Final Results
Domino's Pizza UK & IRL PLC
19 February 2008
19 February 2008
DOMINO'S PIZZA UK & IRL plc
PRELIMINARY RESULTS
FOR THE FIFTY-TWO WEEKS ENDED 30 DECEMBER 2007
Domino's Pizza UK & IRL plc ('Domino's Pizza' or the 'Company'), the UK and
Ireland's leading pizza delivery company, announces its preliminary results for
the fifty-two weeks ended 30 December 2007.
Highlights
• System sales increased 23.4% to £296.3m (2006: £240.1m)
• Profit before tax* increased 33.1% to £18.7m (2006: £14.1m)
• Like-for-like sales in 404 mature stores up 14.7% (2006: 9.7% in 357
stores). First six weeks in 2008 up 11.0% (2007: 14.3%)
• Earnings per share*:
- Basic earnings per share up 39.0% to 8.48p (2006: 6.10p)
- Diluted earnings per share up 39.1% to 8.33p (2006: 5.99p)
• Total dividend increased 43.8% to 4.40p per share (2006: 3.06p)
• 50 new stores opened in the year (2006: 46 stores) and none closed
(2006: two) resulting in a total of 501 stores at the year end (2006: 451
stores)
• E-commerce sales up 60.5% to £32.2m (2006: £20.1m)
• Net cash at bank and in hand of £8.6m (2006: £4.3m) after returning
£8.3m cash to shareholders in share buybacks (2006: £10.2m).
__________
• Announcement of intention of moving to the Official List
• Official sponsor to Britain's Got Talent on ITV and America's Got Talent
on ITV2. This is in addition to continuing our sponsorship of The Simpsons
on Sky One
* Before accelerated LTIP charge and operating and non-operating exceptionals
Chris Moore, Chief Executive of Domino's Pizza, commented:
'In 2007, Domino's Pizza recorded another year of excellent results with the
opening of 50 new stores and exceptional like-for-like sales growth. The Company
leveraged its relatively fixed cost base to generate record profits and, with
strong operating cash flow and very little capital required by the business, we
continued our programme of returning surplus cash to shareholders by way of
share buybacks and record dividends.
'Trading in the first six weeks of 2008 has got off to a strong start with
like-for-like sales up 11.0% (2006: 14.3%). This is particularly encouraging
given the strong comparatives of last year. E-commerce has continued to show
robust growth with an increase of 90.6% in the same period (2006:36.2%).
E-commerce in the first six weeks accounted for 21% of all UK delivered sales.
'Our store opening programme is looking more encouraging with more sites in the
pipeline with planning approval than at the same time last year. This gives us
optimism at this early stage that we are on track to once again achieve our
target of 50 new store openings this year.
Your Company is well positioned for another year of strong growth.'
For further information, please contact:
Domino's Pizza:
Chris Moore - Chief Executive Officer 01908 580604
Lee Ginsberg - Chief Financial Officer 01908 580611
Numis Securities Limited:
David Poutney, James Serjeant, Nick Westlake 020 7260 1000
Altium
Ben Thorne 020 7484 4040
Hogarth Partnership Limited
Fiona Noblet, Anthony Arthur 020 7357 9477
Notes to Editors:
Domino's Pizza Group Limited is the leading operator in the UK and Ireland's
fast-growing pizza delivery market and is a subsidiary of AIM-listed Domino's
Pizza UK & IRL plc (symbol: DOM). Domino's Pizza Group Ltd holds the exclusive
licence to own, operate and franchise Domino's Pizza stores in the UK and
Ireland. The first UK store opened in 1985 and the first Irish store opened in
1991.
As at 30 December 2007, there were 501 stores in the UK and Ireland. Of these,
398 stores are in England, 38 are in Scotland, 19 are in Wales, 12 are in
Northern Ireland and 34 are in the Republic of Ireland.
As part of a commitment to delivering more to the communities served by its
stores, Domino's Pizza Group Limited is proud to support Special Olympics GB and
Special Olympics Ireland.
Founded in 1960, the Domino's Pizza brand is the recognised world leader in
pizza delivery. Through its primarily franchised system, Domino's operates a
global network of over 8,000 stores in more than 50 countries.
For photography visit www.dominos.uk.com/media or contact The Hogarth
Partnership on 020 7357 9477.
Chairman's Statement
As your newly appointed Chairman, may I open my report by congratulating Chris
Moore on his appointment as Chief Executive on 31 December 2007. Chris and I
have worked together for almost ten years and during that time he has had, at
one time or another, responsibility for almost every area of the business. A
more qualified and able 'new' Chief Executive would be hard to imagine! I
therefore personally wish him every success in leading us toward and hopefully
beyond, 1,000 stores.
In 2007, Domino's Pizza recorded another year of excellent results with the
opening of 50 new stores and exceptional like-for-like sales growth. The Company
leveraged its relatively fixed cost base to generate record profits and, with
strong operating cash flow and very little capital required by the business, we
continued our programme of returning surplus cash to shareholders by way of
share buybacks and record dividends.
As I know only too well, this can only be achieved with a great team of people
behind you. Domino's Pizza is a rather unique business, being almost entirely
franchised which means that we have a small central team, currently 325,
supporting a much larger group of franchisees and team members in the stores,
currently numbering 12,000. One of the huge benefits of franchising is that the
stores are run by local entrepreneurs who know their local market, employ local
people and become part of the communities in which they operate.
In a business structured in the way we have chosen, it is equally important that
we in the centre ensure that we deliver the services that are our responsibility
to the highest standards. One of the key functions is the manufacture and
distribution of all the food items used in our stores. The specification we have
set ourselves is extremely demanding. We deliver fresh food to every one of our
stores three times a week, at times when the stores are not operating. This is a
significant logistical effort for which we need the best facilities and systems.
We have therefore recently embarked on a major capital expenditure programme
that will see the doubling in size of our Penrith commissary and the
construction of a new state-of-the-art commissary on a newly to be acquired ten
acre site in Milton Keynes. When fully operational in late 2009, this new
commissary will be the most advanced manufacturing and distribution facility
anywhere in the Domino's Pizza system worldwide and will provide our business
with significant additional operating efficiencies and resilience.
Maintenance of the consistently high standards expected of a brand such as
Domino's Pizza requires careful monitoring, training and investment by both the
franchisees and corporate. We have therefore launched a number of initiatives in
recent years to assist our franchisees in achieving the high standards we expect
from them in the areas of health and safety, employment practices and
environmental health standards.
Finally, having opened by welcoming our new CEO, I would like to close by paying
tribute to our retiring Chairman, Colin Halpern. Colin acquired the rights to
Domino's Pizza in the UK and Ireland back in 1993. His 'feel' for the market and
his wise commercial counsel have been of invaluable help to me in guiding the
business to the enviable position we are in today. I am pleased to say that we
will not be losing this advice, as Colin has agreed to stay on as Non-Executive
Vice Chairman. I look forward to working with him for many years to come.
Stephen Hemsley
Executive Chairman
Chief Executive's Report
Introduction
It is with great pleasure that I present my first report as Chief Executive and
I would like to open it by thanking the Board and shareholders for their
confidence.
Domino's Pizza is now a 500 store system which is accessible to 55% of UK and
Irish households. Our franchisees and in store team members and employees in our
three commissaries and headquarters, have worked with passion to reach this
stage and I would like to convey my thanks to them at the start of this report.
The strong performance of our stores against a backdrop of tough comparatives is
representative of two areas of focus for your Company over the past year:
increasingly innovative, targeted marketing and tangible improvements to
customer service standards.
Whilst our 500th store milestone was cause for celebration across the company,
we are mindful of the fact that Domino's is still only halfway to its target of
1,000 stores. I am confident that the combination of our talented people, high
quality pizza and market-leading service standards, will deliver against this
target by 2017.
System Sales
In 2007 system sales, which are the sales of all stores in the Domino's system
in the UK and Republic of Ireland, rose by 23.4% (2006: 19.7%) to £296.3m (2006:
£240.1m). Like-for-like sales in the 404 stores open for more than twelve months
in both periods grew by 14.7% (2006: 9.7% in 357 stores), the highest percentage
increase recorded since 2001.
Product innovation
As I mentioned in my introduction, stores have delivered impressive sales
results thanks, in part, to the effectiveness of both centralised and localised
marketing activity as well as one of the wettest British summers. This programme
was driven by a calendar of innovative product development which included the
hugely popular Meateor pizza, a back-to-basics focus on the classic Pepperoni
Passion and the rugby-themed Scrummy.
Given the stable central cost base of running the marketing fund, more of the
franchisees' contributions to our £15m National Advertising Fund were
effectively spent on more national TV advertising volumes, targeted direct mail
and intensive online promotion. Considerable effort has also been directed at
price promotions which, whilst still communicating our reputation for premium
quality pizza, offer great value to consumers.
Service excellence
I can also attribute 2007's sales performance to a measurable improvement in
customer service standards. Domino's is not just a pizza business, it's a
service business and we recognise that our financial performance is driven by
our service standards. These standards must be good enough to make customers
talk about us and create the vital word of mouth recommendations that generate
sales. In 2006, we began a programme of training and high value incentives
designed to help stores improve on the time it takes to get a customer's pizza
to the door - the single most important metric when it comes to evaluating our
service standards. We did this by improving speed in the store, never on the
road, as the safety of our team members remains of paramount importance.
Innovation
E-commerce continues to be our fastest-growing channel to market as well as one
which enhances store-level profitability through labour savings. In 2007, total
sales via these platforms, which include online and SMS ordering, reached £32.2m
(2006: £20.1m), an increase of 60.5%. In 2007, e-commerce accounted for 16% of
our delivered pizzas sold in the UK (2006:13%) and generates a higher than
average ticket value. The Irish service, which was launched in February 2007, is
already delivering close to 5% of delivered sales.
Last year was defined by your Company's push into digital multi-channel retail
platforms. We now feature on 16 e-commerce platforms including the launch of SMS
ordering in August 2007.
Food Cost Pressures
Unprecedented increases in the prices of raw materials since the middle of 2007,
in particular milk and wheat, had a significant effect on both us and our
franchisees. This was exacerbated by our cheese supplier going into receivership
and the consequential ending of our fixed price contract. As a result, new
supply arrangements saw the cost of cheese increasing by over 50% over the
course of the year. Wheat has also recently increased significantly in price,
but by less than the 100% we had feared and is now fixed for the remainder of
the year. The outlook for pricing in 2008 looks more stable.
These increases in raw material prices have now been passed on to our
franchisees who have had time to reflect them in their menu prices. The new menu
pricing which fully recovered all cost increases, saw increases average around
4%. This new pricing has been accepted by customers as witnessed by the
continued momentum in sales since November when prices first increased.
Expansion
In 2007 we opened 50 new stores (2006: 46) and closed none (2006: two) bringing
the year-end store count to 501 stores (2006: 451). Whilst we continue to
experience some inconsistency in planning decisions, this did not significantly
hamper our expansion last year. The aim of many local authorities appears to be
the regeneration of secondary retail space and this has worked in our favour,
with Domino's being recognised as a responsible and attractive occupant of
previously redundant units.
This successful expansion was the result of considerable efforts, particularly
in the fourth quarter, by our expanded business development team who have worked
in close conjunction with our existing franchisees to identify sites, secure
planning permission and build stores.
Over 4,300 applications to franchise were received in 2007 but only 16 went on
to be awarded franchises. Our rigorous interview process ensures that only the
best candidates, with aspirations to franchise multiple stores, join our system.
It remains important to your Company that we increase the number of stores
operated by each franchisee so that they have a viable, long-term business.
However, we only allow franchisees with the highest standards to expand which in
turn assures the quality growth of our system. As at 30 December 2007, we had
144 franchisees (2006: 150), of whom 56 are single unit operators. Each
franchisee has an average of 3.5 stores. (2006: 3.0 stores). This consolidation
of the number of stores for each franchisee also means that we can manage our
growing system more efficiently and further improve operational gearing.
During 2008, your Company will acquire freehold land for a new commissary and
headquarters in Milton Keynes and construction is expected to complete towards
the latter part of 2009. The project cost of £25m will be incurred over 2008 and
2009. The commissary in Penrith will also be expanded this year at a cost of £4m
which will double the capacity of that facility. We will also need to expand the
commissary operation in Naas to meet the increasing demand for Domino's Pizza in
Ireland. These developments, combined with the addition of a fourth commissary,
in the UK, which we expect will be needed by 2012, will complete the
infrastructure required for 1,000 stores.
Store Image
Last year we commissioned a new store design to refresh the current image of the
estate which was introduced seven years ago. We will now begin to roll-out the
new image across the system. Recent store openings have already started to
feature this new design and we envisage that up to 100 refits for the older
looking stores in the system will be implemented in 2008 with the rest of the
estate being upgraded over the next few years. All such refits are funded by the
franchisees some of whom may use the facilities offered by our in-house leasing
company.
The Market
The UK eating out market was estimated by Mintel to be worth £30bn in 2007. The
home-delivered food market continues to grow at a fast pace and in 2007 was
worth an estimated £1.5bn which is a third more than it was just 5 years ago.
The extent of current research by Mintel predicts that the market is expected to
grow at a compound rate of 7% a year over the next four years. Based on these
estimates we are currently selling around one in six of all home delivered
meals. The popularity of home delivered food shows no signs of slowing down and
lifestyle factors such as longer working weeks, more dual income households,
more in-home entertainment and more one person households work in our favour.
Corporate Social Responsibility
Food Quality
We constantly review the quality of our ingredients and have pioneered pizza
innovation within our market. Last year we were pleased to complete the removal
of added hydrogenated fats and MSG (Monosodium Glutamate) from all products on
the menu in addition to our long-standing policy of not allowing any GMO's
(Genetically Modified Organisms). Our ongoing review of ingredients serves to
maintain quality standards whilst also identifying opportunities to improve the
nutrient profile of our food.
Environment
The new commissary in Milton Keynes is being designed to be certified to BREEAM
excellence (Building Research Establishment Environmental Assessment Method). A
third of our truck fleet, which deliver food to our stores, are already
registered 'Euro 5', currently the highest standard in emissions control. It is
anticipated that half the fleet will be Euro 5 by the end of the current year
and all trucks will be at this level by 2012. New fuel alternatives, such as
biodiesel, are constantly being tested.
Currently 80% of our pizza boxes are made with recycled board and are 100%
recyclable. Furthermore all invoices and statements are now sent to our
franchisees electronically. Not only is this more efficient but is importantly
saving substantial paper and wastage in the process.
We continue to seek further ways in which our business can become more
environmentally aware and are about to embark on a study of the whole business
to establish what opportunities we have for improvement.
People
In stores, our franchisees today employ approximately 12,000 team members, a
large and diverse group of people including some who require a short-term income
and others looking for a long-term career. We rely upon these people to work
with a fanatical focus on customer service and food quality without which we
will lose the momentum required to fuel our growth.
Considerable effort continues to be directed at helping franchisees to keep pace
with ever-changing employment legislation and at ensuring that their people
benefit from a hard-working environment which is still huge fun and very
rewarding. We have bolstered the support provided to the stores with the
appointment of a full-time franchisee HR consultant, nationwide seminars,
telephone hotlines and web-based resources. Improvements to the scope and volume
of training available to franchisees and in-store teams will serve to underline
our reputation as a great place to work.
Charity
The phrase 'Delivering More' sums up our franchisees' approach to developing
relationships with their local communities. It is these local activities that
build loyalty and sustain long term success. In 2007 our stores have made
considerable strides in terms of their community relations efforts, driven in
particular by our first full year of association with Special Olympics GB and
Special Olympics Ireland. Special Olympics is a major provider of sporting
opportunities for people with a learning disability and provides equality of
opportunity for all our athletes regardless of ability or degree of disability.
The Company also organised and funded a number of events aimed at encouraging
regional participation in Special Olympics activities and promoted the charity
on boxes and menus.
Current Trading and Outlook
Trading in the first six weeks of 2008 has got off to a strong start with
like-for-like sales up 11.0% (2006: 14.3%). This is particularly encouraging
given the strong comparatives of last year. E-commerce has continued to show
robust growth with an increase of 90.6% in the same period (2006: 36.2%).
E-commerce in the first six weeks accounted for 21% of all UK delivered sales.
Our store opening programme is looking more encouraging than at the same stage
last year. We have more sites in the pipeline with planning than at the same
time last year and this gives us optimism at this early stage that we are on
track to once again achieve our target of 50 new store openings this year.
Cash flows remains strong and we have the debt facilities in place to secure the
expansion of our existing commissary in Penrith and the investment in our new
commissary in Milton Keynes. Accordingly it is the Directors' intention to
continue to return surplus cash to shareholders by further share buybacks and
dividends.
Your Company is well positioned for another year of strong growth.
Chris Moore
Chief Executive Officer
Chief Financial Officer's Review
Introduction
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS'). This is the first year in
which the Group financial statements of Domino's Pizza UK & IRL plc have been
prepared in accordance with IFRS and the comparative amounts for 2006 have been
restated from UK Generally Accepted Accounting Practice (UK GAAP) to comply with
IFRS.
Trading results
Group turnover, which includes the sales generated by the Group from royalties,
fees on new store openings, food sales, finance lease and rental income, as well
as the turnover of corporately owned and operated stores, grew by 21.0% to
£114.9m (2006: £95.0m).
Group operating profit, including our share of operating profit in joint
ventures, but before exceptional costs and the accelerated Long Term Incentive
Plan (LTIP) charge was up 32.7% to £18.8m (2006: £14.2m). Exceptional operating
costs were incurred as a result of your Company's continuing strategy of exiting
its corporate stores and amounted to £0.3m (2006: £0.5m). In addition, as a
result of the rapid growth in profitability and earnings per share over the last
three years, the performance targets included in the 2004 LTIP award have been
achieved. The early vesting of these awards necessitates the acceleration of the
2008 and 2009 charge and a charge of £0.2m was incurred in the year (2006:
£nil).
The commissary rebate scheme, first launched in 2005 to help our franchisees
overcome the burden of new external cost pressures, continued to benefit the
system strongly in 2007. This scheme enhances the profitability of franchisees
who achieve like-for-like sales targets and fully comply with our operating
standards. Included in Group operating profit is the cost of this rebate which
amounted to £1.4m (2006: £0.6m). The rebate was substantially higher than last
year as a result of stronger like-for-like sales.
As highlighted in the Chief Executive's report, the Group saw unprecedented
increases in the prices of many raw materials towards the latter part of the
year. This had an adverse impact to our food margin of £0.5m in 2007 as we felt
unable to pass those increases on as quickly as they came through. Excluding
these unexpected costs, Group operating profits, before exceptionals, would have
reached £19.3m, an increase of 35.9%.
Finally, the Group sold six stores during the year, five of which were in a
subsidiary company DP Newcastle & Sunderland Limited. The Group generated an
exceptional profit on the sale of these stores of £0.3m (2006: £0.2m).
Profit on ordinary activities before interest and tax grew by 30.5% to £18.7m
(2006: £14.3m). This includes the profit on the sale of the corporate stores of
£0.3m (2006: £0.2m). In 2007 there was £0.1m of property and legal provision
releases relating to the sale of corporate stores in prior periods (2006:
£0.5m).
Profit before tax and the accelerated LTIP charge of £0.2m was up 32.1% to
£18.7m (2006: £14.2m). Unadjusted profit before tax was £18.6m (2006: £14.2m) an
increase of 30.9%. One of our key measurements of profitability is the ratio of
profit before tax to system sales which grew to 6.3% in 2007 from 5.9% in the
previous year. This highlights the strength of the underlying operational
gearing of our business model.
The tax charge for the year was 28.7% (2006: 29.6%) and is lower than the
corporation tax rate of 30%, primarily due to the impact of the lower tax rate
applicable in our Irish subsidiary company.
Profit after tax and minority interest was up 31.3% to £13.2m (2006: £10.1m).
Earnings per share and dividend
Basic earnings per share before the accelerated LTIP charge of £0.2m and
exceptional items were up 39.0% to 8.48 pence. (2006: 6.10 pence). Diluted
earnings per share before the accelerated LTIP charge of £0.2m and exceptional
items increased by 39.1% to 8.33 pence (2006: 5.99 pence).
Unadjusted basic earnings per share were up 34.5% to 8.38 pence (2006: 6.23
pence) and diluted earnings per share were up 34.6% to 8.24 pence (2006: 6.12
pence).
In line with our strategy of returning cash not required for the growth and
expansion of the business to shareholders, the Board is pleased to recommend a
further significant increase in the dividend payment which, if approved by
shareholders, will give a final dividend of 2.50 pence per share (2006: 1.76
pence per share). This would give a total dividend for the year of 4.40 pence
per share (2006: 3.06 pence per share) a 43.8% increase. The full year dividend
is 1.9 times covered by profits after tax (2006: 2.1 times).
Subject to shareholders' approval at the Annual General Meeting to be held on 24
April 2008 the final dividend will be payable on 2 May 2008 to shareholders on
the register on 11 April 2008.
Cash flow and balance sheet
Our cash position continues to remain strong. Net cash generated from operations
reached £24.4m, up from £18.8m in 2006. This increase was mainly attributable to
the higher operating profits as well as an improvement in working capital.
During the year, outflows of £0.1m of net interest, £4.3m of taxes and £1.1m of
capital expenditure and financial investment were incurred.
Overall net cash flow before financing was £19.5m. This strong cash generation
has allowed us to return a further £8.3m to shareholders through share buybacks
during the year.
In the year, options over 1.4m shares were exercised generating an inflow of
£0.7m (2006: £0.4m).
DP Capital continued to provide leasing support to franchisees for the fit-out
of new stores and the refit of existing stores, with new advances of £1.3m
(2006: £1.0m). After repayments, the balance outstanding at the year end on
these leases was £2.8m (2006: £2.6m). These facilities are financed by a limited
recourse loan facility and the amount drawn down at the end of the year stood at
£2.4m (2006: £2.3m).
At the end of the year, the Group had cash at bank and in hand of £14.6m (2006:
£10.3m), which taken together with the leasing borrowings of DP Capital as noted
above of £2.4m, the loans in the Employee Benefit Trust ('EBT') of £7.7m and
term loan debt of £6.0m, gave consolidated net debt of £1.6m (2006: £5.6m).
After the deduction of the cost of the shares held in the EBT, shareholders
funds were £9.9m (2006: £8.9m), resulting in a gearing ratio of 15.9% (2006:
62.5%).
Towards the end of the year, the Group also finalised a £25.0m five-year term
loan facility to enable it to finance the expansion to its commissary facilities
thereby leaving the net cash flows generated by operating activities free to
return to shareholders. This facility had not been utilised at the year end.
Corporate store, associates and subsidiaries
As stated at the preliminary stage last year, your Company remains focussed on
withdrawing entirely from the operation of corporate stores. We have an equity
interest in five (2006: six) associates and subsidiaries which totals £0.6m
(2006: £0.7m) involving a total of 30 stores (2006: 34 stores).
In 2007, our share of post tax profits of associates amounted to £0.2m (2006:
£0.2m).
Share split
On 27 February 2007, the Company announced a sub-division of its share capital.
The Company's ordinary shares of 5 pence each prior to the sub-division were
divided into 3.2 new ordinary shares of 1.5625 pence. These shares were admitted
to trading on Aim on 27 April 2007.
Intention to move to the Official List
Your Company has grown considerably in the past few years, and the Board now
feels that it is of a size that is more appropriate to be listed on the Official
List of the London Stock Exchange. The move is expected to take place in the
second quarter of this year.
Conclusion
We are particularly pleased with another year of strong growth operationally and
financially. Long term financing at competitive rates, combined with the strong
cash flows generated by the business give us both the confidence and the
opportunity to continue to return funds to shareholders by way of share buybacks
and dividends.
Lee Ginsberg
Chief Financial Officer
Group income statement
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
Notes £000 £000
Revenue 114,891 94,965
Cost of sales (70,736) (57,811)
---- ----
Gross Profit 44,155 37,154
Distribution costs (9,246) (8,177)
Administrative costs (including operating
exceptional
charges) (16,746) (15,462)
---- ----
18,163 13,515
Share of post tax profits of associates 158 171
---- ----
Operating profit 18,321 13,686
---------------------------- ------ --------- ---------
Accelerated LTIP charge (174) -
Operating exceptional charges 2 (333) (499)
Operating profit before exceptional charges 18,828 14,185
---------------------------- ------ --------- ---------
Profit on the sale of non current assets and
assets held for sale 2 288 159
Profit on the sale of subsidiary undertakings 2 58 454
---- ----
Profit before interest and taxation 18,667 14,299
Finance income 528 397
Finance expense (619) (507)
---- ----
Profit before taxation 18,576 14,189
Taxation 3 (5,337) (4,193)
---- ----
Profit for the year 13,239 9,996
---- ----
Profit for the year attributable to:
Equity holders of the parent 13,245 10,084
Minority interest (6) (88)
---- ----
13,239 9,996
---- ----
Earnings per share
- Basic (pence) 5 8.38 6.23
- Diluted (pence) 5 8.24 6.12
Group balance sheet
At At
30 December 31 December
2007 2006
Notes £000 £000
Non current assets
Goodwill and intangible assets 813 1,496
Property, plant and equipment 13,716 12,378
Prepaid operating lease charges 702 683
Net investment in finance leases 1,923 1,748
Investments in associates 685 589
Deferred tax asset 3 565 1,209
---- ----
18,404 18,103
Current assets
Inventories 2,340 1,818
Trade and other receivables 10,071 9,632
Net investment in finance leases 857 864
Prepaid operating lease charges 220 247
Cash and cash equivalents 14,629 10,262
---- ----
28,117 22,823
Non current assets held for sale 1,772 1,172
---- ----
Total assets 48,293 42,098
---- ----
Current liabilities
Trade and other payables (18,187) (13,433)
Deferred income (68) (31)
Financial liabilities (6,817) (6,835)
Current tax liabilities (2,503) (2,339)
---- ----
(27,575) (22,638)
Non current liabilities
Provisions (155) (233)
Financial liabilities (9,380) (9,009)
Deferred income (1,071) (989)
Deferred tax liabilities 3 (215) (243)
---- ----
Total liabilities (38,396) (33,112)
---- ----
---- ----
Net assets 9,897 8,986
---- ----
Shareholders' equity
Called up share capital 7 2,538 2,574
Share premium account 7 5,307 4,765
Capital redemption reserve 7 319 261
Treasury share reserve 7 (4,403) (4,216)
Currency translation reserve 7 209 (21)
Retained earnings 7 5,888 5,575
---- ----
Equity shareholders' funds 9,858 8,938
Minority interest 7 39 48
---- ----
Total equity 9,897 8,986
---- ----
Group cash flow statement
52 weeks 52 weeks
ended ended
Notes 30 December 31 December
2007 2006
£000 £000
Cash flows from operating activities
Profit before taxation 18,576 14,189
Net finance costs 91 110
Share of post tax profits of associates (158) (171)
Amortisation and depreciation 1,545 1,815
Profit on disposal of non current assets (346) (613)
Share option and LTIP charge (including
accelerated LTIP charge) 880 344
(Increase)/decrease in inventories (535) 349
(Increase)/decrease in debtors (685) 82
Increase in creditors 4,956 2,764
Increase in deferred income 119 120
Decrease in provisions (20) (221)
---- ----
Cash generated from operations 24,423 18,768
UK corporation tax (4,117) (3,624)
Overseas corporation tax paid (218) (131)
---- ----
Net cash generated by operating activities 20,088 15,013
Cash flows from investing activities
Interest received 528 389
Dividends received 62 21
Receipts from repayment of associate loan 171 105
Receipts from repayment of franchisee
finance leases 1,127 1,349
Purchase of property, plant and equipment (3,509) (2,294)
Purchase of other non current assets (451) (866)
Net cash acquired on the disposal of
subsidiary undertaking 1,118 -
Receipts from the sale of non current
assets 335 453
Purchase of minority interests - (103)
---- ----
Net cash used by investing activities (619) (946)
---- ----
---- ----
Cash inflow before financing 19,469 14,067
Cash flow from financing activities
Interest paid (619) (459)
Issue of ordinary share capital 700 403
Purchase of own shares (8,346) (10,161)
Short term loans - bank overdraft (6,000) 6,000
Bank revolving facility 6,000 -
New long term loans 1,302 1,244
Repayment of long term loans (1,169) (1,457)
Payments to acquire finance lease assets (1,295) (1,026)
Equity dividends paid 4 (5,816) (4,234)
---- ----
Net cash used by financing activities (15,243) (9,690)
---- ----
---- ----
Net increase in cash and cash equivalents 4,226 4,377
Cash and cash equivalents at beginning of
period 10,262 5,885
Foreign exchange gains on cash and cash
equivalents 141 -
---- ----
Cash and cash equivalents at end of period 14,629 10,262
---- ----
Notes to the accounts
At 30 December 2007
1. Accounting Policies
Basis of preparation
The preliminary results for the year ended 30 December 2007 have been prepared
in accordance with International Financial Reporting Standards (IFRS) as adopted
by the EU and are in line with the accounting policies set out in the interim
financial statements for the six months to 30 June 2007.
The financial information in the preliminary statement of results does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985 (the 'Act'). The financial information for the year ended 30 December
2007 has been extracted from the statutory accounts on which an unqualified
audit opinion has been issued. Statutory accounts for the year ended 30 December
2007 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting.
The financial statements, and this preliminary statement, of Domino's Pizza UK &
IRL plc for the year ended 30 December 2007 were authorised for issue by the
Board of Directors on 19 February 2008 and the balance sheet was signed on
behalf of the Board by Lee Ginsberg.
The statutory accounts have been delivered to the Registrar of Companies in
respect of the year ended 31 December 2006 and the Auditors of the Company made
a report thereon under Section 235 of the Act. That report was an unqualified
report and did not contain a statement under Section 237(2) or (3) of the Act.
2. Exceptional Items
Recognised as part of operating profit
The Group has taken the decision not to invest in or trade in corporately owned
stores. During the year one (2006: three) corporately owned store was sold and
none (2006: one) closed.
The Group has incurred the following exceptional charges relating to store
closures and stores sold during the financial period:
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Onerous lease and dilapidation provisions 45 76
Restructuring and reorganisation costs 143 252
Assets written off 145 52
Lease finance and other bad debts provided for* - 119
---- ----
333 499
---- ----
*relates to a store owned and operated by a franchisee, closed during the 2006
financial year.
Except for the assets written off, for stores closed, the charges should be
deductible for corporation tax purposes. Except for the restructuring and
reorganisation costs, these charges had no impact on the cash flow of the Group
during the year.
Notes to the accounts (continued)
2. Exceptional Items (continued)
Recognised below operating profit
Profit on the sale of subsidiary undertakings
During the 2005 financial year the Group sold two subsidiary undertakings, DPGS
Limited and Triple A Pizza Limited (which included 12 corporate stores at the
date of the transaction). As a result of this transaction, certain legal and
property provisions were made.
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Movement in provisions 58 454
---- ----
58 454
---- ----
During the year partial resolution relating to the conditions for the provisions
made in relation to the sale of the subsidiary undertakings was reached and as a
result £58,000 (2006: £454,000) of the provisions created have been released.
These are reported in the profit on sale of subsidiary undertakings line on the
income statement.
Profit on the sale of non current assets and assets held for sale
The Group disposed of its subsidiary undertaking, DP Newcastle & Sunderland
Limited in June 2007, generating a profit of £279,000. The gain in respect of
this disposal will be chargeable to corporation tax at the statutory rate of
30%.
In addition the Group sold one (2006: three) corporate store resulting in a
profit of £6,000 (2006: £159,000). The gain in respect of this disposal will be
chargeable to corporation tax at the statutory rate of 30%.
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Sale of one (2006: three) corporate store 6 159
Profit on sale of assets held for sale - DP
Newcastle & Sunderland Limited 279 -
Profit on sale of other non current assets 3 -
---- ----
288 159
---- ----
Notes to the accounts (continued)
3. Taxation
(a) Tax on profit on ordinary activities
Tax charged in the income statement
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Current income tax:
UK corporation tax
- current year - continuing operations 5,497 4,677
- adjustment in respect of prior periods (430) (418)
---- ----
5,067 4,259
Income tax of overseas operations on profits for
the year 198 154
---- ----
Total current income tax 5,265 4,413
---- ----
Deferred tax:
Origination and reversal of temporary differences (81) (220)
Effect of change in tax rate (28) -
Adjustment in respect of prior periods 181 -
---- ----
Total deferred tax 72 (220)
---- ----
---- ----
Tax charge in the income statement 5,337 4,193
---- ----
The tax charge in the income statement is disclosed as
follows:
Income tax expense on continuing operations 5,337 4,193
---- ----
Tax relating to items (charged) or credited to equity:
Reduction in current tax liability as a result of
the exercise of share options 780 400
Origination and reversal of temporary differences in
relation to
unexercised share options (566) 483
---- ----
Tax credit in the group statement of changes in
equity 214 883
---- ----
Notes to the accounts (continued)
3. Taxation (continued)
(b) Reconciliation of the total tax charge
The tax expense in the income statement for the 52 weeks ended 30 December 2007
is lower than the statutory corporation tax rate of 30% (2006: 30%). The
differences are reconciled below:
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Profit before taxation 18,576 14,189
---- ----
Accounting profit before income tax 18,576 14,189
---- ----
Accounting profit multiplied by the UK statutory rate
of corporation
tax of 30% (2006: 30%) 5,573 4,257
Expenses not deductible for tax purposes 168 171
Profit on disposal of tangible assets - not
taxable 19 (6)
Accounting depreciation not eligible for tax
purposes 135 196
Adjustments relating to prior years corporation
tax (247) (418)
Effect of decreased tax rate (28) -
Tax rate differences (283) (7)
---- ----
Total tax expense reported in the income statement 5,337 4,193
---- ----
Effective tax rate 28.73% 29.55%
---- ----
The standard UK rate of corporation tax will reduce to 28% from 1 April 2008. On
the basis that the Group's deferred tax assets and liabilities are not expected
to materially crystallise before 1 April 2008 the Group's deferred tax balances
have been recognised at 28% at 30 December 2007.
(c) Temporary differences associated with Group investments
At 30 December 2007, there was no recognised deferred tax liability (2006: nil)
for taxes that would be payable on the unremitted earnings of the Group's
subsidiaries, or its associates, as:
• there are no corporation tax consequences of the Group's UK subsidiaries
or associates paying dividends to their parent companies; and
• the Group has determined that undistributed profits of its Irish
subsidiary will not be distributed in the foreseeable future. The temporary
difference associated with the investment in the Group's Irish subsidiary,
for which deferred tax has not been recognised aggregate to £3,340,000
(2006: £1,816,000).
There are no income tax consequences for the Group attaching to the payment of
dividends by the Group to its shareholders.
Notes to the accounts (continued)
3. Taxation (continued)
(d) Deferred tax
The deferred tax included in the balance sheet is as follows:
At At
30 December 31 December
2007 2006
£000 £000
Deferred tax liabilities (215) (243)
Deferred tax assets 565 1,209
---- ----
350 966
---- ----
At At
30 December 31 December
2007 2006
£000 £000
Gross movement in the deferred income tax account
Opening balance 966 263
Tax credited to equity (566) 483
Income statement (credit)/charge (72) 220
Release on sale of subsidiary undertaking 22 -
---- ----
Closing balance 350 966
---- ----
Deferred tax assets
Share based Accelerated Lease Goodwill and Provisions Total
payments capital inducements amortisation
allowances
£000 £000 £000 £000 £000 £000
At 1
January
2006 751 (671) 270 - 159 509
Credit to
equity 483 - - - - 483
Credit/
(charge)
to income 41 290 36 (5) (145) 217
---- ---- ---- ---- ---- ---
At 31
December
2006 1,275 (381) 306 (5) 14 1,209
Charge to
equity (566) - - - - (566)
Credit/
(charge)
to income 68 (170) 13 (10) (1) (100)
Released on
sale of
subsidiary
undertaking - 22 - - - 22
---- ---- ---- ---- ---- ---
At 30
December
2007 777 (529) 319 (15) 13 565
---- ---- ---- ---- ---- ---
Notes to the accounts (continued)
3. Taxation (continued)
(d) Deferred tax (continued)
Deferred tax liabilities
Roll over Accelerated Total
relief capital
allowances
£000 £000 £000
At 1 January 2006 191 55 246
Credit to income - (3) (3)
---- ---- ----
At 31 December
2006 191 52 243
Credit to income (13) (15) (28)
---- ---- ----
At 30 December
2007 178 37 215
---- ---- ----
4. Dividends paid and proposed
52 weeks 52 weeks
ended Ended
30 December 31 December
2007 2006
£000 £000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2006: 1.76p (2005: 1.30p) 2,792 2,115
Interim dividend for 2007: 1.90p (2006: 1.30p) 3,024 2,119
---- ----
Dividends paid 5,816 4,234
---- ----
Proposed for approval by shareholders at the AGM (not recognised as a liability
at 30 December 2007 or 31 December 2006)
Final dividend for 2007: 2.50p (2006: 1.76p) 3,896 2,792
5. Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing profit for the year
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the profit attributable to
ordinary equity holders of the parent by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number of ordinary
shares that would have been issued on the conversion of all dilutive potential
ordinary shares into ordinary shares.
Notes to the accounts (continued)
5. Earnings per ordinary share (continued)
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Profit for the 52 weeks 13,239 9,996
Adjusted for - minority interests 6 88
---- ----
Profit attributable to equity holders of the
parent 13,245 10,084
---- ----
Analysed as:
Profit attributable to equity holders of the parent -
adjusted for the
effect of dilution 13,245 10,084
---- ----
At At
30 December 31 December
2007 2006
No. No.
Reconciliation of basic and diluted weighted
average number of
shares*:
Basic weighted average number of shares (excluding
treasury shares) 157,975,572 161,967,072
Dilutive potential ordinary shares:
Employee share options 1,759,797 2,342,486
Reversionary interests 1,089,001 672,592
---- ----
Diluted weighted average number of shares 160,824,370 164,982,150
---- ----
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of the
financial statements.
The performance conditions for reversionary interests granted over 9,920,000
(2006: 6,640,000) shares and share options granted over 3,097,485 (2006:
2,515,110) shares have not been met in the current financial period and
therefore the dilutive effect of the number of shares which would have been
issued at the period end have not been included in the diluted earnings per
share calculation.
*After the share split of 3.2 ordinary shares of 1.5625 pence each for 1
ordinary share of 5 pence approved at the Annual General Meeting held on 26
April 2007.
Earnings per share before exceptional items
The Group presents as exceptional items on the face of the income statement,
those material items of income and expense which, because of the nature and
expected infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the elements of
financial performance in the year, so as to facilitate comparison with prior
periods and to assess better the trends in financial performance.
Notes to the accounts (continued)
5. Earnings per ordinary share (continued)
To this end, basic and diluted earnings from continuing operations per share is
also presented on this basis and using the weighted average number of shares for
both basic and diluted amounts as per the table above. The amounts for earnings
per share from continuing operations before exceptional items are as follows:
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
Basic earnings per share 8.48p 6.10p
---- ----
Diluted earnings per share 8.33p 5.99p
---- ----
Net profit from continuing operations before exceptional items and attributable
to equity holders of the parent is derived as follows:
52 weeks 52 weeks
ended ended
30 December 31 December
2007 2006
£000 £000
Profit for the year 13,239 9,996
Adjusted for - minority interests 6 88
---- ----
Profit attributable to equity holders of the
parent 13,245 10,084
Exceptional items after tax - attributable to equity
holders of the parent 148 (200)
---- ----
Profit before exceptional items attributable to equity
holders of the parent 13,393 9,884
---- ----
6. Additional cash flow information
Analysis of Group net debt
At At
31 December Cash Non-cash 30 December
2006 Flow movements 2007
£000 £000 £000 £000
Cash and cash equivalents 10,262 4,226 141 14,629
Bank revolving facility - (6,000) - (6,000)
Bank overdraft (6,000) 6,000 - -
Loans (9,799) (149) (221) (10,169)
Finance leases (45) 17 - (28)
---- --- ---- ----
(5,582) 4,094 (80) (1,568)
---- --- ---- ----
At At
1 January Cash Non-cash 31 December
2006 Flow Movements 2006
£000 £000 £000 £000
Cash and cash equivalents 5,885 4,377 - 10,262
Bank overdraft - (6,000) - (6,000)
Loans (10,000) 201 - (9,799)
Finance leases (26) 12 (31) (45)
---- --- ---- ----
(4,141) (1,410) (31) (5,582)
---- --- ---- ----
Notes to the accounts (continued)
7. Reconciliation of Shareholders Funds and Movement on Reserves
Share Capital Treasury Currency Equity
Share Premium Redemption Share Translation Retained Shareholders' Minority Total
Capital Account Reserve Reserve Reserve Earnings Funds Interest Equity
£000 £000 £000 £000 £000 £000 £000 £000 £000
At 31
December
2006 2,574 4,765 261 (4,216) (21) 5,575 8,938 48 8,986
Exchange
difference
on the
translation
of
net assets
of
subsidiary
undertaking - - - - 230 - 230 - 230
Tax credit
on
employee
share
options - - - - - 214 214 - 214
-- --- ---- --- ---- -- --- --- --
Total
income and
expense for
the year
recognised
directly in
equity - - - - 230 214 444 - 444
Profit for
the period - - - - - 13,245 13,245 (6) 13,239
-- --- ---- --- ---- -- --- --- --
Total
income and
expense for
the year - - - - 230 13,459 13,689 (6) 13,683
Proceeds
from share
issue 22 678 - - - - 700 - 700
Share buybacks (58) - 58 - - (8,210) (8,210) - (8,210)
Treasury
shares held
by EBT - - - (187) - - (187) - (187)
Share
transaction
charges - (136) - - - - (136) - (136)
Share
option and
LTIP charge - - - - - 880 880 - 880
Equity
dividends
paid - - - - - (5,816) (5,816) - (5,816)
Minority
interest
movement - - - - - - - (3) (3)
-- --- ---- --- ---- -- --- --- --
At 30
December
2007 2,538 5,307 319 (4,403) 209 5,888 9,858 39 9,897
-- --- ---- --- ---- -- --- --- --
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