Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — H1 FY2021 Earnings Presentation
57 slides from Domino's Pizza Enterprises's earnings presentation, Feb 17, 2021
Slide 1: ASX market presentation cover letter
Domino’s Pizza Enterprises Limited 1/485 Kingsford Smith Drive Hamilton, QLD, Australia 4007 ACN: 010 489 326 www.dominos.com.au 17 February 2021 The Manager Market Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Dear Sir Market presentation for the ha
Slide 2: Half Year Results
Sy Dominos HALF YEAR RESULTS PERIOD ENDING 27 DECEMBER 2020 AUSTRALIA NEW ZEALAND BELGIUM FRANCE THE NETHERLANOS JAPAN GERMANY LUXEMBOURG DENMARK
Slide 3: Presented By
S Dominos PRESENTED BY AUSTRALIA NEW ZEALAND DON MEld GROUP CEO & MANAGING DIRECTOR NICK KNIGHT AUSTRALIA & NEW ZEALAND CEO RICHARD CONEY JOSH KILIMNIK GROUP CFO JAPAN CEO ANDRE TEN WOLDE STOFFEL THIJS EUROPE CEO GERMANY CEO BELGIUM FRANCE THE NETHERLANDS JAPAN GERMANY LUXEMBOURG DENMARK
Slide 4: Management is prepared for a medium-term future living with COVID-19
3 Management outlined the following at our Full Year Presentation, on 19 August 2020: See DPE FY20 Market Presentation, “Living With COVID-19” slide 40 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,
Slide 5: H121 Actual Half-on-Half
4 H121 Half-on-Half Half-on-Half Actual Growth % Growth Network Sales $1,843.0m +$260.8m +16.5% Online Sales $1,417.0m +$286.6m +25.4% Same Store Sales Growth +8.5% Network Store Count 2,795 stores +131 stores EBITDA(1) $218.7m +$42.0m +23.8% EBIT(1) $153.0m +$37.4m +32.3% NPAT (after Minority Inter
Slide 6: H121 Actual Trading Update
5 H121 H221 (1) (1) Actual Trading Update Network Sales Growth +16.5% +20.9% Same Store Sales Growth +8.5% +10.1% New Organic Store Additions +131 stores +11 stores ▪ Very strong Network Sales growth and store openings continued across all regions for the first 7 weeks of H221 ▪ In the prior corresp
Slide 7: Same Store Sales Growth 3-5 Year Outlook
6 3-5 Year H121 Outlook(1) Actual Same Store Sales Growth +3-6% +8.5% (3) +131 stores New Organic Store Additions +7-9% of network +5.0% of network Net CAPEX(2) $60-100m $36.9m ▪ Pleasing Group-wide performance with strong SSS and new store openings in H121; Japan and Germany are ongoing highlights
Slide 8: Positive performance across global portfolio
7 (1) Positive performance across global portfolio: ▪ Reflecting a highly focused business: investing for the long-term with clear purpose, values and mindset ▪ Agile franchisees in all markets ▪ Japan and Germany bringing forward the future Navigating ongoing uncertainty through: ▪ Experienced fran
Slide 9: Network Sales growth +16.5%
8 (1) (2) (3) (4) ▪ Network Sales growth +16.5%, (+17.0% in constant currency), SSS +8.5% ▪ Group Online Sales growth +25.4% ▪ Japan: Online Sales growth +56.6%, Network Sales growth +42.6%, SSS +36.4%(5) ▪ Germany: Surpasses initial expectations with highest average weekly unit sales in Europe 1) T
Slide 10: Group: +131 new stores added to the network
9 (1) (1) (2) ▪ Group: +131 new stores added to the network ▪ Significant Network Sales growth, from both new and existing stores ▪ Europe: +50 new stores ▪ ANZ: +13 new stores ▪ Japan: +68 new stores ▪ See slide 49 for further details 1) Including acquisitions in France (FY16) and Germany (FY16 and
Slide 11: Network Sales, store growth and EBIT by region
10 +13 $711.9m +50 EU +4.5% $648.0m ANZ +1.6% +68 $483.1m JP +10.6% EU ANZ JP EU ANZ JP (1) $44.4m $63.7m ($10.6m) $55.5m EU ANZ JP Global 1) Underlying EBIT, excluding significant charges
Slide 12: Group Financials
GROUP FINANCIALS
Slide 13: Network Sales growth across the Group
12 H120 H121 +/(-) H120 Underlying Underlying Underlying(1) $ mil $ mil % Network Sales 1,582.2 1,843.0 16.5% ▪ Network Sales growth across the Group (+$260.8m) Revenue 905.8 1,095.1 20.9% ▪ Revenue growth benefitted from extraordinary Corporate store sales EBITDA 176.7 218.7 23.8% growth in Japan D
Slide 14: Group EBIT growth +32.3%
13 H1 20 H1 21 +/(-) H1 20 (1) ▪ Group EBIT growth +32.3% (1) Underlying Underlying Underlying (EBIT growth +33.4% in constant currency) $ mil $ mil % Revenue Group FX translation headwind $1.2m. FX translation (on current spot rates) Europe 281.0 324.8 15.6% is forecast to be a larger headwind for
Slide 15: H121 Significant Charges relate to legal defence fees
14 H120 H120 H120 H121 H121 H121 +/(-) H120 Significant Significant Statutory Underlying Statutory Underlying Underlying(1) Charges Charges $ mil $ mil $ mil $ mil $ mil $ mil % Network Sales 1,582.2 1,582.2 1,843.0 1,843.0 16.5% Revenue 905.8 905.8 1,095.1 1,095.1 20.9% EBITDA 171.0 5.7 176.7 217.7
Slide 16: Unwinding of COVID-19 working capital build up
15 H1 20 H1 21 Statutory Statutory EBITDA BASED CASHFLOW $ mil $ mil Underlying EBITDA 176.6 218.7 Change in working capital 19.3 (11.7) ▪ Unwinding of COVID-19 working capital build up at Full Year Profit on sale of non-current assets (11.2) (13.2) (Full Year Working Capital benefit $63.6m) Other m
Slide 17: H121 Net CAPEX $36.9m
16 ▪ H121 Net CAPEX $36.9m (Prior Half $49.1m) ▪ CAPEX which Recycles $10.3m ‒ Gross CAPEX $41.8m, including investment in new Corporate stores (primarily Japan), Franchisee loans for new and existing stores and Franchisee acquisitions (predominantly Europe and ANZ) ‒ Cash inflows $31.5m, arising fr
Slide 18: Net debt reduced $70.6m vs. Full Year
(1) 17 FY20 H121 +/(-) H120 Statutory Statutory Statutory $ mil $ mil $ mil Cash & cash equivalents 245.7 177.3 (68.3) Trade and other receivables 146.5 177.8 31.3 Other current assets 130.3 138.7 8.4 Total Current Assets 522.4 493.8 (28.6) ▪ Net debt reduced $70.6m vs. Full Year and $102.5m vs. H12
Slide 19: ROE increases, due to strong NPAT growth
18 FY20 H121 Underlying Underlying (2) DPE Key Financial Ratios (1) Return on Equity 38.1% 44.4% ▪ ROE increases, due to strong NPAT growth Return on Capital Employed 14.1% 16.1% ▪ ROCE increases, due to significant EBIT growth, whilst DPE continues to invest in our international markets and Corpora
Slide 20: Strong Balance Sheet Position
(1) 19 Strong Balance Sheet Position: ▪ Overall significant reduction in net debt, due to strong operating cash flows and lower capital expenditure ▪ Total available cash and cash equivalents $177.3m ▪ Undrawn debt facilities of $268.3m, of which $228.5m is committed ▪ Weighted average maturity of c
Slide 21: Underlying EPS 111.1c
(1) 20 ▪ Underlying EPS 111.1c, +31.7% on H120 ▪ Underlying EPS 3 year CAGR +15.9% ▪ Underlying EPS 10 year CAGR +22.8% 1) H121 underlying compared to H120 underlying, including AASB16 from H120 onwards
Slide 22: Europe
Lud a Oo i= 4 —| Lil
Slide 23: Europe sales and store charts
22 (1) (2) (3) 1) Including sales via aggregator platforms 3) New organic stores include all new stores opened after 28 June 2015 2) Online Sales percentage calculated as total Online Sales divided by total Network Sales
Slide 24: Europe stores by country
23 Germany Benelux France 345 TOTAL STORES H121 417 TOTAL STORES H121 430 TOTAL STORES H121 +15 NEW STORES +14 NEW STORES +19 NEW STORES AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STORES PER AVERAGE NUMBER OF STORES PER FRANCHISEE: FRANCHISEE: FRANCHISEE: 2.0 (+0.2) 2.7 (+0.2) 3.0 (+0.1) POPULAT
Slide 25: Network Sales and store openings grew in all countries
24 Network Sales and store openings grew in all countries including significant expansion in Germany ▪ As a result of the above, marketing reach has grown including increased national television in major markets ▪ Delivery order growth has also been very strong, partly offset by challenges in carry-
Slide 26: Australia & New Zealand
AUSTRALIA & NEW ZEALAND
Slide 27: ANZ sales and store charts
26 (1) (2) (3) 1) Including sales via aggregator platforms 3) New organic stores include all new stores opened after 28 June 2015 2) Online Sales percentage calculated as total Online Sales divided by total Network Sales
Slide 28: ANZ total stores H121
27 846 TOTAL STORES H121 +13 NEW STORES AVERAGE NUMBER OF STORES PER FRANCHISEE: 2.1 (+0.2) POPULATION: 30.0M 35,000+ PEOPLE PER STORE
Slide 29: Franchisee company EBITDA strong through organic openings
28 Franchisee company EBITDA strong through organic openings, refranchising and high level of unit profitability ▪ Delivery growth in Australia and New Zealand remains strong: online ordering outpacing offline ▪ Carry-out sales remain affected in some regions – focus continues on returning carry-out
Slide 30: Australian Government response to the franchising inquiry
29 ▪ The Australian Government has issued a response to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the operation and effectiveness of the Franchising Code of Conduct: the Fairness in Franchising report ▪ In response the Australian Government will implement
Slide 31: Japan
JAPAN
Slide 32: Japan sales and store charts
31 (1) (2) (3) 1) Including sales via aggregator platforms from H120 onwards 3) New organic stores include all new stores opened after 28 June 2015 2) Online Sales percentage calculated as total Online Sales divided by total Network Sales
Slide 33: Japan total stores H121
32 742 TOTAL STORES H121 +68 NEW STORES AVERAGE NUMBER OF STORES PER FRANCHISEE: 3.0 (+0.6) POPULATION: 124.8M 168,000+ PEOPLE PER STORE
Slide 34: Successful implementation of a long-term strategy has delivered exceptional results
33 Successful implementation of a long-term strategy has delivered exceptional results ▪ Executing on pre-COVID plan to reach more customers on more occasions accelerated growth: ▪ Menu and pricing (Barbell Menu) ▪ Metropolitan fortressing ▪ Excellence in operations (High Volume Mentality) ▪ New app
Slide 35: Domino's for Good
DOMINO’S FOR GOOD ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Slide 36: We are pleased to welcome our first Chief ESG Officer
35 ▪ We are pleased to welcome our first Chief ESG Officer, Marika Stegmeijer, to the Global Leadership Team New initiatives continue to launch under Domino’s for Good’s five pillars: Our Food: ▪ From April 2021, all EU markets will use UTZ sustainable chocolate in all lava cakes Our Environment: ▪
Slide 37: Committed to continuous improvement through Domino's for Good
36 Domino’s is committed to continuous improvement through “Domino’s for Good” FY19 FY20 (Benchmark) ▪ A global working group including representatives from all markets was CO2e 3.61 tonnes 3.41 tonnes established in H121 emissions CO2e per store CO2e per store The European Supply Chain Centre fleet
Slide 38: Domino's Pizza Enterprises Ltd Purpose
37 37 - Domino’s Pizza Enterprises Ltd Purpose
Slide 39: The clear principles that have delivered Domino's success
38 The clear principles that have delivered Domino’s success, before and during COVID-19, will guide this next phase: ▪ Putting people first – prioritising the safety of our customers and team members ▪ Partnership, with an even stronger franchisee base ▪ Long-term decisions and investments benefiti
Slide 40: New products and occasions
39 = ▪ New products and occasions – including our chicken ‘box and a bucket’ – are winning and retaining new customers
Slide 41: Record number of new stores expected in Europe in FY21
40 Domino’s expects to open a record number of new stores in Europe in FY21 ▪ Franchisees have risen to the challenge: engagement and profitability is very strong, lead by Germany ▪ All markets maximising the opportunity to grow delivery; aiming to rebuild carry-out orders when restrictions ease ▪ C
Slide 42: Confidence in franchisees' capability to navigate COVID-19 effects
41 Management is confident in franchisees’ capability to navigate the ongoing effects of COVID-19 ▪ All stores are well-placed for delivery growth and rebuilding carry-out (which remains challenged, including in NZ) ▪ ANZ short-term soft commodity headwinds anticipated in H221, which are expected to
Slide 43: Franchising expected to reach 50% milestone in 2021
42 Franchising expected to reach 50% milestone in 2021: ahead of plan ▪ National changes to store ingredient distribution, including dough making in stores, are opening up new regions ➢ New, white space areas are now proving successful targets for expansion ➢ Four franchised stores have recently ope
Slide 44: Group future outlook 5,550 stores
43 (1) ▪ Group future outlook 5,550 stores, 2.0x ▪ DPE will continue to leverage its ▪ Europe future outlook 2,850 stores, 2.4x, by 2028-2033 position through store expansion ▪ ANZ future outlook 1,200 stores, 1.4x, by 2025-2028 ▪ Management remains active in pursuing suitable Domino’s acquisitions
Slide 45: 3-5 Year Outlook Annual Same Store Sales Growth
44 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
Slide 46: A single-minded focus, clear strategy, and long-term decision making
45 A single-minded focus, clear strategy, and long-term decision making, have delivered Domino’s to this time ▪ Outstanding growth in Network Sales and profits in H121 is testament to our talented people ▪ Domino’s continues to build on this performance, with extraordinary Network Sales growth (part
Slide 47: 46 46
46 46
Slide 48: Appendices
APPENDICES
Slide 49: Key dates: dividend record date and payment
48 ▪ 24 February, 2021 – Dividend record date ▪ 11 March, 2021 – Dividend payment date ▪ May, 2021 – CEOs webcast ▪ 1 June, 2021 – Blackout period commences
Slide 50: Group – 131 new store additions
49 H1 19 FY 19 H1 20 FY 20 H1 21 European stores Franchised stores 1,012 1,028 1,042 1,060 1,105 Corporate stores 62 69 81 101 102 European Network Stores 1,074 1,097 1,123 1,161 1,207 Net stores added in period 20 43 26 64 46 ANZ stores Franchised stores 738 716 713 714 736 Corporate stores 92 109
Slide 51: Summary: ROE and ROCE
50 FY20 H121 FY20 H121 Return on Equity Return on Capital Employed Underlying Underlying Underlying Underlying $ mil $ mil $ mil $ mil 12 Month Rolling NPAT (Before Minority Interest) 151.6 177.6 12 Month Rolling EBIT 230.4 267.8 Total Assets 2,360.1 2,452.4 Shareholders equity(1) 397.4 400.3 Less:
Slide 52: Summary: Cash Conversion
51 FY20 H121 Cash Conversion Underlying Underlying 396.7 195.6 Operating cash flow before interest & tax EBITDA 355.9 218.7 Cash conversion 111.5% 89.5% Summary ▪ Strong Cash Conversion through: ‒ Continued strong operating performance ‒ Partly offset by timing benefit in working capital in prior pe
Slide 53: Summary: Interest Coverage and Net Debt
52 FY20 H121 FY20 H121 Interest Coverage Underlying Underlying Net Debt Underlying Underlying Pre AASB16 Pre AASB16 Pre AASB 16 Pre AASB 16 $ mil $ mil $ mil $ mil 12 Month Rolling EBITDA (ex AASB16) 303.0 342.8 Non-current borrowings 657.2 546.1 12 Month Rolling Interest (ex AASB16) (12.4) (11.8) P
Slide 54: H120 Underlying Pre AASB16
53 H120 H120 H120 H121 H121 H121 +/(-) H120 Underlying AASB 16 Underlying Underlying AASB 16 Underlying Underlying(1) Pre AASB16 Adjustments Post AASB16 Pre AASB16 Adjustments Post AASB16 Pre AASB16 $ mil $ mil $ mil $ mil % Network Sales 1,582.2 1,582.2 1,843.0 1,843.0 16.5% Revenue 905.8 0.0 905.8
Slide 55: Class action, Speed Rabbit Pizza, Pizza Sprint
54 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
Slide 56: Same Store Sales are calculated weekly
55 ▪ 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
Slide 57: Domino's Pizza Enterprises Limited disclaimer
56 ▪ 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 presentati
Domino's Pizza Enterprises — H1 FY2021 Earnings Presentation on 6ix