Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2018 Earnings Presentation
34 slides from Domino's Pizza's earnings presentation, July 2018
Slide 1: The Official Presentation of the Interim Results
oa ay = THE OFFICIAL 4 +=” PRESENTATION ~ OF THE INTERIM RESULTS o’s Pizza Group plc 26 weeks ended 1 July 2018 e 9 & Dominos:
Slide 2: Today's Agenda
TODAY’S AGENDA 1 Highlights y] Financial performance 3 Business update 4 Q&A David Wild, CEO Simon Wallis, COO Peregrine Riviere, IR & Dominos: D THE OFICIAL FOOD oF EVERYTHING
Slide 3: Growth Driven by Strong UK Performance
GROWTH DRIVEN BY STRONG UK PERFORMANCE UK & ROI SYSTEM SALES UK LFL GROWTH UK & ROI EBIT UK STORE OPENINGS £565.1mf 59% £482mf% 22 GROUP SYSTEM SALES — PROFITBEFORETAX EARNINGS PER SHARE INTERIM DIVIDEND PER SHARE £616.6m@ £457m@ 78pf@ 4.05p@% +t 9. $ Domino's’
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Peregrine Riviere Investor Relations & Dominos: DTH OFICIAL FOOD oF L EVERYTHING
Slide 5: Continued Strong Growth in EBITDA
CONTINUED STRONG GROWTH IN EBITDA £m H1 2018 H1 2017 % Growth System sales 616.6 546.5 12.8% Revenue 259.1 211.3 22.6% Underlying EBITDA Bhs} 49.2 8.4% EBITDA margin (%) 8.6% 9.0% (0.4)pt Depreciation and amortisation (6.9) (4.9) (40.8)% Operating profit 46.4 44.3 4.7% Dominos:
Slide 6: Good Growth in EPS
GOOD GROWTH IN EPS £m H1 2018 H1 2017 % Growth Net finance costs (0.7) 0.3 - Profit before tax 45.7 44.6 2.5% Tax (9.0) (8.7) (3.0% NCI 0.8 (0.1) - Attributable profit after tax 37.6 35.8 4.9% Earnings per share (pence) 7.8 7.3 6.8% Non-underlying (4.0) 1.6 $ Domino’:
Slide 7: Non-Underlying Items
NON-UNDERLYING ITEMS £m H1 2018 UK supply chain transformation (1.9) UK acquired intangibles amortisation (0.4) Accelerated depreciation on IT platforms (0.7) Norway conversions (2.1) Germany conversions/integration (1.4) Germany MAF 2.5 Total (4.0) Mainly costs to commission Warrington Relating to
Slide 8: Segmental Analysis: UK Margins Stable
SEGMENTAL ANALYSIS: UK MARGINS STABLE UK & ROI International Group % % % H12017 growth H12017 growth H12017 growth System sales 565.1 522.7 8.1% 51.5 23.8 116.4% 616.6 546.5 12.8% Revenue Franchise revenue 201.3 187.5 7.4% 17 0.1 203.0 187.6 8.3% Corporate 11.1 - 45.0 23.7 56.1 23.7 136.7% revenue T
Slide 9: £123m Capital Allocated to Present and Future Shareholder Returns
£123M CAPITAL ALLOCATED TO PRESENT AND FUTURE SHAREHOLDER RETURNS = + £38.9m invested in share purchases a SHARE * Completion of Warrington, providing + Completion of £50mprogramme PURCHASES Significant additional capacity and planned for Q3 ORGANIC ericiency GROWTH * Further investments in IT and c
Slide 10: Net debt movement
200.0 (38.9) 180.0 160.0 (25.2) 140.0 (182.1) (41.0) 120.0 53.3 100.0 (18.3) 80.0 (7.5) (2.5) (8.8) 60.0 (4.0) 40.0 (89.2) 20.0 0.0 FY17 net debt EBITDA Non U-L cash Working Tax Other Capex M&A Dividends Buybacks H1 net debt capital
Slide 11: 2018 Guidance Updated; Financial Outlook Unchanged
2018 GUIDANCE UPDATED; FINANCIAL OUTLOOK UNCHANGED Around 60 new stores in UK Warrington underlying P&L impact of £3m - opex and depreciation Capital expenditure of around £30m for 2018 * Warrington completion ° ITassets * Corporate stores in UK and International Medium-term net debt/EBITDA range of
Slide 12: Business Update
BUSINESS UPDATE David Wild Chief Executive Officer & Dominos: DTH OFICIAL FOOD oF L EVERYTHING
Slide 13: UK: Volume-Driven Growth
UK: VOLUME-DRIVEN GROWTH SYSTEM ONLINE COLLECTION ORDER TICKET SALES GROWTH SALES GROWTH SALES GROWTH GROWTH GROWTH 8.3% 14.0% 8.8% 8.1% 0.1% (£m) 27.4 535.0 218 37 fT as H1 2017 LFLexcluding Newstoregrowth Immaturestore Split territories H1 2018 splits growth e 9 $ Dominos: THE OFFICIAL FOOD OF EVE
Slide 14: Competitive Environment: Delivering a Superior End-to-End Customer Experience
COMPETITIVE ENVIRONMENT: DELIVERING A SUPERIOR END- TO-END CUSTOMER EXPERIENCE NATIONAL BRAND LOCAL/TACTICAL PROCUREMENT PRICE ORDERING cook DELIVER MARKETING MARKETING QUALITY PLATFORM » » » » » » ge $$ $Y $F$ $ $Y PF 2 Dominos:
Slide 15: EBITDA bridge H1 2017 to H1 2018
• • • • • • 7.2 6.6 17.6 8.4 2.8 3.6 64.6 68.0 EBITDA H1 2017 Order volumes Basket/composition Food Cost Inflation Labour Royalty & NAF Other Operating Expenses EBITDA H1 2018
Slide 16: AWUS, Food % and Labour %
AWUS Food % Labour % 35.0% 20,090 19,897 19,803 19,120 34.0% 20,000 17,325 15,869 33.0% 14,680 14,837 15,214 15,000 32.0% 30.2% 30.4% 31.0% 30.0% 29.8% 29.7% 29.9% 29.9% 10,000 29.2% 30.0% 28.9% 28.3% 28.5% 28.5% 29.0% 28.2% 28.0% 28.1% 28.2% 27.8% 5,000 28.3% 28.0% 27.0% - 26.0% 2010 2011 2012 2013
Slide 17: Costs and Offsets as Indicated in March
COSTS AND OFFSETS AS INDICATED IN MARCH Labour costs: Food costs +3-4% in 2018: Key offsets: + National living wage April + Up 4.6% in H1 + Volume - franchisees capture 75-80% 2018 * Lower inflation in H2 of value from incremental sales * Apprenticeship, auto * Some risk to milk prices from * GPS -
Slide 18: Progress on Store Openings
PROGRESS ON STORE OPENINGS * 22 openings in H1- 17 different franchisees + ASPA9QOp, base 82p * Addresses 15.7k, base 24.5k ¢ Around 60 UK openings for full year, of which timing on several remains uncertain * Seeking to grow next generation of franchisees + Long term benefits to the system * Balanc
Slide 19: London Acquisition: Operational Progress
LONDON ACQUISITION: OPERATIONAL PROGRESS Foc Objective Organisation Reduce manager andteam - turnover Customer Improve value for money perception Customer Reduce delivery times Growth Increase efficiency and capacity at store level Growth Unlock split opportunities Introduced development programme N
Slide 20: Brand: Stepping Up Engagement
BRAND: STEPPING UP ENGAGEMENT ‘Official Food of Everything’ campaign going from strength to strength Value perception improvement sustained: * 33.1% of customers rated us 5/5 for value in H1 (H1 2017: 24.0%) Innovative and integrated World Cup engagement: + SportBible: record 9.5m views/shares for b
Slide 21: Digital: Still a Growth Driver; Ready for Next Steps
DIGITAL: STILL A GROWTH DRIVER; READY FOR NEXT STEPS Traffic (m) Online incidence (%) Conversion rate (%) Online delivered ticket (£) 22.7 61.2 = 7 32.6 = _” ad H12017 H1 2018 H1 2017 H1 2018 H12017 H1 2018 H1 2017 H1 2018 * Domino’s is a digital business - 78.7% of UK sales are online * Mobile is t
Slide 22: GPS - Strong Progress on Labour Efficiency
GPS - STRONG PROGRESS ON LABOUR EFFICIENCY 603 stores live, including 15 in ROI; complete in UK by year-end + 594 stores customer-facing Labour benefits (net of cost) c. O.6pt of system sales We hope you enjoyed your food! * Partially offsetting NLW impact Clear improvements in Feed Us Back + +5 pto
Slide 23: ROI - Slower H1
ROI - SLOWER H1 LOCAL CURRENCY LOCAL CURRENCY SYSTEM SALES ONLINE SALES COLLECTION SALES GROWTH GROWTH GROWTH AWUS (£) 2.5% 15.1% 4.1% £23,489 + Weak campaign in Q1 impacted on value for money perception * Consistently adverse weather conditions * Many stores at or near capacity —- new openings requ
Slide 24: International: Portfolio for Long Term Growth
INTERNATIONAL: PORTFOLIO FOR LONG TERM GROWTH + SCALE a , ¢ 4 u bl 4 + PROFITABILITY a Medium term trend +t 9. $ Domino's’
Slide 25: International: Multiple Long Term Growth Avenues
INTERNATIONAL: MULTIPLE LONG TERM GROWTH AVENUES Key drivers of profitable growth: * Stores + AWUS = market share * Delivery * Online * Supply chain margin H1 H1 Mature Expansion International Supply chain Food Labour Franchise Location AWUS€£ potential pizzabrands investment cost% cost% potential S
Slide 26: International: Key Actions in H1 and H2
INTERNATIONAL: KEY ACTIONS IN H1 AND H2 H1 actions H2 plans Switzerland - New ops and marketing heads - 5+store openings appointed - Migration to GOLO, Domino’s global online platform - Food and labour cost actions programme - Property head appointed Iceland - Management and colleague - Two new stor
Slide 27: Organisational Changes
ORGANISATIONAL CHANGES International * Simon Wallis promoted to International Managing Director ¢ Direct responsibility for long term growth opportunity * Well placed to export online, supply chain and franchise expertise * Supported by ongoing strengthening of local leadership UK * Simon W’s operat
Slide 28: Summary: Leading Player in Attractive Markets
SUMMARY: LEADING PLAYER IN ATTRACTIVE MARKETS TOTAL SALES UK FRANCHISEE GROWTH PROFIT PER STORE" EPS GROWTH DIVIDEND GROWTH 12.8% +5.3% +6.8% 8.0% * Delivered food is a strong and growing market * Pizza is the number one delivered food; DPG is number one in pizza in several markets * Our competitive
Slide 29: Q&A
Q5A David Wild Chief Executive Officer Simon Wallis Chief Operating Officer Peregrine Riviere Investor Relations & Dominos: DTH OFICIAL FOOD oF L EVERYTHING
Slide 30: YS Dominos:
YS Dominos: ) THE OFFICAL FOOD OF L EVERYTHING
Slide 31: Appendices
APPENDICES * Appendix 1 Definitions Page 32 * Appendix2 UK&ROIP&L Page 33 * Appendix3 Forward-looking statements caution Page 34 $ Domino’:
Slide 32: Definitions
DEFINITIONS * Constant currency basis restates the prior year results to the current year’s average exchange rates + System sales represent the sum of all sales made by both franchised and corporate stores in the United Kingdom, Republic of Ireland, Switzerland and Nordics to consumers + Like-for-li
Slide 33: UK & ROI P&L
UK & ROI P&L 26 weeks ended1 July 26 weeks ended 25th 2018 (£m) June 2017(&m) __” Change System sales 565.1 522.7 8.1% Revenue 212.4 187.5 13.3% Of which supply chain centre 156.7 143.6 9.1% Net royalties 15.8 14.7 7.5% Supply chain centre margin 45.5 43.1 5.6% Net overheads, realty and incentives (
Slide 34: Forward-Looking Statements Caution
FORWARD-LOOKING STATEMENTS CAUTION These 2018 interim results, our preliminary results, our Annual Report and the Domino’s Pizza website may contain certain "forward-looking statements" with respect to Domino’s Pizza Group plc and the Group's financial condition, results of operations and business,