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DMP

Domino's Share Price Up Strongly On The Back of a Positive Result

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

Domino’s Pizza Enterprises Ltd (ASX: DMP) is an Australian-owned master franchise holder for Domino’s in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg and Denmark. Domino’s has a market capitalisation of A$5.5 billion.

What are the key points from Domino’s HY20 results?

  • Network sales for HY20 is $1.58 billion, up 10.6% compared with the corresponding period.
  • Online sales for HY20 is $1.11 billion, up 18.8% compared with the corresponding period.
  • Underlying net profit after tax (NPAT) for HY20 is $72.6 million, up 6.4% compared with the corresponding period.
  • Free cash flow for HY20 is $58.2 million, up 59.3% compared with the corresponding period.
  • Earnings per share (basic) for HY20 is 84.5 cents per share, up 6.1% compared with the corresponding period.
  • Dividend per share for HY20 is 66.7 cents per share, up 6.4% compared with the corresponding period.

What are the drivers of this result?

The key market drivers for this result was the strong performance in Japan and Europe. Japan sales were up 12.2% with 42 new stores, while Europe’s sales were up 9.4% with 37 new stores. Australia and New Zealand sales were also positive at 3.5% growth with 6 new stores. This half year international markets drove the success of Domino’s result.

Regarding both regions (Japan and Europe), President and CEO Josh Kilimnik notes:

Of 42 organic new stores, 40 were fortressing territories to get closer to customers, reducing delivery times, increasing sales and lowering costs to our stores... across this region Management is not only pleased with our performance, but confident in the future opportunity –it’s up to us to use the platform we now have in place to continue to innovate through our digital platforms and menu, driving sales growth and more store openings.

What is the outlook for Domino’s?

The outlook for Domino’s is positive. Domino’s has opened another 11 stores in the first weeks of the next half year with significant store openings planned in the later parts of the half year that should continue Domino’s expansion in domestic and global markets.

Management is very pleased with positive Same Store Sales (SSS) growth in all markets, which reflects ongoing strength in Europe and Japan, and materially improved trading in Australia/New Zealand. SSS growth in the first trading weeks of H2 20 is +6.3%, and for the Financial Year to Date +4.6%. Network sales are +10.7% higher for the Financial Year to Date3reflecting organic new stores typically open towards the end of each half.

What is the market reaction?

The market reaction to Domino’s was positive. Domino’s share price was up 10% and is currently trading at around A$63. Domino’s has a forward P/E ratio in the mid-thirties and has an annual dividend yield of around 2%.

 


 

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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