DP Eurasia N.V. Preliminary Results for the Year ended 31 December - - PowerPoint PPT Presentation

DP Eurasia N.V.

Preliminary Results for the Year ended 31 December 2017

2

This Presentation is not an offer to buy or sell any securities. Save where otherwise indicated, the Company is the source of the content of this Presentation and, accordingly, although care has been taken to ensure that the facts stated in this Presentation are accurate and that the opinions expressed are fair and reasonable, no representation, warranty or undertaking, express or implied, is made by any of the Company, any of its directors, officers, employees, affiliates, advisors, shareholders or representatives as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. Neither the Company nor any of its directors, officers, employees, affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this Presentation or its contents

• r otherwise arising in connection with the Presentation.

Certain statements in this Presentation are not historical facts and are “forward looking” statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology. None of the Company, its directors, officers, employees, affiliates, advisors, shareholders or representatives intend or have any duty or obligation to supplement, amend, update or revise any of the forward-looking statements contained in this Presentation or to update or to keep current any other information contained in this Presentation. The information and opinions contained in this Presentation are provided as at the date of this Presentation and are subject to change without notice. As a result, you are cautioned not to place undue reliance on such forward looking statements.

Disclaimer

3

Highlights

Aslan Saranga - Chief Executive Officer

Operational Review

Aslan Saranga Güvenç Dönmez - Chief Executive Officer of Russian Operations

Financial Results

Selim Kender - Chief Strategy Officer and Head of Investor Relations

Conclusion

Aslan Saranga

Q&A

Today’s Agenda

Highlights

SECTION 1:

5

2017 highlights

• 10.0%

(2016: 7.0%)

28.9%

(2016: 41.6%) LIKE-FOR-LIKE GROWTH 40.3% REVENUE

TRY 633.0 m

(2016: 451.1m) STORE COUNT SYSTEM SALES Adjusted EBITDA

TRY 859.8 m

(2016: 647.4m)

TRY 96.8 m

(2016: 75.1m) 28.9%

51.8%

(2016: 42.4%) 32.8% ONLINE DELIVERY 76

643

(2016: 567) 9.4% points

Operational Review

SECTION 2:

7

Innovation is at the core of DP Eurasia

Source: Company Information

Loyalty Program

• Turkish app Lfl increased

to 112.6% from 56.8%

• Russian app Lfl increased

to 317.5% from 34.7%

• Unique customer
• Conversion
• Incremental sales
• pportunity
• Oven baked sandwich mix

at 14% without cannibalisation

• Product transfer from

Turkey to Russia, e.g. ultra-thin crust and mosaic cake

• Launched in Turkey in

November’17

• Expanded to desktop and

mobile website in February’18

• Encouraging early signs –
• nline and overall order

frequency increasing

Products Apps

8

19% 7% 38% 10% Online Total

2016 2017

141% 42% 79% 29% Online Total

2016 2017

Like-for-like performance

Lfl performance continues to be strong

System sales Lfl growth, %

Russia Turkey

Online channels continue to be the main driver of same store sales

9

Attractive pricing vs competitors in Turkey and Russia with high value for money Quick delivery times all year round in Turkey and Russia, despite the challenging weather conditions

Why do consumers choose Domino’s?

Value for money?

% of affirmative respondents

Value for money?(1)

% of affirmative respondents

Delivery on Time

%

Delivery on Time

%

I II

Innovation – New Products

III

65 24 20 50 47

Domino's Pizza Pizza Hut Little Caesar's Burger King Mc Donald's

84.5 2017 93.0 2017

40 33 28

Domino's Pizza Pizza Hut Papa John's Source: Ipsos Connect Brand Health and Ad Tracking, Feb/Mar 2017 Source: "Russian OHD market and dining habits" consumer survey in 2016 conducted by Ipsos Source: Company Information

Russia Turkey Oven baked Sandwich Dev Malzemos Ultra thin crust Mosaic cake

Notes:

• 1. The figures are representing only Moscow

Source: Company Information

Market positioning

10

Store count growth

…with Russia opening a record 49 stores

# of stores at period end

Turkey surpassing 500 stores...

# of stores at period end (1) # of stores at period end

Continuous and significant store rollout

Source: Company Information Source: Company Information

466 495 522 450 550 2015 2016 2017 43 72 121 50 100 150 2015 2016 2017 +27 +29 +49

370 432 466 495 522 13 19 43 72 121 80 103 130 160 219 289 383 451 509 567 643 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 +23 +27 +30 +59 +70 +94 +68 +58 +58 +76 DP Russia DP Turkey

Source: Company Information

+29

Notes:

• 1. Includes Azerbaijan and Georgia

11

608 514 236 193 133 120 90 50 514 120 90 85 45 45 33 32 4.3x larger than #2 player 27 62 19 123 23 140 262 132 121 108 54 24 2.3x 9.7x 2.1x 116 70 61 39 Delivery focused players 6.4x

Notes:

• 1. All Turkish data as of Dec-17
• 2. All Russia data as of Dec-17
• 3. Includes Moscow and Moscow regions

Leading the pizza market, the Domino’s brand… The Domino’s brand is a strong challenger to the top two…

Chained pizza in Russia, number of stores(2)

…and is the largest pizza player in Greater Moscow(3)…

Number of stores(2)

Source: DP Russia Company Information on Competitors Source: DP Turkey Company Information on Competitors Source: DP Russia Company Information on Competitors

Chained pizza in Turkey, number of stores(1)

…is #2 player in the fast food market…

Number of stores(1)

Source: DP Turkey Company Information on Competitors

‘14 ’17 ‘14 ’17 ‘14 ’17 ‘14 ’17 ‘14 ’17 ‘14 ’17

Competition

12

Moscow

• St. Petersburg

Rostov-on-Don Krasnodar

Russian expansion

• Having successfully implemented the castle strategy

in Moscow, we are continuing to expand, further building upon our growing market presence

• Key focus outside Moscow

‒

3 new cities:St. Petersburg, Krasnodar and Rostov-on-Don

‒

New city stores reaching similar opening order counts as Moscow Region, demonstrating viability and opportunity

‒

Introducing 30 minute delivery guarantee

‒

Continuing planned roll out to further cities

• Commissary capacity expanded to 250 stores

Progress in Greater Moscow has been rapid Expansion outside of Greater Moscow progressing well

European part of Russia 3 corporate stores 1 franchise store 3 franchise stores 43 72 116 42 52 70 13 37 61 2015 2016 2017 DPEU Papa John's Dodo

13

52% 34% 67% 44% Delivery Total

2016 2017

41% 26% 48% 32% Delivery Total

2016 2017

42% 27% 52% 35% Delivery Total

2016 2017

Digital growth

Share of online ordering growing healthily

Online system sales, %

Russia Turkey Group

Source: Company Information

Financial Results

SECTION 3:

15

75 97 2016 2017 647 860 2016 2017 Year on year growth 212 241 355 402 567 643 2016 2017 Corporate Franchise

DP Eurasia: Financial snapshot

System Sales, TRY MM

46 78 39% 19% 2016 2017 Capex Cash Conversion

TRY MM %

63% 37%

# of Outlets

33%

TRY MM

Growth in system sales supported by store roll-out Adjusted EBITDA with margin a function of sales mix effect Capex and cash conversion(2)

Source: IFRS Combined and Consolidated Financial Information, Management Accounts Notes:

• 1. As % of System Sales
• 2. Cash conversion defined as (Adj. EBITDA – Capex ) / Adj. EBITDA

11.6%

• Adj. EBITDA Margin(1)

11.3% 63% 37%

16

DP Turkey: Financial snapshot(1)

72 86 2016 2017 571 654 2016 2017 Year on year growth 144 142 344 372 488 514 2016 2017 Corporate Franchise

System Sales, TRY MM TRY MM %

70% 30%

# of Outlets

15%

TRY MM

System Sales Adjusted EBITDA and margin Capex and cash conversion(4)

Source: IFRS Combined and Consolidated Financial Information, Management Accounts Notes:

• 1. Including contributions from Azerbaijan and Georgia
• 2. Turkey only

12.6%

• Adj. EBITDA Margin(3)

13.1% 72% 28%

Store count(2)

• 3. As % of System Sales
• 4. Cash conversion defined as (Adj. EBITDA – Capex ) / Adj. EBITDA

25 37 65% 57% 2016 2017 Capex Cash Conversion

17

DP Russia: Financial snapshot

3 12 2016 2017 76 205 2016 2017 Year on year growth 68 99 4 22 72 121 2016 2017 Corporate Franchise

System Sales, TRY MM TRY MM # of Outlets

169%

TRY MM

System Sales Adjusted EBITDA Capex

Source: IFRS Combined and Consolidated Financial Information, Management Accounts Notes:

• 1. As % of System Sales

4.1%

• Adj. EBITDA Margin(1)

6.1% 18% 82%

Store count

21 42 2016 2017

18

Cash flow generation and debt profile

Notes:

• 1. Adjusted for activities that are not part of the normal course of business and are non-recurring including share-based incentives, IPO costs and severance costs for Turkey and Russia
• 2. Adjusted net debt is calculated as sum of short-term borrowings and long-term borrowings, less cash and cash equivalents and adjusted for non-recurring items including long term deposit for loan guarantee and delay in

collection/payment day coinciding on a weekend

75 97 (46) (78) 29 18 2016 2017

• Adj. EBITDA

Capex

• Adj. EBITDA - Capex

Cash Conversion 146 107 53 121 200 228 1.9x 1.1x 2016 2017

• Adj. Net Debt

Gross Debt

TRY MM TRY MM

Cash flow generation 2017 gross debt by currency Euro cash / Euro debt

Source: IFRS Combined and Consolidated Financial Information

Debt profile of DP Eurasia

39% 19%

(1)

• Adj. Net Debt / Adj. EBITDA

(2) (1) (2)

25% 69% 6% TRY EUR RUB 17% 53% 2016 2017

19

Management guidance

Total potential store count Targeted net store

• penings per year

(medium term) LfL (medium term) CAPEX program

• 900
• 1,500
• High single digit LfL growth
• Low to mid-teens LfL growth
• 30 stores
• We expect franchise stores to be the main driver of

new store openings

• 40 – 60 stores
• We expect franchise and corporate stores to be the

main drivers of new store openings

• c. TRY 30 MM in 2018
• c. RUB 375 MM in 2018

Conclusion

SECTION 4:

21

Conclusion

Source: Company Information

• Strong topline and profitability growth
• System Sales: 32.8%
• Adjusted EBITDA: 28.9%
• Solid Lfl growth

2017 2018 YTD Turkey 10.0% 10.7% Russia 28.9% 25.0%

• 76 stores opened in 2017, visible pipeline for 2018
• Online share increasing: 51.8% of delivery (+9.4% year-on-year)
• Strong Lfl start to 2018; Board confident in year ahead and store roll out

Appendix

SECTION 5:

23

Future growth driven by four core strategy pillars

Innovation and online ordering to drive like-for-like growth

Source: Company information

Potential to export the platform Large whitespace opportunity in countries of presence

Domino’s stores, #

Source: Company estimates Notes:

• 1. Excluding Azerbaijan and Georgia

Russia Adj. EBITDA / System Sales, %

Source: Company information

Leverage scale advantage to further improve profitability

System sales LfL growth, % 19% 7% 38% 10% Online Total 141% 42% 79% 29% Online Total

Turkey Russia 2016 2017

2017 Total Potential 514

• c. 900

2017 Total Potential 121

DP Russia DP Turkey

• c. 1,500

(1)

Turkey Adj. EBITDA / System Sales, % DP Eurasia

1 2 3 4

• Adj. EBITDA / System Sales

4.1% 6.1% 2016 2017 12.6% 13.1% 2016 2017

24

25 34 75 97 2014 2015 2016 2017 DP Russia DP Turkey

7% Average LfL(2) ’14–’17 Market Position 2017 (by number of stores) #3 #1 #1 #1 Number of Stores 2017 514 121 5 3 Corporate 142 99

• Franchise

372 22 5 3 Number of Commissaries 2017 4 1

• 13%

System SalesCAGR ’14–’17 118% 37% Turkey Russia Georgia Azerbaijan Moscow

99 372 142 3 5 x4 22

Franchise stores Corporate stores Commissaries

• Adj. EBITDA Margin (Adj. EBITDA/System Sales)

5% 6% 12%

DP Eurasia overview

Growing regional expansion from an established strong base in Turkey(1)… …combined with strong growth in System Sales…

TRY MM

Notes:

• 1. Number of stores as of 2017
• 2. LfL calculation includes stores which are operational for more than 52 weeks and aren’t considered as split stores for the underlying period. Arithmetic average of non-split LfL for 3 years (’13–’14, ‘14 –’15 and ’15 –’16); excluding

Azerbaijan and Georgia due to no LfL stores in the period

• 3. Adjusted for activities that are not part of the normal course of business and are non-recurring including share-based incentives, IPO costs and severance costs for Turkey and Russia

Source: Company Information, Management Accounts Source: IFRS Combined and Consolidated Financial Information, Management Accounts Source: Management Accounts

470 543 647 860 2014 2015 2016 2017

…resulted in accelerating Adjusted EBITDA(3) performance

TRY MM 11%

25

Attractive investment opportunity with high growth potential and proven business model

Leading market positions

1

Highly attractive, underpenetrated markets with substantial growth potential in the Group’s addressable segments

2

Strong online capabilities underpin DP Eurasia’s growth

3

Globally proven business model successfully applied and adapted to DP Eurasia’s local markets

4

Simple and scalable, asset-light business model

5

Track record of resilient and profitable growth as well as strong cash conversion

7

Founder-led, experienced management team

8

Highly attractive customer proposition and strong brand equity

6

26

DP Eurasia: Financial summary

Key KPIs DP Eurasia income statement

System sales

• Sales generated by the Group’s system stores

(both corporate and franchise) Corporate revenue

• Revenue from the Group’s corporate stores

Franchise revenue and royalty

• Consists of revenue from commissary sales to

franchise stores and royalties calculated based on franchise store sales to customers, including the contribution to national advertising Cost of sales

• Corporate store costs; production related costs of

the Group’s commissaries, such as merchandise and raw materials; ingredients and non-food items (including those sold to the Group’s sub- franchisees); labour; rent; utilities and other, including D&A of corporate stores and commissaries General and administrative expenses

• Consists of headquarters expenses such as

personnel (excl. marketing and selling personnel), rent, utilities, commissaries’ rents and non- production related personnel and headquarters- related D&A expenses Marketing and selling expenses

• Includes marketing and selling personnel costs,

royalties paid by the Group (on-going fees) and promotion and advertising expenses

Source: Company Information, IFRS Combined and Consolidated Financial Information, Management Accounts Notes:

• 1. One-off items include activities that are not part of the normal course of business and are non-recurring including share-based incentives, IPO costs and severance costs for Turkey and Russia

(TRY MM) 2017 2016 Change Revenue 633.0 451.1 40.3% Cost of Sales (398.7) (279.6) 42.6% Gross Profit 234.3 171.5 36.6% General Administrative Expenses (109.1) (68.9) 58.3% Marketing and Selling Expenses (82.6) (61.3) 34.8% Other Operating Income / (Expense) (3.6) 0.5 n.m. Operating Profit 38.9 41.8

• 7.1%

Foreign Exchange (losses)/gains (11.7) 12.0 n/a Financial Income 1.2 1.4 n/a Financial Expense (21.6) (17.0) 27.3% Profit / (Loss) Before Tax 6.8 38.3 n/a Tax Expense (1.9) (9.0)

• 78.3%

Net Income 4.8 29.3 n/a EBITDA 80.0 68.5 16.8% Adjusted EBITDA 96.8 75.1 28.9% Adjusted net income 21.7 35.8

• 39.4%

(TRY MM) 2017 2016 Change System sales 859.8 647.5 33% Corporate 370.7 250.1 48% Franchise 489.1 397.4 23%

27

DP Eurasia: Revenue & Expense Breakdown

Notes:

• 1. One-off items include activities that are not part of the normal course of business and are non-recurring including share-based incentives, IPO costs and severance costs for Turkey and Russia

(TRY MM) 2017 2016 Change 2017 2016 System sales 859.8 647.5 33% Corporate 370.7 250.1 48% as a % of system sales 43.1% 38.6% Franchise 489.2 397.4 23% as a % of system sales 56.9% 61.4% 2017 2016 Change 2017 2016 Revenue 633.0 451.1 40% Corporate 370.7 250.1 48% as a % of revenue 58.6% 55.4% Franchise 226.6 183.8 23% as a % of revenue 35.8% 40.7% Other revenue 35.7 17.2 107% as a % of revenue 5.6% 3.8% Cost of Sales (398.7) (279.6) 43% Cost of Food/Non-Food/Transportation (213.8) (160.1) 34% as a % of system sales 24.9% 24.7% Corporate Store Expenses (155.5) (100.5) 55% as a % of corporate system sales 42.0% 40.2% Depreciation and Amortization (29.4) (19.0) 54% Gross Profit 234.3 171.5 37% as a % of system sales 27.2% 26.5% General Administrative Expenses (109.1) (68.9) 58% Overhead (Including Commisary) (80.5) (54.7) 47% as a % of system sales 9.4% 8.4% Depreciation and Amortization (11.7) (7.6) 54% Share based incentives (1.5) (5.7) n/a as a % of system sales 0.2% 0.9% IPO Costs (15.3) (0.9) n/a Marketing and Selling Expenses (82.6) (61.3) 35% Marketing and Advertising (43.4) (31.4) 38% as a % of system sales 5.0% 4.8% Corporate Store Local Marketing (4.9) (4.1) 20% as a % of corporate system sales 1.3% 1.6% Royalty (34.3) (25.8) 33% as a % of system sales 4.0% 4.0% Other Operating Income / (Expense) (3.6) 0.5 n/a Operating Profit 38.9 41.8

• 7%

28

Adjusted EBITDA and Net Debt calculation

DP Turkey DP Russia DP Eurasia

Notes:

• 1. Excludes income and expenses which are not part of normal course of business and are non-recurring items

(TRY MM) 2017 2016 System Sales 654.4 571.0 Revenue 425.7 373.4 Operating profit 56.6 44.2 D&A 27.1 21.6 EBITDA 83.7 65.8 Non-recurring (income)/expenses 2.0 6.2 Adjusted EBITDA 85.7 72.0 % of system sales 13.1% 12.6% Adjusted EBIT 58.6 50.4 % of system sales 9.0% 8.8% Capital expenditures 36.7 25.0 Cash conversion 57.1% 65.3% (TRY MM) 2017 2016 System Sales 205.4 76.4 Revenue 207.3 77.7 Operating profit (2.9) (2.3) D&A 14.0 5.1 EBITDA 11.1 2.8 Non-recurring (income)/expenses 1.4 0.4 Adjusted EBITDA 12.5 3.1 % of system sales 6.1% 4.1% Adjusted EBIT (1.6) (2.0) % of system sales

• 0.8%
• 2.6%

Capital expenditures 41.7 20.7 Cash conversion n.m. n.m. (TRY MM) 2017 2016 System Sales 859.8 647.4 Revenue 633.0 451.1 Operating profit 38.9 41.8 D&A 41.1 26.7 EBITDA 80.0 68.5 Non-recurring (income)/expenses 16.8 6.6 Adjusted EBITDA 96.8 75.1 % of system sales 11.3% 11.6% Adjusted EBIT 55.7 48.5 % of system sales 6.5% 7.5% Capital expenditures 78.5 45.7 Cash conversion 19.0% 39.2% (TRY MM) 2017 2016 Short term bank borrow ings 136.9 115.9 Short-term portions of long-term financial lease borrow ings 5.2 3.0 Long-term bank borrow ings 74.5 73.3 Long-term financial lease borrow ings 11.2 7.3 Total borrowings 227.9 199.5 Cash and cash equivalents 76.1 19.5 Net debt 151.8 180.0 Non-recurring items Long term deposit for loan guarantee (28.2) (23.2) Adjusting delay in collection/payment day coinciding on a weekend (16.8) (10.4) Adjusted net debt 106.7 146.4

29

Exchange Rates

Year ended 31 December 2017 2016 Currency Period End Period Average Period End Period Average EUR/TRY 4.516 4.116 3.710 3.338 RUB/TRY 0.065 0.062 0.057 0.045 EUR/RUB 68.867 65.901 63.811 74.231

Source: Company Information

30

63% 62% 37% 38% 2016 2017 Delivery Take-away / Eat-in 63% 63% 37% 37% 2016 2017 Delivery Take-away/Eat-in 62% 60% 38% 40% 2016 2017 Delivery Take-away / Eat-in

Delivery – Take-away/Eat-in mix

% of system sales

Russia Turkey Group

Source: Company Information