APPENDIX 4E
DOMINO’S PIZZA ENTERPRISES LIMITED
Current Reporting Period:
Financial Year Ended 30 June 2019
Previous Corresponding Period:
Financial Year Ended 01 July 2018
SECTION A: RESULTS FOR ANNOUNCEMENT TO THE MARKET
Revenue and net profit
Revenue from ordinary activities
Profit from ordinary activities after tax from continuing operations
Profit from ordinary activities after tax attributable to members
Net profit attributable to members
PERCENTAGE
CHANGE %
AMOUNT
$’ MILLION
Up 24.4%
Down 6.0%
Down 4.6%
Down 4.6%
to 1,435.4
to 114.4
to 115.9
to 115.9
AMOUNT PER
SECURITY (CENTS)
FRANKED PERCENTAGE
PER SECURITY
Dividends
Final dividend in respect of full year ended 30 June 2019 - Payable 12 September 2019
Record date for determining entitlements to the final dividend - 28 August 2019
Interim dividend in respect of half-year ended 30 December 2018
52.8
62.7
100%
75%
Net tangible assets per security
Net tangible assets per security
30 JUNE 2019
01 JULY 2018
(5.81)
(5.70)
SECTION B: COMMENTARY ON RESULTS
Brief explanation of revenue, net profit and dividends (distributions).
For comments on trading performance during the year, refer to the media release.
The final 100% franked dividend of 52.8 cents per share was approved by the Board of Directors on 20 August 2019. In complying with
accounting standards, as the dividend was not approved prior to period end, no provision has been taken up for this dividend in the full
year financial statements.
ADDITIONAL INFORMATION
This report is based on accounts which have been audited. The audit report, which was unqualified, is included within the Annual Financial
Report which accompanies this Appendix 4E. Additional Appendix 4E disclosure requirements can be found in the Annual Financial Report.
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01 / / 201 9 ANN UAL R EPO RT D O M I NO ’S PI Z ZA E NTERPRISES LIMITED
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Chairman’s Message
CEO’s Report
Performance Highlights
Project 3-10
Australia
Australia & New Zealand Overview with CEO
Australia & New Zealand 2019 Highlights & Achievements
Australia & New Zealand Food Innovation
Australia & New Zealand Digital Innovation
Australia & New Zealand Operational Excellence
Australian Franchisee Case Study: Dave Burness
New Zealand Franchisee’s Case Study: Kaeyden and Liam Stops
Japan
Japan Overview with CEO
Japan 2019 Highlights & Achievements
Japan Food Innovation
Japan Digital Innovation
Japan Operational Excellence
Japanese Franchisee Case Study: Kazuya Fukumoto
Europe
Europe Overview with CEO
Europe 2019 Highlights & Achievements
Europe Food Innovation
Europe Digital Innovation
Europe Operational Excellence
French Franchisee Case Study: Tahar Chelli
German Franchisee Case Study: Philipp Servo
Corporate Responsibility
- Our People
- Our Community
- Our Environment
- Our Food
DIRECTORS’ REPORT
FINANCIAL REPORT
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03 // 2 01 9 AN N UAL R EPO RT DO M IN O ’S P IZ ZA EN TERPRISES LIMITED
CHAIRMAN’S
message
JACK
COWIN
franchisees and shareholders, but also
for the communities in which we operate.
Our local stores are proud members of
thousands of local communities, and
this year we again invested in those
communities. From disaster relief to local
doughraisers for community groups and
supporting educational scholarships,
through to making meaningful progress
towards reducing our impact on the local
environment – Domino’s is committed to
being a good neighbour as well as a great
company.
Our people are essential to our future.
The board is confident we have the
people, culture and management depth
to deliver on our growth ambitions. The
franchisees featured in this report speak
multiple languages, but in one voice – they
are investing in our people and nurturing
the future franchisees and leaders of our
business. Our history is one of developing
leaders from within, from store managers
through to franchisees and executives.
Most recently, the benefits of this
approach are being demonstrated by the
executives and CEOs appointed in the
past two years in Europe and Asia. Their
decades of Domino’s experience, and deep
understanding of our business and people,
are already showing in the results they are
delivering.
I anticipate that the next CEO of our
business is already a Domino’s employee,
and the subsequent CEO may already
be delivering our pizzas somewhere in
the world, perhaps even working for a
franchisee featured within.
Domino’s Pizza Enterprises is a business
with a bright future, and I am pleased to
report on our progress so far.
Jack Cowin
Chairman
This year has been another milestone
year for Domino’s Pizza Enterprises Ltd.
Not only has management delivered
impressive operational and financial results
for the year, but the Company also made
important decisions for the future.
This year, Domino’s expanded our footprint,
and future potential, acquiring the rights to
expand into Denmark and Luxembourg,
with the first stores in Denmark already
opened.
Our Company has expectations for
ongoing growth as we work to open more
stores closer to our customers. Now, as
the exclusive master franchisee for the
Domino’s brand in nine countries, on three
continents, with a combined population of
more than 340 million people, we have a
significant opportunity.
We are committed to building out this
opportunity in all regions, investing in our
most successful store managers and
franchisees, those who are eager to take
on their first Domino’s store or to expand
their existing, successful businesses. In
addition, we are strategically opening
more corporate stores to expand our
footprint. This strategy helps our
customers, our team members and
our shareholders, as we leverage the
benefits of scale in procurement,
marketing and operations.
The board is also committed to the
prudent use of capital in support
of this strategy, the success
of which can be seen in the
returns to our shareholders.
I am pleased that our
dividend to shareholders
will increase again this
year, by +7.1% to 115.5c
per share. In the past
three years, Domino’s
Pizza Enterprises Ltd’s
dividend has increased
at a compound annual
growth rate of +16.3%.
For our business to
have a sustainable
future, we must
not only deliver
for our customers,
05 / / 20 19 AN NUAL RE PORT D OM I NO ’S P I ZZA E NTERPRISES LIMITED
CEO’s Report
don meij
This financial year Domino’s Pizza
Enterprises Ltd’s long-term vision to
create a truly global business – backed
by the support of our shareholders to
invest in this vision – delivered a strong
financial performance at a group level.
Through the strategic acquisitions of
new markets, particularly in the past
six years entering Japan and Germany,
Domino’s now has a diversified
portfolio of businesses that spans
a range of market penetration and
maturity. We remain confident in the
ongoing growth opportunity in all of the
markets in which we operate.
With a record underlying EBIT of
$220.8 million, an increase of +7.2%,
this strategy has also shown its
resilience. Domino’s has demonstrated
it is a global, portfolio business that can
continue to grow despite short-term,
local conditions in individual markets.
Online sales (increasing +18.2% to $1.9
billion), delivered total global food sales
of $2.9 billion (+11.9%). As part of this
long-term view we provided an outlook
at a group level that, for the next three
to five years, each year we would lift
sales by between 3% and 6% on a Same
Store basis, open between 7% and 9%
of our network in new stores, with net
Capex of $60 - $70m.
This year we opened 179 new Domino’s
stores and successfully converted
the remaining Hallo Pizza stores in
Europe to the Domino’s brand. The
conversion of the former Hallo Pizza
stores in Germany was, as expected, a
large contribution to one-off costs of
$47.4m. Nonetheless, free cash flow
remained strong at $84.9m. Every
team member in Domino’s, from those
working in stores through to the global
leadership team, is Hungry to be Better
– continually innovating to improve our
digital platforms, our menus, and our
operations. It is this approach that lifted
sales across our group on a Same Store
Sales basis by +3.6%. I am very pleased
with the performance of management
and team members in each region who
have contributed to this performance.
Australia/New Zealand
Our digital platforms in Australia/New
Zealand saw record usage, selling more
than 2 million pizzas and sides in one
week. New products, including our Extra
Large (XL) range, helped deliver value
for customers and franchisees.
understand
We continue to invest in helping
franchisees
the
opportunities for growing profitability
in their business, as well as in Co-
Pilot initiatives that deliver in-store
efficiencies and associated savings.
We recognise our responsibility as one
of Australia’s largest franchisors, and
are reviewing the recommendations
of the Joint Parliamentary inquiry
into franchising to determine which
recommendations we can adapt to
improve our business, even before
these recommendations are finalised
and codified in regulation.
We made some important decisions for
the long-term, including strengthening
our franchisee group by purchasing
back some stores into our corporate
network. Because franchisees have
more opportunities to buy existing
stores new store openings were
muted with 21 newly built stores – but
we achieved a milestone with the
opening of Australia’s 700th store. ANZ
underlying EBITDA declined by 4% to
$127.9m, with positive Same Store Sales
growth of +2.4%.
Japan
Our Japan operations performed very
strongly this year, with new products
building out our barbell menu strategy.
This provided new value offerings to
balance our existing premium ranges,
that have resonated with customers.
This lifted total network sales by +22.2%
to $591.4m, an increase of +8.4% on a
Same Store Sales basis.
Under new leadership, our digital, menu
and operational initiatives are having
a positive impact. This has provided
renewed confidence in the outlook
for our business in Japan, heightening
our expectations of the capacity for
more Domino’s stores. This Financial
Year we opened an additional +81
stores, passing key milestones of 550
and 600 stores. The success of this
approach has supported our long-
term expectations for our network,
which have increased from 850 stores
to 1000 stores.
I commend this report to you and, on
behalf of the leadership team, thank
all of our employees, franchisees and
team members for their significant
achievements this year.
06 // 2019 ANNUAL REPORT DO MI N O ’S PIZ ZA ENTERPRISES LIMITED
With the opening of 77 organic new
stores, Domino’s Pizza Enterprises
Ltd passed 1,000 Domino’s branded
stores in Europe – an important
milestone.Across all countries, new
menu initiatives, digital innovations and
strong operational performance lifted
total network sales 15.1%, to $1136.9m.
This delivered underlying EBITDA 9.3%
higher at $81.9m, on Same Store Sales
growth of 3.1%.
Don Meij
Group CEO &
Managing Director
Europe
Our European operations delivered a
positive performance at a group level,
building out the large opportunity
already available to us. Management
completed
two acquisitions,
Luxembourg and Denmark, both were
strategic opportunities with strong
geographic and cultural alignment to
our existing markets.
The Netherlands and Belgium continue
to perform strongly, with the rest of our
business benefiting from the lessons
learned in these growing markets.
Our results in France did not meet
our expectations, but we are pleased
with the initial indications of improved
performance – particularly in the
second half – with an experienced
Domino’s leader (himself a former
franchisee) improving the alignment
with our franchisees.
The team in Germany successfully
the conversion of
completed
the acquired Hallo Pizza chain to
Domino’s, finishing the year with 327
stores. I recognise the significant
accomplishment of our entire team
in Germany who, after acquiring the
business less than four years ago with
fewer than 15 stores, now operate more
than 300 stores under the Domino’s
brand. Pleasingly, our first newly built
stores for the business have been
opened this year, by franchisees who
joined our business through acquisition,
and have demonstrated their belief in
Domino’s approach and vision.
2019
Performance
highlights
Network sales
$2,897.3m
(+11.9%)
2522
STORES
GLOBALLY
Online Sales
$1,942.9m (+18.2%)
Acquired
Luxembourg
and Denmark
UNDERLYING EPS
165.0 CPS
NEW ORGANIC
STORES OPENED
179
UNDERLYING EBIT
$220.8M (+7.2%)
EUROPE
JAPAN
1097
STORES
65.8m
PIZZAS SOLD
600
STORES
26.1m
PIZZAS SOLD
AUSTRALIA & new zealand
825
STORES
105.6m
PIZZAS SOLD
GLOBAL
PROJECT 3TEN
Across three continents, Domino’s
Pizza Enterprises offers customers
unique menu items and ingredients
tailored to local tastes. But worldwide
there is one constant – every customer
wants their pizza made fresh and hot
out of the oven. Throughout our history
we have worked hard to deliver on this.
than five minutes from the time of
order – was considered impossible.
The Groningen Floresstraat store in
the Netherlands took up the challenge,
setting a new benchmark of 3 minutes
and 36 seconds. A new, ‘unbeatable’
benchmark.
Why are records
important?
Records show all of our stores what
is possible. By setting records, we
challenge the status quo and discover
new and innovative ways to do things.
This drives our business forward and
allows us to push the boundaries of
what’s possible for our customers.
Our goal is to prepare a hot,
freshly made pizza ready
for carry-out within three
minutes, or safely delivered
to our customer’s door within
ten minutes. Project 3TEN
is our strategy to deliver
on this goal, everything
from developing world-
first technology initiatives,
and increasing training for
team members, through to
opening even more stores
closer to our customers.
Why is Project
3TEN so
important?
When our customers are
hungry, they’re hungry now.
WORLD RECORD DELIVERIES
Groningen Floresstraat STORE
NETHERLANDS
JULY 2018
3 MINUTES, 36 SECONDS
We know from our research
that time is the enemy of
food. The longer it waits,
the
lower the customer
w h i c h
s a t i s f a c t i o n ,
significantly decreases
after 20 minutes. Our data
shows stores with faster
delivery times have higher
customer satisfaction scores; that
their customers are more likely to
recommend Domino’s to loved ones;
and that they record higher sales,
including through increased order
frequency.
Domino’s Pizza Enterprises believes
Project 3TEN is central to delivering on
our customers’ expectations, and our
future growth.
“How did they do that?”
This has been a year of breaking
records. A five minute store – able to
deliver all week at an average of less
----------
YOTSUYA STORE
JAPAN
NOVEMBER 2018
2 MINUTES, 38 SECONDS
That is, until the Yotsuya store in Japan
took up the challenge and beat it –
setting a new world record for delivery,
with a safe delivery time of 2 minutes
and 38 seconds for an entire week.
That’s a freshly made pizza ordered and
delivered to your door almost before
you’ve put down your phone.
Every Domino’s region is now looking
at what is possible, setting their sights
on new regional records, with Australia
targeting the first sub-six minute store
in 2019.
How do we make it
happen?
The single most important
change we can make in our
stores, is attitude. Investments
technology and
in new
operational
improvements
are important, but our ability
to deliver on Project 3TEN
first requires leadership from
our franchisees and store
managers.
To foster this attitude, Domino’s
Pizza Inc filmed a world record
attempt
in the Groningen
Floresstraat store. Domino’s has
now shared this documentary
as a central part of training and
development roadshows in all
of our regions. Store managers
are challenged to implement
the proven tactics to reduce
delivery times in a phased
approach.
These phases include steps
such as utilising Domino’s
predictive ordering, increasing
the number of e-bike deliveries, and
having ‘runners’ in peak periods taking
pizzas out to waiting delivery experts.
Upgrading stores to faster ovens does
reduce cooking and delivery times, but
Domino’s has found more time savings
can be found simply by eliminating the
time meals wait for an available driver.
But the largest barrier still remains
the distance from our kitchens to our
customers, which means to have the
fastest, freshest pizzas going out the
door at all times, we need to open
more stores in every country in which
we operate.
AUSTRALIA & NEW Zealand overview WITH CEO
NICK KNIGHT
It is not enough to be Australia and New
Zealand’s leading pizza company; to
be better we must continuously
listen to our customers and
deliver an experience that is
rewarding. That is why we are
so excited about the launch
of DOM Pizza Checker, which
we believe is an essential tool for
our team members committed to
delivering the best pizzas for
our customers every
day.
We will continue
to deliver on this
commitment in the
next 12 months.
Nick Knight
ANZ CEO
Every hard working member of the
Domino’s team in Australia and New
Zealand should be proud of the
achievements they have made this year.
While Australia has seen a number of
retailers reduce their footprints or close
their doors, Domino’s has grown our
network, our share of the pizza market,
and our share of the fast food business.
That result is due to the team members
working across our business, especially
those who put on their Domino’s uniform
every day.
Every decision we made this year in
Australia and New Zealand was because
we are Hungry to be Better. Whether we
have looked for incremental benefits
with the launch of a unique limited time
dessert, or a more expansive launch
such as the Extra Large pizza range, our
goal is to deliver value for our customers,
improved franchisee profitability, and a
better business for our investors.
Our strategy remains unchanged;
delivering high quality meals to
customers, at an affordable price,
as quickly and as safely as possible.
Our focus on Project 3TEN remains
key to this strategy, which is why we
were pleased our store development
– opening more kitchens closer to
our customers – is almost exclusively
delivered by existing franchisees or
store managers. This includes our 700th
store to open in Australia, opened by a
successful, five store franchisee.
01 0 // 2019 ANNUA L REPORT D OM I N O’S PIZ ZA ENTERPRISES LIMIT ED
AUSTRALIA & NEW Zealand
2019 highlights
& achievements
DOM Pizza
Checker
a world first
technology to
check the quality of
each pizza; helping
team members make
and bake pizzas to
perfection.
Developed a new size (Extra Large)
that delivers customers more value
and franchisees additional sales
and incremental margin.
Provided more data and support
for franchisees, launching
quarterly business reviews
through expanded Operations
360 program.
700th Australian Domino’s store,
opened by a successful, five
store franchisee.
01 1 // 2 019 AN N UAL R EPO RT D OM I NO ’S PI Z ZA E NTERPRISES LIMITED
Delivering for our
customers.
communities.
& shareholders.
01 2 // 2019 ANNUA L REPORT DO MI N O’S PIZZA ENTERPRISES LIMITED
AUSTRALIA & NEW Zealand
FOOD
INNOVATION
From limited time offers to launching new products
that are becoming mainstays of our menu, Domino’s
Australia and New Zealand delivered continual
menu innovation this year, to offer customers more
of the flavours they enjoy.
New products were added to the menu across the
range, from new pizzas, new sizes and new desserts
through to new side choices, including Kumara Fries
in New Zealand.
For new crust choices, the Garlic Bread Crust was
a very popular new addition, as was the 3 Cheese
Stacker limited time offering. Both were added
during Summer, when Domino’s launched our
biggest menu upgrade with a campaign aimed to
be the Official Pizza of Summer.
We work hard every day to give customers more
of what they love and this year we delivered some
of the best examples of this approach through our
menu innovation. The perfect example of this was
our December launch of “The Big One” – our biggest
pizza ever. While The Big One wasn’t designed to
be a core part of our pizza menu, it typifies our
approach to be the pizza for every occasion, even
the biggest celebration.
Similarly, our launch of the Extra Large pizza range
gave customers more choice and more value,
offering 50% more toppings and 50% more pizza for
only $3 extra. This was well received by customers
and franchisees, offering customers great value
at the same time as delivering franchisees an
increased average sale and improved margins.
New side and dessert options are important to build
sales, and Domino’s extended two already popular
options in these categories with new chicken sides –
Fried Chicken with four unique sauce options – and
desserts, including limited time Sundae offerings,
new Thickshake flavours including Salted Caramel
and Chocolate Cheesecake.
Domino’s also expanded our menu options for our
vegan customers, with a delicious Vegan Cheesy
Garlic Bread, as well as a Vegan Summer BBQ pizza
to deliver for this important, and growing, customer
group.
01 3 // 2 019 AN N UAL R EPO RT D O MI NO ’S P IZ ZA E NTERPRISES LIMITED
Delivery is an ongoing
journey of constant
improvement.
01 4 // 2019 ANNUA L RE PORT DO MI N O’S PIZ ZA ENTERPRISES LIMITED
AUSTRALIA & NEW Zealand
DIGITAL
INNOVATION
This year we rolled out the most
significant innovation for our business
since launching GPS Driver Tracker in
2015 – DOM Pizza Checker.
DOM Pizza Checker is designed to solve
our largest customer tension point,
‘My pizza doesn’t look like it should’.
This world-first technology uses a
smart scanner above the cut bench
to check the quality of every pizza;
working alongside our team members
to help them make and bake pizzas to
perfection every time. The technology
can recognise, analyse and grade pizzas
based on pizza type, correct toppings
and distribution, as well as share real-
time images of pizzas with customers.
Our innovation team has delivered
a suite of projects this year to the
benefit of our customers, and our team
members.
We know customers value their
time and don’t like waiting. Our team
delivered “Notify Me”, which sends an
SMS (opt-in) letting them know exactly
when their order will be ready in store.
With smart speakers becoming
increasingly common in Australian
homes, Domino’s partnered with
Google to ensure our customers can
order their favourite pizza orders
through the Google assistant, using
only their voice.
Domino’s also launched Augmented
Reality (AR) to help customers create
their ultimate, favourite pizzas through
our existing app. At the end of this
Financial Year we started rolling-out our
new mobile app, the largest upgrade to
this significant customer touchpoint
since our first app was launched.
The new app is designed to be faster,
more intuitive and more engaging, and
our staged roll-out, initially to loyal
users, reflects the importance of this
technology to our online offerings.
In stores Domino’s delivered
innovations designed to help our team
members be even more efficient. In
partnership with Master Franchisor
Domino’s Pizza Inc, our team delivered
an iPhone version of the Domino’s
Inventory App, to help reduce the time
needed for this important daily task.
We continue to refine our predictive
ordering, using machine learning to help
team members anticipate likely orders
as a core component of Project 3TEN.
The team also responded to team
member feedback from stores, to
connect incoming stock orders with
the Pulse point of sale system, to
reduce data input errors and help store
managers monitor and control their
stock levels.
01 5 // 201 9 AN N UAL R EPO RT D O M I NO’S PI Z ZA E NTER PRISES LIMITED
01 6 // 2019 ANNUA L REP ORT D O MI N O’S PIZZA ENTERPRISES LIMIT ED
AUSTRALIA & NEW Zealand
OPERATIONAL
EXCELLENCE
To deliver the best experience for our
customers, Domino’s needs the best
performing kitchens, closer to our
customers.
Operations 360 is a solution including
an extensive set of data that allows
franchisees, store managers and
team members to measure and track
their performance, benchmarked
against other stores. This year we
added quarterly business reviews to
Operations 360, with experienced
Domino’s business consultants using
the data at hand to work with stores to
identify areas for improved profitability
and operational performance. This
has delivered positive results, with
franchisees sharing their successes
and lessons learned for the benefit of
their peers. Equally it has seen some
franchisees, who no longer have the
passion or the capability to take their
businesses to the next level, leave the
Domino’s system, which will over time
strengthen our franchisee base.
Our best improvements are driven
by our experienced team members.
This year we delivered a program of
weekly incremental improvements,
often identified by team members, to
improve efficiencies and profitability.
For example, our innovation team
automated the ability for franchisees
and store managers to link stock
ordering to our point of sale system,
saving time and reducing data-entry
errors.
Project 3TEN underpins everything our
stores work to achieve, with tangible
work on everything from simplifying
menus and packaging through to
reducing the number of times where
a team member delivers to more than
one customer on a single journey.
This focus on single deliveries has
increased customer satisfaction scores
because of the reduction in delivery
times and the improved quality of
customer meals on arrival. This has
been particularly important since the
changes to labour costs associated
with the Modern Fast Food Industry
Award, which have required operational
changes to offset higher labour rates
that appropriately reward our team
members.
From hiring through to day-to-day
operations, we are always looking to
deliver improvements for our stores.
We have worked relentlessly this year
to deliver operational improvements
to drive towards our goal of having
not only the most efficient, but also
the smartest kitchens in our industry.
It’s important that innovation delivers
a customer experience that is more
seamless than ever before. Equally our
goal is to ensure our team members are
supported by systems and technology
that delivers a more rewarding and
efficient working environment.
01 7 // 2 019 AN N UAL R EPO RT D OM I NO ’S PI Z ZA ENTERPRISES LIMITED
Do whatever it
takes to
never lose a
customer
and teach all
your people to
think the same
DAvid
Burness
FRANCHISEE
2006
Sold six stores. Moved to
Netherlands with Domino’s
Pizza Enterprises as Chief
Operating Officer
2007 - 2019
Returned to Australia and bought three stores
on the Sunshine Coast. Doubled sales in those
stores and expanded to two more stores
1995-2006
Built and bought more stores to have six in total
Received multiple awards in this time including Big Red for
Highest Average Sales for a franchisee, Silver Challenge,
Gold Challenge, Multiple Rolex Challenge
1993
Corporate roles: Trainer,
Area Manager,
National Training Manager
1995
Franchised first store in Brisbane
1991
Started as store manager
with a franchisee
DAvid
Burness
FRANCHISEE
Awards
Multi Unit franchisee of the year
Home grown franchise development
2 x Leadership Eagles
5 x $1,000,000 clubs
4 x $2,000,000 clubs
Stores
Gympie
Maroochydore
Maryborough
Nambour
Noosa
When university student David Burness
needed a job, a franchisee he knew
convinced him Domino’s might be
a good short-term option while he
finished his studies in journalism and
politics. That was 28 years ago.
Now countless other young Domino’s
team members have benefitted
from the lessons in leadership and
communication he learned at university,
and especially from his decision to
forge a new career path they have since
followed.
David credits Dallas-based franchisee
Mike Yaw for the initial inspiration
to become a franchisee himself. He
has since taken that inspiration to
build successful, multi-unit Domino’s
franchise businesses not once, but
twice. His first he sold to become a
leader in Domino’s developing business
in the Netherlands. Then after returning
to Australia, David became a franchisee
again, initially with three stores, later
grown to five.
Despite this remarkable achievement
(accompanied by an extended list of
awards and sales records earned along
the way) David considers the most
rewarding part of his Domino’s career
to be the growth he has fostered among
young team members.
Key to that growth has been a range of
programs he has delivered that teach
core skills, recognise and promote
talent, and celebrate success including;
a Manager in Training Competency
handbook to develop assistant
managers, and a Manager Sponsorship
program to help managers become
franchisees.
“Since I’ve started, many of our team
have earned promotions to managerial
roles. We only ever hire managers from
within our stores. Ten of those managers
have gone on to become Domino’s
franchisees.”
If I could give any advice to a driver
starting their Domino’s career today,
it would be: To quote one of the great
Presidents, “Ask not what your store
can do for you, but what you can do for
your store”. My attitude when I was an
employee was that if I did more work
than I was paid for, one day I’ll be paid
for more work than I do. Don’t work to
a clock, work to a task and don’t stop
until that task is done really well. If you
do this, you make yourself very valuable
and valuable people get rewarded.
A motivational saying I live by:
Appreciate the ordinary things in life,
they happen every day.
01 9 / / 20 19 AN NUAL REP ORT D OM I NO’S PI Z ZA E NTERPRISES LIMITED
Every person makes a
difference - today’s
dishwasher is
tomorrow’s franchisee
liam &
Kaedyn
stops
FRANCHISEEs
2018
Became franchisee’s for
Taupo Store
2018
Won Domino’s Leadership Eagle award
2016
Became franchisee’s for Koutu Store
2010-2011
Kaedyn followed by Liam
became managers at Napier
2013
Became youngest Franchisee’s
at 18 and 19 years old
Rotorua Store
2006 - 2007
Kaedyn followed by Liam
start working in store at
Hastings as dishwashers and
wobbleboarders
liam &
Kaedyn
stops
FRANCHISEEs
Awards
Rotorua Retail Business award
Leadership eagle
Stores
Napier
Rotorua
Koutu
Brothers Liam and Kaedyn Stops did not
start their Domino’s journey with grand
ambitions. The youngest Domino’s Pizza
franchisees in New Zealand started with
more modest goals - joining Domino’s at
12 years-old washing dishes and ‘wobble
boarding’ outside the Hastings store.
They quickly moved onward and
upwards to other in-store roles; by the
age of 14 they were running shifts and
then moved into manager roles two
years later.
The Stops brothers recognise the
important training they received along
the way - their first franchisee was an
important mentor, and their father was
a small business owner himself.
The brothers decided to purchase their
first store in Rotorua when they were 18
and 19 respectively. With a firm business
plan guiding them they have now bought
a total of three stores in nearly six years,
and plan to own five stores in five years.
The road map to their success has
been their customer focused approach.
Customers are at the centre of their
business and they are always seeking
innovations or improvements that
enhance their service.
The brothers show a level of leadership
well beyond their years, which was
recognised at this year’s Domino’s Rally
for Australia/New Zealand where they
were awarded a Leadership Eagle.
The Stops brothers understand running
a successful Domino’s franchise is a
team effort - not only are they a close
team themselves, but also they have
built a strong team in their stores.
They are focused on staff development
and, with a group of excited staff
members who share their passion for
the business, they expect to be a mentor
themselves to the next generation of
Managers and Franchisees.
02 1 // 201 9 AN N UAL R EPO RT D O MI NO ’S PI ZZA ENTERP RISES L IMITED
JAPAN overview WITH CEO
Josh Kilimnik
I am very proud of the hard work and
commitment from all our franchisees
and team members this year. In stores,
in the field, and in our offices, they have
delivered an outstanding result for
Domino’s Pizza Japan.
Last year I wrote that we saw in Japan “the
opportunity to implement new ideas to
grow customer counts and sales, using
tried and tested promotions and tactics
that have proved successful in other
markets.” I am pleased to say this has
come to fruition with significant menu
innovation and technology roll-outs,
including the Coupon App and Just Time
cooking, driving the most significant lift in
Same Store Sales in many years.
All of our team recognise this is not the
end of our journey, but the very beginning.
We have a great opportunity in front of
us, and we look forward to building out
the Japanese market in the months and
years ahead.
Domino’s Pizza Japan passed 600 stores
this year – a significant milestone. We
did not believe our original long-term
store target of 850 stores adequately
reflected the market opportunity, and
have increased our planning to target
1000 stores. We believe this larger
opportunity reflects the increased carry-
out and delivery customers we can reach
by building more stores closer to our
customers.
In Japan, the typical Domino’s customer
chooses to order our meals to celebrate
special occasions. Our plan is to retain
that premium market, with high-quality
menu offerings such as our Superstar
Pizza, while building more customer
frequency through our Barbell Menu
Strategy, outlined in more detail in this
report.
Ultimately, Project 3TEN remains as
important in our business as in other
Domino’s Pizza Enterprises markets;
our customers value convenience,
and their time, and want meals safely
delivered fast, or available for carry-out
with no delay. Domino’s Japan was proud
to set a new benchmark this year,
with a world record that will be
challenging for any store
to beat.
We are confident with
the foundations we
have put in place this
year, and the strategy
to deliver even
stronger results in
the years ahead. I am
very pleased that our
franchisees share
this confidence,
and are increasingly
building their small-
and medium-
sized businesses
into multi-unit
franchises.
I look forward to
delivering even more
progress .
Josh Kilimnik
CEO & President Japan
japan
2019 highlights
& achievements
JUST TIME
COOKING
using location-based
technology to give
carry-out customers
a hotter, fresher
meal, straight out of
the oven when they
arrive
Improvement of digital environment was
remarkable in the second half. In historically
long national holidays (i.e. 10-days golden
week), the highest number of sessions
in one day exceeded Christmas day
(traditionally the busiest day).
A new menu strategy – the barbell – is
providing customers with more choices,
and value, to extend beyond the
premium, special occasion market.
Delivered
Same Store Sales Growth
of +8.4%.
The Yotsuya store achieved
a world record delivery
of 2 minutes and 38 seconds.
Review of market potential and increased
franchisee appetite for stores lifted long-
term store outlook to 1000 stores.
600th store opened in June,
regaining #1 position in the pizza
category by store count.
Digital sales grew more than 20.6%, with
more than 64% of sales online –
a DPJ record.
02 3 // 2 019 AN N UAL R EPO RT D O M I NO ’S PI Z ZA E NTERP RISES LIMITED
japan
FOOD
INNOVATION
024 // 2019 ANNUA L REPORT D OM I N O’S PIZZA ENTERPRISES L IMITED
japan
FOOD
INNOVATION
A re-focus on our core menu has been
delivering for Domino’s Pizza Japan, and
customers, this year.
At the heart of this approach is the
data-driven use of customer insights.
These insights identified products and
marketing approaches – particularly
those highlighting Domino’s high-quality
ingredients – that excite customers.
Using this approach, Domino’s Pizza
Japan launched multiple, successful
new products in the First Half, including
the Cheese Burst Crust, and the Ultimate
Italian pizza range, which lifted Same Store
Sales. Customers were equally excited by
the addition of the authentic New Yorker
range in January, mirroring the success of
this product in other markets.
Domino’s Pizza Japan has built a
successful business on delivering
high-quality meals catering for special
occasions, but management recognised
an opportunity in building and meeting
customer demand for other meal
occasions. In the Second Half, Domino’s
Pizza Japan launched the largest menu
upgrade since Domino’s Pizza Enterprises
acquired the region in 2013, adding a
value-focused, single-customer targeted
range, to add to the existing premium
menu offerings.
This Barbell Menu Strategy has been well
received by customers, who can now
choose from premium menu options
including the ‘Superstar’ – with wagyu
beef and tiger prawns – through to the
American Classic Range. The new menu
strategy has also delivered for franchisees,
increasing customer frequency without
losing Domino’s position as a special
occasion meal.
02 5 / / 201 9 AN N UAL R E PORT D OM I NO ’S P I ZZA E NTERP RISES L IMITED
japan
DIGITAL
INNOVATION
Significant investment in prior Financial
Years ensured Domino’s Pizza Japan
moved onto the OneDigital online sales
is technology
platform. OneDigital
developed by Domino’s Pizza Enterprises
and rolled-out to all of the Company’s
international markets.
Just Time Cooking delivers carry-out
customers a hotter, fresher, meal – using
location-based technology to inform in-
store team members when meals should
be prepared so they are fresh out of the
oven just as customers are arriving to pick
up their order.
This Financial Year the benefits of that
investment have started to deliver for
not only the digital development teams,
but also in-store team members and
customers.
Domino’s has recently launched Just Time
Cooking, building on the success of similar
technology in our other markets. Just
Time Cooking built on the development
of On Time Cooking, which helped team
members and customers in Australia.
Domino’s Pizza Japan launched the
Coupon App, offering similar functionality
to the Offers App in Australia and
New Zealand. Since September 2018,
more than 700,000 customers have
downloaded the Coupon App, giving
customers improved value on individual
menu items and meals. The Coupon
App provides Domino’s Pizza Japan an
important, additional marketing channel
for existing and new customers.
japan
OPERATIONAL
EXCELLENCE
Domino’s Japan recognises Project
3TEN is as relevant to delivery and
carry-out customers in Japan as in other
international markets.
Just as our customers value our focus
on improved menu offerings, and a more
seamless ordering experience, they also
value their time – and all team members
are committed to delivering on that
expectation. In the prior Financial Year,
Domino’s launched 20 Minute Mission,
demonstrating to customers Domino’s
market-leading ability to target, and
achieve, deliveries in faster than 20
minutes.
This year a nationwide roadshow –
building on the success of 20 Minute
Mission – focused on safely reducing
delivery times. Franchisees, store
managers and team members learnt
best practice lessons from other regions
and were committed to challenging
themselves to materially reduce delivery
times.
After Domino’s Netherlands set a new
global benchmark for fast, safe deliveries,
Domino’s Japan were determined to re-
take the crown as the world’s fastest
delivery team. After significant planning
and commitment from every team
member, the Yotsuya Yonchome store
set a new benchmark for delivery with a
new world record for Domino’s deliveries
– averaging 2 minutes 38 seconds for an
entire week.
Menu and digital innovations lifted weekly
sales and customer counts across the
country, including during the Christmas
period – traditionally the busiest time for
Domino’s Pizza Japan.
It has taken a whole team effort to
respond to this challenge. This year
additional preparation and planning was
implemented to cater for heightened
demand – expected to be many multiples
of typical daily volume – and the Domino’s
Pizza Japan team delivered. Online
ordering volumes surged to five times the
normal daily volume of online ordering,
with almost 700,000 pizzas sold online
in the week leading up to New Year’s Eve.
In all, 128 stores broke their monthly sales
record in December.
The planning and execution ensured
team members were able to deliver for
our customers during other periods
of high demand, including this year’s
“Golden Week” celebrations – 10 days of
consecutive national public holidays.
D-Pit: A specially branded garage at one of our Tokyo stores, highlighting
Domino’s expertise in fast, safe deliveries
02 7 // 2 019 AN N UAL R EPO RT D O M INO ’S PI ZZA E NTER PR ISES L IMITED
Make sure you
always express
your thankfulness
and respectfulness
to the customers
Kazuya
Fukumoto
FRANCHISEE
2015-2017
Purchased four more stores
and awarded Franchise Owner of the Year
2018
Purchased fifth franchise store
2015
Purchased first franchised store
2014
Nominated manager of the year
2009
Store Manager
2005
Hourly wage driver
Kazuya
Fukumoto
FRANCHISEE
Awards
Manager of the year nominee
Franchise owner of the year
Stores
Moriyama
Hikone
Uzumasa yasui
Nishioji hanayacho
Kawaramachi Marutamachi
Kazuya Fukumoto remembers what first
attracted him to Domino’s. After earlier
jobs including work in a vintage fashion
store, Kazuya joined Domino’s in 2005,
because the hourly wage was higher
than comparable jobs.
training program to help managers
learn the fundamental components of
running a successful Domino’s store
– and a bonus system that rewards
high achievement. It’s a model that is
delivering results.
While the
initial pay was what
encouraged Kazuya to join Domino’s, it
has been the opportunities available to
him that have kept him in the Company.
Kazuya worked as a delivery driver
for four years before becoming a
manager in training, ensuring he had
the fundamental understanding of what
is needed for a high performing store.
It was that knowledge that saw him
nominated as Japan’s best manager,
and opened up more job opportunities,
including becoming a franchisee himself.
And it is those opportunities that he
is delivering to other young managers
who want to build their own Domino’s
careers.
Using his background as a highly-
regarded store manager, Kazuya has
built a successful operational and
“I am very proud of my store managers.
Every single manager has achieved a
5 star OER rating* and won domestic
awards. I really love to see how my
managers exceed my expectations.”
Kazuya’s plans for the next stage of his
Domino’s journey includes becoming
the dominant pizza restaurant in the
Kyoto and Nara prefectures, developing
new territories in West Japan and
supporting his store managers to
become franchisees themselves.
The most important lesson I have
learned within Domino’s:
CAN DO!!
If I could give any advice to a driver
starting their Domino’s career today, it
would be: Always set your own goals!
*OER is defined as operations
evaluation report.
02 9 / / 20 19 AN NUAL RE PO RT D O MI NO ’S P I ZZA E NTERPRISES LIMITED
EUROPE overview WITH CEO
ANDREW RENNIE
This year has been one of significant
achievements for the Domino’s Pizza
Enterprises business in Europe. From
setting a new world record for deliveries,
to developing new technology that is
positioning Domino’s as the favourite
pizza brand in all of our markets, and
reducing delivery times as a focus on
Project 3TEN – the teams in all of our
countries have delivered innovations they
can be proud of.
This year we passed a significant
milestone of 1000 Domino’s branded
stores in Europe. It is perhaps even more
significant for our long-term outlook that
this milestone means we are not even
at the halfway point to delivering on our
plans for the business in Europe, and our
long-term outlook of 2850 stores. This
year that outlook was increased following
the strategic acquisitions of two smaller
markets in Luxembourg and Denmark,
and because of our positive outlook on
the future of our Belgium operations.
In the coming years we intend for
Domino’s Pizza Enterprises business in
Europe to be the largest single driver of
revenue in our business. To get there,
we will work hard every day to deliver for
our customers; preparing and delivering
pizzas fast and safely under Project
3TEN, and with ongoing menu and digital
innovation that make our customers’
orders more convenient, and tasty, than
ever before. I am very pleased with the
performance in all of our markets this
year delivering on this strategy. From the
successful trial of a loyalty program in
the Netherlands, and the development
of some very popular seasonal menu
offerings in France, through to the
unrivalled speed in converting 124 Hallo
Pizza stores to Domino’s stores in
Germany. Our teams are working
hard every day to deliver for
customers, for our franchisees,
and for investors.
In all countries our
franchisees are essential
partners in this approach;
building their businesses
while training the next
team
generation of
members, store managers
and future franchisees who
will help Domino’s deliver our
planned growth.
I am very pleased
to
provide this update on
the achievements of the
Domino’s Pizza Enterprises
European business for this
year, and look forward to
continuing to deliver on our
plan in the year ahead.
Andrew Rennie
CEO Europe
030 // 2019 ANNUA L REPORT D OM I N O’S PIZ ZA ENTERPRISES LIMIT ED
EUROPE
2019 highlights
& achievements
1000 stores
Domino’s Pizza
Enterprises passed
1000 Domino’s
branded stores
in Europe with
the successful
conversion of
acquired Hallo Pizza
stores.
The Groningen Florrestraat store
(Netherlands) achieved the first, sub-five-
minute, world record delivery week at 3
minutes and 36 seconds.
The long-term outlook increased to 2850
stores, with two acquisitions and a review of
the potential of our Belgium business.
Domino’s Pizza Enterprises secured the
master franchise rights to Denmark, and
Luxembourg
(completing the Benelux* region).
Digital platforms delivered double-
digit network sales growth, with newly
converted stores achieving sales uplifts
through Domino’s Pizza Enterprises’
proprietary systems.
*Belgium, Netherlands, Luxembourg
03 1 // 2 019 AN N UAL R EPO RT D O MI NO ’S P IZ ZA E NTERPRISES LIMITED
EUROPE
FOOD
INNOVATION
Our approach to food innovation is both consistent,
and localised. Our consistent approach uses high-
quality ingredients at an affordable price, exceeding
customers’ expectations even when delivered
to a home, workplace, or even a park. Our food
innovation is also localised, so that we delight
customers with local flavours, and traditional
favourites they have grown to love. This year our
food innovation has delivered on this approach
across Europe.
032 // 2 019 ANNUA L RE PORT D OMI NO ’S PIZZA ENTERPRISES LIM ITED
France
Germany
Benelux
In France, Domino’s has delivered
a range of new menu items, from
seasonal limited time offerings, through
to new crust options, to new sides and
snacks.
Our new Cal’z range – Calzone
sandwiches – has added an attractive
new option, particularly for carry-
out customers looking for a single-
person meal. The Cal’z range includes
Domino’s popular mozzarella, as well
as meat and fish choices including roast
chicken, ground beef and tuna.
Our pizza offerings have been built
out with new crusts (including the
Hot Dog crust for a limited time), new
ingredients including chorizo, and new
recipes including two targeted at our
vegetarian and vegan customers.
Our development kitchen has also
created a uniquely French dessert
– Caramel Bread – a delicious treat
delivering great value for both
customers and franchisees.
Domino’s France this year brought
back one of our most popular seasonal
offerings – Raclette – to the menu.
The Raclette Pizza, with its trademark
melted cheese and unique flavour, has
been a very popular addition for the
winter months, and its return this year
was welcomed by customers, coupled
with the addition of a new, Fondue Pizza
to the range.
After making changes to our core
pizza offering, including enhancing
our pizza sauce in the prior financial
year, Domino’s Germany has added
additional menu offerings aimed at new
customers, and new menu occasions.
In the Benelux, Domino’s introduced
three new pizza range offerings
including the Winter Warms range
– with traditional Dutch flavours
Boerenkool and Rookworst (kale and
smoked sausage).
Our goal is to delivery more options
to customers, so they can choose the
flavours, menu offering, and occasion,
that suits their appetite and occasion.
Domino’s Germany now offers two
vegan pizzas, adding the Ventura Vegan
Pizza to the Cape Verde Pizza, which
have been well received by this growing
customer base.
Our local development team have also
introduced two new wraps, particularly
aimed at the lunch market, with a
vegetarian (Greco) wrap, and a spicy
chicken wrap.
Domino’s Germany continues to
innovate with the core pizza menu,
including a Geschmack von Welt (Taste
of the World) range, featuring popular
offerings from around the world
including BBQ Chipotle Chicken Pizza.
With thickshakes adding an important
additional pillar to our menu offering
in other regions, initial testing of
thickshakes in selected markets have
shown promising results.
Our customers loved our cheese-
focused promotion featuring Beemster
(a traditional Dutch cheese) on three
limited time offer pizzas, and Gouda
cheese nuggets as a tasty side.
More recently, customers welcomed
the roasted range, meeting a broad
range of appetites with pizzas featuring
roasted chicken and roasted beef, as
well as a new vegan pizza featuring
roasted vegetables.
Our dessert offering continues to be
strong in the Netherlands and this year
we launched the Choco Lotta Pizza –
15cm, Belgian-chocolate rich dessert,
that adds an important option for
customers sharing a meal.
Thickshakes have now been rolled out
to all stores in the Netherlands, with
three traditional flavours – Strawberry,
Vanilla and Belgian Chocolate – and
three premium flavours; Iced Coffee,
Triple Chocolate and Creamy Cookie.
This popular, all-natural product, is now
in initial testing in Belgium. Domino’s
Netherlands has also recently launched
‘The Big One’ – our largest pizza ever,
delivering four different recipes in one,
aimed at special events and gatherings.
03 3 / / 201 9 ANN UAL R E PORT D OM I NO ’S P I ZZA ENTERPRISES LIMITED
EUROPE
DIGITAL
INNOVATION
EUROPE
DIGITAL
INNOVATION
Digital innovation continues to deliver
benefits for Domino’s customers and
in-store team members. Our goal is to
use technology to make our kitchens
more efficient, and our customers
ordering experience more seamless.
Key projects in our European business
have delivered on this goal this year, but
we recognise that continued innovation
to keep up with, and ahead of, our
customers’ expectations is essential
for our future growth.
France
Our owned digital marketing channels,
particularly email and SMS, give us an
opportunity to provide great value to
our customers – growing both order
frequency and average ticket – and
increased sales for franchisees.
The success of this approach was
demonstrated with record breaking
online sales for Black Friday and Cyber
Monday – two traditionally US-based
shopping holidays aimed at value-
driven consumers that have grown in
France.
Domino’s France broke its own records
for online ordering, order counts,
total network sales volume, and the
percentage of orders driven from email.
Domino’s aim is to ensure customers
using our app get the best possible
experience, and the Company has
partnered with Rakuten TV to become
the official delivery company of chill
nights in with My Movie – offering the
possibility for customers to purchase
movies and television shows with their
favourite pizzas.
This year Domino’s France launched
Domino’s My Spot – allowing customers
to drop a location-based pin using their
mobile app to have pizzas delivered
wherever they are.
Germany
A single brand, and single technology
platform, will deliver benefits for our
franchisees and customers.
With the successful conversion
of acquired Hallo Pizza stores to
Domino’s, our team in Germany
has been able to leverage our own
marketing channels, delivering positive
initial results. These efforts have seen
a double-digital increase in email
subscribers, significant take-up of our
new web push notification channel,
and delivered a record week of sales
generated through the Offers App.
With a higher store penetration
and ability to reach more areas of
Germany than ever before, Domino’s
has launched a local equivalent of
“Order Anywhere”, Domino’s Überall.
With similar functionality to the
offering in France, and building on
the successes from the Benelux and
Australia/New Zealand, our local stores
expect this will become an increasingly
popular way customers will order, as
customers recognise its simplicity and
convenience.
The speed of orders, for carry-out
and delivery, remains an important
differentiator for Domino’s customers,
and Domino’s Germany has reinforced
this with the launch of a 15-minute pick-
up guarantee, launched in the Second
Half. This guarantee has already proven
popular with time-poor customers
looking for new lunch options. To
help give Domino’s kitchens the edge
on delivering to our customers fast,
Domino’s unique predictive ordering
has been installed in trial stores in
Germany showing positive initial
results.
Together, these digital innovations
helped Domino’s Germany set a new
record for online sales in the First Half.
Our digital initiatives are not only
focused on benefits for our customers.
Domino’s Germany this year rolled out
a new print portal, for Franchisees to
access to deliver local store marketing
faster, and at a lower cost.
Benelux*
Our digital development team in the
Benelux continue to lead the way
for our European business, and for
Domino’s Pizza Enterprises more
broadly. After pioneering multiple
successful digital innovations that have
delivered dividends in other markets,
the team are committed to continued
improvement.
This year the team successfully trialled
a customer loyalty program in the
Netherlands, offering customers the
ability to earn points for every pizza
and be rewarded for their loyalty with
free pizzas. Other Domino’s Pizza
Enterprises countries are working
closely with our Netherlands team to
determine if, and how, a loyalty program
would suit their local customers.
The Benelux team launched two
initiatives to help customers enjoy
sharing meals even more. Domino’s
Netherlands now offers payment
integration with Tikkie – the first
platform to allow friends to pay each
other back quickly and simply over
WhatsApp. The development team
also launched the Domino’s Dating App,
which matches potential dates using
one of the most important criteria for
relationship success – their favourite
pizza. The Dating App demonstrates
once again Domino’s position as the
brand that delivers for customers. The
announcement of the Dating App made
international news as an innovative and
fun way to connect pizza lovers.
For carry-out customers, the team has
launched a 15 minute pickup guarantee
during lunch hours, driving more sales
during this important meal occasion.
The success of Domino’s investment
in continued digital innovation was
demonstrated in the First Half when
more than 95% of deliveries in the
Benelux were placed online.
*Belgium, Netherlands, Luxembourg
03 5 // 2 019 AN N UAL R EPO RT D OMI N O ’S PI Z ZA ENTERPRISES LIMITED
EUROPE
OPERATIONAL
EXCELLENCE
Project 3TEN – where stores aim to prepare a carry-out
order in three minutes, and deliver it safely within 10
minutes, is central to our European business. Some
stores have set world records this year, setting the
standard for the rest of Domino’s Pizza Enterprises, as
well as other master franchisees globally. Other stores
have set records for their towns, their regions and their
countries. But what is most important to us is the con-
tinual journey of improvement that all stores are taking.
Even if they have not broken a global record, they are
working each day to safely reduce their delivery times
– impressing their customers, winning new customers
and improving their store operations and profitability.
036 // 2019 ANNUA L REPORT D OM I N O’S PIZ ZA ENTERPRISES L IM ITED
stores
French
France
have
Three
demonstrated the possibilities of
Project 3TEN this year, with other
franchisees and corporate managers
learning from their experiences. The
Lyon 7 Sud store narrowly missed
breaking 10 minutes average delivery
time for a week (10 minutes 2 seconds),
while Le Rheu (8 minutes 59 seconds)
and Paris 16 Sud (8 minutes 51 seconds)
demonstrated sub-10 minute delivery
times are achievable. This is an
important milestone for our French
business, which team members intend
to surpass in the coming year.
In our last Annual Report, Domino’s
France celebrated the success of the
Product Master program, a program
developed
in consultation with
Domino’s Pizza International to train
in-store product ‘masters’ who teach
operational excellence to other team
members. The success of this program
has now seen it rolled out to all existing
and new stores in France.
recognises
This program
the
importance of investing in our team
members. The culture and growth
opportunities in our business sees
our best managers taking the step to
become franchisees. Domino’s France
has recognised this opportunity and
developed a new Emerging Leaders
program to provide even more
opportunities to young, emerging
leaders to reach their potential. The
program, built in partnership with the
Chamber of Commerce and Industry,
helps to give team members the keys
to small business ownership. This
year, four participants in the first
class of 10 Emerging Leaders, have
become franchisees themselves.
Germany
Our team in Germany surpassed
expectations this year with the
successful integration of 124 Hallo Pizza
stores into the Domino’s business. Not
only were 11 more stores converted
than the original business plan on
acquisition, but also the speed of the
transition outpaced similar conversions
for Domino’s Pizza Enterprises.
Significant investment has been made
this year in training and development
of franchisees, store managers and
team members, to ensure the German
business has world-class operations.
This investment is already delivering
results.
Domino’s Germany trained 220
team members, a record, through
the company’s internal Management
Training Program. This provides
essential training to upskill existing
managers, enabling them in turn to
coach and lift performance in their
store. The first German store to receive
a 100% mark on Domino’s OER audit (a
measure of alignment with Domino’s
operational requirements and food
safety and handling) was achieved
this Financial Year. This performance
was a direct result of the increased
focus on operational performance
and customers are also noticing the
improvement – customer satisfaction
scores reached a record high in the
First Half, setting a new challenge for
the team to exceed.
Two stores set new delivery records
for the country, with the Berlin Mitte
store achieving a week of deliveries
in 13 minutes 55 seconds, and the
Hamburg Eimsbüttel store achieving
15 minutes and 19 seconds. These
records are among the best in class for
Germany, but the team in Germany are
committed to matching, and beating,
their colleagues‘ performance in France
and the Benelux.
Benelux*
Several
initiatives over the past
few years have demonstrated the
operational excellence of the Domino’s
team in Belgium and the Netherlands.
With the acquisition of Luxembourg,
and the planned opening of our first
store in the country this calendar
year, the team remain committed to
continued improvement.
The Groningen store epitomised
this approach, targeting a new World
Record for the Domino’s system, under
five minutes for an average delivery
across an entire week. Colleagues
from Domino’s Pizza International
filmed a documentary on the effort to
teach other master franchisees what
is possible, and the team set a new
benchmark of 3 minutes 36 seconds
average delivery time for one week in
the First Half. As a business, we never
believe we have arrived, and are always
seeking our next challenge. After
Domino’s Pizza Japan subsequently
surpassed this world record effort,
Domino’s Benelux are eager to once
again show customers, and other
Domino’s markets what’s possible.
The Benelux
team measure
every aspect of their operational
performance and challenge stores
to grow with regular competitions
targeting areas for improvement.
Previously one store each week
was celebrated for their operations
improvements (for e.g., reducing the
time required for deliveries to leave
the store). Now, individual competitions
focused on operational and sales
targets have increased buy-in from
stores across the country. Each win
by an individual team is celebrated by
the store and by peers on our online
network, Workplace.
The priority operations project for the
Benelux team is a Train the Trainer
program – aimed at store managers
who will then be able to deliver new
skills to their own team members.
Where previous training has been
designed to reduce bottlenecks in
stores, making deliveries and carry-
out orders faster, the new training adds
important additional new skill sets.
Initial training is focused on enhanced
rostering (to maximise both customer
service and store profitability) as well
as dough and product master classes.
Because more customers are choosing
to dine-in at Domino’s stores, team
members are receiving hospitality
training to deliver better service to this
customer group.
The increased training and hard work
of our team members is delivering
results – product quality and customer
satisfaction (Net Promoter Scores)
have increased, and the Benelux team
is committed to delivering ongoing
improvements.
*Belgium, Netherlands, Luxembourg
037 // 2 019 AN N UAL R EPO RT D O MI N O ’S PI Z ZA ENTERPRISES LIMITED
Everything is possible
with will power and
patience. If you do your
job well, you will climb
the ladder and maybe
replace me one day
Tahar
Chelli
FRANCHISEE
2017
Won
Rolex
Challenge
2016
First Franchise
Nantes Jules Verne store
2013
Store Manager of two stores
2018
Buys the four stores in Rennes
Won Rolex Challenge
2010
Elected French Manager of the Year and
EMEA Manager – Won Rolex Challenge
2009
Store Manager
2006
Assistant Manager
2005
Pizza Maker
2001
Delivery Driver
Tahar
Chelli
FRANCHISEE
Awards
French manager of the year
3x Rolex awards
Stores
Cesson Sévigné
Rennes Centre
Rennes Sud
Rennes Ouest
Like many successful Domino’s
franchisees, Tahar Chelli joined the
company while he was studying. It was
while at university studying computer
science that Tahar was looking for work
to support himself. “I needed a job, and
Domino’s was hiring.” That was 17 years
ago.
plans for further expansion. The key
to his success has been ensuring his
team members have the best possible
training. He first built a training program
in Nantes that is still delivering results;
the graduates of that program are still
working in Nantes, or have joined Tahar
in his new business in Rennes.
Since that time Tahar has progressed
from being a delivery driver, to a leader.
He is determined for his team to follow
in his footsteps.
“In fact, every time I train a new
employee, I think that I may be training
my replacement. They must be well
trained.”
Tahar’s Domino’s journey started slower
than some franchisees, spending eight
years before becoming a store manager,
first as a delivery driver, then a pizza
maker and assistant manager. But it
was that deep understanding of every
aspect of store operations that saw
him recognised as the best manager in
France when he took the next step, and
won multiple awards along the way.
Tahar has now built a successful multi-
unit franchise business with four stores
in Rennes, which he credits as one of
his greatest achievements so far, with
The most important lesson I have
learned within Domino’s: Before I
thought that I did not need anyone
to move forward but once I arrived, I
quickly realised that without my teams I
was just a manager among many others.
A motivational saying I live by:
“The only way to do great work is to love
what you do. If you haven’t found it yet,
keep looking”. - Steve Jobs
03 9 // 201 9 AN N UAL R E PORT D OM I NO ’S PI Z ZA ENTERPR ISES L IMITED
Open your Mind!
Everything is
possible!
“Hustle”
pretty much
says
everything
Philipp
Servo
FRANCHISEE
04 0 // 2019 ANNUA L REPORT D OM I N O’S PIZZA ENTERPRISES LIMITED
2019
Takeover of store number five and six
and winner of the Golden Eagle again
2018
Winner of the Golden Eagle
2016
Takeover of store number four
2019
Takeover of store number seven and eight with
an AWUS of 12.5k in March (seven stores)
2015
Awarded a Franny DFV, became a member
of the German franchise council and took
over store number three
2011
Opened second store
2008
First franchise with a 7k AWUS store
2006
Started as a delivery driver
for Joey’s, promotion to shift
manager soon followed
Philipp
Servo
FRANCHISEE
Awards
Franny DFV
2x Golden Eagles
Stores
Berlin Brunnenviertel
Berlin Charlottenburg Nord
Berlin Charlottenburg Süd
Berlin Mitte
Berlin Reinickendorf
Berlin Spandau
Berlin Tiergarten
Berlin Wedding
Phillip has now delivered that
opportunity to other team members,
developing a management training
program in 2011 to develop skilled
team members, managers and even
franchisees.
“I want to inspire and thrill people
with my passion for pizza - My first
two trainees now own three stores
themselves.”
A motivational saying I live by:
Love what you do! Look for the
challenge! Where there is a will, there
is a way! Think positive – always! Never
stop learning and training!
If I could give any advice to a driver
starting their Domino’s career today,
what would it be? Work hard and have
fun with it! Again, anything is possible!
Philipp Servo didn’t initially choose
to join Domino’s. He had built a
successful career as a Joey’s pizza
chain franchisee when Domino’s Pizza
Enterprises acquired the chain. But
despite the unexpected change, what
hasn’t changed is the direction of his
business: up. Since joining Domino’s,
Philipp’s already-successful multi-unit
business has doubled.
Just two years after starting as a delivery
driver, where he first discovered his
passion for pizza, Philipp progressed
through store management to become a
franchisee, and then a multi-unit owner
three years after that. Along the way
he has grown his network, and weekly
sales, and won a sweep of awards for
his leadership. Despite this success, he
considers his greatest achievement his
two sons.
Philipp describes his business career
as 13 years of pizza passion, and he has
passed on that passion to everyone he
has worked with. While Philipp started
his career as an industrial management
assistant, he saw the pizza business
as an opportunity to become self-
employed.
041 / / 201 9 AN N UAL R E PORT D OM IN O ’S PI Z ZA ENTERPRISES LIMITED
CORPORATE
responsibility
OUR
PEOPLE
OUR
COMMUNITY
OUR
FOOD
OUR
ENVIRONMENT
04 2 // 2019 ANNUA L RE PORT D OMI NO ’S PIZZA ENTERPRISES LIMITED
CORPORATE
RESPONSIBILITY
Pizza is the perfect sharing meal –
bringing together family, friends,
colleagues and loved ones.
Just as we share meals, we also share
the broader communities in which we
live and work. Domino’s recognises that
we share these communities not just
with our customers, but also with our
neighbours. Our goal is to actively work
to make our communities better for all.
We believe this is the right thing to do,
for our people, our business, and our
neighbours.
We aim to do this
in four key
focus areas: people, community,
environment, and food.
Since our humble beginnings we have
been working to do the right thing,
with local franchisees helping the
community through sponsorships,
in-kind support and disaster relief.
We have added measurable targets,
including increasing the use of electric
vehicles (including bicycles) in our
delivery fleet, and to work towards
removing artificial colourings,
flavourings and preservatives from our
menu.
We have heard this feedback and,
as in the rest of our business, are
Hungry To Be Better. This will not be
an immediate change, but Domino’s
intends to work with our communities
to develop measurable targets in the
areas important to them. The next step
in delivering, starts now.
Jack Cowin & Don Meij
is
increasingly
The board and management recognise
this
important to
communicate to our communities and
our shareholders.
043 // 2 019 AN N UAL R EPO RT D O M I NO’S PI Z ZA E N TERP RISES LIMITED
CORPORATE
RESPONSIBILITY
The Domino’s Board and management
passionately believe in the importance
of the franchising model in delivering
for our business and our people. Both
the Domino’s Board and management
team include among their ranks former
franchisees whom have had significant
experience in growing successful
Domino’s businesses.
The franchising model has allowed
entrepreneurial small business owners
to create business opportunities for
them and their families, thousands of
jobs for their team members, as well
as valuable investments in their local
communities. Through their ownership
in Domino’s Pizza Enterprises Ltd,
our shareholders benefit from the
franchising model, and the energy and
commitment of our franchisees.
Australian
Parliamentary inquiry
In March 2018 the Australian Senate
referred an inquiry into the operation
and effectiveness of the Franchising
Code of Conduct to the Parliamentary
Joint Committee on Corporations and
Financial Services (Inquiry). Domino’s
Pizza Enterprises Ltd welcomed the
opportunity to provide a submission to
the Inquiry, outlining the contribution
of franchising to the growth of our
business as well as opportunities for
improvement in the operation and
regulation of the franchising model.
The submission (available online1)
provided a detailed explanation of
the Domino’s business model and
its relationships with franchisees
and other stakeholders; outlined
the support that Domino’s provides
to franchisees; and summarised
Domino’s views on the Inquiry and the
Franchising Code of Conduct. While
Domino’s considers that in many areas
its operations are best practice, we also
recognise our performance is based
on our commitment to continuous
improvement, which we reaffirm here.
In March 2019, the Parliamentary
Committee that conducted the Inquiry
released a report (Report) containing
a number of recommendations,
including proposed changes to the
Franchising Code of Conduct and to
the responsibilities and powers of the
Australian Competition and Consumer
Commission.
In the first instance, the Committee
recommended the establishment
of an
inter-agency Franchising
Taskforce to examine the feasibility
and implementation of many of the
Committee’s recommendations. While
this has not yet occurred, and may
take some time, Domino’s is reviewing
these recommendations, to the extent
applicable to the Domino’s model, with
a view to identifying opportunities to
improve the Domino’s business.
Wages compliance
The Inquiry Report outlines the
significant contribution of our people to
the Domino’s business. The collective
efforts of tens of thousands of team
members is essential to the ongoing
success of our stores, franchisees
and Domino’s Pizza Enterprises Ltd.
Our people must be rewarded for this
effort, through fair wage systems, and
the correct payment of team members
in accordance with these systems. This
is our unwavering commitment.
In Australia, Domino’s has been taking
action since 2014 when it identified
that some team members had been
deliberately underpaid their correct
wages and entitlements by franchisees.
Over the past five years, Domino’s
has taken a multi-pronged approach
to addressing this behaviour. We
1
Domino’s submission to the Parliamentary inquiry into the operation and effectiveness of the Franchising Code of Conduct:
https://www.aph.gov.au/DocumentStore.ashx?id=e66caf74-2150-4b35-98fc-2e7030a80d16&subId=565717
have ensured our franchisees are
clearly trained on their obligations,
that systems are in place to assist
franchisees to avoid inadvertently
breaching these obligations, and
adding teams and tools to identify (and
remove from our business) those who
deliberately mistreat our people by
breaching these obligations.
A comprehensive review from Deloitte
in 2017 recommended seven actions.
Domino’s has implemented all of these
actions through the establishment
of the Domino’s Employment Law
Compliance Program, which included
the development of an independent
whistleblower hotline, information
about the hotline distributed to every
store in Australia (including mandatory
posters in-store), and a predictive,
risk-based data analytic compliance
dashboard. A small number (22) of
concerns regarding underpayments
were raised through the hotline
this Financial Year, all of which were
investigated. While not all were found
to be valid, the hotline remains an
important, independent avenue for
team members to raise any concerns,
confident they will be appropriately
investigated and, where necessary,
swift action will be taken.
In addition, Domino’s is continuing
to broaden our compliance activities
across the network through a continual
review and improve exercise.
We continue to invest in our people
and in ensuring our team members are
fairly, and correctly, paid for their work.
OUR
PEOPLE
Our people are essential to our
future growth. Our people are the
more than 50,000 team members
working
in stores, offices and
commissaries in eight countries. This
Annual Report features just some of
the most successful of those team
members – our franchisees from
around the world. Each shares the
experience of having worked as
team members in stores, developing
a deep understanding not only of the
requirements to operate a successful
Domino’s store, but also the empathy
that comes from the hard work
required of the many thousands of
young people employed in Domino’s
as the first roles in their careers.
Domino’s is committed to being an
employer of choice, providing not
only fun and rewarding jobs, but
also an environment where team
members are recognised for their
passion, hard work, and commitment,
not their educational background,
ethnicity or sexuality.
Domino’s is proud of the opportunities
available to our people, whether
a part-time job to support team
members while studying, or a full-
time career. Through a focus on
internal recruitment, professional
development, and support for young
managers becoming franchisees,
young team members can start as
delivery drivers or dish washers, and
aspire to manage teams, or become
Chief Executive.
We recognise the responsibility
of ensuring our people work in a
safe environment, free from harm;
whether physical injury, bullying
or harassment. This also includes
proudly paying amongst the highest
rates
industry, training
programs that deliver team members
qualifications recognised by industry,
and creating opportunities for growth
and development within.
in our
Domino’s stores are safe working
environments, free of deep fryers
and other equipment that may pose
a risk in other fast food businesses.
Nonetheless, we recognise that there
are external factors which may risk
team member safety, and we have
implemented multiple initiatives to
reduce these risks.
045 / / 201 9 ANN UAL R E PO RT D O MI NO ’S PI ZZA E NTERP RISES LIMIT ED
Delivery
driver/ rider
safety
For their safety, and that of the
local community, team members
are required to demonstrate they
understand and will follow, local
road rules before they can deliver for
Domino’s.
This is especially so for our delivery
drivers and riders, on scooters,
motorbikes and electric bicycles,
delivering hot, freshly prepared meals
each day.
It is a common misunderstanding that
our commitment to delivery quickly
and our delivery guarantees require
a team member to speed to deliver
a meal on time. Instead, customers
are only offered the option of a 15
minute or 20 minute guaranteed meal
where our algorithms determine it is
possible for this to be delivered safely
by a team member.
Our GPS Driver Tracker technology
– available in all countries except
Germany and France (both of
which are planned for upcoming
roll-out) – measures every delivery,
monitoring to track speed and
harshness of driving, for review by
store management and Domino’s
Operations teams. Even where
this technology is not yet in place,
the safety of our team members is
paramount, with Domino’s France
launching a road safety training
program with the Vigi2roues
Association. The program increases
manager awareness of risks for
riders and adds additional coaching
including relating to protective
clothing and scooter safety.
Domino’s policy is clear – the rush is in
the store, not on the street. We do not
encourage, expect, or tolerate team
members breaking local road rules,
including exceeding the speed limit,
for any reason. Our local franchisees
and operations team members are
best placed to judge local weather
conditions, and team members can
opt not to undertake deliveries if they
believe local weather conditions are
not safe to do so.
Domino’s recognises the potential
risk of robbery, in our stores and
of our delivery drivers. No money,
or meal, is worth any risk to team
member safety. Domino’s has
extensive risk reduction practices
in place to reduce the opportunity
for theft of our drivers and team
members. For the safety of our
team members, not all of these
procedures can be outlined here. As
one indication, more deliveries than
ever in our history are cashless, with
the meal ordered and paid for online.
OUR PEOPLE
Case study
Rider safety
Australia
Domino’s understands that
sometimes, there are risks to
our delivery drivers beyond our
control, including the inattention or
dangerous behaviour of other road
users. But we can do everything in
our control to reduce the risks to
our team members.
This year we implemented a
new Safe Delivery Procedure for
Australian delivery experts. Where
team members must review
and acknowledge the relevant
procedures via our online training
portal Dotti.
The new procedures set our
specific requirements for e-bike
riders and scooter delivery riders.
Ebikes
Scooters
•
•
•
•
•
•
Increasing the minimum riding age
from 15-years-old to 16.
Introducing a minimum licensing
requirement of a learners permit
(to ensure a strong, demonstrated
understanding of road rules).
A documented requirement for a
complete daily e-bike safety check
to ensure each e-bike is safe and
suitable for use.
A documented requirement not to
hand-hold a mobile phone (which is
illegal) or to use headphones while
delivering, to remove distraction
and the potential for decreased
awareness of traffic conditions.
Documented wet weather
requirements for light rain, fog and
other inclement weather.
In December 2018, Domino’s
updated our rider uniform to allow
for riding in shorts, instead of long
pants, to help manage heat stress.
Domino’s launched a Scooter Safety
training module created in conjunction
with the Australian Motorcycle Academy
and drawing on resources from various
bodies including: WA Government Road
Safety Commission; Motorcycle Riders
Association of WA; WA Government
& National Road Safety Commission;
NSW Roads & Maritime Service; QLD
Department of Transport and Main
Roads; Motorcycle Council of NSW Inc.
The training is focused on roadcraft skills
and an understanding of:
•
•
•
How to adapt to various road
conditions.
The importance of rider attitude
and safe riding.
Recognising hazards and taking
action to reduce the likelihood of
accidents.
• More than 4300 scooter delivery
experts have completed this
training module
047 // 2 019 AN NUAL R EPO RT D O MI N O’S P I ZZA E NTERPRISES LIMITED
OUR PEOPLE
Case study
DELIVERY
EXPERT
SAFETY
NETHERLANDS
In Rotterdam, robberies are not only
an issue for Domino’s, but for other
delivery companies, local residents
and homeowners.
Domino’s Netherlands was concerned
about the risk to drivers from robberies
and was determined to take tangible
action to reduce the likelihood of
injury to team members. Domino’s
franchisees Menno van Eijk and Maurijn
Boelsma worked with police, and local
government to equip delivery riders
with body cameras.
The cameras can be switched on at
the touch of a button, recording any
person who may be a risk to the team
member, as well as alerting a central
control room of a potential incident.
In addition to GPS Driver Tracker
technology, which monitors where
every delivery expert is at any time,
the cameras have added another layer
of safety to the Domino’s business.
They can even be used for other
emergencies, where help is needed.
The introduction of body cameras has
been just one part of a drive to reduce
the risk to our Dutch team members.
Seven Domino’s stores in Rotterdam
have eliminated cash entirely from
their stores, along with another 11
stores nationwide. Other stores have
eliminated cash at night, with orders
required to be paid with bank card,
or online. Not only has this increased
team member safety, but also store
efficiency, with less time required to
count money and reconcile cash at
the end of each shift.
Minister for Justice and Security
Ferdinand Grapperhaus has
encouraged other cities to monitor
the work being done in Rotterdam,
and the lessons they can apply in their
local communities. Domino’s is also
reviewing the lessons of this approach
for implementing in other cities.
04 8 // 2019 ANNUA L RE PORT D OMI NO ’S PIZZA ENTERPRISES LIM ITED
OUR PEOPLE Case study
JAPAN
Case study
NEW ZEALAND
Japan has experienced very low
unemployment, with an ageing
workforce and a tightening labour
market.
Domino’s Pizza Japan has
recognised the importance of
building a strong and vibrant
workforce to grow the business in
the years ahead. Management is
committed to ensuring the company
builds its employment base from all
societal segments, including those
that have traditionally been under-
represented in other businesses.
Domino’s Pizza Japan President
and CEO Josh Kilimnik: “We need to
attract and retain the best possible
team members, franchisees,
corporate, as well as head office
staff. It’s not just about becoming
an employer of choice for one select
group of people. It’s all inclusive.”
Domino’s Pizza Japan has made
changes to its business operations
to reflect this inclusive approach,
modernising conditions of
employment, including in relation
to maternity and paternity leave.
Domino’s is also offering flexible
work arrangements, and leveraging
in
recent regulation changes
relation to hiring foreign workers.
To ensure these team members
are welcomed, and adopt the
Domino’s culture and passion for
pizza, training programs have been
updated to allow for some to be
completed in different languages.
For multi-unit Franchisee Rishi
Sharma, giving back to his
community and offering a helping
hand is at the very heart of his
business. Recently, after hearing
about the plight of refugees trying to
settle in to a new life in New Zealand,
he contacted the Prime Minister’s
office to see what he could do to
help. He is now working with the Red
Cross to get refugees into work and
has already hired two new team
members in his stores.
Part-time evening work is perfect
for team members who are often
not ready to commit to full time
positions as they settle in to a
new country, but they are keen to
contribute to their new societies.
049 / / 2 019 AN NUAL R EPO RT D O M INO ’S PI ZZA E NTER PR ISES LIMITED
OUR PEOPLE OUR PEOPLE STAFF
ENGAGEMENT
DIVERSITY
Workplace by Facebook is a dedicated
and secure space for Domino’s team
members to connect, communicate
and collaborate. The key to its success
is the familiarity team members of
all ages have with Facebook, and
the similar user interface for this
corporate-focused platform.
Currently, we use Workplace as our key
communication channel in Australia,
New Zealand and The Netherlands,
and we are in roll-out phase for Japan
and Germany.
As a geographically dispersed
company with a young workforce it
can be challenging to create a culture
of “togetherness”.
Domino’s
is determined to be
Number 1 in Pizza, and Number 1 in
People, with the best team members
in every position in all countries. The
Company is committed to eliminating
discrimination, and fostering inclusion,
throughout the workforce.
Domino’s Australian operations have
a policy reinforcing gender equality
overall, as well as in the recruitment,
retention, performance management,
training and development of team
members.
to
increasing
Domino’s has taken a top down
approach
the
representation of women in key
positions. A target was set, and
achieved, to increase the number of
experienced women executives on the
Board of Directors.
Management has also reviewed the
remuneration of team members
in head office, and in the field, to
eliminate pay disparities. After a
thorough review, remuneration
p r o c e s s e s
d e c i s i o n - m a k i n g
were
training
was
implemented to eliminate
unconscious bias in relation to gender
equality.
reviewed, and
Workplace allows us to share
information in real-time, create a
two-way dialogue between our team
members, franchisees and corporate
staff, and share best-practice across
the network.
We have recently introduced a number
of integrations to increase efficiencies
for team members, including a Tanda
bot, which allows them to check their
rosters and a QA bot, which allows
them to submit all Quality Assurance
forms.
Domino’s has implemented paid
maternity leave for team members,
ranging from a minimum of eight
weeks, up to a maximum of 14 weeks
depending on the team member’s
length of continuous service.
Domino’s has in place a policy to
support those who are experiencing
family or domestic violence.
We support our team members,
particularly in times of need, including
through a range of flexible working
arrangements, including carer’s leave
and job sharing – for men and women.
We support our LGBTIQ team
members. Working with committed
team members, Domino’s has
established dedicated communication
platforms and provides opportunities
for support of LGBTIQ initiatives.
Research shows team members who
are supported in being open about
who they are, and are welcomed, are
more likely to be satisfied with their
employer, to work more effectively in
their role, and more likely to innovate
than workers who are not open nor
welcomed.
OUR PEOPLE OUR PEOPLE WHISTLEBLOWER
POLICY
Domino’s is committed to a culture
of compliance and honest and ethical
behaviour.
To foster this culture, Domino’s
encourages anyone who has
knowledge, or reasonable suspicions,
of any kind of serious activity that is
illegal, unethical or dishonest to make
an anonymous report to our dedicated
Whistleblower Service.
Domino’s recognises the importance
of ensuring a safe, supportive and
confidential environment where
people feel comfortable about
reporting wrongdoings and are
supported and protected throughout
the process.
The Whistleblower Policy is freely
available to all team members through
our online training portal.
PARTNERS
FOUNDATION
With the mission “Team Members
Helping Team Members”, the Domino’s
Partners Foundation is a separate not-
for-profit organisation funded by team
members to help fellow colleagues
in times of need. The Foundation is
committed to helping team members
through injury, disaster recovery, illness
and times of hardship.
This year we also launched Partners
Foundation in New Zealand and we
look forward to growing Partners
across the Group and aim to launch
the trust in Japan and Europe in the
next 12 months.
Practical examples of this support in
the past 12 months include:
•
Flying family
interstate or
internationally to be with team
members in times of need;
•
•
•
•
Covering the costs of living
expenses when a team member
needed to take time off for
serious surgery for a pre-existing
medical condition;
Covering costs of repatriation
fees following a non-work related
accident involving one of our
team members to ensure they
were back with their family;
Assisting with funeral expenses of
a team member’s family member;
Assisting with living expenses
following emergency surgery; and
• Offering support to team
members
the
devastating Townsville floods in
Australia
following
051 // 201 9 AN N UAL R EPO RT D O M I NO’S PI Z ZA E NTER PRISES LIMITED
OUR PEOPLE OUR PEOPLE
Case study
TRAINING
Australia
Multi-unit franchisees Nathan and
Nicole van Jole have built a pizza
empire in Townsville, Australia,
owning and operating seven stores
across the region with a turnover of
~$225,000 per week.
They attribute much of this
success to the careful recruitment,
training and retainment of hard-
working team members. They
are passionate about investing in
their people and have developed
a comprehensive recruitment
and training program which is now
being rolled out across the country.
This program involves running fun
and interactive group interviews,
inducting team members through
a welcome pack, orientation day,
two training shifts and a three-
month review, and then investing
in personal and team development
their
initiatives
employment.
throughout
In doing so, they have built a team
that is invested in their business,
focused on a common mission and
in it for the long haul – more than
doubling their staff retention.
OUR PEOPLE 053 // 2 019 AN N UAL R EPO RT D OMI N O ’S PI Z ZA E NTERPRISES LIMITED
OUR
COMMUNITY
Domino’s vision is to be the leader
of the internet of food in every
neighbourhood. This means
our kitchens can deliver hot,
fresh meals to more than 2500
Neighbourhoods across the eight
countries in which we have stores
(soon to be nine with the opening
of our first stores in Luxembourg).
It also means Domino’s
franchisees and team members
can provide support, including
meals, donations and volunteer
hours, to those community groups
that need our help.
053 // 2 019 AN N UAL R EPO RT D OMI N O ’S PI Z ZA ENTERPRISES LIMITED
GIVE FOR
GOOD
Domino’s Give for Good is a
registered charity that collects
donations from Domino’s Pizza
Enterprises Ltd, our customers,
and our head office team
members, to support registered
charities and not-for-profit groups
across Australia. More than one-
third of head office team members
contribute from their wage weekly.
Domino’s has contributed more
than $400,000 and 5000 pizzas
through Give for Good this year.
Our goal is to increase donations
from Give for Good to over $1m by
2020.
Give for Good support four key
giving areas, which aims to help
educate, and develop sustainable
best-practices and innovative
ideas.
Education & youth
initiatives
Disaster relief,
recovery and
preparedness
Rural
communities
Leadership &
entrepreneurship
054 // 2019 ANNUA L RE PORT D OMI N O’S PIZZA ENTERPRISES LIMIT ED
OUR COMMUNITY
Give for
good
www.giveforgood.org.au
Rock’s Cool
Location: Canberra, ACT
Through the Give for Good Franchisee
Grant Program, Domino’s Canberra
multi-unit franchisee Chad Cable
supported the Rock’s Cool program at
the University of Canberra with a $5,000
grant. The program kick starts the
careers of young Canberra musicians by
helping them make connections, learn
new skills, improve their understanding
of business and the music industry, as
well as set themselves up as sole traders
so they can start making an income from
their music.
Monash University
scholarships
Location: Melbourne, VIC
Give for Good is supporting eight
students studying STEM-related degrees
to realise their potential at Monash
University. The scholarship helps to
alleviate study costs including textbooks,
travel, computer equipment and living
expenses for students experiencing
financial, social or personal hardship.
University of Tasmania
scholarships
Location: Hobart, TAS
Give for Good is supporting two talented
students studying agriculture and
business at the University of Tasmania
with education-related costs. These
scholarships are provided to students
from regional and remote areas as
part of Give for Good’s mission to
increase access to higher education for
communities under-represented within
tertiary education.
The Smith Family
Location: National
Through Give for Good’s partnership
with The Smith Family, we support 15
disadvantaged young people with their
tertiary studies by providing financial
assistance to cover education-related
costs such as textbooks, stationery and
other learning resources. Our corporate
team members also volunteer their time
through the Christmas Toy and Book
Appeal and Work Inspiration programs.
Orange Sky Australia
Location: Palm Island, QLD
Through the Give for Good Franchisee
Grant Program, Domino’s Townsville
franchisees Nathan and Nicole van Jole
supported Orange Sky Australia with
a $5,000 grant. Orange Sky Australia
provides access to free mobile
laundry facilities, warm showers and
conversations to people experiencing
homelessness or those in need, and
recently established a service on Palm
Island in September 2018. The grant will
be used to supply fuel for the mobile
service on Palm Island for one year.
Harding Miller Education
Foundation
Location: Dubbo, NSW
Through the Give for Good Franchisee
Grant Program, Domino’s Dubbo
franchisee Josh Arnold supported the
Harding Miller Education Foundation with
a $5,000 grant to provide a scholarship
for a disadvantaged year 12 student. The
grant will be used to provide tutoring,
books, stationery, uniforms, online
homework assistance, high speed
internet connection and help desk
support.
Country Education
Foundation
Location: Orange, NSW
Through the Give for Good Franchisee
Grant Program, Domino’s Orange
franchisee Peter Knight supported
the Country Education Foundation
with a $5,000 grant, which will assist
three Orange students to transition
from school to university, TAFE or
work-related training with the costs of
textbooks, travel, computers, equipment
and rent.
055 / / 201 9 ANN UAL REPO RT D OM I NO’S PI Z ZA E NTER PRISES LIMITED
OUR COMMUNITY
DISASTER
RELIEF
SMALL
CHANGE
BIG
DIFFERENCE
When disaster strikes – whether it’s
a fire, flood or drought – Domino’s
registered charity Give for Good,
our franchisees and team members
step into action to support local
communities.
stores also delivered more than
2,000 pizzas to emergency workers
and evacuation centres across North
Queensland, making sure people had
hot meals and helping to keep spirits
up.
Domino’s stores across Australia
banded together in August 2018
to raise $175,000 for Rural Aid to
support Australian farmers and rural
communities affected by drought,
including a $40,000 donation from
Give for Good. All funds raised
helped deliver much-needed fodder,
water and groceries to the farming
communities who were doing it tough.
In February 2019, Domino’s
Queensland stores raised vital funds
to help fellow Queenslanders up north
in flood-affected areas via the Red
Cross Disaster Relief and Recovery
Fund. When it was safe to do so, teams
from our eight Domino’s Townsville
During the devastating bushfires
across Tasmania in February 2019,
Domino’s stores in Rosny, Hobart
and Kingston rallied together to
donate more than 360 pizzas to feed
500 people who had been forced to
evacuate their homes.
When Cyclone Trevor hit in March
2019, Domino’s Darwin City and Millner
stores supported emergency workers
and people in evacuation centres with
450 piping hot pizzas.
In true Dominoid spirit, our local
franchisees and team members are
always there when needed most.
From the smallest donation, to the
largest initiative, these programs make
a difference.
Domino’s previously donated 50c
from every choc lava cake sold in
Australian stores, with the donations
helping vital charities throughout
the country. But team members
Mahia Lai and Cody Rutherford, and
franchisees, David Bird (Muswellbrook
and Scone stores), and Chad Cable
(multi-unit franchisee, Canberra)
believed a small change could make
an even bigger difference.
They came up with the idea of allowing
customers to ‘round up’ their end of
order total price to the nearest dollar,
with the extra small change donated to
disaster relief and charity.
More than 10 per cent of customers
now choose to round up for charity;
their small change making a big
difference to important charities
around the country. More than 2.4
million microdonations have been
made by Domino’s customers
passionate about their small change
making a big difference to a number of
these community-led initiatives.
The team in Australia aren’t the only
Domino’s stores making a difference
through small donations.
In Belgium and the Netherlands, we
organised a giving program for a limited
time product, apple pie. €0.10 from
every apple pie sold was given to ‘Met
je Hart’ (With your Heart), a charity
that works to address loneliness
among the elderly. Domino’s stores
also invited in local elderly residents
to visit, to make pizza, and to share
conversation.
It’s a sweet way of helping those who
need our help.
OUR COMMUNITY OUR COMMUNITY 057 / / 20 19 AN NUAL R EPO RT D O MI N O’S PI ZZA EN TERPRISES LIMIT ED
In true Dominoid
spirit, our local
franchisees and
team members are
always there when
needed most.
057 / / 2 019 AN NUAL RE PO RT D O MI N O’S PI Z ZA E NTERPRISES L IMITED
OUR
environment
Case study – New Zealand
Wastage removal
Domino’s New Zealand is working with
a local company, UBCO, to trial 2x2
electric bikes. The vehicles have more
similarities with a motorbike than a
bicycle, providing riders two wheel drive,
a lower centre of gravity, more power
and increased stability.
Domino’s is committed to reducing
waste across all of our stores.
It may surprise many that Domino’s
stores already generate far less food
wastage per meal than the average
home.
Domino’s New Zealand General
Manager Cameron Toomey said:
“Ontime delivery is critical to the
Domino’s brand and we’re excited to
see if UBCO can deliver – so far our
delivery team are loving the bikes and
they’ve exceeded our expectations.”
The vehicles have an impressive 120km
maximum range on a single charge, and
local stores in the trial are keeping an
extra battery on hand for a quick swap
if needed.
It
is estimated each Australian
household discards 345kg of edible
food each year. Yet despite the millions
of meals prepared in Domino’s kitchens
each year, food wastage is reduced
by careful stock control, regular
stock deliveries, adherence to set
recipes, and stock ordering based on
anticipated sales.
This is an area of social responsibility
that also makes good business
sense, with wasted food a direct
cost to franchisees and Domino’s
corporate store network. In many
stores, managers are rewarded for
reducing food wastage. Pizzas that
are safely prepared, that may not have
been made to a customer’s exact
specifications, are frequently provided
to the customer as an additional act of
goodwill, rather than see the food go to
waste.
We are committed to reducing waste
across all stores in Australia and New
Zealand, particularly when it comes to
food packaging, which is why our pizza
boxes contain recycled papers.
Our pizza boxes are suitable for
recycling and we encourage our
customers to recycle our pizza boxes
and food packaging, provided the local
council recycling program permits it.
Domino’s is reviewing other areas of
operations to reduce wastage, including
simplifying the number packaging items
used for customers’ meals by stores in
Australia and New Zealand.
Electric deliveries
Domino’s is increasingly using electric
vehicles to reduce the environmental
impact of our delivery fleet. Not only
do electric vehicles reduce carbon
emissions, but they are also quieter.
Where e-bikes are used, they may
be more efficient from the store to
the customer’s door because of the
reduced time in navigating a car from the
car park, while providing team members
a healthy and fun way to work.
Electric vehicles add additional benefits
for franchisees – they’re typically lower
cost to operate, and require less ongoing
maintenance than petrol or diesel
vehicles. Domino’s has already taken
tangible steps to increase their use
globally.
In Germany, about 2.6 million deliveries
were carried out using electric vehicles
this Financial Year. In Hamburg, more
than 50% of vehicles are electric,
including bicycles and scooters.
The Netherlands intend to phase out
combustion vehicles - with franchisees
agreeing to purchase only electric
vehicles from 2020.
In France, about 35% of deliveries are
completed using electric vehicles, and
the goal is to have 100% of our delivery
vehicles in France powered by electricity
by the end of 2023.
In Australia, Domino’s
is working
towards carrying out more than 2 million
deliveries each year on electric bicycles.
Because GPS Driver Tracker is not yet
fully available in all Domino’s countries,
the exact number of Domino’s electric
vehicle deliveries has not been
possible to calculate. However, as this
technology is rolled out in all countries,
this information will more easily be
captured, allowing for more tangible
measurements against these targets for
the Domino’s Pizza Enterprises Group.
059 / / 20 19 AN NUAL R EPO RT D O MI N O’S PI ZZA ENTERPRISES LIMITED
OUR FOOD
Domino’s menu provides our
customers an
indulgence –
whether a family meal, or a late
night treat – our customers choose
the menu item that suits them.
Our goal
is to provide our
customers with the best possible
choice, that suits their taste
buds and dietary requirements;
whether it’s a high quality dessert,
a premium dinner, or an afternoon
snack.
Our pizza pride starts with our
dough, which is baked fresh daily
in our stores, contains no artificial
colours, flavours or preservatives,
and is GMO- and MSG-free.
Domino’s strives to ensure our
ingredients are free of artificial
colourings,
flavourings and
preservatives and, in partnership
with our ingredient suppliers, we
have made material steps towards
this goal. In Australia 96% of our
menu is now free from artificial
preservatives, flavours and colours.
060 // 2019 ANNUA L REPORT D OMI N O’S PIZZA ENTERPRISES LIMIT ED
Dietary requirements
Increasingly, our customers seek menu
options essential for their health, diet or
lifestyle requirements. Domino’s aim is
to provide ingredients and recipes to
meet every requirement, and we work
every day to improve these offerings.
We have previously offered vegetarian,
and gluten free options on our menu
before adding, vegan cheese in 2018
to our menu in Australia, initially as
a limited offering. Our vegan pizzas
proved so popular Domino’s sold out
– encouraging us not only to return it
to the menu permanently, but to bring
vegan ingredients to other countries.
Our vegan products have been very
well received by customers, including
customers who are not vegan but
choose, or need, non-dairy alternatives.
We are actively expanding this offering
to give customers more of what they
want, including adding a Vegan Cheesy
Garlic Bread in Australia/New Zealand,
three new vegan pizza recipes and a
vegan ice cream for our customers in
France, and additional vegan pizzas in
Germany and the Benelux.
Transparency
Our suppliers
Domino’s believes the journey for
quality does not start in our kitchens.
That is why we work closely with our
suppliers to ensure only the best quality
ingredients and materials are used in
our business, provided by suppliers
who share our commitment to quality.
It’s this trust that drives us to meet and
exceed the highest of standards. To
work with only the best food suppliers
in the country. Suppliers that we hold
to these standards and that deliver
only the highest quality products.
Trust to hold our own stores to these
standards when it comes to food safety
responsibility. Providing customers with
safe, quality food is not only a priority,
but it is paramount to our integrity and
to our commitment to be Hungry To
Be Better. This includes rigorous food
auditing and food safety programs.
Our suppliers are expected to meet the
standards we include in our Supplier
Code of Conduct, available online
here: https://investors.dominos.com.
au/corporate-governance.
Allergens
Our customers’ safety is paramount
for Domino’s. In a fast-paced, quick
service environment, there is always
the possibility of a food safe ingredient
being placed on a pizza for a customer
that otherwise chooses to avoid
that ingredient. However, our team
members in store are trained to take
careful steps to reduce the risk, as
much as possible.
This includes, where this is raised with
them, team members changing cutting
blades and other ingredients for a
specific pizza order.
Our customers make choices about the
foods they eat.
Domino’s is committed to enabling
our customers make better informed
choices about the food they buy, which
means providing relevant information
to inform those choices. That is why, in
all of the countries in which Domino’s
Pizza Enterprises operates, we provide
detailed nutritional information about
the products we serve.
The information we provide is relevant
to our customers in each country,
and includes information on potential
allergens, energy content, as well as the
volume of specific ingredients, such as
carbohydrates and even egg whites.
Similarly, customers may choose to
know more about the provenance of
our ingredients.
In Australia, Domino’s has been
recognised as leading the Fast Food
Industry on Voluntary Country of Origin
Food Labelling. This includes providing
the amount of Australian-produced
ingredients in our menu offerings, as
well as information about the country in
which products were made, produced
or packed.
Food safety
Domino’s has a responsibility to our
customers and community to ensure
our food safety standards are world-
class. Every team member in every
country understands the importance
of safe food storage, preparation and
handling requirements.
Each country is required to have a
food safety program that is regularly
reviewed, and meets both local laws
and Domino’s Pizza Enterprises’ high
standards. This includes operational
requirements including maximum food
storage times, cooking and storage
temperatures, handling procedures
and pest control.
061 / / 20 19 AN NUAL REP ORT D OM I NO’S PI Z ZA E NTERPRISES LIMITED
domino’s pizza enterprises LIMITED
annual report 2019
Group Highlights
Network Sales
Revenue
EBITDA
Depreciation & Amortisation
EBIT
EBIT Margin
Interest
NPBT
Tax Expense
NPAT before Minority Interest
Minority Interest
NPAT
PERFORMANCE INDICATORS
Earnings per Share (basic)
Dividend per Share
Same Store Sales %
FY 18
UNDERLYING
$ MIL
FY 19
UNDERLYING
$ MIL
+/(-) FY 18
UNDERLYING
%
FY 19
STATUTORY
$ MIL
2,588.9
1,154.0
259.2
(53.3)
205.9
17.8%
(10.3)
195.7
(59.5)
136.2
(3.0)
133.2
2,897.3
1,435.4
282.4
(61.6)
220.8
15.4%
(14.0)
206.8
(60.0)
146.8
(5.6)
141.2
152.8 cps
107.8 cps
4.3%
165.0 cps
115.5 cps
3.6%
11.9%
24.4%
8.9%
15.6%
7.2%
-
36.3%
5.7%
(0.8%)
7.8%
(86.6%)
6.1%
8.0%
7.1%
-
2,897.3
1,435.4
236.2
(62.8)
173.4
12.1%
(14.0)
159.4
(45.0)
114.4
1.5
115.9
135.5 cps
115.5 cps
3.6%
064 // 2019 A NNUA L RE PORT DO MINO’S PIZ ZA ENTERPRISES LIMIT ED
064 // 2019 A NNUA L RE PORT DO MINO’S PIZ ZA ENTERPRISES LIMIT ED
ContentS
Directors’ Report
Remuneration Report
Auditor’s independence declaration
Independent Auditor’s Report
Directors’ declaration
Consolidated Statement of Profit or Loss
Consolidated Statement of Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash flows
Additional securities exchange information
Glossary
Corporate directory
Board of Directors
66
71
87
88
93
96
97
98
99
100
175
177
178
179
065 / / 20 19 AN NUAL RE PO RT D O MI NO ’S PI Z ZA E NTERPRISES LIMITED
065 / / 20 19 AN NUAL RE PO RT D O MI NO ’S PI Z ZA E NTERPRISES 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 and its controlled entities (“the Group”) for the financial year ended 30 June 2019. 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
Jack Cowin
Ross Adler
POSITION
Non-Executive Chairman
Non-Executive Deputy Chairman
Grant Bourke
Non-Executive Director
Lynda O’Grady
Non-Executive Director
Ursula Schreiber
Non-Executive Director
Paul Cave
Non-Executive Director
Appointed 20 March 2014
Appointed 23 March 2005
Appointed 24 August 2001
Appointed 16 April 2015
Appointed 30 November 2018
Appointed 23 March 2005
Resigned 7 November 2018
Don Meij
Managing Director/Group Chief Executive Officer
Appointed 24 August 2001
DIRECTORSHIPS OF OTHER LISTED COMPANIES
Jack Cowin resigned as a director of Fairfax Media Limited on 28 November 2018. Grant Bourke resigned as a director of Pacific Smiles Group
Limited on 05 March 2018. Lynda O’Grady was appointed a director of Wagners Holding Company Limited on 08 November 2017. There were
no other directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year. Paul Cave
resigned as a director and chairman of Lovisa Holdings Limited on 31 October 2017.
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
Jack Cowin
Ross Adler
Grant Bourke
Lynda O'Grady
Ursula Schreiber
Don Meij
DOMINO’S PIZZA ENTERPRISES LIMITED
FULLY PAID ORDINARY
SHARES NUMBER
SHARE OPTIONS NUMBER
CONVERTIBLE NOTES NUMBER
-
200,000
1,628,344
2,000
-
1,843,344
-
-
-
-
-
1,140,000
-
-
-
-
-
-
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 71 to 86.
066 // 2019 ANNUA L RE PORT D OMINO ’S PIZZA ENTERPRISES LIM ITED
Directors’ Report
continued
SHARE OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT
During and since the end of the financial year, an aggregate 645,000 share options were granted to the following directors and senior
management of the Company as part of their remuneration.
DIRECTORS AND SENIOR
MANAGEMENT
NUMBER OF
OPTIONS GRANTED
ISSUING ENTITY
NUMBER OF ORDINARY
SHARES UNDER OPTION
Don Meij
Richard Coney
Andrew Rennie
Josh Kilimnik
Nick Knight
Allan Collins
Michael Gillespie
COMPANY SECRETARY
Craig Ryan:
General Counsel & Company Secretary
220,000
26,000
294,000
40,000
25,000
22,500
17,500
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
1,140,000
156,000
644,000
69,500
169,000
106,000
83,000
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 21 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 Masters of Laws from the University of New South Wales. Craig is also a Chartered Secretary with the Governance Institute Australia.
PRINCIPAL ACTIVITIES
The Group’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 activities and financial performance of the Group and each of its operating segments for the financial year are set out on pages 6 to 7.
CHANGES IN STATE OF AFFAIRS
There has been no significant changes in the state of affairs of the Group that occurred during the financial year.
SUBSEQUENT EVENTS
There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years
other than the matters disclosed in note 28.
ENVIRONMENTAL AND SOCIAL SUSTAINABILITY RISKS
The Group is not subject to any significant environmental regulation or mandatory emissions reporting and does not consider that it has
material exposure to environmental and social sustainability risks.
To the best of the directors’ knowledge the Group complies with its obligations under environmental regulations and holds all licenses required
to undertake its business activities.
067 // 2 01 9 AN N UAL R EPO RT D OMI N O’S PI ZZA EN TERPRISES LIMITED
Directors’ Report
continued
CORPORATE GOVERNANCE
A copy of Domino’s Pizza Enterprises full 2019 Corporate Governance Statement, which provides detailed information about governance, and
a copy of Domino’s Pizza Enterprises’ Appendix 4G which sets out the Group’s compliance with the recommendations in the third edition of
the ASX Corporate Governance Council’s Principles and Recommendations (ASX Principles) is available on the corporate governance section
of the Group’s website at https://investors.dominos.com.au/corporate-governance
DIVIDENDS
In respect of the financial year ended 30 June 2019, an interim dividend of 62.7 cents per share franked to 75% at 30% corporate income tax
rate was paid to the holders of fully paid ordinary shares on 14 March 2019. The Company will be paying a final dividend of 52.8 cents per share
franked to 100% at 30% corporate income tax rate to the holders of fully paid ordinary shares on 12 September 2019.
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:
ISSUING ENTITY
SERIES
NUMBER OF SHARES
UNDER OPTION
CLASS OF SHARES
EXERCISE PRICE
OF OPTION
EXPIRY DATE
OF OPTIONS
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
DPE Limited
23
24
24
25
26
27
28
29
30
31
32
300,000
192,250
150,000
400,000
200,000
410,500
220,000
578,250
147,000
220,000
653,750
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
$40.95
$40.95
$40.95
$76.23
$76.23
$76.23
$46.63
$45.25
$45.25
$51.96
$51.96
28 Oct 20
31 Aug 19
31 Aug 20
28 Oct 20
31 Aug 20
31 Aug 20
31 Aug 21
31 Aug 21
31 Aug 21
31 Aug 22
31 Aug 22
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
SERIES
DPE Limited
DPE Limited
DPE Limited
19
22
24
NUMBER OF
SHARES ISSUED
UNDER OPTION
500
5,600
242,250
CLASS OF SHARES
AMOUNT
PER SHARE
AMOUNT UNPAID
ON SHARES
Ordinary
Ordinary
Ordinary
$7.39
$9.08
$8.18
$nil
$nil
$nil
068 // 2019 A NNUAL RE PORT D O MINO’S PIZ ZA ENTERPRISES LIMITED
Directors’ Report
continued
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 judgement is given against the
officer or in which the officer is not acquitted; or
a liability for costs and expenses incurred by the director regarding 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.
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, six (6)
board meetings, six (6) nomination and remuneration committee meetings and six (6) audit committee meetings were held.
BOARD OF DIRECTORS
NOMINATION &
REMUNERATION COMMITTEE
AUDIT COMMITTEE
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
Jack Cowin
Ross Adler
Grant Bourke
Paul Cave
Lynda O'Grady
Ursula Schreiber
Don Meij
6
6
6
3
6
2
6
6
6
6
3
6
2
6
6
6
6
3
6
2
-
6
6
6
3
6
2
-
-
6
6
3
-
-
-
-
6
6
3
-
-
-
069 // 2 019 AN NUAL R EPO RT D O M I NO ’S PI Z ZA E NTERPRISES LIMITED
Directors’ Report
continued
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 32 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 32 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 87 of the Annual Report.
ROUNDING OF AMOUNTS
The Company is a company of the kind referred to in ASIC Corporations Legislative Instrument 2016/191 (Rounding in Financial/Directors’
Report), dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the financial report are rounded off to the
nearest thousand dollars, unless otherwise indicated.
070 // 2019 A NNUA L RE PORT DO MINO ’S PIZZA ENTERPRISES LIM ITED
Directors’ Report
continued
Remuneration Report
Domino’s Pizza Enterprises Limited is a geographically diverse business with a long history of innovation and growth. The Board remains
committed to ensuring the remuneration frameworks developed for Key Management Personnel (“KMP”) are focused and aligned with
shareholder value creation over the long term.
This Remuneration Report (Audited), which forms part of the Directors’ Report, sets out information about the remuneration of the Company’s
KMP including directors for the financial year ended 30 June 2019.
The prescribed details for each person covered by this report are detailed below under the following headings:
•
•
•
•
•
Director and KMP details
Remuneration policy
Alignment between the remuneration policy and company performance
Remuneration of directors and senior management
Key terms of employment contracts
KMP DETAILS INCLUDING DIRECTORS
The following persons acted as directors of the Company during or since the end of the financial year:
NAME
Jack Cowin
Ross Adler
Grant Bourke
Lynda O’Grady
POSITION
Non-Executive Chairman
Non-Executive Deputy Chairman
Non-Executive Director
Non-Executive Director
Ursula Schreiber
Non-Executive Director (appointed 30 November 2018)
Paul Cave
Don Meij
Non-Executive Director (resigned 7 November 2018)
Managing Director/Group Chief Executive Officer (Group CEO)
The term KMP is used in this report to refer to the following persons.
•
•
•
•
•
•
Richard Coney, Group Chief Financial Officer
Andrew Rennie, Chief Executive Officer Europe
Josh Kilimnik, President and Chief Executive Officer of Japan (appointed on 1 January 2018)
Nick Knight, Chief Executive Officer ANZ
Allan Collins, Group Chief Marketing Officer
Michael Gillespie, Group Chief Digital and Technology Officer (appointed on 15 September 2017)
REMUNERATION POLICY
The performance of the Company depends upon the quality of its KMP including directors and their support teams. To prosper, the Company
must attract, motivate and retain highly skilled directors and other KMP. The remuneration structure is designed to strike an appropriate
balance between fixed and variable pay, rewarding capability and experience and providing recognition for contribution to the Company’s
overall goals and objectives.
The Board Remuneration Policy is to ensure that KMP remuneration packages properly reflect the individual’s duties and accountabilities
and level of performance; and that remuneration is market competitive in order to attract, retain and motivate people of the highest quality.
The Board has a Nomination and Remuneration Committee (“NRC”). Information about this Committee is set out in the Company’s Corporate
Governance Statement.
07 1 // 2 019 AN N UAL R EPO RT D O MI N O ’S PI Z ZA EN TERPRISES LIMITED
Directors’ Report
Directors’ Report
continued
continued
NON-EXECUTIVE DIRECTOR REMUNERATION
Non-executive directors are remunerated by way of cash fees and superannuation contributions in accordance with the Superannuation
Guarantee legislation. The level of directors’ fees reflect their time commitment and responsibilities in accordance with market standards.
During the reporting period, non-executive directors did not receive any performance based remuneration or equity-based remuneration.
Non-executive directors are not entitled to receive any termination payments on ceasing to be a director.
EXECUTIVE REMUNERATION
The Board of Directors (“The Board”), in conjunction with its Nomination and Remuneration Committee, is responsible for approving the
performance objectives and measures for the Group CEO and providing input into the evaluation of performance against them.
The NRC is responsible for making recommendations to the Board on remuneration policies and packages applicable to the Board members
and the Group CEO. The Group CEO is responsible for preparing recommendations on remuneration packages applicable to the other KMP
of the Company for review and approval of the NRC.
RELATIONSHIP BETWEEN THE REMUNERATION POLICY AND COMPANY PERFORMANCE
The remuneration structures explained below are designed to attract suitably qualified candidates, reward them for the achievement of
strategic objectives, and achieve the broader outcome of value creation for shareholders. The remuneration framework takes into account:
•
•
•
the capability and experience of the KMP;
the KMPs ability to control the relevant segments’ performance;
the Group’s performance including:
-
-
-
the Group’s earnings;
growth in earnings per share;
return on shareholders’ investment
Remuneration packages include a mix of fixed, short-term and long-term performance-based incentives. Executives’ bonus payments reflect
the achievement of specific goals related to performance of the Company’s financial and operational results. The mix of these components
is based on the role the individual performs. In addition to their salaries, the Group also provides non-cash benefits to its KMP and contributes
to a post-employment superannuation plan (or equivalent) on their behalf.
072 // 2019 A NNUA L RE PORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Remuneration Report (continued) Directors’ Report
continued
During the year independent remuneration consultants were engaged by the Remuneration Committee to ensure that the reward practices
and levels of remuneration for KMPs are consistent with market practice. A statement of recommendation from the remuneration consultants
has been received for the 2019 financial year. Payment of $118,450 (2018: $52,371) has been made to the remuneration consultant for the
remuneration advisory services provided on the remuneration recommendation. 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 KMP to
whom the recommendation relates to, the remuneration consultants are not a related party to any KMP. As such, the Committee is satisfied
that the remuneration recommendations were made free from undue influence by the member or members of the KMP to whom the
recommendations relates.
Executive remuneration objectives are delivered through three categories of remuneration, as illustrated in the following table:
EXECUTIVE REMUNERATION OBJECTIVES
Attract, motivate and retain highly
skilled executives across diverse
geographies
Reward capability and experience
and provide recognition for the
contribution to the Company’s
overall objectives
An appropriate balance between
fixed and variable remuneration
Alignment to shareholder interests
through equity components
TOTAL REMUNERATION IS SET BY REFERENCE TO THE RELEVANT GEOGRAPHIC MARKET
FIXED
PERFORMANCE LINKED REMUNERATION
FIXED REMUNERATION
SHORT-TERM INCENTIVE (STI)
LONG-TERM INCENTIVE (LTI)
Fixed remuneration is set relative to the
market, reflecting the KMPs accountability,
performance, experience, and geographic
location
Key Performance Indicators (KPIs) are set each
year by the Board reflective of the Group or
Geographically relevant segment and include
financial and individual performance targets
relevant to the specific position
REMUNERATION WILL BE DELIVERED AS:
LTI targets are linked to EPS growth, EBITDA or
EBIT depending on whether the role has Group
or segment responsibility
Base remuneration 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 or equivalents
Cash or a combination of cash and a deferred
component (equity or cash settled) following
a review of the audited performance of the
Group, the relevant segment and individual
performance against the KPIs set at the
beginning of the Financial Year
Equity in options. All equity is held subject to
service and performance for a minimum of
3 years from grant date. The equity is at risk
until vesting. Performance is tested once at the
vesting date
KPIs are predominately financial, and all are
subject to audit
STRATEGIC INTENT
Short-Term Incentive is directed to achieving
Board approved targets, reflective of the
Group plan
LTI’s are intended to reward Executives for
sustainable long-term growth aligned to
shareholder value creation
Fixed remuneration will take into account
the relevant market data, provided by an
independent remuneration consultant, or other
independent data (e.g. Mercer), considering
the individual’s expertise and performance in
the role
FIXED REMUNERATION
Remuneration levels are reviewed annually by the Nomination and Remuneration Committee and Group CEO through a process that considers
individual, segment and overall performance of the Group. In addition, external consultants provide analysis and advice to ensure the directors
and KMP remuneration is competitive in the marketplace. A KMPs remuneration is also reviewed on promotion. All roles are benchmarked
against comparable market data.
07 3 / / 201 9 ANN UAL RE PO RT D O MI NO ’S P IZ ZA EN TERPRISES LIMITED
Remuneration Report (continued) Directors’ Report
continued
PERFORMANCE-LINKED REMUNERATION
Performance-linked remuneration includes both short-term and long-term incentives and is designed to reward KMP 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 or a combination of
cash and a deferred component (equity or cash settled), while the long-term incentive (“LTI”) is provided as options over ordinary shares of
the Company under the rules of the employee share options plan (“ESOP”).
SHORT-TERM INCENTIVE
Each year the Nomination and Remuneration Committee sets the key performance indicators (“KPI’s”) for the Group CEO and the Group CEO
proposes the KPI’s for the other KMP. The KPI’s generally include measures relating to the Group, the relevant segment, and the individual,
and include financial and operational measures that are audited. The measures are chosen as they directly align the individual’s reward to
the KPI’s of the Group 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”),
Earnings before Interest and Tax (“EBIT”) in local currencies, Same Store Sales, “Franchise operations EBITDA”, Net Profit After Tax (“NPAT”),
and Franchisee profitability (EBITDA) compared to budget and last year. The specific targets are not detailed in this report due to their
commercial sensitivity.
LONG-TERM INCENTIVE
Options are issued under the ESOP, and it provides for KMP 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 81.
The Nomination and Remuneration Committee considers this equity performance-linked remuneration structure to be appropriate as KMP
only receive a benefit where there is a corresponding direct benefit to shareholders.
The tables below set out summary information about the Group’s earnings and movements in shareholder wealth for the five years to
30 June 2019:
Revenue
Net profit before tax
Net profit after tax
30 JUNE 2019
$’000
01 JULY 2018
$’000
02 JULY 2017
$’000
03 JULY 2016
$’000
28 JUNE 2015
$’000
1,435,410
159,413
114,379
1,153,952
174,476
121,693
1,073,125
150,680
105,804
930,218
125,819
86,592
702,437
97,840
68,421
30 JUNE 2019
01 JULY 2018
02 JULY 2017
03 JULY 2016
28 JUNE 2015
Share price at start of year ($)
Share price at end of year ($)
Interim dividend per share (cents)(i)
Final dividend per share (cents) (i) (ii)
Basic earnings per share (cents)
Diluted earnings per share (cents)
52.22
37.64
62.7
52.8
135.5
135.4
52.08
52.22
58.1
49.7
139.4
139.0
68.82
52.08
48.4
44.9
116.0
114.7
36.16
68.82
34.7
38.8
94.4
92.2
21.82
36.16
24.6
27.2
74.2
72.8
(i)
Interim and final dividends for the year ended 30 June 2019 are franked at 75% and 100% respectively and at 30% corporate income tax
rate. Interim and final dividends for the year ended 01 July 2018 are franked to 40% and 75% respectively at 30% corporate income tax
rate. For the year ended 02 July 2017 interim and final dividends are franked to 50% at 30% corporate income tax rate and prior periods
interim and final dividends were franked to 100% at 30% corporate income tax rate.
(ii) The final dividend for the financial year ended 30 June 2019 was declared after the end of the reporting period and is not reflected in the
financial statements.
074 // 2019 ANNUA L RE PORT D OMINO ’S PIZZA ENTERPRISES LIM ITED
Remuneration Report (continued) Directors’ Report
continued
POLICY ON HEDGING EQUITY INCENTIVE SCHEMES
Participants are not permitted, without the prior written consent of the Chairman, to enter into transactions (whether through the use of
derivatives or otherwise) which limit the economic risk of participating in the scheme.
MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE OFFICER (GROUP CEO) REMUNERATION STRUCTURE
The following remuneration structure applied to the Group CEO for FY19.
Fixed remuneration
$1,200,000 per annum, reviewed annually by the Board in accordance with normal
remuneration processes
Performance linked remuneration
•
•
Short-term incentive up to $1,000,000, subject to the achievement of KPIs set annually,
and approved by the Board. Paid as 100% cash.
Long-term Incentive - Options subject to performance conditions were granted on
8 November 2017. These options were approved by Shareholder Resolution on
8 November 2017.
KEY PERFORMANCE INDICATORS
The Board set the KPIs for the Group CEO during financial year ended 30 June 2019 to be in line with the plan for the Group. The first and
largest consideration was the financial performance of the Group. This accounts for 95% of the total weighting for the short-term incentive
bonus, based on year on year NPAT growth, and EBIT performance in individual markets. The second consideration was the net increase in
organic new stores across the Group with 5% of the total weighting for the short-term incentive.
KPI
WEIGHTING
MEASURES
Financial Performance
95%
•
•
•
•
Group EBIT ($)
Australia and New Zealand budgeted EBIT ($)
Europe budgeted EBIT (€)
Japan budgeted EBIT (¥)
New Store Growth
5%
Group organic new store openings
In FY19 the Group CEO achieved 15% of his short-term incentive.
The Group CEO achieved none of his FY18 short-term incentive.
LONG-TERM INCENTIVE (EXECUTIVE SHARE AND OPTION PLAN)
The Long-Term incentive approved by shareholder resolution on the 8 November 2017 resulted in the granting of three tranches of options
in calendar years 2017, 2018 and 2019 as follows:
SERIES
NUMBER GRANTED
EXERCISE PRICE
FAIR VALUE
GRANT DATE
FIRST EXERCISE
DATE
Tranche 1 (Series 28)
Tranche 2 (Series 31)
Tranche 3(i)
220,000
220,000
297,000
$46.63
$51.96
$51.96
$11.22
$7.27
$7.27
8 Nov 2017
1 Sept 2020
23 Jan 2019
1 Sept 2021
8 Nov 2019
1 Sept 2022
(i) The fair value and exercise price for Tranche 3 are indicative values and will be revised at the relevant grant date.
The options were granted under the terms and conditions of the Company’s Executive Share and Option Plan. The plan rules are available for
inspection on the ASX’s announcements platform.
07 5 / / 201 9 ANN UAL R E PORT D OM I NO ’S PI Z ZA E NTERPRISES LIMITED
Remuneration Report (continued) Directors’ Report
continued
OPTION VESTING CONDITIONS
Options granted to the Group CEO vest in accordance with the following table if the Company’s cumulative annual compound earnings per
share (EPS) growth as determined by the Board acting reasonably based on the audited financial statements of the Company, over the relevant
performance period is at least 12%. The cumulative EPS target below applies to Tranche 1 and 2 however for Tranche 3 the cumulative EPS
targets will be recalculated prior to the relevant date of grant.
ANNUAL COMPOUND
EPS GROWTH DURING
THE PERFORMANCE
PERIOD
CUMULATIVE
EPS TARGET
(TRANCHE 1 ONLY)
CUMULATIVE
EPS TARGET
(TRANCHE 2 ONLY)
PROPORTION
OF OPTIONS
WHICH VEST
NUMBER OF
OPTIONS
WHICH VEST
NUMBER OF
OPTIONS
WHICH VEST
NUMBER OF
OPTIONS
WHICH VEST
TRANCHE 1
(SERIES 28)
TRANCHE 2
(SERIES 31)
TRANCHE 3
Less than 12%
less than 5.049
less than 5.775
12% up to
less than 13%
13% up to
less than 14%
14% up to
less than 15%
15% up to
less than 16%
16% up to
less than 17%
17% up to
less than 18%
18% up to
less than 19%
19% up to
less than 20%
5.049 up to
less than 5.143
5.143 up to
less than 5.239
5.239 up to
less than 5.335
5.335 up to
less than 5.433
5.433 up to
less than 5.532
5.532 up to
less than 5.632
5.632 up to
less than 5.733
5.733 up to
less than 5.836
5.775 up to
less than 5.882
5.882 up to
less than 5.992
5.992 up to
less than 6.102
6.102 up to
less than 6.214
6.214 up to
less than 6.327
6.327 up to
less than 6.441
6.441 up to
less than 6.557
6.557 up to
less than 6.674
0%
20%
30%
40%
50%
60%
70%
80%
90%
0
0
0
44,000
44,000
59,400
66,000
66,000
89,100
88,000
88,000
118,800
110,000
110,000
148,500
132,000
132,000
178,200
154,000
154,000
207,900
176,000
176,000
237,600
198,000
198,000
267,300
20% or over
5.836 or over
6.674 or over
100%
220,000
220,000
297,000
For options which do not vest they automatically lapse and are cancelled.
076 // 2019 ANNUA L RE PORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Remuneration Report (continued) Directors’ Report
continued
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
FEES
$
NON-MONETARY
BENEFITS(i)
$
SUPERANNUATION
$
263,231
250,000
166,615
160,000
127,333
112,000
117,762
100,000
73,762
36,154
100,000
784,857
722,000
-
24,667
-
24,667
-
24,667
-
24,667
-
-
24,667
-
123,335
20,540
20,049
15,829
15,200
12,097
10,640
11,187
9,500
7,007
3,435
9,500
70,095
64,889
TOTAL
$
283,771
294,716
182,444
199,867
139,430
147,307
128,949
134,167
80,769
39,589
134,167
854,952
910,224
REMUNERATION OF DIRECTORS AND KMP
Non-executive directors
Jack Cowin
Ross Adler
Grant Bourke
Lynda O’Grady
2019
2018
2019
2018
2019
2018
2019
2018
Ursula Schreiber
2019(ii)
Former non-executive directors
Paul Cave
Total
2019(iii)
2018
2019
2018
(i) The 2018 non-monetary benefits relate to directors and officer’s insurance premiums. For 2019 the Company has revised its position
that such insurance premiums do not constitute non-monetary benefits provided to directors and officers given the insurance contact
provides coverage to the Company.
(ii) On the 30 November 2018, Ursula Schreiber was appointed to the board.
(iii) On the 7 November 2018, Paul Cave resigned from the board.
077 // 2 019 AN N UAL R EPO RT D O M I NO’S PI Z ZA EN TERPRISES LIMITED
Remuneration Report (continued) Directors’ Report
continued
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078 // 2019 A NNUA L RE PORT DO MIN O’S PIZZA ENTERPRISES LIMITED
7
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Remuneration Report (continued)
Directors’ Report
continued
(i) The incentives are dependent on satisfaction of performance conditions.
(ii)
Included in salaries and other short-term benefits are amounts relating to tax equalisation.
(iii) On 15 September 2017 Michael Gillespie was appointed as Group Chief Digital and Technology Officer, and as a result of this appointment,
is now considered a KMP. The remuneration of Michael Gillespie is proportioned for the period that he is considered KMP.
(iv) Share-based payment is calculated using the number of instruments granted by the grant date fair value over the vesting period, taking
the cost that relates to the financial year ended 30 June 2019.
(v) The share-based payments remuneration amount for the financial year ended 30 June 2019 includes the derecognition of prior year’s
remuneration for options series 28 or 29 for Australian and New Zealand employees and options series 29 for European employees. The
derecognition of the remuneration is due to a re-assessment of the probability of achievement of the non-market option vesting conditions
in the current year principally being the cumulative annual compound EPS and cumulative EBIT target over the performance period.
The share-based payments remuneration amount for the financial year ended 01 July 2018 includes the derecognition of prior year’s
remuneration for options series 25 or 27 for Australian and New Zealand employees. The derecognition of the remuneration is due to a
re-assessment of the probability of achievement of the non-market option vesting conditions in the current year principally being the
compound annual EPS growth hurdle. In making that assessment the Board exercised its discretion to adjust the Group’s forecasted
compound annual EPS growth for FY19 to better reflect underlying growth and made adjustments to remove the benefits from acquisitions
as well as non-recurring, one-off or extraordinary items. The effect of these adjustments is that there will need to be a higher rate of
underlying compound annual EPS growth for options to vest in FY19.
(vi) Amounts relate to expatriate allowances including but not limited to housing, schooling and healthcare.
(vii) The 2018 non-monetary benefits relate to directors and officer’s insurance premiums. For 2019, the Company has revised its position
that such insurance premiums do not constitute non-monetary benefits provided to directors and officers given the insurance contract
provides covers to the Company.
(viii) The expense relating to the deferred STI payable as equity or cash is recognised over a 2.9 year vesting period which ends on
21 August 2021.
No director or KMP appointed during the period received a payment as part of his or her consideration for agreeing to hold their position.
INCENTIVES AND SHARE-BASED PAYMENTS GRANTED AS REMUNERATION FOR THE FINANCIAL YEAR
INCENTIVES
On 20 August 2019, Don Meij, Richard Coney, Josh Kilimnik, Allan Collins and Michael Gillespie were granted a cash or a combination of cash
and a deferred component (equity or cash) incentive for their performance during the year ended 30 June 2019. The incentive conditions
were agreed by the Board during the year. The amounts were determined and approved by the Board based on a recommendation by the
Nomination and Remuneration Committee.
No other incentives were granted during the financial year ended 30 June 2019.
SHORT-TERM INCENTIVE
INCLUDED IN
COMPENSATION
$(i)
DEFERRED
COMPONENT TO
BE RECOGNISED IN
FUTURE PERIODS
$
AMOUNT
FORFEITED IN
YEAR
$
PERCENTAGE
AWARDED IN YEAR
%(ii)
PERCENTAGE
FORFEITED IN YEAR
%(iii)
Don Meij
Richard Coney
Andrew Rennie
Josh Kilimnik
Nick Knight
Allan Collins
Michael Gillespie
150,000
84,395
-
311,873
-
37,358
93,659
-
49,723
-
-
-
22,010
55,181
850,000
353,583
414,673
-
473,750
387,007
240,285
15.0%
27.5%
0%
100%
0%
13.3%
38.2%
85.0%
72.5%
100%
0%
100%
86.7%
61.8%
07 9 // 2 01 9 AN N UAL R EPO RT D OMI N O’S PI ZZA E NTERP RISES LIMITED
Remuneration Report (continued)
Directors’ Report
continued
(i) Amounts included in remuneration for the financial year represent the amount that vested in the financial year based on achievement
of satisfaction of specified performance criteria.
(ii) Percentage awarded in the year is inclusive of full fair value of the deferred STI payable equity or cash, of the short-term incentive awarded
for the year ended 30 June 2019.
(iii) The amounts forfeited are due to the performance or service criteria not being met in relation to the financial year ended 30 June 2019.
LONG-TERM INCENTIVES
There were no long-term cash incentives granted for the financial year ended 30 June 2019.
EXECUTIVE SHARE AND OPTION PLAN (ESOP)
The Company established the ESOP to assist in the recruitment, reward, retention and motivation of the company’s KMP (“the participants”).
In accordance with the provisions of the scheme, KMP 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.
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.
During the prior and current financial year, the following share-based payment arrangements were in existence:
OPTIONS
SERIES
ISSUE &
GRANT DATE
GRANTED TO
EXPIRY
DATE
GRANT DATE
FAIR VALUE
EXERCISE PRICE
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(24)
(24)
(24)
(25)
(26)
(27)
(27)
(27)
(28)
(29)
(29)
29 Oct. 2014
Don Meij(i)
29 Oct. 2014
ANZ Employees
27 Jan. 2015
Andrew Rennie(i)
03 Feb. 2015
Europe Employees
20 Jun. 2015
Europe Employees
03 Sep. 2015
Don Meij(i)
03 Sep. 2015
Andrew Rennie(i)
03 Sep. 2015
ANZ Employees
03 Sep. 2015
Europe Employees
03 Sep. 2015
Japan Employees
01 Sep. 2016
Don Meij(i)
01 Sep. 2016
Andrew Rennie(i)
01 Sep. 2016
ANZ Employees
01 Sep. 2016
Europe Employees
01 Sep. 2016
Japan Employees
08 Nov. 2017
Don Meij
18 Apr 2018
ANZ Employees
18 Apr 2018
Europe Employees
28 Oct. 2020
31 Aug. 2018
31 Aug. 2020
31 Aug. 2018
31 Aug. 2018
28 Oct. 2020
31 Aug. 2020
31 Aug. 2019
31 Aug. 2019
31 Aug. 2019
28 Oct. 2020
31 Aug. 2020
31 Aug. 2020
31 Aug. 2020
31 Aug. 2020
31 Aug. 2021
31 Aug. 2021
31 Aug. 2021
080 // 2019 A NNUAL RE PORT D OMINO’S PIZZA ENTERPRISES LIMITED
$7.16
$7.39
$10.51
$7.11
$9.08
$8.20
$8.18
$8.18
$8.18
$8.18
$17.00
$16.50
$16.80
$16.80
$16.80
$11.22
$5.88
$5.88
$22.89
$22.89
$16.52
$22.89
$36.31
$40.95
$40.95
$40.95
$40.95
$40.95
$76.23
$76.23
$76.23
$76.23
$76.23
$46.63
$45.25
$45.25
VESTING
DATE
01 Sep. 2017
01 Sep. 2017
01 Sep. 2017
01 Sep. 2017
01 Sep. 2017
01 Sep. 2018
01 Sep. 2018
01 Sep. 2018
01 Sep. 2018
01 Sep. 2018
01 Sep. 2019
01 Sep. 2019
01 Sep. 2019
01 Sep. 2019
01 Sep. 2019
01 Sep. 2020
01 Sep. 2020
01 Sep. 2020
Remuneration Report (continued) Directors’ Report
continued
OPTIONS
SERIES
ISSUE &
GRANT DATE
GRANTED TO
EXPIRY
DATE
GRANT DATE
FAIR VALUE
EXERCISE PRICE
(29)
(30)
(31)
(32)
(32)
(32)
18 Apr. 2018
Japan Employees
14 Aug 2018
Andrew Rennie
23 Jan. 2019
Don Meij
25 May 2019
ANZ Employees
25 May 2019
Europe Employees
25 May 2019
Japan Employees
31 Aug. 2021
31 Aug. 2021
31 Aug. 2022
31 Aug. 2022
31 Aug. 2022
31 Aug. 2022
$5.88
$9.58
$7.27
$3.98
$3.98
$3.98
$45.25
$45.25
$51.96
$51.96
$51.96
$51.96
VESTING
DATE
01 Sep. 2020
01 Sep. 2020
01 Sep. 2021
01 Sep. 2021
01 Sep. 2021
01 Sep. 2021
(i) Options and shares issued on the exercise of options to Don Meij and Andrew Rennie are subject to an escrow. Don Meij’s escrow period
commencing on the date of issue and ending on 28 October 2019. Andrew Rennie’s escrow period commencing on the date of issue and
ending on 01 January 2019.
ANZ EMPLOYEE AND DON MEIJ OPTION VESTING CONDITIONS
Options pertaining to series 18, 19, 23, 24, 25 and 27 vest in accordance with the compound annual EPS growth rate over the relevant three-
year performance period.
PERFORMANCE CONDITION
PERCENTAGE OF PERFORMANCE
HURDLE ACHIEVED
PROPORTION OF OPTIONS
VESTING
DPE EPS percentage growth
over the relevant performance period
($AUD)
Less than 9%
9% up to less than 9.5%
9.5% up to less than 10%
10% up to less than 10.5%
10.5% up to less than 11%
11% up to less than 12%
12% up to less than 13%
13% up to less than 14%
14% up to less than 15%
15% or over
0%
10%
20%
40%
50%
60%
70%
80%
90%
100%
EUROPE EMPLOYEES & ANDREW RENNIE OPTION VESTING CONDITIONS
Options pertaining to series 20, 21, 22, 24, 26 and 27 vest in accordance with the following table. If the options vest, the vesting date will be
the date on which the DPE Europe EBIT three-year performance is determined. If the options do not vest, they automatically lapse. Options
granted to Andrew Rennie, Chief Executive Officer Europe are subject to escrow conditions.
PERFORMANCE CONDITION
PERCENTAGE OF PERFORMANCE
HURDLE ACHIEVED
PROPORTION OF
OPTIONS VESTING
Europe EBIT performance
Less than 90%
90%
0%
25%
(€)
More than 90% but less than 100%
Between 25% and 100% on a pro-rata basis
100% or more
100%
08 1 / / 20 19 AN NUAL R EPORT D OM I NO ’S PI Z ZA E NTERPRISES LIMITED
Remuneration Report (continued)
Directors’ Report
continued
JAPAN EMPLOYEES OPTION VESTING CONDITIONS
Options pertaining to series 24 and 27 vest in accordance with the below table and are subject to a DPE Japan EBITDA performance hurdle
over a three-year performance period.
PERFORMANCE CONDITION
PERCENTAGE OF PERFORMANCE
HURDLE ACHIEVED
PROPORTION OF
OPTIONS VESTING
Japan EBIT performance
Less than 96%
96%
0%
25%
(¥)
More than 96% but less than 100%
Between 25% and 100% on a pro-rata basis
100% or more
100%
Other vesting service or performance criteria:
Other than the above vesting conditions specified by Region, there are no further service or performance criteria that need to be met before
the options vest.
OPTIONS ISSUED DURING FY19 AND FY18
Options pertaining to series 28, 29, 30, 31 and 32 vest in accordance with the below table and are based on a sliding scale of the Company’s
cumulative annual compound earnings per share (EPS) growth for Group based roles, or a combination of the Company’s cumulative annual
compound EPS and the cumulative regional EBIT target over the performance period for regional specific relevant roles.
ANNUAL COMPOUND EPS GROWTH
PERCENTAGE OF CUMULATIVE EBIT
ANNUAL COMPOUND EPS GROWTH
DURING THE PERFORMANCE PERIOD
PROPORTION OF
OPTIONS WHICH VEST
PERCENTAGE OF CUMULATIVE EBIT
TARGET OVER PERFORMANCE PERIOD
PROPORTION OF
OPTIONS WHICH VEST
Less than 12%
12% up to less than 13%
13% up to less than 14%
14% up to less than 15%
15% up to less than 16%
16% up to less than 17%
17% up to less than 18%
18% up to less than 19%
19% up to less than 20%
20% or over
0%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less than 93%
93%
94%
95%
96%
97%
98%
99%
100%
101%
102%
103% or more
0%
25%
35%
45%
55%
65%
75%
80%
85%
90%
95%
100%
082 // 2019 A NNUA L R EPORT D OMINO’S PIZZA ENTERPRISES LIMITED
Remuneration Report (continued)
Directors’ Report
continued
EXERCISED OPTIONS
During the year, the following KMP exercised options that were granted to them as part of their remuneration. Each option converts into one
ordinary share of DPE Limited.
NAME
Don Meij
Richard Coney
Andrew Rennie
Josh Kilimnik
Nick Knight(i)
Allan Collins
Michael Gillespie
NO. OF OPTIONS
EXERCISED
NO. OF ORDINARY
SHARES OF DPE
LIMITED ISSUED
AMOUNT PAID
AMOUNT UNPAID
-
30,000
-
-
500
38,500
8,000
-
30,000
-
-
500
38,500
8,000
-
$1,228,500
-
-
$11,445
$1,576,575
$327,600
$nil
$nil
$nil
$nil
$nil
$nil
$nil
(i)
Includes options exercised by a related party during the period.
The following table summarises the value of options exercised or lapsed during the financial year to directors and senior management:
NAME
Don Meij
Richard Coney
Andrew Rennie
Josh Kilimnik
Nick Knight(iv)
Allan Collins
Michael Gillespie
VALUE OF OPTIONS
GRANTED AT THE
GRANT DATE(i)
$
VALUE OF OPTIONS
EXERCISED AT THE
EXERCISE DATE(ii)
$
VALUE OF OPTIONS
LAPSED AT THE DATE
OF LAPSE(iii)
$
-
245,400
-
-
3,695
314,930
65,440
-
280,800
-
-
16,555
136,675
23,520
-
-
-
-
-
-
-
(i) The value of options granted during the period is recognised in remuneration over the vesting period of the grant, in accordance with
Australian accounting standards.
(ii) Determined at the time of exercise at the intrinsic value, being the share price at the date of exercise less the exercise price, multiplied
by the number of shares exercised.
(iii) 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.
(iv)
Includes options exercised by a related party during the period.
08 3 / / 201 9 ANN UAL R E PO RT D O MI NO ’S P IZ ZA EN TERP RISES L IMITED
Remuneration Report (continued)
Directors’ Report
continued
Fully paid ordinary shares of Domino’s Pizza Enterprises Limited
The numbers of shares in the Company held during the financial year by each director of Domino’s Pizza Enterprises Limited and other key
management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the
reporting period as compensation.
BALANCE AT
BEGINNING OF
FINANCIAL YEAR
NO.
GRANTED AS
COMPENSATION
NO.
RECEIVED ON
EXERCISE OF
OPTIONS
NO.
NET OTHER
CHANGE
NO.
BALANCE AT
THE END OF
FINANCIAL YEAR
NO.
BALANCE HELD
NOMINALLY
NO.
2019
Jack Cowin
Ross Adler
Grant Bourke
Paul Cave
Ursula Schreiber
Lynda O’Grady
Don Meij
Richard Coney
Andrew Rennie
Nick Knight(i)
Josh Kilimnik
Allan Collins
Michael Gillespie
2018
Jack Cowin
Ross Adler
Grant Bourke
Paul Cave
Lynda O’Grady
Don Meij
Richard Coney
Andrew Rennie
Nick Knight
Josh Kilimnik
Allan Collins
Michael Gillespie
-
201,796
1,778,344
369,166
-
2,000
1,843,344
25,454
900,225
61,942
2,600
262
-
-
205,796
1,798,344
369,166
2,000
2,686,807
45,719
1,106,666
72,282
800
232,532
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,796)
200,000
(150,000)
1,628,344
-
-
-
-
369,166
-
2,000
1,843,344
30,000
(30,000)
25,454
-
500
-
38,500
8,000
-
-
-
-
-
(200,000)
700,225
(62,058)
-
(38,570)
(8,000)
-
384
2,600
192
-
-
(4,000)
201,796
(20,000)
1,778,344
-
-
369,166
2,000
300,000
(1,143,463)
1,843,344
54,000
150,000
27,000
(74,265)
(356,441)
(37,340)
-
1,800
38,500
8,000
(270,770)
(8,000)
25,454
900,225
61,942
2,600
262
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(i)
Includes shares held during the period by a related party.
084 // 2019 ANNUA L RE PORT D OMINO ’S PIZZA ENTERPRISES LIM ITED
Remuneration Report (continued) Directors’ Report
continued
Executive share options of Domino’s Pizza Enterprises Limited
BALANCE AT
BEGINNING OF
FINANCIAL YEAR
NO.
GRANTED AS
COMPENSATION
NO.
EXERCISED
NO.
NET OTHER
CHANGE
NO.
BALANCE AT
THE END OF
FINANCIAL YEAR
NO.
OPTIONS
VESTED
DURING YEAR
NO.
2019
Don Meij
Richard Coney
Andrew Rennie
Nick Knight(i)
Josh Kilimnik
Allan Collins
Michael Gillespie
2018
Don Meij
Richard Coney
Andrew Rennie
Nick Knight
Josh Kilimnik
Allan Collins
Michael Gillespie
Scott Oelkers
NAME
Don Meij
920,000
160,000
350,000
144,000
29,500
122,000
73,500
220,000
-
26,000
(30,000)
294,000
-
-
-
-
25,000
(500)
15,500
40,000
-
22,500
(38,500)
17,500
(8,000)
1,000,000
220,000
(300,000)
162,000
500,000
121,000
52,000
(54,000)
-
(150,000)
50,000
(27,000)
-
29,500
-
115,500
46,500
120,000
45,000
(38,500)
35,000
(8,000)
-
-
(120,000)
-
-
-
-
-
-
-
-
-
-
1,140,000
300,000
156,000
644,000
184,000
69,500
106,000
83,000
920,000
160,000
350,000
144,000
29,500
122,000
73,500
-
54,000
150,000
48,500
-
38,500
8,000
300,000
54,000
150,000
27,000
-
38,500
8,000
-
(i)
Includes options relating to a related party.
CONTRACTS FOR SERVICES OF KMP
TERM OF
CONTRACT
CONTRACT
COMMENCEMENT
NOTICE
TERMINATION –
BY COMPANY
NOTICE
TERMINATION –
BY EXECUTIVE
TERMINATION PAYMENT -
AMOUNT EQUAL TO
5 years
8 November 2017
12 months
Richard Coney
Ongoing
16 May 2005
6 months
12 months
6 months
12 months remuneration
6 months remuneration
Andrew Rennie
5 years
1 January 2018
12 months
12/6 months
12/6 months remuneration
Josh Kilimnik
3 years
1 January 2018
6 months
Nick Knight
Ongoing
1 October 2012
3 months
Allan Collins
Ongoing
8 January 2013
6 months
Michael Gillespie
Ongoing
15 September 2017
3 months
6 months
3 months
6 months
3 months
6 months remuneration
3 months remuneration
6 months remuneration
3 months remuneration
08 5 // 2 019 AN N UAL R EPO RT D O M IN O’S PI Z ZA E NTERPRISES LIMITED
Remuneration Report (continued) Directors’ Report
continued
The directors believe that the remuneration for each of the KMP is appropriate given their allocated accountabilities, the scale of the Company’s
business and the industry in which the Company operates. The service contracts outline the components of remuneration paid to the executive
directors and KMP but do not prescribe how the remuneration levels are modified year to year. Remuneration levels are reviewed each year
to take into account cost-of-living changes, any change in the scope of the role performed by the KMP and any changes required to meet the
principles of the Remuneration Policy.
Each of the KMP 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/Group CEO, has a contract of employment with Domino’s Pizza Enterprises Limited dated 8 November 2017. The
contract specifies the duties and obligations to be fulfilled by the Group CEO and provides that the Board and Group CEO 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 12 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 have 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.
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 remuneration 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 remuneration of executive directors and other non-director services provided by directors) is $1,400,000 per annum. The non-
executive directors may divide that remuneration 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 remuneration. Directors’ fees cover all main Board activities.
Current fees, with the effect from 01 December 2018 for a non-executive director was $127,853 per director per annum (2018: $100,000),
Chairman of the Board was $270,000 per annum (2018: $250,000), Deputy Chairman of the Board/ Chairman of the Audit Committee was
$170,000 (2018: $160,000) and Director/Chairman of the Nomination & Remuneration Committee was $135,000 (2018: $112,000), plus
superannuation where applicable.
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
Jack Cowin
Non-Executive Chairman
Sydney, 20 August 2019
Don Meij
Managing Director/Group Chief Executive Officer
Sydney, 20 August 2019
086 // 2019 A NNUAL RE PORT D O MINO’S PIZ ZA ENTERPRISES LIMITED
Remuneration Report (continued) Auditor’s independence declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 23, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
www.deloitte.com.au
20 August 2019
The Directors
Domino’s Pizza Enterprises Limited
Level 1, KSD1
485 Kingsford Smith Drive
HAMILTON QLD 4007
Dear Directors
Auditor’s Independence Declaration to 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 2019, 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 faithfully
DELOITTE TOUCHE TOHMATSU
Matthew Donaldson
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
087 / / 201 9 ANN UAL RE PO RT D O MI NO ’S PI Z ZA E NTERP RISES LIMITED
Independent Auditor’s Report
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 23, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
www.deloitte.com.au
Independent Auditor’s Report to the
Members of Domino’s Pizza Enterprises
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Domino’s Pizza Enterprises Limited (the “Company”) and its
subsidiaries (the “Group”), which comprises the consolidated statement of financial position as at
30 June 2019, the consolidated statement of profit or loss, consolidated statement of other
comprehensive income, the consolidated statement of cash flows and the consolidated statement of
changes in equity for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies, and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2019 and of their
financial performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors as
at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report for the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
088 // 2019 ANNUA L R EPORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Independent Auditor’s Report
continued
Key Audit Matter
Carrying Value of Goodwill and Indefinite Life
Intangible Assets in the Japan, Germany and
France/Belgium Cash Generating Units (CGUs)
As at 30 June 2019, the carrying value of the
Japan CGU included goodwill of $271.5 million
and indefinite life intangible assets of $46.0
million. The carrying value of the German CGU
included goodwill of $84.3 million and indefinite
life intangible assets of $174.8 million. The
carrying value of the France/Belgium CGU
included goodwill of $49.4 million and indefinite
life intangible assets of $49.4 million, as
disclosed in Note 9.
Management is required to exercise significant
judgement in estimating future cash flows,
market growth rates and discount rates, which
are used to determine the recoverable amount
of the CGUs.
How the scope of our audit responded to the
Key Audit Matter
In conjunction with our valuation specialists, our
procedures included, but were not limited to:
the
rates
discount
to
and
the assumptions used
Evaluating the Group’s identification of
CGUs and the allocation of goodwill to the
carrying value of CGUs based on our
understanding of the Group’s business;
Evaluating the appropriateness of the
methodology applied by management in
calculating the recoverable amounts of the
CGUs;
Challenging
calculate
recalculating these rates;
Agreeing the projected cash flows to Board
approved budgets and assessing the cash
flows, operating margins, expected growth
rates during the 5 year budget period and
terminal growth rates against historical
performance
industry
economic data;
Testing the mathematical accuracy of the
models used
to calculate recoverable
amount; and
Performing sensitivity analysis on the
recoverable amount of the CGU’s in relation
to the assumed growth rates during the 5
year budget period, terminal growth rates
and discount rates.
published
and
We also assessed the appropriateness of the
disclosures included in Note 9 to the financial
statements.
AASB 16 Leases: Presentation and Disclosure
Our procedures included, but were not limited
to:
As disclosed in Note 33, the Group is required
to apply AASB 16 from 1 July 2019. The
adoption of AASB 16 is expected to have a
material impact on the Group’s financial
statements.
As at 30 June 2019 the preliminary assessment
of the impact of the standard on the financial
statements for the year commencing 1 July
2019 as disclosed in Note 33 is:
Lease Liability ranging from ($694m)
to ($758m)
Right of use asset ranging from $311m
to $340m
to
their nature
that may contain a
Testing the completeness of the identified
lease contracts by disaggregating operating
identify
expenses by
categories
lease
arrangement. Using
the disaggregated
population, we inspected a sample of
contracts determined by management to
include a lease and a sample of contracts
that management did not assess as
containing a lease;
For a sample of leases, agreeing the lease
terms used in management’s calculation of
the expected impact of AASB 16 to the lease
contract;
Net investment in lease asset ranging
from $377m to $411m
Deferred tax ranging from $1m to $2m
Retained earnings ranging from $4m to
Challenging the incremental borrowing rate
used by management in the calculation of
the lease liability, with the assistance of our
Treasury and Capital Market specialists;
$5m
08 9 // 201 9 AN N UAL R EPO RT D O M I NO’S PI Z ZA E NTERPRISES LIMITED
Independent Auditor’s Report
continued
Key Audit Matter
In estimating the expected impact of AASB 16,
management is required to analyse their
contractual arrangements to conclude whether
they include a lease, and exercise significant
judgement in determining key assumptions
used to calculate the lease liability, right of use
asset and
the
incremental borrowing rates and the likely
exercise of renewal options.
financial asset,
including
the appropriateness of
How the scope of our audit responded to the
Key Audit Matter
Assessing
the
assumptions and key judgements applied
by management
the
expected lease period for each lease,
including the likely exercise of renewal
options;
in determining
Recalculating the lease liability, right of use
asset and financial asset on a sample basis
to test the mathematical accuracy of
management’s lease calculations.
We also assessed the appropriateness of the
disclosures included in Note 33 to the financial
statements.
Valuation of the put option related to the future
exit of the non-controlling interest in the
German component
In conjunction with our valuation specialists, our
procedures included, but were not limited to:
As at 30 June 2019, the put option relating to
the non-controlling interest in Germany is
valued at $87.8 million as disclosed in Notes 21
and 22.
The put option financial liability is classified as
Level 3 on the fair value hierarchy due to
significant unobservable inputs. Consequently,
management are required to make significant
judgements in respect of valuation inputs
relating to market growth rates, the expected
timing of exercise of the put option and the
discount rates.
the appropriateness of
Assessing
the
methodology applied by management in
valuing the option;
Challenging the key assumptions used in
valuing the option, including expected
future earnings of the component, the
expected timing of exercise of the put
option and the discount rate;
Confirming that the assumptions used in the
valuation model are in accordance with the
terms of the put options as prescribed by
the shareholders’ agreement; and
Testing the mathematical accuracy of the
put option calculation.
We also assessed the appropriateness of the
disclosures included in Notes 21 and 22 to the
financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2019, but does not
include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
090 // 2019 A NNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Independent Auditor’s Report
continued
Responsibilities of the Directors 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 preparing the financial report, the directors are responsible for assessing the ability of the Group
to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting
intentional omissions,
involve collusion,
fraud may
from error, as
misrepresentations, or the override of internal control.
forgery,
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the director’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We are responsible for the direction, supervision and performance of the Group’s audit. We
remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
091 / / 20 19 AN NUAL REP ORT D OM I NO’S PI Z ZA E NTER PRISES LIMITED
Independent Auditor’s Report
continued
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 71 to 86 of the Director’s Report for
the year ended 30 June 2019.
In our opinion, the Remuneration Report of Domino’s Pizza Enterprises Limited, for the year ended
30 June 2019 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of Domino’s Pizza Enterprises Limited 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.
DELOITTE TOUCHE TOHMATSU
Matthew Donaldson
Partner
Chartered Accountants
Brisbane, 20 August 2019
092 // 2019 A NNUAL RE PORT D O MINO’S PIZ ZA ENTERPRISES LIMIT ED
Directors’ declaration
The directors declare that:
(a)
(b)
(c)
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;
in the directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated
in the basis of preparation note to the financial statements;
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 Group; 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/Group Chief Executive Officer
Sydney, 20 August 2019
093 // 201 9 AN N UAL R E PORT D OM I NO ’S PI Z ZA E NTERPRISES LIMITED
domino’s pizza enterprises LIMITED annual report 2019
financial report
FINANCIAL REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
96
FINANCIAL MANAGEMENT
CONSOLIDATED STATEMENT OF OTHER
COMPREHENSIVE INCOME
97
19 BORROWINGS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 98
20 FINANCIAL ASSETS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 99
21 FINANCIAL LIABILITIES
CONSOLIDATED STATEMENT OF CASH FLOWS
100
22 FINANCIAL RISK MANAGEMENT
BASIS OF PREPARATION
101
GROUP STRUCTURE
23 SUBSIDIARIES
24 PARENT ENTITY INFORMATION
25
INVESTMENT IN JOINT VENTURE
UNRECOGNISED ITEMS
26 COMMITMENTS
27 CONTINGENT LIABILITIES
28 SUBSEQUENT EVENTS
OTHER INFORMATION
29 RETIREMENT BENEFIT PLANS
30
KEY MANAGEMENT PERSONNEL
COMPENSATION
31 RELATED PARTY TRANSACTIONS
32 REMUNERATION OF AUDITORS
33 OTHER ITEMS
KEY NUMBERS
1
2
3
4
5
6
7
8
9
SEGMENT INFORMATION
REVENUE
OTHER GAINS AND LOSSES
EXPENSES
CASH AND CASH EQUIVALENTS
TAX
ACQUISITION OF BUSINESSES
PROPERTY, PLANT AND EQUIPMENT
GOODWILL AND OTHER INTANGIBLES
10
TRADE, OTHER RECEIVABLES
AND OTHER ASSETS
11 TRADE AND OTHER PAYABLES
12 PROVISIONS
13
INVENTORY
CAPITAL
14 EQUITY
15 NON-CONTROLLING INTERESTS
16 DIVIDENDS
17 EARNINGS PER SHARE
18 SHARE-BASED PAYMENTS
103
103
105
107
107
108
110
114
118
120
125
127
127
128
129
129
131
132
133
134
138
138
139
142
144
157
157
159
160
161
161
163
164
165
165
167
167
169
169
095 / / 20 19 AN NUAL RE PO RT D O MI NO ’S PI Z ZA E NTERPRISES LIMITED
Consolidated statement of profit or loss
for the year ended 30 June 2019
Continuing operations
Revenue
Other gains and losses
Food, equipment and packaging expenses
Employee benefits expense
Plant and equipment costs
Depreciation and amortisation expense
Occupancy expenses
Finance costs
Marketing expenses
Royalties expense
Store related expenses
Communication expenses
Acquisition, integration, conversion and legal settlement costs
Other expenses
Profit before tax
Income tax expense
Profit for the period from continuing operations
Profit is attributable to:
Owners of the parent
Non-controlling interests
Total profit for the period
Earnings per share from continuing operations
Basic (cents per share)
Diluted (cents per share)
NOTE
2019
$’000
2018
$’000
2
3
4
4
4
4
6
17
17
1,435,410
1,153,952
17,433
19,529
(451,768)
(385,675)
(292,439)
(242,340)
(24,560)
(62,785)
(49,512)
(14,004)
(150,999)
(68,827)
(24,636)
(20,666)
(46,216)
(87,018)
159,413
(45,034)
114,379
115,912
(1,533)
114,379
Cents
135.5
135.4
(20,833)
(53,537)
(44,318)
(10,276)
(49,704)
(59,564)
(21,406)
(17,889)
(20,934)
(72,529)
174,476
(52,783)
121,693
121,466
227
121,693
Cents
139.4
139.0
This statement should be read in accompaniment with the notes to the financial statements.
096 // 2019 ANNUA L RE PORT D OMINO ’S PIZZA ENTERPRISES LIM ITED
Consolidated statement of other comprehensive income
for the year ended 30 June 2019
Profit for the period
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Gain/(loss) on net investment hedge taken to equity
Exchange differences arising on translation of foreign operations
Gain/(loss) on cash flow hedges taken to equity
Income tax relating to components of other comprehensive income
Other comprehensive gain/(loss) for the period, net of tax
Total comprehensive income for the period
Items not to be reclassified to profit or loss
Remeasurement of defined benefit obligation
Income tax relating to components of other comprehensive income
Net other comprehensive income not to be reclassified to profit or loss in subsequent periods for the period
Other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the period is attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income for the year
2019
$’000
114,379
(2,230)
26,926
(2,551)
2,012
24,157
2018
$’000
121,693
(5,869)
16,968
614
1,468
13,181
138,536
134,874
(47)
17
(30)
24,127
138,506
138,768
(262)
138,506
(168)
72
(96)
13,085
134,778
132,064
2,714
134,778
This statement should be read in accompaniment with the notes to the financial statements.
097 / / 201 9 AN N UAL R E PORT D OM I NO ’S P I ZZA E NTERP RISES L IMITED
Consolidated statement of financial position
as at 30 June 2019
NOTE
2019
$’000
2018
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Inventories
Current tax assets
Other assets
Total current assets
Non-current assets
Other financial assets
Investment in joint venture
Property, plant and equipment
Deferred tax assets
Goodwill
Other intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Contract liabilities
Other financial liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Contract liabilities
Other financial liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
5
10
20
13
6
10
20
25
8
6
9
9
11
19
2
21
6
12
19
2
21
12
6
14
14
14
101,404
93,902
16,528
22,110
1,579
29,784
265,307
70,413
3,121
253,152
2,618
475,005
368,797
1,173,106
1,438,413
188,608
5,373
3,051
12,360
25,944
11,136
75,996
78,181
26,855
19,271
767
28,529
229,599
75,436
2,762
200,103
-
428,804
365,707
1,072,812
1,302,411
156,045
3,700
-
12,646
18,945
9,709
246,472
201,045
646,076
594,799
15,645
114,146
9,979
60,088
845,934
1,092,406
346,007
206,218
(57,271)
197,060
346,007
-
121,915
8,807
68,181
793,702
994,747
307,664
192,808
(76,371)
191,227
307,664
This statement should be read in accompaniment with the notes to the financial statements.
098 // 2019 A NNUAL RE PORT D O MINO’S PIZ ZA ENTERPRISES LIMITED
Consolidated statement of financial position
as at 30 June 2019
NOTE
2019
$’000
2018
$’000
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Total non-current assets
Total assets
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206,218
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197,060
346,007
75,996
78,181
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229,599
75,436
2,762
200,103
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365,707
1,072,812
1,302,411
156,045
3,700
12,646
18,945
9,709
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121,915
8,807
68,181
793,702
994,747
307,664
192,808
(76,371)
191,227
307,664
246,472
201,045
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i
099 // 2 019 AN NUAL R EPO RT D O M I NO ’S PI Z ZA E NTERPRISES LIMITED
Consolidated statement of cash flows
for the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other finance costs
Income taxes paid
Net cash generated from operating activities
5
Cash flows from investing activities
Proceeds from/(loans to) franchisees
Payments for intangible assets
Payments for property, plant and equipment
Proceeds from sale of non-current assets
Acquisition of stores net of cash
Acquisition of subsidiaries and non-controlling interests
Net cash inflow/(outflow) on investment in joint ventures
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of equity securities
Contributions from non-controlling interests
Proceeds from borrowings
Payments for shares bought back
Payments for establishment of borrowings
Repayment of borrowings
Payments of finance leases
Payment for financial liabilities
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents held
Cash and cash equivalents at the beginning of the period
Effects of exchange rate changes on the balance of cash held in foreign currencies
NOTE
2019
$’000
2018
$’000
1,574,571
1,295,555
(1,348,549)
(1,070,946)
4,916
(12,892)
(41,645)
176,401
64,249
(33,795)
(89,200)
7,332
(38,990)
(650)
(406)
3,751
(9,139)
(33,777)
185,444
20,507
(30,233)
(54,056)
21,788
(23,368)
(89,175)
566
(91,460)
(153,971)
10,135
1,595
208,846
-
(62)
18,830
9,285
428,915
(183,479)
(2,950)
(182,541)
(178,896)
(6,312)
-
(7,885)
(1,159)
(96,124)
(90,808)
(64,463)
(8,147)
20,478
75,996
4,930
23,326
50,454
2,216
75,996
Cash and cash equivalents at the end of the period
5
101,404
This statement should be read in accompaniment with the notes to the financial statements.
0100 // 2019 ANNUA L R EPORT DOMINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
BASIS OF PREPARATION
Domino’s Pizza Enterprises Limited (Domino’s) is a for-profit public company limited by shares incorporated and domiciled in Australia
whose shares are publicly traded on the Australian Securities Exchanges and trading under the symbol ‘DMP’. The nature of the operations
and principal activities of Domino’s and its subsidiaries (the Group) are described in the segment information.
The consolidated general purpose financial report of the Group for the year ended 30 June 2019 was authorised for issue in accordance with
a resolution of the directors on 20 August 2019. The directors have the power to amend and reissue the financial report.
The financial report is a general purpose financial report which:
• has been prepared on a going concern basis in accordance with the requirements of the Corporations Act 2001, Australian Accounting
Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and also comply with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB);
• has been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value (refer to
note 22) and equity-settled share-based payments (refer to note 18). The carrying values of recognised assets and liabilities that are the
hedged items in fair value hedge relationships, which are otherwise carried at amortised costs, are adjusted to record changes in the fair
values attributable to the risks that are being hedged;
•
is presented in Australian dollars with all values rounded to the nearest thousand dollars ($’000) unless otherwise stated which is in
accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191;
• presents reclassified comparative information where required for consistency with the current year’s presentation;
•
adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the Group and effective
for reporting periods beginning on or before 02 July 2018 as listed in note 33;
• does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet effective; and
•
accounts for associates and joint ventures using the equity method as listed in note 25.
BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year-end
is contained in note 23.
Subsidiaries are entities over which the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Group using the acquisition method of accounting described in
note 7. They are deconsolidated from the date that control ceases.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
In preparing the consolidated financial statements all inter-company balances and transactions, income and expenses and profits and losses
resulting from intra-Group transactions have been eliminated.
FOREIGN CURRENCY
The functional currency of Domino’s Pizza Enterprises Limited is Australian dollars (‘$’), the functional currencies of overseas subsidiaries are
listed in note 23. As at the reporting date, the assets and liabilities of overseas subsidiaries are translated into Australian dollars at the rate of
exchange ruling at the balance sheet date and the income statements are translated at the average exchange rates for the year. The exchange
differences arising on the retranslation of overseas subsidiaries are taken directly to a separate component of equity.
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet 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.
01 01 / / 201 9 ANN UAL RE PORT D O MI N O’S P IZ ZA E N TERPRISES LIMITED
Notes to the Financial Statements
continued
Exchange differences arising from the application of these procedures are taken to the income statement, with the exception of differences
on foreign currency borrowings that provide a hedge against a net investment in a foreign entity, which are taken directly to equity until the
disposal of the net investment and are then recognised in the income statement. Tax charges and credits attributable to exchange differences
on those borrowings are also recognised in equity.
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.
COMPARATIVE INFORMATION
Comparative amounts have, where necessary and immaterial, been reclassified or adjusted so as to be consistent with current year disclosures.
OTHER ACCOUNTING POLICIES
Significant and other accounting policies that summarise the measurement basis used and are relevant to the understanding of the financial
statements are provided throughout the notes the financial statements.
KEY JUDGEMENTS AND ESTIMATES
In applying the Group’s accounting policies, the directors are required to make estimates, judgements and assumptions that affect amounts
reported in this Financial Report. The estimates, judgements and assumptions are based on historical experience, adjusted for current market
conditions and other factors that are believed to be reasonable under the circumstances and are reviewed on a regular basis. Actual results
may differ from these estimates.
The estimates and judgements which involve a higher degree of complexity or that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next period are included in the following notes:
NOTE
Note 9
Note 9
Note 9
Note 9
Note 21
Note 33
KEY JUDGEMENTS AND ESTIMATES
Valuation of Master Franchise Rights & Franchise Network Assets on Acquisition
Master Franchise Rights & Franchise Network Assets
Useful Lives of Other Intangible Assets
Recoverable Amount of Cash Generating Units
Germany Put Option Liability
Adoption of AASB 16 Leases
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period; or in the
period and future periods if the revision affects both current and future periods.
0102 // 2019 ANNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
KEY NUMBERS
Key numbers provides a breakdown of individual line items in the financial statements that the directors consider most relevant and summarises
the accounting policies, judgements and estimates relevant to understanding these items.
1
SEGMENT INFORMATION
RECOGNITION AND MEASUREMENT
The Group’s operating segments are organised and managed separately according to the market in which they operate.
The Group operates predominantly franchise networks and retail pizza stores. The Managing Director and Group Chief Executive Officer (the
chief operating decision-maker) considers, organises and manages the business from a geographic perspective, being the geographical region
where the goods and services are provided. Discrete financial information about each of these operating businesses is reported monthly to
the Managing Director and Group Chief Executive Officer, via a Group financial report for the purpose of making decisions about resource
allocation and performance assessment.
The operating segments for the Group are as follows:
• Australia / New Zealand (“ANZ”)
• Europe (includes non-controlling interest) refer to note 15
•
Japan
The Group provides services to and derives revenue from a number of customers. The Group does not derive more than 10% of the total
consolidated revenue from any one customer.
UNDERSTANDING THE SEGMENT RESULT
SEGMENT REVENUES AND RESULTS
The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment.
Continuing operations
Revenue
EBITDA
Depreciation & amortisation
EBIT
Finance costs
Net profit before tax
YEAR ENDED 30 JUNE 2019
ANZ
$’000
EUROPE
$’000
JAPAN
$’000
TOTAL
$’000
414,300
113,918
(25,132)
88,786
537,414
49,701
483,696
1,435,410
72,583
236,202
(18,392)
(19,261)
(62,785)
31,309
53,322
173,417
(14,004)
159,413
01 03 // 201 9 AN N UAL R EPO RT D OMI N O’S P I ZZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
1
SEGMENT INFORMATION (Continued)
Continuing operations
Revenue
EBITDA
Depreciation & amortisation
EBIT
Finance costs
Net profit before tax
YEAR ENDED 01 JULY 2018
ANZ
$’000
EUROPE
$’000
JAPAN
$’000
TOTAL
$’000
341,089
127,495
(21,805)
105,690
407,168
405,695
59,713
(14,151)
45,562
51,081
(17,581)
33,500
1,153,952
238,289
(53,537)
184,752
(10,276)
174,476
Revenue reported above represents revenue generated from external customers and franchisees. There were no inter-segment sales during
the period (2018: Nil).
The accounting policies of the reportable segments are the same as the Group’s policies described throughout the financial report. 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.
SEGMENT ASSETS AND LIABILITIES FROM CONTINUING OPERATIONS
The amounts provided to the chief operating decision-makers in respect of total assets and liabilities are measured in a manner consistent
with that of the financial statements.
2019
Continuing operations
Australia/New Zealand
Europe
Japan
Total segment assets/(liabilities)
Unallocated liabilities
Consolidated assets/(liabilities)
2018
Continuing operations
Australia/New Zealand
Europe
Japan
Total segment assets/(liabilities)
Unallocated liabilities
Consolidated assets/(liabilities)
0104 // 2019 A NNUAL RE PORT D OMINO ’S PIZZA ENTERPRISES LIMITED
ASSETS
$’000
LIABILITIES
$’000
295,821
(546,966)
564,705
(255,758)
577,887
(289,682)
1,438,413
(1,092,406)
-
-
1,438,413
(1,092,406)
ASSETS
$’000
LIABILITIES
$’000
297,747
511,974
492,690
1,302,411
-
(503,828)
(247,647)
(243,272)
(994,747)
-
1,302,411
(994,747)
Notes to the Financial Statements
continued
1
SEGMENT INFORMATION (Continued)
OTHER SEGMENT INFORMATION
The non-current assets by geographical location are detailed below.
DEPRECIATION
AND AMORTISATION
ADDITIONS TO
NON-CURRENT ASSETS
NON-CURRENT
ASSETS
2019
$’000
25,132
18,392
19,261
62,785
2018
$’000
21,805
14,151
17,581
53,537
2019
$’000
56,950
65,749
50,004
172,703
2018
$’000
48,094
98,335
24,620
171,049
2019
$’000
236,676
469,189
467,240
1,173,105
2018
$’000
220,241
427,408
425,163
1,072,812
Australia / New Zealand
Europe
Japan
Total
2
REVENUE
RECOGNITION AND MEASUREMENT
Revenue is recognised when or as the performance obligation under the relevant customer contract is completed. Performance obligations
may be completed at a point in time or over time.
Refer to note 33, which outlines the previous reporting period revenue recognition and measurement policies and the impact of the adoption
of AASB 15 Revenue from Contracts with Customers.
SALE OF GOODS
The revenue from the sale of food and beverages is recognised when the performance obligation has been satisfied. The performance
obligation is assessed to be satisfied when control of the goods is passed to the customer (at a point in time).
FRANCHISE REVENUE
Initial fees are recognised as revenue on a straight-line basis over the term of the respective franchise agreement. This is on the basis that
the Group has determined that the services provided in exchange for the initial fees are highly interrelated with the franchise right and are not
individually distinct from the ongoing services provided to the franchisees.
Revenue associated with continuing sales-based royalties and marketing fund royalties is recognised when the related franchisee sale occurs.
The Group considers there to be one performance obligation, being the franchise right.
SERVICE REVENUE
The Group provides services to franchisees and other third parties which are carried out in accordance with the contract. Service revenue is
recognised on satisfaction of the performance obligation which is when the services are rendered.
INTEREST REVENUE
Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured
reliably. Interest is determined using the effective interest rate method, which accrues interest 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.
01 05 / / 201 9 ANN UAL R E PORT D OM I NO ’S P I ZZA E NTERP RISES LIMITED
Notes to the Financial Statements
continued
2 REVENUE (Continued)
Revenue
Revenue from sale of goods - point in time
Revenue from rendering of services - over time
Franchise services, supplier fees & other - point in time
Royalties, franchise services, supplier fees & other - over time
Interest revenue
Total revenue
YEAR ENDED 30 JUNE 2019
ANZ
$’000
EUROPE
$’000
JAPAN
$’000
TOTAL
$’000
127,569
10,563
148,389
125,143
2,636
414,300
361,530
448,646
424
53,321
121,791
348
-
4,583
28,535
1,932
937,745
10,987
206,293
275,469
4,916
537,414
483,696
1,435,410
Revenue
Revenue from sale of goods
Revenue from rendering of services
Interest revenue - bank deposits
Interest revenue - other loans and receivables
Store asset rental revenue
Royalties, franchise service & supplier fees
Other revenue
Total revenue
CONTRACT LIABILITIES
2018
$’000
776,269
17,803
244
3,506
7,156
326,333
22,641
1,153,952
Contract liabilities consist of deferred franchise fees. The Group’s franchise agreements typically require certain one-off fees. These fees
include initial fees paid upon executing a franchise agreement, renewal of the franchise right and fees paid in the event the franchise agreement
is transferred to another franchisees (collectively termed initial fees). Upon adoption of AASB 15, the Group has determined that the initial
fees are highly interrelated with the franchise right and are not individually distinct from the ongoing services provided to the franchisees. As a
result, upon adoption of AASB 15, initial fees are recognised as revenue over the term of each respective franchise agreement, which generally
ranges from a 5 to 10 year period. Revenue from these initial franchise fees are recognised on straight-line basis with the franchisee’s right to
use and benefit from the intellectual property.
The Group has recognised the following deferred franchise fees:
Contract liabilities
Within one year
More than one year
Total
2019
$’000
3,051
15,645
18,696
Contract liabilities at the beginning of the period was $20.1 million. The Group recognised $4.5 million of revenue related to contract liabilities.
Management expects to recognise $3.1 million related to deferred franchise fees during the next reporting period.
The Group has applied the sales-based royalty exemption which permits exclusion of variable consideration in the form of sales-based royalties
from the disclosure of remaining performance obligations.
0106 // 2019 A NNUA L RE PORT DO MINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
3
OTHER GAINS AND LOSSES
Net gain on disposal of property, plant & equipment, goodwill and other non-current assets
Other
Total other gains and losses
2019
$’000
17,433
-
17,433
2018
$’000
18,079
1,450
19,529
No other gains or losses have been recognised in respect of loans and receivables other than as disclosed in note 2 and impairment losses
recognised/reversed in respect of trade and other receivables (see note 10).
4
EXPENSES
RECOGNITION AND MEASUREMENT
EMPLOYEE BENEFITS
The Group’s accounting policy for liabilities associated with employee benefits is set out in note 12. The policy relating to share-based payments
is set out in note 18.
The majority of employees in Australia and New Zealand are party to defined contribution schemes and fixed contributions from Group
companies and the Group’s legal or constructive obligation is limited to these contributions. Contributions to defined contribution funds are
recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a
reduction in the future payment is available.
OCCUPANCY EXPENSES
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. Operating lease incentives are
recognised as a liability when received and released to the income statement on a straight-line basis over the lease term.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
An asset or liability is recognised for the difference between the amount paid and the lease expense recognised in earnings on a straight-line
basis.
DEPRECIATION AND AMORTISATION
Refer to notes 8 and 9 for details on depreciation and amortisation.
FINANCE COSTS
Finance costs are recognised as an expense when they are incurred, except for interest charges attributable to major projects with substantial
development and construction phases that are capitalised.
Provisions and other payables are discounted to their present value when the effect of the time value of money is significant. The impact of
the unwinding of these discounts and any changes to the discounting is shown as a discount rate adjustment in finance costs.
01 07 / / 201 9 ANN UAL R E PO RT D O MI NO ’S P IZ ZA EN TERP RISES LIMITED
Notes to the Financial Statements
continued
4
EXPENSES (Continued)
PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS
Profit for the year from continuing operations was arrived at after charging (crediting):
Remuneration, bonuses and on-costs
Defined contribution plans
Defined benefit plans
Share-based payments expense
Employee benefits expenses
Depreciation of property, plant and equipment
Amortisation of intangible assets
Amortisation of loan establishment costs
Depreciation and amortisation expense
Lease payments
Net rental payments(i)
Occupancy expenses
Interest on commercial bill and loans
Amortisation of borrowing costs
Finance costs
NOTE
29
2019
$’000
279,081
11,014
935
1,409
2018
$’000
227,919
11,874
877
1,670
292,439
242,340
40,847
21,454
484
62,785
160
49,352
49,512
12,892
1,112
14,004
36,332
16,738
467
53,537
162
44,156
44,318
9,139
1,137
10,276
(i) Net rental expenditure includes $27.9m (2018: $26.0m) rental receipts arising under sublease arrangements.
5
CASH AND CASH EQUIVALENTS
RECOGNITION AND MEASUREMENT
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. Bank
overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position.
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
0108 // 2019 ANNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
2019
$’000
101,404
101,404
2018
$’000
75,996
75,996
Notes to the Financial Statements
continued
5
CASH AND CASH EQUIVALENTS (Continued)
RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period
Profit on sale of non-current assets
Equity settled share-based payments
Depreciation and amortisation
Share of associate entities net (profit)/loss
Amortisation of loan establishment costs
Other
MOVEMENT IN WORKING CAPITAL
(Increase)/decrease in assets:
Trade and other receivables
Inventory
Other current assets
Increase/(decrease) in liabilities:
Trade and other payables
Provisions
Current tax assets and liabilities
Deferred tax balances
Net cash generated from operating activities
Net debt reconciliation
2019
$’000
114,379
(17,873)
1,409
62,785
113
1,112
2,470
164,395
2019
$’000
2018
$’000
121,693
(18,716)
1,670
53,537
(30)
1,137
2,870
162,161
2018
$’000
(12,297)
(3,639)
(1,801)
8,512
2,802
28
14,791
1,712
5,848
(4,759)
176,401
8,793
(1,507)
10,654
6,152
185,444
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Cash and cash equivalents
Borrowings - repayable within one year
Borrowings - repayable after one year
Net debt
Cash and liquid investments
Gross debt - fixed interest rates
Gross debt - variable interest rates
Net debt
2019
$’000
101,404
(5,373)
2018
$’000
75,996
(3,700)
(646,076)
(594,799)
(550,045)
(522,503)
101,404
75,996
(422,400)
(100,403)
(229,049)
(498,096)
(550,045)
(522,503)
01 09 // 2 019 AN NUAL RE PO RT D O MI NO ’S P I ZZA E NTERP RISES LIMITED
Notes to the Financial Statements
continued
5
CASH AND CASH EQUIVALENTS (Continued)
Net debt as at 03 July 2017
Cash flows
Finance lease additions
Foreign exchange adjustments
Other non-cash movements
CASH
$’000
50,454
23,326
-
2,216
-
Net debt as at 01 July 2018
75,996
FINANCE
LEASES DUE
WITHIN
1 YEAR
$’000
FINANCE
LEASES
DUE AFTER
1 YEAR
$’000
BORROW.
DUE WITHIN
1 YEAR
$’000
BORROW.
DUE AFTER
1 YEAR
$’000
TOTAL
$’000
(3,537)
7,885
-
-
(8,048)
(3,700)
(12,541)
(14,373)
(298,789)
(278,786)
-
14,373
(261,442)
(215,858)
(4,259)
(684)
8,048
(9,436)
-
-
-
-
-
(4,259)
(23,995)
(22,463)
(1,137)
(1,137)
(585,363)
(522,503)
FINANCE
LEASES DUE
WITHIN 1
YEAR
$’000
FINANCE
LEASES DUE
AFTER
1 YEAR
$’000
(3,700)
(9,436)
-
(1,298)
(375)
-
6,312
(7,300)
(835)
-
CASH
$’000
75,996
20,478
-
4,930
-
Net debt as at 02 July 2018
Cash flows
Finance lease additions
Foreign exchange adjustments
Other non-cash movements
Net debt as at 30 June 2019
101,404
(5,373)
(11,259)
BORROWINGS
DUE WITHIN 1
YEAR
$’000
BORROWINGS
DUE AFTER
1 YEAR
$’000
TOTAL
$’000
-
-
-
-
-
-
(585,363)
(522,503)
(27,274)
-
(484)
(8,598)
(21,146)
(17,426)
(1,034)
(1,034)
(634,817)
(550,045)
6
TAX
RECOGNITION AND MEASUREMENT
Income tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAXES
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities at the tax rates
and tax laws enacted or substantively enacted by the balance sheet date in respective jurisdictions.
DEFERRED TAXES
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary
differences, carried forward unused tax assets and unused tax losses, to the extent that it is probable that taxable profits will be available to
utilise them.
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 balance sheet date.
0110 // 2019 A NNUAL RE PORT D O MINO’S PIZ ZA ENTERPRISES LIM ITED
Notes to the Financial Statements
continued
6
TAX (Continued)
Deferred income tax is provided on temporary differences at balance sheet date between accounting carrying amounts and the tax bases of
assets and liabilities, other than for the following:
• where they arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
• where taxable temporary differences relate to investments in subsidiaries, associates and interests in joint ventures:
Deferred tax liabilities are not recognised if the timing of the reversal of the temporary differences can be controlled and it is probable that
the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are not recognised if it is not probable that the temporary differences will reverse in the foreseeable future and taxable
profit will not be available to utilise the temporary differences.
Deferred tax liabilities are not recognised on the recognition of goodwill.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.
OFFSETTING DEFERRED TAX BALANCES
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
UNRECOGNISED TAXABLE TEMPORARY DIFFERENCES ASSOCIATED WITH INVESTMENTS AND INTERESTS
At the end of the financial year, an aggregate deferred tax liability of $97,886 thousand (2018: $93,984 thousand) 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.
INCOME TAX RECOGNISED IN THE PROFIT OR LOSS
Tax expense comprises:
Current tax expense in respect of the current year
49,773
46,335
2019
$’000
2018
$’000
Adjustments recognised in the current year in relation to the current tax of prior years
Other
Deferred tax expense/(income) relating to the origination and reversal of temporary differences
Deferred tax expense/(income) relating to the origination in relation to change in tax rate in other jurisdiction
Other
330
-
50,103
(5,069)
-
-
(1,144)
584
45,775
8,443
(1,159)
(276)
Total tax expense relating to continuing operations
45,034
52,783
01 1 1 // 20 19 AN NUAL R EPO RT D OM IN O ’S P IZ ZA EN TERP RISES L IMITED
Notes to the Financial Statements
continued
6
TAX (Continued)
RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX RATE:
Profit before tax from continuing operations
Income tax expense calculated at 30%
Non-assessable/non-deductible amounts
Effect of different tax rates of subsidiaries operating in other jurisdictions
Effect of tax concessions (research and development and other allowances)
Adjustments recognised in the current year in relation to the current tax of prior year
Adjustments recognised in the current year in relation to the deferred tax of prior year
Effect of change in tax rate in other jurisdictions
Income tax expense recognised in profit or loss
2019
$’000
159,413
47,824
(1,801)
610
(1,445)
45,188
330
(484)
-
2018
$’000
174,476
52,343
618
1,008
(585)
53,384
(1,269)
1,071
(403)
45,034
52,783
The tax rate used for the 2019 and 2018 reconciliation above is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law.
INCOME TAX RECOGNISED IN EQUITY
Arising on income and expenses in other comprehensive income:
(Gain)/Loss on hedges taken to equity
(Gain)/Loss on defined benefit plan taken to equity
Share option trust
CURRENT TAX ASSETS AND LIABILITIES
Current tax assets
Income tax refund receivable
Current tax liabilities
Income tax payable
0112 // 2019 A NNUA L RE PORT D O MIN O’S PIZZA ENTERPRISES LIMITED
2019
$’000
2018
$’000
2,012
17
(1,318)
711
1,468
72
(519)
1,021
2019
$’000
2018
$’000
1,579
1,579
767
767
(25,944)
(25,944)
(18,945)
(18,945)
Notes to the Financial Statements
continued
6
TAX (Continued)
DEFERRED TAX BALANCES
2019
Temporary differences
OPENING
BALANCE
$’000
RESTATED
OPENING
BALANCE (i)
$’000
CHARGED
TO P&L
$’000
CHARGED
TO EQUITY
$’000
ACQUISITIONS/
DISPOSALS
$’000
EXCHANGE
DIFFERENCE
$’000
CLOSING
BALANCE
$’000
Property, plant & equipment
(15)
(15)
Intangible assets
(84,221)
(84,221)
Provision for employee entitlements
5,216
Other provisions
Doubtful debts
Other financial liabilities
Options reserve
Unearned income (i)
Other
Unused tax losses and credits
Tax losses
Deferred tax asset
Deferred tax liability
449
(1,161)
1,655
(143)
188
103
(517)
(572)
156
158
4,911
4,911
143
609
1,023
1,835
(996)
2,576
5,216
143
609
1,023
1,835
5,200
2,576
(73,830)
(67,634)
5,649
5,649
5,649
5,649
(68,181)
(61,985)
5,069
-
-
17
-
-
2,012
(1,318)
-
-
711
-
-
711
-
(64)
22
-
-
-
-
-
-
(38)
396
(2,577)
(88,023)
349
7,259
-
51
8
-
201
127
-
848
3,146
-
4,829
2,859
(42)
(1,879)
(68,686)
480
480
438
176
176
11,216
11,216
(1,703)
(57,470)
2,618
(60,088)
(57,470)
(i) The Group adopted the modified retrospective approach to the implementation of AASB 15. The new standard has therefore been
applied to contracts that remain in force at 02 July 2018. A transition adjustment has been recognised on transition at 02 July 2018,
without adjustment of the comparative. The Group has recognised a deferred tax asset of $6,196 thousand as at 02 July 2018 relating
to the contract liability on adoption of AASB 15. Refer to note 33 for the impact of the adoption of AASB 15 on the Group.
01 1 3 / / 201 9 ANN UAL R E PORT D OM I NO ’S P I ZZA E NTERP RISES LIMITED
Notes to the Financial Statements
continued
6
TAX (Continued)
2018
Temporary differences
Property, plant & equipment
Intangible assets
Provision for employee
entitlements
Other provisions
Doubtful debts
Other financial liabilities
Options reserve
Unearned income
Other
Unused tax losses and credits
Tax losses
Deferred tax asset
Deferred tax liability
OPENING
BALANCE
$’000
CHARGED
TO P&L
$’000
CHARGED
TO EQUITY
$’000
ACQUISITIONS /
DISPOSALS
$’000
EXCHANGE
DIFFERENCE
$’000
CLOSING
BALANCE
$’000
(2,476)
(64,541)
4,356
140
324
(1,110)
6,220
8
863
2,451
(5,202)
604
3
276
660
(3,866)
(914)
1,620
-
-
72
-
-
1,468
(519)
-
-
-
10
(15)
(10,814)
(3,664)
(84,221)
-
-
-
-
-
-
-
184
-
9
5
-
(90)
93
5,216
143
609
1,023
1,835
(996)
2,576
(56,216)
(4,368)
1,021
(10,814)
(3,453)
(73,830)
8,101
8,101
(48,115)
(2,641)
(2,641)
(7,009)
-
-
-
-
189
189
5,649
5,649
1,021
(10,814)
(3,264)
(68,181)
-
(68,181)
(68,181)
7
ACQUISITION OF BUSINESSES
RECOGNITION AND MEASUREMENT
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 acquired, liabilities incurred or assumed, and equity instruments issued
by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
Goodwill is measured as the excess of 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) over the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable
assets acquired and liabilities assumed 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 interest in the acquiree (if any), the excess is recognised immediately in profit or
loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in
the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognised
amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other
types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another Standard.
0114 // 2019 ANNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
7
ACQUISITION OF BUSINESSES (Continued)
Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent
consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the
contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments
against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement
period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments
depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent
reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability
is remeasured at subsequent reporting dates in accordance with AASB 9, with the corresponding gain or loss being recognised in the statement
of profit or loss.
Where a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is remeasured to its acquisition
date fair value 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 Group 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.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the
Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during
the measurement period (see above), 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 Group obtains complete information about facts and
circumstances that existed as of the acquisition date and is subject to a maximum of one year.
01 1 5 // 2 019 AN NUAL RE PO RT D O M I NO’S PI Z ZA E NTER PRISES LIMITED
Notes to the Financial Statements
continued
7
ACQUISITION OF BUSINESSES (Continued)
CURRENT YEAR ACQUISITIONS
ACQUISITION OF DOMINO’S PIZZA STORES AND OTHER BUSINESSES
During the year the Group acquired a number of Domino’s Pizza branded stores from former and current franchisees, as well as other minor
acquisitions of businesses. The below provides a summary of these acquisitions during the year by segment:
2019
Number of stores acquired
Fair value on acquisition
Inventories
Other current assets
Property, plant & equipment
Other intangible assets
Deferred tax assets
Trade payables
Provisions
Loans
Deferred tax liabilities
Total identifiable net assets
Cash consideration
Shares issued at fair value
Less fair value of net identifiable assets
Goodwill
ANZ(i)
31
ANZ
$’000
355
-
6,039
215
-
-
(75)
-
(42)
6,492
20,506
-
(6,492)
14,014
EUROPE
JAPAN
TOTAL
28
EUROPE
$’000
-
5,711
4,124
-
480
(6,721)
-
(1,034)
-
2,560
16,966
793
(2,560)
15,199
8
JAPAN
$’000
-
-
1,518
-
-
-
-
-
-
1,518
1,518
-
67
TOTAL
$’000
355
5,711
11,681
215
480
(6,721)
(75)
(1,034)
(42)
10,570
38,990
793
(1,518)
(10,570)
-
29,213
(i)
included in ANZ are the acquisition of two minor businesses for $1,703 thousand of consideration.
Goodwill arising on acquisition of stores in Europe is expected to be deductible for tax purposes. For the other jurisdictions, Goodwill arising
on acquisitions is not deductible for tax purposes.
The cost of acquisitions comprise cash for all of the acquisitions. In each acquisition, the Group has paid a premium for the acquiree as it
believes the acquisitions will introduce additional synergies to its existing operations.
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.
0116 // 2019 ANNUAL RE PORT D O MINO’S PIZZA ENTERPRISES L IMITED
Notes to the Financial Statements
continued
7
ACQUISITION OF BUSINESSES (Continued)
PRIOR YEAR ACQUISITIONS
HALLO PIZZA
On the 5 January 2018, the Group acquired through its 66.67% controlled joint venture company Daytona JV (UK) Limited, 100% of the issued
share capital in Hallo Pizza. Hallo Pizza is a chain of 163 franchised pizza stores in Germany. This acquisition is expected to reinforce DPE’s
position as the largest pizza chain in the German market. The acquisition was funded through debt raising.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are set out in the table below, which is on a
100% basis.
Assets
Cash
Trade and other receivables
Other current assets
Property, plant and equipment
Other intangible assets
Other non-current financial assets
Total identifiable assets
Liabilities
Trade and other payables
Non-current borrowings
Deferred tax liability
Total identifiable liabilities
Total identifiable net assets at fair value
Total consideration
Less identifiable net assets at fair value
Goodwill
Total consideration
Cash
Working capital adjustment
Total consideration
Net cash outflow arising on acquisition
Cash consideration
Less: cash and cash equivalent balances acquired
FAIR VALUE ON
ACQUISITION
$’000
7,592
1,908
2,543
217
34,725
24
47,009
(6,228)
(124)
(10,846)
(17,198)
29,811
54,171
(29,811)
24,360
52,324
1,847
54,171
52,324
(7,592)
44,732
During the period, the Group has finalised its acquisition accounting of Hallo Pizza with no revisions to the provisional acquisition accounting.
Goodwill arose on the acquisition because the cost of the combination included a control premium. In addition, the consideration paid for the
combination effectively included amounts in relation to the benefit of expected synergies, revenue growth, future market development and
the assembled workforce of Hallo Pizza. These benefits are not recognised separately from goodwill because they do not meet the recognition
criteria for identifiable intangible assets.
In determining the fair value of intangible assets arising on the acquisition of Hallo Pizza, judgements and estimates are required to be applied.
These estimates and judgements are detailed in note 9.
01 1 7 / / 201 9 ANN UAL R E PO RT D O M IN O’S PI Z ZA E NTER PRISES LIMITED
Notes to the Financial Statements
continued
7
ACQUISITION OF BUSINESSES (Continued)
ACQUISITION OF DOMINO’S PIZZA STORES AND OTHER BUSINESSES
During the prior year the Group acquired a number of Domino’s Pizza branded stores from former and current franchisees. The below provides
a summary of these acquisitions during the prior year by segment:
2018
Number of stores acquired
Fair value on acquisition
Cash and cash equivalents
Inventories
Other current assets
Property, plant & equipment
Other intangible assets
Trade payables
Total identifiable net assets
Cash consideration
Less fair value of net identifiable assets
Goodwill
ANZ
28
ANZ
$’000
11
198
-
4,417
-
-
4,626
13,145
(4,626)
8,519
EUROPE
12
EUROPE
$’000
32
-
157
1,677
927
(186)
2,607
7,096
(2,607)
4,489
JAPAN
16
JAPAN
$’000
-
-
-
3,171
-
-
3,171
3,171
(3,171)
-
TOTAL
56
TOTAL
$’000
43
198
157
9,265
927
(186)
10,404
23,412
(10,404)
13,008
8
PROPERTY, PLANT AND EQUIPMENT
RECOGNITION AND MEASUREMENT
The carrying value of property plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure
that is directly attributable to the acquisition of an item.
DEPRECIATION AND AMORTISATION
Items of property, plant and equipment are depreciated on a straight-line basis over their useful lives. The estimated useful life of plant and
equipment is between 1 and 10 years and equipment under finance lease is between 3 and 10 years.
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.
DERECOGNITION
An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to bring no future
economic benefits. Any gain or loss from derecognising the asset, being the difference between the proceeds of disposal and the carrying
amount of the asset, is included in the income statement in the period the item is derecognised.
IMPAIRMENT
At the end of each reporting period, the Group reviews the carrying amounts of its property plant and equipment 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 Group 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.
0118 // 2019 A NNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
8 PROPERTY, PLANT AND EQUIPMENT (Continued)
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 or 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.
Where an impairment loss subsequently reverses, the carrying amount of the asset or 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 or 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.
Year ended 30 June 2019
Cost or fair value
Accumulated depreciation
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Acquisitions of Domino’s Pizza stores and other businesses
Disposals and write-offs
Depreciation
Other including foreign exchange movements
Net carrying amount at the end of the year
Year ended 01 July 2018
Cost or fair value
Accumulated depreciation
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Acquisitions of Domino’s Pizza stores and other businesses
Acquisition of subsidiary
Disposals and write-offs
Depreciation
Other including foreign exchange movements
Net carrying amount at the end of the year
PLANT &
EQUIPMENT
AT COST
$’000
EQUIPMENT
UNDER
FINANCE
LEASE AT
COST
$’000
TOTAL
$’000
349,550
(113,053)
236,497
187,615
89,200
11,681
(25,890)
(35,220)
9,111
236,497
256,228
(68,613)
187,615
183,806
54,056
9,265
217
(35,801)
(30,608)
6,680
187,615
39,360
388,910
(22,705)
(135,758)
16,655
253,152
12,488
8,598
-
-
(5,627)
1,196
16,655
29,726
(17,238)
12,488
14,868
4,259
-
-
(1,570)
(5,724)
655
12,488
200,103
97,798
11,681
(25,890)
(40,847)
10,307
253,152
285,954
(85,851)
200,103
198,674
58,315
9,265
217
(37,371)
(36,332)
7,335
200,103
There was no depreciation during the period that was capitalised as part of the cost of other assets.
01 1 9 // 201 9 AN N UAL R EPO RT D O MI NO ’S PI Z ZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
9
GOODWILL AND OTHER INTANGIBLES
RECOGNITION AND MEASUREMENT
GOODWILL
Goodwill acquired in a business combination is initially measured at cost. Cost is measured as the cost of the business combination minus
the net fair value of the acquired and identifiable assets, liabilities and contingent liabilities. Following initial recognition, Goodwill is measured
at cost less any accumulated impairment losses.
INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less amortisation and any impairment losses. Intangible assets with finite lives
are amortised on a straight-line basis over their useful lives and tested for impairment whenever there is an indication that they may be impaired.
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.
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.
The following useful lives are used in the calculation of amortisation:
• Capitalised development intangibles
2 – 10 years
•
Licenses and other
2 – 10 years
Intangible assets with indefinite lives are tested for impairment in the same way as goodwill. Assets with an assumed indefinite useful life
are reviewed at each reporting period to determine whether this assumption continues to be appropriate. If not, it is changed to a finite life
intangible asset and amortised over its remaining useful life.
0120 // 2019 ANNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
9 GOODWILL AND OTHER INTANGIBLES (Continued)
IMPAIRMENT
The Group tests intangibles and goodwill for impairment:
•
at least annually for indefinite life intangibles and goodwill; and
• where there is an indication that the asset may be impaired, which is assessed at least each reporting period; or
• where there is an indication that previously recognised impairment, on assets other than goodwill, may have changed.
If the asset does not generate independent cash inflows and its value in use cannot be estimated to be close to its fair value, the asset is tested
for impairment as part of the cash generating unit (CGU) to which it belongs.
Assets are impaired if their carrying value exceeds their recoverable amount. The recoverable amount of an asset or CGU is determined as
the higher of its fair value less costs of disposal (FVLCOD) or value in use (VIU). An impairment loss recognised for goodwill is not reversed in
subsequent periods.
IMPAIRMENT CALCULATIONS
In assessing VIU, 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 or CGU. In determining FVLCOD, a discounted cash flow model is
used based on a methodology consistent with that applied by the Group in determining the value of potential acquisition targets, maximising
the use of market observed inputs. These calculations, classified as Level 3 on the fair value hierarchy, are compared to valuation multiples
or other fair value indicators where available to ensure reasonableness.
INPUTS TO IMPAIRMENT CALCULATIONS
For VIU calculations, cash flow projections are based on corporate plans and business forecasts prepared by management and approved by
the Board. The corporate plans are developed annually with a five-year outlook.
On determining FVLCOD, the valuation model incorporates the cash flows projected over the duration of the current corporate plan period.
These projections are discounted using a risk adjusted discount rate commensurate with a typical market participant’s assessment of the
risk associated with the projected cash flows.
For both the VIU and FVLCOD models, cash flows beyond the corporate plan period are extrapolated using estimated growth rates, which are
based on Group estimates, taking into consideration historical performance as well as expected long-term operating conditions. Growth rates
do not exceed the consensus forecasts of the long-term average rate for the industry in which the CGU operates.
Discount rates used in both calculations are based on the weighted average cost of capital determined by prevailing or benchmarked market
inputs, risk adjusted where necessary. Other assumptions are determined with reference to external sources of information and use consistent,
reasonable estimates for variables such as terminal cash flow multiples. Increases in discount rates or changes in other key assumptions, such
as operating conditions or financial performance, may cause the recoverable amounts to reduce.
RECOGNISED IMPAIRMENT
There was no impairment recognised during the 2019 financial year (2018: nil).
01 2 1 // 2 019 AN NUAL R EPO RT D OM IN O’S PI ZZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
9 GOODWILL AND OTHER INTANGIBLES (Continued)
ESTIMATES AND JUDGEMENTS - OTHER INTANGIBLES
MASTER FRANCHISE RIGHTS & FRANCHISE NETWORK ASSETS
Management has determined that the Master Franchise Rights (‘MFA’) relating to Domino’s Pizza Germany and the Franchise Network Assets
(‘FNAs’) arising on the acquisition of Hallo Pizza, Joey’s Pizza and Pizza Sprint are to be treated as indefinite life intangible assets (2019: $31.6m,
2018: $48.7m). In addition, the same treatment has been applied to the MFA and associated franchise agreements recognised on the acquisition
of Domino’s Pizza Japan (2019: $46.0m, 2018: $42.5m). This judgement is based on the sufficiency of available evidence supporting the ability
of the Group to renew the underlying agreements beyond their initial terms without incurring significant cost.
The liability associated with the Franchise Network Assets for Germany is valued using a multi-period excess earnings method income approach
taking into account forecast revenue and EBITDA margin with a discount rate applied. These inputs are not observable therefore the liability
is considered a level 3 in the hierarchy of fair value as disclosed in note 22.
USEFUL LIVES OF OTHER INTANGIBLES
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.
Year ended 30 June 2019
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Acquisitions of Domino’s Pizza stores and other businesses
Disposals and write-offs
Other including foreign exchange movement
Net carrying amount at the end of the year
Year ended 01 July 2018
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Acquisitions of Domino’s Pizza stores and other businesses
Acquisitions through business combinations
Disposals and write-offs
Other including foreign exchange movement
Net carrying amount at the end of the year
0122 // 2019 A NNUA L RE PORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
GOODWILL
$’000
475,005
-
475,005
428,804
29,213
(7,591)
24,579
475,005
428,804
-
428,804
387,111
322
13,008
24,360
(14,762)
18,765
428,804
Notes to the Financial Statements
continued
9 GOODWILL AND OTHER INTANGIBLES (Continued)
FINITE LIFE
INDEFINITE LIFE
CAPITALISED
DEVELOPMENT
$’000
LICENSES
AND OTHER
$’000
OTHER
INDEFINITE
LIFE
INTANGIBLES
$’000
FRANCHISE
NETWORK
ASSET
$’000
OTHER
INTANGIBLE
ASSETS
TOTAL
$’000
151,205
(70,363)
80,842
44,564
(28,779)
15,785
77,781
194,389
467,939
-
-
(99,142)
77,781
194,389
368,797
71,493
25,420
-
-
(319)
(17,104)
1,352
80,842
122,872
(51,379)
71,493
60,732
25,595
-
-
-
(790)
(14,191)
147
71,493
13,715
6,605
215
-
(903)
(4,350)
503
15,785
35,558
(21,843)
13,715
6,816
4,315
927
1,415
-
(297)
(2,547)
3,086
13,715
91,411
1,770
-
(20,005)
-
-
4,605
77,781
91,411
-
91,411
189,088
365,707
-
-
-
-
-
33,795
215
(20,005)
(1,222)
(21,454)
5,301
11,761
194,389
368,797
189,088
438,929
-
(73,222)
189,088
365,707
89,352
145,845
302,745
-
-
-
(1,346)
-
-
3,405
91,411
-
-
33,310
-
-
-
9,933
29,910
927
34,725
(1,346)
(1,087)
(16,738)
16,571
189,088
365,707
Year ended 30 June 2019
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Acquisitions of Domino’s Pizza stores and
other businesses
Revaluation
Disposals and write-offs
Amortisation for the year
Other including foreign exchange movement
Net carrying amount at the end of the year
Year ended 01 July 2018
Cost
Accumulated amortisation and impairment
Net carrying amount
Movement
Net carrying amount at the beginning of the year
Additions
Acquisitions of Domino’s Pizza stores and
other businesses
Acquisitions through business combinations
Revaluation
Disposals and write-offs
Amortisation for the year
Other including foreign exchange movement
Net carrying amount at the end of the year
01 2 3 / / 201 9 ANN UAL R EPORT D OMI N O’S PI ZZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
9 GOODWILL AND OTHER INTANGIBLES (Continued)
ALLOCATION OF GOODWILL AND INDEFINITE LIFE INTANGIBLE ASSETS TO CGUs
Goodwill and indefinite life intangible assets have been allocated for impairment testing purposes to the following CGUs:
• Australia and New Zealand markets
• Europe market, which comprises:
-
-
The Netherlands & Belgium stores located in the region of Antwerp (NL) and Denmark
France & the rest of Belgium (FR) & (BE)
- Germany (DE)
•
Japan market
The carrying amount of goodwill and other indefinite life intangible assets was allocated to the following CGUs:
Goodwill
2019
2018
Goodwill impairment
2019
2018
Indefinite life intangible assets
2019
2018
Indefinite life intangible assets impairment
2019
2018
ANZ
$’000
FR & BE
$’000
NL
$’000
DE
$’000
JAPAN
$’000
TOTAL
$’000
63,289
55,023
49,434
38,519
6,488
6,327
84,331
79,742
271,463
249,193
475,005
428,804
-
-
226
203
-
-
-
-
49,381
48,034
-
-
-
-
1,776
-
-
-
-
-
-
-
-
-
174,795
189,801
45,992
42,461
272,170
280,499
-
-
-
-
-
-
0124 // 2019 A NNUAL RE PORT D O MINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
9 GOODWILL AND OTHER INTANGIBLES (Continued)
ESTIMATES AND JUDGEMENTS IN DETERMINING THE RECOVERABLE AMOUNT OF THE CASH GENERATING UNITS
In assessing the recoverable amount of CGUs, the calculations necessarily require estimates and assumptions around future cashflows, growth
rates and discount rates. The resulting recoverable amount can be sensitive to these outputs. Key assumptions used are detailed further below.
All CGUs have adopted the VIU valuation methodology to determine the recoverable amount. EBIT growth over the forecast period is based
on past experience and expectations of average sale percentages growth rates. The post-tax discount rates incorporate a risk-adjustment
relative to the risks associated with the net post-tax cash flows being achieved, whilst the terminal growth rates are based on market estimates
of the long-term average industry growth rate.
Discount rate (post-tax)
2019
2018
Compound annual growth rate for corporate plan (i)
2019
2018
Nominal terminal growth rates
2019
2018
ANZ
FR & BE
NL
DE
JAPAN
8.5%
9.5%
11.2%
13.2%
2.0%
2.5%
9.9%
11.2%
33.6%
26.4%
2.0%
2.0%
8.8%
10.3%
14.8%
17.9%
2.0%
2.0%
8.9%
10.0%
9.0%
11.2%
2.0%
2.0%
9.7%
9.0%
17.3%
9.8%
1.0%
2.0%
(i) Compound annual growth rate (CAGR) for the corporate plan period has been calculated based on the compound EBITDA growth over
the forecast period adjusted for any non-recurring costs.
The FR & BE CGU has been adversely impacted by discretionary franchisee support provided during 2019; with this cost not forecast to
continue over the longer term. Therefore this has increased the 2019 disclosed CAGR for the FR & BE CGU.
The Group has reviewed sensitivity on the key assumptions on which the recoverable amounts are based and believes that any reasonable
change would not cause the cash-generating units carrying amount to exceed its recoverable amount. The sensitivity tests applied were to
reduce the forecasted EBITDA growth rates by 2% and an increase to the post-tax discount rates by 1% for each cash-generating unit, which
did not result in the cash-generating units carrying amounts exceeding the recoverable amounts.
10 TRADE, OTHER RECEIVABLES AND OTHER ASSETS
RECOGNITION AND MEASUREMENT
TRADE RECEIVABLES
At initial recognition, trade receivables and other debtors that do not have a significant financing component are recognised at their transaction
price.
Trade receivables generally have terms of up 30 days. They are recognised initially at fair value and subsequently at amortised cost using the
effective interest method, less an allowance for impairment. Allowance for impairment is determined using an expected credit loss approach.
Before accepting any new franchisees and business partners, the Group uses extensive credit verification procedures. Receivable balances
are monitored on an ongoing basis and the Group’s exposure to bad debts is not significant. With respect to trade receivables that are neither
impaired nor past due, there are no indications as of the reporting date that the debtors will not meet their payment obligations.
INTEREST RATE RISK
Trade receivables are non-interest bearing and are therefore not subject to interest rate risk.
01 2 5 // 2 019 AN N UAL R EPO RT D OM I NO ’S P I ZZA E NTERP RISES LIMITED
Notes to the Financial Statements
continued
10 TRADE, OTHER RECEIVABLES AND OTHER ASSETS (Continued)
FAIR VALUE
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
CREDIT RISK
Credit risk arises from exposure to retail customers and franchisees, including outstanding receivables and committed transactions.
Collectability and impairment are assessed on an ongoing basis at a regional level. Impairment is recognised in the income statement when
there is objective evidence that the Group will not be able to collect the debts.
The Group applies the ‘simplified approach’ to measuring expected credit losses (“ECL”) which uses a lifetime expected loss allowance for all
trade receivables. The ECL is estimated using a provision matrix based on the Group’s historical credit loss experiences
The Group writes off trade receivables when there is information indicating the debtor is in severe financial difficulty and there is no realistic
prospect of recovery, e.g. when the debtor has been placed in liquidation or has entered bankruptcy proceedings. Trade receivables written
off may still be subject to enforcement activities under the Group’s recovery processes, considering legal advice where appropriate. Any
recoveries made are recognised in profit and loss.
Trade receivables
Allowance for expected credit loss
Other receivables
Total trade and other receivables
Prepayments
Work in progress - store builds
Other - current
Total other assets
Movement in allowance for expected credit loss
Balance at the beginning of the year
Provision for expected credit loss
Amounts written off as uncollectible
Amounts recovered during the year
Unused amount reversed
Effect of foreign currency
Balance at the end of the year
2019
$’000
98,112
(6,990)
2,780
93,902
2019
$’000
15,193
5,052
9,539
29,784
2019
$’000
4,307
4,556
(1,252)
(533)
(305)
217
6,990
2018
$’000
82,065
(4,307)
423
78,181
2018
$’000
14,176
2,783
11,570
28,529
2018
$’000
3,100
2,608
(1,092)
(399)
(89)
179
4,307
Included in the Group’s trade receivables balance are debtors with a carrying amount of $5,707 thousand (2018: $4,280 thousand), which
are past due at the reporting date.
0126 // 2019 A NNUA L RE PORT D O MINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
11 TRADE AND OTHER PAYABLES
RECOGNITION AND MEASUREMENT
These amounts represent liabilities for goods and services provided to the Group prior to the balance sheet date which are unpaid. Trade and
other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.
Current
Trade payables(i)
Goods and services tax (GST)/ Value added tax (VAT) payable
Other creditors and accruals
Total trade and other payables
2019
$’000
2018
$’000
116,137
9,733
62,738
188,608
88,644
9,980
57,421
156,045
(i) The average credit period on purchases of goods is 30 days. The Group has financial risk management policies in place to ensure that
all payables are paid within the credit timeframe.
12 PROVISIONS
RECOGNITION AND MEASUREMENT
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the
Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
EMPLOYEE BENEFITS
The provision for employee benefits represents annual leave, long service leave entitlements and incentives accrued by employees.
WAGES AND SALARIES
Liabilities for wages and salaries including non-monetary benefits expected to be settled within 12 months of the reporting date are recognised
in provisions and other payables in respect of employees’ services up to the balance sheet date. They are measured at the amounts expected
to be paid when the liabilities are settled.
ANNUAL AND LONG SERVICE LEAVE
The liability for annual leave and long service leave is recognised in the provision for employee benefits. It is measured as the present value of
expected future payments for the services provided by employees up to the reporting date. Expected future payments are discounted using
market yields at the balance sheet date on terms to maturity and currencies that match as closely as possible to the estimated future cash outflows.
STRAIGHT LINE LEASE PROVISION
The lease provision covers stepped lease arrangements to enable the lease expense to be recognised on a straight-line basis over the lease term.
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 recognised on leases, based on historical data in relation to store closure numbers and costs, as
well as future trends that could differ from historical amounts.
LEGAL PROVISION
The provision for legal costs relate to claims that were brought against the company by a number of former and current Pizza Sprint franchisees.
01 2 7 / / 20 19 AN NUAL RE PORT D O MI N O’S P I ZZA E N TERPRISES LIMITED
Notes to the Financial Statements
continued
12 PROVISIONS (Continued)
ESTIMATES AND JUDGEMENTS
Management judgement is applied in determining the following key assumptions used in the calculation of long service leave and annual leave
at balance date:
future increases in wages and salaries;
future on-cost rates; and
experience of employee departures and period of service.
•
•
•
NOTE
29
2019
$’000
8,878
7,467
4,770
21,115
11,136
9,979
21,115
MAKE GOOD
$’000
STRAIGHT-
LINE LEASING
$’000
LEGAL
PROVISIONS
$’000
1,713
45
379
(342)
96
1,891
(93)
138
-
1,936
189
-
16
-
-
205
(79)
-
-
126
6,000
(1,444)
60
(1,733)
364
3,247
(60)
(569)
90
2,708
2018
$’000
6,755
6,418
5,343
18,516
9,709
8,807
18,516
TOTAL
$’000
7,902
(1,399)
455
(2,075)
460
5,343
(232)
(431)
90
4,770
Employee benefits
Defined benefit plan
Other Provisions
Total provisions
Current
Non-current
Total provisions
Other provisions
Balance at 03 July 2017
Recognised in profit or loss
Additional provisions recognised
Reductions arising from payments
Movements resulting from remeasurement
Balance at 02 July 2018
Recognised in profit or loss
Reductions arising from payments
Movements resulting from remeasurement
Balance at 30 June 2019
13
INVENTORY
RECOGNITION AND MEASUREMENT
Inventories are valued 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 is the estimated selling price in the ordinary course of business less estimated costs to sell.
Raw materials
Finished goods
Total inventory
2019
$’000
5,219
16,891
22,110
2018
$’000
4,154
15,117
19,271
There are no inventories (2018: $nil) expected to be recovered after more than 12 months. Expenses relating to inventories are recorded under
Food, equipment and packaging expenses.
0128 // 2019 ANNUA L RE PORT DO MINO’S PIZ ZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
CAPITAL
Capital provides information about the capital management practices of the Group.
14 EQUITY
ISSUED CAPITAL
85,634,040 fully paid ordinary shares (01 July 2018: 85,368,040)
2019
$’000
206,218
2018
$’000
192,808
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.
FULLY PAID ORDINARY SHARES
Balance at beginning of financial year
85,368
192,808
88,873
2019
2018
NUMBER OF
SHARES
‘000
SHARE
CAPITAL
$’000
NUMBER OF
SHARES
‘000
SHARE
CAPITAL
$’000
340,040
Shares issued:
Issue of shares under executive share option plan
Issue of share capital for acquisition of businesses
Issue of shares under employee share plan
Share buy-back
Capital costs associated with share issue
248
18
-
-
-
12,617
793
-
-
-
839
36,094
-
4
-
155
(4,348)
(183,479)
-
(2)
Balance at end of financial year
85,634
206,218
85,368
192,808
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
OPTIONS
The Company approved the establishment of the Executive Share and Option Plan (“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. Refer to note 18.
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, 248,350 options were exercised (2018: 839,250). A total of $12,616,763 was received as consideration for 248,350 fully paid
ordinary shares of Domino’s Pizza Enterprises Limited on exercise of the options in the current financial year (2018: $36,094,377).
01 2 9 / / 201 9 ANN UAL R EPO RT D O MI NO ’S P IZ ZA E N TERPRISES LIMITED
Notes to the Financial Statements
continued
14 EQUITY (Continued)
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.
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 2019
will be paid in cash only.
RESERVES
FOREIGN CURRENCY TRANSLATION
Exchange differences relating to the translation of the net assets of the Group’s foreign operations from their functional currencies to the Group’s
presentation currency (i.e. Australian dollars) are recognised directly in other comprehensive income and accumulated in the foreign currency
translation reserve. The significant movement in the translation of the foreign operations has arisen as a result of the weakening of the Australian
Dollar verse Japanese Yen and Euro.
HEDGING RESERVE
The hedging reserve represents hedging gains and losses recognised on the effective portion of net investment and cash flow hedges.
OTHER RESERVES
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 18 to the financial statements. The Group settled the Domino’s Pizza Enterprises
Limited Employee Share Trust to manage the share option plan.
Foreign currency translation
Hedging
Other
Balance at the end of the year
Foreign currency translation reserve
Balance at beginning of financial year
Translation of foreign operations
Balance at the end of the year
Hedging reserve
Balance at beginning of financial year
Net investment hedge
Cash flow hedge
Income tax related to gain/(loss) on hedging items
Balance at the end of the year
0130 // 2019 A NNUAL RE PORT D OMINO ’S PIZZA ENTERPRISES LIMITED
2019
$’000
42,861
(6,714)
(93,418)
(57,271)
17,206
25,655
42,861
(3,945)
(2,230)
(2,551)
2,012
(6,714)
2018
$’000
17,206
(3,945)
(89,632)
(76,371)
2,725
14,481
17,206
(158)
(5,869)
614
1,468
(3,945)
Notes to the Financial Statements
continued
14 EQUITY (Continued)
Other Reserves
Balance at beginning of financial year
Share-based payment
Movement in put option liability and non-controlling interest
Share option trust
Remeasurement of defined benefit plan
Balance at the end of the year
RETAINED EARNINGS
Balance at beginning of year
Change in accounting policy
Restated retained earnings
Net profit attributable to members of the Company
Payment of dividends
Balance at the end of the year
2019
$’000
2018
$’000
(89,632)
(1,072)
(1,366)
(1,318)
(30)
(88,112)
(15,740)
14,835
(519)
(96)
(93,418)
(89,632)
NOTE
33
16
2019
$’000
191,227
(13,955)
177,272
115,912
2018
$’000
160,569
-
160,569
121,466
(96,124)
(90,808)
197,060
191,227
15 NON-CONTROLLING INTERESTS
RECOGNITION AND MEASUREMENT
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of profit or loss
and other comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total
comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted
to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
We have applied the partial recognition of the non-controlling interest method (equity method) when accounting for the put option liability
and non-controlling interest. This approach is appropriate given the Company has no present ownership of the minority interest shares. While
the non-controlling interest remains, the accounting treatment is as follows:
(a) The amount that would have been recognised for the non-controlling interest, including an update to reflect allocations of profit or loss,
allocations of changes in other comprehensive income and dividends declared for the reporting period, as required by AASB 10;
(b) The non-controlling interest is derecognised as if it was acquired at that date;
(c) A financial liability at the present value of the amount payable on exercise of the non-controlling put in accordance with AASB 9. There is
no impact on the profit or loss from the unwinding of the discount due to the passage of time; and
(d) The difference between (b) and (c) as an equity transaction in other reserves.
If the non-controlling interest put or call is exercised, the same treatment is applied up to the date of exercise. The amount recognised as the
financial liability at that date is extinguished by the payment of the exercise price.
The non-controlling interest relates to a 33.3% interest in the Group’s operations in Germany.
01 31 / / 201 9 ANN UAL R E PORT D OM I NO ’S P I ZZA E NTERP RISES LIMITED
Notes to the Financial Statements
continued
15 NON-CONTROLLING INTERESTS (Continued)
Balance at beginning of year
Change in accounting policies
Restated equity at the end of the year
Non-controlling interest contributions during the period
Share of profit/(loss)
Foreign currency translation
Non-controlling interest put option adjustment
Balance at the end of the year
16 DIVIDENDS
Recognised amounts
Fully paid ordinary shares
Interim partially franked dividend for half-year ended
Partially franked dividend for full year ended
Unrecognised amounts
Fully paid ordinary shares
NOTE
33
2019
$’000
2018
$’000
-
(17)
(17)
(4,708)
(1,533)
1,271
4,987
-
-
-
-
8,846
227
2,487
(11,560)
-
2019
2018
CENTS PER
SHARE
TOTAL
$’000
CENTS PER
SHARE
TOTAL
$’000
62.7
49.7
112.4
53,693
42,431
96,124
58.1
44.9
103.0
50,904
39,904
90,808
Partially franked dividend for full year ended
52.8
45,215
49.7
42,431
On 20 August 2019, the directors declared a final dividend of 52.8 cents per share to the holders of fully paid ordinary shares in respect of
the financial year ended 30 June 2019, to be paid to shareholders on 12 September 2019. The dividend will be paid to all shareholders on the
Register of Members on 28 August 2019. The total estimated dividend to be paid is $45,215 thousand.
FRANKED DIVIDENDS
The franked portions of the final dividends determined after 30 June 2019 will be franked out of existing franking credits or out of franking
credits arising from the payment of income tax in the financial year ended 30 June 2019.
Franking credits available for subsequent financial years based on a tax rate of 30.0%
2019
$’000
24,057
2018
$’000
17,025
The above amounts are calculated from the balance of the franking account as at the end of the reporting period, adjusted for franking credits
and debits that will arise from the settlement of liabilities or receivables for income tax and dividends after the end of the year.
0132 // 2019 A NNUA L R EPORT D OMINO ’S PIZZA ENTERPRISES LIM ITED
Notes to the Financial Statements
continued
17 EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity
(other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
From continuing operations attributable to the ordinary equity holders of the Company
DILUTED EARNINGS PER SHARE
2019
CENTS
135.5
2018
CENTS
139.4
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
•
•
costs of servicing equity (other than dividends);
the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the year that would result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
The diluted earnings per share calculation takes into account all options issued under the ESOP, as in accordance with AASB 133 Earnings per
Share, the average market price of ordinary shares during the period exceeds the exercise price of the options or warrants.
From continuing operations attributable to the ordinary equity holders of the Company
EARNINGS USED IN CALCULATING EARNINGS PER SHARE
Profit from continuing operations
Profit attributable to the ordinary equity shareholders of the Company used in calculating basic and
diluted earnings per share
WEIGHTED AVERAGE NUMBER OF SHARES USED AS DENOMINATOR
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options on issue
Weighted average number of ordinary and potential ordinary shares used as the denominator in
calculating diluted earnings per share
2019
CENTS
135.4
2018
CENTS
139.0
2019
$’000
115,912
2018
$’000
121,466
115,912
121,466
2019
NO.’000
85,531
2018
NO.’000
87,134
80
233
85,611
87,367
01 33 // 201 9 AN N UAL R EPO RT D O M INO ’S PI Z ZA E NTER PR ISES LIMITED
Notes to the Financial Statements
continued
18 SHARE-BASED PAYMENTS
RECOGNITION AND MEASUREMENT
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 Black Scholes 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.
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 Group’s estimate of equity instruments that will eventually vest. At each reporting period, the Group 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.
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.
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.
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 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.
0134 // 2019 ANNUA L RE PORT D O MINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
18 SHARE-BASED PAYMENTS (Continued)
The following share-based payment arrangements were in existence during the current and comparative reporting period:
OPTIONS GRANTED UNDER THE INCENTIVE PLANS
Set out below are summaries of the performance options and rights granted in respect of the 2019 and 2018 financial years under the
incentive plans:
2019
OPTIONS
SERIES
ISSUE &
GRANT
DATE
EXPIRY
DATE
BALANCE AT
START OF
THE YEAR
GRANTED
DURING
AND IN
RESPECT OF
THE YEAR
EXERCISED
DURING
THE YEAR
LAPSED /
FORFEITED
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
EXERCISABLE
AT END OF
THE YEAR
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
(19)
(21)
(22)
(23)
(24)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
29 Oct 14
31 Aug 18
3 Feb 15
31 Aug 18
20 Jun 15
31 Aug 18
500
4,000
5,600
3 Sep 15
28 Oct 20
300,000
3 Sep 15
31 Aug 19
437,500
3 Sep 15
31 Aug 20
150,000
1 Sep 16
28 Oct 20
400,000
1 Sep 16
31 Aug 20
200,000
1 Sep 16
31 Aug 20
423,000
8 Nov 17
31 Aug 21
220,000
19 Apr 18
31 Aug 21
616,000
-
-
-
-
-
-
-
-
-
-
-
14 Aug 18
31 Aug 21
23 Jan 19
31 Aug 22
25 May 19
31 Aug 22
-
-
-
147,000
220,000
653,750
(500)
-
-
(4,000)
(5,600)
-
-
-
-
-
-
300,000
(242,250)
(3,000)
192,250
-
-
-
-
-
-
-
-
-
-
-
-
150,000
400,000
200,000
(12,500)
410,500
-
220,000
(37,750)
578,250
-
-
-
147,000
220,000
653,750
TOTAL
2,756,600
1,020,750
(248,350)
(57,250)
3,471,750
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
01 35 / / 201 9 ANN UAL RE PO RT D O MI NO ’S P I ZZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
18 SHARE-BASED PAYMENTS (Continued)
2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
BALANCE AT
START OF
THE YEAR
GRANTED
DURING
AND IN
RESPECT OF
THE YEAR
EXERCISED
DURING
THE YEAR
LAPSED /
FORFEITED
DURING
THE YEAR
BALANCE
AT END OF
THE YEAR
EXERCISABLE
AT END OF
THE YEAR
NUMBER
NUMBER
NUMBER
NUMBER
NUMBER
OPTIONS
SERIES
ISSUE &
GRANT
DATE
EXPIRY
DATE
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(24)
(25)
(26)
(27)
(28)
(29)
29 Oct 14
28 Oct 20
29 Oct 14
31 Aug 18
27 Jan 15
31 Aug 18
3 Feb 15
31 Aug 18
20 Jun 15
31 Aug 18
3 Sep 15
28 Oct 20
3 Sep 15
31 Aug 19
3 Sep 15
31 Aug 20
1 Sep 16
28 Oct 20
1 Sep 16
31 Aug 20
1 Sep 16
31 Aug 20
8 Nov 17
31 Aug 21
19 Apr 18
31 Aug 21
NUMBER
300,000
319,250
150,000
43,000
37,100
300,000
579,250
150,000
400,000
200,000
692,750
-
-
-
-
-
-
-
-
-
-
-
(300,000)
(318,750)
(150,000)
(39,000)
(31,500)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(141,750)
-
-
-
(269,750)
-
(13,500)
-
500
-
4,000
5,600
300,000
437,500
150,000
400,000
200,000
423,000
220,000
616,000
-
-
220,000
629,500
TOTAL
3,171,350
849,500
(839,250)
(425,000)
2,756,600
The weighted average exercise price at the date of the exercise of options during the 2019 financial year was $40.81 (2018: $21.44).
The weighted average remaining contractual life of options outstanding at the end of the 2019 financial year was 1.92 years (2018: 2.34 years)
FAIR VALUE OF SHARE OPTIONS GRANTED IN THE YEAR
The weighted average fair value of the options granted during the 2019 year is $3.98 (2018: $7.26). Options were valued using a Black Scholes
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.
The model inputs for options granted during 2019 financial year include:
PERFORMANCE CONDITIONS
SERIES 30
SERIES 31
SERIES 32
Grant date share price
Exercise price
Expected volatility
Option life years
Dividend yield
Risk-free interest rate
The model inputs for options granted during 2018 financial year include:
PERFORMANCE CONDITIONS
Grant date share price
Exercise price
Expected volatility
Option life years
Dividend yield
Risk-free interest rate
0136 // 2019 A NNUAL RE PORT D O MINO’S PIZ ZA ENTERPRISES LIMIT ED
$49.00
$45.25
30%
2.07
2.10%
1.73%
$45.17
$51.96
34%
2.91
2.39%
1.73%
$40.40
$51.96
33%
2.42
2.67%
1.23%
SERIES 28
SERIES 29
$48.10
$46.63
35.00%
2.88
1.94%
2.05%
$39.41
$45.25
35.00%
2.41
2.60%
2.09%
Notes to the Financial Statements
continued
18 SHARE-BASED PAYMENTS (Continued)
SHARE OPTIONS EXERCISED DURING THE YEAR
The following share options granted under the ESOP were exercised during the year:
2019 OPTION SERIES
NUMBER EXERCISED
EXERCISE DATE
SHARE PRICE AT
EXERCISE DATE ($)
(19) Issued 29 October 2014
(22) Issued 20 June 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
(24) Issued 3 September 2015
500
5,600
75,000
19,500
12,500
26,000
30,000
5,750
38,500
35,000
17 August 2018
17 August 2018
03 September 2018
04 September 2018
10 September 2018
08 November 2018
13 November 2018
11 February 2019
21 February 2019
25 February 2019
$56.00
$56.00
$54.10
$54.14
$54.70
$55.68
$50.31
$47.27
$44.50
$43.89
2018 OPTION SERIES
NUMBER EXERCISED
EXERCISE DATE
SHARE PRICE AT EXERCISE
DATE ($)
(19) Issued 29 October 2014
(21) Issued 3 February 2015
(19) Issued 29 October 2014
(18) Issued 29 October 2014
(19) Issued 29 October 2014
(21) Issued 3 February 2015
(19) Issued 29 October 2014
(21) Issued 3 February 2015
(22) Issued 20 June 2015
(19) Issued 29 October 2014
(19) Issued 29 October 2014
(21) Issued 3 February 2015
(22) Issued 20 June 2015
(19) Issued 29 October 2014
(21) Issued 3 February 2015
(22) Issued 20 June 2015
(22) Issued 20 June 2015
(19) Issued 29 October 2014
(20) Issued 3 February 2015
(21) Issued 3 February 2015
(19) Issued 29 October 2014
(21) Issued 3 February 2015
220,750
1,500
32,250
300,000
11,250
4,000
7,000
17,000
5,600
11,500
5,000
5,000
7,000
27,000
5,000
10,500
8,400
1,000
150,000
2,500
3,000
4,000
1 September 2017
1 September 2017
5 September 2017
7 September 2017
8 September 2017
8 September 2017
11 September 2017
11 September 2017
11 September 2017
15 November 2017
17 November 2017
17 November 2017
17 November 2017
22 November 2017
22 November 2017
22 November 2017
23 November 2017
29 November 2017
19 February 2018
21 February 2018
6 March 2018
6 March 2018
$43.00
$43.00
$43.00
$42.42
$42.42
$42.42
$42.60
$42.60
$42.60
$46.96
$46.93
$46.93
$46.93
$46.70
$46.70
$46.70
$45.93
$47.00
$42.50
$42.50
$40.50
$40.50
01 37 / / 201 9 ANN UAL RE PO RT D O MI NO ’S P IZ ZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
FINANCIAL MANAGEMENT
Financial management provides information about the debt management practices of the Group as well as the Group’s exposure to various
financial risks, how these affect the Group’s financial position and performance and what the Group does to manage these risks.
19 BORROWINGS
RECOGNITION AND MEASUREMENT
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period
of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs
of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw
down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the facility to which it relates.
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.
FINANCE LEASES
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.
Assets held under finance leases are initially recognised as assets of the Group 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 Group’s general policy on borrowing costs. 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.
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.
During the current financial year, the Group acquired $8.6 million of assets under finance lease (2018: $4.3 million).
0138 // 2019 ANNUA L R EPORT D OMINO ’S PIZZA ENTERPRISES LIM ITED
Notes to the Financial Statements
continued
19 BORROWINGS (Continued)
Loan from other entities
Loans from other entities
Total from other entities
Committed
Bank loans(i)
Finance lease liabilities(ii)
Total committed borrowings
Current
Non-current
Total borrowings
NOTE
2019
$’000
35,786
35,786
599,031
16,632
615,663
5,373
646,076
651,449
2018
$’000
32,839
32,839
552,524
13,136
565,660
3,700
594,799
598,499
SUMMARY OF BORROWING ARRANGEMENTS:
(i)
Loans to meet the cost of DPE’s acquisitions in Germany are secured by way of a mortgage over shares DPE holds in the joint venture
entity that owns the German territory assets. DPE’s borrowings are otherwise unsecured.
(ii) Secured by the assets leased, the current market value of each exceeds the value of the finance lease liability.
The unused facilities available on the Group’s bank overdraft are $5,868 thousand (2018: $5,752 thousand). For further information in respect
of the Group’s borrowings, refer to note 22.
20 FINANCIAL ASSETS
RECOGNITION AND MEASUREMENT
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 time frame 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’ (FVPL) or through
other comprehensive income (FVOCI) and those held at amortised cost.
Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. Management
determines the classification of financial assets at initial recognition. Generally, the Group does not acquire financial assets for the purpose
of selling in the short-term. When the Group enters into derivative contracts, these transactions are designed to reduce exposures relating
to assets and liabilities, firm commitments or anticipated transactions.
Refer to note 33 for impact of AASB 9 Financial Instruments and previous recognition and measurement policies.
FINANCIAL ASSETS HELD AT AMORTISED COST
This classification applies to debt instruments which are held under a hold to collect business model and which have cash flows that
meet the ‘Solely payment of principal and interest’ (SPPI) criteria.
Other financial assets are initially recognised at fair value plus related transaction costs; they are subsequently measured at amortised
cost using the effective interest method. Any gain or loss on derecognition or modification of a financial asset held at amortised cost
is recognised in the income statement.
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 financial assets held at amortised cost.
01 39 // 2 019 AN NUAL R EPO RT D O M IN O’S PI Z ZA E NTERPRISES LIMITED
Notes to the Financial Statements
continued
20 FINANCIAL ASSETS (Continued)
FINANCIAL ASSETS HELD AT FVOCI
This classification applies to the following financial assets:
• Debt instruments that are held under a business model where they are held for the collection of contractual cash flows and also for sale
(‘collect and sell’) and which have cash flows that meet the SPPI criteria.
All movements in the fair value of these financial assets are taken through other comprehensive income, except for the recognition of
impairment gains or losses, interest revenue (including transaction costs by applying the effective interest method), gains or losses
arising on derecognition and foreign exchange gains and losses which are recognised in the income statement. When the financial assets
are derecognised, the cumulative fair value gain or loss previously recognised in other comprehensive income is reclassified to the
income statement.
• Equity investment where the Group has irrevocably elected to present fair value gains and losses on revaluation in other comprehensive
income. The election can be made for each individual investment however it is not applicable to equity investments held for trading.
Fair value gains or losses on revaluation of such equity investments, including any foreign exchange components, are recognised in other
comprehensive income. When the equity investment is derecognised, there is no reclassification of fair value gains or losses previously
recognised in other comprehensive income to the income statement. Dividends are recognised in the income statement when the right
to receive payment is established.
FINANCIAL ASSETS AT FVPL
This classification applies to the following financial assets, and in all cases, transaction costs are immediately expensed to the income statement:
• Debt instruments that do not meet the criteria of amortised cost or fair value through other comprehensive income.
Subsequent fair value gains or losses are taken to the income statement.
• Equity investments which are held for trading or where the FVOCI election has not been applied. All fair value gains or losses are related
dividend income are recognised in the income statement.
• Derivatives which are not designated as a hedging instrument. All subsequent fair value gains or losses are recognised in the income
statement.
DERIVATIVE FINANCIAL INSTRUMENTS
The Group enters into derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks.
Derivatives are initially recognised at fair value at the date the derivative contracts are entered into and are subsequently remeasured to
their fair value at the end of 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.
NON-CASH FINANCING AND INVESTING ACTIVITIES
Included in the movement of other financial assets are non-cash transactions of $40.9 million (2018: $48.2 million) for loans to
Franchisees.
IMPAIRMENT OF FINANCIAL ASSETS
A forward looking ECL review is required for: debt instruments measured at amortised cost or held at fair value through other comprehensive
income, loan commitments and financial guarantees not measured at fair value through profit or loss; lease receivables and trade receivables
that give rise to an unconditional right to consideration.
As permitted by AASB 9, the Group applies the ‘simplified approach’ to trade receivable balances and the ‘general approach’ to all other
financial assets (refer to note 10). The general approach incorporates a review for any significant increase in counterparty credit risk since
inception. The ECL reviews include assumptions about the risk of default and expected loss rates.
0140 // 2019 A NNUAL RE PORT D OMINO ’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
20 FINANCIAL ASSETS (Continued)
DERECOGNITION OF FINANCIAL ASSETS
The Group 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 Group neither transfers nor retains substantially
all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
Financial Assets
Current
Loans to franchisees
Foreign exchange forward contracts
Total current financial assets
Non-current
Loans to franchisees
Allowance for doubtful loans
Financial guarantee receivable
Long-term store rental security deposits
Total non-current financial assets
Current
Non-current
Total financial assets
IMPAIRMENT
2019
$’000
2018
$’000
16,528
-
16,528
50,081
(1,141)
1,494
19,979
70,413
16,528
70,413
86,941
26,705
150
26,855
61,159
(1,232)
195
15,314
75,436
26,855
75,436
102,291
Before providing any new loans to franchisees, the Group 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 was 6.7% (2018: 7%) in Australia and New Zealand, the average interest charged in France is 5.61% (2018: 6.41%),
in the Netherlands is 7.79% (2018: 7.88%), in Germany is 4.78% (2018: 4.87%) and the average interest charged in Japan is 5.0% (2018: 5.0%).
The Group applies the ‘general approach’ to measuring expected credit losses which uses a lifetime expected loss allowance for franchisee
loans. The general approach incorporates a review for any significant increase in counterparty credit risk since inception. The ECL review
includes assumptions about the risk of default and expected credit loss rates.
Franchisee loans
Allowance for doubtful loans
Ageing of Franchisee Loans
Amounts not yet due
2019
$’000
66,609
(1,141)
65,468
2019
$’000
65,468
65,468
2018
$’000
87,864
(1,232)
86,632
2018
$’000
86,632
86,632
01 41 // 2 019 AN N UAL R EPO RT D OM I NO ’S PI ZZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
20 FINANCIAL ASSETS (Continued)
Movement in allowance for loss allowance
Balance at the beginning of the year
Impairment losses recognised on loans
Amounts written off as uncollectible
Unused amounts reversed
Effect of foreign currency
Balance at the end of the year
21 FINANCIAL LIABILITIES
RECOGNITION AND MEASUREMENT
FINANCIAL LIABILITY AND EQUITY INSTRUMENTS
CLASSIFICATION AS DEBT AND EQUITY
2019
$’000
2018
$’000
1,232
60
(180)
-
29
1,141
1,114
954
(885)
(10)
59
1,232
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.
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.
FINANCIAL GUARANTEES AND CONTRACT LIABILITIES
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.
Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as at FVPL, 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 Note 2.
FINANCIAL LIABILITIES
Financial liabilities are classified as either financial liabilities ‘at FVPL’ or ‘other financial liabilities’.
FINANCIAL LIABILITIES AT FVPL
Financial liabilities are classified as at FVPL when the financial liability is either held for trading or it is designated as at FVPL.
0142 // 2019 ANNUA L R EPORT D OMINO ’S PIZZA ENTERPRISES LIM IT ED
Notes to the Financial Statements
continued
21 FINANCIAL LIABILITIES (Continued)
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 Group 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 FVPL 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 9 ‘Financial Instruments’ permits the entire combined
contract (asset or liability) to be designated as at FVPL.
Financial liabilities at FVPL 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.
FINANCIAL BORROWINGS
Borrowing and other financial liabilities (including trade payables but excluding derivative liabilities) are recognised initially at fair
value, net of transaction costs incurred, and are subsequently measured at amortised cost.
DERECOGNITION OF FINANCIAL LIABILITIES
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference
between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
ESTIMATES AND JUDGEMENTS
GERMANY PUT OPTION LIABILITY
The put option associated with Domino’s Pizza Germany (DPG) is valued by management by taking into account adjusted unlevered price/
earnings multiple rates and estimate of the timing of the exercise of the put. This is based on management’s experience and knowledge of
market conditions of the German Pizza industry and dealings with the sellers of Joey’s Pizza and Hallo Pizza. As the inputs are not observable
the liability is considered Level 3 in the fair value hierarchy.
FINANCIAL LIABILITIES
Current
Interest rate swaps
Foreign exchange contracts
Rent incentive liabilities
Security deposits
Market access right (i)
Contingent consideration
Deferred consideration
Other
Total current financial liabilities
2019
$’000
467
436
111
9,402
-
672
1,253
19
12,360
2018
$’000
49
-
121
6,909
4,270
625
650
22
12,646
01 43 / / 20 19 AN NUA L RE PO RT D O MI N O’S PI Z ZA E NTERPRISES LIMITED
Notes to the Financial Statements
continued
21 FINANCIAL LIABILITIES (Continued)
FINANCIAL LIABILITIES
Non-current
Interest rate swaps
Rent incentive liability
Market access right (i)
Contingent consideration
Deferred consideration
Put / call minority interest liability (ii)
Total non-current financial liabilities
Current
Non-current
Total financial liabilities
2019
$’000
2018
$’000
1,882
1,161
19,859
2,134
1,278
87,832
114,146
12,360
114,146
126,506
-
1,222
28,228
1,500
2,065
88,900
121,915
12,646
121,915
134,561
(i) Market access right arising in respect of the Group’s contractual arrangements with DPG.
(ii) Put / call option liability arises in respect of the minority interest in Domino’s Germany.
FAIR VALUE OF DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
As described in note 22, 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 22.
22 FINANCIAL RISK MANAGEMENT
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that it will be able to continue as a going concern, while maximising the return to stakeholders through
optimisation of the debt and equity balances.
The capital structure of the Group consists of net debt, which includes borrowings, cash and cash equivalents and equity attributable to equity
holders of the parent, comprising issued capital, reserves, retained earnings and non-controlling interest.
The Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades, these companies
are not subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand the Groups assets, as well as to make routine outflows of tax, dividends and repayment
of maturing debt. The Group policy is to control borrowing 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. The board of directors consider
the cost of capital and associated risk. Based on recommendations from management and the board of directors, the Group will balance its
overall capital structure through payment of dividends, new share issues and issue or redemption of debt.
0144 / / 2019 ANNUA L RE PORT D O MINO’S PIZZA EN TERPRISES LIMIT ED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
GEARING RATIO
The gearing ratio at the end of the reporting period was as follows:
Debt(i)
Cash and cash equivalent
Net debt
Equity(ii)
Net debt to equity ratio
2019
$’000
651,449
(101,404)
550,045
346,007
159.0%
2018
$’000
598,499
(75,996)
522,503
307,664
169.8%
(i) Debt is defined as long-term and short-term borrowings, as detailed in note 19.
(ii) Equity includes all capital and reserves that are managed as capital.
The categories of financial assets and liabilities are outlined below:
FINANCIAL ASSETS
CLASSIFICATION
NOTE
Trade and other receivables
Amortised cost
Loans receivable
Amortised cost
Financial guarantee contracts
Amortised cost
Deposits
Amortised cost
Forward exchange contracts
FVOCI
10
20
20
20
20
2019
2018
INTEREST
RATE %(I)
-
5.70
6.25
-
-
$’000
93,902
65,468
1,494
19,979
-
INTEREST
RATE %(I)
-
4.91
6.25
-
-
2019
2018
FINANCIAL LIABILITIES
CLASSIFICATION
NOTE
INTEREST
RATE %(I)
Trade and other payables
Amortised cost
Other financial liabilities
Amortised cost
Rent incentive liability
Amortised cost
Bank loans
Amortised cost
Loans from other entities
Amortised cost
Finance lease liability
Amortised cost
Market access right
Put-option liability
Contingent consideration
Deferred consideration
FVOCI
FVOCI
FVPL
FVPL
Interest rates swaps
Derivative financial instrument
Foreign exchange contracts
Derivative financial instrument
11
21
21
19
19
19
21
21
21
21
21
21
-
-
-
2.16
2.70
1.13
-
-
-
-
-
-
$’000
188,608
9,421
1,272
599,031
35,786
16,632
19,859
87,832
2,806
2,531
2,349
436
INTEREST
RATE %(I)
-
-
-
1.65
3.00
1.13
-
-
-
-
-
-
(i)
Interest rates represent the weighted average effective interest rate.
$’000
78,181
86,632
195
15,314
150
$’000
156,045
6,931
1,343
552,524
32,839
13,136
32,498
88,900
2,125
2,715
49
-
01 45 // 201 9 AN N UAL R EPO RT D O M I NO’S PI Z ZA E NTERP RISES L IMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
FINANCIAL RISK MANAGEMENT
Group treasury co-ordinates access to financial markets, monitors and manages the financial risks relating to the operations of the Group in
line with its policies. These risks include;
•
Liquidity risk
• Market risk, including foreign currency, interest rate and commodity price risk; and
• Credit risk
The Group seeks to manage and minimise its exposure to these financial risks by using derivative financial instruments to hedge the risk,
governed by the approved Group policies, which provides written principles on foreign exchange risk, interest rate risk, credit risk and the use
of derivatives and investment of excess liquidity. Compliance with policies and exposure limits are reviewed by the board of directors. The
Group does not enter into or trade financial instruments, including derivative instruments, for speculative purposes.
LIQUIDITY RISK
NATURE OF THE RISK
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, continuously monitoring
forecast and actual cash flows, and matching the maturity profiles of financial assets and liabilities. Ultimate responsibility for liquidity risk
management rests with the board of directors, which has established an appropriate liquidity management framework for the management
of the Group’s short, medium and long-term funding and liquidity management requirements.
FINANCING FACILITIES
Unsecured bank overdraft, reviewed annually and payable at call:
Amount used
Amount unused
Total
Committed commercial bill facility, reviewed annually:
Amount used
Amount unused
Total
Uncommitted facilities, at call:
Amount unused
Total
2019
$’000
2018
$’000
-
5,868
5,868
601,894
162,258
764,152
54,435
54,435
-
5,752
5,752
556,356
184,803
741,159
56,769
56,769
MATURITY OF FINANCIAL ASSETS AND LIABILITIES
The following tables analyse the Group’s financial assets and liabilities, including net and gross settled financial instruments, into relevant
maturity periods based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are
contractual undiscounted cash flows and hence will not necessarily reconcile with the amounts disclosed in the balance sheet.
Expected future interest payments on loans and borrowings exclude accruals already recognised in trade and other payables.
For foreign exchange derivatives and cross-currency interest rate swaps, the amounts disclosed are the gross contractual cash flows to be paid.
0146 // 2019 ANNUAL RE PORT D OMINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
For interest rate swaps, the cash flows are the net amounts to be paid at each quarter, excluding accruals included in trade and other payables,
and have been estimated using forward interest rates applicable at the reporting date.
30 JUNE 2019
Financial assets
Trade and other receivables
Loans receivable
Cash and cash equivalents
Financial guarantee contracts
Deposits
Financial liabilities
Trade and other payables
Derivative instruments in designated hedge accounting relationships
Bank loans
Loans from other entities
Finance lease liability
Market access right
Put option liability
Contingent consideration
Deferred consideration
Rent incentive liability and other
Other financial liabilities
01 JULY 2018
Financial assets
Trade and other receivables
Loans receivable
Cash and cash equivalents
Financial guarantee contracts
Deposits
Financial liabilities
Trade and other payables
Derivative instruments in designated hedge accounting relationships
Bank loans
Loans from other entities
Finance lease liability
Market access right
Put option liability
Contingent consideration
Deferred consideration
Rent incentive liability
Other financial liabilities
LESS THAN
1 YEAR
$’000
1-5 YEARS
$’000
MORE THAN
5 YEARS
$’000
93,902
16,528
101,404
-
-
(188,608)
(903)
-
-
(5,373)
-
-
(672)
(1,253)
(130)
(9,402)
78,181
26,705
75,996
-
-
(156,045)
(49)
-
-
(3,700)
(4,270)
-
(625)
(650)
(121)
(6,931)
-
26,271
-
1,494
19,979
-
(1,882)
(599,031)
(35,786)
(11,259)
(19,859)
(87,832)
(2,134)
(1,278)
(1,161)
-
-
36,823
-
195
15,314
-
-
(552,524)
(32,839)
(9,436)
(28,228)
(88,900)
(1,500)
(2,065)
(1,222)
-
-
22,669
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
23,104
-
-
-
-
-
-
-
-
-
-
-
-
-
-
01 47 / / 201 9 ANN UAL R E PO RT D O MI NO ’S PI Z ZA E NTER PR ISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
The following table details the Group’s liquidity analysis for is derivative financial instruments. The table has been drawn up based on the
undiscounted contractual net cash inflows and outflows on derivative instruments that settle on a net basis, and the undiscounted gross
inflows and outflows on those derivatives that require gross settlement. When the amount payable or receivable is not fixed, the amount
disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.
LESS THAN
1 MONTH
$’000
1-3 MONTHS
$’000
3 MONTHS
TO 1 YEAR
$’000
1-5 YEARS
$’000
-
(467)
(1,882)
4,228
(4,302)
(74)
20,763
(21,125)
(829)
-
-
(1,882)
-
-
-
-
-
(49)
-
1,122
(1,114)
8
5,014
(4,977)
(12)
14,287
(14,182)
105
-
-
-
-
2019
Net Settled
Interest rate swaps
Gross Settled
Forward foreign exchange contracts - Inflow
Forward foreign exchange contracts - (Outflow)
2018
Net Settled
Interest rate swaps
Gross Settled
Forward foreign exchange contracts - Inflow
Forward foreign exchange contracts - (Outflow)
MARKET RISK
NATURE OF FOREIGN CURRENCY RISK
The Group’s activities exposes it primarily to the Euro and Japanese Yen currencies and to interest rate risk through its borrowings. The Group’s
foreign operations are carried out in New Zealand, Japan and Europe, which exposes the Group’s investments to movements in the AUD/NZD,
AUD/JPY and AUD/EUR exchange rates. The Group mitigates and manages the effect of its translational currency exposure by borrowing in
NZ dollars, Japanese Yen and Euro.
The Group enters into a variety of derivative and non-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
• Cross currency interest rate swap to mitigate rising interest rates and foreign exchange fluctuation
• Debt to manage currency risk
•
Forward foreign exchange contracts to hedge the exchange rate risk of purchases
0148 // 2019 A NNUA L REPORT D OMINO ’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
EXPOSURE
The Group’s exposure, before hedging arrangements, to the NZ dollar, Euro and Japanese Yen at the balance sheet date were as follows:
New Zealand Dollar
Euro
Japanese Yen
ASSETS
LIABILITIES
2019
$’000
8,063
67,408
105,898
2018
$’000
8,700
72,008
78,941
2019
$’000
(4,432)
2018
$’000
(3,354)
(497,362)
(466,851)
(262,024)
(220,556)
FOREIGN CURRENCY RISK MANAGEMENT
The hedging function of the Group is to address foreign currency risk and is managed centrally. The Group requires all subsidiaries to hedge
foreign exchange exposures for firm commitments relating to sale or purchases or when highly probable forecast transactions have been
identified. Before hedging, the subsidiaries are also required to take into account their competitive position. The hedging instrument must
be in the same currency as the hedged item.
The objective of the Group’s policy on foreign exchange hedging is to protect the Group from adverse currency fluctuations.
SENSITIVITY TO FOREIGN EXCHANGE MOVEMENTS
The sensitivity analysis below shows the impact that a reasonable possible change in foreign exchange rates over a financial year would have
on profit after tax and equity, based solely on the Group’s foreign exchange rate exposure existing at the balance sheet date. The Group has
used the observed range of actual historical rates for the preceding five-year period, with a heavier weighting placed on recently observed
market data, in determining reasonable possible exchange movements to be used for the current year’s sensitivity analysis. Past movements
are not necessarily indicative of future movements.
The following exchange rates have been used in performing the sensitivity analysis:
Actual 2019
+ 10%
-10%
Actual 2018
+ 10%
-10%
EURO
0.62
0.68
0.56
0.63
0.70
0.57
JPY
75.54
83.09
67.99
81.82
90.00
73.64
NZD
1.05
1.15
0.94
1.09
1.20
0.98
The impact on profit and equity is estimated by relating the hypothetical changes in the NZ Dollar, Japanese Yen and Euro exchange rate to
the balance of financial instruments at the reporting date. Foreign currency risks, as defined by AASB 7 Financial Instruments: disclosure, arise
on account of the financial instruments being denominated in a currency that is not the functional currency in which the financial instruments
are measured.
01 49 / / 201 9 ANN UAL RE PORT D OM I NO ’S P IZ ZA E N TERPRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
Differences from the translation of the financial statements into the Group’s presentation currency are not taken into consideration in the
sensitivity analysis. The results of the foreign exchange rate sensitivity analysis are driven by three main factors, as outlined below:
• The impact of applying the above foreign exchange movements to financial instruments that are not in hedge relationships will be recognised
directly in profit or loss;
• To the extent that the foreign currency denominated derivatives on balance sheet form part of an effective cash flow hedge relationship,
any fair value movements caused by applying the above sensitivity movements will be deferred in equity and will not affect profit or loss; and
• Movements in financial instruments forming part of an effective fair value hedge relationship will be recognised in profit or loss. However,
as a corresponding entry will be recognised for the hedged item, the net effect on profit or loss will be nil.
The below table details the impact of the Group’s profit after tax and other equity had there been a movement in the NZ dollar, Japanese Yen
and Euro with all other variables held constant.
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
TOTAL IMPACT
2019
$’000
2018
$’000
-
-
-
-
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
8,707
(10,642)
10,404
(12,715)
NATURE OF INTEREST RATE RISK
The Group’s exposure to changes in market interest rates relates primarily to the Group’s debt obligations that have floating interest rates.
INTEREST RATE RISK MANAGEMENT
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings, and by the use of interest rate
swaps. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective
hedging strategies are applied.
From a Group perspective, any internal contracts are eliminated as part of the consolidation process, leaving only external contracts.
EXPOSURE
As at the balance sheet date, the Group had financial assets and liabilities with exposure to interest rate risk. Interest on financial instruments
classified as floating rate, is repriced at intervals of less than one year. Interest on financial instruments, classified as fixed rate, is fixed until
maturity of the instrument. The classification between fixed and floating interest takes into account applicable hedge instruments. Other
financial instruments of the Group that are not included in the following table are non-interest bearing and are therefore not subject to interest
rate risk.
0150 // 2019 ANNUA L REPORT D OMINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
SENSITIVITY TO INTEREST RATE MOVEMENTS
The following sensitivity analysis shows the impact that a reasonable possible change in interest rates would have on Group profit after tax
and equity. The impact is determined by assessing the effect that such a reasonable possible change in interest rates would have had on the
interest income/(expense) and the impact on financial instrument fair values. This sensitivity is based on reasonable possible changes over
a financial year, determined using observed historical interest rate movements of the preceding five-year period, with a heavier weighting
given to more recent market data.
If interest rates had moved by 100 basis points and with all other variables held constant, profit before tax and equity would be affected as
follows:
Interest rates - increase by 100 basis points
Interest rates - decrease by 100 basis points
FAIR VALUE OF FINANCIAL INSTRUMENTS
IMPACT ON PROFIT BEFORE TAX
2019
$’000
(1,961)
1,917
2018
$’000
(2,373)
1,366
The carrying amounts and estimated fair values of all Group’s financial instruments recognised in the financial statements are materially the
same.
The methods and assumptions used to estimate the fair value of financial instruments are as follows:
CASH
The carrying amount is the fair value due to the asset’s liquid nature.
RECEIVABLES/PAYABLES
Due to the short-term nature of these financial rights and obligations, carrying amounts represent the fair values.
OTHER FINANCIAL ASSETS/LIABILITIES
Loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘Other Financial
Assets’. Loans are measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying
the effective interest rate.
DERIVATIVES
The Group enters into derivative financial instruments with various counterparties, principally financial institutions with investment grade
credit ratings. Foreign exchange forward contracts, interest rate swap contracts and cross-currency interest rate swaps are all valued using
forward pricing techniques. This includes the use of market observable inputs, such as foreign exchange spot and forward rates, yield curves
of the respective currencies, interest rate curves and forward rate curves of the underlying commodity. Accordingly, these derivatives are
classified as Level 2.
INTEREST BEARING LOANS AND BORROWINGS
Quoted market prices or dealer quotes for similar instruments are used to value long-term (greater than one year) debt instruments.
01 51 // 2 019 AN NUAL RE PO RT D O M I NO’S PI Z ZA E NTER PRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
VALUATION OF FINANCIAL INSTRUMENTS
For all fair value measurements and disclosures, the Group uses the following to categorise the method used:
•
•
Level 1: the fair value is calculated using quoted prices in active markets.
Level 2: the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices).
•
Level 3: the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The following table presents the Group’s assets and liabilities measured and recognised at fair value at the reporting date.
30 JUNE 2019
Recurring fair value measurements
Financial liabilities
Interest rate swaps
Foreign exchange contracts
Put option over non-controlling interest
Market access right
Contingent consideration
Total financial liabilities
01 JULY 2018
Recurring fair value measurements
Financial assets
Forward foreign exchange contracts
Total financial assets
Financial liabilities
Interest rate swaps
Put option over non-controlling interest
Market access right
Contingent consideration
Total financial liabilities
LEVEL 1
$’000
LEVEL 2
$’000
LEVEL 3
$’000
TOTAL
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
2,349
436
-
-
-
-
-
87,832
19,859
2,806
2,349
436
87,832
19,859
2,806
2,785
110,497
113,282
150
150
49
-
-
-
49
-
-
-
88,900
32,498
2,125
123,523
150
150
49
88,900
32,498
2,125
123,572
There have been no transfers between Level 1 and Level 2.
The only financial liabilities subsequently measured at fair value on Level 3 fair value measurement represent the fair value of the put option
and market access right relating to the acquisition of Domino’s Pizza Germany and contingent consideration for previous acquisitions.
No gain or loss for the year relating to these liabilities has been recognised in profit or loss.
The opening balance for the put option liabilities was $88.9 million and has a closing balance at year end of $87.8 million. The movement of
the put liability is recorded in reserves.
No gain or loss relating to level 3 liabilities has been recognised in profit or loss.
0152 // 2019 ANNUA L RE PORT D OMINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
VALUATION TECHNIQUES USED TO DERIVE LEVEL 2 AND 3 FAIR VALUES
The fair values of the financial assets and financial liabilities included in the level 2 and 3 categories above have been determined in accordance
with generally accepted pricing models based on a discounted cash flow analysis, with the most significant inputs being the discount rate that
reflects the credit risk of counterparties and long-term revenue and profit growth rates.
The level 2 financial instruments have been valued using the discounted cash flow technique. Future cash flows are estimated based on
forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that
reflects the credit risk of various counterparties.
Specific valuation techniques used to value level 3 financial instruments include:
PUT OPTION OVER NON-CONTROLLING INTEREST
The valuation technique used is the unlevered price/earnings multiple which requires future earnings to be estimated. The significant
unobservable inputs include adjusted unlevered price/earnings multiple and the put option is exercisable 4 years (January 2020) from date
of the joint venture agreement (December 2015). The call option is exercisable 6 years (January 2022) from the date of the joint venture
agreement. The earnings and margins are based on management’s experience and knowledge of the market conditions of the industry, with
the higher earnings resulting in a higher fair value and the shorter the time period resulting in a lower fair value.
MARKET ACCESS RIGHT
The valuation technique used is the income approach. In this approach the discounted cash flows are used to capture the future cost of
the asset. The significant unobservable inputs include adjusted unlevered price/earnings multiples. The earnings and margins are based on
management’s experience and knowledge of the market conditions of the industry, with the higher earnings resulting in a higher fair value.
CONTINGENT CONSIDERATION IN A BUSINESS COMBINATION
The discounted cash flow method was used to calculate the present value of the expected future economic benefits that will flow out of
the Group arising from the contingent consideration. The significant unobservable inputs include the projected gross margin based on
management’s experience and knowledge of market and industry conditions. Significant increase/(decrease) in the gross profit would result
in a higher/(lower) fair value of the contingent consideration liability.
OFFSETTING FINANCIAL INSTRUMENTS
The Group presents its derivative assets and liabilities on a gross basis. Derivative financial instruments entered into by the Group are subject
to enforceable master netting arrangements, such as International Swaps and Derivatives Association (ISDA) master netting agreements. In
certain circumstances, for example, when a credit event such as a default occurs, all outstanding transactions under ISDA agreements are
terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.
The amounts set out in note 20 and 21 represent the derivative financial assets and liabilities of the Group, that are subject to the above
arrangements and are presented on a gross basis.
HEDGING
The Group designates certain derivatives as hedging instruments in respect of foreign currency risk and interest rate risk in fair value hedges,
cash flow hedges, or hedges of net investment in foreign operations as appropriate. Hedges of foreign exchange risk on firm commitments
are accounted for as cash flow hedges.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the 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 Group documents whether the hedging instrument is effective in offsetting changes in fair values or cash flows
of the hedged item attributable to the hedged risk, which is when the hedge relationship meet all of the hedge effectiveness requirements
prescribed in AASB 9. There has been no material change to the Group’s hedging policies as a result of the adoption of AASB 9.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective
for that designated hedging relationship remains the same, the Group adjust the hedge ratio for the hedging relationship (i.e. rebalances the
hedge) so that it meets the qualifying criteria again.
01 53 / / 201 9 ANN UAL RE PO RT D O MI NO ’S P I ZZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
The Group holds the following hedging instruments:
FORWARD EXCHANGE CONTRACTS
Contracts denominated in US dollar to hedge highly probable sale and purchase transactions (cash flow hedges).
INTEREST RATE SWAPS
To optimise the Group’s exposure to fixed and floating interest rates arising from borrowings. These hedges incorporate cash hedges, which
fix future interest payments, and fair value hedges, which reduce the Group’s exposure to changes in the value of its assets and liabilities
arising from interest rate movements
CROSS-CURRENCY INTEREST RATE SWAPS
To either reduce the Group’s exposure to exchange rate variability in its interest repayments of foreign currency denominated debt (cash flow
hedges) or to hedge against movements in the fair value of those liabilities due to exchange and interest rate movements (fair value hedges).
The borrowing margin on the Group’s cross-currency interest rate swap has been treated as a cost of hedging and deferred into equity. These
costs are then amortised to the profit and loss as a finance cost over the remaining life of the borrowing.
CASH FLOW HEDGES
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated and qualify as
cash flow hedges is recognised in other comprehensive income and accumulated under the heading of cash flow hedging reserve, limited
to the cumulative change in fair value of the hedged item from inception of the hedge. The gain or loss relating to the ineffective portion is
recognised immediately in the profit or loss.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria. This
includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation is accounted for prospectively.
Any gain or loss recognised in other comprehensive income and 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 gain or loss
accumulated in equity is recognised immediately in profit or loss.
The Group uses cash flow hedges to mitigate the risk of variability of future cash flows attributable to foreign currency fluctuations over the
hedging period associated with foreign currency borrowings and ongoing business activities, predominantly where there are highly probable
purchases or settlement commitments in foreign currencies. The Group also uses cash flow hedges to hedge variability in cash flows due to
interest rates associated with borrowings.
At 30 June 2019, the Group have interest rate swap agreements in place with a notional amount of €131 million and ¥12 billion, whereby the
Group receives a fixed rate of interest of EURIBOR (floored at 0%) and TIBOR +0% and pays interest at rate equal to 0.168% and 0.242% on
the notional amount. The swap is being used to hedge the exposure to changes in the fair value of its fixed rate secured loans.
Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated
on agreed notional principal amounts. Such contracts enable the Group to mitigate the risk of changing interest rates on the fair value of issued
fixed rate debt held and the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting
date is determined by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract, and
is disclosed below. The average interest rate is based on the outstanding balances at the end of the financial year.
As the critical terms of the interest rate swap contracts and their corresponding hedged items are the same, the Group performs a qualitative
assessment of effectiveness and it is expected that the value of the interest rate swap contracts and the value of the corresponding hedged
items will systematically change in opposite direction in response to movements in the underlying interest rates. The main source of hedge
ineffectiveness in these hedge relationships is the effect of the counterparty and the Group’s own credit risk on the fair value of the interest
rate swap contracts, which is not reflected in the fair value of the hedged item attributable to the change in interest rates. No other sources
of ineffectiveness emerged from these hedging relationships.
0154 // 2019 A NNUA L R EPORT D OMINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
The impact of the hedging instruments on the statement of financial position as at 30 June 2019 is, as follows:
Interest Rate Swap
Notional Amount (Euro)
Carrying Amount (AUD)
Change in intrinsic value of outstanding hedging instrument since 02 July 2018 (AUD)
Change in value of hedged item used to determine hedge effectiveness (AUD)
Notional Amount (JPY)
Carrying Amount (AUD)
Change in intrinsic value of outstanding hedging instrument since 02 July 2018 (AUD)
Change in value of hedged item used to determine hedge effectiveness (AUD)
2019
‘000
131,000
212,283
(715)
715
12,000,000
158,856
(1,634)
1,634
The line item in the statement of financial position which is impacted by the hedging instrument is current financial liabilities.
Amounts recognised in equity are transferred to income statement when the hedged transaction affects profit or loss, such as when hedged
income or expenses are recognised or when a forecast sale occurs or the asset is consumed. When the hedged item is the cost of a non-
financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If
the hedging instrument expires or is sold, terminated or exercised without replacement or roll over, or if its designation as a hedge is revoked,
amounts previously recognised in equity remain in equity until the forecast transaction occurs.
HEDGES OF NET INVESTMENT 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 under the heading of foreign
currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
Gains and losses on the hedging instrument relating to the effective portion of the hedge accumulated in the foreign currency translation
reserve are reclassified to profit or loss on the disposal or partial disposal of the foreign operations.
Included in borrowings at 30 June 2019 is borrowings of $150,164 thousand, which has been designated as hedge of the net investments in
the Group’s European subsidiaries. These borrowings are being used to hedge the Group’s exposure to the foreign exchange risk on these
investments.
There are economic relationships between the hedged items and the hedging instruments as the net investment creates a transaction risk
that will match the foreign exchange risk on the Euro borrowings. The Group has established a hedge ratio of 1:1 as the underlying risk of the
hedging instruments are identical to the hedged risk component. The hedge ineffectiveness will arise when the amount of the investment in
the foreign subsidiary become lower than the amount of the fixed rate borrowing.
The impact of the hedging instruments on the statement of financial position is, as follows:
Hedge of Net Investment in Foreign Operations
Notional amount (EURO)
Carrying amount (AUD)
Change in intrinsic value of outstanding hedging instrument since 02 July 2018 (AUD)
Change in value of hedged item used to determine hedge effectiveness (AUD)
2019
‘000
92,667
150,165
(4,059)
4,059
01 55 // 2 019 AN N UAL R EPO RT D O M IN O’S PI Z ZA E NTERP RISES LIMITED
Notes to the Financial Statements
continued
22 FINANCIAL RISK MANAGEMENT (Continued)
HEDGING RESERVES
The Group’s hedging reserves are disclosed in note 14.
CREDIT RISK
NATURE OF CREDIT RISK
Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument or customer contract that will result
in a financial loss to the Group. The Group is exposed to credit risk from its operating activities (primarily from customer receivables and from
its financing activities, including deposits with financial institutions, foreign exchange transactions and other financial instruments).
CREDIT RISK MANAGEMENT: RECEIVABLES & LOANS
Customer credit risk is managed by each division subject to established policies, procedures and controls relating to customer credit risk
management. The Group trades with recognised well-established franchisees. Depending on the division, credit terms for receivables are
generally up to 30 days from date of invoice. Loans payments are received weekly in advance. The Group’s exposure to bad debts is not
significant and default rates have historically been very low on both receivables and loans.
Franchisee’s and customers who trade on credit terms are subject to credit verification procedures, including an assessment of financial
position, past experience and industry reputation. In addition, receivable balances are monitored on an ongoing basis with the result that the
Group’s exposure to bad debts is not significant. In the event that a loan defaults, the Group’s policy is to purchase and operate the store as
a corporate store.
The credit quality of trade receivables and loans neither past due nor impaired has been assessed as high based on information on counterparty
and historical counter party default. The carrying value of the Groups trade, other receivables and loans are denominated in Australian dollars,
NZ dollars, Japanese Yen and Euros.
EXPOSURE
The Group’s maximum credit exposure to current receivables, finance advances and loans are shown below:
ANZ
Europe
Japan
Total
2019
$’000
74,985
53,915
30,470
159,370
2018
$’000
64,577
45,311
54,925
164,813
CREDIT RISK MANAGEMENT: FINANCIAL INSTRUMENTS AND CASH DEPOSITS
Credit risk from balances with banks and financial institutions is managed by the Group in accordance with the Board-approved policy.
Investments of surplus funds are made only with approved counterparties.
The carrying amount of financial assets represents the maximum credit exposure. There is also exposure to credit risk when the Group
provides a guarantee to another party. Details of contingent liabilities are disclosed in note 27. There are no significant concentrations of
credit risk within the Group.
0156 // 2019 A NNUA L RE PORT D OMINO’S PIZ ZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
GROUP STRUCTURE
Group structure explains aspects of the Group structure and how changes have affected the financial position and performance of the Group.
23 SUBSIDIARIES
Details of the Company’s subsidiaries at 30 June 2019 are as follows:
NAME OF ENTITY
Domino’s Development Fund Pty Ltd(i)
Hot Cell Pty Ltd(i)
Silvio’s Dial-a-Pizza Pty Ltd(i)
IPG Marketing Solutions Pty Ltd(i)
Catering Service & Supply Pty Ltd(i)
Domino’s Pizza Enterprises Ltd Employee Share Trust
Construction, Supply & Service Pty Ltd(i)
Ride Sports ANZ Pty Ltd(i)
Domino’s Pizza New Zealand Limited
DPH NZ Holdings Limited
Domino’s Pizza Japan, Inc.
Domino’s Pizza Europe B.V.
Domino’s Pizza Netherlands B.V.
DOPI Vastgoed B.V.
Domino’s Pizza Geo B.V.
Domino’s Pizza WOW Group B.V
N4N B.V.
Domino’s Pizza Belgium S.P.R.L
Daytona Holdco Limited (UK)
Daytona JV Limited (UK)
Ausmark Holdco Limited
Ausmark ApS
PLACE OF
INCORPORATION
AND OPERATION
FUNCTIONAL
CURRENCY
PROPORTION
OF OWNERSHIP
AND VOTING
POWER HELD
2019
%
2018
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Japan
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
The Netherlands
Belgium
UK
UK
UK
Denmark
AUD
AUD
AUD
AUD
AUD
AUD
AUD
AUD
NZD
NZD
JPY
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
DKK
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
100
100
67
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
-
100
100
67
-
-
01 57 / / 201 9 AN N UAL R E PORT D OM I NO ’S PI Z ZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
23 SUBSIDIARIES (Continued)
PLACE OF
INCORPORATION
AND OPERATION
FUNCTIONAL
CURRENCY
PROPORTION
OF OWNERSHIP
AND VOTING
POWER HELD
2019
%
2018
%
NAME OF ENTITY
Daytona Germany HRB
Agentur fur Wertbung und Etatverwaltung GmbH(ii)
Germany
Germany
Domino’s Pizza Deutschland GmbH (previously Joey’s Pizza International GmbH)
Germany
Hallo Pizza Hamburg GmbH(ii)
Hallo Pizza GmbH
Chrisa Handelsgesellschaft GmbH(iii)
Hallo Pizza Nord GmbH(iv)
DPEU Holdings S.A.S.
Domino’s Pizza France S.A.S.
HVM Pizza S.A.R.L.
Fra-Ma-Pizz S.A.S.
Double Six S.A.S.
Pizza Centre France S.A.S.
Groupe AVB S.A.S.
AVB2 S.A.R.L.
AVB Services S.A.R.L.
AVB3 S.A.R.L.
AVB4 S.A.R.L.
AVB5 S.A.R.L.
Germany
Germany
Germany
Germany
France
France
France
France
France
France
France
France
France
France
France
France
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
EUR
67
-
67
-
67
-
-
100
100
100
100
100
100
100
100
100
100
100
100
67
67
67
67
67
67
67
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.
(ii) Entities have been legally merged into Domino’s Pizza Deutschland GmbH
(iii) Entities have been legally merged into Hallo Pizza GmbH.
(iv) Entities have been liquidated.
0158 // 2019 A NNUA L RE PORT D O MINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
24 PARENT ENTITY INFORMATION
PARENT ENTITIES
The parent entity and the ultimate parent entity in the Consolidated entity is Domino’s Pizza Enterprises Limited.
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
FINANCIAL PERFORMANCE
Profit for the year
Other comprehensive income
Total comprehensive income
TAX CONSOLIDATED GROUP
2019
$’000
46,203
678,589
724,792
73,290
467,066
540,356
206,218
57,170
(76,509)
(2,443)
184,436
86,156
(966)
85,190
2018
$’000
63,914
627,416
691,330
59,599
439,113
498,712
192,808
74,833
(73,545)
(1,478)
192,618
86,610
1,346
87,956
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.
A tax-consolidated group was formed with effect from 1 July 2003 and is 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 23.
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. Refer to
note 27 for further information regarding the contingent liabilities of the parent entity.
01 59 / / 201 9 ANN UAL REPO RT D OM I NO’S PI Z ZA E NTERP RISES L IMITED
Notes to the Financial Statements
continued
25
INVESTMENT IN JOINT VENTURE
RECOGNITION AND MEASUREMENT
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint
arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
The results, assets and liabilities of the joint ventures are incorporated in these consolidated financial statements using the equity method of
accounting, except when the investment, or a portion thereof, 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, an investment in a joint venture is initially
recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or
loss and other comprehensive income of the joint venture. When the Group’s share of losses of a joint venture exceeds the Group’s interest
in that joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint venture),
the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of the joint venture.
An investment in a joint venture is accounted for using the equity method from the date on which the investee becomes a joint venture. On
acquisition of the investment in a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the
identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any
excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment,
is recognised immediately in profit or loss in the period in which the investment is acquired.
The requirements of AASB 9 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s
investment in a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in
accordance with AASB 136 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with
its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment
loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the date when the investment ceases to be a joint venture, or when the investment
is classified as held for sale. When the Group retains an interest in the former joint venture and the retained interest is a financial asset, the
Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance
with AASB 9. The difference between the carrying amount of the joint venture at the date the equity method was discontinued, and the fair
value of any retained interest and any proceeds from disposing of a part interest in the joint venture is included in the determination of the
gain or loss on disposal of the joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive
income in relation to that joint venture on the same basis as would be required if that joint venture had directly disposed of the related assets or
liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that joint venture would be reclassified to profit
or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification
adjustment) when the equity method is discontinued.
The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment
in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.
When the Group reduces its ownership interest in a joint venture but the Group continues to use the equity method, the Group reclassifies to
profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction
in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities.
When a Group transacts with a joint venture of the group, profits and losses resulting from the transactions with the joint venture are recognised
in the Group’s consolidated financial statements only to the extent of interests in the joint venture that are not related to the Group.
On 24 November 2014, the Group acquired 50% equity of a joint venture called Stuart Preston Pty Ltd as Trustee for the Preston Holdings
Family Trust / Hot Cell Pty Ltd Partnership. On 30 March 2015, the Group acquired 50% equity of a joint venture called Triumphant Pizza Pty
Ltd / Hot Cell Partnership.
On 4 April 2016, the Group acquired 50% equity of a joint venture called Northern Beaches Enterprises Pty Ltd as trustee for the Northern
Beaches Trust/ Hot Cell Pty Ltd Partnership.
As per February 3, 2017 Domino’s Pizza Netherlands B.V. entered into a joint venture named Domino’s Pizza GEO B.V. with a franchisee, Mr.
Steenks (50% each). Upon establishing this joint venture a total of three corporate stores previously owned by Domino’s and two stores owned
by the franchisee were transferred to the legal entity.
0160 // 2019 A NNUA L RE PORT DO MINO’S PIZZA ENTERPRISES LIMIT ED
Notes to the Financial Statements
continued
UNRECOGNISED ITEMS
Unrecognised items provides information about items that are not recognised in the financial statements but could potentially have a significant
impact on the Group’s financial position and performance.
26 COMMITMENTS
RECOGNITION AND MEASUREMENT
OPERATING LEASES
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 Group exercises its options to renew. The Group does not have an option to purchase the leased asset
at the expiry of the lease period.
OPERATING LEASES COMMITMENTS
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Total
2019
$’000
98,619
221,823
103,472
423,914
2018
$’000
80,248
189,835
78,631
348,714
The operating lease commitments above include leases of franchised stores under sublease arrangements representing a future payment
and future receivable to the Group. Future lease payments receivable under sub-leases as end of the financial year are as follows:
Not longer than 1 year
Longer than 1 year and not longer than 5 years
Longer than 5 years
Total
2019
$’000
44,220
98,031
29,291
171,542
2018
$’000
42,835
104,878
31,117
178,830
01 61 // 201 9 AN N UAL R EPO RT D O MI NO ’S PI Z ZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
26 COMMITMENTS (Continued)
In respect of non-cancellable operating leases the following liabilities have been recognised:
Current
Make good
Non-current
Straight-line leasing
Make good
Total
FINANCE LEASES
FAIR VALUE
NOTE
2019
$’000
2018
$’000
12
12
12
187
183
126
1,749
2,062
205
1,708
2,096
The fair value of the finance lease liabilities is approximately equal to their carrying amount.
FINANCE LEASE COMMITMENTS
PRESENT VALUE OF MINIMUM
FUTURE LEASE PAYMENTS
No later than 1 year
Later than 1 year and not later than 5 years
Minimum lease payments(i)
Less future finance charges
Present value of minimum lease payments
Included in the financial statements as:
Current borrowings
Non-current borrowings
Total finance lease commitments
2019
$’000
5,373
11,259
16,632
-
16,632
5,373
11,259
16,632
(i) Minimum future lease payments include the aggregate of all lease payments and any guaranteed residual value.
CAPITAL EXPENDITURE COMMITMENTS
Plant and equipment
Total
2019
$’000
5,817
5,817
0162 // 2019 A NNUA L RE PORT D O MINO’S PIZZA ENTERPRISES LIMITED
2018
$’000
3,700
9,436
13,136
-
13,136
3,700
9,436
13,136
2018
$’000
1,760
1,760
Notes to the Financial Statements
continued
27 CONTINGENT LIABILITIES
RECOGNITION AND MEASUREMENT
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.
Guarantees - franchisee loans and leases
Total
2019
$’000
10,470
10,470
2018
$’000
7,622
7,622
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.
Included in the above are contingent liabilities of the parent entity of $4,703 thousand.
ESTIMATES AND JUDGEMENTS
LEGAL AND REGULATORY MATTERS
The Group operates in a number of jurisdictions with different regulatory and legal requirements. Given this complexity, management is at
times required to exercise judgement in evaluating compliance with relevant laws and regulations.
SPEED RABBIT PIZZA
There are various separate French legal proceedings by a competitor, Speed Rabbit Pizza (SRP) against subsidiary, Domino’s Pizza France
(DPF) (the main claim) and seven SRP franchisees against DPF and the relevant DPF franchisees (the local claims). The allegations are that
DPF and its franchisees breached French laws governing payment time limitations and lending, thereby giving DPF and its franchisees an
unfair competitive advantage. SRP claimed significant damages for impediment of the development of its franchise network, lost royalty
income from SRP franchisees and harm to SRP’s image. DPF and its franchisees denied liability and vigorously defended the claims. On 7 July
2014 the Court handed down its decision in the main claim, as well as in five of the local claims. All of the claims of SRP and the relevant SRP
franchisees were dismissed.
SRP filed an appeal to these decisions in the Court of Appeal, which dismissed the appeal of SRP in the main claim on 25 October 2017 and the
appeal of SRP and/or SRP franchisees in five local claims on 12 December 2018. SRP has filed an appeal from the decision in the main claim and
in 2 local claims to the Cour de Cassation. It is not yet clear when a decision will be handed down by the Cour de Cassation in the main claim,
but it is expected to be by the end of 2019. For the sixth local claim, the Court found in favour of DPF at first instance in September 2016, and
SRP filed an appeal from this decision to the Court of Appeal. On 30 January 2018, the Court of Appeal dismissed the appeal of SRP in the
sixth local claim. The two SRP franchisees have filed an appeal from that decision to the Cour de Cassation. The seventh local claim has yet
to be heard by the Court at first instance.
DPE denies all claims made and is vigorously defending the proceedings brought against it. DPE is confident of its legal and commercial position.
Accordingly, no provision has been recognised as at 30 June 2019.
01 63 // 2 019 AN NUAL R EPO RT D O M IN O’S PI Z ZA E NTERPRISES LIMITED
Notes to the Financial Statements
continued
27 CONTINGENT LIABILITIES (Continued)
PIZZA SPRINT
In May 2016, proceedings were brought against Fra-Ma Pizz SAS and Pizza Center France SAS, the Pizza Sprint entities, by a number of former
and current franchisees whom allege a significant imbalance in the rights and obligations by the franchisor. The alleged practices predated
the acquisition of Pizza Sprint by the company, accordingly during the re-measurement period the company has adjusted the purchase price
accounting to recognise a contingent liability and asset in relation to the above matter. A number of the claims by franchisees have been
settled on a commercial basis.
The French Ministry for the Economy and Finance has also brought proceedings involving the same facts against Fra-Ma Pizza SAS, Pizza Center
France SAS and Domino’s Pizza France SAS. The claims are being defended. The franchisees have sought to have their proceedings joined to
the proceedings brought by the Ministry, which DPF, Fra-Ma-Pizz SAS and Pizza Center France SAS have opposed. The decision handed down
on this matter on 15 February 2018 has rejected this claim.
Hearing of the claims at the first instance has taken place on 24 June 2019 for all the Pizza Sprint proceedings (brought by the former and
current franchisees and by the French Ministry for the Economy and Finance). Decisions will be handed down on 1 October 2019.
PRECISION TRACKING
During the current period DPE has settled its dispute with Precision Tracking Pty Ltd, Delivery Command Pty Ltd and the three directors of
these two companies, agreeing to discontinue against each other their general respective claims. Therefore, this matter is no longer considered
a contingent matter.
CLASS ACTION
On 25 June 2019, Riley Gall, as the representative Applicant, commenced a representative proceeding (class action) against the Company in
the Federal Court of Australia on behalf of Australian franchisee employees who were employed as delivery drivers or in-store workers between
24 June 2013 and 23 January 2018. The Company was formally served with the proceeding on 1 July 2019.
The statement of claim alleges, amongst other things, that Domino’s misled its franchisees by advising them to pay delivery drivers and in-
store workers under a series of industrial instruments and not the Fast Food Industry Award 2010. The statement of claim does not quantify
the damages the claimants will seek in the proceedings for all or any part of the claim period.
The Company rejects the allegation and intends to defend the action.
At this early stage of the proceedings, the Company is unable to determine any possible obligation or financial impact of this matter.
GENERAL CONTINGENCIES
As a global business, from time to time DPE is also subject to various claims and litigation from third parties during the ordinary course of its
business. The directors of DPE have considered such matters which are or may be subject to claims or litigation at 30 June 2019 and unless
specific provisions have been made are of the opinion that no material contingent liability for such claims of litigation exist. The group had no
other material contingent assets or liabilities.
28 SUBSEQUENT EVENTS
On 20 August 2019, the directors declared a final dividend for the financial year ended 30 June 2019 as set out in note 16.
Other than the above, there has been no further matters or circumstance occurring subsequent to the end of the financial year that has
significantly affected, the operations of the Group, the results of those operations, or the state of affairs.
0164 // 2019 ANNUAL RE PORT D OMINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
OTHER INFORMATION
29 RETIREMENT BENEFIT PLANS
RECOGNITION AND MEASUREMENT
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling
them to the contributions.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial
valuations being carried out at the end of each annual reporting period. Re-measurement, comprising actuarial gains and losses, the effect
of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the statement
of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Re-measurement
recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past
service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the
beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are categorised as follows:
• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
• Net interest expense or income; and
• Re-measurement
The Group presents the first two components of defined benefit costs in profit or loss in the line item employee benefits expense. Curtailment
gains and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus in the
Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available.
ESTIMATES AND JUDGEMENTS
DISCOUNT RATE USED TO DETERMINE THE CARRYING AMOUNT OF THE GROUP’S DEFINED BENEFIT OBLIGATION
The Group’s defined benefit obligation is discounted at a rate set by reference to market yields at the end of the reporting period on high quality
corporate bonds. Significant judgement is required when setting the criteria for bonds to be included in the population from which the yield
curve is derived. The most significant criteria considered for the selection of bonds include the issue size of the corporate bonds, quality of
the bonds and the identification of outliers which are excluded.
DEFINED BENEFIT PLANS - DOMINO’S PIZZA JAPAN, INC.
The Group operates an unfunded retirement benefit plan where a lump-sum amount is paid out to eligible full-time employees of Domino’s
Pizza Japan with more than three years of service as of retirement.
The lump-sum amount is calculated as monthly salary as of retirement multiplied by a multiple. The multiple is based on years of service up
to a maximum of 41 years and whether retirement is voluntary or involuntary.
The plan typically exposes the Group to actuarial risks such as: interest rate risk, retention risk and salary risk which impacts the plan as follows:
•
Interest rate risk: A decrease in the bond interest rate in Japan will increase the plan liability by reducing the discount rate;
• Retention risk: The present value of the defined benefit plan liability is calculated by reference to the expected length of service of full-time
staff. As such, an increase in the length of service above the expected length will increase the plan’s liability; and
• Salary risk: The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As
such, an increase in the salary of the plan participants will increase the plan’s liability.
01 65 / / 201 9 ANN UAL REPO RT D OM I NO’S PI Z ZA E NTERP RISES L IMITED
Notes to the Financial Statements
continued
29 RETIREMENT BENEFIT PLANS (Continued)
The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at 30 June 2019
by Mr. K. Takeda, Certified Pension Actuary.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Discount rate
Expected rate of salary increase
Number of employees
Average service years
Expected service years
Amounts recognised in other comprehensive income in respect of these defined benefit plans are as follows:
Service cost:
Current service cost
Net interest expense
Components of defined benefit costs recognised in profit or loss
Remeasurement of the net defined benefit liability:
Actuarial gain recognised in the period
Components of defined benefit costs recognised in other comprehensive income
Total
2019
(0.11%)
2.59%
467
4.9 yrs
5.2 yrs
2018
0.09%
2.59%
469
4.7 yrs
5.1 yrs
2019
$’000
2018
$’000
929
6
935
68
68
1,003
868
9
877
116
116
993
Of the expense for the year, an amount of $935 thousand has been included in profit or loss as administration expenses. (2018: $877 thousand).
Movements in the present value of the defined benefit obligation in the current year were as follows:
Opening defined benefit obligation
Current service cost
Net interest expense
Remeasurements (gains)/losses:
Actuarial gains and losses arising from changes in financial assumptions
Benefits paid
Exchange differences of foreign plans
Closing defined benefit obligation
2019
$’000
6,418
929
6
68
(512)
558
7,467
2018
$’000
5,681
868
9
116
(576)
320
6,418
The Group expects to make a contribution of $1.1 million (2018: $945 thousand) to the defined benefit plans during the next financial year.
0166 // 2019 A NNUA L REPORT D OMINO ’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
30 KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employee benefits
Post-employment benefits
Other long-term employee benefits
Equity settled share-based payments
Total
2019
$
2018
$
6,596,060
6,200,352
223,685
107,170
926,209
183,978
53,959
1,151,207
7,853,124
7,589,496
The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of
individuals and market trends.
During the year independent remuneration consultants were engaged by the Remuneration Committee to ensure that the reward practices
and levels of remuneration for KMPs are consistent with market practice. A statement of recommendation from the remuneration consultants
has been received for the 2019 financial year. Payment of $118,450 (2018: $52,371) has been made to the remuneration consultant for the
remuneration advisory services provided on the remuneration recommendation. 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.
31 RELATED PARTY TRANSACTIONS
EQUITY INTEREST IN SUBSIDIARIES
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 23 to the financial statements.
EQUITY INTERESTS IN OTHER RELATED PARTIES
There are no equity interests in other related parties.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
KEY MANAGEMENT PERSONNEL COMPENSATION
Details of key management personnel compensation are disclosed in note 30 to the financial statements.
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.
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 18 to the financial statements.
OTHER TRANSACTIONS WITH DIRECTORS OF THE GROUP
During the year the Group engaged the services of Mr Michael Cowin, a related party of Mr Jack Cowin, as a Board Member of DPE Japan Co.
Ltd. The services rendered were based on market rates for such services and were due and payable under normal payment terms. A total of
$50,000, excluding GST, was paid or payable to Mr Michael Cowin during the year ended 30 June 2019.
01 67 / / 20 19 ANN UAL RE PO RT D O MI NO ’S PI Z ZA E NTERPRISES LIMITED
Notes to the Financial Statements
continued
31 RELATED PARTY TRANSACTIONS (Continued)
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL OF DOMINO’S PIZZA ENTERPRISES LIMITED
Comgroup Supplies Pty Ltd, an entity associated with Mr Jack Cowin, supplies food products to the Group on commercial arm’s length terms.
Comgroup was selected as a preferred supplier after a competitive tender process in which Mr Cowin had no involvement. During the year, the
Group made purchases totalling $76,941. As at 30 June 2019, $76,941 was outstanding and there were no bad or doubtful debts.
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.
TRANSACTIONS WITH OTHER RELATED PARTIES
Other related parties include:
•
associates;
• directors of related parties and their director-related entities; and
• other related parties.
TRANSACTIONS WITHIN THE GROUP
The Group includes the ultimate parent entity of the Group and its controlled entities.
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 23 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 year the Company extended or had in place loans to Joint Venture partnerships of which the Group has a 50% interest. The balance
of these loans as at 30 June 2019 is $9.4 million and interest is charged based on commercial rates and terms.
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 between entities in the group in accordance with the relevant Service Agreements.
All transaction were at arm’s length.
0168 // 2019 A NNUA L RE PORT D O MINO’S PIZZA ENTERPRISES LIMITED
Notes to the Financial Statements
continued
32 REMUNERATION OF AUDITORS
The auditor of Domino’s Pizza Enterprises Limited is Deloitte Touche Tohmatsu.
GROUP AUDITOR(I)
Audit of the parent company
Audit of subsidiaries and other entities
Total audit services
Other assurance related services(ii)
Total assurance services
Taxation services(iii)
Other non-audit services(iv)
Total other services
2019
$
519,976
843,252
1,363,228
173,694
173,694
31,335
893,500
924,835
2018
$
460,626
753,389
1,214,015
328,852
328,852
94,501
872,306
966,807
Total Group auditor’s remuneration
2,461,757
2,509,674
(i) All amounts were paid to Deloitte Touche Tohmatsu by the Company and its subsidiaries. Fees are billed in local currencies and converted
into AUD at average rates. The auditor of the parent entity is Deloitte Touche Tohmatsu Australia.
(ii) Other assurance services relate principally to the Domino’s Franchisee Wage Supervision Framework review and compliance activities
payable to the parent company auditor.
(iii) Taxation services relate to tax compliance services and tax advisory services relating to acquisitions paid to related overseas practices
of the parent company auditor.
(iv) Other non-audit services relate principally to digital advisory services payable to the parent company auditor.
33 OTHER ITEMS
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
In the current year, the Group has applied a number of amendments to Australian accounting standards and new interpretations issued by
the Australian Accounting Standards Board (‘AASB’) that are mandatorily effective for an accounting period that begins on or after 02 July
2018 and therefore relevant for the current year end.
STANDARDS AFFECTING PRESENTATION AND DISCLOSURE
AASB15 Revenue from Contracts with Customers
The Group has adopted AASB 15 Revenue from Contracts with Customers (AASB 15) from 02 July 2018, which supersedes AASB 118 Revenue
(AASB 118). AASB 15 is based on the principle that revenue is recognised when control of a good or service transfers to a customer. See below
the details of the impact of the Group’s revenue streams for the adoption of AASB 15.
Impact of Adoption
As the Group has adopted the modified transitional approach to implementation and the new standard has therefore been applied only to
contracts that remain in force at 02 July 2018. A transition adjustment has been recognised in retained earnings on transition at 02 July 2018
without adjustment to comparatives.
01 69 / / 20 19 ANN UAL R EPORT D OM I N O’S P I ZZA E N TERPRISES LIMITED
Notes to the Financial Statements
continued
33 OTHER ITEMS (Continued)
The impact on the Group’s retained earnings as at 02 July 2018 is as follows:
Retained earnings as at 01 July 2018
Recognition of contract liability for franchise initial fees
Adjustment in recognition of deferred tax
Adjustment to retained earnings for adoption of AASB 15
Opening retained earnings at 02 July 2018
$,000
191,227
(20,151)
6,196
(13,955)
177,272
Set out below are the amounts by which each financial statement line item is affected as at and for the year ended 30 June 2019 as a result
of the adoption of AASB 15. The adoptions of AASB 15 did not have a material impact on profit, or OCI or the Group’s operating, investing and
financing cash flows. The first column shows amounts prepared under AASB 118, had AASB 15 not been adopted and the second column
shows the amount under AASB 15, which the Group has adopted.
Consolidated Statement of Profit or Loss and Other Comprehensive Income (Extract)
Revenue
Employee benefits expense
Marketing expenses
Profit before tax
Income tax expense
Profit for the period from continuing operations
Consolidated Statement of Financial Position (Extract)
Current assets
Non-current assets
Total assets
Current liabilities
Contract liabilities
Total current liabilities
Non-current liabilities
Contract liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Reserves
Retained earnings
Total equity
0170 // 2019 A NNUA L RE PORT DO MINO’S PIZZA ENTERPRISES LIMITED
PREPARED
UNDER
AASB 118
$’000
PREPARED
UNDER
AASB 15
$’000
1,318,223
(284,693)
(42,981)
157,990
(44,599)
113,391
1,435,410
(292,439)
(150,999)
159,413
(45,034)
114,379
PREPARED
UNDER
AASB 118
$’000
PREPARED
UNDER
AASB 15
$’000
265,307
265,307
1,173,106
1,438,413
1,173,106
1,438,413
-
243,421
-
65,872
836,073
3,051
246,472
15,645
60,088
845,934
1,079,494
1,092,406
358,919
346,007
(57,325)
210,026
358,919
(57,271)
197,060
346,007
IMPACT
$’000
117,187
(7,746)
(108,018)
1,423
(435)
988
IMPACT
$’000
-
-
-
3,051
3,051
15,645
(5,784)
9,861
12,912
(12,912)
54
(12,966)
(12,912)
Notes to the Financial Statements
continued
33 OTHER ITEMS (Continued)
Impact of Adoption on Revenue Streams
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third
parties. The Group recognises revenue from the following significant sources:
SALE OF GOODS
In the previous reporting period, revenue from the sale of good was recognised when the Group had transferred to the buyer the significant
risk and rewards of ownership. In applying AASB 15, revenue associated with the sale of goods is recognised when the performance obligation
of the sale has been made and control of the goods has been transferred to the customer. Therefore, the adoption of AASB 15 has not had a
material impact on the revenue recognition in relation to the sale of goods.
SERVICE REVENUE
The Group provides services to franchisees and other third parties which are carried out under the instructions of the customer. Prior to the
adoption of AASB 15, revenue from the provision of services was recognised when the services were rendered and based on reference to the
stage of completion of the contract. In adoption AASB 15, no adjustments have been made to when the Group recognises revenue relating
the rendering of services as the Group recognises revenue over the period in which the services are being rendered.
FRANCHISE ROYALTIES
Franchise agreements entitle the contracted party to access the Domino’s name and associated intellectual property (the ‘franchise right’) in
exchange for fees. The majority of this fee is based on a percentage of the applicable franchisee’s stores sales. Continuing sale-based royalties
represent substantial majority of the consideration the Group receives under the Group’s franchise agreements. Continuing sale-based royalties
are generally invoiced and paid on a weekly basis and were recognised as the related sale occurred. The timing and the amount of revenue
recognised relating to continuing sales-based royalties were not impacted by the adoption of AASB 15 on the basis that the recognition of the
sales-based royalty continues to be recognised when the related franchisee sales occur as this reasonably depicts the Group’s performance
toward the complete satisfaction of the franchise license performance obligation to which the sales-based royalty has been allocated.
The Group’s franchise agreements also typically include certain less significant, one-off fees. These fees include initial fees paid upon executing
a franchise agreement, renewal of the term of the franchise right and fees paid in the event the franchise agreement is transferred to another
franchisee (collectively termed initial fees). Under AASB 118 revenue relating to initial fees were recognised when the related upfront services
were provided. Upon adoption of AASB 15, the Group has determined that the initial fees are highly interrelated with the franchise right and are
not individually distinct from the ongoing services provided to franchisees. As a result, upon adoption of AASB 15, initial fees are recognised
over the term of each respective franchise agreement. Revenue from these initial franchise fees are recognised on straight-line basis, which
is consistent with the franchisee’s right to use and benefit from the intellectual property. This resulted in an increase in revenue of $1,423
thousand, recognition of contract liabilities of $18,696 thousand and deferred tax asset of $5,784 thousand. An opening retained earnings
adjustment of $17 thousand was recognised by Non-Controlling Interests on adoption of AASB 15.
NATIONAL ADVERTISING FUNDS
The Group receives an additional franchise fee that is based on a percentage of gross revenue of the franchisee. The fees are to be used on
advertising activities that will benefit the brand, franchisees and Group. With the adoption of AASB 15, the Group has determined that it is not
a separate performance obligation from the franchise right and therefore the services are bundled as a single distinct performance obligation.
Because the fee is also a sales-based royalty, revenue is received in relation to the advertising fund is recognised when the related franchisee
sales occur. National advertising fund expenses are recognised as incurred. This has resulted in a gross up in the amount reported of revenue
of $115,764 thousand, employee benefit expense of $7,746 thousand and marketing expenses of $108,018 thousand, however, the impact
is generally expected to be an offsetting increase to both revenue and expenses such that the impact on income from operations and net
income is not expected to be material.
AASB 9 Financial Instruments
AASB 9 Financial Instruments (‘AASB 9’) replaces AASB 139 Financial Instruments: Recognition and Measurements (‘AASB 139’) for annual
period beginning on or after 01 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and
measurement; impairment; and hedge accounting.
IMPACT OF ADOPTION
The Group adopted AASB 9 on 02 July 2018, which resulted in changes in accounting policies. Amounts recognised in the financial statements
as at this date did not require any material adjustments on application of the new accounting policies. The standard replaced the provisions of
AASB 139 that relate to the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial
instruments; impairment of financial assets; and hedge accounting.
01 7 1 / / 20 19 AN NUAL R EPO RT D OMI N O ’S PI Z ZA EN TERPRISES LIMITED
Notes to the Financial Statements
continued
33 OTHER ITEMS (Continued)
For transition, the Group has elected to apply the limited exemption in AASB 9 relating to the classification, measurement and impairment
requirements for financial assets and accordingly has not restated comparative periods.
The Group applies the new forward-looking expected credit loss (ECL) model required by AASB 9, using the simplified approach for its trade
receivables portfolio review and the general approach for all other financial assets as required by the standard. There was an insignificant
impact on transition to AASB 9 on the Group’s opening balances as at 02 July 2018.
CLASSIFICATION AND MEASUREMENT
On 01 July 2018, the Group assessed the classification of its financial assets on the basis of the contractual terms of their cash flows and the
business model by which they are managed. All of the Group’s financial assets were previously classified as loans and receivables or held to
maturity and were reclassified to held at amortised cost on transition date.
DERIVATIVES AND HEDGING ACTIVITIES
The Group’s risk management strategies and associated hedge documentation have been aligned with the requirements of AASB 9 and existing
hedging relationships under AASB 139 have been treated as continuing hedges.
IMPAIRMENT OF FINANCIAL ASSETS
The Group implemented the new forward-looking expected credit loss model which is required for certain financial instruments. The simplified
approach was used for the trade receivables portfolio and the general approach used for franchisee loans. There was an insignificant impact
on application of the expected credit loss model.
CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS
The Group classifies its financial assets into the following categories: those to be measured subsequently at fair value (either through other
comprehensive income (FVOCI) or through profit or loss (FVPL)) and those to be held at amortised cost. Refer to note 20 regarding classification
of financial assets. The adoption of AASB 9 did not have a material impact on classification.
Financial Assets
Trade and other receivables
Loans receivable
Financial guarantee contracts
Deposits
Forward exchange contracts
Financial liabilities
Trade and other payables
Other financial liabilities
Rent incentive liability
Bank loans
Loans from other entities
Finance lease liability
Market access right
Put-option liability
Contingent consideration
Deferred consideration
Interest rates swaps
Foreign exchange contracts
0172 // 2019 A NNUA L RE PORT D OMINO’S PIZZA ENTERPRISES L IMITED
Original (AASB 139)
Loans and receivables
Loans and receivables
Loans and receivables
Loans and receivables
Other
Original (AASB 139)
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Other
Other
Other
Other
Other
Other
Other
Other
New (AASB 9)
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVOCI
New (AASB 9)
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVOCI
FVOCI
FVPL
FVPL
Derivative financial instrument
Derivative financial instrument
Notes to the Financial Statements
continued
33 OTHER ITEMS (Continued)
Classification depends on the business model for managing the financial assets and the contractual terms of the cash flows. Management
determines the classification of financial assets at initial recognition. Generally, the Group does not acquire financial assets for the purpose
of selling in the short-term. When the Group enters into derivative contracts, these transactions are designed to reduce exposures relating
to assets and liabilities, firm commitments or anticipated transactions.
AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement
of Share-based Payment Transactions
Amends AASB 2 Share Based Payments to clarify how to account for certain types of share-based payment transactions. The amendments
provide requirements on the accounting for:
• The effect of vesting and non-vesting conditions on the measurement of cash-settled share-based payments
• Share-based payment transactions with a net settlement feature for withholding tax obligations
• A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash settled
to equity settled.
AASB 2017-1 Amendments to Australian Accounting Standards - Transfers of Investments Property,
Annual Improvements 2014-2016 Cycle and Other Amendments
The amendments clarify certain requirements in:
• AASB 1 First-time Adoption of Australian Accounting Standards - deletion of exemptions for first-time adopters and addition of an exemption
arising from AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
• AASB 12 Disclosure of Interests in Other Entities - clarification of scope
• AASB 128 Investment in Associates and Joint Ventures - measuring an associate or joint venture at fair value
• AASB 140 Investment Property - change in use.
The adoption of these amendments did not have any impact on the amounts recognised in prior periods and will also not affect the current
or future periods.
NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
Certain new accounting standards and interpretations have been published that are not mandatory for 02 July 2018 reporting periods and
have not been early adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below.
AASB 16 Leases
AASB 16 Leases specifies how to recognise, measure and disclosure leases. It will result in almost all leases being recognised on the balance
sheet, as the distinction between operating and finance leases has been removed. Under the new standard, an asset (the right to use the
leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The accounting
for lessors will not significantly change.
IMPACT
AASB 16 will require the recognition of a right of use asset and a lease liability based on the discounted value of committed lease payments as
lessee. These lease payments are currently expensed within occupancy expenses, will be replaced by the straight-line depreciation expense
of the right of use asset and will reduce the lease liability. As the lease liability will be carried at present value, an interest expense will arise over
the duration of the lease term. The principal component of lease payments will be classified in the statement of cash flows from operating to
financing activities. In assessing the adoption of AASB 16, the Group has made certain assumptions and judgements in relation to economic
conditions including but not limited to borrowing rates, composition of lease portfolio and likely exercise of renewal options that may cause
the actual output to differ from that concluded at 30 June 2019.
Domino’s occupied-operated properties
Leasehold properties occupied by the Group are primarily Group operated Domino’s branded stores, warehouse and offices. For these
properties, the balance sheet will be adjusted to recognise a right of use asset and associated lease liability. The financial liability will be
measured at the net present value of future payments under the lease, including optional renewal periods, where the Group assessed that
the probability of exercising the renewal is reasonably certain.
01 7 3 / / 201 9 AN N UAL R EP ORT D O MI NO ’S P IZ ZA EN TERP RISES LIMITED
Notes to the Financial Statements
continued
33 OTHER ITEMS (Continued)
The Group will initially apply the new standard using the modified retrospective approach, which requires no restatement of comparative
information. On transition, the right of use asset will be measured, on a lease by lease basis, at either (a) the value of the lease liability adjusted for
any prepaid or accrued lease payments; or (b) present value of committed lease payments since commencement of the lease, less cumulative
straight-line depreciation and utilising 01 July 2019 discount rates for durations equivalent to the remaining lease term (this approach results
in an adjustment to opening retained earnings).
In the income statement, net rental expense will be replaced by net interest expense and a straight-lined depreciation expense (currently
operating leases are expensed within occupancy expenses). As the lease liability will be carried at the present value, an interest expense
will arise over the duration of the lease term. This is expected to impact the Group’s earnings before interest and tax (‘EBIT’), which is a key
measure used by the business. The principal component of lease payments will be reclassified in the statement of cash flows from operating
to financing activities.
The Group will elect to use the exemptions in the standard on lease contracts for which the underlying asset is of low value and if the lease
term is less than 12 months.
Subleases arrangements
The Group has a portfolio of long-term ‘back-to-back’ property leases which secure competitive store locations on behalf of franchisees.
Cash flows under these arrangements substantially offset each other.
For back-to-back leases, the adoption of AASB 16 will result in the recognition of a financial asset and financial liability, representing the present
value of future cash flows receivable on the sublease and payable on the head lease respectively. Both categories of financial instruments
are expected to generate interest (income and expense, respectively), resulting from the unwinding of the discount over the lease term. The
impact of interest income and expense, which will be presented on a gross basis (compared to a net basis for the year ended 30 June 2019),
is expected to materially offset within the income statement.
The recoverability of the financial asset will be assessed at each reporting date.
Estimated impact from adoption of the standard
The Group has substantially completed its assessment of the impact of the adoption of the new standard; however certain technical and
judgemental aspects remain open, including the refinement and application of lease terms for leases with renewal options. The estimated
impact on the Group on the consolidated statement of financial performance as at 01 July 2019 is set out below allowing for these uncertainties.
$M
311 to 340
377 to 411
(694) to (758)
1 to 2
4 to 5
Balance Sheet - as at 01 July 2019
Right of use assets
Net investment in lease assets
Lease liabilities
Deferred tax
Retained earnings
The Group will adopt AASB 16 on 01 July 2019.
0174 // 2019 A NNUA L RE PORT D OMINO ’S PIZZA ENTERPRISES LIMITED
Additional securities exchange information
NUMBER OF HOLDERS OF EQUITY SECURITIES
ORDINARY SHARE CAPITAL
• 85,634,040 fully paid ordinary shares are held by 10,777 individual shareholders.
• All issued ordinary shares carry one vote per share, however partly paid shares do not carry the rights to dividends.
OPTIONS
•
3,471,750 options are held by 124 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
100,001 and over
10,001 - 100,000
5,001 - 10,000
1,001 - 5,000
1 - 1000
Total
28
76
89
1,053
9,531
10,777
SUBSTANTIAL SHAREHOLDERS
ORDINARY SHAREHOLDERS
Somad Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Total
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
1
-
1
120
124
FULLY PAID
PARTLY PAID
NUMBER
HELD
PERCENTAGE
NUMBER
HELD
PERCENTAGE
23,050,966
26.92%
22,111,511
12,859,258
58,021,735
25.82%
15.02%
67.76%
-
-
-
-
-%
-%
-%
-%
01 7 5 // 20 19 AN NUAL RE PORT D O MI N O ’S PI ZZA EN TERPRISES LIMITED
Additional securities exchange information
continued
TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES
FULLY PAID
PARTLY PAID
PERCENTAGE
NUMBER
HELD
PERCENTAGE
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
ORDINARY SHAREHOLDERS
Somad Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Noms Pty Ltd
Citicorp Nominees Pty Limited
Mr Grant Bryce Bourke
Mr Donald Jeffrey Meij
Mrs Esme Francesca Meij
Mr Grant Bryce Bourke & Mrs Sandra Eileen Bourke
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Invia Custodian Pty Limited
Mr Donald Jeffrey Meij
Mr Andrew Charles Rennie
Success Pizzas Pty Ltd
Clyde Bank Holdings (Aust) Pty Ltd
Woodross Nominees Pty Ltd
Bond Street Custodians Limited
NUMBER
HELD
23,050,966
22,111,511
12,859,258
5,254,629
2,707,668
2,222,700
1,961,637
1,284,798
799,828
796,537
749,280
698,516
501,624
486,087
369,868
360,076
340,149
308,296
300,000
228,161
26.92%
25.82%
15.02%
6.14%
3.16%
2.60%
2.29%
1.50%
.93%
.93%
.87%
.82%
.59%
.57%
.43%
.42%
.40%
.36%
.35%
.27%
Total
77,391,589
90.39%
0176 // 2019 ANNUA L RE PORT D O MINO’S PIZZA ENTERPRISES LIMITED
Glossary
ASIC means the Australian Securities & Investments Commission.
EBIT means earnings before interest expense and tax.
ASX means Australian Securities Exchange Limited
(ABN 98 008 624 691).
EBITDA means earnings before interest expense, tax, depreciation
and amortisation.
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 or Consolidated entity 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 23 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.
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 Link Market Services Pty Limited.
Same Store Sales Growth means comparable growth in sales
across Domino’s stores that were in operation for at least 24 months
prior to the date of the reporting period. Non-Domino’s stores that
have been acquired (e.g. Joey’s, Pizza Sprint and Hallo) are included
in the Same Store Sales Growth calculation upon conversion to
Domino’s for at least 12 months.
Share means any fully paid ordinary share in the capital of the
Company.
Underlying EBITDA and Underlying NPAT excludes transaction
and integration related costs associated with the acquisition and
one-off costs relating to the relation of the Paris Commissary.
01 7 7 / / 201 9 ANN UAL REPO RT D O MI N O’S PI ZZA EN TERPRISES LIMITED
Corporate directory
REGISTERED OFFICE & PRINCIPAL
ADMINISTRATION OFFICE
Domino’s Pizza Enterprises Ltd
ABN: 16 010 489 326
KSD1, L1
485 Kingsford Smith Drive
Hamilton
Brisbane QLD 4007
Telephone: +61 (7) 3633 3333
WEBSITE ADDRESS
dominos.com.au
AUDITORS
Deloitte Touche Tohmatsu
Level 23, Riverside Centre
123 Eagle Street
Brisbane QLD 4000
SECURITIES EXCHANGE
Domino’s Pizza Enterprises Limited shares
are listed in the Australian Securities Exchange
under ASX code DMP
SHARE REGISTRY
Link Market Services Limited
Level 21
10 Eagle Street
Brisbane QLD 4000
Tel: 1300 554 474 (AUS)
Tel +61 (0) 2 8280 7111 (OS)
SECRETARY
Craig A Ryan BA LLB LLM AGIS
SOLICITORS
Thomson Geer Lawyers
Level 28, Waterfront Place
1 Eagle Street
Brisbane QLD 4000
DLA Piper
Level 9,
480 Queen Street
Brisbane QLD 4000
0178 // 2019 ANNUA L R EPORT D OMINO’S PIZ ZA ENTERPRISES LIMIT ED
Board of Directors
Jack Cowin
Lynda O’Grady
Non-Executive Chairman
Jack has extensive experience in the quick restaurant service
industry and is the founder and Executive Chairman of Competitive
Foods Australia Pty Ltd. Competitive Foods was founded in 1969
and owns and operates over 350 Hungry Jack’s fast food restaurants
in Australia, while also operating several food manufacturing plants
for the supermarket and food service industries. Jack holds a
Bachelor of Arts from the University of Western Ontario.
Ross Adler
Non-Executive Deputy 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.
Grant Bourke
Non-Exectutive 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 a
MBA from The University of Newcastle.
Non-Executive Director
Lynda has extensive experience in executive roles in IT,
telecommunications and media organisations including Executive
Director and Chief of Product at Telstra and Commercial Director of
the publishing division of PBL. Her non-executive roles include Non-
Executive Director of Wagner Holdings Ltd and member of Advisory
Board of Jamieson Coote Bonds. Former roles included Inaugural
Chair of the Aged Care Financing Authority (ACFA) and Independent
Director of National Electronic Health Transition Authority (NEHTA).
She holds a Bachelor of Commerce (Hons) from the University of
Queensland and is a Fellow of the Australian Institute of Company
Directors.
Ursula Schreiber
Non-Executive Director
Ursula Schreiber AM is an experienced executive with previous
roles in large organisations with global operations, both in Australia
and internationally. Throughout her career, she has developed an
extensive track record in strategy, transformation and innovation,
most recently in fields with significant digital disruption. Her
experience extends to working and living in emerging and mature
markets, including countries in which Domino’s is expanding its
operations. Ursula is the founder of Innovation Realized, an annual,
global CEO forum on emerging technology issues; the creator of
the Worldwide Women Public Sector Leaders’ Network; a previous
member of the World Economic Forum’s Global Agenda Council
on the Future of Government, and an advisor to the Women in
Political Leadership Global Forum. Since returning to Australia in
2019, she has been active as a non-executive director, consultant
and executive coach.
Don Meij
Managing Director / Group Chief Executive
Officer
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 Group
Chief Executive Officer / Managing Director in 2002. Don was Ernst
& Young’s Australian Young Entrepreneur of the Year in 2004.
01 7 9 / / 201 9 ANN UAL REPO RT D O MI N O’S PI ZZA EN TERPRISES LIMITED
0 1 8 0 // 2 019 A NNUA L REPORT D OM I N O ’S PI Z ZA EN T E RP RI S ES LIM IT ED