Dominos Regulatory News (DOM)

14 December 2017

Domino's Pizza Group announces increased ownership of Domino's Iceland, new target capital structure and extension to share buyback programme

Domino's Pizza Group plc ("DPG"), the leading pizza group in the UK, is today announcing developments which will further strengthen its international operations and establish a more efficient capital structure.

Highlights

· Proposed acquisition of a further 44.3% shareholding in Domino's Iceland for EUR 30.2 million (£26.7 million), taking ownership to 95.3% (the "Acquisition")

· Completion of refinancing: new revolving credit facility ("RCF") of £350 million through a syndicate of seven banks

· Increase in target leverage to a range of 1.75x - 2.5x net debt/EBITDA, reflecting the strong cash generation of the business model

· Further share buyback of £20 million to commence shortly

Commenting on today's announcements, David Wild, CEO, said:

"We're really pleased to be increasing our ownership of Domino's Iceland earlier than was planned. It's a great business and after 18 months of partnership, we have good visibility of its strengths and further opportunities for growth. There is a strong financial and commercial rationale for buying out minorities now rather than waiting for the put or call option to be exercised.

"We've also reviewed our capital structure. It makes sense for a highly cash generative franchise business like DPG to have a balanced approach to equity and debt funding, and this is reflected in our revised target leverage range.

"The additional £20 million share buyback takes the total share purchases announced in the current year to £55 million and underlines our commitment to returning excess capital to shareholders."

Proposed acquisition of a further 44.3% shareholding in Domino's Iceland

We have reached agreement to acquire a further 44.3% interest in Pizza Pizza ehf ("Domino's Iceland"), the 51% owned subsidiary which owns the Domino's Master Franchise in Iceland and operates 23 stores there, taking our ownership to 95.3%. The consideration is approximately EUR 30.2 million (£26.7 million), payable in cash on completion.

Rationale for the Acquisition

Domino's Iceland enjoys a very strong market position and is the leading quick service restaurant chain in the country. It has the highest average weekly unit sales of any country in the Domino's worldwide system. Iceland offers opportunities for further growth through new store openings and the benefits of DPG's expertise, particularly in digital and supply chain.

Through this agreement we are pre-empting the put and call agreements on the majority of the shares not already owned by DPG which would otherwise be exercisable between 1 July 2019 and 30 June 2020. We believe that the Acquisition enables DPG to acquire the shares at a lower price than under the put and call agreements.

In addition, the Acquisition will give DPG increased flexibility in running the business. Certain existing minority shareholder veto rights, including approval for decisions on the timing and implementation of improvements to digital marketing and supply chain, will be removed as a result of the Acquisition.

Selling shareholders and related parties

The Acquisition and certain other transactions are considered a related party transaction for the purposes of the Listing Rules and are therefore conditional on shareholder approval.

The Acquisition includes the purchase of all of the shares of two significant shareholders in Domino's Iceland, being EYJA II and Högni Sigurdsson, and a proportion of the Domino's Iceland shares owned by the other shareholders being Steinar Sigurosson and Birgir Örn Birgisson.

EYJA II and Högni Sigurdsson are related parties of DPG under the Listing Rules. EYJA II and Högni Sigurdsson are substantial shareholders in Domino's Iceland because each of them owns or controls more than 10% of the voting rights in Domino's Iceland. EYJA, which is 100% owned by Birgir Bieltvedt through his wife, owns 59% of EYJA II.

In addition, the transaction involves DPG amending the terms of a consultancy agreement, between it and, amongst others, Birgir Bieltvedt and his service company B2B. As Birgir Bieltvedt is a director of Domino's Iceland, which is a subsidiary of DPG, any transaction between him and DPG (or Domino's Iceland) is a related party transaction for the purposes of the Listing Rules.

Accordingly, a circular (the "Circular") is to be sent to all shareholders shortly to provide them with details of the Acquisition, to convene the General Meeting and to explain why the Board considers the Acquisition to be in the best interests of DPG and its shareholders as a whole.

Birgir Örn Birgisson and Steinar Sigurosson (being the key management of Domino's Iceland) will retain between them a 4.7% shareholding in Domino's Iceland.

Financials

For the 52 weeks ended 25 December 2016, Domino's Iceland generated on a standalone basis, sales of approximately ISK 5,026 million, and a profit before tax of approximately ISK 340 million (£2.4 million).

DPG will finance the Acquisition through existing debt facilities. On completion of the transaction the financial effects on DPG will include:

(a) DPG's debt increasing by approximately £26.7 million;

(b) DPG owning an additional 44.3% of the share capital of Domino's Iceland and receiving an additional 44.3% of Domino's Iceland's earnings from the date of completion of the transaction; and

(c) DPG's net assets changing by the difference between the reduction in value of the put option liability as at the date of completion of the Acquisition and the consideration payable for the Acquisition.

New target capital structure

We have recently reviewed our capital structure. Our goal is to establish an efficient funding mix more suitable for a highly cash generative business, while maintaining flexibility to take advantage of opportunities that may arise and respond quickly to a changing market environment.

We have recently agreed a new five year £350 million revolving credit facility, with the option to extend for two further periods of 12 months, which replaces our existing £175 million facility. We have therefore raised our target leverage from 1.25x net debt/EBITDA to a range of 1.75 - 2.5x net debt/EBITDA.

Share buyback programme

DPG has recently completed a £15 million share buyback programme, taking total share purchases to £35 million for 2017. The Board has approved a further £20 million programme, to commence shortly.

Returns of excess capital to shareholders will continue to represent a key element of our capital allocation strategy.

Conference call

We will be hosting a conference call at 08:30 this morning. The call can be accessed by dialling +44 20 3936 2999, and the access code is 383810.

Circular

The Circular contains further details regarding the Acquisition and the other transactions, and the reasons why the Board of DPG is proposing the resolution. The Circular also contains a notice convening a General Meeting to be held at the offices of the Company at 1 Thornbury, West Ashland, Milton Keynes, Buckinghamshire MK6 4BB, United Kingdom at 10:00 a.m. on 11 January 2018. Terms used in this announcement shall have the meaning given to them in the Circular.

The Circular will be available to view on DPG's website (http://investors.dominos.co.uk) and at the offices of Domino's Pizza Group plc at 1 Thornbury, West Ashland, Milton Keynes, Buckinghamshire MK6 4BB, United Kingdom and at the offices of Norton Rose Fulbright LLP at 3 More London Riverside, London SE1 2AQ, United Kingdom. A copy of the Circular and the accompanying Form of Proxy will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm.

For further information, please contact:

For Domino's Pizza Group plc:

Peregrine Riviere07909 907193

Maitland:James Devas020 7379 5151

About Domino's Pizza Group

Domino's Pizza Group plc is the UK's leading pizza brand and a major player in the Irish market. We hold the master franchise agreement to own, operate and franchise Domino's stores in the UK, the Republic of Ireland, Switzerland, Luxembourg and Liechtenstein. In addition, we have a controlling stake in the holders of the Domino's master franchise agreements in Iceland, Norway and Sweden, as well as an associate investment in Germany. As at 24 September 2017, we had 1,149 stores across six markets, including 1,008 stores in the UK.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulations (EU) No. 596/2014 ("MAR") and is disclosed in accordance with DPG's obligations under Article 17 of MAR.