Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2017 Earnings Presentation
45 slides from Domino's Pizza's earnings presentation, Jul 17, 2017
Slide 1: Interim Results for the 26 weeks ended 25 June 2017
o #€ DOMINO'S DIFFERENCE Domino’s Pizza Group plc Interim Results for the 26 weeks ended 25 June 2017
Slide 2: Today's Agenda
$ _ i TODAY’S AGENDA : ws T WELCOME AND HIGHLIGHTS David Wild INTERIM RESULTS Rachel Osborne Us MARKET DETAIL AND OUTLOOK yr! avi i SS . nee — = Se
Slide 3: Welcome and Highlights
2 ree Y WELCOME AND HIGHLIGHTS DAVID WILD Chief Executive Officer
Slide 4: Continued growth, record new stores and increased digital participation
Continued growth, record new stores and increased digital participation GROUP UK & ROI SYSTEM SALES PROFIT BEFORE TAX UK & ROI SYSTEM SALES UK & ROI OPERATING PROFIT INTERNATIONAL £546.5m £44.6m £522.7m £44.6m Bewinm 410.5% 49.1% 47.3% 48.1% APPENDICES 7.3p 3.75p £39.5m £61.0m 49.9% 47.1% v£14.5m 4£
Slide 5: Interim Results
INTERIM RESULTS RACHEL OSBORNE Chief Financial Officer
Slide 6: Strong results, International consolidation
Strong results, International consolidation £m H1 2017 H1 2016 % Growth System sales 546.5 494.5 10.5% Revenue 211.3 176.4 19.8% EBITDA 47.6 43.3 10.0% Depreciation and amortisation (4.9) (3.5) Share of JV and associates 1.6 ibs Operating profit 44.3 40.9 8.3% Interest 0.3 0.0 Profit before tax 44.6
Slide 7: System sales growth by market
System sales growth by market LOCATION H1 2017 H1 2016 Reported % Constant currency % Pro-forma Constant currency UK ROI Switzerland Nordic 6.5% 22.4% 24.8% 6.5% 10.1% 10.0% Group Note: pro forma shows H1 2017 to H1 2016 on a comparable basis. 10.5% 9.7% GROUP UK & RO! INTERNATIONAL LOOKING FORWARD
Slide 8: Segmental results
Segmental results UK & ROI International Group £m H1 2017 H12016 %growth| H1 2017 H12016 %growth} H1 2017 H12016 %growth System sales 522.7 487.3 7.3% 23.8 7.1 231.7% 546.5 494.5 10.5% Revenue Franchise revenue 187.4 169.2 - - 187.4 169.2 10.8% Corporate revenue - - 23.8 Ti. 23.8 ipl 231.7% Total re
Slide 9: Underlying operating profit
50.0 45.0 40.0 35.0 30.0 Underlying Depreciation Net CAPEX Working Other Underlying Tax Interest Free cash flow operating and excluding Capital operating cash profit amortisation Warrington flow
Slide 10: Prioritising our capital
aS a al GROUP Prioritising our capital Efficient balance sheet Target net debt/EBITDA: 1.25x Current net debt/EBITDA: 0.6x Net debt to EBITDA ratio based on past 12 months EBITDA aROUP PLC 10
Slide 11: Net debt movement
20.0 10.0 0.0 -10.0 -20.0 -30.0 -40.0 -50.0 -60.0 -70.0 2016 closing net Free cash flow Total CAPEX Consideration Nordics Dividend Share Other H1 2017 closing debt excluding for Nordics consolidation purchases net debt CAPEX impact
Slide 12: Group interim dividend increased by 7.1%
—-.. ee ee a Group interim dividend increased by 7.1% Interim key dates: -+ Exdividend date: 3 August 2017 -+ Record date: 4 August 2017 -+ Payment date: 1 September 2017 26 weeks ended 26 weeks ended 25 June 2017 26 June 2016 % change Interim Dividend per share (pence) 3.75 3.50 7.1% Dividend cover
Slide 13: Guidance
GROUP Guidance UK& ROI + International expected to be profit neutral for 2017, positive thereafter INTERNATIONAL LOOKING FORWARD + FY 2017 is a 53 week period APPENDICES + Capital expenditure outlook remains £50-£60m in 2017 ¢ Maintenance, IT * New supply chain ¢ International + Medium-term net debt
Slide 14: United Kingdom & Ireland
UNITED KINGDOM ‘4am & IRELAND DAVID WILD Chief Executive Officer
Slide 15: Delivered food market still growing
Delivered food market still growing aes” ae UK & RO! 16.0% Delivered Food Market Performance Delivered food market 14.0% a F ‘ INTERNATIONAL oe ++ Delivered food market continues ana to grow er 14.0% 6.0% ; ~ 11% growth in 2017 CES 4.0% 2.0% 0.0% 2014 - 2016 CAGR 2017 FF ap Delivered Pizza Market Pe
Slide 16: Domino's growing pizza share
. . , GROUP Domino’s growing pizza share UK & ROI Domino’s Delivered Pizza market share 49.0% INTERNATIONAL 47.0% LOOKING FORWARD 45.0% 43.0% APPENDICES a 46.0% oe 42.0% 37.0% 35.0% a aa oath + Scale and brand strength ~ Product and service quality Advantaged unit economics f ~? Ownership of end to
Slide 17: UK: Continued growth, record new stores and increased digital participation
GROUP UK: Continued growth, record new stores and increased digital participation - UK & RO! DOMINO'S TOTAL SYSTEM DOMINO'S ONLINE Total system sales 6.5% SALES GROWTH SALES GROWTH i, INTERNATIONAL Online growth 11.5% 6.5% y, . fe) . (e) ing spli LFL excluding splits 2.4% LOOKING FORWARD Net new sto
Slide 18: Market strategy
as” ae. ll Market strategy & J VISION & BE THE #1 PIZZA COMPANY JN Tele WY ORR LID axe IN EVERY NEIGHBOURHOOD -+ Dominate towns and cities Strong brand presence ~+ Exploit potential of ‘Golden Mile’ -r Easy for collection customers GROUP UK & ROI INTERNATIONAL LOOKING FORWARD APPENDICES DOMINO'S PIZ
Slide 19: Market strategy - Case Study
GROUP Market strategy — Case Study ET 3 Stores 1 ~ Territory split twice since 2013 now with 3 stores THeleaelees % INTERNATIONAL count 53,163 64,712 21.7% + Total address count increased 21% Average eatsliess + Total area AWUS doubled over 3 years and average per store sales per address increased 6
Slide 20: Split territory benefits
Split territory benefits UK & RO! + Service level improvement for customers INTERNATIONAL -~+ Increased coverage ++ Additional collection sales LOOKING FORWARD ++ Improved productivity of labour and local marketing APPENDICES Un-split territory Split territory 80.0% = -— —_ - -- - | PL P2 P3 P4 PS P
Slide 21: ROI: Growth across all areas
ROI: Growth across all areas H1 2017 TOTAL SYSTEM SALES GROWTH! 10.1% . oO ONLINE SALES GROWTH! 28.3% 75 stores 1 At constant currency. Total system sales Online growth LFL excluding splits Order growth Ticket growth GROUP UK & RO! INTERNATIONAL LOOKING F APPENDICES DOMINO'S PIZZA GROUP PLC 21
Slide 22: Customer value
Se Pas Peis a eS ee TP a ee pt = aa suns Swe @ Customer value e - ee Promotion plan softened due to inflation concerns UK & RO! - Less aggressive national tactical activity Q2 recovery in collection driven by Walk-in-Wins Investing up to £4m of gross margin in customer value New national promotion f
Slide 23: Sponsorship, advertising and digital initiatives
Sponsored ‘The Voice’ in Q1 driving greater awareness and value advertising in Q2 emphasising freshness and quality ingredients Mobile first focus 16.5m app downloads to date 9 major web releases in 2017 we oe & Domino's PROUD SPONSORS OF + Saved card details ++ Saved previous xetS -++ Reduced page
Slide 24: New product launches
UK & RO! INTERNATIONAL 4s LOOKING FORWARD APPENDICES MEXICAN FIESTA PIZZA CINNI DIPPERS LOTTA-CHOCCA PIZZA ...and more to come DOMINO'S PIZZA GROUP PLC 24 See = es a Tey, SS ee
Slide 25: Opened record new stores, performing strongly
UK & RO! A INTERNATIONAL Opened record 40 new stores, performing strongly ; LOOKING FORWARD AWUS of new stores of £15k Strong value creation for franchisees APPENDICES 24 stores from territory splits 1,000" store in UK imminent Increasing full year outlook to 90 new stores DOMINO'S PIZZA GROUP PLC 2
Slide 26: EBITDA per mature store
EBITDA per mature store 180,000 +27% 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - 2014 2016
Slide 27: Supply chain and infrastructure
Ne > @ Supply chain and infrastructure Handled record volumes Maintained excellent service levels of 99.9% Work on new facility in Warrington progresses Increased capacity for 1,600 stores Increased automation Capex remains in line with previous guidance of £37-39m Production to start in Q1 2018 201
Slide 28: International Operations
INTERNATIONAL OPERATIONS
Slide 29: International: Strong performance with increased ownership
' 4 p F GROUP International: Strong performance with increased ownership UK & ROI Switzerland Iceland Norway Sweden INTERNATIONAL Total System Sales YoY % 24.8% N/A N/A N/A LOOKING FORWARD Constant currency / proforma 10.0% 15.2% 66.6% N/A ae Like-for-like sales 10.1% 3.3% 11.5% N/A New stores 0 1 4
Slide 30: Switzerland and Iceland
ts ~ < ge ia 7 - 2 ae “~ aa ss mma | svete” ee $5 vs INTERNATIONAL SWITZERLAND Strong performance, system sales and revenue up by 10% Uplift driven by pricing structure changes Online sales increased by 10 ppts to 49% of total sales q 4 new stores planned for H2 Commissary planned for 2018 as scale
Slide 31: International performance: Norway and Sweden
p Xfce: Sie x ee i re a) @ International performance: Strong progress NORWAY System sales growth of 67% INTERNATIONAL Franchised 5 stores in Telemark region Online sales increased by 9 ppts to 63% of total sales Acquisition of Dolly Dimple’s 4 Controlling interest acquired ahead of schedule hy 5 sto
Slide 32: Looking Forward
g LOOKING FORWARD
Slide 33: Continued growth, record new stores and increased digital participation
Continued growth, record new stores and increased digital participation 10.5% AO 11.5% Financial highlights ++ Group system sales up 10.5% -++ Underlying PBT up 9.1% and EPS up 9.9% ++ Strong cash funding shareholder returns — intend to resume share buy-backs shortly + Investment for growth in UK &
Slide 34: Q&A
g Q&A DAVID WILD Chief Executive Officer RACHEL OSBORNE Chief Financial Officer SIMON WALLIS Chief Operating Officer
Slide 35: Appendices
g APPENDICES
Slide 36: Appendices
GROUP Appendices UK& RO! + APPENDIX 1 Definitions Page 37 INTERNATIONAL -+ APPENDIX 2 Non-GAAP measure: underlying profit Page 38 -++ APPENDIX 3 Analysis of UK & ROI operating profit Page 39 LOOKING FORWARD + APPENDIX 4 Group ten-year history: Store count, system sales and Group profit Page 40 an -+
Slide 37: Definitions
Definitions Constant currency basis restates the prior year results to the current year’s average exchange rates System sales represent sum of all sales made by both franchisee and corporate stores in the United Kingdom, ROI, Switzerland and the Nordies to consumers Like-for-like sales (‘LFL’) sales
Slide 38: Non-GAAP measure: underlying profit
GROUP Non-GAAP measure: underlying profit UK& ROI 26 weeks ended 26 weeks ended 25 June 2017 26 June 2016 Continuing operations £m £m % Change INTERNATIONAL LOOKING FORWARD Underlying operating profit 44.3 40.9 8% Interest 0.3 (0.0) SPENCE Underlying profit before tax 44.6 40.9 9% Tax (8.7) (7.8) Un
Slide 39: Analysis of UK & ROI operating profit
ms GROUP Analysis of UK & ROI operating profit UK& RO! 26 weeks ended 26 weeks ended 25 June 2017 26 June 2016 a al £m £m % Change Net royalties 14.7 13.6 3% LOOKING FORWARD Supply chain centre margin 43.1 40.4 7% APPENDICES Net overheads, realty and incentives (10.8) (10.6) (2)% UK joint ventures a
Slide 40: Group ten-year history: Store count, system sales and Group profit
Group ten-year history: Store count, system sales and Group profit STORE COUNT (CONTINUING OPERATIONS) 1,013 ee 1,000 835 872 931 . 787 800 608 665 720 600 53) 400 200 (0) 2008 2009 2010 2011 2012 2013 2014 2015 2016 H1 2017 ANNUAL SYSTEM SALES AND GROUP UNDERLYING OPERATING PROFIT (£m) 1,200 120 1,
Slide 41: UK & ROI LFL sales growth by quarter
UK & ROI LFL sales growth by quarter UK LFL SALES GROWTH BY QUARTER (EXCLUDING SPLITS) iNshe 12.7% 13.3% 10% 7.2% 6.2% i 3.5% oe 14% L a APPENDICES — = — Ql Q2 Q3 a4 ™2016 ™2017 ROI LFL SALES GROWTH BY QUARTER 20% 13.7% f 10.5% 11 aeons ‘ L a - Z Q2 Q3 DOMINO'S PIZZA GROUP PLC 41 2016 ™2017
Slide 42: UK digital
GROUP UK digital UK& RO! + The total online sales growth rate is 11.5% (H1 2016: 29.7%) verte ++ Continued mobile migration (app and mobile website) with total orders up 8.2% in the UK and 16.5m app - j downloads LOOKING FORWARD TOTAL ONLINE NET SALES! (£m) TOTAL ONLINE ORDERS (m) ONLINE GROSS TICKE
Slide 43: ROI digital
GROUP ROI digital UK& RO! ++ The total online sales growth rate is 28.3% (H1 2016: 25.8%) INTERNATIONAL + Continued mobile migration (app and mobile website) with total orders up 27.3% LOOKING FORWARD TOTAL ONLINE NET SALES' (€m) TOTAL ONLINE ORDERS (m) ONLINE GROSS TICKET (€) APPENDICES 20 1.0 22.5
Slide 44: International summary
International summary URBAN TOTALSTORE 1 2017 MATURE LOCATION POPULATION POTENTIAL STORECOUNT AWUS SHAREHOLDING MODEL Switzerland 6.1m 100 16 £21,792 100% Corporate Iceland 0.3m 30 22 £36,036 51% Corporate Norway 4.2m 15 52 £17,426 1% Corporate/Franchised Sweden 8.4m 125 3 N/A 1% Corporate ROI 2.9m
Slide 45: Forward-looking statements caution
aS A eae: = & E = ‘ a Forward-looking statements caution GROUP UK & ROI These 2017 interim results, our annual 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, resu