REG - DP Poland PLC - Interim Results & Trading Update
26/09/2023 07:00
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RNS Number : 5896N DP Poland PLC 26 September 2023
This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.
DP Poland plc
("DP Poland", the "Group" or the "Company")
Interim Results for the Period Ended 30 June 2023 and Trading Update
DP Poland, the operator of Domino's pizza stores and restaurants across Poland
and Croatia, is pleased to announce its unaudited results for the six months
ended 30 June 2023.
Unaudited Financial Information
Currency: £000 H1 2023 H1 2022 % change
Group System Sales 21,386 17,098 25.1%
Group Revenue 20,960 16,575 26.5%
EBITDA* 1,051 388 171.2%
EBITDA*(Pre-IFRS 16) (720) (1,130) 36.3%
EBITDA margin % 5.02% 2.34%
Loss for the period (1,592) (2,200) 27.6%
* excluding non-cash items, non-recurring items and store pre-opening expenses
Financial highlights
· Overall Group revenue increased by 26.5% to £21.0m (H1 2022:
£16.6m), including Croatia.
· Poland revenue increased by 21.0% to £20.1m (H1 2022: £16.6m)
· Group system sales were up 25.1% to £21.4m including Croatia (H1
2022: £17.1m)
· Poland system sales increased by 14.9% to PLN 108.1m (H1 2022:
PLN 94.1m)
o Strong Poland LFL revenue growth of 18.0% in H1 2023 compared to H1 2022
driven by increased order count (11.3%) and average ticket price (5.8%)
o Growth of delivery and non-delivery Poland LFL System Sales of 15.8% and
22.6%, respectively, compared to prior period
· Group EBITDA increased by 171.2% to £1.1m (H1 2022: £0.4m)
· Group loss before tax improved from £(2.2)m for H1 2022 to
£(1.6)m for H1 2023
· Cash at bank of £2.7m as at 30 June 2023 (£1.7m as at 30 June
2022)
Operational highlights
· The Group operated 116 stores at the end of June 2023, including
112 Domino's Pizza stores across Poland and 4 across Croatia
· One new store was opened in Poland and one in Croatia in the
first half of 2023. At the same time, four ex-Dominium stores have been
upgraded to Domino's standards and two stores were closed as part of the store
network optimisation plan
· Average delivery times reduced by 13.0% in H1 2023 (vs H1 2022),
resulting in improved Net Promoter Scores and customer satisfaction
· Further development of digital capabilities
· Mitigating actions were taken in H1 to reduce the impact of
inflationary pressures particularly in food and energy which have now begun to
ease, however, labour inflationary pressures have remained
Nils Gornall, CEO, commented:
"H1 2023 saw the company move into positive store EBITDA and I am confident
that we can build on this in the second half of the year. Delivery times are
coming down, which are driving improved customer satisfaction and increased
orders which are now regularly exceeding 700 orders per store per week.
Driving order count higher is our prime objective in the second half as this
is a key driver of consistent and improved profitability.
The results we have achieved position the Company firmly for ongoing market
share expansion. This growth will be fueled by continued operational
excellence, enhancing our digital solutions for customer orders and internal
processes, and maintaining an unwavering commitment to our customer value
proposition. We anticipate that these efforts will lead to the creation of new
sales records for the Company, and continued improvement in EBITDA".
Post period end trading update
Polish trading remains strong with double digit sales and order count LFL
growth. In July and August, Polish LFL sales grew by 10.6% and 17.3%,
respectively, compared to 2022, with the growth split evenly between sales
channels. Performance in the first half of September has so far been strong.
In the year to August 2023, the Polish market has seen double-digit revenue
growth compared to 2022:
· 16.9% increase in LFL System Sales
o 18.9% LFL non-delivery revenue growth
o 15.7% LFL delivery revenue growth
· 12.3% increase in total System Sales, despite a reduction of 8
store locations vs 2022
The Croatian market has been impacted by inflationary pressures and consumers
enjoying the summer on the coast where we are not currently present. This
resulted in LFL sales growth in July and August of (14,0%) and 0.1%,
respectively, compared to 2022. Overall, the addition of one new store
resulted in system sales growth of 10.9% and 25.5% in July and August,
respectively, versus the prior year.
In the year to August 2023, Croatia grew system sales 35.9% and LFL sales 4.4%
with the prospects for September and the rest of the year looking encouraging.
We expect to deliver a solid performance for the Group in Q3 and to be in
line with expectations for Q4. In the coming months, we expect to open another
two stores in Poland and one store in Croatia, further improve our cost
position through additional cost saving initiatives and driving market share.
Investor Presentation
The Company is pleased to announce that Nils Gornall and Edward
Kacyrz will provide a live presentation relating to the Interim Results via
Investor Meet Company on 27th Sep 2023 at 3:00pm BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet DP
POLAND PLC via:
https://www.investormeetcompany.com/dp-poland-plc/register-investor
(https://www.investormeetcompany.com/dp-poland-plc/register-investor)
Investors who already follow DP Poland plc on the Investor Meet Company
platform will automatically be invited.
Enquiries:
DP Poland plc
Nils Gornall, CEO
Tel: +44 (0) 20 3393 6954
Email: ir@dppoland.com
Singer Capital Markets (Nominated Adviser and Broker)
Shaun Dobson
Tel: +44 (0) 20 7496 3000
Notes for editors
About DP Poland plc
DP Poland, has the exclusive right to develop, operate and sub-franchise
Domino's Pizza stores in Poland and Croatia. The group operates 116 stores and
restaurants throughout cities and towns in Poland and Croatia.
Chief Executive Officer's Review
After twelve months of leading DP Poland plc, it is a great pleasure to share
with you insights to visibly improving performance of the Company, which prove
that the proposed transformation strategy for the Company is working, despite
challenging market conditions, predominantly related to inflationary
pressures visible in food, labour and utility cost.
I feel confident that current results and Company setup build strong
foundations for further Company growth. Supported by an energised team, we
will enter into the second stage of our transformation plan, concentrating on
further company expansion and transition towards a franchisee model, which
allows us to capitalise on the opportunity to grow market share and sales
volumes under our High-Volume Mentality.
Store performance
The Company has seen strong top line performance in the first six months of
2023, recording 18.0% and 10.2% LFL system sales growth in Poland and Croatia,
respectively, compared to the prior year. At the same time, Company total
system sales grew by more than 25% year-on-year, driven by the third store
opening in Croatia and store network optimization in Poland. The sales growth
vs. prior year was achieved through a combination of (i) 11.3% growth in order
count in Poland; (ii) continued simultaneous dynamic growth in both delivery
and non-delivery channels, and (iii) improved product quality and reduced
delivery times in both markets.
In Poland, a Q1'23 TV campaign targeting the carry-out offering helped deliver
a 22.6% year-on-year growth, and delivery sales continued growing at
double-digits, delivering a 15.8% year-on-year growth.
In Croatia, the transition of the Croatian currency from the Kuna to the Euro
at the beginning of 2023 contributed to weaker sales in January, whilst also
impacting higher inflation. However, the market returned to strong
double-digit LFL sales growth from February, delivering 10.2% year-on-year
growth in H1 and average weekly order count per store exceeded 1,100, which
sets an aspirational benchmark for the Polish market.
Value for money
In the current trading environment, our focus on providing the consumer with
the best value-for-money is essential for building market share and, thus, our
strong value message together with delivery promise is key to success.
We aim to attract and retain new consumers with a strong pipeline of
promotions, new pizzas and sides to increase frequency of purchase. We started
the year with the compelling offer for carry-out and delivery, medium pizzas
for 19.99PLN and 24.99PLN, respectively. This drew new customers to Domino's,
a key factor in the ongoing sales momentum we've experienced this year. In the
second quarter, we focused on product quality and our menu offering by
upgrading recipes with additional ingredients, launching new menus purely
dedicated for the dine-in channel as well as implementing one-topping pizzas
with the entry price points at 17.99PLN for a medium pizza. Our promotions
have proved successful with consumers and the changes made in the portfolio
mix have started contributing positively to the Company performance.
In H1 2023 we continued to improve on the pizza delivery process, adding
eBikes and rejuvenating our scooter fleet, which allowed us to substantially
shorten our delivery times by 13% year-on-year to around 25 minutes. As a
direct result of these initiatives, we have seen an improving Net Promoter
Score. Although our delivery times are already at the European average for
Dominos stores in the coming year we are introducing GPS technologies to
improve driver route planning to further reduce delivery times to 22 minutes.
Input cost inflation and mitigating action
High inflation in labour, energy and food costs over the last two years has
had an adverse implication on the restaurant sector in the region. In Q2 2023,
high inflation in energy and food have started to abate, however, labour rates
are still under inflationary pressures.
In the first half of the year, we have worked hard to mitigate against these
inflationary pressures through renegotiating supply chain contracts and
reducing distribution costs to our stores. Additionally, we have improved
labour efficiency by implementing the 'Tanda' scheduling system across our
entire store network, which resulted in visible labour costs reduction and
allowed us to remain competitive on our pizza prices. These actions have made
our Company much more resistant to economic fluctuations and put us in a
strong position to grow market share.
We expect to further improve our cost position in the second half of the year
through additional cost saving initiatives.
Digital
In the past six months, we've witnessed a substantial leap in our digital
capabilities. The Company has focused on further development of the mobile app
and improvements in the webpage layout to enhance the consumer experience at
every touchpoint with Domino's. This has resulted in a faster ordering process
and higher basket values. Overall sales growth through the mobile app almost
quadrupled year-on-year and app downloads have doubled. Additionally,
customers' consents for text messages have grown 20% and consents for email
marketing have grown 44%. Digital orders now account for 89% of all delivery
orders and we are well on our way to our 90% target. Towards the end of the
year, we plan to launch a dine-in self-ordering solution via mobile app and
trial self-ordering kiosks for carry-out and dine-in customers.
At the beginning of 2023 we upgraded our ERP system bringing us closer towards
a paperless organisation. This change has been followed with the introduction
of a digital approval process (Q2 2023), and in the coming months will be
supplemented with automatic bookings and cash reconciliation processes - all
for the purpose of simplified and integrated accounting and controlling.
Outlook
We have made a strong start to the second half of the year and expect to see a
continued improvement in profitability as we grow our sales. We are confident
that the drive for order growth and network expansion is the key to success
and will soon bring us to a pre-IFRS 16 positive EBITDA.
The improvement of business profitability and positive cash flow is the prime
goal for the entire team. Demonstrating consistently profitable stores will
enable us to move to the second stage of planned transformation and accelerate
the growth of our stores' portfolio using the franchise model to become the
market leader in Poland over the next 3-5 years with 250+ stores.
FINANCIAL STATEMENTS
Group Income Statement
for 6 months to 30.06.2023
Unaudited Unaudited Audited
6 months to 30.06.2023 6 months to 30.06.2022 Year to 31.12.2022
Notes £ £ £
Revenue 2 20,959,825 16,575,350 35,694,098
Direct Costs (16,345,959) (13,529,067) (28,312,921)
Selling, general and administrative expenses - excluding: (3,562,483) (2,658,585) (5,687,720)
store pre-opening expenses, depreciation, amortisation and share based
payments
Group adjusted EBITDA - excluding non-cash items, non-recurring items and 1,051,383 387,698 1,693,457
store pre-opening expenses
Store pre-opening expenses - (32,894) (37,584)
Other non-cash and non-recurring items 191,282 23,035 (500,971)
Depreciation and amortisation (2,406,520) (2,079,335) (4,336,210)
Share based payments(1) (198,483) - (137,748)
Foreign exchange gains / (losses) 290,825 276,382 17,406
Finance income 13,199 11,648 257,984
Finance costs (499,865) (786,469) (1,258,850)
Loss before taxation (1,558,179) (2,199,935) (4,302,516)
Taxation(2) 3 (33,806) - (57,429)
Loss for the period (1,591,985) (2,199,935) (4,359,945)
Loss per share Basic 4 (0.22 p) (0.38 p) (0.67 p)
Diluted 4 (0.22 p) (0.38 p) (0.67 p)
(1, 2) - share based payments and taxation for 6 months to 30.06.2022 have not
been included into Group income statement due to the amount being immaterial
All the loss for the year is attributable to the owners of the Parent Company.
Group Statement
of comprehensive income
for 6 months to 30.06.2023
Unaudited Unaudited Audited
6 months to 30.06.2023 6 months to 30.06.2022 Year to 31.12.2022
£ £ £
Loss for the period (1,591,985) (2,199,935) (4,359,945)
Currency translation differences (192,317) 11,380 (333,785)
Other comprehensive expense for the period, net of tax to be reclassified to (192,317) 11,380 (333,785)
profit or loss in subsequent periods
Total comprehensive income for the period (1,784,302) (2,188,555) (4,693,730)
All of the comprehensive expense for the year is attributable to the owners of
the Parent Company.
Group Balance Sheet
on 30 June 2023
Unaudited Unaudited Audited
30.06.2023 30.06.2022 31.12.2022
£ £ £
Non-current assets
Goodwill 15,179,109 15,016,129 15,111,002
Intangible assets 3,528,313 1,969,417 3,714,479
Property, plant and equipment 6,669,521 5,915,292 6,645,301
Leases - right of use assets 6,678,007 7,512,357 6,472,965
Trade and other receivables 848,060 800,448 822,042
32,903,010 31,213,643 32,765,789
Current assets
Inventories 852,198 522,300 982,110
Trade and other receivables 2,017,944 1,354,550 1,966,987
Cash and cash equivalents 2,715,746 1,730,716 4,110,322
5,585,888 3,607,566 7,059,419
Total assets 38,488,898 34,821,209 39,825,208
Current liabilities
Trade and other payables (5,341,623) (5,415,603) (5,343,028)
Lease liabilities (2,990,580) (2,813,656) (2,834,336)
(8,332,203) (8,229,259) (8,177,364)
Non-current liabilities
Lease liabilities (5,771,073) (6,107,204) (5,666,835)
Deferred tax (313,703) (213,982) (276,099)
Borrowings (6,715,686) (6,217,469) (6,763,297)
(12,800,462) (12,538,655) (12,706,231)
Total liabilities (21,132,665) (20,767,914) (20,883,595)
Net assets 17,356,233 14,053,295 18,941,613
Equity
Called up share capital 3,562,409 3,102,293 3,561,969
Share premium account 46,925,141 42,593,641 46,925,141
Capital reserve - own shares (48,163) (48,163) (48,163)
Retained earnings (22,843,714) (19,427,950) (21,450,212)
Merger relief reserve 23,676,117 21,282,500 23,676,117
Reverse Takeover reserve (33,460,406) (33,460,406) (33,460,406)
Currency translation reserve (455,151) 11,380 (262,834)
Total equity 17,356,233 14,053,295 18,941,613
Group Statement of Cash Flows
for 6 months to 30.06.2023
Unaudited Unaudited Audited
6 months to 30.06.2023 6 months to 30.06.2022 Year to 31.12.2022
£ £ £
Cash flows from operating activities
Loss before taxation for the period (1,558,179) (2,199,935) (4,302,516)
Adjustments for:
Finance income (13,199) (11,648) (257,984)
Finance costs 499,865 786,470 1,258,850
Foreign exchange movements (891,037) 150,204 (144,025)
Depreciation, amortisation and impairment 2,406,520 2,079,335 4,336,210
Loss on fixed asset disposal (529) 5,563 136,974
VAT refund - interests - - 231,476
Dismantling provision - - 20,466
Share based payments expense 198,483 - 137,748
Operating cash flows before movement in working capital 641,924 809,989 1,417,199
Decrease / (increase) in inventories 129,912 285,332 (314,212)
Decrease / (increase) in trade and other receivables (76,975) (79,915) (748,711)
Increase / (decrease) in trade and other payables (1,405) 94,096 359,363
Cash generated from operations 693,456 1,109,502 713,639
Taxation payable - - -
Net cash generated from operations 693,456 1,109,502 713,639
Cash flows from investing activities
Payments to acquire software (161,007) (32,856) (241,032)
Payments to acquire property, plant and equipment (605,693) (453,236) (1,072,811)
Payments to acquire intangible fixed assets (65,646) (19,721) (62,831)
Proceeds from disposal of property plant and equipment 23,474 37,349 46,063
Interest received on sub-franchisee loans 8,651 27,020 16,767
Interest received on short-term deposits - 8,048 -
Cash flows of acquiring a subsidiary - - (2,241,534)
Net cash (used in) investing activities (800,221) (433,396) (3,555,378)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 440 - 7,231,341
Repayment of lease liabilities (926,962) (1,313,525) (2,068,948)
Repayment of borrowings - - (163,539)
Interest paid on lease liabilities (305,924) (347,824) (665,084)
Net cash from/(used in) financing activities (1,232,446) (1,661,349) 4,333,770
Net increase / (decrease) in cash (1,339,211) (985,243) 1,492,031
Exchange differences on cash balances (55,365) 14,313 (83,355)
Cash and cash equivalents at beginning of period 4,110,322 2,701,646 2,701,646
Cash and cash equivalents at end of period 2,715,746 1,730,716 4,110,322
Group Statement of Changes in Equity
for 6 months to 30.06.2023
Share Currency Capital Reverse Merger
Share premium Retained translation reserve - Takeover Relief
capital account earnings reserve own shares reserve reserve Total
£ £ £ £ £ £ £ £
At 30 June 2022 3,102,293 42,593,641 (19,427,950) 11,380 (48,163) (33,460,406) 21,282,500 14,053,295
Translation difference - - - (275,484) - - - (275,484)
Loss for the period - - (2,160,010) - - - - (2,160,010)
Total comprehensive income for the year - - (2,160,010) (275,484) - - - (2,435,494)
Shares issued (net of expenses) 459,676 4,331,500 - - - - 2,393,617 7,184,793
Share based payments - - 137,748 - - - - 137,748
Transactions with owners in their capacity as owners 459,676 4,331,500 137,748 - - - 2,393,617 7,322,541
At 31 December 2022 3,561,969 46,925,141 (21,450,212) (262,834) (48,163) (33,460,406) 23,676,117 18,941,613
Translation difference - - - (192,317) - - - (192,317)
Loss for the period - - (1,591,985) - - - - (1,591,985)
Total comprehensive income for the year - - (1,591,985) (192,317) - - - (1,784,302)
Shares issued (net of expenses) 440 - - - - - - 440
Share based payments - - 198,483 - - - - 198,483
Transactions with owners in their capacity as owners 440 - 198,483 - - - - 198,923
At 30 June 2023 3,562,409 46,925,141 (22,843,714) (455,151) (48,163) (33,460,406) 23,676,117 17,356,233
Notes to the Financial Statements
for 6 months to 30.06.2023
1 Basis of preparation
These condensed interim financial statements are unaudited and do not
constitute statutory accounts within the meaning of the Companies Act 2006.
These condensed interim financial statements have been prepared in accordance
with IAS 34 'Interim Financial Reporting' and were approved on behalf of the
Board by the Chairman David Wild.
The accounting policies and methods of computation applied in these condensed
interim financial statements are consistent with those applied in the Group's
most recent annual financial statements for the year ended 31 December 2022.
The financial statements for the year ended 31 December 2022, which were
prepared in accordance with UK-adopted international accounting standards,
IFRIC Interpretations and the Companies Act 2006 have been delivered to the
Registrar of Companies. The auditors' opinion on those financial statements
was unqualified and did not contain a statement made under s498(2) or (3) of
the Companies Act 2006.
Copies of these condensed interim financial statements and the Group's most
recent annual financial statements are available on request by writing to the
Company Secretary at our registered office DP Poland plc, One Chamberlain
Square, Birmingham, B3 3AX, United Kingdom, or from our website
www.dppoland.com (www.dppoland.com) .
2 Revenue
Unaudited Unaudited Audited
6 months to 30.06.2023 6 months to 30.06.2022 Year to 31.12.2022
£ £ £
Core revenue 20,959,825 16,575,350 35,693,133
Other revenue - - 965
20,959,825 16,575,350 - 35,694,098
Core revenues are ongoing revenues including sales to the public from
corporate stores, sales of materials and services to sub-franchisees,
royalties received from sub-franchisees and rents received from
sub-franchisees. Other revenues are non-recurring transactions such as the
sale of stores, fittings and equipment to sub-franchisees.
3 Taxation
Unaudited Unaudited Audited
6 months to 30.06.2023 6 months to 30.06.2022 Year to
31.12.2022
£ £ £
Current tax - -
Deferred tax charge relating to the origination and reversal 33,806 - 57,429
of temporary differences
-
Total tax charge in income statement 33,806 - 57,429
4 Earnings per ordinary share
The loss per ordinary share has been calculated as follows:
Unaudited Unaudited Audited
6 months to 30.06.2023 6 months to 30.06.2022 Year to
31.12.2022
£ £ £
Profit / (loss) after tax (£) (1,591,985) (2,199,935) (4,359,945)
Weighted average number of shares in issue (excluding EBT held shares) 710,642,415 578,123,216 653,776,085
Basic and diluted earnings per share (pence) (0.22 p) (0.38 p) (0.67 p)
The weighted average number of shares for the period excludes those shares in
the Company held by the employee benefit trust. At 30 June 2023 the basic and
diluted loss per share is the same, because the vesting of share awards would
reduce the loss per share and is, therefore, anti-dilutive.
5 Principal risks and uncertainties
The principal risks and uncertainties facing the Group are disclosed in the
Group's financial statements for the year ended 31 December 2022, available
from www.dppoland.com (www.dppoland.com) and remain unchanged.
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