Domino’s Pizza Enterprises Ltd impresses investors, shares up 5.7%

NPAT grew by 38.8% and total sales rose 39.9%.

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Investors reacted positively to Domino’s Pizza Enterprises Ltd’s (ASX: DMP) half-year results with shares climbing as high as $18.49 following the announcement, before settling at around $18.10 by midday – a 5.7% gain for the day.

The report was overall very positive for the group, which included a $20.2 million underlying net profit after tax (NPAT), resembling an increase of 38.8% compared to the previous corresponding period. Although its NPAT was slightly below the market consensus forecasts of $21.1 million, underlying earnings before interest and tax were reported as $31.6 million, which exceeded the market’s expectations of $30.5 million.

Furthermore, total sales rose a whopping 39.9% to $576.2 million, aided by the opening of a record 60 new stores worldwide including 25 in Australia and New Zealand.

Domino’s Pizza Japan

The company’s newly acquired Domino’s Pizza Japan (DPJ) business pleased investors no-end. Domino’s acquired the 75% shareholding in the business roughly four months ago and, in that time, experienced a record sales month in December of ¥3.6billion (roughly $38.8 million). Pleasingly, the company also surpassed Pizza Hut in total network sales in Japan, to become number two in the region and achieved 7.8% growth in same store sales (SSS). Twenty-one new stores were also opened for the half.

Online sales

Almost 60% of total sales across Australia are now being made online with 50% of those sales coming from mobile devices. In its 2013 annual report, the company announced that it had plans to grow this figure to around 80% in the next three years, as it aims to transform its current pizza business into “an online digital business that sells pizza.”

The company reported today that it has implemented the global online ordering and point-of-sale systems in the Netherlands, while the rollout has also begun in France and Belgium.

Outlook

The company will continue to focus on improving its Europe division with Andrew Rennie, the new CEO Europe, aiming to accelerate store, sales and profit growth for the region. Following on from its strong first half, Domino’s has also upgraded its EBITDA growth guidance for Japan to be around 25% for the full year.

Meanwhile, the company will continue to rollout new stores, with a further 25 to be opened across Australia and New Zealand in the coming half. The company has also increased its interim fully-franked dividend by 14.2% to 17.7c per share, which will be paid on Tuesday 11 March, 2014, with a record date of Monday 24 February, 2014.

Foolish takeaway

There is no denying that Domino’s is a quality business – the above results are proof of that. However, with the company trading on a P/E ratio of 35.6, its shares are no bargain. In comparison, Retail Food Group (ASX: RFG), which owns Pizza Capers, is trading on a P/E ratio of 16.5 and offers a trailing 4.4% fully franked dividend yield.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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