Domino's Pizza

HOLD

26/07/2011 Ben Jaglom

Pizza delivery group Domino's Pizza (DOM) has unveiled a resilient set of interim results, growing pre-tax profits by 14.8% as the British public showed little sign of tiring of its convenience foods.

The fully-listed concern reported pre-tax profits of £20.1m on 'system sales' (sales made by its range of franchisees) up 9% to £258.4m over the 26 weeks to 26 June. Like-for-like sales at its 607 stores increased by 2.4% with like-for-like growth of 3.4% in the UK. There were 22 store openings over the period, as compared to the 19 opened last year. There was a 22.2% increase in the interim dividend to 5.5p. Like-for-like sales decreased by 8.4% in Ireland.

A crucial acquisition over the period was the 75% stake made in the master franchise for Domino's Germany for £8.6m, with the company describing 2011 as the year in which it has made its 'first move into an overseas market'. Online sales increased by 50.9% to £85m while its iPhone and Android apps were described as generating 4.1% of online orders.

Analysts at Panmure Gordon are forecasting pre-tax profits of £41.8m (EPS: 18.6p) for the year to December 2011.

Growth Company Investor first recommended shares in Domino's in 2002 at 73p, and of late the shares have grown impressively, having more than doubled from a 2007 value of 200p, reaching a peak of 586p earlier this year. The latest interims show respectable like-for-like sales, with both its online and international plans progressing at a considerable rate.

The sponsorship of Britain's Got Talent has now come to an end so Domino's will now back the new Red or Black television show. Marketing spend will be significantly ramped up in the second half, to coincide with the launch of a new gourmet pizza range. Domino's is a quality operator, but the current share rating reflects this. Hold.