REG - DP Eurasia N.V - Trading Update

DP Eurasia NVAnnouncement

31/05/2023 07:00

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RNS Number : 0834B  DP Eurasia N.V  31 May 2023

   31 May 2023

 

DP Eurasia N.V.

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

Trading Update for the four months ended 30 April 2023 (the "Period") ((1)
(2))

(millions of TRY, unless otherwise indicated)

                                          For the period ended 30 April
                                          2023             2022             Change
 Number of stores                         856              828              28
 Turkey (Domino's)                          658*           617              41
 Turkey (COFFY)                           40               12               28
 Azerbaijan                               10               10               -
 Georgia                                  6                5                1
 Russia                                   142              184              -42
 Number of stores (excluding Russia)      714              644              70
 Group system sales (after IAS 29) ((3))  2023             2022             Change  Change

                                                                                    (pre-IAS 29)
 Turkey                                    1,385.5          1,148.0         20.7%   83.9%
 Azerbaijan                                25.6             28.1            -8.8%   38.5%
 Georgia                                   18.9             13.2            43.2%   117.4%
 COFFY                                    50.1             10.5             378.4%  612.5%
 Total continuing operations              1,480.2          1,199.8          23.4%   87.9%
 Russia (discontinued operations)          291.1            283.0           2.8%    2.8%
 Grand Total                              1,771.2           1,482.8         19.5%   64.8%

 

 

 

 System sales LfL growth((4))                               (after IAS 29)                                   (pre-IAS 29)
                                                 2023                2022                2023                        2022
 Turkey                                          17.5%               -6.6%               78.9%                       47.6%
 Azerbaijan (based on AZN)                       3.2%                -3.5%               3.2%                        -3.5%
 Georgia (based on GEL)                          5.0%                45.9%               5.0%                        45.9%
 Total continuing operations                     17.1%               -6.2%               76.9%                       46.8%
 Russia (discontinued operations, based on RUB)  -23.9%              -1.5%               -23.9%                      -1.5%

 

 

*Including temporarily closed 10 stores due to earthquake

 

Highlights

·     Strong Period with Group system sales for continuing operations up
23.4% (pre-IAS 29: 87.9%) or 17.1% on a LfL basis.

·     Growth reflects ongoing focus on network expansion, strategic
pricing, product and service innovation, and sustained demand for COFFY.

·     17.5% LfL growth in Turkey achieved amid sustained inflationary
environment. Swift reaction to devastating earthquake in February means its
impact not expected to be material to 2023.

·     Of the 12 stores not operational because of the earthquake as
reported within our Preliminary Results announcement, two are up and running.
We have been working on several options for the temporarily closed 10 stores,
including moving some to other cities and opening prefabricated stores in the
affected regions.

·     Azerbaijan and Georgian operations delivered a positive LfL
performance in local currencies with growth of 3.2% and 5.0% respectively.

·     Online delivery system sales in Turkey increased to 83.3% (2022:
81.2%) as a share of delivery system sales((6)), reflecting our robust
positioning for the online ordering channel. Turkish online system sales
growth was a strong 18.2% (pre-IAS 29: 80.1%).

·     New store opening momentum was maintained across the Group.

o  41 Domino's Pizza net new store openings in Turkey year-on-year,
reflecting strong demand profile.

o  One new store in Georgia increases the total number in the country to six.

o  COFFY network increased by 28 stores year-on-year to reach 40. Expect new
COFFY store openings to accelerate during the rest of the year.

·     COFFY delivered TRY 50.1 million to Group system sales, up 378.4%,
and continues to represent an excellent growth opportunity.

·     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. Total number of stores stood at 142 at
Period-end, compared to 184 year-on-year. All corporate stores were franchised
by the end of May as a result of the optimisation process, while the total
store count in Russia remains unchanged from Period-end. Cash proceeds from
the conversion of corporate stores to franchised stores have been retained
within the Russian business to maintain the flexibility whilst the Group
continues to progress a potential exit from the country.

·     Liquidity position as of 30 April 2023: TRY 293 million cash and an
undrawn bank facility of TRY 290 million.

·     Guidance is being maintained, though we are mindful of sustained
macro-economic volatility and inflation. Continue to believe that inflation
can be appropriately managed, and management has an excellent track record of
mitigating its impact, but the risk it poses to overall growth levels remains.

·     Full year guidance is as follows:

 

 LfL growth rate                      High single digit

                                      (pre IAS 29: 60-70%)
 Domino's Pizza net store openings    35 - 40
 COFFY net store openings             50 - 60
 Capital expenditure                  TRY 160 millon

 

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

 

"We have started the year well and successfully implemented our targeted
action plan despite the ongoing macro challenges. Management is extremely
experienced in navigating volatility, and Group system sales remained strong
overall with LfL growth.

 

"The impact of the earthquake in February was devastating, and our thoughts
and condolences remain with all of those who have been impacted. The Board is
proud of the Group's rapid reaction to support affected colleagues and restore
operations where possible. We continue to stand in solidarity with our
employees, business partners and the wider community.

 

"Since the beginning of 2022, we have implemented and operated a targeted
strategy that focuses on three areas - strategic pricing and 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 continues to be visible through volume generation and customer
acquisition.

"Our focus on product innovation remains integral. We continue to broaden our
entry price product range and launched a new mushroom pizza in January which
has already reached good volumes. Following the successful Pizzetta launch
last year, we added new varieties to further enhance the potential of this
product line. In addition, our new 'snacks from the oven' range was launched
in February presenting a broad choice of attractively priced products to
customers who increasingly seek value and affordability. The latest addition
to our product range has been Pizza XL which will contribute to average ticket
price and size mix.

"We continue to improve 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 for both Domino's Pizza and COFFY continues to
be very healthy. We have a strong pipeline and remain confident that 2023 will
be another solid year for network expansion.

"Consumer demand for COFFY stands very strong owing to its already proven
sales performance. This demand, alongside our ambitious targets for 2023, will
enable us to add further scale to the business.

"Overall, we are pleased with the good start to the year and will continue to
deliver on our targeted strategy in order to make the most of what continues
to be a significant growth opportunity."

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:                    08006522435

 

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 856 stores (658 in Turkey, 142 in Russia, 10 in
Azerbaijan and 6 in Georgia) as of 30 April 2023 and operates through its
owned corporate stores (14%) and franchised stores (86%). In addition to its
pizza delivery business, the Group also has its own coffee brand, COFFY, which
trades from 40 stores at period-end, 29 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.

 

Performance Review

 Store count        As of 30 April
                    2023                               2022
                    Corporate  Franchised  Total       Corporate  Franchised  Total
 Turkey (Domino's)  87         571         658         100        517         617
 Azerbaijan         -          10          10          -          10          10
 Georgia            -          6           6           -          5           5
 COFFY              11         29          40          5          7           12
 Total              98         616         714         105        539         644
 Russia             23         119         142         92         92          184
 Grand Total        121        735         856         197        631         828

 

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 30
April 2023 and 2022:

                                       For the period ended 30 April
                                       2023                   2022
                                       Turkey  Russia  Total  Turkey  Russia  Total
 Store                                 16.1%   5.4%    16.1%  18.3%   6.3%    17.7%
 Online       Group's online platform  22.3%   72.2%   30.0%  24.8%   72.9%   33.9%
              Aggregator               61.0%   22.4%   53.5%  56.4%   20.8%   48.1%
              Total online             83.3%   94.6%   83.4%  81.2%   93.7%   82.0%
 Call centre                           0.6%    -       0.5%   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
30 April 2023 and 2022:

 Group online system sales LfL growth          (after IAS 29)                (pre-IAS 29)
                                       2023               2022               2023     2022
 Group((5))                            7.6%               0.2%               55.4%    44.8%
 Turkey                                15.9%              0.4%               76.5%    58.6%
 Russia (based on RUB)                 -23.6%             -0.4%              -23.6%   -0.4%

 

 

 

 

 

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 preliminary results for the year ended 31
December 2022, published on 12 April, 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.

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Appendices

Exchange Rates

           For the period ended 30 April
           2023                                2022
 Currency  Period End  Period Average          Period End  Period Average
 EUR/TRY   21.440      20.457                  15.545      15.698
 RUB/TRY   0.237       0.252                   0.202       0.167
 EUR/RUB   88.371      81.241                  74.559      93.460

 

Delivery - Take away / Eat in mix

                     For the period ended 30 April
                     2023                   2022
                     Turkey  Russia  Total  Turkey  Russia  Total
 Delivery            73.8%   74.3%   73.7%  76.6%   77.9%   76.5%
 Take away / Eat in  26.2%   25.7%   26.3%  23.4%   22.1%   23.5%
 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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