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Nathan Scholz: 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.
Jack Cowin: 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?
George Saoud: 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.
Jack Cowin: 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.
Nathan Scholz: 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.
Shaun Cousins: 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?
George Saoud: 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.
Shaun Cousins: 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.
George Saoud: 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.
Nathan Scholz: Thank you, Sean. The next person to go is Michael Simotas.
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?
Jack Cowin: 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.
Michael Simotas: 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?
Jack Cowin: 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.
George Saoud: 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.
Nathan Scholz: The next person, analyst to speak, I'm just unmuting Craig Woolford from MST.
Craig Woolford: 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?
George Saoud: 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.
Craig Woolford: So what was the cost savings in that -- in the first half?
George Saoud: For franchisees or for ourselves --
Craig Woolford: Yes, the gross number.
George Saoud: The gross number would have been around $13 million.
Craig Woolford: 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?
George Saoud: 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.
Craig Woolford: But it must have dropped faster because it dropped by 12% versus network sales down 1%?
George Saoud: 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.
Nathan Scholz: Thank you, Craig. The next question is from Sam Teeger from Citi.
Sam Teeger: What is Domino's doing to address growing consumer GLP-1 adoption?
Nathan Scholz: 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.
Jack Cowin: 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.
George Saoud: 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.
Sam Teeger: 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?
Jack Cowin: 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.
Sam Teeger: 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?
Nathan Scholz: Sam was asking if it's the same pricing strategy in WA as in Victoria?
George Saoud: Likely, yes.
Nathan Scholz: Okay. Thank you, Sam. Moving across to Ben Gilbert from Jarden.
Ben Gilbert: 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?
Jack Cowin: 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.
Ben Gilbert: 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.
Jack Cowin: 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.
Nathan Scholz: The next question up is from Ajay Mariswamy from Macquarie.
Ajay Mariswamy: 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?
George Saoud: 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.
Ajay Mariswamy: 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?
George Saoud: 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.
Nathan Scholz: Next up is Tom Kierath from Barrenjoey.
Thomas Kierath: 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?
George Saoud: 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.
Thomas Kierath: 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?
George Saoud: 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.
Nathan Scholz: 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?
Jack Cowin: 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.
George Saoud: 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.
Nathan Scholz: 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?
George Saoud: 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.
Nathan Scholz: 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?
George Saoud: So the first -- the first...
Nathan Scholz: First 17 weeks, negative 1.2% and then accelerated to negative 2.5% for the first half.
George Saoud: 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.
Jack Cowin: 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.
Nathan Scholz: 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.