Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2009 Earnings Presentation
51 slides from Domino's Pizza's earnings presentation, February 2010
Slide 1: Preliminary Results for the 52 weeks ended 27 December 2009
Preliminary Results for the 52 weeks ended 27 December 2009
Slide 2: The Team
The Team Chris Moore Chief Executive Officer Lee Ginsberg Chief Financial Officer 2
Slide 3: Financial Highlights for 2009
Financial Highlights for 2009 40% Another record year 30% +31.4% 20% +27.8% +26.0% 10% +16.0% +8.4% 0% LfL sales growth System sales Diluted EPS pre- PBT pre- Total dividend exceptionals * exceptionals * pence per share 3 * Accelerated LTIP charges and impairment + other exceptionals
Slide 4: Other 2009 Highlights
Other 2009 Highlights • Of the circa 8,900 Domino’s stores worldwide, our market has eight of the Top 10 in sales • Of the circa 3,950 International stores, our market has 20 of the Top 20 in sales • Last year we delivered to 3.4 million UK households, 13% of all homes (2008: 2.85m) • 68 stores had
Slide 5: Profit and Loss (Pre-exceptionals)
Profit and Loss (Pre-exceptionals) 52 weeks ended 52 weeks ended % increase 27 December 2009 28 December 2008 £’000 £’000 System sales 406,924 350,771 16.0 Operating Profit 30,008 23,739 26.4 Net interest (143) (378) 62.2 Profit before tax 29,865 23,361 27.8 Taxation (8,291) (6,546) - Profit after t
Slide 6: Profit and Loss (exceptional items)
Profit and Loss (exceptional items) 52 weeks ended 52 weeks ended 27 December 2009 28 December 2008 £’000 £’000 Operating exceptionals - Accelerated LTIP charge (980) - - Restructuring/reorganisation costs (264) (54) - Impairment – commissary (2,706) - (3,950) (54) Non-operating exceptionals - Profi
Slide 7: Balance Sheet
Balance Sheet At 27 December 2009 At 28 December 2008 £’000 £’000 Current Assets: At 27 Dec At 28 Dec 2009 2008 Non-current assets 78,514 27,660 £’000 £’000 Inventories 2,735 2,542 Current assets 41,129 35,784 Receivables 12,514 13,650 Investment in Non-current assets finance leases 1,745 858 held f
Slide 8: Statement of Changes in Equity
Statement of Changes in Equity At 27 December At 28 December 2009 2008 £’000 £’000 At beginning of year 12,780 9,897 Proceeds from share issue 2,132 653 Treasury shares held by EBT - (4,308) Share buybacks (7,624) (3,783) Profit for year 33,484 15,664 Tax credit/(charge) on employee share options 44
Slide 9: Cash Flow Statement
Cash Flow Statement 52 weeks ended 52 weeks ended 27 December 2009 28 December 2008 £’000 £’000 Profit before taxation 40,968 22,149 Excess of fair value of assets acquired on consideration (15,053) - Impairment 2,706 - Net finance costs 360 378 Share of post tax profits of associates (553) (187) Am
Slide 10: Analysis of Borrowings
Analysis of Borrowings * At 27 Dec 2009 At 28 Dec 2008 £’000 £’000 Cash at bank 23,997 18,602 Revolving credit facilities (25,000) (12,300) Net Cash (1,003) 6,302 DP Capital (2,703) (2,424) EBT loan (12,035) (12,035) Other - (17) Adjusted net debt (15,741) (8,174) Adjusted net debt/EBITDA 0.5 0.3 *
Slide 11: Available Debt Facilities
Available Debt Facilities Expiry Utilised at Undrawn at Facility Date 27 Dec 09 27 Dec 09 Term Purpose £’m £’m £’m 25.0 * 20 Dec 2012 25.0 - 5 years Multi-purpose 5.0 31 Dec 2013 2.7 2.3 5 years DP Capital 13.0 * 31 Jan 2014 12.0 1.0 7 years EBT 43.0 39.7 3.3 Cash and cash equivalents at 27 Dec 2009
Slide 12: Cash Returned to Shareholders
Cash Returned to Shareholders 5 year total 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000 £’000 Profit after tax 68,720 21,574 * 15,664 13,239 9,996 8,247 Share buybacks 38,135 7,623 3,783 8,346 10,161 8,222 Dividends 31,720 10,466 8,035 5,816 4,234 3,169 Total returned 69,855 18,089 11,818
Slide 13: Diluted Earnings Per Share
Diluted Earnings Per Share * Compound increase of 27% 26% over last five years 15 14 29% 13 12 39% 11 13.49 10 27% Pence 9 8 18% 10.71 7 6 8.33 5 4 5.99 3 4.72 2 1 0 2005 2006 2007 2008 2009 Diluted earnings per share Linear (Diluted earnings per share) * pre-exceptionals 13
Slide 14: Dividends Per Share
Dividends Per Share * 31% 9 Compound increase of 36% over last five years 8 34% 7 6 44% 7.75 Pence 5 35% 5.90 4 38% 3 4.40 2 3.06 1 2.27 0 2005 2006 2007 2008 2009 Dividends per share Linear (Dividends per share) * All figures adjusted for share split 14
Slide 15: System Sales – The Growth Driver
450 System Sales – The Growth Driver 35.00 19% compound growth in system sales £406.9 400 29% compound growth in PBT 30.00 £350.8 £29.9 350 25.00 £296.3 300 £23.4 System Sales £’m PBT * £’m 20.00 250 £240.1 £18.7 £200.7 15.00 200 £14.1 £10.9 10.00 150 100 5.00 2005 2006 2007 2008 2009 System Sales P
Slide 16: Cumulative Like-for-Like Sales Growth
Cumulative Like-for-Like Sales Growth 8.4% growth in 2009 30.00% 12.8% 13.5% 25.00% 11.9% 9.7% 9.30% 9.70% 20.00% 3.6% 3.1% 8.9% 11.2% 15.00% 7.1% 3.0% 10.00% 5.00% 0.00% 1 2 3 4 5 6 7 8 9 10 11 12 2008 % increase 2009 % increase 16
Slide 17: Key Drivers of Like-for-Like Growth
Key Drivers of Like-for-Like Growth 2007 Constant Mature Store Population 45 £19.00 16.0% 15.3% £18.21 £18.50 £18.06 15.0% 40 35.2 £18.00 34.5 34.5 14.0% £17.50 13.1% 35 £16.99 £17.00 13.0% 12.1% 30 £16.50 12.0% 11% £16.00 11.0% 25 £15.50 £15.00 10.0% 20 2007 2008 2009 2007 2008 2009 2007 2008 2009
Slide 18: Two for Tuesday
Two for Tuesday Attracting new customers - from 1,700 to 4,800 a week 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 18
Slide 19: Growth in Households Served
Growth in Households Served We delivered to 3.4 million homes in 2009 4,000,000 3,500,000 3,000,000 Households Served 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2007 2008 2009 HHs served by '07 Mature Stores All HHs served 19
Slide 20: More Advertising Fire Power
More Advertising Fire Power •Total System spent approx. £36.5m on marketing • National Ad Fund of £20m (2008: £18m) • Total LSM spend £16.5m (2008: £14m) •Lower costs across most media, particularly TV • Domino’s taking maximum advantage of reduced media rates • Spent 17% more in 2009 on TV = £441,3
Slide 21: TV Sponsorship
TV Sponsorship • Britain’s Got Talent - three year audience delivery completed in two years • Delivered almost £5m of additional (free) media value • BGT final - the biggest show on TV in the last five years 21
Slide 22: Key Drivers of Like-for-Like Sales Growth: E-commerce
Key Drivers of Like-for-Like Sales Growth E-commerce: 40% increase in online sales £100 30% 27.8% Average ticket 20% higher than regular orders 23.3% £78.5m 25% £80 20% £60 16.1% £55.9m 15% 12.5% £’m £40 10.4% £32.2m 10% £20.1m £20 £13.9m 5% £0 0% 2005 2006 2007 2008 2009 22 e-commerce net sales (£)
Slide 23: E-commerce Drivers
E-commerce Drivers • Increase of 29% in e-commerce marketing • iPhone ordering available with dedicated app coming soon • Increasing focus on Social Media applications 23
Slide 24: Key Growth Drivers: Service
Key Growth Drivers: Service Mature Store Average Delivery Time: 23 minutes Continuous improvement: % OTD <15 minutes 86% 84% 82% 80% 78% 76% 74% 72% 70% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 2009 24
Slide 25: The Competition
The Competition New openings in 2009 End of year store count Net sales Domino’s Pizza 55 608 £407m Pizza Hut (delivery) * 6 264 £110m Papa John’s* 12 128 £40m Perfect Pizza* 1 110 £19m Others* n/a 2000 £310m TOTAL 74 3110 £886m * company estimates - includes estimates for Ireland where applicable 25
Slide 26: New Store Openings
New Store Openings 608 600 553 550 55 Number of stores at year end 501 52 500 451 450 50 407 400 46 350 50 300 250 200 2005 2006 2007 2008 2009 (0) (2) (0) (0) (0) ( ) = no. of closures 26
Slide 27: Store Level Economics
Store Level Economics Mature Stores 2008 2009 Variance % Average Weekly Sales £13,000 £14,089 8.4% (AWUS) Annual Sales £676,001 £732,605 8.4% Average £93,288 £115,019 23.3% EBITDA £ EBITDA % 13.8% 15.7% 27
Slide 28: Franchisee Appetite for Growth in 2009
Franchisee Appetite for Growth in 2009 • Considerable internal and external demand • 2009 success builds confidence for 2010 • Store:Franchisee ratio now at 4.5:1 (2008: 4.2:1) • 7% increase in franchise enquiries (3,604) • 18 new franchisees • 11 opened new stores • 7 purchased existing stores • St
Slide 29: Store Roll-out - Taking it up a Gear
Store Roll-out - Taking it up a Gear • Now targeting a run-rate of 55 openings a year • Strong openings in smaller territories • Continued gradual improvement in property environment • As at February 9th, 71 stores in pipeline (vs.67 LY) • Potential new opportunities 29
Slide 30: Commissary Update
Commissary Update • Penrith expansion completed in May 2009 • Circa £5m spend on time and on budget • Doubled capacity • Automated process of cooling dough • Spiral chiller • Improved quality and life of doughball • Supporting current capacity peaks in system 30
Slide 31: Commissary Update (cont.)
Commissary Update (cont.) • New West Ashland commissary • Capacity to service 500 stores at build out volumes • Fabric of building and plant completed August 2009 • Production equipment and white wall structures being installed •Tray wash, mixer, spiral chillers completed •Dough placement and refrig
Slide 32: Commissary Update (cont.)
Commissary Update (cont.) •Trial production during Quarter 2 •Extensive testing of product and facility •On track for opening end Quarter 2 •Total spend of £28m •In line with previous guidance WORLD CLASS FACILITY 32
Slide 33: Commissary Update (cont.)
Commissary Update (cont.) • New West Ashland commissary •Processes substantially automated •Tray washing, dough making, dough placement, dough cooling •Sizeable production efficiencies •Guidance on opening of facility –Increasing benefits in future –Partially offset by incremental depreciation and u
Slide 34: Where it all began…
Where it all began… WEST ASHLAND: 2010 - KINGSTON: 1997 - 2010 TONGWELL: 1985 -1997
Slide 35: New West Ashland Commissary – Progress (cont.)
New West Ashland Commissary – Progress (cont.) 35
Slide 36: New West Ashland Commissary – Progress (cont.)
New West Ashland Commissary – Progress (cont.) 36
Slide 37: New West Ashland Commissary – Progress (cont.)
New West Ashland Commissary – Progress (cont.) 37
Slide 38: New West Ashland Commissary – Progress (cont.)
New West Ashland Commissary – Progress (cont.) 38
Slide 39: New West Ashland Commissary – Progress (cont.)
New West Ashland Commissary – Progress (cont.) 39
Slide 40: Commissary Update (cont.)
Commissary Update (cont.) • Future developments to support 1,200 stores •Irish commissary expansion •Additional space at current facility •Previously anticipated £7m capital spend in 2010 • Deferred to 2012/13 •Further medium size commissary in UK •Estimated spend of circa £15m in 2013/2014 •Resilie
Slide 41: Commissary Update (cont.)
Commissary Update (cont.) •Sale of existing Milton Keynes commissary •Towards end of 2011 •Value depends on planning •New Head Office build •On new West Ashland commissary site •Total spend of circa £7.5m • £3.0m in 2010 • £4.5m in 2011 41
Slide 42: Operational Gearing Driving Profits
Operational Gearing Driving Profits • Strong growth in commissary gross margins • Driven by: • Food margins • Purchasing economies of scale + supply chain re-engineering • Volume benefits from Two for Tuesday • Production efficiencies • Labour benefits • Depreciation • Lower distribution costs • Mor
Slide 43: 2010 Food + Other Cost Outlook
2010 Food + Other Cost Outlook • Strategy to enter into longer term contracts • Price stability to franchisees • Certainty for menu pricing • 6 new campaigns annually • 300m leaflets printed ahead of new launches • 2010 outlook • Circa 65% of food basket locked in • Chicken, meats, flour, boxes • Pr
Slide 44: Current Trading and Prospects
Current Trading and Prospects • Exceptional start to year in first six weeks of 2010 • Like-for-like sales up 11% (2009: 15.0%) despite the snow in Week 2 • New record for like-for-like weekly sales in Week 5 - £18k • New international store record in Week 5: £86,182 • Challenging comparatives for b
Slide 45: Appendices
APPENDICES APPENDIX 1 The Financial Model at 2018 (Pages A-1 – A-2) APPENDIX 2 The Franchisee Model (Page A-3 – A-5)
Slide 46: The Financial Model at 2018
The Financial Model at 2018 2001 2006 2007 2008 2009 At 2020* No. of stores 237 451 501 553 608 1,200 - 55 openings p.a. AWUS growth at 3% p.a. £8,422 £11,347 £12,539 £13,493 £14,089 £19,502 System sales £ 98m £ 240m £ 296m £ 351m £407m £ 1,217m Profit before tax** £ 2.9m £ 14.2m £ 18.7m £23.4m £29.
Slide 47: The Financial Model at 2018 (cont.)
The Financial Model at 2018 (cont.) AT LEAST 10 YEARS OF CASH GENERATIVE ORGANIC GROWTH 2007 2008 2009 At 2020 * • PBT £18.7m £23.4m £29.9m £146.0m • Share buybacks *** • Average no. of shares in issue 158.0m 156.9m 159.9m 128.0m • Diluted EPS** - pence 8.4p 10.71p 13.49p 81.0p - CAGR 19% p.a. • Div
Slide 48: The Franchisee Model
The Franchisee Model 2009 average store cost to an existing franchisee was: £ Store construction costs 155,000 (range £115k - £190k) Acquisition and legal costs 15,000 (range £9k - £20k) 170,000 Franchisee fee 13,000 (range £3,750 - £15k) Project management fee: - Acquisition fee 5,000 (range £1,500
Slide 49: The Franchisee Model (cont.)
The Franchisee Model (cont.) 52 weeks ended 52 weeks ended 27 December 2009 28 December 2008 % variance £’000 £’000 Average sales (AWUS) £ 14,089 £ 13,000 + 8.4% System sales £732,605 £676,001 + 8.4% EBITDA £115,019 £ 93,288 +23.3% + £21,731 EBITDA % 15.7% 13.8% COMPELLING STORE LEVEL ECONOMICS A-4
Slide 50: The Franchisee Model (cont.)
The Franchisee Model (cont.) • Average mature store system sales £ 732,605 - £14,089 AWUS in 2009 • Average mature store EBITDA after: £ 115,019 - Food costs 27% - Labour 27% - NAF & Royalty 10.5% - Occupancy 6% - LSM 4% - Delivery 5% • Cash payback on investment < 2.0 years (range 1.4 – 2.5) FRANCH
Slide 51: Mature Store Turnover by AWUS banding
Mature Store Turnover by AWUS banding 100% 5% 3% 3% 10% <£7k 17% 19% 24% 29% 75% 34% £7k-£10k 42% 42% 42% £10k-£15k 50% 43% 42% £15k-£20k 25% 31% 24% 22% 16% 10% >£20k 7% 11% 7% 8% 3% 4% 0% 2005 2006 2007 2008 2009 51