Preliminary Results for the 52 weeks ended 27 December 2009 The Team - - PowerPoint PPT Presentation

Preliminary Results for the 52 weeks ended 27 December 2009

Chris Moore Chief Executive Officer Lee Ginsberg Chief Financial Officer

The Team

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0% 10% 20% 30% 40% LfL sales growth System sales Diluted EPS pre- exceptionals * PBT pre- exceptionals * Total dividend pence per share

Financial Highlights for 2009

Another record year

+8.4% +16.0% +26.0% +27.8% +31.4%

* Accelerated LTIP charges and impairment + other exceptionals

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Other 2009 Highlights

• Of the circa 8,900 Domino’s stores worldwide, our market

has eight of the Top 10 in sales

• Of the circa 3,950 International stores, our market has 20
• f the Top 20 in sales
• Last year we delivered to 3.4 million UK households, 13%
• f all homes (2008: 2.85m)
• 68 stores had sales in excess of £1 million (2008: 47)
• Up to one million pizzas sold per week
• 55 new store openings, a new record

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52 weeks ended 52 weeks ended % increase 27 December 2009 28 December 2008 £’000 £’000 System sales 406,924 350,771 16.0 Operating Profit 30,008 23,739 26.4 Net interest (143) (378) 62.2 Profit before tax 29,865 23,361 27.8 Taxation (8,291) (6,546)

• Profit after tax

21,574 16,815 28.3 Dividends per share:

• Pence

7.75p 5.90p 31.4

• Cover

1.68x 1.72x Earnings per share:

• Basic

13.81p 10.86p 27.2

• Diluted

13.49p 10.71p 26.0

STRONG GROWTH IN OPERATIONAL GEARING

Profit and Loss (Pre-exceptionals)

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52 weeks ended 52 weeks ended 27 December 2009 28 December 2008 £’000 £’000 Operating exceptionals

• Accelerated LTIP charge

(980)

• Restructuring/reorganisation costs

(264) (54)

• Impairment – commissary

(2,706)

• (3,950)

(54) Non-operating exceptionals

• Profit/(loss) on sale of assets

247 (184)

• (Loss)/profit on sale of subsidiaries

(30) 28

• Admission to Official List
• (1,002)
• Negative goodwill

15,053

• Unwinding of discount

(217)

• 11,103

(1,212)

• Taxation impact of exceptionals

816 61 TOTAL EXCEPTIONAL ITEMS 11,919 (1,151)

Profit and Loss (exceptional items)

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At 27 December 2009 At 28 December 2008 £’000 £’000

Current Assets: At 27 Dec At 28 Dec 2009 2008

Non-current assets 78,514 27,660

£’000 £’000 Inventories 2,735 2,542

Current assets 41,129 35,784

Receivables 12,514 13,650 Investment in

Non-current assets

finance leases 1,745 858

held for sale 954 736

Prepaid lease charges 138 132

Total Assets 120,597 64,180

Cash 23,997 18,602 41,129 35,784 Current Liabilities

Current liabilities (40,430) (28,094)

Trade & other (24,345) (20,523) Deferred income (77) (77) Non-current liabilities (58,591)

(23,306)

Financial liabilities (1,772) (4,867) Share buyback

Total Liabilities (99,021) (51,400)

• bligation

(10,592) - Tax liabilities (3,644) (2,627) (40,430) (28,094)

Net Assets 21,576 12,780

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Balance Sheet

At 27 December At 28 December 2009 2008 £’000 £’000

At beginning of year 12,780 9,897 Proceeds from share issue 2,132 653 Treasury shares held by EBT

• (4,308)

Share buybacks (7,624) (3,783) Profit for year 33,484 15,664 Tax credit/(charge) on employee share options 449 (59) Share options and LTIP charge 1,897 1,106 Exchange translation differences (554) 1,644 Dividends (10,466) (8,035) Share buyback obligation (10,592)

• 21,506

12,779 Minorities 70 1 21,576 12,780

Statement of Changes in Equity

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52 weeks ended 52 weeks ended 27 December 2009 28 December 2008 £’000 £’000 Profit before taxation 40,968 22,149 Excess of fair value of assets acquired on consideration (15,053)

• Impairment

2,706

• Net finance costs

360 378 Share of post tax profits of associates (553) (187) Amortisation and depreciation 2,014 1,958 (Profit)/Loss on disposal of non-current assets (217) 156 Share option and LTIP charge 1,897 1,106 Changes in working capital 3,513 (1,255) Cash generated from operations 35,635 24,305 Taxation paid (5,511) (5,965) Net cash generated by operating activities 30,124 18,340 Net cash used by investing activities (20,658) (9,573) Cash inflow before financing 9,466 8,767 Financing activities (3,669) (5,845) Net increase in cash 5,797 2,922 Opening cash balance 18,602 14,629 Foreign exchange (loss)/gain on cash and cash equivalents (402) 1,051 Cash at end of year 23,997 18,602

Cash Flow Statement

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At 27 Dec 2009 At 28 Dec 2008 £’000 £’000

Cash at bank 23,997 18,602 Revolving credit facilities (25,000) (12,300) Net Cash (1,003) 6,302 DP Capital (2,703) (2,424) EBT loan (12,035) (12,035) Other

• (17)

Adjusted net debt (15,741) (8,174) Adjusted net debt/EBITDA 0.5 0.3

* Excludes non-recourse loans and share buyback obligation

Analysis of Borrowings *

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Expiry Utilised at Undrawn at Facility Date 27 Dec 09 27 Dec 09 Term Purpose £’m £’m £’m

25.0 * 20 Dec 2012 25.0

• 5 years

Multi-purpose 5.0 31 Dec 2013 2.7 2.3 5 years DP Capital 13.0 * 31 Jan 2014 12.0 1.0 7 years EBT 43.0 39.7 3.3 Cash and cash equivalents at 27 Dec 2009 24.0 Surplus available headroom at 27 Dec 2009 27.3

* LIBOR + 50bpts

Available Debt Facilities

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5 year total 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000 £’000 Profit after tax 68,720 21,574 * 15,664 13,239 9,996 8,247 Share buybacks 38,135 7,623 3,783 8,346 10,161 8,222 Dividends 31,720 10,466 8,035 5,816 4,234 3,169 Total returned 69,855 18,089 11,818 14,162 14,395 11,391 % of profit after tax 102% 84% 75% 107% 144% 138% Total CAPEX –

• Maintenance 12,823

2,312 2,250 2,516 3,104 2,641

• Expansion

30,874 20,196 9,178 1,444 56

• 43,697

22,508 11,428 3,960 3,160 2,641

* Pre-exceptionals

Cash Returned to Shareholders

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 2005 2006 2007 2008 2009

Diluted earnings per share Linear (Diluted earnings per share)

18%

Compound increase of 27%

• ver last five years

4.72 8.33 5.99 10.71

Pence

Diluted Earnings Per Share *

13.49

27% 39% 29% 26%

* pre-exceptionals

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Dividends Per Share *

1 2 3 4 5 6 7 8 9 2005 2006 2007 2008 2009

Dividends per share Linear (Dividends per share)

Compound increase of 36%

• ver last five years

2.27 3.06 4.40 5.90

Pence

* All figures adjusted for share split

7.75

35% 44% 34% 31%

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38%

£200.7 £240.1 £296.3 £350.8 £406.9

£10.9 £14.1 £18.7 £23.4 £29.9

5.00 10.00 15.00 20.00 25.00 30.00 35.00 100 150 200 250 300 350 400 450

2005 2006 2007 2008 2009 System Sales PBT

19% compound growth in system sales 29% compound growth in PBT

System Sales £’m

System Sales – The Growth Driver

PBT * £’m

* pre-exceptionals

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12.8% 13.5% 3.6% 3.1% 8.9% 3.0% 11.2% 11.9% 9.7% 9.30% 9.70% 7.1%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 1 2 3 4 5 6 7 8 9 10 11 12 2008 % increase 2009 % increase

Cumulative Like-for-Like Sales Growth

8.4% growth in 2009

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Key Drivers of Like-for-Like Growth

11%

10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0% 2007 2008 2009

12.1% 13.1% 15.3% Penetration (% HHs purchased in last 210 days)

20 25 30 35 40 45 2007 2008 2009

34.5 34.5 35.2 Re-order frequency

£15.00 £15.50 £16.00 £16.50 £17.00 £17.50 £18.00 £18.50 £19.00 2007 2008 2009

£16.99 £18.06 £18.21 Average Ticket (gross)

2007 Constant Mature Store Population

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Two for Tuesday

Attracting new customers - from 1,700 to 4,800 a week

1,000 2,000 3,000 4,000 5,000 6,000 7,000

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Growth in Households Served

We delivered to 3.4 million homes in 2009

Households Served

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000

2007 2008 2009

HHs served by '07 Mature Stores All HHs served

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• Total System spent approx. £36.5m on marketing
• National Ad Fund of £20m (2008: £18m)
• Total LSM spend £16.5m (2008: £14m)
• Lower costs across most media, particularly TV
• Domino’s taking maximum advantage of reduced media rates
• Spent 17% more in 2009 on TV = £441,355
• Delivered 49% more TVRs (not including sponsorship)
• This means we reached over 1m more people than last year

More Advertising Fire Power

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TV Sponsorship

• Britain’s Got Talent - three year audience delivery completed

in two years

• Delivered almost £5m of additional (free) media value
• BGT final - the biggest show on TV in the last five years

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Key Drivers of Like-for-Like Sales Growth

E-commerce: 40% increase in online sales

£13.9m £20.1m £32.2m £55.9m £78.5m 10.4% 12.5% 16.1% 23.3% 27.8% 0% 5% 10% 15% 20% 25% 30% 2005 2006 2007 2008 2009 e-commerce net sales (£) % of delivered sales (RHS)

£100 £80 £60 £40 £20 £0

£’m

Average ticket 20% higher than regular orders

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E-commerce Drivers

• Increase of 29% in e-commerce marketing
• iPhone ordering available with dedicated app coming soon
• Increasing focus on Social Media applications

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Mature Store Average Delivery Time: 23 minutes

Continuous improvement: % OTD <15 minutes

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Key Growth Drivers: Service

70% 72% 74% 76% 78% 80% 82% 84% 86% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2008 2009

The Competition

New openings in 2009 End of year store count Net sales

Domino’s Pizza 55 608 £407m

Pizza Hut (delivery) * 6 264 £110m Papa John’s* 12 128 £40m Perfect Pizza* 1 110 £19m Others* n/a 2000 £310m TOTAL 74 3110 £886m

* company estimates - includes estimates for Ireland where applicable 25

Number of stores at year end

New Store Openings

(0) (2) (0) (0)

( ) = no. of closures

407 451 501 553 608

200 250 300 350 400 450 500 550 600 2005 2006 2007 2008 2009

50 50 46 52 55

(0)

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Store Level Economics

Mature Stores 2008 2009 Variance % Average Weekly Sales

(AWUS)

£13,000 £14,089 8.4% Annual Sales £676,001 £732,605 8.4% Average EBITDA £ £93,288 £115,019 23.3% EBITDA % 13.8% 15.7%

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• Considerable internal and external demand
• 2009 success builds confidence for 2010
• Store:Franchisee ratio now at 4.5:1 (2008: 4.2:1)
• 7% increase in franchise enquiries (3,604)
• 18 new franchisees
• 11 opened new stores
• 7 purchased existing stores
• Strong support for franchisees from banks during the year

Franchisee Appetite for Growth in 2009

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• Now targeting a run-rate of 55 openings a year
• Strong openings in smaller territories
• Continued gradual improvement in property environment
• As at February 9th, 71 stores in pipeline (vs.67 LY)
• Potential new opportunities

Store Roll-out - Taking it up a Gear

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• Penrith expansion completed in May 2009
• Circa £5m spend on time and on budget
• Doubled capacity
• Automated process of cooling dough
• Spiral chiller
• Improved quality and life of doughball
• Supporting current capacity peaks in system

Commissary Update

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• New West Ashland commissary
• Capacity to service 500 stores at build out volumes
• Fabric of building and plant completed August 2009
• Production equipment and white wall structures being installed
• Tray wash, mixer, spiral chillers completed
• Dough placement and refrigeration installed
• Testing scheduled end March 2010

FURTHER BARRIERS TO ENTRY & COMPETITIVE ADVANTAGES

Commissary Update (cont.)

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• Trial production during Quarter 2
• Extensive testing of product and facility
• On track for opening end Quarter 2
• Total spend of £28m
• In line with previous guidance

WORLD CLASS FACILITY

Commissary Update (cont.)

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• New West Ashland commissary
• Processes substantially automated
• Tray washing, dough making, dough placement, dough cooling
• Sizeable production efficiencies
• Guidance on opening of facility

–Increasing benefits in future –Partially offset by incremental depreciation and utilities

Commissary Update (cont.)

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Where it all began…

TONGWELL: 1985 -1997 KINGSTON: 1997 - 2010 WEST ASHLAND: 2010 -

New West Ashland Commissary – Progress (cont.)

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New West Ashland Commissary – Progress (cont.)

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New West Ashland Commissary – Progress (cont.)

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New West Ashland Commissary – Progress (cont.)

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New West Ashland Commissary – Progress (cont.)

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• Future developments to support 1,200 stores
• Irish commissary expansion
• Additional space at current facility
• Previously anticipated £7m capital spend in 2010
• Deferred to 2012/13
• Further medium size commissary in UK
• Estimated spend of circa £15m in 2013/2014
• Resilience rather than capacity needs

Commissary Update (cont.)

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• Sale of existing Milton Keynes commissary
• Towards end of 2011
• Value depends on planning
• New Head Office build
• On new West Ashland commissary site
• Total spend of circa £7.5m
• £3.0m in 2010
• £4.5m in 2011

Commissary Update (cont.)

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• Strong growth in commissary gross margins
• Driven by:
• Food margins
• Purchasing economies of scale + supply chain re-engineering
• Volume benefits from Two for Tuesday
• Production efficiencies
• Labour benefits
• Depreciation
• Lower distribution costs
• More efficient routing
• Benefit of store infilling
• Other central costs
• Tightly controlled

Operational Gearing Driving Profits

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• Strategy to enter into longer term contracts
• Price stability to franchisees
• Certainty for menu pricing
• 6 new campaigns annually
• 300m leaflets printed ahead of new launches
• 2010 outlook
• Circa 65% of food basket locked in
• Chicken, meats, flour, boxes
• Prices in line with 2009
• Energy price
• Fuel costs higher than 2009
• Guidance for distribution costs still at 75% of system sales
• Utility costs
• Locked in until mid 2011

WELL PLACED FOR PRICE STABILITY IN 2010

2010 Food + Other Cost Outlook

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• Exceptional start to year in first six weeks of 2010
• Like-for-like sales up 11% (2009: 15.0%) despite the snow in Week 2
• New record for like-for-like weekly sales in Week 5 - £18k
• New international store record in Week 5: £86,182
• Challenging comparatives for balance of year, especially in H2
• Demand for growth and store opening pipeline looking good
• Moving guidance to 55 store openings
• Product quality, execution, people and growing NAF key
• Resilient model in tougher economic times and food cost

pressures under control

WELL PLACED FOR ANOTHER YEAR OF STRONG GROWTH

Current Trading and Prospects

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APPENDIX 1 The Financial Model at 2018

(Pages A-1 – A-2)

APPENDIX 2 The Franchisee Model

(Page A-3 – A-5)

APPENDICES

2001 2006 2007 2008 2009 At 2020*

• No. of stores

237 451 501 553 608 1,200

• 55 openings p.a.

AWUS growth at 3% p.a. £8,422 £11,347 £12,539 £13,493 £14,089 £19,502 System sales £ 98m £ 240m £ 296m £ 351m £407m £ 1,217m Profit before tax** £ 2.9m £ 14.2m £ 18.7m £23.4m £29.9m £146.0m PBT/System sales 3.0% 5.9% 6.3% 6.7% 7.3% c.12.0% +100% 64%

• Stores double – profits grow four-fold
• Circa 9.5% of incremental sales to profit (commissary 6.5% + net royalty 2.8%)
• Significant operational gearing

»Commissaries »Central infrastructure

A-1

The Financial Model at 2018

* Independent analyst research – not a forecast ** Pre-exceptionals

2007 2008 2009 At 2020 *

• PBT

£18.7m £23.4m £29.9m £146.0m

• Share buybacks ***
• Average no. of shares in issue

158.0m 156.9m 159.9m 128.0m

• Diluted EPS**
• pence

8.4p 10.71p 13.49p 81.0p

• CAGR

19% p.a.

• Dividend
• cover

1.9x 1.7x 1.68x 1.5x

• pence

4.4p ** 5.9p 7.75p 54.0p

* Independent analyst research – not a forecast ** Pre-exceptionals *** To achieve cash neutral position at 2018. Circa 20% of equity.

The Financial Model at 2018 (cont.)

A-2

AT LEAST 10 YEARS OF CASH GENERATIVE ORGANIC GROWTH

2009 average store cost to an existing franchisee was: £ Store construction costs 155,000 (range £115k - £190k) Acquisition and legal costs 15,000 (range £9k - £20k) 170,000 Franchisee fee 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

The Franchisee Model

A-3

52 weeks ended 52 weeks ended 27 December 2009 28 December 2008 % variance £’000 £’000 Average sales (AWUS) £ 14,089 £ 13,000 + 8.4% System sales £732,605 £676,001 + 8.4% EBITDA £115,019 £ 93,288 +23.3% + £21,731 EBITDA % 15.7% 13.8%

COMPELLING STORE LEVEL ECONOMICS

The Franchisee Model (cont.)

A-4

• Average mature store system sales

£ 732,605

• £14,089 AWUS in 2009
• Average mature store EBITDA after:

£ 115,019

• Food costs

27%

• Labour

27%

• NAF & Royalty

10.5%

• Occupancy

6%

• LSM

4%

• Delivery

5%

• Cash payback on investment

< 2.0 years (range 1.4 – 2.5) FRANCHISEE PROFITABILITY KEY

The Franchisee Model (cont.)

A-5

Mature Store Turnover by AWUS banding

3% 4% 7% 8% 11% 7% 10% 16% 22% 24% 31% 42% 43% 42% 42% 42% 34% 29% 24% 19% 17% 10% 5% 3% 3% 0% 25% 50% 75% 100%

2005 2006 2007 2008 2009

<£7k £7k-£10k £10k-£15k £15k-£20k >£20k

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