Domino s Pizza UK & IRL plc. Preliminary Results for the 52 weeks ended 30 December 2007

Transcription

1 Domino s Pizza UK & IRL plc Preliminary Results for the 52 weeks ended 30 December 2007

2 The Team Stephen Hemsley Executive Chairman Chris Moore Chief Executive Officer Lee Ginsberg Chief Financial Officer 2

3 Financial Highlights for % Another record year 40% 30% +43.8% 20% +33.1% +34.6% 10% +14.7% +23.4% 0% LFL sales growth System sales PBT pre-exceptionals* Diluted EPS Total Dividend pence per share * Pre-accelerated LTIP charge + other exceptionals 3

4 Profit and loss IFRS adoption % increase System Sales 296, , Operating profit * 18,828 14, Operating exceptionals (333) (499) - Profit on sale of stores Accelerated LTIP charge (174) - - Profit before interest and tax 18,667 14, Net interest payable (91) (110) 17.3 Profit before tax 18,576 14, Taxation (5,337) 28.7% (4,193) 29.6% (27.3) Profit after tax 13,239 9, Dividends Per share 4.40p 3.06p Cover 1.9x 2.1x Earnings per share - Basic 8.38p 6.23p Diluted 8.24p 6.12p 34.6 * Pre-accelerated LTIP charge and other exceptionals 4

5 Current Assets: Balance Sheet Non current assets 18,404 18, Inventories 2,340 1,818 Current assets 28,117 22,823 Receivables 10,071 9,632 Investment in Non current assets finance leases held for re-sale 1,772 1,172 Prepaid lease charges Total Assets 48,293 42,098 Cash 14,629 10,262 28,117 22,823 Current Liabilities Current liabilities (27,575) (22,638) Trade & other (18,187) (13,433) Deferred income (68) (31) Non current liabilities (10,821) (10,474) Financial liabilities (6,817) (6,835) Tax liabilities (2,503) (2,339) Total Liabilities (38,396) (33,112) (27,575) (22,638) Net assets 9,897 8,986 5

6 Statement of Changes in Equity At beginning of year 8,986 12,088 Prior period effect of IFRS adoption - (70) 8,986 12,018 Proceeds from share issue Treasury shares held by EBT (187) - Share buybacks (8,346) (10,457) Profit for year 13,239 9,996 Tax credit on employee share options Share options and LTIP charge Exchange differences 230 (21) Dividends (5,816) (4,234) 9,900 8,932 Minorities (3) 54 9,897 8,986 6

7 Cash flow statement Profit before taxation 18,576 14,189 Net finance costs Share of post tax profits of associates (158) (171) Amortisation and depreciation 1,545 1,815 Profit on disposal of non-current assets (346) (613) Share option and LTIP charge Changes in working capital 3,835 3,094 Cash generated from operations 24,423 18,768 Taxation paid (4,335) (3,755) Net cash generated by operating activities 20,088 15,013 Net cash used by investing activities (619) (946) Cash inflow before financing 19,469 14,067 Financing activities (15,243) (9,690) Net increase in cash 4,226 4,377 Opening cash balance 10,262 5,885 Foreign exchange gains on cash and cash equivalents Cash at end of year 14,629 10,262 7

8 Analysis of Borrowings Cash at bank 14,629 10,262 Revolving credit facility/bank overdraft (6,000) (6,000) Net Cash 8,629 4,262 DP Capital (2,448) (2,299) EBT loans (7,721) (7,500) Other (28) (45) Net debt (1,568) (5,582) Gearing % 15.9% 62.5% NOTE: New 25m existing credit facility not drawn down at year end 8

9 Cash returned to shareholders 4 year total Profit after tax 38,245 13,239 9,996 8,247 6,763 Share buybacks 28,289 8,296 10,161 8,222 1,610 Dividends 15,459 5,816 4,234 3,169 2,240 Total returned 43,748 14,112 14,395 11,391 3,850 % of profit after tax 114% 107% 144% 138% 57% Net cash at year end 8,629 4,262 5,885 4,824 9

10 Reported diluted earnings per share * Compound increase of 33% over last 5 years 8.24 Pence Earnings per share All figures adjusted for share split 10

11 5 4 Dividends per share * Compound increase of 42% over last 5 years Pence * All figures adjusted for share split Dividends per share Linear (Dividends per share) 11

12 IFRS Minimal impact 1. P&L PBT impact UK Gaap Effect of transition IFRS EPS to IFRS Impact weeks ended 30/12/07 18, * 18, p - 52 weeks ended 31/12/06 14,292 (103) ** 14,189 (0.06)p * Assets held for resale less lease inducements spread over period of lease ** Lease inducements spread over full lease term 2. Balance Sheet Net Assets Impact - At 30/12/07 9, *** 9,897 - At 31/12/06 8, *** 8,986 *** Rent frees and deferred tax asset on share based payments 12

13 System Sales The Growth Driver % compound growth in system sales 30% compound growth in PBT 296.3m m System Sales m m +20% 174.3m +23% 200.7m +15% +20% +23% PBT m (53 wks) System Sales PBT 0 13

14 System Sales Up 23.4% Like-for-like stores up 14.7% Immature Stores up 27% 50 New Store Openings More Ad Fund Fire Power Product Quality & Innovation Increased Focus on E-Commerce Optimised Customer Database Service Excellence Weak Competition, Growing Market Wet Summer Stronger Team & Franchise Community 14

15 Like-for-like sales % Growth of 14.7% for the year 20.00% 19.7% 18.00% 16.00% 14.00% 12.00% 12.8% 16.8% 17.6% 15.3% 16.1% 13.3% 12.2% 13.8% 17.8% 14.7% 10.00% 9.5% 9.7% 8.00% 6.00% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec mature store sales increase 15

16 Historical like-for-like sales growth 16% Average increase of 9.1% over last 5 years % 400 Sales growth 12% 10% 8% 6% 4% 7.4% 6.6% 7.1% 9.7% 14.7% LFL store population 2% 150 0% LFL sales growth LFL store population 16

17 Other sales highlights 36 stores with sales in excess of 1 million 9 out of Top 10 Domino s Intnl. Stores for third consecutive year Three weeks in December, mature store AWUS* exceeded 15k Our 2017 target! * AWUS Average Weekly Unit Sales 17

18 New Store Openings (net of closures) 500 Average 47 Openings Per Year over last 5 years 501 number of stores at year end (1) (1) (0) (2) (0) ( ) = no. of closures Potential for 1,000 stores 18

19 50 new stores in 2007 how did we achieve it? Re-focused the Business Development Team Strengthened the Acquisitions department Enhanced location analysis Focus on existing franchisees; only 7 of the 50 stores opened with new franchisees Built the pipeline Smarter processes and organisation Record number of openings in a six month period 19

20 System Sales Up 23.4% Like-for-like stores up 14.7% Immature Stores up 27% 50 New Store Openings More Ad Fund Fire Power Product Quality & Innovation Increased Focus on E-Commerce Optimised Customer Database Service Excellence Weak Competition, Growing Market Wet Summer Stronger Team & Franchise Community 20

21 More Ad Fund Fire Power 15m in 2007 (2006: 13m) Increased spend on e-commerce Competitive entry in April 07 Online sales up 60.5% to 32.2m (2006: 20.1m) Now over 20% of all UK delivered sales Optimised Customer Database c. 2 million active customers Major advantage of our business 21

22 Product Quality & Innovation Pizzas Sides Desserts Communicating quality credentials Removal of Hydrogenated Fats and MSG 22

23 80.00% 75.00% 70.00% 65.00% 60.00% 55.00% 50.00% 45.00% Service Excellence OTD Less Than 15 Minutes Mature Stores Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

24 The competition 2007 Net Stores Openings Sales - Domino s m - Pizza Hut* 255 (7) 104m - Perfect Pizza 100 (10) 18m - Papa Johns* m - Others ** 2,000 n/a 312m - TOTAL 2, m * includes estimates for Ireland ** estimates/mintel Home Delivery report (UK) 24

25 Home Delivery Market 1, m Mintel UK Home Delivery (net) 1,600 1,400 1,200 1, m Domino s UK Home Delivery Mintel UK Home Delivery ( '000s) Domino's (less carryout and ROI) Market still relatively under-researched UK Home Delivery predicted to grow by 7% per year to 2011 Approx 1 in 6 home delivered meals delivered by Domino s 25

26 Consumer Spending Domino s classic option when trading down offering better value for money than dine-out options Exposure in 1991 recession; flat sales (45 stores, NAF c 300k) Premium quality, great service, trusted brand for c. 6 per person Consumer spending shows trend towards eating in vs. dining out is continuing to grow (Mintel) 26

27 Consumer Spending (contd.) Bespoke research conducted to quantify consumer opinion Consumers that come to Domino s are driven by much more than just price Brand strength protects against squeeze on disposable income (Quality, Service, Marketing spend) NAF will ensure continued aggressive marketing spend 27

28 18m Ad Fund for 2008 Continue focus on product quality and innovation Five new product campaigns e.g. Steak Special Over 300 million menus 26+ weeks of TV advertising Increasing focus on driving online sales And the biggest sponsorship deal Domino s has ever done 28

29 Britain's Got Talent ITV1 s flagship show, plus.. Britain s Got More Talent ITV2 America s Got Talent ITV2 Step change for Domino s Pizza High profile to drive awareness and standout BGT final last year had over 11m viewers 29

30 Outlook for store openings in 2008 Team is well placed to achieve 2008 target of 50 store openings At 11 th Feb with planning and franchisee vs (+ 5 ) 85 locations under negotiation vs (+ 9 ) Benefit of building pipeline Rolling 150 Target Acquisition List Early indications of improved planning environment Franchisee Focus 2007 success builds confidence Expansion plans agreed with key franchisees Store: Franchisee ratio now at 3.5 : 1 (2006: 3.0:1) Banks confirming funding and see a Domino s franchise as a good lending opportunity 30

31 Store refit programme New store modernisation programme Last image update in 2000 Improving design, theatre and branding Communicating core values» Quality, fresh, fun Up to 100 stores to be re-fitted in 2008 Cost of c 20k pre-store (funded by franchisee) Up to 5 day closure for store c 1m lost system sales 31

32 New Store Design 32

33 Commissary update Extension to Penrith 100% additional capacity (to circa 200 stores at build-out) Completion expected Q Cost of circa 4.0m New Milton Keynes facility 10 acres of land to be acquired Capacity to service 500 stores at build-out (current MK circa 300 stores) Higher capacity to cover growing sales New Head Office and Training facility Technological investment/automation Estimated completion of commissary Q Budgeted cost of 25m including freehold land 33

34 People Smooth succession in place Executive Chairman Stephen Hemsley CEO Chris Moore New Arrivals in Q1; Legal Counsel/Company Secretary Procurement Director Both joining Domino s Pizza Executive Team Team in place for growth to 1000 stores 34

35 Food cost pressures Franchisee price increases of 4% Effected mid-november 2007 Fully recovered increases in: Cheese, flour, meats and boxes 2008 Food cost outlook Flour Settled below 100% anticipated increase Contract locked in from 1/11/ /12/2008 Cheese Current price levels covered by franchise price increases Spot prices lower than this Indications for further price reductions NO FURTHER PRESSURES ANTICIPATED IN

36 Continuing strategy Focus on roll out of Domino s system in UK and Ireland Build infrastructure for 1000 stores Drive like-for-like sales growth Operational leverage to drive net margin Resulting cash generated to be returned to shareholders Announcement of intention to move to Official List Well placed for further strong growth in

37 The financial model at build out At build out * (circa 2017) No. of stores , openings p.a. AWUS growth at 3% p.a. ** 8,422 11,347 12,539 15,700 System sales 98m 240m 296m 820m Profit before tax 2.9m 14.2m 18.6m 73.8m PBT/System sales 3.0% 5.9% 6.3% 9.0% +100% +50% Stores double profits grow six-fold c.8% of incremental sales to profit (commissary 5.5% + net royalty 2.8%) Significant operational gearing Commissaries Central infrastructure * Independent analyst research not a forecast ** Average Weekly Unit Sales 37

38 The financial model at build out (contd.) At build out * (circa 2017) PBT 14.2m 18.6m 73.8m Share buybacks *** Average no. of shares in issue 162.6m 158.0m 128.0m EPS - pence 6.2p ** 8.4p 40.6p - CAGR 18% p.a. Dividend - cover 2.1x 1.9x 2.0x - pence 3.1p ** 4.4p 20.3p COMPELLING 11 YEARS OF CASH GENERATIVE ORGANIC GROWTH * Independent analyst research not a forecast ** Restated for share split *** To achieve cash neutral position at Circa 20% of equity. 38

39 Current trading and prospects Strong start to year in first six weeks of 2008 Like for like sales up 11.0% (2007: 14.3%) Challenging comparatives for balance of year E-commerce up 90.6% (2007: 36.2%) now 21% of delivered sales Store opening pipeline more reassuring On track to open 50 stores Exciting sponsorship deal in place for 3 years Resilient model in tougher economic times and food cost pressures under control WELL PLACED FOR ANOTHER YEAR OF STRONG GROWTH 39

40 APPENDICES APPENDIX 1 (Page A-1) APPENDIX 2 (Page A-2) APPENDIX 3 (Page A-3) APPENDIX 4 (Pages A-4-A-5) Analysis of Group turnover Earnings per share reconciliation Analysis of Group Operating Profit (Pre-exceptionals) The Franchisee Model

41 Analysis of group turnover Variance Royalties 16,295 13,207 3,088 Store sales 6,588 6,861 (273) Franchise/TST/FDP fees 1, Commissary & E&S sales 79,242 64,879 14,363 Property sales 9,304 8,180 1,124 Computer sales 2,275 1, Other sales 2,910 2, Inter-company sales (2,803) (3,031) 228 Total sales 114,891 94,965 19,926 A-1

42 Earnings per share reconciliation At 30 December At 31 December Profit attributable to shareholders 13,245 10,084 Basic weighted average number of shares 157, ,967 (excluding shares held by EBT) Dilutive - Share options 1,760 2,342 - Reversionary interests 1, Diluted weighted average no. of shares 160, ,982 Basic EPS 8.38 pence 6.23 pence Diluted EPS 8.24 pence 6.12 pence A-2

43 Analysis of group operating profit (pre-exceptionals) Variance % Franchise Operations 7,212 4,814 2, Commissary 16,114 13,270 2, DP Realty Central overheads * (5,136) (4,078) (1,058) 25.9 Other ** 230 (226) ,828 14,185 4, * Includes IFRS2 (FRS20) charge of 905k (2006: 380k) ** Includes corporate stores, JV s and DP Capital A-3

44 The Franchisee Model 2007 average store cost to an existing franchisee was: Store construction costs Acquisition and legal costs Franchisee fee 155,000 (range 115k - 190k) 15,000 (range 9k - 20k) 170,000 13,000 (range 3,750-15k) Project management fee: - Acquisition fee 5,000 (range 1,500-6k) - Design and develop 6,000 ( 6k) - Project supervisor fee 2,000 (range 0k - 3k) Total Capital Investment 196,000 plus VAT A-4

45 The Franchisee Model (contd.) Average mature store system sales 650,000-12,500 AWUS in 2007 Average mature store EBITDA after: 95,000 - Food costs 27% - Labour 28% - NAF & Royalty 10.5% - Occupancy 6% -LSM 4% Cash payback on investment 2.1 years (range ) FRANCHISEE PROFITABILITY KEY A-5