Domino's Pizza Enterprises Limited

Good morning and thank you for joining the Domino's Pizza Enterprises Limited FY26 Full Year Results Investor Call. I'm Nathan Scholz, the Chief Communications and Investor Relations Officer. This morning you'll be hearing from Chairman Jack Cowan, Group CEO and Managing Director Andrew Gregory, and Group CEO and CFO George Sayoud. After the presentations, we will have a Q&A. Analysts will have the option to select raise hand, and then you'll be unmuted to ask a question and a follow-up. With that, I'll pass to Chairman Jack Cowan.

Good morning and thank you for joining us. 12 months ago, I said this business needed a reset. I want to start with what we said we would do and what we have done. We said we would rebuild franchisee profitability. Average franchisee EBITDA is up 11.3% to $105,700 a store globally in Q3 FY26. Store margin has moved from 7.1% to 7.9%. That is real money back in the hands of the people that run our stores. It's not where it needs to be, but our Australian stores are higher than the global average at 128,000. Our target is 130,000 globally, and we will keep working until we get there. I've said before that this business is only as good as a franchisee partner's ability to make a decent income. When our franchisee partners make money, they invest. They hire better people, they look after the customer, and the sales follow. What we have said, we said we would take cost out, We have actioned 67 million of annualized savings with 35.3 million of that realized in FY26. We said we'd strengthen the balance sheet. Free cash flow is up 116.6 million to 164.1 million. Net leverage is 1.86 times. Underlying net profit after tax is up 4% to $121.6 million, and the dividend is up 51.2% to $0.325 per share. Now to the next task, which is rebuilding profitable sales growth in FY2017. We have simplified pricing, reduced voucher dependency, and moved towards smarter offers and built a leaner cost base. That has strengthened store economics, but has also lowered order counts where customers have been responding mainly to discounting. We became the king of discounts. On some orders, we were selling product and not making enough for our stores. We have stopped a lot of that, and we knew when we did it that it would cost us volume. In Western Australia, where we have run our clearest test of simpler everyday pricing, we gave up top-line sales and improved store profitability substantially. A portion of the transactions were entirely dependent on too aggressive a discount. We've learned a lot through that test. Our mistake was not recognizing that we still have to promote great value. You have to grab people's attention. The work now is to promote great value profitability, simpler menus, stronger meal menu, better digital and CRM execution, and customer service improvement. that rebuilds frequency without giving back the economics the team had built for FY27. Western Australia continues to outperform the rest of the country on the key customer and profitable sales indicators we are watching. We've still got more to do, but the evidence is encouraging, and we'll adapt those lessons to apply them in a measured way across the country. I want to say something about the team, because in my experience, that is what determines the outcome. Over the past 12 months, we've put in place a management team, I believe, that's second to none. I want to thank our group chief operating officer and chief CFO, George Sahoud, who has taken on significant leadership responsibilities in the last year and helped lead the reset that brings us to where we are today. Andrew Gregory has joined us as Group CEO and Managing Director this month. Andrew started as a crew member in 1993, ran McDonald's in Australia and New Zealand for eight years, and most recently spent three years in the headquarters in Chicago. He understands the franchisee economics from both sides of the counter. As chairman, my job from here is to support Andrew, not to run the business for him, and I'm confident he is the right person for the job. We've also renewed the board with Judith Swales and Drew O'Malley joining this year, adding additional experience in retail and QSR. Let me finish where I started. We're in the franchise business, and we happen to sell pizza. The argument is not about who gets what slice of the pie. It's about making the pie bigger. The reset is delivered. Returns are improving. And FY27 is about building profitable orders. The test from here is simple. Rebuild order momentum without giving back the store economics we have just restored. I'd now like to hand over to Andrew to introduce himself and his team's plans.

Thanks Jack, good morning. I started on the 5th of August and I'm still early in this role but I'm not early to the QSR industry. I've already spent time listening in stores, meeting franchisees and talking and listening to leadership from across our 12 markets. What I've seen is a business with strong foundations, a strong brand, a committed team and passionate franchisee partners who want to grow and be successful. I'm more confident in the success of this business as a result. Having said that, sales momentum is not where it needs to be, and regaining momentum and growing our baseline of average weekly order count will be the operating measure that I focus on as an absolute priority. I am clear on the current strategy to create a more sustainable business based on more consistent value that grows franchisee profitability at the same time as growing sales. Our results in growing order count will be choppy in the short term. but it must be and is our longer term objective. It's the only way to sustainably grow income for both the franchisees and the company. The FY26 reset that Joy will outline has delivered a strong foundation to build upon for this business and it's my responsibility to continue the strong focus on costs and capital discipline and also to build and grow the Domino's brand and business from that foundation. We know our customers want us to be great value every day, not just at particular times or for particular days of the week or even for short periods on our calendar. We will grow this business and create profitability for our franchisees if we are able to offer predictable, compelling value to our customers. And of course, value is not just price. Value is great food, great pizza, great service and delivering joy with every pizza. In each of our markets, we have a strong leadership position against our direct pizza rivals. An uncertainty and challenging consumer environments are not within our control. However, our decisions and the way we show up for customers and our teams in the stores is within our control and it's our responsibility. We control how we price, how we execute world-class marketing and how we execute in our stores with our franchisees. In each of our markets, There are QSR brands successfully driving profitable growth for their franchisees and sustainably growing market share. I'll come back later to the FY27 priorities, but my direction is clear. We need to turn stronger foundations into profitable customer growth and better outcomes for Domino's stakeholders.

Thank you Andrew. Good morning everyone and thank you for joining us. FY26 was a year of necessary reset for DPE. We made deliberate decisions to simplify the business, reduce costs, strengthen the balance sheet and restore franchise partner economics. Some of those decisions had a visible impact on sales and order volumes during the year. However, they've also created a more sustainable operating and financial base from which we can rebuild profitable growth. At a high level, there are four messages I would like you to take from today. First, the financial reset has been delivered. Second, franchise partner profitability is improving. Our balance sheet, liquidity and cash generation has strengthened materially. And fourth, the focus for FY27 is clear. Rebuilding profitable sales and auto growth without giving back the economic gains achieved through the reset. Turning to the FY26 financial results on slide 6. Network sales were $3.87 billion, down 6.8%, while same-store sales declined 4.1%. This reflected the reduction in store numbers and our deliberate move away from broad, high-discount promotional activity, particularly in Australia, New Zealand and Japan. Despite those sales pressures, Underlying EBIT increased 1% to $200.1 million and underlying MPAT increased 4% to $121.6 million. This demonstrates the impact of our cost actions taken across the group, the stronger contributions from Europe and Asia and improved portfolio margins. It is also important to note that the EBIT result was achieved while cycling approximately $10 million less profit from store sales than in the prior year. Free cash flow excluding divestment proceeds increased $116.6 million to $164.1 million. Net debt reduced by $227.8 million, from $724.8 million to $497 million, and net leverage reduced from 2.57 times to 1.86 times. The board has declared a final dividend of $0.325 per share, an increase of 51.2% on the FY25 final dividend. The dividend represents a 50% payout ratio on the second half underlying MPAT and reflects a balanced approach to share all the returns, continue deleveraging and appropriate reinvestment back into the business. The statutory result includes a post-tax impact of $255.7 million from balance sheet write downs and other non-recurring items. These items principally relate to revised carrying values for France and Taiwan goodwill and intangible assets, technology assets that no longer align with our enterprise IT strategy, underperforming scores and other balance sheet adjustments. While significant from an accounting perspective, these write downs are largely non-cash. They do not change the underlying operating performance, cash generation or the covenant position of the group. They represent a more realistic alignment of our carrying values with current performance expectations and our strategic priorities. Turning to slide 7, Geographic Summary. Looking across the regions, the portfolio shows improved earnings resilience despite softer sales. In AIM-Z, EBIT declined 5.9% to $122.9 million. Sales were affected by the pricing and promotional reset, particularly the decision to reduce broad discounting. Order volumes moderated, but improvements in ticket, food cost and cost control supported stronger franchise partner economics. Europe delivered even growth of 2.6% to $74.9 million. A stronger performance in Benelux offset softer trading in France and also in Germany in the second half. Asia delivered EBIT growth of 19.9% to $34.7 million, despite lower revenue. This improvement primarily reflected the closure of underperforming stores in Japan, menu simplification and cost discipline. Japan's corporate store network returned to positive EBITDA, while Malaysia and Singapore continued to improve from a profitable base. Global overheads also improved. This reflects the tighter cost control, disciplined headcount management and lower discretionary expenditure. The key point is that the group delivered modest EBIT growth and margin expansion despite lower sales volumes. Lower revenues did not flow through to lower profit. That gives us confidence that the reset has created greater operating leverage as sales momentum improves. Turning to slide 8, free cash flow. Free cash flow was one of the most important outcomes of FY26. Free cash flow before divestments increased from $47.4 million to $164.1 million. Operating cash flow before interest and tax increased by $10.5 million to $312.6 million, supported by favourable working capital movements. Net operating cash flow increased by $59.5 million to $226.7 million, which also benefited from $44.9 million of lower tax payments, primarily reflecting the timing of payments across jurisdictions. We recognise that tax timing was a meaningful contributor, however the improvement was not solely related to tax. It also reflected better working capital management, lower interest payments and a substantial reduction in capital expenditure. Capital expenditure reduced by $48.1 million to $38.7 million, reflecting greater investment discipline that contributed to a reduction in net investing cash outflows to $5.7 million. The focus on cash is structural. We have strengthened working capital disciplines, reduced investment in lower priority activities and introduced a more rigorous returns-based approach to capital allocation. We said we would improve cash generation and we did. Turn to slide 9, Investing Activities. Within capital expenditure, digital investment reduced to $21.5 million from $44.8 million, a decline of $23.3 million. This does not mean we are stepping away from technology, it means we are moving to a more disciplined enterprise IT model with clearer prioritisation, stronger commercial accountability and explicit investment cases. Our digital priorities will focus on reducing friction in the customer journey, strengthening our CRM and personalisation, and supporting store productivity and franchise partner execution. Looking forward, we currently anticipate digital investment in the range of $30 to $45 million, with expenditure subject to clear business cases and alignment with the group's strategic priorities. Slide 10, Debt and Capital Management. The stronger cash performance has translated directly into a stronger balance sheet. Net debt reduced by $227.8 million. Of this, $138.9 million related to cash repayments and $88.9 million related to favourable foreign exchange translation, predominantly associated with the Japanese yen. Net leverage reduced to 1.86 times, achieving our target of below 2 times. interest coverage improved to 20.6 times. During FY26 we also completed the refinancing of $1.05 billion of debt facilities. The refinancing delivered improved pricing, staggered maturities and a weighted average tenure of approximately four years. At year end the group has 467.5 million of cash and undrawn permitted facilities providing substantial liquidity and strategic flexibility. We are therefore entering FY27 with a stronger financial position, improved liquidity and greater capacity to invest selectively behind initiatives that can generate substantial returns. We said we would strengthen the balance sheet and we did. I will now turn to the operational reset starting with Western Australia. WA provides an important example of both the opportunity and the execution lessons from FY26. In September we removed broad high percentage discounting. That improved average ticket and store economics but it also reduced orders more than intended. From February, the market progressively reintroduced sharper, targeted carryout offers and began testing lower delivery fees. The objective was to rebuild orders while preserving the stronger economics achieved through the initial reset. The results are encouraging. WA delivered five months of record franchise partner EBITDA. Carryout comparative sales became positive and delivery sales improved. and WA same-store sales outperformed the rest of Australia relative to the prior year. Note that we introduced a delivery fee in WA at $895 when we began the trial. We are now in market with a $595 delivery fee across WA as of two weeks ago and we're seeing improved conversion. The lesson is not simply that lower prices generate volume. The lesson is that different customer occasions require a more deliberate value architecture. For FY27, we intend to apply these learnings through clearer menu pricing, targeted carry-out value, more disciplined delivery fee settings and lower reliance on broad voucher-led discounting. WA is not a copy and paste answer for every market. It is a playbook for how we test value, volume and margin together. But the principle is simple – clear value, targeted offers and profitable sales. Moving to slide 13 – Franchise Partner Economics Strengthening your franchise partner profitably has been central to the reset. Average roll in Q3 12-month franchise store EBITDA increased 11.3% to $105,700, while the average store EBITDA margin increased from 7.1% to 7.9%. The improvement was driven by higher average ticket, clearer pricing, lower food and packaging costs, tighter cost control and operational simplification. Franchise partner profitability increased across the major markets and particularly strong outcomes in Australia, New Zealand and Japan and continued growth in the Netherlands and Germany. The target is $130,000. We are not there yet but the direction is right. The business only scales properly when franchise partners have the confidence and the returns to invest. Slide 14 the Roadmap to Sustainable Growth. We are targeting average global franchise partners for $130,000 over time. Reaching that level will require contributions from three areas. Renewed customer growth, further procurement savings and improved store productivity and store execution. Importantly, this is a shared agenda with franchisees. Domino's must provide a stronger customer proposition, better technology, procurement benefits and simpler operating systems. Franchise partners must convert those initiatives into consistent execution, customer service and local growth. This page shows the levers to get from today's average franchise EBITDA of $105,700 towards the $130,000. The important point is that there is no single lever and these initiatives are not sequential, they can move together. One lever is profitable customer growth, the right volume at the right margin supported by clearer pricing and smarter offers. Another is procurement, continuing to lower food, packaging and other input costs where we can and sharing those benefits appropriately through the system. The third is productivity and execution. Better labour scheduling, simpler processes, improved store efficiency and stronger in-store execution. The model only works when both sides execute and when growth shows up in stronger store economics. This is where management's attention is because a more profitable franchisee is the engine of our business. It's better for our network growth, our customer service and shareholder returns. The cost program delivered in line with our expectations. We've actioned $67 million of the annualised savings across technology, central support, procurement, logistics, marketing and G&A expenses. Of that amount, $35.3 million was realised in FY26. Two points matter. First, a meaningful share of the savings supported franchise partners through lower input costs and better store economics. Second, the savings retained by ZPE helped protect earnings while we moved away from lower margin volume. That is the balance. Franchisees have to eat first and ZPE also needs the right cost base. We've also identified a further $15 to $25 million of opportunities across food, and packaging and procurement, and that's subject to implementation and timing. The intent is for the additional savings to be shared between franchise partners and DPE so that the benefits support both the store economics and the group resilience. This next phase is not simply about reducing cost. It is about creating capacity to reinvest in customer growth while continuing to improve franchise partner economics. Slide 17 – Trading Update As we enter FY27, the immediate task is to restore order frequency and profitable volume. The reset has produced healthier store economics but also lowered order counts. We must now convert stronger unit economics into sustainable sales growth. Groups saying store sales declined 2.5% in half one and 5.7% in half two, with the first seven weeks of FY27 broadly consistent with the second half run rate at minus 5.8%. A&Z will progressively apply the lessons learned from WA with a disciplined approach to pricing, promotions and delivery fees. In Europe, the focus is on recovering transactions while preserving the benefits of our cost control. In Asia, it is to convert the healthier economics created through store rationalisation and operational simplification into sustainable growth. Across the group, our approach will be evidence-based. We will test initiatives market by market, measure customer response and store profitability, and scale only those initiatives that deliver both. We're not providing forward earnings commentary on FY27. To conclude, FY26 was a year in which we made difficult but necessary choices. Sales and volumes declined, and we're not satisfied with that outcome. However, underlying earnings were resilient, franchise partner profitability improved, free cash flow strengthened materially, debt reduced, and the balance sheet was reset. We now have a leaner operating base, stronger liquidity, and better store economics. The challenge for FY27 is to turn those foundations into profitable sales growth. With that, I'll hand over to Andrew to take you through his initial observations and the priorities for profitable growth. Thank you.

Thanks George. I've come into a business that has done a lot of hard work through FY26 and the platform is stronger because of it. In my first three weeks, I've seen stores, branch IVs and met with market leadership. The strongest impression is the pride and passion people have for this brand. Branch IV partners want to grow and our teams are committed to give customers a great experience. I've also heard and seen practical opportunities to improve. We can make the customer experience easier, store execution simpler and local decisions more focused on the consumer. Our momentum is not strong enough and both comp store sales and comp average weekly order count is below where it needs to be. We do need to do two things at once. We need to rebuild sales and maintain discipline on costs and capital. We must work towards providing better, more consistent and reliable value to our customers. We have to help our franchisees by making their stores easier to run by being simpler and more focused in our menu and to provide great service, whichever way the customer orders, through the Domino's app or in-store interacting with our teams. Our 27 priorities are clear. Grow sales by turning the tide on order count, delivering a frictionless customer experience and maintaining our cost discipline to support both franchisee and DPE profitability alike. This slide sets out my priorities for my team in FY27. First, grow the baseline and average weekly order count. Delivering profitable growth is the operating metric I will track and be accountable for. A stronger business relies on more customers choosing Domino's more often. We will leverage from the successful and ongoing trial in Western Australia. That trial is based on a simpler and more predictable value proposition to our customers. As a result, our stores in Western Australia are running better. They're making more money because the franchisees can more easily project sales and schedule their teams. Our marketing will become more focused on customer experience and sharing occasions with family and friends, large groups. From next month, our marketing in Australia will be more focused on that occasion and the experience of enjoying great pizza from Domino's. will feature our great product and a stronger brand presence in our creative. And, as we've already announced, next month all of our stores will transition and our customers will have the opportunity to choose beverages from their favourite brands here in Australia as Coca-Cola becomes our exclusive supplier. Second, improving franchisee profitability sustainably. Growth has to work for franchisee partners. The $130,000 average franchisee EBITDA ambition remains an important global benchmark. It's a multi-year objective and a focus for my team and the business. The target is a benchmark for the level of profitability needed to support franchisee confidence in sustainable new store growth over time. Franchisee profitability will not come from one lever. Primarily, however, it will come from profitable sales growth. It will also come from store execution and better store productivity and smart decisions to lower input costs responsibly. But it is a shared responsibility of both the franchisor and the franchisee and requires us to work together on this objective. Third, leading with urgency and accountability. Accountability will be fundamental to our success for my team and our market leaders who own the execution of their strategy. The purpose and objective of our market leadership teams is to intimately know their industry, their customers and then importantly, lead and work shoulder to shoulder with the franchisees to make compelling consumer-based plans and then deliver so that our customers experience those plans in real life. Many of the solutions to our challenges across the market will be consistent and we can learn more quickly and faster to share great ideas and learn from our mistakes. Importantly, local consumer tastes and segments, industry economics and competitive dynamics in the different markets mean there will be nuanced local solutions that also need to be implemented. Overall, my accountability is to lead a team to understand and listen to customers, and lead and work with franchisees to deliver better outcomes and profitable growth for all of Domino's stakeholders. Thank you. George and I are now happy to take your questions.

Thank you, Andrew. The first question comes from Sean Cousins from UBS. Sean, you can unmute. Great. Thanks, Nathan. Can you hear me now?

We can indeed. Fantastic. Thank you. Good morning, Jack, Andrew, George and Nathan. I've got some questions regarding cost savings. That was a big tailwind or support for 26th. Will the remainder of the $100 million savings announced at the AGM, so did you realise $35 million in 26, so there's 65 to go, will that be realised in fiscal 27, please?

George, thank you, Sean. It will be realised in 27 and 28, so it's over the three years, the $100 million. So you've seen what's come through 26, 27... has got a material component to it, and then in 28.

Great. And my second question is just around DNA. That was quite low in the second half, and I think you've called out amortization. I think it was $55 million in the second half. Consensus estimates are around $137 million, $138 million. Should we annualise that second half DNA? It's just there's been a lot of change in your CapEx and your broader asset base. Any assistance on that number would be great.

Yeah, very good question. If you go to the most six of our accounts, you'll see DNA has come down significantly, as you said. And if you go through the components of that, store closures was a big component, you know, both in terms of DNA around property planning equipment and leases. but also with intangible assets. That's come down considerably. In addition to that, so annualising second half would be closer to the month. In addition to that, what you will start to see and part of going forward, we will be expensing a lot more than capitalising when it comes to a lot of the software development costs that we've got in the program. So you'll see a lot less in DNA going forward.

Thank you very much.

Thank you, Sean. The next question comes from Tom Curie from Baron Joey, and thank you to Baron Joey for hosting us this week. Tom, you can go ahead.

Thanks, guys. Can I just get some colour on order count versus ticket? So your sales are tracking like-for-like down about five. I assume orders could be down 20% or 30% in tickets. maybe up 10% or 20% and something in that range. Can you maybe just give us a bit of colour to understand what's exactly happened in that like-for-like or that same-sale sales number, please?

Yeah, no problem, Tom. Order count's more like 10%, 11%. No difference to what Jack has spoken to historically. And then she could upload.

Okay, cool. And then in WA, that's obviously like the, I guess, the test case for what you're doing. Are you backing the positive comp growth there? Like what gives you the confidence that this is the right thing to do or what evidence do you have to show that you're on the right path with the strategy?

So when we compare WA to the rest of Australia, it is in carrier, it is comping positive. And when we tested that market, so we introduced a $8.95 delivery fee and... That is the channel that we need to get positive. So, periodic positive, $8.95 delivery fee was not getting us positive. We ran a trial across six stores at a lower delivery fee, and we had double digit volume growth when we did that. And so, we're in market at the moment at $5.99 as a delivery fee, and it's only two weeks, it's early days. and we're getting positive conversion rates on our OLO system. So if we can continue to track positive Ontario and through the reduction in our delivery fees, the volumes are going up, we think that is the right direction.

Just to clarify, but WA is still negative, though, in terms of the overall state or business?

That's right, at this point in time, yes.

Let's just chip in on WA. ending June, franchisee profitability is up 30-odd percent. So that's a very significant change. Yes, we're down on order count. We're down on sales. But product quality is up. Those numbers are all very positive. The franchisee income is up substantially. And now we have to try and figure out how do we get the order count and the sales to respond accordingly. Yep.

Great. Thanks, guys. Thanks, Tom. The next person up is Michael Simotas. Michael, you should be able to unmute now.

Good morning, everyone. So, look, you've done a very good job on stabilising earnings. Earnings at a group level have been stable for about six halves now. Also a very good job on cash flow and balance sheet. But If same-store sales don't improve from this level through 27, do you have enough in there to maintain earnings at the current base or would that be reliant on getting same-store sales growth during FY27?

I think it does. It's Andrew here. I think the short answer to that is our plan and our objective is we need to return to group positive sales comp over the course of the year. We've got every market with actions in place, and I think to share the way I'm thinking about what we will see as we progress to lower and lower negatives over time, there's two things that we're focused on. Firstly is a simple, average, seasonally adjusted week sales plan. trend that will help us really understand and confirm that our baseline sales are moving in the right direction. There'll be noise because we're tracking over 12-month anniversary of different comp levels and things like that, but we have to focus on average weekly store sales and order count to drive the plan and the assumptions that we've got in the plan.

I think that's a good way to look at it. And when you look at where that metric's sitting right now, is it stable, improving, or still deteriorating?

In most of our large markets, it's stable or slightly improving, but we're not in the position to say that it's changed trajectory from a longer-term sustainable position.

Okay, thank you. And can I just confirm something on the cost savings? Maybe just ask Sean's question in a slightly different way. So you realise $35 odd million of cost savings in FY26. If we look at what will actually hit the system in 27, based on what you've said, it'll look like it'll be a fairly similar number. Is that the right way to think about it?

The reason that is the right way, yeah. And just remember it's system profit, so it's for us. No, no, totally. Yep. Yep.

All right. Thank you. Thanks, Michael. The next up is Brian Roman from JP Morgan. Brian, you can unmute and go ahead now.

Thank you. Good morning, all. First of all, just on the trading update, I just want to check if there's any sort of FIFA World Cup impact there, particularly given the time zone in Europe was not too bad, I would have thought, for the dinner occasion, the late-night occasion. So just wanting to understand if that was a help at all in the period.

Yeah, there was. The markets have told us and it obviously depends which teams are playing and which markets we're talking about. Some of the markets or the teams from those markets were exited relatively early from the World Cup as well. So there was some benefit but it was relatively short term and not material.

Okay, great. And then just on the Coca-Cola transition, is that something that is expected to drive ticket or items? Is there any way to sort of quantify what that might do for the overall business?

Yeah, the simple metric, we track on beverage incidents in terms of orders. So we think we've got significant headroom. Currently, we've run about 34% incidents per where a customer orders that they also order a beverage in that transaction. And if we only regain back to where we were previously, we've got 6% or 7% incidence improvement from our customers ordering at that normal level. And we think there's significant upside. It's clear Coca-Cola is Australia's customers' favourite choice for beverages.

Excellent. And then just to understand your big, big picture question, like from the McDonald's background you've got there, a lot of focus on product and day part, et cetera. Obviously day part's a little bit different in a piece of business, but how are you thinking about product? That doesn't seem to feature a lot in the commentary today, a lot about pricing and procurement and cost out, et cetera, but the actual product itself, like that doesn't seem to get a lot of focus. I just wonder if that's something you've got any observations on that you might like to make any changes to, et cetera.

Yeah, it is too early to be definitive, but I think one opportunity we have, there is a tendency in this business, which exists across a lot of QSR, to focus on limited time offers and new news and things like that. what this business needs not only in the area of product quality but across many of the different initiatives are things that go into the stores that have longer term platform like impact in a positive sense and so we can do a great six week promotion and get a short term sugar hit and we should still continue to do those where they make sense but what I am working with on the team is to try and understand how we can put in platform-like improvements to our core offers, it actually also makes it easier for our stores to run if we're not chopping and changing all the time. And so next month, one of the other things we're doing is launching a new range of pizza as a permanent menu addition, so it's not an LTO, but a new permanent menu addition that hits the target of family and group occasions, so large Group Family Occasion and we're going to relaunch the New Yorker range into the market in Australia and we're really confident on the quality messaging that we can take into that launch but also as I said, it becomes a permanent addition to the menu versus the short term limited time offer. Okay, interesting. Thank you.

Thanks Brian. The next up is Elijah Mayer. Elijah, go ahead. Elijah, you should be able to unmute there.

Apologies, can you hear me now? We can indeed. Too easy, thanks guys. Just firstly on the franchise profitability, you noted earlier just for WA you had the data up to the end of June and strong profitability growth there. Do you have the data up to end of June for the wider group or at least maybe ANZ just to give us a little bit of a trend in that profitability in that last quarter?

Yeah, it is the same trajectory, Elijah. We did have a challenge with our Fintel system, which down in Europe, but since we've got the data coming through, it is the same trajectory as quarter three.

Same trajectory as in an improvement or same trajectory sort of in line?

As an improvement, yeah, in line.

And then maybe just secondly, at the first half result, you noted around 20 to 40 year stores growth over the next 12 to 18 months. You did about 18 in the second half. What are your expectations currently?

Roughly the same. No material differences or movements for next year.

No problem. Thanks, guys. Thank you, Elijah. The next up to speak is Craig Wolford. Craig, you should go to unmute.

Thanks Nathan and morning all. Can I ask a question firstly about how you choose priorities here? Obviously there's a focus on growing average weekly orders and franchisee profitability. How do you choose a trade-off there between that and DPE profitability? Is there a clear preference that growing orders is the number one priority?

I think a balanced approach to both order count improvement will absolutely drive same store sales comps. I think since we've reset the way that we do offers and the volatility of how we have been marketing in the past to our customers, as we reset that to be less volatile, less focused on individual days of the week, Actually, it's more, I won't say it's simple, but it's more possible that we can balance that order count growth with the right level of sales growth that will almost certainly drive and improve profitability outcome for our customers. One of the ways I've looked at what the work the team have done over the last 12 months we are now a more financially fit organisation for the future. And as a result, what that means is, as we grow the business, both for us and the franchisees, we'll have a stronger contribution margin into the future.

Okay. Yeah. It's clear, but it's obviously a tricky issue to navigate. Just in terms of the reset of offers, I'm It's quite tricky to just track that across each of the countries. So can I just get some clarity on when, roughly, you have reset those promotional offers? The reason for this question is I noticed there was a change as recently as June in how your discounts have shifted for the market in Japan. So are there still discounts coming out of the base that could adversely impact sales?

So I think what we've learned in Western Australia, so it's clear moving to a more stable way of marketing to our consumers and being more consistent and predictable in value is going to benefit us in the long run. What we are working through in each of the markets, and we are at different stages in each of the markets, is how we minimize the time between taking away for or reducing all of those aggressive discounts, how do we minimize the time between when we take them away and when we actually regain those customers and those occasions with more profitable transactions? So the other thing to emphasize is we are investing and getting some really strong support from some outside experts and agencies to help us manage the dynamic between How do we balance order count growth? How do we balance price margin as well? And how do we drive the right product mix outcomes that can also not only make our customers happy but also deliver strong margins through the P&L for our franchisees? So it's not a specific answer because different markets are at very different stages and we need to really work and think strategically about how we put those changes in.

Yeah, albeit Australia's further ahead. directed.

So Western Australia is much further ahead and Australia is somewhat further ahead, yes. Understood.

Okay, and last one just on marketing costs. Marketing expenses in the P&L fell 22% compared with network sales down seven. Is that a cost item that needs to be rebuilt or is this a new base?

Obviously, I think it's gone, it's reduced closer to a big It's a reflection of a couple of things. One is the sales being down. Two, just making sure that we're aligning the standard marketing with the sales activities across each of the markets. And that's really important. And thirdly, for us, it's improving the working media. So the allocation now is moving more and more into the working media and removing a lot of those marketing costs that weren't effective in the past.

So if I look at marketing to network sales, it's typically been 5.5%, and now it's more like mid-4s. Is that the new marketing to sales ratio, network sales?

In some markets, we've reduced the contribution from franchisees through the ad fund, and so you're seeing the reflection of that in that number. But I would say the right base would be closer to 5% going forward.

Thanks George Thanks Craig, we'll next hand to Richard Barwick from CLSE Richard go ahead Thanks Nathan and good morning guys Good morning I thought the Sly 14 was a really interesting one, it obviously demonstrates the pathway to franchisee profitability improvement and it highlights just the importance of franchisee execution in getting to that 130 target So I think the question for Andrew, new into the business and obviously coming from a background with franchisees, how would you rate the quality and the capability of the franchisees as you see it? Does it vary much by market, et cetera? I guess where I'm going with this is, do you see any requirements for investment in training or additional systems or so on to help the franchisees actually deliver products?

Got it, thank you. Two things. I have spent time in Australia in the last couple of weeks and will have visited all 12 markets by the end of October. So my first-hand knowledge, let's assume it's about the Australian market. Firstly, one of the things that's a really strong message that I've already heard from the team internally and it's already clear in my experience as well, A great well-run store that provides great service and great quality pizza is exactly the same store that is productive and makes more money than a poorly run store. And so there is no trade-off between operations execution and profitability. that principle or framework is really alive and well I think in Domino's in Australia both from the internal team and the small number of franchisees I've spoken to I've been in a restaurant or a store on a Friday night I've been really impressed and positively surprised about the execution the impressively well-trained crew and team in the stores, and it's clear where we have engaged franchisees working in the stores, and this is where it's a combined effort to drive profitability with franchisees. There's got to be the right level of collaboration and focus on the right decisions, but franchisees absolutely play their own part in delivering on part of that roadmap.

So, I mean, I guess, well, from what you can see from Australia, obviously you're saying that their role is important in the quality, what you would hope it to be.

Yeah, the other context here is the vast majority of franchisees in the Australian network and actually in all of our markets, the vast majority have grown up in their careers working in stores, they know the operations, they know The challenge and chaos of what a Friday night looks like in a Domino's store, and they're actually all experts in operations. There's no question in their ability. They have to be engaged in the business. That's our role to lead and motivate the franchisees to be engaged in their stores. As a result, I'm absolutely confident they can drive their end of the bargain from a profitability point of view.

Thank you. My second question is actually on that 130 target. So the disclosure we get is good, it's a real improvement of where it had been in previous years, obviously giving us a real sense of momentum in franchisee profitability. But when you're talking about an average number across 12 markets, I guess I'm cautious as to how instructive it is. So I guess my question is, does that 130 target, does that vary much across in the individual markets. And can you give us a little bit of a reminder why 130, why does that make it sort of the magic number where the difference between, I guess, success and disappointment?

Yeah, no problem. 130 does vary significantly across markets. The way we get to 130 is really the payback period three to four times on costs of school. That's the background for it. And so if you go to... every market and you look at the costs that open up the store, we're looking at a three to four times payback. We think that's the competitive set that we need to have when we're competing in the franchise world.

Do you have any plans to provide a bit more detail? So as things evolve, would you ever give a more detailed breakdown of franchisee profitability across the markets?

I think we did, Jack mentioned this morning about the Australian number being at 128. Our target for Australia is higher because as George mentioned, the cost of physically opening a store in Australia is also higher and therefore to generate the right three to four year payback, we need a higher number. And we should be clear, a 130 is our objective. It will take us time. It won't depend on one individual decision, and it will require us to work together with the franchisees, but we should not stop in terms of our opportunity to improve franchisee profitability as we grow the business into the future.

That's helpful. Thank you very much.

Thanks, Richard. Next up to speak is Caleb Whitley. Caleb, go ahead.

Morning, Jack, Andrew, George and Nathan. My first question was just more specifically around France. Yeah, just keen if you could provide any additional detail on sort of your performance there and the broader market in France, just sort of trying to tie up some of the commentary that is in the past. Obviously, the sort of impairment that was announced a couple of weeks ago and then any sort of additional comment you could make on the MFA renewal, which I think is sort of coming up in a month or so's time, please.

Yeah, no problem. With France, it's fair to say that EBITDA has been positive for France. And I've said in the past that the EBIT result is not materially different or materially close to break-even. We are budgeting a positive result both in EBIT and EBITDA for France. So it's very important. And we're seeing positive sales momentum. I was saying to Jack earlier today, we're seeing really good momentum coming through France. With the MFA, we're finalising the agreement on the MFA. Russell and the team have, we're working with the right spirit and the spirit of partnership. We should be concluding that in the next week or so.

Okay, great. That's helpful. Thank you. And then my second question, I know you sort of commented on store openings on a go-forward basis. We just wanted to come back. I think it was at the AGM where you called out specifically Germany and Malaysia as being sort of the more meaningful growth opportunities. Yeah, I don't think there was any sort of comment around timing there, but just sort of looking at your stock out since that period, it doesn't look like there's been any sort of meaningful change. So I just wanted to see if there was any update on propensity for growth in those markets in particular.

Absolutely. We still see both those markets as opportunities for significant growth. Germany is a thousand store market so we have significant growth potential in Germany and same with Malaysia. There's segments in areas of Malaysia that are untouched. So that's the plan. Our plan is to deliver growth in those markets.

And Malaysia is largely a company operation and we can release $50 million of capital through the sale of company operations to franchisees. We just have completed one in the last month, George. That's right. So that's the other opportunity that's alive and growing.

Okay. Has there been any sort of locks in terms of, I don't know, maybe where those initial plans were? It sounded particularly upbeat, and so we don't have any movement so far. Am I coming to a bit of a surprise or perhaps getting a bit ahead of ourselves? But yeah, just in terms of sort of actually getting those sites, has there been any particular blockages or just a matter of time?

No, I think we should be clear around the sequencing. We need to fix and make sure the economics of the stores is right. And then what George referred to in terms of, for example, in Germany, that market clearly on the population, the demographics, et cetera, has the potential for 1,000 stores in the future. But we need to sequence this correctly. We need to make sure, frankly, the economics is right. then we can look to scale and grow the stores.

Yep, okay, that makes sense. Very safe to follow.

Okay, thank you, Caleb. And I just have a few more questions that have been submitted online. I'll go to the first one. George, ANZ Network sales are down 6.1% but revenue was down 11.3%. Can you identify what the third helper is there?

Yeah, it's just the savings that we've been able to deliver, the productivity both... through head office and cost savings through things. So a lot of our programs have been delivered through ANZ, so that's the difference there.

So with revenue being lower there, I think we've also made some commentary in the pack that we reinvested some of those savings ahead of our savings in sheet.

So we went out to, we gave a lot of the procurement savings to franchisees ahead of negotiating them with suppliers. So there was a timing difference that had franchisees getting a lot of these savings ahead of the curve of when we realised them, and that's part of the gaps as well.

Thank you. Then a question, is the divestment of any of the groups operating regions being considered? Maybe to Andrew, fresh into the building, and then to the chairman.

So no, at the moment we are... If you look at... in France and Japan in particular. We are positive EBITDA in both of those markets, positive cash flow. We feel confident that we can grow those businesses in the same strategy and sequence of events that we've outlined today.

Comment, we have a very strong financial balance sheet and structure. We don't need cash. which if you said, okay, well, maybe if we sell some of these markets, we'll get some cash in, it'll help us do something. To me, the real challenge in front of us is get the unit economics correct. Starting in Australia, get that correct. Then if we get the unit economics, I'm relatively confident that we can apply that to other markets. We have a business today which has Ibn Tawb, market capitalization about five times, six times, and if we can get the unit economics right, which we can apply across a bigger market, then that's how we will create value for the shareholders. And that, to me, is what the primary target should be, rather than liquidating. The downside of that theory is, is there too much disruption in the market that we can't do all these things And there's an argument that says, you know, maybe we should be more focused on doing what we're doing. But I think, you know, we have in front of us a very experienced management team. And my view is let's have a go at seeing what we can do to get the unit economics right. If we get the order count, the sales coming in various markets that can be applied to other places. If we can't, if we cannot, then that answer will change.

Thank you. A question from Santiga. Japan's been in turnaround mode for some time, yet profits remain very weak. So when do we see the benefits from those store closures, and what are the FY27 growth drivers?

I think I talked about Japan profits increasing 19% despite lower revenues. So Japan has delivered on profitability out of the store closures. into 27 and into 28.

We've obviously talked about the reduction in net leverage today. The refinancing loosened our covenant cap to a temporary 3.5% with leverage now at 1.86. So what scenario were you buying everyone for? Why the need for an extension of the covenant that we had a temporary extension of 3.5 times?

So at the time the market felt that we needed to go back to the market and obtain more cash and so they were concerned around the balance sheet. So we went and put a temporary covenant in with the banks. We're not going to need that covenant. It was a temporary measure. We're not going to need cash. You've seen the results of both our cash flow and our balance sheet. It was just a proportion at the time.

And I'm just going to wrap it up with just one more which is a few questions in one which are really on the same topic and that is that obviously there's been a lot of work in terms of fixing the balance sheet and investors are now looking forward to when we're growing order counts. What is the reasonable trajectory people should look for in terms of return to positive same store sales and should they consider FY27? Is that another transition year or is that going to be a recovery year?

So the expectation is that we will start to drive positive sales growth in 27. So I'll be disappointed if this time next year we're not in positive sales growth. That's the plan. You'll get positive sales growth first, followed by positive order count growth. It won't be consistent across all markets. Our focus is Australia and our all markets. That's our focus. But that will materially impact the group results as well.

Thank you, George. That has gone through those questions. I'm just going to hand back now to Andrew for any closing remarks before we end today's call.

Thank you, everyone, for joining the call. And as George mentioned, I think from a prioritisation point of view, it's really clear. We're focused on regaining momentum in our baseline. And then on top of that, we're prioritising the work, the effort that we need to do to get Australia first and then our other large markets back into growth.

Thank you so much. We appreciate everyone joining today and for your questions, and we will see you on our roadshow over the next few days. Thank you.