Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2019 Earnings Presentation
44 slides from Domino's Pizza's earnings presentation, July 2019
Slide 1: 26 Weeks Ended 30 June 2019
(Domine ’s Pizza Group plc 26 Weeks Ended 30 June 2019 . &8 9 i } THE OFFICIAL FOOD OF : f ie
Slide 2: Today's Agenda
TODAY’S AGENDA 1 2 3 | oe Summary David Wild, CEO Financial performance David Bauernfeind, CFO UK review David Wild, CEO & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 3: First Half Summary Financials
FIRST HALF SUMMARY FINANCIALS UK & ROI SYSTEM SALES UK LFL GROWTH UK & ROI EBIT INTERNATIONAL EBIT £596.0ma@ 3.9% £516m@% £(6.4)m GROUP EBIT UNDERLYING GROUP PBT BASIC EPS DIVIDEND PER SHARE £45.2mM ES £423mB 7.5p 4.2p & e 9 Based on underying performance at reported exchange rates on 926 week bass,
Slide 4: Financial Performance
FINANCIAL PERFORMANCE David Bauernfeind Chief Financial Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 5: IFRS Restatement of Revenue and Costs
IFRS 15 RESTATEMENT OF REVENUE AND COSTS * IFRS 15 implemented for the first time for Hi 2018 results * View was that IFRS 15 had no impact on revenue treatment relating to NAF and eCommerce funds * Technical assessment of new auditors: appropriate to include revenues and costs of the funds * New ac
Slide 6: Group System Sales and Revenue
GROUP SYSTEM SALES AND REVENUE croup £m H1 2019 H1 2018 % Change System Sales 645.8 616.6 4.7% Franchise Revenue 207.3 203.0 2.1% Corporate Revenue 60.4 56.1 7.7% NAF & eCommerce Revenue 27.9 26.5 5.3% Total Revenue 295.6 285.6 3.5% EBIT 45.2 46.4 (2.6%) Margin % of system sales 7.0% 7.5% (50bps) Ba
Slide 7: System Sales and Revenue
SYSTEM SALES AND REVENUE pK Breland ternational | International UK & Ireland £m H1 2019 H1 2018 % Change H12019 H12018 % Change System Sales 596.0 565.1 5.5% 49.8 51.5 (3.4%) Franchise Revenue 206.2 201.3 2.4% 11 1.7 (35.3%) Corporate Revenue 15.5 1.1 39.6% 44.9 45.0 (0.2%) NAF & eCommerce Revenue 2
Slide 8: Group P&L
GROUP P&L £m H12019 H1 2018 % Change Underlying EBITDA 52.4 53.3 (1.7%) Depreciation & Amortisation (7.2) (6.9) 4.3% EBIT 45.2 46.4 (2.6%) Net underlying finance costs (2.9) (0.7) Profit before tax 42.3 45.7 (7.4%) Underlying tax (9.4) (9.0) 4.4% Effective tax rate on underlying PBT 22.2% 19.7% 250b
Slide 9: Non Underlying Items
NON UNDERLYING ITEMS Contribution to eCommerce fund (7.1) International impairments (2.2) Amortisation of London Corporate Stores (0.5) German associate store conversion costs (2.5) Put options 0.9 Non underlying EBIT (11.4) Put option discount unwind (0.7) Market access fee discount unwind 0.3 Non
Slide 10: UK & ROI LFL Sales Growth
UK & ROI LFL SALES GROWTH £m Q12019 Q2 2019 H12019 Excluding impact of splits UK LFL 3.1% 4.8% 3.9% Ireland LFL 6.8% 7.0% 6.9% Including impact of splits UK LFL 0.9% 2.7% 1.8% Ireland LFL 5.3% 5.5% 5.4% $ Domino’:
Slide 11: Analysis of UK & ROI P&L and Margin Drivers
ANALYSIS OF UK & ROI P&L AND MARGIN DRIVERS £m H12019 H1 2018 % change Supply Chain Centre revenue 163.0 156.7 4.0% Supply Chain Centre EBITDA 49.0 45.5 7.7% Net royalties 16.7 15.8 5.7% Net overheads, realty & NSO incentives (10.8) (10.3) (4.9%) UK corporate stores 0.4 0.6 (33.3%) UK JVs & associat
Slide 12: Iceland
ICELAND ° FY 2018: EBIT £4.1m, capex £2.2m * FY 2019 capex c.£1m; c.£0.5m in H1 ° Weak macro-economic background a significant headwind ° Website relaunched in July - functionality for localised offers * H2initiatives primarily focused on labour productivity System Sales 18.1 20.2 (£m) EBIT (£m) 11
Slide 13: Norway
NORWAY «FY 2018: EBIT (£6.6m), capex £4.4m po 2019 | 2018 . System Sales (£m) 19.5 19.9 * FY 2019 capex c.£3m, c.£2m in H1 EBIT (£m) (41) (2.6) * Acquisition and integration of Dolly Dimples stores 57 49 has represented a significant challenge Of which Domino’s 47 34 C hensi lan being impl d branded
Slide 14: Switzerland
SWITZERLAND ¢ FY 2018: EBIT (£2.5m), capex £1.8m * FY 2019 capex c.£3m, c.£1m in H1 * Regionalising marketing plans with particular focus on driving Geneva * Relaunched dough weight and topping mix in June * Labour productivity key ongoing focus System Sales (£m) 10.0 9.5 EBIT (£m) (1.7) (0.9) Store
Slide 15: Sweden
SWEDEN ¢ FY 2018: EBIT (£1.6m), capex £2.0m * FY 2019 capex c.£2m, c.£1m in H1 * GOLO launched end of Hi; early signs encouraging with conversion rate improving * Currently piloting labour scheduling tool to improve store level profitability System Sales (£m) 2.2 1.9 EBIT (£m) (1.8) (1.3) Stores 9 6
Slide 16: Net Debt Bridge
NET DEBT BRIDGE net de EBITDA 2.2x (240.0) (17.4) (07) (238.8). UK & Ireland International (230.0) £19.1m (£11.6m) (25.0) (220.0) (210.0) (203.2) (200.0) (43) (190.0) G3) (7.5) (180.0) 26.6 (170.0) fT UK&4I FCF (pre Capex) International FCF (pre Capex) Funding for German JV Share buybacks Closing ne
Slide 17: Group Cash Flow
GROUP CASH FLOW £m H1 2019 Mipxeyey | Working Capital: Underlying EBITDA 52.4 53.4 | ° £7mincrease in inventory as Add back non-cash items (2.7) (2.2) part of Brexit planning fed sls 22) (22.2) (8.8) |. £&7m of additional creditor Capex (11.8) (18.3) payments due to seasonal Dividends received 0.5 0
Slide 18: Group Cash Flow (Cont'd)
GROUP CASH FLOW (CONT'D) £m H12019 H1 2018 underlyingitems 2.4 16.2 Non-underlying items (0.5) (4.0) Free cash flow 8.9 12.2 Funding to German associate (1.4) (10.8) Acquisitions - (30.2) Dividends (25.0) (25.2) Share buybacks (17.4) (38.9) Cash flow movement in Net Debt (34.9) (92.9) Forex on RCF (
Slide 19: Capex
CAPEX &m H1 2019 Maintenance capex 2.5 New UK corporate stores 0.7 E-commerce and other IT 4.3 Total UK 7.5 International 4.3 Total Group 11.8 * Full year guidance remains £25m-£30m * Next 24 months - UK & ROI capex projects: * Cages and Dollies £2m-£3m * Naas SCC extension and upgrade £6m-£8m * Sco
Slide 20: 2019 Guidance
2019 GUIDANCE « UK new store openings and pipeline impacted by ongoing discussions with franchisees * Underlying Depreciation & Amortisation c.£16m * Underlying Interest (excluding foreign exchange movements) c.£6m « Underlying Effective Tax Rate c.22% * Non-underlying items - no further cash non-un
Slide 21: Franchisee Profitability
FRANCHISEE PROFITABILITY * Working closer with our franchisees * Improved our processes to gain more consistent data ¢ Both store and franchisee level profitability * Consistent treatment of head office allocations Still embedding new approach and unable to quantify comparatives through this year Mo
Slide 22: H1 Store Level Profitability
H1 STORE LEVEL PROFITABILITY Mature Stores, Mature Stores, All Stores excluding split including split affected stores affected stores H1 Average store EBITDA £68.7k £71.8k £70.7k Average store EBITDA margin 13.4% 13.8% 13.6% * Labour costs: National Living Wage increased 4% - 5% April 2019; competit
Slide 23: UK & Ireland Performance
UK & IRELAND PERFORMANCE Pemue Wild hief Executive Officer
Slide 24: UK Performance
UK PERFORMANCE (&m) 535.0m 19.1m 1.7m a . (9.7m) UK system sales +5.3% 2018 H1 LFL exc Splits New Store Growth —_ Immature Store Growth Split Territories 2019 H1 * Online sales +9.3% * Collection sales +3.6% ¢ LFLinc splits: orders (3.4%), items per order (0.8%), product mix +2.9%, price +3.0% * Tot
Slide 25: Brand
BRAND Number one brand, with recall at 87% Solidified dominance in catch-up TV Emily Somers joins as Chief Marketing Officer in August THEOFFICIAL <= FOOD OF CAME < FOR 1 EPISODE STAYED FOR 20 & Ae ae <¥ Domino's’ wartnersup “THE orci Fon oF, VERFTHING WITH ALL 4 es 9 & Dominos:
Slide 26: New Product Development
NEW PRODUCT DEVELOPMENT Delight range broadens our appeal Cheeseburger pizza success continues Catalan Chicken and Chorizo Tabasco Stuffed Crust Mango and Habanero wings es 9 & Dominos:
Slide 27: Continued Success with App and Mobile
CONTINUED SUCCESS WITH APP AND MOBILE App demand up 15% App conversion up 170bps 245.4m 48.2% 213.1m 7 46.5% i H1 2018 H12019 H1 2018 H12019 * 24.5 million App downloads in total * H1App downloads +4.4% year on year to 1.9 million * Mobile (App and mobile internet) now accounts for two-thirds of sal
Slide 28: Single Customer View
SINGLE CUSTOMER VIEW Single Customer View delivered in H1, marketing to over 9m customers Frequency & Value Lapsing High Value Trialling campaign management tool in H2 HOME ALONE DEAL GARLIC PIZZA BREAD Lapsing 7 Low Value GooneEnS Recency Single Lapsing Single Active New Customer segmentation compl
Slide 29: Walk the Talk
“Walk the Talk” Build operational literacy Develop talent “Skin in the Game” Understand and learn Innovate, share and pioneer Make a financial return Unlock London opportunities - currently significantly underpenetrated So far opened 4 stores, relocated 2 and refitted 8 Have More Fun acquisition was
Slide 30: Corporate Stores Performance
CORPORATE STORES PERFORMANCE Financial: * LFLsales growth excluding splits +4.4% * EBITDA £0.4m, versus £0.6m H1 2018, due to increased local store marketing spend Operational Orders per man hour * Rolled out carry out deals to HMF; driven carry out proportion from 22% to 27% * Good performance in o
Slide 31: ROI Performance
RO! PERFORMANCE * ROI System sales +8.5% * Online sales +19.9% « ROIAWUS c.£25k 0.7m 37.2m 2.2m 0.4m ——< {=x = (0.3m) ROl system sales +8.5% 2018 H1 LFL exc Splits New Store Growth Immature Store Growth Split Territories 2019 H1 (€m) = $ Dominos: -
Slide 32: Summary
SUMMARY David Wild Chief Executive Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 33: Summary
SUMMARY * Strong performance in UK & Ireland * Active discussions with our franchisees continue, confident we will reach win-win solutions but will take time, likely into 2020 * Focused on improving operational capabilities and performance in International e 9, $ Domino's’
Slide 34: Q&A
Q5A David Wild Chief Executive Officer David Bauernfeind Chief Financial Officer & Dominos’ PTH oFFIiaL Foon oF EVERYTHING §
Slide 35: Appendix
YS Dominos: ) THE OFFICAL FOOD OF L EVERYTHING
Slide 36: Store Numbers
STORE NUMBERS H1 2019 H1 2018 FY 2018 UK 1109 1067 1103 Franchise 1074 1042 1070 Corporate 35 25 33 ROI 51 49 50 Switzerland 21 19 20 Norway 57 49 54 Domino’s branded 47 34 42 Dolly Dimples branded 10 15 12 Iceland 25 23 25 Sweden 9 6 9 Group 1272 1213 1261 Dominos:
Slide 37: UK & ROI LFL Sales Growth Prior Year
UK & ROI LFL SALES GROWTH PRIOR YEAR Excluding impact of splits Q1 2018 Q2 Q3 2018 Q4 2018 H2 2018 FY 2018 UK LFL 7.0% 4.7% 2.2% 4.5% 5.9% 3.4% 4.6% Ireland LFL 3.5% 1.4% 3.3% 7.5% 2.4% 5.5% 4.0% Including impact of splits UK LFL 3.9% 1.8% (0.4%) 2.0% 2.9% 0.9% 1.9% Ireland LFL 0.4% (1.4%) (0.5%) 4.
Slide 38: UK Sales Composition
UK SALES COMPOSITION Items Per 9 9 YOY Order || Sales Orders Order Product Mix Price Orders (m) Growth 2018 H1 2.9% 2.3% 1.5% (1.2%) 0.3% 32.2m 8.1% H2 0.9% (2.6%) 2.8% (1.7%) 2.4% 32.3m 2.3% FY 1.9% (0.2%) 2.1% (1.6%) 1.5% 64.5m 5.1% 2019 H1 1.8% (3.4%) (0.8%) 2.9% 3.0% 32.3m 0.2% $ Domino’:
Slide 39: Restatement of Revenue and Costs
RESTATEMENT OF REVENUE AND COSTS £m H1 2018 FY 2018 Previously disclosed revenue 259.1 534.3 Restatement impact 26.5 53.9 Restated revenue 285.6 588.2 Previously disclosed cost of sales (152.8) (311.1) Restatement impact 0.5 11 Restated cost of sales (152.3) (310.0) Previously disclosed admin costs
Slide 40: Group Balance Sheet
GROUP BALANCE SHEET £m H1 2019 H1 2018 Intangible assets 102.7 114.4 Property, plant and equipment 110.1 110.5 Trade and other receivables 89.8 91.9 Inventory 15.0 10.6 Market access fee OFS) 11.8 Investments 40.9 33.1 Cash and cash equivalents 11.5 18.5 Deferred consideration 6.6 - Tax assets 0.9 7
Slide 41: Group Balance Sheet (Cont'd)
GROUP BALANCE SHEET (CONT'D) £m H1 2019 H1 2018 Trade and other payables (95.9) (96.9) RCF (247.2) (197.0) Other financial liabilities (14.7) (18.3) Tax liabilities (15.8) (16.3) Provisions (17.2) (17.5) Total Liabilities (390.8) (346.0) Net Assets (4.0) 52.7 $ Dominos:
Slide 42: Glossary
GLOSSARY Item AWUS ASPA German associate HMF International London Corporate Stores eCommerce fund MAC Maintenance capex NAF SMP Defi ion Average Weekly Unit Sales Average Sales Per Address Represents our 33% associate investment in the trading operations of Domino’s Pizza Germany (also referred to a
Slide 43: Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ocation in release of reconcilia 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 notes to the account
Slide 44: Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURES ocation in release of reconcilia 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 sales performance is calculated a