Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2018 Earnings Presentation
43 slides from Domino's Pizza's earnings presentation, March 2019
Slide 1: The Official Presentation of the Results
5 THE OFFICIAL ©) PRESENTATION OF THE RESULTS D ’*s Pizza Group plc 52 Weeks Ended 30 December 2018 e 9 & Dominos:
Slide 2: Today's Agenda
TODAY’S AGENDA Goi & OG BO Highlights David Wild, CEO Financial performance David Bauernfeind, CFO UK review David Wild, CEO International review Simon Wallis, International MD Q&A & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 3: Good Growth in UK; International Disappointing
GOOD GROWTH IN UK; INTERNATIONAL DISAPPOINTING UK & ROI SYSTEM SALES UK LFL GROWTH UK & ROI EBIT UK & ROI STORE OPENINGS £1155.4m@@ 46% £1010m 59 GROUP SYSTEM SALES BASIC EPS DIVIDEND PER SHARE —_— INVESTMENTS FOR GROWTH! £1,259.5m@ 1161p @& 95pf £89.0m £103.5m returned to shareholders via dividends
Slide 4: Financial Performance
FINANCIAL PERFORMANCE David Bauernfeind Chief Financial Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 5: Continued Top Line Growth
CONTINUED TOP LINE GROWTH FY2018 FY 2017 cali 52 weeks 52 weeks “ISITE TS System sales 1,259.5 1,155.7 9.0% Revenue 534.3 466.5 14.5% Underlying EBITDA 109.8 106.5 3.0% EBITDA (%) 8.7% 9.2% (0.5)pt Depreciation and amortisation (13.0) (12.5) (4.0)% Operating profit 96.9 94.0 3.1% Based on underlying
Slide 6: Higher Interest Costs and Tax
HIGHER INTEREST COSTS AND TAX FY2018 FY 2017 a 52 weeks 52 weeks eae Interest (3.5) 0.4 - Profit before tax 93.4 94.4 (1.1)% Tax (19.7) (17.2) (14.5)% Profit after tax 73.7 77.1 (4.4)% Earnings per share (pence) 16.1 15.7 2.5% Non-underlying (29.8) (15.0) Total profit after tax 43.9 65.3 (32.7)% Eff
Slide 7: UK & ROI Segment
UK & ROI SEGMENT System sales Revenue Franchise revenue Corporate revenue Total revenue Operating profit Operating margin % of system sales Operating margin % of revenue 52 weeks 2018 1,155.4 412.4 27.1 439.5 101.0 8.7% 23.0% 52 weeks 2017 1,079.4 387.5 5.9 393.4 93.2 8.6% 23.7% % growth 7.0% Based
Slide 8: International Segment
INTERNATIONAL SEGMENT 52 weeks 52 weeks 2018 2017. %growth System sales 104.1 76.3 36.4% Revenue Franchise revenue 2.0 0.9 122.2% Corporate revenue 92.8 72.2 28.5% Total revenue 94.8 73.1 29.7% Operating (loss)/profit (4.1) 0.8 Based on underlying performance at reported exchange rates on a 52 week
Slide 9: International Carrying Values
INTERNATIONAL CARRYING VALUES Carrying value at Revised 30 Dec 18 (pre carrying impairment) value Iceland 39.1 2 = 39.1 Sweden 18.0 (2.7) - 15.3 Switzerland 11.8 (1.2) (0.1) 10.5 Norway 24.3 (10.2) 14.5 * Total impairments of £14.1m across Norway, Switzerland and Sweden * Sweden: increased risk prof
Slide 10: Non-Underlying Items
NON-UNDERLYING ITEMS ES UK supply chain transformation (9.5) Amortisation of e-Commerce (2.9) platform Dolly Dimple’s integration costs (4.5) * Supply chain transformation: commissioning of Warrington and International impairments (14.1) decommissioning of Penrith and Kingston Put option revaluation
Slide 11: Non-Underlying Items (Continued)
NON-UNDERLYING ITEMS (CONTINUED) ES TT UK supply chain transformation Amortisation of e-Commerce platform Dolly Dimple’s integration costs International impairments Put option revaluations Amortisation and other acquisition costs Market Access Fee Germany store conversion costs Recorded in operating
Slide 12: Capex - Warrington Complete
CAPEX - WARRINGTON COMPLETE £m FY 2018 Warrington 7.8 UK corporate stores 1.3 IT 7.4 Other 2.0 * Warrington opened on time and on budget - already serving 316 stores today Total UK 18.5 * £5.6min web and app development in IT . International 10.4 * International capex - corporate stores, conversions
Slide 13: Leverage Towards the Bottom of Target Range
LEVERAGE TOWARDS THE BOTTOM OF TARGET RANGE Cash movement (£m) (59.2) _(26) (203.3) (44.3) (89.2) (60.1) | (28.9) (5.8) 35 (145) Investment in the Returns to ate __._—_G), business shareholders Net debt/4 85x 109.8 53 Ww £89.0m £103.5m EBITDA ™ x > x ‘ = i s & £€ § EF &€ co g ¢ S SS “Sg S © s & 2 =
Slide 14: Full Year Dividend Up 5.6%
FULL YEAR DIVIDEND UP 5.6% Annual dividend - pence per share (adjusted for stock splits) 9.50 9.00 8.00 6.92 5.30 5.83 4.83 - 4.10 3.40 2.58 ; | 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Final dividend key dates: Ex-dividend date Record date Payment date 21 March 2019 22 March 2019 25 April
Slide 15: 2019 Guidance
2019 GUIDANCE * UK&ROl-continued growth * UK new store pipeline healthy but no guarantees on timing * International - break-even targeted (inc. Germany) * Capital expenditure £25-30m for 2019 * “Core” capex of £20-25m, including £8m on International + £5m oncapacity and efficiency projects in UK&ROI
Slide 16: UK Review
UK REVIEW David Wild Chief Executive Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 17: UK: Good Performance
UK: GOOD PERFORMANCE SYSTEM ONLINE COLLECTION LFL ORDER LFL TICKET SALES GROWTH SALES GROWTH SALES GROWTH GROWTH GROWTH 7.1% 12.5% 5.9% 2.2% 2.4% (£m) 19.1m eat 1091.6m 37.0m | (23.0m) 1019.3m 2017 (Wks 1-52) LFL exc Splits New Store Growth Immature Store Growth Split Territories 2018 2 Domino's’ 7
Slide 18: A UK Technology Leader
A UK TECHNOLOGY LEADER 1000 90% 79% 900 2 80% 72% g . , 800 67% 70% 2 * DPGis one of the most successful € 60! 674 2 . . or wi 700 60% “bricks-to-clicks” stories in the UK % 600 556 3 . . cs 50% 8 * 89% penetration of delivery sales and & 500 = © 400 ay, ae 40% 6 orders < 27% 326 2 . S 300 259 30% i
Slide 19: Significant Improvement in App Conversion
SIGNIFICANT IMPROVEMENT IN APP CONVERSION Traffic (m) Online incidence (%) Conversion rate (%) 79.0 33.6 2017 2018 2017 2018 2017 2018 * Mobile app - 22.5m downloads * Traffic +4.0% * Conversion improved 3.7pt to 47.3% ¢ Mobile internet driving highest growth * Traffic +20.1% * Conversion +1.6pt to
Slide 20: Digital Growth Drivers
DIGITAL GROWTH DRIVERS * Investment in data-led decision-making enhancing sales performance at lower cost * Using Al to bid more effectively for pay-per-click spots * Analysing market demand * Contextual influences - weather, local sporting events etc * PPC orders +33.6% in 2018 * Drives down cost p
Slide 21: New Product Development
NEW PRODUCT DEVELOPMENT * Aimto keep menu simple and not too long * Maintain newness through limited term offer pizzas + Meatfielder (World Cup) - peak mix 7% * Cheeseburger - peak mix 9% * Both supported by very strong social media campaigns * Offers continue to target £20 price point, collection a
Slide 22: Sales per Man Hour, Orders per Man Hour, Labour Cost %
• • • • Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Sales per Man Hour £30.70 £28.03 £29.92 £31.34 £32.03 • Orders Per Man Hour 1.86 1.80 1.92 1.92 1.91 • Labour Cost % 26.9% 29.4% 28.1% 26.7% 26.2% Avg weekly hours per store 637 670 613 579 639 •
Slide 23: EBITDA Bridge 2017 to 2018
21.0 16.1 (7.9) (14.3) (4.4) (5.8) 135.8 140.4 EBITDA 2017 Order volumes Basket/Composition Food Cost Inflation Labour & Mileage Royalty & NAF Other Operating EBITDA 2018 Expenses • • •
Slide 24: New and Immature Stores Still at High Levels
NEW AND IMMATURE STORES STILL AT HIGH LEVELS Over 20% of estate remains immature New and immature AWUS remain very or impacted by splits short term encouraging but are inevitably temporarily dilutive 30.0% 25000 25.0% 20000 20.0% 15000 15.0% 10000 10.0% 5.0% 5000 0.0% ie) 2014 2015 2016 2017 2018 20
Slide 25: Continued Franchisee Support
CONTINUED FRANCHISEE SUPPORT * >30 franchisees have stores in the pipeline * Ongoing discussions on commercial terms, but no plans to change key supply chain arrangements * Will continue to support franchisees through: * Volume rebates/rebate protection for new and donor stores - £2.6min 2018 * Majo
Slide 26: Levers to Offset Industry-Wide Cost Pressures
LEVERS TO OFFSET INDUSTRY-WIDE COST PRESSURES Labour costs: Supplies costs: + 3-4% in 2019: Key offsets: * National living wage April * Dairy expected to be broadly flat YoY * Volume - franchisees capture 2019 + Flour impacted by 2018 drought 75-80% of value from * Competition for drivers * Chicken
Slide 27: ROI: Strong Recovery in H2
ROI: STRONG RECOVERY IN H2 TD LOCAL CURRENCY LOCAL CURRENCY SYSTEM SALES ONLINE SALES GROWTH GROWTH ORDER GROWTH NEW STORES AWUS (£) 5.2% 17.1% 2.5% 1 c. £25,000 * Strong economic recovery continues ° Htaffected by weather and weaker promotions * Transaction with largest franchisee * Value crystalli
Slide 28: International Review
INTERNATIONAL REVIEW Simon Wallis International Managing Director & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 29: What Do We Need to Improve
WHAT DO WE NEED TO IMPROVE A za . Established strong controls over food and labour . Stabilise and simplify business XN | 4 * Drive order count & digital performance . Improve operational consistency and productivity . Established SCC capability . Increase ticket & digital performance . Improve repe
Slide 30: Strengthened Management Support
STRENGTHENED MANAGEMENT SUPPORT CEO David Wild International MD Simon Wallis Country Country Country Country Manager - Manager - Manager - Manager - Group support functions Norway Sweden Iceland Switzerland Robin Peter Birgir Orn Bart Caley Jakobsen Birgisson DeVreese e 9 $ Domino's’ |
Slide 31: Key Principles to Support International Growth
KEY PRINCIPLES TO SUPPORT INTERNATIONAL GROWTH 1. Leverage DPG expertise and experience 2. Clarify local accountability 3. Identify smarter ways to manage labour more efficiently 4. Leverage scale and relationship with suppliers 5. Provide help to do things quicker, better and cheaper e 9, $ Domino'
Slide 32: 2019 Key Initiatives - Norway
2019 KEY INITIATIVES - NORWAY * Open up to 8 new stores - inc of 6 DD conversions N Eo EES * Drive order count with focused marketing activity AWUS £ 17,306 Avg O/C 805 * Launch Global On Line Ordering platform from H2 2019 AvgTicket £ 21.48 Collection% sales 62 * Review product specification Digita
Slide 33: 2019 Key Initiatives - Sweden
2019 KEY INITIATIVES - SWEDEN AWUS & 11,446 Avg O/C 915 AvgTicket £ 12.51 Collection % sales 70 Digital % sales 56 Food & Overall Store Labour Satisfaction | Profitability 33 Open up to 7 new stores Drive ticket with new price/promo plan Drive digital traffic & launch GOLO in H1 2019 Create differen
Slide 34: 2019 Key Initiatives - Switzerland
2019 KEY INITIATIVES - SWITZERLAND AWUS £ 20,730 Avg O/C 974 AvgTicket £ 21.28 Collection % sales 60 Digital % sales 60 Food & Overall Store Labour Satisfaction | Profitability 34 Open up to 5 new stores Regionalise marketing Drive digital through GOLO Drive collection Review product specification I
Slide 35: 2019 Key Initiatives - Iceland
2019 KEY INITIATIVES - ICELAND AWUS & 33,446 Avg O/C 1,577 Avg Ticket £ 21.20 Collection % sales 73 Digital % sales 62 Food & Overall Store Labour Satisfaction | Profitability 35 Drive collection & delivery Improve digital experience Target LSM & tourism Improve driver productivity Drive procurement
Slide 36: Summary
SUMMARY * 2018 a period of rapid expansion with pains of growth * Drive performance across existing estate - Focus on order count growth in Norway - Drive ticket in Sweden - Regionalise activity in Switzerland - Break the glass ceiling on what is possible in Iceland * Drive collection and improve la
Slide 37: Summary
SUMMARY David Wild Chief Executive Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 38: Summary: UK & ROI Performing Well; Clear Plan for International
SUMMARY: UK & ROI PERFORMING WELL; CLEAR PLAN FOR INTERNATIONAL GROUP SYSTEM SALES UNDERLYING BASIC EPS DPS INVESTMENTS FOR GROWTH +9.0% +2.5% +5.6% £89.0m * Food delivery market dynamics positive * UK & ROI continues to grow profitably * Committed to win/win solution with franchisees * Clear, resou
Slide 39: Q&A
Q5A David Wild Chief Executive Officer David Bauernfeind Chief Financial Officer Simon Wallis International Managing Director & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 40: YS Dominos:
YS Dominos: ) THE OFFICAL FOOD OF L EVERYTHING
Slide 41: Definitions
DEFINITIONS * Constant currency basis restates the prior year results to the current year’s average exchange rates + System sales represent the sum of all sales made by both franchised and corporate stores in the United Kingdom, Republic of Ireland, Switzerland and Nordics to consumers + Like-for-li
Slide 42: Analysis of UK & ROI P&L and Margin Drivers
ANALYSIS OF UK & ROI P&L AND MARGIN DRIVERS 2018 2017 (52 weeks (£m) ¢ cen % Change System sales 1155.4 1079.4 7.0% Revenue 439.5 393.4 11.7% Of which supply chain centre 323.5 297.4 8.8% Net royalties 32.3 30.2 7.1% Supply chain centre margin 94.9 87.6 8.3% Net overheads, realty and incentives (20.
Slide 43: Forward-Looking Statements Caution
FORWARD-LOOKING STATEMENTS CAUTION These 2018 annual results, our interim results, our Annual Report and the Domino’s Pizza website may contain certain "forward-looking statements" with respect to Domino’s Pizza Group plc and the Group's financial condition, results of operations and business, and c