Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Investor Day (2019)
15 slides from Yum China's investor day presentation, 2019
Slide 1: Finance Update: Growth with Discipline
FINANCE UPDATE GROWTH WITH DISCIPLINE Jacky Lo, CFO
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements. This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor
Slide 3: Significant Progress Since Spin-Off
Significant Progress Since Spin-Off ~1,000 13% 48% $640mn 59% Net new stores System sales Operating Shareholder Increase in added1 growth2 profit returns4 share price5 growth3 (7% CAGR) (22% CAGR) ($320mn per year) 3 1.Spin-off to YE18. 2. Constant currency, 2018 vs. 2016. 3. Reported Currency, 2018
Slide 4: Financial Position Continues to Strengthen
Financial Position Continues to Strengthen Cash and short-term investments Free cash flow 1 Dividends & Share ($ mn) ($ mn) Repurchases ($ mn) • Repurchased shares since Q2 2017, with 2018 1,388 863 473 $960 million authorization remaining unused 2017 1,264 469 166 • Initiated quarterly cash dividen
Slide 5: Discipline to Drive Profit Growth
Discipline to Drive Profit Growth Increasing Sales Sales Growth and + Diligent Cost Restaurant Margin Management Control to Drive + Long-Term Target G&A Growth < Revenue Growth of Double Digit OP = Growth (ex FX) Operating Profit Growth 5
Slide 6: Opening ~2 stores per day
Opening ~2 stores per day Reaching 10,000 stores by 2021 Supported by Unrivalled Platform >1,000 development YUMC store count professionals 10,000 Local knowledge ~8,500 Supply chain, especially in remote areas ~7,400 Brand recognition and positioning Balanced across city tiers Spin-off 20
Slide 7: Optimizing New Store Format Drives Healthy Payback
Optimizing New Store Format Drives Healthy Payback Average Pre-tax Cash Payback Cash Average Unit Cash Period* Investment Volume Margin ~ 2 years ~RMB 2.5 mm ~RMB 6.0 mm ~23% <4 years ~RMB 2.6 mm ~RMB 5.3 mm ~15% 1Includes all units opened from Oct 2016 to Sep 2017, after deduction of 3% license fee
Slide 8: Driving Same Store Sales Growth
Driving Same Store Sales Growth 1 • Strengthen core products MenuMenu 2 • Grow underpenetrated Innovation Great Value dayparts and categories Innovation Great Value • Smart Value 3 • Members privilege • Leverage digital media, Grow SSSG 4 CRM and SuperApp • Develop digital ecosystem Digital Digital
Slide 9: Improving Restaurant Margin
Improving Restaurant Margin 2018 Long-Term Target Key Drivers ~17% blended restaurant 15.7% margin • Digital and delivery initiatives to improve productivity and efficiency Maintain with upside reinvested • Growing economies of scale 17.9% to drive growth • Proactive cost optimization and control to
Slide 10: Effective G&A Management
Effective G&A Management G&A expenses year-over-year change Maintaining G&A Growth < Revenue Growth by: 14% 17% • Simplifying Organization Structure • Optimizing Procurement • Tightening Expense Policies -9% 2016 2017 2018 Reinvest part of savings to drive % of Total Revenue 6.1% 6.4% 5.4% long te
Slide 11: Strong Cash Flow Funds Investment, Shareholder Returns
Strong Cash Flow Funds Investment, Shareholder Returns Investing to Win Shareholder Returns Strategic Options • New stores • Cash Dividends • Joint Ventures • Remodels • Share Repurchases • Strategic Investments • Technology $1.5 bn over next 3 ~$500 mn/year Discretionary years* * Based on current d
Slide 12: Powerful Long-Term Financial Targets
Sales Restaurant Profit Growth Margin Growth Powerful Long-Term High Single Digit Systems Sales* 17% Double Digit Operating Profit Growth* Financial Targets Increasing Shareholder Returns $1.5 billion over next 3 years^ * In constant currency ^ Based on current dividend and share repurchase authoriz
Slide 13: Outlook
2019 Outlook • Growing store count • Wage & commodity inflation • Ongoing Pizza Hut • 600-650 new stores • Strong delivery growth revitalization • Efficiency gains • Value campaigns • $450-500 million capex • Digital marketing initiatives • Maturing higher than average 2018 new builds • Lower tax le
Slide 14: Takeaways
Takeaways Existing capacity to ~2 new stores a day Robust plan to return $1.5 billion to to reach 10,000 drive revenue, shareholders over stores by 2021 profit growth next 3 years 14
Slide 15: Innovation
Innovation Powering & Growth >> 4