Bottom Feeding - DOM.LSE, TRN.LSE, and CFX.AIM
A look at two well-known growth companies, and a micro-cap aggressively repurchasing its shares.
This week we're taking a look at a couple of pretty well known names on the London Stock Exchange, along with an AIM-listed company in the home furnishings sector that's been aggressively repurchasing its shares.
Domino's Pizza Group (DOM.LSE)
DOM is a pizza takeaway business which holds the master franchise agreement to own, operate and franchise Domino's stores in the UK and the Republic of Ireland. As of 29 Dec 2024, it had 1,372 stores across these two regions.
In the year ended 29 Dec 2024, it generated total revenue of £664.5m (FY23: £679.8m), gross profit of £318.9m (FY23: £316.2m), operating profit of £142.6m (FY23: £156.8m), and net profit of £90.2m (FY23: £115.0m).
Total equity at 29 Dec 2024 was £(82.2)m (FY23: £(134.0)m), and it had net debt excluding lease liabilities of £265.5m (FY23: £232.8m), and £495.2m including lease liabilities (FY23: £463.1m). It should be noted that the company sub-leases its leased properties to its franchisees using back-to-back leases, so there are lease receivable assets matching each lease liability.
DOM generated net cash flows from operations of £103.5m (FY23: £113.5m), and invested £62.4m into a mix of PP&E, intangible assets, subsidiary acquisitions, and other investments (FY23: £20.8m). Free cash flow was £59.7m (FY23: £69.5m), which it used to pay out £42.0m in dividends (FY23: £41.9m), alongside £26.3m in share repurchases (FY23: £98.3m). Note: the proceeds from asset sales balanced out the investments and shareholder distributions, resulting in the cash balance being maintained at year end.
Market capitalisation: £1,049.15m
Valuation: Using the FY24 figures, the shares currently offer an 8.6% earnings yield, 5.7% free cash flow yield, 4.0% dividend yield, and 6.5% shareholder yield (dividends + share repurchases).
Reason: Growth has flattened over the the last couple of years after a lockdown-induced boom during the pandemic.
Interest level: Moderate - Seems like a reasonably attractive entry point for a business with a good historic growth record, returning all its free cash flow to shareholders. However, you'd need to have a view on where growth goes from here.
Trainline (TRN.LSE)
TRN operates an independent rail and coach travel platform that sells rail and coach tickets worldwide, with the UK as its primary market.
In the year ended 28 Feb 2025, it generated total revenue of £442.095m (FY24: £396.718m), gross profit of £352.313m (FY24: £305.285m), operating profit of £85.578m (FY24: £55.579m), and net profit of £58.348m (FY24: £33.986m).
Total equity at 28 Feb 2025 was £282.747m (FY24: £312.016m), entirely intangible, and it had net debt including lease liabilities of £81.825m (FY24: £62.028m).
TRN generated net cash flows from operations of £138.197m (FY24: £121.729m), and invested £42.669m into predominantly intangible assets (FY24: £40.749m). Free cash flow was £61.857m (FY24: £49.006m), which it used to partly fund share repurchases totalling £106.491m (FY24: £35.358m). Note: these repurchases offset £22.445m in share-based compensation (FY24: £22.629m), which I accounted for in the free cash flow calculation.
Market capitalisation: £1,102.02m
Valuation: Using the FY25 figures, the shares currently offer a 5.3% earnings yield, 5.6% free cash flow yield, and 7.6% repurchase yield (after subtracting share based compensation).
Reason: The company faces some near-term headwinds in FY26, including the phased expansion of the contactless travel zone in central London, commission rate reductions in the UK from April 2025, and the impact of global macroeconomic uncertainty on international travel.
Interest level: High - The current valuation isn't too demanding given the historic performance, and future growth potential. It's also got a monopoly in the UK, and deservedly so, because its app is excellent.
Colefax Group (CFX.AIM)
CFX is an international designer and distributor of luxury furnishing fabrics and wallpapers, and a leading international decorating company.
In the year ended 30 Apr 2024, it generated total revenue of £107.162m (FY23: £104.818m), gross profit of £60.028m (FY23: £59.733m), operating profit of £8.476m (FY23: £9.519m), and net profit of £5.794m (FY23: £6.687m).
Total equity at 30 Apr 2024 was £31.745m (FY23: £33.960m), entirely tangible, and it had net cash excluding lease liabilities of £17.763m (FY23: £19.746m), and net debt including lease lease liabilities of £5.655m (FY23: £6.316m).
CFX generated net cash flows from operations of £13.467m (FY23: £13.142m), and invested £2.991m into purchases of PP&E (FY23: £3.580m). Free cash flow was £5.581m (FY23: £3.717m), which it used to pay £0.353m in dividends (FY23: £0.399m) alongside £7.227m in share repurchases (FY23: £5.382m).
Market capitalisation: £47.04m
Valuation: Using the FY24 figures, the shares currently offer a 12.3% earnings yield, 11.9% free cash flow yield, 0.8% dividend yield, 16.1% shareholder yield, and trade at 1.48x tangible book value.
Reason: Challenging near-term market conditions in the UK and Europe, and the potential for tariffs to impact the US business.
Interest level: High - Seems like a case study for a steadily growing, well-capitalised business, repurchasing a substantial portion of its shares each year, facilitated by the fact its valuation is perpetually low. It's also been around for almost a century.
Well that concludes this week's newsletter. If you own, or have studied any of the companies profiled, please share any additional insights you might have in the comments. See you next week for some more bottom feeding.