Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — FY2018 Earnings Presentation
47 slides from Domino's Pizza Enterprises's earnings presentation, Aug 14, 2018
Slide 1: Full Year Results
FULL YEAR RESULTS Period ending 01 July 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 ANDRE TEN WOLDE DPE EUROPE COO 2
Slide 3: Results Highlights
RESULTS HIGHLIGHTS FY18 Year-on-year Year-on-year Actual $ Growth % Growth Network Sales $2,588.9m +$270.4m +11.7% Online Sales $1,655.5m +$269.5m +19.4% EBITDA - Underlying(1) $259.2m +$28.3m +12.3% NPAT - Adjusted for share buy-back(1) $136.2m +$17.7m +15.0% NPAT - Statutory $121.5m +$18.6m +18.1%
Slide 4: Group Commentary
GROUP COMMENTARY ▪ We achieved positive SSS in all markets ▪ Strong free cash flow of $120.6m(1), up +125.8%, supported by material working capital improvement and paydown of Franchisee loans, predominantly in Japan ▪ H2 18 NPAT(2) up +23.1% to $72.3m, vs. $58.8m in H2 17 ▪ OneDigital live in all ma
Slide 5: Regional Commentary
REGIONAL COMMENTARY ANZ Europe Japan Highlights and Achievements Highlights and Achievements Highlights and Achievements ➢ Fastest growing top-10 QSR in ➢ Germany/Hallo Pizza integration is ➢ New CEO and CMO are offering Australia progressing ahead of plan fresh strategic direction ➢ Well received n
Slide 6: FY18 Guidance Assessment
FY18 GUIDANCE ASSESSMENT FY18 FY18 Guidance Actual SAME STORE SALES - ANZ 6-8% 4.5% SAME STORE SALES - EUROPE 6-8% 5.7% SAME STORE SALES - JAPAN 0-2% 0.9% NEW ORGANIC STORE ADDITIONS 140-160 145 NEW INORGANIC STORE ADDITIONS 170 163 (1) NPAT GROWTH in the region of 20% 15.0% (2) NET CAPEX $80-90m $6
Slide 7: Network Sales Growth
NETWORK SALES GROWTH TOTAL NETWORK SALES SSS ONLINE SALES 2,588.9 GROWTH (A$) GROWTH GROWTH 2,318.5 (1) ANZ EUROPE +7.7% +24.5% +4.5% +5.7% +11.4% +30.4% Total Network Sales ($m) 1,964.1 JAPAN -0.8% +0.9% +11.6% 1,479.8 1,249.3 1,262.2 1,326.7 1,155.5 1,162.9 1,036.0 928.1 805.3 848.6 716.6 763.2 67
Slide 8: Network Store Count
NETWORK STORE COUNT FY 16 FY 17 FY 18 Australia/NZ stores ▪ +308 stores added to the network in FY18 Franchised stores 649 703 733 ➢ +163 Hallo Pizza stores (January 2018) Corporate stores 65 74 86 Aus/NZ Network Stores 714 777 819 ➢ +145 new organic stores Stadium outlets incl. in above 17 15 10 Ne
Slide 9: FY19 Trading Update
FY19 TRADING UPDATE ANZ Europe Japan Group FY19 Same Store Sales 3.9% 1.6% 12.0% 4.4% 02 Jul 18 - 05 Aug 18 FY19 New Store Openings 2 6 4 12 02 Jul 18 - 14 Aug 18 FY18 Same Store Sales 7.2% 8.8% -1.2% 6.3% 03 Jul 17 - 06 Aug 17 FY18 New Store Openings 4 4 4 12 02 Jul 17 - 15 Aug 17 ▪ Group – Managem
Slide 10: Financials
FINANCIALS JUNGRY TO & BE BETTER
Slide 11: Group P&L Highlights
GROUP P&L HIGHLIGHTS FY 16 FY 17 FY 18 +/(-) FY 17 Underlying Underlying Underlying(1) Underlying $ mil $ mil $ mil % Network Sales 1,964.1 2,318.5 2,588.9 11.7% Network Sales up +$270.4m, to $2,588.9m Revenue 930.2 1,073.1 1,154.0 7.5% Revenue up +$80.8m, to $1,154.0m EBITDA 180.0 230.9 259.2 1
Slide 12: Geographic Summary
GEOGRAPHIC SUMMARY (1) FY 16 FY 17 FY 18 +/(-) FY 17 ▪ Group: Underlying EBITDA growth of +12.3%, with EBITDA margins Underlying Underlying Underlying Underlying increasing as a result of scale benefits $ mil $ mil $ mil % REVENUE ▪ ANZ: Strong EBITDA growth of +15.4%, noting the following: Australi
Slide 13: Statutory to Underlying Reconciliation
STATUTORY TO UNDERLYING RECONCILIATION FY 17 Non-recurring FY 17 FY 18 Non-recurring FY 18 +/(-) FY 17 Statutory Costs Underlying Statutory Costs Underlying Underlying $ mil $ mil $ mil $ mil $ mil % Network Sales 2,318.5 2,318.5 2,588.9 2,588.9 11.7% Revenue 1,073.1 1,073.1 1,154.0 1,154.0 7.5% EBI
Slide 14: Non-Recurring Costs
NON-RECURRING COSTS FY 18 ANZ ▪ $4.2m – professional fees associated with protecting our $ mil operational IP; further fees are anticipated in FY19 ▪ $0.9m – professional, advisory and compliance costs associated ANZ - IP dispute resolution and IR audit 5.1 with the nationwide IR audit process Europ
Slide 15: Underlying Earnings Per Share
UNDERLYING EARNINGS PER SHARE 152.8 ▪ Underlying EPS 152.8c, +14.4% on FY18 (Statutory EPS 139.4c, +20.2%) 133.6 ▪ Underlying EPS CAGR +27.2%, over 3 years 81.5 105.4 ▪ Underlying EPS CAGR +24.1%, over 10 years 66.2 74.2 53.1 54.6 40.5 41.5 37.2 29.9 71.3 30.0 67.4 21.6 25.0 19.8 21.6 52.4 17.6 15.7
Slide 16: Cash Flow
CASH FLOW EBITDA BASED CASHFLOW FY17 H1 18 H2 18 FY18 $ mil $ mil $ mil $ mil ➢ Strong cash conversion of 77.8%(1) in FY18 Underlying EBITDA 230.9 122.4 136.8 259.2 Non-recurring costs (28.4) (6.3) (14.6) (20.9) ➢ Loan book recycling, delivering +$20.5m, predominantly in Japan, resulting in favourab
Slide 17: Balance Sheet
BALANCE SHEET FY17 FY18 +/(-) FY 17 $ mil $ mil $ mil Cash & equivalents 50.5 76.0 25.5 Increase in cash balances at year end, in all markets Other current assets 137.4 153.6 16.2 Includes additional Franchisee loans of $9.8m Total Current Assets 187.8 229.6 41.8 Property, plant & equipment 19
Slide 18: Key Financial Ratios
KEY FINANCIAL RATIOS FY17 FY18 Underlying Underlying ▪ Return on Equity has improved to 37.7%, benefiting from the Return on Equity 31.2% 37.7% share buy-back, funded by low interest-bearing debt Return on Capital Employed 19.5% 19.9% ▪ Net Leverage ratio has increased, due to: Net Leverage Ratio(1)
Slide 19: Australia & New Zealand
AUSTRALIA & NEW ZEALAND HUNGRY TO & BE BETTER
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Slide 21: ANZ - Network Sales
ANZ - NETWORK SALES Australia/NZ Network Sales A$m ANZ SSS Growth 17.4% 1,117.1 15.9% 1,037.2 13.8% 889.2 11.8% 10.6% 10.0% 8.7% 731.7 6.9% 627.6 5.6% 5.3% 4.5% 562.8 3.7% 544.1 2.6% 0.4% 2012 2013 2014 2015 2016 2017 2018 H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18
Slide 22: ANZ – Store Splits
ANZ – STORE SPLITS +211% AWUS in 5 years ▪ Since 2015, approximately 60% of new stores have been opened via the split of an existing territory, or territories Store Split Performance(2) ▪ Management forecasts that store splits will increase to 70-80% of new stores ▪ Supported by increase in populati
Slide 23: ANZ - Highlights & Achievements
ANZ - HIGHLIGHTS & ACHIEVEMENTS Highlights and Achievements: ▪ 50 new organic stores added to the network, 96% by existing Franchisees, or their employees ▪ New products continued to drive sales ▪ Following the retirement of the Head of Franchise Operations, a 33 year Domino’s veteran, Management ha
Slide 24: ANZ – Looking Forward
ANZ – LOOKING FORWARD ▪ Targeting strong organic new store openings in FY19 ▪ ANZ no longer has the headwind of Award Modernisation – Management looks forward to a direct flow through in Franchisee profitability, as we drive sales ▪ Focus on Project 3-10 continues – bringing more kitchens closer to
Slide 25: Europe
EUROPE HUNGRY TO & BE BETTER 25
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Slide 27: Europe - Network Sales
EUROPE - NETWORK SALES 642.1 European Network Sales €m Europe SSS Growth(1) (inc. acquisitions) (1) 549.2 8.0% 7.5% 7.5% 7.7% 7.5% 410.4 5.3% 4.9% 4.6% 4.0% 4.0% 278.2 3.1% 245.1 2.5% 2.3% 227.2 201.4 0.7% 2012 2013 2014 2015 2016 2017 2018 H1 12 H2 12 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16
Slide 28: Germany
GERMANY Highlights and Achievements: ▪ DPE majority owned joint venture completed the acquisition of Hallo Pizza, adding 163 Franchised stores to the network ▪ 130 stores have signed up to convert, upgraded from 115 stores at point of acquisition, 19 of which have already converted to date ▪ Convert
Slide 29: France
FRANCE Highlights and Achievements: ▪ Opened 22 organic new stores and converted an additional 13 Pizza Sprint stores; all conversions now complete(1) ▪ A new CEO has been appointed from within the Domino’s France family. Andrew Bradley is a former multi-unit Franchisee, a French Market veteran of 1
Slide 30: The Netherlands, Belgium and Luxembourg
THE NETHERLANDS, BELGIUM AND LUXEMBOURG Additional acquisition: ▪ Through a joint arrangement with DPG, Domino’s has secured the Master Franchise Agreement for Luxembourg, completing the Benelux Region ▪ First stores in Luxembourg will open in FY19, with a future outlook of 10-15 stores Highlights a
Slide 31: Japan
日本 JAPAN 31
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Slide 33: Japan - Network Sales
JAPAN - NETWORK SALES Japan Network Sales ¥m Japan SSS Growth 40,119.7 41,402.6 14.4% 38,234.2 33,317.6 7.8% 24,264.5 3.5% 3.6% 2.2% 1.3% -1.2% -3.0% -1.9% -4.7% (1) (2) (3) 2014 2015 2016 2017 2018 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 ▪ Network sales +3.2%, +¥1,282.8m, to ¥41
Slide 34: Japan - Highlights & Achievements
JAPAN - HIGHLIGHTS & ACHIEVEMENTS ▪ Opened 27 organic new stores, finishing FY18 with 520 stores ▪ Domino’s is now #1 by stores count and network sales in Japan ▪ Very strong SSS and network sales growth, as referenced in preceding slide ▪ New leadership has enabled fresh strategic direction, focuss
Slide 35: Japan – Looking Forward
JAPAN – LOOKING FORWARD ▪ Very strong new store openings forecast for FY19 ▪ Entice store design has commenced rollout, improving ambience and encouraging incremental dine in orders ▪ New CMO, Todd Reilly, a 10-year Domino’s ANZ veteran is revitalising Japan’s Marketing and media channel strategy ▪
Slide 36: Outlook
OUTLOOK 36
Slide 37: Shareholder Value Proposition
SHAREHOLDER VALUE PROPOSITION Investment Case Well-Balanced Targeting Long-Term 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 growth, as we stre
Slide 38: Group Net Capex Direction
GROUP NET CAPEX DIRECTION Group Net CAPEX as a proportion of EBITDA(1) 59.4% ▪ Group Net CAPEX as a proportion of EBITDA continues to reduce, 34.4% from 59.4% in FY16, to 25.0% in FY18 25.0% ▪ Management expects this trend to continue, as we leverage our balance sheet through our capital light busin
Slide 39: Historic Group Store Count
HISTORIC GROUP STORE COUNT 4,650 stores Historic Store Count vs. Future Guidance FY17 target 5,000 4,500 4,000 3,500 2,250 stores FY14 target 1,750 stores Group Store Count 3,000 1,600 stores FY11 target FY06 target 2,500 550 stores 2,393 2,135 2,000 FY05 target 1,983 1,500 1,506 1,333 1,000 741 776
Slide 40: Future Outlook - Group Store Count
FUTURE OUTLOOK - GROUP STORE COUNT FUTURE OUTLOOK TO 2025 1,200 2,600 850 FY18 STORE COUNT 819 Stores 1,054 Stores 520 Stores ▪ Management believes that there is significant future growth potential in our existing businesses over the next 7 years ▪ We are therefore reaffirming our Group future outlo
Slide 41: FY19 Guidance
FY19 GUIDANCE FY19 Guidance SAME STORE SALES GROWTH - GROUP +3-6% NEW ORGANIC STORE ADDITIONS - GROUP +225-250 (1) EBIT - GROUP $227-247m NET CAPEX(2) - GROUP $60-70m (1) Excluding non recurring costs (2) Excluding acquisitions 41
Slide 42: 3-5 Year Outlook
3-5 YEAR OUTLOOK 3-5 Year Outlook ANNUAL SAME STORE SALES GROWTH - GROUP +3-6% ANNUAL STORE GROWTH - GROUP +7-9% ANNUAL NET CAPEX(1) - GROUP $60-70m ▪ The above provides an illustration of our medium-term annual growth expectations, but does not constitute specific earnings guidance ▪ It is importan
Slide 43: Conclusion
CONCLUSION ▪ We achieved positive SSS in all markets ▪ Strong Free Cash Flow of +$120.6m, +125% on 2017, pre-acquisitions, indicative of more to come ▪ H2 18 NPAT(2) up +23.1% to $72.3m, vs. $58.8m in H2 17 ▪ +308 stores added to our system in FY18, including 145 organic additions ▪ Australian Franc
Slide 44: Conclusion
CONCLUSION ▪ Digital sales up +19.4%, driven by our whole system now operating on the OneDigital platform, with further significant innovations like: Pizza Checker, AR Pizza Chef and our next generation iPhone App launching in FY19 ▪ Project 3-10, is a major focus for all countries in FY19, where Ma
Slide 45: Appendices
APPENDICES HUNGRY TO & BE BETTER 45
Slide 46: Appendix 1 – ANZ Industrial Relations
APPENDIX 1 – ANZ INDUSTRIAL RELATIONS ▪ Our nationwide store assessment, announced February 2017, has been completed ‒ Of 669 stores assessed, 646 stores required little or no action ‒ As previously reported, 4 Franchisees were issued breach notices ▪ To date, our independent whistleblower hotline,
Slide 47: Appendix 2 - Disclaimer and Important Information
APPENDIX 2 - 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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