Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2019 Earnings Presentation
51 slides from Domino's Pizza's earnings presentation, March 2020
Slide 1: Full Year Results 2019
FULL YEAR RESULTS 2019 Domino’s Pizza Group plc 52 Weeks Ended 29 December 2019
Slide 2: Today's Agenda
TODAY’S AGENDA 1 Perspectives on the business lan Bull, Interim Chairman Financial performance Bethany Barnes, Head of Investor Relations David Wild, CEO Q&A 3 UK & Ireland performance & Dominos’ 2 PTH oFFIiaL Foon oF EVERYTHING §
Slide 3: Strength of the Core Business Model
STRENGTH OF THE CORE BUSINESS MODEL * Strong brand and consumer franchise * Brand dominates the pizza segment * Positive sector dynamics * Strong business model * Integrated model: end-to-end control of customer experience * Exceptionally strong operational expertise of our franchisee partners * Hig
Slide 4: This Has Been a Challenging Year
THIS HAS BEEN A CHALLENGING YEAR + Performance of International has been disappointing * Number of operational challenges * Ongoing dispute with our UK & Ireland franchisees * Lack of stability around governance and leadership * All against a backdrop of: * Highly competitive market backdrop and cha
Slide 5: Decisive Action Being Taken
DECISIVE ACTION BEING TAKEN + Norway transaction agreed and announced, subject to shareholder approval > Will continue with measured approach with exit of other international markets * Board is evolving * Re-engaging with franchisee community * Search for Chair progressing well e 9 $ Domino's’ ee
Slide 6: Our Four Priorities
OUR FOUR PRIORITIES 1. Recruit a Chair, CEO and CFO and oversee a managed Board succession 2. Reinforcing our UK and Ireland core business with ambitious plans to be the best franchisor in the system 3. Rebuild relationships with our franchisee partners 4. Find the right owners for the brand in our
Slide 7: Financial Performance
FINANCIAL PERFORMANCE Bethany Barnes Head of Investor Relations & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 8: Treatment of International Operations
TREATMENT OF INTERNATIONAL OPERATIONS * Norway, Switzerland, Sweden and Iceland classified as discontinued operations within the income statement, and as disposal groups held for sale in the Balance Sheet * Operations presented as a single line on the income statement: trading loss of the operations
Slide 9: UK & Ireland Performance
UK & IRELAND PERFORMANCE 2019 2018 % Change UK 1,144.0 1,091.6 4.8% Ireland 66.9 63.8 4.9% UK & Ireland System Sales 1,210.9 1,155.4 4.8% Franchise Revenue 421.4 412.4 2.2% Corporate Revenue 32.1 27.1 18.5% NAF & eCommerce Revenue 54.8 53.9 1.7% Total Revenue 508.3 493.4 3.0% EBIT 102.4 101.0 1.4% M
Slide 10: UK & ROI LFL Sales Growth
UK & ROI LFL SALES GROWTH £m Excluding splits UK Ireland UK & Ireland combined Including splits UK Ireland UK & Ireland combined Qi 3.1% 6.8% 3.3% 0.9% 5.3% 1.1% Q2 4.8% 7.0% 4.8% 2.7% 5.5% 2.9% Q3 3.0% (0.7%) 2.9% 1.4% (1.7%) 1.3% Q4 3.9% (1.0%) 3.5% 2.6% (2.4%) 2.2% H1 3.9% 7.0% 4.1% 1.8% 5.4% 2.0
Slide 11: Analysis of UK & ROI P&L and Margin Drivers
ANALYSIS OF UK & ROI P&L AND MARGIN DRIVERS Supply chain centre revenue 334.8 323.5 Supply chain centre EBITDA 101.4 94.9 6.8% Net royalties 33.9 32.3 5.0% Net overheads, realty & NSO incentives (24.5) (20.6) 18.9% UK corporate stores 1.3 1.9 (31.6%) UK JVs & associates 2.0 1.7 17.6% Depreciation &
Slide 12: International Performance (Discontinued)
INTERNATIONAL PERFORMANCE (DISCONTINUED) 2018 £m System sales EBIT System sales EBIT Iceland 36.6 17 40.3 4.1 Norway 38.3 (11.3) 40.1 (6.6) Switzerland 20.6 (5.4) 19.7 (2.5) Sweden 5.2 (4.0) 4.0 (1.6) Central costs (1.8) Total trading result 100.7 (20.8) 104.1 (6.6) Impairments and restructuring (35
Slide 13: International Impairments
INTERNATIONAL IMPAIRMENTS Carrying value at Impairment Other Carrying value at 30 Dec 2018 movements* 29 Dec 2019 Iceland 39.1 (2.5) (2.8) 33.8 Norway 14.5 (13.4) (1.1) 0.0 Switzerland 10.5 (10.9) 0.4 0.0 Sweden 15.3 (8.4) (0.9) 6.0 Total 79.4 (35.2) (4.4) 39.8 *net of capital expenditure, depreciat
Slide 14: International Disposal Process
INTERNATIONAL DISPOSAL PROCESS * Disposal of Norway announced, subject to shareholder approval * Cash outlay of up to £7.0m * Provides a complete exit * Transfer of 29% minority stake in Sweden to us as part of the transaction * P&L loss on completion due to cash outlay and recycling of minority int
Slide 15: Group P&L
GROUP P&L Underlying EBITDA 117.0 112.7 3.8% Depreciation & Amortisation (11.7) (9.2) 27.2% EBIT 105.3 103.5 1.7% Net underlying finance costs (6.5) (3.5) 85.7% Profit before tax 98.8 100.0 (1.2)% Underlying tax (17.7) (17.4) 1.7% Effective tax rate on underlying PBT 17.9% 17.4% +40bps Underlying pr
Slide 16: Net Debt Bridge
NET DEBT BRIDGE (240.0) (220.0) (200.0) (180.0) (160.0) (140.0) (120.0) UK & Ireland £53.2m (203.3) (44.3) py 0) a : Openingnet UK&IFCF UK&I Capex Funding for Dividends debt (pre Capex) German associate Net debt/ EBITDA continuing International 1.99x (£19.5m) (8.4) ical (11.1) 4 7A) Share purchases
Slide 17: Group Cash Flow
GROUP CASH FLOW £m 2019 pYest:4 | Working Capital: Underlying EBITDA 117.0 112.7 | * &7mincrease in inventory as Discontinued operations EBITDA (15.2) (2.9) part of Brexit planning Add back non-cash items (3.7) (3.3) |. commof payment timing Working capital (23.3) O.7 change which reversed in Capex
Slide 18: Franchisee Profitability
FRANCHISEE PROFITABILITY Mature Stores, Mature Stores, including split FY19, UK only All Stores excluding split affected stores Average store EBITDA £145.1k £151.2k Average store EBITDA margin 14.1% 14.4% * Average Franchisee enterprise level EBITDA margin 10.6% * As at half year, unable to quantify
Slide 19: UK & Ireland Performance
UK & IRELAND PERFORMANCE Pere Wild hief Executive Officer
Slide 20: UK Performance
UK PERFORMANCE £23.5m £(16.6)m £36.9m Pe £1,091.6m UK system sales +4.8% FY 2018 LFL exc Splits New Store Growth Immature Store Growth Split Territories FY 2019 * Online sales +8.6%, to 81.8% of system sales * Collection sales +5.0% to 21.2% of system sales e 9 # Domino's: THE OFFICIAL FOOD OF EVERY
Slide 21: Continued Strength in Digital
CONTINUED STRENGTH IN DIGITAL ¢ App growthcontinues * 26.6million downloads overall * 4.1million downloads in 2019 - over four times more than our two pizza competitors ; * 4.7/5rating TWESDAY * 2019 active app users +11% : * Use of Alin PPC hugely successful * PPC revenue +20%; minimal incremental
Slide 22: Good Performance of New Stores
GOOD PERFORMANCE OF NEW STORES * 29 franchised stores opened in the UK & Ireland, by 23 different —7°°°° franchisees 20,000 * 83% of UK & Ireland franchisees 15,000 have 20 stores or less 10,000 * 62% of new store openings in 2019 from this group, versus 41% 5,000 in 2018 °O 2014 2015 2016 2017 2018
Slide 23: New Product Development
NEW PRODUCT DEVELOPMENT es 9 & Dominos:
Slide 24: Corporate Stores - Strategic Rationale
CORPORATE STORES - STRATEGIC RATIONALE “Walk the Talk” Build operational literacy Develop talent “Skin in the Game” Understand and learn Innovate, share and pioneer Make a financial return Unlock London opportunities - currently significantly underpenetrated Have More Fun acquisition was also an opp
Slide 25: Corporate Stores Performance and Plans
CORPORATE STORES PERFORMANCE AND PLANS 2019 challenges * — Still learning how to optimise operations and maximise profitability + London brings significant cost challenges * 11 stores impacted by splits since 2018 2020 plans Sales & Marketing: * Collaboration with London franchisees on promotions *
Slide 26: World Class Supply Chain
WORLD CLASS SUPPLY CHAIN 2019 performance: * 99.9% accuracy and availability + Warrington supplying 457 stores * Allsites FSSC 22000 * Introduced second flour supplier to derisk supply chain * Managed Brexit uncertainty * Paragonenhanced routing and monitoring capability now live 2020 plans: * Cages
Slide 27: Summary
SUMMARY David Wild Chief Executive Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 28: Summary
SUMMARY > Solid UK and Ireland performance > Continued strength in digital > Pleased with 2019 new store performance > Confident in 2020 plans for corporate stores > World class supply chain > Focused on finding the right owners for our International businesses e 9 $ Domino's’ ee
Slide 29: Q&A
Q5A
Slide 30: YS Dominos:
YS Dominos: ) THE OFFICAL FOOD OF L EVERYTHING
Slide 31: 2020 Guidance
2020 GUIDANCE * Underlying Depreciation & Amortisation c.£12m - £14m * Underlying Effective Tax Rate c.18% * Capital expenditure £25m - £30m * Underlying Interest (excluding foreign exchange movements) c.£6m, similar level to FY19 ¢ Net debt slightly lower than FY19, excluding any cash implications
Slide 32: ROI Performance
RO! PERFORMANCE €2.0m €72.2m €0.7m €(0.9)m 21m — 761m ROl system sales +5.4% FY 2018 LFL exc Splits * Online sales +14.9% * Collection sales +10.3% * ROIAWUS €29,278 New Store Growth Immature Store Growth Split Territories FY 2019 +t 9. $ Domino's’
Slide 33: Store Numbers
STORE NUMBERS 30 Dec 2018 30 June 2019 29 Dec 2019 UK 1103 1109 1130 Franchise 1070 1074 1094 Corporate 33 35 36 ROI 50 51 54 UK & ROI total 1153 1160 1184 Switzerland 20 21 21 Norway 54 57 56 Domino’s branded 42 47 47 Dolly Dimples branded 12 10 9 Iceland 25 25 24 Sweden 9 9 13 Group 1261 1272 1298
Slide 34: 2019 Franchisee Base and New Store Openings
2019 FRANCHISEE BASE AND NEW STORE OPENINGS * 83% of UK & Ireland franchisees have 20 stores or less * 62% of new store openings in 2019 from this group, versus 41% in 2018 Franchisee base 2019 New store openings, categorised by size of 13 franchisee store estate 2 6 =0-5stores =6-10 stores 2 32 =11
Slide 35: UK & ROI LFL Sales Growth - 2018
UK & ROI LFL SALES GROWTH - 2018 £m Ql Q2 Q3 @Q4 H1 H2 FY Excluding impact of splits UKLFL 7.0% 4.7% 2.2% 4.5% 5.9% 3.4% 4.6% Ireland LFL 3.5% 1.4% 3.3% 7.5% 2.4% 5.5% 4.0% Including impact of splits UK LFL 3.9% 1.8% (0.4%) 2.0% 2.9% 0.9% 1.9% Ireland LFL 0.4% (1.4%) (0.5%) 4.8% (0.5%) 2.3% 0.9% 2 D
Slide 36: UK Sales Composition
UK SALES COMPOSITION a Sales Orders items rer Product Mix Price Orders (m) vey reer 2018 H1 2.9% 2.3% 1.5% (1.2%) 0.3% 32.2m 8.1% H2 0.9% (2.6%) 2.8% (1.7%) 2.4% 32.3m 2.3% FY 1.9% (0.2%) 2.1% (1.6%) 1.5% 64.5m 5.1% 2019 H1 1.8% (3.4%) (0.8%) 2.9% 3.0% 32.3m 0.2% H2 2.1% (0.11% (2.4)% 2.4% 2.2% 33.0
Slide 37: UK Performance: Unit Metrics
UK PERFORMANCE: UNIT METRICS Collection Delivery 10% 10% 5% l [I 5% o% all = o% | | | —_ a 5% -5% 10% -10% Qi Q2 Q3 Q4 Qi Q2 Q3 Q4 mOrder mTicket mOrder mTicket e 9, UK only, excluding splits basis gg Dom inos*
Slide 38: Corporate Stores Performance
CORPORATE STORES PERFORMANCE £m H1 2019 H2 2019 FY 2019 LFL sales growth excluding splits +4.4% (0.6)% +1.3% Total revenue 15.4 16.7 32.1 Revenue growth yoy % +40.0% +3.7% +18.5% Revenue growth yoy +£4.4m +£0.6m +£5.0m EBITDA 0.4 0.9 1.3 EBITDA growth yoy (£0.2m) (£0.4m) (£0.6m) EBITDA margin 2.6% 5
Slide 39: Non Underlying Items
NON UNDERLYING ITEMS Corporate stores impairment (18.7) Contribution to NAF and eCommerce funds (7.1) Market access fee (2.1) Amortisation of London Corporate Stores (1.0) German associate store conversion costs (2.8) Put option revaluations 9.0 Other (1.2) Total non-underlying items (23.9) Put opti
Slide 40: Group Balance Sheet
GROUP BALANCE SHEET £m 29 Dec 2019 30 Dec 2018 Intangible assets 34.5 106.7 Property, plant and equipment 84.8 107.6 Trade and other receivables 99.1 94.1 Inventory 13.0 8.4 Market access fee 71 8.9 Investments 42.9 40.8 Cash and cash equivalents 11.1 24.8 Deferred consideration 5.7 6.6 Tax assets c
Slide 41: Group Balance Sheet (Cont'd)
GROUP BALANCE SHEET (CONT'D) £m 29 Dec 2019 30 Dec 2018 Trade and other payables (95.5) (111.1) RCF (248.1) (224.5) Other loans (0.5) (3.6) Other financial liabilities (0.8) (11.8) Tax liabilities (6.9) (12.4) Provisions (15.5) (16.8) Share buyback obligation - (15.8) Liabilities held for sale (27.9
Slide 42: Group Cash Flow
GROUP CASH FLOW £m 2019 pYest:4 | Working Capital: Underlying EBITDA 117.0 112.7 | * &7mincrease in inventory as Discontinued operations EBITDA (15.2) (2.9) part of Brexit planning Add back non-cash items (3.7) (3.3) |. commof payment timing Working capital (23.3) O.7 change which reversed in Capex
Slide 43: Group Cash Flow (Cont'd)
GROUP CASH FLOW (CONT'D) £m 2019 2018 underlyingitems 92.6 63.3 Non-underlying items 1.1 (2.0) Free cash flow 33.7 61.3 Funding to German associate (2.9) (11.6) Acquisitions (2.7) (54.3) Dividends (44.3) (44.3) Share buybacks (17.4) (63.6) Cash flow movement in Net Debt (33.6) (112.5) Forex on RCF 4
Slide 44: Capex
CAPEX £m 2019 Maintenance capex 5.3 Strategic growth capex (largely new UK corporate stores) 17 E-commerce (customer funded) 8.0 Total UK & Ireland 15.0 International 8.4 Total Group 23.4 e 9 $ Domino's’ ee
Slide 45: Impact of Adoption on IFRS - UK&I Property
IMPACT OF ADOPTION ON IFRS 16 - UK&I PROPERTY IFRS 16 effective for FY20 * Current impact assessment has focussed on UK&l property based on the complexity here * Impact on UK&l equipment and the international operations (classified as discontinued operations) disclosed in due course Within the UK&I
Slide 46: Impact of Adoption on IFRS - UK&I Property
IMPACT OF ADOPTION ON IFRS 16 - UK&I PROPERTY * The adoption of IFRS 16 will have a differing impact based on the categories of store: Nature of lease payap relationsh; Commentary Accounting impact ill be recognised ‘back to back’ for leases with a g term over 12 months and a lease receivable and A
Slide 47: Impact of Adoption on IFRS - UK&I Property
IMPACT OF ADOPTION ON IFRS 16 - UK&I PROPERTY * Inestimating the present value of the lease payments, we have determined a range of discount rates based on our incremental borrowing rate, store location and property type. These range from 4.9% to 7.9% * Asaresult of the transition, certain balances
Slide 48: Impact of Adoption on IFRS - UK&I Property
IMPACT OF ADOPTION ON IFRS 16 - UK&I PROPERTY Warehouses Franchisee Corporate and other Onerous lease stores stores leased leases Lease receivable 207.4 - - - 207.4 Right-of-use asset - 9.0 1.7 - 10.7 Lease liability (207.8) (9.0) (2.0) (0.8) (219.6) Net assets / (liabilities) recognised (0.4) (0.3)
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 4 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