Domino’s Pizza (NYSE:DPZ) shares are in the red this morning after the company had a ‘mixed year’. Full-year group system sales increased by 9%, while underlying profit before tax dropped by 1.1%. The UK and Ireland accounts for roughly 90% of the group’s business, and the combined region posted a 7% rise in system sales. The company’s international operation continues to play catch-up, and it registered a 7.7% rise in pro forma sales.
The company had generous returns to shareholders. In total, £103.5 million was returned, which was made up of £44.3 million in the form of dividends, and £59.2 million was returned in the form of share buybacks. The net debt position soared by 128% to £203.3 million – which still is at the lower end of their debt to earnings ratio. It seems odd that the company is boosting shareholder returns while racking up debt at the same time.
The company had a respectable start to the year as first-half group sales increased by 12.8%. Pre-tax profit for the period fell by 9.7% to £41.7 million, and the firm cited exceptional cost for the decline in earnings. Domino's capital expenditure increased as the firm allocated funds to help expand its operations in Norway and Germany. Investment in the future is a sensible move as its peers are doing the same. Just Eat (LON:JE) ramped up its capital expenditure in order to fend off competitors like Uber Eats and Deilveroo.
The UK division was the standout performer in terms of sales growth in the six first months, and this is another reason why the company should be expanding overseas. With falling inflation and rising wages, UK consumers are getting a nice boost in real wages, but the group should diversify more in terms of geographical regions.
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