Domino’s Pizza Enterprises Limited 1/485 Kingsford Smith Drive Hamilton, QLD, Australia 4007 ACN: 010 489 326 www.dominos.com.au 24 August 2022 The Manager Market Announcements Office Australian Securities Exchange 4th Floor, 20 Bridge Street SYDNEY NSW 2000 Dear Sir Appendix 4E and financial statements for the year ended 03 July 2022 Please find attached for immediate release to the market the following documents in respect of the year ended 03 July 2022: (a) Appendix 4E (b) 2022 Annual Report For further information, contact Nathan Scholz, Head of Investor Relations at investor.relations@dominos.com.au or on +61-419-243-517. Authorised for lodgement by the Board. Craig Ryan Company Secretary END Appendix 4E DOMINO’S PIZZA ENTERPRISES LIMITED Current Reporting Period: Previous Corresponding Period: Financial Year Ended 03 July 2022 Financial Year Ended 27 June 2021 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 Dividends Dividends PERCENTAGE CHANGE % AMOUNT $’MILLION Up 4.1% Down 13.9% Down 14.0% Down 14.0% to to to to 2,289.3 166.7 158.7 158.7 AMOUNT PER SECURITY (CENTS) FRANKED PERCENTAGE PER SECURITY Final dividend in respect of full year ended 03 July 2022 – Payable 15 September 2022 Record date for determining entitlements to the final dividend: -31 August 2022 Interim dividend in respect of half-year ended 02 January 2022 68.1 88.4 70% 70% Net tangible assets per security Net tangible assets per security 03 JULY 2022 27 JUNE 2021 (5.94) (5.10) 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 70% franked dividend of 68.1 cents per share was approved by the Board of Directors on 23 August 2022. 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. 2022 ANNUAL ANNUAL REPORT REPORT Domino’s Pizza Enterprises Limited ACKNOWLEDGEMENTS EDITORIAL 2022 Rebecca Chao (Taiwan) Rhiannon Frater (Australia) Amanda Harper (New Zealand) Marianne Kemps, Manon Stoutjesdijk (Benelux) Guillemette Le Goascoz (France) Annelise Muller (Australia) Kathrin Rezac (Germany) Shizue Suzuki (Japan) Megan Woodward Nathan Scholz (Investor Relations) DESIGNERS Jessica Carwardine Anna Bruck Dave Tiedemann 3 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 D O M I N O’ S PI Z Z A E NTE R PR I S E S LI M ITE D • A N N UA L R E P O RT 2 022 CONTENTS Chairman's Message CEO's Report Economic Risks Board of Directors Performance Highlights Our Values Our Purpose Domino's for Good Hall of Fame Global Award Winners APAC Europe 3Ten Update Europe Germany Belgium/Luxembourg France Netherlands Denmark APAC Japan Taiwan ANZ Australia The Lismore Experience New Zealand Directors' Report 07 08 10 12 14 16 17 19 24 26 29 30 32 34 38 42 46 53 56 62 66 70 74 78 82 84 88 4 5 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 6 I N V E STI N G I N F UTU R E G ROW TH CHAIRMAN’S MESSAGE measuring our environmental footprint, as an important step in setting science-based targets for the Company to achieve. The challenges ahead are significant – but we have the solid foundations of leadership, strategy, and committed people that give us confidence Domino’s Pizza Enterprises Ltd is well placed to deliver continued performance in the years ahead. BEFORE I CLOSE, I recognise the retirement in this Financial Year of our inaugural chairman Ross Adler, who dedicated almost two decades of service to this business, and brought a wealth of experience to Domino’s as we listed on the Australian Securities Exchange, to international expansion. On behalf of the board, I thank him for his diligence and his contribution to the long-term interests of shareholders and the broader business. JACK COWIN CHAIRMAN Two years ago, in the early stages of the COVID-19 pandemic when we were facing unprecedented global disruption, Domino’s Pizza Enterprises Ltd faced a clear choice. We could take a conservative approach, and pause investments until our future became clearer. Or we could invest in growth despite the global turmoil, pursuing a strategy we knew would be essential to deliver on our long-term potential. THE BOARD AND MANAGEMENT WERE OF ONE-MIND; a long-term focus had delivered our continued success achieved throughout our company history, and a long-term focus continued to be the key to our future. I believe the results of that shared determination, as outlined in this Annual Report, are clear. Our franchisees and store managers have shared this focus, investing together in our future growth, with 96% of new stores opened by internal candidates. This has delivered a materially stronger base for growth; a larger store network (+294 in FY22), that allows Domino’s to reach record numbers of customers, a record investment in digital technology to service those customers, and more marketing to reach new and existing customers. Domino’s Pizza Enterprises Ltd’s decision to invest in our future has delivered for our franchisees, team member and customers. It has also delivered for our shareholders, with a return on equity of 42.3%, and an average return on equity over the past three years of 43.3%. ONE OF THE KEY DECISIONS DURING THIS TIME was to expand through the acquisition of our 10th market, Taiwan, negotiated in Financial Year 2021 during a period in which borders were closed for most travel. Team Taiwan joined Domino’s Pizza Enterprises Ltd in Financial Year 2022 and has performed above expectations for new store openings, sales and earnings, as our newest colleagues integrate the business into the DPE family. With this people-focused approach, management has worked diligently to protect our team members and customers throughout this pandemic – and has continued this effort in this Financial Year. As we now transition to ‘living with COVID’, the Board recognises the ongoing efforts in offices, commissaries and stores to protect our people. Two years ago in these pages I reflected COVID-19 has brought the most extraordinary time of change I had experienced in my five decades in this industry. With global conflict, inflation at generation-highs, and turmoil in local economies, many businesses face the choice again – to hunker down or invest in future growth. »We intend to be the most efficient, sustainable food delivery business on the planet« A long-term focus remains the key to our future, one we will continue to invest in to achieve. Our intention is to more than double our store footprint in our existing markets over the decade ahead, delivering value for our customers, and best- in-class returns for our franchisees and shareholders. We intend to be the most efficient, sustainable food delivery business on the planet, which requires us to work with our communities to ensure we minimise our environmental footprint as we expand. I am pleased to provide an update in this report on important progress Domino’s has made in 7 A R E F LE C TI O N O F L A ST Y E A R S E A R N I N G S A N D C H A LLE N G E S WE INVEST FOR THE LONG- TERM 8 When I reflect with our shareholders, our franchisees and our team members on what has been the single most important contributor to our progress this year, it is our people that have made all the difference. Financial Year 2022 has been, like the prior two years, one of extraordinary achievement in the face of continuing global upheaval and ongoing challenges to our communities and our business. From waves of illness, which affected our team members and their loved ones, through to global supply chain disruptions that saw basic ingredients unavailable to many – our people have risen to the challenge to help us serve our customers hot, fresh meals. WHEN COVID-19 FIRST STARTED to impact the communities in which we live and work, it was uncertain how long the pandemic’s effects would continue. What was certain was our commitment to invest in our long-term future, confident our strategy of delivering value, through opening more stores closer to our customers, would be essential in the short- and long-term. This year we added 450 stores to the network, a record in one financial year. This included the acquisition of 156 stores in our 10th market, Taiwan, and the opening of 294 new organic stores. This represents an expansion of 15.3% in our store network in one year, to 3,387 stores, with 10.0% of our growth added through organic store openings. OUR EARNINGS THIS YEAR WERE STRONG, though did not surpass the prior financial year; this was largely due to important The future of our industry is delivery markets, including Japan and France, not reaching their record results of Financial Year 2021. We invest for the long-term, and this commitment to invest in this future has built, in partnership with our franchisees, a materially stronger business than pre-COVID. When compared to Financial Year 2019, today Domino’s operates an additional 865 stores, a store footprint 34.3% larger in just three years. Each of those stores equally relies on, and delivers for, our people. Each creates employment and career opportunities, grows our investment in the local community, and brings joy to our local customers. Our store expansion has contributed to our medium-term financial performance. COMPARED TO THE FINANCIAL YEAR 2019, Domino’s Pizza Enterprises Ltd delivered an underlying EBIT of $262.9m (+19.1% growth vs FY19), and underlying EPS of 190.6 cps (+15.5% vs. FY19). Total Non-Recurring costs were $8.8m for FY22, with statutory EBIT $254.1m and statutory EPS 183.4 cps. On a one-year basis, Group revenue was up +4.1%, with statutory EBIT down -11.6%. This was predominantly due to a lower performance from corporate stores in Japan, as this market rebuilt from a new base following a rapid change to trading conditions during the first half, an investment in expanding our business in Denmark, foreign exchange translation headwinds, and relatively high inflation in Europe. FY22 Free Cash Flows(1) were–$103.2m, largely due to the acquisition of Domino’s Pizza Taiwan for $79.4m in September 2021, working capital headwind of $77.5m in FY22 due to an additional trading week, and an increase in capital expenditure of $57.3m (excluding acquisition payments) predominantly due to an investment in new stores and digital innovation. DURING THE INITIAL STAGES OF COVID-19, DOMINO’S FACED A CHOICE – to become defensive, or to invest in growing a larger, more sustainable business. We chose the latter. The benefits of this decision are clear: substantially growing the delivery business, cultivating a stronger franchisee base, and maximising opportunities to reach more customers through expanded advertising and accessibility. Since January, we and our Franchisees have seen significant increases in key costs: largely energy, labour and food. Domino’s menu offering and operational efficiencies provide sufficient flexibility to shelter franchisee profitability from turmoil in the macro economy. Our barbell menu strategy has been critical to negotiating this challenge, with our experience in France reinforcing the importance of taking this approach to pricing. Domino’s Pizza Enterprises Ltd is not immune to the broader challenges that affect our society – including conflict in Europe, historically high levels of inflation, and the threat of climate change, which are already being experienced in many of the markets in which we operate. DOMINO’S WILL CONTINUE TO RESPOND TO THESE CHALLENGES as we have throughout our history; focusing on delivering for our customers through our Purpose, Our Pizza Brings People Closer, and our Values, including Do the Right Thing, because it’s the Right Thing to do. The future of our industry is delivery. Where others have had to turn customers away because of a lack of team members, Domino’s intends to thrive in the Age of Delivery by providing rewarding roles with the opportunity of future growth, including the unrivalled pathway to entrepreneurship. »Our people have been the most important contributor to our progress this year« Domino’s is well positioned to navigate the near-term uncertainty of inflation; as we have always done, we will offer customers choice and exceptional value through our Product, Service and Image. Over the longer-term, we will ensure we can rise to the challenges by being the most efficient and sustainable food delivery business, with ambitious and measurable environmental targets that demonstrate we are partners with our customers in the future of our community. Over the next year, and the next decade, management has continued confidence in our opportunities for growth, and Domino’s ability to deliver on them. That confidence is because of our people. They have been the most important contributor to our progress this year – their profiles, awards and achievements are documented in this report. It is my privilege to share them with you. DON MEIJ GROUP CEO & MANAGING DIRECTOR (1) Defined as net cash generated in operating activities plus net cash used in investing activities, less net lease payments. 9 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 ECONOMIC RISKS INFORMATION IN RESPECT OF DPE'S ASSESSMENT OF THE PRINCIPAL ECONOMIC RISKS THAT COULD HAVE A MATERIAL IMPACT ON THE COMPANY, AND THE COMPANY'S MITIGATION STRATEGIES FOR THOSE RISKS IS SET OUT BELOW. COMPETITION DPE operates in a competitive market. DPE's financial performance or operating margin could be adversely affected if the actions of competitors or potential competitors become more effective, or if new competitors enter the market. DPE addresses this risk by closely monitoring the market in which it operates so that it is able to respond quickly to any competitor. TALENT RISK DPE is committed to providing an attractive employment environment, conditions and prospects to assist in retaining and attracting key senior management personnel. However, there can be no assurance that DPE will be able to maintain or attract key personnel. DPE aims to mitigate this risk by creating an all-inclusive, fun, friendly and energetic culture. CONSUMER PREFERENCES AND PERCEPTIONS Food service businesses are affected by changes in consumer tastes national, regional and local economic conditions, and demographic trends. There could be a material adverse effect on DPE's business and operating results if consumer preferences changes. DPE addresses this risk through active customer engagement via social media, consumer data and research, innovative product development and updates to its menu offerings. FRANCHISE RISK DPE's right to operate Domino's Pizza stores and grant franchises in Australia, New Zealand, Europe, Japan and Taiwan is conferred by separate Master Franchise Agreements (MFAs). These MFAs may be terminated in certain circumstances, such as breach by DPE, its insolvency and failure to achieve growth targets. If a MFA in respect of a territory is terminated, DPE will lose the right to operate Domino's Pizza stores in that territory and this will fundamentally impact on its business. DPE addresses this risk by maintaining a close working relationship with its Master Franchisor, and by actively monitoring compliance with obligations and operational standards. REPUTATION AND BRAND The success of DPE is heavily reliant on its reputation and branding. Unforeseen issues or events which place DPE's reputation at risk may impact on its future growth and profitability. DPE aims to mitigate this risk by fostering strong relationships with key stakeholders and continuing to build its reputation through ongoing positive contributions to the community. SAFETY DPE employs people to run and operate stores, in a safe working environment, that provide food products to the public. A health or safety incident in its operations or health incident of a supplier involving the input of products it uses, could impact on DPE's financial results. DPE aims to address this risk through robust internal food safety and quality practices and occupational health and safety practices, audit programs, customer complaints processes and supplier selection protocols. SUPPLY CHAIN Disruption to DPE's supply chain caused by an interruption to the availability of key components and raw materials or environmental and social wrongdoings in its supply chain, may adversely affect sales and/ 10 or customer relations, resulting in unexpected costs. DPE aims to mitigate this risk by implementing a multi-sourcing strategy for the supply of raw materials, building long term relationships with its suppliers, conducting supplier due diligence and risk management and entering into contracts that provide for the regular and timely procurement of raw materials. FRANCHISEE RISK There is a risk of DPE's franchisees not operating their franchise in accordance with the terms and conditions of their respective franchise agreements. The consequences of non-compliance may include damage to the brand, fines or other sanctions from regulators, and/or a reduction in franchise fees received from the franchises. DPE mitigates this risk by continually monitoring and evaluating the financial and operating performance of each franchisee to actively assess compliance with executed franchise agreements and conducting random audits. ONLINE ORDERING PLATFORMS The majority of DPE sales are placed through our online ordering platforms. There is a significant reliance on third-party data centres and IT teams for hosting and development of these sales platforms. Loss of platform or application availability or integrity would result in a short-term impact on DPE’s future growth and profitability, including loss of customer goodwill, revenue and potentially negatively impacting franchisee relationships. DPE mitigates this risk through controls and processes aimed to protect these platforms availability including data centre replication and other redundancy methods. CYBER SECURITY The risk of cyber-attack continues to grow in both frequency and sophistication, including ransomware and data breaches. The occurrence of a cyber incident could negatively impact DPE by causing a disruption to operations, a compromise or corruption of confidential information, or damage to our employee and business relationships, any of which could subject DPE to loss or damage to the brand. In addition to maintaining insurance to cover cyber incidents, which may not fully cover all of the associated costs should a cyber incident occur, DPE has also invested in risk mitigation activities designed to proactively prevent and detect cyber events as well as respond to and recover from them should they impact operations. PHOTO BY BRISBANE LOCAL MARKETING ON UNSPLASH 11 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 D O M I N O’ S PI Z Z A E NTE R PR I S E S LI M ITE D BOARD OF DIRECTORS Jack Cowin Chairman Appointed: March 2014 Don Meij Group CEO & Managing Director Appointed: August 2001 BACKGROUND & EXPERIENCE: Professional Background: More than five decades experience in the quick service restaurant industry. Founder and Executive Chairman of Competitive Foods Australia Pty Ltd, the owner and operator of more than 350 Hungry Jack’s restaurants in Australia and several food manufacturing plants. Other boards: Competitive Foods Australia Pty Ltd, v2 Foods, Apache Industrial Service (USA). Former directorships: Fairfax Media Limited, Ten Network Holdings, Chandler Macleod Group. Qualifications: Bachelor of Arts – University of Western Ontario, Canada; Doctor of Laws, honoris causa – University of Western Ontario, Canada. BACKGROUND & EXPERIENCE: Professional Background: Award-winning multi-unit franchisee and internationally recognised pizza executive. Mr Meij started as a delivery driver in 1987 and held various management positions with Silvio’s Dial-a-Pizza and Domino’s Pizza until 1996. Mr Meij then became a Domino’s Pizza franchisee, owning and operating 17 stores before selling them to Domino’s Pizza in 2001. Multiple-award winner, including Chairman’s Award for outstanding leadership and Ernst & Young Australian Young Entrepreneur of the Year. In 2018, under Don’s leadership, Domino’s was inducted into Queensland Business Leaders Hall of Fame. Group CEO & Managing Director since 2002, leading the Company to become Australia’s first publicly-listed pizza chain on the ASX (2005). In 2017, Don celebrated 30 years with Domino’s. Other boards: Not applicable. Ross Adler AC Non-Executive Director, Deputy Chairman, (Former Chairman) Appointed: March 2005 Retired: November 2021 BACKGROUND & EXPERIENCE: Member of the Audit and Risk Committee and Nomination, Culture and Remuneration Committee. Professional Background: Extensive experience as an executive and board member, recognised for his significant contribution to education and the arts. Previously the CEO of oil and gas producer Santos Ltd (1984-2000) and Chairman of the Australian Trade and Investment Commission (Austrade) (2001-2006). Recipient of the Centenary Medal (2001) for outstanding service to Australia’s international trade. Other boards: Executive Chairman of Amtrade International Pty Ltd. Former directorships: Santos Ltd, Commonwealth Bank of Australia Ltd, Telstra Ltd, Port Adelaide Maritime Corporation, Adelaide Festival, The Art Gallery of South Australia, State Theatre Company, Grand Prix Corporation, Deputy Chancellor of the University of Adelaide. Qualifications: Bachelor of Commerce – Melbourne University; MBA – Columbia University, United States of America. Grant Bourke Non-Executive Director Appointed: August 2001 BACKGROUND & EXPERIENCE: Chair of the Audit and Risk Committee and Member of the Nomination, Culture and Remuneration Committee. Professional Background: Experienced food industry executive with extensive experience as an award- winning Domino’s franchisee and executive. Prior to joining Domino’s Mr Bourke was an international executive with Masterfoods (Mars Inc.). He was awarded Domino’s Golden Franchisee award (1995), Franchisee of the Year (1997 and 1998), Golden Eagle winner (1999) for his contribution to the Company and global Chairman’s Award winner for outstanding leadership. Former Director of Corporate Store Operations, Managing Director Europe, and Non-Executive Director since 2007. Other boards: Not applicable. Former directorships: Pacific Smiles Group Ltd. Qualifications: Bachelor of Science (Food Technology) – University of New South Wales; MBA – the University of Newcastle. 12 Lynda O’Grady Non-Executive Director Appointed: April 2015 Uschi Schreiber AM Non-Executive Director Appointed: November 2018 Doreen Huber Non-Executive Director Appointed: February 2020 Tony Peake Non-Executive Director Appointed: May 2021 BACKGROUND & EXPERIENCE: Member of the Audit and Risk Committee and Nomination, Culture and Remuneration Committee. Professional Background: Extensive career with senior executive experience in IT, telecommunications and media organisations. Former Executive Director and Chief of Product of Telstra, Commercial Director of Australian Consolidated Press, the publishing division of Publishing and Broadcasting Limited, and General Manager of Alcatel Australia. Other boards: Director of Rubicon Water Limited, Non- Executive Director AVANT Mutual Ltd, Non-Executive Director Wagner Holdings Ltd, Member of the Advisory Board of Jamieson Coote Bonds, and Council of Southern Cross University and Director of Musica Viva. Former directorships: Council of Bond University, Boards of the Aged Care Financing Authority (Chair), National Electronic Health Transition Authority (NEHTA), Screen Queensland and TAB Queensland, and the IT&T Board of Advisors to the New South Wales Treasurer. Qualifications: Bachelor of Commerce (Hons) – University of Queensland, Fellow of the Australian Institute of Company Directors. BACKGROUND & EXPERIENCE: Chair of the Nomination, Culture and Remuneration Committee and Member of the Audit and Risk Committee. Professional Background: Experienced global strategy and operations executive in the private and public sectors, including in countries in which the company is expanding its operations. Chair, Health Care, APM, a leading global health and human services organisation. Former EY Chair, Global Accounts Committee; Global Vice Chair Markets; member of the EY Global Executive Management Board and EY Fellow, Digital Society and Innovation. Former Director-General, Queensland Health; Deputy Director General, Department of the Premier and Cabinet and Cabinet Secretary, Queensland Government. Consultant, executive coach and diversity advocate. Qualifications: Master of Arts – Griffith University; Australia, Graduate Certificate in Management – University of Western Sydney, Australia; Bachelor of Social Work and Special Education – University of Braunschweig/Wolfenbüttel, Germany. BACKGROUND & EXPERIENCE: Member of the Nomination, Culture and Remuneration Committee. Professional Background: Respected business entrepreneur and food technology expert. Founder and former CEO of business catering aggregator Lemoncat (acquired by B2B Food Group). Former Chief Operations Officer and part of the founding team of Delivery Hero, the largest global food ordering aggregator (outside of China). Experienced angel investor, and former partner and investor in Springstar, which supported US-based internet furnishing platform Houzz, which are both multi-billion dollar companies. Other boards: Non-executive Director Ceconomy AG, Bundesverband Deutsche Startups (German Start-ups Association). Former directorships: Lemoncat (Germany), Delivery Hero. Qualifications: Magister Artium / Master of Arts (Literature, Art and Media) – Humboldt University of Berlin, Germany. BACKGROUND & EXPERIENCE: Member of the Audit and Risk Committee and member of the Nomination, Culture and Remuneration Committee. Professional Background: Chartered Accountant with more than two decades’ of board-level experience across the public, commercial and not-for-profit sectors. Former Senior Partner at PwC, serving as an Audit and Consulting Partner, Chief Operating Officer, and Executive Director, with particular experience in Retail & Consumer, Education, and Government. Was the lead audit partner at PwC for major international brands, and led financial due diligence for large scale, multi- national client acquisitions. Other boards: Country Fire Authority, Central Highlands Water, Scanlon Capital, Melbourne Fashion Festival. Former directorships: Methodist Ladies College and The University of Melbourne. Qualifications: Bachelor of Business (Distinction) – RMIT, Fellow of Chartered Accountants Australia & New Zealand, GAICD. 13 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 NETWORK SALES STORES GLOBALLY PERFORMANCE HIGHLIGHTS 3,387 $3,918M $3,060M 190.6 CPS $ 262.9 M UNDERLYING EPS ONLINE SALES UNDERLYING EBIT 14 EUROPE 1,401 STORES 72.8M PIZZAS SOLD ASIA/PACIFIC 1,986 STORES 107.3M PIZZAS SOLD 15 OUR VALUES CRUSH CONVENTION BE GENEROUS & PROVIDE JOYFUL EXPERIENCES INVEST TO CREATE DEVOTION DO THE RIGHT THING BECAUSE IT'S THE RIGHT THING TO DO HELP PEOPLE GROW & PROSPER 16 OUR PURPOSE WHY DO WE EXIST? THE HARD-WIRED HUMAN NEED FOR SOCIAL CONNECTION – SEEMINGLY BETTER ENABLED THAN EVER BEFORE – IS BREAKING DOWN. PEOPLE CRAVE BELONGING, WHILE THEY ASSERT THEIR RIGHT TO BE DIFFERENT. AT OUR BEST WE SMASH THE PREVAILING WISDOM WHICH SAYS YOU CAN’T HAVE QUALITY, SPEED AND LOW PRICE… THUS PUTTING THE WORLD’S MOST DELICIOUS AND VERSATILE BONDING FOOD WITHIN REACH OF EVERY PERSON. OUR PIZZA BRINGS PEOPLE CLOSER 17 18 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 E N V I RO N M E NTA L , S O C I A L & G OV E R N A N C E DOMINO'S FOR GOOD SINCE OUR FOUNDING, WE’VE WORKED TO DO THE RIGHT THING, and limit our impact on our environment and support our communities. We’ve also had high standards of governance and ethical behaviour from the Board and management. Last year we released our first Sustainability Report. The report’s main intention was to increase our transparency and share the progress we’ve made in our ESG journey so far. This year we’ve achieved significant progress, especially with regard to our environmental strategy. Because of the importance to us and our stakeholders, we have provided an update on this strategy in this year’s Annual Report, ahead of the release of our Sustainability Report. With this year’s Sustainability Report we will report in accordance with broadly accepted existing ESG reporting frameworks. This process takes time and we’ve therefore decided to release our full Sustainability Report by the end of calendar year 2022. It is important to note that our ESG strategy consists of five pillars: Our People, Our Customers, Our Food, Our Community and Our Environment. Although this update focuses mainly on Our Environment – which overlaps with most pillars, we also achieved meaningful progress on the other pillars. This will be shared in the full Sustainability Report. With respect to our environment, we want to give as much as we can for the good of our planet, not as little as we can get away with. Our environmental strategy is based on this vision. It’s also the result of company- wide engagement, which included our whole global leadership team, representatives from all markets and key departments. The core building blocks of our strategy are explained over the page: the results of our corporate footprint baseline measurement, our climate roadmap and our science-based environmental targets. 19 Corporate footprint baseline This year we completed our first global corporate footprint baseline measurement. We partnered with sustainability consultancy firm Quantis, who calculated our footprint according to the Greenhouse Gas Protocol. This assessment included our impact on climate, water, land use and biodiversity and measured the nine markets Domino’s Pizza Enterprises Ltd operated at the start of the Financial Year, for their impact from the prior year: CARBON FOOTPRINT BY SCOPE FY21 BASELINE 1% 2% 97% SCOPE 1 DIRECT GHG EMISSIONS • Energy combusted on site • Energy combusted in owned stores SCOPE 2 INDIRECT ELECTRICITY EMISSION • Electricity production emissions from our provider SCOPE 3 ALL OTHER INDIRECT EMISSIONS • Ingredients & packaging • Capital goods • Upstream impacts of energy and refrigerants • Operational waste & product End-of-Life • Business travel & employee commuting • Customer pick up • Franchises 1. GREENHOUSE GAS EMISSIONS (GHG) Climate is one of the biggest risks faced by the world today; we consider it imperative to reduce our emissions to limit global warming. 2. WATER IMPACTS Water availability and quality is an important impact factor for food producing companies. We understand that the hotspots of our water impacts will vary between regions and will in many cases be local. We believe that better understanding our water impact and adequately addressing this, together with our suppliers, is key for the resilience of our company now and in the future. 3. LAND USE CHANGE (LUC) Land use is one of the main GHG drivers of food and agricultural companies. Deforestation assessment goes hand-in-hand with LUC assessment. Understanding this part of our footprint will therefore be essential in our efforts to reduce our impact. 4. QUALITY OF ECOSYSTEM – BIODIVERSITY Biodiversity has become a key issue for consumers and investors, driven by scientific research results that underline the importance of restoring nature. Understanding our impact in this field is the first step for a consistent holistic biodiversity strategy for our entire value chain. Biodiversity is an encompassing concept that is driven by all other indicators assessed. FY21 corporate footprint baseline results Our first baseline measurement found our baseline results are dominated by Scope 3 categories (indirect activities from the value chain), representing 97% and 99.7% of total footprints for Carbon and Water respectively. Our main hotspots on all impact categories are predominantly Purchased Goods, followed by Utilities and Logistics. CLIMATE * WATE R* L AND USE CHANGE * Equivalents 100% 9% 18% 23% 50% *Million metric tons CO₂ equivalents Equivalents 100% *Million m3 equivalents 100% *Hectares Share of scope 3: 97% Share of scope 3: 99,7% 93% 93% Period: FY 2021 PURCHASED GOODS UTILITIES LOGISTICS OTHERS 20 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Purchased goods, carbon footprint by category 2% 7% 100% 91% 47% 29% Focusing in on our carbon footprint, procurement of food ingredients is the highest contributor, accounting for 91% of total procurement emissions. This is mainly driven by dairy (29%) and other animal based proteins (47%) (beef, pork & chicken): 6% 5% 2% 3% PURCHASED GOODS BEVERAGES & NON FOOD DPE, kT CO2eq, FY 2021 PACKAGING FOOD PROTEIN DAIRY DOUGH SAUCE VEGETABLES OTHERS Our top 20 suppliers account for 75% of total supplier emissions, which enables us to focus on meaningful engagement and collaboration with this group first. Electricity consumption is the main contributor to our utility consumption, with franchised stores responsible for 79% of utility emissions. Delivery and pick-up from franchised stores are the primary drivers of our logistics’ emissions. The Carbon Footprint breakdown is similar between markets with some local specificities: Carbon footprint breakdown by market PURCHASED GOODS UTILITIES LOGISTICS OTHERS 100% 75% 50% 25% 0% NETHERLANDS BELGIUM LUXEMBOURG DENMARK GERMANY FRANCE JAPAN AUSTRALIA NEW ZEALAND DPE, Base 100%, FY 2021 21 22 Climate roadmap and Science Based Targets We believe that Science Based Targets (SBT) will help us do the right thing and help us to measure and report on our progress consistently over time. We announced our commitment to Science Based Targets during our AGM in November 2021. In June 2022 we submitted our targets to the Science Based Target initiative (SBTi). These are now in the process of being validated by the SBTi. Further details on our targets and our climate roadmap will be released once the SBTi has validated our targets. Our corporate footprint measurement helped us to better understand our hotspots. It identified three main areas that we can directly influence and have the most potential to reduce our emissions. In our climate roadmap we’ve included targets and actions for these three focus areas: • Sustainable Stores & Operations • Responsible Sourcing • Sustainable Product Innovation All targets and actions are designed to deliver an emissions reduction pathway consistent with the 1.5° C ambition of the Paris Agreement. They are aligned with the latest Science Based Targets guidelines and include intermediate targets for 2030 and reaching science-based net-zero emissions by 2050. 2030 SBT ALIGNED ENVIRONMENTAL STRATEGY 3 KEY FOCUS AREAS SUSTAINABLE STORES & OPER ATIONS RESPONSIBLE SOURCING SUSTAINABLE PRODUCT INNOVATION • E-delivery in all our markets • Responsible sourcing policy • Low carbon energy • Energy efficiency in our operations, stores and offices • Waste management in our operations, stores and offices • Sustainable store design • Traceability for our top commodities • Zero deforestation on top high-risk commodities • Sourcing core ingredients from low impact agricultural practices or from alternatives • Less carbon intensive transport modes and fuel • Footprint reduction of cheese per pizza in the menu in all markets • Low impact ingredients products on the menu • Customer transparency for all products • Sustainable consumer facing packaging in all markets As above, for each focus area we have identified the main actions and a phased implementation across our markets. Global Centres of Excellence will be dedicated with the task of identifying sustainable innovations that can be implemented across our markets, reduce our environmental impact and ensure they are an attractive solution for our franchisees. NEXT STEPS Our corporate footprint baseline measurement is a start. It helped us to better understand our environmental impact and identify our hotspots. We intend to expand our environmental strategy with water and biodiversity targets next year. We also plan to improve the maturity of our environmental data over the medium term by further engaging with our suppliers and franchisees. As part of our ESG reporting process, we’re developing ESG data management procedures that will also help us to report on our Science Based Targets, which we intend to do once our targets are validated. More ESG data and progress will be shared in our Sustainability Report. For this year’s Sustainability Report we will start reporting with reference to the GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board) frameworks. In the following years we will work towards aligning our reporting with the TCFD (Taskforce on Climate Related Financial Disclosures). We look forward to sharing more information about our progress in the Sustainability Report later this year. 23 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 HALL OF HALL OF FAME FAME Domino’s Pizza Enterprises Ltd has a proud history and has celebrated thousands of team members over our decades of operation. In 2020, Domino’s Pizza Enterprises Ltd formed the Hall of Fame, to recognise those leaders whose contributions have made a significant contribution to our company over a number of years. It is not expected that new inductees will be made to the Hall of Fame each year, but this year Domino’s Pizza Enterprises Ltd is proud to welcome two more of our team to this exclusive club. 24 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 HALL OF HALL OF FAME FAME Don Meij DOMINO’S GROUP CEO AND MANAGING DIRECTOR From a part time delivery driver in Redcliffe to Group CEO, leading more than 80,000 Dominoids in 10 markets. Don Meij epitomises what it means to be a Dominoid. As a founder of Domino’s Pizza Enterprises Ltd, Don’s story is Domino’s story, and is well known. After joining Silvio’s Dial-a-Pizza in 1987 as a delivery driver, Don quickly moved from driver, to store manager, to director of national operations by age 25. As a franchisee, Don built a network of 17 stores, and was recognised as the best Domino’s manager in the world. He then sold his stores back to Domino’s, becoming Australian CEO in 2002, listing on the stock exchange in 2005, and leading the company to expand first to New Zealand, then Europe and Asia. Domino’s Pizza Enterprises Ltd Chairman Jack Cowin, who first identified Don’s talent as a young delivery driver, said DPE has become, under Don’s leadership, ‘one of the great food companies in the world’. This is in no small part due to the decision to grow many former franchisees into corporate roles – a business of pizza people, for pizza people. Throughout his career, Don has applied an ongoing curiosity and drive to improve the business through cutting-edge ideas and the bold technology to make DPE an industry trend setter. His renowned energy level and leadership skills have been instrumental in making DPE such a success. He has paved the way for thousands of successful franchisee entrepreneurs, and hundreds of thousands of team members, who have followed this path and shared this success. Domino’s Founder Tom Monaghan said it has been an honour and a pleasure to see Don expand the reach of the humble company he founded, taking his original vision and core principles to a level he could not have dreamt was possible. Don Meij – a name synonymous with Domino’s – and now a proud inductee to the Domino’s Pizza Enterprises Ltd Hall of fame. A slice of history well earned! Allan Collins ALLAN COLLINS – FORMER ANZ CHIEF MARKETING OFFICER From the moment Allan Collins was appointed Chief Marketing Officer for Domino’s in 2007 he poured his heart and soul into the brand, proving to be instrumental in turning Domino’s into the trusted, well- known household name that it is today. Those who know Allan know he never does things in halves. His creativity, energy and enthusiasm light up the room, and during his tenure he helped us achieve significant growth and success. From 2007 to 2021, Allan’s time at Domino’s will be remembered for his honesty, tenacity, commitment and hard work, his insatiable laugh and larger than life personality– so much lives on in the DNA of the Domino’s brand and will do for years to come. As the longest standing CMO in any Domino’s market ever, he will forever hold a special place in the story of Domino’s, and we can’t thank him enough for all that he sacrificed and achieved for our business. Allan Collins – forever a Dominoid – and now a proud inductee into the Domino’s Pizza Enterprises Ltd Hall of Fame. 25 GLOBAL AWARD WINNERS 2021 Announced 2022 Financial Year DPE GLOBAL FRANCHISEE OF THE YEAR AWARD: (JOINT WINNERS) James & Astrid Acreman, ANZ James and Astrid have demonstrated exceptional leadership and have lived up to Domino’s core purpose and values, successfully leading a team of hundreds of Dominoids over the past several years. In fact, when they moved to a small, coastal town for a sea change, little did they know that almost a decade later they’d have seven Domino’s stores, a network of passionate team members, and pizza sauce running through their veins. James and Astrid are leaders not only in their market, but across the entire Australia and New Zealand business. They are highly respected and celebrated franchisees – and not to mention highly awarded, having won Multi-Unit Franchisee of the Year the same year their Store Manager won Store Manager of the Year. Hugo Tholen & Jorrit Datema, Netherlands 2021 Netherlands Franchisees of the Year Hugo Tholen and Jorrit Datema have celebrated more than 10 years with Domino’s Netherlands. They bought two franchised and one corporate store in 2021 in the northern part of the country. They became Franchisee of the Year because they had the highest average score on order growth, same store sales, sales per household, OER, HTC, PQ and EDT combined. They accomplished more than 53% SSS in their first year and have recently opened their fourth store. 26 GLOBAL AWARD WINNERS 2021 DPE GLOBAL SUPPORT TEAM MEMBER OF THE YEAR Anne Jacobs – Chief of Staff Anne Jacobs has worked with Domino’s for over 14 years, beginning as an executive assistant and most recently in the role of Chief of Staff to Group CEO Don Meij. Anne embodies Domino’s five core values, with a passion for culture and innovation and a commitment to ensuring that the office and business is a better place. Anne has led a number of projects in the past 12 months to improve DPE, including the refurbishment of the Brisbane head office to provide a better environment for team members to return to after a long period of working from home; the launch of the DPE Global Awards, and project managing Domino’s first Mobile Pizza Kitchen. Anne drives her projects with passion and determination and is an invaluable asset to the business. DPE GLOBAL LEADERSHIP AWARD (GOLD EAGLE) Sjoerd van Seters, Netherlands At the beginning of 2021, Sjoerd van Seters was a five-store franchisee and scored 10 times a 5* OER and had three of his stores win a Rolex. In September 2021, he bought five underperforming stores in Rotterdam – the second biggest city in the Netherlands and like all bigger cities the challenges were the same: low on staff, high on EDT, sales dropping and with lots of competition losing market share. In just a few months Sjoerd has managed to get staff, to get EDT down and sales up. The secret to this success according to Sjoerd? He said it’s all thanks to hiring a happiness coach! Sjoerd really embodies the ideal Domino’s franchisee, always looking for better and more. He was the NL Franchisee of the Year in 2019 and 2020, and DPE Franchisee of the Year in 2020. In 2021, Sjoerd also won multi-unit sales champ award (highest AWUS for a franchisee with 3+ stores). He makes sure that the team feels great working for Domino’s and Domino’s NL is currently exploring five locations in his area to fortress, with one already secured. DPE GLOBAL STORE MANAGER OF THE YEAR: Fan Hui-Ling, Taiwan Fan has been a proud Domino’s Store Manager since 2016 and is known for her investment in her team members who she treats like family members. Honoured as the Best Store Manager of the Month six times in 2021 as well as the 2021 Fastest Pizza Maker in the Taiwan market, Fan has grown store sales 41% in the past twelve months. Under her leadership, ADT in the store has made very good progress. ADT average in May-Aug was 24:45, Sep-Dec averaged 20:21. 27 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 AWARD WINNERS 28 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 APAC Australia & New Zealand The Alvaro Del Busto Memorial Award – Delivery Expert of the Year Darcy Smyrek-Lapham Corporate Services Team Member Award Josh Pitman Charlie Reynolds Memorial Award–Franchisees Hands on Hero Bhavik Patel Multi-Unit Franchisee of the Year James and Astrid Acreman Big Red Award Mark Glynn Home Grown – Franchisee Development Award Greg Steenson and Nathan Carrington People Excellence Award – “Growth from Within” Greg Steenson and Nathan Carrington Raymon Exposito Memorial Award–Team DPANZ Regional Leader of the Year Dipesh Tanna State Operations Manager of the Year Tommy Foster Franchise Operations Team Member of the Year Dion Standley Team DPE Rookie Manager of the Year Bikramjeet “Robin” Arora Rookie Manager of the Year Gerry Schroeder Team DPE Manager of the Year: Garo Irikian (Endeavour Hills) Store Manager of the Year Tushar Dodiya Leadership Eagles ♦ Nathan and Nicole Van Jole and Thomas Walker ♦ David Hutchinson and Chad Cable ♦ Rick Zhang and Junyu Jin ♦ Nathan and Vanessa Quiring ♦ Greg Steenson and Nathan Carrington ♦ Steven Gilbert ♦ Greg and Sarah Tinson ♦ Daniel Murray ♦ Mark Johnson ♦ Lindsay and Jason Tod ♦ Justin Munro ♦ Chris Donnelly ♦ Alex Whale ♦ Lucky Singh Million Dollar Club Awards ♦ David Hutchinson and Chad Cable ♦ Steven Gilbert ♦ James Dooley ♦ Greg Tinson Partners Foundation Award Domino’s Maryborough Give for Good – Most Generous Community Domino’s Terrigal Domino’s for Good Award Domino’s Warana Domino’s Group Digital and Delivery Team Member of the Year Madeleine Franklin Domino’s Group IT Team Member of the Year: Roger Bucks Hunter Mackenzie Big Heart Big Fun Domino’s Wanganui 29 EUROPE Belgium Driver of the Year Amine Mohamed MVP, Multi Unit Franchise of the Year Yassine Norezzine & Khadija Lawrizy Rookie Manager of the Year Hava Aldamova Manager of the Year Abdelfatah Mhanna FPMC Isaa Barrou & Mathieu Parent After Lunch Champion DP Beringen Highest AWUS Rookie DP Zottegem Highest Opening Week Sales DP Maaseik One Team Award 2021 Thomas Warin Multi-unit Sales Champion Suhail Alshawwa Online Champion DP Tessenderlo Service Number One DP Mouscron Development Award Kamil Osman Bad Luck of the Year Award DP Willebroek Million Euro Store DP Beringen, DP Brugge, DP Menen, DP Mouscron, DP Tournai Rolex Award Suhail Alshawwa Highest turnover shop DP Beringen Highest turnover gainer DP Aalst Highest weekly turnover DP Tournai Domino’s League DP Asse Split Store Manager Nurdin Abdella Dominator Nermin Naimane France Best EDT Tom Amiel Multi-Unit Franchisee Romain Drode Best opening week Cyril Durand Best sales growth Julien Gazagnaire Best NPS Patrick Santamaria Biggest sales record Nathalie Obert Manager of the Year Damon Barbe Rookie Manager of the Year: Baptiste Bigot Best Customer Relationship Mohamed Benserir Fastest Pizza Maker Julie Fiard Best Single Unit Franchisee Salem Boulhadid Highest Daily Sales Record Adel & Salem Boulhadid Germany Local Hero Cluster A Rostock City Local Hero Cluster B Schwerin Stadt Local Hero Cluster C Luebben Top Shop of the Year Luebben NPS Hero Kiel Kronshagen OER Streak Luebbenau Opening Record Week Sascha Dethlefsen, Heide German Record Week Rafael Czinczoll, Regensburg German ATD Record Berlin Charlottenburg Nord 9:27min Delivery Expert of the Year Andrei Soloviev Japan 2021 DPI Gold Franny Eiichi Tanizawa 2022 DPI Gold Franny Kiyoshi Izumi 2022 DPI Gold Franny Hikaru Oshima 2022 DPI Regional & International Delivery Expert of the Year Tsutomu Idesawa Taiwan 2021 Gold Franny Lin Chun-Chi 2021 Regional Manager of the Year Kuo Yu-Shan Congrats for the great performance 30 The Netherlands Golden Franny DPNL 2021 Multi-Unit Franchisee 2021 Hugo Tholen & Jorrit Datema– Hoogezand, Winschoten en Stadskanaal Most Valuable Player Award Bernd van Berkel Dominator Award Dionne van Anrooij New Manager of the Year Nathan Oosterhof, Wolvega Manager of the Year (Split Store) Emiel Allefs, Woensel Manager of the Year Wijk bij Duurstede–Mandy en Tristan 31 Time is the Enemy of Food Award Hamburg Hafencity Top Ace Award Leon Kreipe and Konrad Mai Supervisor of the Year Engin Doksoez Support Team Member of the Year Stefanie Thiemann Franchisee of the Year Michael and Sebastian Dornbrack Golden Eagle of the Year Reik Kretschmer New Store Manager of the Year Carolin Gaudl Store Manager of the Year Philipp Kaemmerer 3TEN UPDATE customers receive their delivery orders in ten minutes or less. In Belgium and Luxembourg, we focus on 3TEN under the name “Domino’s League”. This competition among shops runs throughout the year and focuses on three elements. Each month, a different element is highlighted, and shops can win or lose points through: 4 X Single Runs where the objective is 90% single runs to earn points; 4 X EDT where we compare the EDT with month before and they can earn points if there is improvement; and 4 X Product Quality where shops communicate via WhatsApp or email and must produce three pizzas to be made as perfectly as possible and get 50 points per great pizza. Additional points were awarded for NPS scores made in that period higher than 4.5. The winning shop is invited to our annual Awards and receives a nice big cup with an exclusive “Domino’s League Champion” badge (embroidered) and pin for each team member to pin on their cap. The winner of 2021 was Domino’s Asse. Under the title of ‘Back to Basics’, Domino’s Netherlands started an internal campaign to critically assess what could be done more efficiently – and reward those who found ways to operate faster without compromising on quality. We focused on the use of GPS, product quality, single runs, and the NPS score. This way, we prepared all shops for the real challenge, which was to set a record. The goal was to set a new national delivery record from 1 to 31 May 2022 and to do so in under 19:40 minutes. There was also an additional target in week 22, namely, to break the current own shop record. The competition month was supported by a marketing campaign in which customers could send in their own challenge of something they could do in 20 minutes. In week 22, customers also received a free pizza if the delivery man did not arrive within 20 minutes. Several shop records were broken, and while unfortunately we were not able to set a new world record, we gained invaluable new insights into working efficiently. HOT, FRESHLY PREPARED MEALS, DELIVERED SAFELY AND FAST – that’s the essence of what Domino’s team members deliver. In 2016, Domino’s Pizza Enterprises set a goal with Project 3TEN – with the aim to have a pizza ready for takeaway in three minutes, or delivered in 10 minutes. At the time, the goal seemed like an extraordinary moon shot – that it would be impossible for any store to make and deliver a pizza to a customer’s home in such a short amount of time. And while we have more to do to reduce the average delivery times across stores in each of our 10 markets, each week Domino’s Pizza Enterprises Limited’s top stores set the international standard – about 10 minutes or less for an average delivery, for the entire week. Why does it matter? The most important reason for a faster, safe delivery is the heightened customer appreciation for their meal; in short, the faster a pizza is delivered, the better it tastes. That shouldn’t surprise: after all, no-one who goes to a restaurant expects their meal to be delayed needlessly, spending time on the preparation table. Instead, they want their meal on their plate as quickly as possible. Pizza is no different. Our sophisticated data also shows that faster delivery times builds customer loyalty and order frequency, improving the unit economics for our locally owned stores. There is also an important saving for stores that comes from faster deliveries. The ‘run time’ from a store to a customer and return, is a crucial factor not only in the time it takes to deliver, but the cost of delivery as well. Domino’s this year published data showing that reducing the average run time for stores to 10 minutes would reduce the cost of delivery by more than a third in every Domino’s Pizza Enterprises Ltd market. Simply put, a faster delivery is not only good for customers (and their pizzas) but for franchisees as well, giving them a key competitive advantage in a world where competition for labour is ever increasing. 3TEN is no longer a project, but a fundamental feature of the Domino’s Pizza Enterprises Ltd business, and a key building block for our future and franchises across the world. WE CURRENTLY HAVE 801 STORES GLOBALLY ON PACE TO HAVE THEIR FASTEST EDT YEAR, and three markets – Japan, France and Luxembourg – on pace to set their fastest market-avg EDT. To help drive 3TEN in Australia and New Zealand, Domino’s launched an EDT Record Week in February 2022 which encouraged stores to beat their average EDT times. The EDT Record Week engaged team members across Australia and New Zealand to improve their current EDT and inspired them to hustle where it was safe to do so in order to deliver hotter and fresher pizzas to our customers. While Australia and New Zealand fell slightly short of achieving the record, one store in Australia, Domino’s Chermside, placed first in global EDT rankings for the week, achieving an incredible average EDT of just 7.4 minutes. This result showed a commitment to achieving 3TEN, and ensuring 32 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 TH E N E W N O R M A L: LIVING WITH COVID IN PREVIOUS REPORTS, DOMINO’S PIZZA ENTERPRISES LTD HAS OUTLINED THE CHANGES IN OUR CUSTOMERS’ APPROACH to ordering, the restrictions in our communities, and how our stores have risen to this challenge to adapt our operations to serve hot, fresh meals to customers regardless of the conditions. In FY22 our communities have experienced significant waves of COVID-19, particularly with the Omicron variant, and have now transitioned to ‘living with COVID’ – with international borders opening and our communities increasingly moving to the ‘new normal’ of ongoing cases but fewer societal restrictions. Nonetheless, our teams in all markets have needed continued flexibility and operational excellence to adjust to ongoing challenges; these have included staff shortages during the peaks of Omicron waves, and a change to customer occasions (such as customers still not ordering office lunches as frequently as prior to COVID-19). This report recognises the numerous challenges that franchisees across all markets continue to face. They are real and significant issues that have pushed each and every team member from Brisbane to Belgium to truly reassess what it means to ‘crush convention’. BUT WITH INCREDIBLE TEAMWORK and a commitment to doing the right thing because it’s the right thing to do, every store, every market, every region has navigated through the hardest pandemic years and come out stronger and more in control of their future than ever before. This Annual Report is a tribute to every single team member, from delivery experts to the boardroom, who has stayed true to the Domino’s ethos and fundamentally believes that our pizzas bring people together. 33 A N D R E TE N WO LD E – E U RO PE C E O R E P O RT EUROPE Andre ten Wolde, CEO Europe since 2020 34 Like most industries the world over, particularly in food delivery and hospitality, FY22 saw Domino’s Europe has faced the challenges of ensuring we can meet demand and maintain the quality service our customers have come to know and love. Despite an extraordinary external environment that included conflict in Europe, ongoing COVID-19 waves and inflation, I’m proud to report that despite these challenges, we’ve continued to grow and thrive. In the early stages of COVID-19, we saw a rapid change in customer behaviour, as carry-out orders declined across our European markets and delivery grew very strongly. Now, as we are in the position of ‘living with COVID-19’, delivery remains a larger part of our business than prior to the pandemic. We will serve our customers whatever their preference for service, whether from carry-out, or delivered to their home, office, or even a local park. An increase of deliveries has presented operational challenges for our stores, particularly because of the rapid growth, and I am pleased that our stores have risen to the challenge. OUR FUTURE IS CLEARLY FOCUSED ON DELIVERY, and to meet this demand we need to deliver hot, fresh, meals fast – by reducing the distance between our stores and our customers – and affordably, by reducing the cost of the last mile of delivery. It remains crucial that we have more stores opened closer to customers, and we are working on this in all markets. 46 new stores opened in Germany, including the country’s 400th store, another 17 in Belgium and two in Luxembourg. In France over the past 12 months, we have opened 30 stores bringing the total of Domino’s stores there to 477 – putting us on the path to 500 stores. In the Netherlands we opened 21 new stores which has us on track to open our 350th store next financial year there. AT THE CENTRE OF THIS GROWTH is delivering high quality meals for our customers. We were particularly proud to introduce the Nutri-Score initiative this year. The Nutri-Score is a five-level traffic light system from A to E, which is intended to make it easier for customers to make more conscious choices about certain products, continuing our path towards a commitment to transparency and quality. Both in physical shopfronts and online, it is clear for each menu item which Nutri-Score label it falls under. The green label (A) is the most responsible choice within the category. The products with a dark orange colour, or a score of E, have the least favourable health composition. Many regions have developed an ‘A Score’ Pizza, and Domino’s Germany was the first QSR chain in that country to introduce the Nutri-Score. In May we initiated the Better Pork Commitment in Europe – a core »It remains crucial that we have more stores opened closer to customers, and we are working on this in all markets.« reflection of our value to do the right thing, because it’s the right thing to do. With the introduction of higher animal welfare standards for pigs and sows, we are committed to better animal welfare standards for all meat and seafood ingredients we carry on all menus. Previously in 2020, Domino’s Europe announced its partnership with Compassion in World Farming (CIWF) and signed the Better Chicken Commitment. In appreciation of these efforts to develop these better welfare standards for all the animal-based ingredients on menus, Domino’s Europe was awarded the Cage Free Award by CIWF in June 2022. Doing our bit to end the use of cages across all species in the European supply chain is not an easy task, but it’s an ambitious stance we hope will inspire other companies in Europe also. We aim to crush convention in our operations, including delivery. Our Dominoids in Germany took it one step further with a pilot program to test a delivery robot with the assistance of Artificial Intelligence specialist, Teraki. Read more about its success in the Digital Innovation section of this report. In these times of rising costs and increasing labour scarcity, I’m looking forward to seeing how the next phase of our robot delivery driver implementation goes! Continuing in the innovation space, Domino’s France launched a pioneering pizza tray called GOLF with 18 spaces for dough bowls – like 18 holes of a golf course – which allows an optimised arrangement of the dough, reducing storage space, shipping costs, and helping towards reducing our carbon footprint. The team there are also getting close to reaching their goal of a 100% electric fleet before the end of 2022. Similar efforts to reduce our environmental impact have also been acknowledged in the Netherlands, with the store in Oldenzaal winning a global ESG award for running their store with energy generated from solar panels. In Belgium, which has seen particularly rapid growth over the past few years, we opened our first store in an amusement park: at ‘Bobbejaanland’ – a theme park that’s been in operation since 1961. This is a great example of Domino’s creating joyful experiences for customers wherever they may be. Here’s to more enjoyment and innovation over the next 12 months! Andre ten Wolde CEO EUROPE 35 36 TOP HIGHLIGHTS ACHIEVEMENTS & OPERATIONS • Fastest delivery in 9:27 in BERLIN CHARLOTTENBURG April 2021–the first German store to go under 10 minutes for a full week! • In December 2021, KAMEL, SALEM AND ADEL BOULHADID mobilised all the teams of the BK group in one of their stores in Hésingue to reach the national record of Domino’s Pizza in France – all the benefits were donated to 3 associations to support children in the region. • Domino’s DENMARK are testing prototypes for a reusable pizza box to crush convention and be one of the most environmentally friendly Domino’s operations STORE DEVELOPMENT • Germany opened 400th store • Launch of first amusement park shopfront at Bobbejaanland in Belgium FOOD DEVELOPMENT • FRANCE launch of GOLF Project – innovating the pizza tray and allowing dough to proof vertically, enabling more dough pieces per tray and leading to a 55% reduction in the number of trays in the network RECOGNITION • Domino’s GERMANY wins Franchisor of the Year 2022 from the German Franchise Association and Best International Food Chain 2021 in the Lieferando Awards. • Domino’s named the Winner of the Best Global Brand in the NETHERLANDS by the takeaway.com awards 37 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W GERMANY OUR TEAM HAS RISEN TO THE CHALLENGE THIS YEAR – growing sales and opening more stores despite the labour and supply chain issues broadly affecting the country. It is a credit to our franchisees, store managers and our head office team that, despite these challenges, we were able to continue to serve our customers. This was exacerbated by the shortage of raw materials and the consequent increase in prices. Maintaining our logistics was very challenging, and at the same time our top priority was to deliver value for our customers while also ensuring the long-term profitability of our franchisees. There were well publicised delays in approvals from local government for new stores due to COVID-19, as well as a shortage of building material and delivery difficulties. Rising inflation, rising energy prices and the increase of wages have kept our franchise partners busy in recent months and presented them with new challenges. But – we are Dominoids and crushing convention is what we do. This year the broader market benefited from opening an incredible 46 new stores, including the opening of our 400th store which marks a great milestone for Domino’s Germany. It also contributed to the overall revenue growth, brand positioning and national advertising, while stores also benefited from the introduction of the Late-Night Deal and the Snack and Family Bundles – to attract new customers and increase ordering frequency. We continue to rely on established offers such as the Domino’s Duo. Another approach is our “more for more” strategy to offset some of the inflationary pressures– upgrading menu offerings while adding incremental pricing – delivering great value for customers, increased sales for stores and of course – joyful experiences for all. STRENGTHENING OUR POSITION AS A DELIVERY EXPERT with an ongoing focus on optimising our delivery territories and operational processes to make sure we keep our position as the most efficient food delivery company in Germany 38 remains a focus. Our aim is to increase the productivity of our teams without them working harder. During the winter months, there were still strict COVID-19 requirements to follow, such as keeping a minimum distance at pick-up but since May, all requirements have been lifted. We continue to offer our customers contactless delivery. Our customers have more confidence in the increasingly established brand and the introduction of our new reward program, ‘Domino’s Club’, in October 2021. Well-known TV face, Jorge Gonzalez, was engaged as a celebrity testimonial and his support of the program was launched at a press event in Hamburg. The continuous expansion of the product range – including greater variety via the Golden Chicken range and extended vegan range – have also delivered for our stores and customers this year. The constant development and roll-out of various tools to further digitalise the processes in the stores and thus make the work even more efficient remains a constant focus. This includes an inventory app, digital temperature monitoring and an online tool for simple and targeted feedback management, Critizr, launched across multiple markets. Platforms such as these also ensure ongoing support and feedback to help our people grow and prosper. Through the promotion and development of our employees we are cultivating a corporate culture of flat hierarchies and open doors. Whether you’re the delivery driver, franchise partner or the assistant to the department manager, everything is possible at Domino’s. We are proud of our ‘Grow from Within’ approach and the many opportunities we offer in our Domino’s Academy to motivate employees to develop. This past year six of our managers in Germany have taken up the opportunity to become franchisees, which pleases us greatly. To further support this, we also have our talent development program “Stars for Success”, where qualified store managers can collect ‘stars’ by participating in and successfully completing development programs to secure start-up capital when they join the system as franchise partners. And since we know that a well-trained team member is more loyal and more productive, we have doubled down on our training programs. During the pandemic we moved all classes online and added more subjects. Today our team members across Germany can attend online training on a broad variety of subjects either taught by one of our professional trainers or a senior leader in the business. This year we also implemented free Culture Classes, including ‘New Employee Orientation Class’, ‘High Volume Mentality Class’, ‘Handle the Rush’ and ‘20 Golden Rules for a Successful Business’. We also introduced new regular classes around employee engagements, customer feedback management, employment law, and a new ‘Webinar of the Month’ series. (Fun fact: Stoffel Thijs, our German CEO, loves to teach our culture classes and his all-time favourite is “High Volume Mentality”.) As an important part of our ESG program, Domino’s for Good, Domino’s Germany implemented our whistleblower policy and contact form, which enables all employees to give anonymous information where they identify behaviour that does not meet our purpose and values. After all, at Domino’s we do the right thing, because it’s the right thing to do. In Spring 2022, the “Round up for Charity” function Whether you’re the delivery driver, franchise partner or the assistant to the department manager, everything is possible at Domino’s. was introduced, which allows customers to round up payment of their order. These micro donations flow to our brand-new charity and, in addition, we have set up the non- profit organisation Domino’s Partners Foundation in response to the flood disaster in which our store in Stolberg was devastated. Together in a committee made up of staff from headquarters, partners, and employees, we organised help from our employees for our employees and make sure that it reaches where it is needed. We’re proud to report that Domino’s Germany received a number of coveted awards this past year, including the Franchisor of the Year 2022 from the German Franchise Association and Best International Food Chain 2021 in the Lieferando Awards. Our Cinnamon Bread was awarded the Vegan Food Award 2022 by PETA in the category “Best Vegan Snack” and Domino’s Pizza Germany came in sixth on the ProVeg Rankings for the most vegan-friendly restaurant chains of 2022. Finally, we were particularly proud of being the first QSR chain in Germany to introduced the Nutri-Score on our website dominos.de. 39 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 G E R M A N F R A N C H I S E E S P OTLI G HT CAROLIN GAUDL Chemnitz Markersdorf, Chemnitz Siegmar, Glauchau, Freiberg 2019 Visited DPE Australia, Won Rolex Challenge 2020 Opened Siegmar store, building the delivery area of Markersdorf 2021 Manager of the Year New Store in Siegmar, Siegmar won the Triathlon EDT Challenge in summer 2021 with 17min ADT / One Million Dollar Club Markersdorf 2022 Opening store Freiberg together with her 20 year old daughter 2022 Opening store Glauchau, first store out of Chemnitz, in a white spot and a small, unknown city 2018 Opening of Markersdorf store Carolin’s Story Pizza is in Carolin Gaudl’s DNA and now she’s building a family pizza dynasty. “I worked in my parents’ pizza stores from the age of 15 in Dresden and Chemnitz as insider and later a shift manager,” she said. “In August 2000 I opened my first store at just 19 years of age and in 2018 converted that to a Domino’s franchise, and we’ve continued to grow. “I have just opened a store in Freiberg with my 20-year-old daughter, so we now have a third generation running pizza stores which is unique for Domino’s Pizza Germany.” Carolin is a founding member of the Domino´s Partners Foundation Germany and is focused on connecting and helping all Domino’s Partners and their teams to become stronger together and increase the value of working at Domino´s for our team members. “Sharing my spirit and know-how with the teams only 40 makes them better and stronger and it’s given me much more self- confidence over the past few years too,” she said. “To see how a team member develops to a Dominoid is pretty cool and makes me proud of our work. It’s also such an honour to see my daughter now able to raise her own business and have a good future in the Domino’s family.” Carolin knows the importance of keeping a team supported and well run, first-hand. “In September 2021 the Average Delivery Time (ADT) in our Siegmar store increased from 17 minutes to more than 23 minutes without an obvious reason,” she remembered. “I determined our operational flows were not as good as they should be and worked with my team, training them to optimise our in-store flows. We were back reaching our ADT goals after a short time, so this was cool to see how training input makes a difference even in what is considered a good working team. “In fact, opening the Siegmar store was one of our most successful initiatives, because the store solved nearly all the operational problems we had before in Markersdorf with delivery times, sales per team member hour, and our ability to raise sales. “The store opened in an area using 25 per cent of Markersdorf’s former delivery territory. Markersdorf made €38k Average Weekly Unit Sales (AWUS) before the change and Siegmar was supposed to make €10K AWUS, but runs now constantly €17-20K AWUS.” Across all her stores, delivery focus is strong with more bikes and scooters assisting to lower Estimated Delivery Time (EDT) combined with an increase in pick up sales, which Carolin puts down to the modern and visually great stores. CAROLIN GAUDL »Opening new stores in smaller areas with less competition is a good move for us. A big brand in a small city makes the people so happy that you’re there and they appreciate your investment in their small town.« 41 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W BELGIUM/LUXEMBOURG DOMINO’S BELGIUM/LUXEMBOURG MANAGED TO COUNTERACT PARTIAL LOCKDOWNS during COVID outbreaks, ongoing restrictions and the impacts of the labour market tightness, through recruiting and training more delivery staff, improving staff training, and increasing productivity from every team member, helping all of our Dominoids be as versatile as possible. That versatility and ability to crush convention allowed us to adapt quickly when we started to see changes in customer behaviour this year. Belgium used to be a pick-up focused market, but this past year 63% of sales came from delivery. We will serve our customers however they choose to order and recognise the efforts of our store managers in responding to this increase in delivery, and the associated operational challenges of rostering and fleet management. In Belgium we are keen to continue to open new franchises to allow us to introduce Domino’s to a larger part of Belgium and attract new target groups. In FY22 we opened 19 stores in total. We are balancing this expansion with a focus on expanding internal franchisees. A small number of external franchisees will likely join our business in new regions, and we are focused on ensuring these new franchisees successfully align with our culture. One franchise that opened to great excitement was our new store front at the Bobbejaanland amusement park: an incredibly unique store that offers opportunities for the future that we are keen to explore. We’re proud to report that in Belgium we had our best ‘Stunt Week’ ever in March. A stunt week sees us put on local marketing activities that are highly visible in 42 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 We will serve our customers however they choose to order and recognise the efforts of our store managers our communities, including team members wearing costumes that bring fun and energy into our stores. We achieved an impressive 46 local records and a 136% boost in orders compared to a normal week. Unsurprisingly, the highest monthly sales were also achieved in that same month. Domino’s Pizza Belgium closed 2021 with a special campaign in December – for every Cheesybread sold, Domino’s donated €2 to Bednet and ClassContact. These charities connect young people, who are unable to attend school due to illness, with their teachers and classmates. This way they can continue to be who they want to be. The campaign was extraordinarily successful and together the two charities collected € 80,000 with our support. In April, Domino’s Belgium welcomed two new CEOs – for a day. 12-year-olds Redouan and Maguette joined Ringo Joannes as part of a special program coordinated by JINC, a foundation that collaborates with companies and schools aiming to build a society where a child’s background does not determine their future. Together with Ringo, they discussed issues such as personnel recruitment and offered some advice – and of course they made their own pizza. IN LUXEMBOURG, MORE THAN HALF OF OUR SALES CONTINUE TO COME FROM DELIVERY ORDERS. To lift our online sales, especially in delivery, this year, Luxembourg started an ‘always on’ delivery deal, offering a second pizza for €2 (Mon-Thurs) until mid- January, and TocToc days from mid-January. Together they accounted for 8% of total sales. From a product level, we know that consumers in Luxembourg like to experiment with their own tastes and preferences. The bestselling pizzas were those that customers can build themselves according to their own tastes, as well as the half/half pizza. We are also pleased with the take-up of Domino’s Crunchy Chicken, which is extremely popular in Luxembourg and making a meaningful contribution to sales. Pizza lockers for Domino’s first store in the Bobbejaanland theme park (Belgium) 43 BELGIUM/LUXEMBOURG B E LG I U M F R A N C H I S E E S P OTLI G HT NERMIN NAIMANE Domino’s Pizza Maaseik 2021 Franchised first store 2021 Dominator Award 2016 Joined Domino’s Belgium as a pizza maker 2021 Highest opening sales Nermin’s Story Nermin started working at Domino’s as a pizza maker straight out of high school, a little lost, and searching for direction. “I really did not know what to do next after finishing school and Domino’s felt like a good place to land while I figured it out,” she said. “I really liked the Domino’s culture and was afforded many opportunities to grow in the company, so I stayed. It was the best choice I could make. I worked hard and learned and did my best, and it has paid off – last year I opened my own store with the money I saved from working at Domino’s!” Just a year into her franchisee journey, Nermin, 25, is keen to continue to grow sales off the back of an impressive opening year. “I invested in electric scooters and e-bikes and as a result, our delivery times have dropped to an average of 18 minutes! The customers are happy, and we also get to do our part in reducing our environmental footprint,” she said. “My future goals are focused around being a better entrepreneur and growing into another two stores in the future. That’s important not just for my personal success, but also being able to support other team members to grow, too. “I always tell my apprentices to set goals and work as hard as you can. That is how dreams become reality.” Nermin has also committed to giving back to her local community – because it’s the right thing to do. “I am very proud of a recent collaboration between my store and a school for children with difficulties,” she said. “We hosted a pizza making workshop for the students and the children’s enthusiasm really made my day! “We received beautiful thank you drawings from the children afterwards and it felt so good to be doing something for society.” 44 NERMIN NAIMANE »I had the opportunity to flourish and grow in my early years at Domino’s and I would like to give this opportunity to other young people as well.« 45 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W FRANCE AS IN OUR OTHER EUROPEAN MARKETS, DOMINO’S FRANCE HAS CONTINUED TO EXPAND despite a challenging broader environment. In FY22, more than ever, it was critical to help our people grow and prosper and they returned that investment in spades. We proudly opened 30 new stores with both existing franchisees who wanted to expand their business and store managers who followed our ‘Emerging Leaders’ training program for entrepreneurship to become franchisees. ‘Top Depart’ is one of our projects that helped support these new store openings. This project focuses on the first week of opening and maintains consistent communication in this first week to help support high level of sales in the first weeks of operation. We’ve found that this is a very good example of franchisees for the whole network because it encourages the others to do the same when they open. The second project is the ‘Turnkey store’ which consists of building the shops ourselves as Domino’s Pizza France. This means that we support the investment and time spent on building, to let the franchisee focus on the business – from marketing to employing team members. Some other DPE markets are doing it already with great success, but this is the first time it’s been attempted in France. Crushing convention is in our DNA at Domino’s France! In the midst of this growth, our team set out to crush convention in a most audacious way with a focus on a modern new project that we’re incredibly proud of. The GOLF project has innovated the pizza tray, optimising the arrangement of dough pieces to include up to 18 bowls – like 18 holes on a golf course. In France we make our dough for stores in our two commissaries, which is then shipped in a tray to stores. The nature of dough is it continues to expand once it is made, which means it needs space to ‘proof’, in effect requiring Domino’s to ship trays, dough and air around the country. Our team knew more efficiencies were possible. We carried out numerous tests on the growth, fermentation, and quality of the dough to ensure that it met Domino's standards at all stages of the process from our commissary to the shops for stretching and baking – and the results were very conclusive. GOLF allows the dough to proof vertically, enabling more dough pieces per tray, thus saving space in trucks and in our shops. It has also led to a 55% reduction in the number of trays in the network, fewer return trips in our shops between the cold room and the stretch table and impressively, a reduction of CO2 emissions. After finding the right trays, one of the biggest challenges was to identify how to easily remove the dough pieces from the tray. We came up with the idea 46 of tongs and we did a lot of testing and, using a 3D printer, we were able to create different tongs and find the best model. The first phase of the pilot launch was launched in February 2022 with 35 stores using the new tray in the west of France. Step by step, the new tray was used by more stores (recently 170 stores) and the second phase was launched nationally in May 2022 with plans for a European launch soon. Ultimately, we estimate that with this project we will reduce the number of trays per year by 55% and the number of trucks per year by 44%. In terms of logistics, all dough pieces delivered to our shops are placed in reusable bins that are returned to the warehouse to be cleaned and reused. And since April 2021, the plastic protection around the delivery trolleys has been completely replaced by a reusable material. An innovation that allows for a significant reduction in CO2 and better recyclability, and reflects our values to do the right thing, because it’s the right thing to do. This approach and these streamlining of processes is more important than ever before because the demand for our pizzas continues to grow – this past year we passed the milestone of over 1 million people joining our loyalty programme that offers one free medium pizza after six orders. This has been supported by our national television advertising which not only helps to ensure our pizzas bring people closer together, but it also means we are The premium ingredients, combined with the Signatures dough – a very crispy rectangular dough baked in a caquelon – proved to win over old and new customers alike able to make a concerted effort to set up some new stores in very small towns. The business opportunities and outcomes to date have been impressive, and the stores also benefit from high customer expectations and engagement due to the size of the town these stores are operating in. We have been working with our franchisees to adapt to an increasing demand for delivery and to meet customers’ expectations in the wake of COVID-19 restrictions. We had some restrictions where our competitors could not offer dine-in, and then people needed to use a ‘Corona-pass’ to visit restaurants, but only if they were vaccinated. We also had curfews in some of our stores, meaning customers couldn’t pick up or visit our stores after 6pm. As conditions have improved, we did have staff shortages for a limited time due to a wave of Omicron, but we are largely ‘back to normal’ in France since May. It is a credit to our stores that they have successfully navigated these challenges. The Signatures range which ran from September 2021 to June 2022 was a great success with our "over-35" customers–specifically the Signatures dough. – a very crispy rectangular dough baked in a caquelon – proved to win over old and new customers alike. As such, the Signature dough will be used for all of our classic recipes to align with customer expectations. Recently we have launched the Cal’z Croque Monsieur which has been a best seller for a few months now and remains a really successful campaign that is lifting sales. 47 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 F R A N C E F R A N C H I S E E S P OTLI G HT # 1 CAROL GIRARD 2 x stores in Saint-Lô Plage and 1 x in Vire Head of Training, France and Belgium Director of Operations Domino’s France 2003 Joined Domino’s as a consultant for Paris and West of France 2009 Original Trainer of the year Award for Europe and Middle East 2015 Opened first Domino’s small concept store in Europe in Saint-Lô Plage Carol’s Story Next year, Carol Girard will celebrate 20 years with Domino’s, made up of more than a decade in corporate roles before turning her hand to opening her first store – Domino’s smallest shop in the network. “I was the first to open in a town of 20,000 people – that’s just 10,000 mailboxes – with a 48m2 shop in Saint-Lô Plage,” Carol said. “This store was the first Domino’s small concept franchise, and we took a completely different approach with this store. My operational knowledge helped me to imagine this new concept with a small shop in a small town. We had to reduce the menu and the drinks menu just to be able to fit within the space but so far, it’s worked very well. I’m so proud to have made the first small concept in France a reality because I believed in it. My delivery area is small too so it makes sense for delivery to be done by electric bikes and scooters. One of my stores is now 100% serviced by electric scooters and we are working for that to be the case across all of my stores in the coming months.” Now with three stores, Carol enjoys sharing her entrepreneurial spirit and belief with the team members she employs. “I spend a lot of time with my teams, in stores, in the kitchen, so I can pass on the values that are important to me. Sticking together in difficult times is key for me and I like that we can share and be stronger when needed. The Domino’s value of ‘Helping people to grow and prosper’ is really important to me because without my team I am nothing – they are completely part of my business and my life.” That commitment to her team is also a critical foundation to Carol’s ability to develop sales. “We had to roll up our sleeves after the COVID-19 years to recreate the link but the customers know us very well. They call me by my name and they know I’m the boss who makes the pizzas! We know each other, we welcome each other with a hug and a kiss, and some regular customers have even become almost friends. The latest Critizr review we received said, ‘Change nothing, best pizzas in the world!’ So why would we change anything?” 48 »When you do your job well and you smile you create customer loyalty.« 49 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 »That dialogue and the closeness with the customers are key. This is why they come, and then come back. The customer is a member of our family.« 50 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 F R A N C E F R A N C H I S E E S P OTLI G HT #2 CRISTINA PRENEUX Gujan-Mestras 2021 Opened first franchisee store in Gujan-Mestras 2021 Best sales week to date €21K on opening week. Cristina’s Story When Cristina opened her Gujan- Mestras store in the south-west of France just over 12 months ago, there was only one other pizza delivery competitor in the district. “We immediately recorded big numbers on delivery, but we clearly had to work on the quality of the delivery, in particular with a focus on a reduction in the delivery time,” Cristina said. “That took several months to be effective, and we introduced time limits that had to be abided by, by the teams. We are very proud that now we are all around 19 minutes, and customer feedback is really good.” With delivery resourced with a 100% electric scooter fleet, Cristina said team members in runner roles help supervise logistics around delivery. “The runner ensures there’s no mistakes, no safety issues and no unnecessary back and forth to come and get a forgotten drink for example,” she said. “The runner changes regularly and we have noticed that this makes the delivery staff who work on the runner’s job much more responsible and more aware of customer feedback too.” Cristina has approached the training of team members with a focus on versatility. “Every team members knows how to do at least two jobs, and we have a lot of students, so we help them with their internship projects,” she said. “We’ve created a partnership with the Mission Locale to let people discover our delivery jobs and we also offer job opportunities with the idea of opening new stores. Many team members have offered to work for us and stay longer to be promoted. “I am also very flexible on work hours based on people’s personal lives. For example, parents will be offered the opportunity to work at lunchtime rather than for the evening service.” The goal for Cristina is to open three stores in three years, so she’s actively looking for new local locations to make her dream a reality. In the meantime, she said the customer remains the centre of all she does. “I often remind my team that it’s someone in their family who will eat what they make or someone from their family who gets the delivery. This is very important for me and this helps them understand the quality standards that we have to respect. “We’re proud to know a lot of customers well. Many of them are between 40 and 60 years old and 60% of them are loyal customers and we welcome them by name. That’s really part of the atmosphere and the fun in my store. 51 52 Y E A R I N R E V I E W NETHERLANDS After two years in which the pandemic played a significant role in disrupting all aspects of life, it is a joy that our customers can fortunately enjoy our pizzas together again. We capitalised on this during one of the Netherlands’ biggest public holidays – King’s Day – where we surprised revelers on the Amsterdam canals with water scooter deliveries. We handed out about 300 free pizzas on and around the water and, after two years of absence due to COVID, it was a King’s Day to remember! We opened 21 new stores in the Netherlands this past year, made up of a mix of existing and new franchisees. We are proud to report an increasing number of female franchisees in our organisation and we celebrated this on International Women’s Day, when franchisee Yous Syeds transformed her store in Schoonhoven into an all-women operation for one day. The delivery market continues to grow. Most of our sales come from delivery, most of these served through our online channels. Whereas delivery used to be most popular in the big cities, we are seeing a trend in smaller villages that also have a strong need for delivery services. In addition, these villages often have a limited choice of takeaways and delivery restaurants. Opening stores in these villages meets our growth ambitions, provides new customer target groups, and contributes to the local business climate. To help our people grow and prosper, this year we have increased team members’ wages, and committed to further training and employee motivation campaigns to ensure all team members have the skills to enjoy their jobs and remain at Domino’s. With the rise of the delivery market, we are also facing more competition in this area. In addition to traditional competitors, including those using delivery aggregators, ‘immediacy grocers’ have now started serving customers. These services are able to deliver groceries quickly, meaning even a frozen supermarket pizza can now be delivered to your home quickly. It is a reminder that the most efficient delivery company will be best positioned to meet growing demand through superior product, service and image. Another challenge is the political and social debate about the growth of fast-food chain operations in our communities. Transparent communication about our fresh and high-quality products and ingredients is now more important than ever. We continue to show that our food is an indulgence, but also one We are proud to report an increasing number of female franchisees in our organisation and we celebrated this on International Women’s Day without regret, because our pizzas are made from fresh dough, real cheese, and superior quality ingredients. We continue to offer customers choices like plant- based alternatives and pizzas with Nutri Score A. We went one step further this year to impress upon our customers how much we value our fresh ingredients with our campaign, ‘The Journey of the Tomato’. Throughout most of the year the vegetables we use in our pizza toppings are sourced locally, and to celebrate the start of spring we visited one of our tomato farmers to see how these tomatoes are grown and what makes the tomato so perfect for pizza. We work to do the right thing, because it’s the right thing to do. Like other Domino’s regions in Europe, we also collaborated with youth development group JINC this year. Students participated in one day work placements at various Domino’s stores around the Netherlands and team members from head office also assisted with job application training at secondary schools. Through the program a 14-year-old student won the opportunity to be our ‘CEO for a Day’ which was a humbling experience for all involved. We were also proud to support the donation of 42,000 pizzas to the Dutch Food Bank over the Christmas period at the end of 2021. These pizzas were donated with the kind help of our Loyalty Program. This past year was also a successful one in terms of peer recognition. We won the Fast Service category at the Dutch Foodservice Awards and were named the Winner of the Best Global Brand in the Netherlands by the takeaway.com awards 53 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 N ETH E R L A N DS F R A N C H I S E E S P OTLI G HT KLASKE SOMSEN FRANCHISEE: Harlingen, Dokkum 2017 Became Store Manager, first at Sneek and later at Leeuwarden store 2019 Moved into new position in the Operations Team of Domino’s Netherlands 2020 Franchisee of Domino’s Harlingen 2022 Officially a double franchisee, taking on Domino’s Dokkum 2014 Started as an insider at Domino’s Sneek Klaske’s Story At just 26 years of age, Klaske Somsen takes her role as an example to other young future Domino’s franchisees very seriously. “I love working to help my team members become enthusiastic about growing and pursuing their ambitions,” she said. “When I support them and lead by example it has a positive effect, and I can see these younger Dominoids setting themselves goals and competing to be their best. If I see potential in team members, I bring that up with them and give them feedback, so they can continue to grow towards new challenges. “I think that this way you also keep employees with you longer as they get new challenges every time, and obviously sales grow when you have an enthusiastic and motivated team in your shop and you’re delivering a good product. “Personally, I’m really proud of the career growth I’ve been able to achieve at such a young age with Domino’s.” Klaske said it’s the formula and culture of the Domino’s brand that has drawn out her entrepreneurial spirit and drive. “I’m so proud of recently opening my second store and now I’m learning to focus on dividing my time and attention properly between stores and team members,” she said. “As a young franchisee, I certainly found it to be a challenge in the beginning to get the team on board with my vision and direction but now I can see that my enthusiasm has motivated them.” Her success to date also self- motivates, with Klaske planning to open more locations in the future, specifically in her home province of Friesland in the north of the Netherlands. But in the meantime, she knows there’s a significant piece of work to focus on post- pandemic lockdowns. “Now that the Netherlands is out of the pandemic and there are no more COVID-19 measures, people are going out more often and that means our deliveries are decreasing compared to the peak of the pandemic,” she said. “I think it is important to show that we still have the fastest delivery times, a good product and a motivated team. If we make sure we stay the fastest, we will always have an advantage. It is about making a difference in the shops. As one example, we have to make sure that we know when our delivery person arrives back the order is ready, and we make sure they can just stay on their bike – saving even more time.” 54 KLASKE SOMSEN »Your team grows by working towards something, working together, and having fun.« 55 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 DENMARK OUR OPERATIONS IN DENMARK CONTINUE TO DEMONSTRATE THE HIGHEST OF STANDARDS, showing customers what to expect from a Domino’s experience. Prior to our purchase of this business in 2019, it had experienced brand damage after negative publicity relating to the previous owners’ operations. Under the leadership of General Manager Kellie Taylor, the team in Denmark has been running a 100% corporate store operation, opening stores in new territories, and show- casing the rigorous standards Domino’s is known for. This approach has been turning around public perceptions and has continued this year. We opened seven stores in Denmark this year, focused on opening stores predominantly in areas that have previously never had a Domino’s store. In addition to best-in-class operations, Domino’s Denmark is taking active steps to ensure it is one of the most environmentally friendly Domino’s operations. This year we have partnered with a Danish company to test prototypes for a reusable pizza box. In Denmark, 96% of bottles and cans are recycled, so we expect a positive result with the circular approach to the life of a pizza box. We intend to put these prototypes to the test in the coming financial year. Our goal is for the next Financial Year to be a step change for our local operations – continuing to open stores and bringing in our first franchisee partner to make one of our corporate stores the first entrepreneur-owned store. A new marketing campaign, to ‘clear the slate’ from the previous owner’s operations, will also commence from August. 56 57 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 58 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Food innovation Our food is at the heart of what we do, and throughout Europe our development chefs work constantly to find great new flavours for our customers, to be served in unique products that can be delivered hot and fresh. We want our food to be indulgent, and taste great, and to reach customers regardless of their taste preferences or dietary requirements. In Germany we developed a new chicken product, our ‘Golden Chicken’, as well as a vegan version ‘Golden Vegan Chicken’, both are perfect complements to our pizza range. The German team also launched two new vegan pizzas – ‘La Vega’ and ‘Vegayaki’ – as well as an accompanying vegan pizza bread. We also improved the recipe of our Cinnamon Bread, which is now vegan, and earned the Vegan Food Award 2022. In line with the new Nutri-Score system, Domino’s Germany developed an ‘A Score’ pizza – the ‘Fitness Fan’. The goal of these initiatives, as seen across our European markets, is to break down barriers between Domino’s and our customers. By offering high quality meals that can meet the needs of a broad range of our customers, we’re able to serve families and groups of friends alike. In spring we introduced the ‘Bella Bianca’s’ to our German customers – three fresh pizza variations all with a delicious crème fraîche base – that take customers to three of the most beautiful places in Europe: Rome, Paris, and Alsace. In Belgium and Luxembourg we launched the Cal’Z – a delicious variation of the traditional calzone –it’s a pizza folded in half and easy to eat. The Cal'Z is available in three different flavours: The Cal'z Ham & Cheese, the Cal'z Goat’s Cheese & Honey, and the Cal'z Chicken Kebab & Garlic Sauce. This built on the success of the Cal’z in other markets, including France. The Belgium/Luxembourg Nutri- Score A pizza we launched was the Fresh ‘n Tasty. This pizza contains 50% less mozzarella and is richly topped with grilled chicken, fresh spinach, onion, peppers, and tomatoes. Our most popular Domino’s side dish is the Cinnastix vegan. This allows us to delight our vegan customers not only with pizza, but also with a delicious dessert. Across Belgium, Luxembourg, Germany, and the Netherlands, in cooperation with plant-based ingredient supplier The Vegetarian Butcher, we developed a plant- based alternative for the popular pepperoni pizza. The Vegeroni is the perfect alternative for vegetarian and vegan consumers and has been received with great enthusiasm by consumers across Europe. In France we developed a new range of Signatures pizzas in September with premium, organic and labelled ingredients. We also developed our own organic tomato sauce that we launched in February 2022. Digital innovation With the future of our industry focused on delivery, we understand there will come a time when there are not enough people in the world to meet this demand. Hiring the best delivery experts will be crucial, but so will be autonomous alternatives. Domino’s, together with AI specialist Teraki, is bringing a semi-autonomous delivery robot to the streets of Berlin. We are once again betting on technological progress and, together with Teraki, a company specialising in artificial intelligence software, are now making deliveries with a new type of delivery robot within the “Golden Mile” in Berlin. With this, Domino’s relies on the only robot in Germany that currently operates on the city’s pavements, with the first delivery robot to receive an official permit to operate in Berlin’s public space. Still in Germany, we relaunched the Domino’s website and mobile app for an even more user- 59 friendly ordering experience for our customers. The new, next generation app has also recently gone live in the Netherlands. Both Netherlands and Belgium introduced menu deals on our online ordering platforms, which has proved a good driver of sales. A menu deal consists of one or more pizzas combined with, for example, drinks, desserts or side dishes. This is a way to show the customer the variety of dishes that Domino's offers – we can create a joyful experience and show we’re more than just pizza. The menu deals also offer a great way to highlight other products and introduce elements of the menu a customer may not have considered previously. They have successfully contributed to the upselling of products and encourage customers to try a different dish at an attractive price. It also offers comfort to the customer: with one push on the button you have a complete menu. The menu deals are in line with Domino's sales ambitions and are a great example of how we apply the ‘more for more’ strategy in everyday operations. 60 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Operational Excellence Customer feedback is crucial to our ongoing improvement. In France we signed a partnership with Critizr, a French company specialising in customer relations. Thanks to their platform, our teams and in-store staff can now interact in real time with their customers and answer their questions. Actively engaging with customers in a timely manner through responding quickly to customer praise and concerns, is key to maintaining a relationship of trust with our customers. We are delighted with this solution which brings a real culture of customer satisfaction. We have now rolled out this partnership to other DPE markets. In Germany, TANDA, our online rostering software, is becoming more important to ensure productive staff planning. We offer webinars every two weeks to train franchisees and managers, and the results are already obvious. Franchisees who have embraced TANDA are reporting an increase in productivity of 10% thanks to better rostering. We also created further efficiencies with reduced delivery zones. The future is bright – and on so many levels – our pizzas continue to bring people together The operations team started with “Remote OERs” (Operations Evaluation Reports) in December 2021 targeting a higher audit frequency and increased efficiency. The goal of our OER program is to ensure our stores are meeting the highest operational standards, including brand adherence. DPE Germany and France both reported successes with the introduction of the Young Franchisee Program. In Germany, currently six managers are undergoing the program, all set to become franchisees in the coming months or have recently opened their first store. In France we have trained ten managers who have already opened their own stores between June 2021 and June 2022. The future is bright – and on so many levels – our pizzas continue to bring people together. 61 JOS H K I LI M N I K – A PAC C E O R E P O RT APAC Josh Kilimnik, CEO APAC since 2022 62 franchisee, starting his career back in 1991 and having worked across a variety of roles in the Company, including as a franchisee in Australia, and as the Chief Operating Officer for Domino’s Netherlands–shortly after the market was acquired by DPE. David has also been a driving force in nurturing team members and guiding them to become franchisees in their own right, having had ten team members take the step to becoming a franchisee. David also created a Manager in Training Competency Handbook and a Manager Sponsorship program to assist managers in becoming franchisees. He intends for team member development to be a key focus in his role – because it’s the right thing to do. In July 2021 we also appointed a new Chief Marketing Officer for ANZ, Adam Ballesty, following a global recruitment search. A skilled consumer marketing specialist I N A N OTH E R F I N A N C I A L Y E A R W H E R E TH E O N LY C E RTA I NT Y WA S U N C E RTA I NT Y, D O M I N O I DS TH ROUG H OUT TH E A S I A- PAC I F I C CO NTI N U E D TO PUS H TH ROUG H . Despite lockdowns and restrictions as the Delta and Omicron COVID-19 variants peaked, food and labour cost increases and Omicron-related staff shortages as team members self-isolated, our teams have not faltered. From embracing Zero Contact delivery to epic efforts by Dominoids to embrace being ‘slow where it matters and fast where it counts’, we have proved our steadfast commitment to ensuring our customers are delivered the hottest and freshest pizzas possible. This means focusing on things like predictive ordering, using Pizza Checker to ensure product quality, using fast bake ovens and specialised hot cells and taking the time to make each pizza carefully and to be careful on the roads when out delivering. We’ve continued to crush convention and help people grow and prosper at every turn in the face of the ‘new normal’ with strong market growth. Our expansion in Asia continues to return year on year success with more than 130 new stores now operating in the region. Our newest market, Taiwan, opened 14 new stores in FY22. To continue the strong growth trajectory in Australia and New Zealand too, Domino’s introduced Project Ignite, an investment of more than $AU40 million by DPE across Australia and New Zealand over the next four years to stimulate growth. The program commenced on 1 July 2021. 19 new Australian stores and four new stores in New Zealand opened this financial year utilising this project, both by existing franchisees and new franchisees who were previously store managers, helping to accelerate growth. Initiatives like these, supported by additional new markets, and an outlook of more than 3600 stores over the next decade – which will more than double our current store footprint – ensures this truly is an Asia-Pacific business which has made significant strides this financial year. In Australia/New Zealand, we appointed new ANZ CEO David Burness in September 2021. David is an experienced Domino’s with decades of experience, Adam prides himself on growing a business through the lens of brand and disrupting the market with new to world ideas. Responsible for all facets of the Domino’s Australia and New Zealand brand, Adam is focused on consumer marketing including brand, digital marketing, communications and product development. Adam is also responsible for leading the development of the Domino’s food innovation pipeline. In partnership with a new creative marketing agency, Domino’s Australia/New Zealand has launched a number of very popular campaigns, including the relaunch of the Extra Value Range (New Zealand), the Value Max Range (Australia), the Cheese Toastie »slow where it matters and fast where it counts« Crust and ‘Hot & Fresh delivered’ (Australia). Demonstrating a commitment to animal welfare – and doing the right thing because it’s the right thing to do – the Company partnered with Compassion in World Farming (CIWF) and signed the Better Chicken Commitment in November 2021. This was a first for the fast- food industry across Australia and New Zealand. In committing to this initiative, Domino’s has pledged that by 2026, the Company will ensure 100 per cent of its chicken meets or exceeds the Better Chicken Commitment standards for all stores across Australia and New Zealand – an important step in our Domino’s for Good journey as we work to make the world a better place. And speaking of making the world a better place, by being generous and providing joyful experiences, Australia and New Zealand hosted inaugural “Domino’s for Good Day” events on World Pizza Day in February of 2022. Australian stores and their customers raised $133,000 for Australian charities and Domino’s New Zealand and its customers raised more than $19,000 for disadvantaged Kiwi’s in just one day. Similarly in Japan, April 2022 saw the establishment of the Sanchoku Domino’s Foundation in support of those working in the agriculture, dairy and fishery sectors who are facing multiple challenges such as successor shortages and deserted cultivated land. Sanchoku Domino’s Foundation will utilise the donations collected through round-up sales. We continue to remain focused through all the ways we crush convention and FY23 is looking prosperous for us all. Josh Kilimnik CEO APAC 63 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 64 TOP HIGHLIGHTS ACHIEVEMENTS & OPERATIONS • Domino’s Chermside (Brisbane, Australia) placed first in GLOBAL ESTIMATED DELIVERY TIME RANKINGS for the week, achieving an incredible average EDT of just 7.4 minutes. • Average ADT in Taiwan is now 00:21:29 as compared to the pre-acquisition average of 25 minutes 45 seconds • Japan achieved a company-wide daily sales record on December 25th, 2021 • More than 130 electric bikes now in operation across Domino’s New Zealand • New Domino’s app roll-out launched STORE DEVELOPMENT • G15 new franchisees + 67 franchisees grew their business by one or more stores for the year in Japan – DPJ now operate in all 47 prefectures • Taiwan opened 14 new stores • 19 new stores in Australia, with 58 franchisees expanding their business, FOOD DEVELOPMENT • Australia and New Zealand launch the Cheese Toastie Crust – a delicious combination of pizza and everyone’s childhood favourite, the cheese toastie! • “Cheese Burst” pizza launched in Japan in direct response to customer feedback showing 12% of customers don’t eat the crust RECOGNITION • Domino’s Australia awarded Corporate Philanthropist of the Year by the Queensland Community Foundation 65 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W JAPAN DOMINO’S PIZZA JAPAN ACHIEVED A COMPANY-WIDE DAILY SALES RECORD ON DECEMBER 25TH, 2021 – A 32% INCREASE ON THE SAME TIME LAST YEAR. We’re proud to report that sales on the day were higher in 412 stores. Powering this has been the growth in our franchisees– with 545 franchisee-owned stores as of June 2022. These are impressive results in what proved to be a challenging year for Domino’s Japan as we worked tirelessly to ensure we had enough resources to cover the growth requirements of the business. Thanks to the huge contributions made by team members and consistently strong leadership across all levels of the business we have managed to secure raw materials for our products throughout the year to help us persist on our value to crush convention. Continued franchisee activation and leadership has resulted in strong direct sales generation and more efficient operations and our strongest service levels and operations ever in Japan. We’ve added 15 new franchisees and 67 franchisees grew their business by one or more stores for the year. This has been a direct result of the programs we have put in place. This past financial year we launched “miRISE” to help team members of corporate stores to develop stores as franchisees, along with the new “LAD” program that helps existing franchisees develop more stores. We have partnered with our franchisees on recruitment strategies and created recruiting posters for all franchise stores to promote “crew to full-time” hires, and we host the “Domino’s Brand Orientation” session twice a month to communicate Domino’s culture and values. So far, 150 members have attended this orientation, and 10 have been successfully hired as full-time employees. The Domino’s recruiting website has also been renewed so that we can accept applicants from outside of Domino’s, and we have extended this system to franchisee stores as well. To support the wellbeing and lifestyle of all team members we introduced Flexible Working Hours and changed the number of monthly days off from nine to 10 days so that our employees can maintain a healthy work-life-balance. We have also invested in various activities focusing on diversity to promote female employees to thrive and conduct biannual GLINT surveys to improve employee engagement. In terms of gender diversity, we now boast 23% of all store managers are female, which is up from the previous financial year of 8%. Towards FY23 we also are aiming to increase the employment of people with a disability from our current ratio of 1.7% to 2.3 %. This FY was also pivotal in establishing the foundation of what will be a new era in customer engagement, including the first rollout of our Critizr platform integration, for smarter and scalable customer feedback management. 66 We also integrated and renewed our Customer Service and Relationships division. This function is taking care of customer relationships and customer care on all core marketing channels, including our customer call centre, and merged with our Digital and Marketing operations division, which has been rebranded as the ‘Voice of Customer’ team. This is a critical change that fully aligns with our efforts to be Customer First focused on every aspect of the business. Thanks to the new Voice of Customer function and investments in better, digitised, and streamlined Customer care processes, we are reducing our target Customer Inquiries’ Response time and Resolution time from up to a few days to a maximum of 24 hours. This reduction significantly improves our ability to serve our customers where they need it the most: when they reach out to us asking for help. In collaboration with BI and marketing insights, we connected our Voice of Customer inquiry management process with our business reports. This ensures that all franchisees can receive regular reports on the quality of their service, comments from customers, and an easy-to-understand assessment of their customer’s satisfaction level. We also completed the integration of our network of stores with the Uber Eats platform in Japan. Now all of our stores are connected to the UE network to reach new revenue and new customers. We built and rolled out new and smarter Marketing Automations for our Owned media marketing push channels, making our email marketing channel smarter in alignment with our CLV holistic customer experience, strategy, and standards. These automations reduced the operational burden on our team– and the time and cost necessary to set up and deploy new campaigns and offers. Thanks to smarter tags technology, more personalised and relevant communications can reach our customers now too, improving the time to respond to issues and making sure offers are more relevant, and ensure strong customer satisfaction – to continue to provide joyful experiences. We built and migrated our website and top page this past year. The new website comes with a modern, light, and redesigned layout that is in line with our global standards. It offers a faster page loading experience, the best mobile web experience available in our platform, better design, usability, and stability. The new platform developed on top of the latest versions of the Umbraco global solution launched at the end of June 2022 and is just the first step in our ongoing plan to bring the best of Domino’s to our Japanese Customers through quality digital experiences. Our Japan Digital Marketing and Marketing Operations Division constantly strive for innovations and efficiencies, both in the planning and executing of strategic and tactical promotions, in deploying optimised media, and in project investments. We commit to maintaining and building next generation digital experiences and platforms that help our stores, franchisee, and corporate grow more efficiently and closer to our customers. This year critical investments have been made to build foundational technologies, experiences, and user interfaces, and integrate them with smart global platforms that support our current and next growth phase. 23% of all Store Managers are female This investment in marketing and customer satisfaction is further supported by our desire to continue to do the right thing because it’s the right thing to do – and that extends across the communities we operate in. In the past year we’ve donated nearly 103,000 pizzas to support local communities through more than 850 of our stores throughout the country, and to celebrate ‘Coming of Age Day’, free pizzas were sent to community members who turned 20 in local municipal areas where celebration ceremonies had to be cancelled or held on-line due to pandemic restrictions. And because we do the right thing, because it’s the right thing to do, our measures to reduce CO2 were boosted greatly and the percentage of e-bike and EVA increased to 75% of newly purchased vehicles. The national e-Bike/EVA ownership has increased to 51% compared to 46% last year. Plans to introduce e-scooters in metropolitan areas are also underway. We’re also proud to report that in an effort to invest to create devotion, we have resumed “Pizza Academy– Pizza making trial lessons” for the first time in two years. Through the lessons participants are able to create their own customised pizza – and have a joyful experience. 67 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 JA PA N F R A N C H I S E E S P OTLI G HT HIKARU OSHIMA Domino’s at Kitanagoya Takadaji, Kogane Dori, Honjin Ekimae 2015 Became fulltime 2011 Joined Domino’s Japan as crew member 2020 Increased sales by 15% to 14 million yen at Kitanagoya Takadaji store, became franchisee 2021 Opened second store 2022 Won DPI Gold Franny Hikaru’s Story Japanese franchisee Hikaru Oshima is making a big mark on a small delivery territory. “The store I opened last year at Kogane Dore now makes all deliveries by eBikes and it’s made a huge impact,” she said. “The move has reduced carbon dioxide emissions by 128 kilograms every month, improved delivery efficiency and also reduced delivery cost because there is no need for petrol. “Across all my stores we also commit to delivering all orders within 20 minutes, which results in good NPS scores and many repeat customers.” And when customers are happy, it can only mean one thing – the team members behind their experience are happy too. “For me, the most important Domino’s values are to be generous and provide joyful experiences,” Hikaru said. “I want care and compassion to be the foundation for my stores,” she said. “That includes compassion towards everyone, whether it be people in the local community, the Domino’s team and crew members. “I believe that a store that values, care and compassion is able to maintain a good condition and be positive towards taking on new challenges. “Through engaging with each team member that chooses to work for Domino’s and taking the time to focus on each of them as individuals means I can build stores where everyone can thrive–I want to nurture them to grow as a person.” Hikaru has also removed the role separation between drivers and in-store crew. “This ensures that any team member can cover any position, at any time, which has helped improve store productivity,” she said. It’s these lessons that she plans to take into the future, with plans to expand to four stores. “Each time I expand my store count, I feel that my mindset changes and develops and this helps me to continue to set new goals,” Hikaru said. “I’ve drawn on that belief from the start. I didn’t receive any loan or partners’ support from existing franchisees when I decided to start my own franchisee journey. “Although I was worried about many things such as the possibility of failing or the lack of knowledge and experience, I wanted to take the challenge – to be bold and positive.” 68 HIKARU OSHIMA »I believed that taking on the challenge of growing my franchises would help me grow too – and it has.« 69 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W TAIWAN IN THE PAST THREE FINANCIAL YEARS, PRIOR TO DPE ACQUIRING THE MARKET, DOMINO’S TAIWAN DID NOT EXPAND ITS STORE FOOTPRINT BUT NOW BOASTS 14 NEW STORES AND IN FY23 WE ARE ON TRACK TO BEAT THIS GROWTH. Our grand opening events in FY22 set the scene of what was to come – 5,400 orders in the first nine days of opening – setting us on a path to provide joyful experiences and create devotion in a region obviously eager to consume Domino’s pizzas! We are proud to offer a variety of affordable and quality products to meet customers’ needs and bring people together by creating memorable pizza experiences. We are committed to do the right thing, because it’s the right thing to do, and we’ll continue to strive for higher transaction counts and better performance. In our quest to continue to ensure our pizza brings people closer together, we have provided more special offers for small pizzas and more flavour options for quattro pizzas. And we’re working hard to make those experiences create devotion to our product – and that obviously includes a focus on always improving delivery times. Our stores achieved an average delivery time of 21 minutes, 29 seconds in the past six months, which marks an improvement of 4:16 mins as compared to the pre-acquisition average of 25 minutes 45 seconds for the first eight months of 2022. A move in the right direction! 5,400 orders in the first nine days of opening It’s a good thing, too, that this process is being refined with the Domino’s Pizza Taiwan mobile app now downloaded 700,000 times, with more than 30% of total orders coming from the app. In FY22, a total of 106 stores in Taiwan broke their own records and reported all-time- high sales figures. FY22 is also the first year we joined the global ESG (Environment, Social & Governance) efforts. We now have formulated plans for 2022-2023, and we will start making ESG an integral part of our operation and managing the brand in a sustainable way. April 2022 marked the start of Taiwan’s second major COVID wave. Many stores still face labour shortages as staff members test positive and quarantine at home. Some stores had to close temporarily to undergo comprehensive disinfection before resuming business. In a response to the possible labour shortages caused by the COVID outbreak, we stepped up recruitment efforts: successfully recruiting 29 new full-time members (with a 43% retention rate) and many part-time team members. Given the rise of Omicron cases this year, from April onward delivery experts are required to show proof of three COVID vaccinations to ensure the health and safety of the drivers and customers alike. So far, indoor dining in Taiwan remains open since the restriction was lifted last year. 70 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 71 TA IWA N F R A N C H I S E E S P OTLI G HT MAGGIE JIANG 4 x stores in Banqiao district, 1 x store in Yonghe district 2007 Became Store Manager 2005 Joined Domino’s Taiwan as a pizza maker 2012 Rookie Manager of the Year 2013 Store Manager of the Year 2021 All five of Maggie’s stores receive Sales Ladder Award 2015 Officially a franchisee Maggie’s Story With the backing of a Business Start- up Loan for Young Entrepreneurs, combined with the financial support from her family, Maggie Jiang proudly embarked on her franchisee career first by purchasing stores from existing franchisees, and later, opening her own stores. And that’s just the beginning. She has plans to open up another three stores in the next five years and is focused on assisting her current store managers to follow in her footsteps and become future franchisees. “I encourage my team members to have a growth mindset and try to make this possible by creating a positive work environment and recognising hard work and good performance,” Maggie said. “I set clear sales targets and also encourage all team members to invite their families or friends to join the team, so that they gain a better understanding of the environment and have common topics to talk about.” It’s a value she makes sure to model to everyone she works with. “My biggest achievement at Domino’s so far is to bring about attitude change among my team members by committing to staying involved and engaged,” she said. “Those I can see who have good potential are selected to join the management trainee program. Meanwhile, store managers continuously conduct trainings for new staff to ensure every team member can do their job well.” Maggie names the recruitment of new staff as her biggest challenge for the year ahead. “It is crucial to maintain proper staffing level in the stores as it brings about better and more efficient services for our customers,” she said. “At present there are only between 16 and 18 part-time and full-time team members in each store, and my aim is to increase the total number to at least 20 to 25.” In the meantime, she’s meeting demand and maintaining customer satisfaction by using scooter rental services to help ease the pressure, particularly during peak order hours and holidays. “We also rely on a contact list of backup team members that is maintained to facilitate coordination during peak days. It’s in those busy times that it is most important to foster a positive attitude among the team.” 72 »My teams know the importance of good quality food and service, delivered with exceptional hustle!« 73 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 A N Z I N N OVATI O N R E P O RT ANZ David Burness, CEO ANZ since 2021 74 Food Innovation In another year of upheaval, we focused on feel-good foodie vibes and in November 2021, Australia and New Zealand launched the Cheese Toastie Crust – a delicious combination of pizza and everyone’s childhood favourite, the cheese toastie! The indulgent new crust offered customers an oozy slice of heaven, with their favourite pizza now finished with Aussie or New Zealand Cheddar right to the edge of the crust. The product launched accompanied by a ‘cheesy’ love song duet, Cheese Toastie Love, and customers were invited to enter a competition telling Domino’s why Cheese Toastie Love was the perfect tune for their first wedding dance, with the winner receiving their wedding catered by Domino’s. The launch of Domino’s Vanilla Puff Rolls as an 8-week limited time only offering was a major hit with Aussies and Kiwis alike and resulted in the product selling out within four weeks of launch (February 2022) in New Zealand. Featuring deliciously sweet, creamy vanilla custard, wrapped in layers of crispy, flaky puff pastry, topped with a dusting of icing sugar, Domino’s Vanilla Puff Rolls were the perfect addition (and ending) to any pizza meal. The Pepperoni Puff Roll featuring diced Pepperoni, Mozzarella Cheese and tasty Marinara sauce was equally as satisfying. In October, Domino’s Australia released a limited-edition Cheesy Vegemite Pizza, featuring the famous/infamous Australian spread on the base of a Classic Crust topped with creamy Mozzarella Cheese. The release of this product followed a video created by the Domino’s Social Media Team to ‘test’ the idea of a Vegemite Pizza being shared on the Domino’s Australia social media channels, which resulted in thousands of comments. For those with a sweet tooth, Domino’s Australia launched a Red Velvet Thickshake for Halloween, which was a limited time only product and reinvigorated the Company’s thickshake range. The thickshake was made with Red Velvet Cake Syrup and creamy ice cream and topped with whipped cream. And a few months later, launching in time for Valentine’s Day, Domino’s was ‘shaking’ things up again in February 2022 with the new Domino’s Choc Brownie Thickshake, a combination of Domino’s Hot Choc Fudge Brownies blended with creamy vanilla ice-cream and topped with whipped cream. Domino’s Japan chose savoury over sweet for their Halloween campaign, launching the Halloween Quattro – four different levels of sauce and spice on each pizza quadrant featuring Level 1: Garlic Master: sausage and pancetta with black pepper and double garlic for a mildly spicy kick; Level 2: Spicy Chili Garlic Pepperoni: a hot combination of chili garlic powder and pepperoni; Level 3: Buffalo Wing Sauce & Garlic: Two hot spicy sauces and buffalo wing sauces; and Level 4: Jalapeno & Ghost Pepper featuring plenty of jalapeno and ghost pepper oil to turn the spice up to the max! In a customer survey conducted in February 2022, 12% of Domino’s Japan customers responded that they don’t eat the crust – so we launched “Cheese Burst” in March 2022, where string cheese is placed on the crust and parmesan consommé is sprinkled so that customers could enjoy pizza from the crust. A true joyful experience! Always leading in culinary innovation, Domino’s Japan delivered a wide variety of new flavour combinations including the Summer Favorite Quattro with butter chicken curry, crispy fish and chips (with fresh lemon slice), crispy chicken and honey mustard, and 5 seafood ahijo (garlic), the TSUKIMI Quattro Pizza with Creamy Egg & 4 Mushrooms, Creamy Egg Genovese, Creamy Egg & Bacon, and Creamy Egg & Chicken Teriyaki and they relaunched the World Cheese Quattro – this time with nine premium cheeses from around the world all on one pizza. The Secret Menu ‘Overflow Series’ offered additional toppings of corn, smoky bacon, Italian sausage, pancetta, sliced sausage, and garlic, together with Domino’s original chopsticks. The Christmas Premium Quattro pizza served up four different flavors of Bincho-tan Char-roast Beef, Smoked Chicken & Basil Sauce, Italian Juicy Roast Pork, Shrimp and Scallop with Blue Crab Sauce, and in February of 2022 the ‘Best 34’ was created – named for the 18” pizza covered with 34 different toppings all split up into four quarters, so that the pizza is “balanced to perfection” in taste. Following on from Japan’s success with Pizza Rice Bowls – Domino’s original take on the rice bowl, with rice covered in classic topping combos – two new flavours were introduced in September 2021. The ‘Seafood Special’ and ‘5 Cheese’ were added to the Pizza Rice Bowl menu, alongside favourites such as the ‘Domino’s Deluxe’ and the ‘Garlic Master’. Finally, in April, Japan’s local harvest menu was launched, offering seasonal fresh ingredients from all over the country called Sanchoku Domino’s. Designed to run all year round, the first offering is “Japan Harvest Quattro Spring” – a pizza topped with locally sourced baby sardines, Sakura shrimp sauce, char- gilled premium Kurobuta, canola flower, and Hokkaido cheeses. 75 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Digital Innovation In FY22, Domino’s started to roll- out the new Domino’s app, which is being delivered in progressive stages to ensure it delivers benefits for customers beyond the existing app, which has been well regarded by some of our most frequent customers. The new app offers an experience that’s faster and easier for the customer and provides money- saving special offers. To accompany the launch, customers will also be offered a free pizza with their next order when they use the new app for the first time. To continue to build on year-on- year growth in store openings and the solid foundations of existing operations, we are committed to ensuring our team members have the chance to grow and take on new challenges and opportunities and Domino’s Path to Excellence is the new online training platform for Domino’s team members. Path to Excellence is a world of personal growth and professional development, delivered to the palm of team members hands’, via the Path to Excellence app. This is going to change the way we onboard and train team members, making sure every single employee has a rewarding Domino’s experience, and is able to see just how far a career at Domino’s can take them. Path to Excellence, which builds on the concepts proven by the successful and long-standing Mammoth training platform from Domino’s Japan, will be launched in all DPE markets. It is a true example of Domino’s operational excellence being enabled by digital innovation. In Japan, critical investments have been made to build foundational technologies, experiences, and user-interfaces, that have been integrated with smart global platforms that support current and next growth phase. Technology Group – Japan IT – continues to focus on removing legacy systems, removing technical debts by aligning to security and compliance, reducing IT cost of ownership, and enhancing business capabilities. Highlights in FY2022 include the simplification of all store servers by diminishing the legacy configuration lingering from DPE pre-acquisition days. This enabled higher server performance and minimised server issues which enhance store efficiency. Domino’s Japan also implemented security software and MFA (multi- factor authentication) to all required device endpoints and a new security patch process is also in place. This helped to reduce new store IT costs and enabled more store capabilities at the same time such as Wi-Fi, wireless order tablets, remote-accessible security cameras, and more. Pulse Inventory Mobile Application was also implemented in October 2021 nationwide as a first step to remove paperwork from stores to boost efficiency. While we keep working to ensure we offer the best experience of Domino’s product and brand on our native app and website, we’ve proactively worked to reach new customers through new experiences and platforms. From partner platforms like food aggregators to highly engaging social media platforms like Tik Tok where we connect with new generations of consumers. Domino’s Japan completed the first rollout of the Critizr platform integration, for smarter and scalable customer feedback management. With the launch of the first phase of our Critizr integration with the web platform and Customer center in Japan we bring a leap in speed, quality, and scale to our ability to listen to customer feedback, process it, and learn from it and respond in a timely manner. Japan also launched its new App first promotion layer, combining cross channel marketing with innovative incentives for our stores, which led to a new record percentage of App sales this year – more than 20% of total app sales in their record week. Domino’s is always looking for ways to innovate to ensure our stores are operating at the highest level possible, in turn providing our customers with a great experience. In Australia in March 2022, the Company announced a partnership with Macquarie Telecom to roll out nbn, VolP and SD-WAN services to more than 720 Domino’s stores across the country. This new partnership allows the Company to ensure our customers have fast and reliable access to Domino’s various applications, that our franchisees and stores are supported for new innovations, and that we provide sufficient capacity for Domino’s to continue on the Company’s technology roadmap, further improving experiences for customers and our store teams. In New Zealand, we’re looking to see how far we can take pizza – from the sky! We’re proud to announce we signed an agreement with Flirtey Inc. (SkyDrop) to expand our drone food delivery trials in New Zealand this year. Due to increases in the number of deliveries we are currently seeing across our stores in New Zealand, we see a need to introduce a new method to our delivery systems. To be clear, we do not see drone delivery as a replacement delivery method. This is in addition to our traditional delivery methods. Since the initial trial in 2016, SkyDrop has been focused on the development of faster, safer, quieter, and greener drones capable of carrying increased payloads of up to 3.5kg. Now, we are back to see what is possible in 2022 and make history with the agreement to conduct a drone delivery trial with new and improved drones. The outcome of this commercial trial will guide what happens in the future. As we focus on the next phase of trials, we will be examining its commercial viability and investigating any other improvements that need to be made. Domino’s and SkyDrop expect to start drone delivery trials later this year. 76 Operational Excellence Project Ignite powered new stores across Australia and New Zealand. In Australia, 19 new stores opened with the support of Project Ignite. However, across the country the total number of managers becoming franchisees (through purchasing previously corporate stores) or expanding their businesses by acquiring existing stores, was also ignited. In New Zealand we had two store managers, and one franchisee, pass through the Ignite program this year, incentivised to open brand new stores in Thames, Tawa and Golflands helping to increase New Zealand’s store count to 144. It is through this investment in helping our people grow and prosper, and growing our local presence, we believe we can give customers a better experience and Domino’s a fortressed presence in the New Zealand QSR industry. Further to this, the appetite for expansion has definitely been on display in Australia. In the first half of FY22 alone, 58 franchisees expanded their business, and of those, 25 expanded by two stores or more. Recruitment has featured heavily as a cornerstone to support continued operational excellence, with both Australia and New Zealand focusing on growing our teams. Ahead of the festive season in 2021, Domino’s New Zealand set out to hire more than 1,500 people to help make, bake, and take safe, hot meals during our busiest period of the year. With a wide variety of roles that could suit anyone from a student looking for a part time job to those who may be looking for a longer- term career in the food industry, we offered Kiwis the ultimate ‘pepperoni on top of the pizza’ opportunity, giving one lucky person who was hired a year’s supply of pizza and a Nintendo Switch. The same perk was offered in Australia, when in November 2021, the company launched a national recruitment drive, calling out for more than 7,000 team members to fill roles across the country, and help us deliver Hot & Fresh pizzas to our customers. Domino’s Australia continued to offer Zero Contact Delivery throughout the lockdowns across the country, ensuring everyone could still enjoy a slice of their favourite pizza. As the country emerged into the new normal, Zero Contact Delivery was then offered as an option to customers who were isolating, allowing Domino’s to keep our team members and customers safe. In the second half of the year, the Company revised the current food safety program to align with the FSE (Food Safety Evaluation) program utilised by Domino’s in the United States, allowing for consistency. In New Zealand, the team was proud to launch Hospo Savvy and Team Lead Savvy Courses for all team members to complete as part of their National Certificate of Educational Achievement (NCEA), which is the main national qualification for secondary school students in New Zealand. These courses enable team members to earn NCEA credits towards their formal schooling education, with both courses offering at least 20 credits each. The first course, Hospo Savvy is aimed at team members covering everything from customer service to health and safety. The second course, Team Lead Savvy is aimed at store managers and those in training to be managers. These cover communication skills, problem solving, training along with teamwork learnings. Both courses are free for our team members to complete. Helping to position Domino’s New Zealand as an employer of choice, the launch of these accredited courses help to train and retain more team members across our business by supporting them to grow and prosper and to gain formally recognised education. A true reflection of investment creating devotion. 77 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W AUSTRALIA NOT LONG AFTER THE NEW FINANCIAL YEAR BEGAN, A NUMBER OF STATES AND TERRITORIES IN AUSTRALIA HEADED INTO LENGTHY LOCKDOWNS, WITH HEALTH ORDERS AFFECTING HOW DOMINO’S STORES OPERATED. In some states such as New South Wales, stores were required to move to a click and collect model, close foyers, use EFTPOS only, and enforce restrictions on staff travelling to and from work. While in some states, the first wave peaked with the Delta variant early in the financial year, there was a second wave of COVID in early 2022, with restrictions re-introduced for many states, including mask wearing. During both peaks of the virus, staffing levels were impacted, with many team members required to isolate due to close contact restrictions. These rules and lockdowns lasted several months, and affected staffing of stores, due to positive COVID cases and close contact isolation rules. However, heading into the second half of the financial year, Australia has emerged into a new normal, with stores trading almost as they were pre-COVID. Across the country, dine in has reopened and customers can enter store foyers again. Severe weather events have also affected some Domino’s stores, with the Southeast Queensland and Northern New South Wales floods impacting a number of stores, whether it be due to stock being unable to be delivered to stores due to flooded roads, or stores themselves being flooded as a result of the weather. However, the supply chain issues that impacted much of the QSR industry had a relatively minimal effect on Domino’s Australia’s operations due to our robust supply chain systems that have been supported through our strong partnerships with long-term agreements. Our people are central to our operations and our future, and we were proud to provide more opportunities for team members in FY22, including through a nationwide recruitment drive in November 2021 for more than 7,000 team members. Delivery is key to our future growth, and to show what is possible, we launched an EDT (Estimated Delivery Time) Record Week in February, encouraging stores to beat their average delivery times. This record attempt resulted in one Australian store, Domino’s Chermside, achieving an EDT of 7:04 minutes, the fastest time globally out of all Domino’s markets during this week, (not just DPE), which was an incredible achievement. 19 new Domino’s stores are now operating in Australia with a number of new store openings projected to occur early in FY23. In June 2022, Domino’s was awarded Corporate Philanthropist of the Year by the Queensland Community Foundation. Domino’s was recognised for our Round Up for Charity initiative, which allows customers to round up their pizza order to support 78 This year, the Company has continued to provide pizza with a purpose, holding a Doughraiser across Queensland, New South Wales and Australian Capital Territory stores following the devastating February 2022 floods. Donating $1 from every pizza sold, the Company, together with its franchisees, team members and generous customers, raised $150,000 for GIVIT’s Flood Appeal. Domino’s stores have also donated a record number of pizzas through the Company’s Feed the Knead program, ensuring those doing it tough have one less thing to think about – a safe, hot meal. More than 50,000 pizzas have been donated to Australian causes and community members in need through the program. Domino’s registered charity Give for Good and its charity partners, the Workplace Giving efforts across the Company, and additional donations to Give for Good’s partners. The past year has been one of growth for our Give for Good charity, welcoming a General Manager, Bronwyn Spencer, a new Chair of the Board, Helen Poropat, and for the first time, a Domino’s franchisee, Chad Cable, in the role of Executive Director. »More than 50,000 pizzas have been donated to Australian causes and community members in need...« Additionally, Give for Good has partnered with a range of new charities to support the communities in which Domino’s operates across the country (in addition to existing partnerships) and these charities all support one or more of Give for Good’s key focus areas of Youth and Education, Leadership and Entrepreneurship, Disaster Relief, and Rural Communities. 79 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 AU STR A LI A F R A N C H I S E E S P OTLI G HT MADDIE MCMILLAN AND TEGAN EAYRS Domino’s at Ferny Grove, Samford, Arana Hills, Kallangur, North Lakes, Redcliffe 2018 Tegan’s franchisee journey begins with Domino’s Redcliffe 2015 Maddie and Tegan meet at Domino’s North Lakes 2022 Presented on stage at the Domino’s ANZ Rally and continued growth with takeover of Ferny Grove store in June 2021 Expansion time: Maddie and Tegan expand (along with franchisee Steven Gilbert) and buy Kallangur, Arana Hills, and Samford 2019 Maddie franchisee journey begins with Domino’s North Lakes 2020 Domino’s North Lakes wins the Rolex Challenge Maddison and Tegan’s Story Maddie McMillan and Tegan Eayrs live out the mantra of ‘There’s no I in team’ every single day, and when asked what the most important Domino’s value is to them, they unanimously answer, ‘To help people grow and prosper’. “Without our people, I wouldn’t be where I am today and I want to create opportunities and learnings for everyone, whether it be for an instore, driver, shift runner, manager or a business partner,” Maddie said. “I don’t want staff to feel like they can’t grow in our business, personally or professionally. I want all staff to feel like their life has been enriched by their time at Domino’s, whether they are with us for a long time or it’s their first job.” Fellow franchisee Tegan Eayrs agrees. “By investing in my people through consistent training and support I have taken them on my journey with me over the years. My current Rookie Manager of the Year was originally a 14-year-old team member, and now he is the Store Manager of a successful Domino’s store,” she said. “Before expanding in December to buy Arana Hills and Samford, we had prepared ourselves by investing and ensuring all three of our stores had two trained Store Managers available.” The pair started their franchising as business partners with experienced franchisees, with Tegan and Maddie working as business partners with Steven Gilbert. As multi-unit franchisees, both Maddison and Tegan have taken themselves and each other on a powerful trajectory since starting out as a wobble boarder and delivery expert, respectively. “I was managing for Steven ‘Gilly’ Gilbert when he approached me to become a Business Partner and at first, I wasn’t interested because I wasn’t confident in my abilities,” Maddie said. “However, in time that changed and the next time the opportunity to take the step was offered to me, I said 80 »It takes a team of motivated and passionate people to run a successful Domino’s store, and we need to keep investing in our people in order to grow.« yes and haven’t looked back since! “Increasing Domino’s North Lakes sales by 300% and achieving a record number of sales for the store is something I’m proud of. “Additionally, training Domino’s North Lakes Store Managers Calia and Jordan and having the opportunity to now watch them create and build their own teams is something that’s made me professionally happy.” Tegan Eayrs worked her way through a number of roles including Store Manager and Regional Manager before partnering with Gilly also. Between 2020 and 2021, she grew the Redcliffe store by 200% compared to its first week when she was the Store Manager, achieved a record week in sales and won a prestigious Rolex award in the process. Together, the franchisees have introduced outdoor dispatch, set bonuses for managers to hit their EDT goals, and introduced more e-bikes in more stores. “We’re currently looking at other ways to reduce our cost per delivery. For example, this includes changing delivery area, reallocating areas to one of our neighbouring stores, and using more company cars and e-bikes,” Maddie said. Tegan said in addition, they have placed small “Domino’s Delivers Here” on lawns across their delivery areas in areas data showed received fewer delivery orders, in order to grow sales. “Aside from the basics, we also hold four ‘Doughraisers’ each year, place promotional material on the pizza boxes going out to customers, and support local groups by handing out sports awards,” she said. “I’m committed to giving back to our local community and one of the most successful initiatives I’m proud of is donating 5,000 sports awards each year to help give back to the community and grow brand awareness.” 81 THE LISMORE EXPERIENCE WITH THE LISMORE BUSINESS DISTRICT, INCLUDING THE LOCAL DOMINO’S STORE, DEVASTATED BY FLOODS IN THE FIRST HALF OF 2022, DOMINO’S ACCELERATED A RETURN TO NORMAL WITH THE COUNTRY’S VERY FIRST “MOBILE PIZZA KITCHEN” ROLLING INTO TOWN. A cross-department team from Domino’s Australia/New Zealand developed the very first Mobile Pizza Kitchen, a fully-fledged Domino’s store on wheels, in FY22. It’s designed to fill a need for a Domino’s store, where a full store may not be feasible. The first Mobile Pizza Kitchen, built in Queensland, started serving hot & fresh pizzas to customers in Lismore on Saturday 2 July. The unique store is operated by Domino’s franchisee Oryssa Van Keuk, who grew up in the area. “I’ve been a Domino’s franchisee for more than 18 months now, and recently became the proud owner of Domino’s Goonellabah. “I grew up in the Northern Rivers region in Mullumbimby, so it’s been special to return home to my local area to operate the Domino’s store in Goonellabah, and now the Mobile Pizza Kitchen in Lismore,” she said. “After a difficult couple of months for many in Lismore, I’m excited to bring some good news to the area. Both in the form of pizza – which I know locals have been missing – and also jobs. “I’m looking forward to bringing locals on to help me run our very special Mobile Pizza Kitchen, and training and developing the team.” The Mobile Pizza Kitchen will enable Domino’s to serve even more customers across the country. ANZ CEO David Burness said: “At Domino’s, we believe everyone deserves their favourite food, affordably, including in regional towns across Australia. Through our Mobile Pizza Kitchens, we will be able to deliver great value to even more customers nationwide and we’re particularly excited to be bringing the very first Mobile Pizza Kitchen in the country to Lismore. “The Mobile Pizza Kitchen will also allow us to be closer to our local communities in times of need. For example, during events such as the devastating floods Lismore faced earlier this year, the Mobile Pizza Kitchen will be able to continue providing safe, hot meals to those impacted,” said Mr Burness. “Future Mobile Pizza Kitchens will help us share the love of pizza to even more communities; as a ‘pop-up’ store for festivals and large community events, in regional locations where the local population may not justify a store seven days a week, or even where a suitable permanent site is not yet possible. “We’re excited to be working with our franchisees, using the Mobile Pizza Kitchen, to bring people closer.” 82 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 83 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 Y E A R I N R E V I E W NEW ZEALAND LIKE EVERY DPE MARKET, WE EXPERIENCED COVID-19 RELATED CHALLENGES DUE TO AN INCREASE IN RESTRICTIONS AND MANDATORY LOCKDOWNS. On 17 August 2021, the entire Auckland market entered a five-week lockdown until 21 September 2021, forcing stores to close their doors. All stores in this Auckland market where unable to trade for the duration of the lockdown period. As part of the new COVID ‘traffic light’ system that was introduced by the New Zealand Government in late 2021, businesses had the option to check customers vaccination status. We carefully considered this issue for our team members and customers and determined we would keep dine-in closed, rather than requiring proof of customer vaccination status, until March 2022 when the vaccine pass requirements were lifted. In the interim, we continued following our Zero Contact processes through Red and Orange Levels to ensure the delivery of safe, hot meals to local customers. In March 2022, the COVID-19 Omicron variant peaked causing pressures on our supply chain, temporary staff shortages and even forcing some stores to close or to operate at reduced trading hours. Additionally, the acceleration of the Omicron strain across New Zealand saw us experience major labour shortages within our store development and supply chain – from trade experts to specialist operators, and builders – all due to an increase in COVID-19 cases, isolation periods and delays in testing nationwide. This unfortunately delayed the opening of some Domino’s stores. Throughout the COVID-19 outbreak, the New Zealand Government urged everyone to look after one another and at Domino’s, we wanted to continue to do our bit. That’s why in July 2021 we worked with The Salvation Army to offer a ‘Slice of Kindness’ to more than 2,000 Kiwi families in need, by giving them the gift of a hot meal, safely delivered, and donating more than 10,000 pizzas to those in ‘knead’ via the Feed the Knead program. As conditions have slowly improved with the easing of restrictions, removal of vaccine pass requirements, a drop in positive cases across the country and the announcement international borders will open to all overseas travellers from July 31, 2022, we are taking a step forward and learning to live with the virus. Domino’s New Zealand is proud to have opened four new stores, including DPE’s first container store at Domino’s Tawa (October 2021), plus Domino’s Thames (March 2022), Domino’s Golflands (May 2022) and Domino’s Takanini (June 2022). The reality is living with COVID has been challenging for our franchisees and team members as it has for everyone in our community, so while we have grown our delivery sales, many of our regular Pick-Up occasions, like office luncheons and celebrations, have declined. 84 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 However, despite this, the evolution of Domino’s delivery service is a unique journey, fuelled by innovation, technology, and a commitment to sustainability. In New Zealand, this innovation continues to evolve with the use of electric bikes by Kiwi-owned business UBCO. UBCO’s 2X2 electric bikes have been specially modified to suit Domino’s delivery needs, while helping to reduce carbon emissions and the cost of delivery. They also provide a fun, safe and active way for our team members to deliver pizzas to customers and increase the variety of employment opportunities we can offer to those looking for work. Currently, we have more than 130 electric bikes (50 of which are UBCO branded) in operation across Domino’s New Zealand and we are proud to partner with a locally owned business like UBCO to innovate for the good of the planet (and pizzas)! We’re also continuing the exploration of drone delivery trials with SkyDrop later this calendar year – the next step in developing this important technology. After making history with the world’s first pizza delivery by drone from the Domino’s Whangaparaoa store in Auckland in 2016, we’re excited to partner with SkyDrop again to offer the innovative service to even more Kiwi pizza lovers with new and improved drone technology. Additionally, we also believe drone delivery will be an essential component of our pizza deliveries in the future, and that customers will benefit from the convenience of having Hot & Fresh pizzas delivered with Zero Contact to their homes by battery-powered drones, which also reduces traffic congestion and greenhouse emissions. While it was a tough year, it definitely wasn’t all doom and gloom – we did our bit to keep spirits high where possible. To celebrate the lifting of some restrictions as Auckland moved to Alert Level 3 in September 2021, allowing Domino’s to open and safely deliver after a five-week lockdown, Domino’s stores celebrated this reopening day across Auckland by giving away a free Choc Lava Cake to every customer with every online delivery order. Bringing people closer is Domino’s purpose: We launched Domino’s ‘Pizza Proposal’ delivery service for Valentine’s Day, giving customers the opportunity to pop the question to their loved one in February 2022. And for those looking to go one step further and actually tie the knot, we developed a marketing campaign that encouraged a newly married couple to do their first dance to ‘Cheese Toastie Crust Love’ – the ballad created by David Novak of the Polish Club and up-and-coming musical talent Natalie Conway – at their wedding to have their big day catered by Domino’s! Young couple Richard and Milly won the competition, dancing to the iconic song for their first dance and enjoying slices of their favourite, piping hot Domino’s pizza at their reception. They newlyweds said having their wedding catered by Domino’s was a dream come true, and that it meant there was something for everyone. In FY22 Domino’s New Zealand ran our Youthline Doughraiser in two parts due to Auckland being in lockdown, while the rest of the country was open and trading. Incredibly, Auckland raised a whopping $11,631 in early November taking the total number of funds raised to $36,726 across the country. All funds raised were donated to Youthline to help thousands of young people across the country receive the support they need through Youthline’s phone, text, and email services. 85 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 N E W Z E A L A N D F R A N C H I S E E S P OTLI G HT ALEX WHALE Domino’s at Mangere, Mount Eden, Newmarket, St Heliers, Papakura, Onehunga, Te Rapa, Takanini, Taupo and Te Atatu South. (Business partner with Brandon and Kushla Brooking) 2015 Became Store Manager of Nawton in Hamilton while studying full time at university. 2013 Started with Domino’s as a Delivery Expert; six to eight hours week in final year of high school. 2016 Moved into Training Manger position for a NZ Franchisee, managing stores across Auckland 2017 Moved to Saint Heliers and broke two sales records 2022 Became a franchisee, awarded second Leadership Eagle. 2020 Awarded Leadership Eagle, promoted to Head of Corporate Operations in charge of 17 corporate stores in New Zealand. 2019 Returned to Head Office to run the Mount Eden store, and then became a Training Manager of Franchisees and then Regional Manager. Alex’s Story Alex Whale’s career highlights with Domino’s tells the story of someone with ambition beyond their years. In under a decade, she’s managed to conquer a lifetime of work goals – and she’s only just getting started. “I want to build a network of 20 stores across New Zealand with my business partners, Brandon and Kushla Brooking,” she said. “I’m always aiming to be the best in my business through helping our team members understand that they work with me – not for me. “Providing them with the skills, knowledge, and resources that they need to be able to their jobs is something I pride myself on. We can only do the best with what we have so we need to ensure we always give our team members what they need to achieve the best results.” In fact, ‘results’ is Alex’s middle name. After attending her first Domino’s ANZ Rally in 2016 she came back to her store in Domino’s Nawton to chase lower Estimated Delivery Times (EDT). “The store went from an average EDT of 24 minutes to 21 minutes all by changing the hustle game and calling drivers earlier,” she said. Not long after, Alex moved to the Davies Corner store, growing sales with lower delivery times, which lifted customer satisfaction. Chasing an EDT of below 15 minutes, the store soon lifted customers’ ‘net promoter score’ (NPS) from 45% to more than 50%, which grew sales from $14K a week, to $19K a week within a few months. Her secret? Investing in team members. “You must be willing every day to teach someone something new, and ensure you are providing them with what they need for them to give you what you need,” she said. “The training program and pay for performance scheme has been the easiest culture change in my time in Domino’s. “Now many of my teams have that understanding that there is a future in Domino’s, it’s not just a part time job.” 86 »Many of my teams have the understanding that there is a future in Domino’s, it’s not just a part time job.« 87 DOMINO’S PIZZA ENTERPRISES LTD • ANNUAL REPORT 2022 DIRECTORS’ DIRECTORS’ REPORT REPORT Group Highlights FY21 UNDERLYING $ MIL FY22 UNDERLYING1 $ MIL +/(-) FY21 UNDERLYING % FY22 STATUTORY $ MIL Network Sales 3,744.4 3,918.0 Revenue EBITDA Depreciation & Amortisation EBIT EBIT Margin Interest NPBT Tax Expense NPAT before Minority Interest Minority Interest NPAT PERFORMANCE INDICATORS 2,199.1 423.7 (130.0) 293.7 13.4% (13.8) 2,289.3 396.5 (133.6) 262.9 11.5% (13.5) 4.6% 4.1% (6.4%) (2.8%) (10.5%) 2.2% 3,918.0 2,289.3 387.7 (133.6) 254.1 11.1% (13.5) 279.9 249.4 (10.9%) 240.6 (81.8) 198.1 (9.5) 188.6 (76.4) 173.0 (8.0) 165.0 6.6% (12.7%) 15.6% (12.5%) (73.9) 166.7 (8.0) 158.7 EPS (basic) 218.1 cps 190.6 cps (12.6%) 183.4 cps Dividend per Share 173.5 cps 156.5 cps (9.8%) 156.5 cps Same Store Sales % 9.3% -0.3% -0.3% 1 Underlying excludes significant acquisition and legal settlement costs. DIRECTORS’ DIRECTORS’ REPORT REPORT Contents Directors’ Report Remuneration Report Independent Auditor’s Report Auditor’s Independence Declaration Directors’ Declaration Consolidated Statement of Profit Or Loss Consolidated Statement of Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Change In Equity Consolidated Statement of Cash Flow Notes to the Financial Statements Additional Securities Exchange Information Glossary Corporate directory 91 101 131 130 131 135 136 137 138 139 140 215 217 218 90 // 202 2 ANN UA L REPO RT DO M I NO’S PIZZA ENTER PRISES LIMIT ED. 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 03 July 2022. 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 Grant Bourke Lynda O’Grady Ursula Schreiber Doreen Huber Tony Peake Don Meij Ross Adler POSITION Non-Executive Director Appointed 20 March 2014 Independent Non-Executive Director Appointed 24 August 2001 Independent Non-Executive Director Appointed 16 April 2015 Independent Non-Executive Director Appointed 30 November 2018 Independent Non-Executive Director Appointed 21 February 2020 Independent Non-Executive Director Appointed 14 May 2021 Managing Director/Group Chief Executive Officer Appointed 24 August 2001 Independent Non-Executive Director Appointed 23 March 2005 Resigned 03 November 2021 DIRECTORSHIPS OF OTHER LISTED COMPANIES Lynda O’Grady was appointed a director of Wagners Holding Company Limited on 08 November 2017 and was appointed a director of Rubicon Water Limited which was admitted to the Official List of the ASX on 31 August 2021. Doreen Huber was appointed a non-executive director of Ceconomy AG on 09 February 2022. There were no other directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year. DIRECTORS’ SHAREHOLDINGS The following table sets out each director’s relevant interest in shares, debentures, and rights or options in shares or debentures of the Company as at the date of this report. DIRECTORS Jack Cowin Grant Bourke Lynda O’Grady Ursula Schreiber Doreen Huber Tony Peake Don Meij FULLY PAID ORDINARY SHARES NUMBER SHARE OPTIONS NUMBER CONVERTIBLE NOTES NUMBER DOMINO’S PIZZA ENTERPRISES LIMITED 23,066,390 1,628,344 2,000 1,500 1,450 1,400 – – – – – – 1,800,001 772,869 – – – – – – – 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 101 to 125. SHARE OPTIONS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT During and since the end of the financial year, an aggregate 230,047 share options were granted to the following directors and senior management of the Company as part of their remuneration. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 91 Directors’ Report continued INFORMATION ABOUT THE DIRECTORS AND SENIOR MANAGEMENT (continued) DIRECTORS AND SENIOR MANAGEMENT NUMBER OF OPTIONS GRANTED ISSUING ENTITY NUMBER OF ORDINARY SHARES UNDER OPTION Don Meij Richard Coney Josh Kilimnik Nick Knight (i) Andre ten Wolde Michael Gillespie 98,932 32,953 34,077 572 31,836 31,677 DPE Limited DPE Limited DPE Limited DPE Limited DPE Limited DPE Limited 552,869 113,865 134,103 – 91,166 105,393 (i) Nick Knight retired and ceased meeting the definition of KMP on 28 September 2021. COMPANY SECRETARY Craig Ryan: General Counsel & Company Secretary 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 23 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 8 to 11. EXPLANATION OF STATUTORY PROFIT TO UNDERLYING PROFIT Statutory profit after tax is prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards, which comply with International Financial Reporting Standards (IFRS). Statutory profit after tax of $166.7 million includes a loss of $6.3 million after tax treated as significant items. Excluding these items, the Underlying Profit after tax was $173.0 million, 12.7% down on the prior corresponding period. Underlying profit after tax is reported to give information to shareholders that provides a greater understanding of the performance of the Company’s operations. DPE believes Underlying Profit after tax is useful as it removes significant items thereby facilitating a more representative comparison of financial performance between financial periods. Underlying Profit is a non-IFRS measure which is not subject to audit or review. 92 // 2 022 ANNUA L R E PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. Directors’ Report continued REVIEW OF OPERATIONS (continued) The below provides a reconciliation of Statutory Profit to Underlying Profit including earnings before interest and tax (EBIT), and earnings before interest, tax, depreciation and amortisation (EBITDA): FOR THE YEAR ENDED 03 JULY 2022 STATUTORY $’000 2,289,268 SIGNIFICANT ITEMS $’000 UNDERLYING $’000 ANZ $’000 EUROPE $’000 ASIA $’000 UNALLOCATED $’000 – 2,289,268 782,469 704,163 802,636 – 387,725 (8,803) 396,528 156,594 120,201 140,483 (20,750) Revenue EBITDA Depreciation & amortisation (133,632) – (133,632) (35,403) (41,356) (55,507) EBIT 254,093 (8,803) 262,896 121,191 78,845 84,976 (1,366) (22,116) Net finance costs (13,469) – (13,469) Net profit before tax 240,624 (8,803) 249,427 Income tax expense (73,892) 2,544 (76,436) Net profit after tax 166,732 (6,259) 172,991 Profit attributed to: Owners of the parent 158,716 (6,259) 164,975 Non-controlling interest 8,016 – 8,016 166,732 (6,259) 172,991 YEAR ENDED 27 JUNE 2021 RESTATED 1 STATUTORY $’000 SIGNIFICANT ITEMS $’000 UNDERLYING $’000 ANZ $’000 EUROPE $’000 ASIA $’000 UNALLOCATED $’000 Revenue EBITDA 2,199,106 – 2,199,106 756,581 665,125 417,396 (6,307) 423,703 155,861 127,506 777,400 163,024 Depreciation & amortisation (130,018) – (130,018) (37,987) (38,963) (52,487) – (22,688) (581) (6,307) 293,685 117,874 88,543 110,537 (23,269) EBIT Net finance costs Net profit before tax Income tax expense Net profit after tax Profit attributable to: Owners of the parent Non-controlling interest 287,378 (13,769) 273,609 (79,961) 193,648 184,477 9,171 – (6,307) 1,837 (4,470) (4,141) (329) (13,769) 279,916 (81,798) 198,118 188,618 9,500 198,118 193,648 (4,470) 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decisions, refer to note 35. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 93 Directors’ Report continued REVIEW OF OPERATIONS (continued) SIGNIFICANT ITEMS Significant items in the current and comparative periods include external legal costs that relates to discrete matters and cost relating to structural changes in the business. Statutory profit before tax was $240.6 million, this included the following significant costs excluded from Underlying Profit after tax as outlined below: CURRENT PERIOD • External costs of $3.5 million pertaining to the Fast Food Industry Award class action. • External costs of $1.4 million incurred in relation to the acquisition of Domino’s Taiwan. • External costs of $1.8 million incurred in relation to acquisition of Domino’s Pizza businesses in Malaysia, Singapore and Cambodia and other investigatory diligence costs. • External costs of $2.1 million related to litigation costs pertaining to Pizza Sprint and Speed Rabbit Pizza. PRIOR PERIOD • External costs of $1.7 million pertaining to the Fast Food Industry Award class action. • External costs of $0.7 million incurred in relation to the acquisition of Domino’s Taiwan. • Write-down of inventories relating to personal protective equipment to net realisable value of $3.1 million. • Integration costs of $0.8 million relating to Denmark. CHANGES IN STATE OF AFFAIRS There have 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 30. 94 // 2022 ANNUAL REPO RT DO M IN O’S PIZZA ENTERPR IS ES LIMITED. Directors’ Report continued REVIEW OF OPERATIONS (continued) ENVIRONMENTAL AND SOCIAL SUSTAINABILITY RISKS The Group is currently not subject to any significant environmental and social sustainability risks that have an immediate impact on its operations. However, the directors understand the Group operates in a rapidly changing global landscape with increasing demands from its stakeholders regarding environmental and social responsibility, risk management and associated reporting. In response, last year the Group released its first Sustainability Report, with the aim of communicating to shareholders in a transparent manner its activities to address its environmental, social and governance efforts with this year’s Sustainability Report we will start reporting with reference the GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board) framework, which are broadly accepted existing ESG reporting frameworks. The report will outline the meaningful progress which has been undertaken, particularly regarding the Group’s environmental strategy. An ESG update has been provided in the Annual Report and the 2022 Sustainability Report is anticipated to be released before the end of calendar year 2022. To the best of the directors’ knowledge, the Group complies with its current obligations under environmental regulations and holds all licenses required to undertake its business activities. CORPORATE GOVERNANCE A copy of Domino’s Pizza Enterprises full 2022 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 03 July 2022, an interim dividend of 88.4 cents per share franked to 70% at 30% corporate income tax rate was paid to the holders of fully paid ordinary shares on 17 March 2022. The Company will be paying a final dividend of 68.1 cents per share franked to 70% at 30% corporate income tax rate to the holders of fully paid ordinary shares on 15 September 2022. 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 OPTIONS 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 DPE Limited DPE Limited 32 33 34 35 36 37 38 39 40 41 42 43 44 33,250 297,000 145,878 265,345 2,378 3,038 156,937 590,496 1,420 2,966 95,975 12,056 454,780 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary $51.96 $50.25 $50.25 $50.25 Nil Nil $84.28 $84.28 Nil Nil $127.09 Nil $69.58 31 Aug 22 01 Sep 23 26 Nov 23 01 Sep 23 20 Aug 29 18 Aug 30 01 Sep 24 01 Sep 24 07 Jun 31 28 May 31 31 Aug 25 31 Oct 31 31 Aug 25 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRIS ES LIMITED. // 9 5 Directors’ Report continued REVIEW OF OPERATIONS (continued) 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 NUMBER OF SHARES UNDER OPTION CLASS OF SHARES AMOUNT PER SHARE DPE Limited DPE Limited DPE Limited DPE Limited 29 32 36 37 10,325 15,750 3,872 602 Ordinary Ordinary Ordinary Ordinary $5.88 $3.98 $42.47 $81.37 AMOUNT UNPAID ON SHARES $nil $nil $nil $nil INDEMNIFICATION OF OFFICERS AND AUDITORS The Company has entered into deeds of indemnity, insurance and access with each director. To the extent permitted by law and subject to the restrictions in s.199A of the Corporations Act 2001, the Company must continuously indemnify each director against liability (including liability for costs and expenses) for an act or omission in the capacity of director. However, this does not apply in respect of any of the following: • a liability to the Company or a related body corporate; • a liability to some other person that arises from conduct involving a lack of good faith; • a liability for costs and expenses incurred by the director in defending civil or criminal proceedings in which 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 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 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. 96 // 2022 ANNUA L REPO RT DO M IN O’S PIZZA EN TER PRISES LIMIT ED. Directors’ Report continued REVIEW OF OPERATIONS (continued) 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, nine (9) Board meetings, nine (9) Nomination, Culture and Remuneration Committee meetings and five (5) Audit and Risk Committee meetings were held. BOARD OF DIRECTORS NOMINATION, CULTURE AND REMUNERATION COMMITTEE AUDIT AND RISK COMMITTEE HELD ATTENDED HELD ATTENDED HELD ATTENDED 9 9 9 9 9 9 9 3 9 9 9 9 8 9 9 3 – 9 9 9 5 5 – 4 – 9 8 9 3 5 – 3 – 5 5 5 – 5 – 2 – 5 5 5 – 5 – 2 Jack Cowin Grant Bourke Lynda O’Grady Ursula Schreiber Doreen Huber Tony Peake Don Meij Ross Adler DPE directors have been on the boards of Domino’s Pizza Japan and Domino’s Pizza Germany since DPE started operating in those markets. DPE also has more informal “Advisory Boards” for Australia/New Zealand, Benelux/Denmark and France. At least two of the DPE directors sit on each of the five boards. The boards meet on a quarterly basis. The meetings are mutually beneficial, providing DPE directors with a better understanding of local management and business issues, while also allowing DPE directors the opportunity to provide guidance to local management more directly. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 97 Directors’ Report continued REVIEW OF OPERATIONS (continued) It is proposed to rotate the DPE directors onto different advisory boards every two years so that: (a) DPE directors receive in-depth exposure to different parts of the group over time; and (b) local management receive the benefit of engagement with different DPE Board Members. 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 34 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 34 to the financial statements do not compromise the external auditor’s independence, based on the advice received from the Audit and Risk 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 130 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. 98 // 2022 ANNUA L R E PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. Directors’ Report continued LETTER FROM THE CHAIR OF THE NOMINATION, CULTURE AND REMUNERATION COMMITTEE Dear fellow Shareholders, I am pleased to present the remuneration report for FY22. This remuneration report sets out remuneration information for the Managing Director/Group CEO, Non-Executive Directors and identified senior executives. The report describes the remuneration framework and pay outcomes for FY22 and introduces a new set of principles that will help the Nomination, Culture and Remuneration Committee (NCRC) shape the framework for FY23 and beyond. Domino’s Pizza Enterprises Limited (DPE) is a geographically diverse business with a long history of innovation and growth. We are operating in an international, highly volatile environment. As a result, our approach to remuneration is under review regularly to ensure it remains fit for purpose in a changing and expanding organisation, and in culturally diverse business environments. The Board is deeply committed to ensuring the remuneration frameworks developed for Key Management Personnel (KMP) remain relevant across a growing range of markets, the changing needs and expectations of a long-standing executive group and are aligned with shareholder value creation over the long term. This year, Tony Peake and I met with a number of investors and proxy advisors to obtain feedback on the remuneration framework as well as the company as a whole. These annual sessions are valuable in increasing transparency, and providing us with the opportunity to test new ideas with investors and proxy-advisors. Thank you to all who participated in these sessions. FY22 REMUNERATION OUTCOMES In FY22 fixed remuneration increases were based on a combination of benchmarking data, role changes and changes in the market. The Managing Director/Group CEO received a 2.5% increase in his fixed remuneration. We undertook a comprehensive benchmarking exercise for our senior executive KMP and made changes to the composition of these packages where warranted. We also introduced net-settled options for all executive KMP and moved to greater equity in our Short-term Incentive arrangements. As a result, The Managing Director/Group CEO is on an all equity Short-term Incentive (STI) with other executives on a combination of cash and equity. Short-term Incentive results for our senior executive KMP for FY22 averaged 28.2% of bonus opportunity, with the Managing Director/Group CEO receiving 23.2% of his bonus opportunity. Details of the Long-term Incentive outcomes are detailed in the report. The NCRC is conscious that the Long-term Incentive payout has been low or nil for the majority of executives (with the exception of Japan based employees) for the last few years, particularly relative to the growth of the business over that time. In FY22 the Japan team were the only recipients of the Long-term Incentive in and this related to the Japan EBIT performance conditions being met. No other Long-term Incentive vested. The Board has absolute discretion to adjust the Short-term and Long-term Incentive outcomes, and in FY22 decided not to make any changes. APPLICATION OF DISCRETION DURING THE COVID-19 PANDEMIC We continued to see the effects of COVID-19 on our business in FY22. Lock-downs and absenteeism impacted our business across the world. The Board determined that a formal review of the STI targets would be undertaken after the release of the FY22 H1 results. Following this review the Board decided to keep the targets as previously determined based on the ongoing volatility in the global operating environment. In reviewing the FY22 STI outcomes, the Board decided to apply discretion to the Group Organic New Store Openings target for the Group CEO/Managing Director given how close the result was to the target and given the challenges faced in opening stores during COVID-19 and in an inflationary environment. The Board did not apply discretion to any other targets for KMP. It is important to highlight that the COVID-19 pandemic significantly increased the demands on our executives. During the last two years complexities and workloads have escalated with changing circumstances demanding an agile adjustment to strategic and operational priorities. Our reward structures have not always reflected this challenging environment. On behalf of the Board I would like to thank DPE’s senior executives for their commitment and effort. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRISE S LIM ITED. // 99 Directors’ Report continued LETTER FROM THE CHAIR OF THE NOMINATION, CULTURE AND REMUNERATION COMMITTEE (continued) FY23 REMUNERATION & FOCUS During FY22 the Committee formalised four guiding principles to assist in the review and development of the Company’s remuneration framework. The four principles are: (i) simplicity; (ii) alignment between shareholders and executives; (iii) incentivisation to drive an entrepreneurial culture; and (iv) the need to be globally appropriate. I will provide more detail on these principles in the body of the Remuneration Report. I look forward to sharing how these principles shape changes to the framework over the next twelve months. I would also like to thank you for your support and interest in our Company, and look forward to your attendance at our Annual General Meeting currently planned to be held in November 2022. Uschi Schreiber Chair, Nomination, Culture and Remuneration Committee 100 // 2022 ANNUA L R EPO RT DO M IN O’S PIZZA ENTER PR ISES L IMITED. Directors’ Report continued REMUNERATION REPORT 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 03 July 2022. The prescribed details for each person covered by this report are detailed below under the following headings: • KEY MANAGEMENT PERSONNEL (KMP) INCLUDED IN THIS REPORT • REMUNERATION AT DOMINO’S AT A GLANCE • REMUNERATION GOVERNANCE • EXECUTIVE REMUNERATION POLICY AND STRUCTURE • OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE OFFICER (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 • OVERVIEW OF EXECUTIVE KMP REMUNERATION FRAMEWORK FOR FY22 • REMUNERATION FRAMEWORK CHANGES FOR FY22 • LINK BETWEEN PAY AND PERFORMANCE • REMUNERATION OF EXECUTIVE KMP • CONTRACTS FOR SERVICES OF KMP • NON-EXECUTIVE DIRECTOR REMUNERATION KMP MANAGEMENT PERSONNEL (KMP) INCLUDED IN THIS REPORT The following persons acted as directors of the Company during or since the end of the financial year: NAME Jack Cowin Grant Bourke Lynda O’Grady Ursula Schreiber Doreen Huber Tony Peake Don Meij Ross Adler POSITION Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Managing Director/Group Chief Executive Officer (Group CEO) Non-Executive Deputy Chairman (retired 3 November 2021) The term Executive KMP is used in this report to refer to the following persons, who were considered to be KMP for part or all of the financial year: NAME Don Meij Richard Coney Josh Kilimnik Andre ten Wolde Michael Gillespie Nick Knight POSITION Managing Director/Group Chief Executive Officer (Group CEO) Group Chief Financial Officer Chief Executive Officer APAC (formerly, President and Chief Executive Officer of Japan) Chief Executive Officer Europe Group Chief Digital and Experience Officer Chief Executive Officer ANZ (retired 28 September 2021) On 28 September 2021 Josh Kilimnik was appointed as Asia-Pacific (“APAC”) CEO with the Japan CEO, Taiwan CEO and the ANZ CEO to report directly to the APAC CEO. As a result of the structural change to the reporting lines the ANZ CEO ceases to meet the definition of a KMP; this coincided with the retirement of Nick Knight former ANZ CEO. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 101 Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION AT DOMINO’S AT A GLANCE EXECUTIVE REMUNERATION OBJECTIVES Our executive remuneration structures are designed to support the following 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 Align to shareholder interests through equity components OVERVIEW OF EXECUTIVE REMUNERATION FRAMEWORK Our remuneration framework is designed to attract suitably qualified executives, reward them for the achievement of strategic objectives, and achieve the broader outcome of value creation for shareholders. ELEMENT OF REWARD PURPOSE & PHILOSOPHY LINK TO PERFORMANCE PERFORMANCE MEASURES Fixed remuneration 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 Short-term Incentive (STI) Annual incentive opportunity delivered as a combination of cash and Rights (depending on role) or just Rights that are deferred for two years. • Set with reference to relevant market remuneration data • Set at a level to attract and retain experienced executives in the geographies in which Domino’s operates • Designed to achieve Board approved targets, reflective of the Group’s plan • Considers performance in the role and Domino’s performance based on market capitalisation and revenue • Reflects 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 • Financial measures include EBIT in local currencies, Same Store Sales, Franchise operations EBITDA and Franchisee profitability compared to budget and last year. • Non-financial measures such as Group organic new store openings and delivery of key strategic projects (e.g. introducing ESG science based targets) • LTI targets are linked to either EPS growth, or a combination of EPS growth and EBIT over three years depending on whether the role has Group or segment responsibility Long-term Incentive (LTI) Three year incentive opportunity delivered through options which vest subject to service and performance • Reward executives for • Awards only vest sustainable long-term growth aligned to shareholder value creation on achievement of predetermined targets • Options only provide value to executives where the share price has increased 102 // 2022 ANNUAL RE PORT DOM I NO’S PIZZA EN TERPRIS ES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION AT DOMINO’S AT A GLANCE (continued) FY22 PERFORMANCE AND REMUNERATION OUTCOMES The Managing Director/Group CEO and other Executive KMP received fixed remuneration increases averaging 2.50% during FY22. A number of executives received increases in FY22 that reflected a change in role or increase in responsibility. Where an executive was significantly outside the market competitive ranges, the NCRC determined that it would be appropriate to transition those executives to the new remuneration levels over a number of years. The continued strong performance across the Group during FY22 included positive Network Sales growth of +4.6% and record network expansion of +450 stores (+10.0%). The decline in profits in Asia and Europe on a one-year basis was a result of rolling extraordinary results during the peak of COVID during FY21. Accordingly, STI and LTI achievements were lower than the prior corresponding year. The results of the Short-term Incentive reflected the overall performance of the business and the performance in each market The options granted under our FY19 LTI plan were eligible to vest during FY22. The following vesting applied for each Executive KMP: PROPORTION OF OPTIONS VESTING CAN BE EXERCISED UNTIL EXECUTIVE KMP PERFORMANCE MEASURE RESULT Managing Director/ Group CEO Group EPS percentage growth over the relevant performance period < 12% EPS Growth Group EPS percentage growth over the relevant performance period < 12% EPS Growth ANZ Executives ANZ EBIT Performance < 93% of target 0% 0% Group EPS percentage growth over the relevant performance period < 12% EPS Growth 0% Europe Executives Europe EBIT Performance < 93% of target N/A N/A N/A Group EPS percentage growth over the relevant performance period < 12% EPS Growth 70% 31 August 2022 Japan Executives Japan EBIT Performance > 103% of target The following table outlines actual remuneration received in the year ended 03 July 2022. This table is not the statutory remuneration table (please see section REMUNERATION OF EXECUTIVE KMP): EXECUTIVE KMP Managing Director/Group CEO Group Chief Financial Officer Chief Executive Officer APAC Chief Executive Officer Europe FIXED REMUNERATION (i) $ 1,310,973 592,396 725,034 628,332 STI (ii) $ 815,187 262,818 279,670 279,547 Group Chief Digital and Experience Officer 613,768 255,672 (i) Reflects salaries and superannuation. DEFERRED STI (iii) $ LTI VESTED (iv) $ TOTAL REMUNERATION $ 401,413 129,370 137,243 139,144 125,840 – – 2,527,573 984,584 2,817,640 3,959,587 – – 1,047,023 995,280 (ii) The value of STI paid in cash during the year ended 03 July 2022 which is in relation to the performance targets achieved for FY21. (iii) The value of deferred STI is determined based the number of rights granted during the year ended 03 July 2022, for performance targets achieved for FY21, multiplied by the share price at the date of grant. (iv) LTI vested is determined based on the LTI vested during the year ended 03 July 2022 and is valued based on the intrinsic value being the share price at the first exercise date less the exercise price, then multiplied by the number of options vested. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 103 Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION GOVERNANCE ROLE OF THE NOMINATION, CULTURE AND REMUNERATION COMMITTEE The following chart outlines the key stakeholders in the governance of remuneration at Domino’s: Shareholders and advisory bodies • Includes consultation, engagement at the Annual General Meeting and investor meetings. Board The Board is responsible for: • Approving Domino’s remuneration strategy. • Approving the performance objectives and measures for the Group CEO and providing input into the evaluation of performance against them. The Board has overarching discretion with respect to any awards made under the Company’s incentive plans. Nominations, Culture and Remuneration Committee The NCRC is responsible for: • Making recommendations to the Board on remuneration policies and packages applicable to the Board members and the Group CEO. • Review and approve remuneration packages applicable to other KMPs of the Company. Remuneration consultants • Provide independent advice, information and recommendations relevant to remuneration decisions. Audit and Risk Committee • Supports the NCRC by reviewing figures which form the basis for incentive awards. Management Management are responsible for: • Preparing recommendations on remuneration packages applicable to the other KMPs of the Company. • Obtains remuneration information from external advisors / independent consultants to assist the NCRC. USE OF INDEPENDENT REMUNERATION CONSULTANTS During the year an independent remuneration consultant was engaged by the Nomination, Culture and Remuneration Committee to provide advice and guidance in relation to market practice and Domino’s remuneration matters. The Company made payments totalling $194,783 (2021: $102,330) to the remuneration consultant in relation to the remuneration advice and guidance provided. The Committee considers the advice and forms its own views on all remuneration matters. No remuneration recommendation was sought from or provided by the remuneration consultant. The remuneration consultant is engaged directly to the Committee and is free of any undue influence by Executive KMP/management. OVERARCHING BOARD DISCRETION The Board retains the discretion to alter the treatment of awards to ensure there is appropriate alignment between executive pay outcomes and the performance of the company. That discretionary assessment (and exercise where required) is conducted at the conclusion of each year when incentive outcomes are determined. For example, where an acquisition is anticipated to have a meaningful effect on EPS growth, the board may increase LTI targets accordingly, to ensure these reflect the prudent use of capital. For financial year 2022, the Board considered the impact of the COVID-19 pandemic on the company and its shareholders to determine whether discretion should be exercised in relation to STI outcomes for the year. The Board decided to apply discretion to the Group Organic New Store Opening target given how close the result was to the target and given the challenges faced in opening new stores during COVID-19 and in an inflationary environment. The Board did not apply discretion to any other targets for KMP. 104 // 2 022 AN NUA L RE PO RT DO MI N O’S PIZZA ENTERPR IS ES L IMITED. Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION GOVERNANCE (continued) MALUS AND CLAWBACK The Board retains the discretion to lapse any unvested (or vested but not yet exercised) STI or LTI equity awards if, at the discretion of the Board, a trigger event has occurred (for example, fraud or dishonesty, breach of contractual obligations, serious misconduct or gross negligence, or material reputational damage to the company). The Board also retains the discretion, in the same circumstances outlined above, to clawback equity awards that have been exercised but are held in escrow (where local laws allows). CHANGE OF CONTROL EVENTS The Board retains the discretion to determine the treatment of awards in the event of a change of control. 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. EXECUTIVE REMUNERATION POLICY AND STRUCTURE The performance of the Company depends upon the quality of its Executive KMP including directors and their support teams. To prosper, the Company must attract, motivate and retain highly skilled directors and other Executive 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 Executive 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. This Policy can be described in four key remuneration objectives outlined in the table below: 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 OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 The following remuneration structure applied to the Managing Director/Group CEO for the year ended 03 July 2022. The table also shows the changes for the Managing Director/Group CEO’s remuneration structure in FY22: PERFORMANCE-LINKED REMUNERATION FIXED REMUNERATION SHORT-TERM INCENTIVE LONG-TERM INCENTIVE $1,291,000 per annum, inclusive of base salary and superannuation contributions. This represents an increase of 2.5% from FY21 and was applied after the Board undertook a review in accordance with its annual processes. STI is awarded up to a maximum of $1,800,000, subject to the achievement of KPIs set annually, and approved by the Board. This is an increase of 43% from FY21, based on benchmarking data from our third-party providers and balancing of the total remuneration package. Paid as 100% equity (half held in escrow for 1 year and the remainder held in escrow for 2 years). Options approved by shareholders at the 2021 AGM worth $3,100,000 in total were granted during FY21 (the number of options granted was determined using a Black Scholes option pricing model). The options vest from 2024 subject to achievement of cumulative annual growth in Earnings Per Share hurdles, measured over rolling three-year performance periods. Value is only delivered to the Group CEO where the Domino’s share price increases from grant (the exercise price) in addition to achieving the performance condition. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 105 Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 (continued) BENCHMARKING The NCRC undertakes extensive benchmarking of the Group CEO role on a regular basis. Benchmarking data is received from ASX listed companies, using revenue and market capitalisation, as well as data from Quick Service Restaurant (QSR) comparator groups overseas and within Australia. This data is then pulled together to create a hybrid data set to which the fixed remuneration, Short-term Incentive and Long-term Incentive components as well as the total remuneration package is compared. The pay mix for the Group CEO role is heavily weighted toward at risk remuneration with greater than 79% of the package at risk in FY22. The pay mix is reviewed annually to ensure that it remains competitive and meets the needs of both shareholders and the executive. SHORT-TERM INCENTIVE The Board set the KPIs for the Managing Director/Group CEO during the financial year ended 03 July 2022 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 70% of the total weighting for the Short-term Incentive bonus, based on year on year EBIT performance for the Group. Organic new store openings and strategic projects complete the metric allocation. The specific measures for each KPI include a threshold, target and strong performance levels. These levels are not disclosed because they are commercially sensitive in nature. KPI WEIGHTING MEASURES Financial Performance New Store Growth Strategic Projects 70% 20% 10% • Group EBIT ($) • Group organic new store openings • ESG Target – Introduction of Science Based Targets for the Group • New Global On-Line Ordering Platform deployed FY21 SHORT-TERM INCENTIVE – ACHIEVEMENT – TARGETS VS ACTUAL We provide a look-back approach to actual incentive targets in the interests of transparency. The following table provide target and actual performance for the FY21 period. BELOW THRESHOLD THRESHOLD TARGET STRONG PERFORMANCE SCORECARD RESULT ACTUAL ACHIEVEMENT Group EBIT A$(i) 50% 0% Payout 33% Payout 66% Payout 100% Payout 5% worse than budget or more < 5% worse than budget Achieve budget > 5% growth than budget Group Organic New Store Openings 20% Achieve < 7% of store network 7% of store network 8% of store network 9% of store network ANZ + Global EBIT A$(i) EU EBIT €(i) 10% 5% worse than budget or more < 5% worse than budget 10% 5% worse than budget or more < 5% worse than budget Achieve budget Achieve budget > 5% growth than budget > 5% growth than budget Japan EBIT ¥(i) 10% 5% worse than budget or more < 5% worse than budget Achieve budget > 5% growth than budget (i) Adjusted to exclude management bonuses 106 // 2 022 ANNUA L RE PORT DO M I NO’S PIZZA ENTER PR ISES L IMITED. Strong Performance $286.4m Strong Performance – 282 New Store Openings Target Achieve Budget $116.8m Strong Performance €51.7m Strong Performance ¥8,762.9m Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 (continued) LONG-TERM INCENTIVE (EXECUTIVE SHARE AND OPTION PLAN) MANAGING DIRECTOR/GROUP CEO LTI AWARDS ON-FOOT The Long-term Incentive approved by shareholder resolution on the 3 November 2021 resulted in the granting of options over a three-year period. 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. The options are subject to a performance condition, including continuous employment, which must be achieved, and have an exercise price set at grant. The value that the Managing Director/Group CEO derives from the LTI plan is subject to the partial or whole achievement of the performance condition, as well as the share price following vesting. Over the exercise period, if the share price does not exceed the exercise price (set at grant), then the options are “underwater” and no value is delivered to the Managing Director/Group CEO. The number of options granted and on-foot under each tranche, and the relevant exercise prices, are outlined in the table below. The first exercise date is shown, and the exercise period is one year from the first exercise date, after which any options not exercised will lapse. SERIES Series 31 Series 33 Series 38 Series 42 NUMBER GRANTED 220,000 297,000 156,937 95,975 EXERCISE PRICE $51.96 $50.25 $84.28 $127.09 FAIR VALUE $7.27 $11.79 $16.72 $32.30 GRANT DATE FIRST EXERCISE DATE 23 Jan 2019 26 Nov 2019 4 Nov 2020 3 Nov 2021 1 Sept 2021 1 Sept 2022 1 Sept 2023 1 Sept 2024 PERFORMANCE CONDITION FOR ON-FOOT LTI AWARDS The options approved by shareholders at the 2017 AGM vest if the Company’s cumulative annual compound earnings per share (EPS) growth over the relevant performance period, as determined by the Board acting reasonably based on the audited financial statements of the Company, is at least 12% in Series 31 and 33 as shown in the table below. ANNUAL COMPOUND EPS GROWTH DURING THE PERFORMANCE PERIOD CUMULATIVE EPS TARGET (SERIES 31) CUMULATIVE EPS TARGET (SERIES 33) PROPORTION OF OPTIONS WHICH VEST Less than 12% less than 5.775 less than 6.235 12% up to less than 13% 5.775 up to less than 5.882 6.235 up to less than 6.351 13% up to less than 14% 5.882 up to less than 5.992 6.351 up to less than 6.469 14% up to less than 15% 5.992 up to less than 6.102 6.469 up to less than 6.588 15% up to less than 16% 6.102 up to less than 6.214 6.588 up to less than 6.708 16% up to less than 17% 6.214 up to less than 6.327 6.708 up to less than 6.831 17% up to less than 18% 6.327 up to less than 6.441 6.831 up to less than 6.954 18% up to less than 19% 6.441 up to less than 6.557 6.954 up to less than 7.079 19% up to less than 20% 6.557 up to less than 6.674 7.079 up to less than 7.206 20% or over 6.674 or over 7.206 or over 0% 20% 30% 40% 50% 60% 70% 80% 90% 100% The options approved by shareholders on 4 November 2020 vest if the Company’s cumulative annual compound earnings per share (EPS) growth over the relevant performance period, as determined by the Board acting reasonably based on the audited financial statements of the Company, is at least 6%, as shown in the table below. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 107 Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 (continued) CUMULATIVE EPS TARGET Base EPS – FY20 Underlying Performance Period FY21 FY22 FY23 Cumulative EPS Target for the Performance Period, subject to adjustment LOWER $1.694 UPPER $1.694 at 6% compound growth rate at 15% compound growth rate $1.796 $1.903 $2.018 $5.717 $1.948 $2.240 $2.576 $6.765 The options approved by shareholders on 3 November 2021 vest if the Company’s cumulative annual compound earnings per share (EPS) growth over the relevant performance period, as determined by the Board acting reasonably based on the audited financial statements of the Company, is at least 8%, as shown in the table below. CUMULATIVE EPS TARGET Base EPS – FY21 Underlying Performance Period FY22 FY23 FY24 Cumulative EPS Target for the Performance Period, subject to adjustment ANALYSIS OF PAY OUTCOMES LOWER $2.176 UPPER $2.176 at 8% compound growth rate at 15% compound growth rate $2.350 $2.538 $2.741 $7.629 $2.502 $2.878 $3.309 $8.689 For the year ended 03 July 2022, the following outcomes were applied to the Managing Director/Group CEO in respect of his STI and LTI. STI OUTCOMES FOR FY22 In FY22, the Managing Director/Group CEO achieved 23.2% of his Short-term Incentive opportunity (96.6% in FY21). See section LINK BETWEEN PAY AND PERFORMANCE for more detail. LTI OUTCOMES FOR FY22 The following table outlines the vesting outcome for the LTI award made to the Managing Director/Group CEO in 2017: SERIES NUMBER GRANTED EXERCISE PRICE FIRST EXERCISE DATE PERFORMANCE CONDITION PROPORTION VESTING Series 31 (23 Jan 2019) 220,000 $51.96 1 Sept 2021 Not met 0% INCENTIVE OUTCOMES OVER TIME The board considers both STI and LTI to be true ‘at risk’ elements of the executive’s remuneration. Over the past three years, the Managing Director/Group CEO’s STI and LTI payouts and vesting have varied significantly. The following chart shows the outcomes of the Group CEO’s STI and LTI plans in the year ended 03 July 2022, and the two prior financial years. The Group CEO’s LTI did not vest in FY22. 108 // 2022 AN NUA L RE PORT D OM I NO’S PIZZA EN TERPRIS ES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 (continued) 100% ) i ( l a i t n e t o p f o % 80% 60% 40% 20% 0% 96.6% 15% STI 0% LTI STI 0% LTI 23.2% STI 0% LTI FY20 FY21 FY22 (i) STI reflects that which was earned and paid in relation to each financial year, and LTI reflects that which vested and became exercisable in each financial year (in relation to the grant made three years prior). The following table outlines actual remuneration received by the Managing Director/Group CEO in the year ended 03 July 2022 and the two prior financial years. This table is not the statutory remuneration table (please see section REMUNERATION OF EXECUTIVE KMP): ELEMENT OF REWARD Total fixed remuneration (i) Short-term incentive (ii) % Earned Total Earned Cash Equity (iv) Value of prior long-term incentive vested in financial year (iii) FY20 FY21 FY22 $1,228,800 $1,259,520 $1,291,000 15% $153,600 $153,000 – $0 96.6% $1,216,697 $815,187 $401,510 $0 23.2% $417,600 $0 $417,600 $0 TOTAL REMUNERATION EARNED IN THE YEAR $1,382,400 $2,476,217 $1,708,600 (i) Reflects salary and superannuation. (ii) The value of STI earned during the relevant financial year, relates to the achievement of performance targets in the relevant financial year based on an accrual basis of accounting. FY21 was a combination of cash and equity and FY22 in the form of equity. (iii) The value of the LTI is determined based on the share price at the first exercise date less the exercise price, then multiplied by the number of options vested. The performance conditions have not been satisfied, therefore no LTIs have vested for FY20, FY21 and FY22. (iv) The equity component of the Short-term Incentive will be delivered in the form of one zero exercise priced option to subscribe for Shares at the underlying market price around the time of release of the annual results. The exercise period is 10 years from the date of grant. Shares allocated on exercise of the STI option will be escrowed for 2 years from the date of grant of the STI option. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 109 Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 (continued) The following chart shows the performance and exercise/escrow periods for all LTI awards since FY16, as well as the change in the Domino’s share price since the start of FY16. The Managing Director / Group CEO’s LTI did not vest in FY22 as the performance conditions were not met. SERIES FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 % VESTED 23 25 28 31 33 38 42 Performance period Performance period Performance period Performance period Performance period Performance period Performance period Share price percentage change from FY16 100% 0% 0% 0% TBC TBC TBC ) % ( e g n a h c e c i r p e r a h S 350% 300% 250% 200% 150% 100% 50% 0% Performance period completed Performance period on-foot Exercise and escrow period FY16 FY17 FY18 FY19 FY20 FY21 FY22 Vesting date The table below outlines the timeline and terms for each LTI options series awarded to the Managing Director / Group CEO since FY16. Please note, the FY16 award that vested in full was exercised and paid in FY20. GRANT YEAR SERIES NUMBER GRANT DATE FIRST EXERCISE LAST EXERCISE DATE HOLDING STOCK EXERCISE PRICE VESTING SHARE PRICE AT VEST VALUE AT VEST (i) EXERCISE DATE FY16 FY17 FY18 FY19 FY20 FY21 FY22 23 300,000 03/09/2015 01/09/2018 28/10/2020 28/10/2020 $40.95 100% $54.14 $3,957,000 12/11/2019 25 400,000 01/09/2016 01/09/2019 28/10/2020 28/10/2020 $76.23 28 220,000 08/11/2017 01/09/2020 31/08/2021 31/08/2021 $46.63 31 220,000 23/01/2019 01/09/2021 31/08/2022 31/08/2022 $51.96 33 38 42 297,000 26/11/2019 01/09/2022 31/08/2023 31/08/2023 $50.25 156,937 4/11/2020 01/09/2023 31/08/2024 31/08/2023 $84.28 95,975 3/11/2021 1/09/2024 31/08/2025 31/8/2024 $127.09 0% 0% 0% TBC TBC TBC – – – TBC TBC TBC – – – TBC TBC TBC – – – TBC TBC TBC (i) The value at vesting is determined based on the share price at the first exercise date less the exercise price, then multiplied by the number of options vested. 110 // 2 022 ANN UA L RE PO RT DO MI N O’S PIZZA ENTERPR ISES L IMITED. Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF EXECUTIVE KMP REMUNERATION FRAMEWORK FOR FY22 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 Executive KMP; the Executive 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 PAY MIX Remuneration packages include a mix of fixed, short-term and long-term performance-based incentives. The mix of these components is based on the role the individual performs. SUMMARY OF REMUNERATION ELEMENTS The framework is illustrated in the following table: FIXED REMUNERATION SHORT-TERM INCENTIVE (STI) LONG-TERM INCENTIVE (LTI) Strategic intent Domino’s approach Delivery 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 is set relative to the market, reflecting the Executive KMPs accountability, performance, experience and geographic location. 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. Short-term Incentives are paid for achieving Board approved targets, reflective of the Group plan. Long-term Incentives are intended to reward Executives for sustainable long-term growth aligned to shareholder value creation. 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. Provided as cash only, or a combination of cash and Rights which are deferred and if exercised, are held in escrow for a period of two years from grant. LTI targets are linked to EPS growth, or EPS and EBIT depending on whether the role has Group or segment responsibility. Equity in options. All equity is held subject to service and performance for a minimum of three years from grant date. The equity is at risk until vesting. Performance is tested once at the vesting date. Executives have 12 months after the vesting date to exercise the options. Shares received on exercise of the options are held in escrow for a further two years from the date of vest. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 111 Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF EXECUTIVE KMP REMUNERATION FRAMEWORK FOR FY22 (continued) FIXED REMUNERATION Remuneration levels are reviewed annually by the Nomination, Culture and Remuneration Committee and Managing Director/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 Executive KMP remuneration is competitive in the marketplace. Benchmarking data is sought for each role to ensure that remuneration packages are relevant to the country in which the executive operates and takes into account internal relativities and job specific market information. A number of executives received increases in FY22 that reflected a change in role or increase in responsibility. Where an executive was significantly outside the market competitive ranges, the NCRC determined that it would be appropriate to transition those executives to the new remuneration levels over a number of years. 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 Executive KMP and any changes required to meet the principles of the Remuneration Policy. All roles are benchmarked against comparable market data. Executive KMPs remuneration is also reviewed on promotion. PERFORMANCE-LINKED REMUNERATION Performance-linked remuneration includes both short-term and long-term incentives and is designed to reward Executive 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, Culture and Remuneration Committee sets the Key Performance Indicators (“KPI’s”) for the Group CEO and the Managing Director/Group CEO proposes the KPI’s for the other Executive KMP. The KPI’s generally include measures relating to the Group, the relevant segment, and the individual, and include financial, operational and strategic measures. The measures chosen directly aligned 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 the most relevant short-term performance condition, and for each KPI sets a range that reflects: • A threshold level of performance, below which no payment is made; and • A target level of performance that meets the annual forecast and budget; and • A strong level of performance for exceeding the challenging KPIs. The financial performance objectives include but are not limited to: • Earnings before Interest and Tax (“EBIT”) in local currencies • Same Store Sales • Franchisee profitability (EBITDA) compared to budget and last year. The specific targets are not detailed in this report due to their commercial sensitivity but will be discussed retrospectively in future remuneration reports. STI OPPORTUNITY The table below expresses the annual standard STI opportunity for each Executive KMP during FY22: EXECUTIVE KMP Group Chief Financial Officer Chief Executive Officer APAC Chief Executive Officer Europe Group Chief Digital and Experience Officer STI OPPORTUNITY (% OF FIXED REMUNERATION) 80% 80% 80% 75% 112 // 2022 ANN UA L REPO RT DO M I NO’S PIZZA ENTER PR ISES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF EXECUTIVE KMP REMUNERATION FRAMEWORK FOR FY22 (continued) DELIVERY In the year ended 03 July 2022, delivery was in the form of cash and equity split 67% and 33% respectively, with the equity deferred for a minimum of two years. The equity is in the form of Rights. The Rights can be exercised by the participant at any time up to ten years from the date of grant (subject to local tax laws). If the Rights are exercised within the period two years from the date of grant, they remain under escrow until the two-year deferral period has concluded. Dividends are earned from the time at which the Right is exercised into a fully paid ordinary share. LONG-TERM INCENTIVE The Company established the Employee Share Option Plan (ESOP) to assist in the recruitment, reward, retention and motivation of the company’s Executive KMP (“the participants”). In accordance with the provisions of the scheme, Executive KMP are granted options for no consideration to purchase parcels of shares at various exercise prices, subject to the meeting of performance conditions, including Annual Compound Earnings Per Share (EPS) Growth for the Managing Director/Group CEO and Group or a combination of EPS Growth and Earnings Before Interest and Tax (EBIT) for regional roles. The value an Executive KMP member derives from the LTI plan is subject to the partial or whole achievement of the performance condition, as well as the share price following vesting. If the share price does not exceed the exercise price (as set at grant), then the options are “underwater” and no value is delivered to the Executive KMP member. Dividends are only payable once the options have vested and been exercised into an ordinary share. The Nomination, Culture and Remuneration Committee considers this equity performance-linked remuneration structure to be appropriate as Executive KMP only receive a benefit where there is a corresponding direct benefit to shareholders. LTI OPPORTUNITY The LTI opportunity, as a percentage of fixed remuneration, awarded to each Executive KMP is outlined in the table below (excludes the Managing Director for whom the LTI award was approved at the 2021 AGM). The number of options awarded is determined by dividing the LTI dollar opportunity by the fair value of the relevant option series: EXECUTIVE KMP Group Chief Financial Officer Chief Executive Officer APAC Chief Executive Officer Europe Group Chief Digital and Experience Officer LTI OPPORTUNITY (% OF FIXED REMUNERATION) 80% 80% 80% 75% VESTING CONDITIONS FOR OPTIONS ISSUED DURING FY22 Options awarded during the year ended 03 July 2022 vest subject to the achievement of performance conditions set at the time of grant. These performance conditions 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 70% of LTI and the cumulative regional EBIT target 30% of LTI over the performance period for regional specific relevant roles. Please see section OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 for details of the LTI award for the Managing Director/Group CEO. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 113 Directors’ Report continued REMUNERATION REPORT (continued) OVERVIEW OF EXECUTIVE KMP REMUNERATION FRAMEWORK FOR FY22 (continued) The EPS Growth performance condition applicable to 100% of the FY22 LTI grant for the Group Chief Financial Officer and Chief Digital and Experience Officer vest in accordance with the schedule shown in the tables below: GROUP CHIEF FINANCIAL OFFICER, APAC CEO AND GROUP CHIEF DIGITAL AND EXPERIENCE OFFICER (100% OF THE LTI AWARD) ANNUAL COMPOUND EPS GROWTH DURING THE PERFORMANCE PERIOD PROPORTION OF OPTIONS WHICH VEST Less than 8% At 8% Above 8% and up to less than 15% 15% or over 0% 30% Straight-line vesting 100% The EPS Growth performance condition applicable to 70% of the FY22 LTI grant and cumulative regional EBIT performance condition applicable to 30% of the FY22 LTI grant for the Chief Executive Officer Europe vest in accordance with the schedule shown in the tables below: CEO EUROPE (70% OF THE LTI AWARD) CEO EUROPE (30% OF THE LTI AWARD) ANNUAL COMPOUND EPS GROWTH DURING THE PERFORMANCE PERIOD PROPORTION OF OPTIONS WHICH VEST PERCENTAGE OF CUMULATIVE EBIT TARGET (IN EUROPE AND JAPAN RESPECTIVELY) PROPORTION OF OPTION WHICH VEST Less than 8% At 8% 0% 30% Less than 90% At 90% 0% 40% Above 8% and up to less than 15% Straight-line vesting Above 90% and up to less than 105% Straight-line vesting 15% or over 100% 105% or over 100% 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. Participants have 12 months after the vesting date in which to exercise their options. Any shares received on exercise are subject to a two-year holding lock from the vesting date (i.e. five years from grant). 114 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA EN TER PRISES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION FRAMEWORK DESIGN PRINCIPLES FY23 The Board met with a number of key executives during FY22 to better understand the key issues they are facing and whether the current remuneration framework was achieving its purpose of retaining and incentivising executives. It was clear from these discussions that there were a number of issues in relation to the current framework. Importantly there was a sense that DPE need to be more accommodating around differing remuneration practices in international markets. Following from these discussions and in consultation with our external advisors the NCRC developed a new set of principles to guide the development of the remuneration framework for FY23 and beyond. These principles are outlined below:. O Sim plicity – our current fra m e w ork is too co m plex and hard for tea m m e m bers to understand. u r r e n e e d m u n b e t w s t o e r a a n d e e d riv e n s h e x e a r e tio n fr a alig m e n w c u h tiv old e s. e r s m e o r k n t SIMPLICITY ALIGNMENT W e INCENTIVISATION e n tr e w a r e w w e n p r e n t t e e n e o f o a r d u r s d t o d s f o eliv hip, st e r a c a n d r p e r a p t his e rf ult u r e o r m p r o m e o f a n p ria t e s a n c e. GLOBALLY APPROPRIATE A ustralian centric and do not translate O ur current structures are very w ell Globally. O ur ne w structure needs to w ork in all our m arkets. The NCRC is currently considering a number of changes to the remuneration approach for the Managing Director/Group CEO and other executives for FY23. The Board looks forward to sharing more on these proposals in advance of the upcoming AGM and through further consultation with investors over the course of the year. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRIS ES LIMITED. // 115 Directors’ Report continued REMUNERATION REPORT (continued) LINK BETWEEN PAY AND PERFORMANCE BUSINESS OUTCOMES FOR FY22 The following table outlines performance against each of the Key Performance Indicators that have been used across our Executive KMP group for STI purposes in FY22: KEY PERFORMANCE INDICATOR EBITDA – Group EBIT: Group ANZ Europe Asia Same Store Sales – Group NPAT attributable to shareholder PERFORMANCE(I) $339.7m – 8.4% growth YoY $259.0m – 12.1% growth YoY $118.8m + 3.0% growth YoY $78.2m – 12.1% growth YoY $84.3m – 31.4% growth YoY - 0.3% $164.6m – 9.1% growth YoY (i) The performance measure is on an underlying basis which excludes significant non-recurring costs as well as the impact from adoptions of AASB 16 Leases. HISTORICAL COMPANY PERFORMANCE The tables below set out summary information about the Group’s earnings and movements in shareholder wealth for the five years to 03 July 2022: Revenue Net profit before tax Net profit after tax 03 JULY 2022 $'000 27 JUNE 2021(iii) $’000 28 JUNE 2020 $’000 30 JUNE 2019 $’000 01 JULY 2018 $’000 2,289,268 240,624 166,732 2,199,106 273,609 193,648 1,905,261 1,435,410 1,153,952 203,436 142,921 159,413 114,379 174,476 121,693 03 JULY 2022 27 JUNE 2021 28 JUNE 2020 30 JUNE 2019 01 JULY 2018 Share price at the start of the year ($) Share price at the end of the year ($) Interim dividend per share (cents) (i) Final dividend per share (cents) (i) (ii) Basic earnings per share (cents) Diluted earnings per share (cents) 118.00 68.55 88.4 68.1 183.4 183.0 67.79 118.00 88.4 85.1 213.3 212.5 37.64 67.79 66.7 52.6 160.9 160.8 52.22 37.64 62.7 52.8 135.5 135.4 52.08 52.22 58.1 49.7 139.4 139.0 (i) The final and interim dividend for the year ended 03 July 2022 are franked at 70%. The final and interim dividend for the year ended 27 June 2021 are franked at 70% and 50%, respectively. The interim and final dividend for the year ended 28 June 2020 are franked at 100%. The interim and final dividend for the year ended 30 June 2019 are franked at 75% and 100%, respectively. Interim and final dividend for the year ended 01 July 2018 are franked to 40% and 75%, respectively. The Company’s tax rate has remained at 30% for franking purposes over this 5-year period. (ii) The final dividend for the financial year ended 03 July 2022 was declared after the end of the reporting period and is not reflected in the financial statements. (iii) Results for the year ending 27 June 2021 has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements. 116 // 2022 ANNUA L REPO RT DO M IN O’S PIZZA ENTER PR ISES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) LINK BETWEEN PAY AND PERFORMANCE (continued) SHORT-TERM INCENTIVE On 23 August 2022, Don Meij, Richard Coney, Andre ten Wolde, Josh Kilimnik and Michael Gillespie were awarded a combination of cash and a deferred component incentive for their performance during the year ended 03 July 2022. 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, Culture and Remuneration Committee and are outlined in the table below: DIRECTOR OR KMP Don Meij Richard Coney Josh Kilimnik Andre ten Wolde Michael Gillespie CASH COMPONENT $(i) DEFERRED COMPONENT $ AMOUNT FORFEITED IN YEAR $ PERCENTAGE AWARDED IN YEAR %(ii) PERCENTAGE FORFEITED IN YEAR %(iii) – 96,480 137,440 31,996 151,583 417,600 47,520 67,694 15,759 74,660 1,382,400 336,000 268,618 429,803 235,007 23% 30% 43% 10% 49% 77% 70% 57% 90% 51% (i) Amounts included in compensation represent the amount that was awarded based on the achievement of specified performance criteria for the financial year ending 03 July 2022. (ii) Percentage awarded in the year is inclusive of full fair value of the deferred STI payable as equity or cash, of the Short-term Incentive awarded for the year ended 03 July 2022. (iii) The amounts forfeited are due to the performance or service criteria not being met in relation to the financial year ended 03 July 2022. No other incentives were granted during the financial year ended 03 July 2022. LONG-TERM INCENTIVE OUTCOMES The table below outlines the options series for which the performance period concluded in FY22, including the vesting result and the relevant proportion of options that vested: OPTION SERIES 33 (Don Meij) PERFORMANCE MEASURE RESULT PROPORTION OF OPTIONS VESTING CAN BE EXERCISED UNTIL Group EPS percentage growth over the relevant performance period < 12% EPS Growth 0% N/A N/A 35 (ANZ Employees – Richard Coney, Michael Gillespie Group EPS percentage growth over the relevant performance period < 9% EPS Growth 0% ANZ EBIT Performance < 95% performance 35 (Europe Employees – Andre ten Wolde) Group EPS percentage growth over the relevant performance period < 9% EPS Growth 0% N/A Europe EBIT performance < 93% of target 35 (Japan Employees – Josh Kilimnik) Group EPS percentage growth over the relevant performance period < 9% EPS Growth 70% N/A Japan EBIT performance < 93% of target 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRIS ES LIMITED. // 117 Directors’ Report continued ) $ i ( ) I T L ( S N O T P O I ) $ i ( ) I T S ( I N $ O T A U N N A i ) $ v ( E V A E L v ( I ) $ S T F E N E B D E R R E F E D R E H T O T N E N O P M O C - R E P U S I E C V R E S G N O L M R E T - T R O H S E C N A M R O F R E P D E T A L E R L A T O T ) v i ( - S T N E M Y A P D E S A B E R A H S - T S O P I S T F E N E B I S T F E N E B T N E M Y O L P M E M R E T - G N O L I S T F E N E B M R E T - T R O H S ) d e u n i t n o c ( T R O P E R N O I T A R E N U M E R P M K E V I T U C E X E F O N O I T A R E N U M E R % % 7 4 1 . % 7 0 6 . % 2 7 . % 8 9 4 . % 4 9 2 . % 4 6 3 . ) % 0 . 1 ( % 3 3 4 . % 9 2 3 . % 8 3 4 . % 2 2 4 . % 9 5 1 . % 9 8 4 . ) % 8 5 6 . ( $ , 3 1 5 3 6 5 , 1 , 9 0 7 7 6 1 , 3 , 0 7 5 9 9 9 6 7 5 7 0 1 , 0 6 6 0 6 6 , ) , 5 1 5 3 5 1 ( , 7 2 0 5 8 0 , 1 , 1 0 7 8 0 2 , 3 8 5 0 6 2 , 1 4 0 3 5 1 1 , , 0 4 6 7 0 6 , 1 9 5 1 , 9 6 2 , 3 9 6 2 9 0 , 1 2 8 7 6 5 1 , 6 9 2 2 6 6 , ) , 8 6 9 5 0 1 ( 0 3 6 4 0 1 , 8 6 3 8 6 , 0 1 4 8 1 1 , 7 0 9 6 3 , 8 7 1 , 7 6 0 9 8 6 3 , ) 8 5 4 3 3 ( , , 3 6 8 2 6 2 4 5 0 4 2 , 4 9 6 , 1 2 4 5 0 4 2 , 4 9 6 , 1 2 9 2 4 2 5 , 4 6 7 3 4 , 4 8 3 , 1 3 3 4 7 5 3 , 5 6 2 3 3 9 , 9 2 1 , 4 7 1 , 1 6 3 0 9 6 1 , , 9 1 9 9 2 9 7 1 1 , 7 5 0 9 , , 3 5 3 9 4 2 5 , ) 9 6 3 6 9 , ( 7 7 4 8 7 1 , , ) 1 3 0 2 5 1 ( , 0 1 6 4 0 2 ) 7 3 0 6 2 4 , ( , 9 9 2 7 1 0 2 , 8 6 8 , 1 5 2 4 5 0 4 2 , 0 0 0 0 8 , 7 4 8 0 4 , 8 8 8 9 2 , , 6 9 7 5 4 8 9 2 6 9 5 3 , 4 9 6 , 1 2 9 3 4 5 , 4 9 6 , 1 2 4 1 4 , 1 6 1 3 8 2 6 6 1 , 5 3 1 , 3 2 5 1 9 , 1 2 1 6 5 0 1 , 9 6 6 0 2 , – – – – 5 1 4 2 1 , 8 5 4 3 3 , – – – – – – 5 9 3 4 6 1 , , 1 3 9 3 5 2 8 5 7 0 4 , 7 4 8 , 1 4 i ( ) $ S U N O B – 7 8 1 , 5 1 8 0 8 4 6 9 , , 8 1 8 2 6 2 0 4 4 7 3 1 , 0 7 6 9 7 2 , 6 9 9 , 1 3 , 7 4 5 9 7 2 3 8 5 , 1 5 1 , 2 7 6 5 5 2 ) , 6 8 6 6 5 1 ( 8 0 3 5 2 1 , – 4 1 9 , 1 1 – 5 0 8 7 5 1 , ) 7 6 4 0 0 1 ( , , 1 6 4 0 3 3 9 9 4 7 1 4 , 8 4 8 7 7 , , 8 7 7 5 9 2 , 9 9 6 0 5 0 2 , I S $ E R A L A S , 9 1 9 6 8 2 , 1 7 6 7 , 1 0 2 , 1 2 2 0 2 1 2 0 2 j i e M n o D , 2 4 3 8 6 5 2 2 0 2 y e n o C d r a h c i R 5 8 8 2 1 5 , 5 0 6 2 7 6 , 9 0 2 4 2 7 , ) i i ( 2 2 0 2 ) i i ( 1 2 0 2 1 2 0 2 i k n m i l i K h s o J , 8 4 9 6 9 5 2 2 0 2 l e d o W n e t e r d n A 4 8 8 , 1 4 5 , 4 1 7 9 8 5 , 8 2 8 4 0 6 9 5 1 , 6 0 3 8 0 0 4 0 5 , , 7 8 6 0 2 0 4 , , 1 8 5 9 8 0 4 , ) i v ( 1 2 0 2 1 2 0 2 2 2 0 2 i e p s e l l i G l e a h c i M 1 2 0 2 2 2 0 2 1 2 0 2 ) i i i ( 2 2 0 2 i t h g n K k c i N e v i t u c e x E r o t c e r i D e v i t u c e x E s r e c ffi O e v i t u c e x E s r e c ffi O r e m r o F l a t o T a s a s e s a e r c e d e c n a a b e v a e l l ’ s e v i t u c e x E n a e r e h w e p m a x e r o l f , e v i t a g e n e b y a m e v a e l i e c v r e s g n o l f l o e u a v g n i t n u o c c a e h T . r a e y e h t g n i r u d e c n a a b e v a e l l e h t n i t n e m e v o m e h t s e d u c n l i e v a e l i e c v r e s g n o L . r a e y t n e r r u c e h t g n i r u d e u r c c a y e h t n a h t e v a e l e r o m g n k a t i f o t l u s e r ) i v ( . i d o i r e p e c v r e s d n a e c n a m r o f r e p l t n a v e e r e h t r e v o d e s i t r o m a d n a e u a v r i a f l e t a d t n a r g e h t y b t s e v o t d e t c e p x e s t n e m u r t s n i f o r e b m u n e h t i g n s u d e t a u c a c s l l i t n e m y a p d e s a b - e r a h S ) v i ( . O E C Z N A s a d e r i t e r i t h g n K k c N i t , 1 2 0 2 r e b m e p e S 8 2 e h t n O ) i i i ( . , 8 0 3 5 2 1 $ f o s t fi e n e b n o i i t a n m r e t i d e v e c e r i t h g n K k c N i , 2 2 Y F n I . e r a c h t l a e h d n a g n i l o o h c s , i g n s u o h o t d e t i m i l t o n t u b g n d u c n i l i s e c n a w o l l a e t a i r t a p x e o t e t a e r l s t n u o m A ) v ( . n o i t a s i l a u q e x a t . s n o i t i d n o c e c n a m r o f r e p f o n o i t c a f s i t a s n o t n e d n e p e d e r a s e v i t n e c n i e h T o t g n i t a e r l s t n u o m a e r a s t fi e n e b m r e t - t r o h s r e h t o d n a s e i r a a s n l i d e d u c n l I ) i ( ) i i ( . , 4 7 9 9 4 2 $ f l o e u a v a h t i w n o i t p o e c i r p - o r e z a f o m r o f e h t n i y n a p m o c e h t o t n o i t u b i r t n o c t n a c fi n g s i i i s h f o n o i t i n g o c e r n i , e v i t n e c n i y r a n o i t i e r c s d a d e v e c e r e p s e i i l l i G l e a h c M i ) i i v ( . n o i t i s o p r i e h t l d o h o t i g n e e r g a r o f n o i i t a r e d s n o c r e h r o s h i f o t r a p s a t n e m y a p a d e v e c e r d o i r e p e h t i i g n i r u d d e t n o p p a P M K e v i t u c e x E r o r o t c e r i d o N 118 // 2 022 ANN UA L REPO RT DO M I NO’S PIZZA EN TERPRIS ES LIMITED. Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION OF EXECUTIVE KMP (continued) EXECUTIVE SHARE AND OPTION PLAN (ESOP) During the prior and current financial year, the following share-based payment arrangements were in existence. For terms, including vesting conditions, of prior year grants, please see relevant year remuneration reports. See section OVERVIEW OF MANAGING DIRECTOR/GROUP CHIEF EXECUTIVE (GROUP CEO) REMUNERATION STRUCTURE FOR FY22 for terms relating to option awards made in the year ended 03 July 2022: OPTIONS SERIES ISSUE & GRANT DATE GRANTED TO EXPIRY DATE GRANT DATE FAIR VALUE EXERCISE PRICE VESTING DATE (29) (29) (29) (31) (32) (32) (32) (33) (34) (35) (35) (35) (36) (37) (38) (39) (39) (39) (40) (41) (42) (43) (43) (43) (43) (44) (44) (44) 19 Apr 2018 ANZ Employees 31 Aug 2021 19 Apr 2018 Europe Employees 31 Aug 2021 19 Apr 2018 Japan Employees 31 Aug 2021 23 Jan 2019 Don Meij 31 Aug 2022 25 May 2019 ANZ Employees 31 Aug 2022 25 May 2019 Europe Employees 31 Aug 2022 25 May 2019 Japan Employees 31 Aug 2022 26 Nov 2019 Don Meij 01 Sep 2023 26 Nov 2019 ANZ Employees 26 Nov 2023 26 Nov 2019 ANZ Employees 01 Sep 2023 26 Nov 2019 Europe Employees 01 Sep 2023 26 Nov 2019 Japan Employees 01 Sep 2023 20 Aug 2019 ANZ Employees 20 Aug 2029 18 Aug 2020 ANZ Employees 18 Aug 2030 04 Nov 2020 Don Meij 01 Sep 2024 25 Nov 2020 Europe Employees 01 Sep 2024 25 Nov 2020 Japan Employee 01 Sep 2024 25 Nov 2020 ANZ Employees 01 Sep 2024 $5.88 $5.88 $5.88 $7.27 $3.98 $3.98 $3.98 $11.79 $9.84 $11.79 $11.79 $11.79 $42.41 $81.37 $16.72 $10.92 $10.92 $10.92 07 Jun 2021 ANZ Employees 31 Oct 2021 $105.63 28 May 2021 ANZ Employees 28 May 2031 03 Nov 2021 Don Meij 01 Oct 2021 ANZ Employee 01 Oct 2021 Japan Employee 31 Aug 2025 01 Oct 2031 01 Oct 2031 01 Oct 2021 Europe Employee 01 Oct 2031 01 Oct 2021 Don Meij 01 Oct 2031 19 May 2022 ANZ Employee 31 Aug 2025 19 May 2022 Japan Employee 31 Aug 2025 19 May 2022 Europe Employee 31 Aug 2025 $84.28 $32.30 $135.75 $135.75 $135.75 $135.75 $15.00 $15.00 $15.00 $45.25 $45.25 $45.25 $51.96 $51.96 $51.96 $51.96 $50.25 $50.25 $50.25 $50.25 $50.25 Nil Nil $84.28 $84.28 $84.28 $84.28 Nil Nil 01 Sep 2020 01 Sep 2020 01 Sep 2020 01 Sep 2021 01 Sep 2021 01 Sep 2021 01 Sep 2021 01 Sep 2022 21 Aug 2022 01 Sep 2022 01 Sep 2022 01 Sep 2022 21 Aug 2019 19 Aug 2021 01 Sep 2023 01 Sep 2023 01 Sep 2023 01 Sep 2023 07 Jun 2023 28 May 2021 $127.09 01 Sep 2024 Nil Nil Nil Nil $69.58 $69.58 $69.58 31 Oct 2021 31 Oct 2021 31 Oct 2021 31 Oct 2021 31 Aug 2024 31 Aug 2024 31 Aug 2024 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRISE S LIM ITED. // 119 Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION OF EXECUTIVE KMP (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. DIRECTORS AND SENIOR MANAGEMENT NO. OF OPTIONS EXERCISED NO. OF ORDINARY SHARES OF DPE LIMITED ISSUED AMOUNT PAID AMOUNT UNPAID Don Meij Richard Coney Josh Kilimnik Nick Knight Andre ten Wolde Michael Gillespie – – 10,325 – – 1,755 – – 10,325 – – 1,755 – – $467,206 – – – $nil $nil $nil $nil $nil $nil The following table summarises the value of options exercised or lapsed during the financial year to directors and senior management: DIRECTORS AND SENIOR MANAGEMENT Don Meij Richard Coney Josh Kilimnik Nick Knight(iv) Andre ten Wolde 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) $ – – 60,711 – – 74,430 – – 1,066,056 – – 255,616 1,599,400 103,399 47,722 230,668 99,422 69,595 (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, then 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. This is determined based on the fair value of the options at the date of grant multiplied by the number of lapsed options. (iv) Includes options granted to a related party. 120 // 2022 ANNUAL RE PORT DOM I NO’S PIZZA EN TERPRIS ES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION OF EXECUTIVE KMP (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 THE FINANCIAL YEAR NO. BALANCE HELD NOMINALLY NO. 2022 Jack Cowin 23,066,390 Grant Bourke 1,628,344 Lynda O'Grady Ursula Schreiber Doreen Huber Tony Peake Don Meij Richard Coney Josh Kilimnik Andre ten Wolde Michael Gillespie Nick Knight (i) 2,000 1,200 1,100 – 1,800,001 25,719 800 3,000 – 3,402 2021 Jack Cowin 23,050,966 Ross Adler Grant Bourke Lynda O'Grady Ursula Schreiber Doreen Huber Tony Peake Don Meij Richard Coney Josh Kilimnik Nick Knight(i) Andre ten Wolde Michael Gillespie 200,000 1,628,344 2,000 1,000 – – 1,800,001 25,719 2,600 384 3,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 10,325 – – – 300 350 1,400 – (7,500) 1,800 – (3,000) 1,755 – – – – – – – – – – (1,325) (3,402) 15,424 – – – 200 1,100 – – – 10,325 – (12,125) 3,018 15,000 (15,000) – – 23,066,390 1,628,344 2,000 1,500 1,450 1,400 1,800,001 18,219 12,925 – 430 – 23,066,390 200,000 1,628,344 2,000 1,200 1,100 – 1,800,001 25,719 800 3,402 3,000 – – – – – – – – – – – – – – – – – – – – – – – – – – (i) Includes shares held during the period by a related party. Nick Knight retired as ANZ CEO effective 28 September 2021, and no longer was considered KMP. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRISE S LIM ITED. // 121 Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION OF EXECUTIVE KMP (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 THE YEAR NO. 2022 Don Meij Richard Coney Josh Kilimnik Nick Knight(i) Andre ten Wolde Michael Gillespie 2021 Don Meij Richard Coney Josh Kilimnik Nick Knight(i) Andre ten Wolde Michael Gillespie 673,937 106,912 122,351 118,486 84,330 92,971 737,000 119,385 100,921 130,578 84,081 82,234 98,932 32,953 34,077 572 31,836 31,677 156,937 39,527 40,605 43,908 40,249 44,682 – – (220,000) (26,000) (10,325) (12,000) – – (119,058) (25,000) (1,755) (17,500) – – (220,000) (52,000) (10,325) (8,850) – (56,000) (15,000) (25,000) – (33,945) 552,869 113,865 134,103 – 91,166 105,393 673,937 106,912 122,351 118,486 84,330 92,971 – – 28,000 – – – – – 20,650 – – – (i) Includes options relating to a related party. Nick Knight retired as ANZ CEO effective 28 September 2021, and no longer was considered KMP. CONTRACTS FOR SERVICES OF KMP TERM OF CONTRACT CONTRACT COMMENCEMENT NOTICE TERMINATION – BY COMPANY NOTICE TERMINATION – BY EXECUTIVE TERMINATION PAYMENT – AMOUNT EQUAL TO NAME Don Meij 5 years 8 November 2017 12 months Richard Coney Ongoing 16 May 2005 6 months Josh Kilimnik Ongoing 6 December 2021 6 months Andre ten Wolde Ongoing 27 June 2020 12 months Michael Gillespie Ongoing 15 September 2017 3 months 12 months 6 months 6 months 6 months 3 months 12 months remuneration 6 months remuneration 6 months remuneration 12/6 months remuneration 3 months remuneration The directors believe that the remuneration for each of the Executive 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 Executive KMP but do not prescribe how the remuneration levels are modified year to year. 122 // 2022 ANNUA L RE PO RT DOM I NO’S PIZZA EN TERPRIS ES LIMIT ED. Directors’ Report continued REMUNERATION REPORT (continued) REMUNERATION OF EXECUTIVE KMP (continued) TERMS RELATED TO THE MANAGING DIRECTOR/GROUP CEO’S CONTRACT: • Don Meij, Managing Director/Group CEO, has a contract of employment with Domino’s Pizza Enterprises Limited dated 8 November 2017. • His 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 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 reflects 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. 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. The maximum aggregate amount of directors’ fees (which does not include remuneration of executive directors and other non-director services provided by directors) is $1,800,000 per annum. NON-EXECUTIVE DIRECTORS Details of the fees associated for the Non-executive Directors roles are set out in the following table. ROLE Chairman Audit and Risk Committee Chair Nomination, Culture and Remuneration Committee Chair Non-executive Director Committee membership fee (per Committee) FY22 FEES $313,947 $180,000 $180,000 $150,000 $15,000 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 123 Directors’ Report continued REMUNERATION REPORT (continued) NON-EXECUTIVE DIRECTOR REMUNERATION (continued) NON-EXECUTIVE DIRECTOR REMUNERATION FOR FY22 Details of the audited remuneration for FY22 for each Non-executive Director of the Company are set out in the following table: SHORT-TERM BENEFITS FEES – DOMINO’S PIZZA ENTERPRISES LIMITED NON-EXECUTIVE DIRECTORS Jack Cowin Ross Adler Grant Bourke Lynda O’Grady Ursula Schreiber Doreen Huber Tony Peake Total 2022 2021 2022(ii) 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021(i) 2022 2021 (i) On 14 May 2021, Tony Peake was appointed to the Board. (ii) On 03 November 2021, Ross Adler retired from Board. FEES $ 287,824 268,837 57,165 159,895 167,467 147,854 162,579 127,854 168,752 142,739 159,519 140,000 154,181 15,244 1,157,487 1,002,423 POST- EMPLOYMENT BENEFITS SUPERANNUATION $ 24,054 21,694 5,717 15,190 16,500 14,046 7,258 12,146 16,892 13,560 – – 15,434 1,448 85,855 78,084 TOTAL $ 311,878 290,531 62,882 175,085 183,967 161,900 169,837 140,000 185,644 156,299 159,519 140,000 169,615 16,692 1,243,342 1,080,507 124 // 2 022 AN NUA L RE PO RT DO MI N O’S PIZZA ENTER PR ISES L IMITED. Directors’ Report continued REMUNERATION REPORT (continued) NON-EXECUTIVE DIRECTOR REMUNERATION (continued) 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 $56,062 was paid or payable to Mr Michael Cowin during the year ended 03 July 2022. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL OF DOMINO’S PIZZA ENTERPRISES LIMITED Comgroup Supplies Pty Ltd, Comgroup NZ Limited T/A Franklin Foods, Markwell Pacific Marketing Pty Ltd, PMFresh Pty Ltd and Shore Mariner Ltd are entities associated with Mr Jack Cowin, which supply food products to the Group on commercial arm’s length terms. The entities were selected as preferred suppliers after competitive tender processes in which Mr Cowin had no involvement. During the year the Group made purchases and had outstanding balances as at 03 July 2022 as follows: ENTITY PURCHASES (EXCLUDING GST) OUTSTANDING BALANCE Comgroup Supplies Pty Ltd and Comgroup NZ Limited (T/A Franklin Foods) $22,813,184 $4,343,934 Markwell Pacific Marketing Pty Ltd PMFresh Pty Ltd (i) Shore Mariner Ltd $501,716 $1,356,936 $795,995 - - $37,807 (i) PM Fresh Pty Ltd ceased to be a related party on 1 April 2022 but was a supplier to DPE for the full financial year. The amounts in the table represent the purchases up to and including 31 March 2022. In addition, the Group received sponsorship contributions to the Company’s annual franchising rally to the value of $55,000 from Comgroup Supplies Pty Ltd, $132,231 from PMFresh Pty Ltd and $500 from Markwell Pacific Marketing Pty Ltd (excluding GST). The Group did not recognise any bad or doubtful debts associated with the above purchases and sponsorship contributions. The Group and Competitive Foods Australia Pty Ltd (CFAL), an entity associated with Mr Jack Cowin, acquire television media services from unrelated third party service providers under a joint venture arrangement and receive volume pricing benefits. The Group does not receive or provide any other benefits to CFAL under the joint venture. 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 Don Meij Managing Director/Group Chief Executive Officer 24 August 2022 24 August 2022 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 125 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 RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Opinion We have audited the financial report of Domino’s Pizza Enterprises Limited (the “Entity”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 03 July 2022, the consolidated statement of profit or loss, the consolidated statement of other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows 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: • Giving a true and fair view of the Entity’s and Group’s financial position as at 03 July 2022 and of their financial performance for the year then ended; and • 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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 organisation. 126 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. Independent Auditor’s Report continued KKeeyy AAuuddiitt MMaatttteerr HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr Carrying Value of Goodwill and Indefinite Life Intangible Assets in the German and France/Belgium Cash Generating Units (CGUs). As at 03 July 2022, the carrying value of the of the German CGU included goodwill of $80.3 million and indefinite life intangible assets of $177.8 million. The carrying value of the France/Belgium CGU included goodwill of $53.8 million and indefinite life intangible assets of $46.7 million, as disclosed in Note 11. is required to exercise Management significant judgement in estimating future cash flows, forecast growth rates and discount to determine the recoverable amount of the CGUs. rates, which are used In conjunction with our valuation specialists, our procedures included, but were not limited to: • • Evaluating the appropriateness of the methodology applied by management in calculating the recoverable amounts of the CGUs. Challenging the assumptions used to calculate the discount rates and recalculating these rates. • Agreeing the projected cash flows to Board approved budgets and assessing the cash flows, expected growth rates and terminal growth rates against historical performance and published industry economic data. • • Testing the mathematical accuracy of the impairment models used to calculate recoverable amount. Performing sensitivity analysis on the recoverable amount of the CGU’s in relation to the assumed growth rates during the 3 year budget period, terminal growth rates and discount rates. • We assessed the appropriateness of the disclosures included in Note 11 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 03 July 2022 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. 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 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 127 Independent Auditor’s Report continued accounting unless the directors either intend to liquidate the Group or to cease operations, or has 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 from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • 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 directors’ 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. 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, actions taken to eliminate threats or safeguards applied. 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. 128 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA ENTER PR ISES L IMITED. Independent Auditor’s Report continued RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 101 to 125 of the Directors’ Report for the year ended 3 July 2022. In our opinion, the Remuneration Report of Domino’s Pizza Enterprises Limited, for the year ended 3 July 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Matthew Donaldson Partner Chartered Accountants Brisbane, 24 August 2022 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 129 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 24 August 2022 The Directors Domino’s Pizza Enterprises Limited Level 1, KSD1 485 Kingsford Smith Drive HAMILTON QLD 4007 Dear Directors AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo DDoommiinnoo’’ss PPiizzzzaa EEnntteerrpprriisseess LLiimmiitteedd 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 report of Domino’s Pizza Enterprises Limited for the year ended 03 July 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of: • The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and • Any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU MMaatttthheeww DDoonnaallddssoonn Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte oganisation. 130 // 2 022 AN NUA L RE PO RT DO M IN O’S PIZZA ENTERPR IS ES L IMITED. 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 Jack Cowin Non-Executive Chairman Don Meij Managing Director/Group Chief Executive Officer 24 August 2022 24 August 2022 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 131 FINANCIAL FINANCIAL REPORT 2022 REPORT 2022 FINANCIAL FINANCIAL REPORT 2022 REPORT 2022 Financial Report 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 Notes to the Financial Statements 135 136 137 138 139 140 134 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA EN TERPRIS ES LIMIT ED. Consolidated Statement of Profit or Loss For the year ended 03 July 2022 Continuing operations Revenue Other gains and losses Finance income 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, legal settlement and inventory write downs 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 2022 $’000 2021 RESTATED 1 $’000 2 3 4 5 5 5 5 5 7 19 19 2,289,268 2,199,106 32,130 5,420 (996,486) (393,924) (34,137) (133,632) (5,698) (18,889) 23,372 4,824 (914,511) (402,281) (29,411) (130,018) (5,446) (18,593) (225,740) (214,436) (101,785) (31,081) (34,630) (8,803) (101,389) 240,624 (73,892) 166,732 158,716 8,016 166,732 Cents 183.4 183.0 (93,279) (28,205) (32,976) (6,307) (78,230) 273,609 (79,961) 193,648 184,477 9,171 193,648 Cents 213.3 212.5 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. The above Statement should be read in conjunction with the accompanying notes. 20 22 AN N UAL RE PORT DO MI NO’S PI Z ZA E NTE R PRISES LIMI TED. // 135 Consolidated Statement of Other Comprehensive Income For the year ended 03 July 2022 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 2022 $’000 2021 RESTATED 1 $’000 166,732 193,648 4,258 (28,725) 10,376 (4,844) (18,935) 147,797 532 (185) 347 (18,588) 148,144 144,807 3,337 148,144 5,270 (44,836) 1,791 (2,201) (39,976) 153,672 (853) 295 (558) (40,534) 153,114 146,793 6,321 153,114 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. The above Statement should be read in conjunction with the accompanying notes. 136 // 2022 AN NUAL RE PO RT D OM I NO’S P IZZA EN TERPRISES LI MITED. Consolidated Statement of Financial Position As at 03 July 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Other financial assets Inventories Current tax assets Other assets Investment in lease assets Total current assets Non-current assets Other financial assets Investment in joint venture Property, plant and equipment Deferred tax assets Goodwill Intangible assets Right-of-use assets Investment in lease assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Lease liabilities Borrowings Other financial liabilities Provisions Current tax liabilities Total current liabilities Non-current liabilities Borrowings Contract liabilities Lease liabilities Other financial liabilities Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity NOTE 2022 $’000 2021 RESTATED 1 $’000 6 12 22 15 7 12 10 22 27 9 7 11 11 10 10 13 2 10 21 23 14 7 21 2 10 23 14 7 16 16 16 76,877 163,591 20,892 30,861 1,234 45,760 72,063 411,278 119,869 1,709 273,471 – 485,707 450,352 306,845 382,493 174,689 145,751 14,391 25,955 1,285 35,142 57,541 454,754 82,476 1,937 274,130 7,810 456,091 380,044 344,911 350,256 2,020,446 2,431,724 1,897,655 2,352,409 303,976 3,134 122,304 32,035 140,003 21,559 17,571 640,582 612,066 15,775 646,714 511 8,870 85,249 1,369,185 2,009,767 421,957 264,212 (136,848) 294,593 421,957 346,228 3,105 109,433 – 29,697 21,371 28,988 538,822 507,375 16,066 651,492 167,089 9,108 67,320 1,418,450 1,957,272 395,137 259,500 (150,387) 286,024 395,137 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. The above Statement should be read in conjunction with the accompanying notes. 20 22 AN N UAL RE PORT DO MI NO’S PI Z ZA E NTE R PRISES LIMI TED. // 137 L A T O T 0 0 0 $ ’ , 3 7 3 3 9 3 – - N O N 0 0 0 $ ’ S T S E R E T N I G N I L L O R T N O C 0 0 0 $ ’ I D E N A T E R I S G N N R A E 9 6 9 7 2 2 , ) 5 3 5 4 , ( 8 3 8 8 8 3 , 8 4 6 3 9 1 , ) 4 3 5 0 4 , ( ) 7 9 ( ) 7 9 ( 1 7 1 , 9 ) 0 5 8 2 , ( 4 1 1 , 3 5 1 3 5 3 3 , 3 9 2 3 , ) 4 8 9 , 1 2 1 ( 0 8 0 4 2 , – 1 2 3 6 , 3 9 2 3 , – – ) 4 9 7 6 5 , ( ) 7 1 5 9 , ( 7 3 2 , 1 7 3 1 , 5 9 3 – – 2 3 7 6 6 1 , 6 1 0 8 , ) 8 8 5 8 1 ( , ) 4 4 1 , 8 4 1 ( ) 5 1 5 4 , ( ) 9 3 3 2 , ( – 7 7 6 5 , ) 9 9 6 ( ) 9 9 6 ( 2 1 7 4 , 2 0 1 , 3 3 ) 7 4 1 , 0 5 1 ( ) 7 7 7 3 , ( 7 5 9 , 1 2 4 – – – – ) 8 7 9 4 , ( ) 8 3 4 4 , ( – – , 1 3 5 3 2 2 7 7 4 4 8 1 , – 7 7 4 4 8 1 , ) 4 8 9 , 1 2 1 ( – – – – – 0 0 0 $ ’ R E H T O E V R E S E R ) 2 3 5 3 1 1 ( , ) 2 3 5 3 1 1 ( , – – 0 4 7 9 4 , 0 4 7 9 4 , 0 0 0 $ ’ E V R E S E R I N G E R O F Y C N E R R U C I N O T A L S N A R T ) 8 5 5 ( ) 6 8 9 , 1 4 ( ) 8 5 5 ( – – – 3 5 3 3 , 7 3 2 , 1 ) 7 7 2 7 4 , ( – – – – – – ) 6 8 9 , 1 4 ( – 0 0 0 $ ’ I G N G D E H E V R E S E R ) 4 2 2 6 , ( ) 4 2 2 6 , ( – 0 6 8 4 , 0 6 8 4 , – – – – – – 0 0 0 $ ’ D E U S S I I L A T P A C 0 2 4 5 3 2 , – 0 2 4 5 3 2 , – – – – – – – – 0 8 0 4 2 , d o i r e p e h t r o f e m o c n i i e v s n e h e r p m o c l a t o T d e t a t s e r 0 2 0 2 e n u J 9 2 t a e c n a a B l 1 d o i r e p e h t r o f t fi o r P d e t a t s e R e m o c n i i e v s n e h e r p m o c r e h t O t s u r t s n o i t p o e r a h S s e c i i l o p g n i t n u o c c a n i s e g n a h C 0 2 0 2 e n u J 9 2 t a e c n a a B l t s e r e t n i g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T n o i t p o t u p t s e r e t n i g n i l l o r t n o c - n o N i d a p r o r o f i d e d v o r p s d n e d v D i i e m e h c s e r a h s e e y o p m E l s t n e m y a p d e s a b - e r a h s f o n o i t i n g o c e R y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C l 2 2 0 2 y u J 3 0 d e d n e r a e y e h t r o F 138 // 2022 ANNUA L RE PORT DO MI N O’S PIZZA EN TERP RISES L IMITED. . s l i a t e d r o f 5 3 e o n o t t r e e r f , s t n e m e g n a r r a S a a S f o t n e m t a e r t g n i t n u o c c a e h t i l i i g n y f i r a c n o s c e d a d n e g a C R F I I n a f o n o i t a t n e m e p m l i . i t s e o n g n y n a p m o c c a e h t h t i w n o j i t c n u n o c n i d a e r e b d u o h s l t n e m e t a t S e v o b a e h T – – – , 6 1 7 8 5 1 , 6 1 7 8 5 1 ) 7 4 1 , 0 5 1 ( – – – – 7 4 3 7 4 3 ) 5 1 5 4 , ( – – – 0 8 0 8 3 , ) 7 7 7 3 , ( – – – – – – – ) 6 8 3 6 2 , ( ) 6 8 3 6 2 , ( , 3 9 5 4 9 2 2 4 6 6 2 1 , ) 2 3 6 8 1 ( , – 0 9 7 9 , 0 9 7 9 , – – – – – – – – – – – – – – 2 1 7 4 , 6 2 4 8 , , 2 1 2 4 6 2 d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i i e v s n e h e r p m o c r e h t O d o i r e p e h t r o f t fi o r P t s u r t s n o i t p o e r a h S s t s e r e t n i g n i l l o r t n o c - n o n h t i w s n o i t c a s n a r T e h t t c e fl e r o t d e t a t s e r n e e b s a h e v i t a r a p m o c e h T 1 l 2 2 0 2 y u J 3 0 t a e c n a a B l n o i t p o t u p t s e r e t n i g n i l l o r t n o c - n o N i d a p r o r o f i d e d v o r p s d n e d v D i i e m e h c s e r a h s e e y o p m E l s t n e m y a p d e s a b - e r a h s f o n o i t i n g o c e R 4 2 0 6 8 2 , , ) 7 7 7 6 5 1 ( 4 5 7 7 , ) 4 6 3 , 1 ( 0 0 5 9 5 2 , 1 2 0 2 e n u J 7 2 t a e c n a a B l Consolidated Statement of Cash Flows For the year ended 03 July 2022 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 6 Cash flows from investing activities Proceeds from franchisee loans 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 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 Proceeds from borrowings Repayment of borrowings Payments for establishment of borrowings Receipts from subleases Lease principal payments 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 Cash and cash equivalents at the end of the period 6 NOTE 2022 $’000 2021 RESTATED 1 $’000 2,509,130 2,412,797 (2,238,924) (1,975,804) 10,152 (17,026) (73,213) 190,119 37,487 (71,355) (120,713) 35,541 (35,105) (79,736) 601 9,451 (17,420) (55,773) 373,251 39,294 (44,272) (98,473) 29,688 (23,824) (1,218) 1,349 (233,280) (97,456) 1,286 875,307 (712,215) (4,165) 63,317 (123,331) (150,147) (49,948) (93,109) 174,689 (4,703) 76,877 20,923 176,207 (345,236) (217) 52,892 (112,489) (121,984) (329,904) (54,109) 245,678 (16,880) 174,689 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. The above Statement should be read in conjunction with the accompanying notes. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA ENT ERPRISES LI MITED. // 139 NOTES TO THE FINANCIAL STATEMENTS BASIS OF PREPARATION 141 FINANCIAL MANAGEMENT 21 BORROWINGS 22 FINANCIAL ASSETS 23 FINANCIAL LIABILITIES 24 FINANCIAL RISK MANAGEMENT GROUP STRUCTURE 25 SUBSIDIARIES 26 PARENT ENTITY INFORMATION 27 INVESTMENT IN JOINT VENTURE UNRECOGNISED ITEMS 28 COMMITMENTS 29 CONTINGENT LIABILITIES 30 SUBSEQUENT EVENTS OTHER INFORMATION 31 RETIREMENT BENEFIT PLANS 181 181 182 185 187 200 200 201 202 203 203 203 205 205 205 32 KEY MANAGEMENT PERSONNEL COMPENSATION 207 33 RELATED PARTY TRANSACTIONS 34 REMUNERATION OF AUDITORS 35 OTHER ITEMS 208 209 210 KEY NUMBERS 1 2 SEGMENT INFORMATION REVENUE 3 OTHER GAINS AND LOSSES 4 5 6 7 8 9 FINANCE INCOME EXPENSES CASH AND CASH EQUIVALENTS TAX ACQUISITION OF BUSINESSES PROPERTY, PLANT AND EQUIPMENT 10 LEASES 11 GOODWILL AND OTHER INTANGIBLES 143 143 145 147 147 147 148 150 154 157 159 162 12 TRADE, OTHER RECEIVABLES AND OTHER ASSETS 167 13 TRADE AND OTHER PAYABLES 14 PROVISIONS 15 INVENTORY CAPITAL 16 EQUITY 17 NON-CONTROLLING INTERESTS 18 DIVIDENDS 19 EARNINGS PER SHARE 20 SHARE-BASED PAYMENTS 169 169 171 171 171 174 175 176 177 140 // 2 022 AN NUA L RE PO RT DO MI N O’S PIZZA ENTERPR IS ES L IMITED. 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 Exchange 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 period ended 03 July 2022 comprised a 53-week period, where as the comparative year ended 27 June 2021 comprised a 52-week period. The financial report was authorised for issue in accordance with a resolution of the directors on 23 August 2022. 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 complies 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 24) and equity-settled share-based payments (refer to note 20). 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 28 June 2021 as listed in note 35; and • does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet effective. GOING CONCERN The financial statements have been prepared on the basis that the Group will continue as a going concern. The Group has a net current liability position of $229.3 million at 03 July 2022 (27 June 2021: net current liability position $84.1 million). Contributing to this position is the reclassification of the call option over non-controlling interest of $127.4 million to current as at 03 July 2022 as it has become exercisable within 12 months. As at 03 July 2022, the Group had unrestricted cash and cash equivalents of $76.9 million. The Group’s capital structure is sustainable with sufficient liquidity, including undrawn committed facilities of $230.3 million. The Directors have concluded that there are reasonable grounds to believe that the going concern basis is appropriate, and that assets are likely to be realised, and liabilities are likely to be discharged, at the amounts recognised in the financial statements in the ordinary course of business. BASIS OF CONSOLIDATION The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year-end is contained in note 25. Subsidiaries are entities over which the Group has control. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group using the acquisition method of accounting described in note 8. They are deconsolidated from the date that control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. In preparing the consolidated financial statements all inter-company balances and transactions, income and expenses and profits and losses resulting from intra-Group transactions have been eliminated. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA ENT ERPRISES L IMITED. // 141 FOREIGN CURRENCY The functional currency of Domino’s Pizza Enterprises Limited is Australian dollars (‘$’), the functional currencies of overseas subsidiaries are listed in note 25. 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. 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 to 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 11 Note 11 Note 11 Note 23 Note 29 KEY JUDGEMENTS AND ESTIMATES Master Franchise Rights & Franchise Network Assets Useful Lives of Other Intangible Assets Recoverable Amount of Cash Generating Units Germany Put Option Liability Legal and Regulatory Matters 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. 142 // 2022 AN NUA L R EPO RT DO M I NO’S PIZZA EN TER PRISES LIMIT ED. continuedNotes to the Financial Statements Notes to the Financial Statements 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 consolidated entity has identified its operating segments on the basis of internal reports about components of the consolidated entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. Information reported to the consolidated entity’s Chief Executive Officer for the purpose of resource allocation and assessment of performance is specifically focused on the geographical location the consolidated entity operates in. The consolidated entity’s reportable segments under AASB 8 are therefore as follows: • Australia/New Zealand (“ANZ”) • Europe • Asia1 The Unallocated segment represents corporate costs associated with the management and oversight of global functions which are shared by all jurisdictions in which the Group operates. 1 On 31 August 2021, the Group completed the acquisition of PizzaVest Company Limited (Domino’s Taiwan). Following the completion, the reporting segment “Japan” has been renamed “Asia”. The aggregate financial results of Domino’s Taiwan and Domino’s Japan have been reported in the renamed “Asia” segment. 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 Net finance costs Net profit before tax YEAR ENDED 03 JULY 2022 ANZ $’000 EUROPE $’000 ASIA (i) $’000 UNALLOCATED $’000 TOTAL $’000 782,469 149,950 (35,403) 114,547 704,163 118,130 (41,356) 76,774 802,636 140,395 (55,507) 84,888 – 2,289,268 (20,750) (1,366) (22,116) 387,725 (133,632) 254,093 (13,469) 240,624 (i) On 31 August 2021, the Group completed the acquisition of PizzaVest Company Limited (Domino’s Taiwan). Following the completion, the reporting segment “Japan” has been renamed “Asia”. The aggregate financial results of Domino’s Taiwan and Domino’s Japan have been reported in the renamed “Asia” segment. 20 22 AN N UAL RE PORT DO MI NO’S PI Z ZA E NTE R PRISES LIMI TED. // 143 1 SEGMENT INFORMATION (continued) Continuing operations Revenue EBITDA Depreciation & amortisation EBIT Net finance costs Net profit before tax YEAR ENDED 27 JUNE 2021 (RESTATED) 1 ANZ $’000 EUROPE $’000 ASIA (i) $’000 UNALLOCATED $’000 TOTAL $’000 756,581 153,462 (37,987) 115,475 665,125 123,598 (38,963) 84,635 777,400 163,024 (52,487) 110,537 – (22,688) (581) (23,269) 2,199,106 417,396 (130,018) 287,378 (13,769) 273,609 (i) On 31 August 2021, the Group completed the acquisition of PizzaVest Company Limited (Domino’s Taiwan). Following the completion, the reporting segment “Japan” has been renamed “Asia”. The aggregate financial results of Domino’s Taiwan and Domino’s Japan have been reported in the renamed “Asia” segment. 1 The comparatives have been restated to reflect the implementation of an IFRIC agenda decision, refer to note 35. Revenue reported above represents revenue generated from external customers and franchisees. There were no inter-segment sales during the period (2021: 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. 2022 Continuing operations ASSETS $’000 LIABILITIES $’000 2021 RESTATED 1 Continuing operations ASSETS $’000 LIABILITIES $’000 Australia/New Zealand 592,959 (848,620) Australia/New Zealand 590,034 (759,774) Europe Asia 849,978 (531,582) 976,759 (626,562) Europe Asia 842,885 (565,306) 918,754 (630,050) Total segment assets/(liabilities) 2,419,696 (2,006,764) Total segment assets/(liabilities) 2,351,673 (1,955,130) Unallocated 12,028 (3,003) Unallocated 736 (2,142) Consolidated assets/(liabilities) 2,431,724 (2,009,767) Consolidated assets/(liabilities) 2,352,409 (1,957,272) 1 The comparatives have been restated to reflect the implementation of an IFRIC agenda decision, refer to note 35. 144 // 2022 ANNUA L R E PORT D OM I NO’S PIZZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 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 2022 $’000 35,403 41,356 55,507 1,366 133,632 2021 RESTATED 1 $’000 37,987 38,963 52,487 581 130,018 2022 $’000 58,441 76,594 196,443 12,658 344,136 2021 RESTATED 1 $’000 51,042 57,990 100,597 – 2022 $’000 898,413 453,664 656,341 12,028 2021 RESTATED 1 $’000 440,451 714,824 741,644 736 209,629 2,020,446 1,897,655 Australia/New Zealand Europe Asia Unallocated 1 The comparatives have been restated to reflect the implementation of an IFRIC agenda decision, refer to note 35. 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. 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 INCOME ON FRANCHISEE LOANS AND CASH AND CASH EQUIVALENTS Interest income is recognised when it is probable that the economic benefits will flow to the Group and the amount of income 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. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 145 continuedNotes to the Financial Statements 2 REVENUE (continued) Revenue type Revenue from sale of goods Revenue from rendering of services Interest income Total Timing of revenue recognition At a point in time Over time Total Revenue type Revenue from sale of goods Revenue from rendering of services Interest income Total Timing of revenue recognition At a point in time Over time Total CONTRACT LIABILITIES YEAR ENDED 03 JULY 2022 ANZ $’000 EUROPE $’000 ASIA $’000 TOTAL $’000 558,409 508,466 690,498 1,757,373 221,621 2,439 195,431 266 110,111 2,027 527,163 4,732 782,469 704,163 802,636 2,289,268 579,246 203,223 782,469 524,550 700,126 1,803,922 179,613 704,163 102,510 485,346 802,636 2,289,268 YEAR ENDED 27 JUNE 2021 ANZ $’000 EUROPE $’000 ASIA $’000 TOTAL $’000 540,815 213,032 2,734 756,581 565,442 191,139 756,581 472,236 192,673 216 682,559 1,695,610 93,164 1,677 498,869 4,627 665,125 777,400 2,199,106 487,096 178,029 665,125 688,998 88,402 777,400 1,741,536 457,570 2,199,106 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 franchisee (collectively termed initial fees). 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, 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 over time on a straight-line basis which is determined with reference to the franchisee’s right to use and access 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 146 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA EN TERPRIS ES LIMIT ED. 2022 $’000 2021 $’000 3,134 15,775 18,909 3,105 16,066 19,171 continuedNotes to the Financial Statements 2 REVENUE (continued) Contract liabilities at the beginning of the period was $19.2 million (2021: $17.8 million). The Group recognised $4.3 million (2021: $3.7 million) of revenue related to contract liabilities. Management expects to recognise $3.1 million (2021: $3.1 million) related to deferred franchise fees during the next financial year. 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. 3 OTHER GAINS AND LOSSES Net gain on disposal of property, plant & equipment, goodwill and other non-current assets Net gain on disposal of leases Other Total other gains and losses 2022 $’000 28,140 3,505 485 32,130 2021 $’000 22,667 705 – 23,372 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 12). 4 FINANCE INCOME Finance income Total finance income Finance income relates to interest income on investment in lease assets. Refer to note 10. 2022 $’000 5,420 5,420 2021 $’000 4,824 4,824 5 EXPENSES RECOGNITION AND MEASUREMENT EMPLOYEE BENEFITS The Group’s accounting policy for liabilities associated with employee benefits is set out in note 14. The policy relating to share-based payments is set out in note 20. The majority of employees 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 Occupancy expenses relate to non-lease components of lease contracts and are recognised as an expense when they are incurred. DEPRECIATION AND AMORTISATION Refer to notes 9, 10 and 11 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. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 147 continuedNotes to the Financial Statements 5 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 Equipment operating costs Expenses relating to leases of low value assets Plant and equipment costs Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Amortisation of other assets Depreciation and amortisation expense Non-lease component occupancy expenses Occupancy expenses Interest on commercial bills and loans Amortisation of borrowing costs Interest expense on lease liabilities Finance costs NOTE 31 2022 $’000 381,148 12,056 1,071 (351) 2021 RESTATED 1 $’000 382,822 13,848 1,217 4,394 393,924 402,281 29,444 4,693 34,137 49,930 59,148 24,193 361 133,632 5,698 5,698 8,348 1,505 9,036 18,889 26,353 3,058 29,411 46,762 58,732 24,092 432 130,018 5,446 5,446 9,509 937 8,147 18,593 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. 6 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 from date of inception. 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 148 // 2 022 AN NUAL RE PO RT DO M IN O’S PIZZA ENTERPR IS ES L IMITED. 2022 $’000 76,877 76,877 2021 $’000 174,689 174,689 continuedNotes to the Financial Statements 6 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 joint venture 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 2022 $’000 166,732 (32,408) (351) 133,632 86 1,505 (8,011) 2021 RESTATED 1 $’000 193,648 (22,999) 4,394 130,018 (24) 937 8,811 261,185 314,785 (15,990) (3,708) (13,793) (44,004) 1,128 (11,710) 17,011 190,119 817 (2,446) (41) 42,609 1,856 10,848 4,823 373,251 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. NET DEBT RECONCILIATION 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 cash equivalents Gross debt – fixed interest rates Gross debt – variable interest rates Net debt 2022 $’000 2021 $’000 76,877 174,689 (32,035) – (615,823) (508,485) (570,981) (333,796) 76,877 174,689 (236,239) (373,243) (411,619) (135,242) (570,981) (333,796) 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 149 continuedNotes to the Financial Statements 6 CASH AND CASH EQUIVALENTS (continued) LEASE LIABILITIES DUE WITHIN 1 YEAR $’000 LEASE LIABILITIES DUE AFTER 1 YEAR $’000 BORROWINGS DUE WITHIN 1 YEAR $’000 BORROWINGS DUE WITHIN AFTER 1 YEAR $’000 CASH $’000 TOTAL $’000 Balances as at 29 June 2020 245,678 (105,203) (663,049) Cash flows Finance lease additions Foreign exchange adjustments Balances as at 27 June 2021 (54,109) – (16,880) 174,689 – (10,526) 6,296 112,489 (140,615) 39,683 (109,433) (651,492) (50,195) 50,195 – – – (659,057) (1,231,826) 118,834 227,409 – 31,738 (151,141) 60,837 (508,485) (1,094,721) LEASE LIABILITIES DUE WITHIN 1 YEAR $’000 LEASES LIABILITIES DUE AFTER 1 YEAR $’000 BORROWINGS DUE WITHIN 1 YEAR $’000 BORROWINGS DUE AFTER 1 YEAR $’000 CASH $’000 TOTAL $’000 Balances as at 28 June 2021 174,689 (109,433) (651,492) – (508,485) (1,094,721) Cash flows (93,109) – 123,331 (32,035) (131,057) (132,870) Lease liabilities additions – (17,945) (148,757) 5,074 30,204 – – – (166,702) 23,718 54,293 (122,304) (646,714) (32,035) (615,824) (1,340,000) Foreign exchange adjustments Balances as at 03 July 2022 (4,703) 76,877 7 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. 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. 150 // 2022 AN NUAL RE PORT DOM I NO’S PIZZA ENTERPR IS ES L IMITED. continuedNotes to the Financial Statements 7 TAX (continued) 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 $112,796 thousand (2021: $99,264 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 Adjustments recognised in the current year in relation to the current tax of prior years Deferred tax expense/(income) relating to the origination and reversal of temporary differences Deferred tax expense/(income) relating to the change in tax rate in other jurisdictions Total tax expense relating to continuing operations 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 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 different tax rates of subsidiaries operating in other jurisdictions Effect of change in tax rate in other jurisdictions Income tax expense recognised in profit or loss 2022 $’000 2021 RESTATED 1 $’000 62,479 3,857 66,336 8,367 (811) 73,892 73,725 39 73,764 8,567 (2,370) 79,961 2022 $’000 2021 RESTATED 1 $’000 240,624 273,609 72,187 454 (201) 4,077 (2,832) 1,018 (811) 73,892 82,083 1,238 (2,843) (210) 66 2,032 (2,405) 79,961 The tax rate used for the 2022 and 2021 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 2022 $’000 2021 $’000 (4,844) (185) (4,515) (9,544) (2,201) 295 3,353 1,447 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRIS ES LIMITED. // 151 continuedNotes to the Financial Statements 2022 $’000 1,234 1,234 2021 $’000 1,285 1,285 (17,571) (17,571) (28,988) (28,988) 7 TAX (continued) CURRENT TAX ASSETS AND LIABILITIES Current tax assets Income tax refund receivable Current tax liabilities Income tax payable DEFERRED TAX BALANCES 2022 Temporary differences OPENING BALANCE $’000 ACQUISITION $’000 CHARGED TO P&L $’000 CHARGED TO EQUITY $’000 EXCHANGE DIFFERENCE $’000 CLOSING BALANCE $’000 Property, plant & equipment (2,806) – Intangible assets (83,256) (10,872) Provision for employee entitlements Doubtful debts Other financial liabilities Options reserve Unearned income Other 8,929 604 4,334 4,924 4,671 3,002 31 – – – 49 21 Unused tax losses and credits (59,598) (10,771) 1,070 (3,357) 47 306 (3,515) (192) (1,478) (528) (7,647) – – (185) – (4,844) (4,515) – – 324 2,348 (482) (53) 18 – (17) (100) (1,412) (95,137) 8,340 857 (4,007) 217 3,225 2,395 (9,544) 2,038 (85,522) Tax losses 88 – 188 – (3) 273 (59,510) (10,771) (7,459) (9,544) 2,035 (85,249) Deferred tax asset Deferred tax liability – (85,249) (85,249) 152 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA ENTERPR IS ES L IMITED. continuedNotes to the Financial Statements 7 TAX (continued) 2021 RESTATED 1 Temporary differences OPENING BALANCE $’000 CHARGED TO P&L $’000 CHARGED TO EQUITY $’000 EXCHANGE DIFFERENCE $’000 CLOSING BALANCE $’000 Property, plant & equipment 205 (3,288) Intangible assets Provision for employee entitlements Doubtful debts Other financial liabilities Options reserve Unearned income Other Unused tax losses and credits Tax losses Deferred tax asset Deferred tax liability (87,700) 10,483 667 5,959 619 3,761 2,678 (63,328) 6,201 (57,127) 860 (885) (11) 631 952 1,003 535 (203) – – 295 – (2,201) 3,353 – – 277 3,584 (964) (52) (55) – (93) (211) (2,806) (83,256) 8,929 604 4,334 4,924 4,671 3,002 1,447 2,486 (59,598) (5,994) (6,197) – 1,447 (119) 2,367 88 (59,510) 7,810 (67,320) (59,510) 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 153 continuedNotes to the Financial Statements 8 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. 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. 154 // 2022 AN NUA L R EPO RT DO M IN O’S PIZZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 8 ACQUISITION OF BUSINESSES (continued) CURRENT YEAR ACQUISITIONS ACQUISITION OF DOMINO’S PIZZA TAIWAN PizzaVest Company Limited (Domino’s Taiwan) On 31 August 2021, the Group acquired through its 100% controlled subsidiary Taiwan Domino’s Pizza Co., Ltd, 100% of the issued share capital of PizzaVest Company Limited (“PizzaVest”). PizzaVest holds the franchise rights of Domino’s in Taiwan and also operates corporate stores in Taiwan. The acquisition is expected to expand the Group’s markets across Asia. 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. Assets Cash and cash equivalents Trade and other receivables Inventories Other assets Property, plant and equipment Other intangible assets Right-of-use assets Total identifiable assets Liabilities Trade and other payables Current tax liabilities Borrowings Lease liabilities Provisions Deferred tax liabilities Total identifiable liabilities Total identifiable net assets at fair value Total consideration Less identifiable net assets at fair value Goodwill Net cash outflow arising on acquisition Total consideration – cash Less: cash and cash equivalents FAIR VALUE $’000 6,188 7,035 2,101 661 1,867 54,589 3,509 75,950 12,799 1,074 10 3,627 308 10,771 28,589 47,361 85,630 (47,361) 38,269 85,630 (6,188) 79,442 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 155 continuedNotes to the Financial Statements 8 ACQUISITION OF BUSINESSES (continued) During the period, the Group finalised its acquisition of PizzaVest, with no revisions to the provisional acquisition accounting. Goodwill arose on 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 PizzaVest. These benefits are not recognised separately from goodwill because they do not meet the recognition criteria of identifiable intangible assets. In determining the fair value of assets arising from the acquisition of PizzaVest, judgements and estimates are required to be applied. Acquisition related costs of $1.4 million have been included as an expense in the consolidated statement of profit and loss. The revenue and results from continuing operations have been included in the Asia segment in note 1. In addition to the above, the Group paid $294 thousand relating to deferred consideration for a minor business acquisition which occurred in a prior period. 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. The below provides a summary of these acquisitions during the year by segment: 2022 Number of stores acquired Fair value on acquisition Inventories Property, plant & equipment Total identifiable net assets Cash consideration Less fair value of net identifiable assets Goodwill ANZ 37 EUROPE 23 ANZ $’000 EUROPE $’000 262 4,043 4,305 22,985 (4,305) 18,680 – 2,912 2,912 11,531 (2,912) 8,619 ASIA 1 ASIA $’000 – 255 255 255 (255) – TOTAL 61 TOTAL $’000 262 7,210 7,472 34,771 (7,472) 27,299 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. 156 // 2 022 ANN UA L RE PORT D OM I NO’S PIZZA EN TERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 8 ACQUISITION OF BUSINESSES (continued) PRIOR YEAR ACQUISITIONS 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: 2021 Number of stores acquired Fair value on acquisition Inventories Property, plant & equipment Other intangible assets Total identifiable net assets Cash consideration Less fair value of net identifiable assets Goodwill ANZ 32 EUROPE 10 ANZ $’000 EUROPE $’000 253 4,207 – 4,460 19,879 (4,460) 15,419 – 1,282 11 1,293 2,644 (1,293) 1,351 ASIA 4 ASIA $’000 – 364 – 364 364 (364) – TOTAL 46 TOTAL $’000 253 5,853 11 6,117 22,887 (6,117) 16,770 9 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. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER P RISES LIMITED. // 157 continuedNotes to the Financial Statements 9 PROPERTY, PLANT AND EQUIPMENT (continued) 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. 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. 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 03 July 2022 Cost or fair value Accumulated depreciation Net carrying amount Movement Opening net book amount Additions Acquisitions of Domino's Pizza stores and other businesses Acquisition of subsidiary Disposals and write-offs Depreciation charge Other including foreign exchange movements Net carrying amount at the end of the year Year ended 27 June 2021 Cost or fair value Accumulated depreciation Net carrying amount Movement Opening net book amount Additions Acquisitions of Domino's Pizza stores and other businesses Disposals and write-offs Depreciation charge Other including foreign exchange movements Net carrying amount at the end of the year There was no depreciation during the period that was capitalised as part of the cost of other assets. 158 // 2022 AN NUA L RE PO RT DO MI N O’S PIZ ZA ENTERPRIS ES LIMIT ED. PLANT & EQUIPMENT AT COST $’000 447,153 (173,682) 273,471 274,130 120,713 7,210 1,867 (68,258) (49,930) (12,261) 273,471 432,304 (158,174) 274,130 272,837 98,473 5,853 (37,010) (46,762) (19,261) 274,130 continuedNotes to the Financial Statements 10 LEASES GROUP AS A LESSEE The Group has lease contracts for various properties and equipment; including trucks and car equipment which is utilised in its operations. Leases of properties generally have lease terms of between 2 and 21 years, while operating equipment generally have lease terms between 2 and 7 years. The Group’s obligations under its leases are secured by the lessor’s title to the lease assets. The lease contracts include extension and termination options, which are further discussed below. For these properties, a right-of-use asset and associated liability is recognised. Leased trucks and cars are primarily Group branded vehicles utilised by Domino’s branded stores. The financial liability is measured at the net present value of future payments under the lease, including optional renewal periods, where the Group has assessed that the probability of exercising the renewal is reasonably certain. The right-of-use asset has been measured, at either: (a) the value of lease liability adjusted for any prepaid or accrued lease payments; or (b) present value of commitment lease payment since commencement of the lease term (this approach resulted in an adjustment to opening retained earnings). The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. The right-of-use assets are depreciated on a straight-line basis over the lease term, which is inclusive of extension option periods where the Group is reasonably certain the lease term will be extended. The lease terms range from 1 to 7 years for equipment (trucks and cars) leases and 2 to 21 years for property leases. The Group also has certain leases of equipment with lease terms of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low value assets’ recognition exemptions for these leases. The costs associated with the lease exemption is disclosed in note 5. At the end of each reporting period, the Group reviews the carrying amount of its right-of-use assets to determine whether there is any indication that those assets have suffered an impairment loss. Refer to note 9 which outlines Group’s accounting policy in regard to impairment assessment. Set out below are the carrying amounts of the right-of-use assets recognised and movements during the year: As at 28 June 2021 Acquisition of subsidiary Net additions (i) Depreciation expense Other including foreign exchange movement As at 03 July 2022 As at 29 June 2020 Net additions (i) Depreciation expense Other including foreign exchange movement As at 27 June 2021 PROPERTIES $’000 EQUIPMENT $’000 317,830 3,509 28,191 (49,302) (17,743) 282,485 349,949 48,948 (52,361) (28,706) 317,830 27,081 – 8,914 (9,846) (1,789) 24,360 29,044 7,607 (6,371) (3,199) 27,081 TOTAL $’000 344,911 3,509 37,105 (59,148) (19,532) 306,845 378,993 56,555 (58,732) (31,905) 344,911 (i) Additions include net movement between right-of-use assets and investment in lease assets which arises due to the Company’s occupied-operated properties becoming franchised. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 159 continuedNotes to the Financial Statements 10 LEASES (continued) Set out below are the carrying amounts of lease liabilities and the movements during the period: As at 28 June 2021 Acquisition of subsidiary Additions Accretion of interest Payments Other including foreign exchange movement As at 03 July 2022 Current Non-current Total lease liabilities As at 29 June 2020 Additions Accretion of interest Payments Other including foreign exchange movement As at 27 June 2021 Current Non-current Total lease liabilities 2022 $’000 760,925 3,627 163,075 9,036 (132,367) (35,278) 769,018 122,304 646,714 769,018 2021 $’000 768,252 151,141 8,147 (120,636) (45,979) 760,925 109,433 651,492 760,925 The maturity analysis of lease liabilities is disclosed in note 24. The amounts recognised in the profit and loss for the year are disclosed in note 4 and note 5. The future cash outflows relating to leases that have not yet commenced are disclosed in note 28. The average effective interest rate contracted is approximately 1.18% (2021: 1.07%) per annum. The Group has not recognised any variable payments in its finance lease arrangements. The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. Management exercises significant judgement in determining whether these extension and termination options are reasonably certain to be exercised. GROUP AS A LESSOR The Group has a portfolio of long-term (greater than one year) ‘back-to-back’ property leases which secure competitive store locations on behalf of franchisees. Cash flows under these arrangements substantially offset each other. These leases have terms of between 2 and 21 years. Leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. For back-to-back leases, a financial asset and financial liability is recognised, representing the present value of future cash flows receivable on the subleases and payable on the head lease respectively. Both categories of financial instruments generate interest income and expense, which materially offset within the income statement. 160 // 2 022 ANNUA L RE PORT DO M I NO’S PIZZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 10 LEASES (continued) The financial assets recognised in relation to back-to-back leases have been recognised as “Investment in lease assets” in the Statement of Financial Position. The receipts from these back-to-back leases are included in “Receipts from subleases” in the Statement of Cash Flows within the financing activities. Set out below are the carrying amounts of investment in lease assets and the movements during the period: As at 28 June 2021 Net additions Accretion of interest Receipts Other including foreign exchange movement As at 03 July 2022 Current Non-current Total investment in lease assets As at 29 June 2020 Net additions Accretion of interest Receipts Other including foreign exchange movement Total as at 27 June 2021 Current Non-current Total investment in lease assets Future minimum rentals receivable under non-cancellable operating leases as at the end of the year are as follows: Year 1 Year 2 Year 3 Year 4 Year 5 Onwards Undiscounted lease payments Less: unearned finance income Net investment in leases Current Non-current 2022 $’000 76,327 75,687 69,670 62,569 55,426 136,275 475,954 (21,398) 454,556 72,063 382,493 454,556 2022 $’000 407,797 125,646 5,420 (68,737) (15,570) 454,556 72,063 382,493 454,556 2021 $’000 382,391 92,896 4,824 (57,716) (14,598) 407,797 57,541 350,256 407,797 2021 $’000 63,353 62,574 61,759 56,420 50,312 135,090 429,508 (21,711) 407,797 57,541 350,256 407,797 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRISE S LIM ITED. // 161 continuedNotes to the Financial Statements 10 LEASES (continued) EXTENSION AND TERMINATION OPTIONS Extension and termination options are included in a number of property and equipment lease agreements across the Group. These options provide operational flexibility in managing the lease portfolio. The Group applies criteria to assess whether the exercise of extension options within lease contracts is reasonably certain, including consideration of tenure at existing location, the remaining useful life of the store, plant and equipment, remaining term of sub-franchise agreements (where applicable) and alignment to the assumptions used in the Group’s short to mid-term planning process. Future cash outflows in respect of leases may differ from leases liabilities recognised due to future decisions that may be taken by the Group that will determine whether the options are exercised in respect of the use of leased assets. There is no exposure to these potential additional payments in excess of the recognised lease liabilities until these decisions have been taken by the Group. The majority of the Group’s property leases have option periods or are able to be extended beyond the initial lease term which is at the Group’s (lessee) discretion. Lease option periods are typically for fixed terms of between 1 to 10 years. 11 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 or not yet available for use are tested for impairment. 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. 162 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 11 GOODWILL AND OTHER INTANGIBLES (continued) IMPAIRMENT The Group tests intangibles and goodwill for impairment: • at least annually for indefinite life intangibles and not yet ready for use 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 three-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 2022 financial year (2021: nil). 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 16 3 continuedNotes to the Financial Statements 11 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 (2022: $43.1m, 2021: $44.4m). In addition, the same treatment has been applied to the MFA and associated franchise agreements recognised on the acquisition of Domino’s Pizza Japan (2022: $37.7m, 2021: $41.3m) and Domino’s Pizza Taiwan of $54.1m (refer to note 8 regarding acquisition accounting). 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. 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 03 July 2022 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 Acquisitions through business combinations (see note 8) Disposals Other including foreign exchange movement Net carrying amount at the end of the year Year ended 27 June 2021 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 Other including foreign exchange movement Net carrying amount at the end of the year 164 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA EN TERPRIS ES LIMIT ED. GOODWILL $’000 485,707 – 485,707 456,091 27,299 38,269 (10,736) (25,216) 485,707 456,091 – 456,091 492,549 16,770 (13,344) (39,884) 456,091 continuedNotes to the Financial Statements 11 GOODWILL AND OTHER INTANGIBLES (continued) Year ended 03 July 2022 Cost FINITE LIFE INDEFINITE LIFE CAPITALISED DEVELOPMENT $’000 LICENSES AND OTHER $’000 OTHER INDEFINITE LIFE INTANGIBLES $’000 FRANCHISE NETWORK ASSET $’000 OTHER INTANGIBLE ASSETS TOTAL $’000 229,493 60,025 80,962 238,728 609,208 Accumulated amortisation and impairment (127,064) (31,792) – – (158,856) Net carrying amount 102,429 28,233 80,962 238,728 450,352 Movement Net carrying amount at the beginning of the year Additions Acquisitions through business combinations (see note 8) Remeasurement Disposals 86,935 37,139 231 – (432) 15,650 18,303 – – – Amortisation for the year (20,287) (3,906) 87,627 189,832 380,044 – – – 54,358 (2,190) – – – – – 55,442 54,589 (2,190) (432) (24,193) Other including foreign exchange movement (1,157) (1,814) (4,475) (5,462) (12,908) Net carrying amount at the end of the year 102,429 28,233 80,962 238,728 450,352 Year ended 27 June 2021 Restated 1 Cost 196,841 47,280 87,627 189,832 Accumulated amortisation and impairment (109,906) (31,630) – – 521,580 (141,536) Net carrying amount 86,935 15,650 87,627 189,832 380,044 Movement Net carrying amount at the beginning of the year Additions Acquisitions of Domino's Pizza stores and other businesses Remeasurement Disposals Amortisation for the year Other including foreign exchange movement Net carrying amount at the end of the year 85,419 24,395 11 – (515) (20,640) (1,735) 86,935 13,280 7,572 – – (383) (3,452) (1,367) 15,650 86,228 195,353 380,280 – – 8,474 – – – – – – – (7,075) (5,521) 31,967 11 8,474 (898) (24,092) (15,698) 87,627 189,832 380,044 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision, refer to note 35 for details. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 165 continuedNotes to the Financial Statements 11 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 (ANZ) • Europe market, which comprises: - - The Netherlands France & Belgium (FR) & (BE) - Germany (DE) • Asia market, which comprises: - - Japan (JP) Taiwan (TW) The carrying amount of goodwill and other indefinite life intangible assets is allocated to the following CGUs: Goodwill 2022 2021 Goodwill impairment 2022 2021 Indefinite life intangible assets 2022 2021 Indefinite life intangible assets impairment 2022 2021 ANZ $’000 FR & BE $’000 NL $’000 DE $’000 JP $’000 TW $’000 TOTAL $’000 80,209 53,739 10,683 80,274 222,730 38,072 485,707 71,178 47,720 10,968 82,414 243,811 – 456,091 – – – – – – – – – – – – 226 226 46,681 47,888 3,219 3,304 177,816 37,669 54,079 319,690 184,778 41,263 – 277,459 – – – – – – – – – – – – 166 // 2022 AN NUA L R EPO RT DO M I NO’S PIZZA ENTERPR IS ES L IMITED. continuedNotes to the Financial Statements 11 GOODWILL AND OTHER INTANGIBLES (continued) ESTIMATES AND JUDGEMENTS IN DETERMINING THE RECOVERABLE AMOUNT OF THE CASH GENERATING UNITS Key assumptions used in determining the recoverable amount of assets include future cash flows, long-term growth rates and discount rates. In assessing VIU, estimated cash flows are based on the Group’s most recent Board approved business plan covering a three year period. In forecasting the future cash flows changes in the macro-economic environment have been considered; including but not limited to continued impacts of the COVID-19 pandemic as it entered a new phase and the invasion of Ukraine by Russia which have impacted on the Group’s trading performance. Long-term growth rates are based on past experience, expectations of external market operating conditions, and other assumptions which take account of the specific features of each business unit. The recoverable amount has been determined using a VIU discounted cash flow model. In assessing VIU, the estimated future pre-tax cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and risk specific to the asset. Pre-tax discount rates used vary depending on country of operation. The rates used in determining the recoverable amount are set out below: Discount rate (post-tax) 2022 2021 Nominal terminal growth rates 2022 2021 ANZ FR & BE NL DE JP 10.4% 8.3% 2.5% 0.8% 9.8% 8.6% 1.7% 0.5% 9.0% 7.7% 1.6% 0.5% 8.9% 7.8% 1.2% 0.5% 8.3% 8.5% 0.2% 0.2% The judgments and estimates used in assessing impairment are best estimates based on current and forecast market conditions and are subject to change in the event of shifting economic and operational conditions. Actual cash flows may therefore differ from forecasts. 12 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 to 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, 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. FAIR VALUE Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 167 continuedNotes to the Financial Statements 12 TRADE, OTHER RECEIVABLES AND OTHER ASSETS (continued) 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. 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 Effect of foreign currency Balance at the end of the year 2022 $’000 170,956 (7,489) 124 163,591 2022 $’000 23,091 2,408 20,261 45,760 2022 $’000 5,756 6,330 (317) (4,009) (271) 7,489 2021 $’000 145,532 (5,756) 5,975 145,751 2021 $’000 18,524 1,067 15,551 35,142 2021 $’000 7,184 1,739 (1,021) (1,770) (376) 5,756 Included in the Group’s trade receivables balance are debtors with a carrying amount of $4,188 thousand (2021: $2,090 thousand), which are past due at the reporting date. 168 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 13 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 Goods and services tax (GST) / Value added tax (VAT) payable Other creditors and accruals Total trade and other payables 14 PROVISIONS RECOGNITION AND MEASUREMENT 2022 $’000 2021 $’000 195,934 5,813 102,229 303,976 242,850 13,929 89,449 346,228 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. 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 relates to claims that have been brought against the company by a number of former and current Pizza Sprint franchisees. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 169 continuedNotes to the Financial Statements 14 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; and future on-cost rates; and • experience of employee departures and period of service. NOTE 31 2022 $’000 19,634 7,281 3,514 30,429 21,559 8,870 30,429 MAKE GOOD $’000 LEGAL PROVISIONS $’000 2,297 – (407) (244) 1,646 78 346 – (160) 1,910 2,473 – (585) (77) 1,811 – – (105) (102) 1,604 2021 $’000 19,263 7,759 3,457 30,479 21,371 9,108 30,479 TOTAL $’000 4,770 – (992) (321) 3,457 78 346 (105) (262) 3,514 Employee benefits Defined benefit plan Other provisions Total provisions Current Non-current Total provisions OTHER PROVISIONS Balance at 29 June 2020 Recognised in profit or loss Reductions arising from payments Movements resulting from remeasurement Balance at 27 June 2021 Provision recognised on acquisition of subsidiary Recognised in profit or loss Reductions arising from payments Movements resulting from remeasurement Balance at 03 July 2022 170 // 2022 ANN UA L RE PORT DO M I NO’S PIZZA ENTER PRISES LIMIT ED. continuedNotes to the Financial Statements 15 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 2022 $’000 12,335 18,526 30,861 2021 $’000 9,004 16,951 25,955 There are no inventories (2021: nil) expected to be recovered after more than 12 months. Expenses relating to inventories are recorded under Food, equipment and packaging expenses. CAPITAL Capital provides information about the capital management practices of the Group. 16 EQUITY ISSUED CAPITAL 86,553,914 fully paid ordinary shares (27 June 2021: 86,523,365) 2022 $’000 2021 $’000 264,212 259,500 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 2022 2021 NUMBER OF SHARES ’000 SHARE CAPITAL $’000 NUMBER OF SHARES ’000 SHARE CAPITAL $’000 Balance at beginning of financial period 86,523 259,500 86,238 235,420 Shares issued: Issue of shares under executive share option plan 31 4,712 285 24,080 Balance at end of financial year 86,554 264,212 86,523 259,500 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 20. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRIS ES LIMITED. // 17 1 continuedNotes to the Financial Statements 16 EQUITY (continued) 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 30,549 options were exercised (2021: 285,075). A total of $4,711,872 was received as consideration for 30,549 fully paid ordinary shares of Domino’s Pizza Enterprises Limited on exercise of the options in the current financial year (2021: $24,080,211). 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 03 July 2022 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, Australian dollars, are recognised directly in other comprehensive income and accumulated in the foreign currency translation reserve. HEDGING RESERVE The hedging reserve represents hedging gains and losses recognised on the effective portion of net investment and cash flow hedges. OTHER RESERVES Executive Share and Option Plan 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 20 to the financial statements. The Group settled the Domino’s Pizza Enterprises Limited Employee Share Trust to manage the share option plan. Non-controlling Interests A component of the put option liability and non-controlling interest is recognised in Other Reserves. This is due to the Group’s adoption of the partial recognition of the non-controlling interest method of accounting for the put option liability and non-controlling interest. This accounting policy is disclosed in note 17 to the financial statements. 172 // 2022 ANNUAL RE PO RT DO MI N O’S PIZ ZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 16 EQUITY (continued) 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 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 policies Restated retained earnings Net profit attributable to members of the Company Payment of dividends Balance at the end of the year 2022 $’000 (18,632) 8,426 (126,642) (136,848) 2022 $’000 7,754 (26,386) (18,632) 2021 RESTATED 1 $’000 7,754 (1,364) (156,777) (150,387) 2021 RESTATED 1 $’000 49,740 (41,986) 7,754 2022 $’000 2021 RESTATED 1 $’000 (1,364) 4,258 10,376 (4,844) 8,426 (156,777) (3,777) 38,080 (4,515) 347 (6,224) 5,270 1,791 (2,201) (1,364) (113,532) 1,237 (47,277) 3,353 (558) (126,642) (156,777) 2022 $’000 286,024 – 286,024 158,716 (150,147) 294,593 2021 RESTATED 1 $’000 227,969 (4,438) 223,531 184,477 (121,984) 286,024 NOTE 18 1 The comparatives have been restated to reflect the implementation of an IFRIC agenda decision, refer to note 35 for details. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 17 3 continuedNotes to the Financial Statements 17 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. 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 NOTE 35 2022 $’000 2021 RESTATED 1 $’000 – – – (699) 8,016 (2,339) (4,978) – – (97) (97) 3,293 9,171 (2,850) (9,517) – 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. 174 // 202 2 ANN UA L RE PORT DO M I NO’S PIZZA EN TER PRISES LIMIT ED. continuedNotes to the Financial Statements 18 DIVIDENDS Recognised amounts Fully paid ordinary shares Interim dividend for half-year ended (i) Dividend for full year ended (ii) Unrecognised amounts Fully paid ordinary shares 2022 2021 CENTS PER SHARE TOTAL $’000 CENTS PER SHARE TOTAL $’000 88.4 85.1 173.5 76,514 73,633 150,147 88.4 52.6 141.0 76,487 45,497 121,984 Partially franked dividend for full year ended 68.1 58,943 85.1 73,631 (i) The interim dividend for half year ended was franked at 70% (2021: 50%). (ii) The dividend for full year ended was franked at 70% (2021: 70%). On 23 August 2022, the directors declared a final dividend of 68.1 cents per share to the holders of fully paid ordinary shares in respect of the financial year ended 03 July 2022, proposed to be paid to shareholders on 15 September 2022. The dividend will be paid to all shareholders on the Register of Members on 31 August 2022. The total estimated dividend to be paid is $58,943 thousand. FRANKED DIVIDENDS The franked portions of the final dividends determined after 03 July 2022 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 03 July 2022. Franking credits available for subsequent financial years based on a tax rate of 30% 2022 $’000 222 2021 $’000 12,710 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 for income tax and dividends after the end of the year. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 17 5 continuedNotes to the Financial Statements 19 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 2022 CENTS 183.4 2021 RESTATED 1 CENTS 213.3 DILUTED EARNINGS PER SHARE 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 2022 CENTS 183.0 2021 RESTATED 1 CENTS 212.5 2022 $’000 158,716 158,716 2021 RESTATED 1 CENTS 184,477 184,477 2022 NO.’000 86,548 2021 NO.’000 86,481 165 86,713 343 86,824 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. 176 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 20 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 adjustments 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 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. The following share-based payment arrangements were in existence during the current and comparative reporting period: 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER P RISES LIMITED. // 177 continuedNotes to the Financial Statements (29) (31) (32) (33) (34) (35) (36) (37) (38) (39) (40) (41) (42) (43) (44) TOTAL 2021 20 SHARE-BASED PAYMENTS (continued) OPTIONS GRANTED UNDER THE INCENTIVE PLANS Set out below are summaries of the performance options and rights granted in respect of the 2022 and 2021 financial years under the incentive plans: 2022 OPTION SERIES ISSUE & GRANT DATE EXPIRY DATE BALANCE AT START OF THE YEAR NUMBER GRANTED DURING AND IN RESPECT OF THE YEAR NUMBER EXERCISED DURING THE YEAR NUMBER LAPSED/ FORFEITED DURING THE YEAR NUMBER BALANCE AT END OF THE YEAR NUMBER EXERCISABLE AT END OF THE YEAR NUMBER 19 Apr 18 31 Aug 21 23 Jan 19 31 Aug 22 25 May 19 31 Aug 22 26 Nov 19 1 Sep 23 26 Nov 19 26 Nov 23 26 Nov 19 1 Sep 23 20 Aug 19 20 Aug 29 18 Aug 20 18 Aug 30 4 Nov 20 1 Sep 24 25 Nov 20 1 Sep 24 7 Jun 21 7 Jun 31 28 May 21 28 May 31 3 Nov 21 31 Aug 25 1 Oct 21 31 Oct 31 19 May 22 31 May 25 10,325 220,000 462,500 297,000 183,225 288,779 6,250 3,640 156,937 614,305 1,420 2,966 – – – – – – – – – – – – – – – 95,975 12,056 454,780 (10,325) – – (220,000) – – – – (15,750) (413,500) 33,250 33,250 – – – (3,872) (602) – – – – – – – – 297,000 (37,347) 145,878 (23,434) 265,345 – – – 2,378 3,038 156,937 (23,809) 590,496 – – – – – 1,420 2,966 95,975 12,056 454,780 – – – 2,378 3,038 – – – 2,966 – 12,056 – 2,247,347 562,811 (30,549) (718,090) 2,061,519 53,688 BALANCE AT START OF THE YEAR NUMBER GRANTED DURING AND IN RESPECT OF THE YEAR NUMBER EXERCISED DURING THE YEAR NUMBER LAPSED/ FORFEITIED DURING THE YEAR NUMBER BALANCE AT END OF THE YEAR NUMBER EXERCISABLE AT END OF THE YEAR NUMBER 200,000 64,500 220,000 541,750 147,000 220,000 626,000 297,000 183,225 294,092 6,250 – – – – – – – – – – – – – – – – 3,640 156,937 614,305 1,420 2,966 (200,000) (59,000) – (26,075) – – – – – – – – – – – – – (5,500) (220,000) (505,350) (147,000) – – – 10,325 – – 220,000 (163,500) 462,500 – – (5,313) – – – – – – 297,000 183,225 288,779 6,250 3,640 156,937 614,305 1,420 2,966 – – – 10,325 – – – – – – – – – – – – OPTION SERIES ISSUE & GRANT DATE EXPIRY DATE (26) (27) (28) (29) (30) (31) (32) (33) (34) (35) (36) (37) (38) (39) (40) (41) 1 Sep 16 1 Sep 16 8 Sep 17 19 Apr 18 14 Aug 18 31 Aug 20 31 Aug 20 31 Aug 21 31 Aug 21 31 Aug 21 23 Jan 19 31 Aug 22 25 May 19 31 Aug 22 26 Nov 19 1 Sep 23 26 Nov 19 26 Nov 23 26 Nov 19 1 Sep 23 20 Aug 19 20 Aug 29 18 Aug 20 18 Aug 30 4 Nov 20 1 Sep 24 25 Nov 20 1 Sep 24 7 Jun 21 7 Jun 31 28 May 21 28 May 31 TOTAL 2,799,817 779,268 (285,075) (1,046,663) 2,247,347 10,325 The weighted average exercise price at the date of the exercise of options during the 2022 financial year was $154.24 (2021: $84.47). The weighted average remaining contractual life of options outstanding at the end of the 2022 financial year was 2.14 years (2021: 2.27 years) 178 // 2022 ANNUA L R E PORT D OM I NO’S PIZZA EN TER PRIS ES LIMIT ED. continuedNotes to the Financial Statements 20 SHARE-BASED PAYMENTS (continued) FAIR VALUE OF SHARE OPTIONS GRANTED IN THE YEAR The weighted average fair value of the options granted during the 2022 year is $20.54 (2021: $12.87). 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 rights granted during 2022 financial year include: PERFORMANCE CONDITIONS Grant date share price Exercise price Expected volatility Option life years Dividend yield Risk-free interest rate SERIES 42 SERIES 44 $142.30 $127.09 35.0% $69.58 $69.58 40.0% 3.32 yrs 2.29 yrs 1.74% 0.89% 2.90% 2.26% Series 43 are zero exercise price options, therefore the options share price at date of grant approximates the options fair value. The model inputs for rights granted during 2021 financial year include: PERFORMANCE CONDITIONS Grant date share price Exercise price Expected volatility Option life years Dividend yield Risk-free interest rate SERIES 38 SERIES 39 $86.99 $84.28 35.3% 3.32 1.97% 0.12% $74.04 $84.28 35.5% 3.77 1.97% 0.12% Series 36 is a zero exercise price option, therefore the options share price at date of grant approximates the options fair value. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 17 9 continuedNotes to the Financial Statements 20 SHARE-BASED PAYMENTS (continued) SHARE OPTIONS EXERCISED DURING THE YEAR The following share options granted under the ESOP were exercised during the year: 2022 OPTION SERIES (36) Issued 20 August 2019 (29) Issued 19 April 2018 (36) Issued 20 August 2019 (37) Issued 18 August 2020 (32) Issued 25 May 2019 (36) Issued 20 August 2019 2021 OPTION SERIES (26) Issued 1 September 2016 (27) Issued 1 September 2016 (26) Issued 1 September 2016 (27) Issued 1 September 2016 (27) Issued 1 September 2016 (27) Issued 1 September 2016 (29) Issued 19 April 2018 (29) Issued 19 April 2018 NUMBER EXERCISED 1,888 10,325 700 602 15,750 1,284 NUMBER EXERCISED 100,000 6,500 100,000 30,000 17,500 5,000 15,750 10,325 EXERCISE DATE 25 August 2021 26 August 2021 31 August 2021 31 August 2021 6 September 2021 14 September 2021 EXERCISE DATE 20 August 2020 20 August 2020 21 August 2020 21 August 2020 25 August 2020 26 August 2020 1 September 2020 16 September 2020 SHARE PRICE AT EXERCISE DATE ($) $145.65 $148.50 $156.74 $156.74 $157.95 $164.98 SHARE PRICE AT EXERCISE DATE ($) $83.70 $83.70 $85.58 $85.58 $85.70 $85.79 $80.75 $81.38 180 // 2022 AN NUA L RE PORT D OM I NO’S PIZZA EN TERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 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. 21 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. Loans from other entities Loans from other entities (ii) Total from other entities Uncommitted Bank loans Total uncommitted borrowings Committed Bank loans (i) Total committed borrowings Current Non-current Total borrowings 2022 $’000 16,851 16,851 15,184 15,184 612,066 612,066 32,035 612,066 644,101 2021 $’000 24,371 24,371 – – 483,004 483,004 – 507,375 507,375 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) Relates to loans from Domino’s Pizza Group plc relating to the German joint venture. The unused facilities available on the Group’s bank overdraft are $5,717 thousand (2021: $5,795 thousand). For further information in respect of the Group’s borrowings, refer to note 24. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 181 continuedNotes to the Financial Statements 22 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. 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. 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. 182 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 22 FINANCIAL ASSETS (continued) 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 $74.0 million (2021: $44.9 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 12). 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. 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 Interest rate swaps Other Long-term store rental security deposits Total non-current financial assets Current Non-current Total financial assets 2022 $’000 2021 $’000 10,793 10,099 20,892 88,105 (490) 1,319 2,468 28,467 119,869 20,892 119,869 140,761 12,234 2,157 14,391 54,192 (62) – 2,217 26,129 82,476 14,391 82,476 96,867 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 183 continuedNotes to the Financial Statements 22 FINANCIAL ASSETS (continued) IMPAIRMENT 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 6.1% in Australia and New Zealand (2021: 6.7%), 6.0% in France (2021: 6.0%), 5.0% in the Netherlands (2021: 7.0%), 5.0% in Germany (2021: 5.0%) and 5.0% in Japan (2021: 5.0%). The Group applies the ‘general approach’ to measuring expected credit losses which uses a lifetime expected loss allowance if there has been no significant change in credit risk for franchisee loans where there has been a significant increase in credit risk. Otherwise it uses the 12-month expected credit loss. 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. 2022 $’000 98,898 (490) 98,408 2022 $’000 98,408 98,408 2022 $’000 62 862 (426) – (8) 490 2021 $’000 66,426 (62) 66,364 2021 $’000 66,364 66,364 2021 $’000 182 – (63) (54) (3) 62 Franchisee loans Allowance for doubtful loans Ageing of franchisee loans Amounts not yet due Movement in 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 184 // 2 022 AN NUAL RE PO RT DO M IN O’S PIZZA ENTERPR IS ES L IMITED. continuedNotes to the Financial Statements 23 FINANCIAL LIABILITIES RECOGNITION AND MEASUREMENT FINANCIAL LIABILITY AND EQUITY INSTRUMENTS CLASSIFICATION AS DEBT AND EQUITY Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement. 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. 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. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 185 continuedNotes to the Financial Statements 23 FINANCIAL LIABILITIES (continued) 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 Security deposits Market access right (i) Contingent consideration Put/call minority interest liability (ii) Other Total current financial liabilities Non-current Interest rate swaps Put/call minority interest liability (ii) Other Total non-current financial liabilities Current Non-current Total financial liabilities 2022 $’000 2021 $’000 220 – 12,428 – – 127,355 – 251 723 10,502 17,594 293 – 334 140,003 29,697 – – 511 511 140,003 511 140,514 704 164,444 1,941 167,089 29,697 167,089 196,786 (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. The put/call option has been reclassified to current as at 03 July 2022 as it has become exercisable within 12 months. FAIR VALUE OF DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS As described in note 24, 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 24. 186 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 24 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. 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 2022 $’000 647,858 (76,877) 570,981 421,957 135.3% 2021 RESTATED 1 $’000 508,485 (174,689) 333,796 395,137 84.5% 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. (i) Debt is defined as long-term and short-term borrowings, excluding capitalised borrowing costs, as detailed in note 21. (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 Other financial assets Amortised cost Deposits Amortised cost Investment in lease assets Amortised cost Interest rate swaps Derivative financial instrument Forward exchange contracts Derivative financial instrument (i) Interest rates represent the weighted average effective interest rate. 12 22 22 22 10 22 22 2022 2021 INTEREST RATE %(i) $’000 INTEREST RATE %(i) $’000 – 163,591 – 145,751 6.18 98,408 6.85 66,364 – – 2,468 28,467 – – 2,217 26,129 1.26 454,556 1.22 407,797 – – 1,319 10,099 – – – 2,157 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 187 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 2022 2021 FINANCIAL LIABILITIES CLASSIFICATION Trade and other payables Amortised cost Other financial liabilities Bank loans Amortised cost Amortised cost Loans from other entities Amortised cost Lease liabilities Market access right Put-option liability Contingent consideration Amortised cost FVOCI FVOCI FVPL Interest rates swaps Derivative financial instrument Foreign exchange contracts Derivative financial instrument (i) Interest rates represent the weighted average effective interest rate. FINANCIAL RISK MANAGEMENT NOTE INTEREST RATE %(i) $’000 303,976 12,939 627,250 16,851 – – 1.30 2.70 1.18 769,018 – – – – – – 127,355 – 220 – INTEREST RATE %(i) – – 1.65 2.70 0.93 – – – – – $’000 346,228 12,777 483,004 24,371 760,925 17,594 164,444 293 955 723 13 23 21 21 10 23 23 23 23 23 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; and • 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: Amount used Amount unused Total 188 // 2022 ANNUA L RE PORT DO MI N O’S PIZ ZA ENTER PR ISES L IMITED. 2022 $’000 – 5,717 5,717 2021 $’000 – 5,795 5,795 632,674 230,312 862,986 508,485 243,198 751,683 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) Uncommitted facilities, at call: Amount used Amount unused Total 2022 $’000 2021 $’000 15,184 35,859 51,043 – 55,385 55,385 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. 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. 03 JULY 2022 Financial assets Trade and other receivables Interest rate swap Loans receivable Cash and cash equivalents Other financial assets Investment in lease assets Foreign exchange contracts Deposits Financial liabilities Trade and other payables Derivative instruments in designated hedge accounting relationships Bank loans Loans from other entities Lease liabilities Put option liability Other financial liabilities LESS THAN 1 YEAR $’000 1–5 YEARS $’000 MORE THAN 5 YEARS $’000 163,591 – 10,793 76,877 – 72,063 10,099 – 1,319 87,615 – 2,468 – – – – – 250,699 131,794 – – 28,467 (303,976) (220) (15,184) (16,851) – – (612,066) – – – – – – – (122,304) (424,452) (222,262) (127,355) – – (12,939) – – 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 189 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 27 JUNE 2021 Financial assets Trade and other receivables Loans receivable Cash and cash equivalents Other financial assets Investment in lease assets Deposits Forward exchange contracts Financial liabilities Trade and other payables Derivative instruments in designated hedge accounting relationships Other bank loans Loans from other entities Finance lease liability Market access right Put option liability Contingent consideration Other financial liabilities Forward exchange contracts LESS THAN 1 YEAR $’000 1–5 YEARS $’000 MORE THAN 5 YEARS $’000 145,751 12,234 174,689 – – 54,130 – 2,217 – – – – 57,541 219,595 130,661 – – 26,129 2,157 (346,228) (251) – – – (704) (483,004) (24,371) – – – – – – (109,433) (410,068) (241,424) (17,594) – (293) (334) (723) – (164,444) – (12,443) – – – – – – The following table details the Group’s liquidity analysis for its 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. 2022 Net Settled Interest rate swaps Gross Settled Forward foreign exchange contracts – Inflow Forward foreign exchange contracts – (Outflow) LESS THAN 1 MONTH $’000 1–3 MONTHS $’000 3 MONTHS TO 1 YEAR $’000 1–5 YEARS $’000 – (220) – 1,319 10,172 (9,033) 1,139 23,739 (21,245) 2,494 86,142 (79,957) 6,185 – – – 190 // 2 022 ANNUA L RE PORT DO M I NO’S PIZZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 2021 Net Settled Interest rate swaps Gross Settled Forward foreign exchange contracts – Inflow Forward foreign exchange contracts – (Outflow) MARKET RISK NATURE OF FOREIGN CURRENCY RISK LESS THAN 1 MONTH $’000 1–3 MONTHS $’000 3 MONTHS TO 1 YEAR $’000 1–5 YEARS $’000 – – (251) (704) 12,427 (12,278) 149 20,952 (25,889) (4,937) 74,736 (68,514) 6,222 – – – The Group’s activities expose 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, Europe and Taiwan, which exposes the Group’s investments to movements in the AUD/NZD, AUD/JPY AUD/EUR and AUD/TWD exchange rates. The Group mitigates and manages the effect of its translational currency exposure by borrowing in NZ dollars, Japanese Yen, Euro and Taiwanese dollar. 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 swaps to mitigate rising interest rates and foreign exchange fluctuations • Debt to manage currency risk • Forward foreign exchange contracts to hedge the exchange rate risk of purchases 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 Taiwan Dollar ASSETS LIABILITIES 2022 $’000 20,418 75,774 129,059 18,237 2021 $’000 18,741 102,532 164,596 2022 $’000 (15,784) (457,774) 2021 $’000 (18,599) (541,411) (279,698) (283,431) – (102,680) – 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. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRISE S LIM ITED. // 191 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 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 2022 + 10% − 10% Actual 2021 + 10% − 10% EURO 0.65 0.72 0.59 0.64 0.70 0.57 JPY 92.2 101.42 82.98 84.17 92.59 75.75 NZD 1.10 1.21 0.99 1.07 1.18 0.97 TWD 20.40 22.44 18.36 – – – The Group’s exposure to changes in market interest rates relates primarily to the Group’s debt obligations that have floating interest rates. 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. 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; and • 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 2022 $’000 2021 $’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 16,960 (20,729) 13,246 (16,189) 192 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) NATURE OF INTEREST RATE RISK 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. 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 2022 $’000 (3,630) 474 2021 $’000 (1,824) 102 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. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 19 3 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 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. 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. 03 JULY 2022 Recurring fair value measurements Financial assets Interest rate swaps Foreign exchange contracts Total financial assets Financial liabilities Put option over non-controlling interest Interest rate swaps Total financial liabilities 27 JUNE 2021 Recurring fair value measurements Financial assets Foreign exchange contracts Total financial assets Financial liabilities Interest rate swaps Foreign exchange contracts Market access right Put option over non-controlling interest Contingent consideration Total financial liabilities There have been no transfers between Level 1 and Level 2. 194 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA EN TERPRIS ES LIMIT ED. LEVEL 1 $’000 LEVEL 2 $’000 LEVEL 3 $’000 TOTAL $’000 – – – – – – – – – – – – 1,319 10,099 11,418 – – – 1,319 10,099 11,418 220 220 2,157 2,157 955 723 – – 1,678 127,355 127,355 – 220 127,355 127,575 – – – – 17,594 164,444 293 182,331 2,157 2,157 955 723 17,594 164,444 293 184,009 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 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 $164.4 million and has a closing balance at year end of $127.4 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. 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 and the put option is exercisable on or after 1 January 2021. The call option is exercisable any time after 1 January 2023. 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 22 and 23 represent the derivative financial assets and liabilities of the Group, that are subject to the above arrangements and are presented on a gross basis. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 195 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 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. 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. 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 03 July 2022, the Group have interest rate swap agreements in place with a notional amount of ¥12 billion, whereby the Group receives a variable rate of interest of TIBOR and pays interest at a rate equal to 0.24% on the notional amount, with an expiration date of 24 August 2023. The swap is being used to hedge the exposure to changes in the fair value of its fixed rate secured loans. 196 // 2022 AN NUA L R EPO RT DO M I NO’S PIZZA ENTERPR IS ES L IMITED. continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) During the year the Group has executed additional interest rate swap agreements which commence on 24 August 2023 for the notional amount of ¥10 billion whereby the Group receives a variable rate of interest of TIBOR + 0% and pay interest at a rate equal to 0.17% on the notional amount. 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. The impact of the hedging instruments on the statement of financial position as at 03 July 2022 is, as follows: Interest Rate Swap Notional amount (Euro) Notional amount (AUD) Change in intrinsic value of outstanding hedging instrument since 28 June 2021 (AUD) Change in value of hedged item used to determine hedge effectiveness (AUD) Notional amount (JPY) (i) Notional amount (AUD) Notional amount (JPY) Notional amount (AUD) Change in intrinsic value of outstanding hedging instrument since 28 June 2021 (AUD) Change in value of hedged item used to determine hedge effectiveness (AUD) (i) Interest rate swap has an expiration date of 24 August 2023 2022 $’000 2021 $’000 – – – – 131,000 205,975 (10) 10 12,000,000 12,000,000 130,152 142,569 10,000,000 108,460 756 (1,099) – – (945) 945 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 the 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. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 197 continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 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 transaction 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 03 July 2022 is borrowings of $141,953 thousand, which has been designated as a hedge of the net investments in the Group’s European subsidiaries and $44,607 thousand, which has been designated as a hedge of the net investments in the Group’s Taiwanese 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 27 June 2021 (AUD) Change in value of hedged item used to determine hedge effectiveness (AUD) Notional amount (TWD) Carrying amount (AUD) Change in value of hedged item used to determine hedge effectiveness (AUD) HEDGING RESERVES The Group’s hedging reserves are disclosed in note 16. CREDIT RISK NATURE OF CREDIT RISK 2022 $’000 2021 $’000 92,667 141,953 3,750 (3,750) 910,000 44,608 509 92,667 145,702 (5,270) 5,270 – – – 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). 198 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 24 FINANCIAL RISK MANAGEMENT (continued) 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. Franchisees 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 has been assessed as high based on information on counterparty and historical counter party default. The carrying value of the Group’s trade, other receivables and loans are denominated in Australian dollars, NZ dollars, Japanese Yen, Euro and Taiwanese dollar. EXPOSURE The Group’s maximum credit exposure to current receivables, finance advances and loans are shown below: ANZ Europe Japan Taiwan Total 2022 $’000 109,006 53,740 93,102 6,332 262,180 2021 $’000 97,758 55,133 60,254 – 213,145 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 29. There are no significant concentrations of credit risk within the Group. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 199 continuedNotes to the Financial Statements GROUP STRUCTURE Group structure explains aspects of the Group structure and how changes have affected the financial position and performance of the Group. 25 SUBSIDIARIES Details of the Company’s subsidiaries at 03 July 2022 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) Impressu Print Group Pty Ltd (i) (ii) 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 (iii) N4N B.V. Domino's Pizza Belgium S.P.R.L Daytona Holdco Limited (UK) Daytona JV Limited (UK) Ausmark Holdco Limited Ausmark ApS Daytona Germany GmbH Domino's Pizza Deutschland GmbH Hallo Pizza GmbH DPEU Holdings S.A.S. Domino's Pizza France S.A.S. HVM Pizza S.A.R.L. Fra-Ma-Pizz 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. Taiwan Domino’s Pizza Co., Ltd PizzaVest Co., Ltd PLACE OF INCORPORATION AND OPERATION 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 Germany Germany Germany France France France France France France France France France France France Taiwan Taiwan PROPORTION OF OWNERSHIP AND VOTING POWER HELD FUNCTIONAL CURRENCY 2022 % 2021 % AUD AUD AUD AUD AUD AUD AUD AUD NZD NZD JPY EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR DKK EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR TWD TWD 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 50 100 100 67 100 100 67 67 67 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 50 100 100 67 100 100 67 67 67 100 100 100 100 100 100 100 100 100 100 100 100 – (i) This entity is a member of the tax-consolidated group where Domino’s Pizza Enterprises Limited is the head entity within the tax-consolidated group. (ii) Formally known as IPG Marketing Solutions Pty Ltd. (iii) Entities have been liquidated in the period. 200 // 2022 AN NUAL RE PO RT DO M IN O’S PIZZA ENTERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 26 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 Cashflow hedge reserve Total equity FINANCIAL PERFORMANCE Profit for the year Other comprehensive income Total comprehensive income 2022 $’000 2021 RESTATED 1 $’000 157,950 870,945 1,028,895 149,671 656,526 806,197 264,212 36,932 (81,279) 2,833 222,698 129,857 4,315 134,172 124,448 837,198 961,646 172,590 550,060 722,650 259,500 57,222 (76,244) (1,482) 238,996 148,802 405 149,207 1 The comparative has been restated to reflect the implementation of an IFRIC agenda decision clarifying the accounting treatment of SaaS arrangements, refer to note 35 for details. TAX CONSOLIDATED GROUP 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 25. 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 29 for further information regarding the contingent liabilities of the parent entity. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RISE S LIM ITED. // 201 continuedNotes to the Financial Statements 27 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. The joint venture terminated in December 2020. 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 3 February 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. 202 // 2022 AN NUAL R E PORT DO M I NO’S PIZZA ENTER PRISES L IMIT ED. continuedNotes to the Financial Statements 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. 28 COMMITMENTS The Group has various lease contracts that have not yet commenced as at 03 July 2022. The future lease payments for these non-cancellable lease contracts are $1,333 thousands within one year, $5,909 thousands within five years and $5,420 thousands thereafter. CAPITAL EXPENDITURE COMMITMENTS Plant and equipment Total 29 CONTINGENT LIABILITIES RECOGNITION AND MEASUREMENT 2022 $’000 7,851 7,851 2021 $’000 7,722 7,722 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 2022 $’000 8,848 8,848 2021 $’000 9,434 9,434 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 $3,230 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 have denied liability and are vigorously defending the claims. On 7 July 2014, the Court at first instance 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 SRP’s appeal 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 then filed an appeal from the decision in the main claim and in 2 local claims to the Cour de Cassation i.e. France’s highest court. In the main claim, the Cour de Cassation handed down its judgement on 15 January 2020 which found errors of law in the Court of Appeal decision and set aside parts of the Court of Appeal’s decision. On 20 December 2020, SRP filed a fresh appeal in the Court of Appeal and on 22 January 2021 provided DPF with a brief of evidence including new claims for compensation of €236 million. The referring appeal was heard on 5 January 2022. On 18 May 2022, the Court of Appeal issued a decision making no findings on the allegations and appointing an independent expert whose mission is to provide a report to inform the Court on the allegations. The report is expected to be provided to the Court by February 2023. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 203 continuedNotes to the Financial Statements 29 CONTINGENT LIABILITIES (continued) In the two local claims appealed to the Cour de Cassation, judgements were handed down on 7 July 2020 and 30 September 2020 which found errors of law and cancelled the Court of Appeal decisions. SRP initiated the referring appeals of these two local cases in April 2022 before the Court of Appeal of Paris and filed its briefs in June 2022. DPF is required to file its briefs by mid-August 2022 and the hearings are currently scheduled for 14 September 2022. For the sixth local claim, the Court found in favour of DPF at first instance on 27 September 2016, and SRP filed an appeal from this decision to the Court of Appeal. On 30 January 2018, the Court of Appeal dismissed SRP’s appeal. The two SRP franchisees then appealed to the Cour de Cassation which dismissed their appeal on 29 January 2020. The seventh local claim was heard by the Commercial Court of Nanterre at first instance on 15 January 2021. On 12 April 2021, the First President of the Court of Appeal of Versailles handed down a decision transferring the case to the Commercial Court of Versailles, on the request of the President of the Commercial Court of Nanterre. The case will have to be heard again at first instance before the Commercial Court of Versailles. No hearing date has been set. DPE denies all claims made and is vigorously defending the proceedings brought against it. DPE is confident of its legal position. Accordingly, no provision has been recognised as at 03 July 2022. 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 (Relevant Pizza Sprint Franchisees) whom allege a significant imbalance in the rights and obligations by the franchisor (Franchisees’ Proceedings). 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 the Relevant Pizza Sprint Franchisees have been settled on a commercial basis. The French Ministry for the Economy and Finance (Ministry) also brought proceedings (Ministry Proceedings) involving the same facts against Fra-Ma Pizz SAS, Pizza Center France SAS and Domino’s Pizza France SAS (collectively, DPF Companies). The Ministry Proceedings are being defended by the DPF Companies. The Relevant Pizza Sprint Franchisees sought to join the Franchisees’ Proceedings to the Ministry Proceedings. The request was rejected by the court on 15 February 2018. On 24 June 2019, the Franchisees’ Proceedings and Ministry Proceedings were heard separately. On 22 October 2019, a decision was made in relation to the Ministry Proceedings which did not result in any fine or financial charges against any of the DPF Companies. The Ministry has appealed the decision and the Relevant Pizza Sprint Franchisees have also filed an appeal in support. The appeal has been heard on 15 September 2021 and the Appeal court handed down its decision on 5 January 2022. Fra-Ma Pizz, Pizza Center France and Domino’s Pizza France were ordered to pay a €500k fine to the French Ministry for the Economy and Finance, €60k to six former Sprint franchisees and €20k in procedural costs. Fra-Ma Pizz, Pizza Center France and Domino’s Pizza France filed an appeal to the Cour de Cassation. Five decisions in the Franchisees’ Proceedings were handed down on 3 December 2019 and the remaining four decisions were handed down on 31 January 2020. Fra-Ma Pizz SAS and Domino’s Pizza France SAS were ordered to pay a total amount of €3 million to certain Relevant Pizza Sprint Franchisees. Various appeals have been filed by the DPF Companies, on the one hand, and separately by some of the Relevant Pizza Sprint Franchisees, on the other, with the Paris Court of Appeal. The appeals are currently scheduled to be heard on 23 November 2022. CLASS ACTION On 24 June 2019, Riley Gall, as the lead applicant, commenced a representative proceeding (class action) against the Company in the Federal Court of Australia on behalf of an alleged group comprising some Australian franchisee employees who were employed as delivery drivers or in-store workers between 24 June 2013 and 23 January 2018. The statement of claim alleges that the Company misled its franchisees who, in reliance on the Company’s representations and conduct, paid their delivery drivers and in-store workers in accordance with a number of industrial instruments rather than under the Fast Food Industry Award 2010. The Company rejects the allegations and has been defending the action vigorously. A defence denying the allegations was filed and an application to have the statement of claim (or parts thereof) struck out was heard on 9 June 2020. On 13 April 2021, the Federal Court dismissed that application, and at that time the parties were engaged in a referral before a Registrar of the Federal Court regarding discovery. As a result of that referral process the parties amended their pleadings which were filed in August and September 2021. The parties exchanged lay evidence between February and May 2022. Mediation occurred in June 2022 without resolution of the proceeding. Gall’s expert evidence has been submitted and the Company’s is due in September 2022. The trial of Gall’s claim is currently scheduled to commence in November 2022. 204 // 2022 ANNUA L RE PORT D OM I NO’S PIZZA EN TERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 29 CONTINGENT LIABILITIES (continued) The statement of claim does not quantify any loss by Gall or the alleged group and at this stage of the proceeding it is not possible for the Company to determine with accuracy or reliability any potential obligation or financial impact arising from the alleged damages claimed in the proceeding. The quantum of loss alleged with respect to group members other than Gall will not be determined during the trial in November 2022. Instead, alleged group member loss will be dealt with by the Court at a later hearing if Gall is successful at trial. 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 03 July 2022 and unless specific provisions have been made, are of the opinion that no material contingent liability for such claims of litigation exist. 30 SUBSEQUENT EVENTS ACQUISITION OF DOMINO’S PIZZA BUSINESSES IN MALAYSIA, SINGAPORE AND CAMBODIA On the 24 August 2022 the Group has entered into a binding agreement with Mikenwill (M) Sdn Bhd, Impress Foods Pte Ltd and minority shareholders to acquire 100% interests in the Domino’s Pizza businesses in Malaysia, Singapore and Cambodia. The acquisition aligns with the Group’s twin-region strategy, focused on Europe and Asia-Pacific. The initial purchase price is 660 million Malaysian ringgit (equivalent to AUD 214 million), with a contingent earn out payment to be determined over the next two to three years for a maximum of 440 million Malaysian ringgit (equivalent to AUD 142 million). The acquisition is expected to generate synergies through leveraging the Group’s existing digital, operational, franchising and marketing expertise. The acquisitions are subject to conditions precedents and regulatory approvals and will be funded through cash and debt facilities. The financial effects of this transaction have not been recognised at 03 July 2022, other than acquisition-related costs which has been expensed in the statement of the consolidated statement of profit or loss for the year ending 03 July 2022. OTHER EVENTS On 23 August 2022, the directors declared a final dividend for the financial year ended 03 July 2022 as set out in note 18. Other than the above, there has been no further matters or circumstances 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. OTHER INFORMATION 31 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); and • Net interest expense or income; and • Re-measurement. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 205 continuedNotes to the Financial Statements 31 RETIREMENT BENEFIT PLANS (continued) 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 The Group operates an unfunded retirement benefit plans where a lump-sum amount is paid out to eligible full-time employees of Domino’s Pizza Japan and Domino’s Pizza Taiwan 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 will increase the plan liability by reducing the discount rate; and • 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. The most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out at 03 July 2022 by Mr. K. Taniguchi, 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 loss/(gain) recognised in the period Components of defined benefit costs recognised in other comprehensive income Total 206 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA ENTERPR IS ES L IMITED. 2022 0.68% 1.95% 743 4.9 yrs 7.15 yrs 2022 $’000 1,062 9 1,071 (532) (532) 539 2021 0.07% 1.93% 649 4.2 yrs 5.2 yrs 2021 $’000 1,210 7 1,217 853 853 2,070 continuedNotes to the Financial Statements 31 RETIREMENT BENEFIT PLANS (continued) Of the expense for the year, an amount of $1.0 million has been included in profit or loss as administration expenses (2021: $1.2 million). Movements in the present value of the defined benefit obligation in the current year were as follows: Opening defined benefit obligation Acquisition of subsidiary 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 2022 $’000 7,759 146 1,062 9 (532) (461) (702) 7,281 2021 $’000 7,710 – 1,210 7 853 (797) (1,224) 7,759 The Group expects to make a contribution of $1.4 million (2021: $1.3 million) to the defined benefit plans during the next financial year. 32 KEY MANAGEMENT PERSONNEL COMPENSATION Short-term employee benefits Post-employment benefits Other long-term employee benefits Equity settled share-based payments Total 2022 $ 5,926,134 247,269 (100,467) 2021 $ 7,474,224 208,624 77,848 419,759 2,376,928 6,492,695 10,137,624 The remuneration of directors and key executives is determined by the Nomination, Culture and Remuneration Committee having regard to the performance of individuals and market trends. During the year independent remuneration consultants were engaged by the Nomination, Culture and 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 2022 financial year. Payment of $194,783 (2021: $102,330) 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. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITE D. // 207 continuedNotes to the Financial Statements 33 RELATED PARTY TRANSACTIONS EQUITY INTEREST IN SUBSIDIARIES Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 25 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 32 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 20 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 $56,062 was paid or payable to Mr Michael Cowin during the year ended 03 July 2022. TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL OF DOMINO’S PIZZA ENTERPRISES LIMITED Comgroup Supplies Pty Ltd, Comgroup NZ Limited T/A Franklin Foods, Markwell Pacific Marketing Pty Ltd, PMFresh Pty Ltd and Shore Mariner Ltd are entities associated with Mr Jack Cowin, which supply food products to the Group on commercial arm’s length terms. The entities were selected as preferred suppliers after competitive tender processes in which Mr Cowin had no involvement. During the year the Group made purchases and had outstanding balances as at 03 July 2022 as follows: ENTITY Comgroup Supplies Pty Ltd and Comgroup NZ Limited (T/A Franklin Foods) Markwell Pacific Marketing Pty Ltd PMFresh Pty Ltd (i) Shore Mariner Ltd PURCHASES (EXCLUDING GST) 2022 PURCHASES (EXCLUDING GST) 2021 OUTSTANDING BALANCE 2022 OUTSTANDING BALANCE 2021 $22,813,184 $16,170,049 $4,343,394 $2,833,688 $501,716 $1,356,936 $795,995 $871,707 $1,872,534 $603,577 – – $37,807 $116,747 $369,927 $345,921 (i) PM Fresh Pty Ltd ceased to be a related party on 1 April 2022 but was a supplier to DPE for the full financial year. The amounts in the table represent the purchases up to and including 31 March 2022. In addition, the Group received sponsorship contributions to the Company’s annual franchising rally and rebates from Comgroup Supplies Pty Ltd for $55,000 (2021: $119,323), from PMFresh Pty Ltd for $132,231 (2021: $25,000), from Markwell Pacific Marketing Pty Ltd for $500 (2021: $5,500) and from Shore Mariner Ltd for $nil (2021: $142,626). The Group did not recognise any bad or doubtful debts associated with the above purchases and sponsorship contributions. The Group and Competitive Foods Australia Pty Ltd (CFAL), an entity associated with Mr Jack Cowin, acquire television media services from unrelated third party service providers under a joint venture arrangement and receive volume pricing benefits. The Group does not receive or provide any other benefits to CFAL under the joint venture. 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. 208 // 2 022 ANNUA L R E PORT DO M I NO’S PIZZA ENTER PR ISES L IMITED. continuedNotes to the Financial Statements 33 RELATED PARTY TRANSACTIONS (continued) 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 25 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 03 July 2022 is $6,560,857 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. 34 REMUNERATION OF AUDITORS The auditor of Domino’s Pizza Enterprises Limited is Deloitte Touche Tohmatsu. GROUP AUDITOR (i) Audit or review of financial reports: Audit of the parent company Audit of subsidiaries and other entities Total audit services Other assurance and agreed-upon procedures under other legislation or contractual agreements (ii) Total assurance services Tax consulting services (iii) Due diligence services Digital advisory services (iv) Other advisory services Total other services 2022 $ 2021 $ 563,500 879,376 1,442,876 71,392 71,392 116,400 20,000 – 24,890 161,290 538,959 862,498 1,401,457 63,175 63,175 153,583 137,500 37,718 37,420 366,221 Total Group auditor's remuneration 1,675,558 1,830,853 (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 monitoring and whistleblower services payable to the parent company auditor. (iii) Taxation services relate to tax compliance services and tax advisory services paid to related overseas practices of the parent company auditor. (iv) Principally relate to digital advisory services payable to the parent company auditor. 20 22 AN N UAL RE PORT DO MI NO ’S PI ZZA E NT ER PRISES LIMITED. // 209 continuedNotes to the Financial Statements 35 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 28 June 2021 and therefore relevant for the current year end. In April 2021, the IFRS Interpretations Committee (IFRIC) published its decision clarifying how an entity should account for configuration and customisation costs incurred in implementation of a specific part of cloud technology, Software as a Service (SaaS). IFRIC concluded that these costs should be expensed, unless the criteria for recognising a separate asset is met. Based on the observation made in IFRIC’s agenda decision, the Group concluded costs an organisation incurs in relation to the configuration and customisation of SaaS platforms does not meet the criteria for recognition as intangible assets, as the supplier of the software and not the organisation, controls the software. As a result, these costs should be immediately expensed as incurred. Under the Group’s previous accounting policy, these costs were capitalised and amortised on a straight-line basis over the length of time the benefits were expected to be received (refer to note 11). The Group has updated its accounting policy to comply with the IFRIC agenda decision, and applied AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, to reflect this change. The Group has retrospectively changed its accounting policy in respect to SaaS arrangements previously recorded as intangible assets, on the basis that these do not meet the recognition criteria in AASB 138 Intangible Assets. The Group’s revised accounting policy is outlined below: IT Development and Software Costs incurred in developing systems and acquiring software that will contribute future benefits and which the Group controls are capitalised until the software is capable of operating in the manner intended by management. These include external direct costs of materials and services and direct payroll and payroll related costs of employees’ time spent on the project. Configuration and customisation costs related to Software as a Service that does not meet the recognition criteria of an intangible asset are expensed as incurred. In applying the Group’s accounting policy, the directors have made the following key judgements that may have the most significant effect on the amounts recognised in the financial statements. Capitalisation of configuration and customisation costs in SaaS arrangements Part of the customisation and configuration activities undertaken in implementing SaaS arrangements may entail the development of software code that enhances or modifies, or creates additional capability to existing on-premise software to enable connection with the cloud-based software applications (referred to as bridging modules or APIs). Judgement was applied in determining whether the additional code meets the definition of and recognition criteria for an intangible asset in AASB 138 Intangible Assets. Determining whether configuration and customisation services are distinct from the SaaS access Costs incurred to configure or customise the cloud providers applicable software is expensed when the services are received. In a contract where the cloud provider provides both the SaaS configuration and customisation, and the SaaS access over the contract term, the directors have applied judgement to determine whether these services are distinct from each other or not, and therefore, whether the configuration and customisation costs incurred are expensed as the software is configured or customised (i.e upfront), or over the SaaS contract term. Specifically, where the configuration and customisation activities significantly modify or customise the cloud software, these activities will not be distinct from the access to the cloud software over the contract term. Judgement has been applied in determining whether the degree of customisation and modification of the cloud-based software would be deemed significant. 210 // 2022 ANNUAL RE PORT DOM I NO’S PIZZA EN TERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 35 OTHER ITEMS (continued) The following table summarises the impact of this change in accounting policy on the Consolidated Financial Statements. ADJUSTMENTS TO COMPARATIVE INFORMATION STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME (EXTRACT) FOR THE PERIOD ENDING 27 JUNE 2021 27 JUNE 2021 PRIOR PERIOD $’000 Employee benefits expense Depreciation and amortisation expense Communication expenses Profit before tax Income tax expense Profit from the period from continuing operations Profit is attributable to: Owners of the parent Non-controlling interest Total profit for the period Total comprehensive income for the period is attributable to: Owners of the parent Non-controlling interest Total comprehensive income for the period EARNINGS PER SHARE Basic (cents per share) Diluted (cents per share) STATEMENT OF FINANCIAL POSITION (EXTRACT) AS AT 27 JUNE 2021 Assets Total current assets Deferred tax assets Intangible assets Total non-current assets Total assets Liabilities Total current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Reserves Retained earnings Total equity IMPACT $’000 (1,014) 1,831 (145) 672 (167) 505 466 39 505 466 39 505 27 JUNE 2021 RESTATED $’000 (399,331) (130,018) (32,976) 273,609 (79,961) 193,648 184,477 9,171 193,648 146,793 6,321 153,114 (398,317) (131,849) (32,831) 272,937 (79,794) 193,143 184,011 9,132 193,143 146,327 6,282 152,609 27 JUNE 2021 CENTS INCREASE/ (DECREASE) 27 JUNE 2021 RESTATED CENTS 212.8 211.9 0.5 0.6 213.3 212.5 27 JUNE 2021 PRIOR YEAR $’000 INCREASE/ (DECREASE) $’000 27 JUNE 2021 RESTATED $000 454,754 7,818 385,797 1,903,416 2,358,170 538,822 69,051 1,420,181 1,959,003 – (8) (5,753) (5,761) (5,761) – (1,731) (1,731) (1,731) 454,754 7,810 380,044 1,897,655 2,352,409 538,822 67,320 1,418,450 1,957,272 399,167 (4,030) 395,137 (150,329) 289,996 399,167 (58) (3,972) (4,030) (150,387) 286,024 395,137 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RPRISE S LIM ITED. // 211 continuedNotes to the Financial Statements 35 OTHER ITEMS (continued) STATEMENT OF FINANCIAL POSITION (EXTRACT) AS AT 28 JUNE 2020 28 JUNE 2020 PRIOR YEAR $’000 INCREASE/ (DECREASE) $’000 28 JUNE 2020 RESTATED $’000 Assets Total current assets Deferred tax assets Intangible assets Total non-current assets Total assets Liabilities Total current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Reserves Retained earnings Total equity 522,399 6,005 386,705 1,948,706 2,471,105 535,659 65,022 1,542,073 2,077,732 – (8) (6,425) (6,433) (6,433) 522,399 5,997 380,280 1,942,273 2,464,672 – 535,659 (1,898) (1,898) (1,898) 63,124 1,540,175 2,075,834 393,373 (4,535) 388,838 (70,016) 227,969 393,373 (97) (4,438) (4,535) (70,113) 223,531 388,838 STATEMENT OF CHANGES IN EQUITY (EXTRACT) Total equity at 29 June 2020 Profit for the period Total comprehensive income Total equity at 27 June 2021 27 JUNE 2021 PRIOR YEAR $’000 393,373 193,143 152,609 399,167 STATEMENT OF CASH FLOWS (EXTRACT) FOR THE PERIOD ENDING 27 JUNE 2021 27 JUNE 2021 $’000 IMPACT $’000 27 JUNE 2021 RESTATED $’000 (4,535) 388,838 505 505 (4,030) 193,648 153,114 395,137 IMPACT $’000 27 JUNE 2021 RESTATED $’000 Payments to suppliers and employees (1,974,645) (1,159) (1,975,804) Net cash generated from operating activities Payments for intangible assets Net cash used in investing activities Net cash used from financing activities Net (decrease)/increase in cash and cash equivalents 374,410 (45,431) (98,615) (329,904) (54,109) (1,159) 1,159 1,159 – – 373,251 (44,272) (97,456) (329,904) (54,109) 212 // 2022 ANNUA L RE PO RT DOM I NO’S PIZZA EN TERPRIS ES LIMIT ED. continuedNotes to the Financial Statements 35 OTHER ITEMS (continued) STANDARDS AFFECTING PRESENTATION AND DISCLOSURE AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 The amendment to AASB 4 Insurance Contracts, AASB 9 Financial Instruments, AASB 139 Financial Instruments: Recognition and Measurement, AASB 7 Financial Instruments: Disclosures and AASB 16 Leases address issues that may affect financial reporting during interest rate benchmark reform, including the effect of changes to contractual cash flows or hedging relationships resulting from the replacement of an interest rate benchmark with an alternative benchmark rate. The adoption of these amendments did not have any impact on the amounts recognised in prior periods. The Group is unable to assess what impact these amendments (if any) will have on future reporting periods. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED Certain new accounting standards and interpretations have been published that are not mandatory for 03 July 2022 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 2020-2 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current and AASB 2020-6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current – Deferral of Effective Date The amendments to AASB 101 affect on the presentation of liabilities as current or non-current in the statement of financial position and not the amount or timing of recognition of any assets, liability, income or expenses, or the information disclosed about those items. Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16 In May 2020, the IASB issued Property, Plant and Equipment – Proceeds before Intended Use, which prohibits entities deducting from the cost of an item of property, plant and equipment, any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 and must be applied retrospectively to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented when the entity first applies the amendment. The amendments are not expected to have a material impact on the Group. Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 In May 2020, the IASB issued amendments to IAS 37 to specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. IFRS 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities As part of its 2018-2020 annual improvements to IFRS standards process the IASB issued amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 213 continuedNotes to the Financial Statements The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The Group will apply the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendments are not expected to have a material impact on the Group. AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction The amendments introduce a further exception from the initial recognition exemption. Under the amendments, an entity does not apply the initial recognition exemption for transactions that give rise to equal taxable and deductible temporary differences. Depending on the applicable tax law, equal taxable and deductible temporary differences may arise on initial recognition of an asset and a liability in a transaction that is not a business combination and affects neither accounting nor taxable profit. For example the corresponding right-of-use asset applying AASB 16 at the commencement date of a lease. Following the amendments to AASB 112, an entity is required to recognise the related deferred tax asset and liability, with the recognition of any deferred tax asset being subject to the recoverability criteria in AASB 112. The amendments are not expected to have a material impact on the Group. 214 // 2022 AN NUA L R EPO RT DO M I NO’S PIZZA EN TER PRISES LIMIT ED. continuedNotes to the Financial Statements Additional Securities Exchange Information Number of Holders of Equity Securities as at 08 August 2022 ORDINARY SHARE CAPITAL • 86,553,914 fully paid ordinary shares are held by 16,258 individual shareholders. • All issued ordinary shares carry one vote per share, however partly paid shares do not carry the rights to dividends. OPTIONS • 2,061,519 options are held by 112 individual option holders. • Options do not carry a right to vote. DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES FULLY PAID ORDINARY SHARES % OF SHARE- HOLDERS NUMBER OF SHARES HELD 80,529,936 1,636,247 479,803 1,494,674 2,413,254 0.17 0.33 0.42 4.73 94.35 100 86,553,914 % OF ISSUED SHARES 93.04 1.89 0.55 1.73 2.79 100 NUMBER OF OPTION HOLDERS % OF ISSUED OPTIONS 4 34 23 42 9 112 43.96 42.19 7.79 5.74 0.32 100 100,001 and over 10,001 – 100,000 5,001 – 10,000 1,001 – 5,000 1 – 1000 28 54 69 769 15,338 16,258 SUBSTANTIAL SHAREHOLDERS FULLY PAID PARTLY PAID ORDINARY SHAREHOLDERS NUMBER HELD PERCENTAGE NUMBER HELD PERCENTAGE SOMAD HOLDINGS PTY LTD 23,066,390 26.65% THE CAPITAL GROUP COMPANIES, INC HYPERION ASSET MANAGEMENT LIMITED 6,842,688 4,664,437 7.91% 5.39% 34,573,515 39.95% – – – – –% –% –% –% 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA ENT ERPRISES L IMITED. // 215 Additional Securities Exchange Information continued TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES ORDINARY SHAREHOLDERS SOMAD HOLDINGS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD MR DONALD JEFFREY MEIJ MRS ESME FRANCESCA MEIJ MR GRANT BRYCE BOURKE & MRS SANDRA EILEEN BOURKE AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED MR GRANT BRYCE BOURKE INVIA CUSTODIAN PTY LIMITED MR DONALD JEFFREY MEIJ CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 BNP PARIBAS NOMS(NZ) LTD FULLY PAID PARTLY PAID NUMBER PERCENTAGE NUMBER PERCENTAGE 23,050,966 20,729,719 13,733,748 10,201,544 3,406,273 1,973,612 875,462 753,194 700,000 698,516 653,180 544,828 486,087 369,868 348,911 234,895 215,000 212,290 198,123 172,800 26.63% 23.95% 15.87% 11.79% 3.94% 2.28% 1.01% 0.87% 0.81% 0.81% 0.75% 0.63% 0.56% 0.43% 0.40% 0.27% 0.25% 0.25% 0.23% 0.20% 79,559,016 91.93% – – – – – – – – – – – – – – – – – – – – – –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% UNMARKETABLE PARCELS There were 883 members holding less than a marketable parcel of shares in the Company. 216 // 2022 ANNUAL RE PORT DO MI N O’S PIZZA EN TERPRI SES L IMITED. 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. 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. Domino’s Pizza Stores means Corporate Stores and Franchised Stores. Share means any fully paid ordinary share in the capital of the Company. DPE Limited means Domino’s Pizza Enterprises Limited (ACN 010 489 326) Underlying EBITDA and Underlying NPAT excludes significant integration and legal dispute costs. Earnings Per Share or EPS means NPAT divided by the total number of Shares on issue. 20 22 AN N UAL R E PO RT DO MI NO ’S P I ZZA EN TE RP RIS ES LIMITED. // 217 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 218 // 2022 ANNUA L RE PO RT DO MI N O’S PIZ ZA ENTER PR ISES L IMITED.