Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — Merger or Acquisition (August 2013)
57 slides from Domino's Pizza Enterprises's merger presentation, Aug 13, 2013
Slide 1: Acquisition of Domino's Pizza Japan and Entitlement Offer
For personal use only ACQUISITION OF DOMINO’S PIZZA JAPAN AND ENTITLEMENT OFFER 13 August 2013 NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 2: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER For personal use only Disclaimer This investor presentation (“Presentation”) has been prepared by Domino’s Pizza Enterprises Limited (ABN 16 010 489 326) (“DPE”). This Presentation has been prepared in relation to a pro-rata renounceable entitlement offer of new DPE o
Slide 3: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER For personal use only Financial Data All dollar values are in Australian dollars (“A$”) and financial data is presented as at 30 June 2013 unless otherwise stated. Investors should note that this Presentation contains pro-forma financial information. In particular, pr
Slide 4: Important Notice and Disclaimer
IMPORTANT NOTICE AND DISCLAIMER For personal use only Future Performance This Presentation contains certain “forward-looking statements”. The words “forecast”, “estimate”, “likely”, “anticipate”, “believe”, “expect’, “project”, “opinion”, “predict”, “outlook”, “guidance”, “intend”, “should”, “could”
Slide 5: Contents
CONTENTS For personal use only 1 Transaction Overview 2 Overview of Domino’s Pizza Japan 3 Strategic Rationale 4 Transaction Impact 5 DPE Full Year Results and Outlook 6 Acquisition Funding 7 Appendices NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES 5
Slide 6: Transaction Overview
1 TRANSACTION OVERVIEW For personal use only NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 7: Key Highlights of Transaction
KEY HIGHLIGHTS OF TRANSACTION For personal use only Acquisition of a 75% interest in Domino’s Pizza Japan (“DPJ”), which holds the Master Franchise rights for Domino’s Pizza in Japan with a near 30 year operating history 259 stores (216 corporate owned, 43 franchised), as at 30 June 2013 Third large
Slide 8: Transaction Overview
TRANSACTION OVERVIEW DPE is to acquire a 75% interest in Domino’s Pizza Japan, a leading Domino’s Master Franchise in a For personal use only developed market with the potential for store growth • DPE has entered into a binding agreement with Bain Capital for the acquisition of a 75% interest in Dom
Slide 9: Transaction Overview
TRANSACTION OVERVIEW For personal use only • An established Domino’s Master Franchise complementary to current portfolio of territories Compelling • Expected new pillar of growth with opportunity to increase store numbers Strategic Rationale • DPE is able to bring its intellectual property and exper
Slide 10: Alignment with DPE's Strategic Growth Plan
ALIGNMENT WITH DPE’S STRATEGIC GROWTH PLAN DPE has assessed this transaction against six key criteria For personal use only 1• Expansion within the Domino’s brand 2• Profitable and cash generative business that is EPS accretive to DPE shareholders on FY2013 underlying pro-forma earnings 3• Opportuni
Slide 11: Expanded DPE Following Acquisition of DPJ
EXPANDED DPE FOLLOWING ACQUISITION OF DPJ 1,229 stores across 6 countries(1) For personal use only Stores: 1,229(1) Domino’s Pizza Pro-Forma (“PF”) Network Sales: A$1,117m(2) Enterprises PF Revenue: A$546m(2) PF Underlying EBITDA: A$84m(2) Australia / New Zealand(1)(2) Europe(1)(2) Japan(1)(2) Corpo
Slide 12: Overview of Domino's Pizza Japan
For personal use only OVERVIEW OF 2 DOMINO’S PIZZA JAPAN NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES 12
Slide 13: Overview of Domino's Pizza Japan
OVERVIEW OF DOMINO’S PIZZA JAPAN DPJ is the third largest pizza chain in Japan by number of stores with a primary focus on the Tokyo and For personal use only Osaka regions and potential for expansion in new regions • Domino’s Pizza commenced operations in Store Locations as at 30 June 2013 Japan in
Slide 14: History of Domino's Pizza Japan
HISTORY OF DOMINO’S PIZZA JAPAN Domino’s Pizza has a near 30 year operating history in Japan For personal use only 1985: DPJ 1993: 100th 1997: DPJ’s 2000: Head 2013: DPJ opens first store store of DPJ first store in office moves opens 250th in Ebisu, Tokyo opens Kyushu region from Kamiya- store open
Slide 15: #3 Position in Japanese Pizza Market
#3 POSITION IN JAPANESE PIZZA MARKET For personal use only • There are approximately 2,150 chain pizza outlets in Japan(1), with the three main players representing approximately 1,160 stores(2)(3) • Pizza-La, Pizza Hut and Domino’s Pizza lead the market in Tokyo and Osaka by number of stores • High
Slide 16: Diverse Product Offering
DIVERSE PRODUCT OFFERING For personal use only • DPJ has a diverse menu offering with more than 280 items at a premium price point – Quattro-style pizzas are the key category, comprising 46% of total sales – Medium-sized quattro pizza priced between approximately A$25 and A$35 NOT FOR RELEASE OR DIS
Slide 17: Strong Store Economics
STRONG STORE ECONOMICS For personal use only • Profitable store model Average Weekly Unit Sales A$ – Average DPJ store size of between 80 – 120m2 22,483 – Average DPJ store average weekly unit sales 20,190 (“AWUS”) of ¥1.9 million (A$22,483(1)) 15,239 • Strong operating systems – DPJ’s operational e
Slide 18: Significant Expansion to Store Network
SIGNIFICANT EXPANSION TO STORE NETWORK For personal use only # of DPJ Network Stores Network Rollout Opportunity 259 251 • DPJ increased its store network by 74 stores 43 between March 2011 and June 2013 42 209 185 28 – Number of franchise stores more than 21 doubled over this period, rising to 17%
Slide 19: Domino's Pizza Japan Historical Financial Performance
DOMINO’S PIZZA JAPAN HISTORICAL FINANCIAL PERFORMANCE For personal use only Revenue(1) EBITDA(1)(2) JPY Billion JPY Billion 2.3 2.3 21.5 19.2 16.7 1.6 FY11A FY12A FY13A FY11A FY12A FY13A • Revenue increased by a CAGR of 13% between • EBITDA increased by a CAGR of 20% between FY11A FY11A and FY13A an
Slide 20: Strategic Plan for Growth
STRATEGIC PLAN FOR GROWTH For personal use only Key Initiatives for DPJ • Franchise system opportunity – Potential to move to a 30% franchise model, and potentially a greater mix as DPJ targets 600 stores – Potential to leverage operational depth by offering franchise funding to high performing stor
Slide 21: Shift to High Traffic Locations
SHIFT TO HIGH TRAFFIC LOCATIONS The relocation of back street stores with low visual impact to high street locations is expected to be one For personal use only driver of same store sales growth. There is an ability to employ DPE’s “Entice” store format for future DPJ stores • Improves store based m
Slide 22: Experienced Leadership Team
EXPERIENCED LEADERSHIP TEAM For personal use only • Existing top 5 DPJ executives have been responsible for delivering significant earnings growth, network expansion and operational improvements over the last 5 years • Scott Oelkers, President & CEO of DPJ, is a 25 year Domino’s veteran • All have c
Slide 23: Strategic Rationale
3 STRATEGIC RATIONALE For personal use only NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 24: Strategic Rationale
STRATEGIC RATIONALE The acquisition of DPJ is strategically compelling and aligned with DPE’s growth strategy For personal use only An Established • Domino’s has been in operation in Japan since 1985 and is now the third largest and Profitable pizza chain by number of stores with a network of 259 st
Slide 25: Benefits of DPE Ownership for DPJ
BENEFITS OF DPE OWNERSHIP FOR DPJ A number of strategic initiatives are expected to be rolled out for DPJ For personal use only Leverage DPE’s • Leverage DPE’s IT capability over the next 3 – 5 years Digital Expertise • Investment in online ordering platform, applications and improved internal syste
Slide 26: A Strategic Partnership with Bain Capital
A STRATEGIC PARTNERSHIP WITH BAIN CAPITAL For personal use only • Bain Capital shares DPE’s “Domino’s DNA” Experienced Partner with • Bain Capital has previously been a majority owner of Domino’s Pizza, Inc. (US) “Domino’s DNA” • DPE worked with Bain Capital to undertake detailed financial, legal an
Slide 27: Transaction Impact
4 TRANSACTION IMPACT For personal use only NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 28: Expected Financial Impact
EXPECTED FINANCIAL IMPACT For personal use only • EPS accretion of approximately 9% in FY2013 on a full year pro-forma adjusted basis(1)(2) ̶ Before amortisation of identifiable acquired intangibles and expensing of transaction costs ̶ No revenue and/or cost synergies have been assumed • DPE will co
Slide 29: Expanded Store Numbers and Revenue
EXPANDED STORE NUMBERS AND REVENUE The acquisition of DPJ geographically diversifies earnings and complements Europe as a new For personal use only pillar of growth for DPE DPE Standalone(1) Pro-Forma DPE(1)(2) 970 Stores as at 1,229 Stores as at 30 June 2013 30 June 2013 Japan Europe Europe (259 st
Slide 30: Geographic Diversification of Earnings
GEOGRAPHIC DIVERSIFICATION OF EARNINGS For personal use only DPE Standalone(1) Pro-Forma DPE(1) A$56m EBITDA A$84m EBITDA Europe Europe (A$7m) (A$7m) Japan 12% 8% (A$28m ) Pro-Forma 33% Underlying EBITDA(1) ANZ ANZ (A$49m) (A$49m) 88% 59% A$43m EBIT A$64m EBIT Europe Europe (A$2m) (A$2m) 4% Japan 3%
Slide 31: Expanded Group Structure
EXPANDED GROUP STRUCTURE For personal use only • DPJ will continue to operate as a stand alone operating entity reporting to the newly formed board of DPJ with oversight from a senior leadership team from DPE ̶ New DPJ Board with up to 9 members – Up to 7 from DPE and up to 2 from Bain Capital Expan
Slide 32: DPE Full Year Results and Outlook
For personal use only 5 DPE FULL YEAR RESULTS AND OUTLOOK NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES 32
Slide 33: DPE Results Highlights
DPE RESULTS HIGHLIGHTS For personal use only FY13 Significant FY13 • Underlying NPAT up 13.0% to $30.4m FY11 FY12 Statutory Charges(1) Underlying +/(-) FY12 A$m A$m A$m A$m A$m • Final dividend 15.4c (fully franked), bringing Network Sales 746.4 805.3 848.6 848.6 5.4% full year dividend to 30.9c whi
Slide 34: DPE Trading Update
DPE TRADING UPDATE For personal use only • The momentum that we have seen in the latter part of FY13 has continued into the start of FY14. ANZ SSS are currently +4.7% in the first 5 weeks of the year, rolling a 2 year cumulative growth of 15.6% (same period FY12 + same period FY13) • Europe sales ar
Slide 35: FY14 Guidance
FY14 GUIDANCE(1) For personal use only • FY2014 guidance has been provided separately for ANZ and Europe, and Japan • Japan guidance has been provided on a constant currency, full year pro-forma basis after adjusting for AIFRS(2)(3) • DPE will provide consolidated guidance for FY2014 in due course A
Slide 36: Acquisition Funding
6 ACQUISITION FUNDING For personal use only NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES
Slide 37: Acquisition Funding
ACQUISITION FUNDING The balanced funding structure maintains DPE’s capital structure flexibility and current dividend policy(1) For personal use only • 5 for 23 underwritten pro-rata accelerated renounceable Entitlement Offer to raise gross proceeds of A$156m Entitlement – ~A$125m Institutional Enti
Slide 38: Pro-Forma Historical Combined Balance Sheet
PRO-FORMA HISTORICAL COMBINED BALANCE SHEET For personal use only • Pro-forma balance sheet presented on a historical basis DPE DPJ Adjustments for Adjustments for Pro-Forma Balance A$m 30 June 2013(1) 31 March 2013(2) Acquisition(5) Acquisition Funding Sheet Cash 18.7 - (238.2) 238.2 18.7 Receivabl
Slide 39: Entitlement Offer Details
ENTITLEMENT OFFER DETAILS(1) For personal use only • 5 for 23 pro-rata accelerated renounceable Entitlement Offer to raise gross proceeds of up to Offer Size A$156m • A$10.20 per New Share representing Offer Price ̶ 10.6% discount to the dividend adjusted TERP of A$11.40 on 12 August 2013(2) ̶ 12.6%
Slide 40: Entitlement Offer Timetable
ENTITLEMENT OFFER TIMETABLE(1) For personal use only Event Date Announcement of Acquisition and Entitlement Offer Tuesday, 13 August 2013 Institutional Entitlement Offer opens Tuesday, 13 August 2013 Institutional Entitlement Offer closes Wednesday, 14 August 2013 Institutional Shortfall Bookbuild T
Slide 41: Appendices
For personal use only 7 APPENDICES NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES 41
Slide 42: Pro-Forma Historical Combined Income Statement
PRO-FORMA HISTORICAL COMBINED INCOME STATEMENT For personal use only DPE DPE 30 June 2013 Significant 30 June 2013 DPJ Pro-Forma Pro-Forma for A$m Statutory Charges(1) Underlying 31 March 2013(2) Adjustments(3) Acquisition Sales 294.9 294.9 251.5 - 546.4 EBITDA 54.0 2.0 55.9 27.6 0.1 83.7 EBIT 41.2
Slide 43: Risks
RISKS For personal use only Key Risks There are a number of factors, specific to DPE, specific to the acquisition of DPJ and of a general nature, which may affect the future operating and financial performance of DPE, DPJ and the industry in which they operate and the outcome of an investment in DPE
Slide 44: Risks: Operational Risks (cont'd)
RISKS For personal use only Operational Risks (cont’d) Operating Costs DPE’s ability to consistently offer low prices and operate profitably is dependent on a combination of the scaleability of its operations and the costs of its operating structure. DPE’s ability to maintain a relatively low cost o
Slide 45: Risks: Operational Risks (cont'd)
RISKS For personal use only Operational Risks (cont’d) Relationship with Suppliers DPE relies on numerous key suppliers in Australia, New Zealand, France, Belgium and The Netherlands. Any loss of these key suppliers may have an adverse effect on DPE’s sales and/or terms of trade. In addition, any ch
Slide 46: Risks: Acquisition Risks (cont'd)
RISKS For personal use only Acquisition Risks (cont’d) Change of Control The acquisition of DPJ may trigger change of control clauses in some material contracts to which DPJ are a party. Where triggered, the change of control clauses will in most cases require counterparty consent. If any of the mat
Slide 47: Risks: Acquisition Risks (cont'd)
RISKS For personal use only Acquisition Risks (cont’d) Acquisition Accounting In accounting for the acquisition in the pro-forma historical combined balance sheet, DPE has performed a preliminary fair value assessment of all of the assets, liabilities and contingent liabilities of DPJ. DPE will unde
Slide 48: Risks: Acquisition Risks (cont'd)
RISKS For personal use only Acquisition Risks (cont’d) DPJ’s Future Earnings DPE has undertaken financial and business analyses of DPJ in order to determine its attractiveness to DPE and whether to pursue the Acquisition. To the extent that the actual results achieved by DPJ are weaker than those in
Slide 49: Risks: General Risks (cont'd)
RISKS For personal use only General Risks (cont’d) Asset Impairment As a consequence of the global financial crisis, ASIC has specifically identified impairment of assets as an issue for Australian companies. The DPE board regularly monitors impairment risk. Consistent with accounting standards, DPE
Slide 50: Risks Associated with not taking up New Shares
RISKS For personal use only Risks Associated with not taking up New Shares under the Entitlement Offer Entitlements cannot be traded on ASX or privately transferred. However, New Shares equivalent to the number of New Shares not taken up will be offered for subscription in either the institutional s
Slide 51: Underwriting agreement
Underwriting agreement For personal use only DPE has entered into an underwriting agreement with Morgan Stanley Australia Securities Limited ("Underwriter") who has agreed to fully underwrite the Entitlement Offer (excluding the portion taken up by Somad Holdings Pty Limited). The obligations of the
Slide 52: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS For personal use only This document does not constitute an offer of entitlements ("Entitlements") or new ordinary shares of DPE ("New Shares") in any jurisdiction in which it would be unlawful. Entitlements and New Shares may not be offered or sold in any country out
Slide 53: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS For personal use only France This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code moné
Slide 54: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS For personal use only Japan The Entitlements and the New Shares have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the "FIEL") pursuant to an exemption from th
Slide 55: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS For personal use only Singapore This document and any other materials relating to the Entitlements and the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this documen
Slide 56: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS For personal use only United Arab Emirates Neither this document nor the Entitlements and the New Shares have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities Authority or any
Slide 57: International Offer Restrictions
INTERNATIONAL OFFER RESTRICTIONS For personal use only United Kingdom Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of
Domino's Pizza Enterprises — Merger or Acquisition (August 2013) on 6ix