Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2013 Earnings Presentation
48 slides from Domino's Pizza's earnings presentation, March 2014
Slide 1: Preliminary Results for the 52 weeks ended 29 December 2013
Preliminary Results for the 52 weeks ended 29 December 2013
Slide 2: Agenda
Agenda Introduction Stephen Hemsley Chairman 2013 Financial Results Lee Ginsberg Chief Financial Officer 2013 Business Review and David Wild Interim Chief Executive 2014 Plan 2014 Financial Outlook Sean Wilkins Chief Financial Officer Designate 2
Slide 3: 2013 Financial Review
Lee Ginsberg Chief Financial Officer 2013 Financial Review 3
Slide 4: Financial highlights for 2013
Financial highlights for 2013 • Strong growth in core UK & ROI business – UK LFLs* up 7.0% – PBT** up 11.6% – Online sales in UK & ROI up 28.2% to £338.0m • Now 61.5% of UK delivered sales – Diluted EPS** up 10.3% to 25.6p • Group system sales* up 14.0% to £668.8m • Group PBT*** up 1.9% to £47.6m •
Slide 5: UK LFL %
UK LFL % 10.9% 6.6% 6.1% 4.0% * The financial year 2012 included 53 weeks in total. To provide meaningful comparison, system sales for 2012 have been adjusted to 52 weeks by excluding the first trading week of the 2012 financial year 5
Slide 6: Group Profit and Loss (Pre-exceptionals)
Group Profit and Loss (Pre-exceptionals) 52 weeks ended 53 weeks ended % increase 29 December 2013 30 December 2012 £’000 £’000 System sales 668,830 586,486* 14.0 Operating profit 47,916 47,222 1.5 Net interest (315) (521) 39.5 Profit before tax 47,601 46,701 1.9 Taxation (10,089) (11,321) 10.9 Prof
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 52 weeks ended 53 weeks ended 29 December 2013 30 December 2012 % change £’m £’m LFL Sales +7.0% +5.2%* - System Sales - £’m 650.9 581.0* 12.0% Operating Profit - £’m 55.6 50.0 11.2% Operating Profit % *
Slide 8: Profit and Loss (Operating exceptional Items)
Profit and Loss (Operating exceptional Items) 52 weeks ended 53 weeks ended 29 December 2013 30 December 2012 £’000 £’000 Operating Exceptionals H1 H2 Full year Germany impairments 11,782 7,817 19,599 - Germany other -__ 6,871 6,871 -__ Total Germany 11,782 14,688 26,470 -__ Other 532 518 1,050 4,55
Slide 9: Balance Sheet
Balance Sheet Current Assets: At 29 Dec At 30 Dec 2013 2012 At 29 Dec 2013 At 30 Dec 2012 £’000 £’000 £’000 £’000 Inventories 4,249 7,329 Receivables 34,366 36,147 Non-current assets 94,880 112,450 Investment in 1,108 3,658 finance leases Current assets 71,548 69,326 Prepaid lease 228 217 charges To
Slide 10: Cash Flow Statement
Cash Flow Statement 52 weeks ended 53 weeks ended 29 December 2013 30 December 2012 £’000 £’000 Cash generated from operations 49,318 54,131 Taxation paid (8,585) (6,633) Net cash generated by operating activities 40,733 47,498 Net cash used by investing activities (4,245) (30,270) Cash inflow befor
Slide 11: Analysis of Borrowings
Analysis of Borrowings At 29 Dec 2013 At 30 Dec 2012 £’000 £’000 Cash at Bank 31,597 21,975 Revolving Credit Facilities (29,814) (29,737) Net Cash 1,783 (7,762) DP Capital (2,212) (2,939) EBT loan (13,000) (12,035) Finance leases (134) (228) Adjusted Net Debt* (13,563) (22,964) Adjusted Net Debt*/EB
Slide 12: Available Debt Facilities
Available Debt Facilities Expiry Utilised at Undrawn at Facility Date 29 Dec 2013 29 Dec 2013 Term Purpose £’m £’m £’m 30.0* 01 Aug 2018 30.0 - 5 years RCF Multi-purpose 5.0 On demand 0.0 5.0 On demand Overdraft 5.0 31 Dec 2016 2.2 2.8 5 years DP Capital 13.0 ** 31 Jan 2014 13.0 0.0 7 years EBT*** 5
Slide 13: 2013 Business Review and 2014 Plan
David Wild Interim Chief Executive 2013 Business Review and 2014 Plan 13
Slide 14: Highlights of 2013
Highlights of 2013 • 7% UK LFL (10.9% in Q4) • 50 new stores in the UK, including 8 new formats • UK on-line accounting for 61.5% of delivered sales • UK and Ireland operating margin improved by 21 bps • ROI recovery to 6% LFL • Switzerland successfully integrated • Revised plan for Germany 14
Slide 15: 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 15 15
Slide 16: Domino's Globally
Domino’s Globally • Almost 10,900 stores – Approximately 5,000 US – 5,900 Internationally across over 70 markets – Number 1 pizza delivery business • Successful in developed and emerging markets • Store numbers for example: Australia 480 Japan 259 South Korea 383 Turkey 325 France 224 Mexico 581 Can
Slide 17: The case for expansion into Germany
The case for expansion into Germany • 81 million population • 4th highest GDP in the world • No established international home delivery pizza player • Successful US QSR operators – McDonald’s - 1440 outlets – Burger King - 673 outlets – Subway - 600 outlets Large untapped opportunity 17
Slide 18: Domino's in Germany – Lessons and plan
Domino’s in Germany – Lessons and plan Corporate owned network Franchise operation Too rapid expansion 5 store openings in 2014 Lack of full control Buyout of minority shareholder and local finance team recruited Over sized stores 150m2 template Excessive overhead Reduction in Support Centre numbers
Slide 19: 2013 UK sales performance insights
2013 UK sales performance insights • In 2013 the core UK business has grown at a rapid pace with the strongest results achieved in Q4. * 2013 Mature store group opened on or before 25th December 2011 19
Slide 20: 2013 UK sales performance insights
2013 UK sales performance insights • Strong growth in dinner is a reflection of our success in serving families * 2013 Mature store group opened on or before 25th December 2011 20
Slide 21: UK sales performance insights
UK sales performance insights • Pizza sales reached 64million across UK and ROI, however, there was strong growth across the menu driven by increased bundling * 2013 Mature store group opened on or before 25th December 2011 21
Slide 22: UK Growth Opportunity
UK Growth Opportunity • Home delivery pizza in UK still underdeveloped by global standards • Address count per store higher than other markets – US – c15k addresses per store – Australia – c14k addresses per store – UK – 26.5k addresses per store • Frequency of orders is low by global norms – US - 9
Slide 23: Key elements of UK 2014 plan
Key elements of UK 2014 plan • Build on 2013 success with customers • Slimmed Support Centre overhead • Focus on franchisee profitability through food cost • Continued new store expansion 23
Slide 24: Product innovation
Product innovation Quality Pizza Innovation Product Innovation The Best Tasting New & Different Pizza Plus Improve perceptions through Change customer Deliver a more interactive communication of “fresh behaviour and pizza eating experience dough” and “hand-made to drive interest in the brand with pa
Slide 25: Marketing Initiatives - £55m 2014 planned spend
Marketing Initiatives - £55m 2014 planned spend Engagement Sales layers Bundling Embed Greatness through Drive trial and target Offer abundant value for insight communication and midweek value occasions money at core weekend advertising brand platform. dinner occasion Socialise idea across owned cha
Slide 26: Digital Marketing - UK
Digital Marketing - UK • Innovation in digital marketing to extend our intellectual and technical advantage : – E-commerce now at 61.5% of delivered sales – Mobile now 31% of e-commerce sales – Total App downloads are now nearly 3.9m – Social media community growing and engaged over 912k fans on F
Slide 27: E Commerce plan
E Commerce plan On platform Off platform Integration Deliver new web site to Increase focus on new Understand multi screen improve conversion and customer acquisition in behaviour to target improved mobile performance channels. customers more efficiently functionality to open up Drive retention thro
Slide 28: UK/ROI Supply chain - 2014
UK/ROI Supply chain - 2014 • Build on 2013 successes with Procurement and seek further cost reductions • Dynamic transport system • Focus on raw material quality and food provenance using a new online supplier food safety and supplier assurance portal (QADAX) • Gearing through increased volume via f
Slide 29: Franchisee Development
Franchisee Development • Focus on improving returns to franchisees • Collaborative approach to store development • Recruitment of new franchisees • London project • Domino’s services tailored to franchisee needs 29 29
Slide 30: Summary
Summary • Strong and improving UK performance in 2013 • Recovery in ROI in 2013 • Disappointing result in Germany in 2013 • Clear way forward for Germany in 2014 • Build on UK success with customers • Back to basics for Domino’s with franchisee-focused plan for 2014 30
Slide 31: 2014 Financial Outlook
Sean Wilkins CFO Designate 2014 Financial Outlook 31
Slide 32: 2014 outlook for our core UK and ROI business
2014 outlook for our core UK and ROI business • Maintain sales momentum – 40 - 50 Store openings – Positive start to trading in 2014 but reiterate 3%-5% LFL • Maintain gross margin • Control costs – Low underlying overhead cost growth • Invest operational leverage in franchisee profitability 3232
Slide 33: 2014 - German losses reduced and limited further capital committed
2014 - German losses reduced and limited further capital committed • Transition corporate stores to franchisees – Good progress at end of 2013 – Further migrations in 2014 • Work still to be done on 6 Berlin and 4 JV stores • Focus in 2014 on improving store economics – Drive sales (Pricing and Mark
Slide 34: 2014 first seven weeks of trading
2014 first seven weeks of trading UK • LFLs up 14.6% • Lapping snow last year (only 1.6% LFL) • The Winter Survival Deal mixing at 30% - most successful meal bundle ever ROI • LFLs up 4.6% Germany • LFLs up 3.8% • 1 store opened in Hamburg with a new German franchisee – pleased with early trading Sw
Slide 35: Q&A
Q&A 35
Slide 36: Appendices
APPENDICES APPENDIX 1 The UK Franchisee Model (Pages A-1) APPENDIX 2 Analysis of Group Turnover (Page A-2) APPENDIX 3 Analysis of UK and ROI Turnover (Page A-3) APPENDIX 4 Analysis of Germany Turnover (Page A-4) APPENDIX 5 Analysis of Switzerland Turnover (Page A-5) APPENDIX 6 Analysis of Group PBT
Slide 37: The UK Franchisee Model
The UK Franchisee Model 52 weeks ended 52 weeks ended 29 December 2013 30 December 2012* % increase £’000 £’000 Average sales (AWUS) £16,391 £ 15,317 +7.0% System sales £852,317 £796,461 EBITDA % 12.6% 12.9% EBITDA £107,478 £102,425 +4.9% £ 5,053 * The financial year 2012 included 53 weeks in total.
Slide 38: Analysis of Group Turnover
Analysis of Group Turnover 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Royalties 36,788 32,871 3,917 11.9 Store sales 15,818 5,853 9,965 170.3 Franchise/TST/FDP fees 388 683 (295) (43.2) Supply Chain Centre sales 193,987 174,836 19,151 11.0 P
Slide 39: Analysis of UK & ROI Turnover
Analysis of UK & ROI Turnover 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Royalties 35,754 32,540 3,214 9.9 Store sales - 1,160 (1,160) (100.0) Franchise/TST/FDP fees 329 525 (196) (37.3) Supply Chain Centre sales 191,050 173,817 17,233 9.9 P
Slide 40: Analysis of Germany Turnover
Analysis of Germany Turnover 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Royalties 484 163 321 196.9 Store sales 4,536 1,890 2,646 140.0 Franchise/TST/FDP fees 59 159 (100) (62.9) Supply Chain Centre sales 2,937 1,019 1,918 188.2 Property sal
Slide 41: Analysis of Switzerland Turnover
Analysis of Switzerland Turnover 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Royalties 550 168 382 227.4 Store sales 11,282 2,803 8,479 302.5 Franchise/TST/FDP fees - - - n/m Supply Chain Centre sales - - - n/m Property sales - - - n/m Comput
Slide 42: Analysis of Group PBT
Analysis of Group PBT* 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Net Royalty 18,181 16,537 1,644 9.9 Supply Chain Centre Margin 54,580 49,125 5,455 11.1 Realty 881 981 (100) n/m Subsidiaries (12) 356 (368) n/m Net Overheads (18,716) (17,394
Slide 43: Analysis of UK and ROI PBT
Analysis of UK and ROI PBT* 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Net Royalty 18,181 16,537 1,644 9.9 Supply Chain Centre Margin 54,580 49,125 5,455 11.1 Realty 881 981 (100) n/m Subsidiaries (12) 356 (368) n/m Net Overheads (18,716) (1
Slide 44: Analysis of Germany PBT
Analysis of Germany PBT* 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Net Royalty 220 74 146 197.3 Supply Chain Centre Margin 1 (48) 49 97.9 Corporate stores (2,344) (653) (1,691) (259.0) Other income 30 110 (80) (72.7) Net Overheads _(4,909)
Slide 45: Analysis of Switzerland PBT
Analysis of Switzerland PBT* 52 weeks ended 53 weeks ended Variance Variance 29 December 2013 30 December 2012 £’000 % £’000 £’000 Net Royalty 275 84 191 227.4 Corporate stores 1,664 685 979 142.9 Net Overheads (2,577) (1,019) (1,558) (152.5) PBT _(638) __(250) _(388) (155.2) * Pre-exceptionals A-9
Slide 46: Diluted Earnings Per Share
Diluted Earnings Per Share * 26 Compound increase of 22.3% 25 over last four years 24 23 22 21 20 19 23.9 18 17 16 22.0 15 14 13 19.2 12 11 16.8 Pence 10 9 8 13.4 7 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 * Pre-exceptionals Diluted earnings per share Linear (Diluted earnings per share) A-10
Slide 47: Dividends Per Share
Dividends Per Share Compound increase of 28.1% 16 over last four years 15 14 13 15.90 12 11 10 14.50 9 8 12.30 Pence 7 10.20 6 5 7.75 4 3 2 1 0 2009 2010 2011 2012 2013 Dividends per share Linear (Dividends per share) A-11
Slide 48: Statement of Changes in Equity
Statement of Changes in Equity At 29 December 2013 At 30 December 2012 £’000 £’000 At beginning of year 70,328 59,664 Proceeds from share issue 2,237 2,594 Share buybacks and transaction charges (22) (3,307) Profit for year 17,568 30,307 Tax credit on employee share options 376 793 Share options and