Earnings Transcript for DMP.AX - Q2 Fiscal Year 2024

Nathan Scholz: Good morning. I can see our attendees have now been able to join our Zoom call. My name is Nathan Scholz, I'm the Chief Communications and Investor Relations Officer for Domino's Pizza Enterprises. I will welcome you this morning to our Half Year Results Presentation. Joining you today is our Group CEO and Managing Director, Mr. Don Meij; our Group Chief Financial Officer, Richard Coney; Andre Ten Wold, our Europe CEO; Josh Kilimnik, our Asia CEO. And introducing you for the first time, Michael Gillespie, our Chief Commercial Officer. And with that, I will hand you over to our Group CEO and Managing Director, Mr. Don Meij. Now, also reminded that today, we will, of course, have our Q&A session. I can see people are already populating their questions in the Q&A chat. For those people, for compliance reasons, who cannot enter into the Q&A, please just feel free to send me an e-mail. We'll attempt to get to as many of those questions as possible. Now, with that, I'll hand over to Don. Thanks very much.

Don Meij: Thank you, Nathan and welcome everybody, to our half year market update. Today, I intend to, with the leadership team, tend to walk through three core areas. Firstly, in the first half, where did we make missteps and what were they? In parts of the business, what did we get right? And then how are we going to apply what's working to the rest of the business? If I start with this first slide, which is Slide number 2, what hasn't changed is fundamentally, we're still very mission-focused in that we want to be the dominant sustainable delivery QSR in every market by 2030. And that guides us and we'll refer to the references of that throughout our presentation. We also want to continue to -- once we do get a business unit economics up with strong sales and franchise profitability growth, we still want to make sure that we're fortressing markets with being a competitive advantage to get closer to the customer with hotter and fresher pizza. And fundamentally, since the early 1990s, we've been a business driven with a high-volume mentality, and that is through scale and leverage with some of the benefits of fast-food businesses is that we're able to make sure that we can pass those savings through and be better value than most of our competitors. If you come with me now on to Slide 3, we talk a lot about the value equation of Domino's and the value equation at Domino's is product, service, and image divided by price to equal value. In the last two presentations we've given to the market, we talked a lot about price because in many cases, we weren't getting the price right. But at Domino's, we want to talk a lot today about the whole value equation. What do you get for that price because it's what's driving our business or where we're making missteps in some of the underperforming units. So, we talked about at the full year that the way that our business rebuilds is it always starts with the customer. When customers are excited that they're paying the fair price for our product, that our franchise partners then benefit from the better margins and the sales growth, and then ultimately, our shareholders also succeed. So, it's the whole ecosystem, starting with the customer that we're focused on everybody getting a better slice. When we think about what happened in the first half, the missteps happened when we didn't get that value equation right. So, what have we been focusing on in the first half? The first thing that we talked about at the full year and leading into the full year was that after two decades of international growth outside the Australian market, we've built up a number of business units and that started to have their own independent leadership teams with lots of disparate systems from businesses that we'd acquired before, and we weren't getting the proper leverage of our scale. So in the last half, and it's continuing into this half, we've been very focused on restructuring the business, removing inefficiencies and focusing on building some new business units, which we now call centers of expertise. And the centers of expertise are very much largely driven around things like technology, around marketing, media, strategy, data insights, finance, where we're able to support by building centers of expertise, we're able to achieve best practice and then apply that best practice through the rest of the business, often benchmarking different things like conversion inside our apps, what's performing in new media, like the new entertainment platforms and so on. Once we've been building these, we've been proving them out in originally our home market, Australia and New Zealand going back to how we operated the business for most of our life where ANZ has been the petri dish of the business, and then we expect -- exporting that knowledge like one digital and our data and insights platforms and so forth. And so we've been improving our strategies, and you can see the results of that in Australia and New Zealand and Germany. And now we've been in the phase, as you're seeing in this half, we're applying those learnings through the rest of the business. And we're going to continue to focus on applying these centers of expertise as we build out the knowledge and learning throughout the business, noting that they started in Australia and then it's been migrating through Asia and into Europe. If you come with me on to slide 4, what is leading the results that we're getting in Australia and New Zealand and Germany that we think is applicable to other businesses. First of all, we've been focused very heavily on day parting. So when you look at the Australia and New Zealand business, we've had very strong lunch and early morning growth. And then when we think about occasions, we think about single eaters, we think about families and groups and the creation of the My Domino's Box and now more recently, our melts have been very successful in driving new occasions. And I'll talk about that in more detail in specifically in Australia and New Zealand. We've also been focused on new media testing out things like X and Reddit, and it means creating new creative as well. These new entertainment platforms like TikTok and Meta products and the Google products and so forth or Line in Asia. They perform in a very different way. And so when we're creating creative, we have to create creative this new media and test and learn, and that's part of what the centers of expertise do. And then finally, if we're going to be the dominant, sustainable delivery QSR in every market, we need to dominate some of the biggest delivery platforms. And so we've been early adopters. And with our new agreement, we'd like to thank our partners in DPZ in the US for assisting us in getting the new Uber agreement, which is benefiting many of our markets. We're really leaning in and making sure that we're getting new learning and dominating in these spaces as well. And that's where we're seeing growth in performance. If you come with me now on to slide 5. You can see our key metrics for the first half, our network sales were up 8.8%. We gave a trading update that we thought would between 87% and 90%. In January, we came in at $89.6 million, and our underlying EBIT was down 5.3%. That was largely affected by Japan, Taiwan and France. From a half-to-half we've been rolling from the second half, we can see there that we were up 22.8% in the underlying EBIT and that's largely as we were forecasting around the AGM and at the full year, a lot of that has been the savings from the $21 million or at least the two-thirds of the $21 million that we've been able to bring through with the restructure in the first half. If you come with me now on to Slide 6, and just look at our trading update for the first seven weeks. We're going to talk in more detail, so I'll just go to the high later in the presentation. So I'll just go through to the -- just the high-level numbers that our network sales up 3.78, rolling 4.2% last year. While we're happy with the same-store sales for the first seven weeks, it should be noted that they are rolling softer comps, so still more to be delivered and get a track record in some of the markets that are starting to perform better. Still not a trend yet in those markets. And we've opened seven new stores. And as we highlighted, the full year that this year we would be within the three to five-year view of our store openings as we're rebuilding markets as they rebuild, we can then go and store growth into the next year as we get a track record. If you come with me now on Slide 7. The first thing to note about this is obviously, there are always averages. And so inside these results, we have had stronger performance in Australia, New Zealand and Germany, given the unit economics in parts of where we are more our corporate base like in Singapore, billing and auditing in France has had some good growth with the franchise partners performance as we've supported that and worked hard as one of the early phases of rebilling that business. But those results have been diluted by the Japan and Taiwan franchise partner results. What I can say is that when we reported in August, we're reporting $93.5 and we're slightly up on that at the $94.5. But what is showing better results is in the last quarter that we were up 11% in these numbers that are being added. So we're constantly focused. We -- it's all about rebuilding our franchising economics through strong customer growth and good margins from our customer with the products that we're creating that will deliver our future growth. So if we come now to Slide 8, you can see there that we believe we're on track to deliver circa $50 million in savings for the full financial year. We've already delivered around approximately $21 million back into the system, one-third of those being shared back to our franchise partners. There are some important footnotes to just noticed there that some of the ways that things are flowing through is, for example, the supply chain changes in Asia, where we moved to a back-of-house model that's brought some efficiencies through directly to the stores, whether they be corporate or franchise but also some of these savings are also coming through to the advertising funds. So where we're being more efficient with the people, the Centers of Expertise and so on. And that's partly how we're bringing those benefits through to the system. But it should also be noted that in the -- despite these cost savings that we – what excluded from this is that to note that there are still some cost increases with natural wage inflation for our team members and some CPI costs that are natural in the business. At this point, I'm now going to hand over to Richard Coney. Thank you, Richard.

Richard Coney: Thank you, Don. If we just move to the next slide, you can see here the key points to note on this slide is that although our NPAT is down $9.3 million or 13% on prior year, a large part of this related to increasing in financing costs, which are up $9.6 million, predominantly due to increases in euro and AUD base rates with average interest rates moving from 1.9% to 3.15%. In addition, we had lower profit on sale of stores, which were down $4.1 million, which we expect to recover as unit economics improve. We have announced a half year dividend of $55.5 per share, which although it was down 17.7% on prior year, it is up 30% on the last half. If you now just move to Slide 11, the geographic summary. Revenue is up 10.2%, in line with network sales growth and with the largest increase coming out of Asia from the recent acquisition of Malaysia and Singapore and Cambodia. Margins are down 1.4% versus prior year, predominantly due to very tough trading conditions in Asia, partially offset by Europe, which has benefited from the Denmark closure and improvement performance in the Benelux and German region. When comparing to the half just gone, you will see that the results have improved considerably, with margins up 1.3%, with a large improvement in ANZ moving from 12.3% to 14.2%. Coming to the next slide, non-recurring costs. The group restructuring costs to-date of $10.8 million are largely in line with expectations, noting that we still have not finalized any of the store closures and redundancies in France due to longer than expected negotiations with the workers' council in the region. We have also adjusted down the contingent consideration by $7.3 million relating to the earn-out for the Malaysia, Singapore and Cambodia acquisition. Now moving to our group free cash flow. You can see that our free cash flow has improved by $47.7 million, predominantly due to a large tax refund as a result predominantly result of the restructure, and more importantly, a reduction in CapEx of $24 million, while maintaining the sell-down of our corporate stores and our loan book continuing to recycle. If we now move to Slide 14, some more detail on our CapEx. You can see our net CapEx has reduced by $22.9 million and 35% with store-related CapEx down $18.1 million and our digital CapEx largely maintained, noting that this included the incremental investment to convert the online ordering platform for Singapore, which is now operational and Malaysia, which is expected to go live in the fourth quarter. We saw the benefits of implementing this system in Singapore with higher conversions, and we expect a similar effort when OneDigital is implemented in Taiwan and Malaysia. Noting when Taiwan is completed, this will be the first time that we'll have all of our 12 markets on the same global platform, which will deliver additional scale and synergies for our group. Turning to Slide 15, capital management. As we foreshadowed at the full year results, we have been successful in executing our capital management initiatives, which included reducing our net CapEx, improving operating profits and reinstating the DRP. As a result, our net leverage ratio has improved materially dropping from 2.92 times to 2.76 times for the half. Our banks have also been very supportive, providing additional headroom and formally agreeing to increase our leverage covenants to 3.5 times, which although unlikely to be required, it highlights the strength of their commitment and our strong partnership. Our liquidity and funding capacity remains robust and has increased by a further $65 million with undrawn facilities and cash of $482 million. With that, I will now pass you over to Josh to talk about current trading conditions in Asia. Thank you.

Josh Kilimnik : Yes. Thanks, everyone. And overall, 0.34 same-store sales is a good start of the year considering some of the strong external headwinds in the region. Regardless, there are some also -- there's also some initial encouraging results in our key markets, thanks to Inspire products, better aggregator partnerships, along with some strong operational execution. I guess an example of this is January's Volcano Pizza launch, which was a test at the full year announcement and now is in all markets in Asia. And results are showing that this is helping really grow customer counts and stores are benefiting from lower food costs, enhancing some of the unit economics that we have. If I turn to Taiwan, somewhat delayed from the reopening after COVID. So, we're a little bit in lag, but we'll soon be launching a major -- new branding campaign, and we aim to reach new customers, reconnect with some lapsed customers and build out our barbell strategy. One thing I'll mention is that the market has recently been affected by a third-party supply chain issue, which has dampened some of the results over the important Chinese New Year period and may cause some further headwinds down the track. If I turn to Singapore, it's one of the smaller markets, but reporting really strong product-led sales growth and also aided by having our digital stack. So, DPE's One Digital Technology platform, but we've also coupled that with a repositioning around our core value offer in the pickup channel, which has been growing customer count and volume and taking market share. The good news is, is that one platform -- One Digital platform will roll out into Malaysia. It's, in fact, in test this week. However, what is clear that Malaysian sales are weighing on the region with average weekly customer counts and sales have been affected by some of the tensions in the region. Japan same-store sales have been positive 6.7% with a return to product-led promotions and that's produced customer count growth through our own channels as well as aggregators and that's despite a macro shift to [indiscernible], a consumer trend that we're dealing with. Work, however, it's still underway and is ongoing and we'll continue to grow our own delivery channels, but we need to engage the more price-sensitive carry our customer, and this is going to be launching the first stage this week. One thing I would caution is that it's a positive number, but we're rolling over negative sales from last year. And for us and for our investors, we know that we need to string more than seven weeks together to rebuild Japan and confidence. This is our focus. I'd like to hand over to Michael Gillespie.

Andre Wolde: Or to me.

Josh Kilimnik: Or to Andre.

Nathan Scholz: I think we'll hand over to Andre first for--

Andre Wolde: Thanks for that. So, where we deliver value in Europe, we are clearly growing customers, but we do require more traction in some of the markets and one of those markets is France. France is receiving considerable focus and supported by the global centers of expertise is regaining momentum and growing in delivery orders. However, currently declining mostly offline pickup as other QSR target price-sensitive customers has led to reduced weekly customer counts within Domino's France. On to The Netherlands, currently overcoming our recent mandated increase in labor cost, a big increase and management is redoubling efforts to launch new products with sufficient margins to offset this increase. Germany, as you can see, same-store sales up 6.8%, continues to lead the region, growing delivery sales with great new products and winning new customers through aggregated partnerships. Now, over to Don to talk more about ANZ.

Don Meij: Thank you, Josh and Andre. Yes, in the Australia, New Zealand business, as we've commented in the past, it was our strongest same-store sales in the first half in six years and we're continuing that into this half. I'm really proud to say and give credit to the Australia, New Zealand team that we're 5.28 times in traffic, bigger than our next nearest competitor in pizza. And in the last two quarters, we led in both customer count same-store sales and obviously total growth. We had the fastest growth delivery business out of all major QSR in the Australian market. We also had the fastest growth lunch business out of all QSR in the Australian market, largely led by the -- My Domino's Box and in the last month, the melts and that's continuing into this half. We -- contrary to some of the commentary on our business is that we're actually fast -- when you look at the average QSR customer accounts, we are well and truly exceeding that in the Australia/New Zealand business for the average for the industry. And we're doing this through less discounting and other thing that I want to correct on some of the commentary that our average discounting is down materially, and we're actually not on selling pizza, our fastest growth part of our business is our premium and traditional pizzas. It may look like we're discounting because we're launching products that have got great value, as we talked about earlier, and that is the price like the MyBox, which is very, very really discounted in any way, sold at the price. It's just great value as is the melts. Now, despite all of this growth and the focus on everything we do is designed to be delivered, there's still opportunity in the Australia and New Zealand business. One of the areas that we've had weakness has been in our off-line pickup customers. They're the consumers who just walk into any faster company. They're not looking at digital offerings from digital purveyors. They just want to walk in and get affordable meals and that area we've underperformed against the category. And so today, we launched our $5 or less menu in the Australia/New Zealand business. These are inspiring products, good margins for our franchise partners and we're going to continue to build out that menu as we think there's -- we still have a lot of opportunity to correct some decline in that area. We're also focused on family bundles, and we could get more growth out of particularly Thursday and Friday nights, where we've been quite dominant in our history. But despite all of this growth, we can still perform far better in those areas. And so there's lots of room to improve in the ANZ business. Now, at this point in time, I'm going to hand over and introduce you to Michael Gillespie. Thank you, Michael.

Michael Gillespie: Thank you, Don. So let me introduce myself. My name is Michael Gillespie. I've been DPE for over 16 years now. Starting in a local role and progressing through a range of global roles into my current Chief Commercial Officer. Back in June 2023, we shared that we were taking deliberate action to bring more of a focus to our business, removing distractions and maximizing the benefits of our global reach and scale. Where that comes into play in this part is we've restructured our business to a more centralized model or global model for key expertise and guidance and strategy, but also moving to a local model of empowerment around how do we allow our local leaders to drive and execute on strategy and be more connected, whether it be if they're expired product involved with their local markets, pole driven by what we call center of expertise and global support centers. Through out global support center around this greater global support of our local markets. It allows us to grow our partnerships with using some of our bigger players, whether it be Uber, which you've heard about previously and some of the greater media players and digital players in our landscape and also any partner that stretches at a commercial scale at a group level. What our CEOs then can do at a local level is stay focused on their business, how do they get hot pizzas into the hands of our customers faster and how do they allow our franchisees to operate at a more efficient level with this group support. If we go to the next slide, I'll touch a little bit more on that. It comes down to applying best practice. What does that mean? Our center of expertise and our global support center can be that they can be a backbone for our local markets, our CEO and local teams to operate at a more efficient and scalable level. We can reduce costs where previously we might have been doing things in duet [ph], even 12 times over markets that we can now do across the group, either automatically or by a one central location and then share that across the broader teams and allow them to operate in a more efficient and effective way. While we're doing this across the whole group, that means that we -- with those savings, we can reintroduce or bring them back to our franchisees. Bring back one-third of the total savings, which you've already heard of, of that $20-odd million today, back to allowing them to run more efficiently and effectively. And hopefully, that leads to greater profit and more store openings. But also when we're applying best practice of the group, we can now test and help markets that maybe doing something great in Germany, bring that back to our other market. So as Don even touched on, with Australia, New Zealand, where we started the center of expertise and shared services for global support center services earlier, we've been able to take learnings from that and apply these into other markets, more seamlessly than we could have had before. Move to the next -- as we move to the next slide. Domino's traditionally has been seen as a leader in the digital landscape, and I'm proud to share we continued our momentum with 11.8% growth in the first half of digital outpacing our total sales. I'm excited to share also that soon we'll be aggressively adding all 12 markets onto our one digital platform. What does this mean? It's $3 billion of our sales now, 78% that is of sales via our digital platform. When we have this large mass of customers and sales, we're able to look and achieve changes to the system that enhance business for our franchisee partners, but also make the system easier for our consumers to use and allow our platform and back-end tools that will act itself Malaysia and Singapore and Taiwan on their own, we'll be able to afford. So they get this great digital platform that not only from an investment perspective, but from learnings from over a decade of digital learnings and back into learnings, we can import into all our markets, and also continue to refine the greater inputs across our markets. So it's very exciting to continue that growth and really look at how we can take learnings in one market and execute it across all, or bring a greater economy of scale and efficiencies. So now I'll pass back to Don.

Don Meij: Thank you, Michael. All right, so just going into specific focus before I hand over to Andre to talk about Germany is that the three really big areas that have been driving the Australia/New Zealand business. First, we're very mission-focused to be that dominant sustainable delivery QSR. And so, obviously, we needed to make sure that we're really strong with inside the biggest delivery platforms. So that's been a really important focus, and that is transferable knowledge that can be global. Most of these platforms, you've got two or three quite significant platforms across the world and there are other wins work very similarly across those businesses. We've also been pushing into new media. So looking at the new entertainment platforms not a social media, but actually as the entrant platforms they are to be able to launch these new inspiring products, but we're also testing and learning and having good success in places that were surprising to us like Reddit and X, and so we're constantly pushing and with the centers of expertise, we're able to get real learning and then apply that to the rest of the network. And then finally, it's being inspire products. At the beginning of the last half when we were launching the mall campaign, the lot became overnight, the biggest selling and premium pizza in our menu, all the way through to cheese, volcanoes that we're learning from, and you'll see parts of learning from that for the Australia/New Zealand business. But more recently, the MyBox has been a really important layer to the business as is the melts and the fact that in the $5 or less range today, we've introduced a slightly smaller melts for $5, and we expect that to be quite successful So I'm going to hand over to Andre to talk about Germany.

Andre Wolde: Yes. Thanks, Don. Germany is a great example of the global approach. We've taken learnings from Australia. And with those learnings, we've seen strong growth in site aggregators from already really high base, Germany already had a big presence on aggregators. But with the learnings, we have even grown that. And that's despite some of those channels, the aggregators are facing some headwinds. So we're actually growing our share within these platforms. We're also currently looking at using the same media mix modeling tools as in Australia and Germany, but even without that toolkit, we're seeing great success in using non-traditional social media and other advertising platforms to grow customer counts and sales. And like in Australia, inspired product matters, the Doner pizza range launched in the first half year was very successful. And it was completely inspired by the Burger Pizza range in Australia. It grew sales and it had a strong contribution margin to our franchisees. So let me now take you to Slide 22 to talk about France. We're obviously not happy with the results in France, as I know you are not. Clearly, we have more to do. As we announced last month, the ongoing underperformance in France offset some of the benefits of the saving programs we are delivering in Europe and the improvements in luxury [ph] Germany. But there are some poor principles that apply in France too. We have seen through the burger range in the My Domino's box here, the product matters. In fact, the My Domino's box has helped us compete in the face of very strong pickup competition from burger chains, but we obviously still need to do more. Our investors would be familiar with our Barbell Menu approach, offering a range of products from the lowest entry point to our premium range. It's clear that you need to have an accessible entry point to entice customers. And we need to have products that are designed for the pricing points. For example, My Domino's box allows us to have an entry point around the €5 mark, head-to-head with other QSRs were also having menu bundles at €5 and still maintaining a healthy margin for our franchise partners. There are some particular challenges in France. We've talked about it previously, but including that it's taken longer to implant a new structure due to our local labor laws and different regulations around franchise partner independents. That said, we know we need to get franchisees these aligned on implementing improved promotions even though they have more power of their local pricing. We have a plan to improve that alignment, including through set pricing tiers that give franchises choice and control their pricing, but also gives our market fewer pricing points, which helps target our advertising in our customers. And we also see there's still great potential in finding consumers within the aggregator platforms. Indeed, we have had some additional trials with aggregators to target non-traditional opening hours for our stores, which have shown a word of promise. And we will be working with franchise partners to implement these more widely. And now I'll hand over to Josh to talk about similarities in these markets.

Josh Kilimnik: Thanks, Andre. Look, many of the points Andre and Don have spoken about are working in Japan as well. In fact, My Domino's box was actually first launched in Japan and exported around the world. And now we've launched Volcano as a platform in each of the markets in Asia. And I'm encouraged now by the fact that we've got -- we can see at 12 months in our tested promotional calendar. In fact, getting back to this inspired product was a real missing piece for us. And it's fair to think that we should have simply returned sooner. But because of our testing program, it's a lot longer than other markets due to longer buying cycles to more infrequent customer base. We typically like to get it around two buying cycles, and this really gives us the confidence to launch, but it also helps us narrow down on how much ingredients we need to buy, which normally launch six months from whenever we decide on that promotion. If we get this strong, we not only end up with a failed promotion, but then we have to deal with the aftermath of a potential stock write-off. Further to this and similar to other markets, we've spoken about our barbell pricing strategy over the last six to nine months. We've been refocusing on balancing the barbell. Inflation and supply chain constraints did upset this balance. The good news is that, one, we're building confidence with inspired products, but we now have to answer the other end, which is critically the access point to the brand in Japan, the more value conscious consumer. Now due to inflation, we've got this wrong, pushing the price exceeding really what the customer is willing to pay. And we know that this cannot exceed a JPY 1,000 in Japan. So we made an error albeit with good intentions to protect profitability, but in our game, it's all about building volume. So what are we doing about it? Well, we've been actively lowering the entry point for our brand without a compromise to quality. This has been done through various channels up to now. But structurally, we're launching this nationally with our -- from 790 range, which actually launches today. This is coupon-free. It's unrestricted access to purchase for that really important 40% of consumers that are single eaters in Japan. Furthermore, we also know delivery customers, although, not as price sensitive are still seeking value, and we've had to adapt delivery deals like Buy 1 Get 1 to include more options. Counting intuitively, this actually helps us lower deal food costs with the perception of greater value. I'd now like to hand back to Don Meij.

Don Meij : Thank you, Josh. So if you come with me on to Slide 23, and look at the group outlook. I just want to share our commitment and reiterate our commitment to the long-term potential of our store network. But it is worth noting that after the two years that we've just had, that we are reassessing the timelines of growth based on the improving unit economics. When we've got markets like Australia, New Zealand, Singapore and Germany that have now been pulling together some consistent track record and improved franchise unit economics, we expect that stores should be accelerating into the next financial year in these markets. And it's -- and growth depends on other markets getting to the same sort of strength in their unit economics and same-store sales growth. With that in mind, you'll also note that we removed one of the bug charts, one of the blocks there of around the target for 5,000 stores due to the way that we've missed our targets in the last two years. If you come now with me into conclusion, and we look forward to answering your questions. In conclusion, our most recent performance has been a period of change, and we have not met expectations, yours or ours. The new organizational structure is delivering increased efficiencies and savings into the network, both improving the competitiveness of our company, but also our franchise partners and our corporate stores. Recent trading has demonstrated some initiatives that we're doing in the aggregators through technology, marketing, new media, product and operations apply across all regions, and that there's many of these things that are more similar than we are different. Some markets have taken more time to appropriately balance that value equation and require some time to turn around. That clearly with some of these businesses, we cannot promise yet a result. The recent same-store sales growth has reinforced that our focus and now the way we went after aggregators as a vibrant marketplace was right for incremental customers, and that's doing -- serving us well. Established markets continue to identify new approaches to get incremental customers and so we're working on those new dayparts and new occasions as a driving force. And finally, the Domino's value equation relies on in-store execution as well. So, inspiring our franchise partners and our store managers and our 100,000-plus team members all over the world and that we match that quality to the appropriate pricing to deliver value. As markets return to those stronger unit economics, we expect new store openings to take place. Typically, the first surge is to acquire some of our corporate store network, where we may be an overweight in some of our corporate stores and then followed by new stores. So, we do think that we should see strong new store growth in Australia, New Zealand, Germany, and Singapore next year. Markets excluding -- executing, sorry, against the value equation are recording good sales, strong growth and so the Domino's mission and strategy remains unchanged to be a high-volume mentality business, the focus on profitable orders to enhance our unit economics, and build stronger, more sustainable franchise partners. So, we've been in a rebuild mode. We still have a lot of rebuilding to do to make sure we're building the next layer so that we can get on and deliver upon our 7,100 store outlook. So, at this point, I'll now hand over and we can answer questions. Over to you, Nathan. Thank you.

A - Nathan Scholz: Thank you, Don, and thank you to all of our speakers. Again, a reminder, you can enter your questions in the Q&A box down at the bottom. Perhaps, Don, if I just start, firstly, in terms of franchisee profitability. Obviously, you mentioned that the franchisee profitability has slightly recovered so far, but we're still working on that. What is the level of franchisee profitability that we're needing to get to, to start the store openings?

Don Meij: Yes. So, when we get to that three times, we've talked about it a number of times, three times the EBITDA, then we just see it accelerate. So, it's -- many of our businesses are out at four times at the moment and even higher or worse in Asia in the last half. So, until -- as we pull it down into three, first thing happens is franchise partners, balance sheets improved. They may have accumulated more debt in their other performance periods. As they improve their balance sheets, they may also be paying back some bad debt to us if we carried in -- if we took any to book over that period of time. And then we often see many of them want to accelerate their growth again. And the more inspiring the results, the more lucky day -- more so you're going to see grow, but we've got to get it towards that three times.

Nathan Scholz: So, Craig Wilford asks, it's not whether the EBIT margins actually fell in Australia despite strong sales. So, why did operating costs rise in Australia and what are some of the other major component parts?

Don Meij: Yes. One of the first things we've done is we have front-loaded in Australia and New Zealand, so that we made sure that our franchise partners are strong, and we're obviously playing a long game here, and you're going to see that over the full year results, where you're going to see the benefits from these sales play out to us. Remember, we talked about customers first, franchise partners, than ourselves. And so yes, it's my expectation that we'll see that flow more through to shareholders next, but the first part of this has been getting a lot of those savings and so on into our franchise partners and creating the value equation.

Nathan Scholz: And then so staying on franchise partners. I feel like outside franchisee profit per store increased modestly and maybe if you could provide some more color about that by region?

Don Meij: Yes. Look, the bigger picture is, as you can expect, were same-store sales rose and unit economics improve. And so whether you're from Singapore or Germany to Australia and New Zealand, one of the outliers was we did see some improvement in franchise partner health in France, which I know it's been such an underperformer. And -- but part of inspiring the changes in that business, we have seen some recurring franchise partners. But by and large, the most pain that was in our business was in Japan and Taiwan in the recent periods. And of course, we own most stores in Singapore and Malaysia for all the stores in Singapore leisure. So it's not in these references.

Nathan Scholz: Okay. I'm just going through. There's a lot of questions here. The -- I had a question in terms of -- sorry, I'm going back to this one. In regards to leverage, is it not a more prudent approach to lowering the net leverage ratio back to 2.0 by divesting some of the more recently acquired or underperforming markets rather than having an ongoing hand break on capital expenditure and the ability to grow new stores.

Don Meij: Yeah. Look, with our current capital management program that we have, we expect that will deleverage at quite a reasonable pace. So these are good markets with a good future outlook as we roll and get these -- some of these challenges we've had in the near term sort of out, they're good pieces to have in our portfolio. So we think we're going to achieve quite a good balance sheet without having to do that. A - Nathan Scholz And keeping in the same vein, will Domino's be shutting stores in Japan and France in 2024.

Don Meij: It's always the ones or two. Remember, we're a business now of 3,800-plus units. So for the purest answer there, there will be the odd store here and there as it has been in our history. But by and large, with the exception of France because France still is going through that final phases of what we said for the restructure. So France still has to close a handful of stores. But yes, for the rest of the business, it's business as usual from the store closures at this point.

Nathan Scholz: Okay. Again, remaining on the franchisee payback, if you can provide some more color in terms of what that payback period is now for franchisee partners opening new stores and how is it trending?

Don Meij: I think I've really kind of answered that one with the four markets that are trending really well, 5th if you are adding France. But yes, I think I've answered those by and large, with -- yeah. With that, we clearly got out beyond four. And that just, as you can see, has really slowed the growth. We have had still store growth because there are franchise partners who regardless have performed well and have wanted to take the opportunity in these moments to expand. But our focus has been really squarely not on the new store focus. It's been really squarely on those unit economics, knowing that as that's getting healthier. As we're moving to three now in the markets that I mentioned, we should see store growth -- we're focusing now on store growth into those other markets -- into those markets.

Nathan Scholz: And before moving on from this topic, then characterizing franchisee appetite to open new stores is really then related by region back to that store payback then?

Don Meij: It is -- these are small business owners, and it's literally based on the performance, and you'd expect that. I mean, they're a most sophisticated investor. When performance is good, they're going to -- the better operators, if you want who have a longer outlook we're going to buy and open stores. So yes, it is -- and vice versa slowing down. When we were underperforming, you saw that the growth slide really quickly as well.

Nathan Scholz: Sean, from CLSA asks on the Page 23 group outlook, you maintained the store opening target number and time line unchanged, but you also said you're assessing the time line of this growth based on improving unit economics. My reads the time line could be delayed. Is that a fair observation?

Don Meij: It is, and that's why we removed also that bar of the 5,000 stores in between because we've lost these couple of years. And as we look forward into the next year, there's still some of these businesses that are showing us the lore time to recover. So that has -- that means that we have to assess market by market. But once again, reiterating as soon as the market shows consistent performance, we're watching appetite, improve and then we'll get back to focusing on those stores. But they're all -- it's not just one size of DPE right now. There's -- you've seen there's two speeds going on in the portfolio.

Nathan Scholz: A question regarding France, perhaps, if I can maybe turn to Andre on this one, the delay in closing some of those stores we referred to in the restructuring update.

Andre Wolde: Yes. So the cause is that you have to go to through a procedure with unions, with workers' councils and you have to follow all the steps there, which we are diligently doing. It's -- so it's a process that I understand that is very difficult to understand, but we have to go through the steps to be complaint. And so it's taken a little bit longer than expected. We expect it by the end of last half year, and we expect it to be finished by the end of this half year.

Nathan Scholz: Okay. Now in relation to the trading update, Tom Kierath ask is the -- in the trading update, same-store sales growth in Asia is plus 0.3%, but Japan is plus 6.7%. So then how much are other countries in Asia down? And are these countries expected to be profitable this year?

Don Meij: Yes. Thanks, Tom. Yes. Look, we are -- we do have some strong growth in Japan, as you know, we have got some external headwinds coming from Malaysia, they are down on our plan, so Taiwan, as we rebuild and get our branding in there and our new brand approach. So we do expect that they'll keep delivering once all the tensions ease and we'll keep continuing with our business plan and doing what we know. And we're really focusing on what we can do at this point in time in the markets. There's a whole bunch of people still coming to us, and we're actually challenging our cost base in these markets. So we'll actually come out the other side quite well.

Richard Coney: And adding to that, the -- both those markets are still profitable right now. Yes, it's not as profitable as our expectations.

Don Meij: Correct, yes.

Nathan Scholz: While we've got you, Josh, a couple of more questions on Asia. A question in terms of the growth in Japan, if you can maybe give some color regarding ticket versus customer accounts.

Josh Kilimnik: Yes. So most of the growth now, I mean, tickets have moved thanks -- we had to move ticket. It's reasonable for a business to take ticket from time to time. We exceeded that. We're now rebalancing that. And now we're growing through customer counts in Japan, which is what we were trying to do. This has taken some time to figure out. But we are in a place where we're launching -- the critical part, which what I mentioned is the access point to the brand, which is our pickup customer who wants to come and meet us every day.

Nathan Scholz: Okay. Also, while we still got you, Josh, if you could maybe give some more color around what the third-party supply chain issue in Asia.

Josh Kilimnik: Yes. Look, we really are working through some of these issues still. So it is live, and I can't share the full details on that, but I can tell you what we're focusing on, we're focusing on what we can -- we're in control of, and that is our stores and just doing what we need to do, and that is relaunching Barbell strategy. The plan hasn't changed. We just need some time to work through those details in our supply chain.

Nathan Scholz: Well, it’s too late – sorry, Josh now I'm going to monopolize your time. A question from Shaun Cousins on Japan. The order frequency. Has it reduced in Japan? And does that mean the business is not profitable each month. Or -- and how does that order frequency compared with, say, Australia being profitable every month?

Josh Kilimnik: Yes. I mean definitely different markets. It's apples and oranges in terms of order frequency, through putting up prices, it did affect order frequency. And we tell that in different cohorts of customers. We are – this is why we need to rebuild out of that. So that is the biggest focus. And as I said, we're growing through order accounts now and ticket is largely flat.

Nathan Scholz: Okay. While we have got some questions from Sean on the screen. ANZ, Don, menu innovation has been important. Is this multiple years of innovation at once? Or can this pace be maintained?

Don Meij : Yes. It's a really important question. So we have built in a couple of new layers. So the MyBox is something that we're going to continue. It's one concept, but there's ideas with inside that. And you've watched since we've launched that, that as we launch a new product, like a lamb tzatziki or a lot pizza, it's also appeared in the MyBox. But there's even other innovations. So we see MyBox as a platform, just as you would see other boxes from the chicken providers and burgers as they bundle up their meals for a single eater. We also think Meltzz is a layer. So you're seeing Meltzz appear both in MyBoxes and independently. Today, we launched a slightly smaller version of the Meltzz for the $5 or less range. We'll be monitoring that. We don't think long-term we'll carry two sizes of Meltzz. In the coming three months, there are some products also coming out the back end. Everything on our menu has to perform. So there's some products that are being retired as we've added these new products. So yes, by and large, there's a couple of more layers. We see the $5 menu as a layer. So when we think about that, $5 or less that is, there's a couple of products that are launching between now and August that will be at $5 or less that will be making its way into that menu as well. So trying to look at these segments and become known for them, become iconic for them in our industry, in our category. And so, yes, a lot less of that much layering, but looking at a day parts. I can say that the business has also expanded trading hours in Australia, which we're benefiting from. So there's been 450 stores out of the 900 Australian, approximately Australia, New Zealand stores that have an extended trading hours, largely earlier trading years. And that's because we've had the Meltzz in the MyBox with some stores due to the aggregator performance in the city stores trading a little later. We do expect that to continue. So as we build on these occasions, we build on these day parts, we're looking to encourage ways that our franchise partners and our own stores will expand trading hours. So that's still part of the menu development and the outcome of that menu development. Because Domino's and the pizza category has been behind, particularly burgers, many of those trading now at 24 hours. And we think there's opportunity, large parts of the market we haven't performed well in previously lunch that we can do a lot better in.

Nathan Scholz: Well, we're talking about aggregators then Don. The aggregates have been a fast-growing channel. And so when did all the stores in Australia get put on that aggregator? So effectively, the question is, so when does that uplift gets cycled?

Don Meij : Yes. The core uplift is around July, August, and it continued to build from there. And originally, the first phase was just largely in Uber, if you're talking about Australia and New Zealand. And now there's some efforts now to expand that energy into DoorDash and Menulog in this part of the world. But there's still lots of areas, despite the fact that we've had really strong growth that we underperformed, both in the menu that we've got in there, the way we're executing the menu. So there's constant learning. It's worth noting these technology platforms also change their algorithms and change their own advertising. So we're often pursuing different ways to advertise and grow in this space. But yes, the fundamental first change is around that July, August period where we took the first step up in the aggregator growth.

Nathan Scholz: Thank you, Don. Maybe if I get through to Andre for a question on France from Sean. When was France last a strong performing market? What are the key challenges with this large pizza market?

Andre Wolde : Sean, I think I'm the most disappointed that it has been this long before, France has been a good performing -- strong performing market, especially given the potential that is in the market. What was the second part of the question, sorry?

Nathan Scholz: What are the key challenges really for that pizza market?

Andre Wolde: The key to -- within the pizza market, we're actually doing quite well in France, I might add very well. The biggest challenge that we face, it's a big market, it's a big QSR market. There's a lot of people fighting for attention. And what we've seen lately on the pickup and, for instance, we've seen that all QSRs are back to fighting over price, which hasn't been there for a long time and pickup is our largest part of our business in France. It's good that we strengthened the delivery because we're absolutely standout in delivery. But pickup is a more generic market. And we have -- it's now fought on price by our competition who has way bigger media budgets than we have. So, we have to be smart around it. I'm very glad we did introduce the MyBox because that's -- together with the Coles, which is more a snacking product that we've introduced earlier, we can fight on the pickup front, but that's where we need to focus on now. But it's clear France is a very competitive market.

Nathan Scholz: Thanks Andre. The question on the covenant and the relaxation announced today. Does the decision to have lenders agreed to the net leverage covenant increase from 3 times to 3.5 times indicate concerns over the second half outlook. Maybe, Don, if I pass you to that one first?

Don Meij: Yes. No, absolutely not. I just want to congratulate Richard, so an opportunity talking with the banks and was able to do a commercial movement, he said, yes, why wouldn't you take it? We still live in a volatile world. But no, we expect to continue to be able to deleverage, that's our focus at the moment. And in this new phase of just -- this near-term phase of rebuilding, how that's deleveraging and we're doing that. Richard, would you want to add anything to that?

Richard Coney: So, I'll add to that. Yes. So in effect, we -- there was virtually zero cost, a very small work fee for us to have the temporary increase in this covenant relaxation. It's out to June 2024 results. So, -- and that's sort of the time period that we expect -- we don't expect to have any issues at this point. So, it's just really why not take it was -- and really just highlights the strength of our relationship with our banks. There's no increase in interest margins unless we exceed the 3 times. So, as I say, it's a bit of a no-brainer.

Nathan Scholz: And Richard, I think that really goes into the next question I actually had on this -- on the interest expense. So, you just said, obviously, there's no increase in the margins unless we go past the 3 times ratio. But what's a jump in interest expense in the first half? And is that -- how much is driven by the cost, which you've already answered, but also overall interest rates or increased borrowings. So, what's the makeup of that? And should analysts expect to annualize that figure?

Richard Coney: Well, as you probably know, we've -- some -- let's say, all of our yen debt is locked in and fixed, so that's not moving. In terms of our other debt, there's no change, as I said, to the risk margins as a result of this relaxation. And so therefore, we're just dependent on what's happening in the global markets in terms of -- as you know, hopefully, we'll get some reductions in interest rates as the countries around the world start to beat the inflation curve down. So I would be expecting no real change in the coming six months to answer the question. But then going out, we'd expect those to reduce given the macro wealth at the moment.

Nathan Scholz: Perhaps, if I can hand over to Josh for a moment a question regarding Japan. Do you think some of the issues that we've been having in Japan stemming from executive leadership having quite limited operational experience within the market or maybe not be familiar with the local demographic or consumer preferences?

Josh Kilimnik: Yes. Look, I think that's a great question. But one thing that I would answer with that is we're research-led. We test, we research, we then find the right approach to enhance the consumer demand. And we balance that through our teams and various focus groups. So I don't feel that that's a factor. And apart from some of the key leaders, the rest of the team is Japanese. So we get -- we're well informed of, if anything doesn't or won't work in the market.

Nathan Scholz: Maybe, Michael, if you can talk about that application of the center of expertise in that sort of local versus global approach?

Michael Gillespie: Yes. Thanks, Nathan. So when you talk about local versus global, when you talk about local markets and culture experience, the center of expertise and the global support center actually reduce some of the risk of have we got the right people on the ground to actually understand our systems or understand what local market we do as Josh touched on a lot of these markets have people that are connected with the franchisees and the research on what should be local -- what product should be local, but backed by global support systems. So when we have new people on the ground or less experience, we can support an over-index in the areas that we are lacking on via the CoEs, which is a tremendous benefit to what we didn't have last year, and we've already seen that leading into Australia. As Don touched on earlier, ANZ is where we first applied a lot of the center of expertise and global support services and now we're leading into Japan and Europe and only taking how we did that and expand on that. So I think it's definitely a benefit that we have that we didn't have previously is this global support to complement, augment and help our local markets where there might be experience lacking in certain areas and grow them to be stronger teams and also lean on them to understand their markets better because we need research. We're not going to launch the same feature in every market, if the research doesn't show this interest. Volcano is a great example. It has gone beyond Japan to the markets but there might be lamb pizza, which just says in Australia, and we need local expertise and local research to know that and that bring the franchisees onboard.

Nathan Scholz: Thanks, Michael. A question for Richard, regarding the working capital position, a question from Michael Simotas, is the current working capital position sustainable? Or were there some timing impacts? And was there a conscious effort to increase the collection of franchisee loans?

Richard Coney: So yes, our working capital is sustainable. And as you saw, we actually went back slightly from a timing perspective around in December. There are lots of ups and downs, but especially into the Asian market. But yes, it's purely timing, and we don't expect any further structural changes to our working capital over time.

Don Meij: And just to add to that, Nathan, sorry, just that we'll have our first franchising in Malaysia in this half. And so as we look into next year, one of the strategies that we've deployed throughout our businesses when we acquire a corporate market as we introduce franchising and that will -- then we start deleveraging that market from the money we put in. So we can expect that to start – it starts this half, but we'll see any sort of movement in that into the next half. So that's something also worth noting in that area.

Nathan Scholz: Richard, a question from Ben Gilbert. Do we have cash conversion targets moving forward? And what are these, is 100% conversion reasonable near-term?

Richard Coney: Yeah. Look, as I say, it's depend -- that one is purely dependent on the working capital to an extent. But if you look the other thing that impacts that is profit and loss on sale of stores, which is an outflow in that calculation if we increase that. So look, around 80% to 100%, but we don't have a specific target each half year. It's more that we expect to have full conversion other than the profit on sale of stores. So the working capital is the key there, and that just moves between periods depending on when our year ends and half year end is falling.

Nathan Scholz: We've obviously given an update on our restructuring program and that we said that we're targeting savings of circa $50 million. A couple of questions just in terms of what that means for the previous guidance for FY 2025. Does this mean that, that -- those targets are still on track?

Don Meij: Yes, that's correct. And that's largely when we start moving into the shared services and Michael is heading up that division at the moment. So that's well and truly underway. We've got our head of shared services currently in Malaysia. We're imminent with the site in Poland. And so that's obviously the second phase of those savings. And from all intent, the team are embracing the approach and things are progressing well.

Michael Gillespie: Yeah. And in addition, you get the full year benefit of when we started the process. And for example, like in France, we're not really getting any of that benefit as that moves into the next quarter when that starts to be implemented, then that's getting a full year benefit at that stage.

Nathan Scholz: Don, while we've got you. There's a couple of questions on the Australian QSR market. Your peers in ANZ have indicated higher levels of discounting and promotional activity. Have you stepped up promotions in ANZ and is this step up sustainable?

Don Meij: No. And I know there's been some analyst reports talking to that, and we actually haven't. I think what might be some of the things that lead that is that for most of recent years, we were doing boost weeks, which is for a year and boost weeks for us is a customer acquisition period. So that's when you'll see something like 50% off, it may be only or maybe certain parts of the menu. Often it doesn't include things like the value range for pickup and so on. And so we returned to those last year, but they've been a layer in our business for a long period of time, as is our Tuesday offerings. But if you look at the other products, when you look at the $5 less, the first reaction to that might be, look, Domino's is getting back into discounting the rate. Those products are built with really good margins for our franchise partners at those prices. They're built for those costs. They're clearly smaller offerings, things like a stuffed pepperoni cheesy bread, millets, our lava cakes, our garlic rolls [ph], drink and soon to be some other products in this area. So our QSR peers often have had products in entry levels there as we are now branching out into an expanded dayparts. We think there's openings for those as well. But at this point, no, we have not stepped up increased activity. And I think there were three things we wanted to make clear and this is that we're not discounting more. And I can say that in that margin is improving for our franchise partners and from our ticket that we have real customer count growth. So there's -- I think that for analysts that are tracking our business, they're missing all the aggregator numbers. So when you're looking at web traffic and app traffic and that stuff, obviously, there’s cross applied platforms. So I don't actually know what are the equations for some of our analysts, but I think that's being missed. And so, yeah, this is real customer growth. This is real sales growth, same-store sales growth. This is category growth, and this is segment growth.

Nathan Scholz: It's always me. Here's another donation. This costs me every time another donation to our Domino's charity, which gives me the opportunity to talk about our -- actually our relaunch of our charity is Minds & Meals, which I'm sure team will be delighted for me to mention. So it's another donation. We might as well just make an auto deduction from my salary. Okay. So just on share of throat from Ben Gilbert, how are we seeing that pizza share of throat that's Ben's words, by key market, ANZ, Japan and Germany, anecdotally restaurants and chicken QSR are losing share. So maybe if we start with Don and then hand to Josh and Andre

Don Meij : We do -- we are in a very interesting period in our history that I can remember in my 37 years, where the two leading players in pizza in Australia and New Zealand are both growing. Typically, it's been either or in the history. And right now, both are growing. And so that is healthy for the category in Australia and New Zealand, which is really positive. Over to you, Josh.

Josh Kilimnik : $50 from me too. For Japan, the conditions have compressed, I guess, all pizza QSR. We are the ones that are sort of growing out of that, the best with their size and scale. So yes, that's what we're seeing. And we're starting to sort of drive within those and various channels within those. So that's the encouraging part.

Andre Wolde : Yes. And for Europe, it's different for Germany, where we see the pizza category, according to the Crest data is still growing, but we're growing the fastest in that. In France, we are growing fast in the pizza category, but the others seem to be losing. So when the pizza is pretty flat. And in the Netherlands, I remember 18 years ago when we bought the market the thing was the Dutch don't eat pizza. Well, they keep eating more pizza and the category is still growing.

Nathan Scholz: This is going to be an expensive morning for me. Okay. So, Ben Gilbert, just asked while I've got you, Andre. To what extent are we seeing it's Japan and Germany? So we'll start with Germany. So to what extent are you seeing Germany follow the path of ANZ, given some of the initiatives were put in place across Australia three to six months earlier? Does it give you confidence in same-store sales growth lifting?

Andre Wolde : Yes, it does. Like Michael said, we share a lot of things that are -- that may not always originate from Australia, but we get the additional learnings from the Australian market. So, yes, both on all the things that we do and the three mains are clearly on the product side, on working with aggregators and the medium mix modeling, we see that continuing. And we keep on introducing learnings from Australia into those markets. Actually, the CEOs of those markets are coming over the next couple of weeks to make sure that we really understand what's working and what's not and how we translate that into the German market and other markets?

Josh Kilimnik : Yes. Same for Japan, I mean, all the product-led promotions, all the access point to the brand has all changed. We're seeing customer count growth. So we're feeling okay about building. I would say, definitely, as I think about the outlook, 3% to 6% is where we're targeting.

Nathan Scholz: Just in terms of some of the costs at a store level, what are we seeing in terms of the food inflation? Do we see there's a benefit flowing through to us? And what kind of timing are we expecting?

Don Meij : If you start in the Australia, New Zealand business, we've obviously still had some currency headwinds, some of the global commodities. So, where the incremental increases, in some cases, decreases, but the net has been quite marginal overall, but it still is on average, an increase in food and we're still expecting on the 1st of July to get more wage increases. I haven't seen any indication yet of the range of that, but that's still what's in our expectations. What the ANZ business is benefiting from is the leverage of the volume and the scale at the moment. So, that means our fixed and semi-fixed costs are coming off, which is a positive as well in those businesses, and especially, considering that we took a sizable wage increase last July, and we're actually running lower store wage costs now. So, we're being more efficient. One of the things that people underestimate with Michael's teams in the commercial area is that the digital expertise they have goes into a lot of things like including co-pilots using AI and so on. So, we are working currently on smarter scheduling. We just started real-time live wage assessments, all sorts of really good analytics to put in our hands more education for our franchise partners and our team DPA, Domino's Pizza corporate team members to be better performance as well. So, these branches right out. And other thing that we're benefiting from is that as we're -- with the center of expertise with the media, the media also some of the creative. So, some of the creative can cross-market, so we can actually shoot products in a central location and use them in more markets. We've really done that as a business because we -- each market was running separate plans that were so separate that they weren't timed to be able to do those sort of things. So, there's some really good leverage that's coming from that in the business. Over to you, Josh.

Josh Kilimnik: Just confirm the question again.

Nathan Scholz: Talking about soft commodities or just inflation period?

Josh Kilimnik: About the impact of the business.

Nathan Scholz: Yes. And then also then the follow-up question is, obviously, in relation to Japan with the currency movements as well, what that means for the local stores?

Josh Kilimnik: Yes. Certainly watching that. I mean we look here, we have an FX program where we do lot currency. Soft commodities have sort of flattened out a little bit, but we are watching the FX because we are an import market. We do have some labor rises that will naturally come through, and we are -- that's sort of in October, September, October next year, but we're already planning for that. And this is the business that we like -- we're getting back to where we only have to deal with those one-offs and -- or two-offs a year. So, everything we're doing now is testing to try to build volume because that's the answer, not pricing, just putting price up, which drives down volume and actually produces -- customers -- what happens when you put the pricing up as customers just shuffle our products out of your basket and that's not what you want. We're a volume-based business, and that obviously then hurts any warehouse profit that we make as well. So we're after volume, and we're seeing some better conditions going forward.

Nathan Scholz: If we go back to franchisee profitability, a question from Max Molinari, rolling $12 million of franchisee profitability is -- sorry, rolling 12-month franchisee profitability is plus $1,000 from the third quarter to the first quarter despite the $21 million in cost savings, of which $7 million went to franchisees. I don't I understand from what you're talking about that, that doesn't -- some of those are supply chains. But that means in Max's assessment that underlying franchisee profitability is moving backwards. So, given that, firstly, is that correct? And then secondly, what makes you think you can return to that store growth in FY 2025?

Don Meij: Yes. So, to be really clear in the last half, yes, in Taiwan and Japan, it did go backwards. That is absolutely true. For the rest of the business, by and large, that's not accurate in the last quarter, in fact, that rolled-off were up 11%. What's missing is the December quarter. And a lot of the performance that you've seen in the business has really shown stronger recovery in the markets that are performing being very clear, and it's coming into the last quarter as it's just accumulating. So yes, when we look at the December quarter, it's been healthy and growing. And so no, we're not going backwards with the exception of Taiwan and Japan in the last half.

Nathan Scholz: Just in terms of the growth in Australia, can you give some more color around ticket, customer count and then the additional trading hours and what the contributions or how they will feed into that puzzle.

Don Meij: Yes. So it's both customer count and sales. And as I mentioned, we've been in some of the top growth QSRs for customer count, and we're in the top four for sales. And we were the leader in lunch. Lunch is being enhanced by the product, but also by increased trading hours. Some of our stores with melts have moved their trading house to 9

Nathan Scholz: Thank you. Now just in relation to a couple of maybe policy questions or how we're thinking questions. The different attitude towards loyalty between DPZ and DMP and then also what our latest thinking around GLP-1 is.

Don Meij: GLP-1, sorry…

Nathan Scholz: Ozempic Style, Medicine

Don Meij: Yes, good point. So the first thing is that it's not a difference completely of opinion on loyalty. And there were parts of our business where loyalty didn't make a lot of sense and it would have just ended up in straight dilution in the way that it would have been done previously. So we actually do have the DPZ platform in parts of Europe. But Michael has got a team assembled in this year, where we'll be revisiting loyalty and looking at some other QSR learning. And so that's still on there. We talk about loyalty in the business, by the way, and we talk about that by customer lifetime value. So when we think about things in the way we use our wallet, when we look at – when we talk with franchise partners about the individual customers, we're very much following the customer through different cohorts. And we talk about that as loyalty. How do we drive people up the curve? But software, which I think is specifically what's being asked there, that is on our platform. When we come back to the current Wycovies, Zempik and so on, and so. One of the things that you see us focusing on is also these smaller meal choices. So our observations and they're clearly light at this point because we don't have length of research in this category, but the consumer is the leading us ending less and still wanting to treat themselves. And so when you see things like melts and you've seen some of these newer products that they very much are also the secondary part of that is we think that they are a small meal choice for people who are making those lifestyle choices with the needle.

Nathan Scholz: Yeah. Thank you. Richard, a couple of questions for yourself. Is the debt of $858 million inclusive of the $365 million line of credit available and is all debt due in FY 2027. If not, what are the due dates for this debt? Richard's on mute. That is $200 so far that we're up through the mines and meals charity donations today. So I know our charity partners will be very delighted today. But Richard?

Richard Coney: Okay. So just to be clear on the question, obviously, the additional facilities are additional to our debt. So I think that is -- I think that is the question. So inclusive yeah, no, we have an additional facility of that $365 million. In terms of when our facilities are falling due, they're all falling due predominantly at the same time. We have one of our debt facilities that is two years out as different to the 27, but predominantly all falling June. We're obviously not -- we're going to be getting ahead of the curve before we get to the end of that period and be looking to extend those at the appropriate time.

Nathan Scholz: Two more questions well. Have you, what was the EBIT benefit to Europe in the first half from the closure of Denmark?

Richard Coney: Yes. So that was $6 million. Just let me just double check that number. But yes, approximately $6.2 million.

Nathan Scholz: Okay. And other expenses as reported in the P&L increased by 21% or $9 million. And what's the category of expenses? What drove that increase?

Richard Coney: Yes. So it is difficult when you're measuring -- so when we're consolidating all of our numbers in the statutory reports, but predominantly, that is the acquisition and additional cost of Malaysia, Singapore, Cambodia predominantly makes up most of that. Another big piece is just the FX rates, those current FX rates in Europe and Japan have improved. So you've got an additional cost there. So removing that, it's effectively about sort of a relatively small increase in line with the revenue growth. In terms of what's included, it's almost everything that doesn't fit into those categories from professional fees to IT infrastructure costs, it's a multitude of items, but I think probably the question is why was that so significantly up and predominantly, it's classification of the additional costs coming in from Malaysia and Singapore, which we only had one month in the prior period.

Nathan Scholz: Don,, a question for you. With the share price much lower than previous years, could we look to do buybacks in the second half?

Don Meij: Yeah. No, at this stage, we're very focused on deleveraging our balance sheet. And so that is an open conversation at this point in time.

Nathan Scholz: I’m just going to finalize the last four questions that I've got on my list. Andre, store closures, we obviously mentioned some of those were delayed in France. How many should we be expecting in the second half?

Andre Wolde: Yeah. It's a moving time, last time I check it was less than 10%. So it's not a massive amount.

Nathan Scholz: Okay. Thank you. Over to you, Josh, in Asia, Japan specifically. Just maybe if you could share some more about the progress you've made. You talked about aggregators today, what progress have you made with Uber in Japan? And when do you expect to see some benefit flowing through from that?

Josh Kilimnik: Yeah. Look, we are active on Uber already. We have been. We've always been on aggregators. The Micon [ph] is actually our biggest aggregator partnership that we have. So that's one thing to think about. We've added on Uber and now Uber is in every single one of our stores, and we are seeing some benefit come through there, and these are incremental. We're also focusing back on our own channels because we have to grow both. If we -- just one exceeds that's not a win. We need to grow our own as well. And that's where the rebalancing comes in. But we expect to play in that marketplace forever more.

Nathan Scholz: Thank you. Now just, Don, a question on franchisee payback. Obviously, we've spoken quite a lot about those payback periods. Sam asked is the store EBITDA representative of the actual cash to franchisees? Or is there sometimes CapEx that needs to be paid by franchisees. So is it simply a build cost divided by the profitability?

Don Meij: Yes, you are right. It's a build cost divided by the profitability of the expectation of that new store. Now what isn't shown, so you're looking at the base EBITDA right now, and that is a simple calculation. But in some of the markets, many of the markets, we also give an incentive to open store. So in fact, it's really interesting in Germany right now, if they continue to annualize their current growth. They will be well below a three-year payback because of -- if we just back out the incentive. If it's the rough calculations in Germany right now, say, €300,000 to open a brand-new store. We would give them right now approximately €100,000 in incentives over a three-year period. And when you look at where Germany's profitability is right now, it means that they're well below three per a brand-new store right now. And that's really the package to get franchise partners moving. I would like to follow it, just got to get a bit more track record, balance sheet strengthening, franchise partners go after that. And that's a similar equation for most markets is what is the build cost? Where are the likely EBITDAs of the new stores and the incentive can obviously help in those first period because for many -- even the banks can look at that as reassurance that that's coming off the price, it's $300 million, $100 is going to come straight back to the franchise partner locked from us, which means it's closer to 200,000 build.

Nathan Scholz: Okay. And just regarding the trading update, we mentioned that we're cycling some softer comps at the moment. So when do these comps step up and what's the delta of the step up?

Don Meij: Specific markets, Nathan?

Nathan Scholz: Maybe if we start with Australia, I mean, the comps, do they get easier from here for Australia and then we'll go to Japan and then Europe.

Don Meij: Yeah. So the comps started accelerating from July last year of any notability and got stronger through the half. And so, yeah, we're really well aware of what we're stepping those up, and what are the strategies this year that will increase. You'll remember I highlighted despite these quite strong same-store sales in Australia/New Zealand, we still have a lot of opportunity. There's areas we're underperforming in some media spend that we're aware of, and we're getting through the year on that. There's also the offline carry-out customer, it's quite a significant number to chase. That's actually -- it's very interesting. Delivery as a category in Australia and New Zealand has been shrinking, and we're accelerating against the shrinking business, because we've been so focused on our expertise. But to pick up, offline pickup and pickup itself has actually been growing. And we've actually been shrinking against that because we haven't had as competitive offering. And so that's an opportunity well into next year that we're going to keep refining and learning. We launched a new menu today for that. And then family bundles, big opportunity for us well. That's just three, never alone. The centers of expertise are constantly teaching us and we're being inspired from around the world where there's behavior that's happening and the centers of expertise will walk in to me as the Australian CEO as well and the CMO and Allan Collins and Kent and Kerri and operator and say, hey, look, there's an opportunity right here. You should be maximizing this. And it's please explain more or less why we wouldn't be chasing this. What's holding us back? How do we resource this and so on. And that's what Michael's team is doing exceptionally well, actually, it's constantly putting, leave no customer left behind and the great opportunity now as we can to see a lot of customers that we can still be pursuing. Over to you, Andre.

Andre Wolde : Yes. So I guess you all agree that we have -- we've been delivering consolidated over Europe a pretty soft sales over the last 12 months. So we don't see that having higher comps to beat, obviously, in market. So Germany has got a good last six months. They will have that from summer, but then Netherlands has been coming off. So consolidated, we're beating soft comps.

Josh Kilimnik : Yes, same soft comps for Japan, specifically, a little bit higher around May and those sorts of months, but pretty soft from there. I think the characterize of the difference being it's not all just about price. It was all price last year in this same half and throughout the year. We've now got product. We've got great product. We've got better channel execution, thanks to the center of expertise. So that will be the thing that we'll be watching and looking to grow against those comps.

Nathan Scholz : And then maybe, Don, if I could just -- we've burned through all the questions today, which I'm pleased to see. Any sort of final commentary that you wanted to provide on sort of recent trading and what the focus is moving forward?

Don Meij : Yes. Clearly, we've been disappointed with our recent results. We're not proud of many parts of the business. And hopefully, today, and we'll continue to highlight where those missteps have been and what we're doing about those missteps. I think it's really important. It is still worth highlighting for the teams that have worked exceptionally hard in Australia, New Zealand and Singapore. I mean, Singapore has gone through some really impressive restructuring in just such a short time. Closing a commissary, moving to back of house of dough in every store, rolling out a brand new app, embracing a whole new approach to their menu. I mean, it's a small market, but they've done an exceptional job, and it shows what we can do when the team executes well against that. In fact, it's the highest growth same-store sales business for us in recent periods. And then the great work the team in Australian, New Zealand has been doing, the Australian, New Zealand business was stagnant for a few years. You can see that in our comps and in franchise performance. And we've got very strong commitments with our franchise partners on together what we're going to do. And I think that's also helping to inspire the rest of the business on what's possible and how we go about rebuilding those profits. But yes, the message we have today, we were still in build mode. We still, seven weeks, it's not a track record in Asia yet, particularly in Japan. We obviously have some macro issues in the Malaysia business that is putting some tension on our regional same-store sales. And that's something we're not fully in control of. It's externally influenced. And so we look forward to that coming to an end and being able to rebound from that. But yes, this is a work to share -- this result is about showing exactly what's working, what's not working and what we're doing about it. So, thank you, everybody, for giving us your time today, and we look forward to some of our one-on-ones.

Nathan Scholz: Thank you so much, Don, and thank you to all of the speakers. And as I mentioned a couple of times on the call, there will be some of our tax going to our charity Minds & Meals for those who are not aware of it, that's at www.dominosmindsandmeals.org. I'm sure both our charity partners -- will appreciate the donations from our speakers today as I hope that all of our attendees have appreciated the answers that we've been giving. We look forward to seeing you on the road show. We'll talk to you very much soon. Thank you so much. Bye.

Don Meij: Thank you.