Domino's Pizza Enterprises Limited · ASX:DMP
Domino's Pizza Enterprises — H1 2007 Earnings Presentation
25 slides from Domino's Pizza Enterprises's earnings presentation, February 2007
Slide 1: Domino's Pizza Enterprises Limited First Half Results to December 2006
Domino’s Pizza Enterprises Limited First Half Results to 31 December 2006
Slide 2: Agenda
AGENDA 1. Executive Summary 2. Network Store & Sales Growth 3. Revenue & EBITDA Results • Australia, New Zealand & Europe • Corporate • Franchise • Corporate Development & Unallocated 4. Financial Details • Profit & Loss • Cash Flow • Balance Sheet French Promotion H2 5. Looking Forward – Major Acti
Slide 3: Executive Summary
EXECUTIVE SUMMARY • Network sales +42.1% and revenue +36.4% largely off European acquisition • Group SSS growth 3.2% • EBITDA down 21.3% and NPAT 46.2% on H1 06 – reflecting first half impact as forecast for Europe. Aus poor first quarter performance per October announcement • New Zealand continues
Slide 4: Executive Summary
EXECUTIVE SUMMARY Store role out continues in all countries • Stores added in H1 Aus/NZ 19, Europe 162 (incl 155 on acquisition) • Europe added 7 stores in first half and conversions starting January 07 DPE innovation to 31 December 06 • Mobile phone service represents 25% of total calls (up from 21
Slide 5: Executive Summary
EXECUTIVE SUMMARY Europe Update • Second half to reflect early guidance (H1 60% H2 40% loss) due to seasonality, loss rate improving and non-recurring start up costs • Non-recurring start up costs in H1 = $600k New Guidance for Full Year 07 • Australia/New Zealand – SSS 0 to -1% – Will have 35 store
Slide 6: Network Store & Sales Growth
NETWORK STORE & SALES GROWTH • Store count as at 31 December 06 Network Sales – Australia - 395 400 359.4 – New Zealand - 62 350 – France/Belgium - 99 306.1 300 – Netherlands - 63 252.9 H1 251.0 619 250 65.1 212.5 H2 $M 200 174.7 182.8 H2 H1 185.9 • Store count projection June 07 150 140.6 157.5 H1
Slide 7: Network Store & Sales Growth
NETWORK STORE & SALES GROWTH • Aus/NZ opened 19 stores in first half • Europe added seven new stores in the half (to the 155 on acquisition) • Aus/NZ corporate store ratio has increased to 32% which is ahead of plan and there are significant reductions planned for second half. See slide 19 for furth
Slide 8: Revenue & EBITDA Results
REVENUE & EBITDA RESULTS REVENUE EBITDA 24.7 200 25 180 172.9 160 20 17.8 140 133.4 H1 15 H2 120 118.1 13.4 109.7 21.4 12.5 H1 H2 11.3 9.6 $M 100 H1 88.0 86.3 H2 $M 96.7 10 12.2 11.0 9.1 80 70.4 H2 H1 7.8 86.6 H1 71.5 8.7 60 H1 5 61.9 3.1 40 34.7 20 0 -1.4 0 2001 2002 2003 2004 2005 2006 2007 2001 2
Slide 9: Results – Australia, New Zealand & Europe
RESULTS – AUSTRALIA, NEW ZEALAND & EUROPE • Australia EBITDA down 16.9% on H1 06 due to: – Domino’s Service & Supply - start up of new cost centre was a higher loss than expected ($230k loss) – $0.5m less corporate development profit than previous halves – Weaker promotions (as per October announcem
Slide 10: Results - Corporate
RESULTS - CORPORATE • Corporate results largely impacted by soft sales • Greater weight of immature stores in Victoria, our newest market • Results include eight corporate stores in Europe (no material effect) • European stores have moved from losses to modest profit H1 05 * H2 05 * F/Y 05 * H1 06 H
Slide 11: Results - Franchise
RESULTS - FRANCHISE • Aus/NZ $0.8m below previous year due to immature franchisee performance in a weaker trading environment • Europe $1.4m loss slightly ahead of plan • All European overheads have been classified in the franchise segment (unallocated overhead immaterial) • Strong return on funds e
Slide 12: Results – Corporate Development & Unallocated
RESULTS – CORPORATE DEVELOPMENT & UNALLOCATED • Corporate Development – Less profit on sale of stores – Projecting to be greater in H2 (in line with previous halves) • Other / unallocated (G&A) – Savings created from Head Office departments generating incremental revenues H1 05 * H2 05 * F/Y 05 * H1
Slide 13: Profit & Loss
PROFIT & LOSS • Interest costs up $0.7m, 88% on last year • Tax compares unfavourably due to 06’s $1m positive tax adjustment • Interest cover 4.3 times – reduction due to European acquisition. Expected to improve in H2 as a result of debt reduction H1 05 * H2 05 * F/Y 05 * H1 06 H2 06 F/Y 06 H1 07
Slide 14: Cash Flow
CASH FLOW H1 06 H2 06 H1 07 $ mil $ mil $ mil EBITDA 12.2 12.5 9.6 • Working capital increase Change in Working Capital 2.3 (0.2) (3.1) $3.1m Other (4.2) (3.1) (3.2) – Additional tax payments Net Cashflow from Operations 10.3 9.2 3.3 $2.0m (catch up) Payment for PPE, intangibles & stores (16.9) (10.
Slide 15: Balance Sheet
F/Y 06 H1 07 +/(-) F/Y 06 $ mil $ mil $ mil BALANCE SHEET Current assets Cash and cash equivalents 19.3 7.4 -11.9 Trade & other receivables 5.3 19.0 13.7 Other financial assets 0.0 1.5 1.5 Inventories 1.4 3.5 2.1 • Cash held for Europe ($14.6m) at Other 6.3 10.2 3.9 Total current assets 32.3 41.6 9.
Slide 16: Looking Forward – Major Activities
LOOKING FORWARD – MAJOR ACTIVITIES Store expansion target + 1,600 stores • Store roll out to continue in all five countries • Will end June with 668 stores due to the additional 75 stores to be added in 2007 • Have significantly reduced entry level store price from $350k to $290k in Australia and fr
Slide 17: Looking Forward – Major Activities
LOOKING FORWARD – MAJOR ACTIVITIES Innovation • Based on the success of Brownies and Chicken Kickers, we will continue our promotional program around menu expansion of non-core pizza products in the second half Australian promotions H1 Australian promotion H2 17
Slide 18: Looking Forward – Major Activities
LOOKING FORWARD – MAJOR ACTIVITIES Innovation (Continued) • Internet Ordering still represents small proportion of total sales, but continues to grow consistently • Further enhancements to the Internet Ordering system in second half 07 • NZ internet ordering system to be enabled in H2 • With 97% of
Slide 19: Looking Forward – Major Activities
LOOKING FORWARD – MAJOR ACTIVITIES Will look to reduce proportion of corporate stores over the next 12 months from 30% to 15-20% Why? • Refocus corporate stores into cost effective geographic locations • Still maintain benefits of hybrid model • Centralise and reduce administration overheads Expecte
Slide 20: Looking Forward – Major Activities
LOOKING FORWARD – MAJOR ACTIVITIES Management aware of: • Drought has unfortunately taken away savings upside in cheese (previously shared), with higher flour and protein costs • Success of promotions continues to be a significant influence on the business, and substantial activity taking place in t
Slide 21: Europe
EUROPE Focus since taking ownership in Europe • Improving economics at store level – SSS 12.5%, applying high volume learning – Remove operational bottlenecks, more equipment, people and training – Increased store presence and advertising (above and below line) – Purchasing and recipes work improvin
Slide 22: Europe
EUROPE Looking forward • Learning and opportunities from research – New pizzas tailored to French and Dutch markets – Locally developed advertising – Confirms original business plan European Promotions H1 – Grow take-away sales – 2007 national TV in Netherlands and radio in France • Growing the netw
Slide 23: Europe
EUROPE Looking forward • Supporting growth – Rolling out common European POS – Increased finance and development resources – Planning second French commissary – Europe franchisees and management visiting Australia to accelerate best practice and HVM learning • Challenges in Europe – Language and cul
Slide 24: Europe
EUROPE Pizza a large but very fragmented market • Opportunity in both France and Netherlands to become the leading Pizza chain • Consumer research re-enforced the opportunity for chains in market • Menu development, pricing and advertising designed to help source consumers from independents Store Co
Slide 25: Conclusion
CONCLUSION • Results consistent with impact of growth into Europe. Australia’s poor first quarter performance per October announcement • Group continuing innovative pizza development, whilst expanding into other non-core products in Australia. NZ and Europe adding new pizzas tailored to local market
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