Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2020 Earnings Presentation
52 slides from Domino's Pizza's earnings presentation, September 2020
Slide 1: The Official Food Of
4 THE OFFICIAL FOOD OF
Slide 2: Today's Agenda
TODAY’S AGENDA 1 2 3 A ous Overview Dominic Paul, CEO Financial performance Neil Smith, Interim CFO Operational update Dominic Paul, CEO & Dominos: D THE OFICIAL FOOD oF EVERYTHING
Slide 3: First Impressions: A Resilient & Strong Core Business
FIRST IMPRESSIONS: A RESILIENT & STRONG CORE BUSINESS * Collective response to the unprecedented challenges faced during the first half demonstrate the strengths of the core business: > World class brand Experienced franchisees Exceptional supply chain Dynamic and responsive model Vv Vv Vv WV Highly
Slide 4: First Half Performance
FIRST HALF PERFORMANCE + UKLFL accelerated over lockdown despite moving nd to delivery only Domino's Pizza i 3 April at 14:00 -@ At Domino's we're doing our part to keep delivering, so you can do your bit by staying home and keeping safe. > @Q2delivery LFL sales +31% and total delivery orders +24% >
Slide 5: Our Business Priorities
OUR BUSINESS PRIORITIES Operational - through Covid-19 lockdown period > Keep serving our customers and looking after our people > Build brand preference and help our communities > Come together with our franchisees Strategic - looking to the future > Realign our relationship with our franchisees >
Slide 6: Financial Performance
FINANCIAL PERFORMANCE Neil Sailer Interim CF
Slide 7: Income Statement
INCOME STATEMENT Underlying, £m H12020 H1 2019 FY 2019 UK & Ireland EBITDA 57.6 56.4 114.1 Depreciation & Amortisation (8.1) (4.8) (11.7) UK & Ireland EBIT 49.5 51.6 102.4 German Associate EBIT 1.9 1.2 2.9 Finance costs (3.8) (2.9) (6.5) Profit Before Tax 47.6 49.9 98.8 Taxation (7.7) (9.4) (17.7) P
Slide 8: Covid-19 Related Costs
COVID-19 RELATED COSTS INCLUDED WITHIN UNDERLYING ITEMS * Supply chain: changing operations and MRE §—shirepatterns to keep colleagues safe Supply chain 21 and paying salary premiums Community 07 * Community: key worker pizza giveaway ; 34 and launch of Partners Foundation Franchisee support - ¢ Fra
Slide 9: Analysis of UK & Ireland EBITDA
ANALYSIS OF UK & IRELAND EBITDA a verrbAere * Supply chain EBITDA pe | tzoz0 | incon | rv00 aie £6.2m Covid-19 costs Supply chain centre EBITDA 48.4 49.0 101.4 + Increase in net royalties Net royalties 17.7 16.7 33.9 from systems sales . . growth of 5.5% Net overheads, realty & incentives (14.3) (10
Slide 10: Sales Performance
SALES PERFORMANCE H12020 _H12019 __% Change UK system sales 597.0 563.5 +5.9% Ireland system sales 31.9 32.5 (1.8%) Total system sales 628.9 596.0 +5.5% Supply chain revenue 170.8 162.0 +5.4% Royalty & other revenue 33.2 44.2 (24.9%) Franchise revenue 204.0 206.2 (1.1%) Corporate stores revenue 15.4
Slide 11: UK & Ireland Trading Performance
UK & IRELAND TRADING PERFORMANCE System sales £92.0m -48% 20% 48% £628.9m (£59.1m) £596.0m +5.5% H1 2019 Delivery Collection H1 2020 Total orders 2.9m +12% -44% 34.2m (4.6m) H1 2019 Delivery — Collection 32.6m -4.7% H1 2020 5.5% system sales growth driven by 20% delivery growth, as collection suspen
Slide 12: UK & Ireland LFL Sales
UK & IRELAND LFL SALES LFL sales growth Q12020 @Q2 2020 H12020 FY 2019 Excluding splits UK 4.0% 5.6% Ireland (1.7%) (5.4%) UK & Ireland combined 3.5% 5.2% Including splits UK 2.8% 4.7% Ireland (3.3%) (6.6%) UK & Ireland combined 2.2% 4.2% 4.8% (3.6%) 4.3% 3.7% (4.9%) 3.2% 3.7% 3.0% 3.7% 1.9% 1.5% 1.
Slide 13: Non-Underlying & Discontinued Operations
WON UNDERLYING & DISCONTINUED OPERATIONS International tracing performance Discontinued International trading performance broadly in line yoy, Iceland 0.5 1.1 despite impact of Norway (3.3) (4.1) Covid-19 Switzerland (1.4) (1.7) * Focused on Sweden (2.4) (1.8) reducing burden on group cash flow Cent
Slide 14: Group Cash Flow
GROUP CASH FLOW £m H1 2020 H1 2019 FY 2019 UK & Ireland EBITDA 57.6 56.4 114.1 German Associate 1.9 1.2 2.9 Discontinued op’s EBITDA (4.3) (5.2) (15.2) Associates & JVs (3.8) (2.4) (4.9) IFRS 16 - net lease payments (8.4) - - Working capital 17.2 (22.2) (23.3) Dividends received 1.5 0.5 1.0 Net inte
Slide 15: Use of Free Cash Flow
USE OF FREE CASH FLOW £m H12020 H12019 FY 2019 , ° Free cash generated in Free cash flow 46.9 20.7 57.1 the period has largely been utilised to reduce Capex (7.1) (11.8) (23.4) net debt Dividend 7 (25.0) (44.3), Capital expenditure was Share buybacks - (17.4) (17.4) paused due to Covid-19 Acquisitio
Slide 16: Net Debt Bridge
NET DEBT BRIDGE STRONG CASH GENERATION FROM CORE BUSINESS USED TO REDUCE NET DEBT Net debt / Net debt / (232.6) Net debt / Reported EBITDA Continuing EBITDA Inc (Covenant EBITDA: 1.8x Discontinuing: Basis): 1.9x 2.0x (4.5) (202.1) (6.4) (1.1) 6.0) (4.9) —_ — 1.6 51.8 UK&l cash generation Internation
Slide 17: Current Trading, Outlook and Dividend
CURRENT TRADING, OUTLOOK AND DIVIDEND Current trading and outlook * Trading in the first few weeks of H2 has been encouraging, however too early to conclude how consumer behaviour will evolve * The macroeconomic, consumer and competitive backdrop for H2 contains considerable uncertainties * Expectin
Slide 18: Franchisee Profitability
FRANCHISEE PROFITABILITY H1 2020, UK only H1 2020 H1 2019 All stores average EBITDA £85k £69k EBITDA margin 16% 13% Mature stores (exc splits) average EBITDA £85k £72k EBITDA margin 16% 14% Mature stores (inc splits) average EBITDA £85k £71k EBITDA margin 16% 14% Average Franchisee enterprise level
Slide 19: Operational Update
OPERATIONAL UPDATE Dominic Paul Chief Executive Officer & Dominos: DTH OFICIAL FOOD oF L EVERYTHING
Slide 20: Three Priorities Through Covid
THREE PRIORITIES THROUGH COVID SYSTEM UNITED BEHIND THESE PRIORITIES AND DID THE RIGHT THING Keep serving Build Come together with our Franchisees our Customers brand preference and looking after and help our People our communities 4 9 $ Domino's’ ee
Slide 21: Core Strengths of Our Business
CORE STRENGTHS OF OUR BUSINESS THESE HAVE BEEN AMPLIFIED IN OUR RESPONSE TO COVID-19 Exceptional supply chain Experienced franchisees World class brand Dynamic and responsive model Highly cash generative 2 Dominos:
Slide 22: 1. World Class Brand
1. WORLD CLASS BRAND ACTIONS TAKEN HAVE FURTHER STRENGTHENED CUSTOMER ENGAGEMENT How much do you agree with the following statement? Getting food from [RESTAURANT] for carryout is safe for me and my family right now Carryout safety: % of recent customers* that gave brand a 4 or a 5 (5 = agree comple
Slide 23: 2. Experienced Franchisees
2. EXPERIENCED FRANCHISEES STEPPED UP COMMUNICATION AND TRANSPARENCY a . *, . i Virtual CEO meetings with every franchisee #Stores by franchisee group = Largest 3 franchisees 199 * Fantastic operators = Corporate Stores and Joint Ventures * Great experience and passion 503 and franchisees 184 =0-5st
Slide 24: 3. Exceptional Supply Chain
3. EXCEPTIONAL SUPPLY CHAIN THE BACKBONE OF THE SYSTEM Maintained 99.9% availability and accuracy throughout lockdown period Rapidly changed processes and ways of working to look after our people and maintain service Investment projects paused during lockdown but now re-commenced Scotland targeted f
Slide 25: 4. Dynamic & Responsive Model
4. DYNAMIC & RESPONSIVE MODEL TOOK SWIFT ACTION TO KEEP CUSTOMERS AND OUR PEOPLE SAFE > Introduction of contact free delivery and switching off collection > Menurationalisation to allow social distancing in stores > Accelerated our evolution to a digital, agile business > Marketing messages quickly
Slide 26: Moving to Contact Free Delivery
MOVING TO CONTACT FREE DELIVERY DYNAMIC AND RESPONSIVE MODEL Quickly introduced contact free delivery, and made the decision to move to delivery-only in late March 2019: Collection 21% of system sales and 31% of orders Trialled contact free delivery and collection in our corporate stores Contact fre
Slide 27: Menu Rationalisation
MENU RATIONALISATION Worked in collaboration with franchisees to rationalise our menu to enable staff to socially distance in store Worked closely with health authorities to ensure we had best in class health and safety procedures across the system Now gradually reintroducing menu lines, informed by
Slide 28: Digital and Agile Business
DIGITAL AND AGILE BUSINESS DYNAMIC AND RESPONSIVE MODEL * Period has accelerated our evolution toa 30% truly digital business 25% . . 20% * Q2UK online sales +22%, with App sales +26% 15% 10% * Quickly mobilised technology teams to 5% prioritise site stability with online traffic 0% doubling at the
Slide 29: Customer Reassurance and Key Worker Giveaway
CUSTOMER REASSURANCE AND KEY WORKER GIVEAWAY ALL DELIVERIES CONTACT FREE CASH NO LONGER ACCEPTED DELIVERY ONLY - NO COLLECTION ‘At Domino's we're doing our part to keep delivering, so you can do your bit by staying home and keeping safe. 406 comme IN-CAR COLLECTION HOW OUR NEW CLICK & COLLECT SERVIC
Slide 30: All Resulting in Record Customer Satisfaction
.. ALL RESULTING IN RECORD CUSTOMER SATISFACTION WHEN WE WORK TOGETHER WE WIN 75% 70% 65% 60% —UK —ROl 55% 123 4 5 6 7 8 9 10 11 12 13 14 15 1 17 18 19 20 21 22 23 24 25 26 Week 2 Dominos:
Slide 31: Looking Forward: Our Strategic Priorities
LOOKING FORWARD: OUR STRATEGIC PRIORITIES CREATING A FRAMEWORK FOR LONG-TERM GROWTH > Realign our relationship with our franchisees Relationship currently challenging; situation dates back several years We are working hard to build constructive relationships with our franchisees > Build plans to rei
Slide 32: Summary
SUMMARY Dominic Paul Chief Executive Officer & Dominos: DTH OFICIAL FOOD oF L EVERYTHING
Slide 33: Summary
SUMMARY The system Development of We havea . delivereda our long-term strong core business resilient H1 strategic plan is performance underway e 9, $ Domino's’
Slide 34: Q&A
Q5A
Slide 35: Appendix
APPENDIX
Slide 36: Appendix Contents
APPENDIX CONTENTS Slide 37 Slide 38 Slide 39-41 Slide 42-44 Slide 45 Slide 46 Slide 47-48 Slide 49 Slide 50-51 IR contact details FY20 Guidance IFRS 16 UK & Ireland trading data Store numbers Discontinued International performance Balance sheet Glossary Alternative performance measures 2 Dominos:
Slide 37: Investor Relations Contact Details
INVESTOR RELATIONS CONTACT DETAILS Bethany Barnes Head of Investor Relations Bethany.Barnes@dominos.co.uk 07387 015695 e 9, $ Domino's’
Slide 38: 2020 Guidance
2020 GUIDANCE For FY20 we expect: * Underlying Depreciation & Amortisation of £15m to £16m, including c.£5m increase as a result of IFRS 16 * Underlying Interest (excluding foreign exchange movements) of £6mto £7m * Underlying Effective Tax rate of c.19% * Capital expenditure of £20mto £25m e 9, $ D
Slide 39: IFRS Impact
IFRS 16 IMPACT * IFRS 16 was implemented in the current year. This brings previous operating leases onto the balance sheet, as a leased asset and related liability for our directly leased assets, and a lease receivable and payable for our ‘back to back’ property leases with our franchisees * Previou
Slide 40: IFRS P&L Implications
IFRS 16 P&L IMPLICATIONS £m Pre-IFRS16 IFRS 16impact Post-IFRS 16 Revenue 259.4 (12.5) 246.9 Costs excl. Depreciation (207.3) 16.1 (191.2) Share of JVs and associates 3.8 - 3.8 EBITDA 55.9 3.6 59.5 Depreciation (5.4) (2.7) (8.1) EBIT 50.5 0.9 51.4 Net finance costs (3.1) (0.7) (3.8) Profit before ta
Slide 41: IFRS Balance Sheet Implications
IFRS 16 BALANCE SHEET IMPLICATIONS > Onthe balance sheet, a lease receivable is recognised for our franchisee leases, a right of use asset is recognised for our lease assets, and a payable related to the amount due under both leases: Right of use asset 19.7 Lease receivable 205.8 Lease liability (22
Slide 42: H1 UK & Ireland Unit Metrics
H1 UK & IRELAND UNIT METRICS LFLinc splits year-on-year growth cree ee order Total ey 2.2% Q2 4.2% H1 3.2% Delivery only ai 3.9% Q2 30.1% H1 16.9% Collection only ey -4.2% Q2 -93.8% H1 -49.4% -0.6% -13.3% -6.9% 0.4% 19.6% 9.9% -3.0% -87.8% -45.9% 1.4% 18.6% 9.3% 1.3% 7.6% 4.4% 0.0% -7.4% 0.2% 0.5% -
Slide 43: UK & Ireland System Sales Bridges
UK & IRELAND SYSTEM SALES BRIDGES UK & system sales +5.9% E103m soz 0m gsm fan Mn £563.5m. ye €37.2M ROI€ system sales (0.9%) €1.5m HE 369m (€0.7m) (€1.2m) ow ot oe oa aw — we . o® es 9 $ Domino's’
Slide 44: UK & ROI LFL Sales Growth - 2019 History
UK & ROI LFL SALES GROWTH - 2019 HISTORY £m Q1 2019 Q@2 2019 Q@32019 Q42019 H1 2019 H2 2019 FY 2019 Excluding impact of splits UK 3.1% 4.8% 3.0% 3.9% 3.9% 3.5% 3.7% Ireland 6.8% 7.0% (0.7%) (1.0%) 7.0% (0.8%) 3.0% UK & Ireland combined 3.3% 4.8% 2.9% 3.5% 4.1% 3.2% 3.7% Including impact of splits UK
Slide 45: Store Numbers
STORE NUMBERS 30 June 2019 29 Dec 2019 28 June 2020 UK 1109 1130 1138 Franchise 1074 1094 1102 Corporate 35 36 36 ROI 51 54 54 UK & ROI total 1160 1184 1192 Discontinued international operations Switzerland 21 21 20 Norway 57 56 NA Domino’s branded 47 47 NA Dolly Dimples branded 10 9 NA Iceland 25 2
Slide 46: International Performance (Discontinued)
INTERNATIONAL PERFORMANCE (DISCONTINUED) H1 2020 H1 2019 &m System sales EBIT System sales EBIT Iceland 15.1 0.5 18.1 11 Norway 9.3 (3.3) 19.5 (4.1) Switzerland 9.7 (1.4) 10.0 (1.7) Sweden 3.4 (2.4) 2.2 (1.8) Central costs (0.7) (1.1) Total trading result 37.5 (7.3) 49.8 (7.6) Loss on disposal of No
Slide 47: Group Balance Sheet
GROUP BALANCE SHEET 30 June 2019 29 Dec 2019 28 June 2020 Intangible assets 102.7 34.5 35.3 Property, plant and equipment 110.1 84.8 85.2 Right-of-use assets - - 19.7 Lease receivables - - 205.8 Trade and other receivables 89.8 99.1 66.0 Inventory 15.0 13.0 11.8 Market access fee 9.3 7.1 7.9 Investm
Slide 48: Group Balance Sheet (Cont'd)
GROUP BALANCE SHEET (CONT'D) £m 30 June 2019 29 Dec 2019 28 June 2020 Lease liabilities (227.7) Trade and other payables (95.9) (80.1) RCF (247.2) (284.4) Other financial liabilities (14.7) - Tax liabilities (15.8) (2.2) Provisions (17.2) (14.0) Liabilities held for sale (27.7) Total Liabilities (39
Slide 49: Glossary
GLOSSARY Item AWUS ASPA German associate HMF International London Corporate Stores eCommerce fund MAC Maintenance capex NAF SMP Defi ion Average Weekly Unit Sales Average Sales Per Address Represents our 33% associate investment in the trading operations of Domino’s Pizza Germany (also referred to a
Slide 50: Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ocation in release of reconcilia to GAAP measure Overall terminology Non-underlying items Items that are material in size, unusual or infrequent in nature, and are Group income statement, note 5 disclosed separately as non-underlying items in the notes to the account
Slide 51: Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ocation in release of reconcilia to GAAP measure Revenue measures System sales System sales represent the sum of all sales made by both franchised and Not applicable corporate stores to consumers. Like-for-like (LFL) sales growth LFL sales performance is calculated a
Slide 52: YS Dominos:
YS Dominos: ) THE OFFICAL FOOD OF L EVERYTHING