Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — H1 2019 Earnings Presentation
52 slides from Domino's Pizza Enterprises's earnings presentation, Feb 20, 2019
Slide 1: Half Year Results
HALF YEAR RESULTS Period ending 30 December 2018 Australia ● New Zealand ● Belgium ● France ● The Netherlands ● Japan ● Germany ● Luxembourg
Slide 2: Presenters
PRESENTERS DON MEIJ GROUP CEO & MANAGING DIRECTOR RICHARD CONEY GROUP CFO NICK KNIGHT AUSTRALIA & NEW ZEALAND CEO ANDREW RENNIE DPE EUROPE CEO STOFFEL THIJS GERMANY CEO JOSH KILIMNIK JAPAN CEO
Slide 3: Results Highlights
RESULTS HIGHLIGHTS H1 19 Half-on-half Half-on-half Actual $ Growth % Growth Network Sales $1,430.9m +$182.0m +14.6% Online Sales $934.3m +$132.2m +16.5% EBITDA - Underlying(1) $137.2m +$14.8m +12.1% EBIT - Underlying(1) $108.3m +$11.7m +12.1% NPAT - Underlying(1) $68.2m +$5.3m +8.4% EPS - Underlying
Slide 4: Group Commentary
GROUP COMMENTARY ▪ A strong performance across the Group, as the network continues to grow sales and market share ▪ Network Sales up +14.6%, with online sales up +16.5%, underscoring our vision to be the leader in the internet of food in every neighbourhood ▪ Underlying EBIT growth up +12.1%, in lin
Slide 5: Network Sales Growth
NETWORK SALES GROWTH (1) JAPAN GROUP NETWORK SALES ($M) 2,588.9 EUROPE 2,318.5 ANZ ▪ Double-digit Network Sales growth 1,964.1 continues as a result of new organic store 1,479.8 additions, unit sales growth and strategic 1,430.9 1,249.3 1,262.2 1,326.7 acquisitions 1,155.5 1,162.9 1,036.0 928.1 ▪ Co
Slide 6: Leading the Internet of Food in Every Neighbourhood
LEADING THE INTERNET OF FOOD IN EVERY NEIGHBOURHOOD (1)(2)(3) GROUP ONLINE SALES % 65.3% 62.0% 63.5% 63.3% 63.4% ▪ Online Sales up +16.5% half-on-half 59.3% 56.5% ▪ 32.4 million orders in H1 19 via digital 49.0% 47.0% channels across the Group 44.7% 45.0% 43.7% 43.1% 42.1% 41.8% ▪ Online Sales up +3
Slide 7: Network Store Count
NETWORK STORE COUNT H1 17 FY 17 H1 18 FY 18 H1 19 ANZ stores ▪ +77 stores added to the network in H1 19 Franchised stores 666 703 733 733 738 Corporate stores 72 74 66 86 92 ➢ +13 opened in ANZ, 11 Franchised(1) ANZ Network Stores 738 777 799 819 830 Stadium outlets incl. in above 15 15 12 10 8 ➢ +3
Slide 8: Network Store Additions
NETWORK STORE ADDITIONS ACQUISITIONS GROUP STORE ADDITIONS (1) NEW ORGANIC STORES 484 412 404 347 308 238 ▪ +1,703 stores added to the network since 2013, 177 178 with record organic additions planned in FY19 92 102 85 80 76 70 77 67 65 31 36 H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1 H2 FY H1
Slide 9: H2 19 Group Trading Update
H2 19 GROUP TRADING UPDATE H2 19 Trading Update SAME STORE SALES GROWTH FIRST 7 WEEKS OF H2 19 +4.0% NEW ORGANIC STORE ADDITIONS H2 19 ENDING 20 FEBRUARY 2019 +13 ▪ During the first weeks of trade in H2 19, we opened +13 new organic stores, with SSS +4.0%(1) ▪ In the prior corresponding period, we o
Slide 10: FY19 Group Guidance
FY19 GROUP GUIDANCE FY19 FY19 Existing Guidance Updated Guidance SAME STORE SALES GROWTH +3-6% +3-6% NEW ORGANIC STORE ADDITIONS +225-250 +200-215 EBIT(1) $227-247m $227-247m NET CAPEX(2) $60-70m $60-70m ▪ SSS growth is forecast to be at the mid to lower end of Guidance ▪ New organic store additions
Slide 11: Financials
FINANCIALS JUNGRY TO & BE BETTER
Slide 12: Group P&L Highlights
GROUP P&L HIGHLIGHTS H1 17 H1 18 H1 19 (1) Significant H1 19 +/(-) H1 18 (1) (2) Underlying Underlying Statutory Charges Underlying Underlying $ mil $ mil $ mil $ mil $ mil % Network Sales 1,166.1 1,248.9 1,430.9 1,430.9 14.6% Network Sales up +$182.0m Revenue 539.4 567.6 702.0 702.0 23.7% Reven
Slide 13: Geographic Summary
GEOGRAPHIC SUMMARY H1 17 H1 18 H1 19 Ad Fund (1) H1 19 +/(-) H1 18 ▪ Group: EBITDA growth +12.1% Underlying Underlying Underlying Cons ol i da tion Normalised Underlying – H1 19 Group revenue benefitted from the $ mil $ mil $ mil $ mil $ mil % consolidation of the Ad Funds into our Financial Revenue
Slide 14: Statutory to Underlying Reconciliation
STATUTORY TO UNDERLYING RECONCILIATION H1 18 Non-recurring H1 18 H1 19 Non-recurring H1 19 +/(-) H1 18 Statutory Costs Underlying Statutory Costs Underlying Underlying $ mil $ mil $ mil $ mil $ mil $ mil % Network Sales 1,248.9 1,248.9 1,430.9 1,430.9 14.6% Revenue 567.6 567.6 702.0 702.0 23.7% EBIT
Slide 15: Non-Recurring Costs
NON-RECURRING COSTS H1 19 $ mi l ANZ ▪ $10.9m – professional fees, legal and settlement ANZ - IP Dispute Resolution and IR Audit 10.9 costs associated with protecting our operational IP and compliance costs associated with the nationwide industrial relations review Europe - Acquisition, Conversion &
Slide 16: Group Underlying EBITDA H1
GROUP UNDERLYING EBITDA H1 (1) GROUP EBITDA A$M (H1) 137.2 122.4 116.2 71.0 87.0 58.3 61.0 60.0 42.4 42.5 24.9 26.5 14.2 64.1 66.2 3.1 55.2 44.5 28.3 35.1 23.3 2013 2014 2015 2016 2017 2018 2019 ANZ Overseas ▪ Total H1 Group Underlying EBITDA has increased +518% since H1 13 ▪ Overseas Underlying EBI
Slide 17: Underlying Earnings Per Share
UNDERLYING EARNINGS PER SHARE 152.8 ▪ Underlying EPS +12.4% on H1 18 (Underlying EPS 80.2c, Statutory EPS 62.4c) 133.6 ▪ Underlying EPS CAGR +15.2%, over 3 years 81.5 105.4 66.2 74.2 53.1 54.6 40.5 41.5 37.2 29.9 80.2 71.3 30.0 67.4 21.6 25.0 19.8 21.6 52.4 17.6 15.7 12.8 33.8 12.6 8.4 24.7 17.4 19.
Slide 18: Cash Flow
CASH FLOW EBITDA BASED CASHFLOW H1 18 H1 19 $ mil $ mil Underlying EBITDA 122.4 137.2 Change in working capital (7.2) 3.9 Strong trading revenues in Japan delivered timing benefit Profit on sale of non-current assets (9.4) (5.8) Other movements 5.0 4.4 Share based payments $3.1m Underlying ope
Slide 19: Balance Sheet
BALANCE SHEET +/(-) FY18 H1 19 FY18 $ mil $ mil $ mil Cash & equivalents 76.0 73.8 (2.2) Other current assets 153.6 170.6 17.0 Increased receivables and inventory in Japan (December period) Total Current Assets 229.6 244.4 14.8 Property, plant & equipment 200.1 227.9 27.8 Increased store builds
Slide 20: Key Financial Ratios
KEY FINANCIAL RATIOS FY18 H1 19 Underlying Underlying Return on Equity 37.7% 44.6% ▪ Return on Equity has increased to 44.6%, as a result of increased profits and share buy-back, funded by low interest-bearing debt Return on Capital Employed 19.5% 19.3% Net Leverage Ratio(1) 1.5x 1.8x ▪ Net Leverage
Slide 21: Australia & New Zealand
AUSTRALIA & NEW ZEALAND HUNGRY TO & BE BETTER
Slide 22: Slide 22
Slide 23: ANZ - Network Sales
ANZ - NETWORK SALES ANZ SSS GROWTH ANZ NETWORK SALES A$Ml (H1) 17.4% 15.9% 592.5 557.8 13.8% 521.0 11.8% 439.9 10.6% 10.0% 355.0 306.6 6.9% 5.6% 5.3% 3.7% 3.5% 2014 2015 2016 2017 2018 2019 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 ▪ H1 19 Network Sales +6.2%, +$34.7m (+3.5%
Slide 24: Australia QSR Dashboard
AUSTRALIA QSR DASHBOARD DOMINO'S MARKET SHARE CAGR VS. TOTAL QSR CAGR(1) DOMINO’S MARKET SHARE (1) +12.9% 42.7% 3.5% 35.0% 2.8% +4.4% +2.9% Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Domino's share of QSR Domino's share of Pizza Total QSR CAGR Total Pizza CAGR Domino's CAG
Slide 25: ANZ - Region in Focus
ANZ - REGION IN FOCUS ▪ 13 new organic stores added to the network, including 11 Franchised stores ▪ Opened our 700th Australian store in Flagstone, QLD – owned by a five-store Franchisee ▪ Extensive testing of Pizza Checker completed with store roll-out underway ▪ Launched Notify-me – sending alert
Slide 26: ANZ – Operations 360
ANZ – OPERATIONS 360 ▪ Multi-unit Franchisees have increased significantly over the last 6+ years and this trend is anticipated to continue into the future ▪ In 2017 we introduced an enhanced information dashboard, Operations 360, with Franchisee benchmarking including: customer feedback, food safet
Slide 27: ANZ – Looking Forward
ANZ – LOOKING FORWARD ▪ Ongoing focus on increasing Franchisee profitability (at a unit and Group level) – while ensuring great value for customers ▪ Project 3TEN initiatives continue to reduce delivery times and drive efficiencies in store, as we create new technologies and optimisation strategies,
Slide 28: Europe
EUROPE HUNGRY TO & BE BETTER
Slide 29: Castricum - Dorpsstraat 75
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Slide 30: Europe - Network Sales
EUROPE - NETWORK SALES EUROPEAN NETWORK SALES €M (H1)(1) 349.9 EUROPE SSS GROWTH(1) 298.0 264.6 8.0% 7.5% 7.5% 7.7% 160.7 4.9% 4.6% 132.1 4.0% 115.7 3.1% 2.5% 2.3% 0.7% 2014 2015 2016 2017 2018 2019 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 ▪ Network Sales +17.4%, +€51.9m, to
Slide 31: Europe – Region in Focus
EUROPE – REGION IN FOCUS Europe ▪ Domino’s Pizza Enterprises achieved a major milestone, opening its 1,000th Domino’s-branded store in the region ▪ Opened 33 new organic stores in H1 19 ▪ The European region performing well in aggregate ▪ There was very strong Network Sales growth in Belgium and sig
Slide 32: Europe – Region in Focus: Benelux
EUROPE – REGION IN FOCUS Benelux (Belgium/Netherlands/Luxembourg): ▪ Added 40 further stores onto Project 3TEN – increasing focus on reducing delivery times and lifting customer satisfaction ▪ As part of Project 3TEN, we are targeting average delivery times of below 18 minutes, with 1/3 of Domino’s
Slide 33: Europe – Region in Focus: France
EUROPE – REGION IN FOCUS France ▪ Performance has been lower than expected in France. This is partly due to the long hot summer and a delay in adding the aggregator sales layer in France, which impacted sales and margins ▪ Brand presence and demand remains very strong in France ▪ New CEO (and former
Slide 34: Europe – Region in Focus: Germany
EUROPE – REGION IN FOCUS Germany ▪ Exceeded 300 Domino‘s-branded stores in February 2019 ▪ Conversion of Hallo Pizza stores to Domino‘s proceeding ahead of schedule – 72 stores converted in H1 19 ▪ Joey‘s stores that have converted to Domino‘s have moved into Phase Three of our growth plan – opening
Slide 35: Europe – Looking Forward
EUROPE – LOOKING FORWARD Benelux ▪ Management anticipates accelerated new store openings in H2 19 based on customer and Franchisee demand ▪ Opening the first store in Luxembourg in H2 19 ▪ Rolling out our first national loyalty program in the Netherlands, following successful regional trials and tes
Slide 36: Europe – Looking Forward
EUROPE – LOOKING FORWARD Germany ▪ Hallo Pizza conversion will be completed in H2 19, delivering significant scale benefits from having one single brand: – National marketing will substantially increase from Q4 19, following the conversion of the final Hallo Pizza stores to Domino’s – Menu innovatio
Slide 37: Japan
日本 JAPAN
Slide 38: Slide 38
Slide 39: Japan - Network Sales
JAPAN - NETWORK SALES JAPAN NETWORK SALES ¥M (H1) 14.4% JAPAN SSS GROWTH 22,936 20,693 20,749 21,038 7.8% 16,428 4.8% 3.6% 3.5% 9,424 2.2% 1.3% -1.2% -1.9% -3.0% -4.7% (1) 2014 2015 2016 2017 2018 2019 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 19 ▪ Network Sales +9.0%, +¥1,898.5
Slide 40: Japan – Region in Focus
JAPAN – REGION IN FOCUS ▪ New products and strong execution have resonated with existing and new customers ▪ Very strong sales performance on total network and same store sales basis – 128 stores broke their monthly sales records in December (our busiest month) – Our OneDigital platform handled an u
Slide 41: Japan – Region in Focus
JAPAN – REGION IN FOCUS Operational Excellence – Project 3TEN ▪ Management has conducted a nationwide roadshow, building on the 20 Minute Mission, focusing on safely reducing delivery times and challenging stores to improve performance ▪ The Yotsuya Yonchome store broke the recently-established worl
Slide 42: Japan – Looking Forward
JAPAN – LOOKING FORWARD ▪ We will continue to build on the innovation roadmap that we have identified, including: – Launched the New Yorker range (January), giving customers new choices and authentic NY tastes – Launching On-Time Cooking – providing hotter, fresher pizzas for carry-out customers – R
Slide 43: Outlook
OUTLOOK
Slide 44: Group Store Count – Future Outlook
GROUP STORE COUNT – FUTURE OUTLOOK FUTURE OUTLOOK 2025-2028 1,200 2,700 1,000 H1 19 STORE COUNT 830 STORES 1,074 STORES 550 STORES +100 STORES +150 STORES ▪ We have increased our Future Outlook in both Japan and Europe. Japan Future Outlook has increased as a result of renewed confidence in this mar
Slide 45: Historic Group Store Count
HISTORIC GROUP STORE COUNT 4,900 stores HISTORIC STORE COUNT VS. FUTURE GUIDANCE H14,850 19 target 5,000 4,500 4,000 GROUP STORE COUNT 3,500 2,250 stores 1,600 stores 1,750 stores FY14 target 2,250 3,000 FY11 target 1,750 550 stores FY06 target 1,600 2,500 2,393 FY05 target 550 2,135 1,983 2,000 1,5
Slide 46: 3-5 Year Group Outlook
3-5 YEAR GROUP OUTLOOK 3-5 Year Outlook ANNUAL SAME STORE SALES GROWTH +3-6% ANNUAL STORE GROWTH +7-9% (1) ANNUAL NET CAPEX $60-70m ▪ The above provides an illustration of our medium-term annual growth expectations, but does not constitute specific earnings guidance ▪ It is important to note that 3-
Slide 47: Conclusion
CONCLUSION ▪ H1 19 total Network Sales growth was +14.6% – another strong half ▪ In line with our vision of being the Leader in the Internet Of Food in Every Neighbourhood, we achieved strong online sales growth of +16.5% ▪ Overall, we had strong performances from Japan, New Zealand, the Netherlands
Slide 48: Conclusion
CONCLUSION ▪ Initiatives to grow sales and improve store unit economics in Australia and France will build momentum through the remainder of the year, however, Management anticipates H2 19 growth will be relatively low versus historic performance in these markets ▪ We are upgrading the outlook for s
Slide 49: Appendices
APPENDICES HUNGRY TO & BE BETTER
Slide 50: Appendix – Shareholder Value Proposition
APPENDIX 1 – SHAREHOLDER VALUE PROPOSITION Well-Balanced Targeting Long-Term Investment Case High-Performance Portfolio Shareholder Value Creation ➢ Proudly the largest Master Franchisee ANZ ➢ Targeting sizable store additions and of the largest pizza company on the ➢ Clear market leader sales growt
Slide 51: Appendix – Investor Relations Calendar
APPENDIX 2 – INVESTOR RELATIONS CALENDAR ▪ 20 February 2019 – DMP Investor Roadshow ▪ April 2019 – Investor Offshore Market Visit ▪ May 2019 – CEOs Webcast (No Trading Update) ▪ 21 August 2019 – DMP FY19 Results and Investor Roadshow ▪ October 2019 – DMP Investor Day ▪ November 2019 – DMP AGM 51
Slide 52: Appendix – Disclaimer and Important Information
APPENDIX 3 – DISCLAIMER AND IMPORTANT INFORMATION ▪ 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 obli
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