Domino’s health warning, Countrywide flop and G4S fighting negative sentiment

Thursday, March 8, 2018 - 09:36

“The FTSE 100 sits on its hands on Thursday, staying flat at 7,157,” says AJ Bell Investment Director Russ Mould.

Domino's Pizza

“Full year results from Domino’s Pizza look impressive at first glance with UK system sales breaking through the £1bn mark for the first time and decent growth in pre-tax profit and dividends.

“Yet under the bonnet there are a few nasties to consider. Operating profit margins are declining; guidance for new store openings in 2018 has been reduced from 80 to a new range of 65 to 75; and it has made an £11m provision for a potential tax liability.

“You also need to consider cannibalisation effects of splitting some territories in the UK, which is where a franchise opens a new store in an existing franchise territory. There are growing concerns this strategy could put financial pressure on franchisees’ earnings.

“We all know pizzas aren’t really good for you; now it seems there is also valid reason to question the health of Domino’s as a business longer term.”


“Estate agent Countrywide is pledging to go ‘back to basics’ after a dreadful year which saw it post a loss of £208.1m. Worryingly the company is starting 2018 with a pipeline significantly below the level it had had the start of 2017.

“A restructuring launched in 2015 has proved unsuccessful and its attempt to respond to the threat posed by industry disruptor Purplebricks has also fallen flat. The company has admitted its hybrid digital offering led to ‘confusion’ for customers and confirms it has withdrawn this offering.

“Any turnaround will take place against a very unhelpful backdrop with the latest data from the Royal Institution of Chartered Surveyors showing a drop in the number of new buyers registering with agents for the 11th consecutive month in February.

“The shares could well drift lower until the company unveils full year guidance and a recovery plan alongside its first half results.”


“An initial share price rise in response to 2017 results from security firm G4S quickly fizzled out. This could reflect investor impatience with the promise of jam tomorrow after revenue came in slightly below analysts’ expectations.

“A positive medium-term outlook may not, in any case, hold a lot of credibility given the patchy track record in recent years. Plus, sentiment towards the wider outsourcing sector has soured in the wake of the collapse of Carillion at the start of 2018.

“Every time G4S seems to be winning the market over, a new issue intervenes to suck the life out of its recovery. The latest headwind being stalling growth in India and the Middle East, first signalled in August last year.”

These articles are for information purposes only and are not a personal recommendation or advice.

The daily market comment is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.

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