Yum China Holdings, Inc. · NYSE:YUMC
Yum China — Investor Day (2017)
21 slides from Yum China's investor day presentation, 2017
Slide 1: Jacky Lo | Chief Finance Officer, Yum China
Jacky Lo | Chief Finance Officer, 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
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Slide 4: Unique Strengths of Yum China
Unique Strengths of Yum China No. 1 Restaurant company Top Western Brands Governance in China Best-in-class Nationwide Management Supply chain 4
Slide 5: How we create value for shareholders
How we create value for shareholders 1 NET NEW UNIT DEVELOPMENT 2 SAME-STORE SHAREHOLDER SALES GROWTH 3 MARGINS & G&A MANAGEMENT RETURNS 4 STRATEGIC CAPITAL ALLOCATION 5
Slide 6: Solid development plan to drive system sales growth
Solid development plan to drive system sales 1 growth 7,747 Restaurants1 ~1.5 Average no. of restaurants opened daily2 1,220 Remodeled stores (Jan 2016 – Aug 2017) >1,100 No. of cities present1 1As of the end of August 2017. 2Per our previous guidance, Yum China targets to open 550-600 new units on
Slide 7: Compelling new unit return
1 Compelling new unit return Average Pre-tax Cash Payback Period1 Average Unit Volume ~2 ~RMB 6.1mn Years <4 Years2 ~RMB 5.6mn Cash Investment ~RMB 2.6mn ~RMB 3.3mn Cash Margin ~22% ~17% 1Includes all units opened from June 2015 to May 2016, after deduction of 3% license fee. 2For Pizza Hut Casual D
Slide 8: Significant lead over competitors
1 Significant lead over competitors >2x Yum China Restaurant Penetration2 15 More units than nearest competitor >5x 5 More units than nearest competitor1 Today Future 1Includes both Pizza Hut Casual Dining and Pizza Hut Home Service units. 2We define restaurant penetration as number of Yum China res
Slide 9: Encouraging trend in same-store sales growth
2 Encouraging trend in same-store sales growth 7% 6% 4% 3% 2% 1% 1% Flat Flat 1Q 2Q 3Q 1Q 2Q 3Q 1Q 2Q 3Q 2017 2017 2017 9
Slide 10: Focusing on SSSG to drive sales leverage
2 Focusing on SSSG to drive sales leverage SSS Innovation Great value Growth Digital capability Delivery network 10
Slide 11: Restaurant margin management
3 Restaurant margin management Restaurant Key Factors Affecting Restaurant Margin (Aug YTD 2017) Margin 19.3% Commodity Inflation 17.0% No longer a Labor Inflation tailwind from Q3 onwards Efficiency Aug YTD 2016 Retail tax Same-store structure reform sales leverage Wage inflation Commodity inflatio
Slide 12: G&A costs optimization
3 G&A costs optimization G&A G&A Change YoY Costs 8% 7% Low-teens percentage 5% increase in Aim to keep G&A increase 2017 below total revenues growth Cost structure optimization Aug YTD 2016 2016 Aug YTD 2017 Beyond 2017 12
Slide 13: Generating robust free cash flow
4 Generating robust free cash flow 26% Free cash flow CAGR1 (2014-2016) $1.6bn Cash and short-term investment2 $987mn Operating cash flow (Jan-Aug 2017) Zero Debt2 1Free cash flow is net operating cash flow less capital expenditure. 2As of the end of August 2017. 13
Slide 14: Recap of capital allocation
4 Recap of capital allocation $550mn Total share repurchase authorization1 $61.7mn Acquisition3 $128mn Share repurchase completed2 ~$39mn First quarterly dividend 1As of October 5, 2017. announced1 2As of the end of August 2017. 3Yum China agreed to pay a cash consideration of $36.7mn to the sellers
Slide 15: Strategic capital allocation
4 Strategic capital allocation Invest Into the core business RepurchaseMore shares Strategic Dividend Growth initiatives Increase on per share basis 15
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Slide 17: Ongoing financial targets
Ongoing financial targets High Single Digit ~17% Double Digit System sales growth, Restaurant margin Operating profit ex FX growth, ex FX 17
Slide 18: Factors impacting EPS growth
Factors impacting EPS growth August YTD 2017 August YTD 2016 Effective tax rate 29.3% 28.0% Diluted share count 397mn 364mn 18
Slide 19: Thank You
A . YumChina Thank You
Slide 20: Non-GAAP Definitions
Non-GAAP Definitions In an effort to provide investors with additional information regarding the Company's financial results and other financial information as determined by generally accepted accounting principles (GAAP), the company also discusses in these materials, the following Non-GAAP informa
Slide 21: Reconciliations of Reported Results to Non-GAAP Measures
Reconciliations of Reported Results to Non-GAAP Measures Reconciliation of Net Income to Adjusted EBITDA Quarter ended Year to date ended (In US$ million) 8/31/2017 8/31/2016 8/31/2017 8/31/2016 Net income – noncontrolling interests $ 10 $ 10 $ 21 $ 10 Net Income – Yum China Holdings, Inc. 211 192 4