Yahoo Finance Only Britain is hungry for Domino's Pizza
Domino’s Pizza (DOM.L) is facing “growing pains” abroad, reporting a 24% dive in pre-tax profits last year, according to its chief executive.
The UK and Ireland’s insatiable appetite for pizza is behind the vast majority of its sales, with the group revealing several of its newer international branches are loss-making.
The takeaway giant said sales had risen 9% over the year across the world, up from £1.16bn to £1.26bn ($1.67bn).
But total pre-tax profit dived from £81.4m ($107.7m) in 2017 to £61.9m ($81.9m) in the year to December 2018.
Net debt also more than doubled last year to £203.3m.
Chief executive officer David Wild said its UK arm had been performing well, but profits were pulled down £31.5m by costs described as one-offs in its international expansion and supply chain restructuring.
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Domino’s Pizza Group now operates in six countries through a franchise model, opening 58 new UK branches and 23 branches across the world.
It sold a record 102 million pizzas last year, but said rising labour costs and overcapacity were hitting the sector hard in the UK.
It said the firm was operating in an “uncertain consumer environment,” suggesting customers were particularly focused on value and that this uncertainty would continue until the terms of Brexit became clearer.
The company’s results also alluded to tensions with franchisees, saying it was determined to “ensure a smoother relationship” in the coming year.
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The company was forced to write down the values of its Sweden, Switzerland and Norway businesses, which are all loss-making. It said converting the stores of the Norwegian chain it bought last year, Dolly Dimple’s, into Domino’s stores had “presented challenges” and seen higher-than-expected losses.
Wild said: “2018 was a mixed year. In the UK and Ireland, which account for around 90% of the business, we extended our excellent track record of growth and cash generation, responding well to the very challenging environment for the casual dining market.
“Internationally, we have experienced some growing pains which have hampered our overall financial performance.
“These are all good markets, with more than 100 million population, good appetites for pizza and little, if any, global brand competition.
“This is why we have strengthened our management teams and are committing disciplined capital to support future development.”
“We expect an improved performance from International, with the business targeted to break even this year.”
