TIDMDOM
RNS Number : 1303C
Domino's Pizza Group PLC
15 October 2020
LEI: 213800Q6ZKHAOV48JL75
15 October 2020
Domino's Pizza Group Plc
Q3 Trading Statement
STRONG Q3 PERFORMANCE; CONFIDENT IN FULL YEAR OUTLOOK
13 wks 13 wks % change 39 wks 39 wks % change
to to to to
27 Sept 29 Sept 27 Sept 29 Sept
2020 2019 2020 2019
UK & ROI system
sales (GBPm) GBP342.1m GBP288.2m 18.7% GBP971.0m GBP884.2m 9.8%
========== ==========
UK & ROI LFL
(exc. splits)
sales growth 17.5% 2.9% 8.6% 3.6%
================= ========== ========== =========
Q3 highlights:
-- Strong UK & ROI performance, with system sales up 18.7% and LFL sales exc. splits up 17.5%
o UK system sales up 19.6%; LFL sales exc. splits up 18.3%
(17.3% inc. splits)
o ROI system sales up 3.1% in local currency; LFL sales exc.
splits up 2.0% (1.5% inc. splits; both local currency)
-- The UK VAT rate changed from 20% to 5% on 15(th) July which
helped franchisees mitigate costs and enabled savings to be passed
on to our customers. Since the rate change, VAT has benefited
reported UK system sales and like-for-like growth
-- Encouraging UK & ROI delivery performance continued, with
orders up 11.8% and items per order and product mix both
encouraging
-- Pleased with the performance of collection, from 0.7m orders
in Q2 to 3.2m in Q3, as we reopened collection across the majority
of our estate
-- Created 5,000 new jobs and over 1,000 work placements in
support of the UK Government's Kickstart scheme
-- Exceptional digital performance, with UK online sales up
35.6% and ROI online sales up 18.0%. Online now accounts for 95.1%
of delivery sales in the UK
Dominic Paul, Chief Executive Officer, said:
"I am pleased to report a strong performance in Q3. Delivery
orders were up 11.8% and we also benefitted from the reopening of
our collection business. I am delighted by the agility the Group
and our franchisees have demonstrated in order to maintain our
momentum. We welcome the UK government's reduction to VAT in
mid-July which helped franchisees mitigate costs and gave them the
opportunity to pass savings on to customers.
"Working closely with our franchisees we continue to do
everything we can to keep our people and customers safe, including
wearing masks, the use of perspex screens, contact free delivery
and collection and continued menu rationalisation. It is a
privilege to stay open and serve our local communities, and we are
confident that we have operational plans in place to adapt to
different levels of lockdown that may arise in the coming months. I
would like to say a huge thank you to the Domino's teams across our
system for their dedication and hard work.
"We continue to work on a long-term strategic plan for the
business. At the heart of our future plans is realignment with our
franchisee partners and we are having detailed discussions to agree
a sustainable way forward, although we continue to expect that
these discussions will take some time. Despite the ongoing
uncertain backdrop, we expect to report full year Underlying Group
PBT in the range of GBP93m to GBP98m, in line with market
consensus."
UK & ROI trading performance
UK & ROI system sales were up 18.7% to GBP342.1m. UK system
sales were up 19.6%, with the UK accounting for 95.1% of total UK
& ROI system sales. UK like-for-like growth, excluding stores
in split territories, was 18.3%, and 17.3% including splits.
On 15(th) July the UK government changed the rate of VAT on hot
takeaway food from 20% to 5%. This change both helped franchisees
mitigate costs and enabled them to pass savings on to our
customers. For the weeks following the rate change, the VAT
reduction benefitted UK reported system sales and like-for-like
sales growth, however it has limited direct benefit to our
profitability.
In ROI, there was no VAT rate change for hot food, and therefore
the reported like-for-like growth is unaffected. ROI system sales
were up 3.1% in local currency and 3.6% on a reported basis. ROI
like-for-like sales, in local currency, excluding stores in split
territories, were up 2.0%, and up 1.5% including splits.
We saw a benefit from staycations and the return of live sport
on television during the period, although we also saw a headwind as
competitors reopened following the national lockdown and, in
September, we saw weaker demand in university areas. We were
pleased to reopen our collection business, and collection orders
were around 60% of the prior year level. We do not expect our
collection business to fully recover to prior levels until normal
consumer behaviour returns.
The table below, provided to show the patterns of trading across
the business, gives details on our performance during the period.
On an including splits basis, UK & ROI orders were down 6.0%,
with 11.8% growth in delivery orders more than offset by a 41.5%
decline in collection orders. Items per order continued to see
significant growth, and the product mix impact was also positive.
Average item price was up 12.6%, affected by the VAT change which
skews these figures.
LFL including splits yoy growth Total (all stores)
Sales Orders Items Product Average Orders Growth
per order mix item price* (m) yoy
-------- -------- ----------- -------- ------------- --------- ----------
Total
-------- -------- ----------- -------- ------------- --------- ----------
Q1 2.2% (0.6%) 1.4% 0.5% 0.9% 17.5m 1.8%
-------- -------- ----------- -------- ------------- --------- ----------
Q2 4.2% (13.3%) 18.6% (2.2%) 1.0% 15.1m (11.3%)
-------- -------- ----------- -------- ------------- --------- ----------
Q3 16.5% (7.8%) 10.4% 1.2% 12.6% 15.7m (6.0%)
-------- -------- ----------- -------- ------------- --------- ----------
Delivery only
-------- -------- ----------- -------- ------------- --------- ----------
Q1 3.9% 0.4% 1.3% 0.9% 1.3% 12.4m 2.5%
-------- -------- ----------- -------- ------------- --------- ----------
Q2 30.1% 19.6% 7.6% 4.6% (1.7%) 14.4m 22.4%
-------- -------- ----------- -------- ------------- --------- ----------
Q3 28.7% 9.6% 3.7% 4.5% 10.9% 12.4m 11.8%
-------- -------- ----------- -------- ------------- --------- ----------
Collection
only
-------- -------- ----------- -------- ------------- --------- ----------
Q1 (4.2%) (3.0%) 0.0% 0.0% (1.2%) 5.1m 0.0%
-------- -------- ----------- -------- ------------- --------- ----------
Q2 (93.8%) (87.8%) (7.4%) 8.3% (6.9%) 0.7m (87.2%)
-------- -------- ----------- -------- ------------- --------- ----------
Q3 (25.6%) (42.9%) 11.8% (3.8%) 9.3% 3.2m (41.5%)
-------- -------- ----------- -------- ------------- --------- ----------
*Figures affected by the VAT change
Five new stores opened in the UK during Q3, of which all were
franchised, and there was one planned closure. For the 39 weeks to
29th September, there have been 13 stores opened in the UK (by ten
different franchisees) and no stores opened in ROI. In total the
store estate at the end of Q3 was 1,197 (UK: 1,143, ROI: 54)
The Covid-19 lockdown has accelerated our transformation to a
digital business, in terms of how we operate, how we communicate
with our customers, and how customers interact with us. Online
sales growth continued to be very strong at 35.6% for the UK and
18.0% for ROI. In the UK, online now accounts for 95.1% of delivery
sales. We have also seen the proportion of collection sales coming
from online increase significantly since reopening this part of our
business, with UK & ROI online accounting for 68.6% of
collection sales in Q3, compared to 45.8% in FY 2019.
Our supply chain operations have maintained their very high
service levels to stores, with 99.9% availability and accuracy.
Construction on our new facility in Scotland is on track. We
continue to expect approximately GBP2m of Covid-19 related costs in
our supply chain in the second half, which allows us to maintain
social distancing through our operations.
Following a successful trial, we were delighted to launch our
new vegan friendly pizzas nationally in September, the Vegan Vegi
Supreme and Vegan Margherita, which come with our new Vegan Garlic
& Herb Dip. This launch follows over a year of development to
ensure the freshly made vegan dough replicates the unmistakable
Domino's taste millions of fans know and love, together with
Domino's very own vegan cheese alternative. Customer response to
our new vegan pizzas has been very encouraging.
Franchisee relationship and strategic plan
We continue to work on a detailed long-term strategic plan for
the business. At the heart of this is realignment with our
franchisee partners and we are having detailed discussions on a
sustainable way forward, although we continue to expect that these
discussions will take some time.
We are keen to establish a framework which would drive growth of
the overall size of the system, sales and profits for both our
business and for franchisees. We would expect that the key elements
of such a framework would include enhanced incentives for both
order volume and new store growth, capital investment by us in
technology and supply chain operations to support growth, together
with investment to upgrade some of our internal capabilities. We
will of course only agree a framework which is in the long-term
interests of our shareholders, our franchisees and all other
stakeholders.
Outlook
Assuming no other significant change to our operations and
incorporating the previously guided GBP2m of Covid-19 related costs
in the second half, we currently expect to report full year
Underlying Group PBT in the range of GBP93m to GBP98m, in line with
market consensus.
International (discontinued operations)
Our directly operated international businesses remain held for
sale, and we are actively marketing them for disposal.
International system sales were up 4.0% year on year in local
currency and down 5.2% year on year on a reported basis in Q3, with
profit performance in line with our expectations.
Next scheduled announcement
Our next scheduled announcement will be our full year results in
March 2021.
For further information, please contact:
Domino's Pizza Group plc:
Bethany Barnes, Head of Investor Relations - 07387 015695
Brunswick:
Tim Danaher, Samantha Chiene - 020 7404 5959
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,
the Republic of Ireland, Switzerland, Sweden, Iceland and
Liechtenstein. We also have an associate investment in Germany and
Luxembourg.
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