Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — H1 FY2022 Earnings Presentation
71 slides from Domino's Pizza Enterprises's earnings presentation, Feb 23, 2022
Slide 1: ASX cover letter: market presentation for half-year ended 2 January 2022
Domino’s Pizza Enterprises Limited 1/485 Kingsford Smith Drive Hamilton, QLD, Australia 4007 ACN: 010 489 326 www.dominos.com.au 23 February 2022 The Manager Market Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Dear Sir Market presentation for the ha
Slide 2: Half Year Results
& Dominos HALF YEAR RESULTS PERIOD ENDING O2 JANUARY 2022 tS Lite i an
Slide 3: Our Purpose
OUR PURPOSE D0 WE EXIST? WE SMASH THE PREVAILING WISDOM WHICH SAYS YOU CAN’T HAVE QUALITY, SPEED AND LOW PRICE... - THUS PUTTING THE WORLO’S MOST DELICIOUS AND VERSATILE BONDING FOOD WITHIN REACH OF EVERY PERSON. ATOUR
Slide 4: Be Generous and Provide Joyful Experiences
A BE GENEROUS AND PROVIDE JOYFUL EXPERIENCES At Domino's, we're not just selling pizza. We're selling happiness and the joy of connection. Our spirit of optimism, empathy and generosity is catching. Solet’s share it with every customer, OUR PIZZ he ae = De E RIGH | 0 TH BECAUSE IT’S THE'RIGHT THING
Slide 5: Presented By
SY Dominos PRESENTED BY DON MEd RICHARD CONEY GROUP CEO & MANAGING DIRECTOR GROUP CFO ANDRE TEN WOLDE JOSH KILIMNIK DOPE EUROPE CEO APAC CED ANDREW BRADLEY DAVID BURNESS FRANCE CEO ANZ CEO MARIKA STEGMEIJER MISJA VROOM GROUP CHIEF ESG OFFICER NETHERLANDS CEO STOFFEL THIS GERMANY CEO AUSTRALIA NEW ZE
Slide 6: Growth vs. H1 21
H1 21 H1 22 Growth vs. Growth vs. Actual Actual H1 21 H1 20 Network Sales $1,843.0m $2,048.4m +$205.4m +11.1% +$466.2m +29.5% Online Sales $1,432.5m $1,597.7m +$165.2m +11.5% +$467.3m +41.3% Same Store Sales Growth +8.5% +2.8% +2.8% +11.3% Network Store Count 2,795 stores 3,227 stores +432 stores +1
Slide 7: Europe, Asia and ANZ Performance
▪ Europe – continued strong Network Sales and EBIT growth, especially in Q1(1) ▪ Asia – the key drivers of short-term performance are twofold: ▪ Following the lifting of the State of Emergency in Japan (in September), there was a re-basing of Network Sales and EBIT per store ▪ Accelerated new corpor
Slide 8: Group EBIT Growth
▪ Group EBIT growth +25.2% (+11.9% CAGR) over a 2-year period ▪ DPE’s performance over the long-term has been strong, with significant expansion in Network Sales, franchisee profitability and DPE profitability ▪ DPE’s strong multi-year performance has been made possible through long-term strategic i
Slide 9: Half Year Results Trading Update First 6 Weeks of Trade
Trading Update Half Year Results First 6 Weeks of Trade H1 21 H1 22 H2 21 H2 22 (1) (2) Actual Actual Actual Actual Network Sales Growth +16.5% +11.1% +20.9% +6.0% Same Store Sales Growth +8.5% +2.8% +10.1% +1.7% New Organic Store Additions +131 stores +129 stores +11 stores +23 Stores ▪ Strong Netw
Slide 10: Same Store Sales Growth, New Organic Store Additions, Net CAPEX
3-5 Year H1 21 H1 22 Annual Outlook (1) Actual Actual Same Store Sales Growth +3-6% +8.5% +2.8% New Organic Store Additions +9-12% of network +131 stores +129 stores Net CAPEX(2) $100-150m $36.4m $66.1m ▪ Positive SSS and Network Sales growth across the Group, despite the majority of markets rolling
Slide 11: Network Sales Growth
(2) (3) (4) (5) ▪ Network Sales growth +11.1% (+$205.4m) ▪ Same Store Sales +2.8% ▪ Group Online Sales growth +11.5%, +41.3% on a 2-year basis (+$467.3m) 1) H1 22 included an additional trading week: 27-week trading period vs. 26-weeks for prior comparative periods 2) Total Network Sales growth usin
Slide 12: Group New Stores Added
(1) (1) (2) ▪ Group: +285 new stores added to the network ▪ Continued significant store growth, from both new during H1 22 (+432 net store additions since H1 21) and existing stores ▪ Europe: +39 new stores ▪ ANZ: +3 new stores, noting +19 corporate stores were franchised in H1 22 ▪ Asia: +87 new st
Slide 13: EU ANZ ASIA
+3 +39 +243 EU ANZ ASIA 1) Underlying EBIT, excluding significant charges 2) Note a 2-Year Dashboard is also available in Appendix 3 12
Slide 14: Franchisee profitability and store metrics
1) Franchised store count based on closing period store counts as per Appendix 2 3) Group franchisee company EBITDA is calculated on the basis of multiplying Group weighted 2) Number of stores per franchisee, including Taiwan for all periods average store EBITDA submitted to DPE, by Group average nu
Slide 15: Group Financials
GROUP FINANCIALS
Slide 16: Network Sales and EBIT
H1 21 H1 22 Growth vs. H1 20 Growth vs. Underlying Underlying H1 21 Underlying H1 20 $ mil $ mil $ mil % $ mil $ mil % Network Sales 1,843.0 2,048.4 205.4 11.1% 1,582.2 466.2 29.5% Revenue 1,095.1 1,206.6 111.5 10.2% 905.8 300.8 33.2% EBIT 153.4 144.7 -8.7 -5.7% 115.6 29.1 25.2% NPAT 96.4 91.3 -5.1
Slide 17: Growth vs. H1 21
(1,2) H1 21 H1 22 Growth vs. H120 Growth vs. Underlying Underlying H1 21 Underlying H120 $ mil $ mil $ mil % $ mil $ mil % Revenue Europe 324.8 361.0 36.1 11.1% 281.0 80.0 28.5% ANZ 383.0 403.0 20.0 5.2% 343.1 59.9 17.5% Asia 387.3 442.6 55.4 14.3% 281.7 160.9 57.1% Total Revenue 1,095.1 1,206.6 111
Slide 18: Non-recurring costs
▪ $1.53m – AU Fast Food Industry Award class action legal defence costs(2) ▪ $1.54m –Taiwan acquisition costs, primarily incurred in ANZ, predominantly relating to specialist advisor fees 1) See Appendix 6 for further details on Class Action and other litigation matters 17 2) Non-Recurring Costs bef
Slide 19: Free Cash Flow
H1 20 H1 21 H1 22 Statutory Statutory Statutory $ mil $ mil $ mil Underlying EBITDA 176.6 218.2 212.8 Change in working capital 19.3 (11.7) (57.2) ▪ H1 22 Working Capital headwind due to additional trading week(1) and Profit on sale of non-current assets (11.2) (13.2) (13.3) resultant timing of paya
Slide 20: Net CAPEX
▪ H1 22 Net CAPEX $66.1m (Prior Half $36.4m) ▪ CAPEX which Recycles $28.5m (Prior Half $10.3m) ‒ Gross CAPEX $66.4m, including investment in new corporate stores (primarily Japan), franchisee loans for new and existing stores and franchisee acquisitions (predominantly Europe and ANZ) ‒ Cash inflows
Slide 21: Net Debt
H1 21 FY 21 H1 22 Growth vs. Statutory Statutory Statutory H1 21 $ mil $ mil $ mil $ mil Cash & cash equivalents 177.3 174.7 107.6 -67.1 Trade and other receivables 177.8 145.8 157.2 11.4 Other current assets 138.7 134.3 163.7 29.3 Total Current Assets 493.8 454.8 428.4 -26.3 Property, plant & equip
Slide 22: DPE Key Financial Ratios
H1 21 FY21 H1 22 Underlying Underlying Underlying DPE Key Financial Ratios (1) (2) Return on Equity 44.4% 49.3% 48.0% ▪ ROE remains strong, due to continued, robust, profits Return on Capital Employed 16.1% 18.8% 18.1% ▪ ROCE remains strong, due to robust EBIT, whilst DPE continues to invest in our
Slide 23: Underlying EPS
▪ Underlying EPS 105.5c, -5.3% on H1 21 ▪ Underlying EPS 2-Year CAGR +11.9% ▪ Underlying EPS 10-Year CAGR +19.8% 22
Slide 24: Total Stores New Stores
23 TOTAL NEW STORES ACQUIRED STORES OPENED FYTD STORES FYTD
Slide 25: Europe
H1 21 H1 22 Growth vs. H1 20 Growth vs. Underlying Underlying H1 21 Underlying H1 20 Europe $ mil $ mil $ mil % $ mil $ mil % Network Sales 711.9 796.7 84.8 11.9% 620.7 176.0 28.4% Revenue 324.8 361.0 36.1 11.1% 281.0 80.0 28.5% EBITDA 63.8 70.5 6.7 10.4% 53.2 17.2 32.4% EBIT 44.6 49.7 5.1 11.5% 37.
Slide 26: Europe same-store and online sales
(1) (2) (3) (4) 1) H1 22 closing same-store count was 917 out of 1,321 total stores (69.4%) 3) Online Sales percentage calculated as total Online Sales divided by total Network Sales 25 2) Including sales via aggregator platforms 4) New organic stores include all new stores opened after 04 July 2016
Slide 27: Germany Benelux France Denmark
Germany Benelux France 383 TOTAL STORES H122 458 TOTAL STORES H122 457 TOTAL STORES H122 +15 NEW STORES +11 NEW STORES +9 NEW STORES AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STORES PER FRANCHISEE: FRANCHISEE: FRANCHISEE: 2.2 (+0.2) 2.6 (-0.1) 3.0 (+0.0) POPULATION:
Slide 28: Germany and France Performance
▪ Germany: Positive growth in H1, with strong two-year CAGR – successfully cycling high comps in H1 ▪ France: Retained record delivery customers (now >50%), noting reduced carry-out is affecting performance ▪ Benelux: Particularly positive growth in Benelux, from both carry-out and delivery ▪ Store
Slide 29: Total Stores New Stores
28 TOTAL NEW STORES ACQUIRED STORES OPENED FYTD STORES FYTD
Slide 30: Asia
H1 21 H1 22 Growth vs. H1 20 Growth vs. Underlying Underlying H1 21 Underlying H1 20 Asia $ mil $ mil $ mil % $ mil $ mil % Network Sales 483.1 562.1 79.1 16.4% 348.3 213.9 61.4% Revenue 387.3 442.6 55.4 14.3% 281.7 160.9 57.1% EBITDA 82.1 74.2 -8.0 -9.7% 53.2 21.0 39.4% EBIT 55.3 45.7 -9.5 -17.3% 2
Slide 31: Asia same-store and online sales
(1) (2) (3) (4) 1) H1 22 closing store same-store count of was 468 out of 1,043 total stores (44.9 %) 3) Online Sales percentage calculated as total Online Sales divided by total Network Sales 30 2) Including sales via aggregator platforms from FY20 onwards, FY21 ¥6.6b and FY20 ¥3.9b 4) New organic
Slide 32: Japan Taiwan
Japan Taiwan 882 TOTAL STORES H122 161 TOTAL STORES H122 +82 NEW STORES +5 NEW STORES AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STORES PER FRANCHISEE: FRANCHISEE: 3.5(+0.5) 3.9(+0.2) POPULATION: 125.4M POPULATION: 23.4M 142,000+ 145,000+ PEOPLE PER STORE PEOPLE PER STORE 31
Slide 33: Japan and Taiwan Performance
▪ Q1 Network Sales set new records, compounding very strong figures from prior periods ▪ Customer behaviour in Japan rapidly changed following the lifting of a nationwide State of Emergency in October 2021 ▪ SSS in Q2 was -12.4%, +27.9% on a 2-year basis, with stores experienced a rebasing, not an o
Slide 34: Total Stores New Stores
33 TOTAL NEW STORES ACQUIRED STORES OPENED FYTD STORES FYTD
Slide 35: ANZ
H1 21 H1 22 Growth vs. H1 20 Growth vs. Underlying Underlying H1 21 Underlying H1 20 ANZ $ mil $ mil $ mil % $ mil $ mil % Network Sales 648.0 689.6 41.6 6.4% 613.2 76.4 12.5% Revenue 383.0 403.0 20.0 5.2% 343.1 59.9 17.5% EBITDA 82.4 78.7 -3.7 -4.5% 76.8 1.8 2.4% EBIT 64.2 60.3 -3.9 -6.1% 58.1 2.3
Slide 36: ANZ same-store and online sales
(1) (2) (3) (4) 1) H1 22 closing same-store count was 778 out of 865 total stores (89.9%) 3) Online Sales percentage calculated as total Online Sales divided by total Network Sales 2) Including sales via aggregator platforms, now including additional sales of $15.4m for H1 21 4) New organic stores i
Slide 37: Australia New Zealand
863 TOTAL STORES H122 +3 NEW STORES AVERAGE NUMBER OF STORES PER FRANCHISEE: 2.1 (+0.0) POPULATION: 31.0M 36,000+ PEOPLE PER STORE 36
Slide 38: Project Ignite
The Project Ignite reinvestment (c. $6m in H1 22)(1) will deliver long-term benefits: ▪ Fortressing underpenetrated markets, especially Victoria and South Australia ▪ Operations 360 has delivered a meaningful improvement in the ▪ Network improvement, as high-quality franchisees purchase underperform
Slide 39: ANZ Leadership and Trading
▪ Domino’s ANZ appointed experienced leaders to CEO and CMO positions – with a focus on enhancing existing strategies ▪ Ongoing hiring efforts have allowed stores to resource larger delivery volumes vs. prior year ▪ Heightened COVID-19 case numbers increased customer demand in Q1 but also affected s
Slide 40: Domino's for Good: Environmental, Social and Governance
DOMINO’S FOR GOOD ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Slide 41: FY22 ESG Priorities
In FY22 we are focused on 4 main elements: ▪ Creating a (structural) measurement and reporting framework ▪ Ensuring compliance and risk management for crucial ESG topics ▪ Communicating and engaging with our stakeholders ▪ Ensuring we have a clearly articulated ESG vision and strategy, aligned with
Slide 42: ESG Milestones in H1 22
Domino’s has completed major ESG milestones in H1 22: ▪ Submitted our Business Ambition for 1.5°C commitment letter to the Science Based Target initiative ▪ Expanded our partnership with Compassion in World Farming, extending our Better Chicken Commitment from Europe to Australia and New Zealand – f
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Slide 44: Next Generation App
▪ Domino’s will navigate short-term challenges with our consistent long- term approach Next generation app, to launch in Q4 ▪ Our stores, our customers and our communities are transitioning to ‘Living with COVID’ as the pandemic becomes endemic ▪ We aim to provide a seamless experience for our custo
Slide 45: Delivering Great Value to Customers
▪ Domino’s is focused on delivering great value to customers Product + Service + Image (PSI) = Value Price ▪ Domino’s chooses to respond to cost pressures with a customer-first approach ▪ Balancing the value equation by giving “More for More” ▪ We have added menu options (bundles, sizing offerings a
Slide 46: Market for Delivered QSR and Immediacy Grocers
▪ The market for delivered QSR and Immediacy Grocers is rapidly expanding – growing total demand and ‘contract’ labour market ▪ QSR competitors and grocers are facing the inherent challenges of delivery operations ▪ During this time, Domino’s Pizza Enterprises has reduced delivery times across our m
Slide 47: The Age of Delivery
▪ The Age of Delivery is upon us: bringing the retail and restaurant industries significant opportunities over the medium- to long-term ▪ This opportunity will also present challenges: optimising delivery networks, technology and access to delivery experts where labour is in high demand ▪ Domino’s i
Slide 48: Europe ANZ Asia Milestones
▪ Europe milestone 3,050 stores by 2033 − Europe 2.3x current market size ▪ ANZ store target 1,200 by 2025-2028 − ANZ 1.4x current market size ▪ Asia milestone 2,400 stores by 2033 − Asia 2.3x current market size ▪ Group milestone 6,650 stores by 2033 − Group 2.1x current market size ▪ Management re
Slide 49: Same Store Sales Growth, New Organic Store Additions, Net CAPEX
H1 21 H1 22 3-5 Year Actual Actual Annual Outlook Same Store Sales Growth +8.5% +2.8% +3-6% New Organic Store Additions +131 stores +129 stores +9-12% of network Net CAPEX(1) $36.4m $66.1m $100-150m ▪ Management Continues to deliver strong results in an uncertain environment ▪ New Organic Store Addi
Slide 50: Living with COVID
“Management is prepared for a medium-term future living with COVID-19; Domino’s will rise to the challenge” “In all regions, we intend to put people first, and grow market share” - Domino’s Market Presentations: August 2020, reprinted February 2021 ▪ During the initial stages of COVID-19: Domino’s P
Slide 51: Positive SSS and Network Sales Growth
▪ Positive SSS and Network Sales growth across the Group, despite the majority of markets rolling very high prior-year comparatives. Of particular note are excellent recent sales momentum in Australia, Benelux and Taiwan ▪ Short-term results reflect full and partial temporary store closures resultin
Slide 52: Network Expansion and Digital Investment
▪ This year, the Network will expand by +500 stores, through both organic new store openings and the integration of Taiwan ▪ DPE opened our 3,000th store in H1 22, our 4,000th store is planned in Calendar Year 2023, and our 5,000th store is planned during Calendar Years 2026-27 ▪ Our unrivalled abil
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Slide 54: Appendices
APPENDICES
Slide 55: Key Dates
▪ 1 March, 2022 – Ex-dividend date ▪ 2 March, 2022 – Dividend record date ▪ 17 March, 2022 – Dividend payment date ▪ 24 August, 2022 – FY 22 Full Year results ▪ 2 November, 2022 – DMP Annual General Meeting ▪ The transcript of today’s presentation will be added to our investor website: https://inves
Slide 56: Store Count by Region
H1 20 FY 20 H1 21 FY 21 H1 22 European stores Franchised stores 1,042 1,060 1,105 1,174 1,198 Corporate stores 81 101 102 112 123 European Network Stores 1,123 1,161 1,207 1,286 1,321 Net stores added in period 26 64 46 125 35 ▪ Group: +278 net stores added during the period ANZ stores Franchised st
Slide 57: Underlying EBIT, excluding significant charges
(1) 1) Underlying EBIT, excluding significant charges 56
Slide 58: Underlying NPAT Growth
H1 20 H1 21 H1 22 +/(-) H121 Underlying Underlying Underlying Underlying(1) H1 21 Analysis vs. Prior Half $ mil $ mil $ mil % Network Sales 1,582.2 1,843.0 2,048.4 11.1% ▪ Network Sales +$205.4m (+14.8% in constant currency) Revenue 905.8 1,095.1 1,206.6 10.2% EBITDA 176.7 218.2 212.8 (2.5%) Depreci
Slide 59: Statutory and Underlying Results
H121 H121 H121 H122 H122 H122 +/(-) H121 Significant Significant Statutory Underlying Statutory Underlying Underlying (1) Charges Charges $ mil $ mil $ mil $ mil $ mil $ mil % Network Sales 1,843.0 1,843.0 2,048.4 2,048.4 11.1% Revenue 1,095.1 1,095.1 1,206.6 1,206.6 10.2% EBITDA 217.1 1.0 218.2 209
Slide 60: Class Action
CLASS ACTION ▪ The Company rejects the allegations and has been defending the action vigorously ▪ The matter has been listed for trial in November 2022, with mediation to occur by May 2022 ▪ The statement of claim does not quantify any loss by the lead applicant or the alleged group ▪ Accordingly, t
Slide 61: Summary
H1 21 FY21 H1 22 H1 21 FY21 H1 22 Return on Equity Return on Capital Employed Underlying Underlying Underlying Underlying Underlying Underlying $ mil $ mil $ mil $ mil $ mil $ mil 12 Month Rolling NPAT (Before Minority Interest) 177.6 197.9 193.2 12 Month Rolling EBIT 268.2 293.7 285.0 Shareholders
Slide 62: Cash Conversion and Working Capital
H1 21 FY21 H1 22 H1 21 FY21 H1 22 Cash Conversion Movement in Working Capital Underlying Underlying Underlying $ mil $ mil $ mil $ mil $ mil $ mil Operating cash flow before interest & tax 195.1 449.1 140.0 Trade and other receivables (33.9) 0.8 (5.9) Trade and other payables 33.2 43.8 (29.2) EBITDA
Slide 63: Interest Coverage and Net Debt
H1 21 FY21 H1 22 H1 21 FY21 H1 22 Interest Coverage Underlying Underlying Underlying Net Debt Underlying Underlying Underlying Pre AASB16 Pre AASB16 Pre AASB16 Pre AASB 16 Pre AASB 16 Pre AASB 16 $ mil $ mil $ mil $ mil $ mil $ mil 12 Month Rolling EBITDA (ex AASB16) 342.3 368.4 362.6 Non-current bo
Slide 64: Investor Visit
▪ Expansion through fortressing and greenfield locations has multiplied Investor visit H1 22 marketing & technology investment, and brand presence April 2019 550 stores 882 stores ▪ Increased footprint allows for larger share of voice in the QSR category 43% franchised 52% franchised ▪ Deliberate ap
Slide 65: We Help People Grow and Prosper
✓ We help people grow and prosper: ✓ High quality franchisees ✓ Significant opportunities for new managers to develop into franchising ✓ Multi-unit owners expanding their operations, including the next generation ✓ We do the right thing, because it’s the right thing to do: stores give to those in ne
Slide 66: Japan and Taiwan
Japan ▪ Trading conditions continue to be challenging – H2 prior comparable same-store sales were +11.4% and the government has recently implemented ‘quasi state of emergency’ in 34 of 47 prefectures Domino’s Japan has built a stronger, more sustainable business, and will continue this success ▪ Gro
Slide 67: Europe Market Outlook
▪ Further easing of societal restrictions is anticipated – Denmark has recently lifted all measures ▪ Despite this easing, ongoing changes to customer behaviour and operations is expected as individuals seek to reduce their COVID-19 risk (e.g. working from home) ▪ Plans to negate inflation are reson
Slide 68: Digital Delivery and Growth
▪ The likelihood of further societal restrictions is reduced, however the return of customers to offices and universities is still uncertain ▪ Digital delivery growth will continue to power our future ▪ Investing in roll-out of new app: bringing new customers to our platform and providing the most r
Slide 69: Upside Beyond 2033
▪ Management foresees significant upside, beyond 2033, in our existing businesses, particularly Europe and Asia, and is resourcing this through investment in our internal Development teams, facilitating franchisee expansion ▪ Note our milestones do not represent fully penetrated targets for these ma
Slide 70: Same Store Sales Methodology
▪ Same Store Sales are calculated weekly, measured in local currency ▪ Same Store Sales is the process of comparing year-on-year growth of existing, mature, stores ▪ Stores are included after two years of trading (either two years of DPE, or one year pre-acquisition plus one year of DPE) ▪ Where a d
Slide 71: Forward looking statements disclaimer
▪ 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 obligation to provide recipients of this presentation
Domino's Pizza Enterprises — H1 FY2022 Earnings Presentation on 6ix