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DMP

Domino’s Pizza Enterprises Limited FY19 results fall short of guidance.

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Domino’s Pizza Enterprises Limited (ASX: DMP) is the largest pizza chain in Australia and has operations across nine countries with more than 2,450 stores. The Company owns the master rights for the Domino’s brand network and operates through franchisees as well as company-owned retail food vendors.

dominos-share-price-1024x576

What are the FY19 results for DMP?

This morning (21st August 2019) DMP released their FY19 results that are detailed below:

  • Global sales of $2.9b up 11.9%
  • EBITDA of $282.4m up 8.9%
  • Underlying NPAT of $141.2m up 8.1%
  • Total dividends for FY19 of 115.5 cents per share up 7.1%
  • International EBITDA of $154.5m overtaking Australian/New Zealand earnings of $127.9m
  • EBIT guidance for FY19 given at $227-247m in comparison to actual FY19 EBIT of $220.8m

 

What are the drivers of this result?

Dominos has increased its market share in the retail food sector particularly through its online sales platform that now accounts for 67.1% of all sales. DMP has also successfully expanded its international operations with its Japanese stores contributing 54.7% of total earnings outperforming Australian/New Zealand operations. During FY19 Domino’s opened an additional 179 stores, one every two days as it completed its conversion of the German Hallo Pizza chain.

The Company’s failure to meet earnings guidance has been attributed to a reduction in margins as Domino’s invests in supporting its franchisees and increasing corporate operated stores taken over from poorly performing franchisees. Domino’s remains committed to its franchise business model acknowledging the benefit franchisees bring to the Company in local knowledge and cost reduction.

 

What is the outlook for DMP?

Domino’s has announced from FY 2020 the Company will not produce 12-month guidance and instead provide 3-5 year strategic direction. Accordingly, the Company expects to generate Same Store Sales growth of 3-6% annually as well as 7-9% Store Count growth over the next 3-5 years, this will continue to generate substantial returns for Domino’s if their guidance can be met.

 

How has the market reacted?

The share price has fallen 3.85% in response to a price of $42.70 as earnings failed to meet guidance investors had been expecting.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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