REG - DP Eurasia N.V - FY22 Trading Update

DP Eurasia NVAnnouncement

30/01/2023 07:00

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RNS Number : 1761O  DP Eurasia N.V  30 January 2023

                30 January 2023

 

DP Eurasia N.V.

("DP Eurasia" or the "Company", and together with its subsidiaries, the
"Group")

Trading Update for the Year Ended 31 December 2022((1))

(millions of TRY, unless otherwise indicated)

                                             2022           2021           Change
 Number of stores                            859            817            42
 Group system sales (pre-IAS 29((2))) ((3))  2022           2021           Change  Change (after IAS 29)
 Turkey                                       2,933.4        1,704.2       72.1%   -0.7%
 Azerbaijan                                   67.4           32.1          109.8%  22.1%
 Georgia                                      36.5           13.8          165.1%  55.4%
 COFFY                                        53.6           5.8           828.8%  429.5%
 Total continuing operations                 3,090.9        1,755.9        76.0%   1.5%
 Russia (discontinued operations)             1,119.9        629.4         77.9%   77.9%
 Grand Total                                  4,210.8        2,385.3       76.5%   13.1%

 

 

 

 System sales LfL growth((4))                               (pre-IAS 29)                                   (after IAS 29)
                                                 2022               2021               2022                         2021
 Turkey                                          63.5%              50.4%              -5.6%                        25.9%
 Azerbaijan (based on AZN)                       8.0%               7.1%               7.9%                         5.1%
 Georgia (based on GEL)                          12.6%              67.2%              12.8%                        31.4%
 Total continuing operations                     62.2%              49.9%              -5.3%                        26.0%
 Russia (discontinued operations, based on RUB)  -9.8%              9.6%               -9.8%                        9.6%
 DPEU Group((5))                                 46.2%              39.8%              -6.3%                        21.9%

 

 

Highlights

·     Group system sales increased by 13.1% (pre-IAS 29: 76.5%),
reflecting our ongoing focus on network expansion, strategic pricing, and
product innovation, as well as excellent growth and demand from our COFFY
proposition.

·     Good performance in Turkey was delivered against a strong prior
year comparative (pre-IAS 29: 59.1%) and while operating in a sustained
inflationary environment. Our Turkish LfL performance caught up with inflation
when adjusted for last year's VAT advantage.

·     Online delivery system sales increased to 82.7% (2021: 77.4%) as a
share of delivery system sales((6)), reflecting our robust positioning for the
online ordering channel.

·     Group online system sales((5)) grew by 15.3% (pre-IAS 29: 76.4%).

o  Turkish online system sales growth was 1.6% (pre-IAS 29: 75.7%).

o  Russian online system sales growth was 77.2% (-15.1% based on RUB).

·     Turkish net new store openings of 48 for Domino's Pizza, higher
than previously guided range of 30-40 for 2022, reflects strong demand and
maintained network expansion momentum, building on the record year in 2021.
Additionally, the Group opened two new stores in Georgia, bringing the total
number of stores to six in the country.

·     The COFFY network this year increased by 21 stores to reach 29 with
solid ongoing franchisee demand.

·     The Group continues to evaluate its presence in Russia and, as
previously announced is considering various options which may include a
divestment of its Russian operations. Whilst work on a potential transaction
is ongoing, there can be no certainty as to the outcome. In the meantime, the
Group continues to limit investment in Russia and remains focused on
optimising the existing store coverage. Following the closure of 29 stores
over the course of 2022, the number of Russian stores stood at 159 as of 31
December 2022.

·     Liquidity position as of 31 December 2022: TRY 368 million cash
(TRY 9 million of which relates to the Russian business) and an undrawn bank
facility of TRY 225 million.

·     The Group plans to share formal guidance for the 2023 financial
year when it publishes its 2022 preliminary results in April.

 

Performance against formal guidance - 2022:

 

                                      Turkey guidance   Actual vs. guidance  Russia guidance    Actual vs. guidance
 LfL growth rate                      55 - 65%*         IN LINE              0% (based on RUB)  WORSE
 Domino's Pizza net store openings    30 - 40           BETTER               0                  WORSE
 COFFY net store openings             20 - 30           IN LINE              -                  -

 

   * excl. impact of IAS 29 accounting

 

 

Commenting on the update, Chief Executive Officer, Aslan Saranga said:

 

"Trading momentum sustained into the final months of the year, as we continued
to implement our targeted action plan in reaction to and in order to overcome
macro factors largely outside of our control. As a result, we anticipate
adjusted EBITDA((8)) for 2022 will come ahead of current market expectations.

"We have a clear and targeted strategy that has focused on three areas -
strategic pricing & product innovation, continued digital innovation, and
operational efficiencies to generate sustainable profitability. This approach
has enabled us to combat the high levels of volatility in the regions in which
we operate, and the impact of our efforts is visible in terms of volume
generation and customer acquisition.

"Our focus on product innovation is integral, allowing us to present a broad
choice to customers who increasingly seek value and affordability amid the
inflationary environment. One of our new products, Pizzetta, which costs circa
USD$1, has become very successful since its launch in Q4 2022. We also
introduced a 'snacks from the oven' range, completing our suite of value
options and highlighting our drive for sustained innovation.

"In 2022, we continued improving the online proportion of our sales, and
digital innovation remains an important enabler for us to enhance the customer
experience and further solidify our robust positioning for the online ordering
channel.

"We retain a fundamental commitment to ensuring franchisees remain profitable.
As a result, franchisee demand was very strong in 2022 and our Domino's Pizza
network in Turkey grew by net 48 stores. Given our strong pipeline and
sustained franchisee interest, we remain confident that 2023 will be another
solid year for network expansion.

"2022 was the year that our own brand, COFFY, strengthened its presence in the
Turkish market with an accelerated expansion programme. Having developed
multiple store concepts to fit in with local circumstances, our COFFY network
reached 29 stores in five cities at year end. Franchisee demand currently
stands very strong owing to COFFY's proven sales performance. This demand,
alongside our ambitious targets for 2023, will enable us to add further scale
to our coffee business."

Enquiries

 DP Eurasia N.V.
 İlknur Kocaer, CFA - Investor Relations Director   +90 212 280 9636

 Buchanan (Financial Communications)
 Richard Oldworth / Toto Berger / Verity Parker     +44 20 7466 5000

                                                    dp@buchanan.uk.com (mailto:dp@buchanan.uk.com)

 

 

A conference call for investors and analysts will be held at 9.00am this
morning, which will be accessible using the following details:

 

 Conference call:  UK Toll: +44 3333000804

                   UK Toll-Free: 08003589473

                   Pin: 28610068#

                   URL for international dial in numbers:

                   https://events-ftp.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf
                   (https://events-ftp.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf)

 

For further details, please contact Buchanan on +44 20 7466 5000
/ dp@buchanan.uk.com (mailto:dp@buchanan.uk.com) .

 

 

Notes to Editors

 

DP Eurasia N.V. is the exclusive master franchisee of the Domino's Pizza brand
in Turkey, Russia, Azerbaijan, and Georgia. The Company was admitted to the
premium listing segment of the Official List of the Financial Conduct
Authority and to trading on the main market for listed securities of the
London Stock Exchange plc on 3 July 2017. The Company (together with its
subsidiaries, the "Group") is the largest pizza delivery company in Turkey and
the third largest in Russia. The Group offers pizza delivery and takeaway/
eat-in facilities at its 830 stores (655 in Turkey, 159 in Russia, 10 in
Azerbaijan and 6 in Georgia as of 31 December 2022) and operates through its
owned corporate stores (18%) and franchised stores (82%). In addition to its
pizza delivery business, the Group also has its own coffee brand, COFFY, which
trades from 29 stores at period-end, 19 of which are franchised. The Group
maintains a strategic balance between corporate and franchised stores,
establishing networks of corporate stores in its most densely populated areas
to provide a development platform upon which to promote best practice and
maximise profitability. The Group has adapted the Domino's Pizza globally
proven business model to its local markets.

Performance Review

 

 Store count        As of 31 December
                    2022                               2021
                    Corporate  Franchised  Total       Corporate  Franchised  Total
 Turkey (Domino's)  89         566         655         100        507         607
 Azerbaijan         -          10          10          -          10          10
 Georgia            -          6           6           -          4           4
 COFFY              10         19          29          5          3           8
 Total              99         601         700         105        524         629
 Russia             63         96          159         94         94          188
 Grand Total        162        697         859         199        618         817

 

Delivery channel mix and online LfL growth

The following table shows the Group's delivery system sales((7)), broken down
by ordering channel and by the Group's two largest countries in which it
operates, as a percentage of delivery system sales for the periods ended 31
December 2022 and 2021:

                                       For the period ended 31 December
                                       2022                    2021
                                       Turkey  Russia  Total   Turkey  Russia  Total
 Store                                 18.2%   6.1%    16.9%   23.3%   7.1%    22.3%
 Online       Group's online platform  24.8%   71.0%   35.6%   25.2%   69.1%   31.4%
              Aggregator               56.4%   23.0%   47.0%   51.1%   23.8%   46.0%
              Total online             81.2%   93.9%   82.7%   76.3%   92.9%   77.4%
 Call centre                           0.6%    -       0.4%    0.4%    -       0.3%
 Total                                 100%    100%    100%    100%    100%    100%

 

 

 

 

 

 

 

The following table shows the Group's online LfL growth ((4)), broken down by
the Group's two largest countries in which it operates, for the periods ended
31 December 2022 and 2021:

 Group online system sales LfL growth             (pre-IAS 29)               (after IAS 29)
                                       2022               2021               2022      2021
 Group((5))                            50.4%              57.8%              -4.3%     36.8%
 Turkey                                67.9%              73.3%              -2.8%     45.2%
 Russia (based on RUB)                 -9.5%              12.4%              -9.5%     12.4%

 

 

 

 

 

Liquidity

The Group had TRY 368 million cash (TRY 9 million of which relates to the
Russian business) and an undrawn bank facility of TRY 225 million as of 31
December 2022.

The Group has sufficient liquidity position to enable it to pre-pay its bank
borrowings in Russia, despite the recent devaluation of TRY, if required. The
Group obtained a waiver (related with net debt/EBITDA ratio) from Sberbank
with respect to its covenants for all four quarters of 2022 and is in
negotiations to reset the covenants or repay the remaining loan. The principal
outstanding amount under the Sberbank loan currently amounts to RUB 0.7
billion, of which RUB 0.02 billion is supported by a cash collateral deposit.

Notes

((1)) COFFY numbers are included in all Turkey and Group figures, unless
presented separately. Like-for-like figures exclude COFFY. These numbers are
not audited.

((2)) IAS 29 'Financial Reporting in Hyperinflationary Economies' is currently
applicable in Turkey. Company's interim results for the period ending 30 June
2022, published on 30 September, was adjusted accordingly.

((3)) System sales are sales generated by the Group's corporate and franchised
stores to external customers and do not represent revenue of the Group.

((4)) Like-for-like growth is a comparison of sales between two periods that
compares system sales of existing system stores. The Group's system stores
that are included in like-for-like system sales comparisons are those the
Group considers to be mature operations. The Group considers mature stores to
be those stores that have operated for at least 52 weeks preceding the
beginning of the first month of the period used in the like-for-like
comparisons for a certain reporting period, assuming the relevant system store
has not subsequently closed or been "split" (which involves the Group opening
an additional store within the same map of an existing store or in an
overlapping area). This is a non-IFRS measure and non-IFRS measures are not
audited.

((5)) Group like-for-like growth is a weighted average of the country
like-for-like growths based on store numbers as described in Note (4). This is
a non-IFRS measure and non-IFRS measures are not audited.

((6)) Online system sales are system sales of the Group generated through its
online ordering channel.

((7)) Delivery system sales are system sales of the Group generated through
the Group's delivery distribution channel.

((8)) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses
are not defined by IFRS. These items are determined by the principles defined
by the Group management and comprise income/expenses which are assumed by the
Group management to not be part of the normal course of business and are
non-trading items. These items which are not defined by IFRS are disclosed by
the Group management separately for a better understanding and measurement of
the sustainable performance of the Group.

Appendices

Exchange Rates

           For the period ended 31 December
           2022                                 2021
 Currency  Period End  Period Average           Period End  Period Average
 EUR/TRY   19.882      17.356                   14.682      10.423
 RUB/TRY   0.258       0.249                    0.173       0.119
 EUR/RUB   75.655      72.151                   84.070      87.188

 

Delivery - Take away / Eat in mix

                     For the period ended 31 December
                     2022                    2021
                     Turkey  Russia  Total   Turkey  Russia  Total
 Delivery            74.1%   75.2%   74.1%   78.6%   77.8%   78.3%
 Take away / Eat in  25.9%   24.8%   25.9%   21.4%   22.2%   21.7%
 Total               100%    100%    100%    100%    100%    100%

 

Forward looking statements

This press release includes forward-looking statements which involve known and
unknown risks and uncertainties, many of which are beyond the Group's control
and all of which are based on the Directors' current beliefs and expectations
about future events. They appear in a number of places throughout this press
release and include all matters that are not historical facts and include
predictions, statements regarding the intentions, beliefs or current
expectations of the Directors or the Group concerning, among other things, the
results of operations, financial condition, prospects, growth and strategies
of the Group and the industry in which it operates.

 

No assurance can be given that such future results will be achieved; actual
events or results may differ materially as a result of risks and uncertainties
facing the Group. Such risks and uncertainties could cause actual results to
vary materially from the future results indicated, expressed, or implied in
such forward-looking statements.

 

Forward-looking statements contained in this press release speak only as of
the date of this press release. The Company and the Directors expressly
disclaim any obligation or undertaking to update these forward-looking
statements contained in this press release to reflect any change in their
expectations or any change in events, conditions, or circumstances on which
such statements are based

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