Domino’s profits hit by international ‘growing pains’

Domino’s saw profits fall last year as it suffered ‘growing pains’ in international markets, the pizza company announced today.

Shares in the fast food firm were up 6.18 per cent to 247.5p this morning after it said it continued to perform well in the UK and Ireland, and revealed plans to break even internationally next year. 

The figures

Profit before tax fell 22 per cent to £61m, from £79.6m the previous year while net debt was £203.3m, up from £89.2m in the 53 weeks to the end of December 2017.

Read more: Domino's sells one pizza every 12 seconds in run-up to Christmas

Earnings per share were 10.3p, a fall of 23.7 per cent from 13.5p.

However, total revenue increased 14.5 per cent from £466.5m to £534.3m and the company recommended a dividend per share of 9.5p, an increase of 5.6 per cent.

Why it’s interesting

Dominos continues to do well in the UK and Ireland, which accounts for around 90 per cent of the business, where 59 new stores were opened in 2018.

Like-for-like sales were up 4.6 per cent and four per cent in the UK and Ireland respectively, and the company expects the growth to continue.

The takeaway firm has struggled in new international markets and said it had made losses in Norway, Sweden and Switzerland.

However, the company said it expects to break even in international markets next year.

What Domino's said

Chief executive David Wild said: "2018 was a mixed year. In the UK and Ireland, which account for around 90 per cent of the business, we extended our excellent track record of growth and cash generation, responding well to the very challenging environment for the casual dining market. Our franchisees opened 59 new stores, creating more than 2,000 jobs and sold a record 102 million pizzas.

“We also continued investing for future growth in digital and by successfully completing our new Supply Chain Centre in Warrington, our most significant investment to date, which supports our target of 1,600 stores in the UK.

"Internationally, we have experienced some growing pains which have hampered our overall financial performance. These are all good markets, with more than 100 million population, good appetites for pizza and little, if any, global brand competition.

“This is why we have strengthened our management teams and are committing disciplined capital to support future development. We expect an improved performance from International, with the business targeted to break even this year.

"I would like to thank our highly talented colleagues and franchisee partners for their ongoing dedication to the brand and our customers."

What analysts said

Fidelity Personal Investing associate director Emma-Lou Montgomery said: "If you like your pizza with a topping of politics, a sprinkling of economic uncertainty and a side order of franchisee strife, then Domino’s Pizza’s latest full-year figures should have you licking your lips.

“Despite a record 102m pizzas sold throughout the course of the year, total pre-tax profits were down 22.2 per cent to £61.9m.

Read more: Domino's denies shareholder unrest over board changes

“With the UK and Ireland’s appetites for pizza going strong and a further 59 stores opened during the year, it’s the overseas expansion plans that are weighing heavily on the group’s bottom line.

“As Domino’s says, these are all “good markets”, with meaty sizable populations of 100 million-plus, little, if any, competition and yet their appetites for pizza seem to be lacking. The best Domino’s can hope for at this stage is to see its international stores break even.”