TIDMDPEU
RNS Number : 8865L
DP Eurasia N.V
11 September 2019
For Immediate Release 11 September 2019
DP Eurasia N.V.
("DP Eurasia" or the "Company", and together with its
subsidiaries, the "Group")
Interim Results for the Period Ended 30 June 2019
Strong top-line and network growth
Highlights
For the period ended
30 June
-------------------------------------
2019 2018 Change
----------------------------- ------ -------
(in millions of TRY,
unless otherwise indicated)
Number of stores 736 672 64
Group system sales (1)
Turkey 386.4 351.6 9.9%
Russia 249.0 152.7 63.0%
Azerbaijan & Georgia 10.0 6.1 63.6%
Total 645.4 510.4 26.4%
Group system sales like-for-like growth(2)
Turkey 7.7% 10.9%
Russia (based on RUB) 4.7% 18.0%
Revenue 462.5 380.2 21.6%
Turkey adjusted EBITDA(3) 55.5 36.5 n.m.
Turkey adjusted EBITDA(3)
(excl. IFRS 16) 41.3 36.5 13.3%
Russia adjusted EBITDA(3) 27.5 7.4 n.m.
Russia adjusted EBITDA(3)
(excl. IFRS 16) 8.6 7.4 16.6%
Adjusted EBITDA(3) 79.6 40.3 n.m.
Adjusted EBITDA(3) (excl.
IFRS 16) 46.4 40.3 15.1%
Adjusted net income (4) (12.1) (9.1) n.m.
Adjusted net income (4)
(excl. IFRS 16) (7.4) (9.1) n.m.
Adjusted net debt(5) (excl.
IFRS 16) 224.9
Operational Highlights
-- 64 new stores were added over the last 12 months, bringing the total number to 736
-- Turkey and Russia continue to leverage the online ordering
platforms - online delivery system sales as a share of delivery
system sales reached 67.5% for the period (2018 H1: 59.3%)
-- Group online system sales(7) growth of 42.5%
o Turkish online system sales(7) growth of 24.9%
o Russian online system sales(7) growth of 72.7% (37.9% based on
RUB)
Financial Highlights
-- Group revenue up 21.6% and system sales up 26.4%, driven by
both like-for-like growth and store openings
o Turkish systems sales growth of 9.9%
o Russian system sales growth of 63.0% (30.1% based on RUB)
-- Adjusted EBITDA (excl. IFRS 16) up 15.1% to TRY 46.4 million (2018 H1: TRY 40.3 million)
-- Adjusted net loss (excl. IFRS 16) of TRY 7.4 million - slight
improvement against the same period for the prior year
-- The Board expects the full year Adjusted EBITDA(3) (excluding
IFRS 16) for 2019 to be in line with expectations
Commenting on the results, Chief Executive Officer, Aslan
Saranga said:
"We are pleased to report another strong set of results for the
first half of 2019. Both Turkey and Russia recorded solid top-line
growth accompanied by increased adjusted EBITDA. We've continued to
grow our store portfolio, adding 64 stores over the last twelve
months and reaching a total of 736 stores.
"Innovation, related to both our products and technology,
continues to be the main driver of our strong performance. We have
recently introduced a new wrap called Dürümos in Turkey which
performed very well in terms of mix and creating incremental sales
during the market tests. We have also initiated segmental pricing
by store in take away in Turkey and will follow up with delivery.
GPS Tracker, launched at the beginning of the year, is adding value
to the business by enabling us to focus on improving delivery times
for better service as well as increasing deliveries per driver. In
Russia, we have introduced a dessert pizza with pineapple, which
has been received enthusiastically by our customers.
"Digital continues to drive our business forward. Online
ordering as a percentage of delivery has reached 67.5% - an
increase of 8.2 percentage points from twelve months ago with
significant increases in both markets.
"In Russia, like-for-like growth for the period was at
mid-single digits, reflecting the strong comparables from the FIFA
World Cup in 2018. We remain confident in delivering high single
digit like-for-like growth in Russia as we moved to a simplified
menu, increased investment in our digital channels and refocused
local store marketing activities as of July.
"We remain on target for store openings for the full year in our
markets and the Board expects the full year Adjusted EBITDA(3)
(excluding the impact of IFRS 16) for 2019 to be in line with
expectations."
Enquiries
DP Eurasia N.V.
Selim Kender, Chief Strategy Officer &
Head of Investor Relations +90 212 280 9636
Buchanan (Financial Communications)
Richard Oldworth / Victoria Hayns / Tilly +44 20 7466 5000
Abraham dp@buchanan.uk.com
A meeting for analysts will be held at 9.30am, 11 September 2019
at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN. A
conference call dial-in will be available via the details
below.
Conference UK Toll: +44 3333000804
call: UK Toll Free: 08003589473
Participant PIN code: 67082946#
URL for international dial in numbers:
http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
For additional details and registration for the analyst
briefing, please contact Buchanan on +44 20 7466 5000 /
dp@buchanan.uk.com
DP Eurasia N.V.'s interim 2019 results and corporate
presentation are available at www.dpeurasia.com. A conference call
replay will be available on the website in due course.
Notes
(1) System sales are sales generated by the Group's corporate
and franchised stores to external customers and do not represent
revenue of the Group.
(2) Like-for-like growth is a comparison of sales between two
periods that compares system sales of existing system stores. The
Group's system stores that are included in like-for-like system
sales comparisons are those that have operated for at least 52
weeks preceding the beginning of the first month of the period used
in the like-for-like comparisons for a certain reporting period,
assuming the relevant system store has not subsequently closed or
been "split" (which involves the Group opening an additional store
within the same map of an existing store or in an overlapping
area).
(3) EBITDA, adjusted EBITDA and non-recurring and non-trade
income/expenses are not defined by IFRS. These items are determined
by the principles defined by the Group management and comprise
income/expenses which are assumed by the Group management to not be
part of the normal course of business and are non-trading items.
These items which are not defined by IFRS are disclosed by the
Group management separately for a better understanding and
measurement of the sustainable performance of the Group. Please
refer to Note 3 in the Condensed Consolidated Financial statements
for a reconciliation of these items with IFRS.
(4) Adjusted net income is not defined by IFRS. Adjusted net
income excludes income and expenses which are not part of the
normal course of business and are non-recurring items. Management
uses this measurement basis to focus on core trading activities of
the business segments and to assist it in evaluating underlying
business performance. Please refer to Note 3 in the Condensed
Consolidated Financial statements for a reconciliation of this item
with IFRS.
(5) Net debt and adjusted net debt are not defined by IFRS.
Adjusted net debt includes cash deposits used as a loan guarantee
and cash paid, but not collected during the non-working day at the
year end. Management uses these numbers to focus on net debt
including deposits not otherwise considered cash and cash
equivalents under IFRS. Please refer to Note 15 in the Condensed
Consolidated Financial statements for a reconciliation of these
items with IFRS.
(6) Delivery system sales are system sales of the Group
generated through the Group's delivery distribution channel.
(7) Online system sales are system sales of the Group generated
through its online ordering channel.
Notes to Editors
DP Eurasia N.V. is the exclusive master franchisee of the
Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia. The
Company was admitted to the premium listing segment of the Official
List of the Financial Conduct Authority and to trading on the main
market for listed securities of the London Stock Exchange plc on 3
July 2017. The Company (together with its subsidiaries, the
"Group") is the largest pizza delivery company in Turkey and the
third largest in Russia. The Group offers pizza delivery and
takeaway/ eat-in facilities at its 736 stores (538 in Turkey, 187
in Russia, seven in Azerbaijan and four in Georgia as at 30 June
2019), and operates through its owned corporate stores (32%) and
franchised stores (68%). The Group maintains a strategic balance
between corporate and franchised stores, establishing networks of
corporate stores in its most densely populated areas to provide a
development platform upon which to promote best practice and
maximise profitability. The Group has adapted the Domino's Pizza
globally proven business
model to its local markets.
Performance Review
For the period ended
System Sales 30 June
-----------------------
2019 2018 Change
------------ --------- -------
(in millions of TRY,
unless otherwise
indicated)
Group system sales(1)
Turkey 386.4 351.6 9.9%
Russia 249.0 152.7 63.0%
Azerbaijan & Georgia 10.0 6.1 63.6%
Total 645.4 510.4 26.4%
Group system sales like-for-like
growth(2)
Turkey 7.7% 10.9%
Russia (based on RUB) 4.7% 18.0%
Store Count As at 30 June
----------------------------------------------------------------
2019 2018
Corporate Franchised Total Corporate Franchised Total
Turkey 136 402 538 145 376 521
Russia 101 86 187 101 41 142
Azerbaijan - 7 7 - 6 6
Georgia - 4 4 - 3 3
Total 237 499 736 246 426 672
DP Eurasia achieved solid operational growth in the period, with
64 stores added to the store portfolio over the last twelve months.
The Group increased its system sales by 26.4% year-on-year, driven
by a combination of like-for-like sales growth and store
openings.
The Turkish operations successfully overcame the slow start to
the year, posting 7.7% like-for-like growth for the first half of
2019 versus 2.5% like-for-like growth over the first two months of
the year, despite less than favourable macroeconomic conditions
prevailing in the country. Our main strategy in response to
increased inflation in Turkey has been to continue to increase our
prices to preserve margins, which has not had a material effect on
order volumes. Including Azerbaijan and Georgia, the Turkish
segment added 19 stores over the last twelve months (four in the
first half of 2019) through splits and opening stores in previously
unpenetrated areas.
The Russian operations' system sales, which represent 39% of
Group system sales, increased by 63.0% (30.1% based on RUB). This
increase was driven primarily by store openings. The Russian
operations achieved like-for-like sales growth of 4.7% for the
period. The Group opened 45 stores in Russia over the last twelve
months (eight in the first half of 2019). The Group also added its
second dough production facility in Rostov to serve the southern
cities of Rostov, Krasnodar and Voronezh. Russian franchise stores
reached 86, representing 46% of the Russian store portfolio.
Delivery Channel Mix and Online like-for-like growth
The following table shows the Group's delivery system sales,
analysed by ordering channel and by the Group's two largest
countries in which it operates, as a percentage of delivery system
sales:
For the period ended 30 June
--------------------------------------------------
2019 2018
------------------------ ------------------------
Turkey Russia Total Turkey Russia Total
Store 34.0% 20.8% 30.0% 43.2% 25.7% 38.6%
Group's online
Online platform 30.1% 79.2% 48.0% 29.6% 74.3% 42.5%
Aggregator 31.9% - 19.5% 24.1% - 16.8%
Total online 62.0% 79.2% 67.5% 53.7% 74.3% 59.3%
Call centre 4.0% - 2.5% 3.0% - 2.1%
Total(6) 100% 100% 100% 100% 100% 100%
The following table shows the Group's online like-for-like
growth(2) , analysed by the Group's two largest countries in which
it operates:
For the period ended
30 June
-----------------------
2019 2018
----------- ----------
Group online system sales like-for-like growth(2)(7)
Turkey 24.1% 42.8%
Russia (based on RUB) 16.9% 52.5%
The Group's like-for-like growth has been driven mainly by the
performance of its online ordering platforms. Online delivery
system sales as a share of delivery system sales was 67.5% for the
period. This represented an 8.2 percentage point increase on a
year-on-year basis.
In Turkey, online system sales like-for-like growth for the
period was 24.1%, as a result of which online delivery system sales
as a share of delivery system sales reached 62.0% for the period,
an 8.3 percentage point increase from a year ago, surpassing the
60% threshold for the first time, aided also by an increase in
volumes through the aggregator.
In Russia, online system sales like-for-like growth for the
period was 6.9%, as a result of which online delivery system sales
as a share of delivery system sales reached 79.2% for the period, a
4.9 percentage point increase from a year ago.
Online system sales continued to outpace the overall system
sales growth at 42.5% for the Group. Turkish online system sales
grew by 24.9%, while Russian online system sales grew by 72.7%
(37.9% based on RUB).
Financial Review
For the period ended
30 June
-----------------------
2019 2018 Change
----------- ---------- --------
(in millions of TRY)
Revenue 462.5 380.2 21.6%
Cost of sales (excl. IFRS 16) (314.5) (251.8) 24.9%
Gross Profit (excl. IFRS 16) 148.0 128.5 15.2%
General administrative expenses
(excl. IFRS 16) (72.1) (63.0) 14.4%
Marketing and selling expenses (63.8) (50.0) 27.5%
Other operating expenses, net
(excl. IFRS 16) 3.3 (0.6) n.m.
Operating profit (excl. IFRS
16) 15.5 14.9 4.1%
Foreign exchange (losses)/gains
(excl. IFRS 16) 2.8 (8.6) n.m.
Financial income (excl. IFRS
16) 3.2 0.5 494.7%
Financial expense (excl. IFRS
16) (25.1) (16.8) 48.8%
(Loss)/Profit before income
tax (excl. IFRS 16) (3.5) (10.0) (64.7)%
Tax expense (excl. IFRS 16) (5.3) (0.3) n.m.
(Loss)/Profit after tax (excl.
IFRS 16) (8.9) (10.3) n.m.
Turkey adjusted EBITDA(3) 55.5 36.5 n.m.
Turkey adjusted EBITDA(3) (excl.
IFRS 16) 41.3 36.5 13.3%
Russia adjusted EBITDA(3) 27.5 7.4 n.m.
Russia adjusted EBITDA(3) (excl.
IFRS 16) 8.6 7.4 16.6%
Adjusted EBITDA(3) 79.6 40.3 n.m.
Adjusted EBITDA(3) (excl. IFRS
16) 46.4 40.3 15.1%
Adjusted net income (4) (12.1) (9.1) n.m.
Adjusted net income (4) (excl.
IFRS 16) (7.4) (9.1) (18.7%)
Adjusted net debt(5) (excl.
IFRS 16) 224.9
Revenue
Group revenue grew by 21.6% to TRY 462.5 million. Turkish
segment revenue grew by 14.3% to TRY 261.0 million, while Russian
segment revenue grew by 32.6% to reach TRY 201.5 million.
Adjusted EBITDA
The Board maintains that adjusted EBITDA is the most relevant
indicator of the Group's profitability at this stage of its
development. The Group has adopted IFRS 16 from 1 January 2019 but
has not restated comparatives for the 2018 reporting period, as
permitted under the specific transition provisions in the standard,
the Group has applied the modified retrospective method for
adoption. As such, the Board believes that analysing the adjusted
EBITDA (excluding IFRS 16) serves as a better comparative for the
prior period.
The Group's adjusted EBITDA (excluding IFRS 16) grew by 15.1% to
TRY 46.4 million. Adjusted EBITDA (excluding IFRS 16) for the
Turkish segment, which includes the Azerbaijani and Georgian
businesses, was TRY 41.3 million, a year-on-year increase of 13.3%,
and adjusted EBITDA (excluding IFRS 16) for the Russian segment was
TRY 8.6 million, a year-on-year increase of 16.6% (a decrease of
7.8% based on RUB). Additionally, costs relating to our Dutch
corporate expenses (excluding those that relate to our initial
public offering) reduced adjusted EBITDA by TRY 3.5 million in the
first half of 2019. The comparable adverse effect of this item was
also TRY 3.5 million for the same period in 2018.
For the period ended 30 June 2019, the Group's adjusted EBITDA
(excluding IFRS 16) margin as a percentage of system sales was 7.2%
compared to 7.9% over the same period in 2018. The main reasons for
the decrease were the reduction in the Russian segment margin and
the mix effect associated with the Russia segment becoming a larger
part of the business.
Adjusted EBITDA (excluding IFRS 16) margin as a percentage of
system sales for the Turkish segment (including Azerbaijan and
Georgia as the revenues from these franchisees are booked at the
Turkish subsidiaries) increased to 10.4% from 10.2% as the Group
was successful in preserving margins.
The Russian segment margin decreased to 3.4% from 4.8%. The main
reason for the decrease is the lower like-for-like growth in Russia
due to like-for-like growth rates averaging over 30% for the last
four years and increased competition in Moscow. The Group will
acquire approximately fifteen regional stores from the franchisees
to establish the store economics before looking to refranchise them
in the future as done in the Greater Moscow expansion. Going
forward, the Group will deploy a three-pronged approach for further
growth in the regions: i) through corporate stores, ii)
incentivising successful Greater Moscow franchisees to open stores,
and iii) continue with local franchisees one store at a time. The
Group is also reviewing its aggregator strategy and beverage
agreement in addition to switching to a more efficient supply chain
and introducing tailored local store marketing in the regions. The
Group's search for a CEO of its Russian Operations is continuing.
The Board remains confident on the medium- and long-term potential
of the Russian market for DP Eurasia.
Adjusted Net Income
For the period ended 30 June 2019, adjusted net loss (excluding
IFRS 16) was TRY 7.4 million. Financial expense (excluding IFRS 16)
recorded an increase due to interest rates in both countries. In
Turkey, due to the macroeconomic volatility, interest rates varied
between 23% - 26.75%. In Russia, while denominated in Euros the
Group's bank borrowings had lower interest rates in the first half
of 2018 compared to the same period in 2019 when bank borrowings
were denominated in Roubles. The Group also recorded a higher tax
expense. However, both these increases were more than offset in the
foreign exchange result and financial income resulting in a
slightly improved adjusted net loss (excluding IFRS 16) compared to
the previous period. Despite not having any hard currency
denominated loans, the Group recorded a foreign exchange gain of
TRY 2.3 million due to the intragroup loans made from Turkey to
Russia.
Capital expenditure and Cash conversion
The Group incurred TRY 29.6 million of capital expenditure in
the period ended 30 June 2019. The Turkish segment capital
expenditure amounted to TRY 19.2 million and the Russian segment
capital expenditures amounted to TRY 10.4 million (RUB 121
million).
Cash conversion (defined as (adjusted EBITDA (excluding IFRS
16)- capital expenditure)/adjusted EBITDA (excluding IFRS 16)) for
the period was 36.3% for the Group and 53.6% for the Turkish
segment. The Russian segment had negative cash conversion as it is
in a period of rapid expansion relative to its size.
Adjusted net debt and Leverage
Excluding the impact of IFRS 16, the Group's adjusted net debt
as at 30 June 2019 was TRY 224.9 million. Following the refinancing
of its Euro denominated loans in Russia with a Rouble denominated
bank facility the Group does not carry any hard currency
denominated loans on its balance sheet; 32.8% of the Group's bank
borrowings is denominated in Turkish Liras and 67.2% is denominated
in Roubles. The increase in the net debt was mainly due to the
translation effect of the appreciation of the Russian Rouble
against the Turkish Lira and capital expenditure.
The Group continues its prudent and conservative approach to
debt and its leverage ratio (defined as adjusted net debt
(excluding IFRS 16)/adjusted EBITDA excluding IFRS 16)) was 1.9x as
of 30 June 2019.
Board compliance statement
The Board of DP Eurasia N.V. declares that, to the best of their
knowledge, the attached condensed combined and consolidated
financial statements give a true and fair view of the assets,
liabilities, financial position and the result of DP Eurasia N.V.
and its subsidiaries included in the attached condensed combined
and consolidated financial statements and the interim report
includes a fair review of the information required pursuant to
section 5:25d, subsections 8 and 9 of the Dutch Financial Markets
Supervision Act (Wet op het financieel toezicht).
Amsterdam, 11 September 2019
The Directors of DP Eurasia N.V. as at the date of this
announcement are as set out below:
Peter Williams*
Aslan Saranga, Chief Executive Officer
Frederieke Slot, Company Secretary
Seymur Tarı*
Izzet Talu*
Aksel ahin*
Thomas Singer*
* Non-executive Directors
Auditor's Involvement
This Interim Report for the six months ended 30 June 2019, and
the attached condensed consolidated financial statements included
herein have been reviewed but not audited by an external
auditor.
Forward looking statements
This press release includes forward-looking statements which
involve known and unknown risks and uncertainties, many of which
are beyond the Group's control and all of which are based on the
Directors' current beliefs and expectations about future events.
They appear in a number of places throughout this press release and
include all matters that are not historical facts and include
predictions, statements regarding the intentions, beliefs or
current expectations of the Directors or the Group concerning,
among other things, the results of operations, financial condition,
prospects, growth and strategies of the Group and the industry in
which it operates.
No assurance can be given that such future results will be
achieved; actual events or results may differ materially as a
result of risks and uncertainties facing the Group. Such risks and
uncertainties could cause actual results to vary materially from
the future results indicated, expressed, or implied in such
forward-looking statements.
Forward-looking statements contained in this press release speak
only as of the date of this press release. The Company and the
Directors expressly disclaim any obligation or undertaking to
update these forward-looking statements contained in this press
release to reflect any change in their expectations or any change
in events, conditions, or circumstances on which such statements
are based.
Appendices
Exchange Rates
Period ended 30 June
----------------------------------------------------------
2019 2018
---------------------------- ----------------------------
Currency Period End Period Average Period End Period Average
----------- --------------- ----------- ---------------
EUR/TRY 6.557 6.343 5.309 4.942
RUB/TRY 0.091 0.086 0.072 0.068
EUR/RUB 71.820 73.840 72.992 71.822
Delivery - Take away / Eat in mix
For the period ended 30 June
--------------------------------------------------
2019 2018
------------------------ ------------------------
Turkey Russia Total Turkey Russia Total
Delivery 63.9% 60.3% 62.5% 63.9% 62.3% 63.3%
Take away / Eat
in 36.1% 39.7% 37.5% 36.1% 37.7% 36.7%
Total(2) 100% 100% 100% 100% 100% 100%
DP EURASIA N.V.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE PERIODSED 30 JUNE 2019 AND 30 JUNE 2018
(Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
Notes 30 June 30 June 2018
2019
--------------------------------------- ------ ---------- -------------
INCOME OR LOSS
Revenue 4 462,484 380,215
Cost of sales (305,377) (251,751)
--------------------------------------- ------ ---------- -------------
GROSS PROFIT 157,107 128,464
--------------------------------------- ------ ---------- -------------
General administrative expenses (71,327) (62,986)
Marketing and selling expenses (63,751) (50,002)
Other operating income/(expense) 1,585 (612)
--------------------------------------- ------ ---------- -------------
OPERATING PROFIT 23,614 14,864
--------------------------------------- ------ ---------- -------------
Foreign exchange gains/(losses) 6 2,277 (8,601)
Financial income 6 1,396 540
Financial expense 6 (37,761) (16,849)
--------------------------------------- ------ ---------- -------------
LOSS BEFORE INCOME TAX (10,474) (10,046)
--------------------------------------- ------ ---------- -------------
Tax expense (3,110) (337)
Income tax expense (3,712) (3,297)
Deferred tax income 602 2,960
--------------------------------------- ------ ---------- -------------
LOSS FOR THE PERIOD (13,584) (10,383)
--------------------------------------- ------ ---------- -------------
OTHER COMPREHENSIVE (EXPENSE)/ INCOME (13,948) 3,244
Items that will not be reclassified
to profit or loss
- Remeasurements of post-employment
benefit obligations, net of tax 274 197
Items that may be reclassified
to profit or loss
- Currency translation differences (14,222) 3,047
--------------------------------------- ------ ---------- -------------
TOTAL COMPREHENSIVE LOSS (27,532) (7,139)
--------------------------------------- ------ ---------- -------------
Loss per share 7 (0.09) (0.07)
--------------------------------------- ------ ---------- -------------
The accompanying notes on form an integral part of these
condensed consolidated interim financial statements.
DP EURASIA N.V.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AT 30 JUNE 2019 AND 31 DECEMBER 2018
(Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
ASSETS Notes 30 June 2019 31 December 2018
--------------------------- ------- ------------- -----------------
Property and equipment 8 148,359 136,041
Intangible assets 9 50,415 48,514
Right-of-use assets 10 166,463 -
Goodwill 11 46,696 45,195
Trade receivables 13 20,011 20,761
Lease receivables 13 43,220 -
Deferred tax assets 20 14,727 12,187
Other non-current assets 16 40,498 25,389
--------------------------- ------- ------------- -----------------
Non-current assets 530,389 288,087
--------------------------- ------- ------------- -----------------
Cash and cash equivalents 12 21,542 28,444
Trade receivables 13 106,782 69,959
Lease receivables 13 13,640 -
Due from related parties 13 20 20
Inventories 15 81,124 77,619
Other current assets 16 59,353 45,584
--------------------------- ------- ------------- -----------------
Current assets 282,461 221,626
--------------------------- ------- ------------- -----------------
TOTAL ASSETS 812,850 509,713
--------------------------- ------- ------------- -----------------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
LIABILITIES Notes 30 June 2019 31 December 2018
--------------------------------------------------- -------- ------------- -----------------
EQUITY
Paid in share capital 19 36,353 36,353
Share premium 119,286 119,286
Contribution from shareholders 21 19,346 20,697
Other comprehensive income/expense
that will not be reclassified to profit or loss
- Remeasurements of post-employment
benefit obligations (2,210) (2,484)
Other comprehensive expense that may
be reclassified to profit or loss
- Currency translation differences (14,911) (689)
Retained earnings (46,106) (34,714)
--------------------------------------------------- -------- ------------- -----------------
Total Equity 111,758 138,449
--------------------------------------------------- -------- ------------- -----------------
Financial liabilities 17 187,008 171,276
Lease liabilities 17 193,868 -
Deferred tax liability 20 - 565
Other non-current liabilities 16 32,777 30,038
-----------------
Non - current liabilities 413,653 201,879
--------------------------------------------------- -------- ------------- -----------------
Financial liabilities 17 99,388 44,330
Lease liabilities 17 51,067 -
Trade payables 13 85,106 74,148
Due to related parties 146 -
Current income tax liabilities 2,172 6,971
Provisions 2,432 9,224
Other current liabilities 16 47,128 34,712
--------------------------------------------------- -------- ------------- -----------------
Current liabilities 287,439 169,385
--------------------------------------------------- -------- ------------- -----------------
Liabilities 701,092 371,264
--------------------------------------------------- -------- ------------- -----------------
TOTAL EQUITY AND LIABILITIES 812,850 509,713
--------------------------------------------------- -------- ------------- -----------------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
DP EURASIA N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE PERIODSED 30 JUNE 2019 AND 30 JUNE 2018
(Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
Remeasurement
of
Contribution post-employment Currency
Share Share from benefit translation Retained Total
capital premium shareholders obligations differences earnings Equity
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Balances at 1
January 2018 36,353 119,286 18,183 (2,193) (10,993) (23,623) 137,013
Remeasurements
of
post-employment
benefit
obligations,
net - - - 197 - - 197
Total loss for
the period - - - - - (10,383) (10,383)
Currency
translation
adjustments - - - - 3,047 - 3,047
Total
comprehensive
loss - - - 197 3,047 (10,383) (7,139)
Share-based
incentive plans
(Note 21) - - 1,068 - - - 1,068
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Balances at 30
June 2018 36,353 119,286 19,251 (1,996) (7,946) (34,006) 130,942
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Balances at 1
January 2019 36,353 119,286 20,697 (2,484) (689) (34,714) 138,449
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
Remeasurements
of
post-employment
benefit
obligations,
net - - - 274 - - 274
Currency
translation
adjustments - - - - (14,222) - (14,222)
Total loss for
the period - - - - - (13,584) (13,584)
Total
comprehensive
loss - - - 274 (14,222) (13,584) (27,532)
Transfers (Note
21) - - (2,192) - - 2,192 -
Share-based
incentive plans
(Note 21) - - 841 - - - 841
Balances at 30
June 2019 36,353 119,286 19,346 (2,210) (14,911) (46,106) 111,758
----------------- ----------- ------------ ------------- ---------------- ------------ ----------- ------------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
DP EURASIA N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODSED 30 JUNE 2019 AND 30 JUNE 2018
(Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
Notes 30 June 2019 30 June 2018
------------------------------------------------------ ------ ------------- -------------
Loss before income tax (10,474) (10,046)
Adjustments for
Depreciation 8 20,388 16,749
Amortisation 9,10 34,103 7,422
Losses on sale of property and equipment (1,097) (170)
Provision for performance bonus - 4,456
Non-cash employee benefits expense -
share based payments 21 841 1,068
Interest income 6 (1,396) (540)
Interest expense 6 37,676 16,087
Unrealised foreign exchange gains
on borrowings - 7,884
------------------------------------------------------ ------ ------------- -------------
Changes in operating assets and liabilities
Changes in trade receivables (92,933) (3,015)
Changes in other receivables and assets (19,339) (14,093)
Changes in inventories (3,505) (9,746)
Changes in contract assets 1,750 1,321
Changes in contract liabilities 3,798 4,064
Changes in trade payables 10,958 (2,427)
Changes in other payables and liabilities (5,015) 2,342
Taxes paid (3,372) (3,342)
Performance bonuses paid (7,010) (5,576)
------------------------------------------------------ ------ ------------- -------------
Cash flows generated (used in) / from
operating activities (34,627) 12,438
------------------------------------------------------ ------ ------------- -------------
Payments for property and equipment 8 (20,184) (18,330)
Payments for intangible assets 9 (9,051) (12,385)
Proceeds from sale of tangible and intangible assets 5,543 4,562
------------------------------------------------------ ------ ------------- -------------
Cash flows used in investing activities (23,692) (26,153)
------------------------------------------------------ ------ ------------- -------------
Interest paid (28,484) (14,460)
Interest received 1,396 540
Loans obtained 612,918 529,270
Loans paid (491,846) (497,889)
Lease payments (39,604) (5,063)
Cash flows generated
from financing activities 54,380 12,398
------------------------------------------------------ ------ ------------- -------------
Effect of currency translation differences (2,963) 12,241
------------------------------------------------------ ------ ------------- -------------
Net (decrease)/increase in cash and cash equivalents (6,902) 10,924
------------------------------------------------------ ------ ------------- -------------
Cash and cash equivalents at the
beginning of the period 12 28,444 76,128
------------------------------------------------------ ------ ------------- -------------
Cash and cash equivalents at the
end of the period 12 21,542 87,052
------------------------------------------------------ ------ ------------- -------------
The accompanying notes form an integral part of these condensed
consolidated interim financial statements.
DP EURASIA N.V.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
INFORMATION AS AT 30 JUNE 2019 AND 31 DECEMBER 2018
(Amounts expressed in thousands of Turkish Lira (TRY) unless
otherwise stated.)
NOTE 1 - GROUP'S ORGANIZATION AND NATURE OF ACTIVITIES
DP Eurasia N.V. (the "Company"), public limited company, having
its statutory seat in Amsterdam, the Netherlands, was incorporated
under the law of the Netherlands on 18 October 2016. The Company
has been incorporated by incorporating shares of Fides Food Systems
Coöperatief U.A. and Vision Lovemark Coöperatief U.A. in Fidesrus
B.V. and Fides Food Systems B.V. Acquisition occurred on 18 October
2016 when the Company acquired Fidesrus and Fides Foods and their
subsidiaries and from this point forward consolidated Group was
formed. This was a transaction under common control.
The Company's registered address is: Herikerbergweg 238,
Amsterdam, the Netherlands.
The Company and its subsidiaries (together referred as the
"Group") operate company and franchise-owned stores in Turkey and
the Russian Federation, including providing technical support,
control and consultancy services to the franchisees.
As at 30 June 2019, the Group operates in 736 stores (499
franchise stores, 237 company-owned stores) (31 December 2018: 724
stores (486 franchise stores, 238 company-owned stores). Split of
stores based on operating countries are as follows:
Turkey Russia
30 June 2019 31 December 2018 30 June 2019 31 December 2018
Corporate 136 137 101 101
Franchisee 413 408 86 78
------------ ------------- ----------------- ------------- -----------------
Total 549 545 187 179
------------ ------------- ----------------- ------------- -----------------
Subsidiaries
The Company has a total of four fully-owned subsidiaries. The
entities included in the scope of the condensed consolidated
financial interim information and nature of their business is as
follows:
30 June 30 June
2019 2018
Effective Effective
Subsidiaries ownership (%) ownership (%) Registered country Nature of business
------------------------------------------ -------------- -------------- ------------------- -------------------
Fides Grup Gıda Restaurant
İ letmecili i A. . ("Fides Turkey") - 100 Turkey Food delivery
Pizza Restaurantları A. . ("Domino's
Turkey") 100 100 Turkey Food delivery
Pizza Restaurants LLC ("Domino's Russia") 100 100 Russia Food delivery
Fidesrus B.V. ("Fidesrus") 100 100 the Netherlands Investment company
Fides Food Systems B.V. ("Fides Food") 100 100 the Netherlands Investment company
Pizza Restaurants LLC is established in the Russian Federation.
Domino's Russia is operating a pizza delivery network of company
and franchise-owned stores in Russian Federation. Domino's Russia
has a Master Franchise Agreement (the "MFA Russia") with Domino's
Pizza International for the pizza delivery network in Russia until
2030.
Fides Grup Gıda Restaurant İ letmecili i A. . and Pizza
Restaurantları A. . ("Fides Turkey" and "Domino's Turkey",
respectively) are established in Turkey. Domino's Turkey is
operating a pizza delivery network of company and franchise-owned
stores in Turkey. Fides Turkey is an investment company, which has
a Master Franchise Agreement (the "MFA Turkey") with Domino's Pizza
International pizza delivery network in Turkey until 2032. The
rights obtained under the MFA have been reassigned from Fides
Turkey to Domino's Turkey in order for it to operate the pizza
delivery network. Fides Turkey was merged with Domino's Turkey with
all of its assets and liabilities as of 12 December 2018 through a
tax-free legal merger.
Fides Food Systems BV and Fidesrus BV ("Fides Food Systems" and
"Fidesrus", respectively) are established in the Netherlands. Both
Fides Food Systems and Fidesrus are acting as investment
companies.
Significant changes in the current reporting period
In spite of the challenging trading conditions in the first half
of 2019, the Group remains well placed to grow revenues through a
simplified menu, opening new stores, increased investment in our
digital channels and refocused local store marketing activities.
The Group has not identified any risks that could impact the
financial performance or position of the Group as at 30 June 2019.
It has sufficient headroom to enable it to conform to covenants on
its existing borrowings and sufficient working capital and undrawn
financing facilities to service its operating activities and
ongoing investments.
NOTE 2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS
2.1 Basis of preparation
These condensed consolidated interim financial statements for
the six months ended 30 June 2019 have been prepared in accordance
with International Accounting Standard 34 ("IAS 34") Interim
Financial Reporting.
The interim report does not include all the notes of the type
normally included in annual financial report. Accordingly, this
report is to be read in conjunction with the annual report for the
year ended
31 December 2018 and any public announcements made by the
Company during the interim reporting period.
The accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards as set out at
Note 2.3.
Seasonality of operations
There is no significant seasonality effect on the Group's
revenue. According to financial year ended
31 December 2018, 48% of revenues accumulated in the first half
year, with 52% accumulating in the second half.
Consolidation of foreign subsidiaries
Financial statements of subsidiaries operating in foreign
countries are prepared in the currency of the primary economic
environment in which they operate. Assets and liabilities in
financial statements prepared according to the Group's accounting
policies are translated into the Group's presentation currency,
Turkish Liras, from the foreign exchange rate at the statement of
financial position date whereas income and expenses are translated
into TRY at the average foreign exchange rate. Exchange differences
arising from the translation are included in the "currency
translation differences" under shareholders' equity.
The foreign currency exchange rates used in the translation of
the foreign operations within the scope of consolidation are as
follows:
30 June 2019 31 December 2018 30 June 2018
------------------ --------------------- ------------------
Period Period Period Period Period Period
Currency End Average End Average End Average
Euros 6.5571 6.3429 6.0280 5.6751 5.3092 4.9417
Russian Rubles 0.0910 0.0860 0.0753 0.0760 0.0723 0.0683
2.2 New and amended international financial reporting standards as adopted by European Union
New and amended standards adopted by the Group, which are
effective for the financial statements as at 30 June 2019
A number of new or amended standards became applicable for the
current reporting period:
- Amendment to IFRS 9, 'Financial instruments'
- IFRS 16, 'Leases'
- IFRIC 23, 'Uncertainty over income tax treatments'
- Annual improvements 2015-2017
- Amendments to IAS 19, 'Employee benefits' on plan amendment,
curtailment or settlement'
The impact of the adoption of the leasing standard IFRS 16 and
the new related accounting policies are disclosed in note 2.3
below. The other standards did not have any impact on the Group's
accounting policies and did not require retrospective
adjustments.
The new standards, amendments and interpretations, which are
issued but not effective for the financial statements as at 30 June
2019
- Amendments to IAS 1 and IAS 8 on the definition of
material
- Amendments to IFRS 3 - definition of a business
This note explains the impact of the adoption of IFRS 16 Leases
on the Group's financial statements and disclose the new accounting
policies that have been applied as from 1 January 2019.
The Group has adopted IFRS 16 from 1 January 2019 but has not
restated comparatives for the 2018 reporting period, as permitted
under the specific transition provisions in the standard, the Group
has applied the modified retrospective method for adoption. The
reclassifications and the adjustments arising from the new lease
accounting rules are therefore recognised in the opening balance
sheet on 1 January 2019.
(a) Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 23.12% for TRY and 9.7% for RUB.
For leases previously classified as finance leases, the Group
recognised the carrying amount of lease assets and lease liability
immediately before transition as the carrying amount of the
right-of-use asset and the lease liability at the date of initial
application. The measurement principles of IFRS 16 are only applied
after that date. Any remeasurement in a lease contract is
recognised as an adjustment to the related right-of-use of
assets.
Definition of a lease
In accordance with IFRS 16, the Group recognises a lease
liability reflecting future lease payments and a 'right of use
asset' for all of its lease contracts. A contract is, or contains,
a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for
consideration. The Group assesses whether a contract is, or
contains, a lease at the inception date. The inception date is the
earlier of the date of a lease agreement and the date of commitment
by the parties to the principal terms and conditions of the
lease.
Subleases
The Group operates as intermediate lessor for a significant
proportion of its leases. The Group has evaluated its rent
agreements and classified its sub-leases as financial lease as
required in IFRS 16.
Where the Group recognised a leasing agreement form a sublease
transaction, which are classified as financial leasing, the right
of use asset from head-lease is derecognised and a lease receivable
equal to the lease receivables in the sub-lease is recognised.
Lease term
The lease term includes the non-cancellable period for which the
lessee has the right to use an underlying asset. Periods covered by
an option to extend the lease term are included in the lease term
if the lessee is reasonably certain to exercise that option. The
same rationale applies to termination options. The term covered by
a termination option is included in the lease term if the lessee is
reasonably certain not to exercise the option. Otherwise, the lease
term ends at the point in time when the lessee can exercise the
termination option.
Measurement
The lease liability is initially measured at the present value
of the future lease payments that are not paid at the commencement
date, discounting using an incremental borrowing rate. The lease
liability is subsequently increased by the interest cost on the
lease liability and decreased by lease payments made. It is
remeasured when there is a change in future lease payments arising
from a change in an index or rate, a change in the estimate or the
amount expected to be payable under a residual value guarantee, or
as appropriate, changes in the assessment of whether a purchase or
extension option is reasonably certain
to be exercised or a termination option is reasonably certain
not to be exercised. The Group recognizes in the right-of-use asset
an estimate of the costs to be incurred for dismantling, removal
and/or restoration to the conditions required by the terms of the
lease.
Impact on transition
The impact on transition to IFRS 16 is summarized in the table
below. Accounts that were not affected by the changes have not been
included. As a result, the sub-totals and the totals disclosed can
not be recalculated from the numbers provided.
Impact
31 December 2018 IFRS 16 1 January 2019
------------------------- ----------------- -------- ---------------
Non-current assets
Property and equipment 136,041 136,041
Intangible assets 48,514 48,514
Right-of-use assets - 162,446 162,446
Lease receivables - 44,569 44,569
Current assets
Lease receivables - 13,857 13,857
Non-current liabilities
Lease liabilities 44,330 162,879 207,209
Current liabilities
Lease liabilities 171,276 57,993 229,269
2019
Operating lease commitments disclosed as at 31 December 2018 34,624
Discounted using the lessee's incremental borrowing rate
of at the date of initial application 23,825
Add/(Less): finance lease liabilities recognised as at 31 December 2018 57,270
Add/(Less): adjustments as a result of a different treatment of extension options 139,777
Lease liability recognised as at 1 January 2019 220,872
The changes in the accounting the policy affected the following
items in balance sheet on
1 January 2019:
Current lease liabilities 57,993
Non-current lease liabilities 162,879
-------------------------------- --------
220,872
------------------------------- --------
The associated right-of-use assets for property leases were
measured at the amount equal to the lease liability, adjusted by
the amount of any prepaid or accrued lease payments relating to
that lease recognised in the balance sheet as at 31 December 2018.
There were no onerous lease contracts that would have required an
adjustment to the right-of-use assets at the date of initial
application.
The recognised net investment and right-of use of assets are as follows:
Lease receivables 58,426
Right of use of assets 162,446
--------------------------------------------------------------------------- --------
220,872
-------------------------------------------------------------------------- --------
The recognised right-of-use assets relate to the following types
of assets:
30 June 2019 1 January 2019
Properties 150,933 145,624
Motor vehicles 15,530 16,822
--------------------------- ------------- ---------------
Total right-of-use assets 166,463 162,446
--------------------------- ------------- ---------------
(i) Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for June
2019 all increased as a result of the change in accounting
policy.
Impact for the period
without IFRS 16 with IFRS 16
30 June 2019 IFRS 16 effect 30 June 2019
Revenue 462,484 - 462,484
Cost of sales (-) (314,485) 9,108 (305,377)
------------------------------------- ---------------- --------------- -------------
Gross profit 147,999 9,108 157,107
------------------------------------- ---------------- --------------- -------------
General administrative expenses (-) (72,081) 754 (71,327)
Marketing and selling expenses (-) (63,751) - (63,751)
Other operating expense, net 3,301 (1,716) 1,585
------------------------------------- ---------------- --------------- -------------
Operating profit 15,468 8,146 23,614
------------------------------------- ---------------- --------------- -------------
Foreign exchange gains/(losses) 2,846 (569) 2,277
Financial income 3,212 (1,816) 1,396
Financial expense (-) (25,070) (12,691) (37,761)
------------------------------------- ---------------- --------------- -------------
Profit before income tax (3,544) (6,930) (10,474)
------------------------------------- ---------------- --------------- -------------
Tax expense (-) (5,311) 2,201 (3,110)
------------------------------------- ---------------- --------------- -------------
Profit for the year (8,855) (4,729) (13,584)
------------------------------------- ---------------- --------------- -------------
Adjusted EBITDA 46,420 33,145 79,565
without IFRS 16 with IFRS 16
Liabilities 30 June 2019 IFRS 16 effect 30 June 2019
------------------------------- ---------------- --------------- -------------
Non - current liabilities
Financial liabilities 194,443 - 194,443
Lease liabilities - 186,433 186,433
Other non-current liabilities 30,631 259 30,890
---------------- --------------- -------------
Current liabilities
Financial liabilities 107,729 - 107,729
Lease liabilities - 42,725 42,725
Other current liabilities 47,002 127 47,129
------------------------------- ---------------- --------------- -------------
without IFRS 16 with IFRS 16
Assets 30 June 2019 IFRS 16 effect 30 June 2019
------------------------- ---------------- --------------- -------------
Non-current assets
Property and equipment 148,359 - 148,359
Intangible assets 50,415 - 50,415
Right-of-use assets - 166,463 166,463
Net investment in lease - 43,220 43,220
Deferred tax assets 13,235 1,492 14,727
------------------------- ---------------- --------------- -------------
Current assets 319,214 211,175 530,389
------------------------- ---------------- --------------- -------------
Net investment in lease - 13,640 13,640
------------------------- ---------------- --------------- -------------
-
(ii) Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
- The use of a various discount rates to a portfolio of leases
with reasonably similar characteristics
- Reliance on previous assessments on whether leases are onerous
- The exclusion of initial direct costs for the measurement of
the right-of-use asset at the date of initial application, and
- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract
is, or contains, a lease at the date of initial application.
Instead, contracts entered into before the transition date the
Group relied on its assessment made appliying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
(b) The group's leasing activities and how these are accounted for
The group leases various offices, warehouses, retail stores and
cars. Rental contracts are typically made for fixed periods of 3 to
5 years but may have extension options as described in (i) below.
Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The lease agreements
do not impose any covenants, but leased assets may not be used as
security for borrowing purposes.
Until the 2018 financial year, leases of property, plant and
equipment were classified as either finance or operating leases.
Payments made under operating leases were charged to profit or loss
on a
straight-line basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease payment is
allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of
the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset's useful life and the
lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially
measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
- Fixed payments (including in-substance fixed payments),
- Variable lease payment that are based on an index or a rate
- The exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and
- Payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be determined, the
lessee's incremental borrowing rate is used, being the rate that
the lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value in a similar economic environment
with similar terms and conditions.
Right-of-use assets are measured at cost comprising the
following:
- The amount of the initial measurement of lease liability
- Any lease payments made at or before the commencement date
less any lease incentives received
- Any initial direct costs, and
- Restoration costs.
Payments associated with the leases of low-value assets are
recognised on a straight-line basis as an expense in profit or
loss. Low value assets comprise small office furniture. There are
no residual value guarantees and the initial direct costs are
negligible.
(i) Extension, termination options
The lease term includes the non-cancellable period for which the
lessee has the right to use an underlying asset. Periods covered by
an option to extend the lease term are included in the lease term
if the lessee is reasonably certain to exercise that option. The
same rationale applies to termination options. The term covered by
a termination option is included in the lease term if the lessee is
reasonably certain not to exercise the option. Otherwise, the lease
term ends at the point in time when the lessee can exercise the
termination option.
Extension options are available for all contracts. In more than
90% of the contracts, DP Eurasia has the right to extend the
contract unilaterally, which does not need the consent of the
landlord.
Critical judgements in determining the lease term
In determining the lease term, management considers all facts
and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension
options (or periods after termination options) are only included in
the lease term if the lease is reasonably certain to be extended
(or not terminated). Potential future cash outflows have not been
included in the lease liability because it is not reasonably
certain that the leases will be extended (or not terminated).
The assessment is reviewed if a significant event or a
significant change in circumstances occurs which affects this
assessment and that is within the control of the lessee. During the
current financial year, there were no revisions related to the
lease liabilities.
(ii) Discount rates used
Incremental borrowing rate is used - rates that the Group would
borrow if they wanted to purchase an asset for the relative
periods.
(iii) Variable elements used
Variable element is the rent increase rate and its calculated
based on Consumer Price Index ("CPI"), Producer Price Index ("PPI")
or an average of both. Variable lease payments based on an index or
a rate are initially measured using the index or the rate at the
commencement date.
Estimation uncertainty arising from variable lease payments
The Group does not forecast future changes of the index/rate;
these changes are considered when the lease payments change.
Variable lease payments that are not based on an index or a rate
are not part of the lease liability, but they are recognised in the
income statement when the event or condition that triggers those
payments occurs.
Nearly 90% of future lease payments for stores are linked to
consumer price index, producer price index or an average of both.
Variable payment terms are mostly used to make up for the volatile
inflation rates in a country. An average of 5% increase in the
consumer price index and producer price index indices would
increase total lease payments by approximately TRY12,247.
NOTE 3 - SEGMENT REPORTING
The business operations of the Group are organized and managed
with respect to geographical positions of its operations. The
information regarding the business activities of the Group as of 30
June 2019,
31 December 2018 and 30 June 2018 comprise the performance and
the management of Turkish and Russian operations and Head
Office.
The Group has two business segments, determined by management
according to the information used for the evaluation of performance
and the allocation of resources, the Turkish and Russian
operations. Other operations are composed of corporate expenses of
Dutch companies. These segments are managed separately because they
are affected by the economic conditions and geographical positions
in terms of risks and returns.
The segment analysis for the period ended 30 June 2019 and June
2018 are as follows:
1 January - 30 June 2019 Turkey Russia Other Elimination Total
--------------------------------------- --------- --------- -------- ------------ ---------
Corporate revenue 99,232 144,538 - - 243,770
Franchise revenue and royalty - -
revenue obtained from franchisees 143,069 43,920 - - 186,989
Other revenue 18,730 12,995 - - 31,725
Total revenue 261,031 201,453 - - 462,484
- At a point in time 258,632 200,615 - - 459,247
- Over time 2,399 838 - - 3,237
--------------------------------------- --------- --------- -------- ------------ ---------
Operating profit 31,487 (4,417) (3,456) - 23,614
Capital expenditures 19,178 10,392 - - 29,570
Tangible and intangible disposals (1,840) (2,602) - - (4,442)
Depreciation and amortization
Expenses (23,356) (31,135) - - (54,491)
Adjusted EBITDA 55,547 27,474 (3,456) - 79,565
--------------------------------------- --------- --------- -------- ------------ ---------
30 June 2019 Turkey Russia Other Elimination Total
--------------------------------------- --------- --------- -------- ------------ ---------
Borrowings
TRY 94,000 - - - 94,000
RUB - 192,396 - - 192,396
--------------------------------------- --------- --------- -------- ------------ ---------
94,000 192,396 - - 286,396
--------------------------------------- --------- --------- -------- ------------ ---------
Lease liabilities
TRY 94,958 - - - 94,958
RUB - 149,977 - - 149,977
--------------------------------------- --------- --------- -------- ------------ ---------
94,958 149,977 - - 244,935
--------------------------------------- --------- --------- -------- ------------ ---------
Total 188,958 342,373 - - 531,331
--------------------------------------- --------- --------- -------- ------------ ---------
1 January - 30 June 2018 Turkey Russia Other Elimination Total
--------------------------------------- --------- --------- -------- ------------ ---------
Corporate revenue 99,190 123,076 - - 222,266
Franchise revenue and royalty - -
revenue obtained from franchisees 121,462 13,503 - - 134,965
Other revenue 7,637 15,347 - - 22,984
Total revenue 228,289 151,926 - - 380,215
- At a point in time 227,176 150,342 - - 377,518
- Over time 1,113 1,584 - - 2,697
--------------------------------------- --------- --------- -------- ------------ ---------
Operating profit 22,061 (3,599) (3,598) - 14,864
Capital expenditures 20,956 12,538 - - 33,494
Tangible and intangible disposals (1,413) (2,979) - (4,392)
Depreciation and amortization
expenses (14,040) (10,131) - (24,171)
Adjusted EBITDA 36,456 7,350 (3,488) - 40,318
--------------------------------------- --------- --------- -------- ------------ ---------
30 June 2018 Turkey Russia Other Elimination Total
--------------------------------------- --------- --------- -------- ------------ ---------
Borrowings
TRY 86,689 - - - 86,689
EUR 27,420 154,988 - - 182,408
RUB - 14,712 - - 14,712
--------------------------------------- --------- --------- -------- ------------ ---------
Total 114,109 169,700 - - 283,809
--------------------------------------- --------- --------- -------- ------------ ---------
EBITDA, adjusted EBITDA, net debt, adjusted net debt, adjusted
net income and non-recurring and non-trade income/expenses are not
defined by IFRS. The amounts provided with respect to operating
segments are measured in a manner consistent with that of the
financial statements. These items determined by the principles
defined by the Group management comprises incomes/expenses which
are assumed by the Group management that are not part of the normal
course of business and are non-recurring items. These items which
are not defined by IFRS are disclosed by the Group management
separately for a better understanding and measurement of the
sustainable performance of the Group.
The reconciliation of adjusted EBITDAs as of 30 June 2019 and
June 2018 is as follows:
TURKEY 30 June 2019 30 June 2018
Adjusted EBITDA 55,547 36,456
------------------------------- ------------- -------------
Non-recurring and non-trade
(income)/expenses per Group
Management
One off non-trading costs 129 105
Share-based incentives 575 250
------------------------------- ------------- -------------
EBITDA 54,843 36,101
------------------------------- ------------- -------------
Depreciation and amortization 23,356 14,040
------------------------------- ------------- -------------
Operating profit 31,487 22,061
------------------------------- ------------- -------------
RUSSIA 30 June 2019 30 June 2018
Adjusted EBITDA 27,474 7,350
------------------------------- ------------- -------------
Non-recurring and non-trade
(income)/expenses per Group
Management
One off non-trading costs 489 -
Share-based incentives 267 818
------------------------------- ------------- -------------
EBITDA 26,718 6,532
------------------------------- ------------- -------------
Depreciation and amortization 31,135 10,131
------------------------------- ------------- -------------
Operating loss (4,417) (3,599)
------------------------------- ------------- -------------
OTHER 30 June 2019 30 June 2018
Adjusted EBITDA (3,456) (3,488)
------------------------------- ------------- -------------
Non-recurring and non-trade
(income)/expenses per Group
Management
One off non-trading costs - 110
------------------------------- ------------- -------------
EBITDA (3,456) (3,598)
------------------------------- ------------- -------------
Depreciation and amortization - -
------------------------------- ------------- -------------
Operating loss (3,456) (3,598)
------------------------------- ------------- -------------
The reconciliation of adjusted net debt as of 30 June 2019 and
31 December 2018 is as follows:
2019 2018
--------------------------------------- --------- ---------
Short term bank borrowings 94,000 24,820
Short-term lease liabilities 51,067 7,789
Short-term portions of
long-term borrowings 5,388 11,721
Long-term bank borrowings 187,008 161,600
Long-term financial lease borrowings 193,868 9,676
--------------------------------------- --------- ---------
Total borrowings 531,331 215,606
--------------------------------------- --------- ---------
Cash and cash equivalents (-) (21,542) (28,444)
--------------------------------------- --------- ---------
Net debt 509,789 187,162
--------------------------------------- --------- ---------
Non-recurring items
per Group Management
Long term deposit for loan guarantee (41,334) (32,537)
Adjusting delay in collection/payment
day coinciding on a weekend (14,424) -
Adjusted net debt 454,031 154,625
--------------------------------------- --------- ---------
The reconciliation of adjusted net income as of 30 June 2019 and
2018 is as follows:
30 June 2019 30 June 2018
Loss for the period as reported (13,584) (10,383)
----------------------------------------------- ------------- -------------
Non-recurring and non-trade (income)/expenses
per Group Management
Share-based incentives 841 1,068
One-off expenses 618 215
Adjusted net loss for the period (12,125) (9,100)
----------------------------------------------- ------------- -------------
NOTE 4 - REVENUE AND COST OF SALES
30 June 2019 30 June 2018
------------------------------------- ------------- -------------
Corporate revenue 243,770 222,266
Franchise revenue and royalty
revenue obtained from franchisees 186,989 134,965
Other revenue 31,725 22,984
-------------------------------------
Revenue 462,484 380,215
------------------------------------- ------------- -------------
Cost of sales (305,377) (251,751)
------------------------------------- ------------- -------------
Gross profit 157,107 128,464
------------------------------------- ------------- -------------
NOTE 5 - EXPENSES BY NATURE
30 June 2019 30 June 2018
---------------------------------------- ------------- -------------
Personnel expenses (96,681) (90,643)
Depreciation and amortization expenses (54,491) (24,171)
---------------------------------------- ------------- -------------
(151,172) (114,814)
---------------------------------------- ------------- -------------
NOTE 6 - FOREIGN EXCHANGE LOSSES, FINANCIAL INCOME AND
EXPENSES
30 June 2019 30 June 2018
Foreign exchange gains/(losses) 2,277 (8,601)
--------------------------------------- ------------- -------------
2,277 (8,601)
--------------------------------------- ------------- -------------
30 June 2019 30 June 2018
Interest income 1,396 540
--------------------------------------- ------------- -------------
1,396 540
--------------------------------------- ------------- -------------
30 June 2019 30 June 2018
Interest expense (22,587) (16,087)
Interest expense on lease liabilities (15,089) -
Other (85) (762)
(37,761) (16,849)
--------------------------------------- ------------- -------------
NOTE 7 - EARNINGS PER SHARE
The reconciliation of adjusted earnings per share as of 30 June
2019 and 2018 is as follows:
30 June 2019 30 June 2018
Average number of shares existing during the period 145,372,414 145,372,414
Net loss for the period attributable to
equity holders of the parent (13,584) (10,383)
----------------------------------------------------- ------------- -------------
Earnings per share (0.09) (0.07)
----------------------------------------------------- ------------- -------------
The reconciliation of adjusted earnings per share as of 30 June
2019 and 2018 is as follows:
30 June 2019 30 June 2018
Average number of shares existing during the period 145,372,414 145,372,414
Net loss for the period attributable to equity
holders of the parent (13,584) (10,383)
----------------------------------------------------- ------------- -------------
Non-recurring and non-trade expenses
per Group Management (*)
Share-based incentives 841 1,068
One-off expenses 618 215
----------------------------------------------------- ------------- -------------
Adjusted net loss for the period
attributable to equity holders of the parent (12,125) (9,100)
----------------------------------------------------- ------------- -------------
Adjusted Earnings per share (*) (0.09) (0.06)
----------------------------------------------------- ------------- -------------
(*) Adjusted earnings per share non-recurring and non-trade
income/expenses are not defined by IFRS. The amounts provided with
respect to operating segments are measured in a manner consistent
with that of the financial statements. These items determined by
the principles defined by the Group management comprises
incomes/expenses which are assumed by the Group management that are
not part of the normal course of business and are non-recurring
items. These items which are not defined by IFRS are disclosed by
the Group management separately for a better understanding and
measurement of the sustainable performance of the Group.
There are no shares or options with a dilutive effect and hence
the basic and diluted earnings per share are the same.
The earning per share presented for the period ended 30 June
2019 is based on the issued share capital of DP Eurasia N.V. at the
date of its incorporation.
NOTE 8 - PROPERTY AND EQUIPMENT
Currency translation
1 January 2019 Additions Disposals Transfers adjustments 30 June 2019
------------------------- --------------- ---------- ---------- ---------- ----------------------- -------------
Cost
Machinery and equipment 55,668 2,960 (3,290) 1,738 9,822 66,898
Motor vehicles 32,963 334 (8,023) - 4,843 30,117
Furniture and fixtures 62,109 3,858 (2,018) - 523 64,472
Leasehold improvements 91,207 5,957 (3,416) - 9,621 103,369
Construction in progress 3,024 7,409 - (1,738) 635 9,330
------------------------- --------------- ---------- ---------- ---------- ----------------------- -------------
244,971 20,518 (16,747) - 25,444 274,186
------------------------- --------------- ---------- ---------- ---------- ----------------------- -------------
Accumulated depreciation
Machinery and equipment (17,975) (5,113) 2,091 - (3,110) (24,107)
Motor vehicles (18,218) (4,287) 7,038 - (2,354) (17,821)
Furniture and fixtures (27,848) (3,694) 1,040 - (187) (30,689)
Leasehold improvements (44,889) (7,294) 2,260 - (3,287) (53,210)
------------------------- --------------- ---------- ---------- ---------- ----------------------- -------------
(108,930) (20,388) 12,429 - (8,938) (125,827)
------------------------- --------------- ---------- ---------- ---------- ----------------------- -------------
Net book value 136,041 148,359
------------------------- --------------- ---------- ---------- ---------- ----------------------- -------------
For the period ended 30 June 2019, depreciation expense of
TRY16,722 has been charged in cost of sales and TRY3,666 has been
charged in general administrative expenses.
Currency
translation
1 January 2018 Additions Disposals Transfers adjustments 30 June 2018
----------------- ---------------- ---------- ---------- ---------- ---------------- ---------------
Cost
Machinery and
equipment 42,094 5,147 (2,589) 96 3,998 48,746
Motor vehicles 26,277 2,779 (405) - 2,063 30,714
Furniture and
fixtures 58,646 3,209 (4,744) 1,475 204 58,790
Leasehold
improvements 77,499 5,157 (4,186) 183 4,079 82,732
Construction in
progress 10,211 4,817 (8) (2,137) 453 13,336
------------------ --------------- ---------- ---------- ---------- ---------------- -------------
214,727 21,109 (11,932) (383) 10,797 234,318
------------------ --------------- ---------- ---------- ---------- ---------------- -------------
Accumulated
depreciation
Machinery and
equipment (11,494) (3,480) 938 - (1,070) (15,106)
Motor vehicles (11,042) (3,676) 393 - (728) (15,053)
Furniture and
fixtures (26,953) (3,374) 3,812 - (58) (26,573)
Leasehold
improvements (36,842) (6,219) 2,497 - (1,090) (41,654)
------------------ --------------- ---------- ---------- ---------- ---------------- -------------
(86,331) (16,749) 7,640 - (2,946) (98,386)
------------------ --------------- ---------- ---------- ---------- ---------------- -------------
Net book value 128,396 135,932
------------------ --------------- ---------- ---------- ---------- ---------------- -------------
For the period ended 30 June 2018, depreciation expense of
TRY13,746 has been charged in cost of sales and TRY3,003 has been
charged in general administrative expenses.
NOTE 9 - INTANGIBLE ASSETS
1 January Currency translation
2019 Additions Disposals adjustments Transfers 30 June 2019
-------------------------- ---------- ---------- ---------- --------------------------- ---------- -------------
Cost
Key money 17,456 3,519 (503) 1,948 - 22,420
Computer software 45,573 5,532 (136) 741 - 51,710
Franchise contracts 48,485 - - - - 48,485
-------------------------- ---------- ---------- ---------- --------------------------- ---------- -------------
111,514 9,051 (639) 2,689 - 122,615
-------------------------- ---------- ---------- ---------- --------------------------- ---------- -------------
Accumulated amortization
Key money (5,342) (3,126) 503 (582) - (8,547)
Computer software (17,178) (3,363) 8 - - (20,533)
Franchise contracts (40,480) (2,614) - (26) - (43,120)
-------------------------- ---------- ---------- ---------- --------------------------- ---------- -------------
(63,000) (9,103) 511 (608) - (72,200)
-------------------------- ---------- ---------- ---------- --------------------------- ---------- -------------
Net book value 48,514 50,415
-------------------------- ---------- ---------- ---------- --------------------------- ---------- -------------
For the period ended 30 June 2019, amortisation expense of
TRY4,507 has been charged in cost of sales and TRY4,596 has been
charged in general administrative expenses.
Currency
1 January translation
2018 Additions Disposals adjustments Transfers 30 June 2018
----------- ---------- ---------- -------------- ------------ ---------- --------------------
Cost
Key money 8,755 6,291 (45) 97 - 15,098
Computer
software 31,502 6,094 (146) 678 383 38,511
Franchise
contracts 48,485 - - - - 48,485
------------ --------- ---------- -------------- ------------ ---------- ---------
88,742 12,385 (191) 775 383 102,094
------------ --------- ---------- -------------- ------------ ---------- ---------
Accumulated
amortization
Key money (2,001) (1,124) 45 - - (3,080)
Computer
software (10,855) (3,874) 46 (188) - (14,871)
Franchise
contracts (35,555) (2,424) - - - (37,979)
------------ --------- ---------- -------------- ------------ ---------- ---------
(48,411) (7,422) 91 (188) - (55,930)
------------ --------- ---------- -------------- ------------ ---------- ---------
Net book
value 40,331 46,164
------------ --------- ---------- -------------- ------------ ---------- ---------
For the period ended 30 June 2018, amortisation expense of
TRY4,229 has been charged in cost of sales and TRY3,193 has been
charged in general administrative expenses.
NOTE 10 - RIGHT OF USE ASSETS
The movement of right-of-use assets as of 30 June 2019 is as
follows:
2019
Opening - 1 January (Note 2.3) 162,446
Amortization (25,000)
Current year additions 15,438
Current year disposals (8,640)
Currency translation adjustments 22,219
Closing - 30 June 166,463
---------------------------------- ---------
For the period ended 30 June 2019, amortisation expense of
TRY24,229 has been charged in cost of sales and TRY771 has been
charged in general administrative expenses.
NOTE 11 - GOODWILL
The goodwill balance amounts to TRY 46,696 (including the
currency translation adjustment amounting to TRY1,501) in the
condensed consolidated financial information as of 30 June 2019
(31 December 2018: TRY45,195).
Acquisition of Pizza Restaurantları A. .
On 1 September 2010, the Group acquired the shares of Pizza
Restaurantları A. ., which operates in pizza delivery business with
a network of company and franchise-owned stores in Turkey.
Following the acquisition, goodwill amounting to TRY37,961 was
recognized in the condensed consolidated financial
information-based acquisition accounting applied under IFRS 3
"Business Combinations".
Acquisition of Russian Operations
On 15 February 2013, the Group acquired the fixed assets of a
pizza network operating in Moscow, Russia. Although the Group did
not acquire shares of a company, the acquisition is treated as a
business combination in accordance with IFRS 3 "Business
Combinations" as the inputs and operational processes that have the
ability to create outputs, have been transferred to the Group.
TRY8,735 (including currency translation adjustment amounting to
TRY1,501) of the goodwill recognised in the condensed consolidated
financial information has arisen from acquisition of the Russian
pizza delivery network. The access to the related market and
creation of synergy with the wider Group are the main reasons
behind the recognised goodwill.
As there were no indicators for impairment, the management of
the Group has not updated any of the impairment testing
calculations performed as at 31 December 2018.
NOTE 12 - CASH AND CASH EQUIVALENTS
The details of cash and cash equivalents as of 30 June 2019 and
31 December 2018 are as follows:
30 June 2019 31 December 2018
Cash 1,459 818
Banks 7,554 16,367
Credit card receivables 12,529 11,259
------------------------- ------------- -----------------
21,542 28,444
------------------------- ------------- -----------------
Maturity term of credit card receivables are 30 days on average
(31 December 2018: 30 days).
NOTE 13 - TRADE RECEIVABLES AND PAYABLES
a) Short-term trade receivables
30 June 2019 31 December 2018
Trade receivables 81,366 50,903
Lease receivables 13,640 -
Cheques received 25,503 19,148
Receivables from related parties 20 20
----------------------------------------------- ------------- -----------------
120,529 70,071
----------------------------------------------- ------------- -----------------
Less: Doubtful trade receivable (87) (92)
----------------------------------------------- ------------- -----------------
Short-term trade and other receivables, net 120,442 69,979
----------------------------------------------- ------------- -----------------
The average collection period for trade receivables is between
30 and 60 days (2018: 30 and 60 days).
b) Long-term trade receivables
30 June 2019 31 December 2018
Lease receivables 43,220 -
Trade receivables 9,287 10,729
Cheques received 10,724 10,032
------------------- ------------- -----------------
63,231 20,761
------------------- ------------- -----------------
c) Short-term trade and other payables
30 June 2019 31 December 2018
----------------------- ------------- -----------------
Payables to suppliers 82,592 70,635
Other payables 2,514 3,513
----------------------- ------------- -----------------
85,106 74,148
----------------------- ------------- -----------------
The weighted average term of trade payables is less than three
months. Short-term payables with no stated interest are measured at
original invoice amount unless the effect of imputing interest is
significant
NOTE 14 - TRANSACTIONS WITH RELATED PARTIES
Key management compensation
30 June 2019 30 June 2018
Short-term employee benefits 9,780 8,111
Share-based incentives (Note 21) 841 1,068
---------------------------------- ------------- -------------
10,621 9,179
---------------------------------- ------------- -------------
There are no loans, advance payments or guarantees given to key
management.
NOTE 15 - INVENTORIES
30 June 2019 31 December 2018
Raw materials 77,624 75,248
Other inventory 3,500 2,371
----------------- ------------- -----------------
81,124 77,619
----------------- ------------- -----------------
NOTE 16 - OTHER ASSETS AND LIABILITIES
Other current assets
30 June 2019 31 December 2018
Advance payments 22,506 9,687
Deposits for loan guarantees (*) 19,278 24,195
Prepaid rent expenses 3,427 3,912
Prepaid taxes and VAT receivable 3,374 3,177
Prepaid consultancy expenses 2,614 -
Prepaid insurance expenses 1,493 945
Prepaid marketing expenses 1,236 2,018
Contract assets related to
franchising contracts (**) 257 438
Other 5,168 1,212
---------------------------------- ------------- -----------------
59,353 45,584
---------------------------------- ------------- -----------------
(*) In July 2018, the Group refinanced its Euro denominated
loans in Russia with a Rouble denominated loan. The RUB 2.2 billion
facility has a 76-month term with a 12-month grace period and
carries an interest rate of 9.7%. The loan carries a 31,643 TRY
(RUB 420 million) cash deposit condition that was made as
collateral by the Russian operating company. Annual interest rate
is 6%. The principal of 31,643 TRY is repayable in accordance with
the schedule specified in the agreement.
(**) The Group incurs certain costs with DP International
related to set up of each franchise contract and IT systems used
for recording of franchise revenue.
Other non-current assets
30 June 2019 31 December 2018
Deposits for loan guarantees (*) 21,146 8,342
Deposits given 8,810 5,909
Prepaid marketing expenses 8,175 7,173
Contract assets related to
franchising contracts (**) 2,367 3,936
Other - 29
---------------------------------- ------------- -----------------
Total 40,498 25,389
---------------------------------- ------------- -----------------
(*) In July 2018, the Group refinanced its Euro denominated
loans in Russia with a Rouble denominated loan. The RUB 2.2 billion
facility has a 76-month term with a 12-month grace period and
carries an interest rate of 9.7%. The loan carries a 31,643 TRY
(RUB 420 million) cash deposit condition that was made as
collateral by the Russian operating company. Annual interest rate
is 6%. The principal of 31,643 TRY is repayable in accordance with
the schedule specified in the agreement.
(**) The Group incurs certain costs with DP International
related to set up of each franchise contract and IT systems used
for recording of franchise revenue.
Other current liabilities
30 June 2019 31 December 2018
Unused vacation liabilities 8,015 6,404
Contract liabilities from
franchising contracts (*) 8,022 5,727
Taxes and funds payable 6,373 6,047
Social security premiums payable 6,223 3,588
Payable to personnel 5,885 6,970
Advances received from franchisees 4,816 2,243
Volume rebate advances 1,388 942
Other expense accruals 6,406 2,791
------------------------------------ ------------- -----------------
Total 47,128 34,712
------------------------------------ ------------- -----------------
(*) The Group incurs certain revenue with set up of each
franchise contract and these franchise fee revenues are deferred
over the period of the franchise agreement.
Other non-current liabilities
30 June 2019 31 December 2018
-------------------------------------------- ------------- -----------------
Contract liabilities from
franchising contracts (*) 29,102 27,599
Long term provisions for employee benefits 1,885 1,665
Other 1,790 774
Total 32,777 30,038
-------------------------------------------- ------------- -----------------
(*) The Group incurs certain revenue with set up of each
franchise contract and these franchise fee revenues are deferred
over the period of the franchise agreement.
NOTE 17 - FINANCIAL LIABILITIES
30 June 2019 31 December 2018
Short term bank borrowings 94,000 24,820
---------------------------------------------------- ------------- -----------------
Short-term financial liabilities 94,000 24,820
---------------------------------------------------- ------------- -----------------
Lease liabilities 51,067 7,789
Short-term portions of long-term borrowings 5,388 11,721
---------------------------------------------------- ------------- -----------------
Current portion of long-term financial liabilities 56,455 19,510
---------------------------------------------------- ------------- -----------------
Short term financial liabilities 150,455 44,330
---------------------------------------------------- ------------- -----------------
Long-term lease liabilities 193,868 9,676
Long-term bank borrowings 187,008 161,600
---------------------------------------------------- ------------- -----------------
Long-term financial liabilities 380,876 171,276
---------------------------------------------------- ------------- -----------------
Total financial liabilities 531,331 215,606
---------------------------------------------------- ------------- -----------------
30 June 2019
Currency Maturity Interest rate (%) Short-term Long-term
---------------- ----------- ------------------ ----------- ----------
RUB borrowings 2024 9.7 5,388 187,008
TRY borrowings Revolving 23.00-26.75 94,000 -
---------------- ----------- ------------------ ----------- ----------
99,388 187,008
---------------------------- ------------------ ----------- ----------
31 December 2018
Currency Maturity Interest rate (%) Short-term Long-term
---------------- ----------- ------------------ ----------- ----------
RUB borrowings 2024 9.7 11,721 161,600
TRY borrowings Revolving 24.71 24,820 -
---------------- ----------- ------------------ ----------- ----------
36,541 161,600
---------------------------- ------------------ ----------- ----------
The loan agreement between Sberbank Moscow and Domino's Russia
is subject to covenant clauses whereby Group, Turkish and Russian
Divisions are required to meet certain ratios.
Throughout the period the Group, Domino's Russia and Domino`s
Turkey have met covenant clauses of Sberbank Moscow.
Details of the short- and long-term financial lease liabilities
according to is as follows;
Currency Maturity Interest rate (%) Short-term Long-term
--------------------------------- ----------- ------------------ ----------- ----------
RUB financial lease liabilities 2019-2029 9.7 38,955 111,022
TRY financial lease liabilities 2019-2029 21.50-24.50 12,112 82,846
--------------------------------- ----------- ------------------ ----------- ----------
51,067 193,868
--------------------------------------------- ------------------ ----------- ----------
The redemption schedule of the borrowings as of 30 June 2019 and
31 December 2018 is as follows:
30 June 2019 31 December 2018
------------------------------------- ------------- -----------------
To be paid in 1 year 99,388 36,541
To be paid between 1-2 years 45,138 19,044
To be paid between 2-3 years 42,525 25,404
To be paid between 3 years and more 99,344 117,152
------------------------------------- ------------- -----------------
286,395 198,141
------------------------------------- ------------- -----------------
The details of the finance lease liabilities as of 31 December
2018 and 2017 are as follows:
30 June 2019 31 December 2018
----------------------------------------------------------------- ------------- -----------------
Total financial lease payments 299,589 25,209
Interest to be paid in upcoming years (54,654) (7,744)
----------------------------------------------------------------- ------------- -----------------
244,935 17,465
----------------------------------------------------------------- ------------- -----------------
Financial lease liabilities to be paid in 1 year 51,067 7,789
Financial lease liabilities to be paid between 1-2 years 54,234 6,128
Financial lease liabilities to be paid between 2-3 years 65,324 3,548
Financial lease liabilities to be paid between 3 years and more 74,310 -
----------------------------------------------------------------- ------------- -----------------
244,935 17,465
----------------------------------------------------------------- ------------- -----------------
NOTE 18 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES
a) Guarantees given to third parties as of 30 June 2019 and December 2018 are as follows;
30 June 2019 31 December 2018
Guarantee letters given 4,327 3,671
------------------------- ------------- -----------------
4,327 3,671
------------------------- ------------- -----------------
b) Guarantees received for trade receivables are as follows:
30 June 2019 31 December 2018
Guarantee notes received 36,164 34,008
Guarantee letters received 33,290 23,295
---------------------------- ------------- -----------------
69,454 57,303
---------------------------- ------------- -----------------
c) Tax contingencies
Russian tax legislation which was enacted or substantively
enacted at the end of the reporting period, is subject to varying
interpretations when being applied to the transactions and
activities of the Group. Consequently, tax positions taken by
management and the formal documentation supporting the tax
positions may be challenged by tax authorities. The Russian tax
administration is gradually strengthening, including the fact that
there is a higher risk of review of tax transactions without a
clear business purpose or with tax incompliant counterparties.
The Russian transfer pricing legislation is generally aligned
with the international transfer pricing principles developed by the
Organisation for Economic Cooperation and Development (OECD) but
has specific characteristics. This legislation provides the
possibility for tax authorities to make transfer pricing
adjustments and impose additional tax liabilities in respect of
controlled transactions (transactions with related parties and some
types of transactions with unrelated parties), provided that the
transaction price is not arm's length.
Tax liabilities arising from transactions between companies
within the Group are determined using actual transaction prices. It
is possible, with the evolution of the interpretation of the
transfer pricing rules, that such transfer prices could be
challenged. The impact of any such challenge cannot be reliably
estimated; however, it may be significant to the financial position
and/or the overall operations of the Group.
The Group includes companies incorporated outside of Russia. The
tax liabilities of the Group are determined on the assumption that
these companies are not subject to Russian profits tax, because
they do not have a permanent establishment in Russia. This
interpretation of relevant legislation may be challenged but the
impact of any such challenge cannot be reliably estimated
currently; however, it may be significant to the financial position
and/or the overall operations of the Group.
As Russian tax legislation does not provide definitive guidance
in certain areas, the Group adopts, from time to time,
interpretations of such uncertain areas that reduce the overall tax
rate of the Group. While management currently estimates that the
tax positions and interpretations that it has taken can probably be
sustained, there is a possible risk that an outflow of resources
will be required should such tax positions and interpretations be
challenged by the tax authorities. The impact of any such challenge
cannot be reliably estimated; however, it may be significant to the
financial position and/or the overall operations of the Group.
Domino's Russia is in the process of undergoing a tax audit for
2015-2017. No reasonable estimate of the impact can be made yet as
the outcome is currently uncertain.
Management will vigorously defend the Group's positions and
interpretations that were applied in determining taxes recognised
in these consolidated financial statements if these are challenged
by the authorities.
NOTE 19 - EQUITY
The shareholders and the shareholding structure of the Group at
30 June 2019 and 31 December 2018 are as follows:
30 June 2019 31 December 2018
Share (%) Amount Share (%) Amount
Fides Food Systems Coöperatief U.A. 32.8 11,928 42.8 15,562
Public shares 62.1 22,591 52.1 18,944
Vision Lovemark Coöperatief U.A. 4.9 1,777 4.9 1,774
Other 0.2 57 0.2 73
36,353 36,353
------------------------------------------ ---------- ------- ---------- -------
As of 30 June 2019, the Group's 145,372,414 shares are issued
and fully paid for.
The nominal value of each share is EUR0.12 (2018: EUR0.12).
There is no preference stock.
As of 30 June 2019, the Group's 145,372,414 (30 June 2018:
145,372,414) shares are issued and fully paid for.
On 3 July 2017, just prior to Admission, the Company issued (i)
13,046,726 ordinary shares, with a nominal value of EUR 0.12 each,
in the capital of the Company to Vision Lovemark Coöperatief U.A.
and (ii) 138,037,219 ordinary shares, with a nominal value of EUR
0.12 each, in the capital of the Company to Fides Food Systems
Coöperatief U.A., which was paid up by debiting the Company's share
premium reserve by TRY 31,239. Also, on 3 July 2017, as part of its
IPO, the Company issued 10,372,414 new ordinary shares with a
nominal value of EUR 0.12 each. As a result, the Company's issued
and outstanding share capital, increased to TRY 36,353 (divided
into 145,372,414 ordinary shares). After IPO 52,1% of the shares
become public. The net proceeds received by the Company from the
IPO is TRY 94,132 (TRY 9,075 per share). DP Eurasia's authorized
share capital is EUR 60,000,000.
Share premium
Share premium represents differences resulting from the
incorporation of Fides Food by Fides Food Systems Coöperatief U.A.
at a price exceeding the face value of those shares and differences
between the face value and the fair value of shares issued at the
IPO.
Ultimate controlling party
The ultimate controlling party of the Company is Turkish Private
Equity Fund II L.P. There is no individual ultimately controlling
the Group.
NOTE 20 - INCOME TAX
The Group is subject to taxation in accordance with the tax
regulations and the legislation effective in the countries in which
the Group companies operate. Therefore, provision for taxes, as
reflected in the condensed consolidated financial information, has
been calculated on a separate-entity basis. The tax rate used for
the period to 30 June 2019 is 25% (31 December 2018: 25%).
The breakdown of cumulative temporary differences and the
resulting deferred income tax assets/liabilities at 30 June 2019
and 31 December 2018 using statutory tax rates are as follows:
30 June 2019 31 December 2018
---------------------------- ----------------------------
Deferred Deferred tax
tax
Temporary assets/ Temporary assets/
differences (liabilities) differences (liabilities)
----------------------------- ------------ -------------- ------------ --------------
Carry forward tax losses
(*) 45,885 9,177 38,001 7,600
Property, equipment
and intangible assets (34,377) (7,635) (39,727) (7,861)
Deferred revenue 28,942 6,220 28,943 6,367
Expense accruals 13,965 2,793 9,515 2,093
Unused vacation liabilities 3,288 723 2,663 586
Provision for employee
termination benefit 1,885 415 1,665 366
Financial leases (IFRS
16) 9,554 1,970 - -
Other 5,067 1,064 12,204 2,471
----------------------------- ------------ -------------- ------------ --------------
Deferred income tax
assets, net 14,727 11,622
----------------------------- ------------ -------------- ------------ --------------
(*) Based on the change in the tax code in the Russian
Federation after 31 December 2015, previously applied limitation on
carry forward tax losses for a 10-year period has been abolished
and any losses incurred since 2007 will be carried forward until
fully recognised.
NOTE 21 - SHARE BASED PAYMENTS
The Phantom Option Scheme
The Phantom Option Scheme was put in place to incentivise senior
members of management. The incentive plan entitles the employees to
a cash payment at the date of an exit by shareholders. The amount
payable will be determined based on the difference between the
equity value of the entities at the time of exit and their grant
dates. Granted options will only vest if certain conditions are
met, including continued employment with the Group, and if there is
an event of 100% exit by Fides Food Systems Coöperatief UA. and
Vision Lovemark Coöperatief UA. However, shareholders have the
right to exercise these plans even if they do not exit 100% of
their stake and may determine the amount payable to employee's pro
rata their exited shareholding.
Based on this scheme, the difference between the grant equity
value and the exit value of the entities have been allocated for
Pizza Restaurantları A. . and Pizza Restaurants LLC separately and
multiplied by the respective option amount of each individual.
Options are granted under the plan for no consideration and
carry no dividend or voting rights.
When exercised, the whole pay-out will be made by the ultimate
shareholders of the Group in cash and any taxes, fees or any other
costs related to the incentive will be borne by employees within
the incentive plan. As a result, the phantom options are accounted
for as equity-settled share-based payment awards.
The Company uses the Black-Scholes option valuation model to
calculate the fair value of the Phantom Option at the date of
grant. Option pricing models require the input of highly subjective
assumptions, including the expected price volatility. The fair
value at grant date is determined using an adjusted form of the
Black Scholes Model that takes into account the exercise price, the
term of the option, the share price at grant date and expected
price volatility of the underlying share, the expected dividend
yield, the risk free interest rate for the term of the option. The
expected price volatility is based on the historic volatility of
the peer group companies. The fair value of the options is then
recognized over the vesting period of the options granted.
The fair value of the options granted in 2010, 2012 and 2015
have been estimated using the Black Scholes option pricing model
based on the following weighted-average assumptions:
Expected average option term in years: 8.8 years
Expected volatility: 42.6%
Expected dividend yield: 0%
Risk-free interest rate: 2.6%
In relation with the IPO, the shareholders used their right to
partly settle the options outstanding under these plans, and 48.6%
of the outstanding phantom options were settled in August 2017. As
a result, this portion of the outstanding share-based incentives is
fully expensed as at 31 December 2017. Subsequently, in relation
with the stake sale by Fides Food Systems Coöperatief UA in
February 2019, Fides Food Systems Coöperatief UA. used its right to
partly settle the options outstanding pro-rata their stake sold and
additional 10.8% of the outstanding phantom options were settled in
the first half of 2019. The unrecognised portion of the total grant
date fair value for the remaining 40.6% of the options amounts to
TRY 114 and will be expensed over the remainder of the estimated
vesting period.
Russian CEO Share Incentive Scheme
A share incentive scheme was put in place at the time of the IPO
on 3 July 2017. According to the incentive scheme an employee was
granted an option to acquire 2,700,000 shares. The price payable
per share on exercise of the option is GBP 2.00. The shares under
the option will vest in equal instalments on each anniversary of
the award, with the final instalment vesting on the fifth
anniversary of Admission. The option will only vest if he has not
ceased to be an employee of the Group and is not under notice to
terminate his employment with the Group. On 4 June 2019 an employee
terminated his employment contract. He retained his vested awards
for 2018 totalling 540,000 shares, however, the remaining unvested
awards were lapsed due to cessation of employment prior to vesting.
TRY2,192 corresponding to the unvested part of the accrued
share-based incentive has been transferred to retained earnings as
of 30 June 2019.
New LTIP Scheme
New share incentive scheme as put in place on 7 May 2018.
According to the incentive scheme employees was granted an option
to acquire shares, based on performance targets of the Group for
the upcoming three years, and continuing employment till the
vesting time. The shares under the option will vest at the end of
scheme period.
The weighted-average fair value of the options granted under the
LTIP Scheme in 2018 amounted to TRY 349 per option, which has been
estimated using the Black-Scholes option pricing model based on the
following weighted-average assumptions. Abovementioned share
options are still outstanding.
Share price on the grant date: GBP 1.85;
Expected average option term in years: three years;
Expected volatility: 36.6%;
Expected dividend yield: 0%; and
Risk-free interest rate: 0.9%.
The expected volatility for each of the vesting installments has
been determined based on the annualized volatility of historical
data for a group of relevant comparator companies, measured over
the expected life of the installments.
Under these two existing plans, amounting to TRY841 has been
charged for 30 June 2019, whereas TRY2,514 for 2018 and the
cumulative charge is TRY19,346 as at 31 December 2018
(31 December 2018: TRY20,697).
Review report
To: the board of directors of DP Eurasia N.V.
Introduction
We have reviewed the accompanying condensed consolidated interim
financial statements for the six-months period ended 30 June 2019
of DP Eurasia N.V., Amsterdam, which comprises the condensed
consolidated statement of financial position as at 30 June 2019,
the condensed consolidated statement of comprehensive income, the
condensed consolidated statement of changes in equity, the
condensed consolidated statement of cash flows for the period then
ended and the selected explanatory notes. The board of directors is
responsible for the preparation and presentation of the (condensed)
consolidated interim financial statements in accordance with IAS
34, 'Interim Financial Reporting' as adopted by the European Union.
Our responsibility is to express a conclusion on the interim
financial statements based on our review.
Scope
We conducted our review in accordance with Dutch law including
standard 2410, 'Review of Interim Financial Information Performed
by the Independent Auditor of the entity'. A review of interim
financial statements consists of making inquiries, primarily of
persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance
with auditing standards and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying (condensed) consolidated
interim financial statements for the six-month period ended 30 June
2019 are not prepared, in all material respects, in accordance with
IAS 34, 'Interim Financial Reporting' as adopted by the European
Union.
Amsterdam, 10 September 2019
PricewaterhouseCoopers Accountants N.V.
Original has been signed by R.P.R. Jagbandhan RA
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LMMFTMBIBBLL
(END) Dow Jones Newswires
September 11, 2019 02:00 ET (06:00 GMT)
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