Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — FY2020 Earnings Presentation
61 slides from Domino's Pizza Enterprises's earnings presentation, Aug 19, 2020
Slide 1: ASX cover letter: market presentation for year ended 28 June 2020
Domino’s Pizza Enterprises Limited 1/485 Kingsford Smith Drive Hamilton, QLD, Australia 4007 ACN: 010 489 326 www.dominos.com.au 19 August 2020 The Manager Market Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Dear Sir Market presentation for the year
Slide 2: Full Year Results, period ending 28 June 2020
FULL YEAR RESULTS PERIOD ENDING 28 JUNE 2020 AUSTRALIA NEW ZEALAND BELGIUM FRANCE THE NETHERLANDS JAPAN GERMANY LUXEMBOURG DENMARK
Slide 3: Presenters
AUSTRALIA NEW ZEALAND PRESENTERS DON MEld GROUP CEO AND MANAGING. DIRECTOR RICHARD CONEY GROUP CFO ANDRE TEN WOLDE OPEEUROPECED STOFFEL THIdS GERMANY CEO ANDREW BRADLEY FRANCE CEO NICK KNIGHT AUSTRALIAAND NEW-ZEALAND CEG JOSH KILIMNIK dAPAN CEO BELGIUM FRANCE THE NETHERLANDS JAPAN GERMANY LUXEMBOURG
Slide 4: OxCGRT Stringency Index
3 The Oxford COVID-19 Government Response Tracker (OxCGRT) Stringency Index is a composite measure based on nine response indicators including school closures, workplace closures, and travel bans
Slide 5: Management thanks franchisees and team members
& MANAGEMENT THANKS GUR FRANCHISEES AND TEAM MEMBERS FOR THEIR CARE, AGILITY AND EXCEPTIONAL WORK DURING THIS TIME
Slide 6: COVID-19 update: group key pillars
Covio-19 UPDATE GROUP - KEY PILLARS ~ is} WE HAVE THE PRIVILEGE TO SAFETY, VALUE, SERVE AND WE ARE LIVING CONVENIENCE AND SPEED UP TO THIS BY GIVING BACK REMAIN AS IMPORTANT AS TO THOSE IN NEED EVER 2 > my A PARTNERSHIP-BASED THERE HAVE BEEN NO SUPPLY CHAIN ENSURE COVID-RELATED EXITS - STORES CONTIN
Slide 7: Group results highlights
100% STABILITY NO FRANCHISEES HAVE LEFT THE SYSTEM QUE TO COVID-19 GROUP - RESULTS HIGHLIGHTS EMPLOYMENT ADDITIONAL TEAM MEMBERS HIRED IN ALL REGIONS 220,000+ GIVING HOT, FRESH MEALS DONATED TO THOSE IN NEED PROTECTION ADDITIONAL PPE INCLUDING MASKS, GLOVES AND PERSPEX SHIELDS &
Slide 8: FY20 actual pre AASB 16
FY 20 Year-on-Year Year-on-Year Actual Growth % Growth Pre AASB 16 Pre AASB 16 Pre AASB 16 Network Sales $3,267.9m +$370.5m +12.8% Online Sales $2,357.0m +$414.9m +21.4% Same Store Sales Growth +5.8% Network Store Count(1) 2,668 stores +163 stores +6.5% EBITDA(2) $303.0m +$20.6m +7.3% EBIT(2) $228.7
Slide 9: A strong performance in an extraordinary year
(1) A strong performance in an extraordinary year, Domino’s has demonstrated resilience and is executing on its five-year strategy as a result of: ▪ Agile franchisees – essential in uncertain times ▪ Continued operational excellence ▪ Proactive adaptation – new procedures for local market conditions
Slide 10: FY20 actual versus guidance and 3-5 year outlook
3-5 Year FY20 Actual (1) Outlook (3) Same Store Sales Growth +5.8% +3-6% +6.5% New Organic Store Additions +7-9% (+163 stores) Net CAPEX(2) $97.4m $60-100m ▪ Very strong Network Sales and SSS growth in Q4, particularly in Japan and Germany ▪ Store openings lower than expected for the Full Year; mark
Slide 11: Network Sales and Online Sales growth
(1) (2) (3) (4) ▪ Network Sales growth +12.8%, (+9.2% in constant currency), SSS +5.8% ▪ Group Online Sales growth +21.4% (H2 20 +23.2%) ▪ Japan: Online Sales growth +44.1% ▪ Japan: Network Sales growth +38.0%, SSS +18.4% 1) Total Network Sales growth using Full Year average FX rates, as reported du
Slide 12: New store additions
(1) (1) (2) ▪ Group: +163 new stores added to the network ▪ Significant Network Sales growth, from both new and existing stores ▪ Europe: +78 new stores ▪ ANZ: +10 new stores ▪ Japan: +75 new stores ▪ See slide 53 for further details 1) Including acquisitions in France (FY16) and Germany (FY16 and F
Slide 13: FY20 network sales, new stores and EBIT by region
FY20 Network Sales FY20 Organic New Stores FY20 Organic New Stores Growth +78 $1,234.4m EU +7.1% +10 $1,217.4m ANZ +1.2% $816.0m +75 JP +12.5% EU ANZ JP EU ANZ JP (1) FY20 EBIT $60.3m $101.8m ($13.1m) $79.7m EU ANZ JP Global 1) Underlying EBIT, excluding non-recurring costs and the impact of AASB 16
Slide 14: Group EBIT
(1) 1) Underlying EBIT, excluding non-recurring costs and the impact of AASB 16 Leases 13
Slide 15: COVID-19 impact on EBITDA
COVID-19 STORE SUPPORT PROVIDED DPE ROYALTIES, REVENUE & COST VARIANCES GOVERNMENT ASSISTANCE (1) (1) ▪ COVID-19 Store Support Provided -$14.1m, including food rebates & royalty waivers to stores, personal protective equipment, ‘distressed’ TV media purchases, community support and donations ▪ DPE r
Slide 16: Trading update and FY21 year to date
H1 20 Q3 20 Q4 20 FY20 FY21 YTD (1) Actual Actual Actual Actual Trading Update Network Sales Growth +10.6% +4.8% +18.2% +12.8% +18.5% Same Store Sales Growth +4.1% +4.8% +12.0% +5.8% +11.0% New Organic Store Additions +85 +33 +45 +163 +24 ▪ Very strong Network Sales growth and store openings continu
Slide 17: onl
16 wn onl =< rx z < = rs o. > o ~ rc
Slide 18: Group underlying income statement
FY 18 FY 19 FY 20 +/(-) FY 19 Underlying Underlying Underlying Underlying(1) Pre AASB 16 $ mil $ mil $ mil % Network Sales 2,588.9 2,897.3 3,267.9 12.8% ▪ Strong Network Sales growth across the Group (+$370.5m) Revenue 1,154.0 1,435.4 1,920.4 33.8% ▪ Revenue growth benefitted from structural changes
Slide 19: Group revenue and EBITDA by region
FY 19 FY19 FY 19 FY 20 +/(-) (1) FY 19 ▪ Group EBITDA growth +7.3% Underlying Underlying Underlying Underlying Reallocated(1) Reallocated Pre AASB 16 Reallocated (EBITDA growth +3.2% in constant currency) $ mil $ mil $ mil $ mil % Group FX translation benefit $11.7m Revenue Europe 537.4 537.4 566.3
Slide 20: FY19 statutory to underlying reconciliation
FY 19 FY 19 FY 19 FY 20 FY 20 FY 20 FY 20 +/(-) FY 19 Non-recurring AASB 16 Non-recurring Underlying Statutory Underlying Statutory Underlying(1) Costs Adjustments Costs Pre AASB 16 $ mil $ mil $ mil $ mil $ mil $ mil $ mil % Network Sales 2,897.3 2,897.3 3,267.9 3,267.9 12.8% Revenue 1,435.4 1,435.
Slide 21: Non-recurring costs
ANZ ▪ $1.9m – Fast Food Industry Award class action legal defence costs(1) Europe ▪ $7.1m – Germany conversion and integration costs relating to the Hallo Pizza acquisition. Conversion now complete ▪ $1.6m – Denmark integration, establishment and set up costs ▪ $1.1m – The Netherlands Commissary rel
Slide 22: EBITDA based cash flow
FY19 FY20 FY20 FY20 Statutory AASB 16 Statutory Statutory EBITDA BASED CASHFLOW Post AASB 16 Adjustments Pre AASB 16 $ mil $ mil $ mil $ mil EBITDA 282.4 355.8 (52.8) 303.0 ▪ Working capital benefit primarily due to higher sales in Japan Change in working capital 9.2 63.6 63.6 and extended payment t
Slide 23: Net CAPEX
▪ FY20 Net CAPEX $97.4m ▪ CAPEX which Recycles $32.5m ‒ Gross CAPEX $84.6m, including investment in new Corporate stores (primarily Japan), Franchisee loans for new and existing stores and Franchisee acquisitions (predominantly Europe and ANZ) ‒ Cash inflows $52.1m, arising from Franchisee loan repa
Slide 24: Balance sheet
FY 19 FY 20 +/(-) Statutory FY19 Statutory Pre AASB 16 Statutory $ mil $ mil $ mil Cash & cash equivalents 101.4 245.7 144.3 ▪ Increase in cash and cash equivalents, as a result of strong operating Trade and other receivables 93.9 146.5 52.6 cash flows and drawing down on debt in order to increase t
Slide 25: Key financial ratios
FY19 FY20 Underlying (2) Underlying Pre AASB 16 ROCE remains strong; slightly offset by investment in Return on Capital Employed 19.2% 18.0% ▪ international markets and Corporate stores, with earnings to be realised in future periods Interest Coverage Ratio 20.2x 24.4x Net Debt(1) $517.1m $447.3m ▪
Slide 26: Strong balance sheet position
(1) Strong Balance Sheet Position: ▪ Overall reduction in net debt, due to working capital timing benefits and strong operating cash flows ▪ Total available cash and cash equivalents $245.7m ▪ Undrawn debt facilities $146.1m ▪ Weighted average maturity of committed facilities 2.2 years ▪ Net Leverag
Slide 27: Everyday heroes
EVERYDAY HEROES Domino’s stores provided hot, fresh meals to frontline medical personnel across the region (pictured: France)
Slide 28: Europe results
(1) (2) (3) (3) 1) Including sales via aggregator platforms 3) New organic stores include all new stores opened after 30 June 2014 27 2) Online Sales percentage calculated as total Online Sales divided by total Network Sales
Slide 29: Europe store network by market
Denmark 13 TOTAL STORES FY20 POPULATION: 445,000+ 5.8M +12 NEW STORES PEOPLE PER STORE Germany Benelux France 330 TOTAL STORES FY20 403 TOTAL STORES FY20 415 TOTAL STORES FY20 +13 NEW STORES +32 NEW STORES +21 NEW STORES AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STO
Slide 30: Europe performance commentary
Positive performance in light of challenging macro conditions with higher levels of COVID-19 than in other DMP markets ▪ Regional restrictions and changed community behaviour affected sales ▪ COVID-19 lowered revenue, increased short-term support ▪ The scale of COVID-19 offset a very strong H1 perfo
Slide 31: New Benelux facility
▪ State of the art facility that will resource future growth in the Benelux ▪ New Domino’s headquarters as well as supply centre for fresh dough, fresh ingredients ▪ Can resource 600 stores at current configuration, while future proofing for growth 30
Slide 32: Meals for seniors
MEALS FOR SENIORS More than 2,000 free meals for New Zealand seniors were delivered using Zero Contact Delivery
Slide 33: ANZ results
(1) (2) (3) 1) Including sales via aggregator platforms 3) New organic stores include all new stores opened after 30 June 2014 32 2) Online Sales percentage calculated as total Online Sales divided by total Network Sales
Slide 34: ANZ store network
833 TOTAL STORES FY20 +10 NEW STORES AVERAGE NUMBER OF STORES PER FRANCHISEE: 2.0 (+0.0) POPULATION: 30.0M 36,000+ PEOPLE PER STORE 33
Slide 35: ANZ business resilience
The ANZ business demonstrated the resilience and capability of the franchise network ▪ Network sales grew; NZ closure and customer movements affected growth ▪ Meaningful support helped franchisees through challenging conditions ▪ Customers and franchisees responded well to operational and product in
Slide 36: People-first approach
PEOPLE-FIRST APPROACH Our stores developed new operational procedures, for Zero Contact Delivery and Carry-out
Slide 37: Japan results
(1) (2) (3) 1) Including sales via aggregator platforms 3) New organic stores include all new stores opened after 30 June 2014 36 2) Online Sales percentage calculated as total Online Sales divided by total Network Sales
Slide 38: Japan store network
674 TOTAL STORES FY20 +75 NEW STORES AVERAGE NUMBER OF STORES PER FRANCHISEE: 2.6 (+0.4) POPULATION: 124.8M 185,000+ PEOPLE PER STORE Number of Stores per Franchisee 35.0% 22.2% 6.8% 2 3-5 6 or more FY16 FY17 FY18 FY19 FY20 37
Slide 39: Japan record result
Record result reflects recent strategic decisions to broaden menu, enhance technology platform and expand store footprint by fortressing metropolitan markets ▪ Network Sales surged to record levels ▪ High standards of operations were essential to meet demand ▪ Significant sales growth offset COVID-1
Slide 40: Outlook
OUTLOOK
Slide 41: Living with COVID-19 outlook
Management is prepared for a medium-term future living with COVID-19; Domino’s will rise to the challenge Likelihood of a mix of above-trend sales, temporary closures and short-term investments are not possible to quantify DPE is however well placed to respond: our strategy, store footprint, and fra
Slide 42: Zero Contact carry-out and drive-through
▪ A new, Zero Contact, carry-out option ▪ Drive-through alternative for carry-out customers ▪ Roll-out underway in Australia ▪ Testing underway in Europe ▪ Higher customer satisfaction and potential for higher ticket “Absolutely loved the delivery from the shop to my car in the car park, I felt very
Slide 43: Europe outlook by market
We expect to open a higher number of stores in FY21, following a short-term pause during the initial phase of COVID-19 European CBDs continue to reflect lack of tourist visitors and closed neighbouring businesses Sales growth will be achieved through returning carry-out customers, and building on st
Slide 44: ANZ outlook
COVID-19 will continue to affect our communities, and localised restrictions can not be ruled out Suburban stores are performing strongly, tourist stores have recovered, however CBD stores require continued focus ▪ Operations and menu innovations are delivering pleasing results ▪ Expanded margins wi
Slide 45: Japan outlook
Management and franchisees are focused on retaining new customers and frequency Domino’s Japan intends to build on recent opportunity to reach new customers and add frequency ▪ Service levels for new and existing customers are industry leading ▪ Half price carry-out is structured to build this categ
Slide 46: Future store outlook by region
▪ Group future outlook 5,550 stores, 2.1x (+500 stores higher) ▪ Europe future outlook 2,850 stores, 2.5x, by 2028-2033 ▪ The Group will continue to leverage (Store openings target date increased by 3 years, from 2025-2030) efficiencies through store expansion ▪ ANZ future outlook 1,200 stores, 1.4x
Slide 47: 3-5 year outlook
3-5 Year Outlook Annual Same Store Sales Growth +3-6% ▪ 3-5 Year Outlook unchanged Annual Organic New Store Additions +7-9% ▪ Management Outlook provides an illustration of our medium- term annual growth expectations, but does not constitute specific earnings guidance Annual Net CAPEX(1) $60-100m 1)
Slide 48: Sustainability and community progress
Each Domino’s region has made significant progress this year to enhance our sustainability and do good in our communities ▪ Community giving: In addition to COVID-19 initiatives, Domino’s stores have provided donations and meals to communities in need, including more than $175,000 to bushfire relief
Slide 49: Record profit year and long-term strategy
▪ Despite the challenges faced by COVID-19, we were able to deliver a record profit year ▪ Continued trading in a COVID-19 world, and beyond, remains a privilege, not a right ▪ The effects on our communities remain uncertain and are subject to rapid change ▪ We are confident we have the right produc
Slide 50: Q&A
Q&A
Slide 51: Lil
tn bu — o z Lil o a <x
Slide 52: Dividend dates and AGM
▪ 25 August, 2020 – Ex-dividend date ▪ 26 August, 2020 – Dividend record date ▪ 10 September, 2020 – Dividend payment date ▪ 4 November, 2020 – DMP Annual General Meeting 51
Slide 53: Underlying EPS growth
▪ Underlying EPS 169.4c, +2.7% on FY19 ▪ Underlying EPS 3 year CAGR +8.2% ▪ Underlying EPS 10 year CAGR +21.1% 52
Slide 54: Store count by region
FY 18 H1 19 FY 19 H1 20 FY 20 European stores Franchised stores 991 1,012 1,028 1,042 1,060 Corporate stores 63 62 69 81 101 European Network Stores 1,054 1,074 1,097 1,123 1,161 Net stores added in period 189 20 43 26 64 ANZ stores Franchised stores 733 738 716 713 714 ▪ Group – 163 new store addit
Slide 55: ROCE and interest coverage
FY 19 FY 20 FY 19 FY 20 Return on Capital Employed Underlying Interest Coverage Underlying Underlying Underlying Pre AASB 16 Pre AASB 16 $ mil $ mil $ mil $ mil EBIT 220.8 228.7 EBITDA 282.4 303.0 Interest (14.0) (12.4) Total Assets 1,370.4 1,583.4 Total Current Liabilities (223.8) (341.3) Interest
Slide 56: Cash conversion and net debt
FY 19 FY 20 FY 19 FY 20 Cash Conversion Underlying Net Debt Underlying Underlying Underlying Pre AASB 16 Pre AASB 16 Operating cash flow before interest, tax and $ mil $ mil 277.2 343.9 non-recurring costs Non-current borrowings 646.1 671.3 Underlying EBITDA 282.4 303.0 Current borrowings 5.4 55.9 C
Slide 57: Movement in working capital
Movement in Working Capital FY19 FY20 Detail ▪ Trade Receivables increased -$51.9m, largely due to changes made to $ mil $ mil the AU warehouse and distribution model and strong sales in Japan Trade receivables (12.3) (51.9) ▪ ANZ Trade Receivables increase -$38.6m ▪ Japan Trade Receivables increase
Slide 58: AASB 16 Leases adoption
FY 19 FY 20 FY 20 AASB 16 FY 20 Statutory +/(-) FY19 Summary Statutory Statutory Adjustments Pre AASB 16 Statutory ▪ The Group adopted AASB 16 Leases on 01 July 2019 $ mil $ mil $ mil $ mil $ mil Cash & cash equivalents 101.4 245.7 - 245.7 144.3 ▪ Adoption has been applied prospectively, with no pri
Slide 59: Same Store Sales and Network Sales definitions
▪ Same Store Sales are calculated weekly, measured in local currency ▪ Same Store Sales is the process of comparing year-on-year growth of existing mature stores ▪ Stores are included after two years of trading (either two years of DPE, or one year pre-acquisition plus one year of DPE) ▪ Where a del
Slide 60: Class action and franchisee litigation
CLASS ACTION • The Company rejects the allegations and has been defending the action vigorously. A defence denying the allegations has been filed and an application to have the statement of claim (or parts thereof) struck out was heard on 9 June 2020 • A decision on the strike out application is yet
Slide 61: Forward looking statements disclaimer
▪ Domino’s Pizza Enterprises Limited (Domino’s) advises that the information in this presentation contains forward looking statements which may be subject to significant uncertainties outside of Domino’s control ▪ Domino’s does not undertake any obligation to provide recipients of this presentation
Domino's Pizza Enterprises — FY2020 Earnings Presentation on 6ix