Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — FY2010 Earnings Presentation
52 slides from Domino's Pizza's earnings presentation, Feb 15, 2011
Slide 1: Preliminary Results for the 52 weeks ended 26 December 2010
Preliminary Results for the 52 weeks ended 26 December 2010
Slide 2: The Team
The Team Chris Moore Chief Executive Officer Lee Ginsberg Chief Financial Officer 2
Slide 3: Financial Highlights for 2010
Financial Highlights for 2010 40% Another record year 30% +31.6% +27.3% +24.2% 20% +19.3% 10% +11.9% 0% LfL sales growth System Sales Diluted EPS* PBT* Total dividend pence per share * Pre-exceptionals 3
Slide 4: System Sales – The Long View
550 System Sales – The Long View £38.0 40 500 Sales double every four years 35 450 PBT doubles at least every three years £29.9 30 £485 400 £23.4 25 350 £407 System Sales £‟m 300 £18.7 20 PBT * £’m £14.3 £351 250 15 £11.2 £296 200 £8.8 10 £6.5 £240 150 £4.2 £201 £2.9 £174 5 100 £142 £98 £119 50 0 20
Slide 5: Like-for-like sales and store growth – the long view
Like-for-like sales and store growth – the long view 25% 600 21.4% 550 20% 553 500 Mature Store Sales growth LFL store population 501 450 14.7% 15% 450 9.7% 11.9% 400 11.2% 7.1% 404 10.0% 350 10% 8.4% 7.4% 6.6% 357 300 317 250 5% 268 235 200 191 214 0% 150 2001 2002 2003 2004 2005 2006 2007 2008 200
Slide 6: Other 2010 Highlights
Other 2010 Highlights • Of the 9000+ Domino‟s stores worldwide, our market continues to have 8 of the Top 10 in sales and 36 of the Top 50 • 18 of the Top 20 international stores are in the UK and Ireland • UK is now the largest international market in store count and sales • In 2010 we delivered to
Slide 7: Profit and Loss (Pre-exceptionals)
Profit and Loss (Pre-exceptionals) 52 weeks ended 52 weeks ended % increase 26 December 2010 27 December 2009 £‟000 £‟000 System sales 485,282 406,900 19.3 Operating profit 38,035 30,008 26.7 Net interest (28) (143) 80.4 Profit before tax 38,007 29,865 27.3 Taxation (10,878) (8,291) (31.2) Profit af
Slide 8: Profit and Loss (exceptional items)
Profit and Loss (exceptional items) 52 weeks ended 52 weeks ended 26 December 2010 27 December 2009 £‟000 £‟000 Operating exceptionals - Accelerated LTIP charge (467) (980) - Restructuring/reorganisation costs (755) (264) - Accelerated depreciation – MK Head Office (583) - - Impairment – assets held
Slide 9: PBT/System Sales % - The Margin Progression
PBT/System Sales % - The Margin Progression 12.5 12.0 11.5 10.5 PBT/System sales % 9.5 40 bpts p.a. 7.8 8.5 7.3 7.5 6.7 6.3 6.5 5.9 5.5 4.5 2006 2007 2008 2009 2010 2020 Analysts' consensus 9
Slide 10: The Operational Gearing Story
The Operational Gearing Story Infrastructure largely in place 35 33.1 28.9 30 27.8 27.3 24.7 % increase 25 23.4 20 19.6 19.3 18.4 15 16.0 10 2006 2007 2008 2009 2010 System sales PBT 10
Slide 11: Balance Sheet
Balance Sheet At 26 December 2010 At 27 December 2009 Current Assets: At 26 Dec At 27 Dec £’000 £’000 2010 2009 Non-current assets 80,556 78,514 £’000 £’000 Inventories 5,054 2,735 Current assets 54,127 41,129 Receivables 16,014 12,514 Investment in Non-current assets finance leases 1,793 1,745 held
Slide 12: Statement of Changes in Equity
Statement of Changes in Equity At 26 December At 27 December 2010 2009 £’000 £’000 At beginning of year 21,576 12,780 Proceeds from share issue 1,594 2,132 Share buybacks (4,715) (7,624) Profit for year 24,036 33,484 Tax credit on employee share options 1,036 449 Share options and LTIP charge 1,432
Slide 13: Cash Flow Statement
Cash Flow Statement 52 weeks ended 52 weeks ended 26 December 2010 27 December 2009 £’000 £’000 Profit before taxation 35,204 40,968 Excess of fair value of assets acquired on consideration - (15,053) Impairment 82 2,706 Net finance costs 448 360 Share of post tax profits of associates (219) (553) A
Slide 14: Analysis of Borrowings
Analysis of Borrowings * At 26 Dec 2010 At 27 Dec 2009 £’000 £’000 Cash at bank 31,128 23,997 Revolving credit facilities (25,000) (25,000) Net Cash 6,128 (1,003) DP Capital (2,732) (2,703) EBT loan (12,035) (12,035) Adjusted net debt (8,639) (15,741) Adjusted net debt/EBITDA 0.2 0.5 * Excludes non-
Slide 15: Available Debt Facilities
Available Debt Facilities Expiry Utilised at Undrawn at Facility Date 26 Dec 10 26 Dec 10 Term Purpose £‟m £‟m £’m 25.0 * 20 Dec 2012 25.0 - 5 years Multi-purpose 5.0 31 Dec 2013 2.7 2.3 5 years DP Capital 13.0 * 31 Jan 2014 12.0 1.0 7 years EBT 43.0 39.7 3.3 Cash and cash equivalents at 26 Dec 2010
Slide 16: Capital Expenditure 2011 - 2014
Capital Expenditure 2011 - 2014 2010 2011 2012 2013 2014 £’m Actual Forecast Maintenance 3.0 2.4 2.5 2.5 2.5 Expansionary 8.6 7.5 - - 2.5 West Ashland 7.0 - - - - HQ 0.3 7.5 - - - Naas 0.3 - - - - Penrith 0.2 - - - 2.5 Store freeholds 0.8 - - - - Total Capex 11.6 9.9 2.5 2.5 5.0 RISING FREE CASH FLO
Slide 17: Cash Returned to Shareholders
Cash Returned to Shareholders 5 year total 2010 2009 2008 2007 2006 £’000 £’000 £’000 £’000 £’000 £’000 Profit after tax * 87,602 27,129 21,574 15,664 13,239 9,996 Share buybacks 34,629 4,715 7,624 3,783 8,346 10,161 Dividends 42,183 13,632 10,466 8,035 5,816 4,234 Total returned 76,811 18,347 18,08
Slide 18: Diluted Earnings Per Share
Diluted Earnings Per Share * Compound increase of 29% +24.2 % over last five years 18 17 +26.0% 16 15 14 +28.6% 13 16.75 12 Pence 11 +39.1 % 10 9 +26.9 % 13.49 8 7 10.71 6 5 8.33 4 3 5.99 2 1 0 2006 2007 2008 2009 2010 Diluted earnings per share Linear (Diluted earnings per share) * pre-exceptionals
Slide 19: Dividends Per Share
Dividends Per Share * Compound increase of 35% +31.6% 11 over last five years 10 +31.3 % 9 8 +34.1% 10.20 7 +43.8 % Pence 6 7.75 5 +34.8 % 4 5.90 3 4.40 2 1 3.06 0 2006 2007 2008 2009 2010 Dividends per share Linear (Dividends per share) * All figures adjusted for share split 19
Slide 20: System sales – The drivers
System sales – The drivers The significance of store openings 2009 2010 2011 2012 2013 2014 2015 LFL % 8.4% 11.9% 3.0%* 3.0%* 3.0%* 3.0%* 3.0%* - Matures - £’m 28.4 46.9 14.2 15.5 17.0 18.6 20.2 Openings** 27.4 31.5 37.5 34.5 36.2 38.0 60.2 - Immatures - £’m 17.3 18.4 17.7 14.2 15.4 16.7 18.1 - New
Slide 21: System sales – The drivers (cont'd)
System sales – The drivers (cont‟d) 2009 2010 Mature Openings Mature Openings 2011 2012 2013 Mature Openings Mature Openings Mature Openings 21
Slide 22: Cumulative Like-for-Like Sales Growth
Cumulative Like-for-Like Sales Growth 11.9% growth in 2010 40.0% 10.8% 21.7% 13.8% 35.0% 9.5% 11.9% 12.9% 16.3% 8.2% 11.3% 11.1% 30.0% 25.0% 8.9% 20.0% 6.6% 12.8% 13.5% 3.6% 3.1% 11.9% 9.3% 15.0% 9.7% 9.7% 3.0% 10.0% 8.9% 11.2% 7.1% 5.0% 0.0% 1 2 3 4 5 6 7 8 9 10 11 12 Q2 2009 up 4.8% 2008 % increas
Slide 23: Key Drivers of Like-for-Like Growth
Key Drivers of Like-for-Like Growth 2008 Constant Mature Store Population 16.9% 17.0% 45 £19.00 £18.53 £18.17 16.0% £18.50 14.7% 40 34.5 35.2 £18.02 15.0% 34.2 £18.00 35 £17.50 14.0% 12.7% £17.00 13.0% 30 12.0% 11% £16.50 25 £16.00 11.0% £15.50 10.0% 20 £15.00 2008 2009 2010 2008 2009 2010 2008 2009
Slide 24: Customer Base
Customer Base „Active‟ Customer Growth i.e. have ordered in last 210 days 3.50 3.2m 3.00 2.7m 2.50 2.2m 1.9m 2.00 1.7m 1.50 • 3.2 million “active” customers now 1.00 on database (figures shown are 0.50 year-end) 0.00 • Almost doubled in four years 2006 2007 2008 2009 2010 'active' customers (million
Slide 25: The Drivers: Advertising Fire Power
The Drivers: Advertising Fire Power •BGT delivered £24.6m in value over the three year period •c.£11m in 2010 •Additional budget for 2011 approx. £7m (not including LSM) •Total marketing (including LSM) spend of £43m in 2010 (2009: £33m) •Total TVRs (spots & sponsorship) flat with 2009 •But higher c
Slide 26: The Drivers: Online Sales Channel
£140,000 The Drivers: Online Sales Channel 50.0% £120,000 63% increase in online sales £128,000 40.0% 35.8% £100,000 % of UK delivered sales E-Commerce Sales £‟m 27.8% 30.0% £80,000 23.3% £78,529 £60,000 20.0% 16.1% £55,930 £40,000 12.5% 10.0% £32,197 £20,000 £20,059 £0 0.0% 2006 2007 2008 2009 2010
Slide 27: Online Support
Online Support • Greater customer loyalty • Boosting investment this year • Mobile, social media, search marketing key components • Mobile sales: £7.6m • Online c. 10% of Ad Budget 27
Slide 28: The Drivers: Building Day Parts
The Drivers: Building Day Parts • H2 Lunch Sales up 18% over H1 UK Mature Store Sales by Day Part (shows % mix of total sales) • H2 Lunch Sales up 38.5% over £25,000,000 H2, 2009 11.1% • On going programme £20,000,000 9.5% • Late night is a longer process although comparable stores £15,000,000 8.3%
Slide 29: The Health of the System: Mature Store Turnover by AWUS banding
The Health of the System: Mature Store Turnover by AWUS banding 5% 3% 4% 3% 10% <£7k 17% 12% 24% 21% 29% £7k-£10k 34% 41% 42% £10k-£15k 42% 42% 87% over 43% £10k £15k-£20k 42% per 41% 28% week over 31% 23% £10k 22% £20-£25k per 16% 11% week 10% 6% 7% 5% 5% 3% 4% 7% 2% 1% 1% 2% 3% >£25k 2005 2006 200
Slide 30: The Pizza Delivery Market
The Pizza Delivery Market New openings in 2010 End of year store count Net sales Domino’s Pizza 57 665 £485m Pizza Hut (delivery) * 36 300 £148m Papa John‟s* 24 152 £55m Perfect Pizza* 0 110 £19m Others* n/a 2000 £310m TOTAL 117 3227 £1,017m •company estimates - includes estimates for Ireland where
Slide 31: New Store Openings
57 New Store Openings 750 (including 22 delivery area splits) 665 650 608 Number of stores at year end 553 550 501 57 451 450 55 52 350 50 46 250 2006 2007 2008 2009 2010 (2) (0) (0) (0) (0) ( ) = no. of closures 31
Slide 32: Strong Demand For Store Growth
Strong Demand For Store Growth • 2010 was second highest for franchise enquiries: 4,234,15% up on ‟09 – 10 new franchisees, 4 opening new stores, 6 taking on existing stores • 57 new stores and 57 changes of hands (COH) – COHs £24 million – New Stores £15 million approx – Refits £ 3 million approx T
Slide 33: Store Roll-Out - taking it up (another) gear
Store Roll-Out - taking it up (another) gear • Now targeting a run-rate of 60 openings a year • Strong openings in smaller territories • Continued gradual improvement in property environment • As at February 9th, 83 stores in pipeline (vs.71 LY) • Potential new opportunities, e.g. Moto 33
Slide 34: Still an immature market
Still an immature market average household count per store 40,000 35,000 30,000 actual Estimated 2020 25,000 Ave. Household Count for 1,200+ stores = c. 23,000 20,000 Average Household Count Per Store in U.S. = 15,335 34
Slide 35: Commissary Update
Commissary Update • West Ashland • Fully commissioned and operational • Efficiencies running to plan + analysts‟ models • Labour savings of £0.4m in 2010 and £1.0m in 2011 • Potentially further opportunities • Quality of doughball improved • Consistency • Longer life optimisation • Truly world class
Slide 36: Commissary Update (cont'd)
Commissary Update (cont‟d) • Naas • Decision taken to stay at current facility • Additional refrigeration • Completed December 2010 • Cost of £0.3m (€0.4m) • Allows us to “sweat” facility until 2014/2015 • Capex of £7m for new commissary deferred 36
Slide 37: Commissary Update (cont'd)
Commissary Update (cont‟d) • Longer term developments • Next commissary in South of England • Likely timing is 2015/2016 • Estimated spend of c.£15m • Sale of Milton Keynes commissary • No plans to dispose in 2011 • Resilience more critical in short term • New Head Office • Construction on track for
Slide 38: Commissary Update (cont'd)
Commissary Update (cont‟d) 38
Slide 39: Operational Gearing Driving Profits
Operational Gearing Driving Profits • Strong growth in commissary margins • Gross margins up 100 bpts (+30.5%) before food rebates to franchisees • Rebates of £3.3m (2009: £1.3m) • Economies of scale and supply chain re-engineering • Volume benefits of increasing system sales • Production labour eff
Slide 40: Food Cost Outlook
Food Cost Outlook • Benefits of strategy to lock into longer term contracts • Created more price stability • Low impact from rising commodities in 2010 • eg wheat • Secured volumes and pricing for 2010 at end of 2009 • Cheese biggest impact • Increase late 2009 • Contracts renewed during 2010 • Pric
Slide 41: Food Cost Outlook (cont'd)
Food Cost Outlook (cont‟d) • Outlook for 2011 • Pressure on contracts renewing in 2011 • Wheat, chicken, paper/boxes and oil • Increases passed on to franchisees • Supply chain re-engineering benefits in 2011 • Boxes • Savings shared with franchisees • Franchisees increased prices by c.3.5% (+/- £0.
Slide 42: Food Cost Outlook (cont'd)
Food Cost Outlook (cont‟d) • Overall position for 2011 now fairly stable • 60% of basket hedged • Balance subject to: • Cheese – linked to milk price • Other contracts renewing during year • Potential impact of above • 1.0% increase in food costs •Energy costs • West Ashland locked in to March 2013
Slide 43: Current Trading and Prospects
Current Trading and Prospects • Solid start to the year in first seven weeks of 2011 • Like-for-like sales up 4.7% (2010: 11.0%) • Challenging comparatives for balance of year, especially in Q2 • Demand for growth and store opening pipeline looking good • Moving guidance to 60 store openings • Produ
Slide 44: How the sales records have been broken
How the sales records have been broken • 2008: £60k • 2009: £69K, £84K • 2010: £110k – 97.5% OTD < 15 minutes on the Friday night (1,037 orders) 44
Slide 45: Q&A - Driven to deliver
Q&A Driven to deliver
Slide 46: APPENDICES
APPENDICES APPENDIX 1 The Financial Model at 2020 (Pages A-1 – A-2) APPENDIX 2 The Franchisee Model (Pages A-3 – A-4) APPENDIX 3 Analysis of Group Turnover (Page A-5) APPENDIX 4 Analysis of Group Operating Profit (Page A-6)
Slide 47: The Financial Model at 2020
The Financial Model at 2020 2001 2007 2008 2009 2010 At 2020* No. of stores 237 501 553 608 665 1,200+ - 55 openings p.a. AWUS growth at 3% p.a. £8,422 £12,539 £13,000 £13,801 £15,438 £20,747 System sales £ 98m £ 296m £ 351m £407m £485m £ 1,295m Profit before tax** £ 2.9m £ 18.7m £23.4m £29.9m £38.0
Slide 48: The Financial Model at 2020 (cont'd)
The Financial Model at 2020 (cont‟d) AT LEAST 10 YEARS OF CASH GENERATIVE ORGANIC GROWTH 2008 2009 2010 At 2020 * • PBT £23.4m £29.9m £38.0m £155.0m • Share buybacks *** • Average no. of shares in issue 56.9m 159.9m 161.8m 128.0m • Diluted EPS** - pence 10.71p 13.49p 16.75p 92.0p - CAGR 19% p.a. • D
Slide 49: The Franchisee Model
The Franchisee Model 52 weeks ended 52 weeks ended 26 December 2010 27 December 2009 % variance £‟000 £‟000 Average UK sales (AWUS)* £ 15,197 £ 13,293 +14.4% System sales £790,255 £691,248 +14.4% EBITDA £110,550 £ 93,896 +17.7% + £16,654 EBITDA % 14.0% 13.6% COMPELLING STORE LEVEL ECONOMICS * VAT at
Slide 50: The Franchisee Model (cont'd)
The Franchisee Model (cont‟d) • Average UK mature store system sales £ 790,255 - £15,197 AWUS in 2009 • Average mature store EBITDA after: £ 110,550 - Food costs 29% - Labour 28% - NAF & Royalty 10.5% - Occupancy 6% - LSM 4% - Delivery 5% • Cash payback on investment < 2.0 years (range 1.4 – 2.5) FR
Slide 51: Analysis of Group Turnover
Analysis of Group Turnover 52 wks ended 52 wks ended 26 Dec 2010 27 Dec 2009 Variance Variance £’000 £’000 £’000 % Royalties 26,692 22,379 4,213 19.3 Store sales 1,117 2,920 (1,803) (61.7) Franchise/TST/FDP fees 1,038 1,210 (172) (14.2) Commissary sales 138,271 110,721 27,550 24.9 Property sales 13,
Slide 52: Analysis of Group Operating Profit
Analysis of Group Operating Profit* 52 weeks ended 52 weeks ended 26 Dec 2010 27 Dec 2009 Variance Variance £’000 £’000 £’000 % Franchise Operations * 18,280 16,135 2,145 13.3 Commissary margin 37,481 29,406 8,075 27.5 Realty 1,254 1,097 157 14.3 Subsidiaries 352 772 (420) (54.4) Overheads (19,552)