Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — FY2017 Earnings Presentation
58 slides from Domino's Pizza Enterprises's earnings presentation, Aug 15, 2017
Slide 1: Full Year Results, Period Ending 2 July 2017
Py FULL YEAR RESULTS Period Ending 2" July 2017 AUSTRALIA + NEW ZEALAND + BELGIUM + FRANCE » THE NETHERLANDS « JAPAN » GERMANY
Slide 2: Don Meij, Group CEO & Managing Director
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Slide 3: FY17 key results metrics
For personal use only GROUP SSS% +8.0% EBITDA(1) +28.3% NPAT(1) +28.8% EPS(1) +26.8% DIVIDEND (CPS) +26.9% FREE CASH FLOW ($m) $44.6m RETURN ON CAPITAL EMPLOYED 19.4% RETURN ON EQUITY 31.2% (1) FY17 Underlying comparison to FY16 Underlying, including acquisitions from the date of DPE ownership – see
Slide 4: FY17 financial highlights
For personal use only ▪ Network sales up 18.0%, +$354.4m, to $2,318.5m ▪ Revenue up 15.4%, +$142.9m, to $1,073.1m ▪ EBITDA up 28.3%, +$50.9m, to $230.9m; 2 year EBITDA up +80.7%, +$103.1 ▪ NPAT (after Minority Interest) up 28.8%, +$26.5m, to $118.5m; 2 year NPAT up +84.9%, +$54.4m ▪ H217 Operating C
Slide 5: For personal use only
For personal use only (1) FY17 Underlying comparison to FY16 Underlying, including acquisitions from the date of DPE ownership 5
Slide 6: Network sales growth FY17
2,318 NETWORK SALES GROWTH FY17 For personal use only 1,964 1,480 1,249 1,156 1,163 1,036 928 805 849 746 717 763 671 578 397 408 415 433 363 384 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY 2011 2012 2013 2014 2015 2016 2017 ▪ Strong Group SSS: 8.0%, excellent ANZ SSS: 13.6% and E
Slide 7: Store additions to the network in FY17
For personal use only ▪ 178 stores added to the network in FY17 ➢ 66 new organic stores opened in ANZ, an ANZ record(1) ➢ 72 new organic stores opened in Europe, an EU record(2) • All Joey’s stores now fully converted to Domino’s • 22 Sprint stores converted in FY17, 44 in total, since acquisition.
Slide 8: NPAT growth versus guidance
▪ Year-on-year NPAT growth of 28.8% was lower than upgraded guidance of 32.5% (upgraded from 30%). This was primarily due to France For personal use only trading being lower than expected in H217, as a result of technical customisation issues with OneDigital, which have now been fully resolved. Fran
Slide 9: For personal use only
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Slide 10: EBITDA growth and margins
For personal use only ▪ Group: underlying EBITDA growth of +28.3%. Group EBITDA margin continues to rise, +2.2% from FY16 and +3.3% from FY15 ▪ ANZ: strong EBITDA growth of +25.8%, whilst increasing margins ▪ Europe: exceptional underlying EBITDA growth of +47.1%. EBITDA margin continues to accelera
Slide 11: FY17 non-recurring costs
For personal use only Europe ▪ H217 conversion and integration costs were purposefully higher than planned, predominantly due to: ‒ Contribution to German marketing fund, supporting brand conversion ‒ Additional store signage and restructuring costs, including redundancy ▪ Non recurring costs relati
Slide 12: Underlying reconciliation
For personal use only ▪ Further details regarding FY17 non-recurring costs are outlined in the preceding slide ▪ FY16 non-recurring costs are outlined in the FY16 Market Presentation 12
Slide 13: Underlying EPS growth
133.6 For personal use only ▪ Underlying EPS 133.6c, +26.8% on FY17 (Statutory EPS 93.3c) ▪ Underlying EPS CAGR +25.2% over the last 10 years, with 3 year CAGR +34.8% 105.4 66.2 53.1 74.2 54.6 40.5 41.5 37.2 29.9 30.0 67.4 21.6 25.0 19.8 52.4 21.6 15.7 17.6 12.8 14.1 33.8 12.6 8.4 24.7 8.7 17.4 19.9
Slide 14: Cash flow
For personal use only ▪ H217 Operating Cash Flow up 69.8%, +$34.4m on H117, to $83.6m ▪ Working Capital returns to normal levels in H217 – Positive movements in ANZ & Europe were partly offset by timing of year-end creditor payments in Japan and continued equipment rollout for Project 3/10 – As a re
Slide 15: Balance sheet
▪ Additional Inventories due to store growth & additional For personal use only equipment required for Project 3/10 rollout ▪ Other Current Assets have increased by $8.6m, predominantly as a result of loans in Japan for Can Do! Partner stores ▪ Goodwill reduction mainly due to Japan FX translation,
Slide 16: Leverage and returns
For personal use only ▪ Net Debt to Equity relatively stable year-on-year, despite increased borrowing requirements ▪ Sustained strong profit growth reduces leverage metrics and creates scope for capital management ▪ Interest coverage remains strong with most of the debt denominated in Yen & Euros (
Slide 17: For personal use only
For personal use only
Slide 18: ANZ operational highlights
▪ Opened 66 new organic stores, an ANZ record, 91% of which were opened by internal Franchisees or Store Managers For personal use only ▪ Domino’s ANZ store count finished at 777 in FY17, targeting to open a further 423 stores within the next 6 years ▪ We wrote record sales in October with SSS +23%
Slide 19: ANZ customer service and digital
▪ Launched customer-service and meal-quality campaign ‘We Care’, featuring Franchisees, supported by advertising and ANZ For personal use only wide in-store training for all team members ▪ Relaunched 131 888 telephone number, supported by ‘click to call’ technology on websites, mobile devices and se
Slide 20: ANZ sales growth
17.4% $516.2m 15.9% For personal use only 13.8% $449.3m 11.8% 10.6% 10.0% $376.7m 8.7% 6.9% $321.1m 5.6% 4.5% $283.8m $270.7m 2.6% 0.4% 2012 2013 2014 2015 2016 2017 H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 ▪ H217 sales up +14.9%, +$66.9m, as a result of new store expa
Slide 21: ANZ initiatives
▪ Leverage Franchisees’ investment in the ice cream category by extending our all-natural, premium, ice cream offerings, driving sales and occasions. For personal use only Full rollout expected to be completed by September, adding premium ice cream-based desserts – a key new pillar for Australian gr
Slide 22: New ANZ menu
For personal use only ▪ The new menu introduces a simplified range of pizzas, without compromising on quality, delivering best-quality, taste and value ▪ As part of the simplification, the single consolidated size is either the same, or larger, than the previous range ▪ Research shows that our custo
Slide 23: Franchisee profitability
▪ Franchisee profitability across all of our Australian network continues to grow. Over the past For personal use only two years, average profitability has increased 25% $133.7k $130.7k ▪ As a result of territory splits, 22 outperforming stores were removed from the ‘same store’ calculation in FY17.
Slide 24: Franchisee wage compliance review
▪ Deloitte has completed its independent assessment of the design of Domino’s monitoring and supervision framework for wage For personal use only underpayment by Franchisees and has identified both strengths and opportunities for improvement in the current process, in light of the proposed legislati
Slide 25: Compliance action plan and audit
▪ Domino’s has developed an action plan to address the recommendations from Deloitte’s report, including a heightened focus on reporting to senior management and to the Board. These recommendations will complement existing identification and auditing For personal use only processes ▪ Domino’s undert
Slide 26: Fair Work Ombudsman and enterprise agreement
For personal use only Fair Work Ombudsman ▪ The Fair Work Ombudsman (FWO) has issued a number of Notices to Produce (NPDs) to both Domino’s and certain Franchisees ▪ Domino’s is complying with those NPDs that have been issued to it and assisting, where possible, the FWO in its investigations ▪ The F
Slide 27: For personal use only
For personal use only
Slide 28: Germany
Germany: ▪ The business is continuing to progress above expectations For personal use only ▪ Domino’s brand awareness is at record levels ▪ Phase two of conversion to High Volume Mentality is well under way ▪ ‘Taste the Colour’ launched in H217 ▪ Pulse and OneDigital now fully integrated ▪ Large num
Slide 29: Netherlands/Belgium
For personal use only Netherlands/Belgium: ▪ A record year for store openings, 38 new stores opened during FY17 ▪ An exceptionally good sales year, with double-digit growth for the 4th year in a row in the Netherlands ▪ Project 3/10 delivered a better customer experience, with all Netherlands stores
Slide 30: France
France: ▪ Record 33 organic new store openings, finishing FY17 with 350 stores For personal use only ▪ 22 Sprint stores converted to Domino’s – converted Sprint stores are achieving double-digit growth ▪ Introduced Value Range (“Bons plans”), diluting SSS in the short term but increasing value perce
Slide 31: Europe sales growth
For personal use only 284.6 249.8 8.0% 7.5% 7.5% 7.5% 5.3% 4.6% 4.9% 146.1 4.0% 129.3 3.1% 118.8 2.5% 106.1 2.3% 0.7% 2012 2013 2014 2015 2016 2017 H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 ▪ H217 sales up 14%, +€34.9m, as a result of continued new store additions and s
Slide 32: Europe FY18 plans: Germany, Netherlands/Belgium
Germany For personal use only ▪ Tanda, our new intelligent rostering system, launching in FY18, bringing further store efficiencies ▪ GPS Driver Tracker planned to launch in late FY18 ▪ 20 minute guarantee to commence in FY18 ▪ Record TV and radio spends to occur in FY18, leveraging scale ▪ We are g
Slide 33: France: new CEO and FY18 plans
France For personal use only ▪ Appointed Stoffel Thijs as France CEO, continuing our growth from within – reflecting the strength and depth of our European teams ▪ Stoffel is a 20 year Domino’s veteran and one of our most successful operators. He started as a delivery driver, working his way through
Slide 34: For personal use only
For personal use only
Slide 35: Japan store growth
For personal use only ▪ Constructed a total of 40 new stores in twelve months, ending FY17 with 493 stores ▪ Franchised stores increased by 50 in FY17, reaching 183 stores, owned by over 100 Franchisees ▪ A concentration of new stores in Greater Nagoya; now 47 stores ▪ Relocated 9 stores to carry-ou
Slide 36: Japan sales mix and franchising
For personal use only ▪ Highest carry-out sales in DPJ history: 49% in FY17, versus 45% last year ▪ Highest digital sales in DPJ history: 58% of network sales, in the second half, versus 55% last year ▪ More than 300 stores are now Mugen design (new image) stores ▪ Japan’s Franchised stores now comp
Slide 37: Japan sales growth
For personal use only ¥19,371.2m ¥16,889.7m ¥17,541.4m ¥14,840.5m 14.4% 7.8% 2.2% 3.6% 1.3% -1.2% -3.0% -4.7% 2014 2015 2016 2017 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 (1) (2) (3) ▪ Sales +10.4%, +¥1,829.8m during the second half of the year ▪ FY17 was a consolidation year for Japan sales
Slide 38: Japan FY18 plans
For personal use only ▪ Opening the 500th store by the anniversary of acquisition, in September ▪ Roll-out of OneDigital platform, in August, taking advantage of ANZ and Europe online ordering innovations ▪ New product development around individual customers, to capture greater ‘share of stomach’: P
Slide 39: Making online ordering even easier
DRU ASSito Tf Making Online Ordering Even Easier
Slide 40: ANZ digital
▪ 30% online sales growth year-on-year For personal use only ▪ Continued growth throughout FY17, with multiple online records achieved ▪ Launched DRU Assist – the most advanced QSR eCommerce A.I. assistant in ANZ. Another significant step forward in our ‘A.I. first’ strategy ▪ Facebook Messenger BOT
Slide 41: Europe and France digital
Europe ▪ Offers App launched in Europe, giving customers a more convenient way For personal use only to access deals ▪ Push notifications for Ordering Apps enabled, providing the markets with a new tool to drive sales ▪ Franchisees now have more flexible and efficient local store marketing options a
Slide 42: Germany and Netherlands/Belgium digital
Germany ▪ +50% online sales growth year-on-year, highest OLO growth in Europe For personal use only ▪ Commenced DRU ground-based deliveries, with Starship Technologies, on behalf of Domino's ▪ Successful launch of Offers Apps, in late FY17 ▪ A range of further location optimisations to the ordering
Slide 43: Japan digital
▪ 16% online sales growth year-on-year For personal use only ▪ Pulse rollout completed in February ▪ Final phase of refining OneDigital for the Japan market, with an anticipated go-live date of August ▪ Launched Apple Pay in February, increasing online payment options for customers ▪ Continued use o
Slide 44: Upcoming digital innovations
▪ ‘PayPal Bill Share’ launched in July in Australia - a market first. Customers can now easily share the costs of their order with their family and friends For personal use only ▪ ‘Social Logins’ via Facebook, PayPal(1) and Google integrated into online ordering for fast and easy account setup ▪ ‘My
Slide 45: For personal use only
For personal use only
Slide 46: ANZ menu innovation
▪ ‘Quality Fresh’ menu range to be implemented in 3 phases this year For personal use only ▪ New menu range introduces succulent new flavours and tasty ingredients, at all price points ▪ There will be extensions to the all-natural, premium, ice cream offerings, including: ➢ Launching 2 new thick sha
Slide 47: France and Germany menu
France: For personal use only ▪ France to launch the biggest menu upgrade in history: ‘Taste the Colour’, including moving to ‘Better for you’ ingredients ▪ There will be an increased focus on quality, continuing to improve and update products ▪ We will also be relaunching two best selling pizzas ov
Slide 48: Netherlands and Belgium menu
Netherlands and Belgium For personal use only ▪ Added sandwiches to the menu, providing more options for the lunchtime consumer, further tapping into this market ▪ As a result, almost 50% of the system have been able to open for lunch, 7 days per week, up from 10% previously ▪ Targeting 100% of stor
Slide 49: Japan menu
For personal use only ▪ Focus on new products like ‘Pizza Sando’, targeted for single consumers, a new segment in which DPJ has small market share ▪ In Q417, a re-launch of the ‘Single Pizza to Go’ promotion nearly doubled the strike rate of single pizzas for carry out ▪ A new simplified menu with t
Slide 50: Store count 2017 to 2025
Australia 02 JULY 2017 JUNE 2025 NZ 2,135 STORES 4,650 STORES
Slide 51: Store count potential to 2025
For personal use only POTENTIAL TO 2025 1,200 2,600 850 FY17 STORE COUNT 777 Stores 865 Stores 493 Stores ▪ Management believes that there is significant future growth potential in our existing organic businesses over the next 8 years ▪ We are therefore reaffirming our Group future outlook of 4,650
Slide 52: Domino's future store count
For personal use only ▪ Europe will exceed the significant 1,000 store milestone DOMINO'S FUTURE STORE COUNT within the next 18 months ▪ As outlined in previous presentations, Europe is the biggest growth engine of the future, with a total future network of 2,600 stores by 2025: 4,650 ➢ France 1,000
Slide 53: For personal use only
For personal use only (1) Excluding incremental interest costs associated with share buy-back (2) Including 100% of Japan’s earnings (3) Excludes the purchase of the Minority Interest in Japan 53
Slide 54: FY18 trading update
For personal use only ▪ ANZ: SSS off to a strong start. H118 will be marginally slower than H217, due to rolling record high prior year comparatives ▪ Europe: excellent SSS start to FY18, highlighting that France issues are behind us ▪ Japan: SSS in line with FY17, noting same-store customer count +
Slide 55: For personal use only
For personal use only
Slide 56: Summary and outlook
For personal use only ▪ Although we missed our FY17 upgraded NPAT guidance (by $3.4m or 2.8%), DPE still achieved very strong year-on-year NPAT growth of 28.8% ▪ DPE opened 178 new organic stores in FY17 and is forecasting another record year of organic new store openings in FY18 ▪ ANZ continues to
Slide 57: Europe outlook
▪ FY17 was a demanding infrastructure growth year for Europe, with the rollout of Pulse, OneDigital, the new Commissary and 2 For personal use only brand conversions. These significant projects deflected Management focus ▪ However, after a successful year integrating theses major infrastructure item
Slide 58: Forward looking statements
▪ Domino’s Pizza Enterprises Limited (Domino’s) advises that the information in this presentation contains forward looking statements For personal use only which may be subject to significant uncertainties outside of Domino’s control ▪ Domino’s does not undertake any obligation to provide recipients
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