Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Investor Day (2016)
60 slides from Yum China's investor day presentation, 2016
Slide 1: The Defining Investment Opportunity in China
THE DEFINING INVESTMENT OPPORTUNITY “CHINA Micky Pant| CEO, Yum China
Slide 2: Cautionary Language Regarding Forward-Looking Statements
Cautionary Language Regarding Forward-Looking Statements Forward-Looking Statements. Our presentation may contain “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 stateme
Slide 3: Agenda
Agenda Yum China Pizza Hut and KFC Overview Yum China Financial Update Summary and Q&A
Slide 4: Significant Progress Since We Last Met
Significant Progress Since We Last Met Strategic partnership On-target formed for Oct. 31 Spinoff Profitability Board of continues to directors improve assembled
Slide 5: Strategic Investment Provides Three Key Advantages
Strategic Investment Provides Three Key Advantages $460MM Credible Exceptional cash investment strategic partners: Chairman of the Board Primavera & Ant Financial
Slide 6: Investment Highlights
Investment Highlights China – World’s Largest Growth Opportunity Leading Iconic Brands in China China’s Largest Restaurant Operator
Slide 7: Urban Expansion in China is Without Precedent
Urban Expansion in China is Without Precedent Pearl River Delta Megacity – Population 60MM
Slide 8: City Clusters are Being Created Across China
19 City Clusters are Being Created Across China
Slide 9: The Development Opportunity for Yum China
The Development Opportunity for Yum China China’s 5 Year Outlook Yum China Urban population Expanding footprint growth of 75MM across urban centres Doubling of Targeting units in all major transportation hubs transportation hubs 1,250 new 1 – 2 stores in top shopping malls ranking malls
Slide 10: Enormous Brand Equity Deeply Rooted in China
Enormous Brand Equity …Deeply Rooted in China 5,000+ units 1,600+ units 350 units 1,100+ cities 400+ cities 50+ cities KFC and Pizza Hut units and city data as of Q3 2016 2+ Billion Customer Visits Annually
Slide 11: Clearly Preferred by Consumers
…and Clearly Preferred by Consumers Most Preferred QSR Brand Most Preferred WCDR* Brand 60% 64% 36% 6% 34% *Western Casual Dining Restaurant Source - Brand Image Tracking in 50+ cities, AC Nielsen KFC data as of Aug. 2016, Pizza Hut Dine-In data as of September 30, 2016
Slide 12: Proven Track Record of Long-Term Growth
Proven Track Record of Long-Term Growth Total Restaurant Count Revenue ($BN) 7,176 $6.9 3,906 $4.1 1,792 $1.0 2005 2010 2015 2005 2010 2015 Dollar figures include FOREX impact
Slide 13: Commanding Lead in China with Iconic Brands
Commanding Lead in China with Iconic Brands 7,330 Others 250 350 1,643 2,223 ~2,200 2,171 5,087 ~660 ~420 ~230 2 3 2 3 3 3 1 Note: Others include East Dawning and Little Sheep. 1 Yum China unit data as of Q3 2016 2 McDonald’s unit data based on company’s website as of YE 2015. Starbucks unit data ba
Slide 14: Undisputed Leader in Digital Engagement
Undisputed Leader in Digital Engagement 100+ MM fans In Less than One Year… 46+ MM 18+ MM Social Media Loyalty Members Added $1+ BN Sales in Cashless Payment
Slide 15: Strong Delivery Network
Strong Delivery Network 4,000+ delivery units* across China Single Largest 20,000 delivery drivers Leading Delivery Delivery Brand 85% delivery sales from Brand Concept online ordering ~10% of total sales** Data as of Q3 2016 *Includes KFC delivery units, Pizza Hut Dine-in units that are delivered b
Slide 16: Unparalleled Infrastructure
Unparalleled Infrastructure • National supply chain • Unrivalled development capabilities • Industry leading marketing scale & coverage • Best in class operations • Robust IT infrastructure
Slide 17: Tenured Leadership
Tenured leadership – Key members with average of 20 years of experience
Slide 18: World-Class Board of Directors
World-Class Board of Directors Other Board Members • Peter Bassi • Christian Campbell • Ed Chan • Edouard Ettedgui • Louis Hsieh • Jonathan Linen Dr. Fred Hu • Micky Pant Non-Executive Chairman of the Board • Zili Shao
Slide 19: Clear Strategy for Growth
Clear Strategy for Growth Other Growth Opportunities New-Unit Development Same Store Taco Bell Little Sheep Sales Growth Leader in Delivery & Digital Engagement
Slide 20: Pizza Hut Dine-In
Pizza Hut Dine-In
Slide 21: Pizza Hut Dine-In: A Powerhouse Brand
Pizza Hut Dine-In: A Powerhouse Brand
Slide 22: Impressive System Sales Growth
Impressive System Sales Growth Total Restaurant Count System Sales ($BN) $1.8 $1.7 1,572 1,313 $1.5 1,060 826 $1.2 2012 2013 2014 2015 2012 2013 2014 2015 Dollar figures include FOREX impact
Slide 23: Five Key Initiatives for Continued Growth
Five Key Initiatives for Continued Growth 1 2 3 4 5 Multiple Digital Focus on Core Targeted Value In-store Experience Operating Models Engagement
Slide 24: Focusing on Core with Disruptive Innovation
Focusing on Core with Disruptive Innovation Durian Pizza Super Supreme Chinese New Year
Slide 25: Smart Value Across All Dayparts
Smart Value Across All Dayparts Breakfast Working Day Lunch Teatime Dinner
Slide 26: Best In-store Experience
Best In-store Experience Contemporary Assets Five-star Service
Slide 27: Digital Initiatives Transforming Marketing
Digital Initiatives Transforming Marketing • 18+ MM members in less than one year • ~10% of total sales in year 1
Slide 28: Redefined Clear Brand Positioning: Love to Share
Redefined Clear Brand Positioning LOVE TO SHARE “Shared joy is doubled joy, shared sorrow is half a sorrow” 爱 分 享
Slide 29: Joey Wat | CEO, KFC China
Joey Wat | CEO, KFC China
Slide 30: KFC
Version: 8/30/2016 30
Slide 31: Four Key Pillars to Drive Continuous Growth
Four Key Pillars to Drive Continuous Growth 1 2 3 4 Focus on Core Multiple Customer Service Digital & Delivery Menu & Value Business Models & People
Slide 32: Strong Rhythm Developed by Consecutive Successful Promotions
Strong Rhythm Developed by Consecutive Successful Promotions Focusing on Core & Value 32
Slide 33: N) APS
\< N) APS ee a atl = = <s ~ 4 (f < 9! S S
Slide 34: Disruptive & Localized Product Innovation
Disruptive & Localized Product Innovation Wing-on-stick Zinger Tower Ice-cream Rice Bucket 34
Slide 35: Tailored Offering for Each Daypart and Occasion
Tailored Offering for Each Daypart and Occasion Core Breakfast Afternoon Tea/ Dinner/ Weekend
Slide 36: Transform the Whole Customer Journey with Digital Experience
Transform the Whole Customer Journey with Digital Experience Virtual stores Mobile Payment 5,000+ stores 5,000+ stores Pre/Self-order Super App 2,600+ stores 13MM downloads Digital Menu Board E-gifting 1,900+ stores Data as of September 2016
Slide 37: Exclusive Privileges for Our 46+ Million Members
Exclusive Privileges for Our 46+ Million Members K-mall Earn & Burn Retail Offers Member Privileges Pre-paid Privileges 10%+ Transactions
Slide 38: Significant Increase in Digital Media
Significant Increase in Digital Media Media Spend Breakdown 11% 41% Digital Outdoor, Print, Radio TV 2011 2016F
Slide 39: Delivery
FURR
Slide 40: Tremendous Growth in Delivery
Tremendous Growth in Delivery • 2,300 stores* • ~8% of sales* • Doubled sales in 5 years *Data as of Q3 2016
Slide 41: Kiosks as the Next Growth Lever
Kiosks as the Next Growth Lever
Slide 42: Rejuvenate Our Brand Asset with New Image
Rejuvenate Our Brand Asset with New Image # of units ~1,000 ~800 ~600 2014A 2015A 2016F New stores Remodel 42 42
Slide 43: Improving All Stages of Customer Service
Improving All Stages of Customer Service Order Packaging Preparation Payment 43
Slide 44: New Brand Positioning
New Brand Positioning Je [is EBS Bee . ke aN,
Slide 45: Ted Stedem | CFO, Yum China
Ted Stedem| CFO, Yum China
Slide 46: Strong Foundation for Growth
Strong Foundation for Growth 7,500+ 400,000+ $8+ BN ~$1.1BN $0 Debt* Restaurants Employees System Sales Pro Forma & EBITDA $900+ MM Cash on Day 1 Estimates of FY2016 results Dollar figures include estimated FOREX impact Pro forma EBITDA assumes 3% license fee on 2016F KFC and Pizza Hut system sales,
Slide 47: Impressive Business Profile
Impressive Business Profile #1 Restaurant Company Strong Margins and in China Cash Flow Top Global Brands in Best-in-Class KFC and Pizza Hut Management Significant US listed with Whitespace to Grow Western Governance
Slide 48: Profitability Continues to Improve
Profitability Continues to Improve Pro Forma Reported OP Share Operating Profit ($MM) Pizza Hut Dine-In ~20% At Least $466* $488** $600 KFC ~80% 2014 2015 2016F 2016F Pro Forma operating profit includes estimated FOREX impact * Reflects 2014 reported operating profit as included in the Form 10 filed
Slide 49: Clear Formula for Shareholder Value Creation
Clear Formula for Shareholder Value Creation SSS Growth Margin New-Unit Disciplined Improvement Development Capital Allocation Ongoing Mid-Teens EPS Growth Model Mid-Teens EPS Growth Model assumes constant currency
Slide 50: Drive Same Store Sales Growth in 2017 and Beyond
Drive Same Store Sales Growth in 2017 and Beyond Core Innovation 1pt SSSG Targeted Value Across All Day Parts = Unmatched Digital Capability $30+ MM Pro Forma Leader in Delivery Operating Purposeful Investments in Asset Upgrades Profit* *1pt full year SSS impact on FY 2016 pro forma operating profit
Slide 51: Tremendous Leverage in Margin Expansion
Tremendous Leverage in Margin Expansion China Restaurant Margin AFTER 3% License Fee 14%+ 13% 12% 2014 2015 2016F
Slide 52: Impressive New Unit Returns Even with 3% License Fee
Impressive New Unit Returns Even with 3% License Fee 2016 New Unit* Economics Average Unit Volume ($MM) $1.0 $1.0 Cash Margin 21% 16% Cash Investment ($K) $530 $610 Pre-tax Payback <3 Years <4 Years * Includes all units opened between June 2014 to May 2015 Cash margin includes 3% license fee Exchang
Slide 53: Potential to Triple Units Over Long Term
Potential to Triple Units Over Long Term Yum Restaurant Penetration (per million people) 37 33 25 15 5 HK Malay Aus Today Future Hong Kong Malaysia Australia China
Slide 54: Investing to Strengthen Core Business
Investing to Strengthen Core Business CAPEX ~$550MM ~$500MM • Digital Projects 13% 27% • Coffee 29% • Energy Saving Remodels 22% 29% • ~800 System Remodels New Units 65% 44% • ~525 New Units 2015 2016F Dollar figures include FOREX impact Capex amount is for wholly owned units excluding JVs and franc
Slide 55: Disciplined Deployment of Cash Generated
Disciplined Deployment of Cash Generated Pro Forma EBITDA Core Brands ($BN) Emerging Brands ~$1.1 Strategic Growth Options 2016F Returning Capital to Shareholders Figures include estimated FOREX impact Pro forma EBITDA assumes 3% license fee on 2016F KFC and Pizza Hut system sales, G&A associated wi
Slide 56: 2016 Financial Summary
2016 Financial 2015F Summary Listing Venue NYSE Domicile US/Western Governance License Fee 3% of system sales of KFC & PH & TB Restaurant Margin 14%+* FY OP Growth (ex F/X) At least 30% New Unit Growth ~525 Capex ~$550MM Effective Tax Rate 27-29% *After 3% license fee
Slide 57: Powerful Ongoing Growth Targets
Powerful Ongoing Growth Targets System Restaurant EPS Growth Sales Margin Model Growth Long-Term Target High-Single ~17%* Mid-Teens Digit * After 3% License Fee Mid-Teens EPS Growth Model assumes constant currency.
Slide 58: The Defining Investment Opportunity in China
THE DEFINING INVESTMENT OPPORTUNITY “CHINA Micky Pant| CEO, Yum China
Slide 59: Slide 59
Slide 60: Make every life taste beautiful
és make every life taste beautiful ‘ a 2 6 @ i