Westlife Development Limited. November 2017

Transcription

1 1 Westlife Development Limited November 2017

2 2 Disclaimer This document or presentation has been prepared by, and is proprietary to, Westlife Development Limited and its subsidiary ( The Company ) This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for or otherwise acquire, any securities in the Company or in the other entities referred to herein or in its or their respective affiliates or associates, nor shall it or any part of it form the basis of or be relied on to any extent or in any manner in connection with any contract therefore or in relation thereto The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. The information in this presentation has not been verified by the Company, its advisors or any other person and is subject to updating, revision and amendment. No representation or warranty, express or implied, has been, is or will be given by the Company, any of its affiliates or any of their respective advisers, directors, officers, employees, associates or agents, as to the accuracy, reliability or completeness of the information or opinions contained in this presentation or in any revision of the presentation or of any other written or oral information made or to be made available to any interested party and no reliance should be placed on them. To the extent permitted by law or regulation, none of them accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, to any extent and in any manner whatsoever to any person from any use of this presentation nor its contents or any part thereof have been cleared or approved by any regulatory, statutory or government authority, agency or body located in any country, territory or jurisdiction and that none of the aforesaid shall be responsible to any extent or in any manner for the same Neither this presentation nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into Canada, Australia, Japan, South Africa, the United Kingdom and the Republic of Ireland or the United States of America, its territories or possession or passed to US persons (as defined in Regulation S of the United States Securities Act of 1933 (as amended)), United States residents, corporations or other entities or individuals or entities in Japan, Canada, Australia, South Africa, the United Kingdom or the Republic of Ireland, save pursuant to an applicable exemption. Neither this presentation nor any copy of it may be taken or transmitted into any jurisdiction outside India or distributed to persons with addresses outside India. Distribution on this presentation in the United States may constitute a violation of United States securities law and the distribution of this presentation in or to persons subject to such other jurisdictions set out may be restricted by law set out herein may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such jurisdictions. Any failure to comply with these restrictions may constitute a violation of the laws of the relevant jurisdiction, attracting penal consequences This presentation contains forward-looking statements in the nature of certain operational and financial projections, and those who view or access or come across this presentation are cautioned that actual results could differ from those in such projections All those who view or who otherwise come across or who have otherwise have access to this presentation shall, in consideration of being made aware of the contents hereof, be irrevocably bound to keep such contents strictly confidential and not disclose them to any extent in any manner to any third party. All those who may view or come across or otherwise have access to this presentation shall be irrevocably deemed to have been fully aware of and to have fully understood and accepted this disclaimer

3 History & Evolution 3

4 McDonald s leads globally Highest Annual Sales Per Store Fortune India 2011 Forbes 2016 Brand Ranking World s 9 th most valuable brand 4

5 Recognized in India as well Great Place to Work Award Best company to work for in Retail Industry th Rank on Brand Equity s MOST EXCITING BRANDS 2014 The Economic Times is an English-language Indian daily newspaper published by the Bennett, Coleman & Co. Ltd. first published in It is the world's second-most widely read English-language business newspaper, after the Wall Street Journal 5 Brand Equity is a weekly color supplement that appears every Wednesday, which covers marketing, advertising, media and market research. Number 1 in the QSR Category Fortune India Next 500 Giants of Tomorrow, 2016

6 First Restaurant in Mumbai, 1996 CONNAUGHT PLAZA RESTAURANTS PVT. LTD. (CPRL) North and East 400+ Restaurants pan India HRPL BACKGROUND : Started as a Joint Venture in 1995 Ownership status changed to DL * in May 2010 DL develops sites at their own cost and pays a royalty HARDCASTLE RESTAURANTS PVT. LTD. (HRPL ) West and South MFA # KEY HIGHLIGHTS : Right to own and operate McDonald s restaurants in Western and Southern India until 2030 HRPL pays royalty and fees to McDonald s Corporation *DL: Development Licensee A Development Licensee, in the context of McDonald s, means an entity which is granted franchise rights, by McDonald s Corporation or its affiliates, to own and operate McDonald s restaurants, to adopt and use the McDonald s system to develop and run McDonald s restaurants in a given area, and to advertise and use the McDonald s brand name and trademarks for products sold at such restaurants. Map of India is indicative # MFA : Master Franchise Agreement

7 Ownership structure Shareholding Pattern * Westlife Development Ltd (BSE : ) 100% Hardcastle Restaurants Pvt. Ltd. FII and Public 38% Promoter Group 62% *As at Sep 30, Major Public Institutional Shareholders Arisaig India Fund Limited SBI Mutual Fund Bay Capital Investments Tree Line Investment Management

8 Evolution: cultural sensitivity & menu localization Local tastes like Aloo Tikki in a uniquely McDonald s form 8 Only country to have SEPARATE Vegetarian and Non Vegetarian Kitchens Adapting popular forms like the PUFF

9 Evolution: building a local supply chain Global suppliers with local production Developed a cold chain Creating direct linkage to the farms Over 95% localization 9

10 Evolution: sustainable unit economics (ROP 1.0) Local supply chain for equipment Right Sizing Restaurants Optimizing Kitchen Capacity Over 95% of produce locally sourced Tax Rationalization Increased supplier capacity through 3 rd party business 1x 2240 basis points improvement 0.4x -X% 10 Average Development Cost * Graphs not to scale, for representational purpose only Restaurant Operating Margins

11 Investment Thesis & Current Trends 11

12 WFF A nascent but rapidly growing category IEO $ 121 Bn Estimated Growth in % IEO Monthly Frequency QSR $ 20.7 Bn 6% IFF $ 18.3 Bn 6% 3 WFF $ 2.4 Bn 12% Mumbai Benchmark Asian City 12 Source: Euromonitor IEO : Informal Eating Out; IFF: Indian Fast Food; WFF: Western Fast Food Source: Brand Track, Mumbai

13 Solid foundation A competitive advantage 13 Strong supply chain Unique farm to fork cold supply chain including delivery of fresh produce & buns every alternate day Provides economies of scale, high food safety standards, product consistency & innovation Continuously work with farmers on an extensive agronomy program Real estate Diverse portfolio of restaurants (Malls, Food courts, DT, High street & Transit points) built through intelligent market planning and penetration Long term deals (normally 20 years vs. industry average of 9-12 years) Strong unit economics that helps deliver a cash on cash ROI of 20%+ within 30 months People One of the most experienced management team in QSR industry with deep knowledge of the business Strong people development and management processes in place Strong knowledge transfer from McDonald s Corp

14 Servicing multiple segments A competitive advantage Chicken Burger Pizza Beverages Desserts McDonald s globally has the highest average unit volume of $2.4 million 1 McDonald s India has wide exposure to the different segments in QSR Delivery Breakfast Indian fast food Others McDonald s India has many iconic products that record sales of over Rs 1 billion/ year There is scope to build more categories 14 1 Fortune India 2011 * Graphs not to scale, for representational purpose only

15 Brand extensions add more occasions A competitive advantage In-store for celebrations, bonding and hanging out McDelivery, Drive Thru and breakfast for convenience McCafé for experience and indulgence As we add brand extensions to each restaurant, the results are greater as a whole than the individual parts resulting in 1+1+1=5 With just incremental capital expenditure and minimal increase in operating costs, brand extensions provide significant operating leverage as they scale 15

16 Strategic levers for next 5 years Vision Broadening Accessibility 3. Margin Expansion 2. Growing Baseline Sales 4. Growth through people 16

17 Grow store footprint Unit Economics Broadening Accessibility 17

18 Re-setting foundation for restaurant growth : execution of ROP 2.0 in 2016 ROP 2.0 Disciplines Restaurant design Equipment options Operating costs Key to success Optimisation to reduce capex and opex Equipment localisation to reduce capex Utility re-design and green initiatives & innovation to reduce opex 18

19 ROP ROP ROP 2.0 Encouraging early results delivered by ROP 2.0 1x 0.8x 24 months months bps improvement for new restaurants Average Development Cost* Cash breakeven* Restaurant Operating Margins* Cash on cash ROI* to 20%+ in months 19 * Can vary basis restaurant type, region and presence of brand extensions ** Graphs not to scale, for representational purpose only

20 Re-setting foundation for restaurant growth New business unit economics (ROP 2.0) Average investment of INR Mio Stores typically need 2-3 years to establish, depending upon the brand awareness in the city Year 3: Sales: INR Mio Cash ROI: 20%+ 20

21 Huge potential in existing towns and cities Most cities and towns significantly under penetrated Gujarat 33 Restaurants Madhya Pradesh 3 Restaurants Chhattisgarh 2 Restaurants Maharashtra 120 Restaurants Telangana 22 Restaurants Goa 2 Restaurants Karnataka 54 Restaurants Andhra Pradesh 3 Restaurant 21 Indicates the number of stores in each state as of Sep 2017 Kerala 8 Restaurants Tamil Nadu 18 Restaurants

22 Value Menu Brand Extensions Growing Baseline Sales 22

23 Key to success driving average volume growth per restaurant (AUV) VALUE For driving new users and frequency CONVENIENCE & BRAND EXTENSIONS For servicing all occasions MENU To provide modern choices for all day parts 23

24 Brand extensions increases addressable market Total market segment exposure for McDonald s* $0.6b $0.45b $2.35b $1.3b $1.75b 1, Past market segment exposure Delivery market New market segment exposure * Source : Euromonitor International - QSR Food Service Market, HRPL proprietary third party market segmentation study Past market segment Chicken, burger, pizza, other cuisine fast food + Ice cream parlors Coffee and Specialty beverages Total market segment exposure

25 Brand Extensions : Strategic lever for driving AUV McDelivery Growth in McDelivery sales >2x 1x 25 FY14 FY15 FY16 FY17 Strong baseline growth through same store delivery sales growth and addition of delivery hubs * Graphs not to scale, for representational purpose only

26 Brand Extensions : Strategic lever for driving AUV McDelivery Average annual sales/ McDelivery hub (Rs in millions) 8-12 Number of delivery hubs Total potential sales of Rs 3,000-4,000 millions Current Potential Will be driven by improvement in technology platforms, digital enablement and McDelivery specific promotions * Graphs not to scale, for representational purpose only Mar-17 Current potential Future potential McDelivery stores Non McDelivery stores McDelivery is in >55% of restaurants. Delivery network can be easily expanded as minimal capital expenditure is required

27 Brand Extensions : Strategic lever for driving AUV McCafé 27

28 Brand Extensions : Strategic lever for driving AUV McCafé Average annual sales/ McCafé hub (Rs in millions) 8-12 Number of McCafés Total potential sales of Rs 3,000-4,000 millions Current Potential Will be driven by new platform launches, McCafé specific promotion and people 28 * Graphs not to scale, for representational purpose only Mar-17 Current potential* Future potential* High potential, McDonald s can become one of the largest coffee players in the country as unit economics is in place * Assuming 100% penetration of McCafé

29 Brand Extensions : Other potential business models to leverage Breakfast, Dessert Kiosk & 24 x 7 29

30 Menu : Strategic lever for driving AUV Multiple QSR segments captured through menu Burgers Over 10 products with many burgers that record annual sales of Rs 1+ billion Desserts $130 million dollar category Wraps 5 wraps Breakfast Only organized WFF player in this space $2+ billion dollar market Sides Strong sides offering 30 Source : HRPL proprietary third party market segmentation study + Euromonitor International Beverages WFF player with the widest variety in this space $4+ billion dollar market

31 Value + Affordability and Menu : Strategic lever for driving AUV Launched strong product platforms McAloo Tikki Breakfast 2009 Chicken McNuggets 2010 McSpicy 2011 McFlurry 2011 Spice Fest 2012 McEgg 2012 Masala Grill 2013 Veg Pops 2013 Royale 2014 CWT 2014 CPP Indi McSpicy Maharaja Mac 2016/17

32 Contemporary menu choices to address new consumer needs 60% reduction in calories of sauces leading to a 8% - 10% reduction in calories of burgers Grilled choices like Chicken McGrill Contemporary bun options like Focaccia bun 32 Steamed product options like McEgg 10% - 20% reduction in sodium content of French fries and McNuggets < 3% fat in dairy products

33 We have driven AUV growth in the past HRPL Average Volume Growth Per Annum (INR Mn) 2.07x 1.74x 1x

34 Margin Expansion 34

35 Margin Expansion Operating Leverage McCafé Adding brand extensions helps grow sales, while optimizing assets Dessert Kiosk MDS In-store Business Breakfast 24 Hours Leverage cost through scale via effective supply chain management 35 Bulk of the cost incurred for operating In Store Diagram representative, not indicative of size of impact

36 Margin Expansion Operating Leverage Building block on margin All levers of the business model coming together EBITDA Gross Margin Operating Leverage Royalty G&A EBITDA 36 Graph not to scale, for representation purpose only

37 Growth Through People 37

38 People Engaging 8,000+ people across 36 cities Strong LEADERSHIP TEAM providing strategic direction backed by an experienced CROSS FUNCTIONAL TEAM managing execution Leadership team committed to TALENT MANAGEMENT, investing over 20 days each year for building pipeline Investments in LEARNING AND DEVELOPMENT, especially in mid management to build skills for the future 38

39 Financial Summary & Vision

40 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000-50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Store growth, sales and comparable sales trends Sales ( INR Mio) Sales Growth % FY18 financials as per Ind-AS 41% 31% 32% 37% 44% 9,308 19% 9% 12% 17% 22% 6% 2% 4% 9% 3,793 5,445 1,604 2,104 2,772 6,810 7,384 8,334 25% 8% 7,640 9% 12% 13% 3% 5,270 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15-6% -6% FY16 FY17 Comps% H1 FY18 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18 22% CAGR Gross Margin % 54.7% 56.0% 56.7% 57.1% 55.6% 56.0% 57.6% 58.4% 60.0% 60.7% 61.2% 40 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18

41 1,200 1, % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Margin trajectory RoM INR Mio 13.3% 11.3% 11.1% 17.3% 17.0% 14.2% 12.5% 8.7% 11.9% 11.0% 11.7% RoM % , FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18 41 INR Mio FY18 financials as per Ind-AS EBITDA EBITDA % 4.8% 2.5% 4.4% % 10.5% 9.2% 6.6% % % 5.3% 6.5% FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18

42 General & administration (G&A) % 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18 G&A

43 Consolidated Balance Sheet million 30-Sep-17 Assets Property, plant & equipment 4,417 Goodwill 466 Other non-current assets 2,717 Inventories 318 Other current assets 1,371 Total 9,289 Equity And Liabilities Share Capital 311 Other Equity 5,173 Financial liabilities 3,450 Other current liabilities 355 Total 9, FY18 financials as per Ind-AS

44 Vision 2022 targets Market share and margin growth GROW BASELINE SALES BROADENING ACCESSIBILITY OF BRAND MCDONALD S Sales growth of 2.4x - 3x Take EBITDA margin to low to mid teens 44 Grow average unit volume Mid to high single digit SSSG% McCafé : 75 to McDelivery: 124 to Leverage other brand extensions and menu in future Grow restaurant base with solid unit economics restaurants Presence in 40+ cities Investment of Rs 5+ billion

45 Thank you 45