Domino’s Pizza Group plc Annual Report & Accounts 2020 ...

1 WE GOT THISA nnual Report & Accounts 2020 Domino s Pizza Group plcDOMINO S Pizza Group PLC1 Thornbury, West Ashland, Milton Keynes MK6 4 s Pizza Group plc Annual Report & Accounts 2020 See more online at Highlights02At a glance03 Purpose, vision and values04 Investment case06 Chair s statement08 Covid-19 STRATEGIC REPORT12 Q&A with Chief Executive Officer and Chief Financial Officer14 Chief Executive Officer s review24 Strategic priorities26 Market context28 Key performance indicators30 Business model32 Sustainability45 Section 172 of the Companies Act46 Engaging with our stakeholders and workforce48 Chief Financial Officer s review56 Risk management57 Principal risks & uncertainties67 Viability statementDomino s Pizza is the UK s leading Pizza brand and a major player in the Republic of ireland GOVERNANCE70 Board of Directors74 Chair s introduction to Corporate Governance76 Corporate Governance88 Nomination Committee report90 Audit Committee report100 Directors remuneration report127 Directors report131 Statement of Directors responsibilitiesFINANCIAL

2 STATEMENTS134 Independent Auditor s report144 Group income statement145 Group statement of comprehensive income146 Group balance sheet148 Group statement of changes in equity149 Group cash flow statement151 Notes to the Group financial statements217 Company balance sheet218 Company statement of changes in equity219 Notes to the Company financial statements226 Five-year financial summary227 Shareholder informationWe are incredibly proud that the business traded throughout the year and grateful to all our team members Domino s Pizza Group plc Annual Report & Accounts 20201. System sales represent the sum of all sales made by both franchised and corporate stores in the UK & LFL excluding splits system sales performance is calculated against a comparable 52 week period in the prior year for mature stores which were not in territories split in the year or comparable period.

3 Mature stores are defined as those opened prior to 30th December 2018. 3. Underlying performance measures are defined as statutory performance measures excluding amounts relating to discontinued operations and non-underlying items. Non-underlying items are defined as being items that are significant in size, unusual or infrequent in nature, and are disclosed separately as non-underlying items in the notes to the Accounts . See note 7 on page 177 for more information. Use of non-GAAP measures: In addition to performance measures directly observable in the Group Financial Statements (IFRS measures), additional financial measures (described as non-GAAP) are presented that are used internally by management as key measures to assess performance. Non-GAAP measures are either not defined under IFRS or are adjusted IFRS figures. Further explanation in relation to these measures can be found on pages 169 to 171, and reconciliations to IFRS figures, where they have been adjusted, are on page 177.

4 1,348m 1,155m 1,211m our new Chair, Matt Shattock, CEO, Dominic Paul and CFO, Neil SmithSuccessfully traded throughout the year, despite unprecedented operational challenges due to Covid-19 Disposed of our Norway business, reached an agreement on the disposal of our Sweden business and transactions in Iceland and Switzerland are progressing2020 KEY FINANCIALSA YEAR OF CHANGE202020202020 1,348m & ireland system sales Statutory profit for the yearUK & ireland like-for-like system sales growth Dividends per shareUK & ireland underlying EBIT Net debtUK & ireland system salesUK & ireland storesUKUK Franchised 1, ,110 IrelandUK CorporateIreland Franchised 6 & ireland HIGHLIGHTSUK mature stores average weekly unit sales REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTST hroughout this Report we share stills from our new campaignsWE GOT THISD omino s Pizza is the UK s leading Pizza brand and a major player in the Republic of ireland .

5 We are part of the global Domino s system, the biggest Pizza delivery operator in the world. We hold the exclusive master franchise rights in five markets under long-term agreements with Domino s Pizza International Franchising Inc., the international arm of Domino s Pizza Inc which is listed on the New York Stock Exchange and which owns the Domino s brand across the globe. Our core business is the UK & ireland , where we have a clear number one market out more at: AT A GLANCES upply chainWe manufacture fresh dough and act as a scale and expert wholesaler of other food and non-food supplies to our franchisees. We currently have three dough commissaries and distribution centres in the UK & ireland , and from these we make three or four deliveries every week to every store. Our purchasing scale and expertise allow franchisees to share in the benefits of a much bigger business, so that they can be very competitive even when they are small the master franchisor, we are responsible for national campaigns and for investing the National Advertising Fund to drive sales and build the brand.

6 Our digital teams drive customer acquisition and order frequency through pay per click, targeted customer marketing and use of affiliate drive brand engagement through social media and PR activities. We also develop menu innovations to refresh our product offering and drive repeat develop and run the technology ordering platforms which support both the website and the App. Our aim is to continually improve the customer experience and drive repeat sales. Our App was downloaded over million times in the year and over 94% of UK delivery sales are now made online. Corporate storesThe majority, 97%, of our UK & ireland estate is franchised however we also directly operate 37 corporate stores. This store estate is based in London and has grown through both acquisition of existing stores and the opening of new stores. Running corporate stores brings significant benefits in terms of the development of operational expertise and the ability to trial new pricing, technology or menu items in a live environment.

7 Importantly, it also gives us greater empathy with our franchisees, as we experience some of the same operational challenges and WE DODomino s Pizza Group plc Annual Report & Accounts 202002 Delivering a better future through food people loveOUR PURPOSETo be the favourite food delivery and collection brand, with Pizza at our heart OUR VISIONWE DO THE RIGHT THINGWE ARE ONE TEAMWE LOVE CUSTOMERSWE ARE BOLDWE GROW AND WIN TOGETHERUNDERPINNED BY OUR NEW VALUES CUSTOMERS COLLEAGUES FRANCHISEES COMMUNITY INVESTORSWe never stop innovating and consistently deliver a better Pizza experienceWe go above and beyond on quality and great value We bring people together to share in their love of Domino s We create opportunities and develop our people We embrace diversity and fresh thinking We celebrate entrepreneurial individuals who continuously push boundaries to drive innovation We share big ambitions we grow and win together We have the same vision.

8 Purpose and values We come together to change people s lives We always consider the impact of our decisions on the communities we serve We champion sustainable choices for people and the environment We make a local impact as responsible local businessesWe make decisions that support long-term growth We are open and transparent about the progress we are making We are guardians of the brand today, but committed to building a legacy for future generations STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTS03 INVESTMENT CASEOur aim is to transform the Group into a high growth, high quality, world class franchisor, delivering best in class profitability. We have a strong investment case, building on our core strengths:WORLD CLASS BRANDEXPERIENCED FRANCHISEESEXCEPTIONAL SUPPLY CHAIN We strive to be the favourite food delivery and collection brand in the UK & ireland , driven by investment in our national brand and social media campaigns to drive sales, brand awareness and customer engagement.

9 We are the leading delivery brand in attractive and growing segments of the market in the network of franchise operators have exceptionally strong operational expertise and experience and are passionate about our brand. We came together with our franchisees to manage the effects of Covid-19 and have demonstrated the strength of the Domino s world class supply chain is the backbone of the business, supplying fresh Pizza dough and ingredients to all our UK & ireland stores, with our purchasing scale and expertise benefiting franchisees. We are making further investment in our supply and production facilities to support our system sales growth, with a relentless focus on product availability, quality and our Market context on page 26 See our S172 Statement on page 45 See our Business model on page 30#1for Pizza brand awareness in the minsaverage delivery and accuracy04 Domino s Pizza Group plc Annual Report & Accounts 2020 DYNAMIC AND RESPONSIVE BUSINESS MODEL HIGHLY CASH GENERATIVEWe operate a digitally driven and agile business model, combining our Group -owned corporate stores with our franchisee stores network.

10 We have accelerated our evolution to a truly digital business, adapting rapidly to meet the surge in online and App growth, reflecting the rapid change in consumer preference and engagement across the are a highly cash generative business, prioritising reinvestment of this cash into the core business to enhance returns and enable future growth. Under new leadership we are embedding a cash-focused philosophy throughout the Group , with a rigorous focus on improving our cash conversion and capital allocation to enhance returns to shareholders. See our Business model on page 30 See the Financial review on page UK delivery sales made online 99mfree cash flow05 STRATEGIC REPORTGOVERNANCEOVERVIEWFINANCIAL STATEMENTS In April we welcomed our CEO Dominic Paul to the Group , and he was quickly joined by our CFO Neil Smith. In September we welcomed Natalia Barsegiyan and Lynn Fordham as non-executive Directors.