Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2014 Earnings Presentation
45 slides from Domino's Pizza's earnings presentation, Jul 28, 2014
Slide 1: Interim Results for the 26 weeks ended 29 June 2014
Interim Results for the 26 weeks ended 29 June 2014 1
Slide 2: The Team
The Team David Wild Chief Executive Officer Sean Wilkins Chief Financial Officer 2
Slide 3: Highlights of H1 2014
Highlights of H1 2014 • 11.3% UK LFL • UK on-line accounting for 69.7% of delivered sales (63.3% in 2013) • UK and Ireland operating margin improved by 51 bps • ROI steady at 3.2% LFL • Good growth in Q2 for Switzerland drove H1 to 2.9% • Germany re-engineering in progress • Strong cash generation a
Slide 4: Sean Wilkins, Chief Financial Officer
Sean Wilkins Chief Financial Officer 4
Slide 5: Financial highlights for H1 2014
Financial highlights for H1 2014 • UK & ROI system sales up 15.0% to £365.6m • Group system sales up 14.9% to £375.0m • Group operating profit* up 10.2% to £24.7m • Cashflow before financing more than doubled to £26.9m • Interim dividend up 10% at 7.81p * Pre-exceptionals 5
Slide 6: Group Profit and Loss (Pre-exceptionals)
Group Profit and Loss (Pre-exceptionals) 26 weeks ended 26 weeks ended % increase 29 June 2014 30 June 2013 £’000 £’000 System sales 374,965 326,498 14.9 Operating profit 24,731 22,432 10.2 Net interest (233) (184) 26.6 Profit before tax 24,498 22,248 10.1 Taxation (5,621) (5,615) 0.1 Profit after t
Slide 7: Profit and Loss (Pre-exceptionals, Germany and Switzerland)
Profit and Loss (Pre-exceptionals, Germany and Switzerland) HEALTH OF THE UK & ROI CORE BUSINESS 26 weeks ended 26 weeks ended 29 June 2014 30 June 2013 % change £’m £’m LFL Sales +10.5% +6.4% - System Sales - £’m 365.6 317.9 15.0% Operating Profit - £’m 29.8 25.9 15.3% Operating Profit % * 21.7% 21
Slide 8: H1 2014 System Sales and PBT Growth
H1 2014 System Sales and PBT* Growth • UK and ROI LFL sales up 10.5%, profits up 15.4% £400 System Sales (£M) PBT * (£M) £32.5 29.7 £30.0 £350 Sales £m 25.7 £27.5 £300 23.3 £25.0 PBT £m £22.5 £250 20.2 £20.0 £200 £365.6 £17.5 £150 £317.9 £285.9 £15.0 £258.3 £12.5 £100 £10.0 £50 £7.5 £0 £5.0 2011 H1
Slide 9: Profit and Loss - Germany
Profit and Loss - Germany 26 weeks ended 26 weeks ended % change 29 June 2014 30 June 2013 LFL Sales (€) -1.7% +23.8% - System Sales - £’m 4.7 3.9 20.4% Operating Loss - £’m (4.7) (3.2) (48.8)% Adjusting items - £’m Accounts receivable provision 1.8 Restructure & reorganisation 0.3 Transition of cor
Slide 10: Profit and Loss - Switzerland
Profit and Loss - Switzerland 26 weeks ended 26 weeks ended % change 29 June 2014 30 June 2013 LFL Sales (CHF) +2.9% +7.8% - System Sales - £’m 4.7 4.7 - Operating Loss- £’m (0.4) (0.3) (15.6)% Adjusting items - £’m Pre-opening/relocation costs 0.2 Underlying Operating Loss- £’m (0.2) (0.3) 33.3% 10
Slide 11: Balance Sheet
Balance Sheet Current Assets: At 29 June At 30 June 2014 2013 At 29 June 2014 At 30 June 2013 £’000 £’000 £’000 £’000 Inventories 4,568 7,328 Receivables 31,448 38,269 Non-current assets 93,142 103,880 Investment in 1,063 3,573 finance leases Current assets 80,885 71,978 Prepaid lease 195 257 charge
Slide 12: Cash Flow Statement
Cash Flow Statement 26 weeks ended 26 weeks ended 29 June 2014 30 June 2013 £’000 £’000 Cash generated from operations 31,623 19,112 Taxation paid (2,970) (3,630) Net cash generated by operating activities 28,653 15,482 Net cash used by investing activities (1,735) (4,147) Cash inflow before financi
Slide 13: Analysis of Borrowings
Analysis of Borrowings At 29 June 2014 At 30 June 2013 £’000 £’000 Cash at Bank 43,611 22,551 Revolving Credit Facilities (29,797) (29,789) Net Cash 13,814 (7,238) DP Capital (2,458) (2,796) Term/EBT loan (15,000) (13,000) Finance leases (93) (221) Adjusted Net Debt* (3,734) (23,255) Adjusted Net De
Slide 14: Capital Expenditure 2014
Capital Expenditure 2014 Actual Forecast H1 H2 Total £m £m £m Maintenance 1.9 3.6 5.5 Expansionary 1.0 3.2 4.2 Total Capex 2.9 6.8 9.7 14
Slide 15: The UK Franchisee Model
The UK Franchisee Model 26 weeks ended 26 weeks ended 29 June 2014 30 June 2013 % increase Average sales (AWUS) £17,468 £ 15,701 +11.3% Total sales £454,171 £408,236 EBITDA % 13.1% 12.5% EBITDA £59,670 £51,065 +16.9% £8,605 15
Slide 16: David Wild, Chief Executive Officer
David Wild Chief Executive Officer 16
Slide 17: Key issues for 2014
Key issues for 2014 • Building on UK success with customers • Overhead management within Domino’s • Execution of German plan • Continued recovery in ROI 18 17
Slide 18: UK: Strong start to 2014, however, tough comps in H2
UK: Strong start to 2014, however, tough comps in H2 * 2014 Mature store group opened on or before 30th December 2012 18
Slide 19: UK: Total sales have grown by +16.0% year on year
UK: Total sales have grown by +16.0% year on year • Strong results from New and Immature stores • 28% growth in Immature store AWUS vs. 2012 cohort in 2013 H1 • New stores have opened on a higher AWUS than in previous years – 8 traditional store openings in H1 and 5 further openings in July 19
Slide 20: Sales driven by both orders and basket size
Sales driven by both orders and basket size • Strong order count has been driven by marketing activity, the Winter Survival deal in Q1 was particularly successful • Bundle deals have encouraged customers to add sides and desserts to their baskets, driving add-on volumes by a third 20
Slide 21: Delivering Greatness from Dominos
Delivering Greatness from Dominos Quality Innovation Great Value ‘Greatness’ TV Campaign We have seen successes Improving value for money launched in September 2013 with the Mega Meltz and the through well structured Carnivale ranges. bundle offers. Research shows improvement in brand affinity Added
Slide 22: We are a true ecommerce business
We are a true ecommerce business • Ecommerce is now at 69.7% of delivered sales, with 38.3% of online sales coming from mobile devices – In some regions, mobile now accounts for half of all online transactions 22
Slide 23: Continued innovation in digital
Continued innovation in digital • 2.3m new App users during H1, taking total to over 5.5m • 121 email programme driving a more direct relationship with customers – Nearly 55m emails sent YTD • 11.1% growth in customer visits, generating nearly 370m page views 23
Slide 24: New website being rolled out across UK and ROI
New website being rolled out across UK and ROI • Communicating quality – Great food photography • Improved experience – Personalised landing pages, previously saved orders and personalised offers. • Increased value perceptions – Transparency of discount amount. – Deals automatically applied to baske
Slide 25: Engaging online customers through social media
Engaging online customers through social media • Over 946k Facebook fans • Driving engagement and awareness through social – Melting Man - 18.6m Twitter reach – Edibox April Fools – 3.5m social reach – Topical content - #Pizzaonatrain – trended for 2 hours globally/3 hours in UK – O2 Priority partne
Slide 26: UK/ROI Supply Chain - 2014
UK/ROI Supply Chain - 2014 Maintain operational gearing through: • Focus on improving production efficiency • Distribution efficiencies • Improved procurement 26
Slide 27: Food Cost Outlook for remainder of 2014
Food Cost Outlook for remainder of 2014 H1 2014 Performance • Franchisee food and packaging basket increased 3.4% year on year over H1 – Record high cheese prices at the end of 2013 carried over into H1 2014 • Strong volume growth has enabled negotiated volume rebates from suppliers – £2m in annuali
Slide 28: ROI: Sustained recovery
ROI: Sustained recovery • Sales in ROI grew +3.2% driven by strong performances in Dublin stores – Dublin stores are +5.1% for HI • Online continues to grow in ROI, with over 40% of delivered orders now through online channels. Sales through mobile devices account for half of online orders LFL Sales
Slide 29: Domino's in Germany – Lessons and plan
Domino’s in Germany – Lessons and plan Corporate owned network Franchise Franchiseoperation operation Too rapid expansion 5 5store storeopenings in 2014 openings in 2014 Lack of full control Buyout Buyoutofofminority shareholderand minority shareholder andlocal local finance finance teamteam recruit
Slide 30: Germany performance
Germany performance • -1.7% like-for-like for H1 • Continued re-engineering of Operating Framework • Reduction in local marketing spend • Rationalisation of overhead • Minimal capex • 3 new stores; 4 closures • Food cost reductions • Balance of corporate and franchise stores • Clean-up of accounting
Slide 31: Switzerland: Accelerating like-for-like growth
Switzerland: Accelerating like-for-like growth • Strong Q2 performance driven by store investment • Sales driven by order growth (+2.0% year on year) • 4 new stores plan in H2 • 3 relocations planned in H2 • Strengthened management team 31
Slide 32: 2014 outlook
2014 outlook • Maintain sales momentum – tougher like-for-like comps in H2 • On track to open 40-50 stores • Hold gross margin – food cost reductions passed to franchisees • Control overheads • One-off transition costs worsen German guidance • Switzerland Q4 breakeven 32 32
Slide 33: Summary
Summary • Strong first half in UK • Online and promotions fuelling growth • Store openings performing well – on track for 40-50 in UK • Supply Chain and overheads under control • Solid result in ROI • Germany re-engineering leading to subdued sales • Switzerland improving through H1 • Strong cash ge
Slide 34: Q&A
Q&A 34
Slide 35: APPENDICES
APPENDICES APPENDIX 1 Analysis of Group Turnover (Pages A-1) APPENDIX 2 Analysis of UK and ROI Turnover (Page A-2) APPENDIX 3 Analysis of Germany Turnover (Page A-3) APPENDIX 4 Analysis of Switzerland Turnover (Page A-4) APPENDIX 5 Analysis of Group Operating Profit (Page A-5) APPENDIX 6 Analysis of
Slide 36: Analysis of Group Turnover
Analysis of Group Turnover 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Royalties 20,611 17,977 2,634 14.7 Store sales 6,015 6,788 (773) (11.4) Franchise/TST/FDP fees 127 217 (90) (41.2) Supply Chain Centre sales 109,314 94,628 14,686 15.5 Property sa
Slide 37: Analysis of UK & ROI Turnover
Analysis of UK & ROI Turnover 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Royalties 20,107 17,480 2,627 15.0 Store sales 69 - 69 n/m Franchise/TST/FDP fees 103 153 (50) (32.8) Supply Chain Centre sales 106,469 92,319 14,150 15.3 Property sales 8,923
Slide 38: Analysis of Germany Turnover
Analysis of Germany Turnover 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Royalties 222 214 8 3.7 Store sales 1,223 2,084 (861) (41.3) Franchise/TST/FDP fees 25 64 (39) (60.9) Supply Chain Centre sales 1,681 1,290 391 30.3 Property sales - - - n/m Com
Slide 39: Analysis of Switzerland Turnover
Analysis of Switzerland Turnover 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Royalties 282 283 (1) (0.4) Store sales 4,723 4,704 19 0.4 Franchise/TST/FDP fees - - - n/m Supply Chain Centre sales 1,164 1,024 140 13.6 Property sales - - - n/m Computer
Slide 40: Analysis of Group Operating Profit
Analysis of Group Operating Profit* 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Net Royalty 10,228 8,897 1,331 15.0 Supply Chain Centre Margin 30,692 26,443 4,249 16.1 Realty 119 393 (274) (69.7) Subsidiaries 289 4 285 n/m Net Overheads (11,886) (10,
Slide 41: Analysis of UK & ROI Operating Profit
Analysis of UK & ROI Operating Profit* 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Net Royalty 10,228 8,897 1,331 15.0 Supply Chain Centre Margin 30,692 26,443 4,249 16.1 Realty 119 393 (274) (69.7) Subsidiaries 289 4 285 n/m Net Overheads (11,886) (
Slide 42: Analysis of Germany Operating Profit
Analysis of Germany Operating Profit* 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Net Royalty 101 97 4 4.1 Supply Chain Centre Margin 81 (3) 84 n/m Corporate Stores (501) (1,012) 511 n/m Net Overheads (4,393) (2,248) (2,145) (95.4) German Operating P
Slide 43: Analysis of Swiss Operating Profit
Analysis of Swiss Operating Profit* 26 weeks ended 26 weeks ended Variance Variance 29 June 2014 30 June 2013 £’000 % £’000 £’000 Supply Chain Centre Margin 77 9 68 755.6 Corporate Stores 3 355 (352) n/m Net Overheads (466) (628) 162 25.6 Swiss Operating Profit (386) (264) (122) (46.2) * Pre-excepti
Slide 44: Diluted Earnings Per Share
Diluted Earnings Per Share * 13 Compound increase of 9.9% over last four years 12 11 10 9 8 7 Pence 6 11.5 10.2 10.7 5 9.1 4 7.9 3 2 1 0 2010 H1 2011 H1 2012 H1 2013 H1 2014 H1 * Pre-exceptionals Diluted earnings per share Linear (Diluted earnings per share) A-9
Slide 45: Dividends Per Share
Dividends Per Share Compound increase of 14.8% 10 over last four years 9 8 7 Pence 6 5 4 7.81 7.10 6.60 3 5.50 2 4.50 1 0 H1 2010 H1 2011 H1 2012 H1 2013 H1 2014 Dividends per share Linear (Dividends per share) A-10