Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2012 Earnings Presentation
50 slides from Domino's Pizza's earnings presentation, August 2012
Slide 1: Interim Results for the twenty-six weeks ended 24 June 2012
Interim Results for the twenty-six weeks ended 24 June 2012
Slide 2: The Team
The Team Lance Batchelor Chief Executive Officer Lee Ginsberg Chief Financial Officer 2
Slide 3: Agenda
Agenda • 2012 – The numbers – Food cost overview • 2012 – Marketing activity – Store openings – Other, including Germany – Commissary • Summary • Q&A 3
Slide 4: H1 2012 Financial Highlights
H1 2012 Financial Highlights A robust set of results +20.0% 20% +16.1% +15.2% 15% +11.0% 10% +5.2% 5% 0% LFL sales growth System sales Profit before tax * Diluted EPS * Interim dividend 4 * Pre-exceptionals and Germany
Slide 5: H1 2012 System Sales and PBT Growth
H1 2012 System Sales and PBT* Growth LFL sales up 5.2%, profits up 15.2% £350 £23.3m £25.0 £300 £22.5 £20.2m £20.0 £250 £17.5m £17.5 Sales £m PBT £m £200 £13.6m £15.0 £150 £10.9m £12.5 £100 £10.0 £50 £7.5 £170.2m £196.4m £237.1m £258.4m £286.9m £0 £5.0 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 5 * Pre
Slide 6: H1 2012 Mature Store Sales Growth
H1 2012 Mature Store Sales Growth Strong LFL sales performance 16% 700 14% 650 662 13.7% 600 Mature store LFL sales growth 12% 607 550 10% 11.4% 553 LFL store population 500 8% 501 450 6% 454 7.1% 400 4% 5.2% 350 2% 300 2.4% 0% 250 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 LFL sales growth LFL store p
Slide 7: H1 2012 Mature Store Sales Growth
H1 2012 Mature Store Sales Growth UK LFL acceleration in Q2 20% UK Mature stores LFL sales growth 15% 14.5% 10.8% 10% 8.1% 5.4% 5% 3.6% 3.2% 2.3% 0.9% 0% JAN FEB MAR Q1 2012 APR MAY JUN Q2 2012 7
Slide 8: H1 2012 Profit and Loss
H1 2012 Profit and Loss * 26 weeks to 26 weeks to % 52 weeks ended 24 June 2012 26 June 2011 increase 25 December 2011 £’000 £’000 £’000 System sales 286,869 258,521 11.0 530,636 Profit before tax pre-Germany 23,302 20,235 15.2 43,555 Germany losses (1,243) (147) (1,399) Profit before tax 22,059 20,
Slide 9: H1 2012 Profit and Loss
H1 2012 Profit and Loss * Health of core business 26 weeks to 26 weeks to % change 24 June 2012 26 June 2011 £’000 £’000 UK & ROI LFLs 5.2% 2.4% System sales 285,894 258,425 10.6% Profit before tax 23,302 20,235 15.2% Diluted EPS 10.68p 9.20p 16.1% STRONG UNDERLYING OPERATIONAL GEARING 9 * pre-excep
Slide 10: H1 2012 Key Profitability Ratios
H1 2012 Key Profitability Ratios * Health of the core business 26 weeks to 26 weeks to 24 June 2012 26 June 2011 Operating profit % ** 20.9% 20.0% PBT/System sales 8.2% 7.8% FURTHER PROGRESSION OF COMMISSARY MARGINS AND TIGHT COST CONTROL * Before exceptionals and Germany 10 ** Operating profit/stat
Slide 11: PBT/System Sales % - The Margin Progression
PBT/System Sales % - The Margin Progression 12.5 12.0 11.5 10.5 9.5 % 8.2 8.5 7.8 7.4 7.5 6.9 6.4 6.5 5.5 4.5 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2020 analysts' forecasts 11
Slide 12: Profit and Loss – Exceptional Items
Profit and Loss – Exceptional Items 26 weeks to 26 weeks to 52 weeks ended 24 June 2012 26 June 2011 25 December 2011 £’000 £’000 £’000 Operating exceptionals (405) (960) (3,007) - Restructuring and reorganisation costs (405) - - - Acquisition of Domino’s Pizza Germany - (960) (1,232) - Accelerate
Slide 13: H1 2012 Segmental Results
H1 2012 Segmental Results * 26 weeks ended 26 weeks ended 24 June 2012 26 June 2011 All £’000 Germany Ireland UK Total Germany Ireland UK Total Operating profit/(loss) (1,032) 2,053 21,186 22,207 (90) 1,857 18,349 20,116 Amortisation of intangibles (173) - - (173) (57) - - (57) (1,205) 2,053 21,186
Slide 14: Balance Sheet
Balance Sheet At 24 Jun12 At 26 Jun 11 At 24 Jun 12 At 26 Jun 11 At 25 Dec 11 £’000 £’000 £’000 £’000 £’000 Current assets: Inventories 3,823 4,170 Non-current assets 96,328 94,417 99,073 Trade & other 29,928 19,667 receivables Net investment in 3,878 1,830 Current assets 61,458 49,933 54,345 financ
Slide 15: Cash Flow Statement
Cash Flow Statement 26 weeks to 26 weeks to 52 weeks ended 24 June 2012 26 June 2011 25 December 2011 £’000 £’000 £’000 Profit before taxation 21,504 18,997 38,789 Net finance costs 248 297 577 Share of post tax profits of associates (123) (146) (335) Impairment - - 837 Depreciation and amortisation
Slide 16: Cash Flow Statement (cont.)
Cash Flow Statement (cont.) 26 weeks to 26 weeks to 52 weeks ended 24 June 2012 26 June 2011 25 December 2011 £’000 £’000 £’000 Cash generated from operations 21,572 13,138 35,474 Taxation paid ( 2,813) (1,356) (3,992) Net cash generated by operating activities 18,759 11,782 31.482 Net cash used by
Slide 17: Analysis of Borrowings
Analysis of Borrowings* At 24 Jun 12 At 26 Jun 11 At 25 Dec 11 £’000 £’000 £’000 Cash at bank 23,625 24,128 24,427 Term debt (25,000) (25,000) (25,000) Net cash (1,375) (872) (573) DP Capital (2,922) (2,703) (2,689) EBT loan (12,035) (12,035) (12,035) Adjusted net debt ( 16,332) (15,610) (15,297) Ad
Slide 18: Available Debt Facilities
Available Debt Facilities Expiry Utilised at Undrawn at Facility Term Date 24 Jun 12 24 Jun 12 Purpose £’m £’m £’m 25.0 * 5 years 20 December 2012 25.0 - Multi-purpose 5.0 5 years 31 December 2013 2.9 2.1 DP Capital 13.0 * 7 years 31 January 2014 12.0 1.0 EBT 43.0 38.9 3.1 Cash and cash equivalents
Slide 19: Capital Expenditure 2011 - 2016
Capital Expenditure 2011 - 2016 2011 2012 2013 2014 2015 2016 £’m Actual Forecast H1 H2 Total Maintenance 3.8 1.4 1.6 3.0 3.0 3.0 3.0 3.0 Expansionary 9.2 1.4 1.9 3.3 4.8 2.5 10.6 9.8 West Ashland 0.9 New UK commissary 10.0 5.0 HQ 6.6 0.3 0.3 Naas 0.5 Pulse POS 1.2 Penrith 2.5 Store leaseholds 0.6 0
Slide 20: Diluted Earnings Per Share Growth
Diluted Earnings Per Share Growth * 11 Compound increase of 22.5% 10 since 2008 9 8 10.16 7 6 9.11 5 7.89 Pence 4 6.21 3 2 5.12 1 0 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 * Pre-exceptional items Diluted EPS 20
Slide 21: Dividends Per Share Growth
Dividends Per Share Growth 7 6.5 Compound increase of 25.1% 6 since 2008 5.5 5 6.60 4.5 4 5.50 Pence 3.5 3 4.50 2.5 2 1.5 3.50 1 2.70 0.5 0 2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 Dividends per share 21
Slide 22: Cash Returned to Shareholders
Cash Returned to Shareholders 35,000 Dividends Share buybacks 30,000 Profit after tax 25,000 20,000 £’000 15,000 10,000 5,000 0 2006 2007 2008 2009 2010 2011 26 weeks 24 June 2012 TARGET TO CONTINUE TO RETURN SURPLUS CASH TO SHAREHOLDERS 22 * Pre-exceptionals
Slide 23: Food Cost Outlook for 2012
Food Cost Outlook for 2012 • Benefits of strategy to lock into longer term contracts • Price stability • 2012 food basket • Broadly flat for year • Cheese reduction offset increases in meats (currency benefit offset) • Outlook for H2 2012 • Entire basket locked in except cheese • Cheese is c.25% of
Slide 24: Food Cost Outlook - Early Indications for 2013
Food Cost Outlook - Early Indications for 2013 • Opportunities • Weakness of Euro • Continued growth in our volumes • Risks • Sterling vs Dollar weakness • Milk price/cheese increase • 50% of basket for 2013 already locked in • Wheat – 100% fixed • Tomato sauce – 100% fixed • Chicken and meat toppin
Slide 25: Key Drivers of Like-for-Like Growth
2009 Constant UK Mature Store Population Key Drivers of Like-for-Like Growth 18.00% 36 35.83 £20.50 £20.03 17.43% £20.00 17.50% 35.5 35.3 17.10% £19.50 £19.21 17.00% 35 £19.00 16.50% 34.5 16.10% 34 £18.50 £18.24 16.00% 34 £18.00 15.50% 33.5 £17.50 15.00% 33 £17.00 H1 2010 H1 2011 H1 2012 H1 2010 H1
Slide 26: Average Delivery Times
Average Delivery Times 25.5 Valentines and APAS 2012 25 24.5 24 Service workshop 23.5 2011 23 2012 22.5 22 21.5 26
Slide 27: H1 UK Store Growth
H1 UK Store Growth • 19 new stores opened in first half (2011: 22) • 738 stores at half year (2011: 688 stores) • Four new franchisees, total 129, ratio 5.7:1 • One closure (2011: 1) 27
Slide 28: Strong Product Pipeline
Strong Product Pipeline Giving customers new reasons to re-order • New Mexicano range • Continuous pipeline of - Chicken Domino’s Stuffed Crust • Relaunch Gourmet • Wider range of desserts - Veggie innovation - Four Seasons - Triple Choc Cookies - Beef - Saucy BBQ - Mexicano - More to come 28
Slide 29: Value Activity Targeted at Carry-out, Delivery and Online
Value Activity Targeted at Carry-out, Delivery and Online Record C/O Most popular deal at The Meal Deal Wizard is probably incidence at 34% 12% of online orders the third greatest wizard of all time after Gandalf and Professor Dumbledore. I really like his magical powers. My pizza was almost twice a
Slide 30: UK E-commerce goes from Strength to Strength
UK E-commerce goes from Strength to Strength Biggest week: 65% of UK delivered sales E-commerce In store £140 Avg ticket 20.42 19.51 60.0% Items/order 3.17 3.00 52.4% £120 50.0% 41.9% £100 £116.7 40.0% 32.7% £80 £81.1 £m 26.2% 30.0% £60 21.8% £56.9 20.0% £40 £35.2 10.0% £20 £24.6 £0 0.0% 2008 H1 200
Slide 31: Mobile Sales Splits 2010-2012
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 2009/38 2009/44 2009/50 2010/3 2010/9 2010/15 2010/21 2010/27 2010/33 2010/39 2010/45 2010/51 2011/4 2011/10 2011/16 2011/22 2011/28 % Mobile Total 2011/34 2011/40 2011/46 2011/52 2012/5 2012/11 2012/17 2012/23 Mobile devices now account for 20% of e-commerce sales
Slide 32: We are getting Deeper into the Digital Space
We are getting Deeper into the Digital Space Number of UK FB Fans Number of UK Twitter Followers 652,192 35000 600000 30000 28692 500000 25000 400000 20000 15000 300000 10836 10000 200000 5000 108,513 100000 0 1/1/11 2/1/11 3/1/11 4/1/11 5/1/11 6/1/11 7/1/11 8/1/11 9/1/11 1/1/12 2/1/12 3/1/12 4/1/12
Slide 33: Targeted E-mail
Targeted E-mail Sending the right deal at the right time to the right customer YOY % Diff Emails sent 59.6% Average broadcast 70,8% Open rate 21.0% Click rate 43.1% Conversion 51.7% % of sales 142.4% 33
Slide 34: New Day-parts Continue to Gain Traction
New Day-parts Continue to Gain Traction UK lunch sales up 7.4% Late night sales up 10.7% Sales post midnight up 31.4% 34
Slide 35: H2 Store Growth
H2 Store Growth • We currently have a strong pipeline of stores with planning • On track for 60 openings • New store design now ‘bedding in’ 23
Slide 36: Germany
Germany •Growth •Franchising •Marketing •Outlook for 2012 •Sales update 36
Slide 37: Germany’s Stores and Team Continue to Grow
Germany’s Stores and Team Continue to Grow • Opened 4 stores in the West (two corporate, one joint venture, one franchise). Total now 10. • Increased talent pool in the Store Development Team focused on site acquisitions • Building pipeline for H1 2013 as well as H2 2012 • Cut the ribbon on the 5000
Slide 38: Germany - Store Design
Germany - Store Design • Introduced the latest innovations in Domino’s store design • Pizza theatre focuses on freshness, fun and skilled pizza makers • Store design also communicates Domino’s history and heritage, important elements in a new market 38
Slide 39: Germany - Franchising
Germany - Franchising German Franchisees Current DPG Franchisees: • 3 candidates are currently in the franchising process • 1st UK franchisee in Germany has now opened his 2nd site • Have received 126 enquiries this year • 1st joint venture franchisee has entered the market • Substantial interest fr
Slide 40: Marketing/Menu/Online Development
Marketing/Menu/Online Development • Continued NPD specific to German market • Testing alternative menu distribution channels • Testing outdoor advertising and radio • Focus groups providing valuable market insight • Joined up with German consolidator sites • Continuous improvement on SEO, paid adver
Slide 41: Commissary development
Commissary development • Germany – East - Berlin • New facility with a capacity to service 50 stores • Service Berlin and Hamburg areas • Produce dough for stores in the West through 2013 • Suitable site has been identified • Aim to be producing dough from end Oct 2012 • Capex - £0.4m – West – Dusse
Slide 42: Commissary development (contd.)
Commissary development (contd.) • United Kingdom – Current facilities have the capacity for dough production through 2020 – Requirement for further warehousing and distribution capability in the North • Penrith extension – Currently assessing commissary resilience • Will require a further commissary
Slide 43: Summary
Summary • Solid H1 growth despite very tough trading conditions • Fanatical focus on the basics – great quality and service, backed up by unrelenting national, regional and local marketing presence has kept core customers close and a resurgent competition at bay • Demand for growth and store opening
Slide 44: APPENDICES
APPENDICES APPENDIX 1 Analysis of Group turnover (Page A-1) APPENDIX 2 Analysis of Group operating profit (Page A-2) (Pre-exceptionals) APPENDIX 3 Earnings per share reconciliation (Page A-3) APPENDIX 4 Statement of changes in equity (Pages A-4) APPENDIX 5 Cash returned to shareholders (Page A-5) AP
Slide 45: Analysis of Group Turnover
Analysis of Group Turnover 26 weeks to 26 weeks to 24 June 2012 26 June 2011 Variance Variance £’000 £’000 £’000 % Royalties 15,811 14,208 1,603 11.3 Store sales 1,361 563 798 141.7 Franchise/TST/FDP fees 189 388 (199) (51.3) Commissary sales 82,873 76,291 6,582 8.6 Property sales 7,415 7,691 (276)
Slide 46: Analysis of Group Operating Profit
Analysis of Group Operating Profit * 26 weeks to 26 weeks to 24 June 2012 26 June 2011 Variance Variance £’000 £’000 £’000 % Net royalty 7,978 7,231 747 10.3 Commissary margin 23,075 20,534 2,541 12.4 Realty 279 473 (194) (41.0) Subsidiaries 227 179 48 26.8 Net overheads (8,320) (8,211) (109) (1.3)
Slide 47: Earnings Per Share Reconciliation
Earnings Per Share Reconciliation 26 weeks ended 26 weeks ended 24 June 2012 26 June 2011 £’000 £’000 Profit attributable to shareholders – post exceptionals 15,634 13,047 Profit attributable to shareholders – pre-exceptionals 16,647 14,712 Basic weighted average number of shares - £’000s 161,752 15
Slide 48: Statement of Changes in Equity
Statement of Changes in Equity At 24 Jun 12 At 26 Jun 11 At 25 Dec 11 £’000 £’000 £’000 At beginning of year 59,664 41,662 41,662 Proceeds from share issue 1,713 5,508 5,792 Share buybacks (3,307) (1,816) (2,219) Profit for year 15,634 13,047 26,746 Tax on employee share options 790 158 41 Share opt
Slide 49: Cash Returned to Shareholders
Cash Returned to Shareholders 26 weeks to 2007 2008 2009 2010 2011 24June 2012 Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 Profit after tax * 13,239 15,664 21,574 27,129 31,015 16,387 125,008 Share buybacks 8,346 3,783 7,623 4,715 2,219 3,307 29,993 Dividends 5,816 8,035 10,466 13,632 18,025 11,
Slide 50: The Franchisee Model
The Franchisee Model 26 weeks to 26 weeks to 24 June 2012 26 June 2011 % variance £’000 £’000 Average sales (AWUS) £ 15,644 £ 14,795 + 5.7% System sales £406,744 £384,670 + 5.7% EBITDA £ 54,475 £ 48,001 + 13.5% + £6,474 COMPELLING STORE LEVEL ECONOMICS A-6