Analysis of Dominos Share Price and Accounting Practices: A Report

This report provides an in-depth analysis of Dominos' share price performance over a two-year period, examining the key factors that have influenced its fluctuations. The study focuses on the impact of the company's dividend policy and accounting practices, supported by an analysis of the 2018 and 2019 annual reports. The report identifies inconsistencies in Dominos' accounting policies and highlights concerns regarding the protection of shareholder interests. It notes that increased investments in innovations in FY2019 led to a decrease in operational revenue, which further affected the stock price. The report covers share price movements, the impact of capital structure changes, variations in revenue, competitive actions, and regulatory developments. It also discusses the impact of online marketing strategies and the implications of the Executive Share and Option Plan. The conclusion summarizes the report's findings, emphasizing the need for improved accounting practices and shareholder protection.

Running Head: CONTEMPORARY ISSUES IN ACCOUNTING
CONTEMPORARY ISSUES IN ACCOUNTING
Name of the Student
Name of the University
Author Note

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Executive Summary
The main purpose of this report is to analyse the share price of Dominos in the last
two years and the factors that are responsible for change in the stock price. The study is
supported by analysing the company’s annual report of 2019 & 2018. It is found that that,
Dominos is not following proper accounting policies in their accounting system. The
company is not protecting the interest of shareholders with related to the company issues. In
FY2019, the company has done more investments in innovations, hence the revenue from the
operations decreased. These factors has affected the price trend of stock price of the
company.

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Table of Contents
Introduction................................................................................................................................1
Discussions.................................................................................................................................1
Conclusion..................................................................................................................................6
References..................................................................................................................................7

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Introduction
This assignment will focus on the share price of Dominos in the last two year. The
paper will focus on the impact of the company’s dividend policy and accounting system in
the share price. The first part of this paper has showed on the movement in the share price of
Dominos in the last two years. The next part of this report has done an analysis of the two
year annual report of the company.
Discussions
Share Price of Dominos
From the above share price, it is showed that, there is a fluctuation in the share price
of Dominos. The share price at starting of July 2018 was $2.08 and on FY 2019 is $ 52.22
and the share price at the end of the year 2019 is 37.64 and the end of 2018 is 52.22. Hence,
there is a huge decrease in the share price at the end of 2018 (Static1.squarespace.com. 2020).
The final dividend of the share price is not reflected in the company’s financial statements.
The volatility in the share price may be due to the factors:

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 Unplanned changes in the capital and the debt structure of the company
 A huge variations from the outcome of the operations.
 There is a changes in the estimation and the actual revenues found.
 Huge speculation by the investment community.
 Competitive action related to the acquisitions, restructurings and sales promotion.
 Change in the dividend policy system.
 Change in the market value of the public companies that work in the similar business
segments.
 Regulatory development that can affect the policies of the similar industry.
 Change in market condition.
 Change in economic factors of the countries like United States and other international
countries that is related to business performance.
From the annual report of FY 2018 and 2019, the following things are evaluated
related to the company’s share price:
For FY 2018
Dominos has opened an International franchise of around 10,038 stores in the 85
markets in the FY 2018. The revenue for this year was $224.7 million and most part of the
revenue came from these international stores. The company has a food centres in the United
States. The revenues from supply chain centres is accounted to be $1.94 billion. In this year,
most of the sales were derived from online orderings and applications. The stores were
continuously contributing their sales in addition to the local market advertising. But, the
revenues from these franchise can fluctuate on the basis of sales on different stores. The
operating margin in different stores has been decreased in 0.4 per cent as compared to 2017.

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These expenses is related to food cost & labour cost increased and insurance cost increases
by 0.4 per cent.
From the above findings, it is found that, the operating margin from the supply chain has
increased by $16.6 million due to high volume of supply chain store. But, later on due to high
labor and delivery cost, the operating margin decreases. On 2018, the company has
recapitalised the subsidiaries that has been issue due to securitization (Alsharairi and
Abubaker 2016). A portion of this recapitalization has been used to pay the interest and other
payable (Annualreports.com. 2020). The shares were repurchased using around $591.2 for
buying back the shares.
Some of the fraud activities and good methods in the FY 2018 are:
 The Goodwill was acquired from the business acquisition was considered as premium.
The amounts was due to benefit from acquisition from expected market development
& growth in revenue (Zhou 2019). These benefits are not separately recognised as
future economic benefit and has included in the goodwill.
 The company has made adjustments of the issues that has been raised from bonus,
reconstruction and right issue in their option plan.
 The company is traded in Australian Stock Exchange, but has not used Australian
accounting standard for accounting process. They have adopted FASB standards for
accounting. This accounting system estimates the amounts of capital & liabilities.
This could differentiate with the actual result. There may be some material
misstatement in the financial statement.

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In FY 2019
In the FY 2019, the company, online digital marketing has increased the sales by 20.6
%. The company has adopted a new market strategy “the barbell”, that allows the customers
to extend the premium with more values and choices. In June 2019, the company has gained
1st position in terms of best pizza. At the year starting, the company had providing more
investment opportunities for the shareholders. New technologies were innovated by the store
teams (enji 2019). Dominos has opened 1000 stores in Europe in this year.
Some of the fraud and good activity of the company:
 The holders of shares of option don’t had right to participate in the issues related to
the company.
 The company has a remuneration scheme related to equity performance structure for
the benefit of the shareholders (Jimenez and Garza 2018). According to this scheme,
it was found that, the total shareholders wealth was decreased at FY 2019 (Liu, Liu
and Ren 2018). It was $1,153,952 in the FY 2018 and decreased to $1,435,410 in the
FY 2019.
 The participants of equity schemes were not allowed to participate in the derivatives.
 The options of the shares are not issued under Australian Stock Exchange, it is issued
under ESOP (Executive Share and Option Plan). This will hamper on the securities of
those companies that are capable to invest in the company shares.
 The financial statement, certain adjustments are made in the accounting policies to
bring into a line of something dissimilar with the accounting policies. These
adjustment may deviate the actual business operations (Deng, Hernandez and Wu
2016). These estimation involves a high degree of complexity in the material
adjustment in the carrying amount of assets and liabilities.

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 Many other shareholders from Australia and New Zealand were not able to participate
in the company shares due to certain legal requirements (Widhoyoko 2017). The
dividend pay was approximately $92.2 million in 2019. This dividend is not reported
and declared in the company’s annual report. Therefore, the stock price decreased and
the number of shares outstanding is not stable in this year.
 The total dividend is estimated to be $45, 215 thousand. The directors declared that,
these dividends are paid on 12th September 2019.
 The earnings per share is found to be 135.5 in the FY 2019. This earnings is from the
operations that are attributed from the equity holders of the company. The earnings
per share decreased in this year as compared to the previous years.
Therefore, due to the above factors, less number of people are interested to buy the
company stock or did not get any opportunity to buy the stock. In FY 2019, Dominos is
involved in material misstatement and has done the financial reporting on the basis of
estimation (Domino 2019). The estimate value may not match with the actual value.
Conclusion
Therefore, it is found that, the share price of the company is fluctuated is the last two
year. From the annual report, it has been found that, Dominos is not following proper
accounting policies in their accounting system. The company is not protecting the interest of
shareholders with related to the issues of business operations. In FY2019, the company has
done more investments in innovations, hence the revenue from the operations decreased. This
factor has a huge impact on the share price.

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References
Alsharairi, M. and Abubaker, W.E., 2016. Does Arab spring have a spillover effect on Dubai
financial market?. The Journal of Developing Areas, 50(6), pp.319-331.
Annualreports.com. (2020). [online] Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_DPZ_2018.pdf
[Accessed 21 Jan. 2020].
Deng, G., Hernandez, M.A. and Wu, Y., 2016. Price discovery and dynamics across housing
developers in China. Economics Bulletin, 36(4), pp.1966-1974.
Domino, K., 2019. Multivariate cumulants in features selection and outlier detection for
financial data analysis. Physica A: Statistical Mechanics and its Applications, 467.
enji, T. (2019). Market Risk on Domino's Pizza Incorporation's Performance.
Jiménez, M. and Garza, M., 2018. EQUITY STRATEGY Special Note.
Liu, F., Liu, C. and Ren, H., 2018. Urban Housing Price Fluctuations and Regional Systemic
Financial Risks: Panel Spatial Economic Models in Jiangsu, China. Sustainability, 10(10),
p.3452.
Static1.squarespace.com. (2020). [online] Available at:
https://static1.squarespace.com/static/5bd052c7c46f6d0e23b11afb/t/
5d5c7b89c3e6df0001a41d2c/1566342143706/FY19+Appendix+4E+
+Annual+Report.pdf [Accessed 21 Jan. 2020].
Widhoyoko, S.A., 2017. The Reluctance of Capitalizing the Borrowing Costs A Recent Study
of Residence Development in the Province of Jawa Barat. INDONESIAN JOURNAL OF
ACCOUNTING AND GOVERNANCE, 1(2), pp.1-13.

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Zhou, Y. Y. (2019, December). The impact of the “vaccine fraud incident” on the
biomanufacturing industry-Based on the domino effect. In AIP Conference Proceedings (Vol.
2185, No. 1, p. 020021). AIP Publishing LLC.