dp eurasia n.v. · 5 domino’s pizza enterprises alsea domino’s pizza group(10) jubilant...
TRANSCRIPT
2018 Trading Update –Group Breakfast/Lunch
DP Eurasia N.V.
2
This Presentation is not an offer to buy or sell any securities. Save where otherwise indicated, the Company is the source of thecontent of this Presentation and, accordingly, although care has been taken to ensure that the facts stated in this Presentation areaccurate and that the opinions expressed are fair and reasonable, no representation, warranty or undertaking, express or implied, ismade 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 opinionscontained herein. Neither the Company nor any of its directors, officers, employees, affiliates, advisors or representatives shall haveany liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this Presentation or its contentsor otherwise arising in connection with the Presentation.
Certain statements in this Presentation are not historical facts and are “forward looking” statements. These forward-lookingstatements 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 dutyor obligation to supplement, amend, update or revise any of the forward-looking statements contained in this Presentation or toupdate or to keep current any other information contained in this Presentation. The information and opinions contained in thisPresentation are provided as at the date of this Presentation and are subject to change without notice. As a result, you arecautioned not to place undue reliance on such forward looking statements.
Disclaimer
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Presentation Team
Aslan SarangaChief Executive Officer
Selim KenderChief Strategy Officer and Head of Investor Relations
OverviewSECTION 1
5
Domino’s Pizza Enterprises Alsea Domino’s Pizza
Group(10)Jubilant
FoodWorks(11) DP Eurasia
Countries
Australia Belgium France
Netherlands Germany
New Zealand Japan
Mexico Colombia
SpainArgentina
ChileBrazil
UK Ireland
SwitzerlandNorwaySwedenIceland
IndiaSri Lanka
Turkey Russia
AzerbaijanGeorgia
Population Served(3) 332 MM 496 MM 95 MM 1,360 MM 238 MM
MajorPortfolio Brands
Domino’s Pizza
Domino’s PizzaStarbucks
Burger KingVips
Other(4)
Domino’s Pizza Domino’s PizzaDunkin’ Donuts Domino’s Pizza
Domino’s Store #(5) 2,135 980 1,149 1,128 643
Other Store #(5) - 2,373 - 43 -
Market Cap(6) $3,199 MM $2,858 MM $2,377 MM $2,161 MM $452 MM
L5Y Share Price CAGR(7)
33% 17% 15% 11% n/a
System Sales(8),(9) $1,748 MM $2,022 MM $1,364 MM $382 MM $215 MM
EBITDA(9) $174 MM $277 MM $127 MM $37 MM $25 MM
DP Eurasia
Domino’s Pizza Group(10)Alsea
Jubilant FoodWorks(11)
Domino’s Pizza Enterprises
DP Eurasia is a member of successful global network• With 643 stores across its network, DP Eurasia is the 5th largest master franchisee within the global Domino’s system and is consistently one of the best performing master
franchisees globally• Domino’s is one of the most successful fast food brands and the global leader of home delivery with US$10.9 Bn sales in 2016 and 14,434 stores in 85 countries with
95 consecutive quarterly positive LfL internationally(1)
• The listed international Domino’s master franchisees (excluding DP Eurasia) have created 177%(2) shareholder value in the US$ terms in the last five years
The largest Domino's master franchisees worldwide Global presence of Domino's 5 largest master franchisees
Notes:1. Store count, countries of operation and consecutive quarterly LfL figure as of October 20172. Average total shareholder return for listed franchisees excl. DP Eurasia for the period between 19 January 2013
and 19 January 20183. Population figures are 2017 actual; Source: United Nations World Population Prospects4. Includes Chili’s, California Pizza Kitchen, P.F.CHANG’S, Pei Wei, Italianni’s, The Cheesecake Factory, El
PorTon, Foster’s Holywood, Canas y Tapas, Archie’s, Lavaca
Source: Company Information for DP Eurasia, Annual Reports for Other Companies, CapIQ, EIU via S&P Global Market Intelligence
5. As of July 2017 for Domino’s Pizza Enterprises, January 2018 for Jubilant FoodWorks, October 2017 for Domino’s Pizza Group, October 2017 for Alsea, December 2017 for DP Eurasia
6. Ordered by market cap as of 19 January 20187. As of 19 January 2018, in local currencies8. Group system sales as of latest financial year reported by the company. Total income figure used for Jubilant
FoodWorks, 2016 figure for DP Eurasia9. Converted at average FX rates of each companies’ latest reported financial year respectively– USDTRY of
3.65, USDINR of 67.06, USDAUD of 1.33, GBPUSD of 1.36, USDMXN of 18.64. Adjusted EBITDA figure for DP Eurasia
10. Domino’s Pizza Group also has investments in Domino’s Iceland, Domino’s Sweden and Domino’s Norway (which will be consolidated once acquisitions of controlling interests is completed)
11. Jubilant FoodWorks also has the exclusive rights to operate Domino’s Pizza brand in Bangladesh and Nepal
6
2534
75
2014 2015 2016
DP RussiaDP Turkey
7%Average LfL(2) ’14–’17
Market Position 2017(by number of stores) #3#1#1 #1
Number of Stores 2017 514 1215 3
Corporate 142 99- -
Franchise 372 225 3
Number of Commissaries 2017 4 1- -
13%System Sales CAGR ’14–’17 118%
37%
Turkey
Russia
Georgia
Azerbaijan
Moscow
99
372 142
35
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 20172. 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 period3. 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
470543
647
860
2014 2015 2016 2017
…resulted in accelerating Adjusted EBITDA(3) performanceTRY MM
7
System Sales(1) LFL Growth Store Count(1)
TRY 205.4 MM
TRY 654.4 MM 522
121
14.6%
169.0%
10.0%
28.9%
FY 17 Trading Update Highlights
27
49
Notes:1. Including Azerbaijan and Georgia
Operational ReviewSECTION 2
9
Attractive investment opportunity with high growth potential and proven business model
Leading market positions1
Highly attractive, underpenetrated markets with substantial growth potential in the Group’s addressable segments2
Strong online capabilities underpin DP Eurasia’s growth3
Globally proven business model successfully applied and adapted to DP Eurasia’s local markets4
Simple and scalable, asset-light business model5
Track record of resilient and profitable growth as well as strong cash conversion7
Founder-led, experienced management team8
Highly attractive customer proposition and strong brand equity6
10
1
603514
262192
151 13792
50
514
120 92 8544 43 33 23
4.3x larger than #2 player
27
123
6219 23
140
262
108132 121
5424
2.3x
9.7x
2.1x
116
7061
39
Delivery focused players
6.4x
Leading Market Positions
Notes:1. All Turkish data s of Oct-17 except for Domino’s (Dec-17)2. All Russia data as of Dec-173. Includes Moscow and Moscow regions
Leading the pizza market, Domino’s…DP Eurasia has become a strong challenger to the top 2 players…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
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2017 Whitespace Total Potential for DP Turkey (2)
Organic growth in footprint
Increased coverage within served regions
Split of current stores
Higher OHD penetration
Entry into new regions
Improvement in store economics
(1)
2…With substantial growth potential in the Group’s addressable segments (cont’d)
Turkey: runway to double footprint… Building blocks of growth# of Domino’s stores
Notes:1. Whitespace represents the difference between Company’s store number potential in the long term and current store count2. Excluding Azerbaijan and Georgia
Source: Company estimates
Source: Company estimates
…and strengthen the castlesNumber of stores, 2017 Number of Provinces
16
38
95
13
Unpenetrated Provinces150 K+ households per store0–50 K households per store
50k–100 K households per store100k–150 K households per store
>1.7x
514
c. 400c. 900
Present in 68 of 81provinces
FranchiseesCompany owned storesCommissaries
6819
Istanbul114
6Bursa
Izmir2117 2923
Ankara
12Notes:1. Whitespace represents the difference between Company’s store number potential in the long term and current store count
2017 Whitespace Total Potential for DP Russia
>12.3x
121
c. 1,400 c. 1,500
Moscow
Saint Petersburg
Volgograd
Nizhniy Novgorod
Ufa
PermSamaraRostov-on-Don
Voronezh KazanYekaterinburg
Krasnodar
Region Population (MM)Moscow and Moscow Oblast 19.8Saint Petersburg and Leningrad Oblast 7.1Krasnodar Krai 5.6Sverdlovsk Oblast (center -Yekaterinburg) 4.3Rostov Oblast 4.2Bashkortostan Republic (center - Ufa) 4.1Tatarstan Republic (center - Kazan) 3.9Nizhniy Novgorod Oblast 3.2Samara Oblast 3.2Perm Krai 2.6Volgograd Oblast 2.5Voronezh Oblast 2.3
2…With substantial growth potential in the Group’s addressable segments (cont’d)
Russia: representing vast potential Building blocks of growth# of Domino’s stores
Prioritised regions
Moscow
Second priority regions
Higher OHD penetration
Source: Company estimates
(1)
Huge potential to expand the platformEuropean part of Russia
Source: gks.ru as of 1 January 2017
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3
System sales LfL growth, %Online channel supports Lfl growth...
Turkey Russia
19%
7%
38%
10%
Online Total2016 2017
141%
42%79%
29%
Online Total2016 2017
…and has further room to improveOnline delivery system sales as a % of delivery system sales
71%78% 81%
28%
34%41%
48%34%
53%67%
2014 2015 2016 2017
Domino's Pizza UK DP Turkey DP Russia
Source: Company Information for DP Turkey and DP Russia, Company Filings for Domino’s Pizza UK
Strong online capabilities underpin DP Eurasia’s growth
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Globally Proven Standards…
…with Successful Local Adaptation and Execution
DP Eurasia attracts the best talent by:
Encouraging former or existing employees to take on franchises, enabling a strong entrepreneurial spirit
Growth is fostered with new tools and techniques initiated by management
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Exceptional Culture
DP Eurasia maximizes efficiency with a well-executed structure whereby:
Well-thought out castle strategy establishes leadership in key cities
Scalable and low cost franchise model provides stable revenue stream with low capex
Commissaries cover all existing (and potential future) stores
1
Strong Operating Setup (Corporate /
Franchise / Commissary)
DP Eurasia is the leader in delivery by:
Embracing the30-minute delivery guarantee in both Turkey and Russia while ensuring highest quality of the product
Supporting all ordering methods and ensuring that all meal occasions are captured
4
Speed of Delivery
DP Eurasia utilizes its online infrastructure to support its marketing and advertising strategy which:
Maximizes demand through clear customer segmentation and constant engagement
Captures demand by offering convenience to its customers, available anywhere at any time
2
Best In Class Online
Infrastructure
DP Eurasia adapted an in-house store design which:
Enables fast preparation and delivery of pizza
Is cost efficient and is anchored by store-level economics requiring moderate capital outlay
Follows Kaizen principles in order to improve the financial return profile of the new stores
3
Simple Store Operations
Source: Company Information
4Globally proven business model successfully applied and adapted to DP Eurasia’s local markets
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5 Simple and scalable, asset-light business model
Scalable business model
Industry leading standards
Corporate Stores Commissaries Franchise Stores
Centralised Strategy, Marketing and ITCentralised Strategy, Marketing and IT
Dough & Other IngredientsLogistics
Dough & Other IngredientsLogistics
Sales & DeliveryLocal MarketingCustomer Data
Sales & DeliveryLocal MarketingCustomer Data HQ
SCALABLE
Lower purchasing costs = competitive prices
Centralised supply chain = command pricing
Store network and disciplined approach = 30 minute delivery guarantee
Scale of the network = resources to invest in marketing and technology
TECHNOLOGY
Continuous investment on online capabilities
Highest website traffic among fast food players in Turkey in 2017
Android application is the most downloaded app of a fast food company in Turkey Google Play Store
Introduced Facebook Messenger, and intends to launch WhatsApp and text message “one-click” ordering capabilities
Best value for money
Quick and convenient
Delicious pizza
Support for employees
Well-designed incentive system
WINNING CULTURE
Source: Company Information
16
6Highly attractive customer proposition and strong brand equity
Attractive pricing vs competitors in Turkeyand 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 DP Eurasia?
Value for money?% of affirmative respondents
Value for money?(1)
% of affirmative respondentsDelivery on Time%
Delivery on Time%
I II
Innovation – New ProductsIII
65
24 20
50 47
Domino'sPizza
PizzaHut
LittleCaesar's
BurgerKing
McDonald's
84.5
2017
93.0
2017
4033
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
RussiaTurkey
Oven baked Sandwich Dev Malzemos Ultra thin crust Mosaic cake
Notes:1. The figures are representing only Moscow
Source: Company Information
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Adjusted EBITDATRY MM
3139
H1 2016 H1 2017
370 432 466 495 52213
19 43 72 121
80 103 130 160 219289
383451 509 567
643
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Continuous and significant store rollout# of stores at period end
+23+27 +30 +59 +70
+94+68
+58 +58+76
470543
647
860
2014 2015 2016 2017
7 Track record of resilient and profitable growth…
DP RussiaDP Turkey
…generating strong momentum in system sales…TRY MM
Source: IFRS Combined and Consolidated Financial Information, Management Accounts
Source: Company Information
18
Neval Korucu Alpagut, Group CFO• 10 years at DP Turkey• Prev. at Volkswagen
Experienced management team
Awards received
Aziz Babacan, Corporate Operations Director• 6 years at DP Turkey• Prev. at Pizza Hut
Ayça Mutluer Bayraktar, Sales and Marketing Director• 4 years at DP Turkey• Prev. at Unilever, Pepsico
Kerem Ciritçi, Franchise Operations and Business Development Director• 10 years at DP Turkey• Prev. at Ritz Carlton, Alarko
Gökhan Yoluaçık, Online Channels and Information Technologies Director• 3 years at DP Turkey• Prev. at Aksigorta, UlkerMuhsin Çevlik, Supply Chain, Purchasing and Investments Director• 6 years at DP Turkey• Prev. at Danone
Turkey, Azerbaijan and Georgia
Gold FrannyGiven yearly to best master franchisees for operational excellence, revenue increase and growth rate
Golden Drum2014
Felis2014
Kristal Elma2013
Effie Reklam Etkinliği Yarışması
2014
Best Data Infrastructure
of the Year2015
Altın Örümcek
2015
2008 2009 2010 2011 2012 2013 2014 2015 2016
Experienced management team
Awards received
Mustafa Özgül, CFO of Russian Operations 3 years at DP Russia Prev. at Migros, Bechtel Int.
Oleg Yudin, Head of Franchise Development 1 year at DP Russia Prev. at Traveler’s Coffee,
Arpicom
Elena Ivanova, Marketing Director 4 years at DP Russia Prev. at 4DK
The Supervisor of the Year 2015AWUS(2) Award 2014 Global Viking Award 2014
Russia
2016 Gold Franny
DP Eurasia
Aslan SarangaGroup CEO
Neval Korucu Alpagut Group CFO
Selim Kender Group Chief Strategy Officer and Head of Investor Relations
Güvenç DönmezCEO of Russian Operations
Aslan Saranga CEO of DP Eurasia and Executive Director
Dmitry Osipov, Real Estate Development Director 4 years at DP Russia Prev. at Enter-Svyaznoy,
MTS
Igor Kiselev, Head of Information Technology 1 year at DP Russia Prev. at Zurich Financial
Services, Sportmaster Maksim Chinenov, CorporateOperations Director 1 year at DP Russia Prev. at KFC Russia
8 Founder-led, experienced management team
Notes:1. Includes top 10 countries in the Domino’s global network2. Average weekly unit sales
Company leadership
• Joined DP Eurasia in 2015 as DP Russia’s CEO and kick-started the accelerated growth of the company
• Previously, he was the CMO at Samsung Russia between 2012-2015. Before that, he held several senior marketing roles at P&G in Russia and Europe
• Holds a BSc in Industrial Engineering from Bogazici University
• Founding CEO of DP Eurasia – been with the company for 20 years, making it the 5th largest Master Franchisee in Global Domino’s network
• Member of General Management Council (″GMC″)(1) – the leadership team of global Domino’s network
• Holds an M.A. in Finance from Istanbul University
DP Turkey’s global awards DP Russia’s global awards
External Awards
Financial ResultsSECTION 3
20
566 646
2016 2017
Year on year growth
144 142
344 372
488 514
2016 2017Corporate Franchise
70%
30%
14%
72%
28%
76
205
2016 2017
6899
22
72
121
2016 2017Corporate Franchise
169%
18%
82%
6%
94%
Financial snapshot
Store count# of Outlets
System SalesSystem Sales, TRY MM
Store count# of Outlets
System SalesSystem Sales, TRY MM
Source: Company Information
Year on year growth
21
19%
7%
38%
10%
Online Total
2016 2017
141%
42%
79%
29%
Online Total
2016 2017
Like-for-like performance
LfL performance in line with guidanceSystem sales LfL growth, %
Source: Company Information
RussiaTurkey
22
53%
34%
67%
44%
Delivery Total
2016 2017
41%26%
48%
32%
Delivery Total
2016 2017
42%
27%
52%
35%
Delivery Total2016 2017
Online channel
Share of online ordering growing healthilyOnline system sales, %
RussiaTurkey
Group
Source: Company Information
23
Total potential store count
Targeted net store openings per year
(medium term)
LfL(medium term)
CAPEX program
• 1,500
• Low to mid-teens LfL growth
• 2017: 40 stores**• Medium term: 40–60 stores • We expect franchise and corporate stores to be the
main drivers of new store openings
• 900
• High single digit LfL growth
• 30 stores**• We expect franchise stores to be the main driver of
new store openings
• c. TRY20 MM in 2017**• c. TRY22 MM in 2018**
• c. RUB500 MM in 2017**• c. RUB300 MM in 2018**
Original management guidance
** short term management guidance was given on 19 September 2017 – some variance in 2017 store numbers/mix and associated capex – full update at prelims
ConclusionSECTION 4
25
Conclusion
Source: Company Information
• Group system sales growth of 32.8%
o Turkey: 14.2%
o Russia: 169.0%
• LfL growth of 10.0% in Turkey and 28.9% in Russia
• Online share increasing: 51.8% of delivery
• 76 store additions in the period
o Turkey: 27
o Russia: 49
26
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 presenceDomino’s stores, #
Source: Company estimates
Notes:1. Excluding Azerbaijan and Georgia
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
Rus
sia
DP
Turk
ey
c. 1,500
(1)
+0.6 p.p.
4.1%
12.6%
2016 2016
Turkey Adj. EBITDA / System Sales, %
DP Eurasia
1 2
3 4
10.5% 11.1%
H1 2016 H1 2017Adj. EBITDA / System Sales
Russia Turkey
Adj. EBITDA / System Sales
APPENDIX
28
DP Eurasia: Financial summary
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
System sales • Sales generated by the Group’s system stores (both corporate and franchise)
1H 2017 1H 2016 ChangeCorporate Store Count 223 188 35Franchise Store Count 370 326 44System sales (TRY MM) 398.5 308.8 29.0%
DP Eurasia income statement(TRY MM) 1H 2017 1H 2016 Change
Revenue 289.8 209.3 38.5%
Cost of Sales (184.7) (135.0) 36.8%
Gross Profit 105.1 74.2 41.6%
General Administrative Expenses (44.3) (33.9) 30.6%
Marketing and Selling Expenses (41.3) (30.1) 37.0%
Other Operating Income / (Expense) (0.9) 1.2 n.m.
Operating Profit 18.6 11.4 63.7%
Foreign Exchange (losses)/gains (7.3) 5.5 n/a
Financial Income 0.4 0.1 n/a
Financial Expense (10.0) (7.9) 27.2%
Profit / (Loss) Before Tax 1.7 9.1 n/a
Tax Expense (3.8) (2.2) 71.4%
Net Income (2.1) 6.9 n/a
EBITDA 37.9 27.0 40.3%
Adjusted EBITDA 39.4 31.2 26.4%
Adjusted net income (0.8) 11.0 n/a
Corporate revenue • Revenue from the Group’s corporate stores
Franchise revenueand 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
Key KPIs
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 2017Delivery 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
RussiaTurkey
Group
Source: Company Information