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Tue 29th Jul 2014 - Domino’s reports UK LFL growth of 11.3% in first half
Domino’s reports UK LFL growth of 11.3% in first half: Domino’s Pizza Group has reported UK like-for-like sales growth of 11.3% in the 26 weeks ended 29 June 2014. System sales increased by 14.9% to £375m (2013: £326.5m). Operating profit, excluding Germany and Switzerland, increased 15.3% to £29.8m (2013: £25.9m). Operating profit, including Germany and Switzerland, after exceptional items, was £24.3m (2013: £10.1m). Group profit before tax increased 10.1% to £24.5m (2013: £22.2m). Like-for-like sales in the Republic of Ireland, in Euros, were up by 3.2% although in Germany, in Euros, they declined by 1.7%. Like-for-like sales in Switzerland, in Swiss Francs, were up by 2.9%. The company reported “strong net cash generated from operating activities of £28.7m (2013: £15.5m) resulting in net debt of £3.7m (2013: £27.9m). Online system sales increased by 30.6% to £204.7m (2013: £156.7m) with online sales accounting for 69.7% of UK delivered sales (2013: 63.3%). Of this, 38.3% of online orders were taken through a mobile device (2013: 27.5%). A total of 11 new stores opened in the period with one closure resulting in a total of 868 stores as at 29 June 2014 (2013: 825). The company has created nearly 300 new jobs in stores, expected to rise to over 1,300 by the end of the year.” Chief executive David Wild, said: “I am pleased to report a strong first half performance for Domino’s led by the sales results in our core market. We have now seen three successive quarters of double-digit like-for-like sales growth in the UK. I am especially pleased at the continued success of our e- and m- commerce platforms showing how customers enjoy and appreciate the benefit of ordering on-line. We are investing further to drive this even harder. Outside the UK, the Republic of Ireland has continued its solid recovery and we have seen an improvement in Switzerland after a slow start to the year. Germany continues to be challenging, but we remain committed to our plans. Looking forward, we plan to open 40-50 stores in the UK this year as previously reported. I remain very excited by the Domino’s business and I am enjoying working with our franchisees and my team to build on our success.” Analyst Douglas Jack, of house broker Numis Securities, issued a ‘Buy’ note with a Price Target of 710p. He said: “H1 reported PBT rose 10% to £24.5m (we forecast £24.5m / consensus: £24.6m). This included £3.0m of one-off costs, without which underlying PBT was up 24%. With UK like-for-like sales up 11.3%, UK/Ireland margins up 51bps and European losses stabilising, we are upgrading our forecasts by 1%. We believe further upgrades are likely. In H1, UK like-for-like sales rose 11.3% (versus 6.4% comp). In Q2, like-for-like sales rose 11.8% (Q1: 10.8%), of which 2.2% related to the World Cup. Like-for-like trading is benefiting from increasing consumer confidence, improving product range and bundle deals driving up add-on volumes by a third. Momentum should continue in Q3, aided by slightly easier comps (of 4.0%) and the roll out of the new customer website over the summer. E-commerce now accounts for 69.7% of UK sales, of which 38.3% is from mobile devices. With the number of App users rising to 5.5m from 2.3m during H1 alone, mobile devices are likely to become the most popular ordering channel next year. In H1, eight sites opened in the UK and three sites opened in Germany, with guidance reiterated for 40-50 UK openings, five German openings and four Swiss openings over the full year. Average sales from new UK outlets are up 12.4% compared to H1 2013 and up 28.0% compared to H1 2012. In Germany, reported losses were £4.7m, although underlying losses (excluding one-off items) fell to £2.4m from £3.2m with reduced overheads offsetting a 1.7% fall in like-for-like sales (partly due to lower marketing spend). Four German stores closed and there are still ten sites to be converted to franchise. In Switzerland, losses were flat at £0.3m; like-for-like sales growth (+2.9% in H1) and expansion are expected to move Switzerland into profit in 2015E. We are upgrading our 2014E PBT forecast to £52.7m from £52.2m (consensus £53.8m) on cautious FY assumptions of 5% like-for-like sales growth and falling EBIT margins. The 2015E P/E is 17x if one excludes Europe, a potentially valuable option, which we view as low for a company with 24% underlying growth and almost zero debt and net rent.”

Eclectic signs for Liverpool site, appoints chief operating officer: Premium bar operator Eclectic has reported that it has signed an agreement to lease on a new site in Liverpool, a key target city for the Group. The company intends to develop this unit in the financial year ending June 2015 to Lola Lo, bringing the total number of Lola Lo units to 11. The new acquisition is subject to the satisfactory outcome of planning and licensing applications. In addition, the company has also concluded a significant extension on the Embargo, Kings Road lease to 2033. This club and terrace space is currently being extended and refitted, and will reopen towards the end of August 2014. The company’s two most recently rebranded sites (Dirty Blonde, Brighton and Lola Lo, Derby) have been successfully launched in the period. In March, the company introduced the Lowlander Grand Café bar and brasserie in Covent Garden to its estate, bringing the number of trading venues to 21. The company intends to pay its first dividend in respect of the 12 month period ended June 2014 after the next annual general meeting in October 2014. The company intends to announce its maiden results for the 12 months ended June 2014 on 30 September 2014. The company also announces that Leigh Nicolson has been appointed to the company’s board as an executive director and chief operating officer with immediate effect. The company stated: “Leigh joined the Group in 2006 as area manager for the London area. His role developed to become national operations manager, and he was appointed operations director for Eclectic in 2010. Leigh has been hugely instrumental in the development and growth of the Group and will further strengthen the Board in his new role.”

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