Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — FY2019 Earnings Presentation
49 slides from Domino's Pizza Enterprises's earnings presentation, Aug 21, 2019
Slide 1: Full Year Results, Period Ending 30 June 2019
FULL YEAR RESULTS PERIOD ENDING 30 JUNE 2019
Slide 2: Presenters
PRESENTERS DON MEld GROUP CEO & MANAGING DIRECTOR RICHARD CONEY GROUP CFO NICK KNIGHT AUSTRALIA ANO NEW ZEALAND CEQ ANDREW RENNIE OPE EUROPE CEO ANDREW BRADLEY FRANCE CEQ ANDRE TEN WOLDE OPE EUROPE COO JOSH KILIMNIK JAPAN CEQ
Slide 3: FY19 Actual and Year-on-Year Growth
FY19 Year-on-Year Year-on-Year Actual Growth % Growth Network Sales $2,897.3m +$308.4m +11.9% Online Sales $1,942.9m +$299.2m +18.2% Same Store Sales Growth +3.6% Network Store Count(1) 2,522 stores +179 stores +7.5% EBITDA - Underlying(2) $282.4m +$23.2m +8.9% EBIT - Underlying(2) $220.8m +$14.9m +
Slide 4: Network Sales and Online Sales growth was very pleasing
▪ Network Sales and Online Sales growth was very pleasing, with double-digit EBITDA growth in both measures, showing little to no effect from Aggregators $282.4m 5 Year Growth: ▪ International operations continue to be the growth engine of our future, $259.2m Group +197% showing significant Network
Slide 5: FY19 Guidance vs Actual and 3-5 Year Outlook
FY19 FY19 3-5 Year Guidance Actual Outlook (3) Same Store Sales Growth +3-6% +3.6% +3-6% New Organic Store Additions +200-215 +179 (+7.5%) +7-9% Net CAPEX(1) $60-70m $90.8m $60-70m EBIT(2) $227-247m $220.8m (1) Excluding acquisitions (2) Underlying EBIT, excluding non-recurring costs (3) Guidance an
Slide 6: FY19 Network Sales, New Stores, EBIT and CAPEX by Region
FY19 Network Sales FY19 Organic New Stores FY19 Store % Growth +21 $1,136.9m $1,169.0m EU +7.3% +77 ANZ +2.6% +81 $591.4m JP +15.6% EU ANZ JP EU ANZ JP FY19 EBIT FY19 Group CAPEX Categorisation $64.7m $102.8m CAPEX which Recycles $23.9m $32.0m Digital CAPEX Stay in Business CAPEX $53.3m Other Invest
Slide 7: Group: Network Sales growth +11.9%, SSS +3.6%
Total Network Sales Online Sales FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 +18.2% +11.9% +19.6% +11.7% +37.1% $1,942.9m +18.0% $2,897.3m +32.7% +42.5% $1,643.7m $2,588.9m +31.6% $1,374.4m +18.5% $2,318.5m +73.0% +47.2% $1,964.1m $1,002.2m $703.3m $1,479.8m $534.4m $1,249.3m 63.5% 6
Slide 8: Group: +179 new stores added to the network
Network Store Count Existing and New Network Sales FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 2,393 2,522 $2,897.3m 2,135 179 $2,588.9m 1,983 308 178 $2,318.5m 1,506 $904.6m 1,333 484 $704.2m 177 $1,964.1m $541.1m 391 2,085 2,343 1,957 $1,479.8m $358.6m 1,329 1,499 942 $1,249.3m $17
Slide 9: FY20 Trading Update
FY20 ▪ SSS growth was 60bps higher in H2 19 than H1 19 Trading Update and higher still in the last quarter of FY19 Same Store Sales Growth FIRST 7 WEEKS OF FY20 +4.7% ▪ Positive sales momentum continued into H1 20, with SSS lifting +4.7% in the first 7 weeks of trade, New Organic Store Additions wit
Slide 10: Underlying EPS 165.0c, +8.0% on FY18
165.0 152.8 ▪ Underlying EPS 165.0c, +8.0% on FY18 133.6 ▪ Underlying EPS 3 year CAGR +16.1% 84.8 ▪ Underlying EPS 10 year CAGR +22.5% 81.5 105.4 66.2 74.2 53.1 54.6 40.5 41.5 37.2 29.9 80.2 71.3 30.0 67.4 21.6 25.0 19.8 52.4 15.7 12.8 33.8 24.7 17.4 19.9 12.2 14.2 FY10 FY11 FY12 FY13 FY14 FY15 FY16
Slide 11: Group Financials
GROUP FINANCIALS 11
Slide 12: Group Income Statement
FY 17 FY 18 FY 19 Significant FY 19 +/(-) FY 18 (1) Underlying Underlying Statutory Charges (2) Underlying Underlying $ mil $ mil $ mil $ mil $ mil % Network Sales 2,318.5 2,588.9 2,897.3 2,897.3 11.9% Network Sales +$308.4m Revenue 1,073.1 1,154.0 1,435.4 1,435.4 24.4% Revenue +$281.5m EBITDA 2
Slide 13: Group EBITDA growth +8.9%
FY 17 FY 18 FY 19 Ad Fund (1) FY19 +/(-) FY 18 ▪ Group EBITDA growth +8.9% Underlying Underlying Underlying Cons ol i da tion Normalised Underlying (EBITDA growth +5.9% in constant currency) $ mil $ mil $ mil $ mil $ mil % Revenue Group FX translation benefit $8.0m Europe 325.6 407.2 537.4 (61.6) 47
Slide 14: Non-Recurring Costs
FY 19 Europe ▪ $31.6m – Germany conversion and integration costs relating $ mil to the Hallo Pizza acquisition ▪ $1.8m – Europe professional and advisory costs associated Europe Non-Recurring Costs 35.2 with potential acquisitions(1) ANZ Non-Recurring Costs 12.2 ▪ $1.3m – France conversion of Pizza
Slide 15: Working Capital improvement $9.2m
FY18 FY19 EBITDA BASED CASHFLOW $ mil $ mil Underlying EBITDA 259.2 282.4 Change in working capital 8.0 9.2 Working Capital improvement $9.2m, timing benefits in Japan Profit on sale of non-current assets (18.7) (17.9) Other movements 0.8 3.4 Underlying operating cash flow before interest and tax
Slide 16: FY19 Net CAPEX $90.8m
▪ FY19 Net CAPEX $90.8m FY19 Group CAPEX ▪ CAPEX which Recycles $32.0m: Categorisation ‒ Gross CAPEX $103.6m, including investment in: new Corporate stores, Franchisee loans for new and existing $23.9m stores and Franchisee acquisitions $32.0m ‒ Gross CAPEX was higher than Guidance, primarily due to
Slide 17: Balance Sheet
+/(-) FY18 FY19 FY18 $ mil $ mil $ mil Cash & equivalents 76.0 101.4 25.4 Other current assets 153.6 163.9 10.3 Total Current Assets 229.6 265.3 35.7 Property, plant & equipment 200.1 253.2 53.0 Increased store builds in each region, led by Japan Goodwill & other intangible assets 794.5 843.8 49.3
Slide 18: Return on Equity has increased
FY18 FY 19 Underlying Underlying ▪ Return on Equity has increased, as a result of increased profits Return on Equity 37.7% 44.9% and share buy-back, funded by low interest-bearing debt Return on Capital Employed 19.5% 19.2% Net Leverage Ratio(1) 1.5x 1.9x ▪ Net Leverage Ratio has increased due to th
Slide 19: AASB Leases Adoption Summary
Summary ▪ The Group adopted AASB 16 Leases on 01 July 2019 ▪ Adoption has been applied prospectively, with no prior-year restatement of either P&L or Balance Sheet ▪ Zero economic impact to the Group in terms of cash flows or debt covenants Opening Balance Sheet Assessment ▪ Recognition of the follo
Slide 20: Europe
EUROPE 20
Slide 21: Significant 1,000 store milestone achieved in FY19
▪ Significant 1,000 store milestone achieved in FY19 EBITDA €51.4m ▪ Europe has seen rapid expansion over the last 5 years, with EBITDA 5 Year Growth: Europe +703% €48.7m expanding by more than 8 times, +€45.0m €41.5m ▪ FY19 Network Sales +11.0%, +€70.7m (+3.1% on a same-store basis) ▪ All Markets h
Slide 22: Europe Network Sales, Online Sales and Store Count
Total Network Sales Online Sales FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 +11.0% +23.7% +16.9% +34.8% +33.8% €712.9m €462.0m €642.1m +82.2% €373.6m +47.5% €549.2m +13.5% +56.5% €277.1m +7.9% €410.4m +84.2% €278.2m +99.3% €152.1m €245.1m €97.2m +8.2% €52.8m +6.4% +5.7% 64.8% 58.2%
Slide 23: Germany: Hallo Pizza conversion complete
▪ The final conversion phase of Hallo Pizza stores to AVERAGE NUMBER OF Domino’s is complete, enabling Management to focus STORES PER FRANCHISEE: 100% on Operations 1.7 ▪ Hallo Pizza Head Office closure is now complete, resulting in operational efficiencies GERMANY POPULATION: 82.8m ▪ There has been
Slide 24: France will surpass the 400 store milestone
▪ France will surpass the 400 store milestone in the AVERAGE NUMBER OF coming weeks, 3x bigger than its nearest competitor STORES PER FRANCHISEE: 3.1 ▪ Franchisee profits are healthy and continue to improve ▪ First Aggregator rollout 50% complete, with an additional FRANCE aggregator in test phase a
Slide 25: Benelux: Franchisees continue to grow
▪ Franchisees continue to grow in both the Netherlands AVERAGE NUMBER OF and Belgium STORES PER FRANCHISEE: 2.5 ▪ The Netherlands will surpass the 300 store milestone during FY20, with Belgium forecast to surpass the 100 store milestone in the coming months BENELUX POPULATION: 29.3m ▪ As a result of
Slide 26: Denmark: first store opening achieved much higher sales than budgeted
▪ The first store opening achieved much higher sales than budgeted DENMARK ▪ Customer feedback so far has been extremely pleasing POPULATION: 5.7m ▪ DPE received an exceptional hygiene report from government authorities and we were commended for use of technology in this area ▪ Next stores are under
Slide 27: New CEOs are now fully-embedded across Europe
▪ New CEOs are now fully-embedded across Europe and are delivering on their strategies, having further strengthened their teams this year ▪ All markets are benefitting from strong digital growth through OneDigital, which is expected to continue into FY20 ▪ Significant new store openings forecast in
Slide 28: Australia & New Zealand
AUSTRALIA & NEW ZEALAND 28
Slide 29: ANZ has shown significant expansion in its Network
▪ ANZ has shown significant expansion in its Network over the last 5 years, EBITDA with EBITDA more than doubling during this period, +$69.8m $133.2m 5 Year Growth: $127.9m ▪ FY19 Network Sales +4.6%, +$51.9m (+2.4% on a same-store basis) ANZ +120% $115.4m ▪ FY19 Online Sales +6.4%, +$50.0m, noting
Slide 30: ANZ Network Sales, Online Sales and Store Count
Total Network Sales Online Sales FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 +7.7% +4.6% +6.4% +16.6% +11.5% +30.0% +21.5% $1,169.0m $826.4m $1,117.1m $776.4m +16.6% $1,037.2m +32.7% $696.5m +11.5% $889.2m +18.9% $731.7m +23.2% $535.7m $627.6m $403.7m $339.6m +14.8% +13.6% +11.3% +6.
Slide 31: Internal demand continues to drive new store openings
▪ Internal demand continues to be the key driver of new store AVERAGE NUMBER OF openings with 95% of stores being opened by either existing STORES PER FRANCHISEE: Franchisees, Managers or Corporate store Managers 2.0 ▪ Internal Managers, Franchisees and their employees are ANZ Franchising Corporate
Slide 32: ANZ business is improving
▪ As a result of the strategic initiatives and decisions implemented in the past 12 months, the ANZ business is improving, ensuring a sustainable platform for growth into the future ▪ The culture and capability of our Franchisee cohort is stronger than in prior years, in part due to Operations 360 ▪
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Slide 34: Since acquisition, the Japan Network has rapidly expanded
EBITDA ▪ Since acquisition, the Japan Network has rapidly expanded, with EBITDA ¥5.8bn more than doubling during the last 5 years 5 Year Growth: Japan +125% ▪ FY19 Network Sales +13.6%, +¥5,623.2m (+8.4% on a same-store basis), ¥4.6bn with the majority of the growth coming from new customers ¥4.4bn
Slide 35: Japan Network Sales, Online Sales and Store Count
Total Network Sales Online Sales FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19 +13.6% +20.6% +14.8% +4.9% +3.2% +37.3% ¥47,025.8m +9.7% +14.3% ¥30,186.3m ¥38,234.2m ¥40,119.7m ¥41,402.6m +30.6% ¥33,317.6m ¥25,026.0m +40.0% ¥22,822.2m ¥24,264.5m ¥19,966.3m ¥15,285.4m ¥10,915.6m +11.7% +
Slide 36: Majority of store growth came from Corporate store expansion
AVERAGE NUMBER OF STORES PER FRANCHISEE: ▪ The majority of our store growth came from Corporate 2.2 store expansion, as part of our Metro Fortressing strategy, designed to capture sales and improve operational efficiencies JAPAN POPULATION: 126.8m ▪ The sell-down of our Corporate store base outside
Slide 37: Strong SSS in the first weeks of FY20
▪ Strong SSS in the first weeks of FY20, with a focus on customer acquisition ▪ Management anticipates improved store unit economics, through: strong sales, customer acquisition and focus on the value segment of the market ▪ New products and food quality will be focal points, including the launch of
Slide 38: Outlook
OUTLOOK 38
Slide 39: Group future outlook 5,050 stores by 2025-2030
Historicial Store Count and Future Guidance Historical EBITDA $m 5,050 282.4 259.2 230.9 180.0 2,393 2,522 1,983 2,135 127.8 1,333 1,506 95.1 970 55.9 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY25-30 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Europe ANZ Japan Europe ANZ Japan Series4 ▪ Group future outlook 5,050
Slide 40: Management Outlook: medium-term annual growth expectations
▪ Management Outlook provides an illustration of our medium- term annual growth expectations, but does not constitute specific 3-5 Year earnings guidance Outlook Annual Same Store Sales Growth +3-6% ▪ It is important to note that 3-6% SSS growth significantly exceeds industry averages, both domestic
Slide 41: Network Sales and Online Sales growth was very pleasing this year
▪ Network Sales and Online Sales growth was very pleasing this year, with double-digit growth in both measures, showing little to no effect from Aggregators ▪ Where local trading conditions required, we made strategic short-term decisions to provide additional targeted support and incentives to Fran
Slide 42: DPE and Franchisees aligned on organic store openings
▪ DPE and our Franchisees are aligned with the benefits of organic store openings, underpinned by strong store unit economics for their businesses and DPE ▪ Our Franchisee base strengthened across the Group through internal growth, noting a particularly strong growth in the Franchisee 3-5 stores seg
Slide 43: Appendices
APPENDICES 43
Slide 44: FY18 and FY19 Statutory to Underlying Reconciliation
FY 18 Non-recurring FY 18 FY 19 Non-recurring FY 19 +/(-) FY 18 Statutory Costs Underlying Statutory Costs Underlying Underlying $ mil $ mil $ mil $ mil $ mil $ mil % Network Sales 2,588.9 2,588.9 2,897.3 2,897.3 11.9% Revenue 1,154.0 1,154.0 1,435.4 1,435.4 24.4% EBITDA 238.3 20.9 259.2 236.2 46.2
Slide 45: Group store additions vs Guidance
FY 17 H1 18 FY 18 H1 19 FY 19 European stores Franchised stores 794 825 991 1,012 1,028 Corporate stores 71 66 63 62 69 European Network Stores 865 891 1,054 1,074 1,097 Net stores added in period 49 26 189 20 43 ANZ stores ▪ Group – 179 new store additions vs. Guidance of 200-215 Franchised stores
Slide 46: Operations 360 data and benchmarking for Franchisees
▪ Operations 360 has delivered Franchisees an unprecedented level of data and benchmarking, to identify areas where they can grow profitability and identify improvement opportunities for their businesses ▪ The program has also identified Franchisees that would benefit from additional coaching and tr
Slide 47: Employment and community investment across three continents
▪ Across three continents, Domino’s Pizza Enterprises Ltd and our Franchisees provide employment for more than 50,000 team members and investment in local communities ▪ Domino’s recognises we share these communities not just with our customers, but also with our neighbours. Our goal is to actively w
Slide 48: Key upcoming dates
▪ 28 August 2019 – Dividend record date ▪ 12 September 2019 – Dividend payment date ▪ 10 October 2019 – Domino’s Investor Day (Brisbane) ▪ 28 October 2019 – Annual General Meeting 48
Slide 49: Forward looking statements notice
▪ Domino’s Pizza Enterprises Limited (Domino’s) advises that the information in this presentation contains forward looking statements which may be subject to significant uncertainties outside of Domino’s control ▪ Domino’s does not undertake any obligation to provide recipients of this presentation
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