Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2016 Earnings Presentation
54 slides from Domino's Pizza's earnings presentation, February 2017
Slide 1: The Domino's Difference
Slide 2: Today's Agenda
So TODAY'S AGENDA WELCOME AND HIGHLIGHTS David Wild PRELIMINARY RESULTS Rachel Osborne MARKET DETAIL AND OUTLOOK David Wild
Slide 3: Welcome and Highlights
2 ree Y WELCOME AND - HIGHLIGHTS DAVID WILD Chief Executive Officer
Slide 4: Group results highlights
GROUP Results highlights UK & RO! SYSTEM SALES UNDERLYING PBT UK & ROI SALES UK & ROI OPERATING PROFIT INTERNATIONAL £1.0bn £85.7m £988.8m_ £86.5M amon 415% 417% 414% 416% APPENDICES 13.8 8.000 £77.8m £34.6m 416% 416% 4£66m 4£75m 1 Dividend and earnings shown post-share split effective 27 June 2016,
Slide 5: Another successful year
, Another successful year a TOTAL SALES GROWTH NEW STORES ty ] UK& RO! mB INTERNATIONAL LOOKING FORWARD 15% 82 Double-digit sales and earnings growth APPENDICES Strong like-for-like (‘LFL’) sales growth: + 7.5% in the UK (9.8% excluding splits); + 10.3% in ROI; and + 5.8% in Switzerland (6.7% exclud
Slide 6: Preliminary Results
PRELIMINARY RESULTS RACHEL OSBORNE Chief Financial Officer
Slide 7: Getting the balance right
= a Bleek ae I Getting the balance right i | A 4 x DOMINO'S PIZZA GROUP PLC i
Slide 8: Continued strong Group trading
Continued strong Group trading £m 2016 UK& RO! System sales 1,004.2 neanaiiinde Revenue 360.6 EBITDA 93.8 LOOKING FORWARD EBITDA margin % 26.1% Depreciation and amortisation (7.6) baad EPS Operating profit 86.2 Interest (0.5) Profit before tax 85.7 Tax (17.4) Profit after tax 68.3 Non-underlying: Sh
Slide 9: UK & ROI
F UK&ROI LOCATION £m £m UK 938.7 825.0 ROI 50.1 40.7 Switzerland 15.4 11.6 Group INTERNATIONAL LOOKING FORWARD APPENDICES DOMINO'S PIZZA
Slide 10: Strong cash conversion
Strong cash conversion CASH CONVERSION (£m) UK& RO! INTERNATIONAL 100.0 90.0 LOOKING FORWARD 80.0 70.0 60.0 50.0 40.0 [| (2.9) (0.6) (14.0) —s APPENDICES 30.0 20.0 10.0 0.0 Underlying Depreciation and Net capexexcl. Trade working —Provisions/other Operatingcash __Net interest Taxation Dividends rece
Slide 11: Prioritising our capital
Prioritising our capital Dividend cover 1.7-2.0x ORGANIC | ORDINARY Efficient balance sheet GROWTH | DIVIDENDS Target net debt/EBITDA: 1.25x Current net debl/EBITDA: 0.4x SHARE BUY-BACKS DOMINO'S PIZZA GROUP PLC at
Slide 12: Balancing growth, sustainability and returns
Balancing growth, sustainability and returns CASH MOVEMENT (£m) UK& RO! INTERNATIONAL 72.4 (19.5) RETURN ON EQUITY 110.0 LOOKING FORWARD (55.3) 7] [e) 90.0 Oo APPENDICES Returns to shareholders a0, (37.0) 30.0 Investment in the business Closing 2015 net Free cash flow Net capex Investment in JVs Div
Slide 13: Increasing the Group dividend
fi ncreasing the Group dividend F UK&ROI Key dates: INTERNATIONAL -+ Ex-dividend date: 16 March 2017 -+ Record date: 17 March 2017 LOOKING FORWARD - Payment date: 25 April 2017 2016 2015 % change APPENMIGES Underlying earnings per share (pence) 13.76 11.90 16% Interim dividend per share (pence) 3.50
Slide 14: UK & ROI
UK& ROI . : INTERNATIONAL LOOKING FORWARD | APPENDICES SUSTAINABILITY RETURNS System sales growth +66bps Underlying PBT margin £60.6m Free cash flow Underlying PBT growth 0.4x Net debt/EBITDA 67% ROE Underlying EPS growth 1.7x Dividend cover 16% DPS growth 6% Capital intensity DOMINO'S PIZZA GROUP P
Slide 15: Value virtuous circle
% Value virtuous circle UK& RO! INTERNATIONAL a Strong system growth Leading brand + High margins aware ne " + Capital light ~ Scale marketing APPENDICES BRAND advantage S ORGANIC | AND SYSTEM \Wisaieeseli-follig a GROWTH | STRENGTH a | -+ Moderate cost STORE | PRODUCTION ++ Customer demand eae. ECO
Slide 16: United Kingdom & Ireland
UNITED KINGDOM ‘4am & IRELAND DAVID WILD Chief Executive Officer
Slide 17: Key drivers underpin growth for the future
‘Caz SSS Bi ee Key drivers underpin growth for the future NEW STORES DIGITAL 81 new UK stores (2015: 61) Total UK online sales growth A 15.4% increase in average oe sales per address (‘ASPA’) UK mobile orders up 30.9% with 14.9m app downloads Immature store average weekly unit sales increased UK onl
Slide 18: UK & ROI: Sales driven by LFL sales growth and new stores
GROUP y UK & ROI: Sales driven by LFL sales growth and new stores ) uKeRoI + Total sales in the UK and ROI have grown by 13.8% (2015: 16.8%) and 10.1% (2015: 8.3%) respectively + Volume growth (orders, items and mix) drives 11.4% of the UK growth and 7.1% of RO! growth ~+ Excluding splits, UK mature
Slide 19: Our strategy is working: Digital engagement and performance
Our strategy is working: Digital engagement and performance ACCELERATED DIGITAL AND TECH DELIVERY Accelerated digital and tech delivery driving conversion and spend a ob a a 33% more major web releases; 50% more app releases Personalised welcome page for My Domino’s customers Reducing checkout steps
Slide 20: Media investment
JE 4 Media investment Z a coaKies ‘4 “4 5's sPoasons KOLLVOMS HOLLYOAKS Continuous year-round presence with very high levels of recall at 93% Reached 67% of 16-34-year- old adults 33.2m of all TV-watching adults have seen our sponsorship Launched in April; medium pizzas are £5.99 and large pizzas ar
Slide 21: Product development and innovation
Pgs SS 4 Product development and innovation UK & RO! iy % ; 3 } 5 : 3 B INTERNATIONAL x j ‘ 3”, LOOKING FORWARD ; a, bine” = oe fe APPENDICES The exciting and new Italiano range National launch | Appeals to a wider customer segment + A national campaign launched the new range in October by -+ Range
Slide 22: Strategy underpinned by efficient supply chain performance
(GEES i, Sa Eo Ee Eee 4 Strategy underpinned by efficient supply chain performance Food Strong purchasing power and future volume growth Falling commodity food costs in year with £5m of food cost savings for the franchisees in 2016 Protected franchisees from FX through forward purchasing and supplie
Slide 23: ROI: Bundle deals and strong online presence driving growth
RE eS ee ee , ROI: Bundle deals and strong online presence driving growth 2016 TOTAL SYSTEM SALES GROWTH! EXPECTED NEW STORES IN 2017 10% 2 O Strong LFL sales at +10.3% -+ Dublin +10.1% ++ Provincial +9.9% -+ Rural +11.0% j by x Online sales up 26.0% YoY and now account for 49.2% of total sales (201
Slide 24: UK market overview: The road to 1,600 stores
UK market overview: The road to 1,600 stores s 4 P LATEST URBAN POPULATION a Market sized at 1,600 stores in the UK LOCATION URBAN POPULATION! STORE COUNT PER STORE + Three sources/methodologies to support the figure: US 262.3m 5,371 48.8k International analogue AUS/NZ 25.2m 738 34.2k + Analysis of
Slide 25: International Operations
INTERNATIONAL OPERATIONS
Slide 26: Switzerland: Country EBITDA breakeven with continued investment
go EC Ue 4 Switzerland: Country EBITDA breakeven with continued investment a TOTAL SYSTEM SALES GROWTH! MMM EXPECTED NEW STORES IN 2017 ‘ vf 4-6 ¥ A 21 oO 16 corporate stores; new store opened in Winterthur LFL excluding splits sales growth of 6.7% (5.8% LFL including splits)? Online sales have grow
Slide 27: Strategic partnership in Germany
4 Strategic partnership in Germany Joint venture between DPG and Domino’s Pizza Enterprises, one-third owned by DPG and two-thirds owned by DPE Joint venture acquisition of Joey’s Pizza on 1 February 2016 Put option from 1 January 2020; call option from 1 January 2022 215 Joey’s stores and 11 ex-DPG
Slide 28: Iceland: Strong performance with some additional store potential
Pg oS EO er pees Iceland: Strong performance with some additional store potential | ZG UK & ROI A = l 6 % ? LOOKING FORWARD Oo APPENDICES 12.4% LFL sales growth in 2016 21 corporate stores | Opened one new store in the year Profit contribution of £0.9m for the seven months of ownership (DPG share) C
Slide 29: Norway: Establishing a footprint in a maturing market
SS ee Se | , Norway: Establishing a footprint in a maturing market a 2016 TOTAL SYSTEM SALES GROWTH! EXPECTED NEW STORES IN 2017 : of 4-6 Ww — 5 «131% 12 corporate stores with five openings in 2016 Both mature stores profitable with 22% LFL sales Commissary currently not profitable due to sub-scale
Slide 30: Sweden: Strong start in a high potential market
Pgs ee ie SS ———= OG Mrs 4 Sweden: Strong start in a high potential market NEW STORE OPENED EXPECTED NEW STORES IN 2017 Dec ‘16 4-6 Strong new store AWUS Loss of £0.2m for the seven months of ownership (DPG share) Building the right Head Office infrastructure — fit for growth Second store opened in
Slide 31: Looking Forward
g LOOKING FORWARD
Slide 32: Customer relationship management, media and digital
Customer relationship management, media and digital One size doesn’t fit all. Legercereteyy “ proce Srousaes OF LOOKING FORWARD iS Step change in customer The Voice — UK & ROI Pizza Legends 2.0 personalisation and targeting -++ Focus on CRM to drive retention -$ Kicked off the sponsorship in ++ Re-e
Slide 33: Looking Forward: new products
LOOKING FORWARD Meltin’ Domi-Balls Mexican Fiesta Pizza Cinni Dippers Caesar Salad -t 15 mini meatballs topped -t “NEW” Mexican chicken, red -+ Freshly baked dough sticks -+ A mix of lettuce leaves, with our signature Domino’s onions and green and red dusted with a sprinkling of Grana Padano, olive
Slide 34: Looking Forward: technology and operations initiatives
GROUP UK& RO! INTERNATIONAL LOOKING FORWARD APPENDICES GPS Shoulder surfing Labour scheduling Tableau -+ Handheld GPS to allow -+ In-store monitors showing -++ Working with a third party to - Business insight tool with driving tracking orders that are in the perform time and motion Q2 roll-out for f
Slide 35: New supply chain centre: Warrington
go a ih ES es 4 New supply chain centre: Warrington | Increase in supply chain infrastructure planned to match store demand to 2,000 stores at current sales levels Improving productivity within our supply chain with a 56% improvement over Milton Keynes — , GROUP UK& RO! 4 INTERNATIONAL : S Total cap
Slide 36: 2017 trading update
2017 trading update sme TI First nine weeks of trading to 26 February 2017 2017 total 2017 first nine weeks LFL 2017 first nine weeks LFL LOCATION YoY sales excluding splits including splits UK 8.3% 3.9% 1.5% ROI 12.3% 12.3% 12.3% Switzerland 17.7% 9.4% 9.4% New store guidance + 80 stores in the UK,
Slide 37: Outlook and guidance
GROUP Outlook and guidance UK& RO! + Business continues to be confident in the underlying strategy, key growth drivers and marketing ore INTERNATIONAL initiatives LOOKING FORWARD + Expected full year 2017 capital expenditure of £50-60m APPENDICES + First half food prices increasing by mid-single dig
Slide 38: 2016 — another successful year
2016 — another successful year TOTAL SALES GROWTH NEW STORES 1 5 % 82 a LOOKING FORWARD Oo : Strong LFL sales growth, 7.5% in the UK (9.8% excluding split stores), 10.3% in ROI and 5.8% in Switzerland (6.7% excluding split stores) Record 81 new UK stores opened in the year and one in Switzerland Onl
Slide 39: Q&A
$ Q&A David Wild, CEO Rachel Osborne, CFO Simon Wallis, COO
Slide 40: Appendices
GROUP Appendices UK& RO! APPENDIX 1 Definitions Pages 41-42 INTERNATIONAL APPENDIX 2 Non-GAAP measure: underlying profit Page 43 APPENDIX 3 Analysis of UK & ROI operating profit Page 44 LOOKING FORWARD APPENDIX 4 Balance sheet Page 45 APPENDIX 5 Group ten-year history: Store count, system sales and
Slide 41: Definitions
GROUP UK& RO! + Constant currency basis restates the prior year results to the current year’s average exchange rates INTERNATIONAL ++ Continuing operations exclude the results of the directly controlled DPG German business, which was discontinued during 2015. The attributable German results are show
Slide 42: Definitions (continued)
= GROUP Definitions (continued) ‘ P -UK& ROI + Underlying basic earnings per share excludes specific adjusting items as listed in the appendix ween trina + Underlying EBITDA — based on underlying operating profit, adding back depreciation and amortisation LOOKING FORWARD Underlying profit before tax
Slide 43: Non-GAAP measure: underlying profit
: GROUP Non-GAAP measure: underlying profit rec 25 December 2016 27 December 2015 oe Continuing operations % Change Operating profit d . 14% Wea Add back share of German conversion costs APPENDICES Underlying operating profit . : 18% Interest Underlying profit before tax . . 17% Tax Underlying profi
Slide 44: Analysis of UK & ROI operating profit
GROUP Analysis of UK & ROI operating profit sme TI UK& RO! 52 weeks ended 52 weeks ended 25 December 2016 27 December 2015 £m £m % Change Net royalties 27.6 24,2 14% INTERNATIONAL LOOKING FORWARD Supply chain centre margin 83.3 TA! 17% APPENDICES Net overheads, realty and incentives (20.0) (17.2) (1
Slide 45: Balance sheet
: GROUP Balance sheet 4 P -UK& ROI INTERNATIONAL £m £m % change Fixed assets 86.0 70.6 LOOKING FORWARD Investments in associates and joint ventures 58.8 8.0 Other non-current assets 36.2 17.2 APPENDICES Working capital (19.5) (25.7) Provisions (2.7) (7.3) Tax liabilities (6.6) (4.3) Other assets/lia
Slide 46: Group ten-year history: Store count, system sales and Group profit
GROUP Group ten-year history: Store count, system sales and Group profit UK& RO! STORE COUNT (CONTINUING OPERATIONS) 1,000 : INTERNATIONAL 800 LOOKING FORWARD I : I 1] APPENDICES 2007 2008 2010 2011 2012 2015 2016 ANNUAL SYSTEM SALES AND GROUP UNDERLYING OPERATING PROFIT (£m) 1,200 1,000 a 598.6 600
Slide 47: UK & ROI LFL sales growth by quarter
Pg UK & ROI LFL sales growth by quarter UK LFL SALES GROWTH BY QUARTER (INCLUDING SPLITS) 20% 15% 10% 5% 0% 10.5% 10.3% Ql 14.9% 11.3% 10.4%, | Py Q m2015 iy ROI LFL SALES GROWTH BY QUARTER 20% 15% 10% 5% 0% 5.4% Ql 13.7% 7.1% Q2 UK LFL SALES GROWTH BY QUARTER (EXCLUDING SPLITS) 20% 15% 11.3% 10% Py
Slide 48: Our strategy is working: UK new stores
GROUP Our strategy is working: UK new stores ; UK& ROI ~+ Immature average weekly unit sales have increased by 7.0% from £13,675 to £14,633 -+ Arecord 81 new UK stores opened in 2016 (2015: 61), of which 53 were splits (2015: 26) -+ New stores are operating in lower address count areas with a 15.4%
Slide 49: Our strategy is working: UK digital
GROUP Our strategy is working: UK digital UK& RO! -+ The total online sales growth rate is 21.2% (2015: 30.8%) + Continued mobile migration (app and mobile website) with total orders up 30.9% in the UK and 14.9m app downloads (2015: 11.5m) INTERNATIONAL LOOKING FORWARD TOTAL ONLINE NET SALES! (£m) T
Slide 50: Our strategy is working: ROI digital
GROUP Our strategy is working: ROI digital UK& RO! + The total online sales growth rate is 26.0% (2015: 29.2%) ++ Continued mobile migration (app and mobile website) with total orders up 36.8% TS LOOKING FORWARD TOTAL ONLINE NET SALES! (€m) TOTAL ONLINE ORDERS (m) ONLINE GROSS TICKET (€) APPENDICES
Slide 51: Our strategy is working: Franchisee profitability
GROUP Our strategy is working: Franchisee profitability UK& RO! -+ Franchisee mature store EBITDA rose by 6.6% YoY in the UK and 8.1% in ROI -+ Record number of new franchised stores, with 81 in the year (2015: 61) -+ Improvement in EBITDA benefiting from increased sales and lower food prices secure
Slide 52: International summary
GROUP International summary UK& RO! URBAN TOTALSTORE 2016 MATURE INTERNATIONAL LOCATION POPULATION POTENTIAL STORECOUNT AWUS SHAREHOLDING = MODEL Switzerland 6.1m 100 16 £21,571 100% Corporate Wea Iceland 0.3m 30 21 £31,020 49% Corporate APPENDICES Norway 4.2m 15 12 £20,475 45% Corporate Sweden 8.4m
Slide 53: Switzerland income statement
GROUP Switzerland income statement UK& ROI 26 December 2016 27 December 2015 mR m m Change System sales (£)! 14.0 116 21% LOOKING FORWARD Currency impact (£) 1.4 APPENDICES Total system sales (CHF) 20.6 17.0 21% LFL sales 5.8% 5.4% LFL mature store EBITDA (CHF)? 1.3 0.3 Operating profit (£) (1.3) @E
Slide 54: Forward-looking statements caution
Forward-looking statements caution These 2016 annual results, our interim results, our Annual Report and the Domino's Pizza website may contain certain “forward-looking statements" with respect to Domino’s Pizza Group ple and the Group's financial condition, results of operations and business, and c