Alignment with our franchise partners delivering value for customers, market share gains and increased returns to shareholders

Q4 22 trading highlights

• Excellent momentum through Q4 22 with like-for-like system sales (excluding the change in the VAT rate)^4,5 up 13.9% vs. Q4 21
• Continued strong gains in UK takeaway market share, which rose to 8.0% in Q4 22⁷, up from 6.8% in Q4 21 in a challenging market
• Strong trading and market share gains throughout Q4 22 driven by continued focus on value, digital initiatives, growth in collections, Just Eat roll-out, collaboration with our franchise partners and the men’s football World Cup
• Q4 22 orders of 18.5m, the highest ever quarter for DPG⁸, up with total orders up 4.1% and collection orders up 27.9% vs. Q421

FY22 Financial highlights

• Like-for-like system sales (excluding the change in the VAT rate)⁴ up 5.3%
• Group revenue, which is not significantly impacted by the change in the VAT rate, up 7.0%
• Underlying EBITDA was affected by the accounting treatment of investment⁹ in cloud-based technology platforms (£5.2m). A lower contribution from the German associate (£2.4m), partially due to the put option exercise to exit our investment, was offset by the profit on sale of five corporate stores (£2.1m). Excluding these, underlying EBITDA would have been broadly flat compared to FY21
• Underlying profit before tax was further affected by an additional £2.4m accelerated amortisation and impairment relating to the technology platforms, and an increase in interest of £4.9m
• The technology platform costs relate to two new cloud-based IT systems, 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
• Statutory profit after tax up 4.2% to £81.6m following exit of loss-making international operations in FY21
• Proposed final dividend for FY22 of 6.8p per share, resulting in a total dividend for FY22 of 10.0p per share, up 2.0% vs. FY21
• £130m of shareholder returns announced in FY22, including £86m of share buybacks
• £266m returned since March 2021 through dividends and share buybacks driving a 10.5% reduction in shares in issue
• Increased returns to shareholders leading to Net Debt¹⁰ of £253.3m and a leverage ratio of 2.06x, within our target Net Debt / EBITDA leverage range of 1.5x – 2.5x
• Price for German associate put option finalised¹¹. This has resulted in a put option exercise price of €79.2m (c.£70m), which combined with the repayment of a €10.8m loan (c.£9m), will yield total cash receipts of approximately €90.0m (c.£79m). Completion of the disposal will occur in June 2023 and the proceeds generated will be flowed through our capital allocation framework.
• Successfully refinanced existing bank debt facilities in July 2022, at favourable rates, with a new £200m private placement facility fixed at 4.26% and a £200m revolving credit facility until July 2027

Operational and strategic highlights

• 90% of sales are now digital, with app orders as a percentage of online orders at 52.2% (+6.1ppts vs. FY21)
• App customers up 16% to 6.1m
• Continued growth in total orders, up 1.6% in FY22
  • Collections grew to 22.3m orders in FY22, up 33.0% vs. FY21. Collections in Q4 22 were at 111% of Q4 19 levels
  • Delivery orders were down 8.5% vs. FY21 as a result of a tough comparator in the Covid-impacted prior year which included periods when the UK was in lockdown
• Domino’s rolled out on Just Eat in 1,167 stores at the end of FY22 following a very successful trial and delivering incremental customers and orders
• Excellent service standards with value for money scores +4.0pts vs. FY19 and average delivery time of approximately 26 minutes
• Outstanding performance from our supply chain with 99.9% availability and 99.8% accuracy
• 35 new store openings vs. 31 in FY21. Good start to Q1 23 with 7 new store openings vs.5 in the same period in FY22. FY23 pipeline significantly ahead of comparable pipeline in FY22 and store openings in FY23 expected to increase total store estate by mid-single digits percentage points

Commenting on the results, Elias Diaz Sese, Interim Chief Executive Officer said:
“The reset of the relationship with our franchise partners in December 2021 has underpinned our strong performance in what has been an exceptionally busy year for the business. We have accelerated the execution of our strategy with the return of national value campaigns, growth in collections, our launch on Just Eat and increased store openings, alongside a strong focus on service from our franchise partners. At a time when customers have been looking for great value, Domino’s has delivered, and you can see the results in the numbers we’re announcing today.

We have made significant strides in digital - strengthening our internal operations and enhancing our customers’ experience, especially with our app. We are accelerating our digital journey with increased investment and new eCommerce projects which will deliver sustainable, commercial benefits over time.

Our outstanding Q4 performance gives the business powerful momentum into this year and there’s a lot to be excited about. Strong national value campaigns, continued growth of collections, accelerated new store openings, digital initiatives and a full year on the Just Eat platform are all set to drive further growth. We are confident that our asset-light business model, our franchise partners’ relentless focus on service, and digitally focused investment will deliver further market share gains and create value for shareholders.

I would like to thank our franchise partners and our colleagues for their immense hard work and dedication which delivered a strong performance in 2022. In the current challenging economic environment, we’re committed to giving our customers the best possible quality, value and service, and are excited about the many opportunities we see for Domino’s in 2023 and beyond.”

Current trading, outlook and guidance
We have continued to grow market share in a challenging consumer and inflationary environment. Like-for-like system sales excluding split stores and VAT in the first ten weeks have increased by 10.8% with orders up 2.5% and new app customers up 46%. This has been driven by our franchise partners’ focus on service, our focus on digital, strong national value campaigns, collections growth and the continued incremental benefit of being on the Just Eat platform. Working with our franchise partners we expect to continue taking market share and driving the benefits of the Domino’s system to offer our customers the best possible value.

In FY23 we expect the impact on EBITDA from the accounting treatment of technology platform costs to be c.£9m and there will be no further contribution from the German associate following the exercise of our put option on 10 November 2022. We expect FY23 EBITDA to be broadly in line with current market expectations¹² before c.£9m of technology platform costs. The accounting treatment has no impact on cash and is simply a reclassification from capital expenditure to operating expenditure.

As we enter the third year of our growth strategy, we are focused on accelerating its 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 increased returns for our shareholders.

For the current financial year:

• Accounting treatment of technology platform costs to impact EBITDA by c.£9m
• No further contribution from German associate
• Underlying depreciation & amortisation of between £22m to £25m
• Underlying interest (excluding foreign exchange movements) in the range of £15m to £18m
• Estimated underlying effective tax rate of c. 22% for the full year
• Capital investment of c.£25m, which has decreased due to accounting treatment for technology platform costs
• Net Debt at year-end between £255m and £275m

Contacts

For Domino’s Pizza Group plc:
Investor Relations
Will MacLaren, Head of Investor Relations +44 (0) 7443 192 118

Media:
Tim Danaher – Brunswick +44 (0) 207 404 5959

Results meeting
A results meeting and Q&A for investors and analysts will be held at 09:30 GMT 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 GMT today for North American based investors not able to join the live presentation at 09:30 GMT this morning. Please click here to register.

Financial calendar
Domino’s Pizza Group plc will hold its 2022 AGM on 4 May 2023. It will publish its half year results on 1 August 2023, followed by a Q3 trading update in October 2023.

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, and have investments in Germany and Luxembourg. As of 25 December 2022, we had 1,261 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 FY22 is 52 weeks ended 25 December 2022. FY21 is 52 weeks ended 26 December 2021. FY19 is 52 weeks ended 29 December 2019.
² FY19 included as a pre-Covid comparator
³ System sales represent the sum of all sales made by both franchised and corporate stores to consumers in UK & Ireland. These are excluding VAT.
⁴ 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.
⁵ 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 27th December 2020.
⁶ 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.
⁷ Kantar Worldwide Panel, bespoke market definition.Q4 22 is 12 weeks to 25 December 2022, Q4 21 is 12 weeks to 26 December 2022. Takeaway market combines both Delivery and Collection.
⁸ Excludes Q4 2017 which, was a 53 week year and so had one extra week.
⁹ 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. The treatment is set out further in the Finance Review.
¹⁰ 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.
¹¹ The Group has a 33.3% investment in Daytona JV Limited ('Daytona'), a UK incorporated company which owns the Master Franchise Agreement and trading operations of Domino's Germany. The remaining shareholding is owned by Daytona Holdco Limited, a UK incorporated company, which is wholly owned by Domino's Pizza Enterprises Ltd, based in Australia. The investment is treated as an asset held for sale by the Group, and as at 25 December 2022 the book value of the investment was £32.9m. The Group's interest is subject to a put and call option. The put option was exercised on 9 November 2022.
¹² Current mean of FY23 EBITDA expectations is £137.6m, prior to adjusting for guided accounting treatment of technology platform costs. Based on 10 analysts’ forecasts with a range of £124.5m to £147.7m.