Scrap takeover plans and QUADRUPLE buyback, urges Domino’s UK investor as shares hit 10-year low

A former Domino’s Pizza Group director has urged the group to abandon any takeover plans and substantially lift payouts to investors.

FTSE 250-listed Domino’s, the UK master franchise of the international brand, revealed a £20million share buyback last week in efforts to reassure investor after it slashed profit guidance last month.

Weaker consumer demand and higher costs have weighed on earnings and Domino’s shares have lost almost a third of their value since the start of the year.

At their current price of 208.2p, Domino’s Pizza Group shares are trading at a 10-year low. 

Founder and investment chief of 5 per cent Domino’s stakeholder Browning West, Usman Nabi told the group’s board its £20million buyback ‘does not go far enough’.

Nabi, who served as a non-executive director of Domino’s between 2019 and 2023, wrote in an open letter on Wednesday called for an urgent discussion on ‘the appropriate scale of capital return and the company’s strategic direction’.

He also urged Domino’s to abandon plans to acquire a secondary brand, which would add ‘leverage, integration risk, and distraction ahead of the economic environment potentially weakening’.

Domino’s Pizza Group shares are trading at around a 10-year low

And Nabi is ‘skeptical’ that a ‘high quality second brand’ could be bought ‘at lower valuation than the Company’s own valuation’, with Domino’s shares now at a 10-year low.

He also thinks an acquisition would ‘distract’ Domino’s from returning its core business to growth.

Nabi said Domino’s ‘is not well-suited to a multi-brand strategy’, and management should pursue a private equity partner instead if this is the route it wants to pursue.

He added: ‘Since the board announced its strategy to acquire a second brand two years ago, critical factors have recently changed.

‘The economic environment has worsened and could become increasingly worse, and the Company’s share price and valuation have fallen lower than could have been imagined.

‘The Board must be dynamic and adjust its strategy given these present realities.’

A Domino’s spokesman said in a statement: ‘DPG has a clear capital allocation framework and is committed to creating shareholder value, as evidenced by the announcement of a £20million share buyback earlier this week. 

‘DPG is a highly cash generative and resilient business with a robust financial position, and as stated in Monday’s announcement, we will review the buyback programme later in the year.’

DIY INVESTING PLATFORMS

AJ Bell

AJ Bell

Easy investing and ready-made portfolios

Hargreaves Lansdown

Hargreaves Lansdown

Free fund dealing and investment ideas

interactive investor

interactive investor

Flat-fee investing from £4.99 per month

InvestEngine

InvestEngine

Account and trading fee-free ETF investing

Trading 212

Trading 212

Free share dealing and no account fee

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investing account for you