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Domino’s Pizza Group Plc Dominates UK But Struggles To Deliver In Germany

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Popular pizza maker Domino’s Pizza (LSE: DOM) said today that while it continues to gain in popularity in the UK and Ireland, it’s still struggling to gain ground — and make a profit — in Germany.

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For the 52 weeks ending 29th December, 2013, the pizza franchiser reported profit before tax (including tough conditions in Germany and Switzerland) of £47.6 million, which is up just 1.9% year over year. Excluding Germany and Switzerland, where Domino’s is deploying an expensive expansion plan yet to be proven in, pre-tax profits were up 11.6% to £55.2 million.

Domino’s said it opened 57 stores (down from 69 in 2012) and closed just 4 in 2013, bringing its grand total to 858 stores across four countries. These stores — and Domino’s strong online business — contributed to a 14% increase in sales to £668 million.

Like-for-like sales — or sales driven from stores that have been open at least a year — were up 7% in the UK, a good sign of growth in Domino’s core UK market.

Looking purely at online sales, which account for a hug 62% of its business in the UK, Domino’s said it saw a 28.2% increase to £338 million. A record 31% of online orders were taken through a mobile device, an important growth area for the business.

Commenting on the results, interim Chief Executive Officer David Wild said:

“It’s been another strong year for Domino’s and I am particularly delighted by the sales performance in our core UK business, which has continued into 2014, confirming the strength of our offer for both new and existing customers. The recovery in the Republic of Ireland is also pleasing. Whilst we have learnt some hard lessons in Germany, we now have a clear way forward and must focus on the delivery of this change in direction.

“We sold 65.5 million pizzas across the Group during the year and created over 1,500 jobs, which is no mean feat.”

For investors following Domino’s for the dividend, there is good news: the firm said the final dividend increased 11.4% to 8.80p per share (2012: 7.90p), bringing the total dividend for the year to 15.90p per share (which is up 9.7% from 2012).

Domino’s is showing positive signs of growth in its core UK business, but it continues to spend money trying to gain traction elsewhere. For investors, Domino’s Pizza’s franchise model means that store growth tends to translate nicely into even greater cash flow growth.

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> Jill Ralph does not own shares of any company mentioned. The Motley Fool has recommended shares in Domino's.

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