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Domino's Pizza Slows German Expansion as Losses Hit Profit

Source: Reuters
30/07/2013

July 30 - Britain's Domino's Pizza posted a 46 percent fall in first half profit, as growth in its core UK business was held back by higher losses and charges in its fledgling German arm.

The group, which operates the British, Irish, German and Swiss franchises of the global delivery brand, said pretax profit for the six months to June 30 after exceptional items was 11.6 million pounds, down from 21.5 million pounds in 2012.

Exceptional items related to an 11.1 million pound impairment charge on the German master franchise agreement and corporate store costs. Profit before tax, excluding Germany and Switzerland, increased 10.3 percent to 25.7 million pounds.

This month the firm warned that losses at its two-year old German arm, which could eventually outgrow its core British business, would be as much as six million pounds this year - higher than anticipated due to increased training costs and a poor performance at some of its managed stores.

Domino's said on Tuesday those factors, together with recent legislation in part of Germany to impose a minimum wage that will require the firm to support stores for longer, meant the group would slow expansion and now look to breakeven in Germany in 2016 or 2017, as opposed to an earlier target of 2015.

Domino's, Britain's biggest pizza delivery firm with over 700 stores, has grown rapidly on the back of new products, promotions and online demand. The firm said first half UK like-for-like sales were up 6.4 percent, with group sales up 13.8 percent to 326.5 million pounds.

The company, which makes around 98 percent of its revenue in the UK and Ireland, also announced that its long-standing chief financial officer Lee Ginsberg is to retire in 2014.

Shares in the firm, which increased its interim dividend by 7.6 percent to 7.10 pence per share, closed at 600 pence on Monday, up 15 percent on a year ago and valuing the business at around 990 million pounds.



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