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Domino's Pizza Group PLC lifted its dividend despite a sharp fall in profit, due to a lag in passing on cost increases to its franchisees.
Shares in Domino's were down 1.7% at 285.76 pence each on Tuesday in London.
The Buckinghamshire-based pizza delivery chain recorded a pretax profit of £50.9 million in the six months to June 26, down 14% versus £59.4 million a year before.
Domino's blamed this on the timing of passing through cost increases to its franchisees. ‘This timing lag is typical in our business and a function of our franchisee agreements,’ it explained.
Revenue grew marginally by 0.2% to £278.3 million from £277.8 million.
The company attributed this to increased ‘supply chain revenue’ from product sales to franchisees. Supply chain revenue is one of Domino's revenue segments.
‘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,’ Domino's said.
The FTSE 250 company declared an interim dividend of 3.2 pence per share, 6.7% higher year-on-year from 3.0p.
Looking ahead, Domino's Pizza expects to grow its market share in the second half of the year.
The company noted that since it started passing on price increases during the first half of the year, it will not see the full benefit until the second half.
It, therefore, expects its profit for 2022 to be weighted towards the second half.
Domino's expects underlying earnings before interest, tax, depreciation, and amortisation and earnings per share to be in line with current market expectations. Underlying Ebitda was £63.5 million in the first half, down 11% from £71.7 million a year before.
Analyst at Liberum noted that while Domino's maintained its guidance as being in line with market expectations, those expectations now are lower, forecasting a 2% EPS decline, versus 2% growth previously.
‘We believe the group is in a downgrade cycle with heightened risks,’ the investment bank said, keeping its 'sell' recommendation in place.
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