Domino’s Pizza UK & Ireland, the pizza delivery operator, has become the latest company to benefit from the “Aldi effect”. Like JD Wetherspoon, Travelodge and Aldi itself, it is profiting from the growing propensity among consumers to trade down.

The group said yesterday that hungry consumers who want to save money but cannot be bothered to cook are boosting both the number of new customers and because of their high disposable spend (the average amount spent per order), which rose 8 per cent.

But there are other factors in the rising amount of money being spent on pizzas, not least the 4 per cent price increase pushed through in October, to mitigate the impact of rising food, fuel and energy costs. All those scooters can use up a fearful amount of petrol. The extra 50p on a pizza does not seem to have hurt sales too badly, but the group did admit to some reduced spending among poorer customers. The good news is that the levelling off in the price of flour and cheese – the two key ingredients in a pizza – means that the next price rise, expected early next year, should be limited to between 1 and 2 per cent – again, not enough to put off customers.

It is difficult to find fault with the company’s first-half numbers. System sales were up 19.5 per cent to £170.2 million, like-for-like sales rose by 11.4 per cent and pretax profits before exceptionals jumped by almost a third to £10.9 million. Diluted earnings per share jumped by 41 per cent to 5.12p, helped by share buybacks, and the dividend is 42 per cent higher at 2.7p a share.

Other positives include the big jump in internet sales, which account for about 22 per cent of system sales. Its forecast that the proportion will hit 30 per cent by 2015 will have to be torn up. Internet sales are important as they save on staff time in the stores and the average spent on an online order is £19, against £15.70 for a phone order. Despite the credit crunch, Domino’s sees no reason to pare back its opening programme of 50 stores a year and it is investing heavily in increasing its food commissary capacity to cope with its anticipated target of about 1,000 stores, almost double its current total. It is spending £25 million adding a commissary and new head office in Milton Keynes and a further £4 million doubling its plant in Penrith, while it will need further capacity in Ireland before long.

The strongly cash-generative nature of the Domino’s franchise model should cope easily with the investment while allowing it to continue to buy back shares and to raise the dividend.

The shares, down 10 per cent in the past month, are trading on about 19 times full-year earnings. In the present climate that is not cheap and the second-half comparatives look tougher, but Domino’s is ideally suited for these tough times. Hold.

Autonomy

Excellent, surprising, impressive – all these upbeat adjectives greeted Mike Lynch, chief executive of Autonomy, the software company, when he announced record second-quarter profits driven by rising sales.

The figures do, indeed, make impressive reading. Second-quarter revenues were up 72 per cent at $126 million (£63 million), while adjusted pretax profit was up more than 80 per cent at $50.8 million, significantly ahead of consensus estimates. For the six months to the end of June, adjusted pretax profit was $81.9 million, up from $47 million, on sales of $231 million.

Autonomy is a leader in the rapidly growing market of offering companies technology to sift through unstructured data – information locked up in e-mails, phone calls and video footage.

As such, the Cambridge-based business, born out of research at Cambridge University, always stood a decent chance of being on the list of winners from the credit crunch – trawling through those company documents to help defences against lawsuits should prove lucrative. Autonomy says that the sub-prime crisis should lead to further big-bucks deals with American banks desperate to track e-mail and phone conversations to protect against litigation from borrowers.

The business has been having a good run recently. Early this year it announced its biggest contract win: a $70 million four-year agreement to supply an unnamed bank with its archiving technology. That deal, seven times bigger than any previous win, was one of three big hits announced by Autonomy with banks in the first half of this year.

The pipeline for Autonomy, the biggest player in legal and compliance software, is strong and getting stronger for the rest of the year and into 2009, the company, the second-largest pure software company in Europe, claims with some confidence.

So where is the downside? Yesterday some analysts were insisting on a “sell”, saying that investors should use the bounce on such a peak set of financials to exit the stock. Others added that most of the good news was already priced into the shares.

Yesterday Autonomy closed at £10.22, up 1.39 per cent after a day of minor ups and downs. That values the company at about 34 times adjusted earnings this year. That is a high rating that will come down only in a couple of years’ time to just over 20 times.

The company has been saying that its exposure to the economic downturn is minor, but despite all the impressive numbers there is very little wiggle room. Those pessimistic analysts might just be right. This is one to watch closely, but it rates only a hold for the time being.

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