Domino s Pizza UK & IRL plc Interim Results for the 26 weeks ended 28 June 2009
m System sales momentum 210 System sales have doubled since 2005 196.4 190 170.2 170 150 130 110 97.1 114.8 142.5 +24.1% +19.5% +15.4% 90 70 +19.1% +18.2% 50 2005 H1 2006 H1 2007 H1 2008 H1 2009 H1 2 12
Constant Mature Store Sales Growth 16,000 2005 Mature Store Population Average Weekly Sales 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 Additional sales of 145k in an average mature store compared to H1 2005 3
Like-for-like sales and PBT* growth * Pre-exceptional items 26 4
Financial highlights Another set of excellent results +25.2% +25.2% +29.6% +15.4% +7.1% * Pre-exceptionals of 0.5m ** Pre-tax impact of prior year exceptionals costs of move to Full List 5 2
Profit and loss 26 weeks to 28 June 2009 26 weeks to 29 June 2008 % increase 52 weeks ended 28 December 2008 000 000 000 System Sales 196,368 170,174 15.4 350,771 Operating profit pre-exceptionals 13,721 11,057 24.1 23,739 Net interest payable (113) (188) 40.0 378 Profit before tax pre-exceptionals 13,608 10,869 25.2 23,361 Accelerated LTIP charge (249) - - - Operating exceptionals (264) (146) - (54) Non-operating exceptionals - (887) - (1,002) (Loss) on sale of stores - (137) - (156) Profit before tax 13,095 9,699 35.0 22,149 Taxation (3,798) (2,812) (35.1) (6,485) Profit after tax 9,297 6,887 35.0 15,664 Dividends Per share 3.50p 2.70p 29.6 5.9p - Cover 1.7 x 1.7x 1.7x Earnings per share pre-exceptionals - Basic 6.26p 5.01p 25.0 10.70p - Diluted 6.21p 4.96p 25.2 10.55p * Pre-tax impact of prior year exceptionals costs of move to Full List 3 6
Balance sheet Current Assets: At 28 Jun 09 At 29 Jun 08 At 28 Dec 08 000 000 000 At 28 Jun 09 At 29 Jun 08 Non current assets 40,281 21,180 27,660 000 000 Inventories 2,883 3,104 Current assets 41,013 30,212 35,784 Trade & other 16,174 15,804 receivables Non current assets Net investment in held for sale 1,037 717 736 finance leases 889 874 Prepaid lease Total assets 82,331 52,109 64,180 charges 138 274 Cash 20,929 10,156 Current liabilities (24,540) (30,593) (28,094) 41,013 30,212 Current Liabilities: Non current liabilities (40,028) (15,254) (23,306) Trade & other (20,309) (17,814) Total Liabilities (64,568) (45,847) (51,400) Financial liabilities (883) (9,857) Deferred income (77) (37) Tax liabilities (3,271) (2,885) Net assets 17,763 6,262 12,780 (24,540) (30,593) 4 7
Cash flow statement 26 weeks to 26 weeks to 52 weeks ended 28 June 2009 29 June 2008 28 December 2008 000 000 000 Profit before taxation 13,095 9,699 22,149 Net finance costs 113 188 378 Share of post tax profits of associates (219) (137) (187) Loss on disposal of non-current assets - 137 156 Depreciation and amortisation 907 847 1,958 Share option and LTIP charge 625 535 1,106 Changes in working capital (3,199) (6,799) (1,255) Cash generated from operations 11,322 4,470 24,305 Taxation paid (2,598) (2,334) (5,965) Net cash generated by operating activities 8,724 2,136 18,340 Net cash used by investing activities (12,645) (1,703) (8,554) Cash (out)/inflow before financing (3,921) 433 9,786 Financing activities 6,943 (5,056) (6,864) Net increase/(decrease) in cash 3,022 (4,623) 2,922 6 8
Analysis of borrowings At 28 Jun 09 At 29 Jun 08 At 28 Dec 08 000 000 000 Cash at bank 20,929 10,156 18,602 Term debt (24,000) (9,000) (12,300) Net cash (3,071) 1,156 6,302 DP Capital (2,914) (2,574) (2,424) EBT loan (12,035) (12,035) (12,035) Other - (18) (17) Net debt (18,020) (13,471) (8,174) Net debt/ebitda* 0.6:1 0.6:1 0.3:1 * 52 week rolling EBITDA 7 9
Available debt facilities Effective Utilised at Undrawn at Facility Date 28 June 09 28 June 09 Term Purpose m m m 25.0 * Dec 2007 24.0 1.0 5 years Multi-purpose 5.0 Dec 2008 2.9 2.1 5 years DP Capital 13.0 * Mar 2008 12.0 1.0 7 years EBT 43.0 38.9 4.1 Cash on Hand 20.9 Headroom 25.0 2010 2011 2012 2013 2014 5 year total Consensus free cash flow projection ** - m 29.9 29.9 30.5 30.0 33.4 153.7 * All at margins at LIBOR + 50bpts ** Before expansionary capex. These are analyst forecasts as at February 2009 8 10
Pence Diluted earnings per share growth * Compound increase of 29% since 2005 6.21 5.12 2.15 2.74 3.63 * Pre-exceptional items as reported 11 9
Pence Dividends per share growth Compound increase of 38% since 2005 3.50 2.70 1.90 1.30 0.97 12 10
Cash returned to shareholders 26 wks 52 wks 52 wks 52 wks 52 wks Total 2009 2008 2007 2006 2005 000 000 000 000 000 000 Profit after tax 56,443 9,297 15,664 13,239 9,996 8,247 Share buybacks 30,512-3,783 8,346 10,161 8,222 Dividends 26,237 4,983 8,035 5,816 4,234 3,169 Total returned 56,749 4,983 11,818 14,162 14,395 11,391 % of profit after tax 101% 54% 75% 107% 144% 138% 11 13
The operational gearing dynamics Consensus Analyst Consensus Analyst Actuals Forecast Forecast 2004 2008 2009 2013 2013 2018 System sales - 000 174,292 350,771 642,200 1,029,306-5 year compound growth + 19% + 13% +10% LFL sales growth 5 year average + 10% + 3% + 3% Store openings 5 year average 48 50 50 Commissary Gross Margin - 000 14,111 32,892 56,600 90,600 - GM% 30.5% 34.0% 32.6% 32.6% - 5 year compound growth + 23% + 11% + 10% Distribution + other costs - 000 (6,600) (11,238) (16,800) (22,600) - 5 year compound growth (+ 14%) (+ 8%) (+ 6%) Commissary net contribution - 000 7,910 21,654 39,800 68,000 - Net contribution % 16.6% 22.4% 23.0% 24.6% - 5 year compound growth + 28% + 13% + 12% 28 14
The operational gearing dynamics (cont.) Consensus Consensus Analyst Analyst Actuals H1 Forecast Forecast 2004 2008 2009 2009 2013 2013 2018 PBT* - 000 8,819 23,361 43,730 86,700-5 year compound growth + 27% + 13% + 14% PBT/System sales - % 5.1% 6.7% 6.9% 6.8% 8.4% Diluted EPS * - pence 4.0p 10.71p 6.21p 20.71p ** 41.0p * * - % growth + 28% + 13% + 15% Dividend per share - pence 1.64p 5.90p 3.50p 11.80p 23.42p - % growth + 38% + 15% + 15% Key assumptions: 50 store openings per annum LFL sales 3% per annum * Pre-exceptionals ** Excluding further share buybacks 28 15
Like-for-like sales by month 15,000 14,000 13,000 12,000 Jan Feb Mar Apr May Jun 2008 2009 14 16
% of stores in each AWUS bracket Like-for-Like Store Health 100% 75% 2% 4% 6% 8% 11% 8% 27% 41% 9% 15% 22% 23% > 20k 15k- 20k 42% 10k- 15k 50% 43% 42% 42% 7k- 10k 25% 0% 34% 29% 25% 21% 21% 12% 7% 3% 4% H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 < 7k 15 17
Product Quality, Service, Marketing and Value Competitive environment has broadened stay-at-home (e.g. M&S, Tesco) Value is key component - everywhere careful approach tactical, short-term offers National media support early wins Quality message still crucial takeafreshlook.co.uk 22 18
Product Quality Which one brand do you think is best for takeaway or delivered pizza? 41% Domino's 43% 47% 25% Competitor A 29% 26% Competitor B 4% 5% 5% Base: 601 UK Adults Source: RHMR Ltd 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Sep-07 Oct-08 Mar-09 19
Service Continuous improvement: % OTD <15 minutes 86% 84% 82% 80% 78% 76% 74% 72% 70% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 08 mature 09 mature 20 17
Marketing Total Spot TVRs (16-34s) 400 350 300 250 200 150 100 50 0 Total 2008 = 550 Total 2009 = 778 40% increase Jan Feb Mar April May Jun All Total '08 All Total '09 Note: Does not include sponsorship TVR figures 21
E-commerce goes from strength to strength 40,000,000 30% 35,000,000 30,000,000 25% 25,000,000 20% 20,000,000 15,000,000 15% 10,000,000 10% 5,000,000 - H1 2005 H1 2006 H1 2007 H1 2008 H1 2009 Net Sales UK % Delivered Sales 5% 20 22
Customer dynamics New customers still spending at same rate as existing customers Penetration now at 14.01% (H1 2008: 13.45%)* Average Order Frequency every 33 days (H1 2008: 35 days) Average Ticket 3% ahead at 16.49 (H1 2008: 15.99) * Households ordering in last 210 days as a % of households in delivery area, 2008 Mature Store Population 23 22
The hill to climb in H2 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 08 mature store increase 09 mature store increase 24 21
System Growth 23 new stores opened in first half (2008: 25) 4 with new franchisees Closures = 0 (2008 = 0) Last 12 months run rate at 50 openings Additional resource & focus delivering results pipeline 10% higher than last year Quality of location paramount 2009 new stores trading in line with the record 2008 intake New record store opening in a tiny delivery area First Mobile Store 576 stores at half year (2008: 526 stores) 25 23
Store Openings Store Growth On Track 50 45 50 46 50 52 H2 Average:27 40 35 30 25 27 25 30 27 H1 Average:22 20 15 10 5 23 21 20 25 23 0 2005 H1 2006 H1 2007 H1 2008 H1 2009 H1 H1 H2 MARKET POTENTIAL EXCEEDS 1,000 STORES 26 24
Appetite for growth Resilient to credit crunch 12.1 million franchisee capex Franchisee enquiries up 13% 17 stores changed hands in H1 09 Belief in Domino s brand strength Franchisees and banks Refit programme building momentum 25 27
Appetite for growth (cont.) 5.0 Store : franchisee ratio 134 franchisees (FY2008:130) 4.5 4.0 4.3 3.5 4.2 3.0 3.5 2.5 2.0 2.7 3.0 1.5 2005 FY 2006 FY 2007 FY 2008 FY 2009 H1 28 27
Commissary update New Milton Keynes facility To support 500 stores at build-out volumes 100,000 sq.ft vs 20,000 sq.ft Key production processes automated Dough tray washing system Continuous dough mixing Dough placement Spiral chillers Automated stacking Completion on track for Second Quarter 2010 29 29
Commissary update (cont.) Capital cost of circa 28m 3m higher than expected Exchange rates 0.9 (non cash) Additional resilience 1.4 (duplicated production lines) Larger footprint 0.4 (bigger facility) Benefits of automation of new MK facility Not yet in analyst forecasts To be achieved once testing complete BREEAM excellence WORLD CLASS FACILITY 29 30
New Milton Keynes facility - progress 29 31
New Milton Keynes facility progress (cont.) 29 32
New Milton Keynes facility progress (cont.) 29 33
Commissary update (cont.) Irish commissary expansion Renting additional space at current facility Anticipated 7m capital spend deferred 2m in 2011/12 5m in 2013 Further medium size commissary in South of England Estimated spend of circa 15m in 2013/14 Resilience rather than capacity needs But may be needed to support >1,000 stores Sale of existing Milton Keynes commissary Towards end of 2011 Value depends on planning 29 34
Commissary update (cont.) Extension to Penrith Completed in May 2009 at 4.8m 100% additional capacity Resilience for wider system Support entire system in crisis Spiral chiller installed Automated dough cooling Further efficiencies Quality of dough improved 35 28
Cost efficiencies driving profits Strong commissary gross margins Driven by improving food margins Falling food prices Economies of scale Production efficiencies Benefits of volume growth Lower distribution costs Lower fuel costs than expected Improved routing to stores Overall lower cost per mile Other central costs and interest Tightly controlled and under budget 30 36
Cost pressures Food costs System benefitted from falling prices in H1 Particularly cheese and wheat 50% of food cost Franchisees profitability improvement Strong growth in EBITDA s Looking forward 2009 Circa 75% of basket now under fixed price contract Using scale and longer term contracts Mitigating some pressures 2010 Trends upwards eg meats and chicken Using scale and supply chain re-engineering 30 37
Cost pressures (cont.) Energy Price Inflation Fuel costs likely to remain below budget for 2009 Guidance of distribution costs: 75% of system sales growth Utility costs Locked in for two years to mid 2011 WELL PLACED FOR NEXT 6-12 MONTHS 30 38
Taxation Acquisition of Dresdner Kleinwort Leasing Company for 26k Good quality assets Leased to sizeable multi-nationals Benefits of acquisition to Domino s Circa 104m of capital allowances available for Group relief Circa 29m of cash tax relief most of which will be available over the period 2010 to 2016. Circa 15m deferred payment to Dresdner 2011-2016» Only if tax relief obtained Full indemnities and warranties From Dresdner and Commerzbank Including all leases No change to underlying tax rate going forward Other than exceptional P&L credit in 2009 for negative goodwill of circa 16.0m 32 39
Summary Resilient brand in current economic climate New customer generation, repeat custom and average spend Home delivery competition still benign Banks keen to lend to Domino s franchisees (new and existing) On track to open 50 new stores this year New sites trading well Developing the infrastructure for 1,000+ stores Strong cash generation & operational gearing set to continue WELL PLACED FOR CONTINUING STRONG GROWTH 32 40
Questions? 30 42
APPENDICES APPENDIX 1 (Page A-1) APPENDIX 2 (Page A-2) APPENDIX 3 (Page A-3) APPENDIX 4 (Page A-4) APPENDIX 5 (Page A-5) Analysis of Group turnover Analysis of Group Operating Profit (Pre-exceptionals) Earnings per share reconciliation The Franchisee Model The Financial Model APPENDIX 6 The Financial Model at 2018 (Pages A-6 A-7) APPENDIX 7 (Page A-8) Statement of Changes in Equity
Analysis of group turnover 26 weeks to 26 weeks to 28 June 2009 29 June 2008 Variance 000 000 000 % Royalties 10,799 9,359 1,440 15.4 Store sales 1,494 2,121 (627) (29.6) Franchise/TST/FDP fees 528 414 114 27.3 Commissary & E&S sales 52,548 47,117 5,431 11.5 Property sales 6,307 5,768 539 9.3 Computer sales 1,353 1,555 (202) (13.0) Other sales 1,280 766 514 67.1 Inter-company sales (610) (900) 290 32.2 Total sales 73,699 66,200 7,499 11.3 A-1 A-1
Analysis of group operating profit (pre-exceptionals) 26 weeks to 26 weeks to 28 June 2009 29 June 2008 Variance 000 000 000 % Franchise Operations 4,322 3,659 663 18.1 Commissary 12,442 10,074 2,368 23.5 DP Realty 214 345 (131) (38.0) Central overheads * (3,557) (3,191) (366) 11.5 Other ** 300 170 130 76.5 13,721 11,057 2,664 24.1 * Includes IFRS 2 charge of 625k (2008: 535k) and forex gains of 11k (2008: 105k) ** Includes corporate stores, JV s and DP Capital A-3 A-2
Earnings per share reconciliation At 28 June 2009 At 29 June 2008 000 000 Profit attributable to shareholders - post exceptionals 9,296 6,911 Profit attributable to shareholders - pre exceptionals 9,735 8,045 Basic weighted average number of shares - 000 s 155,437 155,433 (excluding shares held by EBT) Dilutive 000 s - Share options 1,395 1,713 Diluted weighted average no. of shares - 000 s 156,832 157,146 Basic EPS - post exceptionals 5.98 pence 4.45 pence Basic EPS - pre exceptionals 6.26 pence 5.18 pence Diluted EPS - post exceptionals 5.93 pence 4.40 pence Diluted EPS - pre exceptionals 6.21 pence 5.12 pence A-2 A-3
The Franchisee Model 2009 and 2008 average store cost to an existing franchisee: 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 A-4
The Financial Model 5 months to 5 months to % Var 12 months to Mature Stores May 2009 May 2008 May 09/May 08 28 December 08 Average sales (AWUS) 14,006 12,961 + 8.1% 13,493 YTD system sales 294,126 272,181 + 8.1% 700,000 Average EBITDA 46,472 37,561 +23.7% 100,000 EBITDA % 15.8% 13.8% - 14.3% 8,911 higher EBITDA Most profitable period still to come Strong operational gearing benefits from: Multiple store ownership Tactical price promotions driving volumes Lower food and labour costs COMPELLING STORE A-6 LEVEL ECONOMICS A-5
The Financial Model at 2018 At build out 2001 2006 2007 2008 (circa 2018) No. of stores 237 451 501 553 1,050-50 openings p.a. AWUS growth at 3% p.a. 8,422 11,347 12,539 13,493 17,605 System sales 98m 240m 296m 351m 920m Profit before tax* 2.9m 14.2m 18.7m 23.4m 83m- 92m PBT/System sales 3.0% 5.9% 6.3% 6.7% 9.0%-10.0% +100% 50% Stores double profits grow five-fold Circa 8% of incremental sales to profit (commissary 5.5% + net royalty 2.8%) Significant operational gearing Commissaries Central infrastructure * pre-exceptionals A-6 A-1
The Financial Model at 2018 (cont.) At build out * 2006 2007 2008 (circa 2018) PBT 14.2m 18.7m 23.4m 92.0m Share buybacks *** Average no. of shares in issue 162.6m 158.0m 156.9m 128.0m Diluted EPS** - pence 6.2p 8.4p 10.71p 51.0p - CAGR 19% p.a. Dividend - cover 2.1x 1.9x 1.7x 1.5x - pence 3.1p ** 4.4p 5.9p 34.0p AT LEAST 10 YEARS OF CASH GENERATIVE ORGANIC GROWTH * Independent analyst research not a forecast ** Pre-exceptionals *** To achieve cash neutral position at 2018. Circa 20% of equity. A-2 A-7
Statement of Changes in Equity At 28 Jun 09 At 29 Jun 08 At 28 Dec 08 000 000 000 At beginning of year 12,780 9,897 9,897 Proceeds from share issue 1,025 501 653 Treasury shares held by EBT - (4,317) (4,308) Share buybacks - (3,782) (3,783) Profit for year 9,296 6,911 15,664 Tax on employee share options (52) 56 (59) Share options and LTIP charge 625 535 1,106 Exchange translation differences (929) 368 1,644 Dividends (4,983) (3,882) (8,035) 17,762 6,287 12,779 Minorities 1 (25) 1 17,763 6,262 12,780 5 A-8