SHAKEYS PIZZA ASIA VENTURES, INC. (PSE: PIZZA) FULL YEAR 2018 - - PowerPoint PPT Presentation

SHAKEY’S PIZZA ASIA VENTURES, INC.

(PSE: PIZZA)

FULL YEAR 2018 RESULTS PRESENTATION

APRIL 2019

INVESTMENT HIGHLIGHTS

*Source: Euromonitor, 2017

Summary of Investment Highlights

• Multiple sales channels and store formats; simple operations
• Low upfront cost and strong cash generation lead to shorter store-level

payback periods compared to the industry

• Extensive track records in food and restaurant operations
• Entry of Century Pacific Group as strong and committed shareholders

provides synergies with other food businesses

• Well-loved brand with more than 40 years of history in the Philippines
• Iconic products served in a distinct store environment
• No royalty payments, plus additional revenues from franchisings
• Superior profitability and margins versus peers
• Gearing levels improved post-prepayment of debt care of IPO proceeds
• Cash generative with a negative cash conversion cycle

Market Leadership

1 2

Brand Strength & Ownership

3

Scalable Business Model

4

Experienced Management

5

Industry-Leading Financials

• Dominates the full-service pizza chain market with 65%* market share
• 26%* market share in the full-service (pizza and non-pizza) category - #1 in

that space as well

3

FY 2018 FINANCIAL HIGLIGHTS

Financial Results Highlights

4Q FY

+10% +12% +18% +10% +2% +4% +7% +7%

5

FY 2018 Summarized P&L

• Sustained DOUBLE-DIGIT

SYSTEM-WIDE SALES GROWTH

• f +12% on the back of SSSG OF

4% and net new store opening of 20 DOMESTIC STORES AND 1 INTERNATIONAL STORE

• STABLE FINANCING COSTS,

HIGHER OTHER INCOME, and PRUDENT TAX MANAGEMENT support net income growth of +10%

In PHP Mill FY 2017 FY 2018 Change YoY System-wide Sales 8,346 9,357 12% Total Revenue 7,004 7,579 8% Cost of Sales (4,938) (5,399) 9% Gross Profit 2,066 2,179 5% Operating Expenses (905) (973) 7% EBITDA 1,407 1,500 7% EBIT 1,161 1,206 4% Financing Cost - Net (177) (189) 6% Other Income 39 65 66% Income before Tax 1,022 1,082 6% Income Tax (260) (241)

• 7%

Net Income 762 841 10% Earnings per Share 0.50 0.55 10% Margins Gross Profit 29.5% 28.8%

• 0.7 pps

EBITDA 20.1% 19.8%

• 0.3 pps

EBIT 16.6% 15.9%

• 0.7 pps

Net Income 10.9% 11.1% +0.2 pps

• Higher costs, weaker currency,

sales-supporting initiatives partially

• ffset by SOFTENING CHEESE

PRICES and OPERATING LEVERAGE towards year-end

6

6.4 7.3 8.3

9.4

FY15 FY16 FY17 FY18 FY19F FY20F

On Track to Doubling Business Over 5 Years

7

In PHP Bill 4% 4%

5%

4%

9% 10% 12%

11%

System-wide Sales

SYSTEM-WIDE SALES

1.6X TO 2.0X

–––-––-–––––– OR –––––––––––

10 TO 15% CAGR

2015 TO 2020 TARGET

STORE NETWORK GROWTH* SAME-STORE SALES GROWTH

+14% +14% +1 +12%

8-10% CAGR 3-5% CAGR

• CONSECUTIVE DOUBLE-DIGIT GROWTH in system-wide sales driven by:
• 1. Consistent positive SSSG
• 2. Continued store network expansion

CURRENT PERFORMANCE VERSUS TARGET

*Average of beginning and ending full-year figures were used

Revenues

• Majority of new

store openings

• utside Metro

Manila brings sales trend in favor

• f FRANCHISED

STORES, resulting in more modest growth in revenues

8

3 3 1 5 2 1 1 2 3 4 3 4 3 4

5

5 6 5 8 4 5 5

6

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Company-Owned Franchised

NEW STORE OPENINGS

2.0 2.1 2.0 2.3 2.2 2.4 2.2

2.5

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 In PHP Bill

SYSTEM-WIDE SALES

12%

YoY Growth in FY18

1.7

1.7 1.6

2.0 1.8 1.9 1.8

2.0

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 In PHP Bill

8%

YoY Growth in FY18 REVENUES

18% 7%

Franchised Store YoY Growth in FY18* Company- Owned Store YoY Growth in FY18*

Store Expansion Strategy Skews Overall Top Line Mix

+44

net new stores since end 2016

23%

NCR

77%

Ex-NCR *Average of beginning and ending full-year figures were used

12% 5% 1% 2% 2% 9% 4%

2%

4% 4% 4% 3% 5% 6% 8% 8% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

SSSG Inflation of Food & Non-Alcoholic Beverages*

SSSG

• CONSISTENTLY

MAINTAINED POSITIVE SSSG, notwithstanding external pressures

• Remained top of

mind in 3Q18 with more VALUE PROMOTIONS

• Slower but still

positive 4Q18 SSSG given RE- FOCUS TO PREMIUMIZING PRODUCTS

9

More Challenging 2H18; Softer SSSG in Q4 with Shift in Strategy

* Source: Philippine Statistics Authority

29.9% 30.3% 27.8% 29.9% 28.8% 28.6% 25.8%

31.4%

12% 5% 1% 2% 2% 9% 4% 2%

SSSG Gross Profit Margin

1.7

1.7 1.6

2.0 1.8 1.9 1.8

2.0

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Revenues

Gross Profit Margins

10 10

• 110 bps

YoY

• 160 bps

YoY

• 200 bps

YoY +1 +150 bps bps Yo YoY

• REVERSE IN GROSS MARGIN TREND IN Q4 due to:
• 1. More judicious spend on value-for-money promotions
• 2. Softer cheese prices
• 3. Operating leverage due to seasonality

Q4 Gross Margin Improves Sequentially and Year-on-Year

15.4% 12.3%

12.6%

Cash OpEx as % of Sales

16.4% 12.9%

12.8%

OpEx as % of Sales

985 905

973

FY16 FY17 FY18 925 862

956

FY16 FY17 FY18 OpEx

11 11

In PHP Mill

• 8%

+7%

OpEx Growth Year-on-Year In Line with Increase in Revenues

Cash OpEx

• 7%

+1 +11%

In PHP Mill

• HIGHER CASH OPEX GROWTH driven by:
• 1. Marketing and other sales-sustaining initiatives
• 2. Continued investments in IT and other back-office systems
• 3. Overall impact of inflationary pressures

20.1%

19.8%

FY17 FY18 10.9%

11.1%

FY17 FY18

Maintained Net Margins Despite 2018 Headwinds

EBITDA Net Income 19.5% 19.8% 15.5%

23.7%

1Q18 2Q18 3Q18 4Q18

• 30

30 bps bps

10.4% 11.1% 7.7%

14.6%

1Q18 2Q18 3Q18 4Q18

+2 +20 bps bps

• GROSS MARGIN COMPRESSION YEAR-ON-YEAR resulting from overall inflationary

environment, higher cheese prices, weakened peso, and sales-generating promotional activities

• NET INCOME MARGIN RELATIVELY UNCHANGED

12 12

29.5%

28.8%

FY17 FY18

• 70

bps bps

28.8% 28.6% 25.8% 31.4% 1Q18 2Q18 3Q18 4Q18 Gross Profit

+5 +560 bps bps +6 +690 bps bps +820 820 bps bps

13 13

Challenging Yet Achievable Targets for FY 2019

• Low double-digit growth
• Superior execution in dine-in

and delivery segments

• Increasing presence beyond

typical urban areas

• 20 net new stores locally
• 3-5% SSSG
• Low double-digit growth
• Subdued outlook on inflation
• Stable cheese prices
• Steady peso relative to dollar
• Continued initiatives on

efficiency and cost control

“Peri-Peri” came from the Af Afric ican n Bir Bird’s s Ey Eye Chili hili “Pir Piri Pir Piri” ” that was discovered by the Portuguese who sailed in search

• f the famed spice route. It

releases a fiery spice, igniting a wealth of flavors on every taste bud.

“Peri-Peri”

15 15

Food & Sauces

“Peri-Peri

Peri-Peri Chicken Sauces Pasta Pizza Platters

“Charcoal Chicken

16 16

Ch Chicken en (M (Main in Pla Plate tes) s) 44% 44%

Group Meals 14% Others 42%

“Charcoal Chicken

Sales Mix

17 17

“Peri-Peri

• Mai

Main P Plat ates es make up close to half of sales

“Charcoal Chicken

Menu of Key Items

18 18

• Average spend per

head ranges from PHP HP250 to PHP HP350, comparable to that

• f Shakey’s

“Peri-Peri

Market

“Peri-Peri

“Charcoal Chicken

Philippine Philippines’ s’ SE SE Cla lasse sses % S % Share are

• f Families
• f Families

% S % Share are

• f Income
• f Income

Annua Annual l Inc Income in PHP HP AB 1 9 1,857,000 C 9 26 603,000 D 60 56 191,000 E 30 9 62,000 Total 100 100 206,000

Source: BPI Securities, Social Weather System Survey 2016

Similar to Shakey’s, the expected market is A, A, B, B, an and u d upper C ( pper C (C1 C1) – the growing middle class.

19 19

Ambiance

“Charcoal Chicken

20 20

“Peri-Peri

• Also provides an

aspirational full- service dining experience at an affordabl affordable pri e price ce

• Esta

Establishe lished follo llowing wing and str strong ng brand nd recal recall from different types of visitors

“Peri-Peri

“Charcoal Chicken 1 2

“There’s a special taste exuded because of the process; the chicken taste is unique.”

• Regular User of Peri-Peri

3

“Lots of options - choose sides; there’s tortilla, there’s hummus, salsa. You feel like you can personalize your meal without going out of your budget.”- Non-Regular User of Peri-Peri “It’s like you’re in the Pirates of the Caribbean. I like how the bottles have lots of different colors - something different, colorful, vibrant/good vibes and fun, fresh.”

• Regular User of Peri-Peri

FGD Feedback

22 22

Source: Kantar Millward Brown, February 2019

“Store Network

*Map colors show % population of the country by region. The darker the color, the higher the % population. Source: Philippine Statistics Authority 2015

Company-Owned 35% Franchised 65%

Store Breakdown by Ownership

87%

NCR

4%

Luzon Ex-NCR

9%

Visayas

20 stores 1 store 2 stores

22 22

• Opport

Opportunity t y to s

• scal

cale e in NCR first, then

• utside where there

is severe underpenetration

Why Peri-Peri

Charcoal Chicken?

24 24

“Why Peri-Peri

“Charcoal Chicken?

As an emerging fast-casual and full-service restaurant brand in the Philippines, it is a good addition to PIZZA’s business portfolio given the aim to diversify through a handful of industry-leading full-service restaurant chains that appeal to the Filipinos’ growing need for premium yet affordable dine-out options.

1 2 3

It has demonstrated consistent profitability, consequently increasing the amount of interest for new stores from potential lessors and franchisees.

A Vision of WOW BRANDS Established Brand Strength

It has a strong following and has recently gained more traction as it appeals to Filipinos’ love for both poultry and a strong distinctive taste.

Potential to Grow

25 25

• Pursuing long-term sustainable

growth via diversification of brands and institutionalization

• f non-financial metrics via

enterprise-wide sustainability project – Project InSpire

ANNEX

Balance Sheet

In PHP Mill 2017 2018 Cash 245 434 Receivables 586 508 Other Current Assets 424 668 Total Current Assets 1,255 1,610 Property, Plant, and Equipment 1,538 1,712 Goodwill and Trademarks 6,066 6,066 Other Non-Current Assets 250 245 Total Non-Current Assets 7,854 8,023 TOTAL ASSETS 9,109 9,633 In PHP Mill 2017 2018 Trade Payable and Others 1,065 920 Short-Term Debt 48 48 Total Current Liabilities 1,113 968 Long-Term Debt 3,885 3,837 Other Non-Current Liabilities 137 259 Total Non-Current Liabilities 4,022 4,096 TOTAL LIABILITIES 5,135 5,063 TOTAL EQUITY 3,974 4,570 TOTAL LIABILITIES AND EQUITY 9,109 9,633

• Increase in working capital mainly due

to HIGHER INVENTORY to lock in cheese requirements at favorable prices

• Elevated PPE to support

ORGANIZATIONAL GROWTH and OPERATIONAL CAPABILITIES

• Decreased trade payables versus end

2017 due to PROCESS STREAMLINING

• Long-term loan of PHP3.8 billion all

PESO-DENOMINATED WITH FIXED INTEREST RATES

27 27

Ratios

Net Debt-to-Equity (x) Net Gearing (x) Interest-Bearing Debt-to-EBITDA (x) Return on Equity 1.23

1.01

2017 2018 0.93

0.76

2017 2018 2.80

2.59

2017 2018 21%

20%

2017 2018

28 28

Uses trailing 12-month EBITDA (Interest-Bearing Liabilities - Cash) / Total Equity Uses trailing 12-month earnings and average equity (Total Liabilities - Cash) / Total Equity

• COMFORTABLE

GEARING RATIOS despite elevated debt

• Company’s only

interest-bearing debt is the PESO- DENOMINATED ACQUISITION LOAN USED IN THE CHANGE OF MAJORITY SHAREHOLDERS in 2016

• MAINTAINED

ABOVE-INDUSTRY ROE at 20%

Cash Conversion Cycle

362

597

27

40

• 10

20 30 40 50 60 70 80 90

• 200

400 600 800 1,000 1,200

FY17 FY18 days

₱ Mns

1,065

920

79

62

• 10

20 30 40 50 60 70 80 90

• 200

400 600 800 1,000 1,200

FY17 FY18 days

₱ Mns

586

508

31

24

• 10

20 30 40 50 60 70 80 90

• 200

400 600 800 1,000 1,200

FY17 FY18 days

₱ Mns

(117)

185

(21)

2

(120) (60)

• 60

120 180 240 300 360 (120) (60)

• 60

120 180 240 300 360

FY17 FY18

days ₱ Mns

Working Capital Receivables Inventory Payables

29 29

• Increase in cash

conversion cycle relative to end 2017 to +2 DAYS

• Elevated inventory level following the ADVANCED PURCHASE

OF CHEESE

• Shortened payable days versus end 2017 due to PROCESS

STREAMLINING

2017 Glossy Annual Report

PIZZA’s 2017 Glossy Annual Report can be found on the Company’s corporate website www.shakeyspizza.ph :

30 30

Investors > Investor Presentations

https://spavi-noo-prod.s3.ap-southeast-1.amazonaws.com/s3fs- public/documents/investor_presentations/FINAL_ONLINE_PIZZA_2017 _Glossy_Annual_Report.pdf

2019 Calendar of IR Activities

Investor Conferences Earnings Release

dbAccess Philippines Corporate Day (London)

2 AUG

Macquarie ASEAN Conference (Singapore)

26 SEP

*Schedule updated as of 15 April 2019

1Q19 Earnings Release

14 MAY

Annual Stockholders’ Meeting

20 JUN

2Q19 Earnings Release

7 AUG

3Q19 Earnings Release

12 NOV

32 32

SHAKEY’S PIZZA ASIA VENTURES, INC.

This document is highly confidential and being given solely for your information and for your use and may not be, or any portion thereof, shared, copied, reproduced or redistributed to any other person in any manner. The statements contained in this document speak only as of the date which they are made, and the Company expressly disclaims any obligation or undertaking to supplement, amend or disseminate any updates or revisions to any statements contained herein to reflect any change in events, conditions or circumstances on which any such statements are based. By preparing this presentation, none of the Company, its management, and their respective advisers undertakes any

• bligation to provide the recipient with access to any additional information or to update this presentation or to correct

any inaccuracies in any such information which may become apparent. This presentation contains statements, including forward-looking statements, based on the currently held beliefs and assumptions of the management of the Company, which are expressed in good faith and, in their opinion, reasonable. Forward-looking statements in particular involve known and unknown risks, uncertainties and other factors, which may cause the actual results, financial condition, performance, or achievements of the Company or industry results, to differ materially from the results, financial condition, performance or achievements expressed or implied by such forward-looking

• statements. Given these risks, uncertainties and other factors, recipients of this document are cautioned not to place

undue reliance on these forward-looking statements. Any reference herein to "the Company" shall mean, collectively, Shakey’s Pizza Asia Ventures, Inc. and its subsidiaries. Paranaque City, Philippines +632 742 5397 investorrelations@shakeys.biz www.shakeyspizza.ph http://edge.pse.com.ph/companyInformation/form.do?cmpy_id=664