Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2020 Earnings Presentation
48 slides from Domino's Pizza's earnings presentation, Mar 9, 2021
Slide 1: Full Year 2020 Prelim Results: Delivering future growth
FULL YEAR 2020 Prelim Results Delivering future growth 9 MARCH 2021
Slide 2: Agenda
AGENDA 1. Overview & operational update – Dominic Paul, CEO 2. Financial performance – Neil Smith, CFO 3. New strategy: Delivering future growth – Dominic Paul, CEO 4. Q&A
Slide 3: Strong platform to drive future growth
Strong platform to drive future growth Operational progress and strong trading through Covid-19 • Strong trading performance • Accelerated growth of delivery market and step-change in digital credentials • Significant new customer acquisitions • Transformation of the Board and Executive Leadership T
Slide 4: Three priorities in 2020
THREE PRIORITIES IN 2020 System united behind these priorities and doing the right thing PRIORITY 1 PRIORITY 2 PRIORITY 3 Keep serving Build Come together our customers brand preference with our and looking after and help franchisees during our people our communities Covid-19 PRODUCED • £1,348m syst
Slide 5: Agenda
AGENDA 1. Overview & operational update – Dominic Paul, CEO 2. Financial performance – Neil Smith, CFO 3. New strategy: Delivering future growth – Dominic Paul, CEO 4. Q&A
Slide 6: Income statement
INCOME STATEMENT Robust trading performance generating strong underlying profit Underlying, £m 2020 2019 • Adoption of IFRS 16 benefits EBITDA by £7.9m UK & Ireland EBITDA 120.8 114.1 and PBT by £0.7m Depreciation & Amortisation (16.5) (11.7) • Covid-19 related costs of £9.0m partially offset UK & I
Slide 7: Covid-19 related costs
COVID-19 RELATED COSTS Included within underlying items £m H1 H2 2020 • No government loans or funding; no furlough; Supply chain operations 2.1 2.5 4.6 repaid business rates on corporate stores Franchisee support 3.4 0.3 3.7 • UK VAT rate reduction since July generates Charges to supply chain EBITD
Slide 8: Analysis of UK & Ireland EBITDA
ANALYSIS OF UK & IRELAND EBITDA Strong performance given Covid-19 costs £m 2020 2019 Key impacts on EBITDA are: Supply chain centre EBITDA 99.3 101.4 • Supply chain EBITDA includes £8.3m of Covid-19 Net royalties 37.8 33.9 related costs Net overheads, realty & incentives (31.9) (24.5) • Increase in
Slide 9: Franchisee trading
FRANCHISEE trading Positive year for the system 2020* 2019 • Franchisees and their teams have worked Store level tirelessly to remain open and trade safely Average EBITDA £229k £145k • We have supported ability to trade safely EBITDA margin 20% 14% – Purchasing safety equipment Franchisee level • Re
Slide 10: Sales performance
SALES PERFORMANCE Reported system sales growth aided by effect of UK VAT reduction % £m 2020 2019 change • UK system sales up 12.0% to £1,280.7m. LFL UK system sales 1,280.7 1,144.0 12.0% sales growth across UK & Ireland of 10.3% excluding splits Ireland system sales 67.7 66.9 1.2% Total system sale
Slide 11: UK & Ireland trading performance
UK & IRELAND TRADING PERFORMANCE Strong system sales; order count impacted by reduced collections Delivery & collection analysis Quarterly profile 20.0% Total sales 15.0% 17.5% £225.7m £88.2m 14.6% (34.3%) £1,348.4m 10.0% COLLECTION +11.4% 5.0% £1,210.9m +23.7% 1.8% 5.2% 3.5% 0.0% DELIVERY Q1 Q2 Q3
Slide 12: Non-underlying & discontinued operations
NON-UNDERLYING & DISCONTINUED OPERATIONS Significant reduction of charges arising from discontinued International businesses £m 2020 2019 • Focused on removing burden of Discontinued International trading performance International on Group cash flow Iceland 0.6 1.7 • Trading losses materially reduce
Slide 13: Free cash flow
FREE CASH FLOW Strong generation of free cash flow from the business £m 2020 2019 • Strong free cash flow of £99.0m during the Continuing operations EBITDA 125.5 117.0 year, an increase of £41.9m from £57.1m in 2019 Discontinued operations EBITDA (4.2) (15.2) • Working capital benefit primarily rela
Slide 14: Use of free cash
USE OF FREE CASH We will return £88m of cash generated to shareholders £m 2020 2019 • Overall net debt decreased by £60.8m as a Free cash flow 99.0 57.1 result of strong free cash flow and lower dividend payments Capex (19.4) (23.4) Share transactions 13.4 (17.4) • Total capital expenditure of £19.4
Slide 15: Net debt bridge
NET DEBT BRIDGE Strong cash generation from core business Net debt / Net debt / Reported EBITDA Continuing EBITDA Inc Discontinuing (Excl IFRS16): 1.46x (Excl IFRS16): 1.57x (16.9) 4.6 (7.1) (2.5) (6.4) UK & I Funding (25.6) (4.8) (171.8) Capex – German 13.4 106.1 International International Associa
Slide 16: Capital allocation philosophy
CAPITAL ALLOCATION PHILOSOPHY This is an asset-light, high returns business with strong free cash flow PRIORITIES FOR CAPITAL PHILOSOPHY OUTCOMES FOR FY20 Invest in the business to drive Returns-based approach to Capital investment of £19.4m long-term organic growth investment in core business to su
Slide 17: 2021 guidance
2021 GUIDANCE For FY21 we expect: • PBT in FY20 was held back by £5.4m of net one-offs - not expected to recur in current year • Execution of new strategy will deliver further growth in earnings in current year • Underlying depreciation & amortisation of £16m to £18m, including the impact of IFRS 16
Slide 18: Agenda
AGENDA 1. Overview & operational update – Dominic Paul, CEO 2. Financial performance – Neil Smith, CFO 3. New strategy: Delivering future growth – Dominic Paul, CEO 4. Q&A
Slide 19: A great foundation for delivering future growth
We have A great foundation for delivering future growth Brand that Leader in growing Digital is our World class High quality customers love delivery market core business supply chain franchisees 19 Full Year Results 2020
Slide 20: A compelling market backdrop
A compelling Market backdrop An evolving market which offers growth opportunities Growing Digital customer Improved market acceleration customer experience 9.6% 2013-2019 Delivery CAGR >5 million New digital customers acquired in 69% Overall customer satisfaction (OSAT) up from 61% in 2019 the year
Slide 21: Delivering a better future through food people love
purpose delivering a better future through food people love 1 2 3 4 5 MEDIUM TERM ambition Nobody Turbo-charge Amplify our Uphold our Model delivers like our collection product quality industry-leading excellence as a Domino’s business & value scale economics franchisor £1.6bn to Add 200 £1.9bn New
Slide 22: We have reorganised our business to deliver the future
We have reorganised our business to deliver the future DOMINIC PAUL Chief Executive Officer Costa Coffee Royal Caribbean EasyJet NEIL MARK SARAH NICOLA SCOTT MICHAEL SIMON CLIVE PETER ROBIN NADINE SMITH GRIMES BARRON FRAMPTON BUSH VON WALLIS WEST TRUNDLEY CALEY WYNCOLL Chief GELDERN Chief Chief Chie
Slide 23: We are doing the right thing for...
We are doing the right thing for… Our customers, our people and the environment COMMUNITIES CUSTOMERS PEOPLE ENVIRONMENT • £8m pizza giveaways • New vegan product • Launch of Partners • Packaging waste for key workers range launched Foundation - pizza boxes made from 80% recycled materials • Keeping
Slide 24: Objective one: Nobody delivers like Domino's
objective ONE Nobody delivers like domino’s The opportunity initiatives measuring SUCCESS Domino’s is the leading Launch new digital Accelerate LFL delivery QSR delivery brand platforms order count - new mobile app and Delivery market is website Reduce average accelerating - personalize delivery tim
Slide 25: Objective two: Turbocharge our collection business
objective TWO Turbocharge our collection business The opportunity initiatives measuring SUCCESS Collection market is Collections offers Grow collection faster sizable and growing than delivery Continue to develop our We are food offerings (incl. on- Double our market underpenetrated in the-go) share
Slide 26: Objective three: Amplify our product quality and value
objective THREE Amplify our product quality and value The opportunity initiatives measuring SUCCESS Customers love our Re-invigorate Achieve #1 customer products innovation in pizza and NPS vs other pizza / beyond (incl. healthy delivery players We will drive product offerings) innovation to stay ah
Slide 27: Objective four: Uphold our industry-leading scale economics
objective FOUR Uphold our industry-leading scale economics The opportunity initiatives measuring SUCCESS Consistently strong Leverage scale to drive Maintain world-class system performance supply chain efficiencies profitability of the relative to peers system Deploy in-store tech to Invest to enhan
Slide 28: Objective five: Model excellence as a franchisor
objective FIVE Model excellence as a franchisor The opportunity initiatives measuring SUCCESS We will bolster our Stronger business Attract and retain the internal capabilities review process to best talent support franchisee We can continue to success Be the preferred grow through our partner for p
Slide 29: Investment to enhance our core business and drive sustainable growth
investment to enhance our core business, AND drive sustainable growth Annual capital investment of £10m to £15m Supply chain • Investment to maintain world-class standards as business grows • Capture efficiency opportunities Technology Infrastructure • Upgrade online platform and App • Investment in
Slide 30: What's different in the new strategy vs current situation
What’s different in the new strategy vs current situation Current situation New strategy Leader in delivery and digital, but increasing 1 Revolutionised digital experience to accelerate delivery competition from digital aggregators 2 Primary emphasis on delivery to fuel growth Accelerate delivery wh
Slide 31: Franchisee alignment
Franchisee Alignment We are stronger together • We have engaged with our franchisees in the development of our strategic plans • Made an attractive offer to Domino’s franchisee representatives to align their strategic and financial interests with ours: – Enhanced food rebate – to drive growth – New
Slide 32: Material progress on our strategy execution
We are making material progress on our strategy execution Multiple initiatives driving our strategic programme In 2021 2022 and beyond 1 Personalise web platform & Driving improved Launch new web platform deploy CRM marketing effectiveness Launch new mobile App 2 Roll out In Car Collection Targeted
Slide 33: Summary: Delivering a better future through food people love
Summary: Delivering a better future through food people love • A strong financial performance • A brilliant brand and business model • Great foundations for future growth • Clear building blocks to deliver system sales of £1.6bn to £1.9bn – Nobody delivers like Domino’s – Turbocharged collection bus
Slide 34: Appendix
Appendix WEGOT THIS?
Slide 35: IFRS 16 impact
IFRS 16 IMPACT • IFRS 16 was implemented in the current year. This brings previous operating leases onto the balance sheet, as a leased asset and related liability for our directly leased assets, and a lease receivable and payable for our ‘back to back’ property leases with our franchisees • Previou
Slide 36: IFRS 16 implications – 2020
IFRS 16 IMPLICATIONS – 2020 P&L Balance sheet IFRS 16 £m Pre-IFRS 16 impact Post-IFRS 16 £m 2020 Revenue 530.5 (25.4) 505.1 Right of use asset 20.1 Costs excl. depreciation (423.7) 33.3 (390.4) Lease receivable 204.7 Contribution of investments 10.8 - 10.8 Lease liability (226.5) EBITDA 117.6 7.9 12
Slide 37: UK & Ireland unit metrics
UK & IRELAND UNIT METRICS LFL Inc Splits (YOY Growth) Total (All Stores) Items Per Orders Order Product Mix YOY Order UK & ROI Sales (Volume) (Volume) (Volume) Price Orders (m) Growth Total Q1 2.2% (0.6)% 1.4% 0.5% 0.9% 17.5m 1.8% Q2 4.2% (13.3)% 18.6% (2.2)% 1.0% 15.1m (11.3)% Q3 16.5% (7.8)% 10.4%
Slide 38: UK & Ireland system sales bridges
UK & IRELAND SYSTEM SALES BRIDGES UK system sales £m ROI system sales* €m +12.0% 16.7 (7.6) +0.5% 8.8 1.9 (0.7) Split Immature territories 1,280.7 118.8 New store Split store (0.8) 0.0 76.5 growth 76.1 territories growth LfL New Immature exc. Splits store store growth growth 1,144.0 LfL exc. Splits
Slide 39: UK & Ireland LFL sales growth - 2020
UK & IRELAND LFL SALES growth - 2020 Q1 Q2 Q3 Q4 FY LFL sales growth 2020 2020 2020 2020 2020 Excluding splits UK 4.0% 5.6% 18.3% 15.2% 10.9% Ireland (1.7)% (5.4)% 2.0% 0.2% (1.2)% UK & Ireland combined 3.5% 5.2% 17.5% 14.6% 10.3% Including splits UK 2.8% 4.7% 17.3% 14.6% 9.9% Ireland (3.3)% (6.6)%
Slide 40: UK & Ireland LFL sales growth – 2019
UK & IRELAND LFL SALES GROWTH – 2019 Q1 Q2 Q3 Q4 FY LFL sales growth 2019 2019 2019 2019 2019 Excluding impact of splits UK 3.1% 4.8% 3.0% 3.9% 3.7% Ireland 6.8% 7.0% (0.7%) (1.0%) 3.0% UK & Ireland combined 3.3% 4.8% 2.9% 3.5% 3.7% Including impact of splits UK 0.9% 2.7% 1.4% 2.6% 1.9% Ireland 5.3%
Slide 41: Store numbers
STORE NUMBERS 27 Dec 29 Dec £m 2020 2019 UK 1,147 1,130 Franchise 1,110 1,094 Corporate 37 36 ROI 54 54 UK & ROI total 1,201 1,184 Discontinued International operations Switzerland 20 21 Norway NA 56 Iceland 23 24 Sweden 14 13 41 Full Year Results 2020
Slide 42: International performance (discontinued)
INTERNATIONAL PERFORMANCE (DISCONTINUED) 2020 2019 System System £m sales EBIT sales EBIT Iceland 29.2 0.6 36.6 1.7 Norway 9.3 (3.3) 38.3 (11.3) Switzerland 22.1 (1.5) 20.6 (5.4) Sweden 8.2 (4.5) 5.2 (4.0) Central costs (1.4) (1.8) Total trading result 68.8 (10.1) 100.7 (20.8) Loss on disposal of No
Slide 43: Group balance sheet
GROUP BALANCE SHEET 27 Dec 29 Dec £m 2020 2019 Intangible assets 30.5 34.5 Property, plant and equipment 91.1 84.8 Right-of-use assets 20.1 - Lease receivables 204.7 - Trade and other receivables 57.4 99.1 Inventory 11.0 13.0 Market Access Fee 15.3 7.1 Investments 51.7 42.9 Cash and cash equivalents
Slide 44: Group balance sheet (continued)
GROUP BALANCE SHEET (CONTINUED) 27 Dec 29 Dec £m 2020 2019 Lease liabilities (226.5) - Trade and other payables (90.3) (95.5) RCF (243.6) (248.1) Other financial liabilities - (1.3) Tax liabilities (3.6) (6.9) Provisions (13.5) (15.5) Liabilities held for sale (23.5) (27.9) Total liabilities (601.0)
Slide 45: Glossary
GLOSSARY Item Definition AWUS Average Weekly Unit Sales ASPA Average Sales Per Address German associate Represents our 33% associate investment in the trading operations of Domino’s Pizza Germany (also referred to as Daytona JV) HMF Relates to Have More Fun (London) Limited, which operates 6 corpora
Slide 46: Alternative performance measures
ALTERNATIVE PERFORMANCE MEASURES Location in release of Item Definition reconciliation to GAAP measure OVERALL TERMINOLOGY Non-underlying items Items that are material in size, unusual or infrequent in nature, and are Group income statement, note 5 disclosed separately as non-underlying items in the
Slide 47: Alternative performance measures
ALTERNATIVE PERFORMANCE MEASURES Location in release of Item Definition reconciliation to GAAP measure REVENUE MEASURES System sales System sales represent the sum of all sales made by both franchised and Not applicable corporate stores to consumers. Like-for-like (LFL) sales growth LFL excluding sp
Slide 48: Forward-looking statements caution
FORWARD-LOOKING STATEMENTS CAUTION These 2020 annual results, our interim results, our Annual Report and the Domino's Pizza website may contain certain "forward-looking statements" with respect to Domino's Pizza Group pie and the Group's financial condition, results of operations and business, and c