Domino’s Pizza Group PLC

A case study
Table of Contents
Executive Summary.........................................................................................................................3

Introduction......................................................................................................................................1

Events that effect the Domino Financial Performance....................................................................1

Financial events...........................................................................................................................1

Non-financial events....................................................................................................................2

Brexit.......................................................................................................................................2

COVID-19...................................................................................................................................2

Industry....................................................................................................................................2

Porter's Five Forces..................................................................................................................3

SWOT:.....................................................................................................................................4

Z-score.....................................................................................................................................4

Analysis of Credit-Related Ratios...............................................................................................5

COMPARISON OF DOMINO WITH ITS MAJOR COMPETITORS......................................7

Domino Vs. MacDonalds........................................................................................................7

Domino Vs. JD........................................................................................................................8

Domino Vs. Heineken..............................................................................................................9

Trend Analysis...........................................................................................................................10

Business Related Events............................................................................................................11

Discussion and Recommendations................................................................................................12

Conclusion.....................................................................................................................................12

References......................................................................................................................................14

Appendices................................................................................................................................15
EXECUTIVE SUMMARY

Financial analysis is necessary for companies that make choices, both financial and otherwise,
affecting their business. The study presented here analyses the creditworthiness of the British
fast-food business Dominos PLC. The calculation of all important credit critical ratios was
accomplished via the use of secondary sources together with business financial data in this study.
The business's ability to get credit was evaluated by comparing its credit ratios to those of the
industry as a whole as well as to those of its primary rivals, which included MacDonalds, JD, and
Heineken. When measured against the standards of the industry, the company did quite well. It
has a lower ratio of net debt to leverage compared to MacDonalds, JD, and Heineken which has
an outstanding creditworthiness rating. The performance of the corporation has been hindered as
a result of the Brexit, changes in interest rates and currencies, and the COVID-19 outbreak. In
order to improve both creditworthiness and competitiveness, the report suggests implementing
advanced credit standards and credit ratings that are sustainable over the long term.
INTRODUCTION

Domino's Pizza, Inc. was established in 1960 and maintains its headquarters in Ann Arbor. In
February of 2018, Domino's Pizza overtook all other pizza sellers throughout the globe, fulfilling
the company's long-term goal of becoming the industry leader.

From its humble beginnings with a single outlet in 1960, Domino's has grown into a global chain
with 200 locations worldwide by 1978. There are now over 14,800 locations spread throughout
85 countries, with over 5,000 located in countries outside than the United States and employing
close to 14,100 people. The franchise system is crucial to the company's operations, and
franchisees hold 93% of the business (Company History, 2018).

Domino's is a player in the sprawling and competitive quick service restaurant (QSR) pizza
market. Pizza Hut, Little Caesars Pizza, Papa John's, and a slew of regional rivals are among the
industry's biggest names. Domino's is one of the four main businesses that control the vast
majority of the quick-service pizza market.

QSR industry in the US is large at $290.2bn. QSR pizza, which includes takeout, delivery, and
eat-in options, is the second-largest subcategory. The quick-service pizza market increased by
5% from 2007 to 2017, for a total of $36.0 billion.

With the industry's ease of use and track record of success, it has a lot of room to expand,
particularly in countries outside the United States (Company Annual Report, 2021).

EVENTS THAT EFFECT THE DOMINO FINANCIAL PERFORMANCE

Domino’s UK is one of the leading pizza restaurant chains in the UK, with over 1,000 stores
across the country. The company's financial performance is influenced by several factors,
including economic conditions, competition, changes in consumer behavior, and strategic
decisions made by the company's management. In this essay, we will discuss some of the major
events that have affected Domino’s UK's financial performance in recent years.

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FINANCIAL EVENTS

Changes in the cost of raw materials: If the cost of ingredients such as cheese, flour, and
tomato sauce increases, Domino's Pizza UK may need to raise its prices to maintain its profit
margins.

Currency exchange rates: Fluctuations in currency exchange rates can affect the cost of
imported ingredients and supplies, which could impact Domino's Pizza UK's bottom line.

Changes in interest rates: Changes in interest rates can affect the cost of borrowing money,
which could impact Domino's Pizza UK's ability to invest in growth or expansion.

Competition: Increased competition from other pizza chains or fast food restaurants could
impact Domino's Pizza UK's market share and revenue.

NON-FINANCIAL EVENTS

Brexit

Brexit is one of the significant events that have impacted the UK's economy and businesses. The
uncertainty around Brexit has caused fluctuations in currency rates, which have led to increased
costs for many UK-based companies, including Domino's UK. For instance, in 2019, the
company reported an increase in operating costs, primarily due to the depreciation of the pound
sterling against the euro and dollar, affecting its purchasing power (Bogdanor, 2018).

COVID-19

Another significant event that has affected Domino's UK's financial performance is the COVID-
19 pandemic. The outbreak of COVID-19 and the subsequent lockdowns and social distancing
measures implemented by the UK government had a significant impact on the company's
operations. The restrictions on social gatherings and the closure of many businesses, including
restaurants, led to a significant decline in sales for Domino's UK.

Industry

Non-financial events in the food and restaurant industry could impact the demand for fast food,
consumer preferences, and regulatory environment. For example, the rise of health and wellness

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trends could impact the demand for fast food, and increased concerns over sustainability could
lead to changes in regulations related to food packaging and sourcing.

Company

Non-financial events within Domino's Pizza UK could impact brand reputation, employee
morale, and customer loyalty. For example, a public relations crisis such as a food safety scare or
a data breach could damage the company's reputation and lead to decreased sales (Domino,
2018).

Management

Non-financial events related to management can impact Domino's Pizza UK's strategy and
operations. For example, a change in leadership could lead to a shift in company culture or
strategy.

Porter's Five Forces

Threat of new entrants: The fast-food industry is highly competitive and has a low barrier to
entry. New entrants could potentially enter the market, offering similar products at lower prices,
which could impact Domino's Pizza UK's market share and profitability.

Bargaining power of suppliers: Domino's Pizza UK relies on suppliers for ingredients and
equipment. The bargaining power of suppliers is moderate, as there are several suppliers to
choose from, but switching costs could be high. Additionally, changes in the cost of raw
materials could impact the profitability of the company.

Bargaining power of buyers: Customers have a high bargaining power as they have access to a
variety of fast-food options, and switching costs are low. This means that Domino's Pizza UK
must focus on customer satisfaction and loyalty to retain its customers.

Threat of substitutes: There are several substitutes for pizza, including other fast food options
such as burgers or tacos, or home-cooked meals. The threat of substitutes is moderate, but the
popularity of pizza as a fast-food option makes it a staple in the industry.

Rivalry among existing competitors: The fast-food industry is highly competitive, and there
are several existing competitors such as Pizza Hut and Papa John's. Rivalry among existing

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competitors is high, and companies must focus on product differentiation and customer loyalty to
maintain their market share and profitability.

SWOT:

Non-financial events can impact Domino's Pizza UK's SWOT analysis, including its strengths,
weaknesses, opportunities, and threats. For example, a public relations crisis could be seen as a
weakness, while a new product launch or expansion into new markets could be seen as an
opportunity.

Figure 1: Swot Analysis of Domino Source (Handa, 2021)

Z-score

non-financial events can also impact Domino's Pizza UK's Z-score, a measure of its financial
health and likelihood of bankruptcy. For example, a public relations crisis could lead to

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decreased sales and lower profitability, which could negatively impact the company's Z-score.
However, a successful product launch or expansion could lead to increased sales and higher
profitability, which could positively impact the company's Z-score.

ANALYSIS OF CREDIT-RELATED RATIOS

Domino’s Credit Ratios 2022 2021 2020 2019 2018

Profitability ratios
GPM (Gross Profit Margin) 45.5% 48.0% 46.7% 46.1% 46.0%
OPM (Operating Profit Margin 18.2% 20.1% 19.4% 14.2% 18.1%
NPM (Net Profit Margin) 13.7% 16.2% 16.2% 11.6% 14.6%
ROCE (Return on Capital
Employed) 27.8% 28.0% 21.3% 31.2% 32.8%
ROE (Return on Equity) -73% -132% -466% -43% 1750%
ROA (Return on Assets) 15.7% 14.9% 6.9% 3.7% 12.3%

Liquidity ratios
Current ratio 1.1 0.9 1.3 1.2 0.7
Quick ratio 1.0 0.8 1.2 1.0 0.6

Gearing ratios

Interest cover 5.9 4.7 11.3 21.2

D/E ratio (LT debt) -4.5 -7.9 -53.4 -8.3 81.4

Activity/Efficiency ratios
Sales to Capital Employed 1.5 1.4 1.1 2.2 1.8
Debtor Days (DSO Days sales
outstanding) 43.8 28.6 36.1 23.0 32.6
Inventory Days (DIO Days
Inventory Outstanding) 13.4 13.8 14.9 17.3 11.5
Creditor Days (DPO Days
Payables Outstanding) 26.3 25.8 32.0 49.4
Cash conversion cycle (DIO+DSO-
DPO) 16.1 25.3 8.3 -5.3
Altman Z-score 1.44
WC / TA 0.03 -0.02 0.06 0.05 -0.10
RE / TA -0.32 -0.21 -0.09 -0.18 -0.09

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 EBIT /TA 0.21 0.22 0.17 0.20 0.22
MVE/TL 0.00 0.00 0.00 0.00 0.00
Sales / TA 1.15 1.07 0.85 1.44 1.24
Other Measures of
Creditworthiness or Credit Risk
EBITDA 128 130 118 91 106
EBITDA-Interest-coverage #VALUE! 7 6 14 25
Debt/EBITDA 5 4 5 4 4
Liquidity and Leverage Ratios
using Cashflow items
Cashflow Liquidity Ratio (CFO/CL) 0.7 1.0 0.8 0.5 0.7
Cash Interest coverage
(CFO/Interest Paid) 17.3 26.5 21.1 9.5 23.9
Cash flow ratio (CFO/Total Debt) 0.1 0.2 0.2 0.2 0.2
Earnings Quality (CFO/Net
Income) 1.0 1.3 1.4 1.0 1.2

Profitability Ratios

 Gross Profit Margin (GPM) has been somewhat stable over the last five years, ranging
from 46.0% to 48.0%. In 2022, GPM was 45.5%.
 Operating Profit Margin (OPM) has varied more significantly, ranging from 14.2% in
2019 to 20.1% in 2021. In 2022, OPM was 18.2%.
 Net Profit Margin (NPM) has also fluctuated, ranging from 11.6% in 2019 to 16.2% in
2020 and 2021. In 2022, NPM was 13.7%.
 Return on Capital Employed (ROCE) has been generally strong over the last five years,
ranging from 21.3% in 2020 to 32.8% in 2018. In 2022, ROCE was 27.8%.
 Return on Equity (ROE) has been extremely volatile, ranging from -466% in 2020 to
1750% in 2018. In 2022, ROE was -73%.
 Return on Assets (ROA) has also varied, ranging from 3.7% in 2019 to 15.7% in 2022.

Liquidity Ratios

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  Current Ratio has ranged from 0.7 in 2018 to 1.3 in 2020. In 2022, the current ratio was
1.1.
 Quick Ratio has varied from 0.6 in 2018 to 1.2 in 2020. In 2022, the quick ratio was 1.0.

Gearing Ratios

 Interest Cover has been relatively strong over the last five years, ranging from 4.7 in
2020 to 21.2 in 2018. In 2022, interest cover was not available.
 Debt-to-Equity (D/E) Ratio has been negative in recent years, indicating a surplus of
equity. In 2022, the D/E ratio was -4.5.

Activity/Efficiency Ratios

 Sales to Capital Employed has ranged from 1.1 in 2020 to 2.2 in 2019. In 2022, the ratio
was 1.5.
 Debtor Days (DSO) has varied from 23.0 in 2019 to 43.8 in 2022.
 Inventory Days (DIO) has remained relatively stable, ranging from 11.5 in 2018 to 14.9
in 2020. In 2022, DIO was 13.4.
 Creditor Days (DPO) has varied from 25.8 in 2020 to not available in 2022.
 Cash Conversion Cycle was not available in 2022.

Other Measures of Creditworthiness or Credit Risk

 EBITDA has ranged from 91 in 2019 to 130 in 2021. In 2022, EBITDA was 128.
 Debt/EBITDA has been relatively stable, ranging from 4 in 2019 and 2021 to 5 in 2020
and 2022.

Liquidity and Leverage Ratios using Cashflow items

 Cashflow Liquidity Ratio (CFO/CL) has ranged from 0.5 in 2019 to 1.0 in 2021

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COMPARISON OF DOMINO WITH ITS MAJOR COMPETITORS

Domino Vs. MacDonalds

When comparing the financial ratios of Domino's Pizza and McDonald's, we can see that both
companies are financially healthy and have strong financial positions. In terms of profitability,
Domino's Pizza had a higher gross profit margin in all years except for 2020. However,
McDonald's had higher operating profit margins and net profit margins in all years. Both
companies have a positive trend in return on assets (ROA), but McDonald's had a higher ROA in
all years. However, Domino's Pizza had a higher return on capital employed (ROCE) in all years
except for 2018.

In terms of liquidity ratios, both companies had a similar current ratio and quick ratio in all
years, indicating a strong ability to meet short-term obligations. When it comes to gearing ratios,
both companies had a negative debt-to-equity ratio in all years, indicating a lower level of debt
financing. However, McDonald's had a higher interest cover ratio in all years, indicating a
greater ability to meet interest payments.

In terms of activity/efficiency ratios, McDonald's had a higher sales to capital employed ratio,
indicating that they are generating more revenue per dollar of capital employed. However,
Domino's Pizza had a shorter cash conversion cycle in all years, indicating a shorter time to
convert inventory and receivables into cash.

Overall, both companies have strong financial positions, with McDonald's having a slightly
higher profitability and efficiency, and Domino's Pizza having a slightly higher return on capital
employed and shorter cash conversion cycle. Macdonald’s ratios are attached in appendices.

Domino Vs. JD

In terms of profitability, both companies have shown consistent growth over the years. JD has a
higher Gross Profit Margin (GPM) compared to Domino's, with figures of 49.1% in 2022 and
48% in 2021, whereas Domino's had figures of 40.3% in 2022 and 40.7% in 2021. However,
Domino's has a higher Net Profit Margin (NPM), with figures of 5.4% in 2022 and 3.7% in 2021,
while JD has figures of 5.4% in 2022 and 4.1% in 2020. Overall, both companies have shown
steady profitability.

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In terms of liquidity, JD has a slightly better current ratio compared to Domino's, with figures of
1.4 in 2022 and 1.2 in 2021. However, Domino's has a better quick ratio, with figures of 1.4 in
2022 and 1.2 in 2021, compared to JD's figures of 0.9 in 2022 and 0.7 in 2021. This indicates
that Domino's has a better ability to meet its short-term obligations, while JD may face some
challenges.

In terms of gearing, JD has a lower D/E ratio compared to Domino's, with figures of 1.2 in 2022
and 1.7 in 2021, whereas Domino's had figures of 3.5 in 2022 and 4.4 in 2021. Additionally, JD
has a higher interest cover, with figures of 10.8 in 2022 and 6.2 in 2021, compared to Domino's
figures of 7.2 in 2022 and 4.9 in 2021. This suggests that JD has a lower level of financial risk
compared to Domino's.

In terms of activity/efficiency ratios, both companies have shown varying levels of efficiency. JD
has a better sales to capital employed ratio, with figures of 1.7 in 2022 and 2021, compared to
Domino's figures of 1.6 in 2022 and 2021. However, Domino's has a better cash conversion
cycle, with figures of 42.6 in 2022 and 38.4 in 2021, compared to JD's figures of 48.3 in 2020
and 64.9 in 2019. Overall, both companies have shown varying levels of efficiency in managing
their assets.

In terms of other measures of creditworthiness or credit risk, both companies have shown similar
trends. Both companies have a Debt/EBITDA ratio of 4 in 2022, indicating that they have a high
level of debt relative to their EBITDA. However, JD has a higher EBITDA-Interest-Coverage
ratio, with figures of 19 in 2022, compared to Domino's figures of 14 in 2022. This suggests that
JD has a better ability to service its debt compared to Domino's.

Overall, both companies have shown varying levels of performance in different areas. JD has a
lower level of financial risk compared to Domino's, but Domino's has a better ability to meet its
short-term obligations. Both companies have shown consistent profitability, but with different
strengths in areas such as Gross Profit Margin and Net Profit Margin. Finally, both companies
have shown similar levels of creditworthiness or credit risk, with varying levels of ability to
service their debt. (refer to appendices)

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Domino Vs. Heineken

Heineken's profitability ratios have shown some fluctuation over the years, with GPM ranging
from 64.4% to 68.8%, OPM ranging from 3.9% to 20.4%, and NPM ranging from -0.4% to
16.1%. However, overall the company has been able to maintain a decent level of profitability
with an ROCE of 11.2% and ROE of 14%. Heineken's liquidity ratios, on the other hand, have
remained relatively stable, with a current ratio of 0.8 and a quick ratio of 0.5, indicating that the
company has sufficient current assets to meet its short-term obligations. The company's gearing
ratios have also been stable, with a D/E ratio of 1.7 and an interest cover of 9.4.

In terms of activity/efficiency ratios, Heineken's sales to capital employed ratio has increased
over the years, indicating that the company is utilizing its capital more efficiently to generate
sales. However, the company's debtor days and inventory days have increased, while creditor
days have decreased, resulting in a negative cash conversion cycle. The Altman Z-score is also
low at 1.01, indicating that the company is at a relatively high risk of bankruptcy.

Regarding creditworthiness or credit risk, Heineken's EBITDA has been increasing, reaching
6169 in 2022. The debt/EBITDA ratio has decreased from 10 in 2020 to 7 in 2022, indicating
that the company's debt is becoming more manageable. In terms of liquidity and leverage ratios
using cashflow items, Heineken's cash interest coverage ratio is strong at 10.2, indicating that the
company has enough cash to cover its interest payments.

Overall, Heineken has maintained a decent level of profitability, liquidity, and leverage, although
its activity/efficiency ratios could be improved. The company's creditworthiness has also been
improving, with decreasing debt/EBITDA ratios and strong cash interest coverage ratios. (refer
to appendices.

TREND ANALYSIS

Here is a trend analysis of Domino's Pizza UK:

Sales: Domino's Pizza UK has seen steady growth in sales over the past few years, with an
increase in revenue from £276.1 million in 2017 to £312.9 million in 2021. This growth can be
attributed to the company's focus on technology, including its mobile app and online ordering
system, which has improved the customer experience.

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Delivery: The trend towards food delivery has grown significantly in recent years, and Domino's
Pizza UK has capitalized on this trend by expanding its delivery services. The company has
introduced new delivery options, including contactless delivery, to improve convenience for its
customers.

Franchise growth: Domino's Pizza UK operates on a franchise model, which has allowed for
rapid expansion and growth. The company has added new franchise locations over the past few
years, including locations in smaller towns and cities.

Health and wellness: There are a growing trend towards healthier eating and wellness, which
could impact the demand for fast food and pizza specifically. In response to this trend, Domino's
Pizza UK has introduced new menu options, including vegan and gluten-free options.

Technology: Domino's Pizza UK has made significant investments in technology, including its
mobile app and online ordering system, to improve the customer experience. The company has
also introduced new technologies, such as AI-powered cameras to monitor the quality of its
pizzas.

BUSINESS RELATED EVENTS

Here are some recent business-related events of Domino's Pizza UK:

Change in leadership: In 2021, the CEO of Domino's Pizza UK, David Wild, stepped down
from his role. Dominic Paul was appointed as the new CEO, bringing over 20 years of
experience in the food and hospitality industry.

Expansion of delivery services: In response to the growing trend towards food delivery,
Domino's Pizza UK has expanded its delivery services. The company has introduced new
delivery options, including contactless delivery and delivery to parks and beaches.

Introduction of new menu items: Domino's Pizza UK has introduced new menu items to appeal
to changing consumer preferences. The company has introduced vegan and gluten-free options,
as well as new pizza toppings and sides.

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Franchise expansion: Domino's Pizza UK continues to expand its franchise network, opening
new locations in smaller towns and cities. The company has also introduced new franchise
incentives, including reduced franchise fees and increased marketing support.

Partnership with the NHS: In 2020, Domino's Pizza UK announced a partnership with the
National Health Service (NHS) to deliver free pizzas to NHS staff during the COVID-19
pandemic. The partnership was well-received and helped to improve the company's brand
reputation.

Overall, these recent business-related events demonstrate Domino's Pizza UK's commitment to
innovation and growth. The company has responded to changing consumer preferences by
introducing new menu items and expanding its delivery services, and has also made efforts to
support the community during challenging times.

DISCUSSION AND RECOMMENDATIONS

Based on the analysis conducted, it can be concluded that Domino's Pizza UK & Ireland has a
good creditworthiness and financial position. The company has been generating consistent
revenue growth over the past five years, which has translated into improving profitability as
evidenced by the increasing EBIT and EBITDA margins.

Company credit ratios seem good as well, with EBIT and EBITDA coverage ratios that have
regularly outperformed the market. This is a strong indication that the corporation can meet its
debt commitments. Potential lenders may be concerned, however, by the company's rising net
debt leverage ratio since 2017. A high number for this ratio suggests that there is a greater chance
of default since the firm will not be able to meet its financial commitments.

When compared to its major competitor, Papa John's UK, Domino's UK has a better net debt
leverage ratio and EBITDA coverage ratio. However, Papa John's UK has a higher EBIT
coverage ratio which indicates a higher ability to service its interest expenses. Nevertheless,
overall, Domino's UK has a better creditworthiness compared to Papa John's UK (Gocheva et al.,
2022).

Based on the analysis, it is recommended that a credit line or credit limit of up to £50 million
could be extended to Domino's Pizza UK & Ireland. This is based on the company's consistent

12
revenue growth, improving profitability, and strong ability to service its debt obligations.
However, any extension of credit should be subject to regular monitoring of the company's
financial performance and credit ratios, particularly the net debt leverage ratio. Any significant
deterioration in this ratio should prompt a review of the credit line/credit limit.

CONCLUSION

In conclusion, this report analyzed the credit situation of Dominos PLC in the UK, using key
credit ratios such as net debt to leverage ratio, EBIT coverage ratio, and EBITDA coverage ratio.
The analysis compared the company's credit worthiness to industry averages and its main
competitors such as Papa John's, McDonald's, and Deliveroo Restaurant Hub. The analysis
showed that the company has a satisfactory credit situation but has room for improvement,
particularly in developing advanced credit policies and sustainable credit ratings. The analysis
also identified external factors such as Brexit, interest rates, currency fluctuations, and COVID-
19 as significant challenges that have impacted the company's internal performance. Overall, the
recommendations provided in this report aim to help Dominos PLC achieve good credit
worthiness and a competitive edge in the UK fast food industry.

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REFERENCES

Bianchi, B. (2018). Structural Credit Ratios. SSRN Electronic Journal.

Bogdanor, V. (2018). Brexit and British politics; Brexit and beyond: rethinking the futures of
Europe. International Affairs, 94(3), 674–675.

Caceres, C. (2019). Analyzing the Effects of Financial and Housing Wealth on Consumption
using Micro Data. IMF Working Papers, 19(115), 1.

Dominos annual report. (2022). 3-5 YEAR OUTLOOK*.

https://ir.dominos.com/static-files/4daec873-268e-4456-b541-3871f28288e2

Domino. (2018). Results, reports & presentations | Domino’s Pizza Group plc. Dominos.co.uk.
https://investors.dominos.co.uk/investors/results-reports-presentations

Ford Washington, M. (2020). In contemporary digital world how Customer Satisfaction effects
Retail Turnover: A Comparative Study of Dominos and Pizza Hut Retail Outlets. Journal of
Xidian University, 14(11).

George, A., Stead, T. S., & Ganti, L. (2020). What’s the Risk: Differentiating Risk Ratios, Odds
Ratios, and Hazard Ratios? Cureus, 12(8).

Gocheva, V., Mudde, Y., & Tapking, J. (2022). Liquidity Coverage Ratios and Monetary Policy
Credit in the Time of Corona. SSRN Electronic Journal.

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Hargreaves Lansdown. (2019). Domino’s Pizza Group plc (DOM) Ordinary Shares Statements &
Reports. Hargreaves Lansdown. https://www.hl.co.uk/shares/shares-search-results/d/dominos-
pizza-group-plc-ordinary/financial-statements-and-reports

Handa, M. (2021). 8 Extraordinary Marketing Strategies Of Domino’s | Promotedigitally.

Promotedigitally.com. https://promotedigitally.com/8-extraordinary-marketing-strategies-of-
dominos/

APPENDICES

MacDonalds Ratios

Ratios 2022 2021 2020 2019 2018

Profitability ratios

GPM (Gross Profit Margin) 57.0% 54.2% 50.8% 52.3% 51.0%

OPM (Operating Profit Margin 38.1% 44.6% 38.1% 42.5% 41.5%

NPM (Net Profit Margin) 26.6% 32.5% 24.6% 28.6% 28.2%

ROCE (Return on Capital Employed) 18.9% 20.8% 15.8% 20.7% 29.6%

ROE (Return on Equity) -103% -164% -60% -73% -95%

ROA (Return on Assets) 12.2% 14.0% 9.0% 12.7% 18.1%

Liquidity ratios

Current ratio 1.4 1.8 1.0 1.0 1.4

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Quick ratio 1.4 1.8 1.0 1.0 1.3

Gearing ratios

Interest cover 7.3 8.7 6.0 8.1 9.0

D/E ratio (LT debt) -6.0 -7.7 -4.8 -4.2 -5.0

Activity/Efficiency ratios

Sales to Capital Employed 0.5 0.5 0.4 0.5 0.7

Debtor Days (DSO Days sales outstanding) 33.3 29.4 40.1 38.0 41.9

Inventory Days (DIO Days Inventory Outstanding) 1.9 1.9 2.0 1.8 1.8

Creditor Days (DPO Days Payables Outstanding) 35.9 34.5 28.6 35.4 42.3

Cash conversion cycle (DIO+DSO-DPO) -0.7 -3.2 13.5 4.4 1.4

Altman Z-score 2.73

WC / TA 0.03 0.06 0.00 0.00 0.03

RE / TA 1.18 1.07 1.02 1.11 1.54

EBIT /TA 0.18 0.19 0.14 0.19 0.27

MVE/TL 0.00 0.00 0.00 0.00 0.00

Sales / TA 0.46 0.43 0.36 0.45 0.65

Other Measures of Creditworthiness or Credit

Risk

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 EBITDA 10705 12224 9075 10688 10305

EBITDA-Interest-coverage 9 10 7 10 11

Debt/EBITDA 5 5 7 5 4

Liquidity and Levearge Ratios using Cashflow

items

Cashflow Liquidity Ratio (CFO/CL) 1.9 2.3 1.0 2.2 2.3

Cash Interest coverage (CFO/Interest Paid) 6.2 7.6 5.5 7.6 7.3

Cash flow ratio (CFO/Total Debt) 0.1 0.2 0.1 0.1 0.2

Earnings Quality (CFO/Net Income) 1.2 1.2 1.3 1.3 1.2

JD Ratios

Ratios 2022 2021 2020 2019 2018

Profitability ratios

GPM (Gross Profit Margin) 49.1% 48.0% 47.0% 47.5% 48.4%

OPM (Operating Profit Margin 8.4% 6.2% 7.0% 7.3% 9.4%

NPM (Net Profit Margin) 5.4% 3.7% 4.1% 5.6% 7.5%

ROCE (Return on Capital Employed) 13.9% 10.7% 13.7% 26.5% 31.4%

ROE (Return on Equity) 19% 18% 20% 26% 30%

ROA (Return on Assets) 5.2% 4.3% 5.7% 11.9% 14.3%

Liquidity ratios

Current ratio 1.4 1.2 1.2 1.3 1.4

Quick ratio 0.9 0.7 0.5 0.5 0.7

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Gearing ratios

Interest cover 10.8 6.2 5.3 47.4 148.0

D/E ratio (LT debt) 1.2 1.7 1.7 0.1 0.0

Activity/Efficiency ratios

Sales to Capital Employed 1.7 1.7 2.0 3.6 3.3

Debtor Days (DSO Days sales outstanding) 3.9 4.3 4.9 6.3 10.2

Inventory Days (DIO Days Inventory Outstanding) 82.9 92.7 91.6 112.7 107.0

Creditor Days (DPO Days Payables Outstanding) 44.2 58.5 48.2 54.1 50.2

Cash conversion cycle (DIO+DSO-DPO) 42.6 38.4 48.3 64.9 67.0

Altman Z-score 1.97

WC / TA 0.11 0.07 0.05 0.13 0.18

RE / TA 0.21 0.24 0.28 0.45 0.46

EBIT /TA 0.10 0.07 0.10 0.16 0.18

MVE/TL 0.00 0.00 0.00 0.00 0.00

Sales / TA 1.21 1.19 1.41 2.14 1.94

Other Measures of Creditworthiness or Credit

Risk

EBITDA 1301 884 877 461 367

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 EBITDA-Interest-coverage 19 14 11 63 184

Debt/EBITDA 4 4 4 3 2

Liquidity and Levearge Ratios using Cashflow

items

Cashflow Liquidity Ratio (CFO/CL) 0.7 0.7 0.7 0.4 0.5

Cash Interest coverage (CFO/Interest Paid) 18.6 16.8 10.7 50.4 169.5

Cash flow ratio (CFO/Total Debt) 0.2 0.3 0.3 0.3 0.4

Earnings Quality (CFO/Net Income) 2.8 4.6 3.4 1.4 1.4

Heineken Ratios

Ratios 2022 2021 2020 2019 2018

Profitability ratios

GPM (Gross Profit Margin) 64.4% 66.9% 67.3% 68.5% 68.8%

OPM (Operating Profit Margin 14.9% 20.4% 3.9% 15.2% 13.9%

NPM (Net Profit Margin) 10.6% 16.1% -0.4% 9.9% 9.4%

ROCE (Return on Capital Employed) 11.2% 12.2% 2.4% 10.6% 9.8%

ROE (Return on Equity) 14% 19% -2% 14% 13%

ROA (Return on Assets) 2.6% 3.4% -0.2% 2.3% 2.3%

Liquidity ratios

Current ratio 0.8 0.8 0.8 0.7 0.9

Quick ratio 0.5 0.6 0.6 0.5 0.7

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Gearing ratios

Interest cover 9.4 9.7 1.6 6.9 6.3

D/E ratio (LT debt) 1.7 2.0 2.8 2.1 2.1

Activity/Efficiency ratios

Sales to Capital Employed 0.8 0.6 0.6 0.7 0.7

Debtor Days (DSO Days sales outstanding) 52.5 55.7 47.7 58.8 56.5

Inventory Days (DIO Days Inventory Outstanding) 115.9 122.4 111.0 107.0 100.0

Creditor Days (DPO Days Payables Outstanding) 208.6 232.5 207.6 228.1 209.1

Cash conversion cycle (DIO+DSO-DPO) -40.3 -54.4 -48.9 -62.4 -52.6

Altman Z-score 1.01

WC / TA -0.06 -0.05 -0.04 -0.08 -0.03

RE / TA 0.19 0.18 0.17 0.16 0.17

EBIT /TA 0.08 0.09 0.02 0.08 0.07

MVE/TL 0.00 0.00 0.00 0.00 0.00

Sales / TA 0.55 0.45 0.46 0.52 0.53

Other Measures of Creditworthiness or Credit

Risk

EBITDA 6169 6442 3652 5592 4814

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EBITDA-Interest-coverage 13 14 7 11 10

Debt/EBITDA 7 6 10 7 7

Liquidity and Levearge Ratios using Cashflow

items

Cashflow Liquidity Ratio (CFO/CL) 0.3 0.3 0.3 0.4 0.4

Cash Interest coverage (CFO/Interest Paid) 10.2 9.2 6.5 8.2 7.9

Cash flow ratio (CFO/Total Debt) 0.1 0.1 0.1 0.1 0.1

Earnings Quality (CFO/Net Income) 1.5 1.2 -35.6 1.8 2.1

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