Domino's Pizza Group plc · LSE:DOM
Domino's Pizza — Domino's Pizza UK & IRL — H1 2007 Earnings Presentation
29 slides from Domino's Pizza's earnings presentation, September 2007
Slide 1: Domino's Pizza UK & IRL plc Interim Results
Domino’s Pizza UK & IRL plc Interim Results for the 26 weeks ended 1 July 2007
Slide 2: The Team
The Team Stephen Hemsley Chief Executive Chris Moore Deputy Chief Executive Lee Ginsberg Chief Financial Officer 2
Slide 3: Financial Highlights
Financial Highlights 50% Another record first half 40% +46.2% 30% +44.4% 20% +34.3% +35.0% +24.0% 10% +14.9% 0% LFL sales growth System sales Operating profit pre- PBT - Reported Diluted EPS Interim Dividend p exceptionals * per share * Including accelerated LTIP costs of £0.1m 3
Slide 4: Financial Highlights (contd.)
Financial Highlights (contd.) Record growth driven by: • Operational excellence driving speed of service • Superior product quality • Product innovation driving sales • Increase in National Advertising Fund • Operational gearing driving margins 4
Slide 5: Profit and loss – IFRS adoption
Profit and loss – IFRS adoption 26 weeks to 26 weeks to 52 weeks ended 1 July 2007 2 July 2006 % increase 31 December 2006 £’000 £’000 £’000 System Sales 142,455 114,850 24.0 240,115 Operating profit pre-exceptionals 8,391 6,184 35.7 14,185 Accelerated LTIP charge (87) - - - Operating profit 8,304 6
Slide 6: Balance Sheet
Balance Sheet At 1 Jul 07 At 2 Jul 06 At 31 Dec 06 £’000 £’000 £’000 Current Assets: At 1 Jul 07 At 2 Jul 06 Non current assets 19,314 17,438 17,789 £’000 £’000 Inventories 2,163 2,195 Current assets 23,615 22,694 22,734 Trade & other 11,366 11,742 receivables Non current assets Prepaid lease held f
Slide 7: Statement of Changes in Equity
Statement of Changes in Equity At 1 Jul 07 At 2 Jul 06 At 31 Dec 06 £’000 £’000 £’000 At beginning of year 8,938 12,006 12,006 Prior period effect of IFRS adoption - (70) (70) 8,938 11,936 11,936 Proceeds from share issue 266 263 403 Treasury shares held by EBT (187) - - Share buybacks (819) - (10,4
Slide 8: Cash flow statement
Cash flow statement 26 weeks ended 26 weeks ended 52 weeks ended 1 Jul 2007 2 Jul 2006 31 Dec 2006 £’000 £’000 £’000 Profit before taxation 8,279 6,132 14,189 Net finance costs 114 62 110 Share of post tax profits of associates (149) (62) (171) Profit on disposal of non-current assets (368) (10) (61
Slide 9: Analysis of Borrowings
Analysis of Borrowings At 1 Jul 07 At 2 Jul 06 At 31 Dec 06 £’000 £’000 £’000 Cash at bank 9,934 8,593 10,262 Bank overdraft/term debt (3,500) - (6,000) Net Cash 6,434 8,593 4,262 DP Capital (2,426) (2,661) (2,299) EBT loan (7,721) (7,500) (7,500) Other (37) (19) (45) Net debt (3,750) (1,587) (5,582
Slide 10: IFRS – Minimal impact
IFRS – Minimal impact 1. P&L – PBT impact UK Gaap Effect of transition IFRS EPS to IFRS Impact £’000 £’000 £’000 - 26 weeks ended 1/7/07 8,388 (109) * 8,279 (0.07)p - 26 weeks ended 2/7/06 6,273 (141) * 6,132 (0.08)p - 52 weeks ended 31/12/06 14,292 (103) ** 14,189 (0.06)p * Holiday pay accrual – no
Slide 11: Diluted earnings per share growth
Diluted earnings per share growth 4 Compound increase of 40% over last 5 years 3 3.71 2 2.57 Pence 2.15 1 1.71 1.08 0.69 0 2002 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 Note: Diluted EPS Linear (Diluted EPS) • All numbers adjusted for share split • 2006 and 2007 under IFRS 11
Slide 12: Dividends per share growth
Dividends per share growth 2 Compound increase of 51% over last 5 years 1.5 1.90 1 1.30 Pence 0.97 0.5 0.69 0.41 0.24 0 2002 H1 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 Dividends per share Linear (Dividends per share) Note: All numbers adjusted for share split 12
Slide 13: The sales momentum – System sales
The sales momentum – System sales 160 142.5 System sales doubled in 4 years 140 114.8 120 +24% 97.1 100 81.5 68.6 +18% 80 +19% £’m 60 +19% 40 3.95 +19% 20 0 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 System Sales Linear (System Sales) 13
Slide 14: Like-for-like sales growth and store population
Like-for-like sales growth 16 404 400 14 357 317 350 12 10 268 300 11.2% 14.9% Store population % Growth 8 235 250 6 8.4% 8.3% 200 4 6.9% 4.9% 150 2 0 100 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 LFL sales growth LFL store population 14
Slide 15: Store openings
Store openings • 20 new stores opened in first half (2006: 21) • Last twelve months run rate at 45 openings • 1 store closed (2006: nil) • A5 Planning environment still challenging • Additional resources in place to impact future • Quality of location and franchisee paramount • 470 stores at half ye
Slide 16: Store openings (contd.)
Store openings (contd.) 50 45 40 27 35 29 29 25 30 21 Store population % Growth 25 20 15 10 21 19 23 21 20 5 0 2003 H1 2004 H1 2005 H1 2006 H1 2007 H1 + FY Forecast H1 H2 MARKET POTENTIAL OF 1,000 STORES 16
Slide 17: The Perfect Storm
“The Perfect Storm” extra fire power outrageous from ad budget customer service optimised Like-for-Likes Stronger team & customer database up 14.9% franchise community increased The Great focus on British Summer e-commerce 17
Slide 18: Extra fire power
Extra fire power 2007 average mature store sales per period Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 2006 2007 ytd Extra fire power held back for H2 18
Slide 19: The Great British Summer
The Great British Summer 20.00% 160 17.6% 140 18.00% 16.8% 16.1% 120 16.00% 15.3% 100 14.00% 12.8% 80 12.00% 60 10.00% 9.5% 40 8.00% 20 6.00% 0 Jan Feb Mar Apr May Jun mature store sales increase (LHS) UK precipitation in mm (RHS) 19
Slide 20: Outrageous customer service
Outrageous customer service % of orders OTD in < 15 Mins, January '06 to June '07 80% 75% 70% 65% 60% 55% 50% 45% 40% Jan-06 Feb-06 M ar-06 Apr-06 M ay-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 M ar-07 Apr-07 M ay-07 Jun-07 71% of orders in H1 were OTD in under 15 minutes (20
Slide 21: Outrageous customer service
Outrageous customer service OTD (Minutes) from Jan '06 to June '07 16.50 16.00 15.50 15.00 14.50 14.00 13.50 13.00 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Current OTD time running at 13.5 minutes Fast Bake Oven tec
Slide 22: Optimised customer database
Optimised customer database • 2 million active households on our database • More than doubled the spend on direct marketing in H1 • Helped to identify new prospects; 500,000 new customers in H1 22
Slide 23: Increased focus on e-commerce
Increased focus on e-commerce • Sales up 42.1% (2006: 46.9%) to £13.6 million (2006: £9.6 million) • Increased support due to competitive intrusion/Ofcom • 14.3% of delivered sales (2006: 12.3%) – June at 16.2% (2006: 14.3%) – 60.6% growth in June • Slow start to online ordering in ROI – similar to
Slide 24: Stronger team and franchise community
Stronger team and franchise community • 143 franchisees (2006: 157) • 58 changes of hands in last 12 months – These stores’ LFL sales up 19.3% – Contributing c. 2.5% to H1 LFL figure • Franchise enquiries matching last year…. • ….but only 1 new franchise awarded in H1 • Territory splits good for sys
Slide 25: Driving awareness of our food credentials
• Driving awareness of our food credentials…. • …by focusing on our N°1 selling pizza • Encouraging results so far 25
Slide 26: Commissary update
Commissary update • Extension to Penrith – 100% additional capacity (to c.200 stores) – Completion expected end of Q1 2008 – Resilience in system of supply – Cost of circa £4.0m • New Milton Keynes facility – 10 acres of land to be acquired • Capacity to service 500 stores (current MK circa 300 stor
Slide 27: Commissary update (contd.)
Commissary update (contd.) • Future developments to support 1,000 stores – Irish commissary expansion – Further mid-sized commissary in UK • Estimated spend of £15.0m on both – Sale of existing MK commissary 27
Slide 28: Cost pressures
Cost pressures • Pressure world-wide on food costs • Cheese prices/wheat/flour – Significant increases in USA and Australia – Pressure starting to build in UK • Domino’s Pizza UK relatively well placed – Economies of scale – Option to balance cost pressures in system – Food cost 22% to franchisee •
Slide 29: Current trading and prospects
Current trading and prospects • Store openings running behind last year • Solid like-for-like sales expected – Exciting new product launches to come – Tough hurdle to beat in last quarter • Strong cash generation + operational gearing set to continue • Food cost pressure building – Economies of scal
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