Domino's sees FY profit at lower end of market expectations

(Sharecast News) - Domino's Pizza warned on Tuesday that full-year profit would be towards the lower end of the current range of market expectations after a slower start to the first half. Current market expectations are for FY24 underlying EBITDA of between £144.3m and £149.2m, with a mean of £147.1m.

In results for the 26 weeks to 30 June, the company said underlying pre-tax profit rose 0.8% on the first half of 2023 to £51.3m, but statutory pre-tax profit was down 35.2% to £59.4m.

Group revenue dipped 1.8% to £326.8m and system sales were up 0.2% to £767.7m, while total orders fell 0.9% to 35.1m.

Domino's declared an interim dividend per share of 3.5p, up from 3.3p.

The company said the first quarter and April were challenging, driven by a slower delivery market and by the tactical holdback of marketing spend, particularly in January. However, second-quarter orders were back in growth, "highlighting the growing traction of our strategic initiatives".

Chief executive Andrew Rennie said: "Following a slow start to the year, we now have good momentum in the business with our strategic initiatives gaining traction and our trading performance accelerating steadily against strong comparatives from last year. In Q2 we grew orders, with a notable improvement from the middle of May and importantly have halted the trend of declining delivery orders.

"These are now returning to growth and this momentum has continued through June and July, helped by a good performance through the Men's Euro Football tournament."

At 0935 BST, the shares were down 4.7% at 294.40p.

Russ Mould, investment director at AJ Bell, said: "Takeaway outfit Domino's delivered a set of results which was about as soggy as day-old pizza, guiding for full-year performance at the lower end of expectations after a slower-than-anticipated start to the first half.

"The company has also been affected by passing on a greater proportion of easing food costs to its franchise partners - presumably to help sustain a positive relationship given historic issues with franchisees.

"While a recent boost in business during the Euros football tournament is obviously welcome it is also transitory and the fear will be that a difficult first few months of 2024 are more reflective of people's willingness and ability to shell out £20-plus on a pizza.

"The company has tried to signal some confidence in the outlook with a £20 million share buyback programme but the market appears unconvinced by this for now and Domino's really needs to serve up a strong second half to win investors round."