Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Investor Day (2023)
20 slides from Yum China's investor day presentation, 2023
Slide 1: Andy Yeung, Chief Financial Officer
Andy Yeung Chief Financial Officer
Slide 2: Cautionary Statements
Cautionary Statements Forward-Looking Statements. This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend all forward-looking statements to be covered by the safe harbor
Slide 3: Recap: Emerged from Pandemic Stronger & Better Positioned for Growth
Recap Emerged from Pandemic: Stronger & Better Positioned for Growth 2023 1H vs 2022 1H vs 2019 1H Store Count1 13,602 +12% +55% Total Revenues2 $5.6bn +16% +26% Operating Profit2 $673mn +147% +33% Restaurant Margin 18.3% +530bps +160bps 1. Includes the consolidation of Huang Ji Huang from 2020 2. G
Slide 4: RGM 2.0 - Our Focus is Driving Growth
RGM 2.0 - Our Focus is Driving Growth Growth Resilience Moat Footprint Growth | Sales Growth | Profit Growth 4
Slide 5: Accelerating Network Expansion - Aiming for 20,000 Stores by 2026
Footprint Growth Accelerating Network Expansion - Aiming for 20,000 Stores by 2026 Total Stores Double-digit CAGR Key Drivers 20,000 China’s economic growth Abundant white space 13,602 Flexible store formats Franchise expansion Multi-brand portfolio 2023 1H 2026 5
Slide 6: Expanding to More Cities and Increasing Store Density
Footprint Growth Expanding to More Cities and Increasing Store Density More Cities Higher Density No. of cities and towns Total addressable Total KFC & Pizza Hut stores per mn people2 penetrated in China1 cities and towns 2019 2023 1H 3,000+ 29 1,900+ 21 17 13 650+ 4 5 Jiangxi Jiangsu Shanghai 1. By
Slide 7: Maintaining Strong New Store Payback Period and Unit Economics
Footprint Growth Maintaining Strong New Store Payback Period and Unit Economics Rolling 12 Months New Store Economics Total Smaller Models2 Total Satellite Store (per store)1 Average Pre-tax ~2 years ~2 years ~3 years ~2 years Cash Payback Period3 Cash Investment4 ~1.8 ~1.5 ~1.4 ~1.0 (RMB mn) Annual
Slide 8: Driving Same Store Sales Growth with Multiple Initiatives
Sales Growth Driving Same Store Sales Growth with Multiple Initiatives Pre-Pandemic Same Store Sales Growth Food Innovations Brand Engagement YoY % 1 New products and Signature campaigns categories Collaborations with 4% Wider price range games and toys 3% Same Store Sales Growth Average ~2%
Slide 9: Investing with Discipline to Develop Future Growth Engines
Sales Growth Investing with Discipline to Develop Future Growth Engines Western Catering Brands Chinese Dining Business Unit 85% YoY Revenue Growth 2023 1H Profitable in 2023 1H ~1,000 Emerging Brands Stores as of 2023 1H 9
Slide 10: Rebasing Cost Structure to Enhance Resilience and Profitability
Profit Growth Rebasing Cost Structure to Enhance Resilience and Profitability Key Initiatives Top 3 Fixed Costs1 per Store Restaurant Margin Labor cost structure: Store management team sharing 20-25% 160bps lower Labor productivity: 2023 1H vs 2019 1H Tech-enabled operations Depreciation & amortizat
Slide 11: Target to Maintain and Gradually Improve Margins
Profit Growth Target to Maintain and Gradually Improve Margins Long Term Long Term Margin Improvement Potential Challenges Commodity Inflation Maintain Enhance Lower Drive Wage Inflation Flattish Labor Occupancy G&A Workforce Availability COS Productivity & Other Leverage 11
Slide 12: Fueling Growth and Return to Shareholders with Strong Cash Flows
Capital Allocation Fueling Growth and Return to Shareholders with Strong Cash Flows Strong Operating Cash Flows Priorities for Capital Allocation ($ mn) 1,4131 1 Operational Needs & Contingency 1,114 1,131 924 2 Organic Growth (Capex) 2020 2021 2022 2023 1H 3 Strategic Investments 89% 85% 110% 100%
Slide 13: Investing $3.5-5bn to Drive Organic Growth and Strengthen Competitive Moat
Capital Allocation Investing $3.5-5bn to Drive Organic Growth and Strengthen Competitive Moat over the Next 3 Years 2022-2023E 2024E-2026E Total Capital Expenditure1 $1.4-1.6bn $3.5-5bn New stores Expanding to 20,000 stores by 2026 Store Network $2.3-3bn Store remodeling Keeping stores fresh
Slide 14: Investing Strategically to Drive Growth and Fortify Moat
Capital Allocation Investing Strategically to Drive Growth and Fortify Moat Joint Ventures Hangzhou JV Suzhou JV Wuxi JV Consolidation New Brands Development / Acquisition Eco-system Partners Investment 14
Slide 15: Committed to Return Excess Cash to Shareholders
Capital Allocation Committed to Return Excess Cash to Shareholders ~$2.5 bn Cash Return to Shareholders Since Spin-off1 ($ mn) Share Repurchases Dividends 668 600-800 473 442 278 166 102 2017 2018 2019 2020 2021 2022 2023E 1. From Jan 1, 2017 to Aug 31, 2023 15
Slide 16: Recovery Holds Steady Despite Short Term Economic Headwinds
Outlook Recovery Holds Steady Despite Short Term Economic Headwinds China Consumer Price Index 2.1% New Normal in 2023 1.0% 0.7% 0.1% 0.2% 0.0% 0.1% -0.3% Same Store Sales Jan Feb Mar Apr May Jun Jul Aug 2023E vs 2019 2023 China Export Value1 YoY% 11.4% 7.3% ~90% -2.7% -7.1% -11.6% -12.4% -14.5% -8.
Slide 17: 2023 Outlook
Outlook 2023 Outlook Net new store target: 1,100-1,300 1,400-1,600 Capital expenditure: $700-900mn 17
Slide 18: Appendix
Appendix 18
Slide 19: Operating Cash Flows Conversions
Operating Cash Flows Conversions ($ mn) 2020 2021 2022 2023 1H Net Income – Yum China Holdings, Inc. 784 990 442 486 Net Income- noncontrolling interests 29 33 36 41 Equity in net (earnings) losses from equity method investments - 2 - Income tax provision 295 369 207 196 Interest income, net -43 -60
Slide 20: 2023 Yum China Investor Day
2023 YUM CHINA 2 0 INVESTOR DAY . ‘ QD verrchina @ ® re @ : + tAvATIN $255 )L YumChina