Domino’s, the pizza delivery chain, has consented to dispose of its Norwegian Division

The United Kingdom’s Pizza delivery chain, Domino’s Pizza Group Plc (LON:DOM) has decided to dispose of its Norwegian division as the company wants to refocus on the growth of its core United Kingdom and Ireland businesses. As per the company information, the Norwegian division is a not performing according to expectations and is incurring losses.

The company declared an agreement to sell its full seventy-one per cent stake in the Norway business by the paying up to £7 million in cash to the current minority shareholders of the business. However, Domino’s Pizza Group Plc will reimburse the losses of the division till the sale concludes as expected by the end of May 2020 as well as fund a £500,000 marketing campaign.

In October 2019, the company disclosed that it was planning to beat a retreat from overseas markets to concentrate on its flagship Ireland and the United Kingdom businesses. But the Norway division was the first on the block for sale because the Group is suffering from huge losses as per the company’s recent revelation.Â

As per media report, the Norwegian division fell to a £6.6 million operating loss for the year 2018, while Domino’s Pizza Group Plc cautioned last week that the broader global division is likely to see full-year operating losses of nearly £20 million for the year 2019. It similarly warned regarding write-downs of nearly £40 million on the offshore businesses.

Domino’s Pizza Group Plc’s stated that the company will now focus on offloading businesses in Switzerland, Iceland and Sweden.

David Wild who is retiring chief executive of the company stated that the deal is encouraging for all investors and results in a clean exit from Norway after high amounts of capital expenditure and operating losses over several years.

Through the negotiated agreement for the Norway division, the minority shareholder in the business will transfer their shares in Domino’s Sweden to the United Kingdom group which will further make it easy for the sale of the Norway venture.

The company is also under pressure to change the top management as it continues its search for Mr Wild’s successor, who is leaving the company after five years and a permanent successor for ex-chairman Stephen Hemsley, who left the company in December 2019. Lastly, David Bauernfeind, a recent chief financial officer, expired in a snorkelling accident in Mauritius.

Douglas Jack, who is an Analyst at Peel Hunt, stated that the execution of the disposal will streamline the company and bring in investor attention on the core United Kingdom business, which has put up a sustained performance during the period of volatility. He further stated that the new management team could unleash the actual potential of the core business of the company.

As per media report, the United Kingdom group purchased the stake in Domino’s Norway along with stakes in Icelandic and Swedish businesses in the year 2017 for the value of £24 million. It was eyeing to buy the rest of the businesses between the year 2020 and the year 2023. It has since disclosed that it will also sell its remaining interest in the Icelandic and Swedish businesses.Â

Overview of Domino’s Pizza Group Plc

Domino’s Pizza Group plc (LON:DOM) is a pizza delivery company which is based in the United Kingdom. The company is enthusiastic about delivering great-tasting, hot, freshly handmade pizzas to consumers. The company’s focus helped it become the prominent United Kingdom pizza brand. Additionally, the company has become the most significant player also in Ireland and Iceland. The company opened its first store in the year 1985 in the United Kingdom, and it has now more than 1,000 stores around the country with more than a 35,000 strong workforce. In the year 2019, the company sold nearly 90 million fresh handmade pizza which includes more than 7 million of the United Kingdom’s favourite, Pepperoni Passion.Â

DOM – Trading Updates

On 5^th February 2020, the company announced its fourth-quarter trading statement for the period ended 29^th December 2019.

The group system sales increased to £352.0 million in thirteen weeks to 29^th December 2019 as compared to the £339.6 million in thirteen weeks to 30^th December 2018. The United Kingdom & Republic of Ireland system sales increased to £326.7 million in thirteen weeks to 29^th December 2019 as compared to the £312.9 million in thirteen weeks to 30^th December 2018.

The United Kingdom Like-for-Like (excluding splits) sales growth decreased to 3.9 per cent in thirteen weeks to 29th December 2019 as compared to the 4.5 per cent in thirteen weeks to 30^th December 2018.

The Republic of Ireland like-for- Like (excluding splits) sales growth decreased to a negative of 1.0 per cent in thirteen weeks to 29^th December 2019 as compared to the 7.5 per cent in thirteen weeks to 30^th December 2018.

The International system sales decreased to £25.3 million in thirteen weeks to 29^th December 2019 as compared to the £26.6 million in thirteen weeks to 30^th December 2018.

The company opened 12 stores in the United Kingdom and Rest of Ireland in the fourth quarter ended 29^th December 2019. However, 32 stores have opened in the United Kingdom and the Rest of Ireland during the year 2019.

Online sales in the United Kingdom increased by 8.3 per cent while that in the Republic of Ireland increased by 11.0 per cent during the period.

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DOM - Stock Price Performance

On 14^th February 2020, at around 08:07 AM (GMT), the stock of Domino’s Pizza Group Plc was trading at a price of GBX 313.0 per share on the London Stock Exchange, an increase in the value of around 0.61 per cent or GBX 1.90 per share, as opposed to the closing price of the stock on the previous trading day, which has been reported to be at GBX 311.10 per share.

At the time of writing, the market capitalisation of Domino’s Pizza Group Plc was £1.44 billion with regards to the current market price of the stock. The free float and outstanding shares of Domino’s Pizza Group Plc were reported at 422.78 million and 462.23 million, respectively.

The share price of Domino’s Pizza Group Plc recorded at GBX 335.90 as on 13^th December 2019 was its 1-year peak price, whereas the share price recorded at GBX 218.90 as on 19^th August 2019 was its 1-year low share price. The current share price was lower by 6.8 per cent from the 1-year high price, whereas the current share price was higher by 42.98 per cent from the 1-year low price.

The beta of the stock has been reported at a value of 1.23, representing the fact that the volatility of share price of the company is higher as compared to the volatility in the movement of the comparative benchmark index.