Domino's Pizza Share Discussion Threads

[skinny] 30/7/2013 12:07

Copied from elsewhere :-

Canaccord comment today:
"System sales are up 13.8% and despite operating margins rising 30bps, PBT growth has lagged sales growth at 10.3%. These growth rates exclude Germany and Switzerland which when accounted, has resulted in PBT falling 46%. The group has incurred exceptional charges of £12.3m relating to impairments of the German business. Whilst the headline UK and IRE LFL sales number will make for some positive reading at c6.5%, we are not seeing the expected profit flow through that one would expect. Greater clarity on the price, mix and volume dynamic is required as one should not lose sight that DOM Plc makes c75% of its revenues as a food distributor to its franchisees. Overall EPS (FD) is up 5.4%, DPS is up 7.6% but overall net debt is up 43% to £23.3m. Moreover the CFO, Lee Ginsberg is leaving the business at the 2014 AGM and a search for his successor will commence shortly
The performance of the German business is of increasing concern. Whilst management highlight German LFL sales up 23.8%, at the same time there is a £12.3m write down of German assets. The CEO comments further on that there will be a longer path to profitability with breakeven in 2016 or 2017 rather than 2015 We are also concerned that the drivers of the +6.4% LFL sales in H1 are not sustainable, and could be impacting franchisee margins via an increase in overall system promotional activity. Whether this dynamic as well as the majority of new openings being area splits, could be hampering franchisee appetite to open more stores. This would represent the one main risk to the investment case. Comments that pressures on commodity prices are rising could also lead to higher prices being passed onto franchisees.
The shares trade on a PE of 27x and EV/EBITDA of 16.6x for a business that is now delivering forecast and balance sheet downgrades. Our forecasts assume PBT growth of c15% in the UK & IRE business vs. the 10% delivered in H1, with the overall group c5% - forecast risk remains on the downside. Cash from operations of £15.5m (2012: £18.8m), significant working capital investment in Germany (increase in debtors) has resulted in higher debt. We feel the combination of multiple moving parts has resulted in higher risk suggesting a moderation to our Quest™ derived target price which we reduce to 500p. SELL.

[philanderer] 30/7/2013 12:04

Just watching at the moment.

Canaccord downgrade details c/o FT Alphaville


Oh, Domino's being mentioned on the right.
Domino's Pizza Group PLC (DOM:LSE): Last: 546.00, down 54 (-9.00%), High: 587.00, Low: 542.50, Volume: 1.44m
BE
Typical story really ..... Was tremendously successful for ages ......
BE
Most successful company in the FTSE, according to one (slightly spurious) measure
BE

BE
Then they tried to invade Germany.
BE
And it's not quite worked.
BE
Basically, we're looking at Germany not hitting breakeven until 2016 or 2017, rather than 2015 as previously stated.
BE
They've already had to rejig the franchise to owned model there, which contributed to the earlier profit warning.
BE
So why don't Germans like overpriced, rather too thick and overly damp pizzas? Odd.
BE
The results themselves are a horrible read so I'm going to default to Canaccord to take us through them.
BE
System sales are up 13.8%
and despite operating margins rising 30bps, PBT growth has lagged sales growth at
10.3%. These growth rates exclude Germany and Switzerland which when
accounted, has resulted in PBT falling 46%. The group has incurred exceptional
charges of £12.3m relating to impairments of the German business. Whilst the
headline UK and IRE LFL sales number will make for some positive reading at c6.5%,
we are not seeing the expected profit flow through that one would expect. Greater
clarity on the price, mix and volume dynamic is required as one should not lose sight
that DOM Plc makes c75% of its revenues as a food distributor to its franchisees.
Overall EPS (FD) is up 5.4%, DPS is up 7.6% but overall net debt is up 43% to
£23.3m. Moreover the CFO, Lee Ginsberg is leaving the business at the 2014 AGM
and a search for his successor will commence shortly

BE
The performance of the German business is of increasing concern. Whilst
management highlight German LFL sales up 23.8%, at the same time there is a
£12.3m write down of German assets. The CEO comments further on that there will
be a longer path to profitability with breakeven in 2016 or 2017 rather than 2015.
We are also concerned that the drivers of the +6.4% LFL sales in H1 are not
sustainable, and could be impacting franchisee margins via an increase in overall
system promotional activity. Whether this dynamic as well as the majority of new
openings being area splits, could be hampering franchisee appetite to open more
stores. This would represent the one main risk to the investment case. Comments
that pressures on commodity prices are rising could also lead to higher prices being
passed onto franchisees.

BE
The shares trade on a PE of 27x and EV/EBITDA of 16.6x for a business that is now
delivering forecast and balance sheet downgrades. Our forecasts assume PBT growth
of c15% in the UK & IRE business vs. the 10% delivered in H1, with the overall group
c5% - forecast risk remains on the downside. Cash from operations of £15.5m (2012:
£18.8m), significant working capital investment in Germany (increase in debtors) has
resulted in higher debt. We feel the combination of multiple moving parts has
resulted in higher risk suggesting a moderation to our Quest™ derived target price
which we reduce to 500p. SELL.

BE
27 times!
BE
For what's basically a wholesaler of flour, water and sausage.
BE
Remarkable.
PM
Certainly is
11:52AM

[robinnicolson] 30/7/2013 11:52

The CFO just sold 70k shares.

[spacecake] 30/7/2013 11:27

Stop loss frenzy ?... seems a over reaction to slow start in Germany.. It took Tesco a few years to swallow its pride over their failure in the USA.

[salpara111] 30/7/2013 10:05

The problem here is that the stock trades on a very punchy p/e due to its growth potential but it is clear that profits are not going to even reach the level of 2012 again until probably 2015 as losses (hopefully!) drop in Germany.
If you were to apply a "normal" market average p/e to the stock at present then the share price would be closer to £2.50 so there is plenty of future growth in the share price at present.
I would expect it to drift back to the £5 region in the next few months and if it stabilises then it could make a reasonable entry point.
Germany and particularly Switzerland have proven difficult markets to crack before so it is not a given that they will simply turn around and generate profits.
When the business was simply a play on UK obesity it was a relatively safe bet but now there are a lot more risk variables in play.

[m1das_touch] 30/7/2013 07:37

Results as expected, with losses in Germany holding things back and Germany now not expected to be profitable until 2016 or 2017 instead of 2015 as previously forecast.

This excerpt from the Chairman's statement sums up why I will be topping up on any price weakness today: -

"Germany is a true start up, in one of the most exciting markets in Europe. It will take time to reach scale there, to build enough brand awareness and open sufficient stores to cover our fixed costs. This process will take longer than originally expected. Those of us with long memories will recall that it felt similar in the UK back in the 90's and we have been through this before. It is important to remember that Domino's businesses round the world have taken some time to reach critical mass, before going on to be real profit generators."

[mj19] 29/7/2013 16:33

I bought at £6 looks oversold, hope I am right

[m1das_touch] 29/7/2013 15:27

Not too scared to buy before tomorrow, but prefer to wait until interims are out before topping up - results day often creates a good buying opportunity with DOM.

I have a long term holding in my SIPP, but I also position trade with the price fluctuations. My last trade was buy 446 / sell 646, for a nice 200 point profit!!

[rhatton] 29/7/2013 15:20

Tempted with a small Spread bet, feeling that German news is now known so no surprises tomorrow. May hold off till the morning though.

[mj19] 29/7/2013 14:36

anyone buying before tomorrow or too scared?

[spacecake] 26/7/2013 17:47

Seen the wheat price chart, very bullish going forward.

hxxp://www.4-traders.com/CHICAGO-WHEAT-MAY-13-16218/technical_analysis-full/

[rvsy38] 26/7/2013 16:17

t4j

Thanks - I did confuse the two !

[t4j] 26/7/2013 10:57

Hi rysy38
I think you may be confusing Dominos USA(DPZ) which in listed on NYSE with Domino Pizza UK & Irl plc(DOM) which is listed in London. Dom UK usually pay an interim dividend in early August and a final dividend late Feb- early April.
DOM's share price and dividend is paid in sterling.
Hope this is helpful.

[rvsy38] 26/7/2013 08:38

I have just seen the 2Q results announced in NY on 23 July and see there will be a 20c dividend payable on 30 September.

As a recent shareholder this will be my first dividend . Can someone please advise if UK shareholders get their dividends on the same date converted into sterling.

Thanks.

[robinnicolson] 19/7/2013 17:06

Unfortunately I suspect the hot weather this month will negatively affect Domino Pizza's sales.

[phoenix1234] 04/7/2013 13:23

Domino's Pizza - trading update, unsavoury taste from Germany

[lucky_punter] 04/7/2013 08:34

Domino's Pizza's losses in Germany greater than anticipated
By John Harrington July 03 2013, 10:09am 'Our system leads the leisure sector and, with the majority of our business coming via web and mobile platforms, we are now truly an online retailer,' said Domino's boss, Lance Batchelor."Our system leads the leisure sector and, with the majority of our business coming via web and mobile platforms, we are now truly an online retailer," said Domino's boss, Lance Batchelor.
The market took a slice out of Domino's Pizza (LON:DOM) shares after the company revealed slowing like-for-like (LFL) sales growth and heavier than expected losses in Germany.

[major clanger] 03/7/2013 16:27

Downgraded by Canaccord Genuity to sell from hold; TP cut to 550p from 570p

www.brokerforecasts.com/news/article/articleId/4625987

[m1das_touch] 03/7/2013 15:27

Lol, it's not a profit warning - the German business is still tiny compared to the rest of the group, it's in effect a 'start-up subsidary.' so losses are to be expected in the initial years.

Overall I think this is a cracking trading update and I took advantage of the fall to buy in again at 619p, having taken profits a couple of weeks back after the strong recent run.

I've seen this happen with DOM a number of times before - a big share price fall after strong results or trading update. It usually proves to be a great but short-lived opportunity to buy in or top-up. The price seemed to find some support around the 620p level and is already rebounding strongly.

May fall yet further in the coming days, but personally I'll be looking at any short-term weakness as a buying opportunity.

Germany is the future here, potentially massive upside on a 3-5 year view in my opinion once the operational gearing kicks in over there.

[mj19] 03/7/2013 14:49

Domino's Pizza Group retreated after warning annual losses at its fledging German business would be higher than anticipated due to an increase in training costs and poor performance at some of its stores. Panmure Gordon reiterated a 'sell' rating for the company's stocks following the profit warning on Wednesday.

was it a profit warning....didnt think it was that bad

[huttonr] 03/7/2013 14:31

Thanks for the comments - I decided to take advantage of the fall in price to buy an extra 1000 - may be a mistake but ........

[mj19] 03/7/2013 09:55

lost my house...shirt etc where is the love on this board lol

oh well £900 down

[jak1] 03/7/2013 09:38

Snap, me gone to...



philanderer
13 Jun'13 - 09:21 - 1968 of 1972 1 0

Sold out this morning , trailing stop hit.

Luck to all.

[mj19] 03/7/2013 09:34

i am upset now!

[robinnicolson] 03/7/2013 09:12

From reading City commentary this morning, the fall seems to be due to the larger than expected losses in Germany.
Company broker Numis have just downgraded DOM to 'add' from 'buy'.