DOMINO’S PIZZA ENTERPRISES LIMITED
2013 ANNUAL REPORT
PERFORMANCE
* BASED ON UNDERLYING RESULTS
MILLION
55.9
EBITDA*
16.2%
39.1
48.1
32.5
YR
10 11 12 13
50
40
30
20
10
AUSTRALIA &
NEW ZEALAND
$174.2M
EUROPE $120.7M
2013
TOTAL
REVENUE
$294.9M
NPAT*13.0%
STRONG
GROWTH
NETWORK SALES
$848.6M
TOTAL GROUP STORE COUNT 970
L
A
T
O
T
TOTAL NETWORK SALES
UP 5.4%
EARNINGS PER SHARE
43.4c UP 11.5%*
NEW STORE
OPENINGS 67
ACQUISITION
DOMINO’S JAPAN
YR 10 11 12
13
OVER 1MILLION FANS
ON FACEBOOK IN AUSTRALIA & NEW ZEALAND
2
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED CONTENTS
05GROUP CEO’S REPORT
21CORPORATE SOCIAL
RESPONSIBILITY
15PRODUCT DEVELOPMENT
25APPENDIX
04CHAIRMAN’S MESSAGE
18ONLINE ORDERING
PLATFORMS
KEY DATES
FINANCIAL YEAR END
30 June 2013
FINAL DIVIDEND RECORD DATE
27 August 2013
FINAL DIVIDEND PAYMENT DATE
13 September 2013
ANNUAL GENERAL MEETING
29 October 2013
THE ANNUAL GENERAL MEETING WILL BE HELD AS FOLLOWS:
DATE TUESDAY, 29 OCTOBER 2013
VENUE MORGAN ROOM, CHRISTIE CONFERENCE CENTRE, LEVEL 1, 320 ADELAIDE STREET BRISBANE
TIME 3.00PM
3
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED CHAIRMAN’S MESSAGE
The past 12 months has seen the introduction of a number of significant new platforms
to the business across the Australian, New Zealand and European markets.
We have invested considerably in digital
advancements in all five markets over the past
year, the results of which can be seen in the
Company’s solid financial results.
The company achieved an underlying[1] Net
Profit After Tax of $30.4 million, up 13.0% on
the previous year.
The year’s double digit profit growth, was
generated from Total Network Sales of $848.6
million. Same Store Sales for the full year grew
2.0% over the corresponding period last year.
The Company will pay shareholders a final
fully-franked dividend of 15.4 cents per share,
in addition to the interim dividend of 15.5 per
share. This brings the full year dividend to 30.9
cents. In addition to the dividends, a $30 million
capital return was made to shareholders during
FY13 bringing the total return to shareholders in
the year to 73.7 cents per share.
We have seen great results from focussing on
improving the quality, service and image of our
products and stores. This includes our store
refurbishment program with the roll-out of our
new Entice image and strong product launches
in all five markets.
Domino’s Pizza Enterprises (DPE) added 67
new stores to the network including 27 new
stores in Australia and New Zealand and a
record 40 new organic stores in Europe, taking
the year-end count for the Group to 970.
With Australia and New Zealand continuing to
lead the way in digital and online innovations,
the milestones achieved in this area of the
business are also reflected in the results and
are beginning to build momentum in Europe.
We will continue to make leaps and bounds in
this area and set new benchmarks to highlight
our achievements across the various markets,
as technology continues to play such a
significant role in our sales success. The fact
that more than half of sales are now coming
from digital platforms provides an insight to its
importance now and in the future.
We also look forward to the opportunity for
substantial store growth as we embark on an
exciting new chapter, with the acquisition of
75% interest in Domino’s Pizza Japan (DPJ)-
the company’s biggest ever acquisition. We are
confident Japan is a growth market with huge
potential and we look forward to taking you on
this journey with us.
On behalf of the Directors, I thank our
shareholders for your continued support.
Your ongoing commitment to DPE provides
us with the foundations to drive future
growth. Additionally, our ongoing solid
financial performance would not be possible
without the support and commitment of our
senior management, franchisees and store
employees. Your trust and belief in the brand
allows us the opportunity to continue to explore
new opportunities for growth, as well as keep
up with retail trends and customer demands to
improve our business for the future.
[1] Underlying profit is the Statutory profit contained in Appendix 4E of the Domino’s FY13 Annual Report adjusted for significant items specific to
the 2013 Financial Year. These items were specifically in relation to 2013 and therefore FY12 Statutory profit was not adjusted. Significant charges
included transactions, acquisitions and additional legal charges relating to acquisition activity and additional costs over those planned with the
ongoing legal claims in France. As the Underlying profit is different to the Statutory profit, we note that this has not been subject to audit. Refer to
Appendix for a complete reconciliation between Underlying and Statutory profit.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED GROUP
CEO’S REPORT
This year marks 30 years since the first
Domino’s store opened in Australia and 35
years since the first Silvio’s store fired up their
ovens. The company has evolved and matured
considerably over the years but one thing that
has remained the same is our passion and drive
to own the ‘social eating occasion.’ Our product
brings people together, and it’s evident by the
growth the business has seen over the past
35 years that we have a recipe that works.
5
From our humble beginnings, we know the
past year in particular, has seen our business
grow from a pizza business to an online digital
business that sells pizza, where we are best in
class for digital sales, marketing and execution.
Likewise our new store designs are enticing
and contemporary, being talked about all over
the world as the best in Domino’s.
We are extremely proud of the momentum we
have not only maintained but built and that in
such a significant year, we haven’t lost sight of
the importance of providing customers value
for money and great tasting products.
As such, over the past 12 months we have
listened to our customers and responded to
their demands to have more for less by creating
our new Chef’s Best™ range in Australia and
New Zealand – DPE’s biggest launch in 20
years. Improvements in our menu have been
sparked by both the desire to impress existing
Domino’s customers, win old customers back
and a commitment to attract new customers to
the brand.
6
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED The focus has also been on product innovation
and new store roll-outs to drive sales and
margins across the five markets. I am as
confident as ever that, we are well positioned
for the year ahead. We cannot forget that
we also celebrated an important milestone
in opening our 500th Australian Domino’s
store in Victoria – further emphasising the
growth of the brand. And, we added one more
country to the Group with the Company’s
biggest acquisition since we floated in 2005
– a 75% acquisition of Japan’s third largest
pizza delivery chain, Domino’s Pizza Japan.
The acquisition represents an exciting
opportunity to leverage our proven track
record of successfully growing the Domino’s
network to deliver shareholder value.
Domino’s Pizza Japan has 259 stores, with
a target to grow this to 600 stores, lifting
the Group’s numbers to more than 1,200
stores, across three continents. Japan is a
strategic location for DPE’s future expansion,
providing access to a large market which is
well suited to significant new store roll-outs.
We also look forward to implementing the
success we have had in our other markets
through our online sales, with already more
than half of our sales in Australia currently
executed online. In Japan, this number sits at
an impressive 50% and we have plans to grow
this in line with our Australia and New Zealand
markets to 80% in the next three years.
7
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED FINANCIAL PERFORMANCE
We have made it a strategic priority over the
past 12 months to be more accessible to our
customers through a comprehensive range of
online ordering interfaces, including improved
platforms to showcase our product range,
all using HTML5 technology, a new iPad and
Facebook App.
Our determination to be the market leader for
digital innovation has already seen us achieve
over 50% of sales and customers are now
accessing Domino’s faster, easier and with
more control than ever before.
Total returns to shareholders in the financial
year amounted to 73.7 cents per share,
which includes two separate capital returns
of 21.4 cents per share each, an interim
dividend of 15.5 cents per share and a
final dividend of 15.4 cents per share.
While digital advancements and product
innovation remained our primary focus areas
over the past 12 months, we have been
committed to providing customers value for
money. These areas of the business have
contributed to solid financial results for
Domino’s with an underlying[1] Net Profit
After Tax, up 13.0% on the previous year to
$30.4 million.
We had a total network sales that grew to
$848.6 million and that was achieved with an
increase of 2.0% like for like and 67 new stores.
We also reported strong underlying EBITDA of
$55.9 million, an increase of 16.2% over the
corresponding period last year.
The Australian and New Zealand market
continued to benefit from a combination of
improved margins, economies of scale and
the continued sell down of corporate stores,
recording EBITDA growth of 17.5%.
The solid full year results, including the double
digit profit growth, were attributed to successful
new product innovations across both markets
and a significant increase in sales coming from
continued advancements in digital platforms.
We rolled out new products including our biggest
product launch in 20 years, with the addition of
our new Chef’s Best™ range and the successful
launch of the Artisan pizza range in France.
The results also reflect our commitment to
providing our customers greater accessibility
and flexibility around ordering platforms.
[1] Underlying profit is the Statutory profit contained in Appendix 4E of the Domino’s FY13 Annual Report adjusted for significant items specific to
the 2013 Financial Year. These items were specifically in relation to 2013 and therefore FY12 Statutory profit was not adjusted. Significant charges
included transactions, acquisitions and additional legal charges relating to acquisition activity and additional costs over those planned with the
ongoing legal claims in France. As the Underlying profit is different to the Statutory profit, we note that this has not been subject to audit. Refer to
Appendix for a complete reconciliation between Underlying and Statutory profit.
8
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED DIGITAL CHAMPIONS
AUSTRALIA AND NEW ZEALAND
Today we believe we are Australia’s most
sophisticated digital retailer in the QSR
industry. Both the Australian and New Zealand
markets continue to lead the way in digital
and online innovations. The milestones
achieved in this area of the business are
heavily reflected in the solid financial results
for Domino’s and clearly demonstrate
our ability to pioneer the way for industry
change in each of our five markets.
Embracing technology is at the core of our
operations. Our commitment to investing
in solutions and our determination to be
market leaders in digital innovation has
seen Domino’s grow from only 1% of
online orders in 2006, to over 50% today,
half of which are from mobile phones.
In order to help keep up with the speed of this
growth, we have invested significantly in this
area of the business including the launch of
a new digital platform to facilitate expected
sales growth and slice seconds off the ordering
process for consumers. The launch of the
new public ordering site was an essential
step forward for the brand’s presence on the
digital platform and the biggest change to
online ordering since it was launched in 2006.
Domino’s again pushed the envelope with
a number of exciting digital innovations
throughout the year with the launch of
two new Apps including the iPad App in
September 2012 featuring ‘Pizza Chef™’
and the Facebook Real Time App allowing
customers to rate their feedback in real
time on Facebook, a move never before
seen on the Australian QSR landscape.
EUROPE
In The Netherlands the launch of our iPhone
App and Mobile launch in March 2013 helped
to reinforce our online position. At the end of
June 2013, online orders represented 20%
of total orders in volume and 25% in value.
The traffic on mobile already represents 43%
of total traffic (website, mobile and iPhone),
gradually replacing the use of computers.
In France, we are working towards
reaching the goal of 30% of online orders
in volume by the end of 2013 and 40% in
late 2014. This will be made possible due
to the arrival of the mobile Application
on Android in September and continual
advancements to other online systems.
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED SOCIAL MEDIA
BEING THE CUSTOMER’S CHAMPION!
AUSTRALIA AND NEW ZEALAND
Connecting with our customers is at the
heart of everything we do. This means being
accountable, transparent and being the
customer’s champion. We see our presence on
social media as an integral part of this process.
EUROPE
In The Netherlands we grew from 1,000
to 100,000 fans in April 2013 and, after
McDonald’s are recognised as the biggest
QSR on Facebook. Our fan count in France
on Facebook now sits at over 300,000.
An increased focus on social media means
that we have been busy creating content
specifically for this space and offering our fans
and followers a unique point of difference.
We are now creating custom online content
specifically for channels such as Facebook and
YouTube which is proving to be a huge success.
On YouTube alone we enjoyed 1,000,000
YouTube views between July 12 and July 13.
We have reached over one million Facebook
fans in Australia and New Zealand and have
been recognised as the leading publicly
listed Australian brand on Facebook
by ‘like’ count as at June 2013.
*http://www.afr.com/p/technology/domino_bonds_score_highest fan_numbers_nMbXBMtSR9urQgJFLRz3II
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
NEW STORES
AUSTRALIA AND NEW ZEALAND
We have been working towards the plan we
put in place that included both the ongoing
organic development of our business and the
acquisition of a number of other pizza shops.
A total of 67 new Domino’s stores were
opened during the year taking the group
number to 970 stores.
Work on rolling out and implementing the
new Entice look and feel Domino’s branding
continued through the year with the business
reaping the benefits of the new layout as a
way to reconnect with customers and
reinvigorate the way we sell pizzas.
A total of 74 Domino’s stores underwent
refurbishment (54 in Australia and 20 in New
Zealand), reopening as one of the Company’s
new look stores which feature softer tones
and wood panelling, an enhanced counter
and the latest technology, improving the
overall Domino’s experience for customers.
EUROPE
The European business has grown at an
accelerated rate, opening a significant
number of new corporate stores in the past
two years, expanding from 10 to 55.
We have opened a record 40 new
organic stores in Europe during the year
with a total network sales growth of
12.8% (constant currency) on FY12.
The Netherlands opened their official
first Entice branded store this past
financial year and have a strong pipeline
of new stores planned for FY14.
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED MILESTONE:
500TH AUSTRALIAN STORE OPENING!
Domino’s celebrated the opening of the
500th Australian store in a ceremony
fitting to mark the significant milestone.
The red carpet was rolled out, the staff
gathered to build momentum and the general
public lined up to take advantage of the 500
free pizzas given away to mark the occasion.
The 500th store was opened in
Beaconsfield, Victoria where we have a
great team ready to roll out the Domino’s
brand and become a part of the rich and
dynamic Beaconsfield community.
The store features Domino’s new Entice
designs, which incorporates the existing
structure of the building into the store
layout and features artwork inspired
by the rich and dynamic Beaconsfield
history including the railway station.
It was a great occasion to look at how far the
brand has come since the first store opening
and we are extremely proud of the progress
we have made in all areas of the business.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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DOMINO’S PIZZA JAPAN
DPE acquired a 75% equity interest in the third
largest pizza delivery chain in Japan, Domino’s
Pizza Japan (DPJ). Comprising of 216 corporate
stores and 43 franchise stores, the acquisition
represents an exciting opportunity to leverage
our experience in store growth.
The acquisition of Domino’s Pizza Japan means
additional growth, and a huge market for us
with significant opportunities to open new
stores given the large population.
We are looking forward to introducing our
product expertise, innovation and experience in
the digital space to Japanese customers.
The acquisition increases our total store
network to over 1,200 stores, further cementing
DPE as the leading international Domino’s
franchisee.
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED LOOKING FORWARD
AUSTRALIA AND NEW ZEALAND
Outside of the Domino’s Japan acquisition,
DPE has a busy year ahead with the recent
upgrade to HTML5 technology in Australia and
New Zealand meaning a bigger push towards
digital to drive sales and customer count further.
We are confident we can continue the current
momentum and we expect to deliver EBIDTA
growth in the region of 15%, and to add
approximately 70 to 80 new stores to the network
during this time.
We also expect to have a record number of
organic new store openings, particularly in our
three European countries, and we will continue
to push ourselves to reach new milestones in
this area. The sell down of corporate stores will
continue to be a key objective in FY14 and, in line
with this strategy, we expect to predominantly
open franchisee stores during this period.
DPE continues to work towards the goal of
reaching 80% of business through online sales
and we are committed to new digital platforms
to help facilitate expected sales growth in this
area. This also means striving to grow this area
through aggressive online print, POS and our
biggest television and marketing campaign in
the past two years.
EUROPE
The European market will be similarly busy
with the continued roll-out of the Pulse
POS system, as well as the move to HTML5
technology, which will see the majority
of Australia and New Zealand systems
implemented into The Netherlands business
by December 2013.
FRANCE & BELGIUM
The traffic on mobile already represents 43%
of total traffic (website, mobile and iPhone),
gradually replacing the use of computers.
Domino’s Pizza France has the goal to
reach 30% of online orders in volume by
the end of 2013 and 40% in late 2014. This
will be made possible due to the arrival in
September of the mobile Application on
Android and to the power of online ordering
loyalty programs as it becomes a reflex for
customers and a new Domino’s experience.
We will only build a small number of corporate
stores in FY14, growing our store count through
the recruitment of new high calibre franchisees.
THE NETHERLANDS
All stores in The Netherlands are set to be
running the Pulse POS system by the end
of October. The move to HTML5 technology
will enable us to roll-out the majority of the
Australia and New Zealand digital platforms
to The Netherlands by October 2013. These
enhancements to the business will provide
customers further convenience when ordering
online and we intend to continue to enhance
and grow our online ordering capabilities in
the next twelve months to further lift sales.
JAPAN
We will work closely with the Domino’s
Japanese business to look at ways of
implementing successful innovations of the
current DPE brand and continue to grow the
online business even further. Similarly, we
are confident we will be able to achieve a
15% EBITDA growth and add approximately
40 to 50 new stores to the Japan network.
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED PRODUCT DEVELOPMENT
Across all markets, we have continued on our journey of providing customers with
innovative, healthier products that are affordable and don’t compromise on taste.
We are extremely proud of the progress we
have made at dramatically improving the quality
of ingredients and products across all five
markets. This includes the new Artizza range in
France which has proven to deliver strong
margins for the business and position our
product as much more premium in the market.
We have also worked hard to deliver on the
value adding strategy in The Netherlands –
upgrading our existing range of pizzas and
delivering more for less for the consumer.
Domino’s has always been great at
democratising great food, and positioning our
new premium range of Chef’s Best™ pizzas at a
great price point for customers is no exception.
All of these products have helped to improve
our image and attract new customers to the
Domino’s brand.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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AUSTRALIA AND NEW ZEALAND
MORE OF WHAT WE LOVE...
CHICKEN AND DESSERT
Pizza is the ultimate social food and so too
are the new additions to the Domino’s menu –
perfect to be shared among friends and family.
The Chicken and Dessert Sampler Packs
were created as the perfect complement
to any special family meal or social
occasion. They offer convenience,
choice and a competitive price point.
The Chicken Sampler Pack consists of four
Oven Baked Chicken Wings, Chicken Ribs, and
Chicken Kickers with a Ranch Dipping Sauce.
The Ultimate Dessert Pack provides a great
sampling opportunity for customers who
might have overlooked Domino’s for dessert.
It consists of 12 Mini Dutch Pancakes, three
Chocolate Brownies with Chocolate Dipping
Sauce and three Battered Bananas.
CHEF’S BEST™
Domino’s responded to the need to provide
more for less for customers in March 2013
by launching a new range to the market
to rival competitor pizza chain offers and
reposition value in eyes of the customer.
The Chef’s Best™ range consisted of eight
new pizzas (seven in New Zealand) all made
complete with restaurant quality ingredients
such as ground beef, ham off the bone, roast
pork belly, oregano, blue cheese, camembert,
crème fraiche, duck and baby spinach.
The new range was set to revolutionise the
pizza industry and put Domino’s in the
spotlight and it certainly did just that.
Sales were significantly higher than usual
for a new product launch with the Chef’s
Best™ range representing an unprecedented
25.22%, equating to over a quarter of
all orders placed in the first week.
The Chef’s Best™ range achieved what it
set out to do and at such a low selling price
the range continues its popularity with one in
five orders including a Chef’s Best™ pizza.
CHEESY CRUST
As cheese prices around the world increased,
Domino’s did the unthinkable this financial
year period – promised pizza lovers even more
of the cheese they love on their pizzas and
launched a new Cheesy Crust to the menu.
We had been working on perfecting our
Cheesy Crust for months, making sure that
it would impress pizza consumers and give
them more of what they love - cheese.
Our Cheesy Crust is softer, stretchier,
tastier and healthier – we’ve reduced the
fat content of our Mozzarella cheese by
30% – and we’ve also put more cheese
filling into our crust for a greater cavity fill.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED EUROPEAN F LAVOURS
HOT SIZZLER
This flaming hot pizza is topped with a special
hot and spicy chili sauce, mozzarella, red and
green hot peppers, onion and chicken. It’s
a real hot feast during the cold Dutch winter
and a real winner with our Dutch customers.
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ARTIZZA
This premium Artizza pizza range was intended
to emphasise our knowledge and love for pizza
in France. It wasn’t introduced to change the
existing range, or dethrone our key recipes
that make the success of Domino’s, but to
increase the perceived value of our pizzas.
The delicious recipe consists of: tomato
sauce, fresh spinach, mozzarella, onions,
chicken, dried cherry tomatoes and basilic
sauce. With 93% of pizza consumers believing
the quality of pizza dough is essential to a
good pizza, the emphasis was placed on
quality of our fresh dough and originality
of our pizzas for this successful campaign.
Pizza recipes including Sweet Chèvre,
Sunset Coco and Artizza Poulet-Basilic.
THE NETHERLANDS – DUTCH PANCAKES
In November 2012, we added the popular
Dutch pancakes to our menu making them
available to consumers in the supermarket
and in pancake stalls at festivals.
*Offre non cumulable, pâte pan +1.60€, valable dans les magasins participants. Jusqu’au 06/01/13.
FESTI SAUMON
The new Festi Saumon pizza is made up
of fresh cream, mozzarella, salmon, olives,
aneth, fresh tomatoes and lemon juice.
During the promotion, the limited time
offer price point was advertised nationally
on bus shelters near Domino’s stores for
seven days and supported by radio.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
ONLINE
ORDERING PLATFORMS
Domino’s has made it a strategic priority to be more accessible to its customers
through a comprehensive range of online ordering interfaces, including through
a device agnostic HTML5 ordering system, iPhone App, Android App, iPad App,
Desktop Ordering Site and Facebook Ordering. These interfaces make it easier
for customers to order Domino’s through any device, anywhere at any time.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED FACEBOOK APP – REAL TIME FEEDBACK
A new App allowing customers to rate their
feedback in real time on Facebook was rolled
out by Domino’s in Australia and New Zealand
in February 2013, in a move never before
seen on the Australian QSR landscape.
The real-time feedback App allows customers
to rate stores, with the information shared
on Facebook in a bid to improve the stores’
service and operations. The App, which can
be accessed from Domino’s Facebook page,
allows customers to see how their local store
performs. In addition, customers and non-
customers can review recently rated stores and
view the top five rated stores in the country.
This move cemented our position as the
most transparent company in Australia for
customer feedback and accountability.
i PAD APP AND PIZZA CHEF™
In an Australian first for digital, Domino’s
encouraged Australians to be their very own
Pizza Chef™, offering them the chance to create
the pizza of their choice without even stepping
into the kitchen. Domino’s launched an iPad
App designed and built exclusively for iPads
in October 2012. Not only does it include 1.8
million pizza combinations, but it also allows
customers to design and make their own pizza
with the visual pizza builder ‘Pizza Chef™.’
The ‘Pizza Chef™’ is a creative feature for
customers to make and see their pizza in a
fun and interactive way. Additionally, GPA
integration allows customers to easily locate
their nearest store for pick up, while the Live
Pizza Tracker means customers know exactly
the stage of their order. The new App was all
about putting the customers in control and
brings to life the fun, interactive and social
elements of the pizza eating occasion.
NEW DIGITAL PLATFORM
ORDERING WEBSITE – HTML5
In July 2013, Domino’s introduced a new digital
platform to facilitate expected sales growth
and slice seconds off the ordering process.
The move saw the introduction of a Device
Agnostic HTML 5 ordering system replacing the
Flash, Accessible and Mobile ordering sites,
reducing maintenance costs and providing an
improved user experience for customers. The
transformation allows a customised ordering
experience that works across a range of
devices whether it be on a Mobile or Desktop.
The success of the new online ordering website
in Australia and New Zealand will see The
Netherlands go live with the HTML5 Online
Ordering site in November this year to help
continue to drive sales and customer counts
even further.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
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ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED SOCIAL MEDIA INITIATIVES
We are always looking for innovative ways to connect, reward and engage with
our loyal fans, and the below social media initiatives are just more examples of
Domino’s using this platform to inspire fans of the brand and get them involved
in all aspects of our business.
AUSTRALIA AND NEW ZEALAND
In July 2012, in a world first, Domino’s Australia
asked its 670,000+ Facebook fans and budding
designers to help design the Company’s next
pizza box. As well as nationwide exposure
for their design, the winner received a prize
of one thousand dollars. The idea for the
competition came from the important role
the pizza box plays in the customer’s pizza
eating experience, coupled with Domino’s
desire to give back to their Facebook fans.
The campaign generated a lot of engagement,
interaction and interest from our online
community and media and reinforced our
position of being the customer’s champion.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
20
2020
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED CORPORATE
SOCIAL
RESPONSIBILITY
The Domino’s brand has continued its support for a
variety of charities and not-for-profit organisations
to raise money, host Doughraiser Fundraisers in
local communities and give product away to support
functions and various causes at a local level. We feel
it’s important to start at a grass roots level and
support the local communities we integrate into.
DISASTER RECOVERY AND RELIEF
Domino’s is proud to support communities
across Australia and New Zealand every day of
the year. However, never is it more important to
have our ovens firing and pizzas cooking than
in times of adversity. While pizza is our first
passion, helping communities in difficult times
and when they need it the most is something
we are extremely passionate about.
This year we were able to move fast and
mobilise food and people to assist in the
Tasmanian Bush Fires, during the Queensland
Floods including the Bundaberg devastation
and in Ipswich when a family lost everything in
a severe house fire just to mention a few.
DOUGHRAISER FUNDRAISERS
This year we continued to support plenty of
great local causes through our Doughraiser
Fundraiser program and even a national
campaign called Love Your Sister.
We followed and continue to support ex
Secret Life of Us star Samuel Johnson and
his crew as they ride around Australia on a
unicycle in a quest to raise much needed
funds and awareness for Breast Cancer.
Samuel’s sister Connie was diagnosed with
the disease and his commitment stems from
keeping promises he made to her - raising
a million dollars for Breast Cancer, raising
awareness of the disease and at the same
time, breaking the Guinness World Record for
the longest journey ever made on a unicycle.
Not only did we offer $10,000 for groceries
but plenty of Domino’s stores hosted
Doughraiser Fundraisers to show their
support as Samuel rode into town.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
22
PARTNERS FOUNDATION
give today, need tomorrow
Founded in 1997, The Partners Foundation
is Domino’s internal non-profit organisation.
It assists team members in times of special
need or tragedy as a result of natural disasters,
unexpected personal distress, on-the-job
accidents and other emergencies.
Formed on the principle of ‘give today, need
tomorrow’ the Partners Foundation is all about
looking after our own employees in all situations
which has helped build our strong team culture.
Since its inception, The Partners Foundation
has provided more than $550,000 in aid to
team members and their families facing crisis
situations related to accidents, illness or other
personal tragedies.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
23
DOMINO’S AND THE ENVIRONMENT
As the delivery experts, we need to ensure we
are continually improving our service times and
wowing our customers with speedy delivery
times. We do this by keeping the hustle in
the store and not on the street, keeping our
delivery territories tight and accessible and
ensuring our delivery fleet is suited to our
surrounding area.
Over the past year we have refined our delivery
fleet from cars to scooters and now to electric
scooters and electric bicycles. Not only has
this offered cost savings to franchisees and
stores, but we are seeing rapid improvements
in delivery times where scooters and bicycles
beat the traffic congestion, parking constraints
and fuel frenzies that are unavoidable with cars.
Electric bicycles have been successfully
trialled in inner city stores across Hobart,
Melbourne and the Gold Coast.
Producing zero emissions and minimising
stores’ impact on the environment, the
results have been extremely encouraging
for further roll out.
To improve our supply flow in Europe, we have
introduced extremeley efficient double load
trucks. These trucks meet the Euro6 standard
and they can transport twice as much as
our normal trucks. This will not only save us
on diesel, but also considerably reduce CO2
emissions. We are continuously investing in
environmentally friendly solutions, such as
this initiative.
Our new utility tracking device is being tested in
stores to lower electricity and gas consumption,
as well as monitor store and cool room
temperatures. The system is already proving
to have a positive impact with a significant
reduction in gas consumption and a saving in
electricity usage recorded.
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED
24
APPENDIX - RECONCILIATION BETWEEN STATUTORY AND UNDERLYING PROFIT FOR FY13
FY11
$ MIL
FY12
$ MIL
FY13
STATUTORY
SIGNIFICANT
†
CHARGES
FY13
UNDERLYING
+/(-)
FY 12
$ MIL
$ MIL
$ MIL
$ MIL
Network Sales
Same Store Sales %
Revenue
EBITDA
Depreciation
& Amortisation
EBIT
Interest
NPBT
Tax Expense
NPAT
EPS (basic)
Dividend per Share
746.4
11.0%
246.7
39.1
805.3
848.6
6.5%
264.9
48.1
2.0%
294.9
54.0
(8.7)
(10.0)
(12.8)
30.4
(0.7)
29.7
(8.2)
21.4
31.3
21.9
38.1
(0.5)
37.6
(10.7)
26.9
38.9
27.1
41.2
(0.4)
40.8
(12.1)
28.7
40.9
30.9
848.6
2.0%
294.9
55.9
5.4%
11.3%
16.2%
(12.8)
27.6%
43.1
(0.4)
42.7
(12.3)
30.4
43.4
30.9
13.2%
(10.2%)
13.5%
14.8%
13.0%
11.5%
14.0%
2.0
2.0
2.0
(0.2)
1.8
SIGNIFICANT CHARGES †
NPAT IMPACT
$’000
Domino’s Japan Acquisition
Knight Acquisition
Speed Rabbit Pizza Litigation Costs
Europe Restructuring Costs
TOTAL NPAT IMPACT
1,354
73
153
193
1,773
† Transaction, acquisition and additional legal charges relating to acquisition activity and costs associated with ongoing legal claims in France
[1] Underlying profit is the Statutory profit contained in Appendix 4E of the Domino’s FY13 Annual Report adjusted for significant items specific to
the 2013 Financial Year. These items were specifically in relation to 2013 and therefore FY12 Statutory profit was not adjusted. Significant charges
included transactions, acquisitions and additional legal charges relating to acquisition activity and additional costs over those planned with the
ongoing legal claims in France. As the Underlying profit is different to the Statutory profit, we note that this has not been subject to audit. Refer to
Appendix for a complete reconciliation between Underlying and Statutory profit.
25
ANNUAL REPORT 2013 DOMINO’S PIZZA ENTERPRISES LIMITED 2013 ANNUAL REPORT
DOMINO’S PIZZA ENTERPRISES LIMITED - ACN 010 489 326 - ANNUAL FINANCIAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
04KEY FINANCIAL INDICATORS
05CORPORATE GOVERNANCE
STATEMENT
12DIRECTORS’ REPORT
30CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
31CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
90GLOSSARY
91CORPORATE DIRECTORY
28INDEX TO THE FINANCIAL
REPORT
88ADDITIONAL STOCK
EXCHANGE INFORMATION
AS AT 2 AUGUST 2013
2
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CONTENTS
24AUDITOR’S INDEPENDENCE
DECLARATION
25INDEPENDENT AUDITOR’S
REPORT
27DIRECTORS’ DECLARATION
32CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
33CONSOLIDATED STATEMENT
OF CASH FLOWS
34NOTES TO THE FINANCIAL
STATEMENTS
3
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED KEY FINANCIAL INDICATORS
NETWORK SALES
Revenue
EBITDA
Depreciation & amortisation
EBIT
Interest
NPBT
Tax
PRO-FORMA NPAT
After tax share issue costs
NPAT
EARNINGS PER SHARE (BASIC)
DIVIDENDS PER SHARE
KEY OPERATING DATA
NETWORK SALES GROWTH %
REVENUE GROWTH %
EBITDA GROWTH %
EBITDA MARGIN %
EBIT MARGIN %
Franchised stores
Corporate stores
TOTAL NETWORK STORES
Corporate store %
The above table has not been audited.
2007
518.9
230.1
22.0
(6.8)
15.2
(2.9)
12.3
(3.2)
9.1
0.0
9.1
14.8
10.9
44.4%
33.1%
(10.9%)
9.6%
6.6%
533
130
663
2008
591.2
229.6
25.3
(6.2)
19.1
(2.1)
17.0
(5.2)
11.8
0.0
11.8
18.4
10.9
13.9%
(0.2%)
15.0%
11.0%
8.3%
629
112
741
2009
676.4
239.0
28.3
(6.4)
21.8
(1.6)
20.3
(4.9)
15.4
0.0
15.4
22.6
12.4
14.4%
4.1%
11.7%
11.8%
9.1%
669
107
776
2010
694.3
236.1
32.5
(8.0)
24.5
(0.8)
23.7
(5.9)
17.8
0.0
17.8
26.2
17.8
2.6%
(1.2%)
15.1%
13.8%
10.4%
717
106
823
2011
746.4
246.7
39.1
(8.7)
30.4
(0.7)
29.7
(8.2)
21.4
0.0
21.4
31.3
21.9
7.5%
4.5%
20.2%
15.8%
12.3%
760
106
866
2012
805.3
264.9
48.1
(10.0)
38.1
(0.5)
37.6
(10.7)
26.9
0.0
26.9
38.9
27.1
7.9%
7.4%
23.1%
18.2%
14.4%
796
112
908
2013*
848.6
294.9
55.9
(12.8)
43.1
(0.4)
42.7
(12.3)
30.4
0.0
30.4
43.4
30.9
5.4%
11.3%
16.2%
19.0%
14.6%
831
139
970
19.6%
15.1%
13.8%
12.9%
12.2%
12.3%
14.3%
* Based on underlying results which is the Statutory profit contained in Appendix 4E of the Domino’s FY13 Annual Report adjusted for significant items specific to the 2013 Financial Year as outlined in the 2012-2013
Full Year Market Presentation.
4
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CORPORATE GOVERNANCE STATEMENT
OVERVIEW
Corporate Governance is an important matter to Domino’s Pizza Enterprises Limited (“DPE Limited” or the “Company”) and the Board of Directors
(the “Board”). The Board endorses the 2nd edition of the Australian Securities Exchange (“ASX”) Corporate Governance Council’s Corporate Governance
Principles and Recommendations with 2010 Amendments (“ASX Principles”) originally issued by the ASX Corporate Governance Council in August 2007.
Set out below is a table describing the various ASX Principles and statements as to the Company’s compliance or otherwise with them. Terms used in the
table have the meanings given to them in the ASX Principles unless otherwise defined.
Principle No. Best practice recommendation
Principle 1 – Lay solid foundations for management and oversight
1.1
Establish the functions reserved to the Board and those delegated
to senior executives and disclose these functions.
Disclose the process for evaluating the performance of senior executives.
Provide the information in the Guide to reporting on Principle 1.
1.2
1.3
Principle 2 – Structure the Board to add value
2.1
2.2
2.3
A majority of the Board should be independent directors.
The Chair should be an independent director.
The roles of the Chair and Chief Executive Officer should
not be exercised by the same individual.
The Board should establish a nomination committee.
Disclose the process for evaluating the performance of the
Board, its committees and individual directors.
Provide the information in the Guide to reporting on Principle 2.
2.6
Principle 3 – Promote ethical and responsible decision-making
3.1
Establish a code of conduct and disclose the code or summary of the code as to:
• the practices necessary to maintain confidence in the Company’s integrity
• the practices necessary to take into account their legal obligations
and the reasonable expectations of their stakeholders
• the responsibility and accountability of individuals for reporting
and investigating reports of unethical practices.
Establish a policy concerning diversity and disclose
the policy or a summary of that policy.
Disclose in each Annual Report the measurable objectives for
achieving gender diversity set by the Board in accordance with
the Diversity Policy and progress towards achieving them.
Disclose in each Annual Report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the Board.
Provide the information in the Guide to reporting on Principle 3.
3.5
Principle 4 – Safeguard integrity in financial reporting
4.1
4.2
The Board should establish an audit committee.
The audit committee should be structured so that it:
• consists only of non-executive directors
• consists of a majority of independent directors
• is chaired by an independent Chair, who is not Chair of the Board
• has at least three members.
The audit committee should have a formal Charter.
Provide the information in the Guide to reporting on Principle 4.
4.3
4.4
Principle 5 – Make timely and balanced disclosure
5.1
Establish written procedures designed to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at a senior executive level
for that compliance and disclose those policies or a summary of those policies.
Provide the information in the Guide to reporting on Principle 5.
2.4
2.5
3.2
3.3
3.4
5.2
Compliance
Reason for
non-compliance
Refer to page 7
Not applicable
Refer to page 16
Refer to page 7 & 16
Not applicable
Not applicable
Refer to page 7
Refer to page 7
Refer to page 7
Refer to page 8
Refer to page 11
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Refer to page 7, 8 & 11
Not applicable
Refer to page 8
Not applicable
Refer to page 9
Not applicable
Refer to page 9
Not applicable
Refer to page 9
Not applicable
Refer to page 8 & 9
Not applicable
Refer to page 8
Refer to page 8
Not applicable
Not applicable
Refer to page 8
Refer to page 8
Not applicable
Not applicable
Refer to page 10
Not applicable
Refer to page 10
Not applicable
5
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CORPORATE GOVERNANCE STATEMENT CONTINUED
Compliance
Reason for
non-compliance
Refer to page 10
Not applicable
Refer to page 10
Not applicable
Refer to page 11
Not applicable
Refer to page 11
Not applicable
The Board has received
the declaration
Not applicable
Refer to page 11
Not applicable
Refer to page 8
Refer to page 16
Not applicable
Not applicable
Refer to page 16
Not applicable
Refer to page 8 & 16
Not applicable
Principle No. Best practice recommendation
Principle 6 – Respect the rights of shareholders
6.1
Design a communication policy for promoting effective communication
with shareholders and encouraging their participation at general
meetings and disclose their policy or a summary of that policy.
Provide the information in the Guide to reporting on Principle 6.
6.2
Principle 7 – Recognise and manage risk
7.1
7.2
7.3
Establish policies for the oversight and management of material
business risks and disclose a summary of those policies.
The Board should require management to design and implement the risk
management and internal control system to manage the Company’s material
business risks and report to it on whether those risks are being managed
effectively. The Board should disclose that management has reported to it as to
the effectiveness of the Company’s management of its material business risks.
The Board should disclose whether it has received assurance from the
Chief Executive Officer (or equivalent) and the Chief Financial Officer
(or equivalent) that the declaration provided in accordance with section
295A of the Corporations Act is founded on a sound system of risk
management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks.
Provide the information in the Guide to reporting on Principle 7.
7.4
Principle 8 – Remunerate fairly and responsibly
8.1
8.2
The Board should establish a remuneration committee.
The remuneration committee should be structured so that it:
• consists of a majority of independent directors
• is chaired by an independent Chair
• has at least three members.
Clearly distinguish the structure of non-executive directors’ remuneration
from that of executive directors and senior executives.
Provide the information in the Guide to reporting on Principle 8.
8.3
8.4
6
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED The Board has adopted a Corporate Governance
Charter, a Code of Conduct for Directors and
Officers, a comprehensive set of Board policies
regarding: Independence and Conflicts of
Interest, Risk Management, Board Performance
Evaluation, Chief Executive Officer Performance
Evaluation, Continuous Disclosure, Diversity,
External Communications and Securities
Trading and an Audit Committee Charter
to assist in the discharge of its Corporate
Governance responsibilities. Copies are
available from the Company’s registered office
or may be downloaded from the Company’s
website under the investor section.
The Board has in place Corporate Governance
practices that it considers to be the most
appropriate for DPE Limited. The Board also
recognises that Corporate Governance is not
a static matter, and needs reviewing regularly
as DPE Limited evolves. This statement
describes the main Corporate Governance
practices in place during the year.
ROLE OF THE BOARD
The Board is responsible for guiding and
monitoring DPE Limited on behalf of
shareholders. While at all times the Board
retains full responsibility, in discharging its
stewardship it makes use of committees.
Specialist committees are able to focus on a
particular responsibility and provide informed
feedback to the Board. The Board seeks to
identify the expectations of shareholders,
as well as other regulatory obligations. In
addition, the Board is also responsible for
identifying areas of significant business
risk and ensuring arrangements are in
place to adequately manage those risks.
The Board is responsible, and primarily
accountable to the shareholders, for the effective
Corporate Governance of the Company. The
Board is responsible for directing management
to optimise the Company’s performance
and increase shareholder wealth by:
• providing strategic direction and approving
the annual operating budget;
• appointing and appraising the Managing
Director/Chief Executive Officer, ensuring
that there are adequate plans and
procedures for succession planning;
• ensuring a clear relationship between
performance and executive directors’
and executives’ compensation;
• ensuring that the performance of
senior executive (including executive
directors) is monitored and evaluated;
• approving and monitoring major
capital expenditure programs;
• monitoring the operating and financial
performance of the Company;
• overseeing the Company and developing
key Company policies, including its
control and accountability systems;
• ensuring compliance with laws, regulations,
appropriate accounting standards
and corporate policies (including
the Code of Conduct);
• ensuring that the market and shareholders are
fully informed of material developments; and
• recognising the legitimate
interests of stakeholders.
Those matters not specifically reserved
for the Board are the responsibility of
management, but are subject to oversight by
the Board. The Corporate Governance of the
Company is carried out through delegation of
appropriate authority to the Chief Executive
Officer and, through the Chief Executive
Officer, to management of the Company.
Letters of appointment
Directors receive formal letters of appointment
setting out the key terms, conditions and
expectations of their appointment. The
Managing Director/Chief Executive Officer’s
responsibilities and terms of employment,
including termination entitlements, are also
set out in an executive service agreement.
Executive service agreements are also prepared
for the key management personnel, covering
duties, time commitments, induction and
the Corporate Governance Framework.
Board Meetings
The Board held 16 formal meetings during
the year. Attendance at the 2013 Board
and Committee meetings is detailed
on page 15 of the Annual Report.
CRITERIA FOR BOARD MEMBERSHIP
For directors appointed by the Board, the
Board will consider the range of skills
and experience required in light of:
• the strategic direction and progress
of the Company;
• the current composition of the Board; and
• the need for independence.
A director appointed by the Board must stand
for election at the next Annual General Meeting
(“AGM”). Apart from the Managing Director,
all directors are subject to re-election by
rotation at least once every three years.
STRUCTURE OF THE BOARD
At the date of this report the Board
comprises five directors and includes:
• four independent non-executive directors
(including the Chairman of the Board),
• one executive director.
Chairman of the Board is Mr Ross Adler. DPE
Limited’s Managing Director/Chief Executive
Officer is Mr Don Meij. Board members’
respective qualifications, skills, experience
and dates of appointment are detailed on the
Corporate Directory page of the Annual Report.
The compensation paid to DPE Limited’s directors
for the year ended 30 June 2013 is set out in the
Remuneration Report on pages 16 to 23.
Independence of Directors
The Board comprises a majority of
independent non-executive directors who,
together with the executive director, have
extensive commercial experience and bring
independence, accountability and judgement to
the Board’s deliberations to ensure maximum
benefit to shareholders and employees.
At each Board meeting the Board requires
each independent director to disclose any new
information which could, or could reasonably be
perceived to, impair the director’s independence.
In devising its policy on independence, the
Board’s emphasis is to encourage independent
judgement amongst all directors, at all times,
irrespective of their background. Nonetheless,
the Board in its nominations capacity will
assess annually the ‘independence’ of each
director in light of the ASX Principles.
Independent Advice
To enable DPE Limited’s Board and its
committees to fulfill their roles, it is considered
appropriate that independent experts’ advice
may be obtained at DPE Limited’s expense,
after first indicating to the Chairman the
nature of the advice to be sought and the
party from whom the advice is to be sought.
The Chairman will ensure that the party from
whom the advice is to be sought has no conflict
with DPE Limited in providing that advice.
Re-election of Directors
In accordance with DPE Limited’s Constitution,
at each AGM of DPE Limited, one third of the
directors (excluding the Managing Director) must
stand for re-election. If their number is not three
or a multiple of three, then the number nearest
but not exceeding one third must stand for
re-election. The directors to retire in every year
are those who have been longest in office since
their last election and, as between directors
appointed on the same day, must (unless
otherwise agreed between themselves) be
determined by lot. In addition, no director other
than the Managing Director may hold office
for more than three years without standing
for re-election, and any director appointed by
the Board since the last AGM must stand for
re-election at the next AGM. All retiring directors
are eligible for re-election.
7
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CORPORATE GOVERNANCE STATEMENT CONTINUED
Internal audit
Ernst & Young has been engaged to undertake
an independent and objective internal audit
review function charged with evaluating,
testing and reporting on the adequacy and
effectiveness of management’s control of
operational risk. The internal auditors will
provide regular reports to the Audit Committee.
Chief Executive Officer and Chief Financial
Officer sign-off to the Board in respect
of DPE Limited’s financial statements
The sign-off required from the Chief Executive
Officer (“CEO”) and Chief Financial Officer
(“CFO”) that DPE Limited’s financial statements
present a true and fair view, in all material
respects, of DPE Limited’s financial condition
and operational results in accordance with the
relevant Accounting Standards, is contained
within the representations required as part of
Recommendation 7.2 of the ASX Principles.
The experience and qualifications of
members of the Audit Committee are set out
in Corporate Directory section of the Annual
Report. Membership of and attendance
at 2013 Committee meetings are detailed
in the Directors’ Report on page 15.
CODE OF CONDUCT FOR
DPE LIMITED DIRECTORS
The Board has a formal Directors’ Code of
Conduct which sets the standards to which
each director, the Company Secretary
and all executives will adhere whilst
conducting their duties. The Code requires
a director, amongst other things, to:
• act honestly, in good faith and in the best
interests of the Company as a whole;
• perform the functions of office and exercise
the powers attached to that office with a
degree of care and diligence that a reasonable
person would exercise if they were a
director in the same circumstances; and
• consider matters before the Board having
regard to any possible personal interests,
the amount of information appropriate to
properly consider the subject matter and
what is in the best interests of the Company.
All directors and officers of the Company must,
as far as possible, act with the utmost integrity
and objectivity, striving at all times to enhance
the reputation and performance of the Company,
and where possible, to act in accordance with
the interests of the shareholders, staff, clients
and all other stakeholders in the Company.
Board Committees
The Board has established a number of
committees to assist in the execution of its
responsibilities. The following committees
were in place at the date of this report:
• Nomination and Remuneration Committee, and
• Audit Committee.
Details of these committees are discussed below.
NOMINATION AND
REMUNERATION COMMITTEE
The Board has established the Nomination and
Remuneration Committee, which comprises
the entire Board.
The principal responsibilities of the Committee are:
• advising the Board on directorship
appointments, with particular attention to the
mix of skills, experience and independence;
• ensuring fulfilment of the Board’s
policies on Board composition;
• developing Board succession plans;
• reviewing and making recommendations on
the appropriate compensation of directors;
• ensuring that equity-based executive
compensation is paid in accordance
with thresholds set in plans approved by
shareholders; and
• ensuring disclosure of the information required
Purpose of the Committee
The role of the Audit Committee is to assist
the Board in discharging its obligations with
respect to ensuring:
• accurate and reliable financial information
prepared for use by the Board; and
• the integrity of the Company’s internal controls
affecting the preparation and provision of that
financial information in determining policies
or for inclusion in the financial statements.
In carrying out these functions, the
Committee maintains unobstructed lines of
communication between the Committee,
the internal auditors, the external auditors,
and DPE Limited’s management.
Duties and Responsibilities of the Committee
The Committee advises the Board on all
aspects of internal and external audit, the
adequacy of accounting and risk management
procedures, systems, control and financial
reporting. Specific responsibilities include:
• recommending to the Board the appointment,
re-appointment and removal of external auditors;
• monitoring the independence of the
external auditors;
• recommending and supervising the
engagement of the external auditors
and monitoring auditor performance;
in each Annual Report of the Company.
• reviewing the effectiveness of
The Company’s compensation policy
links the nature and amount of executive
directors’ and key management personnel’s
emoluments to the Company’s financial
and operational performance.
Further details of the Nomination and
Remuneration Committee are included in the
Remuneration Report on pages 16 to 23.
Membership of and attendance at the
2013 Committee meetings are detailed
in the Directors’ Report on page 15.
AUDIT COMMITTEE
DPE Limited has a Board convened
Audit Committee which:
• is comprised entirely of non-executive
directors of DPE Limited;
• has a majority of independent directors; and
• has a Chairman, who is not Chairman
of the Board of DPE Limited.
Committee Charter
The Committee has a Charter to govern its
operations. The Charter is reviewed every two
years, and, if appropriate, updated by the Board
on recommendation from the Audit Committee.
Membership of the Committee
Committee members are appointed by the Board.
Under the Committee’s Charter, members will
have a range of diverse and yet complementary
skills and will be financially literate.
management information and other
systems of internal control;
• reviewing all areas of significant financial
risk and arrangements in place to
contain those to acceptable levels;
• reviewing significant transactions that are not
a normal part of the Company’s business;
• monitoring the internal controls and
accounting compliance with the
Corporations Act 2001, ASX Listing Rules,
reviewing external audit reports and
ensuring prompt remedial action; and
• reviewing the Company’s full year ASX
Appendix 4E, Annual Report and half-year
Appendix 4D, prior to submission to the Board.
Rotation of the External Audit
Engagement Partners
The Corporations Act 2001 has introduced
a five year rotation requirement for audit
partners. DPE Limited’s external auditor,
Deloitte Touche Tohmatsu has an internal policy
which is consistent with this requirement.
Independence of the external auditors
The Committee will consider annually any
non-audit services provided by the external
auditors to determine whether the provision
of those non-audit services is compatible
with the independence of the external
auditors. Policies are in place to restrict
the type of non-audit services which can
be provided by the external auditors.
8
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DIVERSITY POLICY
Diversity is an important aspect of the Company’s success. DPE Limited has adopted a Diversity Policy which aims to ensure that:
• employment decisions are transparent, equitable and fair;
• a safe and supportive workplace is provided in which differences are valued and respected;
• recruitment decisions take account of the diversity of the community; and
• employees have the ability to contribute and access opportunities based on merit.
In accordance with its Diversity Policy, the Board has adopted measurable objectives for achieving gender diversity in Australia. Those measurable
objectives, and the performance against those objectives for the 2013 financial year, are outlined in the following table:
OBJECTIVE
Maintain a fair and balanced level of participation
by women in Corporate Services (ii).
INITIATIVES TO FACILITATE
ACHIEVEMENT OF THE OBJECTIVE
A diversity support program has
been initiated by DPE Limited.
STATUS OF THE OBJECTIVE(i)
Ongoing – as at 30 June 2013, 46% of the
Corporate Services staff were women.
Maintain a balanced level of participation
by women as in-store staff.
Increase the level of participation by women in
management at regional and store level.
As part of the program equal
employment treatment is to be
given without regard to gender.
Under the diversity support program,
equal treatment is to be given
in training and promotion.
Achieve a high parental leave return rate.
The Company has implemented a
parental leave policy for full and part-
time employees in Corporate Services
(i)
(ii)
The statistics are in respect of Australia only.
Corporate Services means staff working at the Company’s Australian head office.
Ongoing – as at 30 June 2013, 43%
of the in-store staff were women.
Ongoing – as at 30 June 2013, the following
proportions of women are in management:
• State Managers – 20%;
• Regional Managers –18%; and
• Store Managers – 30%
Ongoing – as at 30 June 2013, the Company
achieved a 100% parental leave return rate.
The following table shows the proportional representation of men and women at various levels within the Company’s Australian workforce in 2013:
ROLE
Non-executive directors
Senior executives
Other
Total in the whole organisation
WOMEN (%)
Nil
10%
26%
26%
9
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CORPORATE GOVERNANCE STATEMENT CONTINUED
WORKPLACE GENDER EQUALITY
The Workplace Gender Equality Act 2012
(the WGE Act) puts a focus on promoting
and improving gender equality and
outcomes for both women and men in the
workplace. All non-public sector employers
with 100 or more employees are required
to report annually under the WGE Act.
The Company has submitted its 2013
report to the Workplace Gender Equality
Agency. A copy of this report can be found
in the Investors section of the Company’s
website www.dominos.com.au/corporate/
investors/workplace-gender-equality.
SECURITIES TRADING POLICY
The Company has adopted a policy that imposes
certain restrictions on officers, employees
and franchisees trading in the securities of the
Company. The restrictions have been imposed to
prevent inadvertent contraventions of the insider
trading provisions of the Corporations Act 2001.
The key aspects of the policy are:
• trading whilst in the possession of material
price-sensitive information is prohibited;
• trading is permitted without approval in the
three week period after the release to the
ASX of the half-yearly and annual results, the
end of the AGM or at any time the Company
has a prospectus open, but only if they have
no inside information and the trading is not
for short-term or speculative gain; and
• trading in other circumstances is only
permitted if the person is personally
satisfied that they are not in possession of
inside information and they have obtained
approval. Permission will be given for
such trading only if the approving person
is satisfied that the transaction would not
be contrary to law, for speculative gain or
to take advantage of inside information.
DPE Limited’s price-sensitive information
is information which a reasonable person
would expect to have a material effect on the
price or value of DPE Limited’s securities.
10
CONTINUOUS DISCLOSURE POLICY
The Company has adopted a
Continuous Disclosure policy so as to
comply with its continuous disclosure
obligations. The policy aims to:
• assess new information and co-ordinate
any disclosure or releases to the ASX,
or any advice required in relation to that
information, in a timely manner;
• provide an audit trail of the decisions
regarding disclosure to substantiate
compliance with the Company’s
continuous disclosure obligations; and
• ensure that employees, consultants,
associated entities and advisers of the
Company understand the obligations
to bring material information to the
attention of the Company Secretary.
Accountabilities and responsibilities
For administrative convenience, DPE Limited
has nominated the Company Secretary as the
person responsible for communications with
the ASX. In addition, the Company Secretary
has responsibility for overseeing and co-
ordinating disclosure of information to the ASX
and communicating with the CEO and CFO
in relation to continuous disclosure matters.
The Company Secretary and Chief Financial
Officer are also responsible for overseeing
and co-ordinating disclosure of information
to the media and to analysts, brokers and
shareholders and communicating with the Board
in relation to continuous disclosure matters.
Disclosure principle
In order to ensure DPE Limited meets
its obligations of timely disclosure
of such information, DPE Limited
adheres to the following practice:
• immediate notification to the ASX of
information concerning DPE Limited that
a reasonable person would expect to have
a material effect on the price or value of
DPE Limited’s securities as prescribed
under Listing Rule 3.1, except where
such information is not required to be
disclosed in accordance with the exception
provisions of the ASX Listing Rules.
External communications
Under this Policy, only those DPE Limited
employees who have been authorised
by the Chairman or CEO can speak on
behalf of the Company to the media,
analysts or investors. DPE Limited will
not disclose price-sensitive information
to any investor or analyst before formally
disclosing the information to the market.
Release of briefing materials/media releases
All draft DPE Limited media releases and
external presentations are reviewed by senior
management to determine if they are subject
to the continuous disclosure requirements.
The purpose of that review is to ensure:
• the factual accuracy of any information;
• there is no material omission
of information; and
• that the information will be
disclosed in a timely manner.
As a result of that review, any written material
containing price-sensitive information to be
used in briefing media, institutional investors
or analysts, must be lodged with the ASX
prior to the brief commencing. As soon as
practicable after confirmation of receipt
by the ASX, the briefing material is posted
to DPE Limited’s corporate website.
COMMUNICATIONS POLICY
The Board aims to ensure that DPE
Limited’s shareholders are informed of
all major developments affecting the
Company’s state of affairs. Information is
communicated to shareholders through:
• The full Annual Report. All shareholders
have to elect to receive a copy of the full
Annual Report, unless they have elected
not to receive one, and a copy is available,
on request. Current corporations legislation
allows for the default option of receiving
annual reports via the internet. Shareholders
must be given notification of this change
and be given the opportunity to elect to
receive a hard copy of the Annual Report.
• Disclosures made to the ASX. DPE Limited
endeavours to post announcements
on its corporate website the same
day they are released to the ASX.
• Notices and Explanatory Memoranda of each
AGM or other meeting of shareholders.
• The AGM. DPE Limited encourages
shareholders to attend DPE Limited’s AGM
to canvass relevant issues of interest. If
shareholders are unable to attend the AGM
personally, they are encouraged to participate
through the appointment of a proxy or proxies.
The corporate website is located at
http://www.dominos.com.au and contains:
• the full financial statements of DPE Limited;
• all media releases made to the ASX
by DPE Limited. Each media release
posted to the website clearly shows the
date it was released to the market;
• a Company profile;
• contact details for DPE Limited’s
head office; and
• copies of corporate governance policies.
This website has a dedicated investor
information section which is intended to facilitate
quick and easy access for shareholders.
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Board Agendas and Minutes
Agendas for Board meetings include all matters
operational, financial, strategic and compliance
which are important to DPE Limited. Whilst
most agenda items have a degree of detail
and background information included in the
pre-meeting papers, a few items may be listed
on the agenda as discussion points. Papers
are distributed to Board members in a timely
manner prior to each meeting of the Board.
The minutes of each meeting of the Board
record the place, date, time of commencement
and conclusion, along with the names of all
attendees and any apologies. The Company
Secretary prepares the minutes of each meeting
of the Board and is expected to use language
which is non-emotive and impartial. All draft
minutes will be set down for review and approval
at the next meeting of the Board. The Company
Secretary maintains a file copy of all papers
circulated to the Board prior to Board meetings,
along with any documents tabled at meetings
and a signed copy of all minutes. These records
are held in a secure manner so as to prevent
any unauthorised amendments or alterations.
ASX Corporate Governance Recommendations
At the date of this report the Company
considers that the above Corporate Governance
practices comply with the ASX Principles.
The information required to be disclosed
by those recommendations is found both in
this Corporate Governance Statement and in
the Directors’ Report on pages 12 to 23.
Attendance of the external auditor
at the DPE Limited AGM
It is both DPE Limited’s policy and the policy of
the auditor for the lead engagement partner to be
present at the AGM to answer questions about
the conduct of the audit and the preparation and
content of the Auditors’ Report. These policies
are consistent with the Corporations Act 2001.
Shareholders attending the AGM are made aware
they can ask questions of the auditor concerning
the conduct of the audit.
RISK MANAGEMENT POLICY
The Board adopts an active approach to
risk management which recognises that the
Company is engaged in activities, which
necessarily demand that the Company take
certain usual business, entrepreneurial and
operational risks. Accordingly, and in the
interests of the enhanced performance of the
Company, the Board embraces a responsible
approach to risk management, as a risk-aware
Company, but not necessarily a risk-averse one.
Specifically in managing risk, the Company and
the Board adhere to the following principles:
• When considering new strategies or
projects, management analyse the
major risks of those opportunities being
secured or being lost and considers
appropriate strategies for minimising
those risks where they are identified.
• The Company will, when thought prudent
by the CEO or the Board, take appropriate
external advice to determine the best
way to manage a particular risk.
• Financial risk will be managed by the whole
of the Board working closely with the CEO
and the CFO to ensure that the financial
statements and other financial reporting are
rigorously tested prior to submission to audit.
• To complement risk management by the
Company, appropriate insurances are put in
place and advice taken from the Company’s
brokers or insurers where necessary to
cover the usual extraordinary risks which
arise in the circumstances of the Company.
• The Company’s approach to risk
management, and the effectiveness
of its implementation, is reported by
exception to the Board at least annually.
Through the use of its internal review function,
the management of the Company has reported
to the Board that the risk management policies
adopted by the Company are the best to
manage the material business risks of each
part of the Company’s business operations.
The Board has received assurance from
the CEO and CFO that the declaration
provided in accordance with section 295A
of the Corporations Act is founded on a
sound system of risk management and
internal control and that the system is
operating effectively in all material aspects
in relation to the financial reporting risks.
BOARD AND BOARD COMMITTEE AND
SENIOR EXECUTIVE PERFORMANCE
EVALUATION
A formal review of Board and Committee
performance is undertaken annually by the
Chairman. All reviews include open discussions
by the Board of the results of the evaluations.
The performance of senior executives (except
the Chief Executive Officer) is periodically
evaluated and monitored by the Chief Executive
Officer and measured against agreed key
performance indicators. The performance of the
Chief Executive Officer is periodically reviewed
and monitored by the Chairman and measured
against agreed key performance indicators.
Performance evaluations for the Board
Committees and senior executives (including
the Chief Executive Officer) have occurred
in the reporting period in accordance
with the procedures described above.
Role of the Company Secretary and
the Board’s access to information
All directors have unrestricted access to the
Company Secretary. The Company Secretary
is responsible for advising the Board on all
Corporate Governance matters, for co-ordinating
the completion and despatch of the agenda and
Board papers for each meeting, and ensuring
the Board receives sufficient information and
in a form and timeframe to enable the Board to
discharge its duties effectively. Directors may
meet independently with management at any
time to discuss areas of interest or concern.
11
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DIRECTORS’ REPORT
The directors of Domino’s Pizza Enterprises Limited (“DPE Limited” or the “Company”) submit herewith the annual financial report of the Company
for the financial year ended 30 June 2013. In order to comply with the provisions of the Corporations Act 2001, the Directors Report as follows:
Information about the directors and senior management
The names and particulars of the directors of the Company during or since the end of the financial year are:
NAME
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Don Meij
POSITION
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director/Chief Executive Officer
Appointed 23 March 2005
Appointed 23 March 2005
Appointed 24 August 2001
Appointed 23 March 2005
Appointed 24 August 2001
Particulars of directors’ qualifications, experience and any special responsibilities are detailed in Corporate Directory section of the Annual Report.
Directorships of other listed companies
There were no directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year.
Directors’ shareholdings
The following table sets out each director’s relevant interest in shares, debentures, and rights or options in shares or debentures of the Company as at the
date of this report.
DIRECTORS
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Don Meij
DOMINO'S PIZZA ENTERPRISES LIMITED
FULLY PAID
ORDINARY
SHARES
NUMBER
202,221
104,443
1,547,032
382,000
2,787,556
SHARE
OPTIONS
NUMBER
-
-
-
-
900,000
CONVERTIBLE
NOTES
NUMBER
-
-
-
-
-
Remuneration of directors and senior management
Information about the remuneration of directors and senior management is set out in the Remuneration Report of this Directors’ Report on pages 16 to 23.
Share options granted to directors and senior management
During and since the end of the financial year, an aggregate 854,167 share options were granted to the following directors and senior management of the
Company as part of their remuneration.
NUMBER
OF OPTIONS
GRANTED
57,500
166,667
25,000
500,000
25,000
80,000
ISSUING
ENTITY
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
NUMBER OF
ORDINARY
SHARES
UNDER
OPTION
57,500
166,667
25,000
500,000
25,000
80,000
Craig is a solicitor of the Supreme Court of Queensland, Australian Capital Territory and New South Wales and a Solicitor
of the High Court of Australia with over 15 years’ experience. Craig joined the Company as General Counsel on 8 August
2006 and was appointed to the position of Company Secretary on 18 September 2006. Craig holds a Bachelor of Arts and
a Bachelor of Laws from the University of Queensland and a Master of Laws from the University of New South Wales. Craig
is also a Chartered Secretary with Chartered Secretaries Australia.
DIRECTORS AND SENIOR MANAGEMENT
Allan Collins
Andrew Rennie
Craig Ryan
Don Meij
John Harney
Richard Coney
Company Secretary
Craig Ryan
General Counsel
12
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Principal activities
The Consolidated entity’s principal activities in the course of the financial year were the operation of retail food outlets and the operation of franchise
services. During the financial year there were no significant changes in the nature of those activities.
Review of operations
The result for the financial year ended 30 June 2013 was as follows:
Profit before related income tax expense
Income tax expense
Profit after related income tax expense
The following are the key operational
highlights for the year.
• SSS growth in Europe was +3.1%,
rolling +6.3% in FY11/12.
• We successfully launched a new iPhone app
and mobile website in France in March 2013.
• The rollout of the global POS system
(Pulse) in The Netherlands is progressing,
with all stores expected to be converted
by the end of October 2013.
• With the implementation of Pulse, we
expect to roll out the majority of the ANZ
digital platforms to The Netherlands
by December 2013, in the process
delivering a strong lift in sales.
• Legal claims with Speed Rabbit Pizza France
are ongoing. DPE maintains the view that
these claims are tactical and unsubstantiated.
The points above have not been audited.
Changes in state of affairs
There were no significant changes in the
state of affairs of the Consolidated entity
that occurred during the financial year.
Subsequent events
On 13 August 2013, the Group announced
that Aurora Australia Co., Ltd, a newly-formed
and wholly-owned subsidiary of Domino’s
Pizza Enterprises Limited, had entered into a
share purchase agreement with Bain Capital
Domino Hong Kong Limited (Bain) to purchase
100% of the ordinary shares in K.K. DPJ
Holdings 1 (Holdings). Holdings is the parent
company of Domino’s Pizza Japan, Inc. (DPJ)
which holds the master franchisee rights for
Domino’s Pizza in Japan. Immediately following
completion of the acquisition Bain will reinvest
approximately ¥4 billion (A$45 million) to
subscribe for 25% of the issued shares in
Aurora Australia Co., Ltd. The net effect is that
the Group will acquire a 75% equity interest
in DPJ for ¥12.0 billion (A$135 million).
Australia and New Zealand:
• ANZ EBITDA is up 14.1% for the year.
Excluding the significant items of the
Domino’s Japan and Nick Knight acquisitions,
underlying EBITDA is up 17.5%.
• Same Store Sales (SSS) were much
stronger in H2 13 (2nd half of FY12/13)
than the first half, finishing the year
+1.4%, rolling +6.6% in FY11/12.
• The improvement in SSS was heavily
influenced by the launch of the Chef’s Best
range in March 2013. This new range offers
customers a product with restaurant quality
toppings, premium taste and priced from
as low as $8. Almost 1 in 5 orders contains
at least one Chef’s Best pizza to date.
• We have added 27 new stores
to the network this year.
• We have successfully rolled out our new online
ordering platforms using HTML5 technology,
greatly enhancing the customer experience
and our ability to interact with customers.
• We expect the move to HTML5 along
with a more aggressive online marketing
campaign to deliver substantial growth
to our network sales in FY13/14.
Europe
• DMP Europe EBITDA was down 0.7% on
FY11/12. Excluding the significant items of
additional legal costs relating to ongoing
litigation (Speed Rabbit Pizza France)
and European management restructuring
costs, underlying EBITDA is up 7.3%. In
an attempt to grow the European business
at an accelerated rate, we have opened a
significant number of new corporate stores
in the past two years. Whilst we have
achieved good top line sales, fast growth
has resulted in weaker food and labour
management, thus impacting profit margins.
• Record organic store growth of 40 new
stores (18 France, 20 The Netherlands
and 2 Belgium) has enabled total
network sales to grow by 12.8%.
2013
$’000
40,765
(12,108)
28,657
2012
$’000
37,644
(10,708)
26,936
The acquisition will be funded by a combination
of debt and equity. The debt funding will be
provided under a new bilateral facility agreement
with the Commonwealth Bank of Australia and
an amendment to the Group’s existing facility
agreement with Westpac Banking Corporation.
The new debt facilities will enable DPE to
on-lend approximately ¥9.0 billion (A$101
million) of debt to DPJ. The facilities will be
denominated in Japanese yen and Australian
dollars, have a five-year term and have foreign
currency and interest rate exposures that will
be managed pursuant to hedging arrangements.
On 13 August 2013, the Group also announced a
proposed 5 for 23 fully underwritten accelerated
pro-rata renounceable rights issue to raise
up to A$156 million to fund the acquisition.
The parties have entered into a Shareholders’
Agreement which regulates the operation
and funding of Aurora Australia Co., Ltd.
Completion is conditional on: (a) the debt
providers not defaulting on their obligations to
provide loans under the facility agreements,
and; (b) on the underwriting agreement
not being: (i) unlawfully terminated by the
underwriter on or before 28 August 2013, or; (ii)
otherwise terminated due to customary market
fall, hostility and market failure underwriting
termination events. Completion is also subject to
other customary conditions precedent including
compliance with the terms of the acquisition
agreement, no intervening illegality, no breach
of representations and warranties and no
material adverse change relating to DPJ.
The acquisition is expected to complete
in September 2013.
13
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DIRECTORS’ REPORT CONTINUED
Future developments
In Australia and New Zealand, the focus is on
the sell down of corporate stores, opening new
franchise stores, continuing our strong online
business including aggressive online, print,
point of sale and television marketing, reviewing
margin pressures and putting additional
resources into our training department to drive
operational standards. In Europe, the focus is
on having The Netherlands stores running on
Pulse POS, rolling out new digital platforms
from ANZ, store growth, and reviewing
arrangements with suppliers to maximise
efficiencies and economies in commissaries.
Environmental regulations
The Consolidated entity, while not
subject to any significant environmental
regulation or mandatory emissions
reporting, voluntarily measures its carbon
emissions using the National Greenhouse
and Energy Reporting Act 2007.
Dividends
In respect of the financial year ended 1 July
2012, as detailed in the Directors’ Report for
the financial year, a final dividend of 14.1 cents
per share franked to 100% at 30% corporate
income tax rate was paid to the holders of fully
paid ordinary shares on 14 September 2012.
Shares under option or issued on exercise of options
Details of unissued shares or interests under option as at the date of this report are:
In respect of the financial year ended 30 June
2013, an interim dividend of 15.5 cents per
share franked to 100% at 30% corporate
income tax rate was paid to the holders of
fully paid ordinary shares on 12 March 2013.
In respect of the financial year ended 30
June 2013, the Company will be paying
a final dividend of 15.4 cents per share
franked to 100% at 30% corporate
income tax rate to the holders of fully paid
ordinary shares on 13 September 2013.
ISSUING ENTITY
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
NUMBER OF
SHARES
UNDER
OPTION
156,000
270,000
400,000
500,000
386,667
416,667
CLASS OF
SHARES
EXERCISE
PRICE
OF OPTION
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
$3.45
$3.07
$6.07
$9.21
$6.07
$9.21
EXPIRY DATE OF
OPTIONS
31 August 2013
31 August 2014
2 November 2017
2 November 2017
10 August 2015(i)
10 August 2016 (ii)
(i)
(ii)
Expiry date 12 months after vesting date (on or about 10 August 2014)
Expiry date 12 months after vesting date (on or about 10 August 2015)
The holders of these options do not have the right, by virtue of the option, to participate in any share issue or interest issue of the Company or of any other
body corporate or registered scheme.
Details of shares or interests issued during or since the end of the financial year as a result of exercise of an option are:
ISSUING ENTITY
DPE Limited
NUMBER OF
SHARES
ISSUED
CLASS OF
SHARES
AMOUNT PAID
FOR SHARES
AMOUNT OF
UNPAID SHARES
293,000
Ordinary
$3.50
$nil
Indemnification of officers and auditors
The Company has entered into deeds of indemnity, insurance and access with each director. To the extent permitted by law and subject to the restrictions
in s.199A of the Corporations Act 2001, the Company must continuously indemnify each director against liability (including liability for costs and expenses)
for an act or omission in the capacity of director. However, this does not apply in respect of any of the following:
• a liability to the Company or a related body corporate;
• a liability to some other person that arises from conduct involving a lack of good faith;
• a liability for costs and expenses incurred by the director in defending civil or criminal proceedings in which judgment is given against the officer or in
which the officer is not acquitted; or
• a liability for costs and expenses incurred by the director in connection with an unsuccessful application for relief under the Corporations Act 2001 in
connection with the proceedings referred to above.
The Company has also agreed to provide the directors with access to Board documents circulated during the directors’ term in office.
During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company, the Company Secretary and all senior
management of the Company and of any related body corporate against a liability incurred as such a director, secretary or senior management to the extent
permitted by the Corporations Act 2001.
The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any
related body corporate against a liability incurred as such an officer or auditor.
The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’
liability and legal expenses insurance contract as such disclosure is prohibited under the terms of the contract.
14
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Directors’ meetings
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the financial year and the
number of meetings attended by each director (while they were a director or committee member). During the financial year, eight board meetings,
three nomination and remuneration committee meetings and six audit committee meetings were held.
DIRECTORS
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Don Meij
BOARD OF DIRECTORS
NOMINATION &
REMUNERATION COMMITTEE
AUDIT COMMITTEE
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
16
16
16
16
16
16
14
15
16
16
5
5
5
5
5
5
4
4
5
5
6
6
6
6
6
6
6
6
6
6
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 41 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf)
is compatible with the general standard of independence of auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 41 to the financial statements do not compromise the external auditor’s
independence, based on the advice received from the Audit Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor, and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics
for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s
own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing
economic risks and rewards.
Auditor’s independence declaration
The auditor’s independence declaration is included on page 24 of the Annual Report.
Rounding off of amounts
The Company is a Company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in
the Directors’ Report and the Financial Report are rounded off to the nearest thousand dollars, unless otherwise indicated.
15
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DIRECTORS’ REPORT CONTINUED
REMUNERATION REPORT
This Remuneration Report, which forms part of
the Directors’ Report, sets out information about
the remuneration of Domino’s Pizza Enterprises
Limited’s directors and its senior management
for the financial year ended 30 June 2013.
The prescribed details for each person
covered by this report are detailed
below under the following headings:
• director and senior management details
• remuneration policy
• relationship between the remuneration
policy and Company performance
• remuneration of directors and
senior management
• key terms of employment contracts
DIRECTOR AND SENIOR
MANAGEMENT DETAILS
The following persons acted as
directors of the Company during or
since the end of the financial year:
NAME
POSITION
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Don Meij
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director/
Chief Executive Officer
The term ‘senior management’ is used in
this Remuneration Report to refer to the
following persons. Except as noted, the
named persons held their current position
for the whole of the financial year and
since the end of the financial year:
Richard Coney,
Group Chief Financial Officer
John Harney,
Group Chief Procurement Officer
Craig Ryan,
General Counsel and Company Secretary
Allan Collins,
Chief Marketing Officer
Andrew Megson,
Chief Executive Officer Europe (i) (iii)
Melanie Gigon,
President – France
Andre ten Wolde,
President – Netherlands (i)
Andrew Rennie,
Chief Operating Officer
Patrick McMichael,
Australia / New Zealand Franchise
Development Manager
Chris O’Dwyer,
NSW Franchise Operations Manager (ii)
16
(i)
(ii)
(iii)
On 30 July 2012, Andrew Megson returned to
Australia and took the role of National Franchise
Operations Manager. At the same time, Andre ten
Wolde became the President – the Netherlands.
On 30 July 2012 Chris O’Dwyer took the role of NSW
Franchise Operations Manager and was no longer the
National Franchise Operations Manager and therefore
ceased to be a KMP.
On 1 June 2013 Andrew Megson took the newly created
role of CEO Europe.
REMUNERATION POLICY
The Board has a Nomination and Remuneration
Committee. The Committee assists the Board
by reviewing and approving remuneration
policies and practices.
The Remuneration Committee, as delegated
by the Board:
• reviews and approves the executive
remuneration policy;
• reviews and makes recommendations to
the Board on corporate goals and objectives
relevant to the CEO, and the performance of
the CEO in light of those objectives;
• makes recommendations to the Board on the
remuneration of non-executive directors; and
• reviews and makes recommendations to the
Board on equity-based plans.
An independent remuneration consultant is
engaged by the Remuneration Committee to
ensure that the reward practices and levels
for senior management are consistent with
market practice.
The Board, in conjunction with its Nomination
and Remuneration Committee, is responsible
for approving the performance objectives and
measures for the CEO and providing input into
the evaluation of performance against them.
The Nomination and Remuneration Committee
is responsible for making recommendations
to the Board on compensation policies and
packages applicable to the Board members
and the Chief Executive Officer. The Managing
Director/Chief Executive Officer is responsible
for making recommendations on compensation
packages applicable to the other key
management personnel of the Company.
Egan & Associates, an independent
remuneration consultant is engaged by the
Remuneration Committee to ensure that
the reward practices and levels for senior
management are consistent with market
practice. A statement of recommendation
from the remuneration consultant has been
received by the board for the 2013 financial
year. Payment of $25,410 (2012: $62,003)
has been made to the remuneration consultant
for the services provided on the remuneration
recommendation. Additional services provided
in the current year were in relation to the
issuing of options under the Domino’s Pizza
Executive Share and Option Plan (“ESOP”).
No other advice has been provided by the
remuneration consultant for the financial year.
In order to ensure that the remuneration
recommendation would be free from undue
influence by members of the key management
personnel to whom the recommendation
relates to, the board has ensured that the
remuneration consultant is not a related
party to any member of the key management
personnel. As such, the board is satisfied that
the remuneration recommendation was made
free from undue influence by the member or
members of the key management personnel
to whom the recommendation relates.
The performance of the Company depends upon
the quality of its directors, and its secretaries
and other key management personnel. To
prosper, the Company must attract, motivate
and retain highly skilled directors and other key
management personnel. The compensation
structure is designed to strike an appropriate
balance between fixed and variable remuneration,
rewarding capability and experience and
providing recognition for contribution to the
Company’s overall goals and objectives.
The Board Remuneration Policy is to ensure
the compensation package properly reflects
the person’s duties and responsibilities and
level of performance; and that compensation
is competitive in attracting, retaining and
motivating people of the highest quality.
Directors and other key management personnel
may receive bonuses on the achievement of
specific goals related to the performance of
the Company (including operational results).
RELATIONSHIP BETWEEN THE
REMUNERATION POLICY AND
COMPANY PERFORMANCE
The compensation structures explained below
are designed to attract suitably qualified
candidates, reward the achievement of strategic
objectives, and achieve the broader outcome
of creation of value for shareholders. The
compensation structures take into account:
• the capability and experience of the
key management personnel;
• the key management personnel’s ability to
control the relevant segments’ performance;
• the Consolidated entity’s performance including:
- the Consolidated entity’s earnings;
- the growth in earnings per share and return
on shareholder wealth, and
• the amount of incentives within each key
management personnel’s compensation.
Compensation packages include a mix of fixed
and variable compensation and short-term and
long-term performance-based incentives. The
mix of these components is based on the role
the individual performs.
In addition to their salaries, the Consolidated
entity also provides non-cash benefits to its key
management personnel, and contributes to a post-
employment superannuation plan on their behalf.
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Fixed compensation
Fixed compensation consists of base
compensation (which is calculated on a total
cost basis and includes any fringe benefits tax
(“FBT”) charges related to employee benefits
including motor vehicles), as well as employer
contributions to superannuation funds.
Compensation levels are reviewed annually
by the Nomination and Remuneration
Committee and Managing Director/Chief
Executive Officer through a process that
considers individual, segment and overall
performance of the Consolidated entity.
In addition, external consultants provide
analysis and advice to ensure the directors
and executives’ compensation is competitive
in the marketplace. An executive’s
compensation is also reviewed on promotion.
Performance-linked compensation
Performance-linked compensation includes
both short-term and long-term incentives
and is designed to reward key management
personnel for meeting or exceeding their
financial and personal objectives. The
short-term incentive (“STI”) is an ‘at risk’
bonus provided in the form of cash, while
the long-term incentive (“LTI”) is provided
as options over ordinary shares of the
Company under the rules of the ESOP.
Short-term incentive bonus
Each year the Nomination and Remuneration
Committee sets the key performance indicators
(“KPI’s”) for the Managing Director/Chief
Executive Officer and the Managing Director/
Chief Executive Officer sets the KPI’s for
the other key management personnel. The
KPI’s generally include measures relating
to the Consolidated entity, the relevant
segment, and the individual, and include
financial, people, customer, strategy and
risk measures. The measures are chosen as
they directly align the individual’s reward to
the KPI’s of the Consolidated entity and to
its strategy and performance. The Company
undertakes a rigorous and detailed annual
forecasting and budget process. The Board
believes achievement of the annual forecast
and budget is therefore the most relevant
short-term performance condition.
The financial performance objectives include
but are not limited to “Earnings before Interest,
Tax, Depreciation and Amortisation” (“EBITDA”),
“Net Profit”, “Corporate store EBITDA”,
“Franchise operations EBITDA” and Net Profit
After Tax (“NPAT”), compared to budget and
last year. The non-financial objectives vary
with position and responsibility and include
measures such as achieving strategic outcomes,
percentage savings, customer satisfaction,
hygiene and training and staff development.
At the end of the financial year the Nomination
and Remuneration Committee and Managing
Director/Chief Executive Officer assess the
actual performance of the Consolidated
entity, the relevant segment and individual
against the KPI’s set at the beginning of the
financial year. No bonus is awarded where
performance objectives are not achieved.
The Managing Director/Chief Executive
Officer recommends to the Nomination and
Remuneration Committee the performance
bonus amounts of individuals for approval by the
Board. The method of assessment was chosen
as it provides the Committee with an objective
assessment of the individual’s performance.
Long-term incentive
Options are issued under the ESOP (made
in accordance with thresholds set in plans
approved by the Board on 11 April 2005), and
it provides for key management personnel to
receive a number of options, as determined by
the Board, over ordinary shares. Options issued
under the ESOP will be subject to performance
conditions that are detailed on page 22.
The Nomination and Remuneration Committee
considers this equity performance-linked
compensation structure to be appropriate
as key management personnel only receive
a benefit where there is a corresponding
direct benefit to shareholders.
The tables below set out summary information about the Consolidated entity’s earnings and movements in shareholder wealth for the five years to 30 June 2013:
Revenue
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Interim dividend per share 1
Final dividend per share 1
Basic earnings per share
Diluted earnings per share
1
Franked to 100% at 30% corporate income tax rate.
30 JUNE 2013
$’000
1 JULY 2012
$’000
3 JULY 2011
$’000
4 JULY 2010
$’000
28 JUNE 2009
$’000
294,890
40,765
28,657
264,887
37,644
26,936
246,659
29,668
21,435
236,074
23,722
17,814
239,015
20,263
15,353
30 JUNE 2013
1 JULY 2012
3 JULY 2011
4 JULY 2010
28 JUNE 2009
10.05
11.17
15.5 cents
15.4 cents
40.9 cents
40.5 cents
6.22
10.05
13.0 cents
14.1 cents
38.9 cents
38.4 cents
5.45
6.22
10.4 cents
11.5 cents
31.3 cents
30.9 cents
3.20
5.45
6.0 cents
11.8 cents
26.2 cents
25.9 cents
3.65
3.20
4.4 cents
8.0 cents
22.6 cents
22.5 cents
17
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
DIRECTORS’ REPORT CONTINUED
REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT
SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
2013(i)
Non-executive directors
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Executive director
Don Meij
Executive officers
Richard Coney
Andrew Megson (iii) (iv)
Andrew Rennie
Andre ten Wolde (iii)
Melanie Gigon
Craig Ryan
Allan Collins
John Harney
Patrick McMichael
SALARY &
FEES
$
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
160,000
92,000
80,000
80,000
-
-
-
-
3,065
3,065
3,065
3,065
14,408
8,284
6,966
7,204
-
-
-
-
623,881
32,500
3,065
16,543
17,385
293,695
258,468
360,857
182,381
183,246
231,988
342,053
222,103
183,299
3,293,971
33,333
-
22,750
15,096
-
24,500
9,315
57,000
265,250
459,744
41,555
2,759
3,065
26,932
7,693
3,065
3,065
3,065
3,065
109,589
16,596
15,510
16,521
29,802
-
16,560
16,505
16,550
16,597
198,046
8,963
44,776
8,570
-
-
-
-
-
-
79,694
OTHER
LONG-
TERM
EMPLOYEE
BENEFITS(ii)
$
SHARE-
BASED
PAYMENT
TERMI-
NATION
BENEFITS
$
OPTIONS &
RIGHTS
$
PERCENT-
AGE OF
COMPEN-
SATION FOR
THE YEAR
CONSISTING
OF OPTIONS
%
-
-
-
-
TOTAL
$
177,473
103,349
90,031
90,269
-
-
-
-
329,245
1,022,619
32.20%
46,435
-
127,952
-
-
19,193
44,143
19,193
-
586,161
440,577
321,513
539,715
254,211
190,939
295,306
415,081
317,911
468,211
4,727,205
10.54%
-
23.71%
-
-
6.50%
10.63%
6.04%
-
12.40%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The short-term bonus and long-term bonus and the options are dependent on satisfaction of performance conditions.
Relates to long term employee entitlements expense.
On 30 July 2012, Andrew Megson returned to Australia and took the role of National Franchise Operations Manager. At the same time, Andre ten Wolde became the President – The Netherlands.
(i)
(ii)
(iii)
(iv) On 1 June 2013, Andrew Megson took the newly created role of CEO Europe.
18
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED SHORT TERM EMPLOYEE BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
SALARY &
FEES
$
BONUS
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
OTHER
LONG-
TERM
EMPLOYEE
BENEFITS(ii)
$
SHARE-
BASED
PAYMENT
TERMI-
NATION
BENEFITS
$
OPTIONS &
RIGHTS
$
2012(i)
Non-executive directors
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Executive director
Don Meij
Executive officers
Richard Coney
Andrew Megson
Andrew Rennie
Melanie Gigon
Craig Ryan
Allan Collins
John Harney
Chris O’Dwyer
Patrick McMichael
160,000
92,000
80,000
80,000
-
-
-
-
3,007
3,007
3,007
3,007
14,376
8,280
7,200
7,200
-
-
-
-
584,662
468,750
3,007
15,860
22,907
260,915
283,023
333,768
184,193
184,370
352,184
181,412
199,703
165,911
3,142,141
124,384
41,515
136,500
64,764
50,965
72,000
80,000
21,000
267,500
1,327,378
41,497
65,540
3,007
3,172
3,007
3,007
3,007
3,007
3,007
143,286
15,794
-
15,797
-
15,790
15,353
15,795
15,790
15,949
163,184
5,245
-
45,031
-
-
-
-
-
-
73,183
PERCENT-
AGE OF
COMPEN-
SATION FOR
THE YEAR
CONSISTING
OF OPTIONS
%
-
-
-
-
TOTAL
$
177,383
103,287
90,207
90,207
-
-
-
-
147,390
1,242,576
11.86%
23,894
5,692
63,322
2,070
9,610
21,137
9,610
10,066
-
292,791
471,729
395,770
597,425
254,199
263,742
463,681
289,824
249,566
452,367
5,141,963
5.07%
1.44%
10.60%
0.81%
3.64%
4.56%
3.32%
4.03%
-
5.69%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i)
(ii)
The short-term bonus and long-term bonus and the options are dependent on satisfaction of performance conditions.
Relates to long term employee entitlements expense.
No director or senior management person appointed during the period received a payment as part of his or her consideration for agreeing to hold the position.
19
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DIRECTORS’ REPORT CONTINUED
BONUSES AND SHARE-BASED PAYMENTS GRANTED AS COMPENSATION FOR THE FINANCIAL YEAR
Bonuses
Don Meij, Richard Coney, Andrew Rennie, Craig Ryan, Allan Collins and John Harney were granted on 12 August 2013 a cash bonus for their performance
during the year ended 30 June 2013. Patrick McMichael and Andre ten Wolde received a bonus during the year on achieving their performance criteria.
The amounts were determined and approved by the Managing Director/Chief Executive Officer and the Nomination and Remuneration Committee.
No other bonuses were granted during 2013.
Short-term incentive bonus
Directors
Don Meij
Key management personnel
Richard Coney
Andrew Megson
Andrew Rennie
Andre ten Wolde
Melanie Gigon
Craig Ryan
Allan Collins
John Harney
Patrick McMichael
INCLUDED IN
COMPEN-
SATION
$ (I)
PERCENTAGE
VESTED IN
YEAR
%
PERCENTAGE
FORFEITED IN
YEAR
% (II)
32,500
33,333
-
22,750
15,096
-
24,500
9,315
57,000
265,250
5
22
-
13
20
-
35
10
60
100
95
78
100
87
80
100
65
90
40
-
(i)
(ii)
Amounts included in compensation for the financial year represent the amount that vested in the financial year based on achievement of personal goals and satisfaction of specified performance
criteria. No amounts vest in future financial years in respect of the bonus schemes for the current financial year.
The amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year.
Long term bonuses
There were no long term cash bonuses granted for the financial year ended 30 June 2013.
Executive share and option plan
The Company established the ESOP to assist in the recruitment, reward, retention and motivation of directors and executives of the Company (“the participants”).
In accordance with the provisions of the scheme, executives within the Company, to be determined by the Board, are granted options for no consideration
to purchase parcels of shares at various exercise prices. Each option confers an entitlement to subscribe for and be issued one share, credited as fully paid,
at the exercise price.
Options issued under the ESOP may not be transferred unless the Board determines otherwise. The Company has no obligation to apply for quotation
of the options on the ASX. However, the Company must apply to the ASX for official quotation of shares issued on the exercise of the options.
At any one time, the total number of options on issue under the ESOP that have neither been exercised nor lapsed will not exceed 5.0% of the total number
of shares in the capital of the Company on issue prior to 30 April 2009.
Effective 30 April 2009, the Company must not issue any shares or grant any option under this plan if, immediately after the issue or grant, the sum of the
total number of unissued shares over which options, rights or other options (which remain outstanding) have been granted under this plan and any other Group
employee incentive scheme would exceed 7.5% of the total number of shares on issue on a Fully Diluted Basis at the time of the proposed issue or grant.
Fully Diluted Basis means the number of shares which would be on issue if all those securities of the Company which are capable of being converted into
shares, were converted into shares. If the number of shares into which the securities are capable of being converted cannot be calculated at the relevant
time, those shares will be disregarded.
20
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED During the prior and current financial year, the following share-based payment arrangements were in existence:
OPTIONS SERIES
GRANT DATE
EXPIRY DATE
GRANT DATE FAIR
VALUE
EXERCISE
PRICE (iii)
(6) Issued 8 December 2006**
(8) Issued 22 August 2007*
(9) Issued 10 September 2007*
(10) Issued 3 December 2008**
(11) Issued 30 April 2009*
(12) Issued 2 November 2011
(13) Issued 2 November 2011***
(14) Issued 7 November 2012
(15) Issued 7 November 2012****
8 December 2006
22 August 2007
10 September 2007
3 December 2008
30 April 2009
2 November 2011
2 November 2011
7 November 2012
7 November 2012
31 August 2013
31 August 2013
31 August 2013
31 August 2014
31 August 2014
2 November 2017
10 August 2015
2 November 2017
10 August 2016
$0.86
$0.37 (i)
$0.43 (ii)
$0.42
$0.44
$1.39
$1.43
$1.17
$1.16
$3.45
$3.45
$3.45
$3.07
$3.07
$6.07
$6.07
$9.21
$9.21
VESTING DATE
31 August 2011
31 August 2011
31 August 2011
31 August 2011
31 August 2011
2 November 2014
10 August 2014
7 November 2015
10 August 2015
It is a condition of exercise that the optionholder be an employee of the Company at 31 August 2011.
It is a condition of exercise that the optionholder be a director of the Company as at 31 August 2011.
*
**
*** Expiry date 12 months after vesting date (on or about 10 August 2014).
**** Expiry date 12 months after vesting date (on or about 10 August 2015).
1 tranche consisting of 158,000 options were nominal at grant date.
1 tranche consisting of 40,000 options were nominal at grant date.
(i)
(ii)
(iii) The exercise price reduced due to the Capital Returns on the 21 December 2012 by $0.214 and 21 June 2013 by $0.214.
OPTIONS SERIES
(6) Issued 8 December 2006
(8) Issued 22 August 2007
(9) Issued 10 September 2007
(10) Issued 3 December 2008
(11) Issued 30 April 2009
(12) Issued 2 November 2011
(13) Issued 2 November 2011
(14) Issued 7 November 2012
(15) Issued 7 November 2012
PERFORMANCE CONDITIONS
Net profit before tax in Europe to exceed budget
Net profit before tax to exceed budget
Net profit before tax to exceed budget
Proportion of options based on EPS growth performance
Proportion of options based on EPS growth performance
Proportion of options based on EPS growth performance
Proportion of options based on EPS growth performance
Proportion of options based on EPS growth performance
Proportion of options based on EPS growth performance
Options and shares issued on the exercise of series (12) and (14) will be subject to an escrow period commencing on the date of issue and ending on 2
November 2016. There are no further service or performance criteria that need to be met in relation to options granted before the beneficial interest vests
in the recipient.
During the year, the following directors and senior management exercised options that were granted to them as part of their compensation. Each option
converts into one ordinary share of DPE Limited.
NAME
Richard Coney
Craig Ryan
Andre ten Wolde
NO. OF
ORDINARY
SHARES OF
DPE LIMITED
ISSUED
65,000
40,000
100,000
NO. OF
OPTIONS
EXERCISED
65,000
40,000
100,000
AMOUNT PAID
AMOUNT
UNPAID
$227,500
$140,000
$350,000
$nil
$nil
$nil
21
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DIRECTORS’ REPORT CONTINUED
The following table summarises the value of options granted, exercised or lapsed during the financial year to directors and senior management:
NAME
Don Meij
Richard Coney
Andrew Rennie
Allan Collins
John Harney
Craig Ryan
Andre ten Wolde
VALUE OF
OPTIONS
GRANTED
AT THE
GRANT DATE (I)
$
VALUE OF
OPTIONS
EXERCISED
AT THE
EXERCISE DATE
$
VALUE OF
OPTIONS
LAPSED
AT THE DATE
OF LAPSE (II)
$
583,800
92,680
193,084
66,614
28,963
28,963
-
-
630,500
-
-
-
388,000
921,000
-
-
-
-
-
-
-
(i)
(ii)
The value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian accounting standards.
The value of options lapsing during the period due to the failure to satisfy a vesting condition is determined assuming the vesting condition had been satisfied.
CONTRACTS FOR SERVICES OF KEY MANAGEMENT PERSONNEL
Executive service contracts
NAME
Richard Coney
Craig Ryan
Allan Collins
Andrew Megson
Don Meij
Andrew Rennie
John Harney
Chris O’Dwyer
Patrick McMichael
Melanie Gigon
Andre ten Wolde
TERM OF
CONTRACT
CONTRACT
COMMENCEMENT
NOTICE
TERMINATION –
BY COMPANY
NOTICE
TERMINATION –
BY EXECUTIVE
Ongoing
Ongoing
Ongoing
Ongoing
5 yrs
3 yrs
Ongoing
Ongoing
Ongoing
3 yrs
Ongoing
16 May 2005
8 August 2012
8 January 2013
30 July 2012
2 November 2011
16 August 2010
2 July 2010
22 September 2011
23 December 2011
2 August 2010
30 July 2012
6 months
3 months
3 months
3 months
12 months
6 months
3 months
3 months
3 months
6 months
3 months
6 months
3 months
3 months
3 months
12 months
6 months
3 months
3 months
3 months
6 months
3 months
TERMINATION PAYMENT
Amount equal to 6 months compensation
Amount equal to 3 months compensation
Amount equal to 3 months compensation
Amount equal to 6 months compensation
Amount equal to 12 months compensation
Amount equal to 6 months compensation
Amount equal to 3 months compensation
Amount equal to 3 months compensation
Amount equal to 3 months compensation
Amount equal to 6 months compensation
Amount equal to 3 months compensation
22
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED A change in control occurs when any
shareholder (either alone or together with
its associates) having a relevant interest
in less than 50% of the issued shares in
the Company acquires a relevant interest
in 50% or more of the shares on issue at
any time in the capital of the Company or
the composition of a majority of the Board
changes for a reason other than retirement
in the normal course of business or death.
Non-executive directors
The Constitution of the Company provides that
non-executive directors are entitled to receive
compensation for their services as determined
by the Company in a general meeting. The
Company has resolved that the maximum
aggregate amount of directors’ fees (which
does not include compensation of executive
directors and other non-director services
provided by directors) is $600,000 per annum.
The non-executive directors may divide that
compensation among themselves as they
decide. Non–executive directors are entitled to
be reimbursed for their reasonable expenses
incurred in connection with the affairs of the
Company. A non-executive director may also be
compensated as determined by the directors
if that director performs additional or special
duties for the Company. A former director
may also receive a retirement benefit of an
amount determined by the Board of Directors in
recognition of past services, subject to the ASX
Listing Rules and the Corporations Act 2001.
Non-executive directors do not receive
performance-based compensation. Directors’
fees cover all main Board activities.
Fees for the current financial year for the
non-executive directors were $80,000
per director per annum (2012: $80,000),
$92,000 per annum for the Chairman of
the Audit Committee (2012: $92,000)
and for the Chairman of the Board was
$160,000 per annum (2012: 160,000).
Signed in accordance with a resolution of
the directors made pursuant to s.298(2)
of the Corporations Act 2001.
On behalf of the Directors
Ross Adler
Chairman
Sydney, 13 August 2013
Don Meij
Managing Director/Chief Executive Officer
Sydney, 13 August 2013
The directors believe that the compensation
for each of the key management personnel is
appropriate for the duties allocated to them,
the size of the Company’s business and the
industry in which the Company operates. The
service contracts outline the components of
compensation paid to the executive directors
and key management personnel but do not
prescribe how compensation levels are
modified year to year. Compensation levels
are reviewed each year to take into account
cost-of-living changes, any change in the scope
of the role performed by the key management
personnel and any changes required to meet
the principles of the Remuneration Policy.
Each of the key management personnel has
agreed that during their employment and for
a period of up to six months afterwards, they
will not compete with the Company, canvass,
solicit, induce or encourage any person who
is or was an employee of the Company at any
time during the employment period to leave
the Company or interfere in any way with the
relationship between the Company and its
clients, customers, employees, consultants
or suppliers.
Don Meij, Managing Director/Chief Executive
Officer, has a contract of employment with
Domino’s Pizza Enterprises Limited dated 2
November 2011. The contract specifies the
duties and obligations to be fulfilled by the
Managing Director/Chief Executive Officer
and provides that the Board and Managing
Director/Chief Executive Officer will, early
in each financial year, consult and agree
objectives for achievement during that year.
Don Meij’s contract provides that he may
terminate the agreement by giving twelve
month’s written notice. He may also resign
on one month’s notice if there is a change
in control of the Company, and he forms the
reasonable opinion that there has been material
changes to the policies, strategies or future
plans of the Board and, as a result, he will
not be able to implement his strategy or plans
for the development of the Company or its
projects. If Don Meij, resigns for this reason,
then in recognition of his past service to the
Company, on the date of termination, in addition
to any payment made to him during the notice
period or by the Company in lieu of notice,
the Company must pay him an amount equal
to the salary component and superannuation
that would have been paid to him in the 12
months after the date of termination.
23
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
Level 25
123 Eagle Street
Brisbane QLD 4000
GPO Box 1463
Brisbane QLD 4001 Australia
DX 115
Tel: +61 (0) 7 3308 7000
Fax: +61 (0) 7 3308 7001
www.deloitte.com.au
AUDITOR’S INDEPENDENCE DECLARATION
Domino’s Pizza Enterprises Limited
13 August 2013
The Directors
Domino’s Pizza Enterprises Limited
Level 5, KSD1
485 Kingsford Smith Drive
HAMILTON QLD 4007
Dear Directors,
Domino’s Pizza Enterprises Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Domino’s Pizza Enterprises Limited.
As lead audit partner for the audit of the financial statements of Domino’s Pizza Enterprises Limited for the financial year
ended 30 June 2013, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
P G Forrester
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
24
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF DOMINO’S PIZZA ENTERPRISES LIMITED
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
Level 25
123 Eagle Street
Brisbane QLD 4000
GPO Box 1463
Brisbane QLD 4001 Australia
DX 115
Tel: +61 (0) 7 3308 7000
Fax: +61 (0) 7 3308 7001
www.deloitte.com.au
REPORT ON THE FINANCIAL REPORT
We have audited the accompanying financial report of Domino’s Pizza Enterprises Limited, which comprises the statement of financial position as at 30
June 2013, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date,
notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity,
comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 27 to 87.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 3, the directors also state, in
accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing
Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected
depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s preparation of the financial report that gives a true
and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Liability limited is a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
25
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED INDEPENDENT AUDITOR’S REPORT CONTINUED
TO THE MEMBERS OF DOMINO’S PIZZA ENTERPRISES LIMITED
AUDITOR’S INDEPENDENCE DECLARATION
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that
the independence declaration required by the Corporations Act 2001, which has been given to the directors of Domino’s Pizza
Enterprises Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.
Opinion
In our opinion:
(a) the financial report of Domino’s Pizza Enterprises Limited is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Consolidated entity’s financial position as at 30 June 2013
and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 3.
REPORT ON THE REMUNERATION REPORT
We have audited the Remuneration Report included in pages 16 to 23 of the directors’ report for the year ended 30 June 2013. The directors of the
company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001.
Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Domino’s Pizza Enterprises Limited for the year ended 30 June 2013,
complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
P G Forrester
Partner
Chartered Accountants
Parramatta, 13 August 2013
26
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
DIRECTORS’ DECLARATION
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be
able to pay its debts as and when they become due and payable;
(b) in the directors’ opinion, the attached financial statements are in compliance with International
Financial Reporting Standards, as stated in note 3.1 to the financial statements;
(c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including
compliance with accounting standards and giving a true and fair view of the financial position and performance of the Consolidated entity; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Don Meij
Managing Director/Chief Executive Officer
Sydney, 13 August 2013
27
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED INDEX TO
THE FINANCIAL REPORT
CONTENTS
Consolidated statement profit or loss
and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
30
31
32
33
NOTES TO THE FINANCIAL STATEMENTS
CONTENTS
1.
2.
3.
4.
5.
6.
7.
8.
9.
General information
Adoption of new and revised
Accounting Standards
Significant accounting policies
Critical accounting judgements
and key sources of estimation uncertainty
Revenue
Segment information
Other revenue
Other gains and losses
Finance costs
10.
Income taxes
11. Profit for the year from continuing operations
12. Earnings per share
13. Trade and other receivables
14. Other financial assets
15.
Inventories
16. Non-current assets classified as held for sale
17. Subsidiaries
18. Property, plant and equipment
19. Goodwill
20. Other intangible assets
21. Other assets
22. Trade and other payables
23. Borrowings
34
34
36
44
45
45
48
48
49
49
53
54
55
56
57
57
58
59
60
62
63
63
63
24. Other financial liabilities
25. Provisions
26. Other liabilities
27. Obligations under finance leases
28.
Issued capital
29. Reserves
30. Retained earnings
31. Dividends
32. Financial Instruments
33. Share-based payments
34. Key management personnel compensation
35. Related party transactions
36. Acquisition of businesses
37. Cash and cash equivalents
38. Operating lease arrangements
39. Commitments for expenditure
40. Contingent liabilities and contingent assets
41. Remuneration of auditors
42. Events after the reporting period
43. Parent entity information
44. Approval of financial statements
Additional Stock Exchange Information
Glossary
Corporate directory
64
64
65
65
65
67
67
68
68
74
77
79
83
84
85
85
86
86
86
87
87
88
90
91
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Revenue
Other revenue
Other gains and losses
Food and paper expenses
Employee benefits expense
Plant and equipment costs
Depreciation and amortisation expense
Occupancy expenses
Finance costs
Marketing expenses
Store related expenses
Communication expenses
Other expenses
Profit before tax
Income tax expense
Profit for the year from continuing operations
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations
Gain on cash flow hedges taken to equity
Gain/(loss) on net investment hedge taken to equity
Income tax relating to components of other comprehensive income
Other comprehensive income for the period (net of tax)
NOTE
5
7
8
11
11
9
10
11
2013
$’000
188,631
106,259
3,564
(85,150)
(76,260)
(9,331)
(12,792)
(9,103)
(405)
(11,430)
(7,182)
(6,351)
(39,685)
40,765
(12,108)
2012
$’000
168,466
96,421
3,161
(78,679)
(65,264)
(8,588)
(10,029)
(7,837)
(451)
(11,477)
(5,887)
(6,669)
(35,523)
37,644
(10,708)
28,657
26,936
5,990
-
(1,351)
1,389
6,028
(3,778)
137
223
(108)
(3,526)
Total comprehensive income for the year
34,685
23,410
Earnings per share:
From continuing operations
Basic (cents per share)
Diluted (cents per share)
Notes to the financial statements are included on pages 34 to 87.
12
12
40.9 cents
40.5 cents
38.9 cents
38.4 cents
30
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Current tax assets
Other
Assets classified as held for sale
Total current assets
Non-current assets
Other financial assets
Property, plant & equipment
Deferred tax assets
Goodwill
Other intangible assets
Other
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Provisions
Deferred tax liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Capital and reserves
Issued capital
Reserves
Retained earnings
Total equity
Notes to the financial statements are included on pages 34 to 87.
NOTE
2013
$’000
2012
$’000
37
13
14
15
10
21
16
14
18
10
19
20
21
22
23
24
10
25
23
24
25
10
26
28
29
30
18,691
26,412
1,286
6,685
191
6,315
59,580
803
60,383
4,415
49,693
40
57,113
17,427
680
129,368
189,751
38,055
7,082
508
2,550
3,109
51,304
32,589
303
441
2,395
137
35,865
87,169
102,582
40,855
(1,985)
63,712
102,582
40,340
21,018
2,449
5,706
-
3,781
73,294
704
73,998
5,698
35,031
829
46,927
12,809
27
101,321
175,319
34,172
11,534
-
3,544
2,360
51,610
2,509
252
574
3,098
235
6,668
58,278
117,041
69,872
(8,648)
55,817
117,041
31
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
ISSUED
CAPITAL
$’000
HEDGING
RESERVE
$’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$’000
OTHER
RESERVE
$’000
RETAINED
EARNINGS
$’000
TOTAL
$’000
Balance at 4 July 2011
64,523
2,044
(9,064)
1,578
45,835
104,916
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Shares issued
Recognition of share based payments
Payment of dividends
Balance at 1 July 2012
-
-
-
5,349
-
-
69,872
-
252
252
-
-
-
2,296
-
(3,778)
(3,778)
-
-
-
(12,842)
-
-
-
-
320
-
1,898
26,936
-
26,936
-
-
(16,954)
55,817
26,936
(3,526)
23,410
5,349
320
(16,954)
117,041
Balance at 2 July 2012
69,872
2,296
(12,842)
1,898
55,817
117,041
Profit for the period
Other comprehensive income
Total comprehensive income for the period
Shares issued
Capital return
Recognition of share based payments
Payment of dividends
Balance at 30 June 2013
-
-
-
1,025
(30,042)
-
-
40,855
Notes to the financial statements are included on pages 34 to 87.
-
38
38
-
-
-
-
2,334
-
5,990
5,990
-
-
-
-
(6,852)
-
-
-
-
-
635
-
2,533
28,657
-
28,657
-
-
-
(20,762)
63,712
28,657
6,028
34,685
1,025
(30,042)
635
(20,762)
102,582
32
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Income taxes paid
Net cash generated by operating activities
Cash flows from investing activities
Payments for investments and business operations, net of cash and inventory acquired
Loans repaid from third parties and franchisees
Payment for property, plant & equipment
Proceeds from sale of businesses and other non-current assets
Payments for intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Return of Share Capital
Dividends paid
Proceeds from issue of equity securities
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balance of cash held in foreign currencies
Cash and cash equivalents at the end of the year
Notes to the financial statements are included on pages 34 to 87.
NOTE
2013
$’000
2012
$’000
37
36
327,142
(282,864)
1,103
(405)
(11,796)
33,180
(19,077)
2,516
(25,037)
21,069
(9,866)
(30,395)
43,721
(20,506)
(30,042)
(20,762)
1,025
(26,564)
295,099
(250,792)
1,785
(451)
(7,963)
37,678
(11,876)
2,106
(17,658)
22,924
(7,474)
(11,978)
-
(24)
-
(16,954)
5,349
(11,629)
(23,779)
14,071
40,340
2,130
28,085
(1,816)
37
18,691
40,340
33
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Domino’s Pizza Enterprises Limited is a
public company listed on the Australian Stock
Exchange (trading under the symbol ‘DMP’),
incorporated and operating in Australia,
New Zealand, France, Belgium and The
Netherlands. The ultimate parent company
is Domino’s Pizza Enterprises Limited.
Domino’s Pizza Enterprises Limited’s
registered office and its principal
place of business are as follows:
Registered office
KSD1, L5
485 Kingsford Smith Drive
Hamilton
Brisbane
Queensland 4007
Tel: +61 (0)7 3633 3333
Principal place of business
KSD1, L5
485 Kingsford Smith Drive
Hamilton
Brisbane
Queensland 4007
Tel: +61 (0)7 3633 333
The entity’s principal activities are the operation of retail food outlets and operation of franchise services.
2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
2.1 Standards and Interpretations affecting amounts reported in the current period (and/or prior periods)
The following new and revised Standards and Interpretations have been adopted in the current period and the effects if any, have been adjusted
in these financial statements.
Standards affecting presentation and disclosure
Amendments to AASB 101
‘Presentation of Financial Statements’
Amendments to AASB 101
‘Presentation of Financial Statements’
The amendment (part of AASB 2011-9 ‘Amendments to Australian Accounting Standards - Presentation
of Items of Other Comprehensive Income’ introduce new terminology for the statement of comprehensive
income and income statement. Under the amendments to AASB 101, the statement of comprehensive
income is renamed as a statement of profit or loss and other comprehensive income and the income
statement is renamed as a statement of profit or loss. The amendments to AASB 101 retain the
option to present profit or loss and other comprehensive income in either a single statement or in
two separate but consecutive statements. However, the amendments to AASB 101 require items of
other comprehensive income to be grouped into two categories in the other comprehensive income
section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may
be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items
of other comprehensive income is required to be allocated on the same basis – the amendments
do not change the option to present items of other comprehensive income either before tax or net
of tax. The amendments have been applied retrospectively, and hence the presentation of items
of other comprehensive income has been modified to reflect the changes. Other than the above
mentioned presentation changes, the application of the amendments to AASB 101 does not result
in any impact on profit or loss, other comprehensive income and total comprehensive income.
The amendments (part of AASB 2012-5 ‘Further Amendments to Australian Accounting Standards
arising from Annual Improvements 2009-2011 Cycle’) requires an entity that changes accounting
policies retrospectively, or makes a retrospective restatement or reclassification to present
a statement of financial position as at the beginning of the preceding period (third statement
of financial position), when the retrospective application, restatement or reclassification has
a material effect on the information in the third statement of financial position. The related
notes to the third statement of financial position are not required to be disclosed.
Standards and Interpretations affecting the reported results or financial position
There are no new and revised Standards and Interpretations adopted in these financial statements affecting the reporting results or financial position.
34
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
2.2 Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. We have
undertaken an assessment of the standards that we currently believe could affect us, and at this stage do not expect these to significantly affect the
reporting results or financial position for the consolidated entity in the future.
STANDARD/INTERPRETATION
AASB 9
‘Financial Instruments’, and the relevant amending standards
AASB 10
‘Consolidated Financial Statements’ and
AASB 2011-7
‘Amendments to Australian Accounting Standards arising from
the consolidation and Joint Arrangements standards’
AASB 11
‘Joint Arrangements’ and
AASB 2011- 7
‘Amendments to Australian Accounting Standards arising from
the consolidation and Joint Arrangements standards’
AASB 12
‘Disclosure of Interests in Other Entities’ and
AASB 2011-7 ‘Amendments to Australian Accounting Standards arising
from the consolidation and Joint Arrangements standards’
AASB 127
‘Separate Financial Statements’ (2011) and
AASB 2011-7 ‘Amendments to Australian Accounting Standards arising
from the consolidation and Joint Arrangements standards’
AASB 128
‘Investments in Associates and Joint Ventures’ (2011) and
AASB 2011-7
‘Amendments to Australian Accounting Standards arising from
the consolidation and Joint Arrangements standards’
AASB 13
‘Fair Value Measurement’ and
AASB 2011-8
‘Amendments to Australian Accounting Standards arising from AASB 13’
AASB 119
‘Employee Benefits’ (2011) and
AASB 2011-10 ‘Amendments to Australian Accounting Standards arising from AASB 119 (2011)’
AASB 2011-4
‘Amendments to Australian Accounting Standards to Remove Individual
Key Management Personnel Disclosure Requirements’
AASB 2012-2
‘Amendments to Australian Accounting Standards – Disclosures
– Offsetting Financial Assets and Financial Liabilities’
AASB 2012-3
‘Amendments to Australian Accounting Standards – Disclosures
– Offsetting Financial Assets and Financial Liabilities
AASB 2012-5
‘Amendments to Australian Accounting Standards arising
from Annual Improvements 2009-2011 Cycle
AASB 2012-10
‘Amendments to Australian Accounting Standards –
Transition Guidance and Other Amendments’
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
EXPECTED TO BE
INITIALLY APPLIED IN THE
FINANCIAL YEAR ENDING
1 January 2015
30 June 2016
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 July 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2014
30 June 2015
1 January 2013
30 June 2014
1 January 2013
30 June 2014
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations were also in issue but not yet effective,
although Australian equivalent Standards and Interpretations have not yet been issued.
Standard/Interpretation
None at time of publication.
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
EXPECTED TO BE
INITIALLY APPLIED IN THE
FINANCIAL YEAR ENDING
None at time of publication. None at time of publication.
35
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
If the initial accounting for a business
combination is incomplete by the end of the
reporting period in which the combination
occurs, the Consolidated entity reports
provisional amounts for the items for
which the accounting is incomplete. Those
provisional amounts are adjusted during the
measurement period (see below), or additional
assets or liabilities are recognised, to reflect
new information obtained about facts and
circumstances that existed as of the acquisition
date that, if known, would have affected
the amounts recognised as of that date.
The measurement period is the period
from the date of acquisition to the date
the Consolidated entity obtains complete
information about facts and circumstances
that existed as of the acquisition date – and
is subject to a maximum of one year.
3.5 Investments in associates
An associate is an entity over which the
Consolidated entity has significant influence and
that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power
to participate in the financial and operating
policy decisions of the investee but has no
control or joint control over those policies.
The results and assets and liabilities of
associates are incorporated in these financial
statements using the equity method of
accounting, except when the investment is
classified as held for sale, in which case it
is accounted for in accordance with AASB
5 ‘Non-current Assets Held for Sale and
Discontinued Operations’. Under the equity
method, investments in associates are carried
in the consolidated balance sheet at cost as
adjusted for post-acquisition changes in the
Consolidated entity’s share of the net assets
of the associate, less any impairment in the
value of individual investments. Losses of an
associate in excess of the Consolidated entity’s
interest in that associate (which includes
any long-term interests that, in substance,
form part of the Consolidated entity’s net
investment in the associate) are recognised
only to the extent that the Consolidated entity
has incurred legal or constructive obligations
or made payments on behalf of the associate.
3.4 Business combinations
Acquisitions of subsidiaries and businesses are
accounted for using the acquisition method. The
consideration for each acquisition is measured
at the aggregate of the fair values (at the date
of exchange) of assets given, liabilities incurred
or assumed, and equity instruments issued by
the Consolidated entity in exchange for control
of the acquiree. Acquisition-related costs are
recognised in profit or loss as incurred.
Where applicable, the consideration for the
acquisition includes any asset or liability resulting
from a contingent consideration arrangement,
measured at its acquisition-date fair value.
Subsequent changes in such fair values are
adjusted against the cost of acquisition where
they qualify as measurement period adjustments
(see below). All other subsequent changes in
such fair values are adjusted against the cost
of acquisition where they qualify as contingent
consideration classified as an asset or liability
are accounted for in accordance with relevant
Standards. Changes in the fair value of
contingent consideration classified as
equity ware not recognised.
Where a business combination is achieved in
stages, the Consolidated entity previously held
interests in the acquired entity are remeasured
to fair value at the acquisition date (i.e. the date
the Consolidated entity attains control) and the
resulting gain or loss, if any, is recognised in
profit or loss. Amounts arising from interests
in the acquiree prior to the acquisition date
that have previously been recognised in other
comprehensive income are reclassified to
profit or loss, where such treatment would be
appropriate if that interest were disposed of.
At the acquisition date, the identifiable assets
acquired and the liabilities assumed are
recognised at their fair value, except that:
• deferred tax assets or liabilities and liabilities
or assets related to employee benefit
arrangements are recognised and measured
in accordance with AASB 112 Income Taxes
and AASB 119 Employee Benefits respectively;
• liabilities or equity instruments related to
the replacement by the Consolidated entity
of an acquiree’s share-based payment
awards are measured in accordance with
AASB 2 Share-based Payment; and
• assets (or disposal groups) that are classified
as held for sale in accordance with AASB
5 Non-current Assets Held for Sale and
Discontinued Operations are measured
in accordance with that Standard.
3.
SIGNIFICANT
ACCOUNTING POLICIES
3.1 Statement of compliance
These financial statements are general purpose
financial statements which have been prepared
in accordance with the Corporations Act 2001,
Accounting Standards and Interpretations, and
comply with other requirements of the law.
The financial statements comprise the
consolidated financial statements of the
Consolidated entity for the 52-week period
ended 30 June 2013. For the purposes of
preparing the consolidated financial statements,
the Company is a for-profit entity.
Accounting Standards include Australian
Accounting Standards. Compliance with
Australian Accounting Standards ensures
that the financial statements and notes
of the Company and the Consolidated
entity comply with International Financial
Reporting Standards (‘IFRS’).
The financial statements were authorised for
issue by the directors on 13 August 2013.
3.2 Basis of preparation
The consolidated financial statements have
been prepared on the basis of historical cost,
except for the revaluation of certain financial
instruments. Historical cost is based on the fair
values of the consideration given in exchange
for assets. All amounts are presented in
Australian dollars, unless otherwise noted.
The Company is a company of the kind
referred to in ASIC Class Order 98/0100,
dated 10 July 1998, and in accordance with
that Class Order amounts in the financial
report are rounded off to the nearest thousand
dollars, unless otherwise indicated.
The following significant accounting policies
have been adopted in the preparation and
presentation of the financial report:
3.3 Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Company
and entities controlled by the Company (its
subsidiaries) (referred to as ‘the Consolidated
entity’ in these financial statements). Control is
achieved where the Company has the power to
govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed
of during the year are included in the consolidated
statement of comprehensive income from
the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the
financial statements of subsidiaries to bring their
accounting policies into line with those used
by other members of the Consolidated entity.
All intra-group transactions, balances, income and
expenses are eliminated in full on consolidation.
36
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED • exchange differences on monetary items
receivable from or payable to a foreign
operation for which settlement is neither
planned or likely to occur, (therefore forming
part of the net investment in a foreign
operation), which are recognised initially in
other comprehensive income and reclassified
from equity to profit and loss on disposal
or partial disposal of the net investment.
For the purpose of presenting the consolidated
financial statements, the assets and liabilities
of the Consolidated entity’s foreign operations
are expressed in Australian dollars using
exchange rates prevailing at the end of the
reporting period. Income and expense items
are translated at the average exchange rates
for the period, unless exchange rates fluctuated
significantly during the period, in which case the
exchange rates at the date of the transactions
are used. Exchange differences arising, if
any, are recognised in other comprehensive
income and accumulated in equity (attributed
to non-controlling interests as appropriate).
On disposal of a foreign operation (i.e. a disposal
of the Consolidated entity’s entire interest in
a foreign operation, or a disposal involving
loss of control over a subsidiary that includes
a foreign operation, loss of joint control over a
jointly controlled entity that includes a foreign
operation, or loss of significant influence over
an associate that includes a foreign operation),
all of the accumulated exchange differences
in respect of that operation attributable to the
Consolidated entity are reclassified to profit
or loss. Any exchange differences that have
previously been attributed to non-controlling
interests are derecognised, but they are not
reclassified to profit or loss.
In the case of a partial disposal (i.e. no loss
of control) of a subsidiary that includes a
foreign operation, the proportionate share of
accumulated exchange differences are re-
attributed to non-controlling interests and are
not recognised in profit or loss. For all other
partial disposals (i.e. of associates or jointly
controlled entities not involving a change of
accounting basis), the proportionate share
of the accumulated exchange differences is
reclassified to profit or loss.
Goodwill and fair value adjustments arising on
the acquisition of a foreign operation are treated
as assets and liabilities of the foreign operation
and translated at the closing rate.
3.7 Goods and services tax
Revenues, expenses and assets are
recognised net of the amount of goods
and services tax (“GST”), except:
(i)
where the amount of GST incurred
is not recoverable from the taxation
authority, it is recognised as part of
the cost of acquisition of an asset or
as part of an item of expense; or
(ii) for receivables and payables which
are recognised inclusive of GST.
The net amount of GST recoverable from, or
payable to, the taxation authority is included
as part of receivables or payables.
Cash flows are included in the cash flow
statement on a gross basis. The GST
component of cash flows arising from
investing and financing activities which
is recoverable from, or payable to, the
taxation authority is classified within
operating cash flows.
3.8 Revenue recognition
Revenue is measured at the fair value of
the consideration received or receivable.
3.8.1 Sale of goods
Revenue from the sale of goods is recognised
when the Consolidated entity has transferred to
the buyer the significant risks and rewards of
ownership of the goods.
3.8.2 Franchise income
Franchise income is recognised on an
accrual basis in accordance with the
substance of the relevant agreement.
3.8.3 Rendering of services
Service revenue relates primarily to store
building services and is recognised by reference
to the stage of completion of the contract.
3.8.4 Royalties
Royalty revenue is recognised on an accrual
basis in accordance with the substance of the
relevant agreement (provided that it is probable
that the economic benefits will flow to the
Consolidated entity and the amount of revenue
can be measured reliably). Royalties determined
on a time basis are recognised on a straight-
line basis over the period of the agreement.
Royalty arrangements that are based on
sales and other measures are recognised by
reference to the underlying arrangement.
Any excess of the cost of acquisition over
the Consolidated entity’s share of the net
fair value of the identifiable assets, liabilities
and contingent liabilities of the associate
recognised at the date of the acquisition
is recognised as goodwill. The goodwill is
included within the carrying amount of the
investment and is assessed for impairment
as part of that investment. Any excess of
the Consolidated entity’s share of the net
fair value of the identifiable assets, liabilities
and contingent liabilities over the cost of
the acquisition, after reassessment, is
recognised immediately in profit or loss.
Where a group entity transacts with an associate
of the Consolidated entity, profits and losses
are eliminated to the extent of the Consolidated
entity’s interest in the relevant associate.
3.6 Foreign currencies
The individual financial statements of each
group entity are presented in its functional
currency being the currency of the primary
economic environment in which the entity
operates (its functional currency). For
the purpose of the consolidated financial
statements, the results and financial position
of each entity are expressed in Australian
dollars (‘$’), which is the functional
currency of Domino’s Pizza Enterprises
Limited and the presentation currency for
the consolidated financial statements.
In preparing the financial statements of the
individual entities, transactions in currencies
other than the entity’s functional currency
(foreign currencies) are recognised at the
rates of exchange prevailing on the dates of
the transactions. At the end of each reporting
period, monetary items denominated in
foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items
carried at fair value that are denominated
in foreign currencies are retranslated at the
rates prevailing on the date when the fair
value was determined. Non-monetary items
that are measured in terms of historical cost
in a foreign currency are not retranslated.
Exchange differences are recognised in profit or
loss in the period in which they arise except for:
• exchange differences on foreign currency
borrowings relating to assets under
construction for future productive use, which
are included in the cost of those assets when
they are regarded as an adjustment to interest
costs on those foreign currency borrowings;
• exchange differences on transactions
entered into in order to hedge certain
foreign currency risks (see 3.24 below
for hedge accounting policies); and
37
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3.10 Taxation
Income tax expense represents the sum of
the tax currently payable and deferred tax.
3.10.1 Current tax
The tax currently payable is based on taxable
profit for the year. Taxable profit differs from
profit as reported in the consolidated statement
of comprehensive income because of items of
income or expense that are taxable or deductible
in other years and items that are never taxable
or deductible. The Consolidated entity’s
liability for current tax is calculated using tax
rates that have been enacted or substantively
enacted by the end of this reporting period.
3.10.2 Deferred tax
Deferred tax is recognised on temporary
differences between the carrying amounts of
assets and liabilities in the financial statements
and the corresponding tax bases used in the
computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets
are generally for all deductible temporary
differences to the extent that it is probable
that taxable profits will be available against
which those deductible temporary differences
can be utilised. Such deferred tax assets and
liabilities are not recognised if the temporary
difference arises from goodwill or from the
initial recognition of goodwill (other than in
a business combination) or other assets and
liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for
taxable temporary differences associated with
investments in subsidiaries and associates
and interests in joint ventures except where
the Consolidated entity is able to control the
reversal of the temporary differences and it is
probable that the temporary differences will
not reverse in the foreseeable future. Deferred
tax assets arising from deductible temporary
differences associated with these investments
and interests are only recognised to the extent
that it is probable that there will be sufficient
taxable profits against which to utilise the
benefits of the temporary differences they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets
is reviewed at the end of each reporting
period and reduced to the extent that
it is no longer probable that sufficient
taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply in
the period in which the liability is settled or the
asset is realised, based on tax rates (and tax
laws) that have been enacted or substantively
enacted by the end of the reporting period.
The measurement of deferred tax liabilities
and assets reflects the tax consequences
that would follow from the manner in which
the Consolidated entity expects, at the end of
the reporting period, to recover or settle the
carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
set off current tax assets against current tax
liabilities and when they related to income taxes
levied by the same taxation authority and the
Consolidated entity intends to settle its current
tax assets and liabilities on a net basis.
3.10.3 Current and deferred tax for the period
Current and deferred tax is recognised as an
expense or income in the profit or loss, except
when they relate to items that are recognised
outside the profit or loss (whether in other
comprehensive income or directly in equity),
in which case the tax is also recognised
outside the profit or loss, or where they arise
from the initial accounting for a business
combination. In the case of a business
combination, the tax effect is included in the
accounting for the business combination.
3.10.4 Tax consolidation
The Company and all its wholly-owned
Australian resident entities are part of a tax
consolidated group under Australian taxation
law. Domino’s Pizza Enterprises Limited
is the head entity in the tax-consolidated
group. Tax expense/income, deferred tax
liabilities and deferred tax assets arising from
temporary differences of the members of the
tax-consolidated group are recognised in the
separate financial statements of the members of
the tax-consolidated group using the ‘separate
taxpayer within group approach’ by reference to
the carrying amounts in the separate financial
statements of each entity and the tax values
applying under tax consolidation. Current tax
liabilities and assets and deferred tax assets
arising from unused tax losses and relevant tax
credits of the members of the tax-consolidated
group are recognised by the Company (as
head entity in the tax-consolidated group).
The entities in the tax-consolidated group have
not entered into a tax sharing agreement or
tax funding agreement. Income tax liabilities
payable to the tax authorities in respect of the
tax-consolidated group are recognised in the
financial statements of the parent entity.
3.8.5 Dividend and interest revenue
Dividend revenue from investments is
recognised when the shareholder’s right to
receive payment has been established (provided
that it is probable that the economic benefits
will flow to the Consolidated entity and the
amount of revenue can be reliably measured).
Interest revenue is recognised when it is
probable that the economic benefits will flow
to the Consolidated entity and the amount of
revenue can be measured reliably. Interest
revenue is accrued on a time basis, with
reference to the principal outstanding and at
the effective interest rate applicable, which
is the rate that exactly discounts estimated
future cash receipts through the expected
life of the financial asset to that asset’s net
carrying amount on initial recognition.
3.9 Share-based payments
Equity-settled share-based payments to
employees and others providing similar
services are measured at the fair value of
the equity instrument at the grant date. The
fair value is measured by use of a binomial
model. The expected life used in the model
has been adjusted, based on management’s
best estimate, for the effects of non-
transferability, exercise restrictions, and
behavioural considerations. Details regarding the
determination of the fair value of equity-settled
share-based transactions are set out in note 33.
The fair value determined at the grant date
of the equity-settled share-based payments
is expensed on a straight-line basis over the
vesting period, based on the Consolidated
entity’s estimate of equity instruments that
will eventually vest. At each reporting period,
the Consolidated entity revises its estimate of
the number of equity instruments expected
to vest. The impact of the revision of the
original estimates, if any, is recognised in
profit or loss over the remaining vesting
period, with corresponding adjustment to the
equity-settled employee benefits reserve.
The policy described above is applied to
all equity-settled share-based payments
that were granted after 7 November
2002 that vested after 1 January 2005.
No amount has been recognised in the
financial statements in respect of the other
equity-settled share-based payments.
Equity-settled share-based payment
transactions with other parties are measured at
the fair value of the goods and services received,
except where the fair value cannot be estimated
reliably, in which case they are measured at
the fair value of the equity instruments granted,
measured at the date the entity obtains the
goods or the counterparty renders the service.
38
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 3.12.4 Available-for-sale financial assets
Financial assets held by the Consolidated
entity are classified as being AFS and are
stated at fair value. Fair value is determined
in the manner described in note 32. Gains and
losses arising from changes in fair value are
recognised directly in other comprehensive
income and accumulated in the investments
revaluation reserve, with the exception of
impairment losses, interest calculated using the
effective interest method, and foreign exchange
gains and losses on monetary assets, which
are recognised in profit or loss. Where the
investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously
accumulated in the investments revaluation
reserve is reclassified to profit or loss.
Dividends on AFS equity instruments are
recognised in profit and loss when the
Consolidated entity’s right to receive the
dividends is established.
The fair value of AFS monetary assets
denominated in a foreign currency is determined
in that foreign currency and translated at the
spot rate at the end of the reporting period.
The foreign exchange gains and losses that
are recognised in profit or loss are determined
based on the amortised cost of the monetary
asset. Other foreign exchange gains and losses
are recognised in other comprehensive income.
3.12.5 Loans and receivables
Trade receivables, loans and other receivables
that have fixed or determinable payments
that are not quoted in an active market are
classified as ‘loans and receivables’. Loans
and receivables are measured at amortised
cost using the effective interest method less
impairment. Interest income is recognised
by applying the effective interest rate,
except for short-term receivables when the
recognition of interest would be immaterial.
3.11 Cash and cash equivalents
Cash comprises cash on hand and demand
deposits. Cash equivalents are short-term,
highly liquid investments that are readily
convertible to known amounts of cash,
which are subject to an insignificant risk of
changes in value and have a maturity of three
months or less at the date of acquisition.
Bank overdrafts are shown within borrowings
in current liabilities in the consolidated
statement of financial position.
3.12 Financial assets
All financial assets are recognised and
derecognised on trade date where the purchase
or sale of a financial asset is under a contract
whose terms require delivery of the financial
asset within the timeframe established
by the market concerned, and are initially
measured at fair value, plus transaction costs,
except for those financial assets classified
as at fair value through profit or loss, which
are initially measured at fair value.
Financial assets are classified into the following
specified categories: financial assets ‘at fair
value through profit or loss’ (FVTPL), ‘held-to-
maturity investments’, ‘available-for-sale’ (AFS)
‘financial assets’, and ‘loans and receivables’.
The classification depends on the nature
and purpose of the financial assets and is
determined at the time of initial recognition.
3.12.1 Effective interest method
The effective interest method is a method
of calculating the amortised cost of a debt
instrument and of allocating interest income
over the relevant period. The effective interest
rate is the rate that exactly discounts estimated
future cash receipts (including all fees on points
paid or received that form an integral part of
the effective interest rate, transaction costs
and other premiums or discounts) through
the expected life of the debt instrument, or
(where appropriate) a shorter period, to the
net carrying amount on initial recognition.
Income is recognised on an effective interest
rate basis for debt instruments other than
those financial assets as at FVTPL.
3.12.2 Financial assets at FVTPL
Financial assets are classified as at FVTPL
when the financial asset is either held for
trading or it is designated as at FVTPL.
A financial asset is classified
as held for trading if:
• It has been acquired principally for the
purpose of selling it in the near term; or
• on initial recognition it is a part of an
identified portfolio of financial instruments
that the Consolidated entity manages
together and has a recent actual pattern
of short-term profit-taking; or
• it is a derivative that is not designated
and effective as a hedging instrument.
A financial asset other than a financial
asset held for trading may be designated
as at FVTPL upon initial recognition if:
• such designation eliminates or significantly
reduces a measurement or recognition
inconsistency that would otherwise arise; or
• the financial asset forms part of a group of
financial assets or financial liabilities or both,
which is managed and its performance is
evaluated on a fair value basis, in accordance
with the Consolidated entity’s documented
risk management or investment strategy,
and information about the grouping is
provided internally on that basis; or
• it forms part of a contract containing
one or more embedded derivatives,
and AASB 139 Financial Instruments:
Recognition and Measurement permits
the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial assets at FVTPL are stated at fair
value, with any gains or losses arising on
re-measurement recognised in profit or loss.
The net gain or loss recognised in profit or loss
incorporates any dividend or interest earned on
the financial asset and is included in the ‘other
gains and losses’ line item in the statement
of comprehensive income. Fair value is
determined in the manner described in note 32.
3.12.3 Held-to-maturity investments
Bills of exchange and debentures with fixed
or determinable payments and fixed maturity
dates where the Consolidated entity has the
positive intent and ability to hold to maturity
are classified as held-to-maturity investments.
Held-to-maturity investments are recorded
at amortised cost using the effective interest
method less impairment, with revenue
recognised on an effective yield basis.
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2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3.12.7 Derecognition of financial assets
The Consolidated entity derecognises a financial
asset only when the contractual rights to the
cash flows from the asset expire, or it transfers
the financial asset and substantially all the
risks and rewards of ownership of the asset
to another entity. If the Consolidated entity
neither transfers nor retains substantially
all the risks and rewards of ownership and
continues to control the transferred asset, the
Consolidated entity recognises its retained
interest in the asset and an associated
liability for amounts it may have to pay. If
the Consolidated entity retains substantially
all the risks and rewards of ownership of a
transferred financial asset, the Consolidated
entity continues to recognise the financial
asset and also recognises a collateralised
borrowing for the proceeds received.
3.13 Inventories
Inventories are stated at the lower of cost and net
realisable value. Costs, including an appropriate
portion of fixed and variable overhead expenses,
are assigned to inventories by the method most
appropriate to each particular class of inventory,
with the majority being valued on a first in first
out basis. Net realisable value represents the
estimated selling price for inventories less
all estimated costs of completion and costs
necessary to make the sale.
3.14 Non-current assets held for sale
Non-current assets and disposal groups are
classified as held for sale if their carrying
amount will be recovered principally through a
sale transaction rather than through continuing
use. This condition is regarded as met only when
the sale is highly probable and the asset (or
disposal group) is available for immediate sale
in its present condition. Management must be
committed to the sale, which should be expected
to qualify for recognition as a completed sale
within one year from the date of classification.
When the Consolidated entity is committed
to a sale plan involving the loss of control of
a subsidiary, all of the assets and liabilities
of that subsidiary are classified as held for
sale when the criteria described above are
met, regardless of whether the Consolidated
entity will retain a non-controlling interest
in its former subsidiary after the sale.
Non-current assets (and disposal groups)
classified as held for sale are measured
at the lower of their previous carrying
amount and fair value less costs to sell.
3.15 Property, plant and equipment
Plant and equipment, leasehold improvements
and equipment under finance leases are
stated at cost less accumulated depreciation
and impairment. Cost includes expenditure
that is directly attributable to the acquisition
of an item. In the event that settlement of
all or part of the purchase consideration is
deferred, cost is determined by discounting
the amounts payable in the future to their
present value as at the date of acquisition.
Depreciation is provided on property, plant
and equipment excluding land. Depreciation
is calculated on a straight-line basis so as
to write off the cost of each asset over its
expected useful life to its estimated residual
value. Leasehold improvements are depreciated
over the period of the lease or estimated
useful life, whichever is the shorter, using
the straight-line method. The estimated
useful lives, residual values and depreciation
method are reviewed at the end of each
annual reporting period, with the effect of any
changes recognised on a prospective basis.
Assets held under finance leases are depreciated
over their expected useful lives on the same basis
as owned assets or, where shorter, the term of
the relevant lease.
The gain or loss arising on disposal or retirement
of an item of property, plant and equipment
is determined as the difference between the
sales proceeds and the carrying amount of
the asset and is recognised in profit or loss.
The following useful lives are used in
the calculation of depreciation:
• Plant and equipment
1 – 10 years
• Equipment under finance leases 3 – 10 years
3.16 Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of
qualifying assets, which are assets that
necessarily take a substantial period of time
to get ready for their intended use or sale,
are added to the cost of those assets, until
such time as the assets are substantially
ready for their intended use or sale.
Investment income earned on the temporary
investment of specific borrowings pending
their expenditure on qualifying assets is
deducted from the borrowing costs
eligible for capitalisation.
All other borrowing costs are recognised in profit
or loss in the period in which they are incurred.
3.12.6 Impairment of financial assets
Financial assets, other than those at FVTPL,
are assessed for indicators of impairment at
the end of each reporting period. Financial
assets are considered to be impaired
where there is objective evidence that, as a
result of one or more events that occurred
after the initial recognition of the financial
asset, the estimated future cash flows of
the investment have been affected.
For certain categories of financial asset, such
as trade receivables, assets that are assessed
not to be impaired individually are, in addition,
assessed for impairment on a collective basis.
Objective evidence of impairment for a portfolio
of receivables could include the Consolidated
entity’s past experience of collecting payments,
an increase in the number of delayed payments
in the portfolio past the average credit period
of 30 days, as well as observable changes
in national or local economic conditions that
correlate with default on receivables.
For financial assets carried at amortised cost,
the amount of the impairment recognised
is the difference between the asset’s
carrying amount and the present value of
estimated future cash flows, discounted
at the original effective interest rate.
The carrying amount of financial assets is
reduced by the impairment loss directly for all
financial assets with the exception of trade
receivables, where the carrying amount is
reduced through the use of an allowance
account. When a trade receivable is considered
uncollectible, it is written off against the
allowance account. Subsequent recoveries of
amounts previously written off are credited
against the allowance account. Changes
in the carrying amount of the allowance
account are recognised in profit or loss.
When an AFS financial asset is considered to be
impaired, cumulative gains or losses previously
recognised in other comprehensive income
are reclassified to profit or loss in the period.
With the exception of AFS equity instruments,
if, in a subsequent period, the amount of the
impairment loss decreases and the decrease
can be related objectively to an event occurring
after the impairment was recognised, the
previously recognised impairment loss is
reversed through profit or loss to the extent the
carrying amount of the investment at the date
the impairment is reversed does not exceed
what the amortised cost would have been
had the impairment not been recognised.
In respect of AFS equity securities, impairment
losses previously recognised in profit or loss are
not reversed through profit or loss. Any increase
in fair value subsequent to an impairment loss
is recognised in other comprehensive income.
40
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 3.17 Leasing
Leases are classified as finance leases whenever
the terms of the lease transfer substantially all
the risks and rewards incidental to ownership of
the leased asset to the lessee. All other leases
are classified as operating leases.
3.17.1 Consolidated entity as lessee
Assets held under finance leases are initially
recognised as assets of the Consolidated entity at
their fair value at the inception date of the lease
or, if lower, at the present value of the minimum
lease payments. The corresponding liability to
the lessor is included in the statement of financial
position as a finance lease obligation.
Lease payments are apportioned between
finance expenses and reduction of the lease
obligation so as to achieve a constant rate
of interest on the remaining balance of the
liability. Finance expenses are recognised
immediately in profit or loss, unless they are
directly attributable to qualifying assets, in
which case they are capitalised in accordance
with the Consolidated entity’s general policy on
borrowing costs (see 3.16 above). Contingent
rentals are recognised as an expense in the
periods in which they are incurred.
Finance leased assets are amortised on a
straight-line basis over the estimated useful
life of the asset.
Operating lease payments are recognised as an
expense on a straight-line basis over the lease
term, except where another systematic basis
is more representative of the time pattern in
which economic benefits from the leased asset
are consumed. Contingent rentals arising under
operating leases are recognised as an expense
in the period in which they are incurred.
In the event that lease incentives are received to
enter into operating leases, such incentives are
recognised as a liability. The aggregate benefits of
incentives are recognised as a reduction of rental
expense on a straight-line basis, except where
another systematic basis is more representative
of the time pattern in which economic benefits
from the leased asset are consumed.
3.18 Goodwill
3.19 Intangible assets
At cost less accumulated impairment
losses, if any:
Goodwill arising in a business combination is
recognised as an asset at the date that the
control is acquired (the acquisition date). Goodwill
is measured as the excess of the sum of the
consolidation transferred, the amount of any
non-controlling interests in the acquiree, and the
fair value of the acquirer’s previously held equity
interest in the acquiree (if any) over the net of
the acquisition-date amounts of the identifiable
assets acquired and the liabilities incurred.
If, after reassessment, the Consolidated entity’s
interest in the fair value of the acquiree’s
identifiable net assets exceeds the sum of the
consideration transferred, the amount of any
non-controlling interests in the acquiree and
the fair value of the acquirer’s previously held
equity interest in the acquiree (if any), the
excess is recognised immediately in profit or
loss as a bargain purchase gain. On disposal of
a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or
loss on disposal.
Review of potential impairment:
Goodwill is not amortised but is reviewed for
impairment at least annually. For the purpose of
impairment testing, goodwill is allocated to each
of the Consolidated entity’s cash-generating
units expected to benefit from the synergies
of the combination. Cash-generating units to
which goodwill has been allocated are tested
for impairment annually or more frequently
when there is an indication that the unit may
be impaired. If the recoverable amount of the
cash-generating unit is less than the carrying
amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets
of the unit pro-rata on the basis of the carrying
amount of each asset in the unit. An impairment
loss recognised for goodwill is not reversed in a
subsequent period.
3.19.1 Intangible assets acquired separately
Intangible assets acquired separately are carried
at cost less accumulated amortisation and
accumulated impairment losses. Amortisation
is recognised on a straight-line basis over their
estimated useful lives. The estimated useful
life and amortisation method are reviewed
at the end of each annual reporting period,
with the effect of any changes in estimates
being accounted for on a prospective basis.
3.19.2 Internally-generated intangible assets
– research and development expenditure
Expenditure on research activities
is recognised as an expense in the
period in which it is incurred.
An internally-generated intangible asset
arising from development (or from the
development phase of an internal project)
is recognised if, and only if, all of the
following have been demonstrated:
• the technical feasibility of completing
the intangible asset so that it will
be available for use or sale;
• the intention to complete the
intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate
probable future economic benefits;
• the availability of adequate technical,
financial and other resources to
complete the development and to use
or sell the intangible asset; and
• the ability to measure reliably the
expenditure attributable to the intangible
asset during its development.
The amount initially recognised for internally-
generated intangible assets is the sum of the
expenditure incurred from the date when the
intangible asset first meets the recognition
criteria listed above. Where no internally-
generated intangible asset can be recognised,
development expenditure is recognised in profit
or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-
generated intangible assets are reported
at cost less accumulated amortisation and
accumulated impairment losses, on the same
basis as intangible assets acquired separately.
The following useful lives are used in the
calculation of amortisation:
• Capitalised development
intangibles
• Licenses
2 – 10 years
2 – 10 years
41
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3.19.3 Intangible assets acquired
in a business combination
Intangible assets acquired in a business
combination are identified and recognised
separately from goodwill and are initially
recognised at their fair value at the acquisition
date (which is regarded as their cost).
Subsequent to initial recognition, intangible
assets acquired in a business combination are
reported at cost less accumulated amortisation
and accumulated impairment losses, on the same
basis as intangible assets acquired separately.
3.20 Impairment of tangible and intangible
assets excluding goodwill
At the end of each reporting period, the
Consolidated entity reviews the carrying
amounts of its tangible and intangible assets to
determine whether there is any indication that
those assets have suffered an impairment loss.
If any such indication exists, the recoverable
amount of the asset is estimated in order to
determine the extent of the impairment loss (if
any). Where it is not possible to estimate the
recoverable amount of an individual asset, the
Consolidated entity estimates the recoverable
amount of the cash-generating unit to which
the asset belongs. Where a reasonable and
consistent basis of allocation can be identified,
corporate assets are also allocated to individual
cash-generating units, or otherwise they
are allocated to the smallest group of cash-
generating units for which a reasonable and
consistent allocation basis can be identified.
Intangible assets with indefinite useful
lives and intangible assets not yet available
for use are tested for impairment annually
and whenever there is an indication
that the asset may be impaired.
Recoverable amount is the higher of fair value
less costs to sell and value in use. In assessing
the value in use, the estimated future cash flows
are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset (or
cash-generating unit) is estimated to be
less than its carrying amount, the carrying
amount of the asset (cash-generating unit)
is reduced to its recoverable amount. An
impairment loss is recognised immediately
in profit or loss, unless the relevant asset
is carried at the revalued amount, in which
case the impairment loss is treated as a
revaluation decrease (see 3.15 above).
Where an impairment loss subsequently
reverses, the carrying amount of the asset
(cash-generating unit) is increased to the
revised estimate of its recoverable amount, but
so that the increased carrying amount does
not exceed the carrying amount that would
have been determined had no impairment
loss been recognised for the asset (cash-
generating unit) in prior years. A reversal of
an impairment loss is recognised immediately
in profit or loss, unless the relevant asset
is carried at fair value, in which case the
reversal of the impairment loss is treated as
a revaluation increase (see 3.15 above).
3.21 Employee benefits
A liability is recognised for benefits accruing to
employees in respect of wages and salaries,
annual leave, long service leave, and sick leave
when it is probable that settlement will be required
and they are capable of being measured reliably.
Liabilities recognised in respect of short-term
employee benefits, are measured at their nominal
values using the remuneration rate expected to
apply at the time of settlement.
Liabilities recognised in respect of long term
employee benefits are measured as the present
value of the estimated future cash outflows
to be made by the Consolidated entity in
respect of services provided by employees
up to reporting date.
Contributions to defined contribution
superannuation plans are expensed when
employees have rendered service entitling
them to the contributions.
3.22 Provisions
Provisions are recognised when the
Consolidated entity has a present obligation
(legal or constructive) as a result of a past
event, it is probable that the Consolidated
entity will be required to settle the
obligation, and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the
best estimate of the consideration required to
settle the present obligation at reporting date,
taking into account the risks and uncertainties
surrounding the obligation. Where a provision
is measured using the cash flows estimated to
settle the present obligation, its carrying amount
is the present value of those cash flows.
When some or all of the economic benefits
required to settle a provision are expected
to be recovered from a third party, the
receivable is recognised as an asset if it
is virtually certain that reimbursement
will be received and the amount of the
receivable can be measured reliably.
3.22.1 Onerous contracts
Present obligations arising under onerous
contracts are recognised and measured as a
provision. An onerous contract is considered
to exist where the Consolidated entity has a
contract under which the unavoidable costs
of meeting the obligations under the contract
exceed the economic benefits expected to be
received under it.
3.22.2 Make good obligations
A provision is recognised for the make good
obligations in respect of restoring sites to their
original condition when the premises are vacated.
Management has estimated the provision based
on historical data in relation to store closure
numbers and costs, as well as future trends
that could differ from historical amounts.
3.22.3 Contingent liabilities acquired
in a business combination
Contingent liabilities acquired in a business
combination are initially measured at fair
value at the date of acquisition. At subsequent
reporting periods, such contingent liabilities are
measured at the higher of the amount that would
be recognised in accordance with AASB 137
‘Provisions, Contingent Liabilities and Contingent
Assets’ and the amount initially recognised
less cumulative amortisation recognised in
accordance with AASB 118 ‘Revenue’.
3.23 Financial liability and Equity Instruments
3.23.1 Classification as debt and equity
Debt and equity instruments are classified as
either liabilities or as equity in accordance with
the substance of the contractual arrangement.
3.23.2 Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets
of an entity after deducting all of its liabilities.
Equity instruments issued by the Consolidated
entity are recorded at the proceeds received,
net of direct issue costs.
3.23.3 Financial guarantee contract liabilities
Financial guarantee contract liabilities are
measured initially at their fair values and,
if not designated as at FVTPL, are
subsequently at the higher of:
• the amount of the obligation under the
contract, as determined in accordance
with AASB 137 ‘Provisions, Contingent
Liabilities and Contingent Assets’; and
• the amount initially recognised less, where
appropriate, cumulative amortisation in
accordance with the revenue recognition
policies set out in 3.8 above.
42
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 3.24.1 Hedge accounting
The Consolidated entity designates certain
hedging instruments, which include derivatives,
embedded derivatives and non-derivatives, in
respect of foreign currency risk, as either fair
value hedges, cash flow hedges, or hedges of
net investments in foreign operations. Hedges
of foreign exchange risk on firm commitments
are accounted for as cash flow hedges.
At the inception of the hedge relationship, the
entity documents the relationship between the
hedging instrument and hedged item, along with
its risk management objectives and its strategy
for undertaking various hedge transactions.
Furthermore, at the inception of the hedge and
on an ongoing basis, the Consolidated entity
documents whether the hedging instrument
that is used in a hedging relationship is
highly effective in offsetting changes in fair
values or cash flows of the hedged item.
Note 32 sets out details of the fair
values of the derivative instruments
used for hedging purposes.
3.24.2 Fair value hedge
Changes in the fair value of derivatives that are
designated and qualify as fair value hedges
are recognised in profit or loss immediately,
together with any changes in the fair value of the
hedged item that is attributable to the hedged
risk. The change in the fair value of the hedging
instrument and the change in the hedged item
attributable to the hedged risk are recognised
in the line of the statement of comprehensive
income relating to the hedged item.
Hedge accounting is discontinued when the
Consolidated entity revokes the hedging
relationship, when the hedging instrument
expires or is sold, terminated, or exercised, or
when it no longer qualifies for hedge accounting.
The fair value adjustment to the carrying amount
of the hedged item arising from the hedged risk
is amortised to profit or loss from that date.
3.23.4 Financial liabilities
Financial liabilities are classified as
either financial liabilities ‘at FVTPL’
or ‘other financial liabilities’.
3.23.6 Other financial liabilities
Other financial liabilities, including
borrowings, are initially measured at
fair value, net of transaction costs.
3.23.5 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL
when the financial liability is either held for
trading or it is designated as at FVTPL.
A financial liability is classified
as held for trading if:
• it has been acquired principally for the
purpose of repurchasing in the near term; or
• on initial recognition it is a part of an
identified portfolio of financial instruments
that the Consolidated entity manages
together and has a recent actual pattern
of short-term profit-taking; or
• it is a derivative that is not designated
and effective as a hedging instrument.
A financial liability other than a financial
liability held for trading is designated as
at FVTPL upon initial recognition if:
• such designation eliminates or significantly
reduces a measurement or recognition
inconsistency that would otherwise arise; or
• the financial liability forms part of a group
of financial assets or financial liabilities or
both, which is managed and its performance
evaluated on a fair value basis, in accordance
with the Consolidated entity’s documented
risk management or investment strategy,
and information about the grouping is
provided internally on that basis; or
• it forms part of a contract containing
one or more embedded derivatives,
and AASB 139 ‘Financial Instruments:
Recognition and Measurement’ permits
the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising
on re-measurement recognised in profit or
loss. The net gain or loss recognised in profit
or loss incorporates any interest paid on the
financial liability and is included in the ‘other
gains and losses’ line item in the statement
of comprehensive income. Fair value is
determined in the manner described in note 32.
Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method, with interest expense
recognised on an effective yield basis.
The effective interest method is a method of
calculating the amortised cost of a financial
liability and of allocating interest expense
over the relevant period. The effective
interest rate is the rate that exactly discounts
estimated future cash payments through
the expected life of the financial liability,
or, where appropriate, a shorter period.
3.23.7 Derecognition of financial liabilities
The Consolidated entity derecognises
financial liabilities when, and only when,
the Consolidated entity’s obligations are
discharged, cancelled or they expire.
3.24 Derivative financial instruments
The Consolidated entity enters into a
variety of derivative financial instruments
to manage its exposure to interest rate and
foreign exchange rate risk, including foreign
exchange forward contracts and interest rate
swaps. Further details of derivative financial
instruments are disclosed in note 32.
Derivatives are initially recognised at fair value
at the date a derivative contract is entered into
and are subsequently remeasured to their fair
value at each reporting period. The resulting
gain or loss is recognised in profit or loss
immediately unless the derivative is designated
and effective as a hedging instrument, in which
event, the timing of the recognition in profit
or loss depends on the nature of the hedge
relationship. The Consolidated entity designates
certain derivatives as either hedges of the
fair value of recognised assets or liabilities
or firm commitments (fair value hedges),
hedges of highly probable forecast transactions
or hedges of foreign currency risk of firm
commitments (cash flow hedges), or hedges
of net investments in foreign operations.
A derivative with a positive fair value is
recognised as a financial asset; a derivative
with a negative fair value is recognised as
a financial liability. A derivative is presented
as a non-current asset or a non-current
liability if the remaining maturity of the
instrument is more than 12 months and it is
not expected to be realised or settled within
12 months. Other derivatives are presented
as current assets or current liabilities.
43
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
3.24.3 Cash flow hedge
The effective portion of changes in the fair
value of derivatives that are designated and
qualify as cash flow hedges are recognised in
other comprehensive income. The gain or loss
relating to the ineffective portion is recognised
immediately in profit or loss, and is included in
the ‘other gains and losses’ line item.
Amounts previously recognised in other
comprehensive income and accumulated in
equity are reclassified to profit or loss in the
periods when the hedged item is recognised in
profit or loss in the same line of the statement
of comprehensive income as the recognised
hedged item. However, when the forecast
transaction that is hedged results in the
recognition of a non-financial asset or a non-
financial liability, the gains and losses previously
deferred in equity are transferred from equity
and included in the initial measurement of the
cost of the asset or liability.
Hedge accounting is discontinued when the
Consolidated entity revokes the hedging
relationship, when the hedging instrument
expires or is sold, terminated, or exercised, or
no longer qualifies for hedge accounting. Any
gains or losses accumulated in equity at that
time remains in equity and is recognised when
the forecast transaction is ultimately recognised
in profit or loss. When a forecast transaction is
no longer expected to occur, the cumulative gain
or loss that was deferred in equity is recognised
immediately in profit or loss.
3.24.4 Hedges in net investments
in foreign operations
Hedges of net investments in foreign operations
are accounted for similarly to cash flow hedges.
Any gain or loss on the hedging instrument relating
to the effective portion of the hedge is recognised
in other comprehensive income and accumulated
in the foreign currency translation reserve. The
gain or loss relating to the ineffective portion
is recognised immediately in profit or loss and
included in the ’other gains and losses’ line item.
Gains and losses on hedging instrument relating
to the effective portion of the hedge accumulated
in the foreign currency translation reserve are
reclassified to profit or loss in the same way
as exchange differences relating to the foreign
operation as described at 3.6 above.
4.
CRITICAL ACCOUNTING
JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
In the application of the Consolidated entity’s
accounting policies, which are described in
note 3, the directors are required to make
judgements, estimates and assumptions about
the carrying amounts of assets and liabilities
that are not readily apparent from other sources.
The estimates and associated assumptions
are based on historical experience and other
factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the
period in which the estimates are revised if
the revision affects only that period, or in the
period of the revision and future periods if the
revision affects both current and future periods.
4.1 Critical judgements in applying
the entity’s accounting policies
There are no critical judgements, apart from
those involving estimations (Refer note 4.2),
that directors have made in the process of
applying the Consolidated entity’s accounting.
4.2 Key sources of estimation uncertainty
The following are the key assumptions
concerning the future, and other key sources
of estimation of uncertainty at the end of the
reporting period, that have a significant risk of
causing a material adjustment to the carrying
amounts of assets and liabilities within the
next financial year:
4.2.1 Impairment of goodwill
Determining whether goodwill is impaired
requires an estimation of the value in use
of the cash-generating units to which
goodwill has been allocated. The value in use
calculation requires the entity to estimate the
future cash flows expected to arise from the
cash-generating unit and a suitable discount
rate in order to calculate present value.
The carrying amount of goodwill at the end of
the reporting period was $57,113 thousand
(2012: $46,927 thousand) as per note 19.
4.2.2 Fair value of derivatives and
other financial instruments
As described in note 32, management uses
their judgement in selecting an appropriate
valuation technique for financial instruments not
quoted in an active market. Valuation techniques
commonly used by market practitioners are
applied. For derivative financial instruments,
assumptions are made based on quoted market
rates adjusted for specific features of the
instrument. Other financial instruments are
valued using a discounted cash flow analysis
based on assumptions supported, where
possible, by observable market prices or rates.
Details of assumptions are provided in note 32.
4.2.3 Employee benefits
Management judgement is applied in
determining the following key assumptions
used in the calculation of long service leave
at balance date:
• future increases in wages and salaries;
• future on-cost rates; and
• experience of employee departures
and period of service.
Refer to note 25 for further details on the
key management judgements used in
the calculation of long service leave.
4.2.4 Useful lives of other intangibles
As described in note 3.19.2, management
uses their judgement to assess the useful
lives of capitalised development intangibles
and licenses. This is based on the estimated
life of the asset and future economic benefits
of the asset. The majority of these assets
have a life of between 2 – 10 years.
4.2.5 Impairment of loans and receivables
As described in note 3.12.6, management
assesses impairment based on objective
evidence including the Consolidated entity’s
past experience of collecting payments, an
increase in the number of delayed payments
in the portfolio past the average credit period
of 30 days, as well as observable changes
in national or local economic conditions that
correlate with default on loans and receivables.
44
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 5. REVENUE
The following is an analysis of the Consolidated entity’s revenue for the year, from continuing operations (excluding other revenue – see note 7).
Revenue from the sale of goods
Revenue from rendering of services
2013
$’000
182,000
6,631
188,631
2012
$’000
162,337
6,129
168,466
6. SEGMENT INFORMATION
6.1 Products and services from which reportable segments derive their revenues
The Group has identified its operating segments on the basis of internal reports about components of the Consolidated entity that are regularly reviewed by
the chief operating decision maker in order to allocate resources to the segment and to assess its performance.
Information reported to the Consolidated entity’s Chief Executive Officer for the purpose of resource allocation and assessment of performance is
specifically focused on the geographical location the Consolidated entity operates in. The Consolidated entity’s reportable segments under AASB 8 are
therefore as follows:
• Australia / New Zealand
• Europe
6.2 Segment revenues and results
The following is an analysis of the Consolidated entity’s revenue and results from continuing operations by reportable segment.
Continuing operations
Revenue
EBITDA
Depreciation
and amortisation
EBIT
Interest
Net profit before tax
YEAR ENDED 30 JUNE 2013
YEAR ENDED 1 JULY 2012
AUSTRALIA /
NEW ZEALAND
$’000
EUROPE
$’000
CONSOLIDATED
$’000
AUSTRALIA /
NEW ZEALAND
$’000
EUROPE
$’000
CONSOLIDATED
$’000
174,235
120,655
294,890
168,524
96,363
264,887
47,722
6,240
53,962
41,841
6,283
48,124
(7,942)
(4,850)
(12,792)
(6,766)
(3,263)
(10,029)
39,780
1,390
41,170
35,075
3,020
38,095
(405)
40,765
(451)
37,644
Revenue reported above represents revenue generated from external customers and franchisees.
There were no inter-segment sales during the period (2012: Nil).
The accounting policies of the reportable segments are the same as the Consolidated entity’s policies described in note 3. Segment net profit before tax
represents the profit earned by each segment using the measure reported to the chief operating decision maker for the purpose of resource allocation and
assessment of segment performance.
45
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6.3 Segment assets and liabilities
Segment assets
Australia / New Zealand
Europe
Total segment assets
Unallocated assets
Consolidated assets
Segment liabilities
Australia / New Zealand
Europe
Total segment liabilities
Unallocated liabilities
Consolidated liabilities
2013
$’000
2012
$’000
111,170
78,581
121,956
53,363
189,751
175,319
-
-
189,751
175,319
2013
$’000
(53,525)
(33,644)
2012
$’000
(40,447)
(17,831)
(87,169)
(58,278)
-
-
(87,169)
(58,278)
For the purposes of monitoring segment performance and allocating resources between segments:
• all assets are allocated to reportable segments. Goodwill is allocated to reportable segments as described in note 19.1. Assets used
jointly by reportable segments are allocated on the basis of the revenue earned by individual reportable segments; and
• all liabilities are allocated to reportable segments. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.
46
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 6.4 Other segment information
Australia / New Zealand
Europe
DEPRECIATION AND
AMORTISATION
ADDITIONS TO
NON-CURRENT ASSETS
2013
$’000
7,942
4,850
2012
$’000
6,766
3,263
2013
$’000
35,933
17,421
2012
$’000
25,089
11,919
12,792
10,029
53,354
37,008
6.5 Geographical information
The Consolidated entity operates in two principal geographical areas – Australia (country of domicile)/New Zealand and Europe.
The Consolidated entity’s revenue from continuing operations from external customers and franchisees can be found in note 6.2. The non-current assets by
geographical location are detailed below.
Australia / New Zealand
Europe
6.6 Information about major customers
There are no major customers that contribute an amount that is 10% or greater of total revenue.
NON-CURRENT ASSETS
2013
$’000
81,259
48,109
2012
$’000
69,231
32,090
129,368
101,321
47
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7. OTHER REVENUE
Interest revenue:
Bank deposits
Other loans and receivables
Rental revenue:
Store asset rental revenue
Royalties
Franchise services
Other revenue
The following is an analysis of other revenue earned on assets by category of asset:
Loans and receivables (including cash and bank balances)
Other income earned on non-financial assets
8. OTHER GAINS AND LOSSES
Net gain on disposal of property, plant & equipment, goodwill and other non-current assets
Net foreign exchange gains
2013
$’000
495
607
1,102
2012
$’000
1,085
700
1,785
2,172
2,244
46,886
45,072
20,803
17,793
35,296
106,259
29,527
96,421
2013
$’000
1,102
105,157
106,259
2013
$’000
2,979
585
3,564
2012
$’000
1,785
94,636
96,421
2012
$’000
2,220
941
3,161
No other gains or losses have been recognised in respect of loans and receivables other than as disclosed in note 7 and impairment losses recognised/
reversed in respect of trade and other receivables (see note 11 and 13).
48
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 9. FINANCE COSTS
Interest on commercial bill and loans
Interest on obligations under finance leases
Other interest expense
The weighted average interest rate on funds borrowed generally is 2.6% per annum (2012: 3.0%).
10. INCOME TAXES
10.1 Income tax recognised in profit or loss
Tax expense/(income) comprises:
Current tax expense in respect of the current year
Adjustments recognised in the current year in realtion to the current tax of prior years
Deferred tax expense relating to the origination and reversal of temporary differences
Effect of deferred tax balances in New Zealand due to the change in income
tax rate from 30% to 28% (effective 4 July 2011)
Total tax expense relating to continuing operations
The expense for the year can be reconciled to the accounting profit as follows:
Profit before tax from continuing operations
Income tax expense calculated at 30%
Effect of expenses that are not deductible in determining taxable profit
Other assessable/(deductible) amounts
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of tax concessions (research and development and other allowances)
Effect of deferred tax balances in New Zealand due to the change in income
tax rate from 30% to 28% (effective 4 July 2011)
Other
Adjustments recognised in the current year in relation to the current tax of prior years
Income tax expense recognised in profit or loss
2013
$’000
2012
$’000
399
6
-
405
434
5
12
451
2013
$’000
2012
$’000
11,268
(179)
11,089
9,946
(237)
9,709
1,019
987
-
12,108
12
10,708
2013
$’000
2012
$’000
40,765
37,644
12,230
11,293
653
(204)
(54)
(338)
-
-
12,287
(179)
12,108
156
(63)
(29)
(405)
12
(19)
10,945
(237)
10,708
The tax rate used for the 2013 and 2012 reconciliation above is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits
under Australian tax law.
49
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10.2 Income tax recognised in equity
Deferred tax
Arising on income and expenses in other comprehensive income:
Loss on cashflow hedge taken to equity
Loss on net investment hedge taken to equity
10.3 Current tax assets and liabilities
Current tax assets
Income tax refund receivable
Current tax liabilities
Income tax payable
2013
$’000
2012
$’000
-
(1,389)
(1,389)
2013
$’000
191
191
(41)
(67)
(108)
2012
$’000
-
-
(2,550)
(2,550)
(3,544)
(3,544)
50
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 10.4 Deferred tax balances
2013
Temporary differences
Carry forward surplus foreign revenue losses
Property, plant & equipment
Intangible assets
Other non-current assets
Provision for employee entitlements
Other provisions
Doubtful debts
Other financial liabilities
Other
Unused tax losses and credits
Tax losses
2012
Temporary differences
Cash flow hedge
Carry forward surplus foreign revenue losses
Property, plant & equipment
Intangible assets
Other non-current assets
Provision for employee entitlements
Other provisions
Doubtful debts
Other financial liabilities
Other
Unused tax losses and credits
Tax losses
OPENING
BALANCE
$’000
RECLASSIFI-
CATION / LOSS
UTILISATION
$’000
CHARGED TO
INCOME
$’000
CHARGED TO
EQUITY
$’000
EXCHANGE
DIFFERENCE
$’000
CLOSING
BALANCE
$’000
98
(557)
(2,217)
(7)
818
60
261
(1,249)
(305)
(3,098)
829
(2,269)
-
-
-
-
-
-
-
-
-
-
-
-
(98)
(365)
(698)
4
169
(11)
(88)
264
(172)
(995)
(571)
(1,565)
-
-
-
-
-
-
-
1,389
-
1,389
-
1,389
-
2
(7)
-
(2)
-
(1)
-
(17)
(25)
116
91
-
(920)
(2,922)
(3)
985
49
172
404
(494)
(2,729)
374
(2,355)
OPENING
BALANCE
$’000
RECLASSIFI-
CATION / LOSS
UTILISATION
$’000
CHARGED TO
INCOME
$’000
CHARGED TO
EQUITY
$’000
EXCHANGE
DIFFERENCE
$’000
CLOSING
BALANCE
$’000
41
195
(771)
(1,052)
(9)
715
60
(34)
(918)
(256)
(2,029)
1,361
(668)
-
-
-
-
-
-
-
128
-
(111)
17
(17)
-
-
(98)
215
(1,163)
3
103
2
157
(264)
58
(987)
(397)
(1,384)
(41)
-
-
-
-
-
-
-
(67)
-
(108)
-
(108)
Deferred tax balances are presented in the statement of financial position as follows:
Deferred tax assets
Deferred tax liabilities
-
1
(1)
(2)
(1)
-
(2)
10
-
4
9
(118)
(109)
2013
$’000
40
(2,395)
(2,355)
-
98
(557)
(2,217)
(7)
818
60
261
(1,249)
(305)
(3,098)
829
(2,269)
2012
$’000
829
(3,098)
(2,269)
51
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10.5 Unrecognised deferred tax assets
The taxation benefits of tax losses and timing differences not brought to account will only be obtained if:
• assessable income is derived of a nature and of an amount sufficient to enable the benefit from the deductions to be realised;
• conditions for deductibility imposed by the law are compiled with; and
• no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
The Group has an unrecognised aggregate deferred tax asset of $405,366 (2012: zero) in relation to acquisition costs incurred up until the reporting
date. This has not been recognised at 30 June 2013 as the intention of the directors is to hold the subsidiary to be acquired for the foreseeable future.
10.6 Unrecognised taxable temporary differences associated with investments and interests
At the end of the financial year, an aggregate deferred tax liability of $4,288,002 (2012: $4,288,002) was not recognised in relation to investments in
subsidiaries as the parent Company is able to control the timing of the reversal of the temporary differences and it is not probable that the temporary
difference will reverse in the foreseeable future.
10.7 Tax consolidation
Relevance of tax consolidation to the Group
The Company and its wholly-owned Australian resident entities formed a tax-consolidated group with effect from 1 July 2003 and are therefore taxed as a
single entity from that date. The head entity within the tax-consolidated group is Domino’s Pizza Enterprises Limited. The members of the tax-consolidated
group are identified at note 17.
Nature of tax funding arrangements and tax sharing arrangements
The entities in the tax-consolidated group have not entered into a tax sharing agreement or tax funding agreement. Income tax liabilities payable to the
taxation authorities in respect of the tax-consolidated group are recognised in the financial statements of the parent entity.
52
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 11. PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS
Profit for the year from continuing operations is attributable to:
Owners of Company
Profit for the year from continuing operations has arrived at after charging (crediting):
11.1 Impairment losses on financial assets
2013
$’000
2012
$’000
28,657
26,936
Impairment of trade receivables
(314)
(869)
11.2 Depreciation and amortisation expenses
Depreciation of property, plant and equipment
Amortisation of intangible and other assets
11.3 Employee benefits expense
Employee benefit expense:
Post employment benefits:
Defined contribution plans
Share-based payments (see note 33):
Equity settled share-based payments
Other employee benefits
Total employee benefits expense
(7,868)
(4,924)
(12,792)
(6,938)
(3,091)
(10,029)
(3,937)
(3,606)
(635)
(320)
(71,688)
(76,260)
(61,338)
(65,264)
53
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12. EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
2013
CENTS PER
SHARE
2012
CENTS PER
SHARE
40.9
40.5
38.9
38.4
12.1 Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:
Profit for the year attributable to owners of the Company
Earnings used in the calculation of basic EPS from continuing operations
Weighted average number of ordinary shares for the purposes of
basic earnings per share (all measures)
12.2 Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Profit for the year attributable to owners of the Company
Earnings used in the calculation of diluted EPS from continuing operations
2013
$’000
28,657
28,657
2013
$’000
2012
$’000
26,936
26,936
2012
$’000
70,132
69,285
2013
28,657
28,657
2012
26,936
26,936
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary
shares used in the calculation of basic earnings per share as follows:
Weighted average number of ordinary shares used in the calculation of basic EPS
Shares deemed to be issued for no consideration in respect of:
Options on issue
Weighted average number of ordinary shares used in the calculation of diluted EPS (all measures)
2013
NO. ’000
2012
NO. ’000
70,132
69,285
709
70,841
828
70,113
54
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 13. TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for doubtful debts
Other receivables
2013
$’000
27,010
(3,413)
23,597
2,815
26,412
2012
$’000
22,919
(3,275)
19,644
1,374
21,018
13.1 Trade receivables
Trade receivables disclosed above are classified as loans and receivables and are therefore measured at amortised cost.
The average credit period on sales of goods and rendering of services is 30 days. No interest is charged on the outstanding balance. An allowance has
been made for estimated irrecoverable amounts from the past sale of goods and rendering of services, determined by reference to past default experience.
Trade receivables 60 days and over are provided for based on the estimated irrecoverable amounts from the sale of goods and rendering of services,
determined by reference to past default experience.
Before accepting any new franchisees and business partners, the Consolidated entity uses a system to assess the potential franchisee’s and business
partner’s credit quality and defines credit limits. Limits attributed to franchisees and business partners are reviewed twice a year.
Included in the Consolidated entity’s trade receivables balance are debtors with a carrying amount of $2,882 thousand (2012: $1,716 thousand), which
are past due at the reporting date for which the Consolidated entity has not provided as there has not been a significant change in credit quality and the
amounts are still considered recoverable. The Consolidated entity does not hold any collateral over these balances.
Ageing of receivables that are past due but not impaired
30 - 60 days
60 - 90 days
90 days and over
Total
Movement in the allowance for doubtful debts
Balance at the beginning of the year
Impairment losses recognised on receivables
Amounts written off as uncollectible
Amounts recovered during the year
Impairment losses reversed
Effect of foreign currency
Balance at the end of the year
2013
$’000
583
109
2,190
2,882
2013
$’000
3,275
425
(459)
(236)
-
408
3,413
2012
$’000
557
181
978
1,716
2012
$’000
4,958
1,038
(1,323)
(1,050)
-
(348)
3,275
In determining the recoverability of a trade receivable, the Consolidated entity considers any change in the credit quality of the trade receivable from the
date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated.
Accordingly, the directors believe that there is no further allowance required in excess of the allowance for doubtful debts.
Included in the allowance for doubtful debts are individually impaired trade receivables with a balance of $3,413 thousand (2012: $3,275 thousand) for the
Consolidated entity. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of
the expected recoverable proceeds. The Consolidated entity does not hold any collateral over these balances.
Ageing of impaired trade receivables
0 - 30 days
30 - 60 days
60 - 90 days
90 days and over
Total
2013
$’000
42
1
16
3,354
3,413
2012
$’000
97
46
14
3,118
3,275
55
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14. OTHER FINANCIAL ASSETS
Investments carried at fair value:
Non-current
Other
Loans carried at amortised cost:
Current
Loans to franchisees (i)
Non-current
Loans to franchisees (i)
Allowance for doubtful loans
Financial guarantee contracts:
Non-current
Financial guarantee receivable
Current
Non-current
2013
$’000
2012
$’000
8
8
1,286
1,286
5,014
(910)
4,104
8
8
2,449
2,449
6,407
(969)
5,438
303
303
252
252
5,701
8,147
1,286
4,415
5,701
2,449
5,698
8,147
(i)
Before providing any new loans to franchisees, the Consolidated entity reviews the potential franchisee’s credit quality, which is determined by reviewing a business plan and the projected future cash
flows for that store, to ensure the franchisee is able to meet its interest repayments on the loan. On average the interest charged is based on the Westpac Interest Loan Rate (‘WILR’) plus 3% (2012 3%)
margin in Australia and New Zealand the average interest charged in France is 5.7% (2012 5.7%) and in The Netherlands is 7.6% (2012 7.6%).
Included in the Consolidated entity’s balance are loans to franchisees with a carrying amount of $910 thousand (2012: $969 thousand), which are past due at reporting date of which the Consolidated
entity has provided for these amounts. The Consolidated entity holds the store assets as collateral over these balances.
Franchisee Loans
Allowance for doubtful loans
2013
$’000
6,300
(910)
5,390
2012
$’000
8,856
(969)
7,887
In determining the recoverability of the loans to franchisees, the Consolidated entity considers any amount that has been outstanding at reporting date.
Accordingly, management believe that there is no further allowance required in excess of the allowances for doubtful loans.
Included in the allowance for the loans are individually impaired loans to franchisees with a balance of $910 thousand (2012: $969 thousand) for the
Consolidated entity. The impairment recognised represents the difference between the carrying amount of these loan balances and the present value of the
expected recoverable proceeds. The Consolidated entity holds collateral of the stores assets over these balances.
56
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
Ageing of loans to franchisees
Amounts not yet due
Movement in allowance for doubtful loans
Balance at the beginning of the year
Impairment losses recognised on loans
Amounts written off as uncollectible
Impairment losses reversed
Effect of foreign currency
Balance at the end of the year
15. INVENTORIES
Raw materials
Finished goods
There are no inventories (2012: $nil) expected to be recovered after more than 12 months.
16. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE
Asset held for sale
Commissary Property – The Netherlands
This land is currently listed for sale with a broker in The Netherlands and is included in the European Operating Segment.
2013
$’000
5,390
5,390
2013
$’000
969
30
-
(136)
47
910
2013
$’000
520
6,165
6,685
2012
$’000
7,887
7,887
2012
$’000
59
929
-
-
(19)
969
2012
$’000
558
5,148
5,706
2013
$’000
803
803
2012
$’000
704
704
57
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
17. SUBSIDIARIES
Details of the Company’s subsidiaries at 30 June 2013 are as follows:
NAME OF ENTITY
Ashbourke Pty Ltd (i)
Domino’s Development Fund Pty Ltd (i)
Hot Cell Pty Ltd (i)
MFT – DPA JV Nominee Pty Ltd
Reel (NT) Pty Ltd (i)
Shear Pizza Pty Ltd (i)
Silvio’s Dial-a-Pizza Pty Ltd (i)
Twenty/Twenty Pizza Pty Ltd (i)
Twenty/Twenty Pizza Pty Ltd & Domino’s Pizza Australia Pty Ltd Partnership (i)
Nisco Trading Pty Ltd (i) Refer to note 36
Domino’s Pizza New Zealand Limited
DPH NZ Holdings Limited
DPEU Holdings S.A.S.
Domino’s Pizza France S.A.S.
DPFC S.A.R.L.
HVM Pizza S.A.R.L.
Domino’s Pizza Europe B.V.
Domino’s Pizza Netherlands B.V.
DOPI Vastgoed B.V.
Domino’s Pizza Corporate Stores and Distributie B.V.
Domino’s Pizza Belgium S.P.R.L.
Catering Service & Supply Pty Ltd
Eximus S.A.R.L.
Bacalan S.A.R.L.
PLACE OF
INCORPORATION
AND OPERATION
PORTION OF
OWNERSHIP INTEREST
AND VOTING POWER HELD
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
France
France
France
France
The Netherlands
The Netherlands
The Netherlands
The Netherlands
Belgium
Australia
France
France
2013
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2012
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
n/a
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(i)
This entity is a member of the tax-consolidated group where Domino’s Pizza Enterprises Limited is the head entity within the tax-consolidated group.
58
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 18. PROPERTY, PLANT AND EQUIPMENT
Cost
Accumulated depreciation and impairment
Plant and equipment
Equipment under finance lease
Cost
Balance at 3 July 2011
Additions
Disposals
Acquisitions through business combinations (note 36)
Reclassification
Net foreign currency exchange differences
Balance at 1 July 2012
Additions
Disposals
Acquisitions through business combinations (note 36)
Reclassification
Net foreign currency exchange differences
Balance at 30 June 2013
Accumulated depreciation and impairment
Balance at 3 July 2011
Disposals
Depreciation expense
Reclassification
Net foreign currency exchange differences
Other expensed items
Balance at 1 July 2012
Disposals
Depreciation expense
Reclassification
Net foreign currency exchange differences
Other expensed items
Balance at 30 June 2013
2013
$’000
72,452
(22,759)
49,693
49,613
80
49,693
PLANT &
EQUIPMENT
AT COST
$’000
EQUIPMENT
UNDER
FINANCE LEASE
AT COST
$’000
58,906
17,658
(18,408)
3,228
(161)
(1,460)
59,763
25,037
(21,596)
5,224
(30)
3,912
72,310
(24,656)
6,198
(6,914)
161
375
-
(24,836)
11,034
(7,844)
32
(1,083)
-
(22,697)
142
-
-
-
-
-
142
-
-
-
-
-
142
(14)
-
(24)
-
-
-
(38)
-
(24)
-
-
-
(62)
2012
$’000
59,905
(24,874)
35,031
34,927
104
35,031
TOTAL
$’000
59,048
17,658
(18,408)
3,228
(161)
(1,460)
59,905
25,037
(21,596)
5,224
(30)
3,912
72,452
(24,670)
6,198
(6,938)
161
375
-
(24,874)
11,034
(7,868)
32
(1,083)
-
(22,759)
There was no depreciation during the period that was capitalised as part of the cost of other assets.
18.1 Assets pledged as security
In accordance with the security arrangements of liabilities, as disclosed in note 23 to the financial statements, all non-current assets of the Consolidated
entity, except goodwill and deferred tax assets, have been pledged as security. The holder of the security does not have the right to sell or re-pledge the
assets other than in an event of default.
The Consolidated entity does not hold title to the equipment under finance lease pledged as security.
59
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
19. GOODWILL
Cost
Accumulated impairment losses
Cost
Balance at beginning of financial year
Additional amounts recognised from business combinations occurring during the period (note 36)
Amounts disposed of during the period
Effects of foreign currency exchange differences
Reclassification
Other
Balance at end of financial year
Accumulated impairment loss
Balance at beginning of financial year
Impairment losses for the year
Disposals
Balance at end of financial year
2013
$’000
57,113
-
57,113
2012
$’000
46,927
-
46,927
2013
$’000
2012
$’000
46,927
47,485
13,853
(6,275)
2,183
-
425
57,113
-
-
-
-
8,648
(7,978)
(1,352)
-
124
46,927
-
-
-
-
19.1 Allocation of goodwill to cash-generating units
Goodwill has been allocated for impairment testing purposes to the following cash generating units:
• Australian Capital Territory (ACT);
• New South Wales (NSW);
• Queensland & Northern Territory (QLD & NT );
• South Australia, Western Australia and Tasmania (SA, WA & TAS);
• Victoria (VIC);
• New Zealand (NZ);
• The Netherlands & Belgium stores located in the region of Antwerp (NL); and
• France & the rest of Belgium (FR).
The carrying amount of goodwill (other than goodwill classified as held for sale) was allocated to the following cash-generating units:
Australia & New Zealand
QLD & NT
NSW
SA, WA & TAS
VIC
ACT
NZ
Europe
FR
NL
60
2013
$’000
14,068
7,662
5,192
8,323
2,715
2,315
8,111
8,727
57,113
2012
$’000
15,622
3,578
7,703
4,975
427
1,885
6,698
6,039
46,927
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED European market
The goodwill amount allocated to the cash-
generating units in this market relates to
the acquisition of the Domino’s Pizza master
franchise of France, Belgium, The Netherlands
and the Principality of Monaco on 3 July 2006.
The recoverable amount of the market is
determined based on a fair value model which
uses a five-year financial plan that has been
prepared, including the growth of the store
network. The cash flows for years one to five
are based on the expected growth across the
market, which has been included at an average
growth rate of 46.0% per annum. A pre-tax
discount rate of 14.1% has been applied to the
years one to five. The growth rate of 3.0% has
been used in determining the terminal value.
NZ market
The goodwill amount allocated to this market
relates to the acquisition of the Pizza Haven
New Zealand operations in 2005. The
recoverable amount of the goodwill is based
primarily on a value in use calculation which
uses cash flow projections based on the
financial budget approved by the Board for
the 2014 financial year as the year one cash
flow for the NZ franchise stores.
The cash flows for years one to five are based
on the expected sales revenues to be received
from net franchise royalties of the NZ franchise
stores, after applying a growth rate which has
been estimated at 4.0% per annum (2012: 5.0%
per annum). This figure is based on the growth
in forecast average franchise weekly sales
from the 2013 financial year to the 2014 budget
year. Management believes that this growth
percentage is reasonable considering the sales
growth that has been seen in this market during
the 2013 financial year. A pre-tax discount rate
of 14.14% has been applied to years one to
five. An indefinite terminal cash flow calculation
has been applied for cash flows beyond year
five, using the year five cash flow as a base.
The growth rate of 3.0% has been used in
determining the terminal value.
Key assumptions
The key assumptions used in the value in
use calculation for the various significant
cash-generating units are budgeted store
cash flows which are assumed to continue to
increase, driven by higher sales and increased
market share. These assumptions reflect prior
experience and management’s plan to focus on
store level efficiencies and to leverage market
share for higher overall profitability.
Management believes that any reasonable
change in the key assumptions on which the
recoverable amounts are based would not cause
the market’s carrying amount to exceed its
recoverable amount.
NSW, QLD & NT, SA, WA & TAS, VIC
and ACT markets
The operations in the NSW, QLD & NT, SA, WA
& TAS, VIC and ACT markets are similar, and
their recoverable amounts are based on similar
assumptions. The recoverable amounts of the
five markets are based primarily on a value in
use calculation which uses cash flow projections
based on the financial budget approved by the
Board for the 2014 financial year as the year
one cash flow.
The cash flows for years one to five are based
on the expected average sales percentage
growth across corporate and franchise markets,
which has been estimated at 4.0% per annum
nationally (2012: 5.0% per annum nationally).
These figures are based on management’s
estimate of forecast cash flow by store after
considering the 2013 financial year with the
2014 budget year. Management believes that
these growth percentages are reasonable
considering forecast sales growth and
economies of scale. A pre-tax discount rate of
14.14% has been applied to years one to five.
An indefinite terminal cash flow calculation
has been applied for cash flows beyond year
five, using the year five cash flow as a base.
The growth rate of 3.0% has been used in
determining the terminal value.
61
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
20. OTHER INTANGIBLE ASSETS
Cost
Accumulated amortisation and impairment losses
Gross carrying amount
Balance at 3 July 2011
Additions
Acquisitions through business combinations (note 36)
Additions from internal developments
Disposals
Reclassification
Net foreign currency exchange differences
Balance at 1 July 2012
Additions
Acquisitions through business combinations (note 36)
Additions from internal developments
Disposals
Reclassification
Net foreign currency exchange differences
Balance at 30 June 2013
Accumulated amortisation and impairment
Balance at 3 July 2011
Amortisation expense (i)
Disposals
Reclassification
Net foreign currency exchange differences
Other expense
Balance at 1 July 2012
Amortisation expense (i)
Disposals
Reclassification
Net foreign currency exchange differences
Other expense
Balance at 30 June 2013
2013
$’000
30,184
(12,757)
17,427
2012
$’000
20,164
(7,355)
12,809
CAPITALISED
DEVELOPMENT
$’000
LICENCES
$’000
TOTAL
$’000
7,349
1,502
-
5,590
-
(19)
(135)
14,287
1,362
-
6,463
(68)
(70)
583
22,557
(2,987)
(1,912)
-
19
143
-
(4,737)
(4,368)
9
24
(324)
-
(9,396)
6,096
258
-
-
(7)
-
(470)
5,877
988
-
-
(16)
-
778
7,627
(1,514)
(1,166)
2
-
60
-
(2,618)
(556)
4
-
(191)
-
(3,361)
13,445
1,760
-
5,590
(7)
(19)
(605)
20,164
2,350
-
6,463
(84)
(70)
1,361
30,184
(4,501)
(3,078)
2
19
203
-
(7,355)
(4,924)
13
24
(515)
-
(12,757)
(i)
Amortisation expense is included in the line item ‘depreciation and amortisation expense’ in the statement of comprehensive income.
Refer to note 3.19 to the financial statements for descriptions on intangible assets and their useful life.
62
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
21. OTHER ASSETS
Current
Prepayments
Work in progress – store builds
Other
Non-current
Other
22. TRADE AND OTHER PAYABLES
Trade payables (i)
Goods and services tax (GST)/Value added tax (VAT) payable
Other creditors and accruals
2013
$’000
4,136
545
1,634
6,315
680
680
2013
$’000
17,999
1,763
18,293
38,055
2012
$’000
2,266
167
1,348
3,781
27
27
2012
$’000
18,053
1,184
14,935
34,172
(i)
The average credit period on purchases of goods is 30 days. The Consolidated entity has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
23. BORROWINGS
Secured
Finance lease liabilities (i) (note 27)
Euro loan (ii) (iii)
Other Bank Loans (iv)
Other loans
Current
Non-current
2013
$’000
2012
$’000
83
18,041
21,547
-
39,671
7,082
32,589
39,671
108
13,717
-
218
14,043
11,534
2,509
14,043
Secured by the assets leased, the current market value of each exceeds the value of the finance lease liability.
Secured over the assets and undertaking of Domino’s Pizza Enterprises Limited.
23.1 Summary of borrowing arrangements:
(i)
(ii)
(iii) Variable rate loan with Westpac Banking Corporation with maturity periods exceeding 1 year (2012: within 1 year).
(iv)
Secured over the assets and undertaking of Domino’s Pizza Enterprises Limited. Variable rate loan with Bankwest with maturity periods exceeding 1 year and fixed rate loan with ABN-AMRO with
maturity periods not exceeding 1 year.
The unused facilities available on the consolidated entity’s bank overdraft are $2,000 thousand (2012: $2,000 thousand).
63
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. OTHER FINANCIAL LIABILITIES
Non-current
Financial guarantee contracts
Current
Rent Incentive Liability
Other
Current
Non-current
25. PROVISIONS
Employee benefits (i)
Other
Current
Non-current
Other Provisions
Balance at 1 July 2012
Additional provisions recognised
Payments made
Reductions resulting from remeasurement
Balance at 30 June 2013
2013
$’000
2012
$’000
303
303
200
308
508
508
303
811
2013
$’000
3,383
167
3,550
3,109
441
3,550
252
252
-
-
-
-
252
252
2012
$’000
2,732
202
2,934
2,360
574
2,934
MAKE GOOD (II)
$’000
STRAIGHT LINE
LEASING (III)
$’000
TOTAL
$’000
25
-
-
-
25
177
-
-
(35)
142
202
-
-
(35)
167
(i)
(ii)
The current provision for employee benefits includes $2,715 thousand of annual leave and vested long service leave entitlements accrued but not expected to be taken within 12 months (2012: $2,122
thousand for the Consolidated entity) and a funded defined benefit plan for qualifying employees in Europe of $91 thousand which is based on the most recent actuarial valuation.
The provision for the make good is in respect of restoring sites to their original condition when the premises are vacated. Management has estimated the provision based on historical data in relation to
the store closure numbers and costs, as well as future trends that could differ from historical amounts.
(iii) The provision for straight line leasing arises as fixed percentage increases in operating leases are recognised as an expense on a straight line basis, over the period of the lease.
64
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
26. OTHER LIABILITIES
Domino’s Pizza International Inc.
Other
Current
Non-current
2013
$’000
2012
$’000
136
1
137
-
137
137
232
3
235
-
235
235
27. OBLIGATIONS UNDER FINANCE LEASES
27.1 Leasing arrangements
Finance leases relate to plant & equipment with lease terms between three and ten years, and motor vehicles with lease terms between three and
four years. The Consolidated entity has options to purchase the leased assets for a nominal amount at the completion of the lease arrangements.
27.2 Finance lease liabilities
MINIMUM FUTURE LEASE
PAYMENTS
PRESENT VALUE OF MINIMUM
FUTURE LEASE PAYMENTS
No later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Minimum lease payments (i)
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as: (note 23)
Current borrowings
Non-current borrowings
2013
$’000
39
49
-
88
(5)
83
2012
$’000
31
89
-
120
(12)
108
(i) Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual value.
27.3 Fair value
The fair value of the finance lease liabilities is approximately equal to their carrying amount.
28. ISSUED CAPITAL
70,192,674 fully paid ordinary shares (2012: 69,899,674)
2013
$’000
2012
$’000
25
58
-
83
-
83
25
58
83
25
83
-
108
-
108
25
83
108
2013
$’000
2012
$’000
40,855
69,872
Changes to the Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998.
Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.
65
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28.1 Fully paid ordinary shares
Balance at beginning of financial year
Shares issued:
Issue of shares under executive share option plan
Issue of shares under dividend reinvestment plan
Capital Return
Balance at end of financial year
2013
2012
NUMBER OF
SHARES
$’000
SHARE
CAPITAL
$’000
NUMBER OF
SHARES
$’000
SHARE
CAPITAL
$’000
NOTE
69,900
69,872
68,408
64,523
(a)
(b)
(c)
293
-
-
70,193
1,025
-
(30,042)
40,855
1,492
-
-
69,900
5,349
-
-
69,872
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Share options on issue
CATEGORY OF SECURITY
Options
Unexercised options at 1 July 2012
Unexercised options at 1 July 2012
Unexercised options at 1 July 2012
Unexercised options at 1 July 2012
Unexercised options at 1 July 2012
Unexercised options at 1 July 2012
Unexercised options at 1 July 2012
(i)
Expiry date 12 months after vesting date.
NOTE
(a)
TOTAL
NUMBER
NUMBER
QUOTED
EXERCISE
PRICE
EXPIRY DATE
126,000
30,000
270,000
400,000
386,667
500,000
416,667
-
-
-
-
-
-
-
$3.45
$3.45
$3.07
$6.07
$6.07
$9.21
$9.21
31 August 2013
31 August 2013
31 August 2014
2 November 2017
10 August 2015 (i)
2 November 2017
10 August 2016 (i)
Domino’s Pizza Enterprises Limited entered
into an Underwriting Agreement with Goldman
Sachs JBWere for its first four dividend payments
commencing with the final dividend for the
year ended 2 July 2006. The Board decided to
continue the DRP Underwriting and entered into a
renewed agreement with Goldman Sachs JBWere
for the next four dividends commencing with the
final dividend for the year ended 29 June 2008.
On 18 August 2009, the Board resolved to
suspend the DRP until further notice. Therefore,
the final dividend for the year ended 30 June
2013 will be paid in cash only.
(c) Capital Return
Following approval by shareholders on 7th
November 2012, the Consolidated Entity made
two returns of capital to its shareholders of
$0.214 per share each time. This amounted
to $15 million on 21 December 2012 and $15
million on 21 June 2013.
(a) Options
The Company approved the establishment of
the ESOP to assist in the recruitment, reward
and retention of its directors and executives.
The Company will not apply for quotation of the
options on the ASX.
Subject to any adjustment in the event of a
bonus issue, rights issue or reconstruction
of capital, each option is convertible into
one ordinary share.
Terms and conditions of the ESOP
The Company must not issue any shares or
grant any option under this plan if, immediately
after the issue or grant, the sum of the
total number of unissued shares over which
options, rights or other options (which remain
outstanding) have been granted under this
plan and any other Group employee incentive
scheme would exceed 7.5% of the total number
of shares on issue on a Fully Diluted Basis at the
time of the proposed issue or grant.
Fully Diluted Basis means the number of shares
which would be on issue if all those securities
of the Company which are capable of being
converted into shares, were converted into
shares. If the number of shares into which the
securities are capable of being converted cannot
be calculated at the relevant time, those shares
will be disregarded.
During the year, 293,000 options were exercised
(2012: 1,492,000). A total of $1,025,500 was
received as consideration for 293,000 fully paid
ordinary shares of Domino’s Pizza Enterprises
Limited on exercise of the options in the current
financial year (2012: $5,348,540).
(b) Dividend reinvestment plan
On listing, the Board adopted but did not
commence operation of a Dividend Reinvestment
Plan (“DRP”). The DRP provides shareholders
the choice of reinvesting some or all of their
dividends in shares rather than receiving
those dividends in cash.
The Board of Directors resolved to activate the
DRP on 17 August 2006 with a commencement
date of 21 August 2006. Shareholders with
registered addresses in Australia or New Zealand
are eligible to participate in the DRP. Shareholders
outside Australia and New Zealand are not able to
participate due to legal requirements applicable in
their place of residence.
Shares allocated under the DRP rank equally with
existing shares. Shares will be issued under the
DRP at a price equal to the average of the daily
volume weighted average market price of the
Company’s shares (rounded to the nearest cent)
traded on the ASX during a period of ten trading
days commencing on the second business day
following the relevant record date, discounted by
an amount determined by the Board.
66
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 29. RESERVES
Foreign currency translation
Equity-settled share-based benefits
Hedging
29.1 Foreign currency translation reserve
Balance at beginning of financial year
Translation of foreign operations
Balance at end of financial year
2013
$’000
(6,852)
2,533
2,334
(1,985)
2013
$’000
(12,842)
5,990
(6,852)
2012
$’000
(12,842)
1,898
2,296
(8,648)
2012
$’000
(9,064)
(3,778)
(12,842)
Exchange differences relating to the translation of the net assets of the Consolidated entity’s foreign operations from their functional currencies to the
Consolidated entity’s presentation currency (i.e. Australian dollars) are recognised directly in other comprehensive income and accumulated in the foreign
currency translation reserve.
29.2 Equity-settled share-based benefits reserve
Balance at beginning of financial year
Share-based payment
Balance at end of financial year
2013
$’000
1,898
635
2,533
2012
$’000
1,578
320
1,898
The equity settled share-based benefits reserve arises on the grant of share options to executives under the Executive Share and Option Plan (“ESOP”).
Further information about ESOP is made in note 33 to the financial statements.
29.3 Hedging reserve
Balance at beginning of financial year
Gain recognised:
Net investment hedge
Interest rate swap
Balance at end of financial year
The hedging reserve represents hedging gains and losses recognised on the effective portion of net investment hedges.
30. RETAINED EARNINGS
Balance at beginning of year
Net profit attributable to members of the Company
Payment of dividends (note 31)
Balance at end of year
2013
$’000
2012
$’000
2,296
2,044
38
-
2,334
156
96
2,296
2013
$’000
55,817
28,657
(20,762)
63,712
2012
$’000
45,835
26,936
(16,954)
55,817
67
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
31. DIVIDENDS
Recognised amounts
Fully paid ordinary shares
Interim dividend:
Final dividend:
Unrecognised Amounts
Fully paid ordinary shares
Final dividend:
2013
2012
CENTS
PER SHARE
TOTAL
$’000
CENTS
PER SHARE
TOTAL
$’000
15.5
14.1
29.6
10,880
9,882
20,762
13.0
11.5
24.5
9,087
7,867
16,954
15.4
10,810
14.1
9,882
On 12 August 2013, the directors declared a fully franked final dividend of 15.4 cents per share to the holders of fully paid ordinary shares in respect of
the financial year ended 30 June 2013, to be paid to shareholders on 13 September 2013. The dividend will be paid to all shareholders on the Register of
Members on 27 August 2013. The total estimated dividend to be paid is $10,810 thousand.
Adjusted franking account balance
2013
$’000
5,426
2012
$’000
5,178
32. FINANCIAL INSTRUMENTS
32.1 Capital risk management
The Consolidated entity (“Group”) manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the
return to stakeholders through the optimisation of the debt and equity balances. The Group’s overall strategy remains unchanged from 2012.
The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 23, cash and cash equivalents and equity attributable
to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in notes 28, 29, and 30 respectively.
The Group is not subject to any externally imposed capital requirements.
The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades. None of the Group’s entities are
subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand the Group’s assets, as well as to make the routine outflows of tax, dividends and repayment of maturing
debt. The Group’s policy is to borrow centrally, using a variety of capital market issues and borrowing facilities, to meet anticipated funding requirements.
The Group’s management and board of directors review the capital structure formally on an annual basis. As part of this review, management and the
board of directors consider the cost of capital and the risks associated with each class of capital. Based on recommendations of management and the
Board of Directors, the Group will balance its overall capital structure through the payment of dividends, and new share issues as well as the issue of new
debt or the redemption of existing debt.
68
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 32.1.1 Gearing ratio
Debt (i)
Cash and cash equivalents
Net debt /(cash)
Equity (ii)
Net debt to equity ratio
The gearing ratio at the end of the reporting period was as follows:
(i)
(ii)
Debt is defined as long-term and short-term borrowings, as detailed in note 23.
Equity includes all capital and reserves that are managed as capital.
2013
$’000
39,671
(18,691)
20,980
102,582
20%
2012
$’000
14,043
(40,340)
(26,297)
117,041
(22%)
32.2 Significant accounting policies
Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases for recognition of income and expenses)
for each class of financial asset, financial liability and equity instrument are disclosed in note 3.
32.3 Categories of financial assets and liabilities
Financial assets
Trade and other receivables
Loans receivables
Other financial assets
Cash and cash equivalents
Financial guarantee contracts
Financial liabilities
Euro loan
Other financial liabilities
Finance lease liability
Other bank loans
Financial guarantee contracts
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST RATE
%
-
7.78
-
2.79
6.25
1.69
-
6.28
3.36
6.25
WEIGHTED
AVERAGE
EFFECTIVE
INTEREST RATE
%
-
9.72
-
3.90
6.25
3.00
-
5.27
4.31
6.25
2012
$’000
21,018
7,887
10
40,340
252
13,717
32,988
108
218
252
2013
$’000
26,412
5,390
9
18,691
303
18,041
36,292
83
21,547
303
32.4 Financial risk management objectives
The Group’s finance department co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to
the operations of the Group in line with the Group’s policies. These risks include market risk (including currency risk, interest rate risk and price risk),
credit risk and liquidity risk.
The Group seeks to minimise the effects of the above mentioned risks, by using derivative financial instruments to hedge these risk exposures. The use
of financial derivatives is governed by the Group’s policies approved by the Board of Directors, which provide written principles on foreign exchange risk,
interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance
with policies and exposure limits is reviewed by the Board of Directors. The Group does not enter into or trade financial instruments, including derivative
financial instruments, for speculative purposes.
The Group’s management and Board of Directors’ review annually the risks and policies implemented to mitigate risk exposures.
69
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32.5 Market risk
The Group’s activities expose it primarily to the
financial risks of changes in foreign currency
exchange rates (refer to note 32.6) and
interest rates (refer to note 32.7). The Group
enters into a variety of derivative financial
instruments to manage its exposure to interest
rate and foreign currency risk, including:
• Interest rate swaps to mitigate
risk of rising interest rates.
• Debt to manage currency risk.
Market risk exposures are measured
using sensitivity analysis.
There has been no change to the Group’s
exposure to market risks or the manner
in which it manages and measures
the risk from previous period.
Hedging activities
The Group holds financial instruments to hedge
risks relating to underlying transactions. The
major exposure to interest rate risk and foreign
currency risk arises from investment in foreign
operations. Details of hedging activities are
provided below.
The Group designated the Euro loan as a
hedge of a net investment in foreign operations
from the 10 December 2012. Spot rate
changes of $1,351 thousand in respect of
the fair value of the net assets of European
operations was recognised in equity for the
Consolidated entity and the company from
the 10 December 2012 to the reporting date.
For further details refer to note 3.24.
32.6 Foreign currency risk management
As DPE Limited’s Australian operations are
predominantly conducted in Australian dollars,
there is limited foreign currency exchange risk
associated with the Australian business.
DPE Limited also has operations in New
Zealand and Europe. The operations and
revenues of these businesses are predominantly
transacted in New Zealand dollars and
Euros respectively. DPE Limited intends to
mitigate its foreign currency translation risk
exposure by denominating a portion of its
senior debt in Euros. This creates a natural
hedge and mitigates the potential for currency
movements to negatively impact DPE Limited.
DPE Limited also purchases some equipment
in a range of currencies, but predominantly
USD, and has an exchange rate exposure
due to delays between entering into a
contract and final payment. DPE Limited will
only enter into a hedge position (forward
contract) in respect of equipment purchase
once it has committed to the purchase.
The Group undertakes certain transactions
denominated in foreign currencies, hence
exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed
within approved policy parameters. The
Group designated the Euro loan as a hedge
of a net investment in foreign operations
from 10 December 2012. Spot rate changes
of $1,351 thousand in respect of the euro
denominated loan was recognised in equity
for the Consolidated entity and the company
from 10 December 2012 to the reporting
date. For further details refer to note 3.24.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows:
Euro loan
Other bank loans
32.6.1 Foreign currency sensitivity analysis
The Group is mainly exposed to Euros
and New Zealand dollars (NZD).
The foreign currency risk exposure recognised
from assets and liabilities arises primarily
from the borrowings denominated in foreign
currencies. There is no significant impact on the
Consolidated entity’s profit from foreign currency
movements associated with these borrowings
as they are effectively designated as a hedge
of the net investment in foreign operations.
For the Group, the foreign currency translation
risk associated with the foreign investment
results in some volatility to the foreign
currency translation reserve. The impact
on the foreign currency translation reserve
relates to translation of the net assets of
the foreign controlled entities including
the impact of any hedging transactions.
Liabilities
Assets
2013
$’000
18,041
7,047
2012
$’000
13,717
-
2013
$’000
-
-
2012
$’000
-
-
Hedges of net investments in foreign operations
In the consolidated financial statements the
exposure to foreign currency translation risk is
a result of the investment in offshore activities
being Europe where any exchange gains and
losses on translation of the Euro denominated
loan are taken to the net investment hedge
reserve (in the foreign currency translation
reserve) only to the extent of the gains and
losses on the value of the European net assets,
including any intercompany loan payable to
DPEU. Exchange differences on the excess
between the Euro loan and net assets, including
any intercompany loan payable to DPEU, if
any, are recognised in the income statement.
The effectiveness of the hedging relationship
is tested using prospective and retrospective
effectiveness tests. In a retrospective
effectiveness test, the changes in the value
of the hedging instrument and the change
in the value of the hedged net investment
from spot rate changes are calculated. If the
calculation is between 80 and 125 per cent,
then the hedge is considered effective.
Any gains or losses on remeasurement of
derivative or non-derivative financial instruments
designated as hedges of foreign investments
are recognised in the net investment hedge
reserve in equity only to the extent that
the hedging relationship is effective. The
accumulation of the recognised gains or losses
recorded in equity is transferred to the income
statement when the foreign operation is sold.
Any gains or losses of the ineffective
portion of the hedge are recognised in the
income statement within other revenue
or other expenses. During the year there
was no hedge ineffectiveness attributable
to the net investment hedges.
During the year net gains after tax of $38
thousand (2012: $252 thousand) on the
hedging instruments were taken directly to
equity in the consolidated balance sheet.
70
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED The following table details the value of the instrument designated and the impact on the hedge reserve.
Euro loan
Designated hedge of Euro loan
LIABILITIES
EQUITY
2013
$’000
18,041
-
18,041
2012
$’000
13,717
-
13,717
2013
$’000
-
2,334
2,334
2012
$’000
-
2,296
2,296
The following details the Group’s sensitivity to a 10% increase and decrease in the Australian Dollar against the relevant foreign currencies. 10% is the
sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the
possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items. Adjustments
have only been made for transactions outstanding at period end using a 10% change in foreign currency rates. A positive number indicates an increase in
profit or loss and other equity where the Australian Dollar strengthens against the respective currency.
Profit or (loss)
If there was a 10% increase in exchange rates
with all other variables held constant
If there was a 10% decrease in exchange rates
with all other variables held constant
Other equity
If there was a 10% increase in exchange rates
with all other variables held constant
If there was a 10% decrease in exchange rates
with all other variables held constant
EUROS
IMPACT
NEW ZEALAND DOLLARS
IMPACT
2013
$’000
2012
$’000
2013
$’000
2012
$’000
-
-
-
-
1,161
-
(1,419)
1,247 (i)
-
(1,524) (i)
-
-
-
-
-
-
-
-
(i)
This is mainly as a result of changes in fair value of borrowings designated as net investment of foreign operation hedges.
The Group’s sensitivity to foreign currency remains consistent during the current period.
32.6.2 Forward foreign exchange contracts
It is the policy of the Group to enter into
forward foreign exchange contracts to
cover specific foreign currency payments
and receipts. The forward foreign exchange
contract is only entered into once the Group
has committed to the purchase transaction.
There were no forward foreign
exchange contracts outstanding as
at reporting date (2012: nil).
32.7 Interest rate risk management
The Group is exposed to interest rate risk as
it borrows funds at floating interest rates.
The Group holds an interest rate swap
contract to manage interest rate exposure.
Hedging activities are evaluated regularly
to align with interest rate views and defined
risk appetite ensuring optimal hedging
strategies are applied, by either positioning the
balance sheet or protecting interest expense
through different interest rate cycles.
32.7.1 Interest rate sensitivity analysis
The sensitivity analyses below have been
determined based on the exposure to
interest rates for both derivative and non-
derivative instruments at the reporting date
and the stipulated change taking place at
the beginning of the financial year and held
constant throughout the reporting period.
A 100 basis point increase or decrease
is used when reporting interest rate risk
internally to key management personnel
and represents management’s assessment
of the possible change in interest rates.
At reporting date, if interest rates had been
100 basis points higher or lower and all other
variables were held constant, the Group’s:
• Net profit would increase by $52 thousand
and decrease by $237 thousand (2012:
increase by $768 thousand and increase by
$12 thousand). This is mainly attributable
to the Group’s exposure to interest rates
on its variable rate borrowings.
71
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
32.8 Credit risk management
Credit risk refers to the risk that a franchisee or business partner will default on its contractual obligations resulting in financial loss to the Group. The
Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating
the risk of financial loss from defaults. Credit exposure is controlled by limits that are continually reviewed.
The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies.
Except as detailed in the following table, the carrying amount of financial assets recorded in the financial statements, net of any allowances for losses,
represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained:
32.8.1 Financial assets and other credit exposures
Consolidated
Guarantee provided under deed of guarantee
MAXIMUM CREDIT RISK
2013
$’000
2012
$’000
17,057
10,740
The Group provides guarantees to third party financiers in order to enable internal candidates (i.e. franchisees and managers) to fund the purchase of
DPE stores. The Group’s policy in this regard is to predominantly support internal candidates who have displayed strong operational expertise. Further, the
Group generally provides guarantees to internal candidates in the metropolitan markets where it has operated or is operating corporate stores. In the event
that a loan defaults, the Group’s policy is to purchase and operate the failed store as a corporate store.
The Group has also provided a guarantee to third party financial institutions in relation to borrowings of the European subsidiary.
72
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 32.9 Liquidity risk management
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast
and actual cash flows, and matching the maturity profiles of financial assets and liabilities. Included in note 32.9.2 is a listing of additional undrawn
facilities that the Group has at its disposal to further reduce liquidity risk.
32.9.1 Liquidity and interest risk tables
The following tables detail the Group’s remaining contractual maturity for its financial assets and liabilities and non-derivative financial assets and
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial assets and financial liabilities based on the earliest date on
which the Group can be required to pay. The table includes both interest and principal cash flows.
LESS THAN
1 YEAR
$’000
1 - 5
YEARS
$’000
MORE THAN
5 YEARS
$’000
30 JUNE 2013
Financial assets
Trade and other receivables
Loans receivables
Other financial assets
Cash and cash equivalents
Financial guarantee contracts
Financial Liabilities
Trade payables
Other payables
Commercial bills
Euro loan
Finance lease liability
Other bank loans
Other liabilities
Financial guarantee contracts
1 JULY 2012
Financial assets
Trade and other receivables
Loans receivables
Other financial assets
Cash and cash equivalents
Financial guarantee contracts
Financial Liabilities
Trade payables
Other payables
Commercial bills
Euro loan
Finance lease liability
Other loans
Other liabilities
Financial guarantee contracts
26,412
1,369
9
18,691
-
-
(17,999)
(11,386)
-
-
(25)
(7,047)
-
-
21,018
2,929
-
40,340
-
-
(18,053)
(16,118)
-
(11,493)
(25)
(16)
-
-
-
4,471
-
-
303
-
-
-
-
(18,041)
(58)
-
(137)
(303)
-
6,589
-
-
252
-
-
-
-
(2,224)
(83)
(202)
(235)
(252)
-
167
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2013
$’000
7,047
2,000
9,047
32,541
8,601
41,142
2012
$’000
-
2,000
2,000
13,717
24,820
38,537
The Company must not issue any shares or grant
any option under this plan if, immediately after
the issue or grant, the sum of the total number
of unissued shares over which options, rights
or other options (which remain outstanding)
have been granted under this plan and any other
Group employee incentive scheme would exceed
7.5% of the total number of shares on issue on
a Fully Diluted Basis at the time of the proposed
issue or grant.
Fully Diluted Basis means the number of shares
which would be on issue if all those securities
of the Company which are capable of being
converted into shares, were converted into
shares. If the number of shares into which the
securities are capable of being converted cannot
be calculated at the relevant time, those shares
will be disregarded.
32.9.2 Financing facilities
Secured bank overdraft facility, reviewed annually and payable at call:
amount used
amount unused
Secured commercial bill facility, reviewed annually:
amount used
amount unused
33. SHARE-BASED PAYMENTS
33.1 Equity-settled share-based benefits
The Company has one share plan and one
share and option plan available for employees
and directors and executives of the Company:
the Domino’s Pizza Exempt Employee Share
Plan (“Plan”) and the Domino’s Pizza Executive
Share and Option Plan (“ESOP”). Both plans
were approved by a resolution of the Board of
Directors on 11 April 2005. Fully paid ordinary
shares issued under these plans rank equally
with all other existing fully paid ordinary shares,
in respect of voting and dividend rights and
future bonus and rights issues.
33.2 Executive Share and Option Plan
The Company established the ESOP to assist
in the recruitment, reward, retention and
motivation of directors and executives of the
Company (“the participants”).
In accordance with the provisions of the
scheme, executives within the Company, to be
determined by the Board, are granted options to
purchase parcels of shares at various exercise
prices. Each option confers an entitlement to
subscribe for and be issued one share, credited
as fully paid, at the exercise price.
Options issued under the ESOP may not be
transferred unless the Board determines
otherwise. The Company has no obligation to
apply for quotation of the options on the ASX.
However, the Company must apply to the ASX
for official quotation of shares issued on the
exercise of the options.
The Consolidated entity has access to financing
facilities at reporting date as indicated above.
The Consolidated entity expects to meet its
other obligations from operating cash flows
and proceeds of maturing financial assets.
The Consolidated entity expects to maintain
a current debt to equity ratio approved by the
Board. This will be achieved through the issue of
new debt and the increased use of secured bank
loan facilities.
32.10 Fair value of financial instruments
The fair values of derivative instruments are
determined as follows:
• The present value of future cash flows
estimated are discounted based on the
applicable yield curves derived from
quoted interest rates.
The directors consider that the carrying
amount of financial assets and financial
liabilities recorded in the financial statements
approximate to their fair values.
Financial instruments that are measured
subsequent to initial recognition at fair value, are
grouped into Levels 1 to 3 based on the degree
to which the fair value is observable:
• Level 1 fair value measurements are those
derived from quoted prices (unadjusted) in
active markets for identical assets or liabilities.
• Level 2 fair value measurements are those
derived from inputs other than quoted prices
included within Level 1 that are observable
for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived inputs).
• Level 3 fair value measurements are those
derived from valuation techniques that
include inputs for the asset or liability that
are not based on observable market data
(unobservable inputs).
The directors consider that the financial
instruments previously disclosed are classified
as Level 2, and there have been no transfers
between Level 1 and Level 2.
74
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED The following share-based payment arrangements were in existence during the current and comparative reporting period:
OPTIONS SERIES
(6) Issued 8 December 2006 **
(8) Issued 22 August 2007 *
(9) Issued 10 September 2007 *
(10) Issued 3 December 2008 **
(11) Issued 30 April 2009 *
(12) Issued 2 November 2011
(13) Issued 2 November 2011 ***
(14) Issued 7 November 2012
(15) Issued 7 November 2012 ****
GRANT DATE
8 December 2006
22 August 2007
10 September 2007
3 December 2008
30 April 2009
2 November 2011
2 November 2011
7 November 2012
7 November 2012
EXPIRY DATE
31 August 2013
31 August 2013
31 August 2013
31 August 2014
31 August 2014
2 November 2017
10 August 2015
2 November 2017
10 August 2016
GRANT DATE
FAIR VALUE
$0.86
$0.37 (i)
$0.43 (ii)
$0.42
$0.44
$1.39
$1.43
$1.17
$1.16
EXERCISE
PRICE(iii)
$3.45
$3.45
$3.45
$3.07
$3.07
$6.07
$6.07
$9.21
$9.21
VESTING DATE
31 August 2011
31 August 2011
31 August 2011
31 August 2011
31 August 2011
2 November 2014
10 August 2014
7 November 2015
10 August 2015
It is a condition of exercise that the optionholder be an employee of the Company at 31 August 2011.
It is a condition of exercise that the optionholder be a director of the Company as at 31 August 2011.
*
**
*** Expiry date 12 months after vesting date (on or about 10 August 2014 and 10 August 2015).
**** Expiry date 12 months after vesting date (on or about 10 August 2015).
1 Tranche consisting of 158,000 options were nominal at grant date.
1 Tranche consisting of 40,000 options were nominal at grant date.
(i)
(ii)
(iii) The exercise price reduced due to the Capital Returns on the 21 December 2012 by $0.214 and 21 June 2013 by $0.214.
33.3 Fair value of share options granted in the year
The weighted average fair value of the options granted during the 2013 year is $1.17 (2012: 1.41). Options were priced using a binominal option pricing
model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability,
exercise restrictions and behavioural conditions. Expected volatility is based on the historical share price volatility since listing on 16 May 2005.
Inputs into the model
Grant date share price
Exercise price (ii)
Expected volatility
Option life years (i)
Dividend yield
Risk-free interest rate
OPTION SERIES
SERIES 8
SERIES 9
SERIES 10 SERIES 11 SERIES 12 SERIES 13 SERIES 14 SERIES 15
$3.09
$3.45
26.75%
4.03
2.90%
6.04%
$3.09
$3.45
26.75%
3.98
2.90%
6.04%
$3.08
$3.07
26.83%
2.82
3.50%
5.56%
$3.08
$3.07
34.04%
2.34
3.54%
3.07%
$6.82
$6.07
24.00%
6.01
3.08%
3.79%
$6.82
$6.07
24.00%
3.77
3.08%
3.72%
$9.10
$9.21
22.90%
3.90
2.98%
2.73%
$9.10
$9.21
22.90%
3.3
2.98%
2.73%
(i)
(ii)
This is based on a normal 365-day year.
The exercise price reduced due to the Capital Returns on the 21 December 2012 by $0.214 and 21 June 2013 by $0.214.
33.4 Movements in share options during the period
The following reconciles the outstanding share options granted under the ESOP at the beginning and end of the year:
Balance at beginning of the year
Granted during the financial year
Forfeited during the financial year
Exercised during the financial year
Expired during the financial year
Balance at end of the year
Exercisable at end of the year
2013
2012
WEIGHTED
AVERAGE
EXERCISE
PRICE
$
5.11
9.64
-
3.50
-
6.85
3.21
NUMBER OF
OPTIONS
2,537,000
804,167
(343,500)
(1,492,000)
-
1,505,667
719,000
WEIGHTED
AVERAGE
EXERCISE
PRICE
$
3.62
6.50
4.01
3.58
-
5.11
3.58
NUMBER OF
OPTIONS
1,505,667
916,667
-
(293,000)
-
2,129,334
426,000
75
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
33.5 Share options exercised during the year
2013
OPTION SERIES
(11) Issued 30 April 2009
(11) Issued 30 April 2009
2012
OPTION SERIES
(8) Issued 22 August 2007
(9) Issued 10 September 2007
(11) Issued 30 April 2009
(11) Issued 30 April 2009
(11) Issued 30 April 2009
(11) Issued 30 April 2009
(11) Issued 30 April 2009
(11) Issued 30 April 2009
(11) Issued 30 April 2009
(6) Issued 8 December 2006
(10) Issued 3 December 2008
(8) Issued 22 August 2007
NUMBER
EXERCISED
193,000
100,000
EXERCISE DATE
16 August 2012
14 November 2012
NUMBER
EXERCISED
60,000
48,000
369,000
100,000
40,000
40,000
60,000
10,000
40,000
126,000
500,000
99,000
EXERCISE DATE
31 August 2011
31 August 2011
31 August 2011
1 September 2011
9 September 2011
19 October 2011
3 November 2011
8 November 2011
16 November 2011
20 February 2012
20 February 2012
22 February 2012
SHARE PRICE
AT EXERCISE
DATE ($)
9.70
9.21
SHARE PRICE
AT EXERCISE
DATE ($)
7.10
7.10
7.10
7.05
7.11
6.50
6.85
7.22
7.32
7.82
7.82
8.02
The following share options granted under the ESOP were exercised during the year:
33.6 Share options outstanding at end of the year
2013
The share options outstanding at the end of the year consist of:
• 126,000 options with an exercise price of $3.45, and a weighted average remaining contractual life of 0.16 years.
• 30,000 options with an exercise price of $3.45, and a weighted average remaining contractual life of 0.16 years.
• 270,000 options with an exercise price of $3.07, and a weighted average remaining contractual life of 1.16 years.
• 400,000 options with an exercise price of $6.07, and a weighted average remaining contractual life of 4.34 years.
• 386,667 options with an exercise price of $6.07, and a weighted average remaining contractual life of 2.11 years.
• 500,000 options with an exercise price of $9.21, and a weighted average remaining contractual life of 4.34 years.
• 416,667 options with an exercise price of $9.21, and a weighted average remaining contractual life of 3.11 years
2012
The share options outstanding at the end of the year consist of:
• 126,000 options with an exercise price of $3.88, and a weighted average remaining contractual life of 1.16 years.
• 30,000 options with an exercise price of $3.88, and a weighted average remaining contractual life of 1.16 years.
• 563,000 options with an exercise price of $3.50, and a weighted average remaining contractual life of 2.16 years.
• 400,000 options with an exercise price of $6.50, and a weighted average remaining contractual life of 5.34 years.
• 386,667 options with an exercise price of $6.50, and a weighted average remaining contractual life of 3.11 years.
76
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 34. KEY MANAGEMENT PERSONNEL COMPENSATION
The aggregate compensation made to key management personnel of the Consolidated entity and Company, is set out below:
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Termination benefits
Equity settled share-based payments
2013
$
3,863,304
198,046
79,694
-
586,161
4,727,205
2012
$
4,612,805
163,184
73,183
-
292,791
5,141,963
The compensation of each member of the key management personnel of the Consolidated entity is set out on the following page.
The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.
Egan & Associates, an independent remuneration consultant is engaged by the Remuneration Committee to ensure that the reward practices and levels
for senior management are consistent with market practice. A statement of recommendation from the remuneration consultant has been received by the
board for the 2013 financial year. Payment of $25,410 (2012: $62,003) has been made to the remuneration consultant for the services provided on the
remuneration recommendation. Additional services provided in the current year were in relation to the issuing of options under the ESOP. No other advice
has been provided by the remuneration consultant for the financial year.
In order to ensure that the remuneration recommendation would be free from undue influence by members of the key management personnel to whom
the recommendation relates to, the board has ensured that the remuneration consultant is not a related party to any member of the key management
personnel. As such, the Board is satisfied that the remuneration recommendation was made free from undue influence by the member or members of
the key management personnel to whom the recommendation relates.
77
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The compensation of each member of the key management personnel of the Consolidated entity for the current year is set out below:
SHORT-TERM EMPLOYEE BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
SALARY &
FEES
$
BONUS
$
NON-
MONETARY
$
SUPERAN-
NUATION
$
OTHER
LONG-TERM
EMPLOYEE
BENEFITS (ii)
$
TERMI-
NATION
BENEFITS
$
160,000
92,000
80,000
80,000
-
-
-
-
3,065
3,065
3,065
3,065
14,408
8,284
6,966
7,204
-
-
-
-
623,881
32,500
3,065
16,543
17,385
293,695
258,468
360,857
182,381
183,246
231,988
342,053
222,103
183,299
3,293,971
33,333
-
22,750
15,096
-
24,500
9,315
57,000
265,250
459,744
41,555
2,759
3,065
26,932
7,693
3,065
3,065
3,065
3,065
109,589
16,596
15,510
16,521
29,802
-
16,560
16,505
16,550
16,597
198,046
8,963
44,776
8,570
-
-
-
-
-
-
79,694
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
SHARE-
BASED
PAYMENT
OPTIONS &
RIGHTS
$
-
-
-
-
PERCENTAGE
OF COMPEN-
SATION FOR
THE YEAR
CONSISTING
OF OPTIONS
%
-
-
-
-
TOTAL
$
177,473
103,349
90,031
90,269
329,245
1,022,619
32.20%
46,435
-
127,952
-
-
19,193
44,143
19,193
-
586,161
440,577
321,513
539,715
254,211
190,939
295,306
415,081
317,911
468,211
4,727,205
10.54%
-
23.71%
-
-
6.50%
10.63%
6.04%
-
12.40%
2013 (i)
Non-executive directors
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Executive director
Don Meij
Executive officers
Richard Coney
Andrew Megson (iii) (iv)
Andrew Rennie
Andre ten Wolde (iii)
Melanie Gigon
Craig Ryan
Allan Collins
John Harney
Patrick McMichael
The short-term bonus and long-term bonus and the options are dependent on satisfaction of performance conditions.
Relates to long term employee entitlements expense.
On 30 July 2012, Andrew Megson returned to Australia and took the role of National Franchise Operations Manager. At the same time, Andre ten Wolde became the President – The Netherlands.
(i)
(ii)
(iii)
(iv) On 1 June 2013, Andrew Megson took the newly created role of CEO Europe.
78
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED The compensation of each member of the key management personnel of the Consolidated entity for the prior year is set out below:
SHORT-TERM EMPLOYEE BENEFITS
POST-
EMPLOY-
MENT
BENEFITS
SALARY &
FEES
$
BONUS
$
NON-
MONETARY
$
SUPERAN-
NUATION
$
OTHER
LONG-TERM
EMPLOYEE
BENEFITS (ii)
$
TERMI-
NATION
BENEFITS
$
SHARE-
BASED
PAYMENT
OPTIONS &
RIGHTS
$
2012 (i)
Non-executive directors
Ross Adler
Barry Alty
Grant Bourke
Paul Cave
Executive director
Don Meij
Executive officers
Richard Coney
Andrew Megson
Andrew Rennie
Melanie Gigon
Craig Ryan
Allan Collins
John Harney
Chris O'Dwyer
Patrick McMichael
160,000
92,000
80,000
80,000
-
-
-
-
3,007
3,007
3,007
3,007
14,376
8,280
7,200
7,200
-
-
-
-
584,662
468,750
3,007
15,860
22,907
260,915
283,023
333,768
184,193
184,370
352,184
181,412
199,703
165,911
3,142,141
124,384
41,515
136,500
64,764
50,965
72,000
80,000
21,000
267,500
1,327,378
41,497
65,540
3,007
3,172
3,007
3,007
3,007
3,007
3,007
143,286
15,794
-
15,797
-
15,790
15,353
15,795
15,790
15,949
163,184
5,245
-
45,031
-
-
-
-
-
-
73,183
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
PERCENTAGE
OF COMPEN-
SATION FOR
THE YEAR
CONSISTING
OF OPTIONS
%
-
-
-
-
TOTAL
$
177,383
103,287
90,207
90,207
-
-
-
-
147,390
1,242,576
11.86%
23,894
5,692
63,322
2,070
9,610
21,137
9,610
10,066
-
292,791
471,729
395,770
597,425
254,199
263,742
463,681
289,824
249,566
452,367
5,141,963
5.07%
1.44%
10.60%
0.81%
3.64%
4.56%
3.32%
4.03%
-
5.69%
(i)
(ii)
The short-term bonus and long-term bonus and the options are dependent on satisfaction of performance conditions.
Relates to long term employee entitlements expense
35. RELATED PARTY TRANSACTIONS
35.1 Other related party transactions
35.1.1 Equity interests in related parties
(i) Equity interest in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 17 to the financial statements.
(ii) Equity interests in other related parties
There are no equity interests in other related parties.
35.1.2 Transactions with key management personnel
(i) Key management personnel compensation
Details of key management personnel compensation are disclosed in note 34 to the financial statements.
(ii) Loans to key management personnel
There were no loans outstanding at any time during the financial year to key management personnel or to their related parties.
79
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(iii) Key management personnel equity holdings
Fully paid ordinary shares of Domino’s Pizza Enterprises Limited
2013
Ross Adler (i) (xvi)
Barry Alty (i)
Grant Bourke (i)
Paul Cave (i)
Don Meij (i) (ii)
Richard Coney (i) (iii)
Allan Collins
John Harney
Melanie Gigon
Andrew Megson (i) (xvii)
Andrew Rennie (i) (xv)
Andre ten Wold (v)
Craig Ryan (vi)
Patrick McMichael (iv)
2012
Ross Adler (i)
Barry Alty (i)
Grant Bourke (i)
Paul Cave (i)
Don Meij (i) (ii) (iii)
Richard Coney (i)(iv)
Allan Collins
John Harney (v)
Melanie Gigon (vi)(vii)
Andrew Megson (i)(viii)(ix)(x)
Chris O’Dwyer
Andrew Rennie (i)(xi)
Craig Ryan
Patrick McMichael
BALANCE AT
BEGINNING
OF FINANCIAL
YEAR
NO.
GRANTED AS
COMPEN-
SATION
NO.
RECEIVED ON
EXERCISE OF
OPTIONS
NO.
NET OTHER
CHANGE
NO.
BALANCE AT
THE END OF
FINANCIAL
YEAR
NO.
BALANCE HELD
NOMINALLY
NO.
302,221
104,443
1,547,032
382,000
2,787,556
719
-
-
-
113,079
342,713
-
-
13,635
302,221
104,443
1,547,032
382,000
2,537,556
719
-
-
-
113,079
-
407,713
-
13,635
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
65,000
-
-
-
-
-
100,000
40,000
-
-
-
-
-
626,000
170,000
-
40,000
60,000
239,000
-
-
-
-
(100,000)
-
-
-
-
(65,000)
-
-
-
(20,000)
(25,000)
(100,000)
(40,000)
(13,635)
-
-
-
-
(376,000)
(170,000)
-
(40,000)
(60,000)
(239,000)
-
(65,000)
-
-
202,221
104,443
1,547,032
382,000
2,787,556
719
-
-
-
93,079
317,713
-
-
-
302,221
104,443
1,547,032
382,000
2,787,556
719
-
-
-
113,079
-
342,713
-
13,635
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Includes shares held by their related parties.
(i)
(ii) Don Meij’s opening balance now reflects the closing balance of Kerri Hayman, who resigned 31 July 2010 and is no longer a member of key management personnel but is a related party to Mr Meij.
(iii) On 16 August 2012, Richard Coney exercised 65,000 options and on the same day sold 65,000 shares.
(iv) During the year, Patrick McMichael sold 13,635 shares.
(v) On 14 November 2012, Andre ten Wolde exercised 100,000 options and on the same day sold 100,000 shares.
(vi) On 16 August 2012, Craig Ryan exercised 40,000 options and on the same day sold 40,000 shares.
(vii) Melanie Gigon became a member of key management personnel on 2 August 2010. Opening balance represents balance on this date.
(viii) On 20 February 2012, Don Meij exercised 626,000 options and on the same day sold 376,000 shares.
(ix) On 31 August 2011, Richard Coney exercised 170,000 options and on the same day sold 170,000 shares.
(x) On 31 August 2011, John Harney exercised 40,000 options and on the same day sold 40,000 shares.
(xi) On 3 November 2011, Melanie Gigon exercised 60,000 options and on the same day sold 60,000 shares.
(xii) On 1 September 2011, Andrew Megson exercised 100,000 options and on the same day sold 100,000 shares.
(xiii) On 16 November 2011, Andrew Megson exercised 40,000 options and on the same day sold 40,000 shares.
(xiv) On 22 February 2012, Andrew Megson exercised 99,000 options and on the same day sold 99,000 shares.
(xv) During the year 2012, Andrew Rennie sold 65,000 shares and during 2013 he sold 25,000 shares.
(xvi) During the year, Ross Adler sold 100,000 shares.
(xvii) During the year, Andrew Megson sold 20,000 shares.
80
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Executive share options of Domino’s Pizza Enterprises Limited
BALANCE
AT
BEGINNING
OF FINAN-
CIAL YEAR
NO.
GRANTED
AS
COMPEN-
SATION
NO.
EXERCISED
NO.
NET OTHER
CHANGE
NO.
BALANCE
AT THE
END OF
FINANCIAL
YEAR
NO.
BALANCE
VESTED AT
THE END OF
FINANCIAL
YEAR
NO.
VESTED
BUT NOT
EXERCISE-
ABLE
NO.
VESTED
AND
EXERCISE-
ABLE
NO.
OPTIONS
VESTED
DURING
YEAR
NO.
400,000
115,000
-
472,667
15,000
117,500
25,000
65,000
-
100,000
710,000
235,000
305,000
390,000
85,000
60,000
40,000
40,000
83,000
-
500,000
80,000
-
166,667
-
57,500
25,000
25,000
-
-
400,000
50,000
-
166,667
-
57,500
25,000
25,000
22,500
-
(65,000)
-
-
-
-
-
(40,000)
-
(100,000)
(626,000)
(170,000)
(239,000)
-
(60,000)
-
(40,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
(84,000)
-
(66,000)
(84,000)
(10,000)
-
-
-
-
-
900,000
130,000
-
639,334
15,000
175,000
50,000
50,000
-
-
400,000
115,000
-
472,667
15,000
117,500
25,000
65,000
105,500
-
-
-
-
306,000
15,000
60,000
-
-
-
-
-
65,000
-
306,000
15,000
60,000
-
40,000
83,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
306,000
15,000
60,000
-
-
-
-
-
65,000
-
306,000
15,000
-
-
40,000
83,000
-
-
-
-
-
-
-
-
-
-
-
626,000
235,000
239,000
306,000
75,000
60,000
40,000
40,000
83,000
-
2013(i)
Don Meij
Richard Coney
Andrew Megson
Andrew Rennie
Melanie Gigon
Allan Collins
John Harney
Craig Ryan
Patrick McMichael
Andre ten Wolde
2012 (ii)
Don Meij
Richard Coney
Andrew Megson
Andrew Rennie
Melanie Gigon
Allan Collins
John Harney
Craig Ryan
Chris O'Dwyer
Patrick McMichael
(i)
(ii)
During the financial year, Don Meij and other executives were granted share options under the ESOP on 7 November 2012. In addition, 205,000 options (2012:1,135,000 options) were exercised by
key management personnel for 205,000 ordinary shares in the Company (2012: 1,135,000 ordinary shares). No amounts remain unpaid on the options exercised during the financial year at year end.
Further details of the options granted are contained in notes 33 & 35 to the financial statements.
During the financial year, Don Meij and other executives were granted share options under the ESOP on 2 November 2011. In addition, 1,135,000 options (2011:112,500 options) were exercised by
key management personnel for 1,135,000 ordinary shares in the Company (2011: 112,500 ordinary shares). No amounts remain unpaid on the options exercised during the financial year at year end.
Further details of the options granted are contained in notes 33 & 35 to the financial statements.
All executive share options issued to the directors and key management personnel were made in accordance with the provisions of the ESOP. Each share option
converts on exercise to one ordinary share of Domino’s Pizza Enterprises Limited. No amounts are paid or payable by the recipient on receipt of the option.
Further details of the ESOP are contained in note 33 to the financial statements.
81
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(iv) Other transactions with directors of the
(vii) Transactions within the wholly-owned
Consolidated entity
group
During the financial year, directors and their
related parties purchased goods, which were
domestic or trivial in nature, from the Company
on the same terms and conditions available to
employees and customers.
(v) Transactions with key management
personnel of Domino’s Pizza Enterprises
Limited
During the financial year, key management
personnel and their related parties purchased
goods, which were domestic or trivial in nature,
from the Company on the same terms and
conditions available to employees and customers.
(vi) Transactions with other related parties
Other related parties include:
• associates;
• directors of related parties and their director-
related entities; and
• other related parties.
Where applicable, details of dividend and
interest revenue from other related parties are
disclosed in note 7 to the financial statements.
The wholly-owned-group includes:
• the ultimate parent entity in the wholly-owned
group;
• wholly-owned controlled entities; and
• other entities in the wholly-owned group.
The wholly-owned Australian entities within
the Group are taxed as a single entity effective
from 1 July 2003. The entities in the tax-
consolidated group have not entered into a tax
sharing agreement or tax funding agreement.
Income tax liabilities payable to the taxation
authorities in respect of the tax-consolidated
group are recognised in the financial statements
of the parent entity. Refer to note 17 to the
financial statements for members of the
tax-consolidated group.
The Company provided accounting, marketing,
legal and administration services to entities in the
wholly-owned group during the financial year. The
Company also paid costs on behalf of entities in
the wholly-owned group and subsequently on-
charged these amounts to them.
During the financial year, Domino’s Pizza
New Zealand Limited provided management,
franchisee and store development services to
the Company. Domino’s Pizza New Zealand
Limited also collected debtor receipts on
behalf of the Company.
During the financial year, services were
provided by:
• Domino’s Pizza Enterprises Limited to
Domino’s Pizza France S.A.S. and Domino’s
Pizza Netherlands B.V.;
• DPEU Holdings S.A.S. to Domino’s Pizza
France S.A.S.;
• Domino’s Pizza Belgium S.P.R.L. to Domino’s
Pizza France S.A.S.; and
• Domino’s Pizza Netherlands B.V. to Domino’s
Pizza France S.A.S.
in accordance with the Service Agreements and
accordingly arm’s length fees were charged.
In the current financial year, current combined
target returns were achieved by Domino’s Pizza
France S.A.S. and Domino’s Pizza Netherlands
B.V.. Accordingly, Domino’s Pizza Enterprises
Limited charged a DPI royalty.
Other transactions that occurred during the
financial year between entities in the wholly-
owned group were:
• advancement of loans;
• sale of plant & equipment;
• royalty fees;
• administration recharges;
• interest charges; and
• withholding tax payments.
(viii) Parent entities
The parent entity and the ultimate parent entity
in the Consolidated entity is Domino’s Pizza
Enterprises Limited.
82
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 36. ACQUISITION OF BUSINESSES
NAME OF BUSINESSES ACQUIRED
PRINCIPAL
ACTIVITY
DATE OF ACQUISITION
Acquisition of stores
During the year: Significant contract acquisitions for Australia and New Zealand
2013
4 Australian stores
15 Australian Stores
Pizza stores
Pizza stores
November 2012
April 2013
2012
5 stores
2 stores
3 stores
Pizza stores
Pizza stores
Pizza stores
September 2011
Oct & Nov 2011
June 2012
833
10,000
100%
100%
100%
100%
100%
PROPORTION
OF SHARE
ACQUIRED
(%)
COST OF
ACQUISITION
IN 2013
$’000
COST OF
ACQUISITION
IN 2012
$’000
During the year: Significant contract acquisitions for Europe
2013
8 European stores
Pizza stores
July 2012
100%
2,209
2012
3 stores
2 stores
5 stores
During the year: Other store acquisitions
2013
10 stores in aggregate (AU)
1 New Zealand store
11 stores in aggregate (EU)
2012
13 stores in aggregate (AU)
1 New Zealand store
5 stores in aggregate (EU)
Pizza stores
Pizza stores
Pizza stores
August 2011
October 2011
May 2012
Pizza stores
Pizza store
Pizza stores
July - June 2013
June 2013
July - June 2013
Pizza stores
Pizza store
Pizza stores
July 2011 to June 2012
December 2011
July 2011 to June 2012
100%
100%
100%
100%
100%
100%
100%
100%
100%
2,678
504
2,883
Total store acquisitions during full year ended
19,107
11,976
The cost of acquisitions comprise cash for all of the acquisitions. In each acquisition, the consolidated entity has paid a premium for the acquiree as it
believes the acquisitions will introduce additional synergies to its existing operations.
Goodwill arising on acquisitions in Europe is expected to be deductible for tax purposes.
83
2,132
590
350
566
1,168
1,433
3,924
240
1,573
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Acquisition of stores
NET ASSETS ACQUIRED
Current assets:
Cash and cash equivalents
Inventories
Non-current assets
Plant & equipment
Net assets
Goodwill on acquisition
FAIR VALUE ON ACQUISITION
2013
$’000
4
26
30
5,224
5,224
5,254
13,853
19,107
2012
$’000
12
88
100
3,228
3,228
3,328
8,648
11,976
Goodwill arose in the business combination as the consideration paid included a premium. In addition, the consideration paid for the stores effectively
included amounts in relation to benefits from expected synergies, revenue growth and future market development. These benefits are not recognised
separately from goodwill as the future economic benefits arising from them cannot be reliably measured.
37. CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash and cash equivalents includes cash on hand and in banks net of outstanding bank overdrafts. Cash
and cash equivalents at the end of the reporting period as shown in the statement of cash flows can be reconciled to the related items in the statement of
financial position as follows:
Cash and cash equivalents
37.1 Reconciliation of profit for the period to net cash flows from operating activities
Profit for the year
(Gain) on sale or disposal of non-current assets
Equity settled share-based payments
Depreciation and amortisation
Other
Movement in working capital:
(Increase)/decrease in assets:
Trade and other receivables
Inventories
Other current assets
Increase/(decrease) in liabilities:
Trade and other payables
Provisions
Tax liability
Deferred tax balances
Net cash generated from operating activities
84
2013
$’000
18,691
18,691
2013
$’000
28,657
(2,979)
635
12,792
(690)
38,415
(3,751)
(585)
(2,131)
1,704
606
(1,175)
97
33,180
2012
$’000
40,340
40,340
2012
$’000
26,936
(2,223)
320
10,029
562
35,624
(3,345)
(1,772)
409
4,521
355
477
1,409
37,678
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED 37.2 Businesses acquired
Acquisition of stores
During the financial year, 49 businesses were acquired in Australia, New Zealand and Europe (2012: 39 businesses). The net cash outflow on acquisition in
the financial statements was $19,107 thousand (2012: $11,976 thousand).
Included in the above 49 stores, is 15 that the company purchased through the acquisition of Nisco Trading Pty Ltd, as per the ASX announcement on
13 February 2013. The Purchase Price for the acquisition of the Knight Stores was subject to a minimum Purchase Price of $10,000,000 and maximum
Purchase Price of $13,878,000. Of the maximum purchase price, $3,878,000 related to a contingent consideration being an earn out component,
subject to the achievement of certain financial performance targets. The Earn Out component was provided in the form of a Performance Share issued at
completion, which would convert into DMP ordinary shares in 2015 depending on the extent to which the Earn Out targets were achieved. These targets
were not met as at 30 June 2013 resulting in the final purchase price of $10,000,000, with the performance share expected to be converted in 2015 at a
nominal value to extinguish the performance share.
The Company advises, in accordance with the terms of the ASX approval of the Performance Share that comprised the Earn Out component of the purchase
price of 15 stores purchased through the acquisition of Nisco Trading Pty Ltd as announced to ASX on 13 February 2013 and approved by the Company’s
shareholders on 25 March 2013, that:
• There is, and will only be, one such Performance Share on issue;
• The Performance Share will convert to only a Marketable Parcel (as defined in the ASX Listing Rules) of fully paid ordinary shares in or about September 2015;
and
• The Performance Share will not convert to ordinary shares before September 2015, and will not in any circumstances convert to any more than a
Marketable Parcel of ordinary shares. There are no applicable milestones to be met in respect of the Performance Share that might increase that number.
37.3 Non-cash financing and investing activities
During the current financial year, the Consolidated entity did not acquire any equipment under finance lease (2012: Nil).
38. OPERATING LEASE ARRANGEMENTS
38.1 Leasing arrangements
Operating leases relate to both property leases with lease terms of between five and ten years, the majority of which have an option to renew for a further
five-year period, and motor vehicles with lease terms of three years. All store related operating lease contracts contain market review clauses in the event
that the Consolidated entity exercises its options to renew. The Consolidated entity does not have an option to purchase the leased asset at the expiry of
the lease period.
38.1.1 Non-cancellable operating lease commitments
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
In respect of non-cancellable operating leases the following liabilities have been recognised:
Current
Make good (note 25)
Non-current
Straight line leasing (note 25)
39. COMMITMENTS FOR EXPENDITURE
39.1 Capital expenditure commitments
Plant & Equipment
2013
$’000
19,239
46,260
8,925
74,424
2013
$’000
25
141
166
2013
$’000
226
39.2 Lease commitments
Finance lease liabilities and non-cancellable operating lease commitments are disclosed in note 27 and 38 to the financial statements.
2012
$’000
16,356
35,815
6,414
58,585
2012
$’000
25
177
202
2012
$’000
1,707
85
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED NOTES TO THE FINANCIAL STATEMENTS CONTINUED
40. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
40.1 Contingent liabilities
Guarantees - franchisee loans and leases
2013
$’000
10,010
2012
$’000
10,740
Included above are guarantees provided to third party financial institutions in relation to franchisee loans. This is a contingent liability representing
the amounts guaranteed in respect of franchisees that would not, without the guarantee, have been granted the loans. The directors believe that if the
guarantees are ever called on, the Company will be able to recover the amounts paid upon disposal of the stores.
Guarantees – parent entity guarantee over subsidiary borrowings
2013
$’000
7,047
2012
$’000
-
Included above are guarantees provided by the Company to third party financial institutions in relation to borrowings of the European subsidiary.
Other
Set out below are details of claims against the Group. The Company believes that no provision is required as it is not probable that a sacrifice of future
economic benefit will be required or the amount is not capable of reliable measurement.
There are various separate French legal proceedings by a competitor, Speed Rabbit Pizza (“SRP”) and its franchisees against subsidiary, Domino’s Pizza
France (“DPF”) and its franchisees. The allegations are that DPF and its franchisees breached French laws governing payment time limitations and lending,
thereby giving DPF franchisees an unfair competitive advantage. SRP claims significant damages for impediment of the development of its franchise
network, lost royalty income from SRP franchisees and harm to SRP’s image. DPF has denied liability and will vigorously defend the claims.
41. REMUNERATION OF AUDITORS
41.1 Auditor of the parent entity
Audit or review of the consolidated financial statements
Other non audit services - due diligence
- investigating accountants
41.2 Network firm of parent entity auditor
Audit of the financial statements:
Europe
Europe Taxation services
Other non audit services - Japan - due diligence services
2013
$
2012
$
217,540
169,005
57,500
444,045
132,344
17,612
413,898
563,854
217,540
-
-
217,540
136,871
12,909
-
149,780
The auditor of Domino’s Pizza Enterprises Limited is Deloitte Touche Tohmatsu.
42. EVENTS AFTER THE REPORTING PERIOD
On 12 August 2013, the directors declared a final dividend for the financial year ended 30 June 2013 as set out in note 31.
Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item,
transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the
Consolidated entity, the results of those operations, or the state of affairs of the Consolidated entity, in future financial years.
86
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Acquisition
On 13 August 2013, the Group announced that Aurora Australia Co., Ltd, a newly-formed and wholly-owned subsidiary of Domino’s Pizza Enterprises
Limited, had entered into a share purchase agreement with Bain Capital Domino Hong Kong Limited (Bain) to purchase 100% of the ordinary shares in
K.K. DPJ Holdings 1 (Holdings). Holdings is the parent company of Domino’s Pizza Japan, Inc. (DPJ) which holds the master franchisee rights for Domino’s
Pizza in Japan. Immediately following completion of the acquisition Bain will reinvest approximately ¥4 billion (A$45 million) to subscribe for 25% of the
issued shares in Aurora Australia Co., Ltd. The net effect is that the Group will acquire a 75% equity interest in DPJ for ¥12.0 billion (A$135 million).
The acquisition will be funded by a combination of debt and equity. The debt funding will be provided under a new bilateral facility agreement with the
Commonwealth Bank of Australia and an amendment to the Group’s existing facility agreement with Westpac Banking Corporation. The new debt facilities
will enable DPE to on-lend approximately ¥9.0 billion (A$101 million) of debt to DPJ. The facilities will be denominated in Japanese yen and Australian
dollars, have a five-year term and have foreign currency and interest rate exposures that will be managed pursuant to hedging arrangements. On 13 August
2013, the Group also announced a proposed 5 for 23 fully underwritten accelerated pro-rata renounceable rights issue to raise up to A$156 million to fund
the acquisition. The parties have entered into a Shareholders’ Agreement which regulates the operation and funding of Aurora Australia Co., Ltd.
Completion is conditional on: (a) the debt providers not defaulting on their obligations to provide loans under the facility agreements, and; (b) on the
underwriting agreement not being: (i) unlawfully terminated by the underwriter on or before 28 August 2013, or; (ii) otherwise terminated due to customary
market fall, hostility and market failure underwriting termination events. Completion is also subject to other customary conditions precedent including
compliance with the terms of the acquisition agreement, no intervening illegality, no breach of representations and warranties and no material adverse
change relating to DPJ.
The acquisition is expected to complete in September 2013.
43. PARENT ENTITY INFORMATION
43.1 Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Retained earnings
Reserves
Equity-settled share-based benefits
Hedging
Total equity
43.2 Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
2013
$’000
27,514
116,662
144,176
38,450
21,643
60,093
2012
$’000
49,686
99,924
149,610
34,466
6,389
40,855
40,855
41,112
69,872
37,399
2,532
(415)
84,084
1,898
(415)
108,754
2013
$’000
24,458
-
24,458
2012
$’000
23,331
496
23,827
43.3 Contingent liabilities of the parent entity
Guarantees are provided to third party financial institutions in relation to franchisee loans. The amount disclosed as a contingent liability represents
the amounts guaranteed in respect of franchisees that would not, without the guarantee, have been granted the loans. The directors believe that if the
guarantees are ever called on, the Company will be able to recover the amounts paid upon disposal of the stores.
44. APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of directors and authorised for issue on 13 August 2013.
87
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED ADDITIONAL STOCK EXCHANGE INFORMATION
AS AT 2 AUGUST 2013
NUMBER OF HOLDERS OF EQUITY SECURITIES
Ordinary share capital
• 70,192,674 fully paid ordinary shares are held by 2,616 individual shareholders.
• All issued ordinary shares carry one vote per share, however partly paid shares do not carry the rights to dividends.
Options
• 2,129,334 options are held by 10 individual option holders.
• Options do not carry a right to vote.
Distribution of holders of equity securities
FULLY PAID
ORDINARY
SHARES
PARTLY PAID
ORDINARY
SHARES
CONVERTING
CUMULATIVE
PREFERENCE
SHARES
REDEEMABLE
PREFERENCE
SHARES
CONVERTING
NON-
PARTICIPATING
PREFERENCE
SHARES
CONVERTIBLE
NOTES
OPTIONS
27
79
103
833
1,574
2,616
98
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4
6
-
-
-
10
-
100,001 and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
Holding less than a
marketable parcel
Substantial shareholders
ORDINARY SHAREHOLDERS
Somad Holdings Pty Ltd
FMR Corp and Fil
Hyperion Asset Management Limited
Capital Group Companies Inc.
FULLY PAID
PARTLY PAID
NUMBER
PERCENTAGE
NUMBER
PERCENTAGE
16,683,217
9,506,413
6,008,851
4,002,300
36,200,781
23.77%
13.54%
8.56%
5.70%
51.57%
-
-
-
-
-
-
-
-
88
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES
ORDINARY SHAREHOLDERS
Somad Holdings Pty Ltd
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
Mr Donald Jeffrey Meij & Mrs Esme Francesca Meij
Citicorp Nominees Pty Limited
Mr Grant Bryce Bourke
RBC Investor Services Australia Nominees Pty Limited
Mr Grant Bryce Bourke & Mrs Sandra Eileen Bourke
Mr Donald Jeffrey Meij
Somad Holdings Pty Ltd
BNP Paribas Nominees Pty Ltd
Clyde Bank Holdings (Aust) Pty Ltd
Warbont Nominees Pty Ltd
Pizza People Enterprises Pty Ltd
Success Pizzas Pty Ltd
Mr Grant Bryce Bourke
AMP Life Limited
FULLY PAID
PARTLY PAID
NUMBER
PERCENTAGE
NUMBER
PERCENTAGE
18,505,495
14,763,497
10,931,013
5,432,526
3,444,356
2,651,299
1,837,061
1,222,659
697,001
675,264
660,031
626,000
429,227
418,113
332,000
300,144
286,939
200,000
190,000
157,067
63,759,692
26.36%
21.03%
15.57%
7.74%
4.91%
3.78%
2.62%
1.74%
0.99%
0.96%
0.94%
0.89%
0.61%
0.60%
0.47%
0.43%
0.41%
0.28%
0.27%
0.22%
90.84%
-
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-
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-
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-
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-
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-
-
-
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89
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED Franchised Store means a pizza store
owned and operated by a Franchisee
and Franchise Network means the
network of Franchised Stores.
Franchisees means persons and entities
who hold a franchise from the Company
to operate a pizza store under the terms
of a sub-franchise agreement.
Listing Rules means the
Listing Rules of the ASX.
Network or Domino’s Pizza Network or
Network Stores means the network of
Corporate Stores and Franchised Stores.
Network Sales means the total sales
generated by the Network.
New Zealand Network means the network
of Corporate Stores and Franchised
Stores located in New Zealand.
NPAT means net profit after tax.
Related Bodies Corporate has the meaning
given to it by section 50 of the Corporations Act.
Registry means Links Market
Services Pty Limited.
Same Store Sales Growth means comparable
growth in sales across those stores that
were in operation at least 12 months prior
to the date of the reported period.
Share means any fully paid ordinary
share in the capital of the Company.
Statutory profit means profit prepared
in accordance with the Corporations Act
2001 and Australian Accounting Standards,
which complies with International
Financial Reporting Standards (IFRS).
Underlying profit means Statutory profit
contained in Appendix 4E of the Domino’s
FY13 Annual Report adjusted for significant
items specific to the 2013 Financial Year.
GLOSSARY
ASIC means the Australian Securities
& Investments Commission.
ASX means Australian Securities Exchange
Limited (ABN 98 008 624 691).
Australian Store Network means
the network of Corporate Stores and
Franchised Stores located in Australia.
Board or Board of Directors or Directors
means the Board of Directors of the Company.
CAGR means Compound Annual Growth Rate.
Capital Reduction means the selective
reduction of capital described in
Section 11.4 of the prospectus.
Company means Domino’s Pizza
Enterprises Limited (ACN 010 489 326).
Corporate Store means a Domino’s Pizza
store owned and operated by the Company.
Corporate Store Network means
the network of Corporate Stores.
Corporations Act means the
Corporations Act 2001 (Clth).
Directors means the Directors of
the Company from time to time.
Director and Executive Share and Option Plan
or ESOP means the Domino’s Pizza Director and
Executive Share and Option Plan summarised
in note 33 to the financial statements.
Domino’s means the Domino’s Pizza brand
and network, owned by Domino’s Pizza, Inc.
Domino’s Pizza means the Company
and each of its subsidiaries.
Domino’s Pizza Stores means Corporate
Stores and Franchised Stores.
DPE Limited means Domino’s Pizza
Enterprises Limited (ACN 010 489 326)
Earnings Per Share or EPS means NPAT
divided by the total number of Shares on issue.
EBIT means earnings before
interest expense and tax.
EBITA means earnings before interest
expense, tax and amortisation.
EBITDA means earnings before interest
expense, tax, depreciation and amortisation.
Existing Store Sales Growth means
sales growth of stores that have been
trading for 54 weeks or more.
European Same Store Sales Growth
means comparable growth in sales
across those European stores that were
in operation at least 12 months prior
to the date of the reported period.
90
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED
CORPORATE DIRECTORY
DIRECTORS
Ross Adler
Non-Executive Chairman
Ross has held numerous Directorships including
Non-Executive Director of the Commonwealth
Bank of Australia from 1991 to 2004 and
Director of Telstra from 1995 to 2001. His other
appointments include Chief Executive Officer
of Santos Limited from 1984 to 2000 and
Chairman of AUSTRADE from 2001 to 2006.
Ross is currently Executive Chairman of Amtrade
International Pty Ltd and holds a Bachelor
of Commerce from Melbourne University as
well as an MBA from Columbia University.
Barry Alty
Non-Executive Director
Barry has over 47 years’ experience in the
retail industry. He has worked with a number
of leading retailers including Woolworths and
Foodland. His senior management roles include
Managing Director for Foodland in 1994 and
General Manager for Queensland Independent
Wholesalers in 1987. Barry has also held
various other industry consulting appointments
in Queensland and Papua New Guinea.
Grant Bourke
Non-Executive Director
Grant joined Domino’s Pizza in 1993 as a
franchisee and in 2001 sold his eight stores
to Domino’s Pizza. In 2001, Grant became a
Director for Domino’s Pizza and from 2001 to
2004 he managed the Company’s Corporate
Store Operations. In July 2006, Grant was
appointed Managing Director, Europe. Grant has
been a Non-Executive Director since September
2007. Grant holds a Bachelor of Science (Food
Technology) from the University of NSW and
an MBA from The University of Newcastle.
Paul Cave
Non-Executive Director
Paul is the Chairman and Founder of
BridgeClimb, which he started in 1998. Paul
and the BridgeClimb business have been
highly recognised by the tourism and business
community in Australia. Made a Member of
the Order of Australia, in the Queen’s Birthday
Honours 2010, for his services to the tourism
industry. Awarded the National Entrepreneur
of the Year (Business Award) in 2001, and the
Australian Export Heroes Award in 2002-03.
Worked in marketing and general management
roles for B&D Roll-A-Door and also founded
the Amber Group in 1974, which he sold in
1996. Director of Chris O’Brien Lifehouse
at RPA, and founding Director of InterRisk
Australia Pty Ltd. Paul holds a Bachelor of
Commerce from the University of NSW.
Don Meij
Chief Executive Officer / Managing Director
Don started as a delivery driver in 1987 and
held various management positions with Silvio’s
Dial-a-Pizza and Domino’s Pizza until 1996.
Don then became a Domino’s Pizza franchisee,
owning and operating 17 stores before selling
them to Domino’s Pizza in 2001. At that time,
Don became Chief Operating Officer and
Chief Executive Officer / Managing Director
in 2002. Don was Ernst & Young’s Australian
Young Entrepreneur of the Year in 2004.
COMPANY SECRETARY
Mr C.A. Ryan BA LLB LLM ACIS
REGISTERED OFFICE
Domino’s Pizza Enterprises Ltd
ABN 16 010 489 326
KSD1, L5
485 Kingsford Smith Drive
Hamilton
Brisbane QLD 4007
Tel: +61 (0) 7 3633 3333
PRINCIPAL ADMINISTRATION OFFICE
KSD1, L5
485 Kingsford Smith Drive
Hamilton
Brisbane QLD 4007
Tel: +61 (0) 7 3633 3333
AUDITORS
Deloitte Touche Tohmatsu
Level 25, Riverside Centre
123 Eagle Street
Brisbane QLD 4000
SOLICITORS
Thomsons Lawyers
Level 16, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
DLA Piper Australia
Level 28, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
SHARE REGISTRY
Link Market Services Limited
Level 15, 324 Queen Street
Brisbane QLD 4000
Tel: 1300 554 474 (in Australia)
Tel: +61 (0) 2 8280 7111 (overseas)
STOCK EXCHANGE
Domino’s Pizza Enterprises Limited shares are
listed on the Australian Securities Exchange
ASX CODE
DMP
WEBSITE ADDRESS
dominos.com.au
91
2013 ANNUAL REPORT DOMINO’S PIZZA ENTERPRISES LIMITED DOMINO’S PIZZA ENTERPRISES LIMITED
LEVEL 5, KSD1, 485 KINGSFORD SMITH DRIVE,
HAMILTON, QLD 4007
TEL +61 (0) 7 3633 3333
DOMINOS.COM.AU
DOMINOSPIZZA.CO.NZ
DOMINOSPIZZA.BE
DOMINOS.NL
DOMINOS.FR
DOMINOS.JP