Domino Pizza : Interim Results

DOMINO'S PIZZA GROUP PLC

Half Year results for the 26 weeks ended 26 June 2022

Continuing to gain market share in challenging conditions; well placed in this

environment with clear value proposition and strong operating model.

Guidance for the year is unchanged.

All commentary below is on an underlying basis unless otherwise stated

Financial highlights

• Like-for-likesystem sales (excluding the change in the VAT rate)3 grew by 2.4%, driven by order count which increased by 2.1%
  o Reported system sales of £710.5m, down 5.6% due to the change in the VAT rate
  o Like-for-like system sales, excluding splits, down 6.4% (down 7.5% including splits) due to the change in the VAT rate
  o Group revenue, which is not significantly impacted by the change in the VAT rate, was up 0.2%
• Profitability is expected to be second half weighted. During the first half, underlying profit before tax was £50.9m, down £9.9m. As is standard practice, we pass through food cost inflation to our franchisees on a lagged basis. We began passing on these increases during the first half of the

year, but will not see the full impact until the second half

• H2 marketing spend expected to be significantly higher than H1. In 2021 marketing spend was focused on the Q2 yodeling campaign, this year's focus will be on accelerating spend in Q3 and into Q4 campaigns
• Statutory profit after tax of £42.1m, up £0.8m as a result of international losses and non-underlying items incurred in the prior year offsetting inflation and costs incurred in H1 22
• Free cash flow of £36.8m (2021: £51.3m), lower than prior year largely due to a working capital outflow in the period related to the unwind of timing of cash receipts and payments for online sales in the final week of the 2021 year, and a change in the timing of creditor payments in support of our suppliers
• Net debt of £236.4m resulting in a net debt / underlying EBITDA leverage ratio of 1.95x, within our target leverage range of 1.5x - 2.5x
• £72.5m returned to shareholders in H1 22 through dividends and share buybacks
• Interim dividend for H1 22 of 3.2p per share
• New £20m share buyback programme, effective immediately, in line with capital allocation framework and commitment to distribute surplus capital to shareholders
• Successfully refinanced existing bank debt facilities with new £200m revolving credit facility and £200m private placement facility

Operational and strategic highlights

• Strong gain in UK takeaway market share, up from 6.0% in Q2 21 to 6.6% in Q2 22
• Continued growth in total orders, up 2.1% in the first half
• • Delivery orders 8.3% lower than the Covid-impacted prior half year, Q2 declined 12.1% due to softness in the wider delivery market, a tough comparator in the prior and introduction of delivery charge nationally
  • Collections recovery continued, with 39.6% growth and collections were above 2019 levels in Q2 2022
• As a result of the franchisee resolution, the business is on track to open at least 45 new stores in FY22 and had opened 17 new stores as at 1 August 2022 by 10 different franchisees
• Launched trial with Just Eat in 136 stores to assess whether we can reach an incremental customer base with attractive economics for our business. Early results have been encouraging so trial is now being extended to nearly one third of the store estate and should represent a tailwind to growth going forward
• Total active customer base up 2%, including a 5% increase in active app customers
• Over 90% of sales now digital, app now accounts for 43.9% of system sales (+3.1pts vs. H1 21)
• First national price campaign for several years launched in January with a strong value message and excellent traction in evolving consumer demand environment
• Excellent service standards with value for money scores +4pts vs. H1 21 and average delivery times of around 25 minutes
• Outstanding performance from our supply chain with 99.9% accuracy and 99.8% availability
• Investment in Naas facility in Dublin and cross dock facility in the South-West of England
• Strengthened franchisee engagement, with first UK rally since 2018 achieving record attendance by over 1,400 franchisee employees and colleagues

• CEO, Dominic Paul announced his decision to leave the company to take up the role of CEO of Whitbread PLC. He will leave the business in December 2022, and a search for his replacement is underway
• Leadership Team continues to be strengthened with new People Director in March. New Chief Financial Officer joining from Just Eat Takeaway Plc, starts in October 2022

Commenting on the results, Dominic Paul, Chief Executive Officer said:

"I'm proud that in the first half Domino's grew order count, attracted more customers, and increased underlying sales despite unusually challenging market conditions. This is testament to the hard work of our world-class franchisees and all our colleagues across the system, and I'd like to thank them all.

"The system is now fully aligned following the franchisee resolution in December. This enabled us to restart national price campaigns offering customers compelling value and to accelerate market share growth. We have worked really constructively with our franchisees to learn from the first half campaigns. We will be increasing our media spend in the second half compared to the first half, amplifying our value message to customers as we head into key events such as the men's football World Cup. We are also continuing to acquire new customers by expanding our trial with Just Eat following positive initial results.

"Domino's scale and integrated supply chain are always key to our success. As inflation accelerates and consumer budgets tighten, these differentiators are more important than ever. Domino's is an asset-light,cash-generative, resilient business that is well-placed to navigate the current conditions, which is why we are able to maintain our existing guidance. Historically, Domino's has performed well in challenging environments, which demonstrates the resilience of our business. We remain focused on working with our franchisees to accelerate the sustainable growth of the system and delivering an improved second half profit performance."

Current trading, outlook and guidance

In the first half of the year, we increased our market share, order count was positive, collections grew past 2019 levels and we attracted more customers despite challenging market conditions. As we move into the second half of the year, we expect to continue this momentum and grow our market share given our strong value message, planned second-half marketing activity, the men's football World Cup and our dynamic national price campaigns. As during prior periods and in line with our agreement, we pass through food cost inflation to our franchisees on a lagged basis. Due to the rapidly changing inflationary environment this year, we began passing through these increases during the first half of the year but will not recognise the full benefit until the second half. Profitability this year is therefore expected to be weighted towards the second half.

Despite the challenges in the market and the investments we are making this year related to the franchisee resolution, we remain confident in our prior guidance for underlying EBITDA and EPS, which we expect to be in line with current market expectations.

With the scale of our platform and the strength of our brand we have confidence in our asset-light, cash- generative business model and our value proposition underpins our strong positioning in the current environment.

FY 22 Guidance

For the current financial year:

• We remain confident in our previously communicated guidance for underlying EBITDA and EPS, which we expect to be in-line with current market expectations
• Underlying depreciation & amortisation of between £18m to £20m
• Underlying interest (excluding foreign exchange movements) in the range of £9m to £11m
• Estimated underlying effective tax rate of c.17% for the full year
• Capital investment of c. £24m
• Net Debt at year-end around £235m

Notes

1. System sales represent the sum of all sales made by both franchised and corporate stores to consumers in UK & Ireland. These are excluding VAT.
2. Like-for-likeexcluding splits system sales performance is calculated for UK & Ireland against a comparable 26-week period in the prior period for mature stores which were not in territories split in the current period or comparable period. Mature stores are defined as those opened prior to 27th December 2020.
3. An adjustment for the change in VAT rates described for system sales relates to the impact of changes in the VAT applied on hot takeaway food where the VAT inclusive price to customers did not change. The VAT rate in the UK decreased from 20% to 5% on 15 July 2020, increased to 12.5% on 1 October 2021 and reverted back to 20% on 1 April 2022. System sales are consistently reported on an exclusive of VAT basis. However, where the inclusive of VAT price of an order remained the same on a total basis to the customer, over the reduced VAT period the exclusive of VAT price reported in system sales increased. This leads to an increase in system sales from 15 July 2020 through to 31 September 2021 when the VAT rate reduced from 20% to 5%. From 1 October 2021, the rate increased from 5% to 12.5%. Where the inclusive of VAT price of an order remained the same on a total basis, this leads to a decrease in system sales compared to the period from 15 July 2020 and an increase in system sales compared to the period before

1. July 2020. With the increase in VAT from 1 April 2022 back up to 20%, where the inclusive of VAT price remained the same to the consumer, there has been a negative impact on system sales compared to the period from 15 July 2020 - 31 September 2021 and 1 October 21 - 31 March 2022, as the exclusive of VAT price of an order decreased.

As an example, for an order where the inclusive of VAT price is £27:

• From 15 July 2020 to 31 September 2021, during the period where VAT was 5%, the reported system sale would be £25.71
• From 1 October 2021 to 31 March 2022, during the period where VAT was 12.5%, the reported system sale would be £24.00
• From 1 April 2022 onwards, where the VAT rate is 20%, the reported system sale would be £22.50

In Ireland, the VAT rate for hot takeaway food reduced from 13.5% to 9% on 1 November 2020 and remains in place. The system sales figures adjusted for VAT removes the impact on system sales of the lower VAT rates in the comparative periods to provide comparability. This is performed through adjusting the comparative figures over the reduced VAT period back to an equivalent system sales amount based on a 20% VAT rate where applicable. Group revenue is not significantly impacted by the change in the VAT rate as the aforementioned benefit only arose on hot takeaway food, and therefore only impacts the sales on the corporate stores revenue within overall Group revenue.

1. Underlying is defined as statutory performance excluding discontinued operations, and items classified as non-underlying which includes significant non-recurring items or items directly related to merger and acquisition activity and related instruments as set out in note 5 to the financial information.
2. Net debt is defined as the bank revolving facilities, private placement facilities, cash and cash equivalents and other loans, including balances held in disposal groups held for sale.

Contacts

For Domino's Pizza Group plc:

Investor Relations

Will MacLaren, Head of Investor Relations +44 (0) 7443 192 118

Media:

Tim Danaher, Samantha Chiene - Brunswick +44 (0) 207 404 5959

For photography, please visit the media centre at corporate.dominos.co.uk, contact the Domino's Press Office on +44 (0)1908 580757, or call Brunswick on +44 (0)207 404 5959

A results webcast and Q&A for investors and analysts will be held at 10:00 BST today. The webcast and presentation can be accessed through this link click hereand will also be available on the Results, Reports and Presentations page of our corporate website.

Financial calendar

Domino's Pizza Group plc will publish a Q3 trading update in October 2022.

Cautionary statement

Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and assumptions and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results expressed or implied in these forward-looking statements. Persons receiving this announcement should not place undue reliance on forward-looking statements. Unless otherwise required by applicable law, regulation or accounting standard, Domino's does not undertake to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

About Domino's Pizza Group

Domino's Pizza Group plc is the UK's leading pizza brand and a major player in the Irish market. We hold the master franchise agreement to own, operate and franchise Domino's stores in the UK and the Republic of Ireland, and have associate investments in Germany and Luxembourg. As of 1 August 2022, we had 1,243 stores in the UK and Ireland.