The Domino’s Pizza Enterprises Ltd. (ASX: DMP) share price is down almost 8% in early trade after the pizza business reported its half year result to December 2018.
Domino’s Pizza Enterprises is the largest pizza chain in Australia in terms of both network store numbers and network sales. It is also the largest franchisee for the Domino’s Pizza brand in the world. The company holds the exclusive master franchise rights for the Domino’s brand and network in Australia, New Zealand, Belgium, France, The Netherlands, Japan, Germany and Luxembourg with more than 2,400 stores.
Why Domino’s shares are down 8%
Domino’s reported that its revenue grew by 23.7% to $702 million in the half year. Underlying EBITDA grew by 12.1% to $137.2 million (click here to learn what EBIT means), underlying EBIT also increased by 12.1% to $108.3 million and underlying net profit after tax (NPAT) increased by 8.4% to $68.2 million. The dividend was increased by 7.9% to 62.7 cents per share.
The problem is that reported net profit attributable to shareholders fell by 9.2% to $53.3 million. According to Bell Potter, the analyst consensus expectations were for a net profit of $71.8 million, so neither the statutory nor underlying profit achieved this figure.
The reason for the statutory profit decline was $10.9 million of professional fees, legal and settlement costs relating to compliance costs associated with the nationwide industrial relations review and protecting “operational IP”. Domino’s also recognised $12.6 million of costs acquiring, integrating and converting Hallo Pizza in Germany.
Domino’s added 77 new stores to its network and achieved Group same store sales growth of 3.3%. The pizza company said that there were strong performances in Japan, Germany, Netherlands, Belgium and New Zealand, with softer performance in Australia and lower than expected performance in France. Europe now has over 1,000 Domino’s branded stores.
Domino’s FY19 Guidance And Trading Update
The company updated its FY19 guidance to reduce the number of new stores from between an extra 225 to 250, down to 200 to 2015. However same store sales growth is expected to remain between 3% to 6% and underlying EBIT is expected to be between $227 million and $247 million.
In the first seven weeks of the second half of FY19, Domino’s has added 13 stores and achieved same store sales growth of 4%.
Is Domino’s a buy?
Domino’s may have disappointed investors this morning, but it continues to focus on growing internationally. Germany, France and Japan are large opportunities for Domino’s due to the size of the populations.
However, the share price is not cheap, even after the decline in the share price. At under $40 it might be worth a bit more research, but I think there are better ASX shares that are growing strongly internationally.
2 ASX shares growing much faster than Domino’s
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