Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — H1 2007 Earnings Presentation
25 slides from Domino's Pizza Enterprises's earnings presentation, Feb 19, 2007
Slide 1: First Half Results to 31 December 2006
Domino’s Pizza Enterprises Limited First Half Results to 31 December 2006 AJSTPALIA NEW
Slide 2: Agenda
y. e AGENDA 1. 2. 3. Executive Summary Network Store & Sales Growth Revenue & EBITDA Results + Australia, New Zealand & Europe * Corporate * Franchise + Corporate Development & Unallocated Financial Details + Profit & Loss + Cash Flow + Balance Sheet Looking Forward — Major Activities Europe Conclus
Slide 3: Executive Summary
EXECUTIVE SUMMARY + Network sales +42.1% and revenue +36.4% largely off European acquisition + Group SSS growth 3.2% * EBITDA down 21.3% and NPAT 46.2% on H1 06 — reflecting first half impact as forecast for Europe. Aus poor first quarter performance per October announcement + New Zealand continues
Slide 4: Executive Summary
EXECUTIVE SUMMARY Store role out continues in all countries * Stores added in H1 Aus/NZ 19, Europe 162 (incl 155 on acquisition) « Europe added 7 stores in first half and conversions starting January 07 DPE innovation to 31 December 06 WwW. COminos.coMmau * Mobile phone service represents 25% of tot
Slide 5: Executive Summary
EXECUTIVE SUMMARY Europe Update « Second half to reflect early guidance (H1 60% H2 40% loss) due to seasonality, loss rate improving and non-recurring start up costs * Non-recurring start up costs in H1 = $600k ie ; New Guidance for Full Year 07 « Australia/New Zealand - SSS0to-1% — Will have 35 sto
Slide 6: Store count as at December
Store count as at 31 December 06 — Australia — New Zealand — France/Belgium — Netherlands Store count projection June 07 — Australia/NZ — Europe - 395 - 62 - 99 - 63 619 ies) 2001 2002 2003 2004 2005 YEAR 359.4 2006 ©2007 Ht AusiNZ Europe
Slide 7: Network Store & Sales Growth
NETWORK STORE & SALES GROWTH Aus/NZ opened 19 stores in first half Europe added seven new stores in the half (to the 155 on acquisition) Aus/NZ corporate store ratio has increased to 32% which is ahead of plan and there are significant reductions planned for second half. See slide 19 for further det
Slide 8: Network sales and store growth by year
200 480 460 440 120 = = 100 2001 2002 2003 2004 YEAR 1729 2005 2006 ©2007 Ht AusiINZ — 5 2001 2002 2003 2004 2005 2006 2007 Ht YEAR Europe
Slide 9: Results — Australia, New Zealand & Europe
RESU LTS — AUSTRALIA, NE * . W ZEALAND & EUROPE Australia EBITDA down 16.9% on H1 06 due to: - Domino's Service & Supply - start up of new cost centre was a higher loss than expected ($230k loss) — $0.5m less corporate development profit than previous halves ~ Weaker promotions (as per October annou
Slide 10: Results - Corporate
RESULTS - CORPORATE « Corporate results largely impacted by soft sales + Greater weight of immature stores in Victoria, our newest market « Results include eight corporate stores in Europe (no material effect) * European stores have moved from losses to modest profit H1 05 * H2 05 * F/Y 05 * H1 06 H
Slide 11: Results - Franchise
RESULTS - FRANCHISE « Aus/NZ $0.8m below previous year due to immature franchisee performance in a weaker trading environment + Europe $1.4m loss slightly ahead of plan « All European overheads have been classified in the franchise segment (unallocated overhead immaterial) « Strong return on funds e
Slide 12: Results — Corporate Development & Unallocated
od : _ RESULTS — CORPORATE DEVELOPMENT & UNALLOCATED + Corporate Development — Less profit on sale of stores — Projecting to be greater in H2 (in line with previous halves) + Other / unallocated (G&A) - Savings created from Head Office departments generating incremental revenues H1 05 * H2 05 * F/Y
Slide 13: Profit & Loss
PROFIT & LOSS + Interest costs up $0.7m, 88% on last year * Tax compares unfavourably due to 06’s $1m positive tax adjustment + Interest cover 4.3 times — reduction due to European acquisition. Expected to improve in H2 as a result of debt reduction H105* H205* F/YOS* H1 06 H2 06 F/Y 06 HL07 \+/(-)
Slide 14: Cash Flow
CASH FLOW Working capital increase $3.1m — Additional tax payments $2.0m (catch up) — Inventories DSS and Europe $1.0m Acquisition of Europe $13m Investment in corporate stores $16.9m. This will reverse in second half Extra $10.9m in debt finance H1 06 H2 06 H1LO7 $ mil $ mit $mil EBITDA 12.2 i2.5 9
Slide 15: Balance Sheet
BALANCE SHEET Cash held for Europe ($14.6m) at June 06 now paid Trade and Other Receivables increased $13.4m due to Europe Inventories up $2.1m — Europe acquisition and DS&S Other current assets — Europe $1.2m Deferred tax assets - $3.1m Europe losses (available to offset tax on future profits) Good
Slide 16: Looking Forward — Major Activities
LOOKING FORWARD — MAJOR ACTIVITIES Store expansion target + 1,600 stores . . Domino’s Service & Supply (Domino's in-house equipment maintenance Store roll out to continue in all five countries Will end June with 668 stores due to the additional 75 stores to be added in 2007 Have significantly reduce
Slide 17: Innovation
Innovation + Based on the success of Brownies and Chicken Kickers, we will continue our promotional program around menu expansion of non-core pizza products in the second half Australian promotions H1 teen Coreen Tate Gaga Beouniias Australian promotion H2 7
Slide 18: Looking Forward — Major Activities
LOOKING FORWARD — MAJOR ACTIVITIES Innovation (Continued) + — Internet Ordering still represents small proportion of total sales, but continues to grow consistently + Further enhancements to the Internet Ordering system in second half 07 « NZ internet ordering system to be enabled in H2 * With 97% o
Slide 19: Looking Forward — Major Activities
LOOKING FORWARD — MAJOR ACTIVITIES Will look to reduce proportion of corporate stores over the next 12 months from 30% to 15-20% Why? + Refocus corporate stores into cost effective geographic locations + Still maintain benefits of hybrid model * Centralise and reduce administration overheads Expecte
Slide 20: Management aware of:
Management aware of: Drought has unfortunately taken away savings upside in cheese (previously shared), with higher flour and protein costs Success of promotions continues to be a significant influence on the business, and substantial activity taking place in this area eg. increased resources with n
Slide 21: Europe: improving economics at store level
+ Improving economics at store level + Corporate investment in platforms for growth EUROPE Focus since taking ownership in Europe SSS 12.5%, applying high volume learning Remove operational bottlenecks, more equipment, people and training Increased store presence and advertising (above and below lin
Slide 22: Europe
EUROPE Looking forward + Learning and opportunities from research + Growing the network New pizzas tailored to French and Dutch markets Locally developed advertising Confirms original business plan Grow take-away sales 2007 national TV in Netherlands and radio in France European Promotions H1 On tra
Slide 23: Europe
EUROPE Looking forward * Supporting growth Rolling out common European POS Increased finance and development resources Planning second French commissary Europe franchisees and management visiting Australia to accelerate best practice and HVM learning « Challenges in Europe Language and cultural diff
Slide 24: Europe
EUROPE Pizza a large but very fragmented market * Opportunity in both France and Netherlands to become the leading Pizza chain * Consumer research re-enforced the opportunity for chains in market + Menu development, pricing and advertising designed to help source consumers from independents Store Co
Slide 25: Conclusion
CONCLUSION Results consistent with impact of growth into Europe. Australia’s poor first quarter performance per October announcement Group continuing innovative pizza development, whilst expanding into other non-core products in Australia. NZ and Europe adding new pizzas tailored to local markets Au
Domino's Pizza Enterprises — H1 2007 Earnings Presentation on 6ix