REG - DP Poland PLC - Trading Update

DP PolandAnnouncement

16/01/2024 07:01

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RNS Number : 7583Z  DP Poland PLC  16 January 2024

DP Poland PLC

("DP Poland", the "Company" or the "Group")

 

Full Year unaudited Trading Update for 2023

 

 

DP Poland, the operator of Domino's pizza stores and restaurants across Poland
and Croatia, announces a trading update for Q4 2023 and FY 2023.

 

DP Poland's Chief Executive Officer, Nils Gornall, said:

 

"2023 has been a year of hard work and high rewards, with 2023 being a record
year and Q4 being the strongest quarter in the Company's history. I want to
express my gratitude to our employees who have embraced the High Volume
Mentality and transformed Poland into one of the fastest growing Domino's
markets globally. We have relentlessly focused on providing a compelling value
proposition for our customers based on fantastic quality pizza delivered
quickly.

 

In Poland, LFL System Sales grew by almost 20% in 2023. This growth was driven
by increased LFL system orders, which accelerated through the year, growing by
27% in Q4 2023.

 

Average weekly order counts reached 731 for the year, up 19% on 2022, whilst
average delivery times reduced 4%, driving a move to profitability in August.
In Q4 2023, the average weekly order count exceeded 800 or above.

 

We finish the year with a store network that has been optimized, supporting
higher LFL sales as well as growing our store count to 116 stores.
Importantly, we have a highly motivated team ready to continue the momentum we
have built in 2023 and I'm excited to see the business well positioned to
capitalise on this potential in 2024."

 

Highlights

 

·    Expected FY 2023 Group System Sales of £46.0m

·    LFL System Sales in Poland increased by 27.5% in Q4 to the highest in
the Company's history and by 19.7% for FY2023

o  LFL Delivery - 33.6% in Q4 and 20.7% in FY 2023

o  LFL Non-Delivery - 15.8% in Q4 and 17.8% in FY 2023

·    LFL System order count in Poland increased by 27.1% in Q4 and by
16.4% in FY 2023.

·    Croatian Total System Sales grew by 75.7% in Q4 and by 44.2% in FY
2023

o  Total Order Count grew by 63.9% in Q4 and by 29.7% in FY 2023, driven by
new store openings.

o  Croatian LFL System Sales grew by 2.2% in Q4 and by 3.2% in FY 2023.

·    Food costs for 2023 were in line with our expectations, reducing in
H2 2023

·    Labour costs were also in line with our expectations for 2023 but
inflationary pressures are expected to continue in 2024

·    Pre-IFRS16 EBITDA profitable since August and expected to be in line
with market expectations for FY 2023

·    Cash at bank of £2.2m as at 31 December 2023 (£2.7m cash as at 30
June 2023)

 

Operational highlights

·    Average weekly order count in Poland exceeded 800 in Q4 and reached
731 for FY 2023 (an increase of 19% YoY)

·    In 2023, average delivery time in Poland dropped to 27min (4%
improvement YoY).

·    In 2023, Domino's opened 5 stores (3 in Poland and 2 in Croatia),
closed 2 in Poland and fully refurbished 5 stores.

·    In Q1 2023, Domino's held a TV campaign in Poland, which generated
sales momentum for the rest of the year.

·    Revised pricing strategy with targeted communication &
promotional actions have improved customer satisfaction ratings and translated
to strong quarter 4.

·    Inflation in Poland has abated since April 2023, following 17 months
of double-digit inflation to reach 6.1% YoY at the end of December 2023. This
trend is expected to continue in 2024.

 

Trading Update 2023

 

Poland

 PLNm                    Q1 2023                 Q2 2023                 Q3 2023                 Q4 2023                 FY 2023
                         PLNm      % YoY change  PLNm      % YoY change  PLNm      % YoY change  PLNm      % YoY change  PLNm      % YoY change
 Total System sales(1)   53.1      15.4%         55.0      14.4%         55.0      7.10%         65.5      24.7%         228.6     15.5%

 LFL System sales(2)     52.2      19.4%         53.7      16.8%         54.3      14.1%         64.6      27.5%         224.8     19.7%
 non-delivery            16.9      47.7%         18.8      6.3%          20.0      11.9%         20.1      15.8%         75.8      17.8%
 delivery                35.3      9.3%          34.8      23.3%         34.3      15.5%         44.5      33.6%         148.9     20.7%

 M Orders                Q1 2023                 Q2 2023                 Q3 2023                 Q4 2023                 FY 2023
                         M Orders  % YoY change  M Orders  % YoY change  M Orders  % YoY change  M Orders  % YoY change  M Orders  % YoY change
 Total System orders(1)  1.0       4.0%          1.0       12.2%         1.0       9.1%          1.2       24.3%         4.2       11.9%

 LFL System orders(2)    0.9       7.3%          1.0       15.5%         1.0       15.4%         1.2       27.1%         4.1       16.4%

 

(1   )System Sales and System orders - total retail sales or orders
including sales or orders from corporate and sub-franchised stores.

(2   )Like-for-like System Sales growth in Polish Złoty, matching trading
periods for the same stores or orders growth in units, matching trading
periods for the same stores

 

Trading in Poland was strong throughout 2023, with consistent double digit
sales growth across delivery and non-delivery, driven largely by order count
growth and accelerating in Q4. These results have been achieved as a result of
the commitment to a compelling value proposition for customers; high-quality
pizzas, delivered quickly.

 

In addition to strong customer order growth, we have seen improved customer
satisfaction ratings, validating the new pricing strategy as well as enhanced
customer targeting and communication. We have also seen significantly
increased trading from store refurbishments in 2023, improving corporate
branding with a modernised and fresh look.

 

Q4 2023 was the strongest quarter in the history of company, with 27.5% growth
YoY in LFL System Sales and 27.1% LFL System order count growth.

 

During the year, we opened three stores, closed two stores and fully
refurbished five stores continuing our plan to optimise, upgrade and expand
our portfolio. We have now concluded the store optimisation initiative from
2022, leaving a strong portfolio of stores as a platform for future growth.

 

During the year we also implemented cost optimisation projects, including
digitalisation of processes and an automated labour scheduling system, which
have delivered significant cost saving.

 

Croatia

 

 EURm                   Q1 2023             Q2 2023             Q3 2023             Q4 2023             FY 2023
                        EURm  % YoY change  EURm  % YoY change  EURm  % YoY change  EURm  % YoY change  EURm  % YoY change
 Total System sales(1)  0,5   52,9%         0,5   37,7%         0,6   10,9%         1,0   75,7%         2,6   44,2%

 LFL System sales(2)    0,4   15,7%         0,4   5,6%          0,5   -5,3%         0,6   2,2%          1,8   3,2%

( )

(1   )System Sales and System orders - total retail sales or orders
including sales or orders from corporate stores.

(2   )Like-for-like System Sales growth in Euro, matching trading periods
for the same stores or orders growth in units, matching trading periods for
the same stores

 

In 2023, the Croatian team opened two stores in June and in October, both of
which have exceeded sales expectations and contributed to Total System Sales
growth of 44.2% YoY.

 

The three existing Croatian stores maintained their high LFL system sales
through 2023, despite wider inflationary pressures, exacerbated by the
transition of the Croatian currency from the Kuna to the Euro at the beginning
of 2023 impacting consumer confidence.

 

The Croatian business also benefitted from the utilization of group purchasing
from early 2023, which meaningfully reduced costs.

 

Outlook

 

2023 was a record year for DP Poland. In particular, the second half of the
year showed an acceleration in growth, with consistently improving
profitability. The Company achieved pre-IFRS16 EBITDA profitability from
August and 2023 FY performance is in line with market expectations.

 

In 2024, we expect volume led growth to continue, supported by an easing of
inflationary pressures and a new pro-European parliament following the recent
Polish election.  We will continue to focus on delivering a compelling
customer value proposition as we grow, ensuring quick delivery times.

 

The business now has the solid foundations required for future expansion and
in 2024 will begin the transition of the Company towards a more widespread
sub-franchised business model.

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Nils Gornall, CEO.

 

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 / Jen Boorer

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.

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