Companies: DOM   

Domino's Pizza UK & Ireland improved by 1 per cent to 96.5p today, boosted by the release of yet another bullish trading update from the ambitious and rapidly expanding group. Ben Cobley reports.

Though trading information was limited to the news that like-for-like sales in the last five weeks of 2002 were up 6.3 per cent, Paul Hickman of former house broker KBC Peel Hunt was happy to increase his pre-tax profits forecast for the year just passed from £3.8 million to £4.1 million. This is the latest in a string of upgrades for the takeaway pizza specialist, once again emphasising the considerable strength of its operation.

The business is a franchise and around 2.5 per cent of profits go back to its parent operation in the US. In turn about 90 per cent of its 270 or so stores are themselves franchised out to independent operators, in return for 5.5 per cent of its sales. With franchise applications running at around 3,000 per year, Domino's has plenty of choice as to who takes these.

The growth plan is predicated on nothing less than attempting to replicate MacDonalds' success in the UK and across the globe. The current target is to have 440 stores open across the UK and Ireland by the end of 2006, building an increasing presence across the North of England and Scotland in particular. This is a slight cut from the previous target of 500 by this point, but it is impressively ambitious nonetheless.

With the company having increased pre-tax profits from £1.9 million to £2.9 million over the past two years, and 44 per cent earnings growth expected to be reported come the final results in (late) February, it is clear that Domino's is gaining a tight grip on the lucrative pizza market.

A rating of 18 times 2002 earnings and 14 times new house broker Numis's 2003 forecasts is well warranted.