Domino's Pizza Group Plc · LSE:DOM
Domino's Pizza — H1 2021 Earnings Presentation
40 slides from Domino's Pizza's earnings presentation, Aug 3, 2021
Slide 1: First half results 2021
first half results 2021 Domino’s pizza group plc 26 weeks ended 27 June 2021 3 August 2021
Slide 2: Agenda
AGENDA 1. Overview – Dominic Paul, CEO 2. Financial performance – Neil Smith, CFO 3. Strategic & operational update – Dominic Paul, CEO 4. Q&A
Slide 3: First half performance
First half performance • Strong trading performance in the first half • Translated into good earnings, cash generation and shareholder returns – Interim dividend of 3.0p – Additional £35m share buyback announced – totalling £80m announced since March ‘21 • Disposal of non-core international business
Slide 4: Agenda
AGENDA 1. Overview 2. Financial performance – Neil Smith, CFO 3. Strategic & operational update 4. Q&A
Slide 5: Income statement
INCOME STATEMENT Strong trading delivering underlying earnings growth Underlying, £m H1 21 H1 20 FY 20 UK & Ireland EBITDA 69.5 57.6 120.8 • UK&I EBITDA growth of £11.9m assisted by: Depreciation & Amortisation (7.8) (8.1) (16.5) – Covid-19 related costs reduced to UK & Ireland EBIT 61.7 49.5 104.3
Slide 6: Covid-19 related costs & VAT benefit
COVID-19 RELATED COSTS & VAT BENEFIT Included within underlying items £m H1 21 H1 20 FY 20 Supply chain operations 0.9 2.1 4.6 • Covid-19 related costs significantly reduced in H1 21 Franchisee support 0.3 3.4 3.7 – Expected to decline further in H2 Charges to supply chain EBITDA 1.2 5.5 8.3 Communi
Slide 7: Analysis of UK & Ireland EBITDA
ANALYSIS OF UK & IRELAND EBITDA Strong performance £m H1 21 H1 20 FY 20 Supply chain centre EBITDA 52.6 48.4 99.3 Key impacts on EBITDA are: Net royalties 21.1 17.7 37.8 • Supply chain EBITDA includes £1.2m Net overheads, realty & incentives (15.1) (14.3) (31.9) of Covid-19 related costs UK corporat
Slide 8: Franchisee trading
FRANCHISEE trading Healthy profits for the system H1 21* H1 20* FY 20* Store level • Franchisees and their teams continue to operate effectively and safely in Average EBITDA £154k £85k £229k constantly changing environment EBITDA margin 25% 16% 20% • VAT rate cut in UK in July 2020 Franchisee level
Slide 9: Sales performance
SALES PERFORMANCE Reported system sales growth aided by effect of UK VAT reduction £m H1 21 H1 20 % change UK system sales 716.5 597.0 20.0% • UK system sales up 20.0% to £716.5m, including c. £87m benefit from VAT Ireland system sales 35.8 31.9 12.2% reduction Total system sales 752.3 628.9 19.6% •
Slide 10: UK & Ireland trading performance
UK & IRELAND TRADING PERFORMANCE Strong system sales; order count helped by recovery of collection Delivery & collection analysis Quarterly profile Total sales £51.3m £752.3m +79.8% +19.6% 18.5% 20.0% 19.3% £72.1m COLLECTION 13.5% +12.8% £628.9m 3.5% DELIVERY Q1 -5.2% Q2 H1 H1 2020 H1 2021 LFL exc S
Slide 11: Non-underlying & discontinued operations
NON-UNDERLYING & DISCONTINUED OPERATIONS Materially reduced charges £m H1 21 H1 20 Discontinued International trading performance • Focused on removing burden of Iceland 0.6 0.5 International on Group cash flow Norway - (3.3) – Trading losses now negligible Switzerland 0.5 (1.4) • Norway disposal co
Slide 12: Free cash flow
FREE CASH FLOW Strong generation of free cash flow from the business £m H1 21 H1 20 FY 20 Continuing operations EBITDA 71.7 59.5 125.5 • Strong free cash flow of £51.3m in the first half Discontinued operations EBITDA 0.2 (4.3) (4.2) Remove contribution from • Working capital in the prior year inves
Slide 13: Use of free cash
USE OF FREE CASH In the first half we have distributed £70.7m to shareholders £m H1 21 H1 20 FY 20 • Total capital expenditure of £7.8m primarily Free cash flow 51.3 46.9 99.0 relates to SCC (Cambuslang) and IT/Digital investments Capex (7.8) (7.1) (19.4) Share receipts - - 13.4 • Acquisitions and d
Slide 14: Capital allocation philosophy
CAPITAL ALLOCATION PHILOSOPHY £48.8m of cash generated in H1 to be distributed to shareholders PRIORITIES FOR CAPITAL PHILOSOPHY OUTCOMES FOR H1 21 Invest in the business to drive Returns-based approach to Capital investment of £7.8m long-term organic growth investment in core business to support bu
Slide 15: Current trading & outlook
Current trading & outlook For FY 21 we expect: • Execution of new strategy is delivering further growth in earnings • We expect to incur Covid-19 related costs of c. £2.5m in the year (FY 20: £9.0m). The VAT benefit for the full year is estimated at c. £6m (FY 20: £3.6m) • Underlying depreciation &
Slide 16: Agenda
AGENDA 1. Overview 2. Financial performance 3. Strategic & operational update – Dominic Paul, CEO 4. Q&A
Slide 17: Trading environment
TRADING ENVIRONMENT Our flexible and robust business model is incredibly agile and can adapt quickly to changing market conditions • Our agile business model has proved to be a real advantage – Vertically integrated ownership of supply chain – 100% ownership of customer relationship – Franchised mod
Slide 18: Delivering a better future through food people love
purpose delivering a better future through food people love 1 2 3 4 5 MEDIUM TERM ambition Nobody Turbo-charge Amplify our Uphold our Model delivers like our collection product quality industry-leading excellence as a Domino’s business & value scale economics franchisor £1.6bn to Add 200 £1.9bn New
Slide 19: Clear roadmap on our strategy execution
Clear roadmap on our strategy execution Multiple initiatives driving our strategic programme In 2021 2022 and beyond 1 Personalise web platform & Driving improved Launch new web platform deploy CRM marketing effectiveness Launch new mobile App 2 Roll out In Car Collection Targeted promotion of colle
Slide 20: Nobody delivers like Domino's
Nobody delivers like domino’s Driving engagement through new App & functionality • Both iOS and Android App live, with CRM capability built in • Group Ordering and Deal Wizard functionality added and performing in-line with expectations • Significant improvement in sales metrics post launch • Great
Slide 21: Turbocharge our collection business
Turbocharge our collection business Rolling out In Car Collection to grow share of carry out • New ordering channel representing a growing % of digital carry- out orders • 300 stores at end June, potential for over 450 • Rollout across web and App ordering • Regional advertising test planned in Q3 t
Slide 22: Amplify our product quality and value
Amplify our product quality and value OUR SUPERCHARGE MEDIA STRATEGY FOCUSES ON PLACING DOMINO’S AT THE HEART OF REUNIONS, SUPPORTED BY ‘GROUP ORDERING’ 22 Half year results 2021
Slide 23: Uphold our industry-leading scale economics
Uphold our industry-leading scale economics Accelerating franchisee new store openings • New store opening incentive launched at end of Q1 driven by franchisees wanting to seize market opportunity – New stores: £100k - 3 annual instalments – Split stores: £150k - 3 annual instalments – Similar packa
Slide 24: Model excellence as a franchisor
Model excellence as a franchisor Investment in supply chain, opened SCC, Scotland • Opened new Scotland facility in April 2021 • 92 stores now supported from Cambuslang with capacity to serve 150 stores • Facility was built to allow our new store distribution method of food baskets, Cages & Dollies
Slide 25: Franchisee alignment
Franchisee Alignment We are stronger together • Our world class franchisees continue to work hard in challenging and variable market conditions, with strong momentum maintained in H1 • We are engaged with our franchisees to drive profitable system growth • We continue to have open dialogue with Domi
Slide 26: Summary & outlook
SUMMARY & Outlook • We have great foundations for future growth – Asset light business model generating strong cash flow • Excellent progress with clear building blocks in place to deliver our medium-term objectives – System sales of £1.6bn to £1.9bn – Over 200 new stores • Trading in first half of
Slide 27: Appendix
Appendix WEGOT THIS?
Slide 28: UK & Ireland unit metrics - 2021
UK & IRELAND UNIT METRICS - 2021 LFL Inc Splits (YOY Growth) Total (All Stores) Items Per Orders Order Product Mix YOY Order UK & ROI Sales (Volume) (Volume) (Volume) Price Orders (m) Growth Total Q1 17.7% (5.9)% 7.3% 2.1% 14.1% 16.6m (5.2)% Q2 19.2% 12.2% (7.9)% 1.9% 13.0% 17.1m 13.5% H1 18.4% 2.5%
Slide 29: UK & Ireland system sales bridges
UK & IRELAND SYSTEM SALES BRIDGES UK system sales £m ROI system sales £m +20.0% +12.2% 7.1 (3.9) 3.9 0.0 0.0 0.0 114.1 2.2 Immature Split New Immature Split 35.8 New territories 716.5 store store territories store store growth growth growth growth 597.0 LfL 31.9 LfL exc. Splits exc. Splits 2020 H1 2
Slide 30: UK & Ireland LFL sales growth - 2021
UK & IRELAND LFL SALES growth - 2021 Q1 Q2 H1 LFL sales growth 2021 2021 2021 Excluding splits UK 18.8% 20.5% 19.7% Ireland 8.2% 14.5% 11.3% UK & Ireland combined 18.5% 20.0% 19.3% Including splits UK 17.9% 19.6% 18.8% Ireland 8.2% 14.5% 11.3% UK & Ireland combined 17.7% 19.2% 18.4% 30 Half year res
Slide 31: UK & Ireland LFL sales growth - 2020
UK & IRELAND LFL SALES growth - 2020 Q1 Q2 Q3 Q4 FY LFL sales growth 2020 2020 2020 2020 2020 Excluding splits UK 4.0% 5.6% 18.3% 15.2% 10.9% Ireland (1.7)% (5.4)% 2.0% 0.2% (1.2)% UK & Ireland combined 3.5% 5.2% 17.5% 14.6% 10.3% Including splits UK 2.8% 4.7% 17.3% 14.6% 9.9% Ireland (3.3)% (6.6)%
Slide 32: Store numbers
STORE NUMBERS 27 June 27 Dec 29 Dec £m 2021 2020 2019 UK 1,158 1,147 1,130 Franchise 1,123 1,110 1,094 Corporate 35 37 36 ROI 54 54 54 UK & ROI total 1,212 1,201 1,184 Discontinued International operations Switzerland 20 20 21 Norway NA NA 56 Iceland NA 23 24 Sweden NA 14 13 32 Half year results 202
Slide 33: IFRS 16 implications - H1 21
IFRS 16 IMPLICATIONS – H1 21 Income Statement (underlying) Balance sheet IFRS 16 £m Pre-IFRS 16 impact Post-IFRS 16 £m H1 21 Revenue 265.0 12.8 277.8 Right of use asset 21.5 Costs excl. depreciation (201.0) (9.4) (210.4) Lease receivable 201.4 Contribution of investments 4.3 - 4.3 Lease liability (2
Slide 34: Net debt bridge
NET DEBT BRIDGE Net debt broadly unchanged Net debt / Net debt / Reported EBITDA Continuing EBITDA Inc Discontinuing (Excl IFRS16): 1.36x (Excl IFRS16): 1.39x (7.8) 9.2 51.3 (42.3) (171.8) (31.2) 13.5 (2.4) 0.5 3.4 (177.6) OPENING FCF Capex Receipts from Dividends Share Iceland Sweden Other Forex CL
Slide 35: Group balance sheet
GROUP BALANCE SHEET 27 Jun 27 Dec £m 2021 2020 Intangible assets 32.2 30.5 Property, plant and equipment 90.7 91.1 Right-of-use assets 21.5 20.1 Lease receivables 201.4 204.7 Trade and other receivables 54.0 57.4 Inventory 12.7 11.0 Market Access Fee 8.7 15.3 Investments 56.1 51.7 Cash and cash equi
Slide 36: Group balance sheet (continued)
GROUP BALANCE SHEET (CONTINUED) 27 Jun 27 Dec £m 2021 2020 Lease liabilities (224.7) (226.5) Trade and other payables (94.1) (90.3) RCF (217.4) (243.6) Share buyback obligation (16.7) Other financial liabilities (0.4) - Tax liabilities (2.9) (3.6) Provisions (13.4) (13.5) Liabilities held for sale (
Slide 37: Glossary
GLOSSARY Item Definition AWUS Average Weekly Unit Sales ASPA Average Sales Per Address eCommerce fund The fund used to recharge costs for the development and maintenance of our eCommerce platform with franchisees German associate Represents our 33% associate investment in the trading operations of D
Slide 38: Alternative performance measures
ALTERNATIVE PERFORMANCE MEASURES Location in release of Item Definition reconciliation to GAAP measure OVERALL TERMINOLOGY Non-underlying items Items that are material in size, unusual or infrequent in nature, and are Group income statement, note 5 disclosed separately as non-underlying items in the
Slide 39: Alternative performance measures
ALTERNATIVE PERFORMANCE MEASURES Location in release of Item Definition reconciliation to GAAP measure REVENUE MEASURES System sales System sales represent the sum of all sales made by both franchised and Not applicable corporate stores to consumers. Like-for-like (LFL) sales growth LFL excluding sp
Slide 40: Forward-looking statements caution
FORWARD-LOOKING STATEMENTS CAUTION These interim 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, results of operations and business, and certain of Domino's Pizza