Westlife Development Limitedwestlife.co.in/download-pdf/Investor/Presentations/WDLInvestor... · • This document or presentation has been prepared by, and is proprietary to, Westlife

Westlife Development Limited November 2017

1

• This document or presentation has been prepared by, and is proprietary to, Westlife Development Limited and its subsidiary (“The Company”)

• This presentation does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for or otherwise

acquire, any securities in the Company or in the other entities referred to herein or in its or their respective affiliates or associates, nor shall it or any part of it

form the basis of or be relied on to any extent or in any manner in connection with any contract therefore or in relation thereto

• The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice. The

information in this presentation has not been verified by the Company, its advisors or any other person and is subject to updating, revision and amendment.

No representation or warranty, express or implied, has been, is or will be given by the Company, any of its affiliates or any of their respective advisers,

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Disclaimer

2

History & Evolution

1995-2012

3

McDonald’s leads globally

4

Highest Annual Sales Per Store

Fortune India 2011

Forbes 2016 Brand Ranking World’s 9th most valuable brand

16th Rank on Brand Equity’s MOST EXCITING BRANDS 2014

The Economic Times is an English-language Indian daily newspaper

published by the Bennett, Coleman & Co. Ltd. first published in 1961.

It is the world's second-most widely read English-language business

newspaper, after the Wall Street Journal

Brand Equity is a weekly color supplement that appears every

Wednesday, which covers marketing, advertising, media and market

research.

Number 1 in the QSR Category

Recognized in India as well

5

Great Place to Work®

Award – Best company to

work for in Retail Industry -

2016

Fortune India ‘Next 500’ – Giants of

Tomorrow, 2016

HRPL BACKGROUND :

•Started as a Joint Venture in 1995 •Ownership status changed to DL* in May 2010 •DL develops sites at their own cost and pays

a royalty

MFA# KEY HIGHLIGHTS : •Right to own and operate McDonald’s

restaurants in Western and Southern India until 2030

• HRPL pays royalty and fees to McDonald’s

Corporation

First Restaurant in

Mumbai, 1996

HARDCASTLE RESTAURANTS

PVT. LTD.

(HRPL )

West and South

CONNAUGHT PLAZA

RESTAURANTS PVT. LTD.

(CPRL)

North and East

*DL: Development Licensee A Development Licensee, in the context of McDonald’s, means an entity which is granted franchise rights, by McDonald’s Corporation or its affiliates, to own and operate McDonald’s restaurants, to adopt and use the McDonald’s system to develop and run McDonald’s restaurants in a given area, and to advertise and use the McDonald’s brand name and trademarks for products sold at such restaurants. •Map of India is indicative # MFA : Master Franchise Agreement 6

400+ Restaurants pan India

Ownership structure

Westlife Development Ltd

(BSE : 505533)

100% Hardcastle

Restaurants Pvt. Ltd.

FII and Public

38%

Promoter Group

62%

Shareholding Pattern*

*As at Sep 30, 2017

7

Major Public Institutional Shareholders • Arisaig India Fund Limited

• SBI Mutual Fund

• Bay Capital Investments

• Tree Line Investment Management

Evolution: cultural sensitivity & menu localization

Only country to have

SEPARATE Vegetarian and

Non Vegetarian Kitchens 8

Local tastes like

“Aloo Tikki” in a

uniquely

McDonald’s

form

Adapting popular

forms like the

PUFF

Evolution: building a local supply chain

Developed a

cold chain

Global suppliers with

local production

Creating direct linkage

to the farms

9

Over 95% localization

Evolution: sustainable unit economics (ROP 1.0)

• Local supply chain for equipment

• Right Sizing Restaurants • Optimizing Kitchen Capacity

• Over 95% of produce locally sourced • Tax Rationalization • Increased supplier capacity through

3rd party business

2003

1996

2003

-X%

2240 basis points improvement 1x

0.4x

Average Development Cost Restaurant Operating Margins

19

96

* Graphs not to scale, for representational purpose only

10

Investment Thesis & Current Trends

1995-2012

11

IEO

$ 121 Bn

QSR

$ 20.7 Bn

IFF

$ 18.3 Bn

WFF

$ 2.4 Bn

5%

6%

6%

12%

Estimated Growth in 2017

WFF – A nascent but rapidly growing category

3

10 8.6

18

Mumbai Benchmark Asian

City

IEO Monthly Frequency

2003 2013

Source: Euromonitor IEO : Informal Eating Out; IFF: Indian Fast Food; WFF: Western Fast Food

Source: Brand Track, Mumbai

12

Solid foundation – A competitive advantage

Strong supply chain Unique “farm to fork” cold supply chain including delivery of fresh produce & buns every alternate day Provides economies of scale, high food safety standards, product

consistency & innovation Continuously work with farmers on an extensive agronomy program

Real estate Diverse portfolio of restaurants (Malls, Food courts, DT, High street & Transit points) built through intelligent market planning and penetration Long term deals (normally 20 years vs.

industry average of 9-12 years) Strong unit economics that helps deliver a cash on cash ROI of 20%+ within 30 months

People One of the most experienced management team in QSR industry with deep knowledge of the business Strong people development and management processes in place

Strong knowledge transfer from McDonald’s Corp

13

Servicing multiple segments – A competitive

advantage

McDonald’s India has many iconic products that record

sales of over Rs 1 billion/ year

There is scope to build more categories

Chicken

Burger

Pizza

Beverages

Desserts

Delivery

Breakfast

Indian fast food

Others

1 – Fortune India 2011


McDonald’s globally has the highest average unit volume of

$2.4 million1

McDonald’s India has wide

exposure to the different segments in QSR

14

Brand extensions add more occasions –

A competitive advantage

In-store for celebrations,

bonding and hanging out

McDelivery, Drive Thru and

breakfast for convenience

McCafé for experience

and indulgence

As we add brand extensions to each restaurant, the results are greater as a whole than the individual parts resulting in

1+1+1=5 With just incremental capital expenditure and minimal increase in operating costs, brand extensions provide significant operating leverage as they scale

15

Strategic levers for next 5 years – Vision 2022

1. Broadening Accessibility

3. Margin

Expansion

2. Growing Baseline

Sales

4. Growth through people

16

Broadening Accessibility

Grow store

footprint

Unit

Economics

17

Restaurant design

Equipment options

Operating costs

Re-setting foundation for restaurant growth :

execution of ROP 2.0 in 2016

ROP 2.0 Disciplines

Key to success

• Optimisation to reduce capex and opex

• Equipment localisation to reduce capex

• Utility re-design and green initiatives & innovation to reduce opex

18

Average Development Cost*

Encouraging early results delivered by ROP 2.0

20

12

-14

Restaurant Operating Margins*

20

16

RO

P 2

.0

300 – 350 bps improvement for

new restaurants

2012

-14

20

16

R

OP

2.0

1x

0.8x

Cash breakeven* 2

01

2-1

4

20

16

R

OP

2.0

24

months 12-18

months

* Can vary basis restaurant type, region and presence of brand extensions

** Graphs not to scale, for representational purpose only

Cash on cash ROI* to 20%+ in 24 – 30 months

19

Re-setting foundation for restaurant growth

New business unit economics (ROP 2.0)

Average investment of INR 23-25 Mio

Stores typically need 2-3 years to establish,

depending upon the brand awareness in the city

Year 3:

Sales: INR 40-45 Mio

Cash ROI: 20%+

20

Tamil Nadu 18 Restaurants

Chhattisgarh 2 Restaurants

Madhya Pradesh

3 Restaurants

Kerala 8 Restaurants

Gujarat 33

Restaurants

Telangana 22 Restaurants

Karnataka 54 Restaurants

Maharashtra 120 Restaurants

Huge potential in existing towns and

cities

Most cities and towns significantly

under penetrated

Indicates the number of stores in each state as

of Sep 2017 21

Goa 2 Restaurants

Andhra Pradesh 3 Restaurant

Growing Baseline Sales

Value

Menu

Brand

Extensions

22

Key to success – driving average volume growth

per restaurant (AUV)

CONVENIENCE & BRAND EXTENSIONS For servicing all occasions

VALUE For driving new users and frequency

MENU To provide modern choices for all day parts

23

Brand extensions increases addressable

market

* Source : Euromonitor International - QSR Food Service Market, HRPL proprietary third party market segmentation study Past market segment – Chicken, burger, pizza, other cuisine fast food + Ice cream parlors

$1.3b

1,723

$0.45b

$0.6b

$1.75b

$2.35b

Past market segment

exposure

Delivery market New market segment

exposure

Coffee and Specialty

beverages

Total market segment

exposure

Total market segment exposure for McDonald’s*

24

Brand Extensions : Strategic lever for driving AUV

McDelivery

1x

FY14 FY15 FY16 FY17

Growth in McDelivery sales

Strong baseline growth through same store delivery sales growth and addition of delivery hubs


25

>2x


McDelivery

5 - 8

8 -12

Current Potential

Average annual sales/ McDelivery hub

(Rs in millions)

Will be driven by improvement in technology

platforms, digital enablement and McDelivery

specific promotions

148 160 - 180

330 - 350

110 80

120 - 150

Mar-17 Current potential Future potential

Number of delivery hubs

McDelivery stores Non McDelivery stores

McDelivery is in >55% of restaurants. Delivery

network can be easily expanded as minimal capital

expenditure is required


26

Total potential sales of Rs

3,000-4,000 millions


McCafé

27


McCafé

5 - 8

8 -12

Current Potential

Average annual sales/ McCafé hub

(Rs in millions)

Will be driven by new platform launches, McCafé

specific promotion and people

111

200 - 250

300 - 350

Mar-17 Current

potential*

Future potential*

Number of McCafés

High potential, McDonald’s can become one of the

largest coffee players in the country as unit

economics is in place

* Assuming 100% penetration of McCafé * Graphs not to scale, for representational purpose only

28

Total potential sales of Rs

3,000-4,000 millions

Brand Extensions : Other potential business models to leverage

Breakfast, Dessert Kiosk & 24 x 7

29

Menu : Strategic lever for driving AUV

Multiple QSR segments captured through menu

Burgers

Over 10 products with

many burgers that record

annual sales of Rs 1+ billion

Wraps

5 wraps

Sides

Strong sides offering

Desserts

$130 million dollar category

Breakfast

Only organized WFF player

in this space

$2+ billion dollar market

Beverages

WFF player with the widest

variety in this space

$4+ billion dollar market

Source : HRPL proprietary third party market segmentation study + Euromonitor International

30

Value + Affordability and Menu : Strategic lever for driving AUV

Launched strong product platforms

Chicken

McNuggets

2010

McFlurry

2011

McEgg

2012 Spice Fest

2012

McSpicy

2011

McAloo Tikki

2004 Breakfast

2009

Masala Grill

2013

Veg Pops

2013 Royale

2014

CWT

2014

CPP

2015 Indi McSpicy

2015 31

Maharaja Mac 2016/17

Contemporary menu choices to address new consumer needs

60% reduction in calories of sauces leading to a 8% - 10% reduction in calories of burgers

< 3% fat in dairy products 10% - 20% reduction in sodium content of French fries

and McNuggets

Steamed product options like McEgg

Contemporary bun options like Focaccia bun

Grilled choices like Chicken

McGrill

32

We have driven AUV growth in the past…

1x

1.74x

2.07x

2003 2012 2016

HRPL Average Volume Growth

Per Annum

(INR Mn)

33

Margin Expansion

34

Margin Expansion

Operating Leverage

Bulk of the cost incurred for operating In Store

Adding brand

extensions

helps grow

sales, while

optimizing

assets

Diagram representative, not indicative of size of impact

In-store Business

McCafé

24 Hours

Breakfast MDS

Dessert Kiosk

Leverage cost

through scale

via effective

supply chain

management

35

Margin Expansion

Operating Leverage

Building block on margin

All levers of the

business model

coming together

EBITDA Gross

Margin

Operating

Leverage

Royalty G&A EBITDA

Graph not to scale, for representation purpose only

36

Growth Through People

37

People

Strong LEADERSHIP TEAM providing

strategic direction backed by an

experienced CROSS

FUNCTIONAL TEAM managing execution

Leadership team

committed to TALENT

MANAGEMENT,

investing over 20

days each year for

building pipeline

Investments in

LEARNING AND

DEVELOPMENT ,

especially in mid

management to

build skills for the

future

Engaging

8,000+ people

across 36

cities

38

Financial Summary & Vision 2022

39

Store growth, sales and comparable sales trends

1,604 2,104 2,772

3,793 5,445

6,810 7,384

7,640

8,334

9,308

5,270

41%

31% 32% 37%

44%

25% 8% 3%

9% 12% 13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18

Sales ( INR Mio) Sales Growth %

22% CAGR

40

19% 9% 12%

17% 22%

6%

-6% -6%

2% 4% 9%

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1

FY18

Comps%

54.7% 56.0% 56.7% 57.1% 55.6% 56.0% 57.6%

58.4% 60.0% 60.7% 61.2%


Gross Margin %

FY18 financials as per Ind-AS

Margin trajectory

41

76 52 120 400

672 627 488

205 488 495 342

4.8% 2.5%

4.4%

10.5% 12.3%

9.2%

6.6%

2.7%

5.9% 5.3% 6.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

-

100

200

300

400

500

600

700

800


INR Mio EBITDA

EBITDA %

213 237 308

656 925 973 928

668 994

1,022 616

13.3% 11.3% 11.1%

17.3% 17.0% 14.2%

12.5% 8.7%

11.9% 11.0% 11.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

-

200

400

600

800

1,000

1,200


INR Mio

RoM

RoM %

FY18 financials as per Ind-AS

General & administration (G&A)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 H1 FY18

G&A 42

Consolidated Balance Sheet

₹ million 30-Sep-17

Assets

Property, plant & equipment 4,417

Goodwill 466

Other non-current assets 2,717

Inventories 318

Other current assets 1,371

Total 9,289

Equity And Liabilities

Share Capital 311

Other Equity 5,173

Financial liabilities 3,450

Other current liabilities 355

Total 9,289

43 FY18 financials as per Ind-AS

Vision 2022 targets

Grow restaurant base

with solid unit economics

BROADENING ACCESSIBILITY

OF BRAND MCDONALD’S

450 – 500 restaurants

Presence in 40+ cities Investment of Rs 5+ billion

GROW BASELINE SALES

Grow average unit volume

Mid to high single digit SSSG%

McCafé : 75 to 300-350 McDelivery: 124 to 300-325

Leverage other brand

extensions and menu in future

Market

share and

margin

growth

Sales growth of 2.4x - 3x

Take EBITDA margin to low to mid teens

44

Thank you

45

Documents

Westlife Development Limitedwestlife.co.in/download-pdf/Investor/Presentations/WDLInvestor... · • This document or presentation has been prepared by, and is proprietary to, Westlife