Domino’s under fire over £20m buyback
DOMINO’S Pizza has been criticised for embarking on a £20m share buyback programme as its debt pile swells and the UK hurtles towards recession.
Analysts warned the delivery company’s bid to purchase £20m of its own shares will increase its financial risk in a downturn after its debt pile hit £236m.
Wayne Brown, at Liberum, said: “At a time when debt is now up to £236m, and we are about to head into a major recession, the group is ploughing on with a further £20m share buyback programme increasing the financial risk.”
It came as Domino’s posted a 16pc fall in pre-tax profits to £51m for the 26 weeks ended June 26 as the business struggled with rising costs. Group revenue was flat at £278m despite efforts to offset rising ingredient prices and other costs, including the launch of a delivery fee of between 99p and £2.50 in March.
Liberum also questioned whether the company’s franchisee store owners would be able to open new sites accord- ing to Domino’s target. Mr Brown said: “Their margins must be getting smashed in this environment.”
But Dominic Paul, the chief executive, said Domino’s did not foresee any deterioration in its finances. He said the group would be more profitable in the second half when it has passed on inflationary costs to its franchisees.
Mr Paul said: “We today reiterated our guidance for the year. That’s important, many businesses are changing their guidance. We also just went through a really successful round of financing for the next five years, which gives us a lot of headroom.
“All of those things are completely within the framework that we’ve set out, as is our guidance, so we think this a sensible and prudent, but progressive way of running the business going forward. We do all of this in consultation and discussion with our shareholders, and they are very supportive of it.”
Shares fell 6.1pc to close at 273.2p.