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Morning Briefing for pub, restaurant and food wervice operators

Tue 12th Mar 2024 - Update: Domino’s FY lfl sales up 5.7%, upgrades growth targets
Domino’s FY lfl sales up 5.7%, upgrades growth targets: Domino’s has upgraded its growth targets for the UK and Ireland, targeting to have in excess of 2,000 stores by 2033, as the overall reported a 5.7% increase in like-for-like system sales in the year to 31 December 2023. The business, which currently operates circa 1,300 sites in the UK and Ireland said it now expects to have in excess of 1,600 stores in the UK and Ireland by the end of 2028 with the potential for this to be in excess of 2,000 stores in 2033. It said: “As a result of our store growth and continued focus on our core capabilities of giving our customers compelling value, great service, and an enhanced digital experience, we are now able to upgrade our £1.6bn-£1.9bn system sales target put in place in March 2021. We now expect to deliver £2bn system sales in the UK and Ireland by the end of 2028, and we see potential for this to be in excess of £2.5bn system sales in the UK and Ireland in 2033.” The company said that Total system sales were £1,541m, up 5.8% on FY22 on a 52-week basis. Like-for-like system sales across UK and Ireland increased by 4.1%, excluding split stores, or by 2.9% including splits. Like-for-like system sales, excluding splits and the different VAT rate in Q1 22, increased by 5.7%. However, it said that like-for-like system sales in Q4 23 were only ahead 0.4% against a tough comparator (Q4 22: +13.9%). It reported that group revenue for the year was up 11.1% to £679.8m (53-week basis: +13.2%), driven by an increase in system sales volume, acceleration of store openings and the pass-through of increased food cost. Underlying Ebitda was 3.6% to £138.1m (53-week basis: +6.1%), which includes £8.9m of previously guided technology platform costs and no contribution from Germany (FY22: £2.6m). Statutory profit after tax stood at £115m, +40.9%, driven by proceeds from the disposal of the German associate, generating a profit of £40.6m recorded in non-underlying results. The business aid that during the year it continued to gain UK takeaway market share, with a 7.2% market share in FY23, up from 7.1% in FY22. It saw total orders of 70.5 million on a 52-week basis, up 1% versus FY22, while collections grew to 25.3 million orders, up 13.3% versus FY22. It opened 61 new stores and expects to open in excess of 70 new stores in FY24. Average franchisee store Ebitda was up 9% versus 2019. At the same time, the business announced the acquisition of the remaining 85% shareholding it does not already own in Shorecal Limited, the largest Domino’s franchise business operating in the Republic of Ireland and Northern Ireland, which it does not own, for circa £62m. Shorecal operates 34 of the 99 Domino’s stores across the Republic of Ireland and Northern Ireland. The company said that the acquisition will allow the business to take control of a significant opportunity to “materially increase the store count in the Republic of Ireland and Northern Ireland”. The company said: “We have maintained strong momentum against our key strategic priorities in the first quarter of FY24 with a rapid deployment of the Uber Eats trial and 7 new stores opened, with a further 33 with planning consent or under construction. New store openings will accelerate and we now expect to open in excess of 70 stores in FY24. We expect to see some food cost deflation in FY24 which, in line with our model, will be passed through to our franchise partners. In FY23 we proactively took action to reduce our cost base and this will partially offset the overall impact of inflation on our cost base in FY24. As a result, we expect to deliver FY24 underlying Ebitda in line with current market expectations8, and so delivering another year of further profit growth, despite the continued uncertain consumer environment. Trading in February 2024 has seen an improved sales and order trajectory following a slow January, in part because we tactically held back on marketing spend to support more strategic launches later in 2024. We expect the current trajectory to continue but, due to performance in January, we expect orders and like-for-like sales growth to be lower than in Q1 23. We are committed to offering our customers compelling value and a new £4 lunch offer will be launching shortly, providing an incremental opportunity to target different parts of the day. We are confident that our focus on our strategic priorities will deliver order count and like-for-like sales growth in FY24.” Andrew Rennie, chief executive, said: “Last year we continued to make strong strategic progress with 61 new store openings whilst offering our customers compelling value. These efforts delivered an increase in sales and shareholder returns with continued robust profit growth. I would like to thank our world-class franchisees and colleagues for their immense hard work and dedication in achieving these results. In December I set out a framework for accelerating sustainable, long-term growth. Following a great year for store openings in 2023 we are accelerating our growth and expect to have 1,600 UK and Ireland stores delivering £2bn of system sales by 2028 and 2,000 stores by 2033 delivering £2.5bn of system sales. Crucially, we have alignment with our franchisees and there is a strong, motivated second generation talent coming through the franchisee ranks to help drive this growth. Since March 2021, we have taken a disciplined approach to capital allocation by following a clear framework. We have prioritised investment in the core business to drive growth and I’m excited that today we’re acquiring full control of Shorecal to accelerate our Irish growth. We see a significant opportunity to meaningfully increase our Irish store count and deliver long-term, sustainable returns. We are committed to a progressive dividend policy and I’m pleased that we have increased the dividend by 5%. DPG is a highly cash-generative, asset light business and we have been able to announce £427m of shareholder returns since March 2021, whilst also continuing to invest in the business. We are rigorously focused on accelerating organic growth and pursuing value enhancing inorganic growth opportunities, to build a larger and more cash generative business, at pace but with discipline. We look forward to providing an update on these opportunities later in the year.”

Next Who’s Who of UK Hospitality to feature more than 232,000 words of content: The next Who’s Who of UK Hospitality will feature more than 232,000 words of content when it is released to Premium Club members on Friday (15 March), at midday. The database now features 866 companies, and this month’s edition includes 11 new additions and 36 updated entries. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around Ebitda, plans and trading style available. The database merges Companies House information, interviews and other public information to provide an easy to reference and exhaustive guide to the sector. Premium Club members also receive access to five other databases: the Multi-Site Database, produced in association with Virgate; the New Openings Database; the Turnover & Profits Blue Book; the UK Food and Beverage Franchisor Database and the UK Food and Beverage Franchisee Database. All Premium Clubs members will be offered a 20% discount on tickets to five Propel paid-for events – The Excellence in Pub Retailing Conference (14 May), Social Media for Profit (18 July), the Talent and Training Conference (1 October) and Restaurant Marketer and Innovator (two days in January 2025). Operators that are Premium Club members will also be able to send up to four members of staff to each of our four Multi-Club Conferences for free. Premium Club members receive their daily Propel Info newsletter 11 hours earlier than standard subscribers, at 7pm the evening before. They also receive videos of presentations at eight Propel conference events two weeks after they are held. This represents around 100 videos of industry insight over the course of the year. Premium Club members will be sent a dedicated monthly newsletter that will highlight key updates in the sector and direct subscribers to all the vital content their membership offers. Premium Club members also receive exclusive opinion columns every Friday at 5pm, which include the thoughts of Propel group editor Mark Wingett and a host of industry leaders from across the sector. A Premium Club subscription costs an annual sum of £495 plus VAT for operators and £595 plus VAT for suppliers. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or supplier. Email kai.kirkman@propelinfo.com today to sign up.

Boarded-up railway arches in Waterloo to be transformed in 15-year overhaul: Boarded-up railway arches at Waterloo station are to be turned into shops and cafes as part of a 15-year redevelopment project. The Telegraph reports that Network Rail plans to overhaul Waterloo after drafting in Grimshaw, the architecture firm behind the £1bn renovation of London Bridge station. Details laid out in a 210-page document reveal ambitions to replace Waterloo’s empty spaces with retail and pedestrianise the area outside the station’s main entrance. This area will be renamed “Victory Arch Piazza” and filled with hundreds of trees. Network Rail expects the project, which is backed by Lambeth Council, to take up to 15 years and create up to 10,000 jobs. It is not yet clear how much the station’s conversion will cost, and planning permission is yet to be secured. However, Network Rail chair Lord Hendy told the Evening Standard that he wants the private sector to fund the project, meaning it will use “as little public money as we can manage”. The plans come after Network Rail’s five-year revamp of London Bridge, which nearly doubled passenger capacity and added around 90 shops and restaurants to the station. The transformation was hailed a success after London Bridge remained operational throughout and the project was delivered on time. It followed the £800m redevelopment of St Pancras International, which opened as the new Eurostar Terminal in 2007 and the £550m revamp of King’s Cross, which was completed in 2013. Lord Hendy said: “I think our combined objective is to do the same thing around Waterloo as we now see at King’s Cross. It is imperative this station continues to evolve to ensure it is a world-class transport hub and meets the needs of the millions of passengers that use the station each year.”

FTSE 100 companies improve diversity but smaller rivals trail: The number of ethnic minority chief executives at FTSE 100 companies has risen from seven to a dozen in a year, but smaller companies have more to do to hit diversity targets, according to the latest snapshot of race in the boardroom. The Times reports that the annual Parker Review found “good progress” by listed companies in making their boards and senior management ranks more ethnically diverse, but it said that the pace of change needed to accelerate at FTSE 250 companies. Middle-sized companies have nine months to appoint at least one ethnic minority director to hit voluntary targets, with 21%, or 52 firms, still having all-white boards or failing to respond to the survey. They include big names such as WH Smith, the retailer, Domino’s Pizza, Balfour Beatty, the infrastructure group, and Bellway and Vistry, the housebuilders. Only four FTSE 100 companies have failed to appoint an ethnic minority director, a number unchanged from last year. They are Diploma, the distribution specialist, Frasers Group, Howden Joinery and Intermediate Capital. The elevations of Wael Sawan, 49, to the top job at Shell, the oil major, of Tufan Erginbilgic, 64, at Rolls-Royce, the aerospace engineer, and of Karim Bitar, 59, at Convatec, the medical devices group, have boosted the number of ethnically diverse bosses at the biggest publicly quoted companies. Of the 1,053 directors in the FTSE 100, 202 regard themselves as from an ethnic minority. David Tyler, the former chairman of J Sainsbury and chairman of the committee, said that while FTSE 250 companies needed to speed up, he was pleased with the progress. “It was always going to be a step-by-step process. Rome wasn’t built in a day.” For the first time, the latest review looks at senior management teams below the C-suite level. It has found that 13% in FTSE 100 companies and 12% in FTSE 250 companies come from ethnic minority backgrounds.

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