TIDMDPP

RNS Number : 9332T

DP Poland PLC

26 March 2019

DP Poland plc

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

Final results for the full year to 31 December 2018

24% increase in System Sales, 18% growth in revenue, 66 stores open to-date

Financial highlights:

-- 24% increase in System Sales(1) to 72m PLN 2018 (58m PLN 2017)

-- 6% like-for-like(8) growth in System Sales 2018 on 2017, adjusting for delivery area splits(9)

-- 18% growth in revenue to 60m PLN 2018 (50m PLN 2017)

-- 85% increase in corporate store EBITDA

-- 21% increase in commissary gross profit(10)

-- Group EBITDA(5) loss (GBP1.92m(6) ) 2018, versus (GBP1.78m(7) ) 2017

-- Group loss for the period (GBP3.79 m(6) ) 2018, versus (GBP2.63m(7) ) 2017

Operational highlights:

-- 77% of delivery System Sales ordered online 2018 (75% 2017)

-- 9 new stores opened in 2018, 3 further opened in 2019 to-date

-- 66 stores open to-date, across 30 towns and cities

Peter Shaw, Chief Executive of DP Poland said:

"In spite of a challenging second half to the year we achieved a 24% increase in System Sales and significant growth in both corporate store EBITDA and commissary gross profit in 2018. Understanding the external factors that negatively impacted sales growth, namely the unusually warm and dry weather and unprecedented levels of advertising spend by the two main delivery aggregators, has informed our sales and marketing response in 2019.

We have launched an innovative marketing campaign for 2019 featuring bespoke video and image content that will run throughout the year on digital, rather than traditional, channels, including YouTube, Facebook and Instagram. Alongside this campaign we are trialling a partnership with the largest delivery aggregator, Pyszne (Takeaway.com) and early signs of significant incremental sales look promising as we leverage Pyszne's significant advertising spend.

The share placing completed at the end of February gives the business the requisite funds for further corporate store openings and investment in sales and marketing."

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

(2) Source: DPI (Domino's Pizza International).

(5) Excluding non-cash items, non-recurring items and store pre-opening expenses

(6) Exchange rate average for 2018 GBP1: 4.8169

(7) Exchange rate average for 2017 GBP1: 4.8950

(8) Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 31 December 2017 and 1 January and 31 December 2018.

(9) When a store's delivery area is split, by opening a second store in its original delivery area, a significant portion of the original store's customer database is allocated to the new store, resulting in the original store losing sales. Calculating pre-split like-for-likes allows us to see sales growth by matched delivery areas, irrespective of the opening of new stores. Pre-split like-for-likes are a standard measure adopted by many major Domino's Pizza master franchisees. Up to 31 December 2017 we had only split two delivery areas, out of 54 stores, hence not analysing pre-split like-for-likes before 2018. See note under Finance Director's Review.

(10) Sales minus variable costs

Enquiries:

 
   DP Poland PLC 
    Peter Shaw, Chief Executive 
    www.dppoland.com                     020 3393 6954 
   Peel Hunt LLP 
    Adrian Trimmings / George Sellar     020 7418 8900 
 
 

Notes to editor

DP Poland, through its wholly owned subsidiary DP Polska S.A, has the exclusive right to develop, operate and sub-franchise Domino's Pizza stores in Poland. There are currently 66 Domino's Pizza stores, 42 corporately managed, 2 under management contract and 24 sub-franchised.

Chairman's statement

The Company delivered a solid performance in 2018 with System Sales(1) growth of 24% and revenue growth of 18%.

The year was notable for the marked divergence in DP Poland's performance between the first and second halves. The first half delivered robust sales, boosted by our trial of television advertising in January and February. From April, Poland started to experience unseasonably warm and dry weather, not conducive to food delivery sales; this was in part compensated for by the positive impact of the football World Cup from mid-June, with large television audiences of football fans ordering delivery food.

In the second half we saw sales continue to be impacted by exceptionally warm and dry weather, through to mid-November. Further, we experienced the cumulative impact of the two main delivery aggregators' increased advertising spend on the Company's share of advertising voice. In addition our decision to take a more balanced approach to generating sales in 2018, with more of a focus on protecting margin and store EBITDA, no doubt also impacted like-for-like System Sales performance 2018 on 2017.

Despite the pressures on sales performance that we experienced in 2018, the Company's stores continued to perform to a high standard. Domino's Poland's stores rank amongst the best Domino's stores in the world with regards to service times(2) . We were also delighted to receive from our franchisor, Domino's Pizza International, a second consecutive Gold Franny award for sales growth and quality standards(3) .

In February 2019 the Board took the decision to raise GBP5.8 million before expenses by means of a placing, to maintain the roll-out of corporate stores in 2019 and 2020 and to support the Company's sales and marketing plans. The placing was approved at a General Meeting on 28 February.

At the time of the placing we announced that Peter Shaw will be stepping down as Chief Executive, by mutual agreement, at the conclusion of the Company's 2019 Half Year, in June 2019. Peter was co-founder of DP Poland and has led the business since October 2010 - shortly after the master franchise agreement for Domino's Pizza in Poland was acquired. Peter has led DP Poland to become one of the largest pizza delivery operations in Poland, with an estate of 66 stores. The board of DP Poland thank Peter for the great contribution he has made to the development of the business.

DP Poland is fundamentally a Polish company and, having established a strong platform in the Polish market, our principal focus for the future will include optimising resources and cost control and on increasing local market expertise, building on the strong operational team we have put in place. Pending a further appointment reflecting the Group's priorities in this area, myself and Rob Morrish, non-executive director, will take a more active role in the running of the business.

With the eighth largest economy in Europe and current GDP growth of around 5% per year(4) , Poland continues to provide favourable conditions for the continued expansion of the Domino's brand.

Nick Donaldson

Non-Executive Chairman

25 March 2019

Chief Executive's review

Group performance

Revenue increased by 18% to 60m PLN (50m PLN 2017).

Group EBITDA(5) losses increased by 8% (GBP1.92m) in 2018 versus (GBP1.78m) in 2017, at average exchange rates for 2018(6) and 2017(7) , impacted by lower than anticipated sales in the second half of the year.

At constant exchange rates Group EBITDA losses increased by 7% 2018 on 2017.

The Group loss for the period of (GBP3.79m), at actual exchange rates, was an increase of 44% on 2017, including provisions for impairments against leasehold improvements relating to possible store closures and possible sale of certain corporate stores to sub-franchisees, plus possible sub-franchisee bad debt.

Store performance

System Sales were up 24% 2018 on 2017 as a result of 6% like-for-like(8) (pre-split(9) ) System Sales growth 2018 on 2017, growth from non-like-for-like stores and the opening of 9 new corporate stores during the year.

The 2018 like-for-like performance of 6% was on the back of 17% like-for-like growth in 2017, representing 24% compound like-for-like growth over 2 years 2017-18.

The first half sales performance was boosted by our trial of national television advertising, with two campaign bursts of 2 weeks each, at the beginning of January and at the end of January running into February. While the consumer sales response to this television advertising was very strong the return on investment was insufficient to justify continued national television support until we have further expanded our store network.

The second half of the year proved more challenging as the Company experienced pressures on sales, driven predominantly by exceptionally warm and dry weather through to mid-November and the cumulative impact of delivery aggregators' increased advertising spend on the Company's share of advertising voice. The Company also took the decision to offer less discounting in August, September and October 2018 (compared to 2017), in support of margin and store EBITDA, which also no doubt impacted like-for-like System Sales performance.

The average transaction value in 2018, in stores of at least 2.5 years old at 31 December 2018, was the highest to date, as a result of a menu price rise introduced in January and less discounting across the year as a whole, compared to 2017.

Corporate store EBITDA increased 85% 2018 on 2017.

Last year a number of our corporate stores were identified as 'underperformers' and specific plans were put in place to turn those performances around. We are seeing some positive responses to these actions. We are also discussing the possible sale of some of these stores, to sub-franchise, and we are considering the possibility of some closures for those stores where their location is a particular challenge.

Store roll-out

We finished the year with 63 stores, 24 sub-franchised and 39 corporately managed. During the year we opened 9 corporate stores.

 
     Stores        1 Jan 2018   Opened   31 Dec 2018   26 Mar 2019 
    Corporate         30*         9          39*           42* 
                  -----------  -------  ------------  ------------ 
 Sub-franchised        24         0          24            24 
                  -----------  -------  ------------  ------------ 
      Total            54         9          63            66 
                  -----------  -------  ------------  ------------ 
 

* 2 corporate stores are run by sub-franchisees under management contract, with the option to acquire and sub-franchise in the future

Our focus in 2019 is to drive higher store penetration, reduce store delivery areas, improve delivery times and improve the cost of labour. Store openings will be focused on larger cities and will include a high proportion of delivery area splits. We have opened 3 further stores in 2019 to-date.

As stated above, under 'Store performance', we are considering some store closures and the possible sale of certain corporate stores to sub-franchisees

Sub-franchising

The performance of sub-franchised stores in 2018 was mixed with some strong performers and some weaker. In 2019 we are focused on reinvigorating sub-franchisee performance, to drive sales and store openings. In November 2018 we recruited a new head of Sales and Operations with particular experience of working with franchisees.

We anticipate converting a number of our corporately managed stores to sub-franchises, re-balancing the corporate/sub-franchised store mix.

Commissary

Our 2 commissaries continue to perform well in the efficient production of fresh dough and the distribution of all ingredients and non-food items to stores. We saw a 21% increase in commissary gross profit(10) 2018 on 2017.

Marketing and product innovation

2018 marked a key milestone as we trialled television advertising for the first time, adapting a 15 second commercial created by our Dutch Domino's colleagues, including a 50% off promotion. We ran 2 bursts of national television advertising over a period of 2x 2 weeks, in the first half of January and in late January running into February. While the television campaign generated impressive like-for-like sales and our highest average order count to-date the return on investment did not justify continued investment in this medium, until we achieve higher store penetration.

Much of our 2018 activity was focused on social media channels, including our 'DominosBot' AI powered ordering channel on Facebook Messenger.

We introduced 3 new pizzas in 2018, including Tex Mex, Americano (pepperoni and mushroom) and Carbonara.

Fundraising February 2019

On 28 February 2019 a fundraising of GBP5.8m before expenses was confirmed, by means of a placing, including a fully subscribed broker option of GBP0.5m, resulting in around GBP5.5m net funds raised. The fundraising allows the Company to continue rolling out corporate store openings through 2019 and 2020 and to invest in sales and marketing activities.

Current trading and outlook

Comparatives for January and February 2019 were always going to be very tough, in the context of our trial of television advertising in January and February 2018. As such we knew that our like-for-like sales performance in January and February would be negative. The challenge was to ensure that sales momentum was maintained as we pushed through that comparative period.

To that end in mid-January we launched an innovative campaign featuring Damian Kordas, the winner of Polish Master Chef 2018, creating unique Domino's video content, distributed through digital channels. Damian will be producing content for us throughout year, the first of which featured our customers' favourite pizza Domino's Pepperoni. This content, including video and imagery featuring Damian discussing and making Domino's Pepperoni, has met with a strong sales response. It is being distributed through a variety of channels, including YouTube, Facebook and Instagram.

We have taken the decision to start a trial with the main delivery aggregator in our market, Pyszne, part of Takeaway.com, on the basis that we will receive orders from their system and that we fully service those orders, including delivery. We have taken this step following consultation with our franchisor DPI and a number of our European colleagues who have been partnering with Takeaway.com in their markets. Based on the evidence of the first of our stores to be placed on the Pyszne system we are optimistic that this trial will add incremental sales. For the summer months we will be deploying new tactics in support of sales.

On a personal level I would like to thank our team in Poland for the progress that we have made in establishing Domino's Pizza as one of the leading pizza delivery operators, in a highly attractive and very competitive market. I have no hesitation in claiming that our team is best of class and I am fully confident in their abilities to fulfil our long-term vision for the business, as I move on to other challenges. I would also like to thank our Board for their unwavering support over the last eight and a half years that I have been Chief Executive of DP Poland PLC.

Peter Shaw

Chief Executive

25 March 2019

Finance Director's review

Overview

The food delivery market in Poland is growing at an impressive rate, in part driven by a step change in investment from the delivery aggregators, alongside a general broadening in the range of food service offers. While the long-term impact is positive we experienced significant pressure on sales in the second half of 2018. These pressures resulted from a combination of factors including unusually hot and dry weather, the very high advertising spend of competing delivery aggregators impacting our share of advertising voice and our decision to reduce the overall amount of discounting compared to the previous year, in support of margin and store EBITDA.

In response to the delivery aggregators' marketing investment we have commenced a trial in partnership with the leading delivery aggregator in Poland, Pyszne (Takeaway.com), with our first stores going on stream in late January 2019. Leveraging the advertising expenditure of Pyszne we can benefit from their sales platform while retaining complete control of our offer, service and delivery.

While the buoyant Polish consumer economy is broadly beneficial, the related reduction in unemployment and the introduction of a minimum wage has seen labour rates double since we opened our first store in February 2011. As a result Poland can no longer be described as a low-cost labour market. We have worked hard to manage these costs, including the introduction of menu price increases, a move that has been mirrored across the food service sector.

Regarding the cost of food we have seen an easing of inflation and as such we have been able to balance some of the pressure from increased labour costs. Growing sales volumes will continue to have a positive impact on our purchasing power.

Selling, General and Administrative expenses

In 2018 Selling, General and Administrative expenses (S,G&A) were 19% of System Sales, a 2 percentage points improvement against 2017 (2017 21%); both measured using the actual average exchange rates for 2018 and 2017.

Direct costs

The opening of our second commissary in August 2017 provided additional capacity, critical to the expansion of our store estate and reducing distribution costs in the supply of stores to the North, West and South of the country. This new facility has added to our direct costs, including rent, operating costs, production and warehousing labour, impacting Group EBITDA in 2018. These costs will become proportionately less significant as the store estate expands and sales grow.

Store count

 
     Stores        1 Jan 2018   Opened   31 Dec 2018   26 Mar 2019 
    Corporate         30*         9          39*           42* 
                  -----------  -------  ------------  ------------ 
 Sub-franchised        24         0          24            24 
                  -----------  -------  ------------  ------------ 
      Total            54         9          63            66 
                  -----------  -------  ------------  ------------ 
 

* 2 corporate stores are run by sub-franchisees under management contract, with the option to acquire and sub-franchise in the future

In 2019 a number of store openings will result from the splitting(9) of the delivery areas of some of our highest grossing stores. Store openings resulting from splits benefit from the transfer of part of the original store's customer database and improved labour and delivery efficiency thanks to a tighter delivery area. Customers who get their orders more quickly become more loyal and purchase more regularly.

3 new stores have been opened so far in 2019, totaling 66 stores opened to-date, with 1 additional town added, giving us presence in 30 towns/cities to-date.

Sales Key Performance Indicators

24% growth in System Sales (PLN) was supported by 6% like-for-like System Sales (pre-split), growth from non-like-for-like stores and the opening of 9 new stores in 2018. Ignoring splits we saw 4% like-for-like System Sales growth (6% pre-split) constituted of -2% like-for-like System order count decline (0% pre-split) and a 6% growth in average transaction value. In 2017 17% like-for-like System Sales growth reflected a mix of 16% order count growth and 1% growth in the average transaction value.

Delivery System Sales ordered online are growing, however newly opened stores need time to build online customers and that will dilute the System average.

 
                                     2018         2017      Change % 
 System Sales PLN                 71 873 155   58 082 060     24% 
                                 -----------  -----------  --------- 
 System Sales GBP*                14 921 039   12 057 975     24% 
                                 -----------  -----------  --------- 
 L-F-L system sales                   4%          17% 
                                 -----------  -----------  --------- 
 L-F-L system sales pre-split         6%         N/A** 
                                 -----------  -----------  --------- 
 L-F-L system order count            -2%          16% 
                                 -----------  -----------  --------- 
 L-F-L system order count             0%         N/A** 
  pre-split 
                                 -----------  -----------  --------- 
 Delivery System Sales ordered 
  online                             77%          75% 
                                 -----------  -----------  --------- 
 

*Constant exchange rate of GBP1: 4.8169 PLN

** Splitting was immaterial to like-for-like performance in 2017.

Group performance

18% growth of Group Revenue at a constant exchange rate of PLN 4.8: GBP1 is derivative of 24% growth of System Sales.

 
 Group revenue & EBITDA*       2018          2017       Change % 
 Revenue PLN                 59 584 167    50 425 616       +18% 
                           ------------  ------------  --------- 
 Revenue GBP                 12 369 815    10 468 479       +18% 
                           ------------  ------------  --------- 
 Group EBITDA(5) GBP        (1 920 448)   (1 795 467)        -7% 
                           ------------  ------------  --------- 
 

*Constant exchange rate of GBP1: 4.8169PLN

The Group Income statement at actual average exchange rates for 2018 and 2017 was only marginally impacted by sterling weakening 1% against the zloty in 2018.

 
 Group revenue & EBITDA*       2018          2017       Change % 
 Revenue PLN                59 584 167    50 425 616      +18% 
                           ------------  ------------  --------- 
 Revenue GBP                12 369 815    10 377 777      +19% 
                           ------------  ------------  --------- 
 Group EBITDA(5) GBP        (1 920 448)   (1 784 677)     -8% 
                           ------------  ------------  --------- 
 

*Actual average exchange rates for 2018 and 2017

Group loss for the period

Group EBITDA loss excluding non-cash items, non-recurring items and store pre-opening expenses at actual average exchange rates for 2018 and 2017 increased by GBP135,771 (GBP124,981 increase at constant exchange rate of GBP1: 4.81 PLN) against the prior year.

The Group loss for the year at actual average exchange rates for 2018 and 2017 increased by GBP1,158,753 against 2017, mainly due to an increase of depreciation and amortization due to store openings and impairment provisions for possible store closures, possible sub-franchising of certain corporate stores and possible sub-franchisee bad debt.

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. For 2018 a provision of GBP631,118 of impairment losses of eight stores has been recognised in the income statement under the expense category: Depreciation, amortisation and impairment.

Trade and other receivables are recognised initially at fair value and subsequently measured as an amortised cost using the effective interest method, less provision for estimated irrecoverable amounts. In 2018 GBP104,947 of irrecoverable amounts was recognised as a provision in the income statement under the expense category: Other non-cash and non-recurring items.

 
 Group Loss for the period       2018          2017       Change % 
 Loss for the period          (3 793 272)   (2 634 519)     +44% 
                             ------------  ------------  --------- 
 

Actual average exchange rates for 2018 and 2017

Exchange rates

 
    PLN : GBP1        2018     2017    Change % 
 Income Statement    4.8169   4.8590     -1% 
                    -------  -------  --------- 
 Balance Sheet       4.7921   4.7048     +2% 
                    -------  -------  --------- 
 

Financial statements for our Polish subsidiary DP Polska S.A. are denominated in PLN and translated to GBP. Under IFRS accounting standards the Income Statement for the Group has been converted from PLN at the average annual exchange rate applicable to PLN against GBP. The balance sheet has been converted from PLN to GBP at the 31 December 2018 exchange rate applicable to PLN against GBP. In 2018 PLN is virtually unchanged against GBP and has had little impact on the numbers presented at 2018 and 2017 rates.

Cash position

Cash reduced by 57% from 1 January 2018, with the net cash at 31 December 2018 being GBP1.9m. Cash of GBP2.5m was deployed to cover:

- Group losses

- store CAPEX (including CAPEX to be deployed in stores to be opened in 2019)

 
                 1 January   Cash movement   31 December 
                  2018                        2018 
 Cash in bank    4 505 911     (2 547 995)     1 957 916 
                ----------  --------------  ------------ 
 

Actual exchange rates for 2018 and 2017

On 28 February 2019 the Group completed a placing of 96,666,666 new ordinary shares at the price of 6 pence per share, to raise a total of GBP5.8m before expenses, approximately GBP5.5m net.

Macro situation in Poland

In 2018 we saw strong GDP growth combined with inflation and the lowest recorded unemployment rate. The 3 Month Warsaw Interbank Offered Rate is virtually unchanged.

 
               Macro KPI                    2018          2017 
 Real GDP growth (% growth)(11)              5.1           4.8 
                                        ------------  ------------ 
 Inflation (% growth)(11)                    1.8           2.1 
                                        ------------  ------------ 
 Unemployment Rate (% of economically 
  active population)(11)                     3.8           4.9 
                                        ------------  ------------ 
                                         31 Dec 2018   31 Dec 2017 
                                        ------------  ------------ 
 Interest rate(12) (%)                     1.7200        1.7200 
                                        ------------  ------------ 
 

Maciej Jania

Finance Director

25 March 2019

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

(2) Source: DPI (Domino's Pizza International).

(3) An annual award made by DPI to a small proportion of franchisees.

(4) Source: Trading Economics 2018: World Bank 2017.

(5) Excluding non-cash items, non-recurring items and store pre-opening expenses

(6) Exchange rate average for 2018 GBP1: 4.8169

(7) Exchange rate average for 2017 GBP1: 4.8950

(8) Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 31 December 2017 and 1 January and 31 December 2018.

(9) When a store's delivery area is split, by opening a second store in its original delivery area, a significant portion of the original store's customer database is allocated to the new store, resulting in the original store losing sales. Calculating pre-split like-for-likes allows us to see sales growth by matched delivery areas, irrespective of the opening of new stores. Pre-split like-for-likes are a standard measure adopted by many major Domino's Pizza master franchisees. Up to 31 December 2017 we had only split two delivery areas, out of 54 stores, hence not analysing pre-split like-for-likes before 2018. See note under Finance Director's Review.

(10) Sales minus variable costs

(11) Stores less than 12 months old, with no matching trading periods in the previous year

(12) Source: http://www.euromonitor/poland/country-factfile#

(13) 3M WIBOR at 30 December; source www.money.pl

 
 Group Income Statement 
 for the year ended 31 December 
  2018 
 
 
                                                                      2018          2017 
                                                      Notes            GBP           GBP 
 
 Revenue                                                2       12,369,815    10,377,777 
 
 Direct Costs                                                 (11,426,271)   (9,658,691) 
 
 Selling, general and administrative expenses 
  - excluding: 
  store pre-opening expenses, depreciation, 
  amortisation and share based payments                        (2,863,992)   (2,503,763) 
 
 GROUP EBITDA - excluding non-cash items, 
  non-recurring items and store pre-opening 
  expenses                                                     (1,920,448)   (1,784,677) 
                                                     ------  ------------- 
 
 Store pre-opening expenses                                       (72,900)     (143,220) 
 Other non-cash and non-recurring 
  items                                                 5          131,054      (12,271) 
 Finance income                                                    129,315        92,638 
 Finance costs                                                    (21,254)      (24,364) 
 Foreign exchange (losses) / gains                                 (6,513)       148,032 
 Depreciation, amortisation and 
  impairment                                                   (1,793,258)     (656,942) 
 Share based payments                                            (239,268)     (253,715) 
 
 Loss before taxation                                   4      (3,793,272)   (2,634,519) 
                                                     ------  ------------- 
 
 Taxation                                               6                -             - 
 
 Loss for the period                                           (3,793,272)   (2,634,519) 
                                                     ------  ------------- 
 
 
                                                                                   (1.85 
 Loss per share                       Basic             7         (2.53 p)            p) 
                                                                                   (1.85 
  Diluted                                               7         (2.53 p)            p) 
 
 All of the loss for the year is attributable to the owners of the 
  Parent Company. 
 
 
  Group Statement 
  of comprehensive income 
  for the year ended 31 December 2018 
 
 
                                                                2018          2017 
 
                                                                 GBP           GBP 
 -------------------------------------------------      ------------  ------------ 
 
  Loss for the period                                    (3,793,272)   (2,634,519) 
  Currency translation differences                         (253,668)       639,428 
 --------------------------------------------------- 
  Other comprehensive expense for the period, net 
   of tax to be reclassified to profit or loss in 
   subsequent periods                                      (253,668)       639,428 
 -----------------------------------------------------  ------------ 
 
  Total comprehensive income for the period              (4,046,940)   (1,995,091) 
 ---------------------------------------------------    ------------  ------------ 
 
  All of the comprehensive expense for the year is attributable to 
   the owners of the Parent Company. 
 
 
 Group Balance Sheet 
 at 31 December 2018 
 
                                                         2018           2017 
 
                                       Notes              GBP            GBP 
--------------------------------     ---------  -------------  ------------- 
 Non-current assets 
 Intangible assets                       8            604,392        558,438 
 Property, plant and equipment           9          6,437,717      6,617,788 
 Trade and other receivables                        1,730,633      1,767,289 
---------------------------------    ---------  -------------  ------------- 
                                                    8,772,742      8,943,515 
 Current assets 
 Inventories                                          464,102        525,870 
 Trade and other receivables                        1,931,434      2,580,994 
 Cash and cash equivalents                          1,957,916      4,505,911 
----------------------------------   ---------  -------------  ------------- 
                                                    4,353,452      7,612,775 
 
 Total assets                                      13,126,194     16,556,290 
-----------------------------------  ---------  -------------  ------------- 
 
 Current liabilities 
 Trade and other payables                         (2,132,199)    (1,648,960) 
 Borrowings                                         (143,820)      (129,613) 
 Provisions                                          (27,296)       (37,289) 
-----------------------------------  ---------  -------------  ------------- 
                                                  (2,303,315)    (1,815,862) 
   --------------------------------  ---------  -------------  ------------- 
 
 Non-current liabilities 
 Provisions                                                 -              - 
 Borrowings                                         (131,963)      (243,197) 
-----------------------------------  ---------  -------------  ------------- 
                                                    (131,963)      (243,197) 
 
 Total liabilities                                (2,435,278)    (2,059,059) 
-----------------------------------  ---------  -------------  ------------- 
 
 Net assets                                        10,690,916     14,497,231 
-----------------------------------  ---------  -------------  ------------- 
 
 Equity 
 Called up share capital                 10           764,111        762,754 
 Share premium account                   10        31,829,463     31,829,463 
 Capital reserve - own shares                        (48,163)       (48,163) 
 Retained earnings                               (22,053,832)   (18,499,828) 
 Currency translation reserve                         199,337        453,005 
---------------------------------    ---------  -------------  ------------- 
 Total equity                                      10,690,916     14,497,231 
-----------------------------------  ---------  -------------  ------------- 
 
 The financial statements were approved by the Board of Directors 
  and authorised for issue on 25 March 2019 and were signed on its 
  behalf by: 
 
 
 
 Peter Shaw                           Maciej Jania 
 Director                             Director 
 
 
 Group Statement of Cash Flows 
 for the year ended 31 December 2018 
 
                                                                                                                    2018            2017 
 
                                                                                                                     GBP             GBP 
------------------------  -----------  ---------------------  ---------------------  ---------------------  ------------  -------------- 
 Cash flows from operating activities 
 Loss before taxation for the period                                                                         (3,793,272)     (2,634,519) 
 
 Adjustments for: 
 Finance income                                                                                                (129,315)        (92,638) 
 Finance costs                                                                                                    21,254          24,364 
 Depreciation, amortisation and impairment                                                                     1,793,258         656,942 
 Share based payments expense                                                                                    239,268         253,715 
------------------------------------------------------------  ---------------------  ---------------------  ------------  -------------- 
 Operating cash flows before movement in working 
  capital                                                                                                    (1,868,807)     (1,792,136) 
 
 Decrease / (increase) in inventories                                                                            142,777       (221,747) 
 Decrease / (increase) in trade and 
  other receivables                                                                                              313,459       (728,558) 
 Increase in trade and other payables                                                                            556,875         591,686 
 (Decrease) / increase in provisions                                                                                   -        (50,532) 
------------------------------------------------------------  ---------------------  ---------------------  ------------  -------------- 
 Cash used in operations                                                                                       (855,696)     (2,201,287) 
 
 Taxation paid                                                                                                         -               - 
 
 Net cash used in operations                                                                                   (855,696)     (2,201,287) 
 
 Cash flows from investing 
  activities 
 Payments to acquire software                                                                                  (109,307)        (23,833) 
 Payments to acquire property, plant and equipment                                                           (1,534,529)     (4,131,753) 
 Payments to acquire intangible fixed assets                                                                    (93,468)        (26,039) 
 Lease deposits net amount (advanced)                                                                                  -        (50,396) 
 Proceeds from disposal of property plant 
  and equipment                                                                                                      714               - 
 Decrease/(increase) in loans to sub-franchisees                                                                 239,949       (501,731) 
 Interest received                                                                                                20,544          92,638 
 
 Net cash used in investing 
  activities                                                                                                 (1,476,097)     (4,641,114) 
 
 Cash flows from financing 
  activities 
 Net proceeds from issue of ordinary share 
  capital                                                                                                          1,357       5,028,754 
 Repayment of borrowings                                                                                       (126,425)        (35,692) 
 Interest paid                                                                                                  (18,805)        (24,364) 
-----------------------------------------------------------------------------------  ---------------------  ------------  -------------- 
 Net cash from financing activities                                                                            (143,873)       4,968,698 
 
 
 Net (decrease) in cash and cash equivalents                                                                 (2,475,666)     (1,873,703) 
 
 Exchange differences on cash balances                                                                          (72,329)          71,354 
 Cash and cash equivalents at beginning of 
  period                                                                                                       4,505,911       6,308,260 
 
 Cash and cash equivalents at end of period                                                                    1,957,916       4,505,911 
-----------------------------------------------------------------------------------  ---------------------  ------------  -------------- 
 
 Group Statement of Changes in Equity 
 for the year ended 31 December 
  2018 
 
 
                                                       Share                                      Currency       Capital 
                                                                                                                 reserve 
                                Share                premium               Retained            translation             - 
                              capital                account               earnings                reserve    own shares         Total 
                                  GBP                    GBP                    GBP                    GBP           GBP           GBP 
------------------------  -----------  ---------------------  ---------------------  ---------------------  ------------  ------------ 
 
 At 31 December 2016          684,576             26,878,887           (16,116,724)              (186,423)      (50,463)    11,209,853 
 Shares issued                 78,178              5,185,000                      -                      -             -     5,263,178 
 Expenses of share 
  issue                             -              (234,424)                      -                      -             -     (234,424) 
 Share based payments               -                      -                253,715                      -             -       253,715 
 Shares transferred 
  out 
  of EBT                            -                      -                (2,300)                      -         2,300             - 
 Translation difference             -                      -                                       639,428                     639,428 
 Loss for the period                -                      -            (2,634,519)                                    -   (2,634,519) 
------------------------  -----------  ---------------------  ---------------------  ---------------------  ------------  ------------ 
 At 31 December 2017          762,754             31,829,463           (18,499,828)                453,005      (48,163)    14,497,231 
 Shares issued                  1,357                      -                      -                      -             -         1,357 
 Share based payments               -                      -                239,268                      -             -       239,268 
 Translation difference             -                      -                      -              (253,668)             -     (253,668) 
 Loss for the period                -                      -            (3,793,272)                      -             -   (3,793,272) 
 At 31 December 2018          764,111             31,829,463           (22,053,832)                199,337      (48,163)    10,690,916 
------------------------  -----------  ---------------------  ---------------------  ---------------------  ------------  ------------ 
 
 
   1.   ACCOUNTING POLICIES 
 
 Basis of preparation 
 The financial statements have been prepared on the historical 
  cost basis, with the exception of certain financial instruments 
  and share based payments. The consolidated and Company financial 
  statements of DP Poland plc have been prepared in accordance 
  with International Financial Reporting Standards (IFRS) as adopted 
  by the European Union, IFRIC Interpretations and the Companies 
  Act 2006 applicable to Companies reporting under IFRS. The financial 
  statements have been prepared in accordance with IFRS and IFRIC 
  interpretations issued and effective or issued and early adopted 
  as at the time of preparing these statements (March 2019). The 
  preparation of financial statements in accordance with IFRS requires 
  the use of certain critical accounting estimates. It also requires 
  management to exercise judgement in the process of applying the 
  Company's accounting policies. 
 
   2.   REVENUE 
 
 The Group's revenue arises from the sale of goods to consumers 
  from corporate stores, from the sale of products and services 
  to franchisees and the charging of royalties, fees and rent to 
  franchisees. All of the revenue is derived in Poland. 
 
  Corporate store sales: Contracts with customers for the sale 
  of products to end consumers include one performance obligation. 
  The Group has concluded that revenue from the sale of products 
  should be recognised at a point in time when control of the goods 
  are transferred to the consumer, which is the point of delivery 
  or collection. Revenue is measured at the menu price less any 
  discounts offered. 
 
  Royalties, franchise fees and sales to franchisees: Contracts 
  with customers for the sale of products include one performance 
  obligation, being the delivery of products to the end customer. 
  The Group has concluded that revenue from the sale of products 
  should be recognised at a point in time when control of the goods 
  are transferred to the franchisee, generally on delivery. Revenue 
  is recognised at the invoiced price less any estimated rebates. 
  The performance obligation relating to royalties is the use of 
  the Domino's brand. This represents a sales-based royalty with 
  revenue recognised at the point the franchisee makes a sale to 
  an end consumer. Franchise fees comprise revenue for initial 
  services associated with allocating franchisees allotted address 
  counts or a 'change of hands' fee when the Group grants consent 
  to a franchisee to sell stores to a third party. They are non-refundable, 
  and no element of the franchise fee relates to subsequent services. 
  Revenue from franchisee fees is recognised when a franchisee 
  opens a store for trading or on completion of sale of one or 
  more stores to a third party, as this is the point at which all 
  performance obligations have been satisfied. 
 
  Rental income on leasehold property: Rental income arising from 
  leasehold properties is recognised on a straight-line basis in 
  accordance with the lease terms. Rental payments are recognised 
  over the period to which they relate. 
 Core revenues are ongoing revenues including sales to the public 
  from corporate stores, sales of materials and services to sub-franchisees, 
  royalties received from sub-franchisees and rents received from 
  sub-franchisees. Other revenues are non-recurring transactions 
  such as the sale of stores, fittings and equipment to sub-franchisees. 
  Revenue recognised in the income statement is analysed as follows: 
 Revenue is divided into 'core revenues' and 
  'other revenues' as follows: 
                                                                    2018         2017 
                                                                     GBP          GBP 
------------------------------------------------------      ------------  ----------- 
 Core revenue                                                 12,325,147    9,663,088 
 Other revenue                                                    44,668      714,689 
                                                              12,369,815   10,377,777 
    ------------------------------------------------------  ------------  ----------- 
 
 Revenue is further analysed as follows: 
                                                                    2018         2017 
                                                                     GBP          GBP 
------------------------------------------------------      ------------  ----------- 
 Corporate store 
  sales                                                        8,326,906    5,798,649 
 Fixtures and equipment sales to sub-franchisees                  44,668      714,689 
 Royalties and other sales to sub-franchisees                  3,488,196    3,385,901 
 Rental income on leasehold property                             510,045      478,538 
 
                                                              12,369,815   10,377,777 
    ------------------------------------------------------  ------------  ----------- 
 
   3.   SEGMENTAL REPORTING 
 
 The Board monitors the performance of the corporate stores and 
  the commissary operations separately and therefore those are considered 
  to be the Group's two operating segments. Corporate store sales 
  comprise sales to the public. Commissary operations comprise sales 
  to sub-franchisees of food, services and fixtures and equipment. 
  Commissary operations also include the receipt of royalty income 
  from sub-franchisees. The Board monitors the performance of the 
  two segments based on their contribution towards Group EBITDA 
  - excluding non-cash items, non-recurring items and store pre-opening 
  expenses. In accordance with IFRS 8, the segmental analysis presented 
  reflects the information used by the Board. No separate balance 
  sheets are prepared for the two operating segments and therefore 
  no analysis of segment assets and liabilities is presented. 
 Operating Segment contribution 
                                                 2018          2018          2017          2017 
                                                  GBP           GBP           GBP           GBP 
-------------------------------------    ------------  ------------  ------------  ------------ 
                                            Corporate    Commissary     Corporate    Commissary 
                                               stores                      stores 
 Revenues from external customers           8,326,906     4,042,909     5,798,649     4,579,128 
 Direct Costs - corporate 
  stores                                  (7,706,068)                 (5,452,982) 
 Direct Costs - commissary (variable 
  cost only)                                            (3,316,049)                 (3,979,932) 
 Store EBITDA                                 620,838                     345,667 
 Commissary gross 
  profit                                                    726,860                     599,196 
 Total segment 
  profit                                                  1,347,698                     944,863 
 Unallocated expenses                                   (3,268,146)                 (2,729,540) 
---------------------------------------  ------------                ------------ 
 GROUP EBITDA - excluding non-cash items, 
  non-recurring items and store pre-opening 
  expenses                                              (1,920,448)                 (1,784,677) 
-----------------------------------------------------  ------------  ------------  ------------ 
 
 Commissary direct costs shown above do not include labour and 
  occupancy costs. These costs are shared across both segments as 
  the commissary supplies corporate stores as well as supplying 
  sub-franchisees. Corporate store direct costs include all costs 
  directly attributable to operating the stores. 
 
   4.   LOSS BEFORE TAXATION 
 
 This is stated after charging 
 
                                                                                        2018      2017 
                                                                                         GBP       GBP 
---------------------------------------------   ------------------------------    ----------  -------- 
 
 Auditors and their                             - audit of company and group 
  associates' remuneration                       financial statements                 36,767    37,445 
  - tax compliance 
  services                                                                             1,450     1,400 
                                                - remuneration 
 Directors' emoluments                           and fees                            295,818   325,966 
 Amortisation of intangible 
  fixed assets                                                                       136,734    86,057 
 Depreciation of property, plant 
  and equipment                                                                    1,025,406   570,885 
 Impairment of property, plant 
  and equipment                                                                      631,118         - 
                                                - land and 
 Operating lease rentals                         buildings                           874,494   616,415 
 
 and after crediting 
 Operating lease income from sub-franchisees                                         510,045   478,538 
 Foreign exchange gains 
  /(losses)                                                                          (6,513)   148,032 
 
   5.   OTHER NON-CASH AND NON-RECURRING ITEMS 
 
                                                                   2018        2017 
                                                                    GBP         GBP 
------------------------------------------------------      -----------  ---------- 
 
 Reversal of provision for additional 
  VAT payable                                                         -      50,532 
 VAT repayment received                                         378,427           - 
 Costs associated with VAT repayment claim                     (73,005)           - 
 Bad orders                                                    (42,011)    (38,060) 
 Exceptional sub-franchisee bad debt provision                (104,947)           - 
 Unrealised store projects                                     (20,162)    (21,947) 
 Other non-cash and non-recurring items                         (7,248)     (2,796) 
 
                                                                131,054    (12,271) 
    ------------------------------------------------------  -----------  ---------- 
 
 Non-recurring 
  Items 
 Non-recurring items include items which are not sufficiently 
  large to be classified as exceptional, but in the opinion of 
  the Directors, are not part of the underlying trading performance 
  of the Group. During the current year a VAT repayment of GBP378,427 
  was received following a claim submitted to the Polish VAT authorities. 
  In the prior year, the provision for additional VAT payable was 
  reversed following changes to a previous ruling by the Polish 
  VAT authorities. During the year a significant one-off bad debt 
  provision was recognised relating to an amount owed by a sub-franchisee. 
  The directors believe that this amount may be partly or wholly 
  recoverable but full provision has been made in the current year. 
 
   6.   TAXATION 
 
                                                                 2018          2017 
                                                                  GBP           GBP 
---------------------------------------------------      ------------  ------------ 
 Current tax                                                        -             - 
 
 Total tax charge in income 
  statement                                                         -             - 
----------------------------------------------------     ------------  ------------ 
 
 The tax on the Group's loss before tax differs from the theoretical 
  amount that would arise using the tax rate applicable to profits 
  of the consolidated entities as follows: 
 
                                                                 2018          2017 
                                                                  GBP           GBP 
---------------------------------------------------      ------------  ------------ 
 Loss before tax                                          (3,793,272)   (2,634,519) 
 
 Tax credit calculated at applicable rate 
  of 19%                                                    (720,722)     (500,559) 
 Income taxable but not recognised in 
  financial statements                                         88,861        13,444 
 Income not subject to tax                                   (91,395)      (24,137) 
 Expenses not deductible for tax purposes                   1,092,933        84,750 
 Tax losses for which no deferred income tax asset 
  was recognised                                            (369,677)       426,502 
 Total tax charge in income 
  statement                                                         -             - 
----------------------------------------------------     ------------  ------------ 
 

The Directors have reviewed the tax rates applicable in the different tax jurisdictions in which the Group operates. They have concluded that a tax rate of 19% represents the overall tax rate applicable to the Group.

   7.   LOSS PER SHARE 
 
 The loss per ordinary share has been calculated as follows: 
 
                         2018            2018            2017            2017 
                                          GBP                             GBP 
                     Weighted          Profit        Weighted          Profit 
                      average        / (loss)         average        / (loss) 
                       number           after          number           after 
                    of shares             tax       of shares             tax 
  -----------  --------------  --------------  --------------  -------------- 
   Basic          150,185,274     (3,793,272)     142,164,031     (2,634,519) 
   Diluted        150,185,274     (3,793,272)     142,164,031     (2,634,519) 
  -----------  --------------  --------------  --------------  -------------- 
 
 The weighted average number of shares for the year excludes those 
  shares in the Company held by the employee benefit trust. At 
  31st December 2018 the basic and diluted loss per share is the 
  same, as the vesting of JOSS, SIP or share option awards would 
  reduce the loss per share and is, therefore, anti-dilutive. 
 
   8.   INTANGIBLE ASSETS 
 
                                         Franchise 
                                              fees              Capitalised 
                                  and intellectual   Software          loan       Total 
                                          property 
                                            rights                 discount 
 Group                                         GBP        GBP           GBP         GBP 
-----------------------------    -----------------  ---------  ------------  ---------- 
 
 Cost: 
 At 31 December 
  2016                                     400,345    228,407       178,269     807,021 
 Foreign currency difference                38,202     81,912             -     120,114 
 Additions                                  26,039     23,833        67,281     117,153 
 At 31 December 
  2017                                     464,586    334,152       245,550   1,044,288 
 Foreign currency difference               (7,979)    (4,017)       (4,457)    (16,453) 
 Additions                                  93,468     32,835         2,987     129,290 
 Disposals                                       -   (21,528)             -    (21,528) 
 Transfers                                       -     75,115             -      75,115 
 At 31 December 
  2018                                     550,075    416,557       244,080   1,210,712 
-------------------------------  -----------------  ---------  ------------  ---------- 
 
 Amortisation 
 At 31 December 
  2016                                     197,788    161,244         5,225     364,257 
 Foreign currency difference                19,551     15,985             -      35,536 
 Reclassifications                               -          -                         - 
 Amortisation charged for 
  the year                                  33,548     28,733        23,776      86,057 
 Disposals                                       -          -                         - 
 Transfers                                       -          -                         - 
-----------------------------    -----------------  ---------                ---------- 
 At 31 December 
  2017                                     250,887    205,962        29,001     485,850 
 Foreign currency difference               (4,294)    (3,493)         (138)     (7,925) 
 Reclassifications                               -          -                         - 
 Amortisation charged for 
  the year                                  53,320     58,330        25,084     136,734 
 Disposals                                       -    (8,339)             -     (8,339) 
 Transfers                                       -          -                         - 
----------------------------- 
 At 31 December 
  2018                                     299,913    252,460        53,947     606,320 
-------------------------------  -----------------  ---------  ------------  ---------- 
 
 Net book value: 
 At 31 December 
  2018                                     250,162    164,097       190,133     604,392 
-------------------------------  -----------------  ---------  ------------  ---------- 
 At 31 December 
  2017                                     202,557     67,163       173,044     558,438 
 
   9.   PROPERTY PLANT AND EQUIPMENT 
 
                                               Fixtures         Assets 
                                               fittings 
                                  Leasehold         and          under 
                                   property   equipment   construction       Total 
 Group                                  GBP         GBP            GBP         GBP 
-----------------------------    ----------  ----------  -------------  ---------- 
 
 Cost: 
 At 31 December 
  2016                            1,782,197   2,157,981         57,838   3,998,016 
 Foreign currency difference        336,090     584,555      (491,241)     429,404 
 Additions                        2,074,716     440,698      1,616,339   4,131,753 
 Disposals                                -    (87,457)              -    (87,457) 
 Transfers                           55,487   1,041,695    (1,097,182)           - 
 At 31 December 
  2017                            4,248,490   4,137,472         85,754   8,471,716 
 Foreign currency difference       (72,520)    (71,948)        (1,850)   (146,318) 
 Additions                          888,497     520,025        255,268   1,663,790 
 Disposals                                -    (40,253)              -    (40,253) 
 Transfers                           53,332     182,354      (310,801)    (75,115) 
 At 31 December 
  2018                            5,117,799   4,727,650         28,371   9,873,820 
-------------------------------  ----------  ----------  -------------  ---------- 
 
 Depreciation: 
 
 At 31 December 
  2016                              424,352     807,916              -   1,232,268 
 Foreign currency difference         46,716     107,034              -     153,750 
 Depreciation charged for 
  the year                          217,535     353,350              -     570,885 
 Disposals                                -   (102,975)              -   (102,975) 
 At 31 December 
  2017                              688,603   1,165,325              -   1,853,928 
 Foreign currency difference        (7,522)    (17,930)              -    (25,452) 
 Depreciation charged for 
  the year                          417,434     607,972              -   1,025,406 
 Impairment                         552,910      78,208              -     631,118 
 Disposals                                -    (48,897)              -    (48,897) 
 At 31 December 
  2018                            1,651,425   1,784,678              -   3,436,103 
-------------------------------  ----------  ----------  -------------  ---------- 
 
 Net book value: 
 At 31 December 
  2018                            3,466,374   2,942,972         28,371   6,437,717 
-------------------------------  ----------  ----------  -------------  ---------- 
 At 31 December 
  2017                            3,559,887   2,972,147         85,754   6,617,788 
 
 The impairment charge of GBP631,118 relates to eight corporate 
  stores where performance has been below expectations and the 
  decision was taken to recognise a full impairment charge in respect 
  of the investment in those stores which cannot be re-deployed 
  elsewhere. A final decision on the future of these stores has 
  not yet been taken and therefore the final recoverable amount 
  is not yet known. The whole of the investment in these stores 
  which cannot be re-deployed has been impaired. 
 

10. SHARE CAPITAL

 
                                                                      2018            2017 
                                                                       GBP             GBP 
---------------------------------      --------------  ---------  --------  -------------- 
 Called up, allotted and 
  fully paid: 
                                      Ordinary shares of 0.5 
 152,822,131 (2017: 152,550,704)       pence each                  764,111         762,754 
-----------------------------------  ---------------------------  --------  -------------- 
 
 Movement in share capital during 
  the period 
                                                         Nominal 
                                               Number      value             Consideration 
                                                             GBP                       GBP 
---------------------------------      --------------  ---------  --------  -------------- 
 At 31 December 
  2016                                    136,915,112    684,576                29,608,034 
 
 Placing 06 June 
  2017                                     12,200,000     61,000                 5,246,000 
 Option exercises 
  2017                                      3,435,592     17,178                    17,178 
 
 At 31 December 
  2017                                    152,550,704    762,754                34,871,212 
 
 Management share awards 
  2018                                        271,427      1,357                     1,357 
 
 At 31 December 
  2018                                    152,822,131    764,111                34,872,569 
---------------------------------      --------------  ---------  --------  -------------- 
 
 The Company does not have an authorised 
  share capital. 
 
 
 DP Poland Employee Benefit Trust 
  ("EBT") 
 The trustee of the EBT holds 2,534,878 ordinary shares in the Company 
  for the purposes of satisfying outstanding and potential awards 
  under the Company's Joint Ownership Share Scheme, Share Option 
  Scheme and the Share Incentive Plans. The historic cost of these 
  shares was GBP56,859 with a net contribution of GBP6,115 made by 
  the JOSS award holders to acquire their joint interests. The shares 
  held by the EBT had a market value of GBP329,530 at 31 December 
  2018. 
 

11. ANNUAL GENERAL MEETING

The Annual General Meeting of DP Poland plc will be held at the Offices of Peel Hunt, 120 London Wall, London EC2Y 5ET on 3 May 2018 at 9.00 a.m.

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

FR BLGDXLGDBGCU

(END) Dow Jones Newswires

March 26, 2019 03:00 ET (07:00 GMT)

Dp Poland (LSE:DPP)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more Dp Poland Charts.
Dp Poland (LSE:DPP)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more Dp Poland Charts.