TIDMDOM

RNS Number : 5275U

Domino's Pizza Group PLC

02 August 2022

2 August 2022

LEI: 213800Q6ZKHAOV48JL75

DOMINO'S PIZZA GROUP PLC

Half Year results for the 26 weeks ended 26 June 2022

Continuing to gain market share in challenging conditions; well placed in this environment with clear value proposition and strong operating model.

Guidance for the year is unchanged.

 
                                        26 weeks     26 weeks   % change 
                                        ended 26     ended 27 
                                       June 2022    June 2021 
 System sales(1)                       GBP710.5m    GBP752.3m     (5.6)% 
                                     -----------  -----------  --------- 
 Like-for-Like system sales growth 
  (exc.splits)(2)                         (6.4)%       +19.3%          - 
                                     -----------  -----------  --------- 
 Like-for-Like system sales growth 
  (exc.splits & VAT)(3)                    +2.4%        +5.5%          - 
                                     -----------  -----------  --------- 
 Group revenue                         GBP278.3m    GBP277.8m       0.2% 
                                     -----------  -----------  --------- 
 Underlying EBITDA(4)                   GBP63.5m     GBP71.7m    (11.4)% 
                                     -----------  -----------  --------- 
 Underlying EBIT(4)                     GBP54.8m     GBP63.9m    (14.2)% 
                                     -----------  -----------  --------- 
 Underlying profit before tax(4)        GBP50.9m     GBP60.8m    (16.3)% 
                                     -----------  -----------  --------- 
 Underlying basic EPS(4)                    9.5p        10.7p    (11.2)% 
                                     -----------  -----------  --------- 
 Net debt(5)                           GBP236.4m    GBP177.6m      33.1% 
                                     -----------  -----------  --------- 
 Statutory profit after tax             GBP42.1m     GBP41.3m       1.9% 
                                     -----------  -----------  --------- 
 Statutory basic EPS                        9.5p         8.9p       6.7% 
                                     -----------  -----------  --------- 
 Interim dividend per share                 3.2p         3.0p       6.7% 
                                     -----------  -----------  --------- 
 

All commentary below is on an underlying basis unless otherwise stated

Financial highlights

-- Like-for-like system sales (excluding the change in the VAT rate)(3) grew by 2.4%, driven by order count which increased by 2.1%

o Reported system sales of GBP710.5m, down 5.6% due to the change in the VAT rate

o Like-for-like system sales, excluding splits, down 6.4% (down 7.5% including splits) due to the change in the VAT rate

o Group revenue, which is not significantly impacted by the change in the VAT rate, was up 0.2%

-- Profitability is expected to be second half weighted. During the first half, underlying profit before tax was GBP50.9m, down GBP9.9m. As is standard practice, we pass through food cost inflation to our franchisees on a lagged basis. We began passing on these increases during the first half of the year, but will not see the full impact until the second half

-- H2 marketing spend expected to be significantly higher than H1. In 2021 marketing spend was focused on the Q2 yodeling campaign, this year's focus will be on accelerating spend in Q3 and into Q4 campaigns

-- Statutory profit after tax of GBP42.1m, up GBP0.8m as a result of international losses and non-underlying items incurred in the prior year offsetting inflation and costs incurred in H1 22

-- Free cash flow of GBP36.8m (2021: GBP51.3m), lower than prior year largely due to a working capital outflow in the period related to the unwind of timing of cash receipts and payments for online sales in the final week of the 2021 year, and a change in the timing of creditor payments in support of our suppliers

-- Net debt of GBP236.4m resulting in a net debt / underlying EBITDA leverage ratio of 1.95x, within our target leverage range of 1.5x - 2.5x

   --      GBP72.5m returned to shareholders in H1 22 through dividends and share buybacks 
   --      Interim dividend for H1 22 of 3.2p per share 

-- New GBP20m share buyback programme, effective immediately, in line with capital allocation framework and commitment to distribute surplus capital to shareholders

-- Successfully refinanced existing bank debt facilities with new GBP200m revolving credit facility and GBP200m private placement facility

Operational and strategic highlights

   --      Strong gain in UK takeaway market share, up from 6.0% in Q2 21 to 6.6% in Q2 22 
   --      Continued growth in total orders, up 2.1% in the first half 

-- Delivery orders 8.3% lower than the Covid-impacted prior half year, Q2 declined 12.1% due to softness in the wider delivery market, a tough comparator in the prior and introduction of delivery charge nationally

-- Collections recovery continued, with 39.6% growth and collections were above 2019 levels in Q2 2022

-- As a result of the franchisee resolution, the business is on track to open at least 45 new stores in FY22 and had opened 17 new stores as at 1 August 2022 by 10 different franchisees

-- Launched trial with Just Eat in 136 stores to assess whether we can reach an incremental customer base with attractive economics for our business. Early results have been encouraging so trial is now being extended to nearly one third of the store estate and should represent a tailwind to growth going forward

   --      Total active customer base up 2%, including a 5% increase in active app customers 

-- Over 90% of sales now digital, app now accounts for 43.9% of system sales (+3.1pts vs. H1 21)

-- First national price campaign for several years launched in January with a strong value message and excellent traction in evolving consumer demand environment

-- Excellent service standards with value for money scores +4pts vs. H1 21 and average delivery times of around 25 minutes

   --      Outstanding performance from our supply chain with 99.9% accuracy and 99.8% availability 
   --      Investment in Naas facility in Dublin and cross dock facility in the South-West of England 

-- Strengthened franchisee engagement, with first UK rally since 2018 achieving record attendance by over 1,400 franchisee employees and colleagues

-- CEO, Dominic Paul announced his decision to leave the company to take up the role of CEO of Whitbread PLC. He will leave the business in December 2022, and a search for his replacement is underway

-- Leadership Team continues to be strengthened with new People Director in March. New Chief Financial Officer joining from Just Eat Takeaway Plc, starts in October 2022

Commenting on the results, Dominic Paul, Chief Executive Officer said:

"I'm proud that in the first half Domino's grew order count, attracted more customers, and increased underlying sales despite unusually challenging market conditions. This is testament to the hard work of our world-class franchisees and all our colleagues across the system, and I'd like to thank them all.

"The system is now fully aligned following the franchisee resolution in December. This enabled us to restart national price campaigns offering customers compelling value and to accelerate market share growth. We have worked really constructively with our franchisees to learn from the first half campaigns. We will be increasing our media spend in the second half compared to the first half, amplifying our value message to customers as we head into key events such as the men's football World Cup. We are also continuing to acquire new customers by expanding our trial with Just Eat following positive initial results.

" Domino's scale and integrated supply chain are always key to our success. As inflation accelerates and consumer budgets tighten, these differentiators are more important than ever. Domino's is an asset-light, cash-generative, resilient business that is well-placed to navigate the current conditions, which is why we are able to maintain our existing guidance. Historically, Domino's has performed well in challenging environments, which demonstrates the resilience of our business. We remain focused on working with our franchisees to accelerate the sustainable growth of the system and delivering an improved second half profit performance."

Current trading, outlook and guidance

In the first half of the year, we increased our market share, order count was positive, collections grew past 2019 levels and we attracted more customers despite challenging market conditions. As we move into the second half of the year, we expect to continue this momentum and grow our market share given our strong value message, planned second-half marketing activity, the men's football World Cup and our dynamic national price campaigns. As during prior periods and in line with our agreement, we pass through food cost inflation to our franchisees on a lagged basis. Due to the rapidly changing inflationary environment this year, we began passing through these increases during the first half of the year but will not recognise the full benefit until the second half . Profitability this year is therefore expected to be weighted towards the second half.

Despite the challenges in the market and the investments we are making this year related to the franchisee resolution, we remain confident in our prior guidance for underlying EBITDA and EPS, which we expect to be in line with current market expectations.

W ith the scale of our platform and the strength of our brand we have confidence in our asset-light, cash-generative business model and our value proposition underpins our strong positioning in the current environment.

FY 22 Guidance

For the current financial year:

-- We remain confident in our previously communicated guidance for underlying EBITDA and EPS, which we expect to be in-line with current market expectations

   --      Underlying depreciation & amortisation of between GBP18m to GBP20m 
   --      Underlying interest (excluding foreign exchange movements) in the range of GBP9m to GBP11m 
   --      Estimated underlying effective tax rate of c.17% for the full year 
   --      Capital investment of c. GBP24m 
   --      Net Debt at year-end around GBP235m 

Notes

(1) System sales represent the sum of all sales made by both franchised and corporate stores to consumers in UK & Ireland. These are excluding VAT.

(2) Like-for-like excluding splits system sales performance is calculated for UK & Ireland against a comparable 26-week period in the prior period for mature stores which were not in territories split in the current period or comparable period. Mature stores are defined as those opened prior to 27th December 2020.

(3) An adjustment for the change in VAT rates described for system sales relates to the impact of changes in the VAT applied on hot takeaway food where the VAT inclusive price to customers did not change. The VAT rate in the UK decreased from 20% to 5% on 15 July 2020, increased to 12.5% on 1 October 2021 and reverted back to 20% on 1 April 2022. System sales are consistently reported on an exclusive of VAT basis. However, where the inclusive of VAT price of an order remained the same on a total basis to the customer, over the reduced VAT period the exclusive of VAT price reported in system sales increased. This leads to an increase in system sales from 15 July 2020 through to 31 September 2021 when the VAT rate reduced from 20% to 5%. From 1 October 2021, the rate increased from 5% to 12.5%. Where the inclusive of VAT price of an order remained the same on a total basis, this leads to a decrease in system sales compared to the period from 15 July 2020 and an increase in system sales compared to the period before 15 July 2020. With the increase in VAT from 1 April 2022 back up to 20%, where the inclusive of VAT price remained the same to the consumer, there has been a negative impact on system sales compared to the period from 15 July 2020 - 31 September 2021 and 1 October 21 - 31 March 2022, as the exclusive of VAT price of an order decreased.

As an example, for an order where the inclusive of VAT price is GBP27:

-- From 15 July 2020 to 31 September 2021, during the period where VAT was 5%, the reported system sale would be GBP25.71

-- From 1 October 2021 to 31 March 2022, during the period where VAT was 12.5%, the reported system sale would be GBP24.00

-- From 1 April 2022 onwards, where the VAT rate is 20%, the reported system sale would be GBP22.50

In Ireland, the VAT rate for hot takeaway food reduced from 13.5% to 9% on 1 November 2020 and remains in place. The system sales figures adjusted for VAT removes the impact on system sales of the lower VAT rates in the comparative periods to provide comparability. This is performed through adjusting the comparative figures over the reduced VAT period back to an equivalent system sales amount based on a 20% VAT rate where applicable. Group revenue is not significantly impacted by the change in the VAT rate as the aforementioned benefit only arose on hot takeaway food, and therefore only impacts the sales on the corporate stores revenue within overall Group revenue.

(4) Underlying is defined as statutory performance excluding discontinued operations, and items classified as non-underlying which includes significant non-recurring items or items directly related to merger and acquisition activity and related instruments as set out in note 5 to the financial information.

(5) Net debt is defined as the bank revolving facilities, private placement facilities, cash and cash equivalents and other loans, including balances held in disposal groups held for sale.

Contacts

For Domino's Pizza Group plc:

Investor Relations

Will MacLaren, Head of Investor Relations +44 (0) 7443 192 118

Media:

Tim Danaher, Samantha Chiene - Brunswick +44 (0) 207 404 5959

For photography, please visit the media centre at corporate.dominos.co.uk, contact the Domino's Press Office on +44 (0)1908 580757, or call Brunswick on +44 (0)207 404 5959

A results webcast and Q&A for investors and analysts will be held at 10:00 BST today. The webcast and presentation can be accessed through this link click here and will also be available on the Results, Reports and Presentations page of our corporate website.

Financial calendar

Domino's Pizza Group plc will publish a Q3 trading update in October 2022.

Cautionary statement

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements. Persons receiving this announcement should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, Domino's does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

About Domino's Pizza Group

Domino's Pizza Group plc is the UK's leading pizza brand and a major player in the Irish market. We hold the master franchise agreement to own, operate and franchise Domino's stores in the UK and the Republic of Ireland, and have associate investments in Germany and Luxembourg. As of 1 August 2022, we had 1,243 stores in the UK and Ireland.

Strategic and operational review

Performance summary

Group revenue for the half was up 0.2% to GBP278.3m driven by increased supply chain revenue. However underlying profit before tax declined GBP9.9m to GBP50.9m from the prior half year. This decrease was largely driven by the timing lag in passing through higher costs to our franchisees. This timing lag is typical in our business and a function of our franchisee agreements.

Product quality, service standards and customer satisfaction remain high as we are focused on being the UK & Ireland's favourite food delivery and collection brand with pizza at our heart. Despite the challenging environment, we increased our market share in the UK takeaway market in Q2 from 6.0% to 6.6% compared to the same period last year. This is testament to the strength of the Domino's brand and the alignment we now have with our world-class franchisees.

Underlying EBITDA in H1 22 was GBP63.5m, down GBP8.2m compared to the same period last year. This was largely driven by the timing lag described above, as well as a lower contribution from JVs and associates.

Statutory profit after tax in the first half was GBP42.1m, up GBP0.8m on last year as a result of reduced costs and charges from our discontinued international operations offsetting the reduction in underlying profitability.

Free cash flow generated by the business was GBP36.8m, a decrease from GBP51.3m last year largely reflecting a working capital outflow in the half. This was primarily driven by the timing of cash receipts and payments for online sales following the strong trading performance in the final week of last year and a change in the timing of creditor payments in support of our suppliers.

Net Debt increased by GBP36.7m from GBP199.7m at the start of the year to GBP236.4m with Net Debt/EBITDA leverage increasing from 1.54x at the start of the year to 1.95x (excluding IFRS 16). The increase was driven by the payment of the FY21 final dividend and the share buyback programme.

The asset-light, cash-generative nature of the business means that in line with our capital allocation framework we are announcing an incremental GBP20m share buyback which is in addition to the previously announced share buyback programme of GBP46m which was completed on 1 July 2022. In addition, we have announced an interim dividend of 3.2p (GBP13.9m).

Strategic delivery

We launched our new strategy in March 2021 with a vision to be the favourite food delivery and collection brand, with pizza at its heart. The Domino's brand is loved by customers and pizza is the perfect delivery and collection food. Our ambition is to deliver medium-term total system sales of at least GBP1.9bn with a strategy centred on five growth pillars:

   1.   Nobody delivers like Domino's 

Delivery is at the heart of our business and is what we are best known for - we have built a considerable following, with a brand that people love, enabling us to maintain a leading position in the UK delivery market. Whilst delivery sales were lower compared to the prior year we maintained excellent service standards with average delivery times of around 25 minutes.

Domino's is a digital business and we continued to demonstrate our digital-first approach in the period. Over 90% of system sales are through digital channels and the app now accounts for 43.9% of system sales, an increase of 3.1ppts compared to the same period last year. We now have 5.3m active app customers, an increase of 5% over the last 6 months. App customers have a higher lifetime value than other customers, primarily due to higher levels of ordering frequency.

In March 2022 we introduced a delivery charge. This allows our franchisees to offset some of the food and labour cost inflation which they are experiencing, and it is at the sole discretion of the franchisee whether they choose to use it. The delivery charge ranges between 99p and GBP2.50 and each franchisee decides which pricing level to use. The benefit flows through to our franchisees as it represents an increase in system sales, DPG enjoys a small benefit as the delivery charge incurs the standard royalty fee. Take-up has been widespread and in Q2, 90% of delivered orders incurred a delivery charge.

In May 2022 we began a trial with Just Eat to see whether this channel can attract incremental customers to Domino's. We started the trial with 136 Domino's stores across the UK and Ireland and following early encouraging results we are extending the trial to approximately one third of the store estate.

Following the integration of the CRM platform 'Braze' into our data warehouse, we have accelerated initiatives designed to improve our customer churn rate. Where we have started implementing personalisation into customer communications, such as 'Meat' vs. 'Vegetarian' preference we are seeing significantly higher customer engagement rates.

Our enhanced GPS solution, 2.0, has now been rolled out to 728 stores and we are targeting completing the roll out by the end of the year. This will help store managers manage labour through more efficient driver route planning and better integration with the store as well as allowing drivers to use their own device.

   2.   Turbo-charge our collection business 

Collection represents the most efficient labour channel, with delivery effectively outsourced to the customer. This is particularly important in an environment where there are pressures on labour availability and wage inflation. The various lockdown restrictions in 2020 and 2021 dampened the collection market significantly but collection volumes have recovered well. In Q1 volumes were 95% of 2019 levels and we are very pleased that in Q2 they were at 102% of 2019 levels.

Another lever to drive incremental sales is 'In Car Collection' a service we launched in 2021, this has been rolled out to 444 stores by the end of the period (FY21: 422 stores). We are aiming to roll it out to c.500 stores by the end of 2022. Customer feedback has been excellent, and we will continue to promote awareness of this new channel.

   3.   Amplify our product quality and value 

Our customers love our product, and we have re-ignited product innovation over the last year. Our 'Value for money' scores continued to improve this year, demonstrating our focus on customer value. Following the introduction of a Vegan pizza, 'The Chick Ain't' in 2021, this year we have launched 'Vegan PepperoNAY' and a new 'Grilled Vegi Pesto' pizza. Both of these have received positive customer feedback. Other examples of innovation delivered so far this year include Pesto Doughballs, twisted Doughballs and the return of 'Half & Half'. As we enter the important second half of the year with events such as Freshers Week and the men's football World Cup we expect to introduce further innovation to delight our customers.

Following resolution with our franchisees we were able to launch our first national price campaign in January and amplify our value message to the whole country, with a 50% discount for spending more than GBP30 on pizza. Alignment with our franchisees has also enabled us to market collection promotions which contributed to the strong Collection performance in Q2. We also undertook tactical events around Valentine's Day, Mother's Day, Easter and the Jubilee celebrations as well as specific App-only deals to target customers with a higher lifetime value. We are learning, alongside our franchisees, how to optimise our approach to national campaigns and we will apply these learnings to our campaigns in the second half of the year as we increase our media spend around key events such as the men's football World Cup to amplify our important value message to customers.

   4.   Uphold our industry-leading scale economics for both the Group and our franchisees 

Our vertically integrated supply chain is a key differentiator in the market and brings us significant competitive advantages. We can leverage our scale to realise operational and procurement-led efficiencies to help mitigate inflationary pressures in the market. We continue to collaborate closely with key suppliers to ensure we have optimal stock cover and to minimise cost inflation where possible. We have expanded our number of suppliers to ensure we secure best value for money for our system, along with providing resilience across our supplier base.

We remain pleased with the operational performance of our world-class supply chain, which maintained 99.9.% availability and 99.8% accuracy in a period of challenging market conditions. We continue to invest in our supply chain to enhance capacity and drive efficiency. A new 'cross-dock' facility was leased in Avonmouth which allows us to warehouse product there for more efficient distribution across the South-West. This will be particularly important to maintain our availability for Q4. We also commenced re-development of our Naas supply chain centre in the Republic of Ireland.

In our commitment to health and safety within our supply chain operations, we have now rolled out Cages and Dollies to 85% of stores and with full roll-out expected to be complete by the end of 2022.

   5.   Model excellence as a franchisor 

Our franchisees continue to work tremendously hard in challenging market conditions and their trading performance has been impressive. Based on the unaudited data submitted to us by franchisees, average store EBITDA for all UK stores for the year was approximately GBP94k, equivalent to a 16% EBITDA margin. This compares to GBP154k or 25% EBITDA margin achieved in H1 21. The reduction reflects the net benefit of VAT in the prior half year as well as the impact of higher food and labour costs in 2022.

Following the introduction of the new store incentive scheme last year, we have made good progress with our new store openings with 17 to 1 August 2022 compared to 14 in the comparable period last year. We continue to expect at least 45 new stores by the end of the year.

We have supported our franchisees throughout the period with an enhanced food rebate mechanism and the national roll out of the delivery charge and we were delighted to organise our first rally since 2018 in Harrogate for our franchisees and colleagues, of which over 1,400 joined.

Following resolution with our franchisees last year we have rolled out a new Operations forum and launched the Franchisee Performance Management framework. This framework is designed to assess store performance across the system and identify areas for improvement. In H1 22 half we rolled out the Domino's Training Academy which provides management training to team members using a balance of e-learning and classroom exercises. We also rolled out a new inventory android app to all stores which is now being widely used within stores for their counts on a day-to-day basis.

Capital allocation

We have a highly cash-generative, asset-light business model and in March 2021 we launched a clear capital allocation framework. Our first priority is to invest in the business to drive long-term organic growth. We will continue to maximise shareholder returns through a sustainable and progressive dividend policy and to operate a disciplined approach to assessing additional growth opportunities. Finally, operating within a target leverage range of 1.5x - 2.5x net debt to Underlying EBITDA, we aim to maximise returns with an annual allocation of surplus cash to shareholders.

In the first half of the year, we have generated GBP36.8m of free cash flow. We received GBP9.4m in relation to our investment in the German associate, GBP0.6m in relation to previous disposals, and have made a GBP7.5m capital investment in our core business to further enhance our supply chain and digital infrastructure leaving GBP39.3m of cash generated in the period before distributions. We have announced an interim dividend of 3.2p, which amounts to GBP13.9m, set at approximately one-third of the value of the prior year total dividend. In addition, following completion of the GBP46m share buyback announced in March, we are announcing an incremental GBP20m share buyback which will be returned to shareholders over the coming months.

As at 26 June 2022 the Net Debt/EBITDA ratio from continuing operations excluding IFRS 16 was 1.95x, within our target leverage range.

Delivering our sustainable future

Our business is guided by our ambition to deliver a better future through food people love. This ambition means our focus is not just on financial performance but on doing the right thing by bringing people together around the food they love and, by doing so, having a positive impact on everyone who interacts with us: our customers, colleagues, franchisees, investors, and the communities we serve.

Alongside our strategic plan, we have developed a comprehensive sustainability strategy which underpins our purpose and is based around our five core sustainability pillars: Our customer; Our environment; Our people; Our communities; and Responsible sourcing.

Our UK Leadership Team is supporting the delivery of our strategy with some members serving as executive sponsors for relevant areas. Additionally, part of the UK Leadership Team's 2022 bonus is now dependent on the delivery of certain sustainability targets by the end of 2022.

Colleagues and franchisee partners have been updated, and we have also recently communicated our sustainability ambitions to all our major food and non-food suppliers along with details of how they can support our work to achieve our targets.

While we are still in the early stages of implementing our refreshed approach to sustainability, we are making good progress in many areas, for example our decarbonisation targets were recently approved by the Science Based Targets Initiative (SBTI). We recognise we have more work to do in some areas, have established teams focused on ensuring we achieve all our 2022 sustainability targets, and anticipate providing an update on our progress in the 2022 Annual Report.

Operational review

Reported revenue

 
 
                               H1 22     H1 21     % change 
   GBPm 
 Supply chain revenue          190.7     183.1         4.2% 
                            --------  --------  ----------- 
 Royalty, rental & other 
  revenue                       38.1      40.8       (6.7)% 
                            --------  --------  ----------- 
 Corporate stores revenue       17.6      17.7       (0.6)% 
                            --------  --------  ----------- 
 NAF & eCommerce                31.9      36.2      (11.9)% 
                            --------  --------  ----------- 
 
   Reported revenue            278.3     277.8         0.2% 
                            --------  --------  ----------- 
 

Revenues from sales to external customers included within our income statement are summarised above. The most significant element of our revenue is derived from products sold through our supply chain to our franchisees which has grown by 4.2% in the first half of the year driven by increased food costs, which are passed through to franchisees.

Royalty, rental and other revenue is primarily the royalty revenue we receive from our franchised stores based upon a percentage of their system sales. This declined in the first half as a result of lower system sales. Corporate stores revenue is the sales made by the stores we directly operate and was broadly flat year-on-year.

Revenue relating to the National Advertising Fund ("NAF") and eCommerce funds is recognised based on costs incurred, and has decreased by 11.9% due to lower marketing and IT spend in the period.

System sales performance

System sales represent all sales made by both franchised and corporate stores to consumers. Like-for-like system sales across UK & Ireland declined by 6.4%, excluding split stores, or by 7.5% including splits. The increase in the VAT rate in the period compared to the same period last year drove this decline. Like-for-like system sales excluding split stores increased by 2.4% or by 1.2% including splits excluding the change in the VAT rate.

The quarterly analysis of this performance as well as the VAT rate for each period is in the table below. This shows that the strong like-for-like growth in the first half of 2021 was primarily driven by the reduction in the rate of VAT from 20% to 5% which was in effect from 15 July 2020 in the UK and continued to apply throughout the first half of 2021. The rate of VAT increased from 5% to 12.5% on 1 October 2021 and returned to 20% on 1 April 2022.

 
 
                        Q1        Q2        H1       Q1       Q2        H1 
   UK & ROI           2022      2022      2022     2021     2021      2021 
 LFL inc. splits    (3.6)%   (11.4)%    (7.5)%    17.7%    19.2%     18.4% 
                   -------  --------  --------  -------  -------  -------- 
 LFL exc. splits    (2.4)%   (10.4)%    (6.4)%    18.5%    20.0%     19.3% 
                   -------  --------  --------  -------  -------  -------- 
 
 VAT rate            12.5%       20%         -       5%       5%         - 
                   -------  --------  --------  -------  -------  -------- 
 
 LFL inc. splits 
  and exc. VAT        2.6%    (0.2)%      1.2%     4.0%     5.4%      4.7% 
                   -------  --------  --------  -------  -------  -------- 
 LFL exc. splits 
  and exc. VAT        3.9%      0.9%      2.4%     4.9%     6.4%      5.5% 
                   -------  --------  --------  -------  -------  -------- 
 

The VAT rate reduction was on hot takeaway food and therefore applicable to the system sales made by stores to consumers. If the sales price to the consumer was unchanged, then the VAT rate reduction effectively delivers an increased system sales value, which flows through to like-for-like system sales growth. The benefit of the VAT rate reduction therefore primarily accrued to our franchisees, helping them to continue to trade throughout the pandemic period and to drive growth and increase the level of discounts they offered to consumers.

The sales and order count performance for the first half is illustrated below. Like-for-like sales declined in the first half by 7.5% with volumes down 3.6% and price declining by 3.9%. Total order count grew in the first half by 2.1% largely driven by the continued recovery in collections.

In the first quarter, total order count grew 5.5% in the quarter despite a strong comparative quarter last year when there were strict lockdown restrictions in the UK. Collections continued their recovery and grew 45.4% in the quarter. As expected, given the lockdown comparator, delivery orders were 4.5% lower than the prior year.

In the second quarter, total order count declined 1.3%. Delivery orders declined 12.1% in the quarter due to softness in the wider delivery market and a tough comparative quarter last year which had 3 different lockdown restrictions. In March 2022, in line with market norms, we launched the delivery charge nationally. Together with our franchisees we have learnt that now we have a delivery charge in place we need to give our customers compelling value. The 34.7% growth in collections was not able to fully offset the decline in delivery orders.

 
 UK & ROI             LFL inc. splits (YOY Growth)       Total (All Stores) 
                      Sales      Volume      Price     Orders (m)   YOY Order 
                                                                      Growth 
                   ----------  ----------  ---------  -----------  ---------- 
 Total 
                   ----------  ----------  ---------  -----------  ---------- 
 Q1                  (3.6)%      (1.4)%      (2.2)%       17.5           5.5% 
                   ----------  ----------  ---------  -----------  ---------- 
 Q2                  (11.4)%     (5.8)%      (5.6)%       16.9         (1.3)% 
                   ----------  ----------  ---------  -----------  ---------- 
 HY                  (7.5)%      (3.6)%      (3.9)%       34.4           2.1% 
                   ----------  ----------  ---------  -----------  ---------- 
 
 Delivery only 
                   ----------  ----------  ---------  -----------  ---------- 
 Q1                  (8.4)%        (7.5)%    (0.9)%       12.7         (4.4)% 
                   ----------  ----------  ---------  -----------  ---------- 
 Q2                  (16.0)%      (12.4)%    (3.6)%       11.6        (12.1)% 
                   ----------  ----------  ---------  -----------  ---------- 
 HY                  (12.2)%      (10.0)%    (2.3)%       24.3         (8.3)% 
                   ----------  ----------  ---------  -----------  ---------- 
 
 Collection only 
                   ----------  ----------  ---------  -----------  ---------- 
 Q1                     25.3%       30.5%     (5.2)%      4.8           45.4% 
                   ----------  ----------  ---------  -----------  ---------- 
 Q2                     12.4%       22.8%    (10.4)%      5.3           34.7% 
                   ----------  ----------  ---------  -----------  ---------- 
 HY                     18.4%       26.3%     (8.0)%      10.2          39.6% 
                   ----------  ----------  ---------  -----------  ---------- 
 

Data & Insights

The Data & Insights team aims to ensure all business decisions are being led by the rich customer data Domino's holds. In the last 6 months, the team has been actively involved in the evaluation process for menu innovation, putting consumers at the heart of the process to ensure that we only launch the best products to market. The team has also worked with Kantar to give us a deeper understanding of the UK takeaway market, evolving market dynamics and how we can continue to gain market share. It has proved crucial in the 'cost of living' crisis to analyse how consumer spending is changing and how Domino's responds to the increased need for value. Currently the team is involved in supporting the Just Eat trial, to ensure it delivers incremental sales, orders and crucially franchisee profitability.

Corporate stores

We directly operate 35 stores in the London area. Corporate store revenue decreased by 0.6% to GBP17.6m compared to the prior year. The EBITDA of corporate stores was GBP1.1m, compared to GBP2.1m in H1 21. EBITDA, adjusted for the change in the VAT rate, was broadly in-line with expectations and declined from GBP1.2m to GBP0.9m as an improved underlying trading performance was not enough to offset food and labour inflation.

German associate

Our share of post-tax underlying profits from our German associate was GBP1.8m (H1 21: GBP2.2m). Our investment in the German associate is held on our balance sheet at an aggregate value of GBP30.8m. We have a put option exercisable from 1 January 2021 to 31 December 2023. As the exercise price of the option is at fair value, there is no value of the put option recorded on our balance sheet, in accordance with the requirements of IFRS. In total, we believe that exercising our put option and disposing of our interest in the associate could yield total cash receipts of GBP70m - GBP80m depending on EBITDA performance of the associate and the timing of exercise, which will generate profit of between GBP40m - GBP50m. The majority shareholders, Domino's Pizza Enterprises Limited, have a call option exercisable from 1 January 2023 on the same valuation basis.

Financial review

The results for the Group are summarised below

 
                                               26 weeks   26 weeks       52 weeks 
                                                 ending     ending         ending 
                                                26 June    27 June    26 December 
                                                   2022       2021           2021 
                                                   GBPm       GBPm           GBPm 
 Group revenue                                    278.3      277.8          560.8 
 Underlying EBIT before contribution 
  of investments                                   49.7       56.3          106.8 
 Contribution of investments                        3.3        5.4            8.1 
--------------------------------------------  ---------  ---------  ------------- 
 UK & Ireland underlying EBIT                      53.0       61.7          114.9 
 German associate contribution                      1.8        2.2            5.0 
--------------------------------------------  ---------  ---------  ------------- 
 Underlying EBIT                                   54.8       63.9          119.9 
 Underlying interest                              (3.9)      (3.1)          (6.0) 
--------------------------------------------  ---------  ---------  ------------- 
 Underlying profit before tax                      50.9       60.8          113.9 
 Underlying tax charge                            (8.8)     (11.0)         (20.5) 
--------------------------------------------  ---------  ---------  ------------- 
 Underlying profit after tax                       42.1       49.8           93.4 
 Non-underlying items                                 -      (0.9)          (2.7) 
--------------------------------------------  ---------  ---------  ------------- 
 Profit after tax from continued operations        42.1       48.9           90.7 
 Loss from discontinued operations                    -      (7.6)         (12.4) 
--------------------------------------------  ---------  ---------  ------------- 
 Statutory profit after tax                        42.1       41.3           78.3 
--------------------------------------------  ---------  ---------  ------------- 
 

Underlying performance

Group revenue increased by 0.2% to GBP278.3m driven by growth in supply chain revenue from product sales to franchisees, offset by lower royalty income and decreased revenue recognised related to marketing expenditure incurred on behalf of franchisees, as discussed in the performance review section above.

UK and Ireland underlying EBIT was GBP53.0m, a decrease of 14.1% from the prior year. The main drivers were inflationary pressures on supply chain and distribution costs of GBP3.7m and GBP2.3m investment associated with the franchisee resolution. Contributions from investments have decreased by GBP2.1m, due to a lower revaluation increase recognised on the Shorecal investment of GBP1.0m (H1 21: GBP2.1m), and GBP1.1m lower contributions from associates and joint ventures largely due to the trading impact of the change in the VAT rate.

Our associate investment in Germany contributed GBP1.8m (H1 21: GBP2.2m), which leads to an overall Group underlying EBIT of GBP54.8m, a decrease of 14.2%.

Net underlying finance costs in the period were GBP3.9m, an increase from GBP3.1m in H1 21 as a result of an increase in average Net Debt during the period as well as increased base interest rates. Overall underlying profit before tax was GBP50.9m, a decrease from GBP60.8m in the prior period.

The underlying effective tax rate for H1 22 was 17.3% (H1 21: 18.1%), which is lower than the UK statutory rate mainly due the contribution of the joint ventures. This has decreased largely due to the prior period impact on the deferred tax charge of the rate change from 19% to 25% announced in H1 21.

Underlying profit after tax was GBP42.1m (H1 21: GBP49.8m). As disclosed in the 2021 annual report and accounts the Group no longer classifies items as non-underlying. Following the final completion of the disposals of international operations in 2021 no loss from discontinued operations has been recognised.

In H1 21, non-underlying items totaling a loss of GBP0.9m were recognised. These items largely related to GBP1.1m of professional fees associated with the establishment of our long-term strategy in the early part of the year and further marketing costs related to the disposal of our international operations. A loss from discontinued operations of GBP7.6m was recognised in H1 21, which consisted of a trading loss of GBP0.6m and loss on disposals of GBP7.0m.

Statutory profit after tax was GBP42.1m (H1 21: GBP41.3m).

Earnings per share

Underlying basic EPS decreased to 9.5p from 10.7p as a result of the decreased underlying profit performance. Statutory EPS increased to 9.5p from 8.9p, largely due to a reduced loss from discontinued operations.

Free cash flow and Net Debt

 
                                                 26 weeks   26 weeks 
                                                    ended      ended 
                                                  26 June    27 June 
                                                     2022       2021 
                                                     GBPm       GBPm 
-----------------------------------------  ---  ---------  --------- 
 Underlying EBITDA                                   63.5       71.7 
 Discontinued operations EBITDA                         -        0.2 
 Add back non-cash items 
   *    Contribution from investments               (5.1)      (7.6) 
                                                      1.0        0.5 
 
   *    Other non-cash items 
 Working capital                                   (11.2)        3.5 
 IFRS 16 - net lease payments                       (3.8)      (5.0) 
 Dividends received                                   3.9        2.6 
 Net interest                                       (2.2)      (2.2) 
 Corporation tax                                    (9.3)     (10.2) 
 Free cash flow before non-underlying 
  cash items                                         36.8       53.5 
 Non-underlying cash                                    -      (2.2) 
----------------------------------------------  ---------  --------- 
 Free cash flow                                      36.8       51.3 
----------------------------------------------  ---------  --------- 
 
 Capex                                              (7.5)      (7.8) 
 Funding from German associate                        0.8        2.8 
 Receipt of Market Access Fee                         8.6        6.4 
 Disposals                                            0.6       11.6 
 Dividends                                         (30.0)     (42.3) 
 Share buyback                                     (42.5)     (28.4) 
 Share transactions - EBT                           (3.3)      (2.9) 
----------------------------------------------  ---------  --------- 
 Movement in Net Debt                              (36.5)      (9.3) 
----------------------------------------------  ---------  --------- 
 
 Opening Net Debt                                 (199.7)    (171.8) 
 Forex on RCF                                       (0.2)        3.5 
----------------------------------------------  ---------  --------- 
 Closing Net Debt                                 (236.4)    (177.6) 
 Last 12 months Net Debt/EBITDA 
  ratio from continuing operations 
  (excl IFRS 16)                                    1.95x      1.36x 
----------------------------------------------  ---------  --------- 
 Last 12 months Net Debt/EBITDA 
  ratio from continuing and discontinued 
  operations (excl IFRS 16)                         1.99x      1.39x 
----------------------------------------------  ---------  --------- 
 

Net debt increased by GBP36.5m during the period, as free cash inflow of GBP36.8m was offset by increased returns to investors through dividend payments of GBP30.0m together with GBP42.5m of the GBP46m share buyback programme announced in March 2022.

Free cash flow is an inflow of GBP36.8m, a decrease of GBP14.5m from H1 21. Underlying EBITDA decreased by GBP8.2m to GBP63.5m for the reasons outlined above. The working capital outflow of GBP11.2m (H1 21: inflow of GBP3.5m) was largely as a result of the unwind of timing of cash receipts and payments for online sales following the strong trading performance in the final week of the 2021 year of GBP6.0m, and a change in the timing of creditor payments in support of our suppliers of GBP5.0m.

Net IFRS 16 lease payments decreased in the period from GBP5.0m to GBP3.8m largely due to the international lease payments included in the comparative year.

Dividends received increased to GBP3.9m from GBP2.6m, benefitting from a dividend received from our investment in Shorecal of GBP2.2m and GBP1.7m from our investments in associates and joint ventures.

Net interest payments of GBP2.2m in line with H1 21, despite higher finance costs, as a result of the timing of interest payments under the RCF.

In H1 21 non-underlying cash outflows related to the international disposal costs and the payment of costs associated with the establishment of the long-term growth strategy during the first half H1 21.

Capital expenditure in H1 22 was GBP7.5m, which is broadly in line with the GBP7.4m spend in H1 21 relating to the UK & Ireland business (H1 21: disposed international business capex spend GBP0.4m).

In March 2022, the Group received the final instalment of the Market Access Fee of GBP8.6m, relating to the performance of the German associate in the 2021 calendar year.

Disposals cash inflows of GBP0.6m relates to GBP1.8m receipt of deferred consideration for the disposal of the DP Shayban Limited joint venture in 2018, offset by the final payments on the disposals of international operations of GBP1.2m.

The share buyback cash outflow of GBP42.5m represents the settled amount of the GBP46.0m of the share buyback programme announced in March 2022. The remaining obligation has been satisfied in July 2022.

Capital employed and balance sheet

 
 
                                                     At 26     At 26 December 
                                                 June 2022               2021 
                                                      GBPm               GBPm 
--------------------------------------------  ------------  ----------------- 
 Intangible assets                                    34.5               32.1 
 Property, plant and equipment                        90.4               90.3 
 Investments, associates and joint ventures           66.7               64.8 
 Market Access Fee                                       -                8.7 
 Deferred consideration                                1.5                3.3 
 Right-of-use assets                                  20.9               19.4 
 Net lease liabilities                              (23.2)             (21.4) 
 Provisions                                         (15.1)             (16.3) 
 Working capital                                    (28.4)             (37.1) 
 Net Debt (continuing operations)                  (236.4)            (199.7) 
 Share buyback obligation                            (3.7)                  - 
 Tax                                                 (2.8)              (2.7) 
 Net liabilities                                    (95.6)             (58.6) 
--------------------------------------------  ------------  ----------------- 
 

Intangible assets have increased by GBP2.4m as a result of increased spend on IT software relating to the eCommerce platform. Property, plant and equipment is in line with prior year.

Investments, associates and joint ventures represents our investment in the German associate and our investments in Full House, West Country and the Northern Ireland JV in the UK, which are treated as associates and joint ventures, as well as our investment in Shorecal. This has increased by GBP1.9m during the year, due to the trading performance of the associates and joint ventures in excess of dividends received, and includes an increase in the Shorecal investment of GBP1.0m net of dividend received of GBP2.2m. During the period the Market Access Fee was settled.

Right of use assets of GBP20.9m represents the lease assets for our corporate stores, warehouses and equipment leases recognised under IFRS 16 in the current period. The net lease liability is GBP23.2m (26 December 2021: GBP21.4m). There have been no significant changes in the lease portfolio during the period.

The net working capital liability has decreased from GBP37.1m to GBP28.4m as a result of the factors outlined in the cash flow section above.

The share buyback obligation of GBP3.7m represents the remaining amounts committed under the GBP46m share buyback programme announced in March 2022.

Total equity has decreased by GBP37.0m, to a net liability position of GBP95.6m, largely due to the dividend payments and share buybacks in excess of the profit generated in the year. There are sufficient distributable reserves in the standalone accounts of Domino's Pizza Group plc for the proposed dividend payment and announced share buyback.

Treasury management

At 26 June 2022, the Group held an unsecured multi-currency revolving credit facility of GBP350m to December 2023. The total undrawn facility at 26 June 2022 was GBP73.2m.

The Group successfully refinanced the existing revolving credit facility in July 2022, and entered into a new unsecured multi-currency revolving credit facility of GBP200m, expiring in July 2027, together with the issuance of sterling-denominated private placement loan notes of GBP200m, with a due date for repayment in July 2027.

The new unsecured multi-currency revolving credit facility incurs interest at a margin over SONIA of between 185bps and 285bps depending on leverage, plus a utilisation fee of between 0bps and 30bps of the aggregate amount of the outstanding loans.

The private placement loan notes incur interest at a fixed rate at 4.26%.

The financial covenants under both new financing agreements are consistent. These covenants relate to measurement of adjusted EBITDAR against consolidated net finance charges (interest cover) and adjusted EBITDA to net debt (leverage ratio) measured semi-annually on a trailing 12 month basis at half year and year end. The interest cover covenant under the terms of both agreements cannot be less than 1.5:1, and leverage ratio cannot be more than 3:1. Figures used in the calculation of both covenants exclude the impact of IFRS 16.

We ended the period with Net Debt of GBP236.4m, and last 12 months Net Debt/EBITDA ratio on a continuing basis excluding the impact of IFRS 16 increased to 1.95x from 1.36x, as a result of decreased EBITDA performance in the year and a higher Net Debt level.

Group income statement

26 weeks ended 26 June 2022

 
                     Notes                                                                                              52 weeks ended 26 December 2021 
                                        26 weeks ended 26 June 2022              26 weeks ended 27 June 2021                                       GBPm 
                                                               GBPm                                     GBPm 
----------------    ------  ---------------------------------------  ---------------------------------------  ----------------------------------------- 
                             Underlying   Non-underlying*     Total   Underlying   Non-underlying*     Total   Underlying   Non-underlying*       Total 
----------------    ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 Revenue                 3        278.3                 -     278.3        277.8                 -     277.8        560.8                 -       560.8 
 Cost of sales                  (151.6)                 -   (151.6)      (143.2)                 -   (143.2)      (292.2)                 -     (292.2) 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 Gross profit                     126.7                 -     126.7        134.6                 -     134.6        268.6                 -       268.6 
 Distribution 
  costs                          (18.5)                 -    (18.5)       (15.6)                 -    (15.6)       (36.4)                 -      (36.4) 
 Administrative 
  costs                          (58.5)                 -    (58.5)       (62.7)             (1.6)    (64.3)      (125.4)             (4.5)     (129.9) 
 Other expenses                       -                 -         -            -                 -         -            -             (0.3)       (0.3) 
 Share of post-tax 
  profits of 
  associates and 
  joint ventures                    4.1                 -       4.1          5.5                 -       5.5         11.0                 -        11.0 
 Other income                       1.0                 -       1.0          2.1                 -       2.1          2.1                 -         2.1 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 Profit/(loss) 
  before interest 
  and taxation                     54.8                 -      54.8         63.9             (1.6)      62.3        119.9             (4.8)       115.1 
 Finance income          6          6.4                 -       6.4          7.2                 -       7.2         13.1               1.0        14.1 
 Finance costs           7       (10.3)                 -    (10.3)       (10.3)               0.2    (10.1)       (19.1)             (0.4)      (19.5) 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 Profit/(loss) 
  before taxation                  50.9                 -      50.9         60.8             (1.4)      59.4        113.9             (4.2)       109.7 
 Taxation                8        (8.8)                 -     (8.8)       (11.0)               0.5    (10.5)       (20.5)               1.5      (19.0) 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 Profit/(loss) for 
  the period from 
  continuing 
  operations                       42.1                 -      42.1         49.8             (0.9)      48.9         93.4             (2.7)        90.7 
 Loss from 
  discontinued 
  operations             4            -                 -         -            -             (7.6)     (7.6)            -            (12.4)      (12.4) 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ---------------- 
 Profit/(loss) for 
  the period                       42.1                 -      42.1         49.8             (8.5)      41.3         93.4            (15.1)      78.3 
 
 *Non-underlying items are disclosed in 
                                note 5. 
 Earnings per 
 share 
 From continuing 
 operations 
-----------------   ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 - Basic (pence)         9          9.5                         9.5         10.7                        10.5         20.3                          19.8 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 - Diluted (pence)       9          9.5                         9.5         10.7                        10.5         20.2                          19.6 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 From continuing 
 and discontinued 
 operations 
 (statutory) 
-----------------   ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 - Basic (pence)         9                                      9.5                                      8.9                                       17.1 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 - Diluted (pence)       9                                      9.5                                      8.8                                       17.0 
------------------  ------  -----------  ----------------  --------  -----------  ----------------  --------  -----------  ----------------  ---------- 
 
 

Group statement of comprehensive income

26 weeks ended 26 June 2022

 
 
                                                        26 weeks    26 weeks      52 weeks 
                                                           ended       ended         ended 
                                                         26 June     27 June   26 December 
                                                  Note      2022        2021          2021 
                                                            GBPm        GBPm          GBPm 
----------------------------------------------  ------  --------  ----------  ------------ 
Profit for the period                                       42.1        41.3          78.3 
----------------------------------------------  ------  --------  ----------  ------------ 
Other comprehensive income: 
Items that may be subsequently reclassified 
 to profit or loss: 
- Exchange gain on retranslation of foreign 
 operations                                                  0.2         2.8           0.8 
- Transferred to income statement on disposal       14         -         6.6           7.9 
Other comprehensive income for the period, 
 net of tax                                                  0.2         9.4           8.7 
----------------------------------------------  ------  --------  ----------  ------------ 
Total comprehensive income for the period                   42.3        50.7          87.0 
----------------------------------------------  ------  --------  ----------  ------------ 
 

Group balance sheet

At 26 June 2022

 
                                                      At 26 June  At 27 June  At 26 December 
                                                            2022        2021            2021 
                                               Notes        GBPm        GBPm            GBPm 
---------------------------------------------  -----  ----------  ----------  -------------- 
Non-current assets 
Intangible assets                                 11        34.5        32.2            32.1 
Property, plant and equipment                     11        90.4        90.7            90.3 
Right-of-use assets                               12        20.9        21.5            19.4 
Lease receivables                                 12       184.6       188.2           187.5 
Trade and other receivables                                 13.4        17.2            14.0 
Other financial asset                             16           -         7.7             6.8 
Investments                                       16        11.0        12.3            12.1 
Investments in associates and joint ventures      13        55.7        43.8            52.7 
Deferred consideration receivable                              -         1.5               - 
                                                           410.5       415.1           414.9 
---------------------------------------------  -----  ----------  ----------  -------------- 
Current assets 
Lease receivables                                 12        13.6        13.2            13.7 
Inventories                                                  8.5        12.7            10.9 
Assets held for sale                                           -         8.7               - 
Trade and other receivables                                 37.4        36.8            34.3 
Other financial asset                             16           -         1.0             1.9 
Deferred consideration receivable                            1.5         3.6             3.3 
Current tax assets                                             -         1.9             0.2 
Cash and cash equivalents                         20        40.0        36.8            42.8 
                                                           101.0       114.7           107.1 
---------------------------------------------  -----  ----------  ----------  -------------- 
Total assets                                               511.5       529.8           522.0 
---------------------------------------------  -----  ----------  ----------  -------------- 
Current liabilities 
Lease liabilities                                 12      (19.1)      (20.2)          (19.3) 
Trade and other payables                                  (87.4)      (93.8)          (96.1) 
Liabilities held for sale                                      -       (7.7)               - 
Financial liabilities                             15       (3.7)      (16.7)               - 
Deferred and contingent consideration                          -       (0.4)               - 
Current tax liabilities                                    (1.3)           -               - 
Deferred tax liabilities                                       -           -           (0.4) 
Provisions                                                 (0.3)       (0.2)           (2.0) 
---------------------------------------------  -----  ---------- 
                                                         (111.8)     (139.0)         (117.8) 
---------------------------------------------  -----  ----------  ----------  -------------- 
Non-current liabilities 
Lease liabilities                                 12     (202.3)     (204.5)         (203.3) 
Trade and other payables                                   (0.3)       (0.3)           (0.2) 
Financial liabilities                             15     (276.4)     (217.4)         (242.5) 
Deferred tax liabilities                                   (1.5)       (2.9)           (2.5) 
Provisions                                                (14.8)      (13.2)          (14.3) 
---------------------------------------------  -----  ----------  ----------  -------------- 
                                                         (495.3)     (438.3)         (462.8) 
---------------------------------------------  -----  ----------  ----------  -------------- 
Total liabilities                                        (607.1)     (577.3)         (580.6) 
---------------------------------------------  -----  ----------  ----------  -------------- 
Net liabilities                                           (95.6)      (47.5)          (58.6) 
---------------------------------------------  -----  ----------  ----------  -------------- 
 
Shareholders' equity 
Called up share capital                                      2.2         2.4             2.3 
Share premium account                                       49.6        49.6            49.6 
Capital redemption reserve                                   0.5         0.5             0.5 
Capital reserve - own shares                               (6.9)       (6.3)           (4.6) 
Currency translation reserve                               (0.8)       (0.3)           (1.0) 
Accumulated losses                                       (140.2)      (93.4)         (105.4) 
---------------------------------------------  -----  ----------  ----------  -------------- 
Total equity                                              (95.6)      (47.5)          (58.6) 
---------------------------------------------  -----  ----------  ----------  -------------- 
 

Group statement of changes in equity

26 weeks ended 26 June 2022

 
                                                               Capital 
                                          Share      Capital   Reserve      Currency 
                                Share   premium   redemption     - own   translation  Accumulated  Total shareholders' 
                              capital   account      reserve    shares       reserve       losses               equity 
                       Note      GBPm      GBPm         GBPm      GBPm          GBPm         GBPm                 GBPm 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
At 27 December 2020               2.4      49.6          0.5     (3.4)         (9.7)       (48.2)                (8.8) 
Profit for the period               -         -            -         -             -         41.3                 41.3 
Other comprehensive 
 income 
 - exchange 
 differences                        -         -            -         -           9.4            -                  9.4 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
Total comprehensive 
 income for the 
 period                             -         -            -         -           9.4         41.3                 50.7 
Impairment of share 
 issues                             -         -            -       0.1             -            -                  0.1 
Share buybacks                      -         -            -     (3.0)             -       (28.3)               (31.3) 
Share buyback 
 obligation 
 outstanding                        -         -            -         -             -       (16.7)               (16.7) 
Share options and 
 LTIP charge                        -         -            -         -             -          0.7                  0.7 
Tax on employee share 
 options                            -         -            -         -             -          0.1                  0.1 
Equity dividends paid    10         -         -            -         -             -       (42.3)               (42.3) 
At 27 June 2021                   2.4      49.6          0.5     (6.3)         (0.3)       (93.4)               (47.5) 
Profit for the period               -         -            -         -             -         37.0                 37.0 
Other comprehensive 
 income 
 - exchange 
 differences                        -         -            -         -         (0.7)            -                (0.7) 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
Total comprehensive 
 income for the 
 period                             -         -            -         -         (0.7)         37.0                 36.3 
Proceeds from share 
 issues                             -         -            -       0.4             -            -                  0.4 
Impairment of share 
 issues                             -         -            -       1.3             -        (1.3)                    - 
Share buybacks                  (0.1)         -            -         -             -       (35.4)               (35.5) 
Share options and 
 LTIP charge                        -         -            -         -             -          1.0                  1.0 
Tax on employee share 
 options                            -         -            -         -             -          0.4                  0.4 
Equity dividends paid    10         -         -            -         -             -       (13.7)               (13.7) 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
At 26 December 2021               2.3      49.6          0.5     (4.6)         (1.0)      (105.4)               (58.6) 
Profit for the period               -         -            -         -             -         42.1                 42.1 
Other comprehensive 
 income 
 - exchange 
 differences                        -         -            -         -           0.2            -                  0.2 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
Total comprehensive 
 income for the 
 period                             -         -            -         -           0.2         42.1                 42.3 
Proceeds from share 
 issues                             -         -            -       1.4             -            -                  1.4 
Impairment of share 
 issues                             -         -            -       1.0             -        (1.0)                    - 
Share buybacks                  (0.1)         -            -     (4.7)             -       (42.6)               (47.4) 
Share buyback 
 obligation 
 outstanding                        -         -            -         -             -        (3.7)                (3.7) 
Share options and 
 LTIP charge                        -         -            -         -             -          1.0                  1.0 
Tax on employee share 
 options                            -         -            -         -             -        (0.6)                (0.6) 
Equity dividends paid    10         -         -            -         -             -       (30.0)               (30.0) 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
At 26 June 2022                   2.2      49.6          0.5     (6.9)         (0.8)      (140.2)               (95.6) 
---------------------  ----  --------  --------  -----------  --------  ------------  -----------  ------------------- 
 

Group cash flow statement

26 weeks ended 26 June 2022

 
                                                                      26 weeks 
                                                          26 weeks       ended      52 weeks 
                                                             ended     27 June         ended 
                                                           26 June        2021   26 December 
                                                              2022   Restated*          2021 
                                                   Notes      GBPm        GBPm          GBPm 
-------------------------------------------------  -----  --------  ----------  ------------ 
Cash flows from operating activities 
Profit/(loss) before interest and taxation 
 
  *    from continuing operations                             54.8        62.3         115.1 
 
  *    from discontinued operations                              -       (7.6)        (11.3) 
Amortisation and depreciation                                  8.7         8.3          17.4 
Impairment                                                       -         0.8           1.0 
Share of post-tax profits of associates and 
 joint ventures                                              (4.1)       (5.5)        (11.0) 
Loss on disposal of subsidiary                                   -         6.2           8.4 
Net gain on financial instruments at fair value 
 through profit or loss                                      (1.0)       (2.1)         (1.8) 
Share option and LTIP charge                                   1.0         0.8           1.7 
(Decrease)/increase in provisions                            (0.1)       (0.3)           1.0 
Decrease/(increase) in inventories                             2.5       (1.6)           0.3 
(Increase)/decrease in receivables                           (3.8)         2.4           6.7 
(Decrease)/increase in payables                              (9.5)         2.6           4.4 
Cash generated from operations                                48.5        66.3         131.9 
Corporation tax paid                                         (9.3)      (10.2)        (18.0) 
Net cash generated from operating activities                  39.2        56.1         113.9 
-------------------------------------------------  -----  --------  ----------  ------------ 
Cash flows from investing activities 
Purchase of property, plant and equipment                    (2.5)       (3.5)         (5.8) 
Purchase of intangible assets                                (5.0)       (4.3)         (8.5) 
Net consideration (paid)/received on disposal 
 of subsidiary                                        14     (1.2)        11.1          10.2 
Consideration received on disposal of joint 
 ventures                                             13       1.8         0.6           2.4 
Investment in associates                                         -       (0.2)         (6.6) 
Receipt from other financial assets                   16       8.6         6.4           6.4 
Receipt on lease receivables                                  13.2        13.0          25.7 
Interest received                                                -         0.1           0.3 
Other                                                 20       4.7         5.6           8.7 
Net cash generated from investing activities                  19.6        28.8          32.8 
-------------------------------------------------  -----  --------  ----------  ------------ 
Cash inflow before financing                                  58.8        84.9         146.7 
Cash flows from financing activities 
Interest paid                                                (2.2)       (2.3)         (4.3) 
Share transactions                                    20    (45.8)      (31.3)        (83.0) 
New bank loans and facilities drawn down                      60.0        85.0         150.0 
Repayment of borrowings                                     (26.7)     (107.4)       (147.3) 
Repayment of lease liabilities                              (17.0)      (17.9)        (34.1) 
Equity dividends paid                                       (30.0)      (42.3)        (56.0) 
Net cash used by financing activities                       (61.7)     (116.2)       (174.7) 
-------------------------------------------------  -----  --------  ----------  ------------ 
Net decrease in cash and cash equivalents                    (2.9)      (31.3)        (28.0) 
Cash and cash equivalents at beginning of period              42.8        71.8          71.8 
Foreign exchange gain/(loss) on cash and cash 
 equivalents                                                   0.1       (0.7)         (1.0) 
-------------------------------------------------  -----  --------  ----------  ------------ 
Cash and cash equivalents at end of period            20      40.0        39.8          42.8 
-------------------------------------------------  -----  --------  ----------  ------------ 
 

*The Group cash flow statement for the 26 weeks ended 27 June 2021 has been restated to reclassify receipts on lease receivables from financing activities to investing activities, as set out in note 2.

Notes to the interim financial statements

26 weeks ended 26 June 2022

1. General information

Domino's Pizza Group plc ('the Company') is a public limited company incorporated in the United Kingdom under the Companies Act 2006 (registration number 03853545). The Company is domiciled in the United Kingdom and its registered address is 1 Thornbury, West Ashland, Milton Keynes, MK6 4BB. The Company's ordinary shares are listed on the Official List of the FCA and traded on the Main Market of the London Stock Exchange. Further copies of the interim report and Annual Report and Accounts may be obtained from the address above.

2. Basis of preparation

The condensed consolidated interim financial statements (the 'interim financial statements') have been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. The financial information contained in this interim report does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The interim results for the 26 weeks ended 26 June 2022 and the comparatives to 27 June 2021 are unaudited but have been reviewed by the auditors. A copy of their review report has been included at the end of this report.

The financial information for the 52 weeks ended 26 December 2021 has been extracted from the Group financial statements for that period. These published financial statements were reported on by the auditors without qualification or an emphasis of matter reference and did not include a statement under section 498(2) or (3) of the Companies Act 2006 and have been delivered to the Registrar of Companies.

The interim financial information is presented in sterling and all values are rounded to the nearest tenth of million pounds (GBP0.1m), except when otherwise indicated. The accounting policies are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax (see note 8). The financial statements are prepared using the historical cost basis with the exception of the derivative financial assets and contingent consideration which are measured at fair value in accordance with IFRS 13 Fair Value Measurement.

Going concern

The interim financial information has been prepared on the going concern basis. This is considered appropriate, given the financial resources of the Group including the current position of banking facilities, together with long-term contracts with its master franchisor, its franchisees and its key suppliers.

The Directors of the Group have performed an assessment of the overall position and future forecasts for the purposes of going concern in light of the current environment. The overall Group has continued to trade strongly throughout the period in the UK and Ireland, and sales levels has been strong, despite the current pressures in the market, and inflation and labour pressures on the supply chain.

The Directors of the Group have considered the future position based on current trading and a number of potential downside scenarios which may occur, either through reduced consumer spending, reduced store growth, further supply chain disruptions, general economic uncertainty and other risks, in line with the analysis performed for the viability statement as outlined in the Directors' report. This assessment has considered the overall level of Group borrowings and covenant requirements, the flexibility of the Group to react to changing market conditions and ability to appropriately manage any business risks. The Group has a GBP350.0m multicurrency syndicated revolving credit facility which matures in December 2023, of which GBP73.2m was undrawn as at 26 June 2022, and had cash funds of GBP40.0m as at 26 June 2022. The Group replaced this facility with a new GBP200m multicurrency revolving credit facility entered into on 26th July 2022 and GBP200m private placement loan notes entered into on 27th July 2022, which expire in 2027.

The scenarios modelled are based on our current forecast projections out to the end of 2023 and have taken account of the following risks: a downside impact of economic uncertainty and other sales risks over the forecast period, reflected in sales performance, with a c.5% reduction in LFL sales compared to budget; the impact of a reduction of new store openings to half of their forecast level; a further reduction of between 2.5%-3.0% in sales to account for the potential impact of the public health debate; future potential disruptions to supply chain through loss of one of our supply chain centres impacting our ability to supply stores for a period of two weeks; additional costs as a result of labour shortages; the impact of a temporary loss of availability of our eCommerce platform during peak trading periods; the impact of potential future ingredient pricing volatility as a result of indirect international supply chain pressures arising from global events; and a significant unexpected increase in the impact of climate change on costs related to our supply chain. We have also considered a second 'severe but plausible' scenario, which in addition to the above-mentioned risks, also includes the risks of: a disruption to one of our key suppliers impacting our supply chain over a period of four weeks whilst alternate sourcing is secured; and the impact of fines from a potential wider data breach.

In each of the scenarios modelled, there remains significant headroom available on net debt. Under the first scenario there remains sufficient headroom under the covenant requirements of the facilities. If all the risks under the first scenario were to occur simultaneously with the additional risks in the second scenario, before any mitigating actions, the Group would breach its leverage covenants. The Board has a mitigating action available in the form of delays of distributions to shareholders which would prevent a breach of leverage covenants.

Based on this assessment, the Directors have formed a judgement that there is a reasonable expectation the Group will have adequate resources to continue in operational existence for the foreseeable future.

Restatement of comparatives in the Group Cash Flow Statement

Following a review of the Group's 2020 Annual Report by the Directors, subsequent to the receipt of a letter from the Financial Reporting Council ('FRC'), the Group has changed the classification of receipts on lease receivables in the Group cash flow statement from financing activities to investing activities. The Group holds both a head lease with the landlord, and a sub-lease with a franchisee in a 'back-to-back' arrangement for the majority of Domino's sites in the UK & Ireland. The Group accounts for the head-lease and sub-lease separately as two separate contracts.

The Group previously presented both the lease payments on the head lease and the lease receipts on the sub-lease on a gross basis within financing activities, as this was considered to best reflect the substance of the back-to-back nature of the lease cash receipts and payments. Following the review performed, the Group have reconsidered the treatment and consider that the lease receipts should be classified as investing activities in accordance with IAS 7 as, whilst lease receipts largely mirror the payments on the head lease, they do not meet the definition of a financing activity, which are "activities that result in changes in the size and contribution of the contributed equity and borrowings of the entity". The figures for the 52 weeks ended 26 December 2021 include the correct classification.

The figures for the 26 weeks ended 27 June 2021 have been restated which increases net cash generated from investing activities from GBP15.8m to GBP28.8m, and increases net cash used by financing activities from GBP103.2m to GBP116.2m.

 
                                               As previously      Reclassification of receipts on lease 
                                                      stated                                receivables   Restated 
                                                        GBPm                                       GBPm       GBPm 
 Net cash generated from investing 
  activities                                            15.8                                       13.0       28.8 
 Net cash used by financing activities               (103.2)                                     (13.0)    (116.2) 
--------------------------------------------  --------------  -----------------------------------------  --------- 
 

Accounting policies and new standards

The consolidated accounts for the 26 weeks ended 26 June 2022 were prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. The accounting policies applied by the Group are consistent with those disclosed in the Group's Annual Report and Accounts for the 52 weeks ended 26 December 2021, except for the estimation of income tax. There were no new standards and interpretations effective for the first time for the reporting period that have a material impact on the Group financial statements.

3. Segmental information

For management purposes, the Group is organised into two geographical business units based on the operating models of the regions: the UK & Ireland operating more mature markets with a franchise model, limited corporate stores and investments held in our franchisees, compared to International which operate predominantly as corporate stores. The International segment includes the German associate, legacy Germany and Switzerland holding companies; as well as Iceland, Sweden and Switzerland operational entities up to their disposal date in 2021. These are considered the Group's operating segments as the information provided to the Executive Directors of the Board, who are considered to be the chief operating decision makers, is based on these territories. The chief operating decision makers review the segmental underlying EBIT and EBITDA results and the non-underlying items separately. Revenue included in each segment includes all sales made to franchise stores (royalties, sales to franchisees and rental income) and by corporate stores located in that segment.

The International operations in Sweden, Switzerland, and Iceland which were held as discontinued under IFRS 5: Non-current assets held for sale and discontinued operations, were presented as a separate segment up to disposal date in 2021. During 2021, the Board continued to monitor the trading performance of the businesses and therefore were still considered an operating segment. The results of the German associate remain in continuing results and therefore are presented separately.

Unallocated assets include cash and cash equivalents and taxation assets. Unallocated liabilities include the bank revolving facility and taxation liabilities.

 
                                  At        At            At 
                             26 June   27 June   26 December 
                                2022      2021          2021 
                                GBPm      GBPm          GBPm 
--------------------------  --------  --------  ------------ 
Current tax assets                 -       1.9           0.2 
Cash and cash equivalents       40.0      39.8          42.8 
--------------------------  --------  --------  ------------ 
Unallocated assets              40.0      41.7          43.0 
--------------------------  --------  --------  ------------ 
Current tax liabilities          1.3         -             - 
Deferred tax liabilities         1.5       2.9           2.9 
Bank revolving facility        276.4     217.4         242.5 
Unallocated liabilities        279.2     220.3         245.4 
--------------------------  --------  --------  ------------ 
 

Segment assets and liabilities

 
                                         26 weeks ended 26                        26 weeks ended 27 June                      52 weeks ended 26 December 
                                                 June 2022                                          2021                                            2021 
              --------------------------------------------  --------------------------------------------  ---------------------------------------------- 
                   UK                                                                                                             International 
                    &  International  International            UK &  International  International            UK &  International              - 
              Ireland    -continuing  -discontinued  Total  Ireland    -continuing  -discontinued  Total  Ireland    -continuing   discontinued  Total 
                 GBPm           GBPm           GBPm   GBPm     GBPm           GBPm           GBPm   GBPm     GBPm           GBPm           GBPm   GBPm 
------------  -------  -------------  -------------  -----  -------  -------------  -------------  -----  -------  -------------  -------------  ----- 
Segment 
assets 
Segment 
 current 
 assets          61.0              -              -   61.0     67.3              -            5.7   73.0     64.1              -              -   64.1 
Segment 
 non-current 
 assets         343.8              -              -  343.8    359.0              -              -  359.0    350.1              -              -  350.1 
Investment 
 in 
 associates 
 and 
 joint 
 ventures        24.9           30.8              -   55.7     16.2           27.6              -   43.8     23.8           28.9              -   52.7 
Investments      11.0              -              -   11.0     12.3              -              -   12.3     12.1              -              -   12.1 
Unallocated 
 assets                                               40.0                                          41.7                                          43.0 
------------  -------  -------------  -------------  -----  -------  -------------  -------------  -----  -------  -------------  -------------  ----- 
Total assets                                         511.5                                         529.8                                         522.0 
------------  -------  -------------  -------------  -----  -------  -------------  -------------  -----  -------  -------------  -------------  ----- 
Segment 
liabilities 
Liabilities     327.1              -            0.8  327.9    348.4              -            8.6  357.0    333.9              -            1.3  335.2 
Unallocated 
 liabilities                                         279.2                                         220.3                                         245.4 
------------  -------  -------------  -------------  -----  -------  -------------  -------------  -----  -------  -------------  -------------  ----- 
Total 
 liabilities                                         607.1                                         577.3                                         580.6 
------------  -------  -------------  -------------  -----  -------  -------------  -------------  -----  -------  -------------  -------------  ----- 
 

Segmental performance for the 26 weeks 26 June 2022

 
                                                                                                                 Total 
                                                                                          International      including 
                         UK &   International        Total                        Total               -   discontinued 
                      Ireland    - continuing   underlying   Non-underlying    reported    discontinued     operations 
                         GBPm            GBPm         GBPm             GBPm        GBPm            GBPm           GBPm 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Revenue 
 Sales to 
  external 
  customers             278.3               -        278.3                -       278.3               -          278.3 
----------------                               -----------                   ---------- 
 Segment revenue        278.3               -        278.3                -       278.3               -          278.3 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Results 
 Underlying 
  segment result 
  before 
  associates and 
  joint ventures         49.7               -         49.7                -        49.7               -           49.7 
 Share of profit 
  of associates 
  and joint 
  ventures                2.3             1.8          4.1                -         4.1               -            4.1 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Segment result          52.0             1.8         53.8                -        53.8               -           53.8 
 Other                      -               -            -                -           -               -              - 
 non-underlying 
 items 
 Other income             1.0               -          1.0                -         1.0               -            1.0 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit before 
  interest 
  and taxation           53.0             1.8         54.8                -        54.8               -           54.8 
 Net finance 
  costs                 (3.9)               -        (3.9)                -       (3.9)               -          (3.9) 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit before 
  taxation               49.1             1.8         50.9                -        50.9               -           50.9 
 Taxation               (8.8)               -        (8.8)                -       (8.8)               -          (8.8) 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit for the 
  year                   40.3             1.8         42.1                -        42.1               -           42.1 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Effective tax 
  rate                  17.9%               -        17.3%                -       17.3%               -          17.3% 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 
 Other segment 
 information 
 Depreciation - 
  Property, 
  plant and 
  equipment               2.5               -          2.5                -         2.5               -            2.5 
 Depreciation - 
  Right-of-use 
  assets                  3.1               -          3.1                -         3.1               -            3.1 
 Amortisation             3.1               -          3.1                -         3.1               -            3.1 
 Total 
  depreciation 
  and 
  amortisation            8.7               -          8.7                -         8.7               -            8.7 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 EBITDA                  61.7             1.8         63.5                -        63.5               -           63.5 
 Underlying 
  EBITDA                 61.7             1.8         63.5                -        63.5               -           63.5 
 Capital 
  expenditure             7.5               -          7.5                -         7.5               -            7.5 
 Share-based 
  payment charge          1.0               -          1.0                -         1.0               -            1.0 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Revenue 
 disclosures 
 Royalties, 
  franchise 
  fees and 
  change of 
  hands 
  fees                   37.8               -         37.8                -        37.8               -           37.8 
 Sales to 
  franchisees           190.7               -        190.7                -       190.7               -          190.7 
 Corporate store 
  income                 17.6               -         17.6                -        17.6               -           17.6 
 Rental income 
  on leasehold 
  and freehold 
  property                0.3               -          0.3                -         0.3               -            0.3 
 National 
  Advertising 
  and eCommerce 
  income                 31.9               -         31.9                -        31.9               -           31.9 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Total segment 
  revenue               278.3               -        278.3                -       278.3               -          278.3 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 

Segmental performance for the 26 weeks ended 27 June 2021

 
                                                                                                                 Total 
                                                                                          International      including 
                         UK &   International        Total                        Total               -   discontinued 
                      Ireland    - continuing   underlying   Non-underlying    reported    discontinued     operations 
                         GBPm            GBPm         GBPm             GBPm        GBPm            GBPm           GBPm 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Revenue 
 Sales to 
  external 
  customers             277.8               -        277.8                -       277.8            28.8          306.6 
----------------                               -----------                   ---------- 
 Segment revenue        277.8               -        277.8                -       277.8            28.8          306.6 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Results 
 Underlying 
  segment result 
  before 
  associates and 
  joint ventures         56.3               -         56.3                -        56.3           (0.6)           55.7 
 Share of profit 
  of associates 
  and joint 
  ventures                3.3             2.2          5.5                -         5.5               -            5.5 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Segment result          59.6             2.2         61.8                -        61.8           (0.6)           61.2 
 Other 
  non-underlying 
  items                     -               -            -            (1.6)       (1.6)           (7.0)          (8.6) 
 Other income             2.1               -          2.1                -         2.1               -            2.1 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit/(loss) 
  before 
  interest and 
  taxation               61.7             2.2         63.9            (1.6)        62.3           (7.6)           54.7 
 Net finance 
  costs                 (3.1)               -        (3.1)              0.2       (2.9)           (0.5)          (3.4) 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit before 
  taxation               58.6             2.2         60.8            (1.4)        59.4           (8.1)           51.3 
 Taxation              (11.0)               -       (11.0)              0.5      (10.5)             0.5         (10.0) 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit/(loss) 
  for the 
  year                   47.6             2.2         49.8            (0.9)        48.9           (7.6)           41.3 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Effective tax 
  rate                  18.8%               -        18.1%            35.7%       17.7%            6.2%          19.5% 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Other segment 
 information 
 Depreciation - 
  Property, 
  plant and 
  equipment               2.5               -          2.5                -         2.5               -            2.5 
 Depreciation - 
  Right-of-use 
  assets                  3.1               -          3.1                -         3.1               -            3.1 
 Amortisation             2.2               -          2.2              0.5         2.7               -            2.7 
 Impairment                 -               -            -                -           -             0.8            0.8 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Total 
  depreciation, 
  amortisation 
  and impairment          7.8               -          7.8              0.5         8.3             0.8            9.1 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 EBITDA                  69.5             2.2         71.7            (1.1)        70.6           (6.8)           63.8 
 Underlying 
  EBITDA                 69.5             2.2         71.7                -        71.7             0.2           71.9 
 Capital 
  expenditure             7.4               -          7.4                -         7.4             0.4            7.8 
 Share-based 
  payment charge          0.7               -          0.7                -         0.7               -            0.7 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Revenue 
 disclosures 
 Royalties, 
  franchise 
  fees and 
  change of 
  hands 
  fees                   40.4               -         40.4                -        40.4               -           40.4 
 Sales to 
  franchisees           183.1               -        183.1                -       183.1               -          183.1 
 Corporate store 
  income                 17.7               -         17.7                -        17.7            28.8           46.5 
 Rental income 
  on leasehold 
  and freehold 
  property                0.4               -          0.4                -         0.4               -            0.4 
 National 
  Advertising 
  and eCommerce 
  income                 36.2               -         36.2                -        36.2               -           36.2 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Total segment 
  revenue               277.8               -        277.8                -       277.8            28.8          306.6 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 

Segmental performance for the 52 weeks ended 26 December 2021

 
                                                                                                                 Total 
                                                                                          International      including 
                         UK &   International        Total                        Total               -   discontinued 
                      Ireland    - continuing   underlying   Non-underlying    reported    discontinued     operations 
                         GBPm            GBPm         GBPm             GBPm        GBPm            GBPm           GBPm 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Revenue 
 Sales to 
  external 
  customers             560.8               -        560.8                -       560.8            32.4          593.2 
----------------                               -----------                   ---------- 
 Segment revenue        560.8               -        560.8                -       560.8            32.4          593.2 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Results 
 Underlying 
  segment result 
  before 
  associates and 
  joint ventures        106.8               -        106.8                -       106.8           (1.5)          105.3 
 Share of profit 
  of associates 
  and joint 
  ventures                6.0             5.0         11.0                -        11.0               -           11.0 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Segment result         112.8             5.0        117.8                -       117.8           (1.5)          116.3 
 Other 
  non-underlying 
  items                     -               -            -            (4.8)       (4.8)           (9.8)         (14.6) 
 Other income             2.1               -          2.1                -         2.1               -            2.1 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit/(loss) 
  before 
  interest and 
  taxation              114.9             5.0        119.9            (4.8)       115.1          (11.3)          103.8 
 Net finance 
  costs                 (6.0)               -        (6.0)              0.6       (5.4)           (0.5)          (5.9) 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit before 
  taxation              108.9             5.0        113.9            (4.2)       109.7          (11.8)           97.9 
 Taxation              (20.5)               -       (20.5)              1.5      (19.0)           (0.6)         (19.6) 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Profit/(loss) 
  for the 
  year                   88.4             5.0         93.4            (2.7)        90.7          (12.4)           78.3 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Effective tax 
  rate                  18.8%               -        18.0%            35.7%       17.3%            5.1%          20.0% 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Other segment 
 information 
 Depreciation - 
  Property, 
  plant and 
  equipment               5.0               -          5.0                -         5.0               -            5.0 
 Depreciation - 
  Right-of-use 
  assets                  6.5               -          6.5                -         6.5               -            6.5 
 Amortisation             4.8               -          4.8              1.1         5.9               -            5.9 
 Impairment               0.2               -          0.2                -         0.2             0.8            1.0 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Total 
  depreciation, 
  amortisation 
  and impairment         16.5               -         16.5              1.1        17.6             0.8           18.4 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 EBITDA                 131.4             5.0        136.4            (3.7)       132.7          (10.5)          122.2 
 Underlying 
  EBITDA                131.4             5.0        136.4                -       136.4           (0.7)          135.7 
 Capital 
  expenditure            13.6               -         13.6                -        13.6             0.7           14.3 
 Share-based 
  payment charge          1.7               -          1.7                -         1.7               -            1.7 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Revenue 
 disclosures 
 Royalties, 
  franchise 
  fees and 
  change of 
  hands 
  fees                   79.4               -         79.4                -        79.4               -           79.4 
 Sales to 
  franchisees           374.9               -        374.9                -       374.9               -          374.9 
 Corporate store 
  income                 35.6               -         35.6                -        35.6            32.4             68 
 Rental income 
  on leasehold 
  and freehold 
  property                0.6               -          0.6                -         0.6               -            0.6 
 National 
  Advertising 
  and eCommerce 
  income                 70.3               -         70.3                -        70.3               -           70.3 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 Total segment 
  revenue               560.8               -        560.8                -       560.8            32.4          593.2 
----------------  -----------  --------------  -----------  ---------------  ----------  --------------  ------------- 
 

4. Discontinued Operations

Discontinued operations consist of the legacy Germany and Switzerland holding companies and also consisted of the International business disposal groups up to the date of disposal in 2021.

The disposal groups represented the operations in Sweden, Iceland and Switzerland. These operations were disposed of in 2021, see note 14. These entities were included in the Group result for the prior period up to disposal date. The operations met the criteria in IFRS 5: Non-current assets held for sale and discontinued operations to be classified as assets held-for-sale. The operations additionally met the criteria for discontinued operations under the standard. They were classified as held-for-sale and represented a separate major line of business and part of a single co-ordinated plan to dispose.

International central costs were included in the discontinued operations and relate to the costs incurred by the Group in management activities and other services for the discontinued operations, which are not considered to be continuing costs for the Group.

The result of the disposal groups classified as discontinued operations are as follows :

 
                                                26 weeks ended                            26 weeks ended             52 weeks ended 
                                                  26 June 2022                              27 June 2021           26 December 2021 
 -------------------------------------------------------------  ----------------------------------------  -------------------------  ------------- 
                                                  Total result                              Total result                              Total result 
                       Total                              from     Total                            from     Total                            from 
                     trading    Non-underlying    discontinued   trading   Non-underlying   discontinued   trading   Non-underlying   discontinued 
                      result             costs      operations    result            costs     operations    result            costs     operations 
-----------------  ---------  ----------------  --------------  --------  ---------------  -------------  --------  ---------------  ------------- 
                                                                    GBPm             GBPm           GBPm      GBPm             GBPm           GBPm 
 Revenue                   -                 -               -      28.8                -           28.8      32.4                -           32.4 
 Cost of sales             -                 -               -    (21.7)                -         (21.7)    (24.4)                -         (24.4) 
-----------------  ---------  ----------------  --------------  --------  ---------------  -------------  --------  ---------------  ------------- 
 Gross profit              -                 -               -       7.1                -            7.1       8.0                -            8.0 
 Distribution 
  costs                    -                 -               -     (0.5)                -          (0.5)     (0.5)                -          (0.5) 
 Administrative 
  costs                    -                 -               -     (7.2)                -          (7.2)     (9.0)            (1.4)         (10.4) 
 Loss on 
  disposals 
  before 
  professional 
  fees                     -                 -               -         -            (7.0)          (7.0)         -            (8.4)          (8.4) 
 Loss before 
  interest and 
  taxation                 -                 -               -     (0.6)            (7.0)          (7.6)     (1.5)            (9.8)         (11.3) 
 Finance costs             -                 -               -     (0.5)                -          (0.5)     (0.5)                -          (0.5) 
 Loss before 
  taxation                 -                 -               -     (1.1)            (7.0)          (8.1)     (2.0)            (9.8)         (11.8) 
 Taxation                  -                 -               -       0.5                -            0.5     (0.6)                -          (0.6) 
-----------------  ---------  ----------------  --------------  --------  ---------------  -------------  --------  ---------------  ------------- 
 Loss for the 
  period                   -                 -               -     (0.6)            (7.0)          (7.6)     (2.6)            (9.8)         (12.4) 
-----------------  ---------  ----------------  --------------  --------  ---------------  -------------  --------  ---------------  ------------- 
 
 

Segmental result by country

 
 Profit/(loss) before 
 interest and tax                Iceland   Switzerland   Sweden   International central costs   Total trading result 
                                    GBPm          GBPm     GBPm                          GBPm                   GBPm 
 26 weeks ended 26 June 2022           -             -        -                             -                      - 
-----------------------------   --------  ------------  -------  ----------------------------  --------------------- 
 26 weeks ended 27 June 2021         0.6           0.5    (0.9)                         (0.8)                  (0.6) 
------------------------------  --------  ------------  -------  ----------------------------  --------------------- 
 52 weeks ended 26 December 
  2021                               0.7           0.1    (0.9)                         (1.4)                  (1.5) 
------------------------------  --------  ------------  -------  ----------------------------  --------------------- 
 

Non-underlying costs presented in discontinued operations

The non-underlying costs presented in discontinued operations for 2021 related to the disposal of Sweden, Iceland and Switzerland. For Sweden there was GBP0.4m (H1 21: GBP0.4m) loss on disposal, after accounting for the net assets disposed and foreign exchange recycled, and consideration paid. This primarily consisted of professional fees associated with the disposal. For Iceland this consisted of GBP7.3m (H1 21: GBP6.6m) loss on disposal, after accounting for the net assets disposed and foreign exchange recycled, and consideration received. The loss on Iceland includes GBP0.5m (H1 21: GBP0.4m) of professional fees associated with the disposal. For Switzerland this consisted of GBP2.1m (H1 21: GBPnil) loss on disposal, after accounting for the net assets disposed and foreign exchange recycled, and consideration paid. The loss on Switzerland includes GBP0.5m (H1 21: GBPnil) of professional fees associated with the disposal. Details relating to the disposals are set out in Note 14.

Earnings per share

The discontinued operations contributed a basic loss per share of nil (H1 21: 1.6p; FY 21: 2.7p) and a diluted loss per share of nil (H1 21: 1.7p; FY 21: 2.6p).

Cash flows used in discontinued operations

The cash flows from discontinued operations have been presented combined with the cash flows from continuing operations on the Group cash flow statement. The cash flows related to discontinued operations are as follows:

 
 
                                         26 weeks ended     26 weeks ended      52 weeks ended 
                                           26 June 2022       27 June 2021    26 December 2021 
                                                   GBPm               GBPm                GBPm 
 Net cash from operating activities               (0.2)                2.4                 1.2 
 Net cash from investing activities               (0.5)              (1.2)               (2.0) 
 Net cash from financing activities                   -              (6.1)               (5.8) 
--------------------------------------  ---------------  -----------------  ------------------ 
 Net cash flows for the year                      (0.7)              (4.9)               (6.6) 
--------------------------------------  ---------------  -----------------  ------------------ 
 

The cash flows in the current period relate to legacy obligations in discontinued operations, which have been settled during the current period.

Disposal groups held for sale

The International operations represented disposal groups held for sale as at 27 June 2021 and were classified accordingly in the Group balance sheet, with a single line representing the assets of the disposal group held for sale and a single line representing the liabilities of the disposal groups held for sale. Included in these amounts are the following:

 
                                                                                                  52 weeks ended 
                                   26 weeks ended 26 June 2022   26 weeks ended 27 June 2021    26 December 2021 
                                                          GBPm                          GBPm                GBPm 
 Property, plant and equipment                               -                           0.2                   - 
 Right-of-use asset                                          -                           4.5                   - 
 Trade and other receivables                                 -                           0.2                   - 
 Inventories                                                 -                           0.8                   - 
 Cash and cash equivalents                                   -                           3.0                   - 
------------------------------    ----------------------------  ----------------------------  ------------------ 
 Assets held for sale                                        -                           8.7                   - 
------------------------------    ----------------------------  ----------------------------  ------------------ 
 Lease liabilities                                           -                           4.5                   - 
 Trade and other payables                                    -                           3.2                   - 
 Liabilities held for sale                                   -                           7.7                   - 
------------------------------    ----------------------------  ----------------------------  ------------------ 
 

5. Reconciliation of non-GAAP measures

From 2022 onwards, the Group decided to no longer classify items as non-underlying, subject to any material provision reversals or changes which are considered significant enough to consider separate disclosure, such as material profit or loss from business acquisitions or disposals, or material impacts from changes to interpretation of accounting guidelines. Items which were previously included in non-underlying are now included in the underlying result.

 
                                      26 weeks ended  26 weeks ended  52 weeks ended 
                                             26 June         27 June     26 December 
                                                2022            2021            2021 
                                                GBPm            GBPm            GBPm 
-----------------------------------   --------------  --------------  -------------- 
Underlying profit for the period                42.1            49.8            93.4 
Non-underlying loss for the period                 -           (0.9)           (2.7) 
Loss from discontinued operations                  -           (7.6)          (12.4) 
------------------------------------  --------------  --------------  -------------- 
Profit for the period                           42.1            41.3            78.3 
------------------------------------  --------------  --------------  -------------- 
 

Non-underlying items included in financial statements

 
                                                                      26 weeks ended  26 weeks ended  52 weeks ended 
                                                                             26 June         27 June     26 December 
                                                                                2022            2021            2021 
                                                                Note            GBPm            GBPm            GBPm 
-------------------------------------------------------------  -----  --------------  --------------  -------------- 
Included in administrative costs: 
   Legal and professional fees                                   (a)               -           (1.1)           (1.2) 
   Amortisation of London corporate stores                       (b)               -           (0.5)           (1.1) 
   Reversionary share scheme                                     (c)               -               -           (2.2) 
                                                                                   -           (1.6)           (4.5) 
Included in other expenses: 
   Market Access Fee                                             (d)               -               -           (0.3) 
                                                                                   -               -           (0.3) 
Included in profit before interest and taxation                                    -           (1.6)           (4.8) 
Included within net finance cost 
   Market Access Fee                                             (d)               -             0.2             0.6 
Included in profit before taxation                                                 -           (1.4)           (4.2) 
Taxation                                                         (e)               -             0.5             1.5 
Included in profit for the period from continuing operations                       -           (0.9)           (2.7) 
--------------------------------------------------------------------  --------------  --------------  -------------- 
Loss for the year from discontinued operations                   (f)               -           (7.6)          (12.4) 
-------------------------------------------------------------  -----  --------------  --------------  -------------- 
Included in profit/(loss) for the year                                             -           (8.5)          (15.1) 
--------------------------------------------------------------------  --------------  --------------  -------------- 
 
   a)    Legal and professional fees 

For the 52 weeks ended 26 December 2021, legal and professional fees of GBP1.2m (H1 21: GBP1.1m) were incurred of which GBP0.9m (H1 21: GBP0.9m) related to the establishment of our long-term strategic plan in H1 21 which was announced in March 2021. An additional GBP0.3m (H1 21: GBP0.2m) related to the disposal of the International operations. The costs recognised in relation to the disposal of international operations related to professional fees for the marketing of the operations up to the point at which an agreement was reached, at which point remaining costs with the disposal were recognised as part of the loss on disposal in discontinued operations.

   b)    Amortisation of London corporate stores 

Following the decision made regarding classification items as non-underlying, the amortisation of acquired intangibles in H1 22 of GBP0.6m are presented in the underlying result for the current period. For the 52 weeks ended 26 December 2021, amortisation of acquired intangibles of GBP1.1m (H1 21: GBP0.5m) were incurred in relation to the SFA recognised on the acquisition of the London corporate stores and Have More Fun (London) Limited. This was considered to be non-underlying as the Group has a policy of franchise agreements having an indefinite life, however the SFA is deemed to be a re-acquired right under IFRS 3 which requires such rights to be amortised.

   c)     Reversionary share scheme 

No further costs relating to the reversionary share scheme have been incurred in H1 22. For the 52 weeks ended 26 December 2021, a cost of GBP2.2m (H1 21: GBPnil) was recorded in relation to the reversionary share scheme. Of this amount, GBP2.0m related to an increase in the provision previously recorded in 2017, and GBP0.2m related to professional fees. The provision increased as a result of potential exposures around the tax treatment of employee options which vested during 2013 following continued correspondence with HMRC around the treatment of the historical awards.

   d)    Market Access Fee 

The Market Access Fee was fully settled during the current period. For the 52 weeks ended 26 December 2021, a loss of GBP0.3m was recorded following changes in fair valuation of the Market Access Fee relating to the German associate (H1 21: GBPnil). The decrease in valuation is following the trading performance in 2021, which determines the level of income received under the instrument.

For the 52 weeks ended 26 December 2021, t he amount recorded in net finance costs of GBP0.6m (H1 21: GBP0.2m) represents the unwind of the discount of the fair value and foreign exchange movements. The impact of revaluation of the Market Access Fee was not considered to be ordinary trading for the Group. In the event that we received any material capital sum for deferred consideration on any business, it would equally be treated as non-underlying.

   e)    Taxation 

For the 52 weeks ended 26 December 2021, t he tax credit of GBP1.5m (H1 21: GBP0.5m) related to the non-underlying net loss before taxation of GBP4.2m (H1 21: GBP1.4m) and the effective tax rate of 35.7% (H1 21: 35.7%) is higher than the statutory rate of 19.0% (H1 21: 19.0%). The effective tax rate may differ from the statutory tax rate due to the tax treatment of certain fair value gains and the treatment of disallowed items. Taxation on the items considered to be non-underlying is also treated as non-underlying where it can be identified in order to ensure consistency of treatment with the item to which it relates. The creation and revaluation of deferred tax assets are treated consistently with the treatment adopted when the asset was created.

   f)     Loss on discontinued operations 

For the 52 weeks ended 26 December 2021, t he loss of GBP12.4m (H1 21: GBP7.6m) represented the post-tax result of the International operations of Switzerland, Sweden and Iceland, consisting of a trading loss of GBP1.5m (H1 21: GBP0.6m), interest costs of GBP0.5m (H1 21: GBP0.5m), loss on disposal of international operations, primarily consisting of foreign exchange losses recycled and professional fees of GBP9.8m (H1 21: GBP7.0m loss on disposal and impairments) and a tax charge of GBP0.6m (H1 21: credit of GBP0.5m). The detail of the disposals is set out in note 14.

6. Finance income

 
                                                     26 weeks ended  26 weeks ended  52 weeks ended 
                                                            26 June         27 June     26 December 
                                                               2022            2021            2021 
                                                               GBPm            GBPm            GBPm 
---------------------------------------------------  --------------  --------------  -------------- 
Other interest receivable                                         -             0.1             0.1 
Interest on loans to associates and joint ventures              0.2             0.2             0.4 
Discount unwind                                                   -             0.6             1.0 
Interest receivable on leases                                   6.2             6.3            12.6 
Total finance income                                            6.4             7.2            14.1 
---------------------------------------------------  --------------  --------------  -------------- 
 

7. Finance costs

 
                                                  26 weeks ended  26 weeks ended  52 weeks ended 
                                                         26 June         27 June     26 December 
                                                            2022            2021            2021 
                                                            GBPm            GBPm            GBPm 
------------------------------------------------  --------------  --------------  -------------- 
Bank revolving credit facility interest payable              3.3             2.4             4.8 
Discount unwind                                                -               -             0.1 
Interest payable on leases                                   7.0             7.2            13.9 
Foreign exchange                                               -             0.5             0.7 
Total finance costs                                         10.3            10.1            19.5 
------------------------------------------------  --------------  --------------  -------------- 
 

8. Taxation

Tax on profit from continuing activities

 
                                                                 26 weeks ended  26 weeks ended     52 weeks ended 
                                                                   26 June 2022    27 June 2021   26 December 2021 
                                                                           GBPm            GBPm               GBPm 
--------------------------------------------------------------   --------------  --------------  ----------------- 
Tax charged in the income statement 
Current income tax: 
UK corporation tax: 
- current period                                                           10.3            10.8               18.6 
- adjustment in respect of prior periods                                    0.1           (0.1)                  - 
---------------------------------------------------------------  --------------  --------------  ----------------- 
                                                                           10.4            10.7               18.6 
Income tax on overseas operations                                           0.4             0.1                0.7 
---------------------------------------------------------------  --------------  --------------  ----------------- 
Total current income tax charge                                            10.8            10.8               19.3 
---------------------------------------------------------------  --------------  --------------  ----------------- 
Deferred tax: 
Origination and reversal of temporary differences                         (2.0)           (0.9)              (0.9) 
Effect of change in tax rate                                                  -             0.6                0.8 
Adjustment in respect of prior periods                                        -               -              (0.2) 
---------------------------------------------------------------  --------------  --------------  ----------------- 
Total deferred tax credit                                                 (2.0)           (0.3)              (0.3) 
---------------------------------------------------------------  --------------  --------------  ----------------- 
Tax charge in the income statement                                          8.8            10.5               19.0 
---------------------------------------------------------------  --------------  --------------  ----------------- 
The tax charge in the income statement is disclosed as 
follows: 
Income tax charge                                                           8.8            10.5               19.0 
---------------------------------------------------------------  --------------  --------------  ----------------- 
Tax relating to items (charged)/credited to equity 
Reduction in current tax liability as a result of the exercise 
 of share options                                                         (0.1)               -                0.2 
Rate change differences in relation to deferred tax on 
 unexercised share options                                                    -             0.1                0.1 
Origination and reversal of temporary differences in relation 
 to unexercised share options                                             (0.5)               -                0.2 
---------------------------------------------------------------  --------------  --------------  ----------------- 
Tax (charge)/credit in the Group statement of changes in equity           (0.6)             0.1                0.5 
---------------------------------------------------------------  --------------  --------------  ----------------- 
 
 

There is no tax impact in relation to the foreign exchange differences in the statement of comprehensive income. The total effective tax rate is 17.3% (H1 21: 17.7%; FY 21: 17.3%)

Tax charged for the 26 weeks ended 26 June 2022 has been calculated by applying the effective rate of tax per jurisdiction to the underlying profit which is expected to apply to the Group for the period ending 25 December 2022 using rates substantively enacted by 26 June 2022 as required by IAS 34 'Interim Financial Reporting'. Items of an exceptional nature have been assessed independently.

9. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of Ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of Ordinary shares outstanding during the year plus the weighted average number of Ordinary shares that would have been issued on the conversion of all dilutive potential Ordinary shares into Ordinary shares.

Earnings

 
                                                            26 weeks ended  26 weeks ended     52 weeks ended 
                                                              26 June 2022    27 June 2021   26 December 2021 
                                                                      GBPm            GBPm               GBPm 
----------------------------------------------------------  --------------  --------------  ----------------- 
Profit after tax for the period: 
Continuing and discontinuing operations                               42.1            41.3               78.3 
Less: Discontinued operations                                            -             7.6               12.4 
----------------------------------------------------------  --------------  --------------  ----------------- 
Continuing operations                                                 42.1            48.9               90.7 
----------------------------------------------------------  --------------  --------------  ----------------- 
Adjustments for underlying earnings per share: 
Continuing operations                                                 42.1            48.9               90.7 
Included in profit after tax - Other non-underlying items                -             0.9                2.7 
----------------------------------------------------------  --------------  --------------  ----------------- 
Underlying profit after tax                                           42.1            49.8               93.4 
----------------------------------------------------------  --------------  --------------  ----------------- 
 

Weighted average number of shares

 
                                                                       At 26 June   At 27 June  At 26 December 
                                                                             2022         2021            2021 
                                                                           Number       Number          Number 
--------------------------------------------------------------------  -----------  -----------  -------------- 
Basic weighted average number of shares (excluding treasury shares)   441,981,300  464,841,300     459,234,086 
Dilutive effect of share options and awards                             2,481,473    2,323,012       2,434,861 
--------------------------------------------------------------------  -----------  -----------  -------------- 
Diluted weighted average number of shares                             444,462,773  467,164,312     461,668,947 
--------------------------------------------------------------------  -----------  -----------  -------------- 
 

The performance conditions relating to share options granted over 1,455,554 shares (H1 21: 2,457,788; FY 21: 1,486,022) have not been met in the current financial period and therefore the dilutive effect of the number of shares which would have been issued at the period end has not been included in the diluted earnings per share calculation.

There are no share options excluded from the diluted earnings per share calculation because they would be antidilutive (2021: nil).

Earnings per share

 
                                         26 weeks ended  26 weeks ended  52 weeks ended 
                                                26 June         27 June     26 December 
                                                   2022            2021            2021 
---------------------------------------  --------------  --------------  -------------- 
Continuing operations 
Basic earnings per share                           9.5p           10.5p           19.8p 
---------------------------------------  --------------  --------------  -------------- 
Diluted earnings per share                         9.5p           10.5p           19.6p 
---------------------------------------  --------------  --------------  -------------- 
Underlying earnings per share 
Basic earnings per share                           9.5p           10.7p           20.3p 
---------------------------------------  --------------  --------------  -------------- 
Diluted earnings per share                         9.5p           10.7p           20.2p 
---------------------------------------  --------------  --------------  -------------- 
Continuing and discontinued operations 
Basic earnings per share                           9.5p            8.9p           17.1p 
---------------------------------------  --------------  --------------  -------------- 
Diluted earnings per share                         9.5p            8.8p           17.0p 
---------------------------------------  --------------  --------------  -------------- 
 

10. Dividends

 
                                             26 weeks ended  26 weeks ended  52 weeks ended 
                                                    26 June         27 June     26 December 
                                                       2022            2021            2021 
                                                       GBPm            GBPm            GBPm 
-------------------------------------------  --------------  --------------  -------------- 
Declared and paid during the period: 
Final dividend for 2021: 6.8p (2020: 9.1p)             30.0            42.3            42.3 
Interim dividend for 2021: 3.0p                           -               -            13.7 
Dividends declared and paid                            30.0            42.3            56.0 
-------------------------------------------  --------------  --------------  -------------- 
 

The Directors have declared an interim dividend of 3.2p per share. This dividend will be paid on 21 September 2022 to those members on the register at the close of business on 12 August 2022.

11. Intangible assets and property, plant and equipment

During the 26 weeks ended 26 June 2022, the Group acquired assets with a cost of GBP7.4m (cash outflow of GBP7.5m). There were no material disposals in the period.

During the 26 weeks ended 27 June 2021, the Group acquired assets with a cost of GBP7.8m (cash outflow of GBP7.8m), of which GBP7.4m related to UK and Ireland and GBP0.4m related to International. There were no material disposals in the period.

12. Right-of-use assets, lease receivables and lease liabilities

Right-of-use assets

 
            26 weeks ended  26 weeks ended  52 weeks ended 
                   26 June         27 June     26 December 
                      2022            2021            2021 
                      GBPm            GBPm            GBPm 
----------  --------------  --------------  -------------- 
Property              11.1            12.2            11.8 
Equipment              9.8             9.3             7.6 
----------  --------------  --------------  -------------- 
                      20.9            21.5            19.4 
----------  --------------  --------------  -------------- 
 

Amounts recognised in the income statement

 
                           26 weeks ended  26 weeks ended  52 weeks ended 
                                  26 June         27 June     26 December 
                                     2022            2021            2021 
                                     GBPm            GBPm            GBPm 
-------------------------  --------------  --------------  -------------- 
Depreciation - Property               0.5             0.5             1.1 
Depreciation - Equipment              2.6             2.6             5.4 
-------------------------  --------------  --------------  -------------- 
 

Lease receivables

 
           26 weeks ended  26 weeks ended  52 weeks ended 
                  26 June         27 June     26 December 
                     2022            2021            2021 
                     GBPm            GBPm            GBPm 
---------  --------------  --------------  -------------- 
Property            198.2           201.4           201.2 
                    198.2           201.4           201.2 
---------  --------------  --------------  -------------- 
 

Lease liabilities

 
            26 weeks ended  26 weeks ended  52 weeks ended 
                   26 June         27 June     26 December 
                      2022            2021            2021 
                      GBPm            GBPm            GBPm 
----------  --------------  --------------  -------------- 
Property             211.4           215.6           215.2 
Equipment             10.0             9.1             7.4 
----------  --------------  --------------  -------------- 
                     221.4           224.7           222.6 
----------  --------------  --------------  -------------- 
 

13. Investment in associates and joint ventures

 
                                                     26 weeks ended  26 weeks ended  52 weeks ended 
                                                            26 June         27 June     26 December 
                                                               2022            2021            2021 
                                                               GBPm            GBPm            GBPm 
---------------------------------------------------  --------------  --------------  -------------- 
Investments in associates                                      51.0            39.1            48.0 
Investments in joint ventures                                   4.7             4.7             4.7 
---------------------------------------------------  --------------  --------------  -------------- 
Total investments in associates and joint ventures             55.7            43.8            52.7 
---------------------------------------------------  --------------  --------------  -------------- 
 

During the period, the German associate contributed profits of EUR2.1m (GBP1.8m). Full House Restaurants, contributed profits of GBP1.8m, along with paying a dividend of GBP1.2m, whilst the Northern Ireland JV contributed profits of GBP0.6m.

14. Business combinations and disposals

On 2 May 2021, the Group disposed of its 100% interest in PPS Foods AB, the business in Sweden, with net consideration paid to the buyers of GBP2.8m. The loss on disposal of the Group's interest in Sweden was GBP0.4m.

On 31 May 2021, the Group disposed of its 100% interest in Pizza Pizza EHF, the business in Iceland, with net consideration received of GBP13.5m. The final working capital adjustment was finalised during the period, and an additional GBP0.7m was paid to the purchaser. The loss on disposal of the Group's interest in Iceland was GBP7.3m.

On 31 August 2021, the Group disposed of its 100% interest in Dominos Pizza GmbH, the business in Switzerland, with net consideration paid of GBP0.5m. The final working capital adjustment was finalised during the period, and an additional GBP0.5m was paid to the purchaser, and GBP0.3m worth of provisions are held in respect of indemnities under the agreement. The loss on disposal of the Group's interest in Switzerland was GBP2.1m.

 
                                                                   PPS Foods AB  Pizza Pizza EHF  Dominos Pizza GmbH 
                                                                         Sweden          Iceland         Switzerland 
                                                                           GBPm             GBPm                GBPm 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
Cash (paid)/received on disposal                                          (2.7)             14.1                 0.5 
Cash disposed                                                             (0.1)            (0.6)               (1.0) 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
Net cash (paid)/received on disposal                                      (2.8)             13.5               (0.5) 
Consideration payable post disposal                                           -            (0.6)               (0.8) 
Net liabilities/(assets) disposed excluding cash (see below)                3.3           (13.6)                 1.0 
Currency translation losses transferred from translation reserve          (0.5)            (6.1)               (1.3) 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
Loss on disposal before professional fees                                     -            (6.8)               (1.6) 
Non-underlying professional fees related to the disposal                  (0.4)            (0.5)               (0.5) 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
Total costs of disposal                                                   (0.4)            (7.3)               (2.1) 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
 
Property, plant and equipment                                                 -             16.8                 0.4 
Inventories, trade and other payables                                     (0.9)            (0.6)               (1.4) 
Right-of-use assets                                                           -              3.3                 4.5 
Lease liabilities                                                         (2.4)            (3.4)               (4.5) 
Deferred tax liabilities                                                      -            (2.5)                   - 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
Net (liabilities)/assets disposed excluding cash                          (3.3)             13.6               (1.0) 
-----------------------------------------------------------------  ------------  ---------------  ------------------ 
 

Currency translation losses transferred from translation reserve represent the historical gains and losses built up on retranslation of the assets and liabilities of the foreign operation on consolidation from local currency to pounds sterling, which were recognised within the currency translation reserve and presented in other comprehensive income. On disposal, these amounts are recycled from the currency translation reserve to the income statement and presented as part of the loss on disposal.

15. Financial liabilities

Banking facilities

As at 26 June 2022 the Group had a total of GBP350.0m (26 December 2021: GBP350.0m) of banking facilities, of which GBP73.2m (H1 21: GBP131.5m; FY 21: GBP106.7m) was undrawn.

Bank revolving facility

As at the 26 June 2022, the Group had a GBP350.0m multicurrency syndicated revolving credit facility with an original term of five years to 13 December 2022 which following a one-year extension arranged in November 2018 was extended to 12 December 2023. The revolving credit facility was amended and restated on 2 December 2021, to amend the GBP interest base rate from LIBOR to SONIA.

Fees of GBP0.5m were paid for the extension. Arrangement fees of GBP0.4m (H1 21: GBP1.2m; FY 21: GBP0.8m) directly incurred in relation to the facility were included in the carrying values of the facility and were being amortised over the extended term of the facility.

As at 26 June 2022, an ancillary overdraft and pooling arrangement was in place with Barclays Bank Plc for GBP10.0m covering the Companies; Domino's Pizza UK and Ireland Limited, DPG Holdings Limited, DP Realty Limited, and DP Pizza Limited. An ancillary overdraft was in place with Barclays Bank Plc for EUR5.0m for Domino's Pizza UK and Ireland Limited. Interest was charged for both overdrafts at the same margin as applicable to the revolving credit facility above SONIA (or equivalent).

New Debt Financing

The GBP350.0m revolving credit facility was replaced by a GBP200.0m multicurrency revolving credit facility, entered into on 26th July 2022, and GBP200.0m private placement loan notes entered into on 27th July 2022, which expire in 2027.

Interest charged on the new private placement loan notes is at 4.26% per annum.

Interest charged on the new revolving credit facility ranges from 1.85% per annum above SONIA (or equivalent) when the Group's leverage is less than 1:1 up to 2.85% per annum above SONIA for leverage above 2.5:1. A further utilisation fee is charged if over one-third is utilised at 0.15% which rises to 0.30% of the outstanding loans if over two-thirds is drawn. In addition, a commitment fee is calculated on undrawn amounts based on 35% of the current applicable margin.

The new facility is secured by an unlimited cross guarantee between Domino's Pizza Group plc, DPG Holdings Limited, Domino's Pizza UK & Ireland Limited, DP Realty Limited, DP Pizza Limited, Sell More Pizza Limited, Sheermans SS Limited and Sheermans Limited.

As at 1 August 2022, an ancillary overdraft and pooling arrangement was in place with Barclays Bank Plc for GBP20.0m covering the Companies; Domino's Pizza Group plc, DPG Holdings Limited, Domino's Pizza UK & Ireland Limited, DP Realty Limited, DP Pizza Limited, Sell More Pizza Limited, Sheermans SS Limited and Sheermans Limited. Interest is charged for the overdraft at the same margin as applicable to the revolving credit facility above SONIA (or equivalent).

Share buyback obligation

On 8 March 2022, the Group entered into an irrevocable non-discretionary programme with Numis Securities Limited to purchase up to a maximum of GBP46.0m of shares from 9 March 2022. During the period 12,583,665 shares were purchased for consideration of GBP43.7m (GBP42.5m cash paid), which includes costs of GBP0.2m. The remaining share buybacks outstanding as at 26 June 2022 is recognised as a financial liability of GBP3.7m, which includes GBP1.2m payable at the end of the period.

On 9 March 2021, the Group entered into an irrevocable non-discretionary programme with Numis Securities Limited to purchase up to a maximum of GBP45.0m of shares from 12 March 2021. For the 26 weeks ended 27 June 2021 7,825,174 shares were purchased for a consideration of GBP28.8m (GBP28.0m cash paid). The remaining share buybacks outstanding as at 27 June 2021 was recognised as a financial liability of GBP16.7m, which included GBP0.6m payable at the end of the period.

16. Financial instruments

Other financial asset

Other financial asset relates to a contingent consideration (referred to as the 'Market Access Fee') payable by Domino's Pizza Enterprises Limited to the Group for divesting of its interests in operating Domino's Pizza stores in Germany and its exclusive access to the German market. This Market Access Fee was payable in instalments from 2017, the payment of each instalment being contingent on the divested German business achieving defined levels of EBITDA in the calendar years 2020 and 2021.

For the 52 weeks ended 26 December 2021, the Group recognised a Market Access Fee of GBP8.7m. During the current period an amount of EUR10.3m (GBP8.6m) was received in early settlement of the Market Access Fee with foreign exchange loss of GBP0.1m. There were no fair value movements during the period.

Investments

In November 2018, the Group acquired 15% of the issued share capital of Shorecal Limited, a private company registered in the Republic of Ireland that operates Domino's franchise stores in Ireland. The Group's shareholding in Shorecal Limited is in preference shares, acquired for an original cost of investment of EUR12.2m (GBP11.0m). As a preference shareholder, the Group has enhanced rights to dividend distributions and enhanced rights over Shorecal Limited's equity value in the event of a liquidation or onward share sale. The Group also has 'drag and tag' rights to participate in an onward share sale arranged by Shorecal Limited's other shareholders.

The investment in Shorecal Limited has been designated as a fair value through profit and loss equity instrument, whereby dividends received by the Group are recorded against the investment with any fair value gains recognised in other income or losses recognised in other expenses. The fair value of the investment is calculated by discounting the future shareholder returns the Group expects to receive from the investment, being proceeds from a liquidation or onward share sale and dividends received up to that point. A probability weighted expected return method has been applied in performing this fair value calculation, whereby multiple future outcomes for Shorecal Limited are simulated with a probability assigned to each scenario.

The investment in Shorecal Limited is at Level 3 of the fair value hierarchy because determining its fair value requires a probability weighted estimate of future shareholder returns, which is an unobservable fair value input.

During the period, we received dividends of EUR2.6m (GBP2.2m) which have been credited to the investment value, and the investment fair value has subsequently increased by EUR1.2m (GBP1.0m) (H1 21: EUR2.4m (GBP2.1m); FY 21: EUR2.4m (GBP2.1m)), which is recognised as a credit in the income statement, bringing the total valuation to EUR12.8m (GBP11.0m). The fair valuation has been performed based on current and expected forecast performance of the investment on a probability weighted expected return approach. This considers the potential future performance and potential dividend returns together with assessments of likelihood of various exit arrangements as structured under the shareholder agreement. The movement in the period is as a result of strong performance during 2022 and increased expected future performance of the Company over the medium term.

The key assumptions in the model are the scenario probabilities applied, the year 1 budget EBITDA and the discount rate applied. The post-tax discount rate applied is 5.04%. Sensitivity analysis has been performed to highlight the impact of movements within the key judgemental areas:

-- A 10% decrease in Year 1 EBITDA would lead to a EUR3.4m (GBP2.9m) reduction in the valuation.

-- A 10% increase in Year 1 EBITDA would lead to a EUR2.1m (GBP1.8m) increase in the valuation.

-- A 100bps increase in the discount rate would lead to a EUR1.3m (GBP1.1m) decrease in the valuation.

-- A 100bps decrease in the discount rate would lead to a EUR3.2m (GBP2.8m) increase in the valuation.

17. Share-based payments

The expense recognised for share-based payments in respect of employee services received during the 26 weeks ended 26 June 2022 was GBP1.0m (H1 21: GBP0.7m; FY 21: GBP1.7m). This all arises on equity-settled share-based payment transactions.

18. Related party transactions

During the period the Group entered into transactions, in the ordinary course of business, with related parties. Transactions entered into, and trading balances outstanding with related parties, are as follows:

 
                                    26 weeks   26 weeks    52 weeks 
                                       ended      ended    ended 26 
                                     26 June    27 June    December 
                                        2022       2021        2022 
                                        GBPm       GBPm        GBPm 
---------------------------------  ---------  ---------  ---------- 
 Associates and Joint ventures 
 Sales to related parties               16.8       13.8        30.0 
 Amounts owed by related parties         1.3        0.6         1.7 
Loans owed by related parties           10.1       13.3        10.8 
 

19. Analysis of Net Debt

 
                                                 At         As at 
                                       At   27 June   26 December 
                             26 June 2022      2021          2021 
                                     GBPm      GBPm          GBPm 
Cash and cash equivalents            40.0      39.8          42.8 
Bank revolving facility           (276.4)   (217.4)       (242.5) 
Net Debt                          (236.4)   (177.6)       (199.7) 
 
 
Of which: 
Continuing operations     (237.1)  (180.6)  (201.1) 
Discontinued operations       0.7      3.0      1.4 
 
 

The Group's lease liabilities are not included in the Group's definition of Net Debt. Lease liabilities are measured at the present value of future lease payments, including variable lease payments and the exercise price of purchase options where it is reasonably certain that the option will be exercised, discounted using the interest rate implicit in the lease, if readily determinable, or alternatively the Group's incremental borrowing rate as a lessee.

20. Additional cash flow information

Other Cash flows from investing activities

 
                                                        26 weeks ended  26 weeks ended     52 weeks ended 
                                                          26 June 2022    27 June 2021   26 December 2021 
                                                                  GBPm            GBPm               GBPm 
Dividends received from associates and joint ventures              1.7             1.0                2.2 
Dividends received from investments                                2.2             1.6                1.6 
Decrease in loans to associates and joint ventures                 0.8             3.0                4.9 
                                                                   4.7             5.6                8.7 
 
 

Share transactions in cash flows from financing activities

 
                                                        26 weeks ended  26 weeks ended     52 weeks ended 
                                                          26 June 2022    27 June 2021   26 December 2021 
                                                                  GBPm            GBPm               GBPm 
Purchase of own shares - share buyback                          (42.5)          (28.4)             (80.5) 
Purchase of own shares - employee benefit trust                  (4.7)           (2.9)              (2.9) 
Consideration received on exercise of share options - 
 employee benefit trust                                            1.4               -                0.4 
                                                                (45.8)          (31.3)             (83.0) 
 

Reconciliation of free cash flow

 
                                           26 weeks ended  26 weeks ended     52 weeks ended 
                                             26 June 2022    27 June 2021   26 December 2021 
                                                     GBPm            GBPm               GBPm 
Cash generated from operating activities             39.2            56.1              113.9 
Net interest paid                                   (2.2)           (2.2)              (4.0) 
Receipts on lease receivables                        13.2            13.0               25.7 
Repayment of lease liabilities                     (17.0)          (17.9)             (34.1) 
Dividends received                                    3.8             2.6                3.8 
Other                                               (0.2)           (0.3)              (0.7) 
                                                     36.8            51.3              104.6 
 
 
Cash and cash equivalents 
                                                                     26 weeks ended  26 weeks ended     52 weeks ended 
                                                                       26 June 2022    27 June 2021   26 December 2021 
                                                                               GBPm            GBPm               GBPm 
Cash at bank and in hand                                                       40.0            36.8               42.8 
 
Cash at bank and in hand included in disposal groups held for sale                -             3.0                  - 
Total cash at bank and in hand                                                 40.0            39.8               42.8 
 

Reconciliation of financing activities

 
                                    At                                             At 
                           26 December                 Exchange    Non-cash   26 June 
                                  2021  Cash flow   differences   movements      2022 
                                  GBPm       GBPm          GBPm        GBPm      GBPm 
Bank revolving facility        (242.5)     (33.3)         (0.2)       (0.4)   (276.4) 
Lease liabilities              (222.6)       17.0         (0.2)      (15.6)   (221.4) 
                               (465.1)     (16.3)         (0.4)      (16.0)   (497.8) 
 
 
                                    At                                                                        At 
                           27 December                                            Exchange    Non-cash   27 June 
                                  2020  Disposal of international  Cash flow   differences   movements      2021 
                                  GBPm                       GBPm       GBPm          GBPm        GBPm      GBPm 
Bank revolving facility        (243.6)                          -       22.5           4.1       (0.4)   (217.4) 
Lease liabilities              (236.9)                        5.8       17.9           0.8      (16.9)   (229.3) 
                               (480.5)                        5.8       40.4           4.9      (17.3)   (446.7) 
 
 
                                    At                                                                            At 
                           27 December                                            Exchange    Non-cash   26 December 
                                  2020  Disposal of international  Cash flow   differences   movements          2021 
                                  GBPm                       GBPm       GBPm          GBPm        GBPm          GBPm 
Bank revolving facility        (243.6)                          -      (2.7)           4.5       (0.7)       (242.5) 
Lease liabilities              (236.9)                       10.3       34.1           0.9      (31.0)       (222.6) 
                               (480.5)                       10.3       31.4           5.4      (31.7)       (465.1) 
 

21. Post balance sheet events

The GBP350.0m revolving credit facility was replaced by a GBP200.0m multicurrency revolving credit facility, entered into on 26th July 2022, and GBP200.0m private placement loan notes entered into on 27th July 2022, which expire in 2027. For more details see note 15.

22. Principal risks and uncertainties

We continue to operate an effective risk monitoring process conducted via the Executive Risk Committee, which reports to the Audit Committee on a quarterly basis. Details of the principal risks and uncertainties facing the Group, with the potential to materially impact the successful delivery of our strategy, were set out on pages 58 to 68 of the Domino's Pizza Group plc Annual Report and Accounts 2021. The Directors believe that the principal risks being faced over the remainder of the financial year, summarised as follows, are not substantially different to those disclosed in the 2021 Annual Report: competitive pressures; franchisee relationships; supply chain disruption; food safety; eCommerce and mobile platform; loss of personal and corporate data; climate change; public health debate; and people-related risks.

We noted three main challenges for the business in our 2021 Annual report risk disclosures: food supply chain uncertainties arising from the conflict in Ukraine; general food commodity price inflation; and the effect of cost-of-living increases on consumer behaviour. These will continue to be a focus for the business over the next six months and are being addressed and mitigated in several ways.

With the exception of cheese, we have agreed prices in advance with suppliers of all our key ingredients, covering the remainder of 2022. We have also tactically agreed advanced pricing into 2023 for certain ingredients which we expect to remain volatile in the short term. As a result of these measures, and our resilient long-standing relationships with our main suppliers, we have suffered no material shortage of key ingredients and continue to supply franchisee stores to our world-class standards of availability. Franchisees can therefore expect some price certainty throughout 2022, which allows greater confidence in menu pricing and short-term margin forecasting. Where it meets our purchasing objectives, we continue to explore opportunities to diversify our supplier-base and manage the risk of single-source supply.

Cost-of-living challenges have intensified, with the price of motor fuel, energy, and food reaching generational highs. Our focus remains on amplifying our value message through local deals, national campaigns, and menu innovation.

We continue to experience challenges in a constrained labour market with difficulty in recruiting colleagues across our SCCs, and for certain hard-to-fill roles in our Support Office. Our Franchisees report difficulty in attracting sufficient delivery drivers in periods of high demand. In mitigation, we are ensuring our fleet mix is flexible in response to driver availability, including using smaller vehicles where practical. We are also at the early stage of putting in place a "warehouse-to-wheels" initiative which provides opportunity, support, and training for SCC colleagues wishing to pursue a career as a qualified large goods vehicle driver. In support of peak trading around the World Cup we are launching a national recruitment campaign to attract delivery drivers and riders, introducing these applicants to relevant opportunities with our franchisees. We remain confident that Domino's is seen as a high-profile brand and attractive employer of choice.

Alternative Performance Measures and Glossary

The performance of the Group is assessed using a number of Alternative Performance Measures ('APMs').The Group's results are presented both before and after non-underlying items. Underlying profitability measures are presented excluding non-underlying items as we believe this provides both management and investors with useful additional information about the Group's performance and aids a more effective comparison of the Group's trading performance from one period to the next and with similar businesses. Underlying profitability measures are reconciled to unadjusted IFRS results on the face of the income statement with details of non-underlying items provided in note 5.

In addition, the Group's results are described using certain other measures that are not defined under IFRS and are therefore considered to be APMs. These measures are used by management to monitor on-going business performance against both shorter term budgets and forecast but also against the Group's longer term strategic plans. The definition of each APM presented in this report and, also, where a reconciliation to the nearest measure prepared in accordance with IFRS can be found is shown below:

 
                                                                                            Location 
                                                                                             of reconciliation 
Item                    Definition                                                           to GAAP measure 
Overall terminology 
Non-underlying          Items that are material in size, unusual or                         Group income 
 items                   infrequent in nature or discontinued operations                     statement, 
                         and are disclosed separately as non-underlying                      note 5 
                         items in the notes to the accounts. 
Profit measures 
Group operating         Group operating profit before tax excluding                         Group income 
 profit before           non-underlying items                                                statement, 
 tax excluding                                                                               note 3 
 non-underlying 
 items 
Net interest            Group finance costs excluding non-underlying                        Group income 
 before non-underlying   items                                                               statement, 
 items                                                                                       note 3 
Underlying profit       Group profit before tax excluding non-underlying                    Group income 
 before taxation         items                                                               statement, 
                                                                                             note 3 
Underlying profit       Group profit after taxation excluding non-underlying                Group income 
 for the period          items                                                               statement 
Earnings before         EBIT is directly comparable to underlying operating                 Not applicable 
 Interest and            profit 
 Tax (EBIT) 
Non-underlying          Items that are material in size, unusual or                         Group income 
 items                   infrequent in nature, and are disclosed separately                  statement, 
                         as non-underlying items in the notes to the                         note 5 
                         accounts. 
Underlying basic        Group EPS excluding non-underlying items                            Note 9 
 EPS 
Last 12 months          LTM EBITDA for the period from 29 June 2020                         Not applicable 
 (LTM) EBITDA            to 27 June 2021 based on underlying activities 
                         including share of profits from associates and 
                         joint ventures. 
Revenue measures 
System sales            System sales represent the sum of all sales                         Not applicable 
                         made by both franchised and corporate stores 
                         to consumers. 
Like-for-like           LFL sales performance is calculated against                         Not applicable 
 (LFL) sales growth      a comparable 26 week period in the prior year 
 excluding splits        for mature stores opened which were not in territories 
                         split in the year or comparable period. Mature 
                         stores are defined as those open prior to 27(th) 
                         December 2020. 
Like-for-like           LFL sales including splits performance is calculated                Not applicable 
 (LFL) sales growth      based on mature store growth and includes the 
 including splits        impact in like for like results of those stores 
                         which have been impacted by donating territory 
                         to a new store. 
Like-for-Like                 Like-for-like excluding splits and VAT system                 Not applicable 
 (LFL) system                  sales performance also includes the impact of 
 sales growth                  changes in the VAT applied on hot takeaway food 
 (excluding splits             where the VAT inclusive price to customers did 
 & VAT)                        not change. The VAT rate in the UK decreased 
                               from 20% to 5% on 15 July 2020, increased to 
                               12.5% on 1 October 2021 and reverted back to 
                               20% on 1 April 2022. System sales are consistently 
                               reported on an exclusive of VAT basis. However, 
                               where the inclusive of VAT price of an order 
                               remained the same on a total basis to the customer, 
                               over the reduced VAT period the exclusive of 
                               VAT price reported in system sales increased. 
                               This leads to an increase in system sales from 
                               15 July 2020 through to 31 September 2021 when 
                               the VAT rate reduced from 20% to 5%. From 1 
                               October 2021, the rate increased from 5% to 
                               12.5%. Where the inclusive of VAT price of an 
                               order remained the same on a total basis, this 
                               leads to a decrease in system sales compared 
                               to the period from 15 July 2020 and an increase 
                               in system sales compared to the period before 
                               15 July 2020. With the increase in VAT from 
                               1 April 2022 back up to 20%, where the inclusive 
                               of VAT price remained the same to the consumer, 
                               there has been a negative impact on system sales 
                               compared to the period from 15 July 2020 - 31 
                               September 2021 and 1 October 21 - 31 March 2022, 
                               as the exclusive of VAT price of an order decreased. 
                               As an example, for an order where the inclusive 
                               of VAT price is GBP27: 
                                *    From 15 July 2020 to 31 September 2021, during the 
                                     period where VAT was 5%, the reported system sale 
                                     would be GBP25.71 
 
 
                                *    From 1 October 2021 to 31 March 2022, during the 
                                     period where VAT was 12.5%, the reported system sale 
                                     would be GBP24.00 
 
 
                                *    From 1 April 2022 onwards, where the VAT rate is 20%, 
                                     the reported system sale would be GBP22.50 
 
 
                               In Ireland, the VAT rate for hot takeaway food 
                               reduced from 13.5% to 9% on 1 November 2020 
                               and remains in place. 
                               The system sales figures adjusted for VAT removes 
                               the impact on system sales of the lower VAT 
                               rates in the comparative periods to provide 
                               comparability. This is performed through adjusting 
                               the comparative figures over the reduced VAT 
                               period back to an equivalent system sales amount 
                               based on a 20% VAT rate where applicable. Group 
                               revenue is not significantly impacted by the 
                               change in the VAT rate as the aforementioned 
                               benefit only arose on hot takeaway food, and 
                               therefore only impacts the sales on the corporate 
                               stores revenue within overall Group revenue. 
Cash flow measures 
Net Debt                Group cash less bank revolving credit facility                      Note 19 
                         and other 
Free cash flow          Free cash flow comprises cash generated from                        Not applicable 
                         operations less dividends received, net interest 
                         cash flows and corporation tax. Free cash flow 
                         before non-underlying cash items represents 
                         the free cash flow before the inclusion of the 
                         cash impact of items recognised as non-underlying. 
 

Other non-financial definitions

 
Item              Definition 
AWUS              Average Weekly Unit Sales 
ASPA              Average Sales Per Address 
eCommerce fund    The fund used to recharge costs for the development and 
                   maintenance of our eCommerce platform with franchisees 
German associate  Represents our 33% associate investment in the trading 
                   operations of Domino's Pizza Germany (also referred to 
                   as Daytona JV) 
HFSS              High fat, salt, or sugar 
International     Represents our former businesses in Norway, Sweden, Iceland, 
                   and Switzerland as well as our share of the German associate. 
London corporate  Relates to the corporate stores held following the acquisition 
 stores            of Sell More Pizza Limited and Have More Fun (London) 
                   Limited and subsequent corporate store openings and closures 
NAF               National Advertising Fund 
NI JV             Represents our 46% associate investment in the trading 
                   of operations of Victa DP Ltd (also referred to as Northern 
                   Ireland JV). 
Shorecal          Represents our 15% interest in the trading operations 
                   of Shorecal Limited, a franchisee group which operates 
                   stores in the Republic of Ireland and Northern Ireland. 
 

Responsibility statement

Each of the Directors, whose names and functions appear below, confirm to the best of their knowledge that the condensed consolidated interim financial statements have been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the UK and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules (DTR"), namely:

-- DTR 4.2.7 (R): an indication of important events that have occurred during the 26 week period ended 26 June 2022 and their impact on the condensed consolidated interim financial statements; and a description of the principal risks and uncertainties for the remaining 26 weeks of the financial year; and

-- DTR 4.2.8 (R): any related party transactions that have taken place in the 26 week period ended 26 June 2022 that have materially affected the financial position or performance of the enterprise during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

The Directors of Domino's Pizza Group plc as at the date of this announcement are as set out below:

Matthew Shattock*, Chairman

Ian Bull*, Senior Independent Director

Dominic Paul, Chief Executive Officer

Natalia Barsegiyan*

Tracy Corrigan*

Stella David*

Lynn Fordham*

Usman Nabi*

Elias Dias Sese*

*Non-executive Directors

A list of the current Directors is maintained on the Domino's Pizza Group plc website at: corporate.dominos.co.uk.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from the legislation in other jurisdictions.

This responsibility statement was approved by the Board of Directors on 1 August 2022 and is signed on its behalf by Dominic Paul, Chief Executive Officer.

By order of the Board

Dominic Paul

Chief Executive Officer

1 August 2022

Independent review report to Domino's Pizza Group plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Domino's Pizza Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim report of Domino's Pizza Group plc for the 26 week period ended 26 June 2022 (the "period").

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

The interim financial statements comprise:

   --      the Group balance sheet as at 26 June 2022; 

-- the Group income statement and Group statement of comprehensive income for the period then ended;

   --      the Group cash flow statement for the period then ended; 
   --      the Group statement of changes in equity for the period then ended; and 
   --      the explanatory notes to the interim financial statements. 

The interim financial statements included in the interim report of Domino's Pizza Group plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with this ISRE. However, future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim report, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In preparing the interim report, including the interim financial statements, the directors are responsible for assessing the group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

Watford

1 August 2022

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August 02, 2022 02:00 ET (06:00 GMT)

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