The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price is in focus after the company announced it was increasing its German presence.
The ASX-listed Domino’s is a franchisor of Domino’s outlets in a number of countries, including Australia, Japan and a number of other markets.
German expansion
Domino’s told the market that it had finalised a payment to Domino’s Pizza Group plc where it will buy all of Domino’s Pizza Group’s shares in its German joint venture.
The cash payment totals around A$127 million, with a further amount of around A$17 million which related to repaying shareholder loans provided by Domino’s Pizza Group.
Domino’s said that the payment is to be made in June 2023 from surplus cash and existing debt facilities.
Wondering how the payment amount was decided? It was based on the framework for the ‘put option‘ exercise, which the ASX-listed Domino’s announced on 10 November 2022.
ASX-listed Domino’s noted that it has had operational control of the joint venture since inception in December 2015, and there is no change to operational management arising from the acquisition.
What to make of this deal for the Domino’s share price
Ultimately, I’m not sure it’s going to make that much of a difference in the short-term. The company needs to deal with the negatives it’s facing of higher inflation without scaring off customers. Also, Domino’s FY23 is facing off against a locked down financial year of FY22, which is when demand is stronger.
I think that Domino’s is just going to have to just get through this difficult period.
Expanding its ownership in Europe makes sense, Germany is the country with the biggest population in that region. There’s plenty of room for growth for Domino’s there.
Domino’s can do well in a normal environment. But, food is a competitive sector, so I think it’d be better to think that the future price/earnings ratio (p/e ratio) will be lower than the past because its profit growth rate may be lower from here. But, there is still plenty of geographic expansion available.
For now, there are other ASX growth shares I’d rather look at for opportunities where the future success seems clearer.
