Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — Domino's Pizza UK & IRL — Investor Presentation (January 2008)
79 slides from Domino's Pizza's investor presentation, Jan 9, 2008
Slide 1: Investor Presentation: The road to 1,000 stores
Domino’s Pizza UK & IRL plc Investor Presentation 9 January 2008 The road to 1,000 stores
Slide 2: Stephen Hemsley, Executive Chairman
Stephen Hemsley Executive Chairman 2
Slide 3: Agenda
Domino’s Pizza UK & IRL plc Agenda • Introduction Stephen Hemsley • Overview of 2007 Christmas Trading Statement Lee Ginsberg • The Brand in 2017 Chris Moore • Operational Focus Patricia Thomas • Technology within Domino’s Pizza Jane Kimberlin • Store opening and refit programme Andrew Emmerson • Co
Slide 4: Lee Ginsberg, Chief Financial Officer
Lee Ginsberg Chief Financial Officer 4
Slide 5: 2007 Christmas Trading Statement Highlights
Domino’s Pizza UK & IRL plc 2007 Christmas Trading Statement Highlights: 50 new stores opened (2006: 46) Like for like sales in 404 stores (2006: 357) • +14.7% for 52 weeks ended 30 December 2007 (2006: 9.7%) • +17.6% last six weeks (2006: 13.1%) E-commerce sales up 60.5% to £32.2m (2006: £20.
Slide 6: Like-for-like sales growth
Domino’s Pizza UK & IRL plc Like-for-like sales growth Average increase of 9.1% 16% 450 over last 5 years 14% 400 14.7% 12% 350 LFL store population 10% 11.2% Sales growth 300 8% 9.7% 250 6% 7.1% 7.4% 6.6% 200 4% 2% 150 0% 100 2003 2004 2005 2006 2007 LFL sales growth LFL store population 6
Slide 7: Like-for-like sales 2007
Domino’s Pizza UK & IRL plc Like-for-like sales 2007 Growth of 14.7% for the year 22.00% 19.7% 20.00% 17.6% 17.8% 18.00% 16.8% 16.1% 16.00% 15.3% 14.7% 13.8% 14.00% 13.3% 12.8% 12.2% 12.00% 9.5% 9.7% 10.00% 8.00% 6.00% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec mature store sales increase (LHS)
Slide 8: Store count (net of closures)
Domino’s Pizza UK & IRL plc Store count (net of closures) 501 500 451 450 407 400 357 number of stores at year end 318 50 350 269 46 300 50 237 40 250 50 200 34 150 24 100 50 0 2001 2002 2003 2004 2005 2006 2007 Potential for 1,000 stores 8
Slide 9: Cash returned to shareholders
Domino’s Pizza UK & IRL plc Cash returned to shareholders 4 year 2007 2006 2005 2004 Total £’000 £’000 £’000 £’000 Profit after tax 37,937 12,500* 10,427 8,247 6,763 Share buybacks 28,222 8,229 10,161 8,222 1,610 Dividends 15,435 5,792 4,234 3,169 2,240 Total returned 43,657 14,021 14,395 11,391 3,8
Slide 10: Chris Moore, Chief Executive Officer
Domino’s Pizza UK & IRL plc Chris Moore Chief Executive Officer 10
Slide 11: The road to 1000 stores
Domino’s Pizza UK & IRL plc The road to 1000 stores 11
Slide 12: The Brand in 2017
Domino’s Pizza UK & IRL plc The Brand in 2017 12
Slide 13: The financial model at build out
Domino’s Pizza UK & IRL plc The financial model at build out At build out * 2001 2006 (circa 2017) No. of stores 237 451 1,000 - 50 openings p.a. AWUS growth at 3% p.a. ** £8,422 £11,347 £15,700 System sales £ 98m £ 240m £ 820m Profit before tax £ 2.9m £ 14.3m £ 73.8m PBT/System sales 3.0% 6.0% 9.0%
Slide 14: The financial model at build out (contd.)
Domino’s Pizza UK & IRL plc The financial model at build out (contd.) At build out * 2006 (circa 2017) • PBT £14.3m £73.8m • Share buybacks *** • Average no. of shares in issue 162.6m 128.0m • EPS - pence 6.4p ** 40.6p - CAGR 18% p.a. • Dividend - cover 2.3x 2.0x - pence 3.1p ** 20.3p COMPELLING 11
Slide 15: AWUS: a 10 year perspective
Domino’s Pizza UK & IRL plc AWUS: a 10 year perspective £21,000 £20,000 £18,000 £15,000 £11,347 £12,000 £9,000 £6,700 £6,000 £3,000 £0 1997 2006 2017 Mature AWUS OBS: This does not constitute a forecast 15
Slide 16: Sales momentum for all stores
Domino’s Pizza UK & IRL plc Sales momentum for all stores AWUS by Store Opening Year £28,000 £23,000 £18,000 £13,000 £8,000 £3,000 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Opened in 1997 Opened in 1998 Opened in 199
Slide 17: YTD sales growth by age of store
Domino’s Pizza UK & IRL plc YTD sales growth by age of store Sales momentum continues in older stores 25% 20% 15% Mature AWUS growth in ‘07 10% 5% 0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2007 sales growth of stores opened in each year 17
Slide 18: Sales above average in older stores
Domino’s Pizza UK & IRL plc Sales above average in older stores £17,000 £15,000 £13,000 2007 Mature AWUS £11,000 £9,000 £7,000 £5,000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 AWUS of stores opened in each year 18
Slide 19: Mature Store AWUS banding
Domino’s Pizza UK & IRL plc Mature Store AWUS banding 100% 3% 1% 0% 1% 0% 4% 4% 8% 12% 8% 13% <£5k 17% 25% 20% 29% 29% £5k-£7k 75% 34% 42% 42% 31% 42% £7k-£10k 43% 50% 39% 43% £10k-£15k 42% 32% 33% 36% 25% 28% £15k-£20k 26% 18% 16% 10% 10% 9% 9% 7% >£20k 7% 7% 6% 3% 4% 2% 2% 3% 0% 0% 0% 1% 2000 2001
Slide 20: The penetration game
Domino’s Pizza UK & IRL plc The penetration game 15% 11% 4% 1km 2km 3km Overall: 12.5% 20
Slide 21: Optimising delivery areas
Domino’s Pizza UK & IRL plc Optimising delivery areas Case Study 1 One store Two stores £40,000 £35,000 £30,000 £25,000 £20,000 £15,000 £10,000 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111 21
Slide 22: Optimising delivery areas (contd.)
Domino’s Pizza UK & IRL plc Optimising delivery areas (contd.) Case Study 2 One store Two stores £42,000 £37,000 £32,000 £27,000 £22,000 £17,000 £12,000 1 8 15 22 29 36 43 50 57 64 71 78 85 92 99 106 113 120 127 134 141 148 155 162 22
Slide 23: Optimising franchisees
Domino’s Pizza UK & IRL plc Optimising franchisees Case Study 3: a three-store town that went from three franchisees to just one in 2007 £30,000 £26,000 £22,000 £18,000 £14,000 £10,000 2005 2006 2007 Total average weekly sales from 3 stores 23
Slide 24: How 2017 figures are achievable
Domino’s Pizza UK & IRL plc How 2017 figures are achievable 2007 2017 Average households per delivery area 29,000 22,000 Penetration 12.5% 20% Ave. ticket (delivery) £14.42 £17 Average frequency days 38 33 Average frequency per year 9.6 11 Delivery sales £9,650 £15,910 Add carryout sales at 26% 27%
Slide 25: How 2017 figures are achievable (contd.)
Domino’s Pizza UK & IRL plc How 2017 figures are achievable (contd.) 2007 2017 Average households per delivery area 29,000 22,000 Penetration 12.5% 20% Ave. ticket (delivery) £14.42 £17 Average frequency days 38 30 Average frequency per year 9.6 12.2 Delivery sales £9,650 £17,501 Add carryout sales
Slide 26: How do we get there?
Domino’s Pizza UK & IRL plc How do we get there? • Continue fanatical focus on great product, unbeatable service, sharp image • Support the premium quality positioning • Ad Fund will drive the “new news” message and customer counts • Our e-commerce lead will help drive sales and enhance store-level
Slide 27: Investing in people
Domino’s Pizza UK & IRL plc Investing in people DPG Directors • Stephen Hemsley, Chris Moore, Lee Ginsberg • Patricia Thomas, Operations • Jane Kimberlin, IT • Andy Emmerson, Business Development • Robin Auld, Sales & Marketing • Gareth Franks, Foodservice • TBA, Purchasing & Legal Counsel 27
Slide 28: Patricia Thomas, Operations Director
Domino’s Pizza UK & IRL plc Patricia Thomas Operations Director 28
Slide 29: Operations Focus
Domino’s Pizza UK & IRL plc Operations Focus • Operations Support – Getting talent pool and support structure right • Focus on what’s important and incentivise results 29
Slide 30: Support Team
Domino’s Pizza UK & IRL plc Support Team Franchise Consultants Operations Support • Communication link • New store opening support (fee based) • Standards Enforcement • OER min. 3X year • Drive Results • Follow up visits, product • 20 Franchisees per FC roll-outs and operational • 1,997 store visits
Slide 31: Training
Domino’s Pizza UK & IRL plc Training • In store & Centralised Training • Quality upgraded • New materials produced • Courses added • 543 People trained in 2007 (does not include field based training) 31
Slide 32: Franchise Development Programme
Domino’s Pizza UK & IRL plc Franchise Development Programme • Strict selection process • In store orientation • 3 week course • Post-FDP support 32
Slide 33: Maintain High Standards
Domino’s Pizza UK & IRL plc Maintain High Standards • The right measures (OER) • Positive correlation between OER & financial metrics • Clearly communicated and integrated • Reward & repercussions 33
Slide 34: Operations Evaluation Report (OER)
Domino’s Pizza UK & IRL plc Operations Evaluation Report (OER) • Started in 2002 • Focus on a few important things – Service (Delivery times) – Pizza Quality – Image – Safety (for our team and customers) • 5 Star system • Unannounced visits minimum 3X per year 34
Slide 35: 5 Year trend
Domino’s Pizza UK & IRL plc 5 Year trend 2002 2007 OER Ave 70.8 85.3 Stars 2.6 4.0 2002 OTD < 25m 70.2% 2007 OTD < 15m 70.8% AWUS (mature) Growth of 43% over the period 35
Slide 36: It's good to be a 5 star store!
Domino’s Pizza UK & IRL plc It’s good to be a 5 star store! 13500 13000 12500 12000 £ 11500 Mature Store AWUS 11000 10500 10000 9500 2 - 3 3 - 3.5 3.5 - 4 4 - 4.5 4.5 - 5 stars stars stars stars stars 36
Slide 37: Integration
Domino’s Pizza UK & IRL plc Integration • Integrated into Domino’s culture • Element of all recognition and reward systems • All training materials Totally supports and • 5 Star awards communicated on our portal is supported by • Significant weighting on approval Out the Door < 15 to expand initiati
Slide 38: Repercussions
Domino’s Pizza UK & IRL plc Repercussions • Failed audit – notice served • Re-visit at franchisee’s cost • Failed revisit may result in termination of the franchise • Strategy to exit sub-standard franchisees • 55 stores changed hands in 2007 38
Slide 39: 75% of Orders < 15 Minutes OTD
Domino’s Pizza UK & IRL plc 75% of Orders < 15 Minutes OTD 2005 - 10 stores would qualify 2006 • Round 1 - 39 • Round 2 – 47 • Round 3 – 84 2007 • Round 1 – 140 • Round 2 – 242 • Round 3 – 226 39
Slide 40: Elite Membership vs. AWUS & Growth
Domino’s Pizza UK & IRL plc Elite Membership vs. AWUS & Growth 16,000 18.00% 15,000 16.00% 14,000 14.00% 13,000 12.00% £ 12,000 10.00% 11,000 8.00% 10,000 6.00% 9,000 4.00% 7 * 6 * 5 * 4 * 3 * 2 * 1 2007 YTD % Growth * No. of quarters in OTD elite 40
Slide 41: Jane Kimberlin, I.T. Director
Domino’s Pizza UK & IRL plc Jane Kimberlin I.T. Director 41
Slide 42: Technology within Domino's
Domino’s Pizza UK & IRL plc Technology within Domino’s • Integral part of our success • Forefront of innovation • Stable, time proven platform • Further development to support 1,000+ stores 42
Slide 43: Continual innovation delivered in last 12 months
Domino’s Pizza UK & IRL plc Continual innovation delivered in last 12 months • Online ordering for Republic of Ireland • 60+% increase in online sales • SMS • Real Time Stats and EPoS reporting • OTD screen in stores • Electronic invoices & statements to franchisees 43
Slide 44: Real Time Stats
Domino’s Pizza UK & IRL plc Real Time Stats • Demo • All stores in real time • Sales, service times, staff and audit details • Today to date and last 30 minutes • Real, actionable data • Direct impact on sales and service 44
Slide 45: Sales and service reporting
Domino’s Pizza UK & IRL plc Sales and service reporting • Demo • Telephone statistics • Weekly Key indicators • Payroll data • Download to excel • Consistent and visible 45
Slide 46: Plans for next 12 months
Domino’s Pizza UK & IRL plc Plans for next 12 months • Business Intelligence • Food Early Warning System • In-store /kiosk ordering • SMS enhanced ordering • Web site – maintain at leading edge and beyond…… • GPS tracking • Mobility • VOIP • M/S Surfacing Limited only by our imagination and budget!
Slide 47: Andy Emmerson, Business Development Director
Andy Emmerson Business Development Director 47
Slide 48: 50 new stores in 2007 – how did we achieve it?
Domino’s Pizza UK & IRL plc 50 new stores in 2007 – how did we achieve it? • Restructured the Business Development Team- focused functional teams. • Strengthened the team : new hires • Enhanced location analysis • Focus on existing franchisees : only 6 of the 50 stores opened with new franchisees •
Slide 49: New stores: new franchisees
Domino’s Pizza UK & IRL plc New stores: new franchisees 50 40 30 20 10 0 2003 2004 2005 2006 2007 new stores new franchisees new franchisees opening new stores 49
Slide 50: Project @ DominosProperties
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Slide 51: Project @ DominosProperties
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Slide 52: Outlook for 2008
Domino’s Pizza UK & IRL plc Outlook for 2008 • Team is well placed to achieve 2008 target of 50 store openings • At 7th Jan 2008 – 29 with planning and Franchisee vs. 2007 (+ 5 ) – 85 of locations under negotiation vs. 2007 (+ 15 ) – Benefit of building pipeline • Rolling 150 Target Acquisition List
Slide 53: Property advertising 2008
Domino’s Pizza UK & IRL plc Property advertising 2008 53
Slide 54: The road to 1,000 stores
Domino’s Pizza UK & IRL plc The road to 1,000 stores • Detailed study of UK and Ireland demographics • Next 500 stores identified – By town – By year • Roadmap of expansion by franchisee. – 3.5 store/franchisee growing to 5 stores/franchisee At least a 1,000 stores within our territories of the UK a
Slide 55: Gareth Franks, Food Services Director
Domino’s Pizza UK & IRL plc Gareth Franks Food Services Director 55
Slide 56: Commissary update
Domino’s Pizza UK & IRL plc Commissary update • Extension to Penrith – 100% additional capacity (to circa 200 stores at build-out) – Completion expected Q3 2008 – Cost of circa £4.0m • New Milton Keynes facility – 10 acres of land to be acquired • Capacity to service 500 stores at build-out (current
Slide 57: Commissary update (contd.)
Domino’s Pizza UK & IRL plc Commissary update (contd.) Current Facility New Facility 342 Stores at P1 2008 500 Stores at 2017 Square Feet 22,000 101,000 Pallet Spaces 1,310 6,504 Dough Balls Produced (Week) 635,111 1,819,720 Dough Trays per Hour 720 2,400 Cooling Time per Dough Tray 4 Hours 1 Hour F
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Slide 63: Robin Auld, Sales & Marketing Director
Domino’s Pizza UK & IRL plc Robin Auld Sales & Marketing Director 63
Slide 64: Extra fire power: 2007 Mature stores +14.7%
Domino’s Pizza UK & IRL plc Extra fire power: 2007 Mature stores +14.7% 2007 average mature store sales per period Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2006 2007 5% NAF driving sales: strong comparatives ahead 64
Slide 65: The power of momentum
Domino’s Pizza UK & IRL plc The power of momentum 15.9% 14.9% 13.8% 14.0% 12.0% 10.1% 8.6% 8.0% Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Domino’s mature store increase vs same quarter prior year 65
Slide 66: E-commerce +60.5% reflecting increased spend
Domino’s Pizza UK & IRL plc E-commerce +60.5% reflecting increased spend UK E-Commerce Net Weekly Sales £1,200,000 £1,000,000 £800,000 £600,000 £400,000 £200,000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 2007 2006 Now at over 20% of UK delivered sales 66
Slide 67: Driving on-line
Domino’s Pizza UK & IRL plc Driving on-line • Significant increase in on-line marketing investment • £300,000 on search marketing in 2007 • Starting to reduce labour cost overheads for some stores • Integrating on-line ordering message in all forms of communication • 15 separate new media platforms
Slide 68: 15 different new media platforms
Domino’s Pizza UK & IRL plc 15 different new media platforms Portal Deals Contextual targeting User Generated Content Partnerships Local Listings Viral Games Display advertising Rich Media Natural Search Integrated Content IPTV – Internet Sites Mobile Paid Search Second Life Email 68
Slide 69: Q4 Trading Update: Mature store sales +14.9%
Domino’s Pizza UK & IRL plc Q4 Trading Update: Mature store sales +14.9% • Sales continued very strongly, despite challenging comps last year • 7 record sales weeks • E-commerce up +60.5 % achieving sales of £32.2m (2006: £20.1m) – Sales exceeded £1m net in busiest week • Momentum behind the brand,
Slide 70: Consumer Spending
Domino’s Pizza UK & IRL plc Consumer Spending • Domino’s classic option when trading down…offering great value for money vs dine out options • Consumer spending shows trend towards eating in vs dining out is continuing to grow (Mintel) • Premium quality, great service, trusted brand for £6 per perso
Slide 71: Consumer Spending (contd.)
Domino’s Pizza UK & IRL plc Consumer Spending (contd.) • Domino’s brand strength protects against squeeze on disposable income (Quality, Service, Marketing spend) • NAF will ensure continued aggressive marketing spend • Consumers that come to Domino’s are driven by much more than just price • Still
Slide 72: Domino's Pricing Consumer Survey
Domino’s Pizza UK & IRL plc Domino’s Pricing Consumer Survey • 97% of customers (last 3 months) had no idea when or if Domino’s had changed prices in the last year • When asked to estimate the cost of a meal deal (circa £30) less than 10% were correct. Only 30% were correct to within £5. • When aske
Slide 73: Domino's Pricing Consumer Survey (contd.)
Domino’s Pizza UK & IRL plc Domino’s Pricing Consumer Survey (contd.) “There are lots of reasons for going to Domino’s. If their prices went up then I’d still carry on going there” Just 10% disagreed with the statement “Having a pizza is a treat and I don’t worry too much about the price” Just 14% d
Slide 74: 2008 Strategic Overview
Domino’s Pizza UK & IRL plc 2008 Strategic Overview • Focus on new customer acquisition. An average store only delivers to 13% of it’s potential delivery area • Continue to drive average ticket and frequency • Continued focus on on-line sales growth & mobile sales (text ordering etc) • A more aggres
Slide 75: 2008 Overview: January '08
Domino’s Pizza UK & IRL plc 2008 Overview: January ‘08 • 5/5/5 promotion: proven formula • £5.55 per pizza to accommodate rising food costs (11% increase in value) • Boost to average ticket / volume & new customers (over ½ million) in ‘07 • Supported with heavyweight TV advertising • Two week BOGOF
Slide 76: 2008 Overview: Taking Domino's to the next level
Domino’s Pizza UK & IRL plc 2008 Overview: Taking Domino’s to the next level • c.£18m National Advertising spend (doubled since 2005) • ATL budget increased by 50% in 2008 • Scope to increase coverage, frequency, weighting of TV exposure • Identification of ‘big’ new sponsorship properties • Making
Slide 77: 'Big' new sponsorship properties
Domino’s Pizza UK & IRL plc ‘Big’ new sponsorship properties • Domino’s is in a period of exclusive negotiations with ITV to sponsor a flagship show • Important to continue to raise the profile & stature of the brand and to drive the growth • Maximising the impact and benefit of the increased Nation
Slide 78: Summary
Domino’s Pizza UK & IRL plc Summary • 2007 record system sales and sector leading mature store sales increases • Momentum is strong: significant increase in marketing firepower in ’08 • Strong brand offering great value • 2008: take the brand to the next level 78
Slide 79: Continuing strategy
Domino’s Pizza UK & IRL plc Continuing strategy • Focus on roll out of Domino’s system in UK and Ireland • Maintain consistent new store opening programme • Build infrastructure for 1000 stores • Drive like-for-like sales growth • Manage number of franchisees • Operational leverage to drive net marg
Domino's Pizza UK & IRL — Investor Presentation (January 2008) on 6ix