Dominos Pizza Groups(LSE: DOM) full-year results for 2015, released in March, revealed like-for-like sales up close to 12%, representing the ninth consecutive quarter of double digital LFL rises. And aquick look at the Dominos business model makesit understandable how suchconsecutive quarterly of growth in the UK was achieved.
Dominos is essentially a franchise business. Franchisees not only buy the ingredients from Dominos but also pay a royalty on the sales they make. It would appear that increasing the amount of franchisees is the name of the game for Dominos as thatbolsters top-line growth.
However, having a store in every nook and cranny doesnt guarantee success, both the demand and customer awareness has to be theretoo. Fortunately for Dominos, Britains annual spend on fast food exceeds 29bn and expenditure on pizza is predicted to grow by 28% to 7.6bn by 2020.
The majority of that growth will be driven by online and mobile ordering. This is where Dominos really has the upper hand as its digital businessnow accounts for 77.7% of all UK delivered sales, a 30% increase from a year earlier.
There are afew bumps on the road ahead for Dominos such as the living wage, introduced in April, which will surely prove a drag on top-line growth as it increases costs for its franchisees. But this could be offset by lower input costs should the price of cheese and wheat continue to fall.
Income and capital gain investors have reason for optimism as the company has increased its annual dividend by 19% to 20.57p and saidit will resume share buybacks over the medium term.
Return to growth
Tomorrow (17 May), Vodafone Group plc (LSE: VOD) will report its full year results for the year ending 31 March 2016. Apart from the all-important service revenue figures a core metric for Vodafones mobile operations investors will be keen to get an update onpotential deals/takeovers. This stems from the worry that Vodafone may be falling behind competitors such as BT as competition to become the ultimate quad-play service provider, offering broadband, mobile, phone and pay-TV, intensifies.
Fortunately, Vodafone has some good news to wax lyrical about as the number of people using its new money transfer system a service that connects to abank account and allows usersto send and receive money, or pay bills across Africa, Asia and Europe has increased 27% from a year ago.
The City is expecting a return to service revenue growth in two of its largest markets, Germany and Italy. Service revenues are expected to have risenby 1.6% to 9.5bn in the final quarter with the largest growth expected to come from its emerging market businesses. Turkey is of particular importance as services revenues are forecast to rise by more than 20%, which should help offset the decline in the UK and Spain.
Importantly, for income investors, Vodafones current yield of 5.03% may look more secure come this time tomorrow as the company is expected to end its capital-intensive improvements to its network infrastructure. Analysts expect capital expenditure to decrease from 22% to around 15% of sales by 2017. This should help strengthen the current dividend cover of around 1.41.
Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has recommended Domino’s Pizza. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
