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Preliminary Results for the 52 weeks ended 30 December 2007Domino’s Pizza UK & IRL plc
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The Team
Stephen Hemsley Executive Chairman
Chris Moore Chief Executive Officer
Lee Ginsberg Chief Financial Officer
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Financial Highlights for 2007
0%
10%
20%
30%
40%
50%
LFL sales growth System sales PBT pre-exceptionals* Diluted EPS Total Dividend pence pershare
Another record year
+14.7%
+23.4%
+33.1%
+34.6%
+43.8%
* Pre-accelerated LTIP charge + other exceptionals
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2007 2006 % increase£’000 £’000
System Sales 296,349 240,115 23.4
Operating profit * 18,828 14,185 32.7Operating exceptionals (333) (499) -Profit on sale of stores 346 613 -Accelerated LTIP charge (174) - -Profit before interest and tax 18,667 14,299 30.5Net interest payable (91) (110) 17.3Profit before tax 18,576 14,189 30.9Taxation (5,337) 28.7% (4,193) 29.6% (27.3)
Profit after tax 13,239 9,996 32.4
Dividends – Per share 4.40p 3.06p 43.8- Cover 1.9x 2.1x
Earnings per share - Basic 8.38p 6.23p 34.5- Diluted 8.24p 6.12p 34.6
4
Profit and loss – IFRS adoption
* Pre-accelerated LTIP charge and other exceptionals
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2007 2006£’000 £’000
Current Assets:2007 2006 Non current assets 18,404 18,103£’000 £’000
Inventories 2,340 1,818 Current assets 28,117 22,823Receivables 10,071 9,632Investment in Non current assetsfinance leases 857 864 held for re-sale 1,772 1,172Prepaid leasecharges 220 247 Total Assets 48,293 42,098Cash 14,629 10,262
28,117 22,823
Current Liabilities Current liabilities (27,575) (22,638)Trade & other (18,187) (13,433)Deferred income (68) (31) Non current liabilities (10,821) (10,474)Financial liabilities (6,817) (6,835)Tax liabilities (2,503) (2,339) Total Liabilities (38,396) (33,112)
(27,575) (22,638)Net assets 9,897 8,986
5
Balance Sheet
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Statement of Changes in Equity2007 2006£’000 £’000
At beginning of year 8,986 12,088Prior period effect of IFRS adoption - (70)
8,986 12,018Proceeds from share issue 700 403Treasury shares held by EBT (187) -Share buybacks (8,346) (10,457)Profit for year 13,239 9,996Tax credit on employee share options 214 883Share options and LTIP charge 880 344Exchange differences 230 (21) Dividends (5,816) (4,234)
9,900 8,932Minorities (3) 54
9,897 8,986
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Cash flow statement2007 2006£’000 £’000
Profit before taxation 18,576 14,189Net finance costs 91 110Share of post tax profits of associates (158) (171)Amortisation and depreciation 1,545 1,815Profit on disposal of non-current assets (346) (613)Share option and LTIP charge 880 344Changes in working capital 3,835 3,094Cash generated from operations 24,423 18,768Taxation paid (4,335) (3,755)Net cash generated by operating activities 20,088 15,013Net cash used by investing activities (619) (946)Cash inflow before financing 19,469 14,067Financing activities (15,243) (9,690)Net increase in cash 4,226 4,377Opening cash balance 10,262 5,885Foreign exchange gains on cash and cash equivalents 141 -__ Cash at end of year 14,629 10,262
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2007 2006£’000 £’000
Cash at bank 14,629 10,262
Revolving credit facility/bank overdraft (6,000) (6,000) Net Cash 8,629 4,262
DP Capital (2,448) (2,299)
EBT loans (7,721) (7,500)
Other (28) (45)
Net debt (1,568) (5,582)
Gearing % 15.9% 62.5%
8
Analysis of Borrowings
NOTE: New £25m existing credit facility not drawn down at year end
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4 year total 2007 2006 2005 2004£’000 £’000 £’000 £’000 £’000
Profit after tax 38,245 13,239 9,996 8,247 6,763
Share buybacks 28,289 8,296 10,161 8,222 1,610
Dividends 15,459 5,816 4,234 3,169 2,240
Total returned 43,748 14,112 14,395 11,391 3,850
% of profit after tax 114% 107% 144% 138% 57%
Net cash at year end 8,629 4,262 5,885 4,824
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Cash returned to shareholders
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0
1
2
3
4
5
6
7
8
9
2003 2004 2005 2006 2007
Earnings per share
Compound increase of 33%over last 5 years
2.62
3.96
4.83
6.12
Penc
e
Reported diluted earnings per share *
• All figures adjusted for share split
8.24
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Dividends per share *
0
1
2
3
4
5
2003 2004 2005 2006 2007
Dividends per share Linear (Dividends per share)
Compound increase of 42%over last 5 years
1.09
1.64
2.27
3.06
Pence
* All figures adjusted for share split
4.40
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IFRS – Minimal impact1. P&L – PBT impact
UK Gaap Effect of transition IFRS EPSto IFRS Impact
£’000 £’000 £’000- 52 weeks ended 30/12/07 18,438 138 * 18,576 0.09p- 52 weeks ended 31/12/06 14,292 (103) ** 14,189 (0.06)p
* Assets held for resale less lease inducementsspread over period of lease
** Lease inducements spread over full lease term
2. Balance Sheet – Net Assets Impact
- At 30/12/07 9,110 787 *** 9,897- At 31/12/06 8,604 382 *** 8,986
*** Rent frees and deferred tax asset on share based payments
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0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
2003 2004(53 wks) 2005 2006 20070
2
4
6
8
10
12
14
16
18
20
System Sales PBT
20% compound growth in system sales30% compound growth in PBT
+20%+23%
+15%
+20%
Syste
m Sa
les £’
m
System Sales – The Growth Driver
+23%
£142.3m
£174.3m£200.7m
£240.1m
PBT
£’m
£296.3m
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System Sales Up 23.4%
50 New Store Openings
Like-for-like stores up 14.7%
‘Immature’ Stores up 27%
More Ad Fund
Fire Power
Increased Focus on
E-Commerce
Optimised Customer Database
Wet Summer
WeakCompetition,
Growing Market
Product Quality &
Innovation
Service Excellence
Stronger Team & Franchise Community
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12.8%
16.8%17.6%
9.5%
15.3%16.1%
19.7%
9.7%
13.3%12.2%
13.8%
17.8%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
22.00%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
mature store sales increase
Like-for-like sales 2007Growth of 14.7% for the year
14.7%
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Historical like-for-like sales growth
0%
2%
4%
6%
8%
10%
12%
14%
16%
2003 2004 2005 2006 2007100
150
200
250
300
350
400
450
LFL sales growth LFL store population
LFL store populationSa
les gr
owth
Average increase of 9.1% over last 5 years
7.4% 6.6% 7.1%
9.7%
14.7%
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• 36 stores with sales in excess of £1 million
• 9 out of Top 10 Domino’s Intnl. Stores for third consecutive year
• Three weeks in December, mature store AWUS* exceeded £15k– Our 2017 target!
Other sales highlights
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* AWUS – Average Weekly Unit Sales
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200
250
300
350
400
450
500
2003 2004 2005 2006 2007
357
407
num
ber o
f sto
res a
t yea
r end
18
50
46
40
50
451
New Store Openings (net of closures)
Potential for 1,000 stores
501
50
Average 47 Openings Per Year over last 5 years
318
(1) (1) (0) (2) (0)
( ) = no. of closures
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50 new stores in 2007 – how did we achieve it?• Re-focused the Business Development Team
• Strengthened the Acquisitions department
• Enhanced location analysis
• Focus on existing franchisees; only 7 of the 50 stores opened with new franchisees
• Built the pipeline
• Smarter processes and organisation
Record number of openings in a six month period19
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System Sales Up 23.4%
50 New Store Openings
Like-for-like stores up 14.7%
‘Immature’ Stores up 27%
More Ad Fund
Fire Power
Increased Focus on
E-Commerce
Optimised Customer Database
Wet Summer
WeakCompetition,
Growing Market
Product Quality &
Innovation
Service Excellence
Stronger Team & Franchise Community
20
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More Ad Fund Fire Power
• £15m in 2007 (2006: £13m)• Increased spend on e-commerce
• Competitive entry in April ‘07
• Online sales up 60.5% to £32.2m (2006: £20.1m)
• Now over 20% of all UK delivered sales
• Optimised Customer Database• c. 2 million ‘active’ customers
• Major advantage of our business
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Product Quality & Innovation
Pizzas
Sides
Desserts
• Communicating quality credentials• Removal of Hydrogenated Fats and MSG
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Service ExcellenceOTD Less Than 15 Minutes
Mature Stores
45.00%50.00%55.00%60.00%65.00%70.00%75.00%80.00%
Jan
Feb
Mar
Apr
May Ju
nJu
lA
ugS
ep Oct
Nov
Dec Ja
nFe
bM
arA
prM
ay Jun
Jul
Aug
Sep Oct
Nov
Dec
2006 2007
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The competition2007Net
Stores Openings Sales
- Domino’s 501 50 £296m- Pizza Hut* 255 (7) £104m- Perfect Pizza 100 (10) £ 18m - Papa Johns* 100 18 £ 23m- Others ** 2,000 n/a £312m- TOTAL 2,956 £753m
* includes estimates for Ireland** estimates/Mintel Home Delivery report (UK)
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Home Delivery Market
£0
£200
£400
£600
£800£1,000
£1,200
£1,400
£1,600
£1,800
2001 20022003 20042005 2006 20072008 20092010 2011£0
£50
£100
£150
£200
£250
Mintel UK Home Delivery (£'000s)Domino's (less carryout and ROI)
• Market still relatively under-researched• UK Home Delivery predicted to grow by 7% per year to 2011• Approx 1 in 6 home delivered meals delivered by Domino’s
£’m M
inte
l UK
Hom
e Deli
very
(net
) £’m Dom
ino’s UK Home Delivery
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Consumer Spending• Domino’s classic option when trading down…offering better value
for money than dine-out options
• Exposure in 1991 recession; flat sales (45 stores, NAF c£300k)
• Premium quality, great service, trusted brand for c. £6 per person
• Consumer spending shows trend towards eating in vs. dining out is continuing to grow (Mintel)
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Consumer Spending (contd.)
• Bespoke research conducted to quantify consumer opinion
• Consumers that come to Domino’s are driven by much more than just price
• Brand strength protects against squeeze on disposable income (Quality, Service, Marketing spend)
• NAF will ensure continued aggressive marketing spend
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£18m Ad Fund for 2008
• Continue focus on product quality and innovation
• Five new product campaigns e.g. Steak Special
• Over 300 million menus• 26+ weeks of TV advertising• Increasing focus on driving online
sales• And the biggest sponsorship deal
Domino’s has ever done…
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Britain's Got Talent
• ITV1’s flagship show, plus..• Britain’s Got More Talent
ITV2• America’s Got Talent ITV2• Step change for Domino’s
Pizza• High profile to drive
awareness and standout• BGT final last year had over
11m viewers
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Outlook for store openings in 2008• Team is well placed to achieve 2008 target of 50 store openings• At 11th Feb 2008
– 35 with planning and franchisee vs. 2007 (+ 5 )– 85 locations under negotiation vs. 2007 (+ 9 )– Benefit of building pipeline
• Rolling 150 Target Acquisition List• Early indications of improved planning environment• Franchisee Focus
– 2007 success builds confidence – Expansion plans agreed with key franchisees– Store: Franchisee ratio now at 3.5 : 1 (2006: 3.0:1)
• Banks confirming funding and see a Domino’s franchise as a good lending opportunity
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Store refit programme• New store modernisation programme
– Last image update in 2000– Improving design, ‘theatre’ and branding– Communicating core values
» Quality, fresh, fun
• Up to 100 stores to be re-fitted in 2008– Cost of c£20k pre-store (funded by franchisee)– Up to 5 day closure for store– c£1m “lost” system sales
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New Store Design
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Commissary update• Extension to Penrith
– 100% additional capacity (to circa 200 stores at build-out)– Completion expected Q3 2008– Cost of circa £4.0m
• New Milton Keynes facility– 10 acres of land to be acquired
• Capacity to service 500 stores at build-out (current MK circa 300 stores)• Higher capacity to cover growing sales• New Head Office and Training facility• Technological investment/automation
– Estimated completion of commissary Q3 2009– Budgeted cost of £25m including freehold land
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People
• Smooth succession in place– Executive Chairman Stephen Hemsley– CEO Chris Moore
• New Arrivals in Q1;– Legal Counsel/Company Secretary– Procurement Director– Both joining Domino’s Pizza Executive Team
Team in place for growth to 1000 stores 34
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Food cost pressures• Franchisee price increases of 4%
– Effected mid-November 2007– Fully recovered increases in:
• Cheese, flour, meats and boxes• 2008 Food cost outlook
– Flour• Settled below 100% anticipated increase• Contract locked in from 1/11/2007 – 31/12/2008
– Cheese• Current price levels covered by franchise price increases• Spot prices lower than this• Indications for further price reductions
NO FURTHER PRESSURES ANTICIPATED IN 2008 35
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Continuing strategy• Focus on roll out of Domino’s system in UK and Ireland
• Build infrastructure for 1000 stores
• Drive like-for-like sales growth
• Operational leverage to drive net margin
• Resulting cash generated to be returned to shareholders
• Announcement of intention to move to Official List
Well placed for further strong growth in 200836
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At build out *2001 2006 2007 (circa 2017)
No. of stores 237 451 501 1,000- 50 openings p.a.
AWUS growth at 3% p.a. ** £8,422 £11,347 £12,539 £15,700System sales £ 98m £ 240m £296m £ 820mProfit before tax £ 2.9m £ 14.2m £ 18.6m £ 73.8mPBT/System sales 3.0% 5.9% 6.3% 9.0%
+100% +50%• Stores double – profits grow six-fold• c.8% of incremental sales to profit (commissary 5.5% + net royalty 2.8%) • Significant operational gearing
• Commissaries• Central infrastructure
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The financial model at build out
* Independent analyst research – not a forecast** Average Weekly Unit Sales
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At build out *2006 2007 (circa 2017)
• PBT £14.2m £18.6m £73.8m• Share buybacks ***• Average no. of shares in issue 162.6m 158.0m 128.0m• EPS - pence 6.2p ** 8.4p 40.6p
- CAGR 18% p.a.• Dividend - cover 2.1x 1.9x 2.0x
- pence 3.1p ** 4.4p 20.3p
COMPELLING 11 YEARS OF CASH GENERATIVE ORGANIC GROWTH * Independent analyst research – not a forecast** Restated for share split*** To achieve cash neutral position at 2017. Circa 20% of equity.
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The financial model at build out (contd.)
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Current trading and prospects• Strong start to year in first six weeks of 2008
– Like for like sales up 11.0% (2007: 14.3%)– Challenging comparatives for balance of year
• E-commerce up 90.6% (2007: 36.2%) now 21% of delivered sales• Store opening pipeline more reassuring
– On track to open 50 stores• Exciting sponsorship deal in place for 3 years• Resilient model in tougher economic times and food cost pressures
under control
WELL PLACED FOR ANOTHER YEAR OF STRONG GROWTH
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APPENDICES
APPENDIX 1 Analysis of Group turnover(Page A-1)
APPENDIX 2 Earnings per share reconciliation(Page A-2)
APPENDIX 3 Analysis of Group Operating Profit(Page A-3) (Pre-exceptionals)
APPENDIX 4 The Franchisee Model(Pages A-4-A-5)
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Analysis of group turnover2007 2006 Variance£’000 £’000 £’000
Royalties 16,295 13,207 3,088Store sales 6,588 6,861 (273)Franchise/TST/FDP fees 1,080 879 201Commissary & E&S sales 79,242 64,879 14,363Property sales 9,304 8,180 1,124Computer sales 2,275 1,728 548Other sales 2,910 2,262 648Inter-company sales (2,803) (3,031) 228Total sales 114,891 94,965 19,926
A-1
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Earnings per share reconciliationAt 30 December At 31 December
2007 2006 ’000 ’000
Profit attributable to shareholders £13,245 £10,084
Basic weighted average number of shares 157,975 161,967(excluding shares held by EBT)
Dilutive- Share options 1,760 2,342- Reversionary interests 1,089 673
Diluted weighted average no. of shares 160,824 164,982
Basic EPS 8.38 pence 6.23 penceDiluted EPS 8.24 pence 6.12 pence
A-2
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2007 2006 Variance %£’000 £’000 £’000
Franchise Operations 7,212 4,814 2,398 49.8Commissary 16,114 13,270 2,844 21.4DP Realty 408 405 3 0.7Central overheads * (5,136) (4,078) (1,058) 25.9Other ** 230 (226) 456 -
18,828 14,185 4,643 32.7
* Includes IFRS2 (FRS20) charge of £905k (2006: £380k)** Includes corporate stores, JV’s and DP Capital
A-3
Analysis of group operating profit (pre-exceptionals)
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2007 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-4
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• Average mature store system sales £650,000- £12,500 AWUS in 2007
• Average mature store EBITDA after: £ 95,000- Food costs 27%- Labour 28%- NAF & Royalty 10.5%- Occupancy 6%- LSM 4%
• Cash payback on investment 2.1 years(range 1.4 – 2.5)
FRANCHISEE PROFITABILITY KEY
The Franchisee Model (contd.)
A-5