Significant Drop in Profits for Domino’s Largest Franchise in Ireland

Domino’s Pizza’s biggest franchise in Ireland experienced a 35% drop in pre-tax profits despite increasing sales by €2.5 million in 2023 compared to the previous year. Shorecal, a franchise enterprise developed by Charles and Adrian Caldwell, reported revenues exceeding €64.4 million in 2023, marking a 4% increase from the prior year, according to recently released financial statements.

The pre-tax profits for the pizza company declined to €5.6 million, down from €8.6 million. The rising cost of sales at Shorecal contributed to this decline, reaching over €45.9 million in 2023, an increase of nearly €4.5 million. Dividend payouts at Shorecal dropped significantly from over €20.2 million in 2022 to €3.8 million last year.

In March, the UK-listed Domino’s Pizza Group (DPG) acquired the remaining 85% stake in Shorecal in a transaction valued at up to €72 million. This acquisition was part of a growth strategy outlined by DPG last December. It is intended to expedite growth and substantially increase the number of stores in Ireland, with Shorecal’s existing management team, including CEO George Bertram, staying on to support the expansion.

The acquisition was based on what DPG described as an “attractive multiple” of eight times Shorecal’s earnings before interest, tax, depreciation, and amortization (EBITDA). DPG expects this deal to enhance earnings in the first year and to be “significantly accretive” in the long term.

The Caldwell family, who spearheaded the Shorecal business, significantly benefitted from the deal. The Irish Independent previously reported that the Caldwell family received approximately €44 million from the transaction. In 2019, DPG acquired its initial 15% stake in Shorecal for €12.5 million, valuing Shorecal at just over €83 million at that time.

Several of Shorecal’s pizza outlets in Ireland have ranked among the busiest Domino’s locations globally. As of March, Shorecal managed around 34 out of the 99 Domino’s stores in both the Republic of Ireland and Northern Ireland.

When announcing the acquisition, DPG’s chief executive Andrew Rennie expressed confidence in the growth potential in Ireland. “We see a significant opportunity for expansion in Ireland. Our asset-light and highly cash-generative operating model allows us to invest in driving growth both in our core UK and Ireland markets and in additional growth opportunities,” he said. “Our strategy will focus on acquiring, strengthening, and eventually redistributing stores within the network.”

For 2023, DPG reported a 3.6% increase in underlying core profit, totaling £138.1 million.

FAQs

1. Why did Shorecal’s profits decline despite increased sales? Shorecal’s profits fell due to a significant rise in the cost of sales, which climbed to over €45.9 million in 2023, an increase of almost €4.5 million from the previous year.
2. What was the value of Domino’s Pizza Group’s acquisition of Shorecal? Domino’s Pizza Group acquired the remaining 85% stake in Shorecal for up to €72 million.
3. How will the acquisition affect Shorecal’s management team? The existing management team at Shorecal, including CEO George Bertram, will remain in place to help oversee the company’s growth and expansion.
4. What was the pre-tax profit for Shorecal in 2023? Shorecal’s pre-tax profit for 2023 was €5.6 million, down from €8.6 million in the previous year.
5. How many Domino’s stores does Shorecal operate? As of March, Shorecal operated about 34 out of the 99 Domino’s stores in the Republic of Ireland and Northern Ireland.
6. What is the future growth strategy for Domino’s Pizza Group in Ireland? Domino’s Pizza Group plans to accelerate growth by leveraging its asset-light and cash-generative operating model to invest in and expand its store count in Ireland.
7. How much did DPG initially invest in Shorecal in 2019? In 2019, DPG acquired a 15% stake in Shorecal for €12.5 million, valuing the company at just over €83 million.
8. What are the financial expectations for the acquisition in the long term? DPG anticipates that the acquisition will enhance earnings in the first year and become significantly accretive in the long term.