Will Investors Tuck Into A Slice Of Domino’s Pizza Following FY Results?
Spreadex | Mar 06, 2019 13:03
It was a tale of two halves for the food firm in 2018. In early summer things were looking good, the stock hitting a 15-month peak of £3.89 at the start of June. Yet, like a pizza covered in anchovies and olives, Domino’s was tossed out by investors in the back end of the year, wrapping up December at just £2.36.
Initially the company looked like it was entering 2019 in recovery mode, quickly climbing above £2.75 towards the end of January. However, a month-closing Q4 update undid all that work, putting Domino’s Group PLC on track to slip to a current trading price of £2.40.
While the fourth quarter performance in the UK was strong, with a super-charged showing in the run-up to Christmas causing a 4.5% increase in like-for-like sales and a 6% rise in system sales, internationally Domino’s hit a speed bump, where systems sales on a reported basis fell 2%.
Specifically, the troubled integration of its business in Norway – blamed on ‘unseasonably warm and dry weather’ – is causing issues, meaning its underlying pre-tax profit is expected to come in at the lower end of the previously forecast £93.9 million to £98.2 million range. That means it’ll likely see a decline from 2017’s £96.2 million.
Obviously a lot of the reaction on Tuesday is going to be dependent on how low pre-tax profit ends up being. As for 2019, given that in January Domino’s said that its plan to ‘invest in central functions and infrastructure to support much bigger businesses’ internationally will have an impact on ‘overall profitability in the short term’, investors will want to get an idea of the size of said impact.
Domino’s Pizza Group PLC(LON:DOM) (LON:DOM) has a consensus rating of ‘Hold’ alongside an average target price of £3.36.
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