REG - DP Eurasia N.V - Trading Update

DP Eurasia NVAnnouncement

27/07/2023 07:15

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RNS Number : 3199H  DP Eurasia N.V  27 July 2023

   27 July 2023

 

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 2023 (the "Period") ((1) (2))

(millions of TRY, unless otherwise indicated)

                                          For the period ended 30 June
 Number of stores                         2023             2022             Change
 Turkey (Domino's)                        675*             628              47
 Turkey (COFFY)                           51               15               36
 Azerbaijan                               10               10               -
 Georgia                                  6                5                1
 Total continuing operations              742              658              84
 Russia                                   142              184              -42
 Grand Total                              884              842              42

 Group system sales (after IAS 29) ((3))  2023             2022             Change  Change

                                                                                    (pre-IAS 29)
 Turkey                                   2,424.0          1,864.6          30.0%   91.7%
 Azerbaijan                               42.7             44.8             -4.6%   40.7%
 Georgia                                  30.6             22.4             36.2%   99.9%
 COFFY                                    95.3             21.7             339.5%  529.5%
 Total continuing operations              2,592.6          1,953.5          32.7%   95.6%
 Russia (discontinued operations)         422.2             492.7           -14.3%  -14.3%
 Grand Total                              3,014.8          2,446.2          23.2%   64.7%

 

 

 

 System sales LfL growth((4))                    (after IAS 29)      (pre-IAS 29)
                                                 2023      2022      2023     2022
 Turkey                                          26.5%     -8.4%     86.2%    51.0%
 Azerbaijan (based on AZN)                       5.2%      3.7%      5.2%     3.7%
 Georgia (based on GEL)                          4.3%      32.2%     4.3%     32.2%
 Total continuing operations                     25.9%     -7.9%     84.1%    50.1%
 Russia (discontinued operations, based on RUB)  -24.8%    -2.6%     -24.8%   -2.6%

 

* Including nine temporarily closed stores as a result of the earthquake in
early 2023.

 

 

 

Highlights

·     Strong overall performance with Group system sales for continuing
operations up 32.7% (pre-IAS 29: 95.6%) or 25.9% on a LfL basis, leading to
upgraded full year LfL growth guidance.

·      Delivered excellent LfL growth in Turkey of 26.5% amid a
sustained inflationary environment, reflecting our ongoing focus on network
expansion, strategic pricing, product and service innovation.

·      Azerbaijan and Georgian operations delivered LfL growth of 5.2%
and 4.3% respectively (in local currencies).

·     Online delivery system sales in Turkey increased to 83.9% (2022:
81.2%) as a share of delivery system sales((6)), reflecting our robust
positioning for the online ordering channel. Strong Turkish online system
sales growth of 30.7% (pre-IAS 29: 93.0%).

·      Following a swift response to the devasting earthquake in Turkey
in February, which resulted in the temporary closure of 12 Domino's Pizza
stores, three have now been reopened.

·     Net new store opening momentum has been maintained:

o  47 Domino's Pizza openings in Turkey year-on-year, reflecting the strong
demand profile.

o  The COFFY network has now exceeded the 50-store milestone, having
increased by 22 in the current financial year (or by 36 year-on-year) to 51.
We are on track with our guidance of 50-60 net COFFY openings in FY23.

o  Georgia now has six Domino's Pizza stores, an increase of one.

·     The growth opportunity for COFFY remains significant, with
excellent market dynamics in Turkey for the coffee sub-segment. COFFY
delivered TRY 95.3 million to Group system sales, up 339.5%.

·     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, although a sale process is increasingly
challenging. In the meantime, the Group continues to limit investment in
Russia and remains focused on optimising the existing store coverage. At
Period end, the total number of stores in Russia stood at 142, compared to 184
at 30 June 2022.

·     Liquidity position as of 30 June 2023: TRY 370.6 million cash and
an undrawn bank facility of TRY 515 million.

·     While we remain mindful of sustained macro-economic volatility and
inflation, our first half performance was better than the Board's expectations
thanks to solid volume generation and customer acquisition. The Board is
therefore confident that LfL inflation adjusted growth will be in the low
teens for the full year 2023, better than the previously expected high single
digit figure. Guidance for store openings and capital expenditure has been
maintained. 2023 guidance is now as follows:

 

  2023 guidance*                       Previous              Revised
 LfL growth rate                      High single digit      Low teens

                                      (pre IAS 29: 60-70%)   (pre IAS 29: 70-80%)
 Domino's Pizza net store openings    35 - 40                35 - 40
 COFFY net store openings             50 - 60                50 - 60
 Capital expenditure                  TRY 160 millon         TRY 160 millon

                 *Russia excluded

 

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

"It has been a strong first half performance as we continue to successfully
implement our targeted action plan to mitigate the ongoing macro challenges
that management has deep experience in navigating. As a result, we are
reporting excellent and sustained LfL growth, enabling us to upgrade full year
guidance, and continued network expansion.

 

"The Board is proud of the Group's reaction to support colleagues impacted by
February's devastating earthquake. We are restoring impacted operations and
continue to stand in solidarity with our employees, business partners and the
wider community.

 

"Our targeted strategy 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.

"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 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, Pizza XL, has contributed well in its early stages and in line with our
internal expectations. With a Turkish nationwide advertising campaign being
rolled out in July, we expect the contribution from Pizza XL to continue to
improve.

"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 of new sites and are 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 strong first half performance with strong
customer acquisition and elevated volumes. We will continue to deliver on our
targeted strategy to make the most of what continues to be a significant
growth opportunity. Whilst the Board is conscious of the ongoing uncertainty,
current trends suggest that adjusted EBITDA for 2023 is likely to be above the
current market expectations."

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 9.30am 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 833 stores (675 in Turkey, 142 in Russia, 10 in
Azerbaijan and 6 in Georgia) as of 30 June 2023 and operates through its owned
corporate stores (10%) and franchised stores (90%). In addition to its pizza
delivery business, the Group also has its own coffee brand, COFFY, which
trades from 51 stores at period-end, 38 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 June
                    2023                              2022
                    Corporate  Franchised  Total      Corporate  Franchised  Total
 Turkey (Domino's)  82         593         675        94         534         628
 Azerbaijan         -          10          10         -          10          10
 Georgia            -          6           6          -          5           5
 COFFY              13         38          51         5          10          15
 Total              95         647         742        99         559         658
 Russia             0          142         142        92         92          184
 Grand Total        95         789         884        191        651         842

 

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
June 2023 and 2022:

                                       For the period ended 30 June
                                       2023                   2022
                                       Turkey  Russia  Total  Turkey  Russia  Total
 Store                                 15.5%   5.7%    15.8%  18.3%   6.5%    17.6%
 Online       Group's online platform  22.0%   72.0%   28.5%  25.1%   72.2%   34.4%
              Aggregator               61.8%   22.3%   55.2%  56.1%   21.3%   47.7%
              Total online             83.9%   94.3%   83.7%  81.2%   93.5%   82.0%
 Call centre                           0.6%    -       0.5%   0.5%    -       0.4%
 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 June 2023 and 2022:

 Group online system sales LfL growth          (after IAS 29)                (pre-IAS 29)
                                       2023               2022               2023     2022
 Group((5))                            17.2%              -2.9%              65.4%    45.2%
 Turkey                                28.0%              -3.0%              88.6%    59.7%
 Russia (based on RUB)                 -23.8%             -2.5%              -23.8%   -2.5%

 

 

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.

 

Appendices

Exchange Rates

           For the period ended 30 June
           2023                                2022
 Currency  Period End  Period Average          Period End  Period Average
 EUR/TRY   28.154      21.407                  17.522      16.196
 RUB/TRY   0.303       0.256                   0.321       0.200
 EUR/RUB   95.105      83.651                  53.858      83.520

 

Delivery - Take away / Eat in mix

                     For the period ended 30 June
                     2023                   2022
                     Turkey  Russia  Total  Turkey  Russia  Total
 Delivery            73.1%   72.6%   72.7%  75.7%   75.9%   75.4%
 Take away / Eat in  26.9%   27.4%   27.3%  24.3%   24.1%   24.6%
 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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