Domino's Pizza Enterprises Aktie

Good morning, and thank you for joining the Domino's Pizza Enterprises Limited FY '26 Full Year Results Investor Call. I'm Nathan Scholz, the Chief Communications and Investor Relations Officer. This morning, you'll be hearing from Chairman Jack Cowin; Group CEO and Managing Director, Andrew Gregory; and Group COO and CFO, George Saoud. After presentations, we will have a Q&A. Analysts will have the option to select raise hand, and then you'll be unmuted to ask a question and a follow-up. With that, I'll pass to Chairman Jack Cowin.

Good morning, and thank you for joining us. 12 months ago, I said this business needed a reset. I want to start with what we said we would do and what we have done. We said we would rebuild franchisee profitability. Average franchisee EBITDA is up 11.3% to $105,700 a store globally in Q3 FY '26. Store margin has moved from 7.1% to 7.9%. That is real money back in the hands of the people that run our stores. It's not where it needs to be, but our Australian stores are higher than the global average at $128,000.

Our target is $130,000 globally, and we will keep working until we get there. I've said before that this business is only as good as a franchisee partner's ability to make a decent income. When our franchisee partners make money, they invest. They hire better people, they look after the customer and the sales follow. What we have said -- we said we would take cost out. We have actioned $67 million of annualized savings with $35.3 million of that realized in FY '26. We said we'd strengthen the balance sheet. Free cash flow is up $116.6 million to $164.1 million.

Net leverage is 1.86x. Underlying net profit after tax is up 4% to $121.6 million, and the dividend is up 51.2% to $0.325 per share. Now to the next task, which is rebuilding profitable sales growth in FY '27. We have simplified pricing, reduced voucher dependency and moved towards smarter offers and built a leaner cost base. That has strengthened store economics but has also lowered order counts where customers have been responding mainly to discounting. We became the king of discounts. On some orders, we were selling product and not making enough for our stores.

We have stopped a lot of that, and we knew when we did it, that it would cost us volume. In Western Australia, where we have run our clearest test of simpler everyday pricing, we gave up top-line sales and improved store profitability substantially. A portion of the transactions were entirely dependent on too aggressive a discount. We've learned a lot through that test. Our mistake was not recognizing that we still have to promote great value. You have to grab people's attention. The work now is to promote great value profitably, simpler menus, stronger meal menu, better digital and CRM execution and customer service improvement that rebuilds frequency without giving back the economics the team have built for FY '27.

Western Australia continues to outperform the rest of the country on the key customer and profitable sales indicators we are watching. We've still got more to do, but the evidence is encouraging, and we will adapt those lessons to apply them in a measured way across the country. I want to say something about the team because in my experience, that is what determines the outcome. Over the past 12 months, we've put in place a management team I believe, is second to none. I want to thank our Group Chief Operating Officer and CFO, George Saoud, who has taken on significant leadership responsibilities in the last year and helped lead the reset that brings us to where we are today.

Andrew Gregory has joined us as Group CEO and Managing Director this month. Andrew started as a crew member in 1993, ran McDonald's in Australia and New Zealand for 8 years and most recently spent 3 years in the headquarters in Chicago. He understands the franchisee economics from both sides of the counter. As Chairman, my job from here is to support Andrew, not to run the business for him, and I'm confident he is the right person for the job. We've also renewed the Board with Judith Swales and Drew O'Malley joining this year, adding additional experience in retail and QSR.

Let me finish where I started. We're in the franchise business, and we happen to sell pizza. The argument is not about who gets what slice of the pie. It's about making the pie bigger. The reset is delivered, returns are improving, and FY '27 is about building profitable orders. The test from here is simple: rebuild order momentum without giving back the store economics we have just restored. I'd now like to hand over to Andrew to introduce himself and his team's plans.

Thanks, Jack. Good morning. I started on the 5th of August, and I'm still early in this role, but I'm not early to the QSR industry. I've already spent time listening in stores, meeting franchisees and talking and listening to leadership from across our 12 markets. What I've seen is a business with strong foundations, a strong brand, a committed team and passionate franchisee partners who want to grow and be successful. I'm more confident in the success of this business as a result. Having said that, sales momentum is not where it needs to be and regaining momentum and growing our baseline of average weekly order count will be the operating measure that I focus on as an absolute priority.

I am clear on the current strategy to create a more sustainable business based on more consistent value that grows franchisee profitability at the same time as growing sales. Our results in growing order count will be choppy in the short-term, but it must be and is our longer-term objective. It's the only way to sustainably grow income for both the franchisees and the company. The FY '26 reset that George will outline has delivered a strong foundation to build upon for this business, and it's my responsibility to continue the strong focus on costs and capital discipline and also to build and grow the Domino's brand and business from that foundation.

We know our customers want us to be great value every day, not just at particular times or for particular days of the week or even for short periods on our calendar. We will grow this business and create profitability for our franchisees if we are able to offer predictable, compelling value to our customers. And, of course, value is not just price. Value is great food, great pizza, great service and delivering joy with every pizza. In each of our markets, we have a strong leadership position against our direct pizza rivals and uncertainty and challenging consumer environments are not within our control.

However, our decisions and the way we show up for customers and our teams in the stores is within our control, and it's our responsibility. We control how we price, how we execute world-class marketing and how we execute in our stores with our franchisees. In each of our markets, there are QSR brands successfully driving profitable growth for their franchisees and sustainably growing market share. I'll come back later to the FY '27 priorities, but my direction is clear. We need to turn stronger foundations into profitable customer growth and better outcomes for Domino's stakeholders.

Thank you, Andrew. Good morning, everyone, and thank you for joining us. FY '26 was a year of necessary reset for DPE. We made deliberate decisions to simplify the business, reduce costs, strengthen the balance sheet and restore franchise partner economics. Some of those decisions had a visible impact on sales and order volumes during the year. However, they've also created a more sustainable operating and financial base from which we can rebuild profitable growth. At a high level, there are 4 messages I would like you to take from today.

First, the financial reset has been delivered. Second, franchise partner profitability is improving. Third, our balance sheet, liquidity and cash generation has strengthened materially. And fourth, the focus for FY '27 is clear: rebuilding profitable sales and order growth without giving back the economic gains achieved through the reset. Turning to the FY '26 financial results on Slide 6. Network sales were $3.87 billion, down 6.8%, while same-store sales declined 4.1%. This reflected the reduction in store numbers and our deliberate move away from broad high discount promotional activity, particularly in Australia, New Zealand and Japan.

Despite those sales pressures, underlying EBIT increased 1.0% to $200.1 million and underlying NPAT increased 4% to $121.6 million. This demonstrates the impact of our cost actions taken across the group, the stronger contributions from Europe and Asia and improved portfolio margins. It is also important to note that the EBIT result was achieved while cycling approximately $10 million less profit from store sales than in the prior year. Free cash flow, excluding divestment proceeds, increased by $116.6 million to $164.1 million.

Net debt reduced by $227.8 million from $724.8 million to $497 million and net leverage reduced from 2.57x to 1.86x. The Board has declared a final dividend of $0.325 per share, an increase of 51.2% on the FY '25 final dividend. The dividend represents a 50% payout ratio on the second half underlying NPAT and reflects a balanced approach to shareholder returns, continued deleveraging and appropriate reinvestment back into the business. The statutory result includes a post-tax impact of $255.7 million from balance sheet write-downs and other nonrecurring items.

These items principally relate to revised carrying values for France and Taiwan goodwill and intangible assets, technology assets that no longer align with our enterprise IT strategy, underperforming stores and other balance sheet adjustments. While significant from an accounting perspective, these write-downs are largely noncash. They do not change the underlying operating performance, cash generation or the covenant position of the group. They represent a more realistic alignment of our carrying values with current performance expectations and our strategic priorities.

Turning to Slide 7, geographic summary. Looking across the regions, the portfolio shows improved earnings resilience despite softer sales. In ANZ, EBIT declined 5.9% to $122.9 million. Sales were affected by the pricing and promotional reset, particularly the decision to reduce broad discounting. Order volumes moderated, but improvements in ticket, food cost and cost control supported stronger franchise partner economics. Europe delivered EBIT growth of 2.6% to $74.9 million.

A stronger performance in Benelux offset softer trading in France and also in Germany in the second half. Asia delivered EBIT growth of 19.7% to $34.7 million despite lower revenue. This improvement primarily reflected the closure of underperforming stores in Japan, menu simplification and cost discipline. Japan's corporate store network returned to positive EBITDA, while Malaysia and Singapore continued to improve from a profitable base. Global overheads also improved. This reflects a tighter cost control, disciplined headcount management and lower discretionary expenditure.

The key point is that the group delivered modest EBIT growth and margin expansion despite lower sales volumes. Lower revenue did not flow through to lower profit. That gives us confidence that the reset has created greater operating leverage as sales momentum improves. Turning to Slide 8, free cash flow. Free cash flow was one of the most important outcomes of FY '26. Free cash flow before divestments increased from $47.4 million to $164.1 million. Operating cash flow before interest and tax increased by $10.5 million to $312.6 million, supported by favorable working capital movements.

Net operating cash flow increased by $59.5 million to $226.7 million, which also benefited from $44.9 million of lower tax payments, primarily reflecting the timing of payments across jurisdictions. We recognize that tax timing was a meaningful contributor. However, the improvement was not solely related to tax. It also reflected better working capital management, lower interest payments and a substantial reduction in capital expenditure. Capital expenditure reduced by $48.1 million to $38.7 million, reflecting greater investment discipline that contributed to a reduction in net investing cash outflows to $5.7 million.

The focus on cash is structural. We have strengthened working capital disciplines, reduced investment in lower priority activities and introduced a more rigorous returns-based approach to capital allocation. We said we would improve cash generation, and we did. Turn to Slide 9, investing activities. Within capital expenditure, digital investment reduced to $21.5 million from $44.8 million, a decline of $23.3 million. This does not mean we are stepping away from technology. It means we are moving to a more disciplined enterprise IT model with clearer prioritization, stronger commercial accountability and explicit investment cases.

Our digital priorities will focus on reducing friction in the customer journey, strengthening our CRM and personalization and supporting store productivity and franchise partner execution. Looking forward, we currently anticipate digital investment in the range of $30 million to $45 million with expenditures subject to clear business cases and alignment with the group's strategic priorities. Slide 10, debt and capital management. The stronger cash performance has translated directly into a stronger balance sheet. Net debt reduced by $227.8 million. Of this, $138.9 million related to cash repayments and $88.9 million related to favorable foreign exchange translation, predominantly associated with the Japanese yen.

Net leverage reduced to 1.86x, achieving our target of below 2.0x. Interest coverage improved to 20.6x. During FY '26, we also completed the refinancing of $1.05 billion of debt facilities. The refinancing delivered improved pricing, staggered maturities and a weighted average tenure of approximately 4 years. At year-end, the group has $467.5 million of cash and undrawn committed facilities, providing substantial liquidity and strategic flexibility. We are, therefore, entering FY '27 with a stronger financial position, improved liquidity and greater capacity to invest selectively behind initiatives that can generate substantial returns. We said we would strengthen the balance sheet, and we did.

Turning to Slide 12, Western Australia. I will now turn to the operational reset, starting with Western Australia. WA provides an important example of both the opportunity and the execution lessons from FY '26. In September, we removed broad high percentage discounting. That improved average ticket and store economics, but it also reduced orders more than intended. From February, the market progressively reintroduced sharper, targeted carryout offers and began testing lower delivery fees. The objective was to rebuild orders while preserving the stronger economics achieved through the initial reset. The results are encouraging.

WA delivered 5 months of record franchise partner EBITDA. Carryout comparative sales became positive and delivery sales improved. And WA same-store sales outperformed the rest of Australia relative to the prior year. Note that we introduced a delivery fee in WA at $8.95 when we began the trial. We are now in market with a $5.95 delivery fee across WA as of 2 weeks ago, and we're seeing improved conversion. The lesson is not simply that lower prices generate volume. The lesson is that different customer occasions require a more deliberate value architecture.

For FY '27, we intend to apply these learnings through clearer menu pricing, targeted carryout value, more disciplined delivery fee settings and lower reliance on broad voucher-led discounting. WA is not a copy and paste answer for every market. It is a playbook for how we test value, volume and margin together. But the principle is simple, clear value, targeted offers and profitable sales. Moving to Slide 13, franchise partner economics. Strengthening franchise partner profitability has been central to the reset. Average rolling Q3 12-month franchise store EBITDA increased 11.3% to $105,700, while the average store EBITDA margin increased from 7.1% to 7.9%.

The improvement was driven by higher average ticket, clearer pricing, lower food and packaging costs, tighter cost control and operational simplification. Franchise partner profitability increased across the major markets with particularly strong outcomes in Australia, New Zealand and Japan and continued growth in the Netherlands and Germany. The target is $130,000. We are not there yet, but the direction is right. The business only scales properly when franchise partners have the confidence and the returns to invest. Slide 14, the road map to sustainable growth. We are targeting average global franchise partner EBITDA of $130,000 over time.

Reaching that level will require contributions from 3 areas: renewed customer growth, further procurement savings and improved store productivity and store execution. Importantly, this is a shared agenda with franchisees. Domino's must provide a stronger customer proposition, better technology, procurement benefits and simpler operating systems. Franchise partners must convert those initiatives into consistent execution, customer service and local growth. This page shows the levers to get from today's average franchise EBITDA of $105,700 towards the $130,000.

The important point is that there is no single lever and these initiatives are not sequential. They can move together. One lever is profitable customer growth, the right volume at the right margin, supported by clearer pricing and smarter offers. Another is procurement, continuing to lower food, packaging and other input costs where we can and sharing those benefits appropriately through the system. The third is productivity and execution, better labor scheduling, simpler processes, improved store efficiency and stronger in-store execution. The model only works when both sides execute and when growth shows up in stronger store economics.

This is where management's attention is because a more profitable franchisee is the engine of our business. It's better for our network growth, our customer service and shareholder returns. Slide 15, cost savings initiatives. The cost program delivered in line with our expectations. We've actioned $67 million of annualized savings across technology, central support, procurement, logistics, marketing and G&A expenses. Of that amount, $35.3 million was realized in FY '26. Two points matter. First, a meaningful share of the savings supported franchise partners through lower input costs and better store economics.

Second, the savings retained by DPE helped protect earnings while we moved away from lower margin volume. That is the balance. Franchisees have to eat first and DPE also needs the right cost base. We've also identified a further $15 million to $25 million of opportunities across food and packaging and procurement, and that's subject to implementation and timing. The intent is for the additional savings to be shared between franchise partners and DPE so that the benefits support both the store economics and the group resilience. This next phase is not simply about reducing cost. It is about creating capacity to reinvest in customer growth while continuing to improve franchise partner economics.

Slide 17, trading update. As we enter FY '27, the immediate task is to restore order frequency and profitable volume. The reset has produced healthier store economics, but also lowered order counts. We must now convert stronger unit economics into sustainable sales growth. Group same-store sales declined 2.5% in Half 1 and 5.7% in Half 2, with the first 7 weeks (sic) [ 8 weeks ] of FY '27, broadly consistent with the second half run rate at minus 5.8%. In ANZ, we'll progressively apply the lessons learned from WA with a disciplined approach to pricing, promotions and delivery fees. In Europe, the focus is on recovering transactions while preserving the benefits of our cost control.

In Asia, it is to convert the healthier economics created through store rationalization and operational simplification into sustainable growth. Across the group, our approach will be evidence-based. We will test initiatives market by market, measure customer response and store profitability and scale only those initiatives that deliver both. We're not providing forward earnings commentary on FY '27. To conclude, FY '26 was a year in which we made difficult but necessary choices. Sales and volumes declined, and we're not satisfied with that outcome.

However, underlying earnings were resilient, franchise partner profitability improved, free cash flow strengthened materially, debt reduced and the balance sheet was reset. We now have a leaner operating base, stronger liquidity and better store economics. The challenge for FY '27 is to turn those foundations into profitable sales growth. With that, I'll hand over to Andrew to take you through his initial observations and the priorities for profitable growth. Thank you.

Thanks, George. I've come into a business that has done a lot of hard work through FY '26 and the platform is stronger because of it. In my first 3 weeks, I've seen stores, franchisees and met with market leadership. The strongest impression is the pride and passion people have for this brand. Franchisee partners want to grow and our teams are committed to give customers a great experience. I've also heard and seen practical opportunities to improve. We can make the customer experience easier, store execution simpler and local decisions more focused on the consumer.

Our momentum is not strong enough and both comp store sales and comp average weekly order count is below where it needs to be. We do need to do 2 things at once. We need to rebuild sales and maintain discipline on costs and capital. We must work towards providing better, more consistent and reliable value to our customers. We have to help our franchisees by making their stores easier to run by being simpler and more focused in our menu and to provide great service, whichever way the customer orders through the Domino's app or in-store interacting with our team.

Our FY '27 priorities are clear: grow sales by turning the tide on order count, delivering a frictionless customer experience and maintaining our cost discipline to support both franchisee and DPE profitability alike. This slide sets out my priorities for my team in FY '27. First, grow the baseline in average weekly order count. Delivering profitable growth is the operating metric I will track and be accountable for.

A stronger business relies on more customers choosing Domino's more often. We will leverage from the successful and ongoing trial in Western Australia. That trial is based on a simpler and more predictable value proposition to our customers. As a result, our stores in Western Australia are running better. They're making more money because the franchisees can more easily project sales and schedule their teams. Our marketing will become more focused on customer experience and sharing occasions with family and friends, large groups. From next month, our marketing in Australia will be more focused on that occasion and the experience of enjoying great pizza from Domino's.

We will feature our great product and a stronger brand presence in our creative. And as we've already announced, next month, all of our stores will transition and our customers will have the opportunity to choose beverages from their favorite brands here in Australia as Coca-Cola becomes our exclusive supplier. Second, improving franchisee profitability sustainably. Growth has to work for franchisee partners. The $130,000 average franchisee EBITDA ambition remains an important global benchmark. It's a multiyear objective and a focus for my team and the business. The target is a benchmark for the level of profitability needed to support franchisee confidence in sustainable new store growth over time.

Franchisee profitability will not come from one lever. Primarily, however, it will come from profitable sales growth. It will also come from store execution and better store productivity and smart decisions to lower input costs responsibly, but it is a shared responsibility of both the franchisor and the franchisee and requires us to work together on this objective. Third, leading with urgency and accountability. Accountability will be fundamental to our success for my team and our market leaders who own the execution of their strategy.

The purpose and objective of our market leadership teams is to intimately know their industry, their customers and then importantly, lead and work shoulder to shoulder with the franchisees to make compelling consumer-based plans and then deliver so that our customers experience those plans in real life. Many of the solutions to our challenges across the market will be consistent, and we can learn more quickly and faster to share great ideas and learn from our mistakes.

Importantly, local consumer tastes and segments, industry economics and competitive dynamics in the different markets mean there will be nuanced local solutions that also need to be implemented. Overall, my accountability is to lead a team to understand and listen to customers and lead and work with franchisees to deliver better outcomes and profitable growth for all of Domino's stakeholders. Thank you. George and I are now happy to take your questions.

Thank you, Andrew. The first question comes from Shaun Cousins from UBS.

Can you hear me now?

We can indeed.

Fantastic. I've got some questions regarding cost savings. That was a big tailwind or support for '26. Will the remainder of the $100 million savings announced at the AGM, so you realized $35 million in '26. So there's $65 million to go. Will that be realized in fiscal '27, please?

Thank you, Shaun. It will be realized in '27 and '28. So it's over the 3 years, the $100 million. So you've seen what's come through '26, '27 has got a material component to it and then in '28.

Great. And my second question is just around D&A. That was quite low in the second half, and I think you've called out amortization. I think it was $55 million in the second half. Consensus estimates are around $137 million, $138 million. Should we annualize that second half D&A? It's just there's been a lot of change in your CapEx and your broader asset base. Any assistance on that number would be great.

Yes. Very good question. If you go to Note 6 of our accounts, you'll see D&A has come down significantly, as you said. And if you go through the components of that, store closures was a big component, both in terms of D&A around property, plant and equipment and leases, but also with intangible assets, that's come down considerably. In addition to that, so annualizing second half would be closer to the mark. In addition to that, what you will start to see and part of going forward, we will be expensing a lot more than capitalizing when it comes to a lot of the software development costs that we've got in the program. So you'll see a lot less in D&A going forward.

The next question comes from Thomas Kierath from Barrenjoey.

Can I just get some color on order count versus ticket? So your sales are tracking like-for-like down about 5%. I assume orders could be down 20% or 30% and ticket may be up 10% or 20% and something in that range. Can you maybe just give us a bit of color to understand what's exactly happened in that like-for-like or that same-store sales number, please?

Yes, no problem, Tom. Order count is more like 10% to 11%, no different to what Jack has spoken to historically and then up 5%.

Okay. Cool. And then in WA, that's obviously like the, I guess, the test case for what you're doing. Are you back into positive comp growth there? Like what gives you the confidence that this is the right thing to do? Or what evidence do you have to show that you're on the right path with the strategy?

So when we compare WA to the rest of Australia, it is -- in carryout, it is comping positive. So -- and when we tested that market, so we introduced $8.95 delivery fee, and that is the channel that we need to get positive. So carryout is positive, $8.95 delivery fee was not as positive. We ran a trial across 6 stores at a lower delivery fee, and we had double-digit volume growth when we did that. And so we're in market at the moment at $5.99 (sic) [ $5.95 ] as a delivery fee. And it's only 2 weeks, it's early days, and we're getting positive conversion rates on our OLO system. So if we can continue to track positive on carryout and through the reduction in our delivery fees, the volumes are going up, we think that is the right direction.

But just to clarify, but WA is still negative, though, in terms of the overall state of business?

That's right at this point in time.

To chip in on WA, ending June, franchisee profitability is up 30-odd percent. So that's a very significant change. Yes, we're down on order count, we're down on sales, but product quality is up, plus, those numbers are all very positive. The franchisee income is up substantially. And now we have to try and figure out how do we get the order count and the sales to respond accordingly.

The next person up is Michael Simotas.

So look, you've done a very good job on stabilizing earnings. I think earnings at a group level have been stable for about 6 halves now. Also a very good job on cash flow and balance sheet. But if same-store sales don't improve from this level through '27, do you have enough in there to maintain earnings at the current base? Or would that be reliant on getting same-store sales growth during FY '27?

I think it does -- it's Andrew here. I think the short answer to that is our plan and our objective is we need to return to group positive sales comp over the course of the year. We've got every market with actions in place. And I think to share the way I'm thinking about what we will see as we progress to lower and lower negatives over time, there's 2 things that we're focused on. Firstly is a simple average seasonally adjusted week sales trend that will help us really understand and confirm that our baseline sales are moving in the right direction. There will be noise because we're tracking over 12-month anniversary of different comp levels and things like that. But we have to focus on average weekly store sales and order count to drive the plan and the assumptions that we've got in the plan.

No, I think that's a good way to look at it. And when you look at where that metric is sitting right now, is it stable, improving, or still deteriorating?

In most of our large markets, it's stable or slightly improving, but we are not in a position to say that it's changed trajectory from a longer-term sustainable position.

Okay. And can I just confirm something on the cost savings? Maybe just ask Shaun's question in a slightly different way. So you realized $35-odd million of cost savings in FY '26. If we look at what will actually hit the system in '27, based on what you said, it will look like it will be a fairly similar number. Is that the right way to think about it?

Directionally, that is the right way to think of it. And just remember, it's system profit. So it's for us.

The next up is Bryan Raymond from JPMorgan.

First one is just on the trading update. I just want to check if there's any sort of FIFA World Cup impact there, particularly given the time zone in Europe was not too bad, I would have thought for the dinner occasion or late-night occasion. So just wanting to understand if that was a help at all in the period.

Yes, there was. The markets have told us and it obviously depends which teams are playing and which markets we're talking about some of the markets or the teams from those markets were exited relatively early from the World Cup as well. So there was some benefit, but it was relatively short term and not material.

Okay. Great. And then just on the Coca-Cola transition, is that something that is expected to drive ticket or like in terms -- or items? Is there any way to sort of quantify what that might do for the overall business?

Yes. The simple metric we track on beverage incidence in terms of orders. So we think we've got significant headroom. Currently, we run about 34% incidence where a customer orders that they also order a beverage in that transaction. And if we only regain back to where we were previously, we've got 6% or 7% incidence improvement from our customers ordering at that normal level. And we think there's significant upside. It's clear Coca-Cola is Australia's customers' favorite choice for beverages.

Excellent. And then just finally understand, big picture question, like from the McDonald's background, you've got there, a lot of focus on product and daypart, et cetera. Obviously, daypart is a little bit different in the pizza business. But how are you thinking about product? That doesn't seem to feature a lot in the commentary today, a lot about pricing and procurement and cost out, et cetera. But the actual product itself, like that doesn't seem to get a lot of focus. So I just wonder if that's something you've got any observations on that you might like to make changes to, et cetera?

Yes. It is too early to be definitive, but I think one opportunity we have, there is a tendency in this business, which exists a lot across a lot of QSR to focus on limited-time offers and new news and things like that. What this business needs not only in the area of product quality, but across many of the different initiatives are things that go into the stores that have longer-term platform-like impact in a positive sense. And so we can do a great 6-week promotion and get a short-term sugar hit, and we should still continue to do those where they make sense.

But what I am working with on the team is to try and understand how we can put in platform-like improvements to our core offers -- it actually also makes it easier for our stores to run if we're not chopping and changing all the time. And so next month, one of the other things we're doing is launching a new range of pizza as a permanent menu addition. So it's not an LTO, but a new permanent menu addition that hits the target of family and group occasions, so large group family occasion. And we're going to relaunch the New Yorker range into the market in Australia. And we're really confident on the quality messaging that we can take into that launch. But also, as I said, it becomes a permanent addition to the menu versus a short-term limited-time offer.

The next up is Elijah Mayr. Elijah, you should be able to unmute there.

Apologies. Can you hear me now?

We can indeed.

Just firstly, on the franchise profitability. You noted earlier just for WA, you had the data up to the end of June and strong profitability growth there. Do you have the data up to end of June for the wider group or at least maybe ANZ just to give us a little bit of a trend in that profitability in that last quarter?

Yes. It is the same trajectory, Elijah. We did have a challenge with our system, which is down in Europe. But since we've got the data coming through, it is the same trajectory as Q3.

Same trajectory as an improvement or same trajectory sort of in line?

An improvement, yes, in line.

And then maybe just secondly, at the first half result, you noted around 20 to 40 new stores growth over the next 12 to 18 months. You did about 18 in the second half. What are your expectations currently?

Roughly the same, no material differences or movements for next year.

The next up to speak is Craig Woolford. Craig, you should be able to unmute.

Ask a question, firstly, about how you choose priorities here. Like obviously, there's a focus on growing average weekly orders and franchisee profitability. How do you choose a trade-off there between that and DPE profitability? Is there a clear preference to growing orders is the #1 priority?

I think a balanced approach to both order count improvement will absolutely drive same-store sales comps. And I think since we've reset the way that we do offers and the volatility of how we have been marketing in the past to our customers as we reset that to be less volatile, less focused on individual days of the week, actually, it's more -- I won't say it's simple, but it's more possible that we can balance that order count growth with the right level of sales growth that will almost certainly drive an improved profitability outcome for our customers.

One of the ways I've looked at what the work the team have done over the last 12 months, we are now a more financially fit organization for the future. And as a result, what that means is, as we grow the business, both for us and the franchisees, we'll have a stronger contribution margin into the future.

Okay. Yes, it's clear, but it's obviously a tricky issue to navigate. Just in terms of the reset of offers, it's quite tricky to just track that across each of the countries. So can I just get some clarity on when roughly you have reset those promotional offers? The reason for this question is I noticed there was only -- there was a change as recently as June in how your discounts have shifted for the market in Japan. So are there still discounts coming out of the base that could adversely impact sales?

So I think what we've learned in Western Australia, so it's clear moving to a more stable way of marketing to our consumers and being more consistent and predictable in value is going to benefit us in the long run. What we are working through in each of the markets, and we are at different stages in each of the markets, is how we minimize the time between taking away or reducing all of those aggressive discounts, how do we minimize the time between when we take them away and when we actually regain those customers and those occasions with more profitable transactions.

So the other thing to emphasize is we are investing and getting some really strong support from some outside experts and agencies to help us manage the dynamic between how do we balance order count growth, how do we balance price margin as well and how do we drive the right product mix outcomes that can also not only make our customers happy, but also deliver strong margins through the P&L for our franchisees. So it's not a specific answer because different markets are at very different stages, and we need to really work and think strategically about how we put those changes in.

Yes, albeit Australia is further ahead, correct?

So Western Australia is much further ahead and Australia is somewhat further ahead, yes.

Understood. Okay. And last one, just on marketing costs. Marketing expenses in the P&L fell 22% compared with network sales down 7%. Is that a cost item that needs to be rebuilt? Or is this a new base?

Obviously, I think it's gone -- it's reduced closer to $50 million. It's a reflection of a couple of things. One is the sales being down; two, just making sure that we're aligning the spend of marketing with the sales activities across each of the markets, and that's really important. And thirdly, for us, it's improving the working media. So the allocation now is moving more and more into the working media and removing a lot of those marketing costs that weren't effective in the past.

So I mean, if I look at marketing to network sales, like it's typically been closer to 5.5% and now it's more like mid-4s -- like is that the new marketing to sales ratio network sales?

Yes. In some markets, we've reduced the contribution from franchisees through the fund. And so you're seeing the reflection of that in that number. But I would say the right base would be closer to 5% going forward.

Thanks, Craig. We'll next hand to Richard Barwick from CLSA.

Just I thought the Slide 14 was a really interesting one. It obviously demonstrates the pathway to franchisee profitability improvement. But it highlights just the importance of franchisee execution in getting to that 130 target. So I think a question for Andrew, new into the business and obviously coming from a background with franchisees, how would you rate the quality and the capability of the franchisees as you see it? Does it vary much by market, et cetera? And I guess where I'm going with this is, do you see any requirements for investment in training or additional systems or so on to help the franchisees actually deliver their execution side of the equation?

Got it. Thank you. Two things. I have spent time in Australia in the last couple of weeks, and we will have visited all 12 markets by the end of October. So my firsthand knowledge, let's assume it's about the Australian market. Firstly, one of the things that's a really strong message that I've already heard from the team internally, and it's already clear in my experience as well, a great well-run store that provides great service and great quality pizza is exactly the same store that is productive and makes more money than a poorly run store.

And so there is no trade-off between operations execution and profitability. That principle or framework is really alive and well, I think, in Domino's in Australia, both from the internal team and the small number of franchisees I've spoken to. I've been in a restaurant or a store on a Friday night. I've been really impressed and positively surprised about the execution, the impressively well-trained crew and team in the stores. And it's clear where we have engaged franchisees working in the stores, and this is where it's a combined effort to drive profitability with franchisees, there's got to be the right level of collaboration and focus on the right decisions, but franchisees absolutely play their own part in delivering on part of that road map.

So I mean, it's -- I guess, look, from what you can see from Australia, obviously, you're saying that their role is important. Is the quality what you would hope it to be?

Yes. The other context here is the vast majority of franchisees in the Australian network and actually in all of our markets, the vast majority have grown up in their careers working in stores. They know the operations. They know the challenging chaos of what a Friday night looks like in a Domino's store, and they're actually all experts in operations. There's no question in their ability. They have to be engaged in the business. That's our role to lead and motivate the franchisees to be engaged in their stores. As a result, I'm absolutely confident they can drive their end of the bargain from a profitability point of view.

My second question is actually on that 130 target. So like the disclosure we get is good. It's a real improvement on where it had been in previous years and obviously giving us a real sense of momentum in franchisee profitability. But when you're talking about an average number across 12 markets, I guess I'm cautious as to how instructive it is. So I guess my question is, does that 130 target, does that vary much across individual markets? And can you give us a little bit of a reminder why 130? Why does that make it sort of the magic number where the difference between, I guess, success and disappointment?

Yes, no problem. The $130,000 does vary significantly across markets. The way we get to $130,000 is really the payback period 3 to 4x on cost of store. That's the background for it. And so if you go to every market and you look at the cost to open up a store, we're looking at a 3 to 4x payback. We think that's the competitive set that we need to have when we're competing in the franchise world.

Do you have any plans to provide a bit more detail? So as things evolve, would you ever give a more detailed breakdown of franchisee profitability across the markets?

Yes. I think we did. Jack mentioned this morning about the Australian number being at $128,000. Our target for Australia is higher because, as George mentioned, the cost of physically opening a store in Australia is also higher and therefore, to generate the right 3- to 4-year payback, we need a higher number. And we should be clear. $130,000 is our objective. It will take us time. It won't depend on one individual decision, and it will require us to work together with the franchisees. But we should not stop in terms of our opportunity to improve franchisee profitability as we grow the business into the future.

Thanks, Richard. The next up to speak is Caleb Wheatley.

My first question was just more specifically around France. Yes, just keen if you could provide any additional detail on sort of your performance there and the broader market in France, just sort of trying to tie out some of the commentary that is in the past, obviously, the sort of impairment that was announced a couple or so weeks ago. And then any sort of additional comment you could make on the MFA renewal, which I think is sort of coming up in a month or so's time, please?

Yes, no problem. With France, it's fair to say that EBITDA has been positive for France. And I've said in the past that the EBIT result is not materially different or materially close to breakeven. We are budgeting a positive result, both in EBIT and EBITDA for France. So it's very important. We are -- and we're seeing positive sales momentum. I was saying Jack to earlier today, we're seeing really good momentum coming through France. With the MFA, we're finalizing the agreement on the MFA. Russell and the team have -- we're working with the right spirit and the spirit of partnership. We should be concluding that in the next week or so.

Okay. Great. That's helpful. And then my second question, I know you sort of commented on store openings on a go-forward basis. I just wanted to come back. I think it was at the AGM where you called out specifically Germany and Malaysia as being sort of the more meaningful growth opportunities. Yes, I don't think there was any sort of comment around timing there, but just sort of looking at your store count since that period, it doesn't look like there's been any sort of meaningful change. So I just wanted to see if there was any update on propensity for growth in those markets in particular?

Absolutely. We still see both those markets as opportunities for significant growth. Germany is a 1,000-store market. So we have significant growth potential in Germany and same with Malaysia. There's segments and areas of Malaysia that are untouched. So that's the plan. Our plan is to deliver growth in those markets.

And Malaysia is largely a company operation, and we can release $50 million of capital through the sale of company operations to franchisees. We just have completed one in the last month, George. So that's the other opportunity that is entirely.

Okay. Has there been any sort of blocks in terms of, I don't know, maybe where those initial plans were? -- It sounded particularly upbeat and so not have any movements so far comes a bit of a surprise or perhaps getting a bit ahead of ourselves. But yes, just in terms of sort of actually getting those sites, has there been any particular blockages or is it just a matter of time?

No, I think we should be clear around the sequencing. We need to fix and make sure the economics of the stores is right. And then what George referred to in terms of, for example, in Germany, that market clearly on the population, the demographics, et cetera, has the potential for 1,000 stores in the future. But we -- we need to sequence this correctly. We need to make sure franchisee economics is right, then we can look to scale and grow the stores.

Okay. Thank you, Caleb. And I just have a few more questions that have been submitted online. I'll go to the first one. George, ANZ network sales are down 6.1%, but revenue was down 11.3%. Can you identify what the difference is there?

Yes. Just the savings that we've been able to deliver the productivity, both through head office and cost savings through the teams. So a lot of our cost out programs have been delivered through ANZ. So that's the difference there.

So with revenue being lower there, I think we've also made some commentary in the pack that we reinvested some of those savings ahead of savings be achieved.

So we went out to -- we gave a lot of the procurement savings to franchisees ahead of negotiating them with suppliers. So there was a timing difference that had franchisees getting a lot of these savings ahead of the curve of when we realize them, and that's part of the gaps as well.

Then a question, is the divestment of any of the group's operating regions being considered? Maybe to Andrew, fresh into the building and then to the Chairman.

So no, at the moment, we are -- if you look at France and Japan, in particular, we are positive EBITDA in both of those markets, positive cash flow. We feel confident that we can grow those businesses in the same strategy and sequence of events that we've outlined today.

Comment, we have a very strong financial balance sheet and structure. We don't need cash, which if you said, okay, well, maybe if we sell some of these markets, we'll get some cash and it will help us do something. To me, the real challenge in front of us is get the unit economics correct, starting in Australia, get that correct. And then if we get the unit economics, I'm relatively confident that we can apply that to other markets. We have a business today, which has EBITDA market capitalization about 5x, 6x. And if we can get the unit economics right, which we can apply across a bigger market, then that's how we will create value for the shareholders.

And that to me is what the primary target should be rather than liquidating. The downside of that theory is, is there too much disruption in the market that we can't do all these things, and there's an argument that says maybe we should be more focused on doing what we're doing. But I think we have in front of us a very experienced management team. And my view is, let's have a go at seeing what we can do to get the unit economics right. If we get the order count, the sales coming in various markets that can be applied to other places. If we can't, if we cannot, then that answer will change.

Thank you. A question from Sam. Japan has been in turnaround mode for some time, yet profits remain very weak. So when do we see the benefits from those store closures? And what are the FY '27 growth drivers?

Think I talked about Japan profits increasing 19.7% despite lower revenues. So Japan has delivered on profitability out of the store closures, and we continue to believe that, that will continue into '27 and into '28.

We've obviously talked about the reduction in net leverage today. The refinancing loosened our covenant cap to a temporary 3.5x with leverage now at 1.86x. So what scenario were you buying headroom for?

Sorry, what was the question?

Why the need for an extension of the covenant that we had a temporary extension of 3.5x?

So at the time, the market felt that we needed to needed to go back to the market and obtain more cash. And so they were concerned around the balance sheet. So we went and put a temporary covenant in with the banks. We're not going to need that covenant. It was a temporary measure. We're not going to need cash. You've seen the results of both our cash flow and our balance sheet. It was just a precaution at the time.

And I'm just going to wrap it up with just one more, which is a few questions in one, which are really on the same topic. And that is that, obviously, there's been a lot of work in terms of fixing the balance sheet and investors are now looking forward to when we're growing order counts. What is the reasonable trajectory people should look for in terms of return to positive same-store sales? And should they consider FY '27, is that another transition year? Or is that going to be a recovery year?

So the expectation is that we will start to drive positive sales growth in '27. So I'd be disappointed if this time next year, we're noting positive sales growth. That's the plan. You'll get positive sales growth first, followed by positive order count growth. It won't be consistent across all markets. Our focus is Australia and our core markets. That's our focus, but that will materially impact the group result as well.

Thank you, George. That has gone through those questions. I'm just going to hand back now to Andrew for any closing remarks before we end today's call.

Thank you, everyone, for joining the call. And as George mentioned, I think from a prioritization point of view, it's really clear. We're focused on regaining momentum in our baseline. And then on top of that, we're prioritization -- prioritizing the work, the effort that we need to do to get Australia first and then our other large markets back into growth.

Thank you so much. We appreciate everyone joining today and for your questions, and we will see you at our road show over the next few days. Thank you.

Good morning, all. Just waiting for all participants, and then we will get started.

Okay. I can see the participants have now populated into our call. Good morning, and thank you for joining us. I'm Nathan Scholz, the Chief Investor Relations Officer for Domino's Pizza Enterprises.

We're joined this morning by George Saoud, who's our Group Chief Operating Officer and Group Chief Financial Officer. We're going to start with some prepared remarks from George first, and then we will hand over to question and answers. As is our usual practice, we'll allow our analysts to unmute, ask follow-up questions, and ask people then to go to the queue just so everyone gets a go.

George, over to you.

Thank you, Nathan. Welcome, and good morning, everyone, and thank you for joining us at short notice. I'll make some comments and then happy to take any questions.

We've released an update last night to give the market a clear and complete picture of two things at the same time: the position of our underlying performance and the outcome of a comprehensive review of our balance sheet.

Before I go further, one important point to note is that the numbers I'll refer to today are preliminary and unaudited. The audit is ongoing and will conclude ahead of our full year results.

If I step back 12 months ago, we set clear priorities: fix the balance sheet and leverage ratio, take costs out, improve franchisee profitability, prove out changes to pricing in WA model and reduce our reliance on the high load discount.

We have made significant progress to each of these positions. We took out $60 million to $70 million of annualized costs through headcount reductions, IT and supplier input savings.

We refinanced the group at lower rates. We stepped up free cash flow. We improved franchisee earnings and the WA pilot has been positive as our trial.

Let me start with what matters most, how the business is actually performing. Underlying NPAT is expected to be between $118 million and $122 million, consistent with the guidance we gave the market.

Free cash flow is expected to be approximately $164 million, an improvement of around $117 million on the prior year. That is a step change in cash generation.

We've reduced our net leverage to around 1.9x, in line with our target, and we completed a $1.05 billion refinancing that gives us staggered maturities, better pricing and real flexibility.

And critically, franchisee profitability is up. Average franchisee EBITDA is $105,700 for the rolling 12 months to quarter 3 of FY '26, an increase of over 11% on a constant currency basis.

The overall picture is that earnings are in line, cash flow materially stronger, debt down and our franchisee partners making more money, a solid foundation for the business.

But I want to be direct about same-store sales, which were down 4.1% for the year. This reflects a deliberate decision to prioritize profitable, sustainable sales over headline volume. We have brought discipline to promotions and improved unit economics rather than chasing low-margin transactions. The proof is in the outcome.

Sales moderated as expected, but franchisee profitability rose double digits. That is the trade we made. It's the right one for the long-term health of the network.

Now let me turn to the balance sheet. We expect to recognize total write-downs of approximately $259 million, of which $246 million is noncash. This reflects a thorough, deliberate review of the carrying value of our assets. We have written down the France and Taiwan goodwill.

We have completed a portfolio review of our IT projects, a detailed assessment of our corporate store assets and other balance sheet items. They are, in a large part, a reset of book values to reflect today's reality, but also our revised strategic priorities. They do not affect our cash generation, and they do not impact our banking covenants, which is assessed on an underlying EBITDA basis. This is review mirror work.

We've done a comprehensive review of the balance sheet and the risks across the business. That work is now behind us, and we're moving forward with a cleaner, stronger platform.

WA is the most important forward signal in today's update. In WA, average store EBITDA improved by around 30% over the five months to May, and it did that despite lower sales and order volumes. That tells you this is about quality of orders, product mix and operational execution, not just topline growth.

We've seen the same principles work in New Zealand, where franchisee EBITDA is up over 22%. This gives us a proven blueprint, and we intend to progressively roll out the WA model across the rest of Australia through FY '27. The key question from here is how do we continue to grow franchisee profitability. Underneath all of this is a simple operating model built on three key segments that we are focused on: First, growing profitable order count, the right orders on the back of the right promotions. Second, and importantly, reducing supplier input costs, so more value flows to our franchise partners. And thirdly, driving store productivity, particularly through better labor rostering and makeline improvements.

This is where management's attention is because a more profitable franchisee is the engine of our business, for network growth, for better customer service and shareholder returns.

On technology, we've deliberately moved the business away from an agile operating model to set a clear enterprise-wide priorities, with IT firmly in service of the business.

Our focus is on three things: removing customer friction and hygiene points across our markets, building out our CRM and personalization capability and supporting store productivity through rostering and makeline.

The portfolio review that sits behind part of today's write-down is a direct reflection of that sharper focus. We are optimizing our corporate store portfolio with up to 60 stores expected to close, the majority across Australia and Europe.

This is largely a rebalancing after the aggressive expansion through the COVID period, and it is concentrated in our more mature Western markets rather than Asia. These actions are expected to deliver around $11 million of annualized EBIT benefit.

The reality is that the consumer is under real pressure. Cost of living and interest rates are weighing on households across our markets. Performance is mixed by region, and we have work to do. While we have our arms firmly around the issues, we have a proven model in WA to lift the markets that need it, and our focus is squarely on the levers we control, profitable orders, franchisee economics and store productivity.

Finally, Andrew Gregory joins us as Group CEO next week. Having reset the balance sheet and delivered on our FY '26 commitments, Andrew's immediate priority will be building on the work underway to drive sales growth, franchisee profitability and long-term shareholder returns.

So to sum up, underlying earnings are in line. Cash flow is strong, debt is down and our franchise partners are more profitable. The balance sheet is reset and behind us. We feel good at the progress and are focused on the future. We will provide a full detail, including the final dividend and a full reconciliation of our underlying statutory results with our FY '26 result on August 26.

With that, I'll hand back to Nathan and happy to take your questions.

Thank You George. The first question will be from Michael Simotas from Jefferies.

My first question is around the WA pricing trial or trial of the new pricing model. How much of a drag on same-store sales in that market was it? And as you roll that out more broadly, just mathematically, it looks like it would be an even bigger drag on overall group same-store sales. And in that context, can you maintain this stable level of earnings or grow earnings into next year? Or will that start to weigh on earnings given the impact on sales?

Thanks for your question, Michael. In fact, WA is the other way around. we're comping positive on pickup in WA and delivery is the focus point now in WA. It is not a drag on sales for Australia at all. We see the models working around pickup, and we're making changes to our pricing on delivery, and we're expecting delivery to come back into growth in the future.

Okay. So what's driven the sharp decline in same-store sales if it sounds like ASP is more than offsetting order count in the markets where you reset price?

We've dropped a lot of the promotions. So we had a lot of promotions on delivery, and they've gone away. And so when you take out the intensity of promotions in your market, a lot of the value customers, we've lost a lot of those value customers. What we've seen with WA is getting the right prices upfront in menu prices is driving pickup and driving our pickup business. And we're now doing that in our delivery model. So it's not, what's moving and what's changing is our promotions going forward. We will bring back promotions, but in the right way, so it does not impact franchisee profitability.

Okay. So the market has got a little bit of growth baked into numbers for next year. Do you think that's sensible at this stage?

That's what we'd like. We're not giving guidance on sales, Michael. But when I look at what we want to achieve, absolutely.

Then next up is Craig Woolford.

Just wanted to clarify the promotional plans across other countries. You talked about the success of the WA promotion trial, the change in promotions and the rollout to the rest of Australia. But what about the other countries? And as part of that, I read somewhere that you're moving the half price discount for pickup in Japan as well, for example.

Yes. So, when you look at the other countries, you look at Netherlands example, we're not changing Netherlands. Other markets have been doing okay. Japan, we've relooked at Japan, and there is a new pricing model in Japan. It's a project that we've undertaken. And we're focused on increasing order count in Japan.

So, a lot of what we've done has been targeted to Australia. And then we've taken some of those principles in Japan. As an example, some of those promotions that we were doing in Japan were loss-making for our corporate stores and our franchisees, and we've pulled them out. And that's why we're seeing improvements in franchisee profitability, including in Japan. So, we are bringing back promotions that make sense for franchisees. But Japan has been one of those markets where we've just rolled out a new framework for pricing, and its early days to assess that.

Okay. I guess I'm sure there'll be lots of questions on this. I guess what we're wrestling with is trying to understand how to interpret the sales results. Japan got Asia, sorry, got worse. Is that a reflection of the change in tactics? Or is it a sign of market demand?

No. So the changes we've made in Japan have only started from July. They haven't started prior to that. We have tinkered slightly with Japan in taking out some of those promotions that were not accretive to earnings for any party or for the network. So we started to do that in the second half, and that's part of the numbers that you see in the HS sales position, and that's purely for Japan.

The next up is Bryan Raymond.

Just trying to unpick a few of the numbers. So the negative 4.1% like-for-like, I understand we've already had a few questions on the change in promotional approach in WA. Just trying to understand the degree to which that's driving the overall number because a few have called out already, some of the weakness that we've seen in like-for-like is in areas where perhaps we haven't seen as much of a shift in promotional tactics. So is that a meaningful driver of that negative 4% in terms of you pulling back on promotions? Or have there been other factors that have been contributing to that post the weather events you called out in February?

Yes. No, so WA is not dragging down our sales position at all. I just want to make that clear. A large part of the negative 4.1% sales and in particular, in the Australian market is because we pulled a lot of those promotions. So as an example, we used to do half price or to do delivery to the home, and that was one of the key order counts that we had on weekends. We pulled that promotion that had delivery to the home. And so we've lost a lot of those customers. We're still seeing pickup in WA is growing, cycling positive comps. But what we haven't seen is the growth in the delivery channel that we would expect. And that's the one that we're focused on at the moment.

Okay. Okay. And then just as a follow-up, the alignment with DPZ on some of this is something. I mean we obviously follow their quarterly calls and they have indicated in the last two calls, they have a strong preference for order count growth. And you guys are sort of obviously flagging more store closures next year with that provision. You're focusing on profitability over sales orders. How much patience do you think DPZ have? And is there any sort of second order effects we need to be mindful of there?

We have a great relationship, Bryan, with DPZ. I speak to Sandeep every other week, if not two, three times a week. So the relationship is very strong. We would love order count growth. We want to get order count growth, but we want to do it in the right way. So part of that has been doing a lot of those promotions that were negative or lower margins for our franchisees and substituting them with higher profitable margins on through promotions. And that's what you will see in Australia. So starting in August, September, we've got promotions that are coming through, and you'll start to see that in the market in Australia, which are expected to drive order count growth over last year.

I'm just trying to get my head around the profitability piece. I can see you've said NPAT $118 million to $122 million, but there's no kind of commentary on EBIT or EBITDA other than those couple of kind of country comments. And you haven't said what network sales is as well. Can you maybe just give us a bit of color on those three metrics just so that we can understand what's kind of going on through the P&L?

Yes. It's a high level, Tom. And because we haven't got complete audited numbers, we've sort of defined it down to NPAT, and we've left it at that. Over the next couple of weeks, obviously, as we present to the market, we will have a complete analysis of EBIT and EBITDA. But at this stage, we've left it at NPAT, and then we'll do a full reconciliation of those numbers into the future.

The next up is Thomas Kierath.

And I think you're saying that with the write-offs, there's $9 million less amortization coming through in the future. Was there any, I guess, benefit in this half from lower amortization or like a lower tax rate or anything? Just like is there anything we should kind of be cognizant of then, I guess, when we look at the NPAT numbers?

With amortization, there's been ins and outs. So we've actually accelerated some of the things that we ordinarily would have capitalized we've expensed and then we've got some accelerated depreciation going through in those numbers. From an effective tax rate, there is a benefit from effective tax rate. It's probably around 0.5%, 0.6%, around that magnitude.

The next up is Sam Teeger.

I'm just wondering how much of the weakness in the delivery channel is a function of competitors, both in and out of the pizza category outperforming with aggregators. We've just seen a bunch of other QSR operators signing these exclusive agreements with aggregators. So any thoughts on that would be helpful.

Yes, there's no doubt, Sam, this is having an impact, absolutely. So if you look at some of the offers that are in the market in the QSR industry from $0.99, McDonald's or KFCs, that would have an impact and those aggregator deals will have an impact. We are working with the aggregators. Our channel sales through the aggregators is growing, and we are looking at doing the appropriate deals with aggregators to continue to have our share on their platforms.

Great. And I'm just wondering, taking into account the impairments in France and Taiwan, to what extent do you expect these markets to be an earnings drag in FY '27?

Yes. In actual fact, I don't expect them to be an earnings drag in '27. Both those markets are EBITDA positive. From an EBIT perspective, they're sort of close to breakeven or slightly positive, slightly negative. There's nothing material. But we put plans in place. Part of all of what we've done through this balance sheet reset and store closures, et cetera, is to get the right model going forward. Our leadership teams are very clear on what we need to achieve across those markets, and that's what they're working through. I'm expecting some improvements in both those markets going forward.

The next up is Michael Toner from RBC.

Just firstly on franchise profitability. I'm curious, to what extent does that improved franchise profitability reflect changes to sort of operational and menu changes or like sort of organic improvements relative to like food subsidies or sort of forms of corporate franchisee assistance. Like is that improvement in franchisee profitability purely reflective of improved organic performance by franchisees?

There's a combination, Michael, of a myriad of different things. So one of the things we called out was our cost-out program. So a large part of what you're seeing is cost coming down to franchisees. And that is a key pillar. It's one of the key segments I spoke about is fundamentally driving lower supplier costs to our franchisees, and we've got a program where that will continue. But there is also getting the right promotions that are accretive to their earnings, part of that as well. So that's part of what you've seen in New Zealand and in WA, continuing to have those right promotions to drive the margins for franchisees has been at the forefront of our mind. So I'd say it's a combination largely of our promotions and sales activities as well as our supplier input costs coming down.

Okay. And just very quickly on same-store sales growth. I know it's not a primary focus for the company at this stage. But do you think it's reasonable to expect that, I know you're not giving guidance, but if these changes to menus and operational changes are continuing, like, for example, you called out Japan in July, if these are still rolling through, do you think it's reasonable to suspect that there could be sort of potentially negative same-store sales growth next year as well? Because I'm just thinking in the context of a lot of support for franchisees, but I would have thought eventually you kind of need to get organic top line growth going for franchisees so they can grow their earnings independently of any corporate assistance.

Absolutely. That's the right question, Michael. That's our plan. Our plan is to grow sales order count for franchisees this year. That's our plan. It's our clear plan across the markets. That's where we want to be. It's very important also in management of labor and labor utilization that we get growth in order count, and that's the plan that we're rolling out.

Okay. But do you think franchisees can grow their earnings in FY. So, do you think franchise profitability can improve in FY '27 even if same-store sales growth goes negative?

Well, that's what's happened this year. And we see that, it's not our plan to have same-store sales going negative. But what you've seen as we've done the work that we've done in '26 is that their profitability has gone up as we've taken out a combination of promotions that weren't that effective for them, but also driving better prices on ingredients, et cetera.

We have that plan continuing. So, we see more benefits coming down the track. There are things that we're working on at the moment that will give franchisees further benefits in relation to lower supplier input costs that will come in the next couple of months and in different markets. So, I still see that franchisee profitability will continue to grow into the future.

Next up is Sam Haddad.

Just first question is on cost-out opportunities. Do you see any further opportunities beyond the $60 million to $70 million that you've delivered that we can sort of start to assume or factor into '27 and beyond?

Yes. We talked about at the half year an additional $15 million to sort of $20 million. We're working on that $15 million to $20 million, and there's additional upside that will come out of the $15 million to $20 million into FY '27. So to be honest, it's an ongoing program, looking at our business to drive cost-out for our franchisees and to get the total system cost-out is a focus of the business. So I still see that happening into '27 and '28.

And also just your comments around inflation outlook for the business. What are you seeing at the moment on mitigants and just also indirect sensitivity the business has maybe to the oil price given that's pretty volatile at the moment.

Yes. We've modeled both the oil price and there is an impact on the oil price, and we're managing that with our contractors and our partners, and we're talking to franchisees in relation to that. There is no doubt. And as I said, there's headwinds through inflation and labor costs increasing. This is where the store productivity is really, really important and getting the right labor utilization rate.

Things that Sam talked about earlier on with aggregators and partnering, things around dynamic sales and how do we increase dynamic sales. So when labor utilization is down, we can turn on sales. And that's, we're looking at different means with our aggregator partners to do that. We need to continue to improve store productivity across our network. And that's the focus, whether that's makeline efficiency or labor rostering. It is a pivotal point both from our operations team and our systems team.

And just final question. With the WA franchisees, are they the $130,000 target of EBITDA? How far away are they?

They are well above that $130,000, well above.

Thanks, Sam. Next up is from Phil Kimber.

I just had a question. If you have a look, your profit has been very consistent over actually the last six halves. And you've improved franchisee profitability, which I agree is the sort of key to the turnaround. It's still a fair bit below that 130,000 sort of magic number that everyone talks about. Is conceptually, is the priority to get franchisees up to that level across the board before we should start to think about your own profits because it looks like a lot of these cost savings are basically being reinvested into the franchisees, which is fine. But just trying to understand when the leverage comes back into your [Indiscernible].

Yes. No problem, Phil, and thank you for the question. What I should say is that the 130 is a global number and the 105 is a global average number for franchisees. If I look at Australia as a whole, Australia is very close to the 130. So, I just want to make that point clear. There are markets in Australia that are well above the 130 today, well above. And there's a couple of states that are below. But overall, Australia is well above or close to the 130. There are other countries and other markets that drag that down, and that's the focus for us. And that's the three segments that we called out that we are focused on getting them closer to the 130.

Okay. Thanks, Phil. We've got time for one more going back to Michael Simotas.

Okay. Michael has dropped off. George, we're going to wrap up now. For others, you can follow up if there's additional questions, please shoot us an e-mail noting. We will be limited to speaking about what's on today's announcement.

We look forward to welcoming you back and speaking to you at the full year results on August 26 on Wednesday. Thank you very much for your time today. Have a great day. Thank you, everyone.

Okay. I can see our participants have now joined the call. Thank you for joining Domino's Pizza Enterprise Limited's half year results for the period ending December 2025. I'm Nathan Scholz, the Chief Communication and Investor Relations Officer, joined today by Jack Cowin, our Executive Chair; and George Saoud, who is our Group Chief Financial Officer and Chief Operating Officer.

I will hand over shortly to our Executive Chairman to provide some of his opening remarks. When we get to the Q&A session at the end, if you can raise your hand, I will, as usual, hand around to the different analysts to ask a question and a follow-up, and then I'll ask to hand on to the next question and answer before coming back. So with that, I will hand over to Jack Cowin. Jack, for your opening remarks.

Good morning, everyone. It's my pleasure to give you an overview on the company's first half results and progress that the company is making as part of a -- significant reset. Before I start, just a headline, the company is on track to what we have endeavored to do in getting out of the discount business and making more money for our franchisee community, which is a basic plank of the success going forward for this business.

To move into kind of my commentary, the most important step in structuring the company for the future is the new management that has been established over the past few months, world-class management team second to none in the foodservice industry. Incoming Group CEO, Andrew Gregory, most recently Executive Vice President of McDonald's, a senior executive with McDonald's for 30 years, including as CEO, as ANZ, Japan experience, responsibility for plus 40,000 franchise units around the world. He will join us later this year after completing his obligations to McDonald's. George Saoud, CFO, will retain his function, plus from January '26 --2026, takes on the role of Chief Operating Officer. George joined DPE in July 2025.

We have new country heads, Mr. Merrill Pereyra in Australia started in January '26, experienced long-term employee of McDonald's Pizza Hut in Asia; Mr. Abhishek Jain, CEO of New Zealand, now established as a separate market, former COO of Australia for Pizza Hut, long-term Pizza Hut executive; Mr. Phil Reed, CEO of France, started July '25 of this previously executive with McDonald's, Burger King as a franchisee and CEO of Pizza Hut Australia; Mr. Dieter Haberl, CEO of Japan, long-term resident of Japan and the retail business; Mr. Jai Rastogi, Chief Procurement Officer, deep international experience with major competitors in Australia and Asia. Mr. John BouAntoun, Chief Technology Officer, joined us in January 2026, previously Senior Technical Adviser at Deloitte. Today, we also announced that Drew O'Malley, ex-CEO of Collins Foods executive positions with AmRest in Europe has been announced as a new Director of the company.

This new management team is tasked with building the business with the goal of long-term success for a business in 12 markets, 3,500 outlets, $4 billion in network sales. This group will provide the platform for growth and profitability going forward. We're very proud of being able to attract these people to our company with the experience and background that they all have in this industry.

Corporate DBE earnings. At our AGM in November, we undertook to provide earnings to match earnings consensus growth forecast for the F '26 financial year, and I'm pleased to advise that we are on target to do so with the first half EBIT of $101.5 million, an increase of 1% versus the prior corresponding period. Net profit after tax of $60.1 million for the period -- $60.1 million or plus 2% -- 2.2% higher than the prior corresponding period and free cash flow of $70.6 million. We anticipate that the 2026 full year results will be in line with guidance provided at the AGM and consistent with market expectations at that time.

Sales year-to-date, including the first trading week of the second half are minus 3.6% versus the previous year. We have embarked on a test in WA, which changed the business from heavy discounts to everyday pricing. The result have been a loss of customers who are heavy users driven by pricing unattractive to franchisee P&L. The loss of price-driven customers have led to a decrease in sales with an increase in franchisee profitability, which was our original objective and which we forecast would happen, and now we are seeing the results of that. The trial confirmed the benefits to franchisee profitability. We are now refining promotional activity to rebuild traffic on profitable terms.

The increase in franchisee profitability has led to a national reduction in promotional discounts and an effort to enhance franchisee profits, but has led to a negative sales result. We believe that return to profitable promotions will assist in regaining the price-driven customers over the next six months to a year. Franchisee profitability on a rolling 12-month EBITDA basis has grown from 98.6% in FY '25 to $103,000 FY '26, the highest level in three years, very important. We're hopeful that these numbers will continue to grow as returns improve and lead to an increase in investment in new units and sales.

Bottom line on the financials is the dropping of broad discounting will increase franchisee profits and return to sensible promotional activity, which will lead to a return of price-driven customers sales enhancing DPE profits.

Progress continues with the $100 million objective in our sites of cost out with some very new contractual arrangements enhancing global profitability. There are cost pressures in various markets with regard to labor laws, which the cost out program continues to cover as well as enhancing profits. Company debt, total debt reduction from June to December of $196.1 million. Net leverage ratio reduced from 2.21x, down from 2.57x with average debt tenure of 4.5 years. Interim dividend increased to $0.25 per share, plus 16% -- 16.3% higher than the FY '25 final dividend.

I'll now hand over to George to walk you through the detail behind the reset in the financial results. George?

Thank you, Jack, and good morning. I'm on Slide 3.

As Jack outlined, this half was about resetting the business and rebuilding the foundations in pricing, store economics and capital discipline. We've made deliberate decisions to strengthen franchisee returns simplify the system and improve financial discipline. We operate a leading global QSR platform. So we made a deliberate choice, strengthen unit economics first, then rebuild volume on a better base.

Turning to Slide 4, delivering on our plan. As Jack said, the reset is about getting the foundations right in pricing, our cost base, leadership, and capital allocation. We're moving from broad-based discounting to targeted economics-led promotions. In the WA trial, we saw ticket and margin per order improve, volumes moderated as expected, and we refined how we deploy promotions.

Globally, franchise profitability increased 4.5% to $103,000 per store, the highest level in three years, with Australia delivering even higher growth. Most of our franchise partners operate more than two stores. So when average store EBITDA lifts, that's meaningful income improvement across their portfolios. If franchise partners are profitable, the system is strong. We've actioned $55 million of cost savings, a large portion of that flows to franchisees through lower food and network costs. And importantly, we are funding this reset from within. We are strengthening the balance sheet while strengthening store economics.

Just quickly on Slide 5, the CEO appointment. The Board appointed an experienced global QSR executive, Andrew Gregory, after a thorough global search. Andrew understands franchise systems and disciplined growth. There will be a proper transition when he joins us, which is no later than early August. The principles do not change. The work underway continues.

Slide 6, guiding principles. This slide shouldn't surprise you. We're taking a disciplined approach with these principles guiding us as we move through this reset, so you can track how we deliver against our plan.

Turning to Slide 8 and expanding on Jack's earlier commentary. Overall, NPAT was $60.1 million, representing a 2.2% growth over the prior corresponding period. The key components making up the result are as follows: Network sales of $2.04 billion represent a decline in same store sales growth of 2.5%. The decline reflects the deliberate reduction in deep discounting, largely in ANZ and Japan, prioritizing franchisee profitability.

There is also the effect of reducing the number of stores from the prior corresponding period on network sales. Overall sales across each region are balanced with strong sales in Europe, offsetting the softer performance in ANZ due to the reduction in discounting. The group delivered an EBIT of $101.5 million, which represents a 1% increase over PCP, largely due to the performance in Europe and Malaysia, offsetting the reduced warehouse margin and volumes in ANZ. Our higher effective tax rate reflects the greater share of earnings in higher tax jurisdictions.

From a cash flow position, the business generated $70.6 million in free cash flow, which is $40.6 million above last year. Focus and disciplined capital management has resulted in a reduction in spend on technology and digital investments and new store openings. This is driving the improved cash flows. There was a net reduction of $114.2 million and a total debt reduction of $196.1 million during the period, which -- is driven by the strong cash flows. An interim dividend of $0.25 per share to be unfranked and not underwritten. The dividend reflects our support for maintaining the balance between supporting deleveraging and reinvestment. The dividend reinvestment plan remains in place.

Turning to Slide 9 on the geographic summary. Overall revenue across each market region is similar, with growth in Europe, with the same store sales of 1.3%, offsetting the decline in ANZ of minus 4.7%. As mentioned previously, the decline in ANZ reflects a lower order count in the period as the business reduced discounting and promotions to improve margin per order. In ANZ, the cost savings were passed on to franchise partners ahead of those savings being fully realized. The strong results in Germany and Benelux, and Malaysia, offset the softer trading in ANZ, Japan, and France.

Whilst group EBIT is up 1% to $101.5 million, the decline in orders impacted the ANZ result by $6.3 million. This decline was offset by growth in Europe of $7.6 million and growth in Asia of $1.4 million, notwithstanding the sales decline in Asia. Overhead and cost control, as well as improved margins on orders -- assisted the improvements in Asia, as we hold many corporate stores in this region. The increase in global overheads reflects higher amounts expensed in the current period for technology and data versus the prior corresponding period. Gross technology costs are significantly down, as can be seen in our cash flow analysis, and has been a major part of our cost out program.

Turning to Slide 10, cash flows. Importantly, the reset is being funded from within through disciplined cash generation. Free cash flows of $70.6 million was generated in half 1 '26 versus $30 million in the prior corresponding period, representing a $40.6 million improvement. This improvement largely relates to a $30 million cash reduction in investing activities through focused and disciplined capital management. We'll be explaining this further on the next slide. Operating cash flow improved by circa $5.8 million, and net leasing payments improved by $4.8 million as a result of store closures and the associated reduction in the number of stores. Operating cash flows of $101.2 million includes the benefits of reduced tax paid during the period, offset by higher cash payments for nonrecurring costs versus PCP and some negative working capital improvements in Europe.

Slide 11, investing activities. Overall, there is a $30 million reduction in net CapEx from investing activities in this half '26 versus half '25 last year. The business has reduced investments in digital by $14 million over the prior corresponding period, reduced spend on operational systems and back-of-house capabilities by $3.5 million, and reduced spend on new store openings and acquisitions by $4.6 million. Cash inflows of $8.4 million came from store proceeds and from the sale and loan repayments. The introduction of tighter governance by investment committee approvals ensures that all expenditure has the appropriate returns back to the business and aligns with our priorities.

Looking at our debt and capital management on Slide 12. Management has successfully completed debt refinancing of $1.05 billion in new facilities with better pricing and staggered maturity terms with a weighted average tenure of 4.5 years. Total debt has reduced by -- $196.1 million, and net debt has reduced by $114.2 million, with $64.4 million related to cash repayments. And there is $49.8 million relating to positive FX movements during the period. Our net leverage position represents 2.21x at December 2025, approaching our target position of just under or around 2x, with an interest coverage ratio strong at 19.8x. And as previously mentioned, an interim dividend of $0.25 per share will be paid.

Slide 14 and an update on cost savings and our cost simplification program. Our cost reduction program was aimed at driving a simpler business model across technology, group support, and also investing back into operations to drive a sharper focus and execution for franchisees and customers. Our cost out program continues to track to $60 million to $70 million of annualized cost savings, with $55 million of cost savings action today. The majority of this is related to reductions in headcount, in particular in IT, procurement, and logistics savings, and other marketing and G&A expenses.

Of the $60 million to $70 million in savings, $20 million to $30 million will be delivered as benefits in FY '26 and as previously mentioned, circa 33% of those benefits will flow into DPE. We have started Phase 2 of the cost out and simplification program to target indirect services in G&A, IT as well as further opportunities in food and packaging. Further analysis will be presented in the full year results. We expect benefits in the range of $15 million to $25 million annually from this initiative.

Turning to Page 15, franchisee economics. This slide is at the heart of our reset. We've taken deliberate actions on cost out, on pricing and discounting and on supply chain and IT so that we can generate higher returns and reinvest in our franchise network, and it's having a positive result. Group average franchisee store EBITDA has improved 4.5% to $103,000 on an average 12-month rolling basis, the highest in three years. Let's put that in perspective. The earnings increase in franchisee store EBITDA is measured over 12 months, but the program delivered -- the program that delivered, it was largely in the past six months. Importantly, we're seeing this trend continue into this half with ANZ franchise profitability up by more than 10% higher in January this year versus the prior year. The improvement in franchise profitability has been across all markets, demonstrating our reset efforts are not regionally based, but have global benefits. At the core of our changes is ensuring we continue to deliver value for every -- for every day customers every day.

On Slide 16, our value equation. Earlier, I showed the principles we're applying for this reset. This slide shows those principles in action. Historically, we leaned heavily on discounting to drive volume. That lifted transactions but diluted value. We're shifting to a more margin-accretive operating model. That is part of the reset. We're rebuilding pricing discipline so that growth is more profitable. Volume is spread throughout the week, which means franchisees can manage their labor and other costs more effectively and can focus on delivering a better product to our customers.

So pricing and the value equation isn't just about one number. It means simpler menus, clearer bundles and consistent execution. We want to remove customer friction points. The objective is simple: improve customer value while strengthening unit economics. We are already seeing this in evidence. Our pricing is lifting basket size, improved consistency allows our franchisees to improve margins and customer frequency. Value-led bundles are replacing blanket broad-based discounting and CRM is becoming more targeted.

In ANZ and the WA trial, it's helped us learn some of these concepts. We've accepted some short-term volume moderation to improve ticket and grow store profitability. This is not about charging more. It's about pricing transparency, offering great value through consistently executing and growing sustainably.

Slide 17, Smart Offers, putting this into practice. We want Smart Offers that give great value for customers and profitable returns for our franchise partners. Historically, we used broad blanket discounting to drive volume. That lifted transactions but compressed margins and diluted store economics. We've changed that. Promotions now have to meet store level economic thresholds. They focus on margin and on carryout versus delivery. And increasingly, they are targeted through our own channels.

The Saturday promotion as an example, in Australia is a good illustration. We moved from blanket discounting, including delivery to now selectively carry out or pick up offers. That protects contribution while still driving traffic. The principle is simple, unit economics first, then rebuild volume. Early signs are encouraging. Voucher dependency has reduced materially by more than half. Store profitability is improving, and we're refining as we go. It's disciplined smarter discounting.

I will now hand back to Jack to talk about the trading model --trading update.

Thanks, George. Turning to the trading update. You can see group same store sales for the first five weeks of the second half is negative. I'd like to reiterate comments that I made at our AGM in November. I said in the short term, SSS, same store sales will not be a valid measure as the customer offering is changing significantly from a price-driven discounted voucher-driven business to a change to everyday value pricing with higher margins. In simple terms, we're going -- we're getting out of the discount business and endeavoring to run a profit-driven business. That is exactly what we are seeing in our business today, and we believe we're on track from what that original objective was moving forward.

Turning to the first weeks of trading in H2. There were some one-off unusual events that affected this short window, including some significant weather-related closures and suspension of delivery in parts of Europe. Following positive H1 trading momentum, the Netherlands experienced a significant short-term disruption from severe snow conditions over a 9-day period, followed by further 3 days of continued but less severe disruption. Germany, for the period from the 2nd to the 12th of January, a significant number of stores were either closed or operating delivery only due to significant snow resulting in materially negative sales compared to the prior year. That meant markets that were trading positive comps in the first half versus last year suddenly went to significant negative sales during this period -- five week period [indiscernible].

We also had a full period of Chinese New Year in the prior year versus this year Chinese New Year, which started on the 17th of February, which impacted on the sales during that short five week. Notwithstanding those events, the most recent last week of trading closing February 22, we had a recovery of sales, which were flat versus the prior year comparative period. Absent those one-off events, I expect sales going forward to more closely resemble the first half of the year, which is a focus on sales and improved unit economics for our franchise partners.

Pleasingly, ANZ franchisee profitability was more than 10% higher than the prior year in January. So this approach is working. What matters is we are not chasing volume at any price. We are rebuilding profitable traffic. We're also not abandoning discounting either. We want Domino's to offer customers great value, but it's about getting the balance right. In ANZ, we've adjusted by bringing back some targeted offers, particularly in carryout where the economics make sense. Tuesday and Saturday activations are deliberate. This is not a return to old habits. We're rebuilding deliberately. First, fix the economics, then stabilize volumes and then grow.

We have work to do to get the same store sales back to positive. That's a priority. We're not going to abandon discipline to get there. This is consistent with what we discussed previously, including at the AGM. I've said we can't have growth without adequate returns. That hasn't changed. We operate in a resilient global category with leading position in most of our markets. The brand is strong. The franchise network is strong, but the model only works when stores make money and the system generates cash.

Europe is showing what disciplined pricing and operational focus can deliver. When unit economics are right, growth follows. In Australia, we're rebuilding store economics first. Japan and France need further improvement. We'll apply the same return discipline there. The key message is this. We're not running a growth at any cost portfolio. We are running a returns-led portfolio. Markets will expand when store level returns justify it. When unit economics are strong, this business generates cash and compounds. That is the base we are rebuilding.

Our outlook, we said this half would be about a reset. It was. We restored pricing discipline. We simplified the cost base and we strengthened the balance sheet. Franchisee profitability is at its highest level in three years. We generated over $70 million in free cash flow. We reduced debt by nearly $200 million. That tells me the model works when it's run properly. Now we move to the next stage. Because the balance sheet is strong and franchisees are making more money, we can return to selective expansion where economics justify it.

Germany is performing with positive FY '26 year-to-date same store sales and strong EBIT contribution. We will support organic store openings. In Malaysia, we are progressing refranchising across our company-owned store base that releases capital, strengthens franchisee ownership and improves return on invested capital while supporting new store and upgrades. Across the system, we expect between 20 and 40 new stores over the next 12 to 18 months, selectively and returns led, not growth for growth's sake, growth where returns make sense. We moved away from broad-based discounting. That reduced highly priced driven transactions, which was expected. We're calibrating promotions to rebuild traffic on sensible profitable returns. We will not do the shop away.

This is about profitable growth not headline growth. As franchisee returns improve, that strengthens DPE's earnings. We've assembled a strong leadership team to execute this next phase. Resetting the business across -- 12 countries is not simple. It takes discipline and hard work. I want to recognize the work that George Saoud and Atul Sharma have led over the past eight months. The restructuring and financial discipline that they've driven have laid the foundation for long-term growth profitability. Foundations are stronger, growth will follow returns. I look forward to your questions.

Thank you, Jack and thank you to George as well for taking that time. As I mentioned, I'm going to start unmuting the questions. First question is up from Shaun Cousins. Sean, if you want to start off, you should be able to be unmuted.

Maybe just a clarification, please, on the guidance. Your text in your AGM announcement was a quote, we are confident that the company will exceed consensus full year NPAT bracket visible alpha for fiscal '26 as a modest increase on '25 -- to fiscal '25 and I'll make the comment that consensus, I think, was $118.7 million then. Today, you've said in your release, we anticipate that full year '26 results will be in line with guidance and consistent with market expectations at that time. Will underlying --my question is, will underlying NPAT exceed or be consistent with consensus? They're just two different statements. Are you going to beat consensus or are you going to meet it, please?

Yes. So George here, Sean, thank you for the question. From where we stand right now, we're looking to beat the consensus at that time.

Great. So that's unclear in your statement, but clear in your answer there. And my second question is just around the WA trials. Did that, and then you highlighted the good work that's been done in Australia with profit being up for franchisees. Is the WA pricing trial and the approach that you've embarked on there, I recognize how the primacy of franchisee profitability. But is it positive for DMP shareholders because you should have lower warehouse volumes and so that should come at a cost to EBIT in the near term. Is the offset that you have fewer franchisees on support? Or you just need to have a more profitable franchise network just for a business to get going and the cost is that ANZ needs to invest money in the very near term to set the business up for growth. Just curious around the WA trials, please.

Yes. So WA trials, franchisees are making on average more profitability out of WA and what we're seeing there. The overall objective will be that short term, it will have warehouse implications for DPE. But long term, it will reduce the financial support, and the other support provided to franchisees, which will increase the returns to DPE shareholders.

Thank you, Sean. The next person to go is Michael Simotas.

First one for me, look, you're doing a lot of what you promised you would do. Franchisee profitability is up, cost out is coming through, the balance sheets improved. Now you warned us that sales would be soft, but I think the market is a bit spooked by how soft they are. Two questions relating to that. One, is this the worst of what you expect for same store sales or could it continue to deteriorate from here? And how long can you sustain same store sales declining before you'd need to make some adjustments to the pricing architecture?

Michael we, with the WA result had, is driven by, and we can see this very clearly, the loss in sales for the price-driven customers. And it's going to take time to be able to bring those back. The exercise and the objective here is to get to win. They are the heavy user and as a result of that, we have lost a lot of those. Where we made it probably went a little soft in WA is we didn't have our promotion program going. We just kind of went in with everyday pricing. We now accept that promotion is part of the business, and we are now actively putting forward sensible, profitable promotions rather than no promotions which we started off with.

So my kind of forecast is that we -- we can demonstrate where the customer loss is. We will get those back over the next 12 months by running sensible promotions. So we see that coming back and as I say, the most recent numbers last week, we're now back flat. The former -- decrease in profitability. I'm sorry, the decrease in sales, same store sales was now across the total business was now flat. So we're quite encouraged that we've seen a decrease in the loss of those customers the heavier. We are getting increase in check. We are -- the Net Promoter Scores are going up. So there are a lot of positive as to what's happening that this is now a stronger business than what it was 12 months ago.

Okay. Yes, I think I understand the message there. And then the second one I've got is just in terms of the relationship with DPZ. I've covered your stock for a long time, and I don't think I've ever seen DPZ talk about your business as much as they did on their earnings call this week. Some could interpret that as very supportive and helping you get the business where you need to get it. Others could interpret it as putting some pressure on you. Where do you think they're positioned? How patient are they willing to be? And what sort of help can they give you to drive this process?

Michael, to be very straight, I've been very impressed with the support that they've given us. You have to understand that DPE make money on sales and that -- and new stores. Those are the two drivers that influence this. What we are doing doesn't fit that model, but I think they recognize that what has to -- with the steps that we are taking are required to change this business. And so I've been very impressed with their attitude and willingness to help, and that's in motion. So as I say, they have a different incentive. Their incentive is open more stores, get higher sales. And where this business have been for the last 10 years have been going down that path of opening lots of stores and drive sales, and the missing link was franchisee profitability was being reduced. So that's what we're trying to change.

And I think they understand that. And -- I think the key thing here, Michael, is long term versus short term. These decisions that are being made are in the best -- right best interest of the business long term, not short term. We could have -- we go back to giving the shop away, not doing that. And as a result of that, you read negative short-term sales loss. We know why that is. It's price-driven customers abandoning. We give sensible promotion, that will come back. Franchisees will make money, we'll open more stores. Sales will increase with more stores. That's the game plan in simple terms.

I might just add to that, Michael. I speak to Sandeep, the CFO, on a regular basis. I spoke to him on the weekend. It's a very supportive relationship. They're coming down to the rally. They'll be here on the weekend and next week. So we have a very good relationship working through. Key areas, pricing and what we're doing through pricing, they're across. They've been very supportive. They did their own reset of pricing, and that was part of their turnaround. And I think they've taken the share price that's now up above $400. It was a lot lower 5 to 10 years ago. And the other area of support is around systems and continually improving our systems, et cetera. So very supportive and a good working relationship.

The next person, analyst to speak, I'm just unmuting Craig Woolford from MST.

Can I just clarify the path of cost savings that you've got? So first, there's a couple of parts to it, just to understand the first half '26, the contribution of cost savings in that period. And then I just want to be really clear on the way you're looking at sharing those cost savings. There was commentary about the 2/3 and then it looks like some of it might be half of that. So the $60 million to $70 million figure, is that -- the rest of that likely to drop by the end of FY '27?

Yes. Good question, Craig. So we've talked about $60 million to $70 million. We've talked about $20 million to $30 million coming into DPE -- sorry, coming to the network in FY '26. And we called out 1/3 going to DPE and 2/3 going to franchisees. And the components that make up a large part of the cost savings we've called, which is IT and significant cost reduction in IT and you can see that coming through the cash flows. But generally, a lot of those costs were capitalized. So that will come over time. They will not come through over one year. They'll come over the three to four years that we were depreciating those costs. But where you will see the benefits come through the P&L in a shorter duration would be the food and procurement and logistics savings. Those deals and the quantification of those deals are coming through the P&L for franchisees in Australia that they're getting that benefit today.

So what was the cost savings in that -- in the first half?

For franchisees or for ourselves --

Yes, the gross number.

The gross number would have been around $13 million.

Right. So it's roughly half of that. And one other cost line that did reduce quite materially in that first half was marketing expenses. It was down circa $15 million, declined faster than sales. Is that something that can continue? Or are there some limitations around advertising fund or agreements around your funding?

We -- I mean the reduction in stores that we've had from last year has obviously meant a reduction in the marketing fund. We run through a certain percentage across each of the key markets, and they vary. So some markets, it's 4%, some markets, it's 5%, et cetera. So that percentage reflects is typically what we spend across each of the markets.

But it must have dropped faster because it dropped by 12% versus network sales down 1%?

Yes. There is a catch-up. There was an overspend a year ago. There was a large deficit that we brought in to the year that we are managing through this period.

Thank you, Craig. The next question is from Sam Teeger from Citi.

What is Domino's doing to address growing consumer GLP-1 adoption?

Sorry, it was a bit soft on our end, but just to clarify, Sam, the question was -- you don't need to repeat. It was a question about the impact of weight loss drugs like Ozempic and those other weight loss drugs.

I don't think we know the answer to that. If you read the articles, they talked about potentially 10% of the population are on this and reduces appetite. I don't think we know the answer. The grocery store, the foodservice business, a loss of appetite, people eat less, it's obviously going to have a factor. I don't think in Australia today, it is material. And whether or not that continues to grow, not sure.

Maybe, Sam, if I can also just add some commentary to that. I was speaking to my colleagues at DPZ about this and their insights into it. Their view was that pizza was well placed in an environment where, one, it's an indulgent meal. So it's not an everyday occasion. So there's not the same impact that you might see of large grocery retailers. And also that they saw that pizza was well positioned given that it was a sharing occasion as well, and that somewhat put it apart.

I think probably the best indicator of that is that the U.S. is probably the most advanced market in terms of take-up of GLP-1s and other weight loss drugs, and they printed a very strong same store sales number this week. So it indicates that it's not having an effect, but it's certainly something that we constantly monitor trends in terms of food changes. And I mean, we implemented vegan in Australia. We are able to tailor and adjust our menu with higher protein options, whatever our customers are looking for.

Yes, some good points. I wonder if some of their success is due to market share gains, but maybe we can take that offline. I would also want to ask about many retailers are calling out Western Australia as being one of their stronger performing states. Therefore, what's the risk that what Domino's is seeing in Western Australia won't be a fair reflection of how the rest of Australia will respond to the changes, particularly in some of the East Coast states, where the consumer is under a bit of duress?

You're right. WA is a very strong market. And -- but I can tell you, in January, Victoria, which is one of the weaker markets in Australia, has had substantial sales -- substantial profitability increases. And so the franchisee community, and when you see profit increasing, they are very anxious to make the change and I think in the commentary we just made, it is happening across the board in Australia, that getting out of the heavy discounting has led to an increased profitability, and that's the main thing that gets franchisees excited.

So yes, WA was the test market, but it's very rapidly expanded across the country, and that's the result of -- that's where you see the decline in the sales numbers as that heavy user with lack of price-driven promotions goes away, and our job then is how do we figure it and give them back over time with time.

And just checking in Victoria, it's good to hear you getting some good numbers out of that state. Have you got all the new pricing in Victoria? Is that reflective of the pricing strategy you have in WA trial?

Sam was asking if it's the same pricing strategy in WA as in Victoria?

Likely, yes.

Okay. Thank you, Sam. Moving across to Ben Gilbert from Jarden.

Just Jack, just interested in terms of -- obviously, there's been a lot of [indiscernible] the press around M&A, all the sort of stuff. I appreciate your comments publicly that hasn't been entertaining anything. But have you looked on a divisional basis in terms of if interest pops up for Japan or Germany or France? And have you had people looking? And is it something you would consider in terms of the sale of one of the regions?

The answer is yes. We're trying to run 12 different countries, different cultures, different languages, and things like this is not an easy business to run. We recognize that. And there is interest that people, and we will try and make decisions on a long-term basis as to what is the company's best interest. Can we -- can we make more money in some of the markets that we're not getting a return? One of the issues are those markets probably also don't have the profitability that would justify a good selling price.

One of the key values that exists in this company is underdeveloped markets, France and Germany too in case, 400, 500, 1,000 store potential. Valuations in the market is largely based on what's the future growth prospects. If we can -- from my point of view, if we can get management correct and get the pricing, the profitability at store level, at unit level correct, and get these units, then we will look at, is this the most efficient way to run this business. So, we're very fortunate. We are associated with the largest pizza company in the world, very successful.

As we've talked about before, they went through a regrowth period. The 2008, the share price of the U.S. company was $3. Today, it's $400. They got it right, and we have to do the same. We have to get the pricing, the profitability at unit level, and whether or not we can run a more efficient business by reshaping this, time will tell. But at this stage of the game, our primary objective is how do we make these businesses more profitable.

That's helpful. And just second one for me and final one. Just on Andrew's appointment, he comes very well credentialed in terms of his capabilities regarding market. But what's his remit? If he comes in and say, look, I want to take another go hard on pricing again to try and get volume back or take bit of view is he very much -- he's on board with this strategy, and we shouldn't expect any change. He's just coming in to drive that. The concern being, as you know, obviously, in the past, CEOs joining companies that have faced some challenges could often drive rebases and that's just a concern or focus, I suppose, at the moment.

I can't predict what he will come in and do or say. But I can tell you that I've been very impressed with the exposure. And as I look at his background, he has run very successful businesses. He's made the right decisions. And we're not -- we're very fortunate to get a guy with his experience level, and he will not have got to where he did in McDonald's without having a clear understanding of what's in the shareholders' DBE's best interest and what is in the franchisees' best interest. So, I have no fear that he will come in and make dumb decision by wanting to change things from where we're headed because I think we're on the right track. I think you'll see that.

The next question up is from Ajay Mariswamy from Macquarie.

Just in terms of that Malaysia corporate store sales in terms of trying to unlock capital there. Can you give us any indication on how things are tracking on that?

We moved about seven or eight stores at the half year, and we've got plans to do the same for the full year. We're developing a solid franchise team there to move on those stores. Every time we sell those stores and we're recycling the capital, the profitability from a DPE perspective does not reduce as we sell down stores. So, it's a win-win. We find that selling down stores and the result and impact on us, we get the capital and we continue to generate roughly the same profitability.

Got it. And then just secondly, on that cost out savings, you called out the $15 million to $20 million -- sorry, $15 million to $25 million in the future. Is that going to be a similar split between DPE and franchisees as it has been in the past, 1/3 to you guys and 2/3 to the franchisees?

The majority there will go to DPE. There will be costs that are within our cost base that we will look to reduce our own costs and take those benefits. So, largely to ourselves.

Next up is Tom Kierath from Barrenjoey.

I just had a question on Asia. In the prior period, you closed a bunch of underperforming stores. I think the annualized kind of benefit or the annualized losses from those stores are like $15 million, but there hasn't been much improvement in the profitability there. Can you maybe just step through, I guess, the moving parts within that business in the different countries, please?

Yes. I'll talk about Japan in particular because majority of the stores that we're talking about is in Japan. I think we've covered Malaysia and Malaysia has done well. We covered that through the commentary, Malaysia, Singapore and Cambodia is growing. With Japan, we closed down a lot of stores. There was an expectation of additional sales coming back into the existing network and a material uplift as a reduction of the cost out of those stores. We haven't seen that materially come through the P&L.

What I would say in Japan is if you look at Japan 2019 pre-COVID, Japan was doing $53 million on about $600 million of sales. And through COVID, we significantly increased the number of stores. We increased the complexity of the business. And we've ended up in a business where we really need to go and work through to remove a lot of that complexity, et cetera, which state is doing and improve the offers. So unfortunately, we haven't seen the closure of stores impact our sales to the level we expected it to. And that is part of the network analysis we're continually looking at. But we believe in Japan, it is a market that we used to have significant profits in that we complicated after the COVID and during the COVID period.

Great. And then just second on France, like the Europe numbers are pretty good, at least Benelux and Germany, but the commentary is that France is pretty tough. Is that profitable in the half? Is it loss making? Like how are you kind of thinking about that business, in particular, that country?

Yes. France was more a small loss. And France, I think the biggest opportunity with France is driving our sales and marketing campaigns and strategy in alignment with our franchisees and execution and compliance to those programs. And that's where Phil is doing and he's doing a really good job getting the franchisees on board. So the opportunity in France is really execution of better offers, but running the digital programs more effectively and aligning those offers and compliance of those offers with franchisees in the marketplace. There's a lot of complexity in France in the different pricing tiers and the marketing programs. It's all about simplification and building the ways of working with franchisees.

Okay. Thanks, Tom. The last questions are actually being submitted through chat, and they come from Chris Scarpato and from Ben [Moodreaux] on a similar topic. And Jack, those are that you called out 20 to 40 new stores over the next 12 to 18 months. Firstly, is that a net figure? How many stores are you planning on closing over that same period? And also, what's the longer-term franchise profitability target?

There will obviously be some store closures going forward. That's the new store. I don't think we sit here today with -- we can't give you a number on store closures, George. I don't think we -- but that's kind of -- the company is -- if you look at the financial position, we've got the financial capacity to move forward and go into new markets that we think we can operate profitably and -- so the 20 to 40, I think this business is a momentum business. If we can demonstrate franchisees can make a higher return, have a shorter payback on their investment, they will want to open more stores, and that will make everybody happy.

And the 20 to 40, we think -- we're relatively confident that there's enough momentum in the pipeline to do that. I can't give you a net number because we don't sit here today with anything that kind of is imminent that will -- there will be some store closures where -- for whatever reason, the store is unprofitable, franchisees -- but that's kind of -- the plan is development will follow profitable business, and that's the future.

I just build on that. We are not expecting the size of closures at all that was done last year. I think through this reset and sort of call it transition period, those 12 new stores, I would expect that to continue and grow.

Two follow-up questions from Sam Teeger from Citi just on that store opening expectations. Is $130,000 at a group number still the target we should think about for franchise profitability, which we've shared previously was an average expectation. Is that the number we should still be thinking about for franchise profitability to drive material store openings?

As an average, that is the number we're working towards, Sam. That hasn't changed. When you look at the sort of cost of construction and the right payback periods, that is the number that it still needs to be around $130,000 to make this sensible.

Another question from Sam. The SSS decline accelerated to -- negative 2.5% for the whole of the first half compared to negative 1.2% for the first 7 weeks disclosed to the AGM. Can you help us understand the trading environment in those final 9 weeks of that first half?

So the first -- the first...

First 17 weeks, negative 1.2% and then accelerated to negative 2.5% for the first half.

Yes. So as we rolled out more and more of those promotions and as they expanded, that's had an impact on our same store sales. So as we took more and more, removed more and more discounting and removed the promotions that we thought were very low marginal contribution of franchisees that's had an impact on same store sales. The key headline here though, Sam, is franchisee profitability is growing, and it's going in the right direction.

Sam, I took a quick look at your commentary, and you kind of zero in on same store sales. I think what you are ignoring in taking that position is we have consciously changed the way this business is being run by getting out of the loss-making heavy discounting -- sales driven and that has -- as a result, that has reduced the customer count and same store sales. So it's not an apples-and-apples comparison that we consciously said we're going to get out of the loss-making sales that this business has had and restructure it in a manner that is profitable at the store level. And so it is not an apples-and-apples same store sales that we might think about on a consistent basis of a company that's kind of going forward. This is a conscious change, and we think we're on track to move this business into a new territory where we can expand at a profitable growth and it's driven by franchisee profitability.

Okay. Thank you, Jack, and thank you to all of our callers. We have now gone through all of the open questions and all of those analysts who put up their hands. Thank you very much for your time today. We'll be seeing many of our shareholders today and over the next couple of days at our road show. We look forward to seeing you there. The recording of this webcast today will be posted on our website as soon as the recording becomes available. Thank you very much for your time.

Good morning, all, and thank you for joining Domino's Pizza Enterprises full year results. I'll just wait for a moment for all the participants to populate the call, and then we will start our presentation.

Okay. Thank you. I can see all our participants are now on the call. My name is Nathan Scholz. I'm the Chief Communications and Investor Relations Officer of Domino's Pizza Enterprises. Today, you'll be hearing from Jack Cowin, our Executive Chairman; Richard Coney, our Group Chief Financial Officer, who is retiring; and George Saoud, our Group Chief Financial Officer, who has just joined Domino's, and you'll be hearing from him today.

And with that, if I hand over to our Executive Chairman, Mr. Jack Cowin.

Good morning, everyone. I'd like to start with some introductory remarks before we get into the presentation. I'm pleased to speak to shareholders as your Executive Chairman on what is happening at DPE and announced our most recent results for the year ending 2025, after nearly 40 years of being associated with the company as a shareholder.

DPE is a $4.1 billion network sales business in 12 countries operating from 3,500 restaurants. DPE has produced an underlying net profit after tax of $116.9 million. We sell more than 220 million pizzas a year, 7 pizzas every second. We are the largest master franchisee of [ DPZ ], which is the largest, most successful pizza business in the world, and DPE is their largest franchisee. So we are part of a very successful international business with large development potential.

Over recent years, the business has changed with the advent of Uber and other delivery companies who now provide a delivery service to every commercial enterprise that wishes to deliver food and every corner restaurant. To have maintained our sales margin against these fundamentals is somewhat of an achievement when just a few years ago, the pizza business was the default option for customers wanting to use food delivery. Now many alternatives. That's a testament to our franchisees and team members across the world who deliver our customers every day.

With the change in the competitive landscape regarding delivery, we remain the largest pizza player in all our established markets. What advantage us as being the market leader give us an advertising and promotional edge in making contact with the customer with the right message. It also gives us a store network that puts our product close to customers with delivery times that means our meals are delivered hot and fresh. It is measured by our customers who rate their meal quality and overall satisfaction.

Excepting the fact that there are being flat network sales last year at 0.9% and underlying net profit after tax, minus 2.8% from DPE this year. On the back of disappointing results in the past 3 years, the challenge is how to respond and introduce changes to improve the likelihood of success by increasing sales and profit through the system. Given the changes in our industry, we do need to make changes in our business with a new strategy we announced earlier this year, which we call our recipe for growth, and operational plans in each of our markets to reviewing every part of our cost base and how local countries are empowered, making sure decisions are made close to our customers.

A key factor in future success will depend on management execution of the products sold. We have operated historically a business with head office providing direction and having accountability. Our expectation moving forward is country head offices will have responsibility and accountability for all of the activities in their markets. Coupled with that, because accountability and execution at store level is so important in delivering for our customers, franchisees and for shareholders, we want to direct some of our resources from head office into the field. This is a project of fixing product quality, execution and holding people responsible, requiring a reallocation of resources to where the results can be clearly measured.

To support this, we are looking across the business to restructure our offices and reduce our SG&A costs. I've already shared that we are looking at IT and marketing, given these are large cost centers in our business, what we're looking top to bottom at everything we do with lots of activity underway to produce a more efficient business. The above changes will lead to reduction in personnel with funds being redirected into national advertising funds to give us more working media. We can make cost changes, which we believe will benefit the business, but the most significant factor in the company and franchisee success will be menu pricing.

I'll speak more on this, but our goal needs to be clear and transparent pricing as we move away from higher menu price and high use of coupons to a lower menu price and fewer coupons.

The goal is great guiding for customers and improve margin for franchisees. Our franchisees are excited about the changes we're proposing. I received an e-mail from an Australian franchisee who said this approach was refreshing and went on to say, I believe in your ideas and the next chapter of Domino's is exciting. Our first priority is increasing franchise profitability, and I believe the management resources we have and our focus will ensure this happens.

In summary, so as I turn to the presentation in front of you, let me be clear. We've embarked on an aggressive action plan to reduce costs in the business. This is underway and the savings will produce funding to enhance the marketing and operations in our business. We're also embarking on a significant change in direction in our advertising from a dominant discount price of voucher business to an emphasis on selling higher quality premium products for good value, which we anticipate will help franchisee margins.

There will be an enhanced investment in store execution and a conscious effort to put more control in the markets close to our customers that includes operational trainers in the field to work with our franchisees and focus on product quality and execution.

Now if I turn to Page 3 of our presentation. Domino's today put their position. You'll recall, we shared this slide and the one that follows back in February. I want to bring it back today because while we've talked a lot about the changes underway. It's important to remember the fundamentals that haven't changed. First, our strengths. As I noted, we remain the market leader in key countries, supported by strong store teams and culture. We operate in large attractive markets with significant growth potential. Our value proposition is built on quality food and customer experience, and we have a highly recognized brand with a proven flywheel when franchisees do well, customers and shareholders do well. That model hasn't changed in for decades.

We're cutting our -- second, our opportunities. We're cutting out complexity, reinvesting in marketing and focusing on customer conversion. Reducing cost is going to be a big driver improving franchise fee, franchise returns and unlocking reinvestment in marketing and franchisee support. We have a longer-term growth plan to reach our full potential. Third, our challenges. The post-COVID cost base has weighed on unit economics. In markets like Japan and France each require their own tailored responses. There's no one-size-fits-all solution.

So while there are challenges, the fundamentals are solid. The issues are fixable. We've got strength that set us apart in opportunities to seize by state focus on quality, value and customer experience and changing how we operate, we can return to sustainable, profitable growth. If we deliver for our customers and franchisees succeed then shareholders succeed as well. That is the heart of our strategy. But as I said, we are making deliberate necessary changes to how we operate and grow.

There are 4 key points that will frame today's discussion and give you a clear picture of where we are and where we're heading. One, business priorities. How we're focusing on the fundamentals, improving our customer value proposition and building sustainable franchise profitability. Two, financial highlights. The numbers that show the resilience of the business across the markets. Three, capital management. How we're taking a disciplined approach, paying down debt while balancing shareholder returns with reinvestment for the future. And four, leadership. The people guiding our business in the hundreds of franchise partners operating on 3 continents through this period of transition.

But I also want to be clear, this is not business as usual. We're making necessary changes to ensure that Domino's can grow profitably again. Strategy, we have a plan to reach our potential. That means sharpening our customer value proposition and making sure franchisee profitability is sustainable. We're reinvesting in working media funded by cost efficiencies we're creating a head office in the field. And we're changing the business, including IT and operations so we can deliver more consistently for customers and franchisees.

At the group level, network sales were $4.1 billion with flat same-store sales. Underlying EBIT of $198 million demonstrates margin stability and the changing competitive environment. Franchisee EBITDA averaged $95,000 per store, in line with last year, regionally and ANZ delivered strong performance EBITDA 5.2% and Europe was positive overall, with Benelux and Germany driving momentum. Asia was more difficult, particularly Japan, which declined but other Asian markets improved. Underlying net profit after tax came in at $116.9 million. a steady result in tough conditions.

Our executive sort of summary is: one, capital management. We're prioritizing reducing leverage. While leverage is currently above our target. It remains well within covenants, and we are taking proactive steps to bring it below 2x EBITDA. We're paying a dividend of $0.215, equivalent to a payout of 35% for final dividend. We are retaining the dividend reinvestment plan, but without underwriting. We're also keeping a disciplined approach to capital expenditure, which means lower IT costs over time.

Leadership. This year has seen important leadership changes. Recruitment for Japan and ANZ is advanced with experienced teams already driving day-to-day operations. So across the group, our financials are steady. The balance sheet is solid. Australia delivered record franchisee profitability, the best in 3 years. Benelux continues to show what can be done with strong marketing and partner alignment. Germany and Southeast Asia improved year-on-year. While Japan is undergoing a necessary reset and France is under new leadership with a mandate to simplify and grow.

Our underlying net profit after tax of $116.9 million shows this was a steady performance in tough conditions. It tells me 2 things. One, we're making progress on resetting some of our markets. And two, we have clear disciplined strategy to improve profitability and drive long-term growth. After closing FY '25 with same-store sales of 0.2%, we have started the new financial year with sales of 0.9%. The FY '25 same-store sales trend improved throughout the year, ending the first half with minus 0.6% versus plus 1.9% in the previous year before closing the year with 0.4% same-store sales in the second half versus 1.6% in the previous year.

It represents a range of trading performance across our group from strong growth in Germany, Benelux and Malaysia, offset by softer performance in ANZ, Japan and France. The ANZ near-term trading performance had been weighed on by a weaker performance in New Zealand, where our stores and customers are facing a challenging economic environment. In Japan, we are rolling a prior corresponding period where we increased our working media in a period of lower customer demand. We made the strategic decision to hold some powder dry and invest more of our working media in this market towards the important Christmas and special occasion periods.

Importantly, we started this financial year with continued strength from the Benelux, Germany and our Southeast Asian markets. What you're also seeing is less aggressive discounting across our group as we move more of our marketing from a high low approach with lots of discounting coupons to a more everyday value approach where price customers pay is more closely aligned with a more realistic headline growth.

In FY '25, we completed a full strategic review. this gives us the framework and discipline to move back into growth to build out the significant white space we have in large attractive pizza markets. There are 4 priorities at the heart of this plan. One, reinforce the core. We're going back to basics, closing unprofitable stores, protecting margins through stronger procurement and above all, putting pizza quality and customer value at the center of everything we do. We don't get the product right, nothing else matters. Simplifying for efficiency over time, too much complexity and cost has crept into this business. We're stripping that out, simplifying operations and powering decisions closer to the markets and reducing overheads.

We're endeavoring to drive marketing effectiveness. The savings we make are being reinvested into more working media that grows awareness, conversion and sales. We selectively extend our proposition that will grow where it makes sense. That includes building our footprint in under penetrated markets like Germany and France, getting our share of popular aggregator platforms where they add incremental customers and launching new products when they support customer value and franchisee economics. All this is supported by strengthening our capabilities, menu pricing, promotions, procurement and technology and by refining our operating model with stronger accountability and leadership in market.

This is not a tweak on the edges. It's a sharper, leaner plan, making changes to ensure execution and accountability. So we've completed our detailed plans to return to sustainable growth, and the flywheel you see here shows that works, how that works in practice. Starts with a stronger customer proposition, less discounting and better value backed by food experience. That drives same-store sales growth, which improves unit economics, healthier stores, more sustainable returns. Stronger economics then give franchisee the confidence to expand the network and as that happens, we create the capacity to lift profitability across the group.

Our immediate focus is Phase 1 acting on our recipe for growth, in stripping out costs, in marketing and IT to improve the effectiveness, redirecting these savings into higher working media and sharper offers that drive sales. Targeted market actions in Japan and France where transactions are already underway. Phase 2 accelerate with local accountability, builds on this space, sharing efficiency gains with franchisees. So the resources are focused on high-value activities, reigniting network expansion by strengthening unit economics enhancing portfolio profitability through disciplined execution of our strategic priorities.

When we deliver on quality, value and customer experience, everything else falls. With intermodal, we are confident we can execute with discipline and return down those to sustainable, profitable growth. Our shareholders should see this for what it is, a significant change in how we run the business, building on the approach we shared in February with sharper focus and more urgency.

Now let me hand over to Richard Coney to present the financials. Richard?

Thank you, Jack. As highlighted, our network sales of $4.15 billion and down 0.9% on prior year with underlying EBITDA of $9.6 million, declining 4.6%. Both ANZ and Europe delivered growth, which was more than offset by a 32.6% decline in Asia. Our borrowing costs will materially be lower with a $7 million improvement over prior year, predominantly due to the lower yen and euro base rates, we're currently getting and a $51 million repayment of debt and in addition to a planned reduction in our committed debt facilities of $150 million and the resulting reduction in line fees.

The business generated free cash flow of $47.4 million and this is after absorbing $58.1 million in nonrecurring cash outflows. We will declare a final dividend of $0.215 per share with the DRP remaining in place as followed led by Jack.

Now moving to our geographic summary. Same-store sales for the group was slightly down to negative 0.2%, with positive 1.6% for Europe, offset by Asia at negative 3.2% and ANZ of negative 0.4%, which actually placed a tough prior year rollover of 7.9%. EBIT for ANZ was up $6.5 million or positive 5.2%, with margins also lifting by 1.2%, primarily due to many simplification and targeted promotions resulting in a strong lift in unit economics flowing to our franchisees, but also as importantly, our corporate stores.

Europe's EBIT increased by $2.2 million, plus to 3.1%, with strong results from Benelux and Germany, partially offset by France, which remains challenging, but now under new leadership. Asia was down 32.6% with very tough trading conditions in Japan continuing. Noting that we're now getting the full benefit of the 233 store closures in April along with improved trading conditions in Malaysia, Singapore and Taiwan.

Moving to Slide 12. This provides additional detail on our nonrecurring costs of $162.3 million of which $58.1 million being a cash outflow in the year. As you can see, the store optimization program made up the majority of the costs at $118.4 million, which included the closure of 312 loss-making stores and some residual costs from the 80 stores closed in 2024. Remaining charges reflect streamlining and shared service transitions of $16.5 million write-downs $15.6 million and our deployment of our new finance and supply system, Microsoft Dynamics, which will allow us to leverage our global scale and optimize our shared services facilities in Malaysia and Poland. While significant, these charges underpin our leaner operating model, improved profitability and a strong platform for growth.

If we now move to the free cash flow slide, as you can see, excluding the nonrecurring costs, the business actually generated $105.5 million in free cash flow on an ongoing basis. Compared to the prior year, our net operating cash flow decreased by $69.8 million. However, this is largely explained by our $48.9 million normalization of our tax payments and an additional higher and higher nonrecurring costs of $17.1 million. Our net investing decreased by $7.8 million with a significant reduction in store-related CapEx partially offset by lower refinancing or franchisee loans, particularly in Japan.

Moving to some more detail on our investing activities. This slide really shows the detail on the makeup of our group net CapEx, which has reduced to $54.4 million from $62.3 million. As you can see, our CapEx, which recycles, which we talked about before, has provided a positive inflow this year, with a significantly lower number of new store openings and franchise acquisitions funded by DPE of $19 million versus prior year of $63.6 million. Cash inflows continue to be strong at $32.3 million, noting that franchise loan refinancing has reduced significantly as a result of tougher trading conditions predominantly in Japan.

Our digital CapEx has increased slightly to $44.8 million, with continued investments in our online ordering platforms, including integration of new markets in Asia. Our stay-in business CapEx has increased materially to $16.5 million with a focus on store refurbishments in Australia and Malaysia.

I'll now pass you over to George to talk to you about our capital management strategy.

Thank you, Richard. Turning to Slide 15, capital management. In relation to dividends, we are taking prudent action to improve capital allocation and support deleveraging of the balance sheet to achieve our net leverage ratio target of below 2x.

Our priority is to strengthen the balance sheet and reinvest in growth. As such, an unfranked dividend of $0.215 per share will be paid equivalent to a payout ratio of 35% for the final dividend. Total dividends of $0.77 per share for the year, record date being 3rd of September and paid on the 3rd of October. The dividend reinvestment plan is maintained with the underwriting now removed. In relation to debt and leverage, as we've said, we have a net leverage ratio target of below 2x. We ended the fiscal year '25 with net debt of $724.8 million and a leverage ratio of 2.57x versus 2.35x in fiscal year '24.

Our interest coverage ratio is strong at 17.1x in fiscal year '25 versus 12.5x in fiscal year '24. It's important to note that in FY '25, we had a net reduction of $51 million in debt, offset by a negative $85.8 million FX translation impact. In relation to capital optimization, net CapEx is down $7.8 million versus FY '24 as per Richard's presentation. We've had a reduction in bank committed facilities of $150 million during the year, lowering surplus debt facilities and saving on line fees. Domino's will continue to invest in our digital platform and store openings that will deliver sustainable returns.

In terms of liquidity, we have good liquidity of $439.2 million, which comprises cash and undrawn committed facilities, and the majority of these facilities mature in FY '27. We are preserving capacity to invest in growth opportunities.

I'll now hand back to Jack for the final slide.

Thank you, George and Richard. Looking ahead, Domino's has been serving customers in this part of the world for more than 40 years. The appetite for pizza remains strong, and the fundamentals of this business are sound. But to continue to compete in a competitive world, you got to be willing to change, was about stepping back and asking what do we have to do to get this business growing again. And that's exactly what we're doing.

Here are 5 points that if you just took the essence of all that's been said, these are the most important points that I think we're trying to get across. First, we're improving pricing discipline. We're moving away from the old high low coupon, voucher heavy approach. Customers want clear and transparent value and franchisees need margin. We intend to deliver both. Second, we're putting more dollars into high-impact media, redirecting the cost savings into the markets where lift sales and sharpens the proposition. Third, we're reducing our overheads. We intend to deliver a permanent reduction in structural costs, full in complexity out of the system so that franchisees can run better stores and the company can reinvest more into growth.

Fourth, we're setting -- we're resetting the support model using savings to ensure we have people on the ground close to the franchisees and empowering markets to ensure decisions can be made faster where they have the most impact. And finally, we've got a sharper focus in Japan and France. France has new leadership in place. Japan has been through a forensic review and the work is underway. These aren't quick fixes, but the direction is clear. This is what a better Domino's now looks like, one that delivers value to customers, increased profitability to franchisees and long-term growth to shareholders.

I look forward to taking your questions. And Richard, I'd like to just give a vote of thanks to you from the company through the many decades of support and work that you put into this business. Thank you.

Thank you, Jack, and thank you to Richard and to George. We'll now turn to the Q&A. [Operator Instructions] The first question I'm going to unmute is [ Peter Mason ] from [indiscernible].

My question is just on the ANZ trading update. Can you just let us -- are you happy to comment on whether Australia is positive within that and it's New Zealand that's dragging it down. And I guess, when did you make the price changes in Australia? And are you sort of happy with how our sales have held up post those changes? And then I guess the other one is just we were sort of expecting a bit of a bump from the British and Irish lines 2 of Australia in July. So any comments you've got on whether that's been a positive?

Well, a series of questions there. One, I don't think anybody in this business got to bump from the lions business. I know I've seen other food service companies who also were expecting that. It didn't come. Maybe that's a higher income crowd. I don't know what it was, but that didn't seem to materialize. Second question...

Can I jump in [indiscernible], Jack. We get the [indiscernible] origin as yet because of the timing being on a Wednesday, which is a low sales point. So in the matches around the weekend, it's less [indiscernible].

Somewhat [indiscernible], but I don't think we're alone in that. Second, the Australian result has definitely been influenced by New Zealand. We're going through a stage of looking at the new -- it's been run as kind of a 6 state of Australia, and we believe that one of the changes that are coming down the pipeline is we're going to run it as a separate market because it thinks it needs that, and the results haven't been what we think they should be, and it has diminished somewhat the Australian overall. Third question?

I think Peter has slipped in, actually a couple of questions here. Okay. I'm going to come back to you in a bit for follow-up questions. The next person to speak will be Shaun Cousins.

I guess my question is just around cost savings. Jack, when you took on the executive chair role were very much around Mark previously had a 5-year turnaround plan. You I think maybe quipped that it was needed to be a 5-minute plan. Given you had a desire for a higher pace of cost savings, I was surprised you have not provided cost-saving quantification of the new program. So I'm just curious on that part why you didn't do that?

And then maybe to help us size the opportunity that's out there, you called out IT and marketing. What do you spend, OpEx and CapEx on those numbers, just in that they're going to be the areas of opportunity for you? Maybe we can sort of sum if we have the idea of what those broader spend areas that can give us an idea of what the potential could be when you come out at a later date and talk about that, please?

First of all, your comment was I came into this job 6 or 8 weeks ago, something like that. I can give you 100% assurance that we are moving, heaven and earth, on the cost side of the business. And there are some very significant costs in IT, in marketing, in overheads that are all in the process of being executed. We will -- you will see these start to appear. And -- but it's underway. And I can give you a 100% certainty that these will -- this isn't talk. These things are being actioned.

In my 5 minutes sort of scenario was somewhat [ suspicious ] in that I'd say we needed to take we need to take -- we had a longer-term plan, but we needed to take the action on the things that we have today, and it's happening. So you will see these results -- can I quantify as I sit here today, a number, probably not in that there are some big numbers moving around, which we cannot guarantee will be delivered. One, we got to keep the lights on in the business. So when you're dealing with something like IT, we have a program in which you're saying, okay, change is necessary but we can't disrupt the business by deploying the wrong lever and things like that.

So there's a lot of work that's underway to try and make some of these things effective, and that's taking place. The other kind of significant thing that is coming down the pipeline, but isn't here yet is a change in pricing. And if you said to me, what's the most significant thing that can affect this business going forward, it's getting out of the discounting voucher business. We have had, unfortunately, a history of having offers in which people didn't make any money. And so the idea of moving to everyday low pricing to clarify that this is the most attractive deal you're going to get. You don't need a voucher. You don't need a discount to get there, we think, can make a significant impact on the business.

Where is this, it has to be tested to be able to establish that what we're saying is true, but it is coming and we're very confident, the franchisee community is very confident that this is where -- what we're doing, it's the correct thing to do to give the customer better value and move the business ahead. I'm not sure I answered your full -- was there anything else?

I'd love to ask more questions, but I think we get in trouble. I'll go back to the queue.

[indiscernible] feedback from the analyst community. But thank you, Shaun from UBS. So the next person to speak is Craig Woolford from MST.

I think that comment you've made around pricing and pricing discipline is a powerful one. But I am interested in how you expect the balance or the nexus between reduced promotional, I guess, intensity and the potential impact on same-store sales growth. The reason I ask that is that franchisee profitability really hasn't moved. And I'm sure the network economics will benefit from more volume but reducing discounting may result in less volume. So we're wrestling with that concept?

Okay. I think the reality is that in making this change, you may get a reduction in sales in the customer that we have wind trained to buy at a discount he may take a while to swing around to here is a better, more convenient price. The one thing that is clear is the franchisees will make more money by getting out of the discount business. And as I say, we are -- this is under active sort of with some very smart people working on making this change because we think it can have a dramatic influence on the business. We think the pricing change from giving the shop away on almost 50% of all orders have a price off. If we can get that price back to being better value for the customer, they will recognize this and there were profit built in for the franchisees and the company.

Another good thing important point on this is it's not just our franchise stores, what will cut through to us is our corporate store. We've got a very large corporate store business, especially in our Asian markets. So that benefits will flow through even further on that basis.

But it's a change, a significant change.

Yes. And just to clarify, you're saying you're going to test it first before you roll it out across all countries?

Yes. Well, I think we've done a lot of work on this to date. It's a matter of rolling it out into the market, and that's underway. And we're relatively confident that this will significantly change the business.

Our next question is from Michael Simotas.

Can I just follow on from that conversation around reengineering the price architecture. I guess there are some examples of businesses around the world that have managed to do this quite effectively. There can be a bit of a transition period sort of following on from the conversation around the earlier question. How important will balancing the near-term profitability be as you sort of move through this transition? And how do you communicate that offer to customers?

Michael, well, how do we communicate it. We have to do a good job at making the customer understand that this is a better value offer for them than what they're currently getting. I think the kind of -- some of the flow on of that is that it will be much easier to understand right now to order a pizza from Domino's as a complicated procedure. And if we can make in very simple terms show that this is a better value offer, once $12, now it's $8 and you're going to pay a fee for delivery. Would you not going to pay that additional $4 on every 100 pizza if you order 4x or whatever the difference is, the customer will save money and there will be better value.

As a result of that, the franchisees will make more money. And as a result of that, now, we have to -- we've got a responsibility to the franchisees to make sure that in implementing this that it does work and we will -- we've got to be able to prove that theory but that's what we're hoping to do.

Okay. And would you tolerate decline in profitability as you're transitioning through that?

No, I see. Yes, Michael, not in profitability, no, but we will tolerate a reduction in sales if it's more profitable. And that's [indiscernible]. This business, Michael has been built on a sales, high volume mentality of sales at all costs. and profit was somewhat not at the forefront where we think it should be, and this is a reversal of that.

Next passing on to Billy Boulton from Morgans. Billy, go ahead.

I was just wondering if you could address the trading update. It's down almost 1% for the first 7 weeks, and you've also called out that your marketing spend is a lot lower in some of your key markets. Is the expectation that, that trading update will improve towards -- I mean, your same-store sales number will improve towards your sort of 2% to 3% target that you outlined at the recent, call it, in July as that marketing spend kicks in through the year?

I guess the answer is yes. We hope that is the case. And if we spend more money on advertising, then hopefully, that will prove to be the case. I think one, in looking at same-store sales, I think you also have to look at the industry. And if we're flat -- and we've been through a very competitive change in where we sit in the customer's position with regard to delivery the advent of Uber, as I made in my comments and Uber look-alikes, that's a significant change to the business.

And in my opinion, the fact that we've been able to maintain a flat position and readjust into the marketplace with the Ubers and DoorDashes and everyone else now being able to provide a service to every corner restaurant which is a significant impact from a competitive position in the marketplace.

If we've been able to maintain a flat position to me, that has been somewhat is a significant achievement. I think you also have to look at the rest of the industry and what's going on in the world with regard to how they are doing on same-store sales. And again, a flat position is not all bad if you look at the major players in the business and what their financial results are with regard to sales, -- and a lot of them would be pleased to be flat rather than negative. And I'm sure you're aware of what I'm talking about when I talk about the competitive companies and the recent results in the last 12 months that they've been experiencing.

So I'm relatively happy where we sit today with having gone through this year, delivering a flat result and some significant changes that we hope will make some changes in the profitability of this business.

Yes. Sorry, just a quick follow-on. Like a lot of the big guys have been sort of reporting, improving results, particularly in the last quarter, which I assume is potentially going through into this third quarter that we're in now of the year. I'm just [indiscernible] you're potentially losing market share. Is that something that we should be thinking about?

We don't think we're losing market share. If I look at, as I say, we have a very close handle on the results of our -- of the competitors in this industry, and we are not losing market share.

The next question is from Richard Barwick from CLSA.

Jack, now that you've got a bit more time or more time right in the business. But do you think -- the bigger sort of picture question. Do you think the franchise model is the best operating model for Domino's?

Frankly, I do. Franchisee is a wonderful thing as it works right. And when I say it works right, franchisees have to be profitable. If it's not, if they are not profitable, it is not the right model. The franchising per se where the franchisee puts its own money up to be able to develop a business and he pays your royalty and he pays your fees on being in business together. That's a pretty nice sort if you measure things on return on investment, return on equity, however you want to do it, it's a great model. And there are all kinds of examples which illustrate that.

Where it becomes not so good is if the franchisee comes under pressure from a profitability point of view. And that [indiscernible] to enhance the franchisees' profitability in the various markets we're in. That is a very high priority to -- that we're working on to try and make sure. And that means in some cases, giving financial support to the franchisee to make sure that he's viable. In Japan, to give you an example, we're providing support, not just the financial handout, but rather money back into LSM, local store marketing and things like this. And that's the way to do it. And hopefully, as I say, we will see some benefits of more successful franchisees because that's what this -- that's where we're headed as far as how we see the future, more successful franchisees making better profits.

Just to clarify that, Jack. I understand when everything is working well, that all makes sense. But obviously, things are not working well as they stand. Could one of the solutions be increased store ownership corporate stores as you roll forward as opposed to just going back to the continuation of the existing model?

I don't think that's our plan. We think that we have enough ammunition and ideas here that we can work towards making the franchisee community more successful. And if we fail at that, I mean, one, I think I said on the previous call here, the past history of this company has been sales at all expense. It's been new markets, more volume and the new emphasis where we're headed is to make the franchisee profitability, a very important factor in everything we do. And that's what we're doing. And I'm confident we can.

And as I say, we're putting our money where our mouth is and giving support to those that can't make it. Yes, I have a history of operating company restaurants. So I know the benefit of being able to do that and it's largely control. But we think that the -- this is the largest pizza company in the world. There's nothing wrong with the base business properly executed, properly executed. By the way, in this -- in around [indiscernible], hugely successful franchisees are doing well. Those aren't our worry. It's getting the -- those that aren't doing so well to be able to be more profitable. And that's what we're working on.

The next question is from [ Sam Haddad ] from Petro Capital.

Just a question on stores in Japan. You closed those stores as flagged. You did call out that you'd expect -- you were expecting to realize sort of circa $15.5 million of savings to come through. I just wanted to see if that was realized and did your neighbor in stores that weren't closed that were next to those that were closed, you don't get any benefit any optical sales? I know it's still pretty early days since the closures, but you see any early evidence of that?

Sam, I can't give you that level of detail. I think the principal certainly is correct that you have a store that's cannibalized in an existing store, there should be some flow on to existing stores that remain in the market that was previously being shared. And you mentioned Japan, I think there had been probably some overdevelopment whereby storage were built with cannibalized existing stores, and it was a net-net bad loss. I cannot give you what the totality of the transfer of sales and things like that is we can come back to you if you'd like.

I can... The planned sales that we're expecting to get from the closures to the surrounding stores is her expectation. So we did get that flow through, and we'll be tracking that monthly, and it's to plan. So the problem is that the top line is still declining at a global so that those stores are performing better than the rest of the market, the ones that have got surrounding stores, but the full base is still challenged with the top line, which, as we turn that around, you get a double-double benefit.

So the $15.5 million of savings have been realized? And how much will that flow through to the corporate P&L versus the franchisees? Do you have any color around that as to what as you look at the '26?

The majority of that flow through to us some -- a small portion for our franchisees who've got the benefit, but the majority is the closure of those corporate stores, which is delivering the benefits. And now remembering that only happened in towards the end of March, April.

All right. So that should be a benefit to help support some growth in '26, I see.

SP Correct. Correct.

The next question is from Hannah Mitchell from Bank of America.

Are you able to please provide a little bit more color around franchisee profitability by region? I'm interested in your comments around New Zealand's profitability within the ANZ category, particularly in the context of the strongest profitability levels in ANZ in 3 years as well as the soft macro environment in New Zealand that's ongoing. We'd love to hear any thoughts.

Hannah, New Zealand has not shown successful results, and it is a market that requires more attention and change, which we're in the midst of doing. You said other markets, we've talked about Japan. Japan had some closures. France with the other market where franchisees were not getting the results. We have a new CEO in that market who will -- who is in the midst of making some significant changes to enhance the profitability of the business by increasing sales going down the path and what we talked about less discounting.

But those are the 3 markets that have had the most difficulty with regard to franchises, i.e., New Zealand, Japan, and France, which in France, we're hoping. We're starting to see positive same-store sales in France, early days, but we're getting what we call these green shoots that starting to happen. We get the sales increase, we get a change in product mix that will flow through in the franchisee profitability.

I can highlight the top line in New Zealand has been challenging. But in terms of our givebacks in supporting our franchisees and the fact that we're also focusing on the profitability as well that New Zealand stabilized, if not slightly increased over the prior year-end and Australia.

I think one other comment I'd make, Hannah, is that our procurement teams have done a really good job with the [indiscernible], which is the cost of goods for franchisees. That's been improving and an improving trend, and there's plans to continue to achieve procurement savings in FY '26 for the benefit of franchisees.

The next question will be James Leigh from Goldman's.

My question is around the leverage ratio. So it's ticked up again to 2.57 from 2.44 at the half. I appreciate that you've lowered the payout ratio. But against the backdrop of lower like-for-like for the first 7 weeks, how confident are we with that covenant and back towards that 2% target, like how quickly do we think we can get there? And like what are some of the proactive steps we can do to get there in the short to medium term?

Yes. Good question. Largely, that 2.57 reflects the translation position, that negative translation position of the [ 85.8 million ] that was recorded and increased at the 30th of June. So that's the reality of why it's increased to that magnitude. We're confident all of our projections have it going in the right way. In terms of getting it to target ratio, it's going to take 12 to 24 months. That's the sort of position we're forecasting.

Also worth noting that the spot rate conversion at June year-end was effectively with the yen and the euro came off 11 -- sorry, strengthened 11%. And we did get that benefit in the translation of our profits because that was actually only lifted by 1% because of the -- it was an average over the period, and this, in fact, the currencies came off in the last quarter. So that could have just as easily been the other way around.

So on a real core basis, we repaid $50 million in debt. It's just the Aussie dollar was translated in terms of our balance sheet, but our P&L did get the flow through benefit us from a climbing perspective. Does that make sense?

Yes. That makes sense. I guess the question then is like clearly like the FX can be quite volatile. Like, why not potentially look to derisk this quicker rather than potentially 12 to 24 months?

That's definitely on our plans. So that is something of focus and priority for the next 6 months.

James, my comment is that I think we're being relatively conservative on this, and we also want to reinvest money back into the business. And yes, let's take it under 2%. Currency on Japanese debt, something beyond our control. But I think this is a cash positive business. And so I think what we're doing is taking a conservative approach, bringing back target under 2%, which is probably okay. and -- but also reinvesting back into the business with the funds that we have.

It's worth noting our interest coverage as George highlighted, [ 13.9% to 17.1% ]. So -- and honestly, banks are very, very comfortable both. So it seems to be the market that's a concern by the banks.

You look at the counterparts -- James, if you look at the counterparts like DPZ, they have like 5x restaurant brands in the U.S., 6x so we're on the conservative end of how we're managing this.

The next question is from the very patient, Shaun Cousins.

Just a broader question. You're outlining today a very significant change to pricing moving away from high-volume mentality. You've highlighted that the cost base is arguably too high in terms of in-housing IT, marketing. You've been on the Board for quite a long time. And during that time, high-volume mentality was deployed with many coupons. You had that pricing approach. You entered many markets. You've allowed IT and marketing cost to be very high.

Did you have the concerns that you've got today in previous years and you were ineffective to sort of influence there? Or has the weaker earnings or the external environment changed such that you believe a different approach is now required because what you're outlining is a very fundamental change in the way the business operates, please?

I think that's a valid comment, Shaun. We are making some fundamental changes to this business. we don't believe that the high volume mentality when you're going in acquiring new markets, going into Germany, acquiring 400 stores, royalty income flying from that. This business had a good run of growth and -- but we went through COVID. COVID was a bit of a free kick as far as volume and even profitability because of all the issues that kind of came with COVID.

At the end of COVID, I think the reality emerged that a new strategy was required to make this business more profitable. and the idea of building a business based on discounting to a very high percentage of the business to try and bring in trade in the number -- and a number of cases where we're not making money on the sale was wrong. And I think it's -- that penny has dropped, and we are now, as I say, actively in some of changing this business as far as the way it's operated.

I think the other thing is the other thing that goes with that, and we've mentioned this is the fact that we built up significant overheads in this business. That is being reduced. And the good news is a lot of that funding is going back into marketing, whereas previously we paid -- we're spending that money on overhead. So that as well should significantly help the business.

And sorry, if I could just squeeze one, just given your stock is down about 18%, 20% today. There's obviously some concerns there. You made these some quite explicit comments around the capital position of the business not needing to raise capital. Can you just confirm that there was a bit of confusion at the last call. But does the company believe you need to raise capital? And maybe further to James' question around the gearing and the like debt, but just could you maybe be really explicit around that in that the last time it was a little inconsistent or people got different perspectives sort of there as well, but just maybe where you are on the balance sheet and whether or not you feel as though you need to raise capital to address gearing, but also what is quite a dramatic change that you're making in the business?

Shaun, there is no need to raise capital through this business. I don't know where that kind of sentiment comes from. As I say, we are reducing the amount of debt that exists. And what we're endeavoring to do is make a change, which hopefully will impact the P&L, not the balance sheet and balance sheet will eventually benefit, I guess, from it, but this is not something that requires a lot of capital to implement. This is a change in the operating procedures of what we sell at what price, which is pretty fundamental to the success of the business. But no, from I understand, there is absolutely no need or a discussion of having to raise more capital.

The next question comes from Billy Boulton, again from Morgans who is back for his follow-ups.

You haven't made a comment today on how you're thinking about earnings next year. You've obviously got a lot of initiatives in place. Should we be thinking about you able to be able to deliver profit growth in FY '26? Or should we think about another stable year of earnings in FY '26?

I will be very disappointed, Billy, if we do not show an increase in profitability beyond what has been budgeted and has been the history of the last 3 years. We think that we're going in the right direction. And I'll be disappointed, obviously, a lot of water to go into the bridge here over the next -- the balance of this year.

But I think some of the triggers we're pulling in this business, reducing costs, putting more money into advertising, changing the proposition for the customer for a value point of view, enhancing franchisee profitability, those are all positive to what, Shaun, I'm hopeful will flow through to the bottom line and profitability. If not, I'd be very disappointed.

That's great. And I just -- I wanted to touch on something Shaun's earlier question about the level of cost savings. I understand you're still working through the exact number, but like, I think it's important the market potentially gets some sort of idea. And I guess if you do some back of the envelope [indiscernible], like each franchisee needs on average of $35,000 lift up in EBITDA to get to your $130,000 target times in that across your 2,800 franchisee network implies a cost -- total benefit of $100 million of EBITDA.

On your call in July, you also said that you could deliver that through cost savings and you didn't necessarily need sales to improve as well, I'm pretty sure. Are we thinking about that the right way? And you also said that a significant amount will go to the franchisees, not the majority, like that would imply a gross cost-out number north of $200 million. Is that -- am I thinking about that the right way? Broadly?

I'd have to probably get a better understanding what you just finished saying. But I can say that there's a significant amount of money which we are hopeful of being able to take out this business and reinvest back into the franchisees P&L and our own by operating the business more efficiently. We -- am not in a position whereby we can quantify that other than to give you an indication that it's a significant number. And that's what we are working towards with being able to enhance the franchisees results and our own.

With regard to franchisee profitability, you mentioned $130,000 from, I think this last year was $95,000. That number should continue to improve. Yes, also I have to understand -- the real measure is what's the return on investment that a franchisee makes. If you've got a $400,000 investment and he makes $100,000 a year. Most of them have multiple restaurants, so the $100,000 becomes $200,000. But on the $400,000 invested, he's making 25% return on his money. So we're not that -- we're not like we're miles away from having franchisees that are profitable and get to the stage whereby they will reinvest more back into their existing business.

We have -- we've got franchisees that are making lots of money. It's those that aren't that we have to work on. And -- but I mean if you can make -- the real measure for [indiscernible] what kind of return can they make on their investment. And at the end of the day, that's what's going to count. If you get that number up. The higher it goes, the more likelihood is these people will continue to reinvest, open more stores than will help us and help those.

I think the other key point is our focus is obviously, Jack is talking about overhead savings. But where we're redirecting the resource back into operations so that we get those lower-performing franchisees or more profitability. That, itself, is a big one, supply chain logistics, working with our partners to get better outcomes, not just dropping their price but actually working with them to get more efficient, number of deliveries into stores. And then the pricing.

And then in terms of making sure that we're doing offers that really flow through to our franchisees bottom line. But still, as I think everyone has highlighted, we still want to deliver a result with that -- that we keep those sales going because we still are, we still had a high volume mode. So anyway, just on the highlights.

Yes. Thank you, Richard. And I want to just add in -- sorry, all three of us are joining [indiscernible]. That's not the intention. I just wanted to clarify, you referred to some commentary that the Executive Chairman had provided earlier this year. It wasn't the comment that all of the lift in franchise profitability would be through cost out. The Chairman's response was that Sales growth for franchisees is transformative, given the high levels of contribution margin. But I believe the exact point was for the effect of that sales can't be guaranteed, but costs can be. So sales are definitely a key contributor to lift in the branch of profitability, but the costs are an area that can be guaranteed as what you referred to at the top.

Yes. Unfortunately, we cannot guarantee sales. We're doing everything that you can imagine to work on a more effective way of producing higher sales for the company and the franchisees. And we're confident that, that will make a big change in the company. But the jury is out and we got to deliver. And we are working our butts off to endeavor to get there.

So hopefully, it will happen. But as Nathan just said, the cost, we have control over those levers, and that's happening, that's a given. We have some very, what we believe are game changing things swing down in pricing, which I think is the most important aspect of this business as far as profitability goes and that's in the process of coming down the pipeline. Can we deliver it today? And so here is ABC and the results, no, but we're giving this a good shot.

Okay. That's quite color. Just keep calling out SG&A. I was just -- we can't really see that number in your accounts. Is that possible to be quantified just so we're able to compare that to your peers or something?

Yes. We do this all the time, and we are at the top end of SG&A. And I don't think we probably -- it's not in the accounts, is it? No. So we do not declare that, but I can tell you it is at the absolute top, and there is lots of room for being able to make this business more efficient, and we're doing that and is under there.

Thank you, Billy. I know we've got a number of questions. We've obviously gone through down the call. I know it's a busy trading day. So I'm going to just refer to a couple of questions we've had submitted online as analysts said also on the calls. So a couple of questions from Sam Teeger from Citi. Our further store closures are client in Japan of funds.

We can never say never because we don't know the answer to that. But as we sit here today, there's no immediate plans to close stores in those 2 markets. There'll be onesie, twosies things where guys aren't successful, but there's no master plan to be able to close a significant number of stores.

A follow-up question for Sam, is how easy do you think it will be to get consumers stock buying on promotions and coupons?

Time will tell. We do -- we can't -- we don't know the answer to that, but the value button is what we're pressing. And I have enough confidence that the consumer if we can translate that he's going to get a better buy and a better value proposition from Domino's, that will increase sales. Can I guarantee that? No.

Next question from Phil Kimber submitted from E&P. Where same-store sales growth has basically been flat for 4 years? Is there a risk that moving to a more everyday price or less commotions coupons will see another period of flat or declining sales?

I think we've covered that on the basis that the aspect of sales could come down as those that have been trained on discounting, but what the plan that we are endeavoring to execute is that profits will go up. This business has had a history of being sales driven at all costs. And the change or the emphasis that we are endeavoring to bring to the business is profitability for the franchisees and for ourselves is our primary objective.

And then the final question, it's both from Phillip from E&P and also from [ Salman from Ospel ], is that when you cut costs, all of the costs reinvested back into the business-marketing or shareholders get any benefit to group profitability.

I think the current plan is that we want to put this money into marketing. And if the sales are positive, then we'll get a flow on of that. There will -- we obviously -- we'll be handling the cost savings on an overall basis. And the company should benefit from this if we have a more competitive model of -- and we talked about G&A, we can -- our objective is to operate this business more efficiently than it has in the past, and we see lots of examples whereby this is going to happen. The company will benefit from that. The flow on then is, can some of these dollars be translated to marketing, yes. Will that impact the company as well? Yes. So I think it's a double-edged sort here. We'll get it both ways, hopefully.

Thank you. Now, that is all the questions that we've received online. So thank you all of those who have attended today. The recording and transcript of this will go on to the investor website, dominospizzaenterprises.com and we look forward to seeing you at today's launch and also on the road show in the week ahead. Thank you all for joining us. We're just ending now. So thank you all.