Forecast-beating first half profits at Domino’s Pizza (DOM) send shares in the takeaway pizza chain 3.9% higher to 834.5p.

The £1.3 billion cap grew its operating profit by 28% from £25 million to £32 million in the six months to 28 June, which Peel Hunt analyst Ali Naqvi says is a clear outperformance as profits are traditionally second half weighted. The analyst had expected profits of £28 million.

Like-for-like sales in the UK, Domino’s core market, are up by 10% and system sales (sales by both franchisee and corporate stores) are up 14% driven by the opening of 21 new stores, versus eight in the first half of 2014.

DOM - Comparison Line Chart (Rebased to first)

A key sales catalyst has been Domino’s investment in e-commerce initiatives, which has boosted its digital sales by 24.4%. Its app has been downloaded 10 million times and app-based sales now make up more than half of all online sales.

Germany has been less of a drag with a 3% rise in like-for-like sales versus a decline of 1.7% the previous year. Operating losses in Germany are lower at £1.8 million compared with £4.7 million in the first half of 2014.

The group has ended the period with net cash of £19.2 million compared with net debt of £3.7 million this time last year.

Domino’s trades on 24 times its 2015 earnings per share rating but it’s growing earnings by 15% and has a 1,200 UK store target, up from the current 813 stores. ‘We expect there will be more to come to justify the rating,’ says Naqvi.

Numis has upgraded its target price from 985p to £10.00 following the results, implying upside of 19.8%. It has increased its full year pre-tax profit forecast from £62.2 million to £64 million, an increase of 16.8% from 2014.

Issue Date: 28 Jul 2015