European investment takes bite out of Domino’s Pizza first half profits
Takeaway giant Domino's Pizza profits cooled down in the first half as costs investing in new markets in Norway and Sweden took a bite out of earnings.
Its shares experienced a double digit loss in the morning, shedding 10 per cent as it revealed its falling profits.
The figures
Statutory profit before tax lost 9.7 per cent in the first half of the year, going down to £41.7m,despite statutory revenue jumping 22.6 per cent to £211.3m.
Group sales increased 12.8 per cent in the 26 weeks to 1 July 2018, rising to £616.6m. UK and Ireland sales were up 8.1 per cent to £565.1m.
Domino's debt nearly tripled compared to the same time last year, rising from £61m to £182.1m.
But the firm cut investors an extra slice, raising the dividend eight per cent to 4.05p.
The company said it expected full-year profit to be in line with market expectations – something which is underlined by the dividend growth.
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Why it's important
The FTSE 250 pizza firm has been greedily expanding its empire, and in 2018 has opened around 60 new stores. It's also investing in expansion in Europe, something which seems to have slightly taken the shine off its profits.
It also explained the squeeze on casual dining from lower consumer spending in the UK was affecting profits.
Expansion may have left the firm stretched when it comes to maintaining a good relationship with its franchisees. Last month it was reported that franchisees were losing patience with chief exec David Wild's "hard man" behaviour, which was stoking unrest within the company.
Domino's has continued to plough forward despite these issues, and in April reported that sales in the first quarter were up 18 per cent compared to last year.
What Domino's said
Domino's boss David Wild said:
Our ongoing investments in supply chain infrastructure and our IT platform will support future growth and customer engagement. Domino's is proud to be one of the most successful franchise businesses in the UK, and we will continue to work with our franchisee partners to promote the brand and the strength of the system.
Whilst our international businesses continue to make good progress with customers and sales, it has taken us some time to refine the operating model and cost base at store level, particularly in Norway. We are confident that the changes we have made will result in a better performance in the second half, and believe that these businesses offer significant long term growth potential as we export our expertise in digital, supply chain and franchisee management.