Domino's Pizza Enterprises Limited

Good morning all. I'm just going to wait for the webinar to populate with our participants and then we will start today's presentation. Okay, I can see our participants have now joined the call. Thank you for joining Domino's Pizza Enterprise Limited's half-year results for the period ending December 2025. I'm Nathan Scholz, the Chief Communication and Investor Relations Officer, joined today by Jack Cowan, our Executive Chair. and George Sayoud, who is our Group Chief Financial Officer and Chief Operating Officer. I will hand over shortly to our Executive Chairman to prepare to provide some of his opening remarks. When we get to the Q&A session at the end, if you can raise your hand, I will, as usual, hand around to the different analysts to ask a question and a follow-up, and then I'll ask to hand on to the next question and answer before coming back. So with that, I will hand over to Jack Cowan. Jack, for your opening remarks.

Good morning, everyone. It's my pleasure to give you an overview on the company's first half results and progress that the company is making as part of a significant reset. Before I start, just a headline. The company is on track to what we have endeavored to do in getting out of the discount business and making more money for our franchisee community, which is a basic plank of the success going forward for this business. To move into kind of my commentary, the most important step in structuring the company for the future is the new management that has been established over the past few months. World-class management team, second to none in the food service industry. Incoming group CEO, Andrew Gregory, most recently executive vice president of McDonald's, a senior executive with McDonald's for 30 years, including as CEO at ANZ, Japan experience, responsibility for plus 40,000 franchise units around the world. He'll join us later this year after completing his obligations to McDonald's. George Tahoud, CFO, will retain this function, plus from January 26, 2026, takes on the role of Chief Operating Officer. George joined PPE in July 2025. We have new country heads, Mr. Merrill Pariah in Australia, started in January 26, experienced long-term employee in McDonald's Pizza Hut in Asia. Mr. Abhishek Jain, CEO of New Zealand, now established as a separate market, former COO of Australia for Pizza Hut, long-term Pizza Hut executive. Mr. Phil Reed, CEO of France, started July 25, was previously executive with McDonald's, Burger King as a franchisee, and CEO of Pizza Hut Australia. Mr. Dieter Haberl, CEO of Japan, long-term resident of Japan in the retail business. Mr. Jai Rastogi, Chief Procurement Officer, deep international experience with major competitors in Australia and Asia. Mr. John Buantanon, Chief Technology Officer, joined us in January, 2026, previously Senior Technical Advisor at Deloitte's. Today, we also announced that Drew O'Malley, ex-CEO of Collins Foods, executive positions with Amarest in Europe, has been announced as a new director of the company. This new management team is tasked with building the business with the goal of long-term success for a business in 12 markets, 3,500 outlets, 4 billion in network sales. This group will provide the platform growth and profitability going forward. We're very proud of being able to attract these people to our company with the experience and background that they all have in this industry. Corporate DBE earnings. At our AGM in November, we undertook to provide earnings to match earnings consensus growth forecast with a F26 financial year. And I'm pleased to advise that we're on target to do so with the first half EBIT of $101.5 million, an increase of 1% versus the prior corresponding period. Net profit after tax of $60.1 million, or plus 2%. higher than the prior corresponding period, and free cash flow of $70.6 million. We anticipate that the 2026 full-year results will be in line with guidance provided at the AGM and consistent with market expectations at that time. Sales year-to-date, including the first trading week of the second versus the previous year. We have embarked on a test in WA, which changed the business from heavy discounts to everyday pricing. The result had been a loss of customers who were heavy users driven by pricing unattractive to franchisee P&L. The loss of price-driven customers had led to a decrease in sales, but an increase in franchisee profitability, which was our original objective and which we forecast would happen, and now we are seeing the results of that. The trial confirmed the benefits to franchisee profitability. We are now refining promotional activity to rebuild traffic on profitable terms. The increase in franchisee profitability has led to a national reduction in promotional discounts and an endeavor to enhance franchisee profits, but has led to a negative sales result. We believe that a return to profitable promotions will assist in regaining the price driven customers over the next six months to a year. Franchisee profitability on a rolling 12 month EBITDA has grown from 98.6 in FY25 to 103,000 FY26, the highest level in three years. Very important. We're hopeful that these numbers will continue to grow as returns improve and lead to an increase in investment in new units and sales. Bottom line on the financials is dropping broad discount will increase franchisee profits and return to sensible promotional activity, which will lead to a return of price driven customers, sales, enhancing DPE profits. Progress continues with the 100 million objective in our sites of cost out with some exciting new contractual arrangements and enhancing global profitability. There are cost pressures in various markets with regard to labor laws, which the cost out program continues to cover as well as enhancing profits. Company debt, total debt reduction from June to December of 196.1 million. Net leverage ratio reduced from 2.21 times down 3%. with average debt tenure of 4.5 years. Interim dividend increased to 25 cents per share, plus 16%, 16.3% higher than the FY25 final dividend. I'll now hand over to George to walk you through the detail behind the reset in the financial results. George.

Thank you, Jack, and good morning. I'm on slide three. As Jack outlined, this half was about resetting the business and rebuilding the foundations in pricing, store economics and capital discipline. We've made deliberate decisions to strengthen franchisee returns, simplify the system and improve financial discipline. We operate a leading global QSR platform, so we made a deliberate choice. Strengthen unit economics first, then rebuild volume on a better base. turning to slide four, delivering on our plan. As Jack said, the reset is about getting the foundations right in pricing, our cost base, leadership, and capital allocation. We're moving from broad-based discounting to targeted economics-led promotions. In the WA trial, we saw ticket and margin per order improve, volumes moderated as expected, and we refined how we deploy promotions. Globally, franchise profitability increased 4.5% to 103,000 per store, the highest level in three years, with Australia delivering even higher growth. Most of our franchise partners operate more than two stores. So when average store EBITDA lifts, that's meaningful income improvement across their portfolios. If franchise partners are profitable, the system is strong. We've actioned 55 million of cost savings, a large portion of that flows to franchisees through lower food and network costs. And importantly, we are funding this reset from within. We are strengthening the balance sheet while strengthening store economics. Just quickly on slide five, the CEO appointment, the board appointed an experienced global QSI executive, Andrew Gregory, after a thorough global search. Andrew understands franchise systems and discipline growth. There'll be a proper transition when he joins us, which is no later than early August. The principles do not change. The work underway continues. Slide six, guiding principles. This slide shouldn't surprise you. We're taking a disciplined approach with these principles, guiding us as we move through this reset so you can track how we deliver against our plan. Turn into slide eight and expanding on Jack's earlier commentary. Overall MPAT was 60.1 million, representing a 2.2% growth over the prior corresponding period. The key components making up the result are as follows. Network sales of 2.04 billion represent a decline in same-store sales growth of 2.5%. The decline reflects the deliberate reduction in deep discounting, largely in ANZ and Japan, prioritizing franchisee profitability. There is also the effect from reducing the number of stores from the prior corresponding period on network sales. Overall sales across each region are balanced with strong sales in Europe, offsetting the softer performance in ANZ due to the reduction in discounting. The group delivered an EBIT of $101.5 million, which represents a 1% increase over PCP, largely due to the performance in Europe and Malaysia offsetting the reduced warehouse margin and volumes in ANZ. A higher effective tax rate reflects the greater share of earnings in higher tax jurisdictions. From a cash flow position, the business generated $70.6 million in free cash flow, which is $40.6 million above last year. Focused and disciplined capital management has resulted in a reduction in spend on technology and digital investments and new store openings. This is driving the improved cash flows. There was a net reduction of $114.2 million and total debt reduction of $196.1 million during the period which was driven by the strong cash flows. An interim dividend of $0.25 per share to be unfranked and not underwritten. The dividend reflects our support for maintaining the balance between supporting deleveraging and reinvestment. The dividend reinvestment plan remains in place. Turning to slide nine on the geographic summary. Overall revenue across each market region is similar with growth in Europe with the same store sales of 1.3% offsetting the decline in ANZ of minus 4.7%. As mentioned previously, the decline in ANZ reflects the lower order count in the period as the business reduced discounting promotions to improve margin per order. In ANZ, the cost savings were passed on to franchise partners ahead of those savings being fully realized. The strong results in Germany and Benelux and Malaysia offset the softer trading in ANZ, Japan and France. Whilst Group EBIT is up 1% to 101.5 million, the decline in orders impacted the ANZ result by 6.3 million. This decline was offset by growth in Europe of 7.6 million and growth in Asia of 1.4 million, notwithstanding the sales decline in Asia. Overhead and cost control as well as improved margins on orders assisted the improvements in Asia as we hold many corporate stores in this region. The increase in global overheads reflects higher amounts expensed in the current period, the technology and data versus the prior corresponding period. Gross technology costs are significantly down as can be seen in our cash flow analysis and has been a major part of our cost out program. Turning to slide 10, cash flows. Importantly, the reset is being funded from within through disciplined cash generation. Pre-cash flows of 70.6 million was generated in half 1.26 versus 30 million in the prior corresponding period representing a $40.6 million improvement. This improvement largely relates to a 30 million cash reduction in investing activities through focused and disciplined capital management. We'll be explaining this further on the next slide. Operating cash flow improved by circa $5.8 million and net leasing payments improved by $4.8 million as a result of store closures and the associated reduction in the number of stores. Operating cash flows of $101.2 million includes the benefits of reduced tax pay during the period, offset by higher cash payments for non-recurring costs versus PCP and some negative working capital improvements in Europe. Slide 11, investing activities. Overall, there is a 30 million reduction in net capex from investing activities in this half 26 versus half 25 last year. The business has reduced investments in digital by 14 million over the prior corresponding period, reduced spend on operational systems and back of house capabilities by three and a half million and reduced spend on new store openings and acquisitions by 4.6 million. Cash inflows of 8.4 million came from store proceeds and from the sale and loan repayments. The introduction of tighter governance by investment committee approvals ensures that all expenditure has the appropriate returns back to the business and aligns with our priorities. Looking at our debt and capital management on slide 12. Management has successfully completed debt refinancing of $1.05 billion in new facilities with better pricing and staggered maturity terms with a weighted average tenure of 4.5 years. Total debt has reduced by $196.1 million and net debt has reduced by $114.2 million with $64.4 million related to cash repayments. And there is $49.8 million relating to positive FX movements during the period. Our net leverage position represents 2.21 times at December 2025, approaching our target position of just under or around two with an interest coverage ratio strong at 19.8 times. And as previously mentioned, an interim dividend of 25 cents per share will be paid. Slide 14, an update on cost savings and our cost simplification program. Our cost reduction program was aimed at driving a simpler business model across technology, group support, and also investing back into operations to drive a sharper focus and execution for franchisees and customers. Our cost out program continues to track to 60 to 70 million of annualized cost savings, with 55 million of cost savings action today. Majority of this is related to reductions in headcount, in particular in IT, procurement and logistics savings, and other marketing and G&A expenses. Of the 60 to 70 million in savings, 20 to 30 will be delivered as benefits in FY26. And as previously mentioned, circa 33% of those benefits will flow into DPE. We have started phase two of the cost out and simplification program to target indirect services in G&A IT, as well as further opportunities in food and packaging. Further analysis will be presented in the four year results. We expect benefits in the range of 15 to 25 million annually from this initiative. Turning to page 15, franchisee economics. This slide is at the heart of our reset. We've taken deliberate actions on cost out, on pricing and discounting and on supply chain and IT so that we can generate higher returns and reinvest in our franchise network. And it's having a positive result. Group average franchisee store EBITDA has improved 4.5% to 103,000 on an average 12 month rolling basis, the highest in three years. Let's put that in perspective. The earnings increase in franchisee store EBITDA is measured over 12 months, but the program that delivered it was largely in the past six months. Importantly, we're seeing this trend continue into this half, with ANZ franchise profitability up by more than 10% higher in January this year versus the prior year. The improvement in franchise profitability has been across all markets, demonstrating our reset efforts are not regionally based but have global benefits. At the core of our changes is ensuring we continue to deliver value for everyday customers, every day. On slide 16, our value equation. Earlier, I showed the principles we're applying for this reset. This slide shows those principles in action. Historically, we leaned heavily on discounting to drive volume. That lifted transactions but diluted value. We're shifting to a more margin-accretive operating model. That is part of the reset. We're rebuilding pricing discipline so that growth is more profitable, volume is spread throughout the week, which means franchisees can manage their labor and other costs more effectively and can focus on delivering a better product to our customers. So pricing and the value equation isn't just about one number. It means simpler menus, clearer bundles, and consistent execution. We want to remove customer friction points. The objective is simple, improve customer value while strengthening unit economics. We are already seeing this in evidence. Our pricing is lifting basket size, improved consistency allows our franchisees to improve margins and customer frequency, value-led bundles are replacing blanket broad-based discounting, and CRM is becoming more targeted. In ANZ and the WA trial, it's helped us learn some of these concepts. We've accepted some short-term volume moderation to improve ticket and grow store profitability. This is not about charging more. It's about pricing transparency, offering great value through consistently executing and growing sustainably. Slide 17, smart offers, putting this into practice. We want smart offers that give great value for customers and profitable returns for our franchise partners. Historically, we used broad blanket discounting to drive volume. That lifted transactions but compressed margins and diluted store economics. We've changed that. Promotions now have to meet store-level economic thresholds. They focus on margin and on carry out versus delivery. And increasingly they are targeted through our own channels. The Saturday promotion as an example in Australia is a good illustration. We moved from blanket discounting including delivery to now selectively carry out or pick up offers. That protects contribution while still driving traffic. The principle is simple. Unit economics first, then rebuild volume. Early signs are encouraging. Voucher dependency has reduced materially by more than half. Store profitability is improving and we're refining as we go. It's disciplined, smarter discounting. I will now hand back to Jack to talk about the trading model. Trading update.