TIDMDOM
RNS Number : 8109V
Domino's Pizza Group PLC
16 December 2021
LEI: 213800Q6ZKHAOV48JL75
16 December 2021
DOMINO'S PIZZA GROUP PLC
Resolution with franchisees heralds new era of collaboration and
accelerated growth
Domino's Pizza Group plc ("DPG" or "the Company") is pleased to
announce that it has reached resolution (the "Resolution") with its
franchisees to unlock the significant latent potential of the
Domino's system and accelerate both near-term and long-term
growth.
DPG believes the Resolution is a great outcome for all
stakeholders: both DPG and franchisees' long-term growth and
profitability stand to improve with increased system sales and more
new store openings, customers will benefit from further
strengthened innovation and service, employees in the system will
benefit from further recruitment and a more collaborative and
growth-oriented environment, and shareholders will benefit from
enhanced value creation.
Despite a long history of strong performance, the Board
recognises that in recent years DPG has lagged comparable Domino's
businesses around the world. This Resolution unlocks an issue which
has held the Company back and means DPG and its franchisees can
begin a new era of collaboration in which the system can realise
its full potential.
The Resolution was reached between the Domino's Franchisee
Association ("DFA") and DPG, and has received overwhelming support
with franchisees representing over 99% of UK stores voting in
favour of the Resolution.
Following the launch of a new strategy and capital allocation
framework in March the Company has made significant strategic
progress this year and is building strong momentum. We have made
excellent digital progress with our new App, launched our
'Domin-Oh-Hoo-Hoo' integrated media campaign, opened a new supply
chain centre, exited international markets, and continued to
recruit top talent to the Company. All this has been done in the
midst of a challenging operating environment. We are now delighted
to finish the year with a great Resolution with our
franchisees.
Terms of the Resolution
Under the Resolution, and consistent with our strategic growth
plan, DPG will make strategic investments in the system to improve
capabilities and drive system sales growth primarily through order
count. Specifically, the Company has committed to:
-- One-time capital investment of approximately GBP20m, spread
over three years, in digital acceleration, personalisation,
ecommerce app development and in-store innovation to enhance the
customer experience and drive top-line growth;
-- Increased marketing investment to support new national campaigns and promotions;
-- An enhanced food rebate mechanism for franchisees to
encourage order growth, which is conditional on franchisees meeting
new store opening targets and order count thresholds; and
-- An improved new store incentive scheme to reward, encourage
and accelerate new store openings.
In return for DPG's investments, franchisees have agreed to the
following important commitments, which also aim to drive system
sales growth through increased order count:
-- A commitment to an enhanced schedule of new store openings,
equating to at least 45 new stores to be opened per annum over the
next three years, significantly ahead of levels achieved in
previous years;
-- A commitment to participate in new national promotional deals
focused on both delivery and collection, in contrast to a lack of
national advertising and promotions in recent years;
-- An agreement to prioritise, test, and roll-out new technology
and product innovation (such as GPS tracking) and to test new store
formats, which would bring the DPG system in-line with peer
companies; and
-- Support for changes by DPG aimed at driving efficiency across the system.
The Resolution will run for an initial period of three years
from 3 January 2022.
Financial Guidance
DPG expects results for FY21 to be in line with
expectations.
In FY22, DPG expects an acceleration in system sales growth
(excluding the benefit of the reduced rate of VAT), largely driven
by increased store openings and an acceleration in LFL growth due
to the operating and capital investments associated with the
Resolution. Despite the investments associated with the Resolution,
the Company expects FY22 underlying EBITDA(1) and EPS(2) to be in
line with current market expectations. Furthermore, both DPG and
its franchisees are now positioned to drive higher system sales and
profitability, through the medium and longer-term.
The Company is also increasing its medium-term expectations and
now expects to achieve at least the upper end of the previously
announced targets of GBP1.6bn - GBP1.9bn of system sales and exceed
the medium-term target of 200 new stores. DPG can now drive growth
by capitalising on deeper collaboration and significant
opportunities such as increasing collection, leveraging national
advertising campaigns, increasing menu innovation, reducing
delivery times, improving digital innovation, and enhancing its
value orientation. The operating environment remains challenging
however we have shown throughout the pandemic that the strength of
our delivery business, brand and vertically integrated business
model can operate successfully and deliver strong results.
DPG's one-time capital expenditure related to the Resolution
will equate to approximately GBP20m over three years, which will
result in a temporary increase in depreciation over the next few
years, normalising thereafter. In FY22, we anticipate investments
in the business to be weighted toward the first half of the
year.
DPG has a highly cash generative, asset-light business model
which is underpinned by 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 and distributing an
annual allocation of surplus cash through share buybacks. In FY21
we have returned GBP136m of surplus capital to shareholders via
dividends and share buybacks and will update the market with
guidance for the FY22 dividend and buyback programme at the full
year results in March 2022.
Dominic Paul, Chief Executive Officer, said:
"This is an important moment for Domino's, and I'm delighted we
have reached what is truly a great resolution with our
franchisees.
"We saw first-hand through the pandemic how, when we work
together, we win together. I firmly believe that the resolution we
have reached is a good one for franchisees, our people, and our
shareholders. It means that our interests are aligned, and we are
now in an even stronger position to execute our strategic plan. Our
franchisees are truly world-class, and we are looking forward to
accelerating our growth together.
"Our business continues to perform strongly, and we are looking
to the future with confidence. Combined with our new strategic plan
which is focused on accelerating our growth in both delivery and
collection, the resolution we are announcing today can unleash the
power of the Domino's brand, and enable us to deliver long-term,
sustainable growth which will benefit all our stakeholders."
Mark Millar, DFA Chairman, said:
"This framework for growth is the result of many months of
discussions, and the DFA and its members are pleased to have
reached an agreement that brings Domino's and its franchisees
closer together and enables us to focus on a future that delivers
growth for all. The DFA represents the overwhelming majority of
franchisees and what unites all of us is our belief in, and passion
for, the Domino's brand.
"We are excited about the opportunities ahead and look forward
to working closely with the management team at Domino's to deliver
the full potential of the brand."
1. Underlying EBITDA is defined as underlying earnings before
tax, interest, depreciation and amortisation
2. Underlying EPS is defined as underlying basic earnings per share
Analyst and Investor call
A call for investors and analysts will be held at 9am (GMT)
today. The call can be accessed via the registration link and will
also be available on the Results, Reports and Presentations page of
our corporate website.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulations (EU) No. 596/2014
("MAR") and is disclosed in accordance with DPG's obligations under
Article 17 of MAR.
The person responsible for making this notification is Adrian
Bushnell, Company Secretary.
For further information, please contact:
Domino's Pizza Group plc:
Will MacLaren, Head of Investor Relations - 07443 192 118
Brunswick:
Tim Danaher, Samantha Chiene - 020 7404 5959
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. We also have an associate investment
in Germany and Luxembourg.
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END
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December 16, 2021 02:00 ET (07:00 GMT)
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