Continued growth from strong H1 orders, market share gains and acceleration of new store openings

* Underlying excludes the £40.6m profit on disposal of the German associate in H1 23. Further information within footnote 5.

Commenting on the results, Elias Diaz Sese, Interim CEO said:

“We have delivered a strong first half of 2023 with continued growth in orders and sales. Thanks to our alignment with our brilliant franchise partners, we have been able to accelerate our progress on the strategic initiatives set out at the beginning of the year, with a significant acceleration in store openings, greater app penetration and material improvements in delivery times. Today’s results are testament to the hard work of our colleagues and franchise partners who have worked relentlessly to ensure nobody delivers like Domino’s.

“We are delighted to welcome Andrew Rennie as our new CEO, who brings extensive experience from across the Domino’s system. While we continue to face a challenging and uncertain macroeconomic environment, we remain confident in the many opportunities we see for Domino’s in 2023 and beyond as we continue to work towards our purpose of delivering a better future through food people love.”

Financial highlights

• Like-for-like system sales (exc. splits and VAT) up 9.7%, with Q2 up 8.6%
• Group revenue, up 19.6% driven by an increase in system sales volume, acceleration of store openings and the pass-through of food costs
• Underlying EBITDA +8.2% which includes £5.3m of previously guided one-off technology platform costs⁶ and no contribution from Germany (H1 22: £1.8m)
• Excluding the one-off technology platform costs, underlying EBITDA would have been up 16.5%
• Underlying profit before tax flat primarily driven by higher interest costs, following H2 22 refinancing
• Statutory profit after tax +90.5%, driven by proceeds from the disposal of the German associate, generating a profit of £40.6m recorded in non-underlying results
• Good free cash flow of £56.2m (H1 22: £36.8m), driven by working capital management and robust trading momentum
• Interim dividend of 3.3p per share, up 3.1%
• £20m buyback announced on 4 May 2023, with £13.9m repurchased as at 28 July 2023
• New £70m buyback programme, following disposal of German associate, will commence when the current £20m programme has completed
• Net Debt⁷ of £171.4m and a leverage ratio of 1.33x, below our target Net Debt / EBITDA leverage range of 1.5x – 2.5x, reflecting receipt of £79.9m from disposal of German associate in June 2023

Operational and strategic highlights

• Year-on-year UK takeaway market share gains: 7.3% in Q2 23⁸, up from 6.6% in Q2 22⁸, in a challenging consumer environment
• H1 total orders of 35.4m, up 2.8% vs. H1 22. Q2 23, 17.4 m orders up 2.8%
  • Collections grew to 12.2m orders, up 20.0% vs. H1 22. Q2 23 up 17.3%
  • Delivery orders down 4.4% vs. H1 22. Q2 23 down 3.9%
• Material acceleration of new store openings as we continue to reap the benefits of franchisee alignment
  • 29 in H1 23 with 11 franchise partners vs. 12 in H1 22 from 7 franchise partners
  • Pipeline is c.70% larger than in FY22 across 30 different franchisees
• Continued digital progress with significant growth in app customers and orders
  • 7.9m active app customers, up 46% vs H1 22 and up 16% vs Q1 23
  • App penetration increases with app orders as a percentage of online orders at 75.2% (+24.8ppts vs. Q2 22) and app downloads +140% compared to H1 22
• Successful roll-out on Just Eat platform complete and continuing to deliver incremental customers and orders. Uber Eats trial expected to commence in some stores in H1 24
• H1 23 average delivery times now under 25 minutes as a result of our franchise partners’ focus on service and GPS rolled out to 1,179 stores
• One-time investments in ecommerce and ERP projects largely complete by end of FY23
• As previously announced, appointment of Andrew Rennie as Chief Executive Officer (“CEO”), joins DPG today and will become CEO on 7 August 2023

Current trading, outlook and guidance

The business has delivered a strong first-half performance in a challenging market. Trading momentum is encouraging in the first three weeks of H2 23 with like-for-like system sales excluding split stores increasing by 7.9% with total orders up 2.3%. While the market and consumer backdrop remains uncertain, as a result of the strong first-half performance and current momentum, we now expect to deliver FY23 Underlying EBITDA in a range of £132m – 138m⁹.

We remain focused on accelerating our execution, through five key areas of focus: franchise partner profitability & organisation, value for money, digital, convenience, and technology platform projects. Our asset-light business model and value proposition mean we are well placed to succeed in a challenging trading environment, and we remain confident that we will make further financial and strategic progress, and deliver increased returns for our shareholders.

Our technical guidance for FY23 is as follows:

• FY23 is a 53-week year
• H2 22 benefitted from a £2.1m profit on sale of five corporate stores
• H1 23 benefitted from a £2.3m profit on sale of a freehold property
• Accounting treatment of technology platform costs to impact EBITDA by c.£9m
• Underlying depreciation & amortisation of between £22m to £25m
• Underlying interest (excluding foreign exchange movements) in the range of £14m to £16m
• Estimated underlying effective tax rate of c.22% for the full year
• Capital investment of c.£25m
• Net Debt at year-end between £205m and £225m

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 as it forms part of domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018, as amended (together, "MAR").

The person responsible for making this notification is Adrian Bushnell, Company Secretary.

Contacts

For Domino’s Pizza Group plc:
Investor Relations

Will MacLaren, Head of Investor Relations +44 (0) 7443 192 118

Media:

Tim Danaher, Emily Gainsford – Brunswick +44 (0) 207 404 5959

Results meeting

A results meeting and Q&A for investors and analysts will be held at 10:45 BST today. The webcast and presentation can be accessed by here and will also be available on the Results, Reports and Presentations page of our corporate website.

In addition, we will replay the webcast and Q&A at 16:00 BST today for North American based investors not able to join the live presentation at 10:45 BST this morning. Please click here to register.

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 and the Republic of Ireland. As of 25 June 2023, we had 1,288 stores in the UK and Ireland.

Cautionary statement

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements. Persons receiving this announcement should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, Domino’s does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

Notes

¹ H1 23 is 26 weeks ended 25 June 2023. H1 22 is 26 weeks ended 26 June 2022.
² System sales represent the sum of all sales made by both franchised and corporate stores to consumers in UK & Ireland. These are excluding VAT.
³ An adjustment for the change in VAT rates described for system sales relates to the impact of changes in the VAT applied on hot takeaway food where the VAT inclusive price to customers did not change. The VAT rate in the UK decreased from 20% to 5% on 15 July 2020, increased to 12.5% on 1 October 2021 and reverted back to 20% on 1 April 2022. System sales are consistently reported on an exclusive of VAT basis. However, where the inclusive of VAT price of an order remained the same on a total basis to the customer, over the period of reduced VAT the exclusive of VAT price reported in system sales increased. This leads to an increase in system sales from 15 July 2020 through to 31 September 2021 when the VAT rate was reduced from 20% to 5%. From 1 October 2021, the rate increased from 5% to 12.5%. Where the inclusive of VAT price of an order remained the same on a total basis, this leads to a decrease in system sales compared to the period from 15 July 2020 and an increase in system sales compared to the period before 15 July 2020. With the increase in VAT from 1 April 2022 back up to 20%, where the inclusive of VAT price remained the same to the consumer, there has been a negative impact on system sales compared to the period from 15 July 2020 – 31 September 2021 and 1 October 21 – 31 March 2022, as the exclusive of VAT price of an order decreased.
As an example, for an order where the inclusive of VAT price is £27:

• From 15 July 2020 to 31 September 2021, during the period where VAT was 5%, the reported system sale would be £25.71
• From 1 October 2021 to 31 March 2022, during the period where VAT was 12.5%, the reported system sale would be £24.00
• From 1 April 2022 onwards, where the VAT rate is 20%, the reported system sale would be £22.50

In Ireland, the VAT rate for hot takeaway food reduced from 13.5% to 9% on 1 November 2020 and remains in place. The Irish government also confirmed that the temporary VAT rate reduction to 9% in the tourism and hospitality sectors will not be extended, meaning the VAT rate will revert to 13.5% from 1 September 2023.

⁴ Like-for-like (excluding splits) system sales performance is calculated for UK & Ireland against a comparable 52-week period in the prior period for mature stores which were not in territories split in the current period or comparable period. Mature stores are defined as those opened prior to 26th December 2021.
⁵ Underlying is defined as statutory performance excluding discontinued operations, and items classified as non-underlying which includes significant non-recurring items or items directly related to merger and acquisition activity and related instruments as set out in note 4 to the financial information. For H1 23, Underlying excludes the £40.6m profit on disposal of the German associate.
⁶ The technology platform costs relate to two new cloud-based IT systems (a new ecommerce platform and a new ERP system) for which the investment in these assets is required to be expensed through the income statement. This treatment has no impact on cash and is simply a reclassification from capital expenditure to operating expenditure. As previously communicated, both systems are part of our investment in growth and the ecommerce platform is part of our growth investment framework agreed with our franchise partners in December 2021. The accounting treatment of costs incurred for the cloud-based IT solutions is in accordance with the IFRS Interpretations Committee update in March 2021, which included an agenda decision around the treatment of configuration and customisation costs in a cloud computing arrangement involving Software as a Service. Under this guidance, the costs incurred by the Group on these elements of the platform is required to be expensed as incurred.
⁷ Net Debt is defined as the bank revolving facilities, private placement facilities, cash and cash equivalents and other loans, including balances held in disposal groups held for sale.
⁸ Kantar Worldwide Panel, bespoke market definition. Q2 23 is 12 weeks to 11 June 2023, Q2 22 is 12 weeks to 12 June 2022. Takeaway market combines both Delivery and Collection.
⁹ Current mean of FY23 Underlying EBITDA expectations is £127.6m with a range of £125.0m - £129.2m, assumed to be on 52 week basis. Based on 9 analysts’ forecasts.