Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2015 Earnings Presentation
46 slides from Domino's Pizza's earnings presentation, March 2016
Slide 1: Domino's Pizza Group Plc Preliminary Results for the 52 weeks ended 27 December 2015
DOMINO’S PIZZA GROUP PLC Preliminary Results for the 52 weeks ended 27 December 2015
Slide 2: Highlights of 2015
HIGHLIGHTS OF 2015 11.7% 61 UK LFL SALES NEW UK STORES Double-digit like for like (LFL) sales growth for nine successive quarters in core UK business Significant progress in digital initiatives – now 78% of delivered sales Record 61 new UK stores opened in the year with best ever sales performance F
Slide 3: Group Financial Summary
GROUP FINANCIAL SUMMARY GROUP SYSTEM SALES UNDERLYING STORE OPENINGS1 OPERATING PROFIT £877.2m £73.2m 65 stores 15.8% 16.6% 24 UNDERLYING FULL-YEAR DIVIDEND NET CASH BASIC EPS 35.7p 20.75p £40.4m 19.4% 18.6% £29.4m 1 In the year five UK stores (of which four were non-traditional format) and one ROI
Slide 4: Strong Group Trading Results
STRONG GROUP TRADING RESULTS 52 weeks ended 52 weeks ended 27 December 2015 28 December 2014 £m £m % change Continuing operations (Group excluding Germany) System sales 877.2 757.8 15.8% Underlying operating profit 73.2 62.8 16.6% Underlying profit before tax 73.2 62.1 17.9% Discontinued operations
Slide 5: Cash Generation Remains a Key Strength of the Business
CASH GENERATION REMAINS A KEY STRENGTH OF THE BUSINESS Capacity to resume share buy-back Cash generation (£m) 120.0 100.0 (9.6) 6.0 (12.0) 79.9 3.6 3.9 (11.4) 80.0 (31.0) 60.0 40.0 20.0 40.4 11.0 0.0 2014 net cash EBITDA Loss from Closure cost Shares issued Working Capex Tax paid Dividends 2015 net
Slide 6: UK & ROI Income Statement
UK & ROI INCOME STATEMENT 52 weeks ended 52 weeks ended 27 December 2015 28 December 2014 £m £m % change UK system sales 825.0 706.4 16.8% UK LFL sales 11.7% 11.3% ROI system sales1 45.3 41.8 8.6% ROI LFL sales 8.6% 4.3% Currency impact (ROI) (4.6) System sales 865.6 748.2 15.7% Underlying operating
Slide 7: UK: Sales Driven by Double-Digit LFL Sales Growth and New Stores
UK: SALES DRIVEN BY DOUBLE-DIGIT LFL SALES GROWTH AND NEW STORES UK LFL increase driven by volume growth Record new store performance and good immature stores performance SOURCES OF SALES GROWTH MATURE STORES SALES BREAKDOWN 850 790 (0.8) 825.0 1.8% (0.4)% 776.3 830 19.0 19.3 770 1.3% 810 9.0% 790 8
Slide 8: UK: Better Value for Customers Through Bundle Deals
UK: BETTER VALUE FOR CUSTOMERS THROUGH BUNDLE DEALS Focus on value through bundle offers for families 61% of family feasters identify the Domino’s brand as being good value for money Top national deals: Winter Survival, Pick ‘n’ Mix, National Price Slice Weeks and Two for Tuesday LFL BASKET COMPOSIT
Slide 9: UK: Key Drivers Underpin Growth for the Future
UK: KEY DRIVERS UNDERPIN GROWTH FOR THE FUTURE DIGITAL NEW STORES FRANCHISEE PROFITABILITY Investment in digital drives Roll-out of new stores. Those DPG is committed to maintaining increased number of customer added in 2015 show significant and improving franchisee visits, improved conversion rates
Slide 10: UK: Online Sales Growth Continues
UK: ONLINE SALES GROWTH CONTINUES The total online sales growth rate has increased to 30.8% (2014: 30.6%) Online sales as a percentage of delivered sales is now 78% (2014: 71%) and is 67% of total sales (2014: 60%) Continued mobile migration (app and mobile website) with orders up 48%, and 11.5m app
Slide 11: Delivered Digital Innovation
DELIVERED DIGITAL INNOVATION Meet Dom, our new pizza tracker Increased personalisation and personality Introduction of a new animated character, “Dom” Bespoke content for each stage A uniform ‘look and feel’ across all platforms (web, iOS) Journey to “One Touch”: Easy Ordering Prompt to register Sav
Slide 12: Using Digital to Stay 'Top of Mind'
USING DIGITAL TO STAY ‘TOP OF MIND’ Sponsorship of the X Factor app continued our relationship with Saturday night £2.3m media value 2.4m downloads 1.4m Domino’s games played Media presence on key dates for customers (Valentine’s Day, April Fools’ Day) “Beat Team Domino’s” FIFA campaign for Xbox gam
Slide 13: UK: Significantly Improved Performance from Immature and New Stores
UK: SIGNIFICANTLY IMPROVED PERFORMANCE FROM IMMATURE AND NEW STORES A record 61 new UK stores opened in 2015 (2014: 40), of which 26 were splits (2014: 24) Average number of addresses for new stores: 18,891 (2014: 23,879) Immature average weekly unit New store average weekly unit New store average w
Slide 14: UK: New Store Support
UK: NEW STORE SUPPORT From 2010, support has been offered to franchisees to encourage more store openings Supporting franchisees to drive: Aggressive expansion The cash value of majority of support packages is Splitting territories c. £62k per store (P&L value¹ £77k-£85k) Opening stores in low addre
Slide 15: UK: Improving Profitability for Franchisees
UK: IMPROVING PROFITABILITY FOR FRANCHISEES Store EBITDA performance up from 13.6% to 15.5% Improvement in EBITDA benefiting from increased sales and lower food prices secured by DPG AVERAGE WEEKLY UNIT SALES 20,000 19,517 19,500 19,000 +11.7% 18,500 18,000 17,478 17,500 17,000 16,500 16,000 2014 20
Slide 16: UK: Supply Chain Performance
UK: SUPPLY CHAIN PERFORMANCE Aggressive purchasing based on volume growth Falling commodity food costs in year with £11m of food cost savings passed onto franchisees Transport efficiency savings, opened an out-base in Livingstone Delivered on time to stores: 99.8% 16
Slide 17: Increased Targeted Media Investment
INCREASED TARGETED MEDIA INVESTMENT 82% 41% Increase in spend on TV Increase in content and and VOD advertising partnership spend (e.g. X Factor) Hollyoaks 4,561 Drove equivalent media value of £11.6m in 2015 Gross rating points, Helped drive our affinity score to 75% up from 1,932 in 2014 (2014: 67
Slide 18: Building the Brand Image
BUILDING THE BRAND IMAGE Pizza Legends Multi-channel launch now with 435k creations and counting Users state a significantly higher regard for the brand than non-users Campaign brought to life and leveraged social media: reached 1.2m people through vlogger activity 30 years of Greatness Celebrated 3
Slide 19: Product Development and Innovation
PRODUCT DEVELOPMENT AND INNOVATION Tikka Pizza Brownies Chick ‘n’ Mix Box Stuffed Crust Launch of the Tikka New and improved Year-on-year chicken Domino’s Stuffed Pizza brownies increased sales are up 30% Crust sales up orders by 60% Driving the basket mix, by 17%, driven by the over 2014 not just p
Slide 20: International Operations
INTERNATIONAL OPERATIONS
Slide 21: ROI: Bundle Deals and Strong Online Presence Driving Growth
ROI: BUNDLE DEALS AND STRONG ONLINE PRESENCE DRIVING GROWTH 8.6% 30% ROI LFL by quarter 16% 14.1% ROI LFL SALES ONLINE SALES GROWTH 14% 12% 10% Strong LFL sales 8% 7.7% 7.6% Dublin 8.9% 5.4% 5.6% 6% 4.9% Provincial 4.8% 4% 3.5% 3.0% Rural 10.0% 2% Online sales up 30.4% YoY, and now account 0% for 51
Slide 22: Switzerland: Good Mature Store Performance with Continued Investment
SWITZERLAND: GOOD MATURE STORE PERFORMANCE WITH CONTINUED INVESTMENT 5.4% SWISS LFL SALES 18.4% SYSTEM SALES GROWTH1 15 corporate stores Three relocations, Onex, Plainpalais and Servette have led to sales increasing significantly Opened four new stores Altstetten Bern Glatt Basel Profitability has i
Slide 23: Strategic Partnership in Germany
STRATEGIC PARTNERSHIP IN GERMANY New joint venture between DPG and Domino’s Pizza Enterprises, one-third owned by DPG and Deal removes losses and provides future two-thirds by DPE earnings growth potential Joint venture acquisition of Joey’s Pizza on £m 2015 2016 1 February 2016 Operating losses1 (3
Slide 24: Looking Forward
LOOKING FORWARD
Slide 25: UK Market Overview
UK MARKET OVERVIEW A study on Domino’s position and performance in the eating out market was undertaken by Parthenon Domino’s will continue to grow, supported by sustained market tailwinds driving the category and a variety of growth opportunities such as: population growth and maturity of target au
Slide 26: Supply Chain Outlook
SUPPLY CHAIN OUTLOOK Benign food cost and energy outlook for 2016 Increase in supply chain infrastructure planned to match store demand Location Open 2016 2017 Total North West (new Supply Chain 2018 £12.9m £16.0m £28.9m Centre) Ireland 2018 £4.6m £4.2m £8.8m (relocation) South West (new Supply Chai
Slide 27: Future Marketing to Build Brand Image
FUTURE MARKETING TO BUILD BRAND IMAGE Increase media spend by over £4m: Launch of carry-out promotion to drive continue sponsorship of Hollyoaks; incremental sales increase gross rating points; and Continue to provide value-for-money deals associate Domino’s with the nation’s #1 passion – football.
Slide 28: Further Developments in Digital Marketing
FURTHER DEVELOPMENTS IN DIGITAL MARKETING We will continue to drive digital by: being data led, focusing on trials and testing; using CRM to be customer led and drive emotional engagement; improving user experience/design; investing in software development; and ease of ordering; providing better val
Slide 29: Future Product Innovation
FUTURE PRODUCT INNOVATION Hot Pepperoni Passion launched New box designs Chicken Roulette Box launch Extended trial of the new Italiano range More Big Dips New dessert launch 29
Slide 30: 2016 Update
2016 UPDATE First nine weeks of trading to 28 February 2016 LOCATION 2016 first nine weeks LFL 2016 total YoY sales UK 10.5% 16.1% ROI 13.7% 13.2% Switzerland 4.3% 21.1% Comparatives get tougher as the year progresses New store guidance 65 stores in the UK First openings in ROI for six years Continu
Slide 31: Highlights of 2015
HIGHLIGHTS OF 2015 11.7% 61 UK LFL SALES NEW UK STORES Double-digit like for like (LFL) sales growth for nine successive quarters in core UK business Significant progress in digital initiatives – now 78% of delivered sales Record 61 new UK stores opened in the year with best ever sales performance F
Slide 32: Q&A
Q&A David Wild, CEO Simon D’Cruz, Head of Financial Planning and Analysis Barbara Gibbes, Group Financial Controller
Slide 33: Appendices
APPENDICES APPENDIX 1 Analysis of UK & ROI operating profit Page 34 APPENDIX 2 Switzerland income statement Page 35 APPENDIX 3 Group ten year history: store count, system sales and Group profit Page 36 APPENDIX 4 UK & ROI system sales and PBT growth and UK LFL by quarter Page 37 APPENDIX 5 Group ful
Slide 34: Analysis of UK & ROI Operating Profit
ANALYSIS OF UK & ROI OPERATING PROFIT 52 weeks ended 52 weeks ended 27 December 2015 28 December 2014 £m £m % change Net royalties 24.2 20.9 16.0% Supply chain centre margin 71.3 60.8 17.3% Net overheads including incentives and realty (17.2) (13.3) (29.6%) Joint ventures and associates 1.7 1.0 65.4
Slide 35: Switzerland Income Statement
SWITZERLAND INCOME STATEMENT 52 weeks ended 52 weeks ended 27 December 2015 28 December 2014 m m % change System sales (£)1 11.4 9.6 18.4% Currency impact (£) 0.3 Total system sales (CHF) 17.0 14.4 18.4% LFL sales 5.4% 4.7% LFL mature store EBITDA (CHF)2 0.5 0.2 Operating profit (£) (1.3) (1.0) (27.
Slide 36: Group Ten Year History: Store Count, System Sales and Group Profit
GROUP TEN YEAR HISTORY: STORE COUNT, SYSTEM SALES AND GROUP PROFIT Store count (continuing operations) 1000 931 835 872 787 800 720 665 608 600 553 501 451 400 200 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 System sales & Group underlying operating profit (£m) 1000 877.2 120 800 766.6 100 668
Slide 37: UK & ROI System Sales and PBT Growth and UK LFL Sales Growth by Quarter
UK & ROI SYSTEM SALES AND PBT GROWTH AND UK LFL SALES GROWTH BY QUARTER UK & ROI system sales and PBT (£m) 1000 865.6 120 800 748.2 100 592.9 650.9 530.0 74.7 80 600 63.8 60 50.0 55.6 400 43.7 40 200 20 0 0 2011 2012 2013 2014 2015 Note: 53-week year in 2012, unadjusted. System sales PBT UK LFL sale
Slide 38: Group Full-Year Dividend Increased by 18.6%
GROUP FULL-YEAR DIVIDEND INCREASED BY 18.6% Full-year key dates: Ex-dividend date: 10 March 2016 Record date: 11 March 2016 Payment date: 25 April 2016 2015 2014 % change Full year Dividend per share (pence) 20.75 17.50 18.6% Dividend cover1 1.72x 1.52x 1 2015 cover with reference to continuing oper
Slide 39: UK: Continued Migration to Mobile
UK: CONTINUED MIGRATION TO MOBILE Website orders (m) Website net sales¹ (£m) Website gross ticket2 (£) 12.1 214.0 22.0 12.0 213.9 21.8 +2.2% +0.1% 11.9 213.8 21.6 11.8 12.0 -2.0% 213.7 213.9 21.4 21.84 11.7 213.6 213.7 21.2 21.38 11.7 11.6 213.5 21.0 2014 2015 2014 2015 2014 2015 Mobile orders (m) M
Slide 40: Using Digital Content to Drive Engagement
USING DIGITAL CONTENT TO DRIVE ENGAGEMENT 995k 259k Facebook likes Twitter followers on Domino’s Twitter feed 20.3m 886.5m Switcheroo “‘only a Easy Order Domino’s will do” content campaign media reach reach of 20.3m and viewed 3.8m times 40
Slide 41: Using Digital Content to Drive Engagement
USING DIGITAL CONTENT TO DRIVE ENGAGEMENT 68k 207m Tummy Translator Tummy Translator standalone app marketing reach with downloads 14.3m social impressions 1.2m 6k Working with more Snapchat “Dough to vloggers to promote Door” video watched by campaigns and the Pizza 6k on our new channel Legends wi
Slide 42: UK: Re-images and Relocations
UK: RE-IMAGES AND RELOCATIONS The shopfront is a great marketing tool 90 refits in 2015, 40% of the estate now upgraded Improving the in-store experience to drive carry-out sales 25 relocations have been identified bringing: better visibility; higher footfall, boosting carry-out; and improved parkin
Slide 43: Benefits of Splitting Stores
BENEFITS OF SPLITTING STORES 100% increase in sales over five years Sales benefit of splitting stores Franchisee benefits: +100% access to peripheral areas; defence against competitors; increasing penetration; larger take-out opportunity; lower delivery costs; marketing economies of scale; and growi
Slide 44: Domino's Performance vs Key Competitors' Performance
DOMINO’S PERFORMANCE VS KEY COMPETITORS’ PERFORMANCE Quick service restaurant (‘QSR’) Components of total spend Quick service major brands – YE Sep ‘15 vs year ago Total Spend Domino's Pizza 8.4% 2.4% 11.2% Costa Coffee 5.4% 1.5% 7.0% Burger King -1.8% 5.1% 3.2% Nando’s 4.2% 1.1% 5.4% Pret a Manger
Slide 45: Future Tangible Fixed Asset Capital Expenditure Requirement
FUTURE TANGIBLE FIXED ASSET CAPITAL EXPENDITURE REQUIREMENT 2014 2015 2016 2017 £m £m £m £m Maintenance 1.6 3.1 3.6 1.9 Expansionary New supply chain centres 1.1 0.3 20.6 20.2 Website/app development 1.6 2.5 6.7 7.0 ERP 0.3 1.4 2.8 — Switzerland 2.2 3.6 1.4 1.6 Germany 0.3 1.1 — — Total capex 7.1 12
Slide 46: Forward-Looking Statements Caution
FORWARD-LOOKING STATEMENTS CAUTION These 2015 Annual Results, 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 certain of Domino’s Pizza