International ratings service Standard & Poor’s (S&P) has raised its corporate credit rating on pizza delivery company Domino’s to double-‘B’-minus from single-‘B’-plus based on the company’s improved operating performance and credit protection measures. The outlook is stable.
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S&P said the ratings on Domino’s reflect its participation in the highly competitive pizza industry, a narrow product focus, and a significant debt burden of US$640m outstanding as of 24 March 2002.
These factors, however, are partially mitigated by the company’s strong brand identity, simple and cost-efficient operating system, and improved profitability.
Ann Arbor, Mich.-based Domino’s saw systemwide sales increased 6.8% to US$3.8bn in 2001 while same-store sales for domestic franchise stores, which represent about 60% of Domino’s store base, rose 8% in the Q1 2002 following a gain of 3.6% in all of 2001.
S&P said the company’s profits have increased as a result of franchise unit expansion and new promotions and product introductions. This, in turn, resulted in improved credit protection measures, with EBITDA coverage of interest for the year ended 24 March 2002, at 2.6x, up from 2x in the comparable period of 2001.
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By GlobalDataThe company’s highly leveraged capital structure is the result of its 1998 recapitalisation. For the year ended 24 March 2002, total debt to EBITDA declined to 3.8x from 4.6x. Liquidity is provided by a US$100m revolving credit facility, of which US$82.6m was available as of 24 March 2002.
