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Market no like Domino's latest like-for-likes

Is the pizza delivery king reaching saturation point in the UK?
DOmino's Pizza delivery man
Domino's shareholders ... get your skid lid on, it's going to be a bumpy ride

Domino’s Pizza Group PLC’s (LON:DOM) Nordic expansion stepped up another gear with the acquisition of Dolly Dimple’s, a leading Norwegian pizza pedlar.

It is the third largest pizza company in Norway with 42 outlets across the country. The business is being acquired from Norges Gruppen for £4mln net of debt and cash.

“Dolly Dimple's is a great operation with a loyal customer base, because of its great tasting pizzas,” said David Wild, chief executive officer of Domino’s.

“The Norwegian market has plenty of opportunity for growth and with Dolly Dimple's stores and dedicated colleagues, alongside our expertise in digital and e-commerce, this acquisition will drive Domino's growth across Norway,” he added.

The acquisition was announced alongside full-year results that left a nasty taste in the mouth of investors.

The share price tumbled 13% to 342.3p in early trading as the company revealed it is struggling to keep up its breakneck growth rate in the current year.

UK like-for-like system sales, excluding the impact of split stores – where a new branch cannibalises the sales of an existing outlet – rose 9.8% in 2016 but in the first nine weeks of 2017 this growth rate had fallen to 1.5%.

Underlying profit before tax in 2016 rose 17.1% to £85.7mln from £73.2mln the year before. Revenue rose 13.8% to £360.6mln from £316.8mln the previous year.

The full-year dividend was hiked 15.6% to 8p from 6.92p in 2015.

“The UK delivered strong year-on-year growth due to robust like-for-like sales and the opening of 81 new stores,” Wild said.

“Our cash conversion remains very strong and we have reinvested through International expansion and returned cash to shareholders through dividends and share buy-backs.

"We remain confident in the resilience and long-term potential of our business model and are committed to continue to invest with our franchisees for growth. We expect to open at least 80 new stores in the UK with further footprint expansion in all our overseas operations,” he added.

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