Domino's (ASX:DMP) share price higher after delivering strong first half growth

The Domino's Pizza Enterprises Ltd (ASX:DMP) share price is on the move on Wednesday following the release of its half year results…

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In morning trade Domino's Pizza Enterprises Ltd (ASX: DMP) shares are pushing higher following the release of the company's half-year results. At the time of writing, the Domino's share price is up 3.32% to $101.23.

What's driving the Domino's share price?

The Domino's share price is on the rise after the company delivered strong sales growth and even stronger earnings growth during the first half of FY 2021.

For the six months ended 31 December, Domino's delivered total global food sales of $1.84 billion. This was an increase of $260.8 million or 16.5% over the prior corresponding period.

This strong top line growth was driven by same store sales growth of 8.5% and the opening of 131 organic new stores. The majority of its new store openings were in Japan, with 68 new stores. This was supported by 50 new stores Europe and 13 new stores in the ANZ market.

Thanks to margin expansion, Domino's earnings before interest and tax (EBIT) grew at the even quicker rate of 32.3% to $153 million.

This was predominantly driven by its international operations, which delivered EBIT growth of 55.7% to $99.9 million. Its international operations now account for 65.3% of total EBIT. ANZ EBIT grew 9.8% to $63.7 million.

On the bottom line, the company's underlying net profit after tax increased 32.8% to $96.2 million.

Also growing strongly was the pizza chain operator's free cash flow. It came in 50.3% higher at $124.4 million.

This allowed the Domino's board to declare an interim dividend of 88.4 cents per share (50% franked). This represents an increase of 32.5% over last year's dividend.

Management commentary

Domino's CEO and Managing Director, Don Meij, was very pleased with the company's performance. He believes the result reflects experienced management and franchisees executing on a long-term strategy, rather than one-off costs or short-term sales attributable to COVID-19.

He said: "The performance this half predominantly reflects the benefits from investing in, and strengthening, our franchisee base and expanding our store footprint on a global scale, and the efforts of tens of thousands of our people executing against our strategy."

"Despite the unique challenges of this time, store openings have accelerated with an average of five new stores opening each week, which reflects the confidence Domino's, and our franchisees, share in our future. We intend to significantly outperform this strong result in the Second Half."

Outlook

As Mr Meij stated above, Domino's intends to "significantly outperform" its strong first half result in the second half.

And the company certainly is on course to do this, with total network sales growing 20.9% during the first seven weeks of the second half. This has been driven by same stores sales growth of 10.1% over the period. Management also revealed that it has already opened 11 new stores since the end of the first half.

Mr Meij commented: "We continue to experience uncertain times, but have confidence the clear principles that have delivered Domino's success, before and during COVID-19, will guide this next phase."

"Our team's agile response to changing conditions has lifted our expectations for Full Year performance to be even higher than our already positive, medium-term outlook. With a strong balance sheet and franchisee profitability, we intend to accelerate expansion," he concluded.

The Domino's share price has surged more than 70% over the past 12 months.

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