REG - DP Eurasia N.V - Trading Update

DP Eurasia NVAnnouncement

21/07/2022 07:00

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RNS Number : 2133T  DP Eurasia N.V  21 July 2022

 For Immediate Release  21 July 2022

 

DP Eurasia N.V.

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

Trading Update for the six months ended 30 June 2022

Strong trading momentum maintained & FY 2022 guidance reinstated

                           For the period ended 30 June


                           (excl. impact of hyperinflationary accounting ((1)) )

                           2022                                      2021                 Change
                           (in millions of TRY, unless otherwise indicated)

 Number of stores ((2))    827                                       789                  38

 Group system sales ((3))
 Turkey                     1,201.0                                   755.7               58.9%
 Russia                     492.7                                     278.6               76.8%
 Azerbaijan & Georgia       43.0                                      19.4                121.6%
 Total                      1,736.7                                   1,053.7             64.8%

 Group system sales LfL growth((4)) (excl. impact of hyperinflationary
 accounting ((1)))
 Group((5))                38.6%                                     52.9%
 Turkey                    51.0%                                     64.9%
 Russia (based on RUB)     -2.6%                                     18.2%

 

Highlights

·     Strong growth achieved at the Group level while set against very
strong comparatives, with increased visibility enabling guidance to be
re-instated for the full year ending 31 December 2022.

·   Group system sales increased 64.8% with a like-for-like ("LfL") growth
of 38.6%, mainly driven by price adjustments.

·     Adjusting for inflation and last year's VAT reduction of 7ppts to
1% (which lasted until end of July), LfL growth in Turkey would be flat in 1H
2022 with a low single digit growth in volumes.

·     Group online system sales ((6)) growth of 69.7%

o  Turkish online system sales growth of 66%

o  Russian online system sales growth of 77.5% (-6.8% based on RUB)

·     Online delivery system sales further increased to 83.2% (June 2021:
77.5%) as a share of delivery system sales ((7)), reflecting DP Eurasia's
robust positioning for the online ordering channel.

·   21 net store openings in Turkey during the first half of the year
maintains our momentum and is on top of record level of openings in 2021.

·   Good liquidity position at Period-end with TRY 262.2 million cash and an
undrawn bank facility of TRY 107 million.

·   The new COFFY concept has performed very well with robust volume growth
and accelerating expansion in store network. Having opened seven new stores in
the first half of the year, COFFY traded from 15 stores at period-end, 10 of
which are franchised.

·   Following the appointment of independent non-executive director (INED),
Mr Burak Ertas, at the Annual General Meeting (AGM) in June 2022, an
additional INED will be appointed at the Extraordinary General Meeting (EGM)
which will be held in September 2022.

 

Outlook

·     The Group is mindful of operating in a volatile environment with
the potential for further macro-economic and geopolitical challenges, but as a
result of increased full year visibility management is reinstating guidance
for 2022.

·     The strong store openings momentum in Turkey is anticipated to
continue in the second half, driven by solid franchisee demand.

·     The Group continues to limit investment into its Russian operations
given the sustained conflict in the region and is focused on optimising its
existing store network. Management is monitoring the situation in the region
closely.

·     COFFY remains in the early stages of its development, having
launched in 2021, but management believes it represents an outstanding growth
opportunity. More store openings are expected in the second half

·     Guidance for store openings, LfL growth rates and capital
expenditure for 2022 is as follows:

 

                                      Turkey                                  Russia
 LfL growth rate                      55 - 65%*                                0% (based on RUB)
 Domino's Pizza net store openings    30 - 40                                 0
 COFFY net store openings             20 - 30                                 -
 Capital expenditure                             TRY 90 million*                           RUB 190 million

 

                  * excl. impact of hyperinflationary
accounting ((1))

 

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

 

"In first half of 2022, we continued our strong business momentum despite the
unprecedented challenges in the regions we operate. This was thanks to our
experienced team as we navigated the operating environment very carefully.
Even in these difficult times, with our innovative and customer-centric
mindset, we managed to grow in a healthy manner. Group system sales grew by
65% with a 39% LfL performance versus a year ago.

"System sales in Turkey grew by 59%, corresponding to 51% LfL growth. This was
achieved against a strong comparative period of 72% system sales growth and
65% LfL growth. In the first half 2022, with our diligent price adjustments
and sustained volume performance, we broadly caught up with the rapid pace of
inflation. While increasing prices, we remain committed to providing the best
value for money proposition and ensuring our franchisees remain profitable. We
believe that we are well positioned to succeed in this environment and deliver
long-term sustainable growth.

"Our online channel continues to be the main driver behind our solid growth
rates.  In Turkey, LfL growth for online system sales was 59.4% (on top of an
almost 100% increase last year) and the share of online sales in the Turkish
delivery system reached 81.2%. This corresponded to a near seven percentage
point increase over the last twelve months.

"In Russia, we faced into a strong comparable period while operating in a
difficult geo-political and economic environment. As a result, we had a
negative LfL by the end of first half. The online system sales share increased
to 93.5% delivering around one and a half percentage points of increase. As
previously announced, the Group continues to limit investment into the
territory and is focused on optimising the existing store coverage in Russia,
resulting in the closure of four stores during the first half of the year. We
continue to monitor the situation in the region closely while the safety and
welfare of all the Group's employees and customers remains our primary
priority.

"The strong performance in Turkey continues to generate a very robust
franchisee demand.  We opened 21 net stores in Turkey during the first half
of the year. Given our strong pipeline, we remain confident that 2022 will be
another solid year for store growth.

"Our new and own-branded COFFY concept has performed extremely well. We
achieved robust volume expansion also supported by the enriched product range,
which is well received by the Turkish public. Our network reached 15 by the
end of June with the addition of new store concepts that serve different
consumer profiles. I am personally very excited for the future growth
prospects for COFFY and believe it has the ability to make a considerable
contribution to our investment story in years to come."

"Whilst the Board is conscious of the ongoing uncertainty, current trends
suggest that our adjusted EBITDA((8)) for 2022 is likely to be above the
current market expectations."

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018.

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:  Dial-in: +44 (0)330 165 3641

                   PIN code: 212745

                   For international dial-in numbers or any further details, please contact
                   Buchanan on +44 20 7466 5000 /  dp@buchanan.uk.com
                   (mailto:dp@buchanan.uk.com) .

 

 

A recording of the conference call will subsequently be available at
www.dpeurasia.com (http://www.dpeurasia.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 827 stores (628 in Turkey, 184 in Russia, 10 in
Azerbaijan and five in Georgia as of 30 June 2022) and operates through its
owned corporate stores (22%) and franchised stores (78%). 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 at 30 June
              2022                              2021
              Corporate  Franchised  Total      Corporate  Franchised  Total
 Turkey       94         534         628        103        481         584
 Russia       92         92          184        116        76          192
 Azerbaijan   -          10          10         -          9           9
 Georgia      -          5           5          -          4           4
 Total        186        641         827        218        571         789

 

Delivery channel mix and online LfL growth

The following table shows the Group's delivery system sales(( 8)), 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 30
June 2022 and 2021:

                                       For the period ended 30 June
                                       2022                   2021
                                       Turkey  Russia  Total  Turkey  Russia  Total
 Store                                 18.3%   6.5%    16.4%  25.6%   7.7%    22.2%
 Online       Group's online platform  25.1%   72.2%   38.2%  25.9%   69.5%   36.5%
              Aggregator               56.1%   21.3%   45.0%  48.1%   22.9%   41.0%
              Total online             81.2%   93.5%   83.2%  74.0%   92.3%   77.5%
 Call centre                           0.5%    -       0.4%   0.4%    -       0.3%
 Total                                 100%    100%    100%   100%    100%    100%

 

The following table shows the Group's online LfL growth ((2)), broken down by
the Group's two largest countries in which it operates, for the periods ended
30 June 2022 and 2021:

 

                                            For the period ended 30 June

                                            (excl. impact of hyperinflationary accounting ((1)))
                                            2022                            2021
 Group online system sales LfL growth((4))
 Group((5))                                 45.1%           77.6%
 Turkey                                     59.4%           98.0%
 Russia (based on RUB)                      -2.5%           19.2%

 

 

Liquidity

The Group continues to have a strong liquidity position with TRY 262.2 million
of cash and access to an additional banking facility of TRY 107 million.

The Group's sufficient liquidity position enables it to pre-pay its bank
borrowings in Russia, despite the recent devaluation of TRY, if required. The
Group obtained a waiver 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.

Additional disclosure for the period from 1 January 2022 to 31 March 2022

Jubilant Foodworks Limited, a significant shareholder in DPEU holding
approximately 44% of the Company's ordinary share capital, has certain
regulatory disclosure requirements regarding its investment in DPEU.  In
connection with this, going forward DPEU will disclose on a quarterly basis
profit after tax and other comprehensive income.

For the period from 1 January 2022 to 31 March 2022, DPEU recorded unaudited
loss after tax of TRY 29.7 million and unaudited other comprehensive income of
TRY 4.2 million.

Notes

((1)) IAS 29 'Financial Reporting in Hyperinflationary Economies' is currently
applicable in Turkey and the Company's interim results for the period ending
30 June 2022, expected to be published in September 2022, will be adjusted
accordingly. The figures disclosed in this announcement of 21 July 2022 are
unaudited and are not inflation adjusted unless stated otherwise.

((2)) Excluding Coffy stores

((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).

((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).

((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 30 June
           2022                                2021
 Currency  Period End  Period Average          Period End  Period Average
 EUR/TRY   17.522      16.196                  10.365      9.485
 RUB/TRY   0.321       0.200                   0.119       0.105
 EUR/RUB   53.858      83.520                  86.203      89.547

 

Delivery - Take away / Eat in mix

                     For the period ended 30 June
                     2022                   2021
                     Turkey  Russia  Total  Turkey  Russia  Total
 Delivery            75.7%   75.9%   75.4%  83.2%   77.2%   81.4%
 Take away / Eat in  24.3%   24.1%   24.6%  16.8%   22.8%   18.6%
 Total((2))          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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