Domino's Pizza Enterprises Limited

Good morning and welcome to the Domino's Pizza Enterprises full year 2024 financial results. I can see the attendees are now inside of the meeting and so we will get started. My name is Nathan Scholes. I'm the head of investor and relations and communications. Joining us on the call today, our group CEO and managing director, Mr. Don May, our group CFO, Richard Coney, our CEO of Europe, Andre Tenwald, our CEO of Asia, Josh Kalimnik, And I'm also very delighted to welcome other guests from overseas. Our CEO of France, Joel Tissier, who's dialing in very early hours for us. Martin Stinks, our CEO of Japan, who is joining us in Australia on the Roadshow at this time. And a very warm welcome to our new ANZ CEO, Kerry Hayman. So I'm sure everyone will get the opportunity to ask your questions today. So with that, I'm going to hand over to our Group CEO and Managing Director, Mr. Don Lane.

Thank you, Nathan, and thank you for everybody who's made this call today. I'm going to start on slide three of the investor presentation. And hopefully for all of you who have seen our videos online or attended an investor day, that this is not a new slide to you. And it's actually a slide that we start in every important meeting with inside DPE. And this is our strategy slide. We make it clear inside our business that our mission is to be the dominant sustainable delivery QSR in every market. And how we define that is that we're not in the restaurant business. We're not in the drive-through business. We're clearly, our meals are consumed at home. And so whether it's the more premium service where we deliver your order or in the odd occasion, it could even be a third party delivery or whether the customer chooses to be the driver, we're really obsessed about the food and the way that it performs when it makes it to your home. So the strategy is that in all cases, the meals are designed to be delivered that we're very focused on the sustainability improvements as we reinvent our products and reinvent our stores, and that there's also a dominoes X factor, the pizza-ness that we can attribute and differentiate back to these meals as they make it into our consumers' homes or offices. We measure our operational performance under the value equation that we've had now for multi-decades. For us, value is the product, the service, and the image that we offer the customer divided by the price. And one of the two ways that we can define that most consistently is our delivery times. We know that there's a magic point at around 18 minutes where when we get below that, the investment is really not as much gain. And as you draw away from that, then it can be less attractive to customers. And we're obsessed with 4.5 product, that anything as you venture over a four star is rated by our customers inside our app and web. It all relates, in fact, product is the highest weighting to driving a net promoter score. We also talk a lot, and you'll see this in this presentation today, in the markets that are getting significant growth right now, is that it's coming from segmentation growth. This is a business largely with a dinner, multi-pizza or multi-side meal occasion with families and team sport and so on. But you're going to see that we've been very focused on other day parts and getting some great traction. And then it's all delivered by the 120,000 team members in this business, that there's a path to success. You start as a team member. You grow your way through this business. You may become a store manager, a franchise partner, or even an executive in this company, that we have a pathway. And it's the great people of this business that drive it on every day. In fact, on this call, there's about 180 years of Domino's experience. If you come with me again to the next slide. So the key outcomes from the last financial year, we saw our Europe EBIT up 17.9 million and 80 basis points, a larger influence when we exited the Danish market. We had the Australian New Zealand business have a record profit year up 11.7 million and EBIT level up 20 basis points of margin. And our Asian business was actually down 17.3 million, which reduced our margins by 150 basis points. And if I specifically talk to the elements, You know, we've projected all through the year and communicated through years the success of the Australian Zealand business, having its best aim for sales in seven years, the strength of the German business, and more recently in the last quarter, the strength of the Benelux business as it has rolled through significant wage inflations and coming out positively at the other end of that and quite successful. And little old Singapore, we also highlight, be it it's not a big contributor, but it's been a stellar performer in our business. Our performing businesses this last financial year were France and largely Japan. And that slides through the numbers here. And today, you're going to hear from the CEOs who are going to share their plans and how that's going to change in this financial year. Our franchise partner profitability grew 6.7%. This is the turnaround in our business in this last year. Very, very focused on unit economics. We're going to talk a lot about that today. And a lot of that growth came in the last quarter. We're able to deliver some restructuring program costs of $50 million. We put a third of those back or a little bit over a third of those back to our franchise partners. Some of those savings also appear in marketing or in our IT capitalizable savings, which means not all of it makes the remaining two-thirds make it to the bottom line, but a proportion of it does. We're really happy with the fact that we were able to produce so much cash this year and deleverage the business to 2.35 times. I know there's been all sorts of noise in the market about capital raising. I think that's very clear. That is not the case. And we're going to continue to make great progress against that this year. And our EBIT was up 3%. But by and large, our focus has been on driving unit economics because that's what's going to lead to the strength and growth. And those that are driving unit economics are going back to growth in this financial year. Nathan, next slide. One of the things that we talk about our business is that we're a common platform business. That is that we have the next generation one digital in almost every market in the world. And behind that, there are a number of tools that we can aggregate to apply to all businesses with a local nuance. Today, we work with many global media platforms with our global digital platform. And what we did this year is that we We restructured our business to put some of our best and brightest into our centers of expertise. And you see some of those results on this slide, on slide five, where you see our online sales were up 7.5%, where our digital team outperformed in many parts of our digital platform. And we expect strength in this area to continue into the coming year. Also, you know, delivered network sales are 4.6%, and the underlying impact was 120 million. If you come with me onto slide six, This is where we highlight our restructuring savings for the year. We set out this year to make the business more efficient, to benefit from our global scale. As I mentioned, leverage centres of expertise, but make sure we're still applying the brand at a local level. Product and the brand imagery, our store development programs and working with our franchisees is all at a local level. You can see here we came in on the lower end of our restructuring program. There was some delays in optimising our network. It took us a little longer in parts of our business with government legislation, as it did also with some of the restructuring of our overhead. It just took us longer, largely in Europe, as we worked through legislation in those markets. But we're still proud that we delivered a $50 million savings to business. We're forecasting that we're going to deliver another $30 million into the network. Once again, I want to highlight that not all of that makes it through to our shareholder bottom line, in that some of that goes to our franchise partners, some of that goes into our advertising savings, and also into the capitalisation of our software development costs and so on. But we are expecting to deliver another $30 million this year. There will be some headwinds of inflation in our support offices, including this year we expect to achieve our numbers and therefore deliver the cost of the business of LTI and STI that weren't paid in the past year. And yeah, as I said, we've really been investing in our franchise partners and making sure that many of those savings make it both through to themselves, but also into advertising. I talk a lot about how much our media spend is increasing in this financial year, not because it's a higher cost base to our business, but it's just as we'll talk about how we're being more efficient and passing our savings through into this area. If you come with me onto slide seven, it highlights our franchise partner profitability. You can see that we grew in this half. We began the journey on our way to 130K, which is ultimately where we accelerate this business. We're delivering with inspired new products that have higher margins, only available at Domino's, creating new segment growth, things like the My Domino's box, Melts, the Cheese Volcano. These products are not discounted products. They're launched at a price. They've got great margin, and they're gaining new customers as well as delivering stronger profitability results. We've improved our pricing on an everyday basis, and we've also been getting great growth inside the aggregators. I'm going to talk specifically about that in more detail to come. Slide eight is a really significant slide. If we're quite honest and clear with ourselves, we didn't handle the first phase of inflation very well. It was quite stunning how significant it was in various parts of our business. And the model of just simply endlessly putting up price without necessarily giving the consumer any benefit in some of our businesses was not a winning strategy. We also had to rebuild some of our expertise in the business. For example, our product innovation. For a decade of digital innovation and Through the two years of COVID, we had lost a lot of the talent and the skill in our business to rebuild our product innovation. That's a skill that we've regained in the last year, and you're going to see the benefits in this year, and you're already seeing the benefits in some of the thriving businesses. We also, you know, this is a year where hopefully we can illustrate that we are not victims to inflation, but we can take control. We have levers that we can control. And that's all about levers that drive sales, which inspire new products, new segmentation, whether it's about going and deeper into the marketplace of aggregators, which are the largest delivery platforms, and that's where we want to dominate. Our optimization of our media spend, now that's working with getting proper attribution partners so that we're really focused on the real ROI and backing the proper attribution to customer growth. And then, of course, everyday value, making sure that we have consistent, always-on value for our customers, especially for our technology platforms. where we still want to dominate most of our transactions. And then we are in control of our costs, that through inspired products, we're delivering better margins, that we've actually got smarter scheduling systems that we've been delivering in the last financial year, and we'll continue to deliver over the next two years. One of them includes the new labor tracking, which is performing really well in the Australian New Zealand and the Benelux region, and will continue to expand for the rest of business. And then we also want to unlock a smart scheduling system over the next 12 to 24 months as well throughout our business, once again, to improve our efficiencies and help our store managers execute better. We're also unlocking third-party delivery models, and I'm going to go into more details on the next slide, and then passing through savings also to our franchise partners. When we put those against also a store build cost, which over the last two years coming out of COVID, we've worked really hard to make sure that there's been very little growth in those build costs, Why? Well, we were building stores pre-COVID of 120 to 150 square meters today, also motivated by ESG and efficiency. We're largely 70 to 100 square meters. We're targeting You know, we're opening brand new stores as we speak that have 70 square metres, 71, 72 square metres. We reviewed our equipment packages and we've also been able to be more efficient over the last couple of years that, you know, because we're just refitting out a rectangle in a small strip shopping centre, you know, equipment is a large part of the cost of a store and we've actually been able to, you know, beat inflation in our equipment packages. So smaller footprint stores driving up the efficiency of the operating cost of those stores, plus the build cost of those stores, and then driving sales and lowering costs, we think we've got a really good plan that we're going to deliver over the next 12 to 24 months. If you come specifically at the last half, and we talk about our trading performance, the Australian New Zealand business, we talked at the beginning this year would be a petri dish. I came back in and double-hatted for a little while just to get involved, to look at all the plumbing in the network with our COEs and how we were delivering the new structure. I'm really happy to be able to hand over the reins to Kerry now in the aims of business so that I can get back out and make sure that the progress and learning throughout the business is being applied using the global centres expertise, but allowing the local management to thrive and use those tools. In the Japanese business, the essential sales were negative, but we were pleasing in the second half with our customer counts were up. The Malaysia business, we're rolling some geopolitical events that will roll by October, so that's still going to have a drag on our sales, and that particular market's earning on a like-for-like basis in the first quarter. A little of Singapore has been a star performer, and it's the things that we did in Singapore we also did in Malaysia that has delivered a better-than-expected result, at least from an earnings point of view, than might possibly would have happened with the deliveraging of sales in the Malaysian business. So, you know, that team has done an exceptional job of implementing our new technologies, going to back a house, both in back-of-house dough, back-of-house vegetables, less deliveries to store, all of this improving also our ESG footprint and delivering better margins at a store level. Over in Europe, our central sales in the second half were flat. Germany was positive, delivering with delivery and carry-out, but that was offset by France. And the Benelux came through in the final quarter, but it was largely through tickets, as we consumed some significant two levels of wage inflation in that business but really impressed with how Andre and Misha and Annika and the team have delivered there in the Benelux. So if I come out now onto slide 10 and just talk about the trading update, in the first seven weeks, we were minus 1.3%, rolling a plus 2.8% for last year. There is obviously a significant drag there from Malaysia, which we'll be rolling that through. But what we want to highlight is it's seven weeks, and there was some bumpiness in that first seven weeks last year. We had the fantastic performance from the Matildas, which gave us record sales in the A&M business on separate days, which we've rolled through. And in Germany, we had the best promotion in the history of that business with Donna Kebab, and it was really an exceptional performance. From an Asian business, we still have a negative sales largely from Malaysia and Japan. But on the other side, we have strong performance in Singapore and Taiwan, and we are starting to see customer count grow performance out of the Japanese business. At this point in time, I'm going to hand it over to Richie Coney to talk to our group's financials. Thank you.

Thank you, Don. As you can see on this slide, our revenue is up 2%, consistent with our network sales growth. EBIT is up 3% versus last year, which in constant currency is up 2.2%. Also, you can see our interest costs are up 56%, or $12.6 million, predominantly due to central bank rate increases in Europe and ANZ impacting our debt funding costs. Important to note, we have seen these rates stabilised in the second half. Moving to slide 13, Nathan. As you can see, ANZ and Europe are up 10.4% and 33.8% partially offset by Asia, which is down 28.7% versus last year. Margin improvements in A and Z is predominantly due to a significant improvement in our corporate store performance in the second half, which is a combination of re-franchising lower-performing corporate stores and improved food and labour management. Europe margins have improved by 2.2%, largely due to store closures from the restructure, including the Denmark market closure. Moving to slide 14, Nathan. This slide provides a summary of the non-recurring costs totaling $44.2 million with store closures and write-downs of $29.6 million and employee-related costs associated with the restructure and move to shared services of $23.1 million. Worth noting now both our Malaysia and Poland centres are now stood up and operational with coming on in recent months. In addition, we had an earn-out release relating to the acquisition of Malaysia, Singapore and Cambodia of $18.8 million. Next slide, mate. Now moving to group free cash flow. Free cash flow excluding acquisitions has improved by $65.4 million. and a whopping 390.6 million after acquisitions, with significant reductions in net capex of 96.8 million and tax pay to 54.7 million, which has been partially offset by increasing non-recurring payments of 21.4 million from the restructure and working capital movement of 46.1 million noting we are rolling over a reduction in working capital of $36.5 million in the prior period. Next slide, Matt. A key highlight from this slide is that our CapEx, which recycles, is almost neutral for the year, with gross CapEx of $63.6 million for store-related investments. offset by cash inflows from franchisee loan repayments and sale of stores of 63 million. Obviously, this is some of the benefits of not growing at the rapid rate we had in the past and now starting to benefit from these loans, loan stores and sale of corporate stores that's pushing cash back into the business. Digital spend has been maintained with material reductions in stay in business and other investments reflecting our disciplined approach to capital management. Moving to slide 17. As foreshadowed at the FY23 market presentation, DPE has successfully deployed capital management initiatives, which has resulted in a $148.6 million reduction in net debt and our net leverage ratio dropping to 2.35 times versus our current cover of 3.5 times. Just confirming and reiterating, ZPE is still targeting a leverage ratio of two times with our capital management initiatives plan to continue until this target is delivered. I'll now pass you back to Don.

Thank you, Richard. So come with me onto slide 19 and talk about some of the detail of the pieces to our global strategy with the local nuance that we talk about. So we're working really hard, and we really do believe we're in control of unit economic growth. So the first thing is, and I'm going to talk specifically, as I said earlier, with aggregator partnerships. We've got a global strategy there. We're seeking incremental orders, but we're also getting some efficiencies, as I'll highlight, through third-party delivery in the fringes. It doesn't take away from our core, but it's actually adding. The menu development is a big driver of our business, will continue to be a driver of our business. We're increasing and maximising our media spend. You'll see that not only are we delivering savings, as we highlighted, into our ad funds with global efficiencies and also with our global support centres, but we're also very COE focused and targeted on yielding better, better return. We've got a great third party in Australian business. that we're now starting to leverage in each of our markets around the world, which is giving us a better return on investment as we target our customers. But we're also increasing the contributions, and that's often either our franchisees are getting inspired, as they are in places like France and Australia, where they've increased their net advertising contributions, Or DPE is allocating an incentive where we may have incentivized something else and we reallocated across. And you hear that specifically from the CEOs as they talk. But the overall view of that is that we're going to have a lot more media spend and not because it's cost the company more this year. It's through efficiencies and inspiration of delivering results. We've also increased alignment to our proven promotions. You'll hear more about that with their engagement franchise partners. We're executing better, the individual CEOs. One of the things that Kerry's brought back into the business is a really great focus on core operations and individual specific areas so that we can, we have some stores that do exceptional volumes in the Australian New Zealand business and how do they go to the next level? How do they get even more efficient? So pioneering many, many tools, which I'm sure you'll get to hear about. And then dynamic everyday value pricing. We talked about flex pricing a couple of years ago. It's well entrenched in our business. It's a high performing part of value pricing. and giving customers choice, and it reflects the customer's needs. So when we talk about this business, we've got global strategies that then are tailored by local CEOs and management teams, and that's what's driving our results as a business. If you come with me on slide 20, I want to specifically talk about the aggregator business. I remember over the last decade, there was a time when there was a view, would this be the demise of DMP because of the aggregators being a competitor? Andre led the leadership globally within Domino's with a view, no aggregators are not our competitors. They're actually another marketplace, no different to other, what we would call frenemies of other companies that have algorithms that can also market against your own customers. but there's shopping malls that you need, virtual shopping malls you need to compete in. And so we've got better and better at finding our ways to win and play to win. And we have a play to win platform book for each of our aggregators and other digital third-party media providers. And so we see the aggregators as doing two really good things for us at the moment. They're helping us to increase our sales as we're getting incremental sales in established markets, whether it's adding a new aggregator to the business as Uber's launched in the Netherlands or thriving now in Japan. or whether it's using third-party delivery for typically non-trading hours. Our French businesses, Joelle will talk about the great leverage he's getting there. The Australian and New Zealand businesses, we're extending our trading hours to significant earlier trading parts, later trading parts. If you're a Sydney site, or as I know most of our analysts are, after 1 a.m. in the morning, Thursday to Sunday, the Sydney CBD store delivers to the Piedmont area. when the PM1 store isn't trading, which just delivers greater efficiencies and we use third party to do that. We're also using the centers of expertise for pricing. We have global pricing on these platforms. We have best in class with support of our parent DPZ in the US in some cases that we're delivering really, really great margins to our franchisees to make ourselves competitive. Sorry, competitor, competitive in this space. And then we're driving down costs. The incremental sales from the third, you know, third-party orders, additional orders drive better leverage in the business. We're also getting those better rates. And then because we're extending and getting extra... Spillovers that we can also, in the middle of peak, we can actually pass through some orders if we're doing more sales in a store as forecast, they can spill over and continue to perform well from a service point of view. And we can also use them in quieter periods or in lower yielding periods with orders for just getting a better yield out of our business. One thing we want to make really clear is that Domino's will still make sure that we own our core competency of delivery. And so Domino's drivers will dominate the peak periods of our business. We don't want to ever sacrifice that. Our well-trained team members that give us the competitive advantages in their uniforms, their training, their vehicles, their branding in the streets, and we'll continue to make sure that happens. But, you know, one of the other points to highlight, just for example, in Australia, there's 113 Australian New Zealand stores that are trading with extended trading maps, which just gives you an idea of when we go into this half, how we think we can continue to grow our same store sales as another growth area. At this point in time, I'm going to hand over to our newest CEO, be a 36-year veteran of our business, Kerry, to talk about the Australian New Zealand performance.

Thank you, John. It's very exciting for me to be starting out in this company 36 years ago as a pizza maker and really humbled to now step into the CEO role and go full circle. So it's great to be back home and being a part of this. And what's really exciting about the ANZ business is that together with our franchise partners, We've really focused in on that execution that Don was talking about, and we've been able to deliver the best product quality scores and MPS scores out to our customers, which is our ultimate win that we want to continue to be focused on. We absolutely had a rock star campaign in the More campaign, which is the brainchild of Alan Collins. And it's delivered us our most successful sales in seven years, reaching more customers and in more occasions as well. And just to give you an idea of what that looks like at a store level, we had 380 store managers last year break actual record sales week, which is incredible. And then already just in the first seven weeks of this year, we've already had 179 sales. stores break their sales records. So really, really exciting when you get a fantastic campaign like the More campaign come together with improved product quality and execution to deliver a win for a customer and for also our franchise partners. Domino's Australia has outformed the pizza category in FY24, growing spend fastest and also by the largest amount. And at the same time that that's been happening, we've been able to reduce our costs to our franchise partners as well through focusing on labour efficiency, through new technology, great new products that have launched with a reduced cost of goods. and also reinvesting our savings back into lower food margins and support with additional media. As we're looking forward, my focus and where we're going to be with the ANZ team is that we have 27,000 team members that we're taking on this fantastic journey to keep being better. We want to invest in them. Don mentioned our strategy about people-powered pizza. We're very focused on making sure every team member is trained well and has the tools that they need to deliver what's best for our customers. And also an absolute obsession at store level with product quality down to even things like, you know, you might think it's pretty simple to source a pizza. With the tools that we use, we're creating new things that have so much extra things built in there for training for the team to make it easier to execute. And then also, you know, making sure that we're 100% focused on increasing that bottom line for our franchise partners. They are the heart of our business. They're what keeps us moving. And to that note, I actually do want to say a very big thank you to them for coming on this journey with us this year and creating such an amazing result. And also a thank you to our customers for continuing to buy from us. And I'd like to hand over now to Andre, our European CEO. Thank you.

Well, thanks, Kerry. And good morning, everyone. Let me take you to slide 22, commenting on Germany and the Benelux, before I hand over to Joelle to talk more about France. As highlighted during the recent investor strategy days in Europe, we are focusing on these three major initiatives, starting with growing the aggregator marketplace. As Don mentioned, during my 19 years with Domina, we've always had a very successful relationship with aggregators in Europe, but recently we're even maximizing that even more. Adding Uber and Waltz, as Don mentioned, but even though they're still very small, but we've seen in other markets that they have the potential to take market share quite quickly. And in the next month, we will even start trials with using Uber delivery in Benelux in Germany. We haven't started that yet, but based on what we've seen in France and in Australia, we expect big things of that. At the same time, we're optimizing our media spend based on learnings out of ANZ. but also helped by, as Don mentioned, extensive media mix modeling using AI and using an external partner who's helping us quite a bit. Finally, helping the effectiveness of media even more, we're launching some great new products that extend our range and extend the occasions. And we're finding that the launch of pizza dogs, for instance, in the Bell and Lux about a month ago helps us in day parts that we always had very little traction in because we were supposed to be a meal supplier and not necessarily a more snacking supplier. So all these major strategies are resulting as seen earlier in the pack and improve franchise profitability in Germany. and offsetting of considerable labor increases in the balance, even resulting in our last quarter, improving the franchisee results despite a 15% increase in labor. At this point, I'm handing over to Joël to talk about France.

Hi everyone, I'm Joël Pinchet, CEO for France, and I've been with the business for almost a decade. Those who attended the strategy day in May Some of this will sound familiar as we're following the path that we showed back then. The first item, which is essential to us, was lifting our franchise partners' engagement and having more alignment within the market. This has brought trust and it has been key to strengthen our system in order to accelerate further in the next 12 months. For instance, our initiatives on pricing were linked to this engagement. We nationally launched in May the flex bundles, les menus, as we call them in French, and they've been replacing some of these countries. They proved to improve unit economics with a lower food cost. To give you some numbers, we speak of an improvement of 3% of the food cost, which is really significant. France being a very heavy offline market, still around 40% of our customers. It's not the case in all the DPE markets. We also made them available offline since July. Also from September, we'll be launching a national lunch offer as well that will enable to communicate wider with a greater exposure on the lunch experience. And all of this is preparing us for our main goal. While we work closely on monitoring costs, we know that in France, we really need to increase sales and order count per store. For this, we have three strong leverages. We will be refocused to launch initiatives that will directly impact the top line. First one will be reinforcing our presence in the aggregators, where we still have plenty of room to grow. We have almost 300 stores in Uber Eats, like third-party delivery. And we'll expand this to deliver from September. And as well, we will this together with an increasing visibility within uber eats and deliver the second one is product development this is also key to our customers and our franchise partners and we know this this aspect will grow our brand consideration and sales um the third one which is also very important i know like don have been thinking about this already in the in the first slide it's our marketing we really want to develop safe on our own channels and we developed a a new brand platform with a communication agency, and we'll expand it into the market by investing more in working media, including mass media like TV. Over the past two years, the unique economics in France have pushed the franchise partners to decrease the marketing spend. We will reverse this first from October on an opt-in base, and afterwards from January with the annual vote. In both cases, DPF will reallocate part of our existing budget into media. This will enable us to move from 4% to 6% marketing spend. And the smartest thing to this is that all that incremental budget will be dedicating to working media. So to conclude, I'll say that overall, while we are committed and embedded within the global strategy, our approach is really tailored to match the expectations of the French customers our franchise partners uh in france uh we trust that these three focuses that they will give us more visibility and that this will lift our sales and profits for both the franchise partners and for dp through the next 12 months and with it i'm handing over to josh thank you yeah good morning everyone and just before i answer to martin i just wanted to take you through the

for the past three to four years and really what we've learnt. It's clear we have grown rapidly, especially as it relates to COVID. And that was really due to a number of factors that gave us confidence. Simply put, we had availability of sites. We had trained supplementary managers, which is part of our original growth before COVID, we were getting ready to scale. We also had elevated sales and these were favourable and this led our model to suggest that we should grow and grow we did because that's simply what the data suggested. What we also estimated in our model is that we would retain all the customers in our business, but we'd also retain the frequency of the customers in our business that were coming to us because we got confidence even within our own network in DPA that when COVID restrictions came off that we saw those customers stay within the business. This was not really the case in Japan. This coupled with the high inflationary costs that we had accelerated by depreciating yen is where we reacted and this actually deleveraged our business during this time. We didn't forecast the rapid move in food, we didn't forecast the inflation in our utilities and we certainly didn't forecast the inflation in wages which is something we hadn't previously budgeted for to a great extent. Our mistake was really that we reacted by chasing customer traffic by over-discounting or by high discount rates. But in hindsight, in a low-frequency market, this was really a road to nowhere, and it didn't drive traffic enough to counter the cost in the business, and it was a little bit heavier because of those inflation that hit the business. So, you know, I'll hand over shortly to Martin to talk about the benefits of these learnings and what we're doing and the actions. But I want to assure everyone that, you know, the fundamentals that underpin this business, you know, really haven't changed in that we've been a business that, prior to all this, that only really made money a couple of times a year. And that was through Christmas and through Golden Week. But it's because of our consistent approach to our strategies, like the Barber strategy, that has meant profitability is achieved across the whole year.

um and that's because we're actually accessing more customers through more occasions and with that i'm going to hand over to martin to show how we're going to build on this for our future in japan over to you martin thank you josh and good morning everybody uh for the ones who haven't seen me before uh let me introduce myself quickly my name is martin stings almost 30 or three decades in the business and currently responsible for the japanese market as ceo so for today i would like to give you three takeaways for this presentation for for japan um it's store optimization pricing strategy and the positive growth in store profitability as we have announced earlier um we have identified 79 stores to be closed within the next few months we already were able to close 17 stores last may and the remaining 62 stores will be closed by the end or before the end of this quarter The reason why we identified these stores were not only because they were loss making, but also they were dragging away the profits from surrounding stores as well. So with closing these stores, we are able to bring back the sales to the surrounding stores to gain their profitability even more. The savings we have seen and we are implementing for the upcoming months will be reinvested back into the market, which will results in lower food. And at the same time, we are incentivizing stores plus our franchise partners in operational excellence and sales-driven activities. In the future, so with these store closures, we're not expecting any further store closures to be taken. And I have to say this as well, because with these store closures, it doesn't mean that there's still a huge appetite from our franchisees as well. to grow in certain areas. So we keep promoting it, we keep motivating that. And also for the upcoming year, we are still doing that. On the pricing, and here's what we do there on the pricing strategy. So we still see that offline carryout remains affected. The good news is, is that delivery is growing. And in the past six months, we see a trend line of positive growth in the business. And where we in the past were growing through ticket we are now growing through customers which is a healthy thing for the japanese market we were also very disciplined in genuine pricing because with those disciplined technical discounting we were able to actually lower the food and grow the customers that all results with the lower food incentives as well into a huge improvement in franchise profitability in h2 Continuing on this or forwarding towards this, we still keep working with a third party who is consulting us on strategical pricing. We keep doing that, and we already see some green lights in test areas where they were outperforming the control group. On marketing, I would like to announce that we have finally found our Japanese CMO with a strong QSR background who is effectively starting from September 1st. And with him in place, we keep continuing growing on launching inspired products, but also maintaining our core menu. In the past few months, you have seen that we have launched a couple of great inspired products, and we will keep continuing doing that. The same thing happens with My Domino's. We renamed that My Domino's into Pizza Bento, which resonates much better with our local consumers. The final two parts I would like to highlight from this presentation is that our continued journey with aggregators has taken a positive flow there, where we're extending ours is something we're definitely going to develop further into that growth. And then with the right media mix modeling in place, we are now knowing effectively where we can, in which channels to spend with a much higher return on investment. Looking forward to talk to all of you more in detail about this process and what you can expect from us in the upcoming months, in the upcoming one-on-ones. And that said, I would like to give it back to Donmai. Thank you, Martin.

If you come with me now, everybody, onto slide 26 and give an outlook. For this year, we're still saying that we believe, or going forward, we still believe as a group that the milestones of 7,100 stores is still intact. and that we're committed to these long-term opportunities in each business. We anticipate that we will grow with store openings, and that's where we accelerate in the businesses that are performing, 3% of the network, but they'll be negated largely by the small closures that we'd already shared with shareholders, predominantly in France and Japan. So there'll be still a slightly small step up in our store count, but then we will expect that to progress into financial year 26 with at least 3% to 4% as other markets come in line with more stores. And with the lowest store openings, our capex is down, which means that we'll be continuing to pay down debt or continue to review our balance sheet on how with all the free cash flow that we're starting to generate and we recycle off our previous expenditure as we also look at our loan book with our franchise partners, we look at previous IT spends and so on. So you can expect us to continue to be quite aggressive internally there. We still look at a 3% to 5% outlook of 3% to 6%. I mean, this year it is dependent on delivering on our plans in France and Japan, the key markets. And so I'm confident in the plans that we're putting forward today with Martin and Joelle and Andre and Josh, and they need to also contribute to this and we'll then define how the difference is between the 3% and 6%. If you come with me now onto number 27, page 27, I want to reinforce that it is our expectations that we will operate with lower food and labour margins across this business this year. How are we doing that? Well, if we look at soft commodities, almost across the globe, without exception, we've seen soft commodities starting to drop. Big standouts in wheat, tomatoes. Tomatoes goes into our source. The one exception of the decreases is the potential for an increase in ANZ and Japan-Taiwan in cheese. And we say we're looking at futures and we're looking at currency, the two biggest defining deciders for that for the next half. Whatever's happening in currency and milk prices in this half is what we will pay in the next half. If we look at the last half, it shows you how volatile the futures are in that at one part in the first quarter, we were running at near lows for the last five years in cheese prices. And then we saw a big spike in the final quarter The net result of that is we're actually paying lower cheese prices, as an example in Australia, Zealand, in this half, but it was really volatile throughout that half. If you just look at futures, we would say that we will see an increase in cheese prices in ANZ in Japan and Taiwan, and we're already making plans to negate those with the actions that we're doing, as we talked about earlier, with inspired products, with our better pricing in the business. If we look across at the labour costs in the business, that we are seeing now labour starting to moderate more towards the CPI, but still increasing. And we're negating those, and very clearly highlighted earlier, through three core strategies. Number one, through smarter scheduling, live scheduling to keep our managers more informed, as well as smart scheduling, which we plan to implement over the next 12 to 24 months. We're really utilising the 3P partner network for low yielding periods where it's inefficient for us to have a driver on or maybe it's a spillover. So we might, for example, it's not effective to have three drivers and you can go with two and spillover into three drivers. Our peak periods and how we schedule the extra trading hours that we talked about earlier and using third parties with really competitive rates. that are globally negotiated. So these are negotiated for all of the DTE markets, which means that in each country, we're leveraging our global network. And that's part of the benefit of our COEs having specialists in this area, but also leveraging the Domino's global network as a whole, as we are a master franchisee in a much larger network. So we do believe that we will run a lower food cost and lower labour costs, which will deliver better margins. And these are levers we are in control of. It didn't appear that way in the first year of inflation, and we didn't handle it as well. But we now have a lot greater confidence in the business that we are in the driving seat, and we know where we're going. So if we look at slide 28, conclusion on performance, Japan and France have locally specific turnaround plans. There's been an immense amount of learning in both those businesses. I have great confidence in our leadership and our ability to execute against those plans. The initiatives that we've implemented in our most successful businesses of Australia, New Zealand, Germany, Singapore and the Benelux have broad application, but they still need to have local nuances with franchise partners and how we engage our franchise partners, market by market, leadership by leadership. and also the product innovation and execution with the local nuances of the brand, that the brand isn't exactly the same in every market. The consumers do reflect on the pizza consumption and our competitive nature in the QSR industry as a whole, that that often as a base of the brand needs to get localised, but there are some global learnings we can apply. We're returning to a sustainable network expansion, which relies on reducing store paybacks on our road to 130k. Whilst we, you know, unlike a lot in the industry, the big box retailers with their drive-throughs and their large capital spends, the DPE model is a really efficient model and we're actually getting better at smaller footprint stores. As I said, 70 to 100 square metres instead of 120 to 150 square metres, which also improves the operating costs and a better carbon footprint. And we have the strategies in place to deliver a higher EBITDA through growing sales and reducing costs, particularly in the food and labour sector. And therefore, we can invest in our store network, we can deliver for our customers, our franchise partners, and ultimately our shareholders, and many times in that order. If we now go to slide 29, and I give an inclusion before we go to Q&A, we will deliver, we do expect to deliver profitable growth in this financial year, be it that it will be largely delivered in the second half. I want to make it clear that there is momentum into the first half, which shows that we make more profit in the first half versus H2 last year. So that continues the momentum. There is some headwinds in that first half performance, be it that we do expect to deliver our results. And so LTI and STI is layered over the business as expenses through the business, but also in this early phase, as we shift some of our food margin, largely in Japan, Parts of Europe, we shift that into advertising, an investment in our network. So that starts in the first half and then propels us into the second half from a like-for-like rollover. We continue to improve our continual cost reduction as a business. We're still targeting that $30 million plus this year, and we have other initiatives to make sure that we can safety net that number so that it's not just as the $30 million. Management's continued to grow and learn and get more efficient as a business. And finally, our earnings expectations do rely on our same-store sales, and we do need to make sure that we have France and Japan contributing this year. From an Asian perspective, savings in Japan will be reinvested, as I said, into that additional marketing. If I look at ANZ, we are rolling very strong comps, but we have a strong product plan. We have much more media. Our franchisees have not only, we've got our advertising funds lifted from 5.3% to 6%, but also franchisees voluntarily, based on the performance that we can show with the return on investments with our third-party attribution model, markets are voting quarter by quarter to actually contribute 7%, where they shift allocating local store marketing to a much more efficient digital assets, and we can illustrate higher performance. And so with more media, expanded trading hours, a deeper dive into our menu, a continual focus on more, which resonates in a consumer in this environment, because at Domino's we give you more quality, we're giving you more with choice, variety, more day parts, and more in that we're delivering better quality execution and better service, which is the strategy globally. And Europe, you know, management is continuing to invest in unit economics, reducing food costs, We're enjoying some of the lowest food cost percentages that we've enjoyed since the peak of COVID. A margin improvement is expected in Europe, but it is reliant also that France needs to contribute. And so when I look at the business, our corporate store network is also enjoying the unit economic improvement. So that is where we're also seeing flow through to our own businesses. And when we look at it from an investor's point of view, if you look at Domino's Pizza Enterprises, there's been four major earning businesses in the history of this business. France should be the fifth, and we're looking forward to contributing. And when we sit here today, the Australian New Zealand business has strong performance, the German business has strong performance, the Benelux business has strong performance, and we're looking forward to Japan contributing and then adding France as well. And of course, all of the smaller markets, Malaysia rolling off a cycle of one year, Singapore continuing well, Taiwan continuing showing growth, they all still add up and contribute to the greater business. Finally, I'd like to thank all of our franchise partners for their partnership as we've together worked on our strategic plans and engagement for our customers and for our team members. I'd like to thank all of our store managers for how well they've been executing this year and improving our product quality, our net promoter scores, our delivery times. I'd like to thank our customers. It's really exciting when you're in a team of inspired product development, you create something from the ground up and then our customers love it and buy from us and deliver great margins for our stores and give us those extra sales and order counts. And finally, all of the 120,000 plus team members around the world, many of them who have the opportunity that we provide to become a franchise partner or maybe even an executive or CEO one day in this business. So at this point in time, I'm going to hand back to Nathan to answer all of your questions.

Thank you, Don, and thank you to all of our speakers, particularly those who've dialed in. It's currently 3.22 a.m. in Europe. So it's very much appreciated, and I'm hoping that Andre and Joelle have plenty of coffee. Now, we are going to make a minor change to the presentation, the Q&A, for this full year. I've consulted widely with our shareholders and also with our analysts, and some have asked for us to change back from a written submission to verbal Q&A, which is what we're going to do. Now, I have shared with our analysts, and I have asked, we have 220 people on the call. that to make sure that everyone gets a fair go and that it's not monopolized, I've asked for two questions per analyst with any follow-ups to clarify any of the questions. And I have also said that anyone who submits 16-part questions to try and monopolize that time will require to make a donation to Domino's registered charity, Minds and Meals. So I will be liberal with the ban hammer, but you will have plenty of opportunity to ask all of your questions. And for that, I'm going to hand over first to Michael Simotas from Jefferies.

Good morning and thanks for the opportunity to ask the questions live. I think that's a much better way to do it. My first question is on franchisee profitability. Can you give us some indication of whether and how much, if it's true, second half of 24 was higher than first half, because if I look at your commentary around ANZ being up and then Japan much stronger in the second half, Benelux much stronger in fourth quarter, France much stronger in second half, it seems to imply you exited with a much stronger run rate. Can you just give us some detail on that, please?

Yes, thank you, Michael. If you look at our business, it is true that our third quarter, for various reasons, as we were learning and working through, we weren't as strong And it was really fourth quarter that we started to see all these savings and the initiative starting to work through the business as we took more control and businesses started to pass through the efficiency. So when you look at our business, it was really the fourth quarter that really highlighted the progress in the business. And many of those things which are food and labour related have continued into this half.

Can you give us some indication of what the numbers look like to give us a little bit of confidence that you are getting closer to where you need to be?

Yes, we don't break out by market, each individual business, but it is material from a food and labour perspective. So you've heard each of the CEOs talk about how they're yielding a better food and labour perspective. Food is the most obvious in the business. That's where it's the clearest, that we've been much smarter in the way that we're pricing and these new products that we're launching have better margins in them. They're creating also new leverage. But yeah, there were some stellar businesses. It was great to see the Benelux coming so strong in the last quarter. They really were hurt in the first quarter by a 15% wage increase in the Netherlands. And we had to consume that. And so that meant that that was part of the third quarter. There were some pricing initiatives that we were running at in the ANZ business that we got smarter about, and we were able to perform much better in the fourth quarter. And the ANZ business also was part of, and the Benelux, were both pioneers in the labour of live rostering, and now they're also pioneers in the smart rostering. So they also, especially we saw in late May and June into July, we took even further wage increases in Australia and in the Netherlands, further wage increases in July, and we're running lower wage rates And then as Martin talked about in Japan, we saw a much stronger second half overall and so forth. So Germany continued to show strong performance. Yeah, so Taiwan, France, I mean, we don't really break out each individual number, but that gives you some idea. France, despite our earnings not being so strong, we did protect our franchise partners and their margins were strong throughout the year in France.

And Michael, your second topic, and then afterwards I'll hand on to Richard Barwick from CLSA. Michael?

Yep. So the second one I've got is on the outlook and just trying to interpret a few of the bits and pieces you've given us. Do you need to deliver 3% to 6% same store sales growth at a group level to achieve your objective of earnings growth for the 25 year? And if that is the case, what gives you confidence that you can get there?

Yeah. So management do have additional levers that they can work with, with their own corporate store network, with the better we can work on food and labour margins with our franchise partners, then there's less support. We're winding back in different markets. So that's a lever that's an example of positive. But the best tailwind is same-store sales. followed by future store growth. And so in our plan, we are planning to deliver more than 3% sales. But we do have additional leaders that we talk about as our opportunities in the business. And we're pursuing those leaders regardless because they help our corporate stores and they improve our franchisee margins regardless. So yeah, that's probably the best way I can explain it to you. Thank you. Thank you, Michael.

Don, can I just clarify there, just from Michael's question, he asked specifically in terms of whether the three to six was to deliver earnings growth. Obviously, we've said to reach our expectations at three to six percent. I'm not sure whether you had any additional comment whether growth itself relies on three to six percent.

Yeah, so because we're seeing improvement in our corporate store network, because we're seeing improvement in our franchisee margins as a rule, Corporates contributing and franchisees are also getting less support in certain markets that are performing well. And so in that nature, that should deliver some earnings growth because we're also carving $30 million out of the business, don't forget, this year plus. And some of that comes to us as well. So those, by nature, deliver growth in our earnings. But I want to be really clear. This has historically been a growth business. We didn't deliver that same sort of growth in the last two years. but it is our intention and our plans to deliver same-store sales growth as we have in Germany, in the Benelux, in Australia, New Zealand, in Singapore, now in Taiwan, customer count growth in Japan currently, that we are going to put to the floor to make sure that we're still going to get the sales growth in this business overall to make it the business shareholders want to invest in. But we will get earnings growth even without some of that same-store sales.

Thank you for the clarification. I'm now just passing over to Rich Barra from CLSA. For your questions, you're unmuted, Richard.

Thanks, Nathan and team. Can I just question or just clarify this cost program? So you commented that I know one third of the savings goes to franchisees, so implying two thirds through to Domino's and the P&L. But you also pointed out that the total pool includes savings in the ad fund, which would not benefit the Domino's P&L. So With that, maybe some clarification, the $50 million that was saved in FY24, how much of that actually fell to Domino's? And then equally, obviously, you're targeting the $30 million in FY25. How much of that two-thirds actually will go to Domino's as well?

It's a good question, Richard, and we did highlight that in that page when we announced those savings last year, and we worded it exactly the same way, is that... But whilst we don't get a direct P&L saving when we say something like an overhead or an efficiency in the advertising fund, it does lead to more working media. And with more working media, it's obviously going to support the network, but it's not a net saving into our direct P&L. As is when we are building software for our network and then we charge it back to the network. If we're building, if we're spending less capital in that area, then that's because we've got and we've got less people in that. whilst it benefits the network, it's not a direct saving, saves our corporate stores, it improves our advertising funds, but it's going back into the network. Richard, I'm not sure if you can give any other color. We didn't break out how much was a direct saving of the $50 million and what we're forecasting for $30 million. I don't think we gave any guidance on that.

No, I guess that's where I'm sort of going. I know it's less than, so arguably it's less than two-thirds of $30 is what we should be expecting.

That is absolutely correct. It'd be a little bit better than half, But yeah, that is correct.

Okay, thank you. And then the other... Just confirming that, that we haven't broken that out. No, understood. Thank you, Richard. The other question I had was around the non-recurring costs associated, particularly with the restructure in France and Japan. Obviously, you've broken that out for FY24. Is there more to come in FY25? Yeah, I'll hand over to Richard for that.

Yeah, I can answer that. So for Japan, for example, it probably... key one for you to understand is that we, as we've highlighted to the market, we've got the additional store closures and we've provided, we've provisioned for the corporate stores, but we've also got closures relating to our franchise stores that we technically can't provision for, so those costs will come through as we support those franchisees doing store closures. So we will have still some costs relating to the closures that we've advised the market.

Can you give us a sense of what that would be, Richard? Because, I mean, this obviously, they look like mostly cash costs, so it is important for us to think about cash flow and ultimately the balance sheet.

Yeah, yeah. So we haven't given, we haven't provided a breakdown of that, but it's going to be significantly less than what we've incurred in the 24. Okay.

Right, that's helpful. Thank you. Thank you, Richard Bowick and Richard Coney. I'll now hand over to Sean Cousins. Great.

Good morning. Maybe just a question on franchisee EBITDA, if you can hear me. I'm just curious around what the variance of franchisee EBITDA, it's 97k now, you want to get it to 130k. How does that vary by market? I recall maybe Australia might or ANZ might have been 150k. We're sort of curious around how we think about the path to improving franchisee EBITDA and particularly how we compare it to historic periods, given you've added a lot of lower EBITDA regions, i.e. sort of Taiwan and Japan is also performed, you know, is generating low profitability pre-closures today.

Yeah, I can confirm that Australia isn't 150, although we have many stores over that, but no, that isn't the average. And as I was saying, Sean, a little earlier than Michael, is we haven't broken it out by market. There is quite a variable amount both in Australian AUD and from a percentage margin by market. Clearly a much lower performance in the last 12 months out of Taiwan and Japan, which was a bigger drag on the numbers over a full year. As our earnings are low, you can see that into our franchise earnings, and that's partly also why we did some of the restructuring that we did. But there are even inside a market, as you go down through this change, there's some really significant variability where we see some really strong performers that are benefiting from all of the execution operationally and the food and labor. They're very active in these new tools and how we're driving those products. And we're seeing EBITDA numbers in parts of our business of Germany, Australia, the Benelux that we haven't seen at the top end. because those stores are maximising. And what our jobs as CEOs is now to get more people up the chain to benefit from these initiatives. So, but yeah, I'm not sure. I know that there's been the odd verbalisation from analysts that they think Australia makes money, but it isn't. It's not 150. It's a reasonably bit less than that, be it that it's growing.

I guess the basis of the question is trying to understand the historical EBITDA that you've provided by franchisees. When we think about franchisee EBITDA historically being up to 160K or 157K, there's no country mix shift that we should be thinking about that. That's not something that you could emulate again. That's the basis for the question.

Yeah, that's a good question. So now I appreciate that, Sean. The biggest overweighting of those numbers during COVID came out of Japan. and later years, Taiwan. Japan really accelerated to earning levels at a store level that we may not emulate in the next two to three years. On the other side, you're seeing really strong store performance out of Germany and the Benelux. Even France actually has strong margins at a store level, be it not the quantum of Euro EBITDA that Joel would expect for his franchise partners. And Kerry has far greater ambitions knowing what the top end looks like. I must say the top third of the network, the high performing part of the network of where the other two thirds of the network should travel for Australia and Zealand.

Great, thanks. My second question is just on constant currency. The way the results are presented is you've called out constant currency results are based on fiscal 23 FX rates. This seems inconsistent with the way you've disclosed your fiscal 23 result. where what you did was you translated the fiscal 22 results using the fiscal 23 currency. Why are you presenting constant currency using last year's currency? Wouldn't you restate the 23 earnings using 24? Why have you adopted a different approach now? Or is there something around... was there a mistake in the slides? And I guess to confirm that, is there any currency impact in the same store sales growth numbers that you provide in your dashboards there when you talk about constant currency? It just seems an uncommon approach that you've taken.

Yeah, this is a good question, Sean, and thank you for highlighting this. There is no variability like same store sales as a result of currency. They are same store sales as mentioned by market to their local currency. It is not my understanding of any policy change, but maybe Richard can highlight

Sean, you picked up a detailed point in my footnote. Let me come back to you on that one. I don't believe there was a change and it should be just apples with apples, but let me just double check that with my team.

Great. Thank you, Richard. Thank you, Don. Thank you, Sean. Thank you, Sean. And the next question is going to come from Brian Raymond from J.P. Morgan. Brian.

Sorry. Yes. Just on the second half uptick in growth, I'm just keen to explore that a little further, given there's a lot of moving parts here year-on-year in terms of the cost out and the performance of the business. Consensus has got roughly $30 million of year-on-year growth in FY25. You're saying first half will be broadly flat. Just trying to understand... the rough magnitude you're describing in terms of some of these factors relative to that 236 or so mil of EBIT in consensus. Is there a skew in the cost out to the second half, for example, in terms of the realisation of those benefits? Is the ramp up in same-store sales growth very back-end weighted? Obviously, we've seen the trading update, but just keen to explore that second half growth rate. You could help us with that. Thanks.

Yes. No, thank you. And I want to be really clear. We don't give guidance. I've got to be careful that I'm not trapping this into a guidance with the nature of that question. But what I can say is that in the first half, we have the headwinds. The whole year has the headwinds. We intend to hit our targets and therefore management would pay their LTI and STI. So that's a cost to the business over the whole year. But in the first half, there is a real cost to the network, largely in Japan and A little bit in the rest of business and in Europe in warehouses. So we had a reset in our warehouse in Germany, for example, just the cost of distribution. And as a way of passing through the savings to our franchisees, we've taken that cost increase to us. That's our one way of passing a third of the savings through. So if you can imagine, as the year goes on, we've got the annualized savings from last year of the work we did with the restructure of the business. And then more continues through the year as we migrate the targeted roles into the global support center, shared services in Malaysia and Poland. And then the continued progress of the businesses as they kick in with their media spend. So Joel highlighted that he's got a step up in media of working media in October and then a material step up in January. To put it in a perspective, when Joel said that he's expecting a 6% NAF advertising contribution, which is a 2 over 4, that's a more than 100% increase in the working media. Because you can imagine an advertising fund has operating costs to produce media, the artworks, some of the technology, the individuals working in the advertising fund, like the CMO and their key team members. So once you get the additional NAF, which we're seeing in Australia and New Zealand, we're seeing in the France forecast, in Japan's forecast, that's all going into working media drive. And with those significant investments in working media, there is some shift in the same-source sales expectations, also rolling software comps. And then finally, it's our corporate store performance continuing to momentum forward. I think what's really important, if you have a look at what we've said, H1, earnings do progress against H2. Some of these original costs come in and then the savings and the growth continues into the second half. We're also consuming the restructuring costs in Japan and France in this first phase. But that likely gives you the picture that the overall earnings and the way that I think shareholders have looked at our business isn't accurate in a sense. We're just highlighting the movements in the business, but I want to be clear, I'm not giving any sort of guidance to that. That's just more giving you an indication of how the plan comes together.

Okay, that's helpful, Carla. Thanks, Don. And just on Japan, with the store closes, just keen to explore if there's any more Any risks that that does expand over time? If you could give us some colour around which prefectures have got a particularly low level of store density, for example, after these store closures, is there anywhere, you know, some are very materially underpenetrated or potentially need addressing over time? I would imagine the major cities that have better performance than some of the outer prefectures. So just keen to sort of understand why you're so confident that you won't need more than the 79% that are planned to be closed over time.

Yeah, I'll hand over to Martin. But the two biggest changes that happened in the last six months was the wind back from the depth of discounting when we were rebounding in the inflationary period, as Martin said and Josh said. We made the mistake of taking the customer with price in the low-frequency market. That was a big mistake. And what we've done a lot better in the last half, you know, Martin highlighted that our franchise partners nearly made as much in the second half as they made in the full corresponding 12 months before that. So that improved unit economics. And that will, you know, as long as that continues, then, you know, that strengthens our franchise network. And so, yes, it is not expectations to add any more stores to that. with positive, today's customer account is healthy sales growth in our perspective. And we're now in a positive mode there, but maybe Martin, you can add more detail. Yeah, no, thank you.

Brian, the amount of stores we closed were actually scattered all over the market. So there was actually one prefecture we withdraw from, that was a prefecture in Iwate, where we had only two stores there, but they were really underperforming. and we decided to withdraw from there. Potentially we can open there again in the future, but for now we didn't see any reasons to open those stores or keep those stores open. But the rest of the areas were all, all the stores were all scattered. So as I mentioned before, one store was not only lost making, but also taking away the profits from surrounding stores. So by closing those stores, strategically and tactically, we were able to see that the surrounding stores should grow in their profits again.

And probably, Brian, one thing I'd add too, from what Mark said earlier, we actually grew market share in the last year as well in the pizza category. So we are the healthier performer out of the networks of pizza operators. All pizza was deleveraged post-COVID as people returned to restaurants. So the pizza category was a post-COVID loser in that sense. But of that, we've still gained the most market share of what's happened in our own category and for the initiatives that we've, you know, not just stores, but also our product innovation and our execution. Excellent. Thanks, everyone. Thank you, Brian.

Okay, the next question is from Lisa Ding from Goldman Sachs, and then following that will be Craig Wolford. Lisa, go ahead.

Can you hear me?

We can hear you. Yes.

Hi, just thanks for all the details. Two questions. One is on the same store sales trend more specifically for Japan and France, because I think we're all targeting to close most of the stores by first quarter 25. So then when should we expect same store sales to actually turn positive for each of these regions, please?

Yeah, I'll hand over to once again to Joelle first and then Martin. But the first thing I can say is that when a store footprint closes, it's also removed from same-sale sales. So we don't, if you remember in history when someone says, well, you're cannibalizing your business and we can't see your same-sale sales, it reverses the other way. You're the network. could actually show better numbers than central sales when a store, like Martin said, closes and 75% of that business traffic goes to an existing store. But that then doesn't become a life-to-life for that store because it's now got a territory change and that's not an apples-to-apples. So we're consistent in both ways we manage that. So I think that's really important. But overall, it's still, you'll see it in our network sales and you'll see it in our total sales. But the second part of your question, I'll hand over first to Joelle and then to Martin.

Hi, Lisa. So I have a question, so like, In France, we do want some movement in the next 12 months. We do expect that the additional media that we have, again, that will bring a massive change. And we do expect that in the second half that it moves in a much clearer way. We will have more media from October. We need to see the momentum taking. But we do expect much stronger results in H2 in that regard. Is that a question for Frans? Yes, and Maarten?

Yes, thank you, Lisa. First of all, it's not only the first green shield we're seeing is positive customer growth, as mentioned before. If that starts rolling into the right direction, you should see in the near future some increase in SSS as well. And in line with what Joelle was saying about extra media spend, also Japan is... extra media to spend this year as well, but also that needs to build. Based on our media mix modeling, we are seeing that our channels to invest in is predominantly TV and video, closely followed by ad graders and social channels. So we are building up our spend there, but that needs to build as well, so yeah.

So I guess if I simply look at sales per store, so not, or AWAS, not same store definition, we should start to see improvement in sales per store from second quarter and then on to second half. Do I, do I? Okay. Okay. Then the second question is, I am a little confused about the all the puts and takes of the costs into 25. So if I just simply look at page 12 in the PREZO and take away EBITDA less revenue, which is about $2 billion in terms of our operating costs, that increased by about 1.6% in FY24. How should I think about this going into 25, just with all the puts and takes of cost savings but reinvestment that we talked about? Page 12.

Page 12. Richard, did you get that? I didn't quite. I was scrambling to get to the page. So maybe just restate that, Lisa, one more time.

Yeah, I just wanted to be like really simple. So if I go page 12 and I go EBITDA less revenue, right, which is basically all your costs, I get to about $2.014 billion of costs that we've got in the business, including all the food costs and labor costs and all of that and all the cost savings that have come through. That represents 1.6% year on year, if I do exactly the same on FY23.

Yeah, that's a good question. Yeah, so a couple of things to note.

Yeah, yeah. How do I think about 25 with all the puts and takes that we've gone through?

Yeah, so we always try to give an outlook of EBIT to network rather than revenue and EBIT. And there's a very significant reason behind that is that depending on the market moves and what we do with our food, so for example, Today in France and the Benelux, we book revenue of food through our commissaries, whereas we unwound in the last year, the Asian business was operating the same, and then we just went to a straight rebate model from third-party warehouses as we produced dough in store. So that changes the revenue line quite significantly when those things happen. The other significant revenue change is what we do with our corporate stores. And we, as you saw in the Australian New Zealand business, is that we shared with shareholders last year that the recovery happens in three phases. First, it's a customer recovery. And as customers get excited by our business, if it's profitable growth, our franchisees improve their balance sheets. They then look to buy stores in the network with existing corporate stores or other franchisees who may have lost interest in the previous window. And that's what you've seen in us reducing our corporate store network. And then the third phase is you go into network growth with new stores. So when you're deleveraging your corporate store sale size of your network, that has quite a significant impact on revenues. So it's a very bumpy place to look just clearly at EBITDA to revenue. And it is still more clear to look at EBIT to network sales. So I'm not sure if you want to refine the question around EBIT to network sales, if we can help you in any way.

I mean, just dollar-wise, right, net-net, we're saving $30 million and more than half of that is flowing back to DPE. Is our reinvestment going to be higher than that, like call it $15 million? Is our reinvestment going to be higher than $15 million?

No, it's not.

Okay, so it's a net positive, all things considered.

Okay, thank you. Now, being perspective, there is inflation in the business. So, you know, we've got wage inflation in our offices. And then don't forget, you add back that we intend to hit our targets this year or exceed our targets. And that means that LTI and STI gets put back in. So that's something that's really important just to note against that. But yes, when you're looking at the underlying, that what you just said is accurate. And then also the corporate stores as the network improves, So do our corporate store performances as well. Just in that as an apples of apples.

How much is the LTI, STI as my last little bit?

The weighted number of that, I think you've broken out, Richard, if you have a look. Richard, are you able to share that? But I think you broke that out in the 4E or where did you go?

Yeah, look, I mean, yeah, if you go to the, I mean, I can't go into all of the detail, but in the REM report, you can see how much, I guess,

What's the quantum, Richard? What's the basic? Do you remember what the number is?

It's roughly... Yeah, it's a couple of million, including timing on bonuses.

But we haven't really... At least in the REM reports, you can see all of that, where we've missed, and then the forecast when we talk about it internally is that we'll be adding that back as a cost to the business.

I'm going to move on to Craig Wolford from MST for his next question.

Thanks, Nathan, and morning, everyone. Great to be having this type of questioning. So just on the marketing expenses, this is more of a P&L question that I'm observing or quoting to you here. The marketing expense in the second half fell quite dramatically compared with the first half. Is that the new trend for... No, it isn't. ..or is it just a timing issue?

It is partly a timing issue and the way the app funds work. But, Richard, if you can answer that in more detail, what I can say, Craig, because I know some commentary today, is that I want to be really clear. There's three reasons why we are going to be spending more advertising this year and significantly. One is our franchisees are electing to spend more in advertising. Two, it's not a new cost to DPE, but we're actually... well, sorry, that is not, in Japan it's a new cost, but in places like France it's an allocation from an incentive with franchisees to move over into advertising. And then we're also yielding the savings in the overhead in our advertising as we move some people into the global support centre. And then finally, this isn't from a quantum point of view, but we've got a lot smarter with our media mix modelling and we're getting a better ROI in the platforms that we're targeting. But Richard, can you be more specific on last year's numbers?

Yeah, so I think, I mean, look, it does move around when we specifically spend our advertising dollars. But there is some seasonality in there in the first half, and we just did, from a timing perspective, we spent a little more. You've got seasonality in Japan, obviously, with December, and in the Japanese market, that's their biggest sales period. So they're spending ahead of the curve in terms of the December period. And then it's just timing of when promotions are happening and how they fall across that December, January, February period. So I wouldn't read too much into it.

Yeah, one of the things, Craig, as an example of that is the Dutch business and the French business are relaunching their brand. So the Dutch businesses in September, they withheld spend in, for example, July and August. So just in that one window, they withheld spend because they've got a huge launch of the brand rebranding in September. So when you see the timing changes, that's what happens inside the business. The CMOs and CEOs work together and say, I'm onto something significant here, and I'm going to save and allocate the fund and then do a big push. That can cross over from half to half. Or other times, it's just business as usual with the core digital spends that we just spend as business as usual for our digital platform.

Okay, great. Thank you. And then secondly, we've noticed in a lot of developed markets that the focus on value mills by QSR operators has really stepped up in the last couple of months, mainly talking about McDonald's and KFC here. Have you seen any implications on your business in the markets where those two brands have a significant presence and how are you responding?

Yeah, so both those players have been doing that. more than six months in most markets um and and your essential sales are as you see them so the australian new zealand business has been experiencing that step up but starting earlier this calendar year um and so you know we do live in the ecosystem of all qsr And as I highlighted earlier, and I've said this previously, second to nobody, the burger business is the category that can be the most competitive against Domino's in the scale of, like, say, for example, in Australia and parts of our business. There is some parts of the world where pizza competitors could be quite competitive. So it does all exist in the ecosystem, but as those partners have shared, they've still been experiencing negative customer counts or being positive customer counts against that. But it's been more of what actions we're doing in any given market that's defining that. Andre, you've experienced it the longest in Europe. Do you have anything to add to that for Europe?

Not really, to be honest. Sorry, I missed the part of the question.

That's all right. It's just more that we're seeing a step up from the burger and chicken providers into these like five euro meals, all these sort of things. Yeah. You know, the effects on our business.

Yeah, absolutely. And that's why we've introduced things like melts and the pizza dogs. The MyBox, we don't talk about that anymore, but it's an additional layer that really helps us combat the five, six euro mules that we're seeing in all European markets. So, yeah, now it's mainly on the product side of things. And the good thing for us is that these products still deliver really good margins to our franchise partners. So we We are able, not as far as media spend, to compete with the burger brands and the chicken brands, but with our products, we definitely are competing more than we used to be when we just considered a full meal option.

An example of new activity for us is we've never had in the Australian business a $3 small meal product as we just launched with Pizza Dogs. But that's a new meal occasion because that's not somebody who would come to Domino's because the starting price at Domino's a number of years ago was $5 for a more shared meal. But we're literally targeting, you know, that's a pretty sharp price point with really good margin for our franchise partners and the way that's being built. So we feel very competitive in these now new areas with some of our menu development. Thanks, Don.

Thank you, Craig. I'm just going to hand over to Ben Gilbert. Just to let you know that while we do have a stop at 12 o'clock, what I'm going to do is continue the Q&A because I have a couple more questions in here, but Don and Martin need to drop off the call. They have some other obligations, including Don has some journalists who get very cranky if he doesn't turn up. So, Ben, over to you, and then I've got Philip Kimber.

Thank you. This first question from over should be nice and quick. Just, Richard, just in terms of view on whether you're going to keep the DRP underwrite going into fiscal 25?

Well, we're doing the one for the last half to June, and that will be dependent on how our cash flows roll over the coming 12 months. As I said, our goal is to hit two times, and so if we can hit that without undertaking a DRP, then we won't do it. But if we feel that that's at risk, we'll continue the DRP. I think is probably the answer.

Thank you. And just a second one for me. Sorry, I'm just still a bit confused around the media side. So you're talking both gross and net media spend for Domino's is going to be materially up through fiscal 25, led by first half. Does this suggest that there's going to be a bit more of a pivot around building brand as opposed to focus on value? I know Don just touched on the success that you've had in Australia on some of these mailboxes, but is this going to be met with a push to try and drive pricing up? I'm just trying to understand that balance because obviously you got into some challenges a couple of years ago, pulling off the value lever and it's taken you sort of 12, 18 months to get back on that track.

Perhaps if I can throw to Josh first and then to Andre, and I know that Joelle was biting to answer that one as well. So Josh first.

Sorry, I just missed the first part. I think it was around the media spend and how we're going to be spending it across across the group.

Given that it will be materially up in the first half and we're obviously guiding that we will be spending more on media this year, is it changing more to a brand media?

Yeah, look, Ben, look, we build our brand through retailing and retailing of our products. So I don't think there's going to be a material shift where we come up with, you know, fluffy commercials that are 30 seconds long that talk about, you know, the air and these types of things. We are really about our products, the inspired products, and we build our brand that way. through across their whole business. You know, one thing we're doing with our product is not only just the inspired food at the top end to bring in the new customers, but we're actually inspiring the core because we want to be known for our pizza across and very high-quality pizza in our core as well. So you're going to see building of, you know, rewarding customers who are already with us by improving quality and the options available, but then also inspiring through new products. And Pizza Dogs is a great example in Australia of inspiring and building new occasions through new offerings with new price points and different ways of looking at it. So I don't know if Joel wants to answer on behalf of France and Europe or Andre, but that's the way we view the media spend.

Let me take it before, and then I can hand over to Joel specifically on France. But we talk about this new platform layers and occasions. And what we are trying to do in most markets, at least in Europe, is to explain that to the customer better. And that asks for a different brand image, because we used to be the middle business, but we still are very retail-y in our communication. You'll see later this year, a new brand campaign in Netherlands that is filled with product and filled with deals for customers. So we would not get away from being that really retail-y marketing, but we need to position it. We need to make the customer understand why they should go to Domino's still for the pizza-ness and the entertainment as we do, but for a lot more occasions than they used to. So, Joel, anything to add?

Yeah, no. I wanted to say that we should not oppose, you know, like, brand and value. Actually, like, the way, you know, what we oppose, you know, is brand and cheap, and that's what we are not. And actually, value is also a core part of our DNA. You know, like, there is many things in regards of, like, our product, our fun, like, within the DNA, and value is part of it. And again, you know, it's how we address it market to market. But, like, for us, and the way we see the the communication out of the next 12 months is that we will speak brand but again value is still part of it it's just how you are able to address it to uh to make to make it great for the customer you know so that's that was just a small detail at least about prompts

So one quick thought, does this allow you, do you think, to take price? You obviously haven't really taken price the last couple of years. Does it provide scope to take price looking forward? Or you don't think you can in this environment?

Well, in a way, it provides the opportunity to have more occasions. And it might, from a ticket perspective, not necessarily be a higher ticket, but because you have more of those snacking smaller occasions, it will decrease your ticket. But yes, new products, like we've seen with the My Box and the Melts, they have no anchor price, right? Everybody sort of knows what a pizza price is. So we're doing way more rigorous testing, price testing than we used to. We used to be a bit of a cost plus business where now we're actually asking consumers what would you be willing to pay for it if it was part of your staple menu? So, yes, we think that there is more margin to take, and we have different products that will have a bigger margin. For instance, in the drinks in Europe, we're seeing thick shakes still continuing to grow year on year on year, and they are materially more expensive than a – a regular milkshake, but they're also a lot more quality at delivering great margins for our customers.

Great, thank you. Sorry, also what's worth noting is when we really execute products well, then we're discounting less. So in effect, you're getting a higher price point. So as we roll out these new and inspired products and those campaigns execute, And we're spending more of those dollars where we're not having to discount the product. So it's sort of a reverse way of saying it.

Easy. Thanks.

Appreciate it. I'm going to now pass over to Philip Kimber. Philip, you're okay to go ahead. I think Phillip's still on mute. So I'm going to just wrap up with one last question just from Chris Scarpato who's asked, and this is one probably for Richard, why not hold or reduce the dividend and initiate a share buyback providing the group with more optionality around capital management?

That's a good question and sort of probably quite upbeat with our current strategy of reducing our leverage and reducing our debt levels. So we could consider that, but that would involve a whole re-look at our whole debt and capital structure. So we always consider capital structure opportunities, but right at the moment, that's not one of them.

Thanks, Richard. Just going to give one more chance to see if Philip is, Philip, you're off mute now just to see if you're still there. Otherwise, we will wrap up. Appears not. Okay. I want to thank all of our attendees today. As I said, we had more than 200 people on the call today. I particularly want to thank those people dialing in from our executive team from Europe and also those attending in person for their first time. We look forward to seeing all of you on the road show. Thank you and have a great day.

Thanks, everyone.