Domino’s puts brakes on German expansion

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Pizza delivery chain Domino’s is to slow its expansion plans in Germany after losses at the fledgling business took the shine off a rise in sales.

The firm, which has 739 outlets in the UK, said its German operations are not expected to break even until 2016 or 2017 after it decided to proceed more cautiously with its growth plans.

Chief executive Lance Batchelor said uncertainty about the launch of a new minimum wage in Germany, where the group has 25 stores, was “frustrating” and would hamper job creation in the country.

Chairman Stephen Hemsley said Germany was an “exciting” market, with sales up 23.8 per cent, but it will take time to build enough brand awareness to cover the firm’s costs.

He added: “Those of us with long memories will recall that it felt similar in the UK back in the 1990s and we have been through this before. It is important to remember that Domino’s businesses round the world have taken some time to reach critical mass before going on to be real profit generators.”

One-off charges of £12.3 million, including a write-down against its German master franchise agreement, saw pre-tax profit fall 46 per cent to £11.6m in the six months to 30 June.

However, profits excluding its operations in Germany and Switzerland rose by 10.3 per cent to £25.7m as increasing online demand and products such as gluten-free pizza bases and hot-dog stuffed crusts proved popular in the UK, where like-for-like sales grew 6.4 per cent.

Shareholders will receive an interim dividend of 7.1p, up 7.6 per cent year on year.