Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — Domino's Pizza UK & IRL — Investor Presentation (November 2007)
77 slides from Domino's Pizza's investor presentation, Nov 1, 2007
Slide 1: Stephen Hemsley, Chief Executive
Stephen Hemsley Chief Executive 1 November 2007
Slide 2: Management changes
Domino’s Pizza UK & IRL plc Management changes • Succession plans ratified by Board – From start of 2008 financial year – Stephen Hemsley - Executive Chairman – Colin Halpern - Non-executive Vice Chairman – Chris Moore - Chief Executive • Significant strength of Executive Team Well placed to manage
Slide 3: Store Openings
Domino’s Pizza UK & IRL plc Store Openings • Better progress in Q3 – 10 openings (2006: 7) • YTD openings – 30 (2006: 26) • 480 stores at 30 September (2006: 434) • Improved position since interim guidance On track to open circa 45 stores 3
Slide 4: Cost pressures
Domino’s Pizza UK & IRL plc Cost pressures • Franchisees food cost 25% of sales – Cheese - 5.9% – Dough - 5.3% – Meats - 7.5% – Vegetables - 1.5% – Other - 4.8% • Average selling price £12.50 (plus VAT) • Food cost therefore £3.125 • Assume a 20% cost increase (£0.625) • Can be fully recovered by a
Slide 5: Cost pressures (contd.)
Domino’s Pizza UK & IRL plc Cost pressures (contd.) • Global pressure on food prices • Main pressure for Domino’s is on cheese and wheat (flour) – Cheese up £1,060 per tonne since June. No further significant increase expected. All additional cost passed on to franchisees from 1/11/07 – Wheat likely
Slide 6: Chris Moore, Deputy Chief Executive
Chris Moore Deputy Chief Executive 1 November 2007 6
Slide 7: The road to 1000 stores
The road to 1000 stores 7
Slide 8: 1,000 stores vision for 2017
Like-for-like sales of £20,000 per week No.1 Pizza Brand in UK and Ireland in sales Ad fund of a 1 H FE £40-£50 million BRAND IN 2017 1,000 stores System Sales approaching 25,000 Team Members £1 Billion
Slide 9: The financial model at build out
Domino’s Pizza UK & IRL plc The financial model at build out At build out * 2001 2006 (circa 2017) No. of stores 237 451 1,000 - 50 openings p.a. AWUS growth at 3% p.a. ** £8,422 £11,347 £15,700 System sales £ 98m £ 240m £ 820m Profit before tax £ 2.9m £ 14.3m £ 73.8m PBT/System sales 3.0% 6.0% 9.0%
Slide 10: The financial model at build out (contd.)
Domino’s Pizza UK & IRL plc The financial model at build out (contd.) At build out * 2006 (circa 2017) • PBT £14.3m £73.8m • Share buybacks *** • Average no. of shares in issue 162.6m 128.0m • EPS - pence 6.4p ** 40.6p - CAGR 18% p.a. • Dividend - cover 2.3x 2.0x - pence 3.1p ** 20.3p COMPELLING 11
Slide 11: AWUS: a 10 year perspective
Domino’s Pizza UK & IRL plc AWUS: a 10 year perspective £21,000 £20,000 £18,000 £15,000 £11,347 £12,000 £9,000 £6,700 £6,000 £3,000 £0 1997 2006 2017 Mature AWUS OBS: This does not constitute a forecast 11
Slide 12: Sales momentum for all stores
Domino’s Pizza UK & IRL plc Sales momentum for all stores AWUS by Store Opening Year £28,000 £23,000 £18,000 £13,000 £8,000 £3,000 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Opened in 1997 Opened in 1998 Opened in 199
Slide 13: YTD sales growth by age of store
Domino’s Pizza UK & IRL plc YTD sales growth by age of store Sales momentum continues in older stores 25% 20% 15% Mature AWUS growth YTD 10% 5% 0% 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2007 sales growth of stores opened in each year 13
Slide 14: Sales above average in older stores
Domino’s Pizza UK & IRL plc Sales above average in older stores £17,000 £15,000 £13,000 Mature AWUS £ YTD £11,000 £9,000 £7,000 £5,000 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 AWUS of stores opened in each year 14
Slide 15: Mature Store AWUS banding
Domino’s Pizza UK & IRL plc Mature Store AWUS banding 2007 YTD: other years show FY trading 100% 3% 1% 0% 1% 1% 4% 8% 6% 12% 8% 13% 18% 17% <£5k 25% 20% 29% 30% 75% 34% £5k-£7k 42% 42% 30% 31% 42% 43% 50% £7k-£10k 39% 44% 42% 25% £10k-£15k 32% 33% 36% 25% 28% 26% 18% 12% 20% £15k+ 10% 15% 11% 11% 10
Slide 16: The size of the opportunity
Domino’s Pizza UK & IRL plc The size of the opportunity 100% 100% 80% 66% 60% 56% 40% 23% 20% 6% 0% y y + y s er er 15 er ar liv liv liv ye lts de de de du 5 r5 me e me lA m de ho ho ho Al Un 's za d ino ha piz m er d Do Ev ha d er ha Ev Source; Mintel Home Delivery Report, 2004 er Ev Coverage of ap
Slide 17: The penetration game
Domino’s Pizza UK & IRL plc The penetration game 15% 11% 4% 1km 2km 3km Overall: 12.5% 17
Slide 18: The size of the opportunity (U.S. market)
Domino’s Pizza UK & IRL plc The size of the opportunity (contd.) 100% 100% 80% 75% 66% 56% 60% 50% U.S.market 40% U.S.market 23% 20% 6% 0% y y + y s er er 15 er ar liv liv liv ye lts de de de du 5 r5 me e me lA m de ho ho ho Al Un 's za d ino ha piz m er d Do Ev ha Source; Mintel Home Delivery Repor
Slide 19: Optimising delivery areas
Domino’s Pizza UK & IRL plc Optimising delivery areas Case Study 1 One store Two stores £40,000 £35,000 £30,000 £25,000 £20,000 £15,000 £10,000 1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96 101 106 111 19
Slide 20: Optimising delivery areas (contd.)
Domino’s Pizza UK & IRL plc Optimising delivery areas (contd.) Case Study 2 One store Two stores £42,000 £37,000 £32,000 £27,000 £22,000 £17,000 £12,000 1 8 15 22 29 36 43 50 57 64 71 78 85 92 99 106 113 120 127 134 141 148 155 162 20
Slide 21: Optimising franchisees
Domino’s Pizza UK & IRL plc Optimising franchisees Case Study 3: a three-store town that went from three franchisees to just one in 2007 £30,000 £26,000 £22,000 £18,000 £14,000 £10,000 2005 2006 2007YTD Total average weekly sales from 3 stores 21
Slide 22: How 2017 figures are achievable
Domino’s Pizza UK & IRL plc How 2017 figures are achievable 2007 2017 Average households per delivery area 29,000 22,000 Penetration 12.5% 20% Ave. ticket (delivery) £14.42 £17 Average frequency days 38 33 Average frequency per year 9.6 11 Delivery sales £9,650 £15,910 Add carryout sales at 26% 27%
Slide 23: How 2017 figures are achievable (contd.)
Domino’s Pizza UK & IRL plc How 2017 figures are achievable (contd.) 2007 2017 Average households per delivery area 29,000 22,000 Penetration 12.5% 20% Ave. ticket (delivery) £14.42 £17 Average frequency days 38 30 Average frequency per year 9.6 12.2 Delivery sales £9,650 £17,501 Add carryout sales
Slide 24: How do we get there?
Domino’s Pizza UK & IRL plc How do we get there? • Continue fanatical focus on great product, unbeatable service, sharp image • Support the premium quality positioning • Ad Fund will drive the “new news” message and customer counts • Our e-commerce lead will help drive sales and enhance store-level
Slide 25: Investing in people
Domino’s Pizza UK & IRL plc Investing in people DPG Directors • Stephen Hemsley, Chris Moore, Lee Ginsberg • Robin Auld, Sales & Marketing • Andy Emmerson, Business Development • Gareth Franks, Foodservice • Jane Kimberlin, IT • Patricia Thomas, Operations • TBA, Purchasing 25
Slide 26: …the best is yet to come
Domino’s Pizza UK & IRL plc …the best is yet to come 26
Slide 27: Patricia Thomas, Operations Director
Patricia Thomas Operations Director Operations update 1 November 2007 27
Slide 28: Operations Focus
Domino’s Pizza UK & IRL plc Operations Focus • Operations Support – Getting talent pool and support structure right • Focus on what’s important and incentivize results 28
Slide 29: Support Team
Domino’s Pizza UK & IRL plc Support Team Franchise Consultants Operations Support • Communication link • New store opening support (fee based) • Standards Enforcement • OER min. 3X year • Drive Results • Follow up visits, product • 20 Franchisees per FC roll-outs and operational • 1997 store visits
Slide 30: Training
Domino’s Pizza UK & IRL plc Training • In store & Centralized Training • Quality upgraded • New materials produced • Courses added • 457 People trained in 2007 (does not include field based training) 30
Slide 31: Franchise Development Programme
Domino’s Pizza UK & IRL plc Franchise Development Programme • Strict selection process • In store orientation • 3 week course • Post-FDP support 31
Slide 32: Maintain High Standards
Domino’s Pizza UK & IRL plc Maintain High Standards • The right measures (OER) • Positive correlation between OER & financial metrics • Clearly communicated and integrated • Reward & repercussions 32
Slide 33: Operations Evaluation Report (OER)
Domino’s Pizza UK & IRL plc Operations Evaluation Report (OER) • Started in 2002 • Focus on a few important things – Service (Delivery times) – Pizza Quality – Image – Safety (for our team and customers) • 5 Star system • Unannounced visits minimum 3X per year 33
Slide 34: 5 Year trend
Domino’s Pizza UK & IRL plc 5 Year trend 2002 2007 OER Ave 70.8 86.3 Stars 2.6 4.1 2002 OTD < 25m 70.2% 2007 OTD < 15m 70.8% AWUS (mature) £8717 £12334 34
Slide 35: It's good to be a 5 star store!
Domino’s Pizza UK & IRL plc It’s good to be a 5 star store! 13500 13000 12500 12000 11500 Mature Store AWUS 11000 10500 10000 9500 2 - 3 3 - 3.5 3.5 - 4 4 - 4.5 4.5 - 5 stars stars stars stars stars 35
Slide 36: Integration
Domino’s Pizza UK & IRL plc Integration • Integrated into Domino’s culture • Element of all recognition and reward systems Totally supports and • All training materials • 5 Star awards communicated is supported by on our portal Out the Door < 15 • Significant weighting on initiatives approval to exp
Slide 37: Repercussions
Domino’s Pizza UK & IRL plc Repercussions • Failed audit – notice served • Re-visit at franchisee’s cost • Failed revisit may result in termination of the franchise • Strategy to exit sub-standard franchisees 37
Slide 38: Real Time Stats
Domino’s Pizza UK & IRL plc Real Time Stats 38
Slide 39: 75% of Orders < 15 Minutes OTD
Domino’s Pizza UK & IRL plc 75% of Orders < 15 Minutes OTD 2005 - 10 stores would qualify 2006 • Round 1 - 39 • Round 2 - 47 • Round 3 – 84 2007 An average of 206 stores qualified each round 39
Slide 40: Elite Membership vs. AWUS & Growth
Domino’s Pizza UK & IRL plc Elite Membership vs. AWUS & Growth 1 5 ,0 0 0 1 8 .0 0 % 1 7 .0 0 % 1 4 ,0 0 0 1 6 .0 0 % 1 5 .0 0 % 1 3 ,0 0 0 1 4 .0 0 % 1 2 ,0 0 0 1 3 .0 0 % 1 2 .0 0 % 1 1 ,0 0 0 1 1 .0 0 % 1 0 .0 0 % 1 0 ,0 0 0 9 .0 0 % 9 ,0 0 0 8 .0 0 % 6* 5* 4* 3* 2* 1* Y TD A W U S Y TD % G ro w
Slide 41: Jane Kimberlin, I.T. Director
Jane Kimberlin I.T. Director IT Update 1 November 2007 41
Slide 42: Technology within Domino's
Domino’s Pizza UK & IRL plc Technology within Domino’s • Integral part of our success • Forefront of innovation • Stable, time proven platform • Further development to support 1,000+ stores 42
Slide 43: Continual innovation delivered in last 12 months
Domino’s Pizza UK & IRL plc Continual innovation delivered in last 12 months • Online ordering for Republic of Ireland • 48.8% increase in UK online sales • SMS • Real Time Stats and EPoS reporting • OTD screen in stores • Electronic invoices & statements to franchisees 43
Slide 44: Real Time Stats
Domino’s Pizza UK & IRL plc Real Time Stats • Demo • All stores in real time • Sales, service times, staff and audit details • Today to date and last 30 minutes • Real, actionable data • Direct impact on sales and service 44
Slide 45: Sales and service reporting
Domino’s Pizza UK & IRL plc Sales and service reporting • Demo • Telephone statistics • Weekly Key indicators • Payroll data • Download to excel • Consistent and visible 45
Slide 46: Plans for next 12 months
Domino’s Pizza UK & IRL plc Plans for next 12 months • Business Intelligence • Food Early Warning System • In-store /kiosk ordering • SMS enhanced ordering • Web site – maintain at leading edge and beyond…… • GPS tracking • Mobility • VOIP • M/S Surfacing Limited only by our imagination and budget!
Slide 47: Robin Auld, Sales & Marketing Director
Robin Auld Sales & Marketing Director Marketing Update 1 November 2007 47
Slide 48: Extra fire power: YTD Mature stores +14.6%
Domino’s Pizza UK & IRL plc Extra fire power: YTD Mature stores +14.6% 2007 average mature store sales per period Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2006 2007 ytd 5% NAF driving sales: strong comparatives ahead 48
Slide 49: The Great British Summer
Domino’s Pizza UK & IRL plc The Great British Summer 22.00% 180 19.7% 20.00% 160 17.6% 140 18.00% 16.8% 16.1% 120 16.00% 15.3% 100 mm 14.00% 13.3% 12.8% 80 12.00% 60 9.5% 9.7% 10.00% 40 8.00% 20 6.00% 0 Jan Feb Mar Apr May Jun Jul Aug Sep mature store sales increase (LHS) 2007 UK precipitation Weath
Slide 50: The power of momentum
Domino’s Pizza UK & IRL plc The power of momentum 15.9% 13.8% 14.0% 12.0% 10.1% 8.6% 8.0% Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Domino’s mature store increase vs same quarter prior year 50
Slide 51: Sales fuelled by rise in average ticket
Domino’s Pizza UK & IRL plc Sales fuelled by rise in average ticket UK Average Ticket * £14.00 £13.80 £13.60 £13.40 £13.20 £13.00 £12.80 P1 P2 P3 P4 P5 P6 P7 P8 P9 2007 2006 Growth built on strong foundations of rising average ticket * Net of VAT and includes carryout and delivery 51
Slide 52: E-commerce +49% reflecting increased spend
Domino’s Pizza UK & IRL plc E-commerce +49% reflecting increased spend UK E Commerce Sales £800,000 £700,000 £600,000 £500,000 £400,000 £300,000 £200,000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 2007 2006 Reaching 18.5% of UK delivered sales with higher average ticket
Slide 53: Driving on-line
Domino’s Pizza UK & IRL plc Driving on-line • Significant increase in on-line marketing investment • £300,000 alone on search marketing in 2007 • Starting to reduce labour cost overheads for some stores • The Simpsons sponsorship credits have been revised to focus on on-line ordering • 15 separate n
Slide 54: 15 different new media platforms
Domino’s Pizza UK & IRL plc 15 different new media platforms Portal Deals Contextual targeting User Generated Content Partnerships Local Listings Viral Games Display advertising Rich Media Natural Search Integrated Content IPTV – Internet Sites Mobile Paid Search Second Life Email 54
Slide 55: Q3 Trading Update
CM11 Domino’s Pizza UK & IRL plc Q3 Trading Update • Focus on driving core offering: Pepperoni Passion • Clear communication of quality: differentiation to the market • Maintaining the momentum ATL • Increase in on-line marketing investment • Scrummy: 6 meat pizza, leveraging interest in rugby 55
Slide 56: CM11 numbers need checking (and adding)
Slide 55 CM11 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 57: Q4 Update: Ciabatta pizza
Domino’s Pizza UK & IRL plc Q4 Update: Ciabatta pizza NPD continuing to fuel sales 56
Slide 58: Q4 Update
CM12 Domino’s Pizza UK & IRL plc Q4 Update • Ciabatta builds on success of previous Campaign 6 launches • Five weeks TV advertising (+1 vs C6 ’07) • Price premium £1 to £2 additional charge [boosting average ticket] • Supported by ‘big’ DM, On-line, LSM etc • Tough comparatives vs Q4 ‘06 57
Slide 59: CM12 numbers need checking (and adding)
Slide 57 CM12 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 60: Consumer Spending
CM13 Domino’s Pizza UK & IRL plc Consumer Spending • Domino’s classic option when trading down…offering great value for money vs dine out options • Consumer spending shows trend towards eating in vs dining out is continuing to grow (Mintel) • Premium quality, great service, trusted brand for £5.50 p
Slide 61: CM13 numbers need checking (and adding)
Slide 58 CM13 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 62: Consumer Spending (contd.)
CM14 Domino’s Pizza UK & IRL plc Consumer Spending (contd.) • Domino’s brand strength protects against squeeze on disposable income (Quality, Service, Marketing spend) • NAF will ensure continued aggressive marketing spend • Consumers that come to Domino’s are driven by much more than just price • S
Slide 63: CM14 numbers need checking (and adding)
Slide 59 CM14 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 64: Domino's Pricing Consumer Survey
CM15 Domino’s Pizza UK & IRL plc Domino’s Pricing Consumer Survey • 97% of customers (last 3 months) had no idea when or if Domino’s had changed prices in the last year • When asked to estimate the cost of a meal deal (circa £30) less than 10% were correct. Only 30% were correct to within £5. • When
Slide 65: CM15 numbers need checking (and adding)
Slide 60 CM15 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 66: Domino's Pricing Consumer Survey (contd.)
Domino’s Pizza UK & IRL plc Domino’s Pricing Consumer Survey (contd.) “There are lots of reasons for going to Domino’s. If their prices went up then I’d still carry on going there” Just 10% disagreed with the statement “Having a pizza is a treat and I don’t worry too much about the price” Just 14% d
Slide 67: 2008 Strategic Overview
CM16 Domino’s Pizza UK & IRL plc 2008 Strategic Overview • Focus on new customer acquisition. An average store only delivers to 13% of it’s potential delivery area • Continue to drive average ticket • Focus on increasing average frequency from 38 days • Continued focus on on-line sales growth & mobi
Slide 68: CM16 numbers need checking (and adding)
Slide 62 CM16 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 69: 2008 Overview: January '08
CM17 Domino’s Pizza UK & IRL plc 2008 Overview: January ‘08 • 5/5/5 promotion: proven formula • £5.55 per pizza to accommodate rising food costs (11% increase in value) • Boost to average ticket / volume & new customers (over ½ million) in ‘07 • Supported with heavyweight TV advertising • Two week B
Slide 70: CM17 numbers need checking (and adding)
Slide 63 CM17 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 71: 2008 Overview
CM18 Domino’s Pizza UK & IRL plc 2008 Overview • £18m National Advertising spend (doubled since 2005) • ATL budget increased by 50% in 2008 • Scope to increase coverage, frequency, weighting of TV exposure • Identification of ‘big’ new sponsorship properties • Making effective use of additional fire
Slide 72: CM18 numbers need checking (and adding)
Slide 64 CM18 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 73: 2008 Overview (contd.)
CM19 Domino’s Pizza UK & IRL plc 2008 Overview (contd.) • NPD focus on popular products (5 pizza launches planned) • Focus on quality messaging to create discernable differentiation • Greater investment on-line, search Marketing, plus 2nd Life, You Tube, Ebay etc • Direct Mail: Focusing on new custo
Slide 74: CM19 numbers need checking (and adding)
Slide 65 CM19 numbers need checking (and adding) Chris Moore, 05/07/2007
Slide 75: Increasing marketing effectiveness
Domino’s Pizza UK & IRL plc Increasing marketing effectiveness • Approaching 2 million customers on our database • Implementation of new customer segmentation techniques based on behaviour & consumption patterns • Increasing the relevance and therefore response of DM activity • Giving individual sto
Slide 76: Summary
Domino’s Pizza UK & IRL plc Summary • 2007 record system sales and mature store sales increases • Momentum is very strong & growing • Significant increase in marketing firepower in ’08 • Strong brand offering great value • 2008: take the brand to the next level 67
Slide 77: Q&A
Domino’s Pizza UK & IRL plc Q&A 68
Domino's Pizza UK & IRL — Investor Presentation (November 2007) on 6ix