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)
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