dominos pizzaprelimspresentation201115 feb_2012

Preliminary Results for the 52 weeks ended 25 December 2011

Lance Batchelor Chief Executive Officer

Lee Ginsberg Chief Financial Officer

The Team

2

• Initial impressions and the view so far

• 2011

• The numbers

• 2011

• Food cost overview

• Marketing activity

• Store openings

• Commissary

• More on the business, including Germany

• Summary and Q&A

Agenda

3

+3.0%

+9.3%

+14.6% *

+18.6% +20.6%

0%

10%

20%

30%

LfL sales growth System Sales PBT * Diluted EPS * Total dividend pence per share

* Pre-exceptionals and Germany

Financial Highlights for 2011

Another record year

4

System Sales – The Long View

5

£76 £98 £119 £142

£174

£201

£240

£296

£351

£407

£485

£530

£2.2 £2.9

£4.2 £6.5

£8.8

£11.2

£14.3

£18.7

£23.4

£29.9

£38.0

£42.2

£0.0

£5.0

£10.0

£15.0

£20.0

£25.0

£30.0

£35.0

£40.0

£45.0

£0

£100

£200

£300

£400

£500

£600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

PB

T *

£'m

Syst

em

Sal

es

£'m

System Sales £'m PBT * £'m

Like-for-Like Sales and Store Growth – The Long View

21.2%

11.2%

7.4% 6.6%

7.1%

9.7%

14.7%

10.0%

8.4%

11.9%

3.0%

191 214

235

268

317

357

404

450

501

553

604

0

100

200

300

400

500

600

700

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

LFL

Sto

re P

op

ula

tio

n

MA

ture

Sto

re S

ale

s G

row

th

LFL Sales Growth LFL Store Population

AWUS £8,683

AWUS £19,017

6

52 weeks ended 52 weeks ended % increase

25 December 2011 26 December 2010

£’000 £’000

System sales 530,636 485,282 9.3

Operating profit 42,373 38,035 11.1

Net interest (217) (28) -

Profit before tax 42,156 38,007 10.9

Taxation (11,141) (10,878) (2.4)

Profit after tax 31,015 27,129 14.3

Dividends per share:

- Pence 12.30p 10.20p 20.6

- Cover 1.56x 1.64x

Earnings per share:

- Basic 19.48p 17.36p 12.2

- Diluted 19.24p 16.75p 14.9

SOLID GROWTH BUT SKEWED BY GERMAN INVESTMENT

Profit and Loss (Pre-exceptionals)

7

52 weeks ended 52 weeks ended


£’000 £’000

Operating exceptionals

- Acquisition costs relating to DP Germany (1,232) -

- Onerous lease provision (938) -

- Impairment of stores (837) (665) *

- Irish rebate support - (485)

- Accelerated LTIP charge - (467)

- Restructuring/reorganisation costs - (755)

(3,007) (2,372)

Non-operating exceptionals

- Unwinding of discount – DP Leasing (360) (420)

- Loss on sale of assets - (11)

(360) (431)

Tax exceptional

- Reduction in deferred tax asset & impact of (1,182) (261) exceptionals

* Milton Keynes commissary

Profit and Loss (Exceptional Items)

8

HEALTH OF THE CORE BUSINESS


25 December 2011 26 December 2010 % change

£’000 £’000

Group LFLs 3.0% 11.9%

System Sales 530,636 485,282 9.3%

Profit Before Tax 43,555 38,007 14.6%

Diluted EPS 19.86p 16.75p 18.6%

Profit and Loss (Pre-exceptionals and Germany)

9 STRONG UNDERLYING OPERATIONAL GEARING

HEALTH OF THE CORE BUSINESS



Operating profit % * 20.9% 20.2%

Profit before tax/system sales 8.2% 7.8%

PROGRESSION OF COMMISSARY MARGINS AND

CONTROL OF COSTS

Profit and Loss (Pre-exceptionals and Germany)

10 * Operating profit/statutory revenue



All £’000 Germany Ireland UK Total Germany Ireland UK Total

Operating profit/(loss) (1,110) 4,261 39,118 42,269 - 4,476 33,340 37,816

Amortisation of intangibles (231) - - (231) - - - -

(1,341) 4,261 39,118 42,038 - 4,476 33,340 37,816

% Growth pre-amortisation - (4.8%) 17.3% 11.8%

ROI MARGINAL PROFIT DECLINE BUT CORE

UK MARKET STRONG

Segmental Results *

11 * Pre-exceptionals & net interest

PBT*/System Sales % - The Margin Progression

4.5

5.5

6.5

7.5

8.5

9.5

10.5

11.5

12.5

2006 2007 2008 2009 2010 2011 2020 Analysts'

consensus

5.9 6.3

6.7

7.3

12.0

7.8

40 bpts p.a.

PBT/Syst

em

Sale

s %

12

8.2

* Pre-exceptionals and Germany

At 25 December 2011 At 26 December 2010 Current Assets: £’000 £’000

At 25 Dec At 26 Dec

2011 2010 Non-current assets 99,043 80,556 £’000 £’000

Inventories 3,878 5,054 Current assets 54,345 54,127 Receivables 24,343 16,014

Investment in Non-current assets finance leases 1,532 1,793 held for sale - 938 Prepaid lease

charges 165 138 Total Assets 153,418 135,621 Cash 24,427 31,128 54,345 54,127

Current Liabilities Current liabilities (62,587) (40,178)

Trade & other (29,444) (31,707)

Deferred income (136) (77) Non-current liabilities (31,167) (53,781)

Fin. liabilities (26,529) (1,793)

Deferred Total Liabilities (93,754) (93,959) consideration (2,164) (4,346)

Tax liabilities (4,248) (2,255)

Provisions (66) - Net Assets 59,664 41,662

(62,587) (40,178)

Balance Sheet

13

At 25 December At 26 December

2011 2010

£’000 £’000

At beginning of year 41,662 21,576

Proceeds from share issue 5,792 1,594

Share buybacks (2,219) (4,715)

Profit for year 26,746 24,036

Tax credit on employee share options 41 1,036

Share options and LTIP charge 1,499 1,432

Exchange translation differences (917) (286)

Dividends (18,025) (13,632)

Share buyback obligation - (10,592)

Contingent consideration 3,432 -

58,011 41,633

Minorities 1,653 29

59,664 41,662

Statement of Changes in Equity

14



£’000 £’000

Profit before taxation 38,789 35,204

Impairment 837 82

Net finance costs 577 448

Share of post tax profits of associates (335) (219)

Amortisation and depreciation 3,280 2,815

Loss on disposal of non-current assets - 11

Share option and LTIP charge 1,499 1,432

Changes in working capital (9,173) 1,275

Cash generated from operations 35,474 41,048

Taxation paid (3,992) (5,456)

Net cash generated by operating activities 31,482 35,592

Net cash used by investing activities (16,938) (10,514)

Cash inflow before financing 14,544 25,078

Financing activities (21,070) (17,841)

Net (decrease)/increase in cash (6,526) 7,237

Opening cash balance 31,128 23,997

Foreign exchange loss on cash and cash equivalents (175) (106)

Cash at end of year 24,427 31,128

Cash Flow Statement

15

• Significant “one-off” change in receivables

• £3.1m increase in NAF

– Red or Black sponsorship

– Timing of payments for Campaign One 2012

•£3.7m due to e-commerce platforms

– Earlier settlement to franchisees

– Funds collected on franchisees’ behalf

• £1.5m due to more stores

– Debtors’ days constant

WILL NOT ARISE IN 2012

Analysis of changes in working capital

16

At 25 Dec 2011 At 26 Dec 2010

£’000 £’000

Cash at Bank 24,427 31,128

Revolving Credit Facilities (25,000) (25,000)

Net Cash (573) 6,128

DP Capital (2,689) (2,732)

EBT loan (12,035) (12,035)

Adjusted Net Debt (15,297) (8,639)

Adjusted Net Debt/EBITDA 0.4 0.2

* Excludes non-recourse loans, share buyback obligation and Germany minority interest shareholder loan

Analysis of Borrowings *

17

Expiry Utilised at Undrawn at

Facility Date 25 Dec 11 25 Dec 11 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 25 Dec 2011 24.4

Surplus available headroom at 25 Dec 2011 27.7

• Negotiations commenced on refinancing

• In place in H2 2012

SIGNIFICANT FIRE POWER

Available Debt Facilities

18 * LIBOR + 50bpts

2011 2012 2013 2014 2015

£’m Actual Forecast

Maintenance 3.8 3.0 3.0 3.0 3.0

Expansionary 9.2 2.8 - 2.5 -

West Ashland 0.9 - - - -

HQ 6.6 - - - -

Naas 0.5 - - - -

Penrith - - - 2.5 -

Germany - 2.8

Pulse EPOS system 1.2 - - - -

Website development 0.9 - - - -

Total Capex 13.0 5.8 3.0 5.5 3.0

Capital Expenditure 2012 - 2015

RISING FREE CASH FLOWS AND REDUCING CAPEX 19

Five year total 2011 2010 2009 2008 2007

£’000 £’000 £’000 £’000 £’000 £’000

Profit after tax * 108,621 31,015 27,129 21,574 15,664 13,239

Share buybacks 26,687 2,219 4,715 7,624 3,783 8,346

Dividends 55,974 18,025 13,632 10,466 8,035 5,816

Total returned 82,661 20,244 18,347 18,090 11,818 14,162

% of profit after tax 76% 65% 68% 84% 75% 107%

Total capex 62,510 13,012 11,602 22,508 11,428 3,960

ANALYSTS’ FORECASTING c.£250m FREE CASH FLOWS OVER NEXT FIVE YEARS**

* Pre-exceptionals

** Consensus forecasts

Cash Returned to Shareholders

20

0 1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17 18 19 20 21

2007 2008 2009 2010 2011

Diluted earnings per share Linear (Diluted earnings per share)

+39.1%

Compound increase of 24%

over last five years

8.33

13.49

10.71

16.75

Pence

Diluted Earnings Per Share *

19.86

+28.6%

+26.0%

+24.2%

+18.6%

* Pre-exceptionals and Germany 21

Dividends Per Share *

0

1

2

3

4

5

6

7

8

9

10

11

12

13

2007 2008 2009 2010 2011

Dividends per share Linear (Dividends per share)

Compound increase of 29%

over last five years

4.40

5.90

7.75

10.20

Pen

ce

12.30

+34.1%

+31.3%

+31.6 %

+20.6%

+43.8%

22

• Benefits of strategy to lock into longer term contracts

• Created more price stability

• Overall 3% increase from rising commodities in 2011

• Cheese, dough and chicken biggest impact

• Not all passed on to franchisees

• Absorbed some of the increases, notably cheese

Food Cost Outlook

23

• Outlook for 2012

•69% of food basket already covered

• At same/lower prices than 2011

•Cheese outlook

• Stable pricing for Q1 2012

• Outlook for 2012

•1% to 2% for year

• Far more stable

• Energy costs

• West Ashland locked in during 2010 to March 2013

Food Cost Outlook (cont’d)

24

The Pizza Delivery Market

New openings in 2011

End of year store count

Domino’s

Pizza

58 720

Pizza Hut

(delivery) *

-16

288

Papa John’s** 31 183

Perfect Pizza* -20 90

Others* n/a 2000

TOTAL 121 2971

*company estimates - includes estimates for Ireland where applicable and RBDs

** includes estimates for Ireland inc. non delivery stores – and exc. Haven/Butlin stores

25

Domino’s continues to

outgrow the competition:

Customers

26

More and more people are choosing

Domino’s Pizza:

– 4.3m households ordered from

Domino’s (2010: 4.0m)

– Mature store catchment grew to 17%

(2010:16.5%)

– Avg. ticket up to £19.47 (2010: £18.51)

– Order frequency stable at 35 days

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

2009 2010 2011

14.1%

16.2%

16.9%

Penetration (% HHs purchased in last 210 days)

20

25

30

35

40

45

2009 2010 2011

35.5 35.3 35.7

Re-order Frequency

£16.00

£16.50

£17.00

£17.50

£18.00

£18.50

£19.00

£19.50

£20.00

2009 2010 2011

£18.13

£18.51

£19.47

Average Ticket (gross)

Franchisees

27

• Our superb franchisees are the engine of our

growth

– 3750 enquiries

– Five new franchisees accepted into network

– c£15m spent on opening new stores

– £600k average resale value of a store

– Average 5.7 stores each (2010: 5)

– 54% of stores owned by franchisees with

10+ stores

– 35 single store franchisees (2010: 47)

Marketing in 2011

28

– Record marketing budget driven by

system growth

– Major awareness build behind new

launches

– Brand building campaign with a

quality focus

– Red or Black sponsorship successfully

launched Gourmet range

– First ever “Global Domino’s Day”

Future Marketing

29

• We will get ever better returns for our

marketing investment:

– Online will grow to >66% delivered sales

– Increasing budget from system growth

– Increasing use of targeted email, Facebook and

Twitter

– Deepening and customising the relationship

– Mobile now 14% of online sales, growing fast

– Domino’s is an online business

– TV and traditional marketing still has a role

£19 £32.2

£55.9

£78.5

£128.0

£183.1

12.3%

15.9%

23.1%

28.2%

35.5%

46.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

£0

£20

£40

£60

£80

£100

£120

£140

£160

£180

£200

2006 2007 2008 2009 2010 2011

Eco

mm

erc

e sa

les

£'m

Ecommerce Net sales (£'m) % of Uk delivered Sales

Stores

30

Introduced a new look in 2011

– Global best practice store design

– Opened a record 58 UK/ROI stores, plus

four in Germany

– Total 726 stores at year end (2010: 665)

– 133 stores had sales over £1m (2010: 115)

– Average household count per store now 29k

– Trialling new formats (Tesco, food court,

community, stadiums)

– Closed three stores

50

150

250

350

450

550

650

750

2007 2008 2009 2010 2011

UK & ROI

501 58 55

58

553 608

665 720

50 52

Num

ber

of

store

s at

year

end

57

Product Innovation

31

Great products provide more and more

reasons to choose Domino’s

– Stuffed Crust launched Summer 2011:

now over 12% of sales

– Gourmet range launched Autumn

2011: now over 5% of sales

– NPD team now established and more

to come

•West Ashland operating to plan • Realising production efficiencies

•Longer term developments • Feasibility for next commissary in UK

• Identify location, size and spend

• Complete initial study by end of 2012

• Resilience key issue

• Sale of Milton Keynes commissary • No plans to dispose in 2012

• Commercial viability of procurement process

Commissary Update

32

•Germany • Sufficient capacity in Berlin to support 10-15 stores

» Installed dough mixing equipment

• Plans for

» Regional commissary in Dusseldorf/ Cologne area

• To support 2012 openings

• New Head Office • Opened end November 2011

• Total spend of c.£7.5m

• In line with budget

Commissary Update (cont.)

33

Germany Launch

34

In June 2011 we entered the German

market - a huge opportunity

– Inherited two stores in Berlin

– Opened four stores in 2011

– Established our management

team

– Started menu and marketing

development

– Infrastructure established

Outlook for Germany

35

• In 2012:

– Open at least 12 stores, tripling our estate to 18+ (incl 12

corporate stores, providing our test bed for product and

service development)

– We will welcome our first UK and German franchisees to

the market, opening at least six stores

– Build our Western Region Commissary

– Continue to evolve our menu and marketing

– Map the location of our first 50 stores, based on

demographic profiling

– Reach store level operating profitability on our original

six stores

TEMPELHOF

Outlook for UK/ROI

36

• In 2012 we will:

– Open 60 stores

– Consolidate our position as the world’s best

operating market

– Shift an increasing proportion of our

marketing budget to smart, online

channels, as well as to local spend. We

expect the majority of delivered sales to

be online in 2012

– See commodity prices stabilise

Longer term outlook (2020)

37

• UK/ROI : 1200+ stores

• Germany: 400+ stores

• Become an online business with 80% delivered sales

and marketing online

Trading update

38

2012 has started out well:

• First seven weeks LFLs up 3.7%

– UK is up 3.8% LFL, up slightly on Q4 2011

– ROI is up 2.3% LFL, growing again

• Germany: three stores leases signed, two franchisees

onboard

• Trading conditions continue to be challenging

• Set for another year of good growth

When you sell great pizza, you get great results

Q&A

39

APPENDIX 1 The Financial Model at 2020

(Pages A-1 – A-2)

APPENDIX 2 The Franchisee Model

(Pages A-3)

APPENDIX 3 Analysis of Group Turnover

(Page A-4)

APPENDIX 4 Analysis of Group Operating Profit

(Page A-5)

APPENDICES

2001 2007 2009 2010 2011 At 2020*

No. of stores 237 501 608 665 726 1,200+

- 60 openings p.a.

AWUS growth at 3% p.a. £8,422 £12,539 £13,801 £15,002 £15,452 £20,747

System sales £ 98m £ 296m £ 407m £485m £530m £ 1,295m

Profit before tax** £ 2.9m £ 18.7m £29.9m £38.0m £43.5m £155.0m

PBT/System sales 3.0% 6.3% 7.3% 7.8% 8.2% c.12.0%

+100% +46%

• 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 2020

* Independent analyst research – not a forecast

** Pre-exceptionals + Germany

2009 2010 2011 At 2020 *

• PBT ** £29.9m £38.0m £43.5m £155.0m

• Share buybacks ***

• Average no. of shares in issue 159.9m 161.8m 161.7m 128.0m

• Diluted EPS** - pence 13.49p 16.75p 19.86p 92.0p

- CAGR 19% p.a.

• Dividend - cover 1.74x 1.64x 1.61x 1.4x

- pence 7.75p 10.20p 12.30p 65.71p

* Independent analyst research – not a forecast

** Pre-exceptionals + Germany

*** To achieve cash neutral position at 2018. Circa 20% of equity.

The Financial Model at 2020 (cont’d)

A-2

AT LEAST 10 YEARS OF CASH GENERATIVE ORGANIC GROWTH


25 December 2011 26 December 2010 % variance

£’000 £’000

Average sales (AWUS)* £ 15,458 £ 15,000 + 3.1%

System sales £803,816 £780,000 + 3.1%

EBITDA £106,380 £105,276 + 1.0%

+ £1,103

VAT adjusted in 2010

- EBITDA +13.9%

COMPELLING STORE LEVEL ECONOMICS

The Franchisee Model

A-3 * VAT at 20%/17.5% in 2010

52 wks ended 52 wks ended

25 Dec 2011 26 Dec 2010 Variance Variance

£’000 £’000 £’000 %

Royalties 29,238 26,692 2,546 9.5

Store sales 1,670 1,117 553 49.5

Franchise/TST/FDP fees 980 1,038 (58) (5.6)

Commissary sales 157,064 138,271 18,793 13.6

Property sales 14,839 13,828 1,011 7.3

Computer sales 3,796 3,244 552 17.0

Other sales 3,388 4,638 (1,250) (27.0)

Inter-company sales (1,112) (679) (433) (63.8)

Total sales 209,863 188,149 21,714 11.5

Analysis of Group Turnover

A-4


25 Dec 2011 26 Dec 2010 Variance Variance

£’000 £’000 £’000 %

Net Royalty 14,846 13,588 1,258 9.3

Commissary Margin 42,619 37,481 5,137 13.7

Realty 787 1,254 (467) (37.3)

Subsidiaries 391 352 38 10.8

Net Overheads (15,264) (14,861) (403) (2.7)

Associates 335 219 117 53.4

Net Interest (159) (27) (132) (485.6

UK & Irl PBT 43,555 38,007 5,548 14.6

German Segment Results (1,399) - (1,399)

Group PBT 42,156 38,007 4,149 10.9

Analysis of Group Operating Profit*

A-5

dominos pizzaprelimspresentation201115 feb_2012

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