ----
Underlying effective tax rate (%) 20.1 21.1
---- ----
(c) Temporary differences associated with Group investments
At 28 December 2014, there was no recognised deferred tax
liability (2013: nil) for taxes that would be payable on the
unremitted earnings of the Group's subsidiaries, or its associates,
as there are no corporation tax consequences of the Group's UK,
Irish or overseas subsidiaries or associates paying dividends to
their parent companies.
There are also no income tax consequences for the Group
attaching to the payment of dividends by the Group to its
shareholders.
(d) Deferred tax
The deferred tax included in the balance sheet is as
follows:
At At
28 December 29 December
2014 2013
GBP000 GBP000
Deferred tax arising in the UK on non-capital
items 8,203 9,194
Deferred tax arising in Ireland and
the UK on capital gains (65) (110)
Deferred tax arising on acquisition
of subsidiary in previous periods 274 166
---- ----
8,412 9,250
---- ----
At At
28 December 29 December
2014 2013
GBP000 GBP000
Gross movement in the deferred income
tax account
Opening balance 9,250 11,422
Tax credit / (charge) to equity 178 (286)
Income statement charge (1,016) (1,886)
---- ----
Closing balance 8,412 9,250
---- ----
Deferred tax arising in the UK on non-capital items
Share- Accelerated
based capital Goodwill
payments allowances Lease inducements and amortisation Provisions Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 30 December
2012 811 11,077 207 (13) 278 12,360
Charge to equity (286) - - - - (286)
(Charge) / credit
to income (71) (3,185) (41) - 417 (2,880)
--- ---- ---- ---- --- ---
At 29 December
2013 454 7,892 166 (13) 695 9,194
Credit to equity 178 - - - - 178
(Charge) / credit
to income (23) (1,289) (15) - 158 (1,169)
--- ---- ---- ---- --- ---
At 28 December
2014 609 6,603 151 (13) 853 8,203
---- ---- ---- ---- ---- ---
A deferred tax asset of GBP8,203,000 (2013: 9,194,000) has been
recognised to the extent that future taxable profits are expected
to be in excess of the profits arising from the reversal of
existing taxable temporary differences.
The Group has tax losses of GBP79,000 (2013: GBP51,000) which
arose in relation to the Swiss business during the period and are
available for offset against future taxable profits in Switzerland.
A deferred tax asset has been recognised in relation to these
taxable losses in Switzerland on the basis they are expected to be
recovered in the near future. In addition there are GBP901,000 of
losses (2012: GBP1,128,000) that have arisen in Germany and Cyprus
in current and prior periods which are available for offset against
future taxable profits in these jurisdictions. No deferred tax
asset has been recognised in respect of these losses due to the
uncertain timing of the availability of future profits in these
territories. Taxable losses that have arisen in the period in the
German branch of Domino's Pizza Germany Limited are available to
surrender as group relief to the UK Group and have been fully
utilised. There is no tax deduction for the goodwill which arose on
the acquisition of Germany and Switzerland in previous years.
Deferred tax arising in Ireland and the UK on capital gains
Accelerated
Roll over capital
relief allowances Total
GBP000 GBP000 GBP000
At 30 December 2012 (23) (85) (108)
Credit/charge to income 1 (3) (1)
---- ---- ----
At 29 December 2013 (22) (88) (110)
Credit/charge to income - 45 45
---- ---- ----
At 28 December 2014 (22) (43) (65)
---- ---- ----
Deferred tax arising on other overseas subsidiaries
GBP000
At 30 December 2012 (830)
Credit to income 996
----
At 29 December 2013 166
Credit to income 108
----
At 28 December 2014 274
----
Included within the above is a deferred tax asset of GBP303,000
(2012: GBP233,000) in relation to the recognition of Switzerland
tax losses and a deferred tax liability relating to accelerated
capital allowances in Cyprus and Ireland. Deferred tax in respect
of Switzerland cannot be offset against the deferred tax in respect
of Cyprus and Ireland as the Group do not have a legally
enforceable right to offset these assets and liabilities due to
them arising in differing territories.
5. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing
profit for the year attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share are calculated by dividing the profit
attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
year plus the weighted average number of ordinary shares that would
have been issued on the conversion of all dilutive potential
ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
52 weeks 52 weeks
ended ended
28 December 29 December
2014 2013
GBP000 GBP000
Profit for the period 42,738 12,123
Adjusted for - non-controlling
interests 200 5,445
---- ----
Profit attributable to owners of
the parent 42,938 17,568
---- ----
At At
28 December 29 December
2014 2013
No. No.
Basic weighted average number of
shares (excluding treasury shares) 165,471,079 163,737,665
Dilutive potential ordinary shares:
Employee share options 547,979 614,168
Reversionary interests 582,848 270,470
---- ----
Diluted weighted average number
of shares 166,601,906 164,622,303
---- ----
The performance conditions for reversionary interests granted
over nil shares (2013: 1,021,684) and share options granted over
4,087,596 shares (2013: 1,319,391) have not been met in the current
financial period and therefore the dilutive effect of the number of
shares which would have been issued at the period end have not been
included in the diluted earnings per share calculation.
There are no share options excluded from the diluted earnings
per share calculation because they are anti dilutive (2013:
nil).
52 weeks 52 weeks
ended Ended
28 December 29 December
2014 2013
Basic earnings per share 25.9p 10.7p
---- ----
Diluted earnings per share 25.8p 10.7p
---- ----
Underlying earnings per share
Underlying profit attributable to owners of the parent is derived
as follows:
GBP'000 GBP'000
Profit for the period 42,738 12,123
Adjusted for - non-controlling interests 200 5,445
---- ----
Profit attributable to owners of the parent 42,938 17,568
Amounts excluded from underlying profit - attributable
to equity holders of the parent 1,026 21,805
-------------------------------------------------------- -------- --------
* Amounts included in operating profit 1,426 27,520
* Other gains and losses (1,147) (1,745)
* Discount unwind 722 236
* Impact of non-controlling interest related
non-underlying items - (3,584)
* Taxation impact 25 (2,250)
* Change in corporation tax rate - 1,628
---- ----
Underlying profit attributable to owners of
the parent 43,964 39,373
---- ----
Underlying basic earnings per share 26.6p 24.0p
---- ----
Underlying diluted earnings per share 26.4p 23.9p
---- ----
6. DIVIDENDS PAID AND PROPOSED
52 weeks 52 weeks
ended ended
28 December 29 December
2014 2013
GBP000 GBP000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2013: 8.80p (2012: 7.90p) 14,551 12,936
Interim dividend for 2014: 7.81p (2013: 7.10p) 12,929 11,673
---- ----
Dividends paid 27,480 24,609
---- ----
Proposed for approval by shareholders at the AGM (not recognised
as a liability at 28 December 2014 or 29 December 2013)
Final dividend for 2014: 9.69p (2013 8.80p) 16,034 14,432
7. ADDITIONAL CASH FLOW INFORMATION
Analysis of Group net debt
At At
29 December Cash Exchange Non-cash 28 December
2013 flow differences movements 2014
GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents 31,597 1,888 258 - 33,743
Bank revolving
facility (29,814) 24,494 41 (168) (5,447)
Bank loans (13,000) (2,000) - - (15,000)
Finance leases (134) 71 3 - (60)
Other loans (2,213) (65) - - (2,278)
---- --- ---- ---- ----
Adjusted net debt (13,564) 24,388 302 (168) 10,958
Other loans (2,090) 2,059 31 - -
---- --- ---- ---- ----
Net cash / (debt) (15,654) 26,447 333 (168) 10,958
---- --- ---- ---- ----
At At
30 December Cash Exchange Non-cash 29 December
2012 flow differences movements 2013
GBP000 GBP000 GBP000 GBP000 GBP000
Cash and cash
equivalents 21,975 9,158 464 - 31,597
Bank revolving
facility (29,737) - - (77) (29,814)
Bank loans (12,035) (965) - - (13,000)
Finance leases (228) - (1) 95 (134)
Other loans (2,939) 726 - - (2,213)
---- --- ---- ---- ----
Adjusted net debt (22,964) 8,919 463 18 (13,564)
Non-recourse loans (2,604) 2,604 - - -
Other loans (2,050) - (44) - (2,090)
---- --- ---- ---- ----
Net debt (27,618) 11,523 423 18 (16,654)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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