REG - DP Eurasia N.V - Trading Update

DP Eurasia NVAnnouncement

23/11/2022 07:00

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RNS Number : 2768H  DP Eurasia N.V  23 November 2022

   23 November 2022

 

DP Eurasia N.V.

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

Trading Update for the ten months ended 31 October 2022((1))

(millions of TRY, unless otherwise indicated)

                                             2022       2021       Change
 Number of stores                            845        806        39
 Group system sales (pre-IAS 29((1))) ((2))  2022       2021       Change  Change (after IAS 29)
 Turkey                                      2,309      1,384      66.8%   -3.3%
 Russia                                       893        478       86.9%   86.9%
 Azerbaijan                                   53         25        114.7%  25.7%
 Georgia                                     28         10         180.0%  64.4%
 COFFY                                       37         4          845.1%  435.0%
 Total                                       3,320      1,901      74.6%   11.6%

 

 

 

 Group system sales LfL growth((3))             (pre-IAS 29)                                   (after IAS 29)
                                     2022               2021                                   2022                2021
 Group((4))                          42.9%              42.1%                                  -7.7%               25.5%
 Turkey                              58.4%              52.7%                                  -8.2%               30.0%
 Russia (based on RUB)               -7.1%              12.4%                                  -7.1%               12.4%
 Azerbaijan (based on AZN)           -1.3%              8.6%                                   -1.3%               8.6%
 Georgia (based on GEL)              11.2%              58.4%                                  11.2%               58.4%

 

 

 

Highlights

·     Group system sales increased by 11.6% (pre-IAS 29: 74.6%),
reflecting our ongoing focus on strategic pricing, product innovation and the
continued development of our digital proposition.

·     This good performance has been delivered against a very strong
prior year comparative (pre-IAS 29: 51.8%) and while operating in a sustained
inflationary environment.

·     Adjusting to exclude the benefit of last year's VAT reduction
(which ended in September 2021), our LfL performance of -3% broadly caught up
with the pace of inflation.

·     Online delivery system sales increased to 82.3% (October 2021:
76.6%) as a share of delivery system sales ((6)), reflecting DP Eurasia's
robust positioning for the online ordering channel.

 

 

·     Group online system sales ((5)) grew by 14.2% (pre-IAS 29:
75.6%).

o  Turkish online system sales growth was flat (pre-IAS 29: 70.7%).

o  Russian online system sales growth was 86.6% (-14.2% based on RUB).

·     Turkish net new store openings of 31 for Domino's Pizza reflects
strong demand and maintained network expansion momentum, building on the
record year in 2021.

·     Our COFFY network has this year increased by 14 stores to reach 22,
with solid franchisee demand likely to carry the year-end number slightly
above 30, which is top end of 2022 guidance.

·     Liquidity position as of 31 October 2022: TRY 104 million cash and
an undrawn bank facility of TRY 185 million.

 

 

Outlook

·     The Group continues to trade in line with its formal guidance (as
set out below) for FY2022, which was reinstated by management earlier this
year.

·     Guidance for store openings, LfL growth rates and capital
expenditure for 2022 remains unchanged and 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 IAS 29 accounting

 

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

 

"Trading has continued with solid momentum, and we remain dedicated to our
clear and targeted action plan that focuses on three areas - strategic pricing
& product innovation, continued digital innovation, and operational
efficiencies for sustainable profitability. This approach enables us to combat
the high levels of volatility in the regions in which we operate and, as Q4
progresses, we are seeing the impact of our efforts becoming increasingly
visible in terms of volume generation and customer acquisition.

"Our Group system sales grew by 11.6% by the end of October with inflation in
Turkey stripped out.  Our like for like performance broadly caught up with
the rapid pace of inflation when adjusted for last year's VAT advantage thanks
to our diligent price adjustments.

"In Russia, we continue to operate in a difficult geo-political and economic
environment. As a result, our LfL performance by the end of October was
negative. In Russia, we remain focused on store network optimization and
efficiency. This business will continue to operate in a self-sustained manner.

"Our focus on product innovation remains integral and allows us to present a
broad choice for customers who are seeking 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 early October, while we are
also introducing a 'snacks from the oven' take-away range early next year that
will complete our suite of value options.

"We retain a fundamental commitment to ensuring franchisees remain profitable.
As a result, franchisee demand is very strong and our Domino's Pizza store
count in Turkey has increased by 31 year-to-date. Given our strong pipeline
and sustained franchisee interest, we remain confident that 2022 will be
another solid year for Domino's Pizza network expansion.

"Our own brand COFFY continues to strengthen its presence with accelerated
expansion. With multiple store concepts to fit in with local circumstances,
our COFFY network reached 22 stores in four cities by the end of October.
Franchisee demand stands very strong owing to COFFY's proven sales
performance, and this is likely to carry the total store count above 30 by the
end of the year. 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: 76192848#

                   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 823 stores (637 in Turkey, 171 in Russia, 10 in
Azerbaijan and 5 in Georgia as of 31 October 2022) and operates through its
owned corporate stores (20%) and franchised stores (80%). In addition to its
pizza delivery business, the Group also has its own coffee brand, COFFY, which
trades from 22 stores at period-end, 15 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 October
                    2022                               2021
                    Corporate  Franchised  Total       Corporate  Franchised  Total
 Turkey (Domino's)  93         544         637         104        491         595
 Russia             68         103         171         115        77          192
 Azerbaijan         -          10          10          -          9           9
 Georgia            -          5           5           -          4           4
 COFFY              7          15          22          5          1           6
 Total              168        677         845         224        582         806

 

Delivery channel mix and online LfL growth

The following table shows the Group's delivery system sales((6)), 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
October 2022 and 2021:

                                       For the period ended 31 October
                                       2022                    2021
                                       Turkey  Russia  Total   Turkey  Russia  Total
 Store                                 18.8%   6.2%    17.2%   24.2%   7.3%    23.1%
 Online       Group's online platform  24.9%   71.6%   36.2%   25.4%   68.7%   31.2%
              Aggregator               55.7%   22.2%   46.1%   50.0%   24.0%   45.4%
              Total online             80.6%   93.8%   82.3%   75.4%   92.7%   76.6%
 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 ((3)), broken down by
the Group's two largest countries in which it operates, for the periods ended
31 October 2022 and 2021:

 

 Group online system sales LfL growth((3))             (pre-IAS 29)                                   (after IAS 29)
                                            2022               2021                                   2022                2021
 Group((4))                                 47.4%              62.4%                                  -5.5%               42.7%
 Turkey                                     63.3%              78.6%                                  -5.0%               52.1%
 Russia (based on RUB)                      -7.2%              15.0%                                  -7.2%               15.0%

 

 

Liquidity

The Group had TRY 104 million cash and an undrawn bank facility of TRY 185
million as of 31 October 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)) 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.

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

((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.

 

 

Appendices

Exchange Rates

           For the period ended 31 October
           2022                                 2021
 Currency  Period End  Period Average           Period End  Period Average
 EUR/TRY   18.684      16.965                   10.998      9.771
 RUB/TRY   0.301       0.240                    0.135       0.111
 EUR/RUB   61.133      73.911                   82.290      80.001

 

Delivery - Take away / Eat in mix

                     For the period ended 31 October
                     2022                    2021
                     Turkey  Russia  Total   Turkey  Russia  Total
 Delivery            73.9%   74.9%   73.9%   79.0%   77.0%   78.5%
 Take away / Eat in  26.1%   25.1%   26.1%   21.0%   23.0%   21.5%
 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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