Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — H1 2020 Earnings Presentation
52 slides from Domino's Pizza Enterprises's earnings presentation, Feb 19, 2020
Slide 1: ASX cover letter for market presentation
Domino’s Pizza Enterprises Limited 1/485 Kingsford Smith Drive Hamilton, QLD, Australia 4007 ACN: 010 489 326 www.dominos.com.au 19 February 2020 The Manager Market Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Dear Sir Market presentation for the ha
Slide 2: Half Year Results
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Slide 3: Presenters
PRESENTERS DON MEld GROUP CEO AND MANAGING DIRECTOR RICHARD CONEY GROUP CFO ANDREW RENNIE DPE EUROPE CEO ANDRE TEN WOLDE DPE EUROPE COO STOFFEL THIJS GERMANY CEO MISJA VROOM NETHERLANDS AND BELGIUM CEO NICK KNIGHT AUSTRALIA AND NEW ZEALAND CEO JOSH KILIMNIK JAPAN CEO
Slide 4: H1 20 Actual Pre AASB 16
H1 20 Half-on-Half Half-on-Half Actual Growth % Growth Pre AASB 16 Pre AASB 16 Pre AASB 16 Network Sales $1,582.2m +$151.3m +10.6% Online Sales $1,109.8m +$175.5m +18.8% Same Store Sales Growth +4.1% Network Store Count(1) 2,596 stores +85 stores +3.3% EBITDA(2) $151.0m +$13.8m +10.0% EBIT(2) $114.9
Slide 5: Over the past five years, sales more than doubled
▪ Over the past five years, sales more than doubled and online sales more than tripled Underlying EBITDA (1) ▪ Management is pleased with a strong start to FY20, with sales and new store openings 5 Year Growth: $151.0m in line with expectations Group +151% International +246% $137.2m ▪ Online sales
Slide 6: H1 20 Actual vs 3-5 Year Outlook
3-5 Year H1 20 Actual Outlook(1) Same Store Sales Growth +4.1% +3-6% ▪ 3-5 Year Outlook (3) reaffirmed for SSS and New Store additions, as a result of continued strong performance across New Organic Store Additions +85 +7-9% the Group and all key measures being on track in H1 20 Net CAPEX(2) $49.1m
Slide 7: H1 20 Network Sales, Organic New Stores, EBIT and CAPEX
H1 20 Network Sales H1 20 Organic New Stores H1 20 Organic New Stores Growth +6 $620.7m EU +3.4% $613.2m +37 ANZ +0.7% +42 $348.3m JP +7.6% EU ANZ JP EU ANZ JP (1) H1 20 EBIT H1 20 Group CAPEX $9.8m CAPEX which Recycles $37.0m Digital CAPEX $57.7m $7.2m Stay in Business CAPEX ($6.6m) Other Investmen
Slide 8: Group: Network Sales growth +10.6%, SSS +4.1%
Total Network Sales Online Sales H115 H116 H117 H118 H119 H120 H115 H116 H117 H118 H119 H120 +10.6% +18.8% +14.6% +17.7% +26.8% +7.1% +20.5% $1,582.2m +37.3% $1,109.8m +28.5% $1,430.9m +45.3% $934.3m +24.1% $1,166.1m $1,248.9m +42.0% $794.0m $658.9m $919.6m $480.0m $715.4m $330.4m +10.3% +9.4% +8.6%
Slide 9: Group: +85 new stores added to the network
Network Store Count Existing and New Network Sales H115 H116 H117 H118 H119 H120 H115 H116 H117 H118 H119 H120 2,596 2,454 2,193 77 85 2,048 $1,582.2m 76 70 1,580 $1,430.9m 1,422 92 80 $1,248.9m $463.6m $1,166.1m $362.0m 2,377 2,511 1,972 2,123 $269.6m $919.6m $193.6m 1,330 1,500 $715.4m $102.4m $1,
Slide 10: H1 20 Actual and H2 20 Trading Update
H1 20 H2 20 FY20 YTD Actual Trading Update (1) Trading Update(2) Network Sales Growth +10.6% 12.1% +10.7% Same Store Sales Growth +4.1% +6.3% +4.6% New Organic Store Additions +85 +11 +96 ▪ Strong Network Sales and SSS growth for the Group in H1 20, including continuing Group-leading performance in
Slide 11: Group Financials
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Slide 12: Strong Network Sales growth across the Group
H1 18 H1 19 H1 20 +/(-) H1 19 Underlying Underlying Underlying Underlying(1) Pre AASB 16 $ mil $ mil $ mil % Network Sales 1,248.9 1,430.9 1,582.2 10.6% ▪ Strong Network Sales growth across the Group (+$151.3m) Revenue 567.6 702.0 905.8 29.0% ▪ Revenue growth benefitted from structural changes made
Slide 13: H1 19 and H1 20 Statutory to Underlying
H1 19 H1 19 H1 19 H1 20 H1 20 H1 20 H1 20 +/(-) H1 19 Non-recurring AASB 16 Non-recurring Underlying Statutory Underlying Statutory Underlying(1) Costs Adjustments Costs Pre AASB 16 $ mil $ mil $ mil $ mil $ mil $ mil $ mil % Network Sales 1,430.9 1,430.9 1,582.2 1,582.2 10.6% Revenue 702.0 702.0 90
Slide 14: Group EBITDA growth +10.0%
H1 19 H1 19 H1 19 H1 20 +/(-)(1)H1 19 Underlying Underlying Underlying Underlying Reallocated(1) Reallocated Pre AASB 16 Reallocated ▪ Group EBITDA growth +10.0% $ mil $ mil $ mil $ mil % (EBITDA growth +6.8% in constant currency) Revenue Group FX translation benefit $4.4m Europe 263.8 263.8 281.0 6
Slide 15: Non-Recurring Costs
Europe H1 20 ▪ $3.4m – Germany conversion and integration costs relating to the Non-Recurring Hallo Pizza acquisition Costs ▪ $0.8m – Denmark integration, establishment and set up costs $ mil ▪ $0.4m – France conversion of Pizza Sprint stores to Domino’s and Europe Non-recurring Costs 4.6 legal disp
Slide 16: Working capital improvement $19.3m
H1 19 H1 20 H1 20 H1 20 AASB 16 Statutory EBITDA BASED CASHFLOW Underlying Statutory Adjustments Pre AASB 16 Comments $ mil $ mil $ mil $ mil Underlying EBITDA 137.2 176.6 (25.6) 151.0 Change in working capital 3.9 19.3 19.3 ▪ Working capital improvement $19.3m, seasonal Profit on sale of non-curren
Slide 17: H1 20 Net CAPEX $49.1m
▪ H1 20 Net CAPEX $49.1m H1 20 Group CAPEX ▪ CAPEX which Recycles $21.9m ‒ Gross CAPEX $50.6m, including investment in new Corporate stores (primarily Japan), Franchisee loans for new and existing stores and $9.8m Franchisee acquisitions (predominantly Europe and ANZ) ‒ Cash inflows $28.7m, arising
Slide 18: The Group adopted AASB 16 Leases on 1 July 2019
FY19 H1 20 H1 20 H1 20 +/(-) AASB 16 Statutory FY19 Statutory Statutory Adjustments Pre AASB 16 Statutory $ mil $ mil $ mil $ mil $ mil Cash & cash equivalents 101.4 126.9 - 126.9 25.5 ▪ The Group adopted AASB 16 Leases on 1 July 2019. The opening Trade and other receivables 93.9 144.9 - 144.9 51.0
Slide 19: ROCE remains strong
(2) FY19 H1 20 Underlying Underlying Pre AASB 16 ROCE remains strong; slightly offset by investment in Return on Capital Employed 19.2% 18.7% ▪ international markets and Corporate stores, with earnings to be realised in future periods Interest Coverage Ratio 20.2x 23.9x Net Debt reduction $37.4m, du
Slide 20: Underlying EPS 84.5c, +6.1% on H1 19
165.0 152.8 ▪ Underlying EPS 84.5c, +6.1% on H1 19 133.6 ▪ Underlying EPS 3 year CAGR +7.8% 85.3 ▪ Underlying EPS 10 year CAGR +21.3% 81.5 105.4 66.2 74.2 53.1 54.6 40.5 41.5 37.2 84.5 29.9 79.6 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
Slide 21: Europe
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Slide 22: H1 20 has been a period of strong growth for Europe
▪ H1 20 has been a period of strong growth for Europe, with positive sales (1) Underlying EBITDA momentum across all markets, growth in store profitability and store count 5 Year Growth: €29.4m Europe +492% ▪ H1 20 Network Sales +9.4%, +€32.9m (+5.0% on a same-store basis) €25.5m ▪ H1 20 Online Sale
Slide 23: Europe: Network Sales, Online Sales, Store Count
Total Network Sales Online Sales H115 H116 H117 H118 H119 H120 H115 H116 H117 H118 H119 H120 +9.4% +26.3% +17.4% +12.6% +20.6% +64.7% €382.8m +51.3% €270.4m €349.9m +21.7% €298.0m +71.9% €214.0m +14.1% €264.6m +61.8% €177.5m +147.4% €117.3m €132.1m €160.7m €68.2m +7.5% +7.5% +7.7% 70.6% +5.0% 59.6%
Slide 24: Germany: Following the successful integration of our acquisitions
▪ Following the successful integration of our acquisitions, Domino’s Germany has now stepped up performance 324 TOTAL STORES H1 20 +5 NEW STORES ▪ Germany’s first national television campaigns started in AVERAGE NUMBER OF STORES PER September, which have been a key driver of sales FRANCHISEE: 1.8 (+
Slide 25: Netherlands and Belgium: Strong sales growth in Belgium
▪ Strong sales growth in Belgium, with the Netherlands 386 TOTAL STORES H1 20 increasing delivery counts and sales, despite a lift in VAT +15 NEW STORES (+300 bps from January 19) AVERAGE NUMBER OF STORES PER FRANCHISEE: ▪ Loyalty program now live in the Netherlands, designed to 2.5 increase frequen
Slide 26: France: Very pleasing result in this growth market
▪ Very pleasing result in this growth market 407 TOTAL STORES H1 20 +12 NEW STORES ▪ Strategic decisions made in FY19 have delivered shared performance improvements, for both our Franchisees and DPE AVERAGE NUMBER OF STORES PER FRANCHISEE: 2.9 (-0.2) ▪ Stores with access to order aggregators are see
Slide 27: Denmark: Prudent approach to building out the market
▪ Management is taking a prudent approach to building out the market and the brand: Welcome to the Real Domino’s 6 TOTAL STORES H1 20 +5 NEW STORES ▪ 5 organic new stores opened in H1 20, with a focus on opening stores in and around Copenhagen POPULATION: 5.8M 960,000+ ▪ High tempo of training of ne
Slide 28: Management forecasting H2 20 will deliver another strong half
Management are forecasting that H2 20 will deliver another half of strong performance across the region, through: strong sales, increased Franchisee engagement and through our significant pipeline of new store openings UEFA Euro 2020 is expected to provide a one-off boost to sales, however it is unl
Slide 29: Australia & New Zealand
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Slide 30: ANZ performance remains positive
▪ ANZ performance remains positive; growth was slowed by short-term Underlying EBITDA (2) operational decisions, which are being addressed 5 Year Growth: ANZ +104% ▪ H1 20 Network Sales +3.5%, +$20.7m (+3.0% on a same-store basis) $70.2m $71.4m $64.1m ▪ H1 20 Online Sales +6.4%, +$26.6m, with partic
Slide 31: ANZ: Network Sales, Online Sales, Store Count
Total Network Sales Online Sales H115 H116 H117 H118 H119 H120 H115 H116 H117 H118 H119 H120 80 000 000 0 +6.2% +3.5% +6.4% +18.4% +7.1% +8.4% 60 000 000 0 +23.9% +12.1% +15.8% $613.2m +32.9% $557.8m $592.5m $444.2m 40 000 000 0 $521.0m +34.5% $385.3m $417.6m $439.9m +17.0% $343.8m $355.0m $258.7m 2
Slide 32: Management has reversed the short-term impact of changes
▪ Management has reversed the short-term impact of changes to 831 TOTAL STORES H1 20 Value Range pricing +6 NEW STORES AVERAGE NUMBER OF STORES PER ▪ National return of Value offering in carry-out from December is FRANCHISEE: returning high-frequency, price-sensitive, customers, combined 1.9 (-0.1)
Slide 33: Following recent marketing activity changes
▪ Following recent marketing activity changes, Management are very pleased with sales, with recent momentum being above our 3-5 year outlook for ANZ of +3-6% SSS ▪ Consistent with other DPE regions, Domino’s Australia will continue to compete within the aggregator platforms using our strengths: valu
Slide 34: Japan
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Slide 35: Continued strong performance for Domino's Japan
▪ Continued strong performance for Domino’s Japan, with strong sales growing (1) Underlying EBITDA category, underpinning record store openings and profit growth 5 Year Growth: Japan +65% ¥2.8bn ▪ H1 20 Network Sales +12.2%, +¥2,809.4m (+6.1% on a same-store basis) ¥2.6bn ¥2.4bn ¥2.5bn ▪ H1 20 Onlin
Slide 36: Japan: Network Sales, Online Sales, Store Count
Total Network Sales Online Sales H115 H116 H117 H118 H119 H120 H115 H116 H117 H118 H119 H120 +17.1% +12.2% +16.9% +26.0% +0.3% +1.4% +9.0% +6.5% +38.4% +11.4% ¥16.8b +74.3% ¥25.7b +85.0% ¥14.3b ¥20.7b ¥20.7b ¥21.0b ¥22.9b ¥12.3b ¥10.3b ¥11.5b ¥16.4b ¥7.5b +6.1% +4.8% +2.2% 62.6% 65.3% 55.5% 58.3% 50
Slide 37: Increased sales have provided for additional marketing activity
642 TOTAL STORES H1 20 +42 NEW STORES ▪ Increased sales have provided for additional marketing activity, including: online, television and in owned media AVERAGE NUMBER OF STORES PER channels: FRANCHISEE: 2.4 (+0.2) ‒ Online marketing, including through LINE social network, now with weekly activity,
Slide 38: Management intends to continue to compound strong sales growth
▪ Management intends to continue to compound strong sales growth through focus on Barbell Strategy, offering choice to customers ▪ Additional store openings in H2 20 will allow for increased investment in marketing and technology development ▪ Local store marketing (including print) and Domino’s Cou
Slide 39: Outlook
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Slide 40: Global: Historical Store Count and Future Guidance
Historical Store Count and Future Guidance Historical EBITDA $m 5,050 $151.0m $137.2m $116.2m $122.4m 2,596 $87.0m 2,454 2,048 2,193 $60.0m 1,422 1,580 H115 H116 H117 H118 H119 H120 FY25-FY30 H115 H116 H117 H118 H119 H120 Europe ANZ Japan Europe ANZ Japan Global ▪ Group future outlook 5,050 stores,
Slide 41: 3-5 Year Outlook
▪ 3-5 Year Outlook reaffirmed for SSS and New Store additions, as 3-5 Year a result of continued strong performance across the Group and Outlook all key measures being on track in H1 20 Annual Same Store Sales Growth +3-6% ▪ Due to investment in new stores, Franchisee acquisitions and new Netherland
Slide 42: We do the right thing, because it's the right thing to do
WE DO THE RIGHT THING, BECAUSE IT’S THE RIGHT THING TO DO – OUR VALUES ▪ Our goal is to actively work to make our communities better for all ▪ Significant projects are ongoing to improve our impact on our communities including: ▪ Initiatives to reduce energy usage: ➢ The increased usage of electric
Slide 43: Management looks forward to the next stage of our future performance
▪ Management looks forward to the next stage of our future performance with an experienced Management team delivering against a proven strategy ▪ Japan performance continues to be strong, with significant investment in stores made by both DPE and our Franchisees ▪ H1 20 Network Sales and Online Sale
Slide 44: High Volume Mentality strategy is meeting increasing customer demand
▪ Domino’s High Volume Mentality strategy is meeting an increasing customer demand globally for affordable, high-quality food, delivered fast and safely. Continued execution of this strategy is a shared focus of both DPE and its Franchisees ▪ As a result of increased Franchisee engagement, continued
Slide 45: Appendices
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Slide 46: Key dates: dividend record and payment dates
▪ 26 February, 2020 – Dividend record date ▪ 13 March, 2020 – Dividend payment date ▪ 20-22 April, 2020 – European site tours ▪ May, 2020 – CEOs webcast 45
Slide 47: Segmentation of Global Functions
Segmentation of Global Functions Historically, ANZ and Europe have incurred corporate costs for the Board of Directors and corporate costs associated with the following Global Functions: CEO, CFO, General Counsel & Company Secretary, Investor Relations, Security and Information Technology As DPE con
Slide 48: Group – 85 new store additions
H1 18 FY 18 H1 19 FY 19 H1 20 European stores Franchised stores 825 991 1,012 1,028 1,042 Corporate stores 66 63 62 69 81 European Network Stores 891 1,054 1,074 1,097 1,123 Net stores added in period 26 189 20 43 26 ANZ stores Franchised stores 733 733 738 716 713 Corporate stores 66 86 92 109 118
Slide 49: Summary: ROCE and Interest Coverage
FY19 H1 20 FY19 H1 20 Return on Capital Employed Underlying Interest Coverage Underlying Underlying Underlying Pre AASB 16 Pre AASB 16 $ mil $ mil $ mil $ mil 12 month rolling EBIT 220.8 227.4 EBITDA 282.4 151.0 Interest (14.0) (6.3) Total Assets(1) 1,370.4 1,490.1 (1) Total Current Liabilities (223
Slide 50: Summary: Cash Conversion and Net Debt
H1 19 H1 20 FY19 H1 20 Cash Conversion Underlying Net Debt Underlying Underlying Underlying Pre AASB 16 Pre AASB 16 Operating cash flow before interest & tax 139.8 158.4 $ mil $ mil Underlying EBITDA 137.2 151.0 Non-current borrowings 646.1 634.3 Cash conversion 101.9% 104.9% Current borrowings 5.4
Slide 51: Summary: AASB 16 Leases adoption
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 Impact ▪ Recognition of the following
Slide 52: Forward looking statements disclaimer
▪ 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
Domino's Pizza Enterprises — H1 2020 Earnings Presentation on 6ix