REG - DP Poland PLC - Final Results and Trading Update
15/06/2022 07:00
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RNS Number : 8989O DP Poland PLC 15 June 2022
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
DP Poland plc
("DP Poland", the "Group" or the "Company")
Final Results, Trading Update and Investor Presentation
DP Poland, the operator of pizza stores and restaurants across Poland,
announces its audited results for the year ended 31 December 2021.
Financial highlights*:
· Cash at bank of £2.7m as at 31 December 2021 (£1.3m as at 31
December 2020)
· Revenue increased by 3.1% to £29.9m (2020: £29.0m)
o Strong LFL revenue growth in Q4 of 21%
o Growth of dine-in and delivery LFL System Sales of 9% and 4% respectively
compared to prior year
· System Sales were up 4.6% to £31.2m (2020: £29.8m)
· Group EBITDA increased from -£0.2m to £1.1m
· Group loss for the period decreased by 51.2% from -£8.8m to
-£4.3m
Operational highlights:
· 85% of delivery sales were ordered online (2020: 85%)
· Full integration of Dominium S.A. completed in July 2021
· The Group had 121 stores at the end of 2021, with the acquisition
of Dominium S.A. almost doubling the number of stores from 69
· Substantial investment in driver recruitment to improve delivery
times
· FY21 highly affected by the challenges of the Covid-19 pandemic
o Restrictions negatively impacted restaurants' dine-in performance however
food delivery sector thrived
· Polish GDP and inflation increased in 2021 resulting in increased
labour costs with a 7.7% increase in the national minimum wage
Summary Financial Information
Pro-forma unaudited consolidated data
£'000 2020 2021 % change
System Sales 29,779 31,160 4.6%
Revenue 28,959 29,866 3.1%
EBITDA** (152) 1,137 -846%
margin % -0.5% 3.8%
Loss for the period (8,826) (4,309) -51.2%
*FY20 comparatives are unaudited pro-forma Group financials for the year ended
31 December 2020 in order to provide comparable data for the two periods
**excluding non-cash items, non-recurring items and store pre-opening expenses
Trading Update and Investor Presentation
DP Poland also provide an unaudited trading update for the five month period
to 31 May 2022 ("YTD22"):
· LFL System Sales up 21.3% in Q1 and 25% YTD22
o Dine in sales experiencing significantly increased demand with sales up
172% YTD22
o Delivery sales up 1% YTD22
· Substantial investment in driver recruitment has improved
delivery times
· Implementation of various initiatives in response to rising food
costs and wage inflation, including:
o Reduced discounts and increased prices
o Undertaking a review of recipes to reduce food costs
o Insourcing of delivery from third-party operators
o Introduced minimum order value
o Replenished scooter fleet, resulting in savings in mileage and maintenance
costs
· Two new stores opened in June, in Szczecin and Siedlce
· Appointed experienced Marketing and Strategy Director
PLN'000 YTD20 YTD21 YTD22 % change vs YTD20 % change vs YTD21
System Sales 62,910 62,500 78,158 24% 25%
LFL System Sales 62,200 62,500 78,158 26% 25%
Dine-in 15,184 8,791 23,912 57% 172%
Delivery 47,017 53,709 54,246 15% 1%
Non-LFL System Sales 710 0 0 -100% n/a
A presentation has been published in relation to the Group's unaudited trading
update for the YTD22. The presentation will be made available on the Company's
website at https://dppoland.com/
(https://dppoland.com/2015/our-results/full-year-results/) .
Enquiries:
DP Poland plc Tel: +48 22 654 64 15
Przemyslaw Glebocki, Non-Executive Director
Singer Capital Markets (Nominated Adviser and Broker) Tel: +44 (0) 20 7496 3000
Shaun Dobson / Will Goode / Amanda Gray
Notes for editors
About DP Poland plc
DP Poland, through its wholly owned subsidiary DP Polska S.A., has the
exclusive right to develop, operate and sub-franchise Domino's Pizza stores in
Poland. Following its acquisition of Dominium S.A., which constituted a
reverse takeover under the AIM Rules for Companies, the group now operates
over 100 stores and restaurants across a number of cities and towns in Poland.
Chairman's Statement
2021 was a transformational year for DP Poland PLC, having completed the
acquisition of Dominium S.A. ("Dominium") in January 2021. This is the first
DP Poland Annual Report to be published after twelve months have passed since
the businesses came together.
Against the background of unprecedented challenges presented by the COVID-19
pandemic, much has been achieved by your management team. Piotr, our CEO, will
provide more detail about this in his statement.
Your board believes the acquisition of Dominium has delivered a level of
critical mass which makes the Company a key player in the Polish Food &
Beverage sector. At the end of 2021, the Group operated 121 stores across
Poland, providing an opportunity to leverage economies of scale in operations,
procurement and marketing. I am truly excited about the future for DP Poland -
we see a long and exciting roadmap ahead, driven by both organic and other
opportunities.
In 2021 DP Poland won the Golden Franny award from DPI for its operational
excellence. We congratulate Piotr and his team on this huge achievement in the
maiden year following the acquisition of Dominium. I am confident that our
management team will perform well in any trading environment. Despite the
headwinds of COVID-19 and current inflationary pressures, we look forward to
the day when these headwinds become tailwinds.
Meanwhile, at the time of writing this statement, the terrible events in
Ukraine, a close neighbour of Poland, continue. Shareholders will, I am sure,
be pleased to know that DP Poland is working hard to help the citizens of
Ukraine in every way we can. DP Poland has no operations in Ukraine, but does
so, in Poland, near the Ukraine border.
Several important changes in the composition of the Board have taken place
since year-end 2021. In January 2022, Jeremy Dibb joined the Board as a
Non-Executive Director, bringing a wealth of public market experience through
his previous roles. In March 2022, Robert Morrish, Non-Executive
Director, stepped down after 11 years of dedicated service to DP Poland. In
April 2022, Peter Furlong joined the Board as a Non-Executive Director. Peter
is a Director of Pageant Holdings, DPP's second largest shareholder, and has
been a long-term investor in the Company.
Following these changes, I believe that the composition of the Board provides
a strong and diverse range of know-how and experience, well suited to the
business and the challenges ahead. We have a strong team of highly skilled
Executives and Non-Executives, whose interests are 100% focused on creating
shareholder value.
Further changes will occur in 2022 when I will retire as Non-Executive
Chairman of DP Poland. It was announced to the London Stock Exchange in April
2022 that I would stand down as Non-Executive Chairman of DP Poland at the
Company's 2022 AGM in July 2022. However, I have agreed to stay on until the
end of calendar 2022, at the request of the wider Board, in order to help
complete certain on-going initiatives whilst providing time to find a suitable
successor. I am happy to assist.
I would like to end my final statement as Non-Executive Chairman by thanking
our management team and all employees for their superb efforts over the last
year. I would like to thank our Board members for their guidance and input in
this pivotal year for the Company. Finally, I would like to thank our
shareholder base, who have patiently supported DP Poland since my tenure
began. It has been a long road to where DP Poland is today. I am excited about
the road ahead and what that means for our shareholder base.
With best my wishes.
Nicholas Donaldson
Non-Executive Chairman
14 June 2022
Chief Executive's Review
2021 was a transformational year for DPP following the acquisition of Dominium
in January 2021.
It was a year of hard work integrating Dominos and Dominium. We have
successfully converted Dominium restaurants to Domino's standards, which
required a transition to fresh pizza dough, an investment in 28 walk-in
chiller rooms, the redesign of the production areas, the re-organization of 54
makelines, and the installation of 177 new, larger refrigerators.
Additionally, 54 signages have been replaced.
The capital investment required for this integration was significant and
hampered by various COVID disruptions. However, encouragingly the integration
is complete and we are now well positioned for the future.
The operational merger took place and completed in July 2021, as both
businesses migrated onto the same I.T. system 'PULSE'. This brought unforeseen
challenges and resulted in some delays, but we now are starting to reap the
benefits.
As part of the merger, we also took the opportunity to re-design our delivery
areas. As a result, in cities such as Warsaw, Wrocław and Kraków, we have
been able to reduce our delivery times. We now offer one of the most
compelling delivery services in Poland and hope to build further on this
competitive advantage. In fact, we have invested further since year end,
hiring more drivers and training our staff to be best in class. We believe
that this investment will help us to build a sustainable competitive advantage
as we continue to be the pizza company of choice in Poland.
We now are working at scale and are happy to say that our commissaries is
growing from strength to strength. Profitability in this segment continues to
grow and our stores benefit from the economies of scale derived from this core
business line. Capacity rates at our commissaries have increased to their
highest level and we continue to look for ways to drive more efficiencies
here. Production capacity at the branch in Warsaw is at 100%, while the
production capacity of the Commissary in Łódź is at 80%. Our partnership
with Berto has allowed us to reduce distribution costs, whilst still
maintaining the highest quality standards.
These changes required significant investment, which impeded our short-term
profitability and cashflows, however the business is now benefitting from this
investment. We are looking at ways to increase capacity rates further,
including adding overnight shifts in our commissaries to accommodate our
increased market share and associated volumes.
Tourism in Poland has yet to recover to the levels experienced pre-COVID,
which has negatively impacted our dine-in business. Having said that, we
consider the business is getting back to a 'new normal'. On 14th February 2022
students officially went back to school. The more challenging situation has
been with regard to selling to offices, even after the lockdown has ended.
Most companies have noticed the benefits of working remotely and decided not
to return to work in the traditional model. We do hope for further revenue
growth when tourism fully returns, and employees return to their offices over
time.
We have implemented a Digital Experience Platform and launched our new website
and a new smartphone app for placing orders. We have merged many marketing
functions and areas, including Google Analytics and Google Ads. Our stores are
now fully integrated with the website, on both Android and iOS, as well as
with the central data warehouse. In addition, we have been designing customer
segmentation models, and applying Marketing Automation.
Thanks to the doubling of the business by number of stores, we have managed to
negotiate better terms of cooperation with the largest aggregators in Poland,
such as: Pyszne.pl (known in Europe as 'Just take away'), Uber Eats and Glovo.
Our objective is to generate new orders incrementally, with a higher average
spend.
All these activities have allowed us to develop more quickly. Q3 was a steep
learning curve, with the first effects already visible in Q4. Q4 delivered
21% like for like growth (5.3% on delivery and 110.8% on dine-in). Our
enlarged group continues to benefit from the fine tuning of our business,
which is largely driven by the first class analytical tools that come from
being a Domino's business. We feel that we are only really starting to gather
momentum now and the best is ahead of us.
As previously announced in April, our trading through to the end of March was
up 21.3% LFL. I am pleased to say that since March our sales have accelerated
further. YTD through May our LFL sales are up 25% for the group.
A new strong foundation for the DPP business has been built in 2021. This is
the first financial statements which presents the consolidated business, but I
believe it does not show its full potential yet. The numbers reflect the true
financial performance, but include a lot of one-off items related to
integration and the learning curve.
We have seen improvement in profitability, but we aspire for more. Since year
end, we have faced an unprecedented inflationary environment that has had an
impact on our profitability. As announced to the market, we are seeking to
reduce the impact through various cost-efficiency initiatives and price
increases. Due to the scale of our business, we believe we are in a much
better position than other small players in Poland. We want to use our
comparative strength to drive market share, our brand awareness and
consolidate the market further - picking up assets and consolidating at
attractive prices. The board is fully behind this stated strategy of growing
market share. Margin expansion can be optimised at the appropriate time when
we have completed our acquisition drive.
At the end of 2020 and the beginning of 2021, we acquired a total of 17 stores
from existing sub-franchisees. We also reorganised delivery zones to improve
the efficiency of both franchise and corporate stores. As a result, all
sub-franchise stores are showing very positive like for like growth. In line
with previous strategy, we have developed an incentive programme for existing
sub-franchisees. As a result, in 2022 we started a store-opening programme and
a sell-down of corporate stores to sub-franchisees. At the same time, we
launched a comprehensive programme called the Franchise Academy, which will
enable current employees to take over existing corporate stores.
We continue to actively monitor growth opportunities, both organically and
through acquisitions.
The Russian invasion of Ukraine is a tragedy. We have started a number of
initiatives to help our Ukrainian neighbours, such as:
· We are providing free pizzas for volunteers and refugees.
· We are transporting people and material gifts with our company
cars.
· We are organizing collections and donations in our stores and at
our office.
· We temporarily hosted 11 special guests in our office. Currently,
our new friends are living in a company apartment in the centre of Warsaw.
· We are in contact with the CEO of Domino's Ukraine, in order to
help employees from stores which have been shut-down.
· For this purpose, we have created a team responsible for
coordinating assistance in employment and accommodation. We have already
received the first applications and are organising the formalities.
· We are currently looking for a place to live for other new
guests. In the coming days, we will propose a method of financing for aid
activities. We also want to take advantage of the help offered by Domino's
Germany and Domino's Netherlands.
We know that help will be needed for a long time and our actions must be well
coordinated.
I remain very optimistic about the outlook. We are on the right track to
further solidify the leading position of Domino's in Poland. We look forward
to talking directly with our shareholders to answer any questions and to tell
you about further exciting trends and opportunities since our financial
year-end.
Piotr Dzierżek
Chief Executive Officer
14 June 2022
Chief Financial Officer's Review
Overview
It is a great pleasure for me to comment on the financial performance of the
enlarged Group for the first time as the Company's Chief Financial Officer.
2021 continued to be highly affected by challenges of the COVID-19 pandemic,
which had a severe impact on the operations and performance of many industries
worldwide, including the restaurant and food delivery sectors in Poland. The
ability to provide indoor dine-in services was restricted by Polish Government
guidelines twice in 2020: once during the Spring (for 9 weeks) as well as the
Autumn (for the last 10 weeks of 2020 since late October 2020, but continuing
in 2021 for a further 21 weeks until late May 2021). These restrictions have,
inevitably, negatively impacted restaurants' performance, however in contrast,
the food delivery sector has thrived. The food delivery sector in Poland has
grown significantly during the pandemic and the Group, with its short delivery
times, contactless payments and contactless delivery/collection service has
benefitted from this sector's growth despite the unfortunate circumstances.
Despite rapid like-for-like sales growth and consistent store rollout program,
the Group has been facing continued pressure on labour costs which have been
coupled with underutilised operations as a result of its sub-optimal store
footprint. We expect that the integration with Dominium will alleviate these
pressures.
Reverse takeover
On 8 January 2021 the Company completed a reverse acquisition of Dominium S.A.
a company registered in Poland. Further information about the transaction is
disclosed in note 18. Although the transaction resulted in Dominium S.A.
becoming a wholly owned subsidiary of the Company in accordance with IFRS 3
'Business Combinations' the transaction constitutes a reverse acquisition as
the previous shareholders of Dominium S.A. own the majority of the shares of
the Company and the directors of Dominium S.A. make up the majority of the
Company's board. In substance, the shareholders of Dominium S.A. acquired a
controlling interest in the Company and therefore the transaction has been
accounted for as a reverse acquisition.
In accordance with IFRS 3 'Business Combinations' Dominium S.A. has been
identified as the accounting acquirer (although it is the legal subsidiary)
and therefore the comparative consolidated data presented in these financial
statements represents the results for and the position of Dominium S.A. only.
Financial Performance
2021 2020
£ £
System sales 31,159,781 13,982,764
Revenue 29,866,189 13,982,764
Direct Costs (24,427,738) (10,998,475)
Selling, general and administrative expenses - excluding: (4,301,176) (2,314,333)
store pre-opening expenses, depreciation, amortisation and share based
payments
GROUP EBITDA - excluding non-cash items, non-recurring items and store 1,137,275 669,955
pre-opening expenses
Store pre-opening expenses (3,429) -
Other non-cash and non-recurring items 59,278 479,901
Finance income 1,155,806 4,017
Finance costs (1,669,527) (1,312,995)
Foreign exchange losses (61,911) (195,381)
Depreciation, amortisation and impairment (4,867,679) (2,652,861)
Share based payments (51,301) -
Loss before taxation (4,301,488) (3,007,364)
Taxation (58,983) -
Loss for the period (4,360,471) (3,007,364)
The Group Income Statement presented above represents incomparable data for
the two periods. As already mentioned due to the IFRS 3 'Business
Combinations' requirements comparative data presented in these financial
statements represents the results for the position of Dominium S.A. only.
To comment on the financial performance of the Group we present below
unaudited pro-forma Group Income Statement for the period ended 31 December
2020.
Pro-forma unaudited consolidated data
2021 2020
£ £
System sales 31,159,781 29,778,642
Revenue 29,866,189 28,958,607
Direct Costs (24,427,738) (23,997,851)
Selling, general and administrative expenses - excluding: (4,301,176) (5,113,105)
store pre-opening expenses, depreciation, amortisation and share based
payments
GROUP EBITDA - excluding non-cash items, non-recurring items and store 1,137,275 (152,350)
pre-opening expenses
Store pre-opening expenses (3,429) (323)
Other non-cash and non-recurring items 59,278 (1,785,710)
Finance income 1,155,806 87,236
Finance costs (1,669,527) (1,849,358)
Foreign exchange losses (61,911) (271,548)
Depreciation, amortisation and impairment (4,867,679) (4,636,275)
Share based payments (51,301) (217,332)
Loss before taxation (4,301,488) (8,825,660)
Taxation (58,983) -
Loss for the period (4,360,471) (8,825,660)
Revenue
The increase in Group's revenue of 3.1% is primarily due to the Group's
delivery operations benefitting from the Covid-19 restrictions still relevant
for the period January - May 2021 and the improved food delivery dynamics in
Poland. The primary drivers for the 7% LFL growth in 2021 was due to an
increase in average order value as well as effective price increases. From a
phasing perspective, as profiled later in the Key Performance Indicators
section, DP Poland's performance in 2021 consistently improved from quarter to
quarter, with negative LFL growth during the outset of the Covid-19 pandemic
in Q1 to a 21% increase in the last quarter of 2021.
Direct costs
Direct costs increased by 1.8% in 2021 which is lower than the increase in
revenues mainly as a result of achieving part of expected reverse takeover
synergies. The key drivers of this movement included a substantial increase in
national minimum wage in Poland but also high inflation rate in Poland
impacting purchases of food to stores. Furthermore, the Group experienced a
general increase in costs as a result of franchise stores being acquired from
sub-franchisee owners.
Although the Polish economy was subject to one of the highest inflation rates
in Europe during 2021, the Group managed to achieve savings on food cost and
decrease these costs (as % of revenue) in comparison to 2020. This decrease is
a result of achieved synergies on the reverse acquisition.
Throughout 2021 labour cost inflation continued in Poland, representing a
challenge for the Group, particularly for newer stores which usually have
insufficient sales to absorb the fixed cost element of labour during their
early stages. The national minimum wage in Poland in 2021 has been increased
by 7.7% (year-on-year) on top of a 16% (year-on-year) increase in 2020.
Selling, general and administrative expenses ("SG&A")
SG&A were equivalent to 14% of revenue, which is 4 p.p. lower than in
2020. The Group achieved assumed synergies in the area of SG&A by reducing
the HQ office rent, several advisory services and other costs.
Other non-cash and non-recurring items
The Group recognised non-cash and non-recurring items in 2021. These include
non-recurring income positions like sub-franchise leasehold totaling £122,905
which was the result of the takeover of franchise assets as per signed
agreement following the termination of the sub-franchise agreement, release of
Frito Lay bonus received by Dominium S.A. before the reverse acquisition
totaling £252,004, but also IFRS16 adjustments resulting from changes in
lease period and discounts received on some rents for the Covid-19 lockdown
periods amounting to £220,014.
Group loss for the period
Group loss for the period decreased by 51%. This is mainly due to achievement
of part of the synergies assumed on the reverse acquisition, and increased
revenue but also significant decrease in non-recurring costs.
Group Loss for the period* 2021 2020 Pro-forma unaudited consolidated data Change %
Group loss for the period (4,360,471) (8,825,660) +51%
* Actual exchange rates for 2021 and 2020
Store count before reverse acquisition
Store count 1 Jan 2021 Opened Closed Transferred 31 Dec 2021
Corporate 53 1 -2 8 60
Sub-Franchised 16 0 0 -8 8
Total 69 1 -2 0 68
Reverse takeover
Store count 1 Jan 2021 Opened Closed Transferred 31 Dec 2021
Corporate 56 0 -3 0 53
Sub-Franchised 1 0 -1 0 0
Total 57 0 -4 0 53
Enlarged Group
Store count 1 Jan 2021 Opened Closed Transferred 31 Dec 2021
Corporate 109 1 -5 8 113
Sub-Franchised 17 0 -1 -8 8
Total 126 1 -6 0 121
In 2021 DP Poland opened 1 new corporate store and closed 5 stores. 8 stores
were transferred to Corporate and 2 stores were transferred to Franchisees.
The reverse takeover has almost doubled the number of stores in chain in
comparison to 2020. The chain managed to shorten delivery times in large
cities for example in the Warsaw agglomeration where over 40 stores are
placed.
Sales Key Performance Indicators (KPIs)
System Sales were up 4.6% as a result of a 13.0% like-for-like System Sales
growth compared to the previous year.
2021 2020 Pro-forma unaudited consolidated data Change %
System Sales PLN 165,483,363 158,148,412 4.6%
System Sales £* 31,159,781 29,778,642 4.6%
LFL system sales 7% -6% 13%
LFL system order count 0% -10% 10%
LFL system order count pre-split 0% -10% 10%
Delivery System Sales ordered online 85% 85% -
*For exchange rates please refer to a separate table below (page 13)
Like-for-like System Sales growth per quarter were as follows:
Q1 - 2.4%
Q2 +10.0%
Q3 +0.3%
Q4 +21%
Exchange rates
PLN : £1 2021 2020 Change %
Profit & Loss Account 5.3108 4.9965 +6%
Balance Sheet 5.4702 5.0661 +8%
Financial Statements for our Polish subsidiaries DP Polska S.A. and Dominium
S.A. are denominated in Polish Zloty ("PLN") and translated to Pound Sterling
("GBP"). Under IFRS accounting standards the Income Statement for the Group
has been converted from PLN at the average annual exchange rate applicable.
The balance sheet has been converted from PLN to GBP as at the exchange rate
at 31 December 2021.
Cash position
1(st) January 2021 Pro-forma unaudited consolidated data Cash movement 31(st) December 2021
Cash in bank 1,370,996 1,330,650 2,701,646
The large cash movement is a result of fundraising completed in November 2021,
partially offset by expenses incurred with connection to the reverse
acquisition.
Macro-economic conditions in Poland
Polish GDP increased during 2021 against a drop in 2020. The country is
expected to face further increased inflation during 2022. The board is
constantly monitoring purchase prices to ensure the Group can react to any
price increases from its suppliers.
The unemployment rate improved in 2021 with a further improvement to note
during the start of 2022.
Macro KPIs 2021 2020
Real GDP growth (% growth) 5.9 -2.8
Inflation (% growth) 5.1 3.4
Unemployment Rate (% of economically active population) 2.9 3.2
Going concern
The board considered the Group's forecasts, in particular those relating to
the ongoing integration of Dominium operations into the Group and its expected
impact on the Group's performance, to satisfy itself that the Group has
sufficient resources to continue in operation for the foreseeable future.
Over the past quarters in 2020 and 2021, the board of DP Poland has given
considerable thought as to how the Group might define, quantify and minimise
the risks related to the Covid-19 pandemic. As the number of new Covid-19
cases recorded in Poland reached its peak during the months of March and April
in 2021, and has reduced since then, and with the rapid roll-out of the
vaccination program, all government restrictions removed on 1 June 2021 the
board considers that the pandemic-related risks are reducing. The Company's
recent equity fundraise made in November 2021, which provided an additional
£3m (before expenses) of resource, has further improved the Company's cash
balances and its ability to settle the substantial transactions, capital
expenditure as well as operating losses, in expectation of the synergistic
benefits of the merger.
Having considered the Group's cash flows and its liquidity position, and after
reviewing the forecast for the next twelve months and beyond, the Directors
believe that the Group have adequate resources to continue operations for the
foreseeable future and for this reason they continue to adopt the going
concern basis in preparing the financial statements.
That said, the board does take into account the uncertainty related to the
future dynamics of the Covid-19 pandemic and inflationary pressures, as well
as the uncertainty related to the actual quantum and timing of full synergies
being delivered, which remain the most pronounced risks to our going concern
assumptions.
Malgorzata Potkanska
Chief Financial Officer
14 June 2022
Financial Statements
Group Income Statement
2021 2020
Notes £ £
Revenue 2 29,866,189 13,982,764
Direct Costs (24,427,738) (10,998,475)
Selling, general and administrative expenses - excluding: (4,301,176) (2,314,333)
store pre-opening expenses, depreciation, amortisation and share based
payments
GROUP EBITDA - excluding non-cash items, non-recurring items and store 1,137,275 669,956
pre-opening expenses*
Store pre-opening expenses (3,429) -
Other non-cash and non-recurring items 5 59,278 479,901
Finance income 7 1,155,806 4,017
Finance costs 8 (1,669,527) (1,312,995)
Foreign exchange losses (61,911) (195,381)
Depreciation, amortisation and impairment (4,867,679) (2,652,861)
Share based payments (51,301) -
Loss before taxation 4 (4,301,488) (3,007,363)
Taxation 9 (58,983) -
Loss for the period (4,360,471) (3,007,363)
Loss per share Basic 11 (0.75 p) (1.06 p)
Diluted 11 (0.75 p) (1.06 p)
All of the loss for the year is attributable to the owners of the Parent
Company.
Group Statement of Comprehensive Income
2021 2020
£ £
Loss for the period (4,360,471) (3,007,363)
Currency translation differences 24,798 46,152
Other comprehensive expense for the period, net of tax to be reclassified to 24,798 46,152
profit or loss in subsequent periods
Total comprehensive income for the period (4,335,673) (2,961,211)
All of the comprehensive expense for the year is attributable to the owners of
the Parent Company.
Group Balance Sheet
2021 2020
Notes £ £
Non-current assets
Goodwill 32 15,008,736 3,111,110
Intangible assets 12 2,207,448 1,651,047
Property, plant and equipment 13 6,135,097 1,289,390
Leases - right of use assets 19 8,237,471 4,222,502
Deferred tax asset 15 - 30,645
Financial assets - 987
Trade and other receivables 16 820,871 -
32,409,623 10,305,681
Current assets
Inventories 17 667,898 193,660
Trade and other receivables 16 1,219,447 556,812
Cash and cash equivalents 22 2,701,646 34,651
4,588,991 785,123
Total assets 36,998,614 11,090,804
Current liabilities
Trade and other payables 23 (4,983,665) (3,384,308)
Borrowings 24 (11,068) -
Lease liabilities 20 (2,656,091) (1,515,523)
(7,650,824) (4,899,831)
Non-current liabilities
Lease liabilities 20 (7,027,146) (3,313,908)
Deferred tax 15 (213,797) (9,261)
Borrowings 24 (5,840,594) (5,966,881)
(13,081,537) (9,290,050)
Total liabilities (20,732,361) (14,189,881)
Net assets 16,266,253 (3,099,077)
Equity 21
Called up share capital 27 3,097,933 1,648,700
Share premium account 42,551,453 8,124,915
Capital reserve - own shares (48,163) -
Retained earnings (17,228,015) (12,918,845)
Merger relief reserve 21,282,500 -
Reverse Takeover reserve (33,460,406) -
Currency translation reserve 70,951 46,153
Total equity 16,266,253 (3,099,077)
Group Statement of Cash Flows
2021 2020
Note £ £
Cash flows from operating activities
Loss before taxation for the period (4,301,488) (3,007,364)
Adjustments for:
Finance income (1,155,806) (4,017)
Finance costs 1,669,527 1,312,995
Foreign exchange movements 1,180,246 -
Depreciation, amortisation and impairment 4,867,679 2,652,861
Loss on fixed asset disposal 267,866 75,479
Share based payments expense 28 51,301 -
Operating cash flows before movement in working capital 2,579,325 1,029,954
(Increase) / decrease in inventories (32,569) 14,604
Decrease / (increase) in trade and other receivables 144,647 (122,625)
(Decrease)/increase in trade and other payables (2,276,572) 763,327
Cash generated from operations 414,831 1,685,260
Taxation payable - -
Net cash generated from operations 414,831 1,685,260
Cash flows from investing activities
Payments to acquire software (170,637) -
Payments to acquire property, plant and equipment (720,381) (115,656)
Payments to acquire intangible fixed assets (208,004) (33,393)
Proceeds from disposal of property plant and equipment 90,892 8,183
Repayment of sub-franchisee loans 16 25,233 -
Interest received 3,811 -
Cash acquired from subsidiaries 1,336,256 -
Net cash generated from/(used in) investing activities 357,170 (140,866)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 6,121,561 -
Repayment of lease liabilities (3,474,856) (1,414,978)
Proceeds from borrowings - 234,725
Interest paid (751,711) (550,266)
Net cash from/(used in) financing activities 1,894,994 (1,730,519)
Net increase/(decrease) in cash 2,666,995 (186,125)
Exchange differences on cash balances - 2,557
Cash and cash equivalents at beginning of period 34,651 218,219
Cash and cash equivalents at end of period 22 2,701,646 34,651
Group Statement of Changes in Equity
Share Currency Capital Reverse Merger
Share premium Retained translation reserve - Takeover Relief
capital account earnings reserve own shares reserve reserve Total
£ £ £ £ £ £ £ £
At 1 January 2020 1,648,700 8,124,915 (9,911,482) - - - - (137,867)
Translation difference - - - 46,153 - 46,153
Loss for the period - - (3,007,363) - - (3,007,363)
Total comprehensive income for the year - - (3,007,363) 46,153 - - - (2,961,210)
At 31 December 2020 1,648,700 8,124,915 (12,918,845) 46,153 - - - (3,099,077)
Translation difference - - 24,798 - - - 24,798
Loss for the period - - (4,360,471) - - - - (4,360,471)
Total comprehensive income for the year - - (4,360,471) 24,798 - - - (4,335,673)
Transfer to reverse takeover reserve (1,648,700) (8,124,915) - - - 9,773,615 - -
Recognition of DP Poland Plc equity 1,270,543 36,838,450 - - (48,163) (20,532,689) - 17,528,141
Reverse takeover of Dominium 1,418,832 - - - - (22,701,332) 21,282,500 -
Shares issued (net of expenses) 408,558 5,713,003 - - - - - 6,121,561
Share based payments - - 51,301 - - - - 51,301
Transactions with owners in their capacity as owners 1,449,233 34,426,538 51,301 - (48,163) (33,460,406) 21,282,500 23,701,003
At 31 December 2021 3,097,933 42,551,453 (17,228,015) 70,951 (48,163) (33,460,406) 21,282,500 16,266,253
1. ACCOUNTING POLICIES
Authorisation of financial statements and statement of compliance with IFRSs
The DP Poland plc Group and Company financial statements for the period ended
31 December 2021 were authorised for issue by the Board of the Directors on 14
June 2022 and the balance sheets were signed on the Board's behalf by Piotr
Dzierżek and Malgorzata Potkanska. DP Poland plc is a public limited
company incorporated and domiciled in England & Wales. The Company's
ordinary shares are traded on the Alternative Investment Market of the London
Stock Exchange.
Basis of preparation
Both the Group financial statements and the Company financial statements have
been prepared and approved by the directors in accordance with UK-adopted
international accounting standards, IFRIC Interpretations and the Companies
Act 2006. The preparation of financial statements in accordance with
UK-adopted international accounting standards requires the use of certain
critical accounting estimates. It also requires management to exercise
judgement in the process of applying the Company's accounting policies.
An additional line item for 'Group EBITDA - excluding non-cash items,
non-recurring items and store pre-opening expenses' has been presented on the
face of the income statement as the Board believes this presentation is
relevant to the understanding of the Group's financial performance and is a
useful indicator for the underlying cash generated from operations. The
Directors believe that presenting store pre-opening expenses separately on the
face of the Group Income Statement, below the Group EBITDA line, better
reflects the underlying trading performance. Other non-GAAP performance
measures used are:
- System sales (the sum of all sales made by both sub-franchised and
corporate stores to consumers)
- Like-for-like sales (same store sales for those stores which traded
throughout the current and comparative period).
The non-GAAP performance measures may not be comparable with similarly
described items reported by other entities.
The Company has taken advantage of the exemption provided under section 408 of
the Companies Act 2006 not to publish its individual income statement and
related notes.
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 December 2021.
The Group and Company financial statements are presented in Sterling. The
assets and liabilities of the foreign subsidiaries, whose functional currency
is Polish Zloty, are translated into sterling at the rate of exchange ruling
at the balance sheet date and their income statements are translated at the
average rate for the year. Differences arising from the translation of the
opening net investment in the subsidiary are taken to reserves and reported in
the Group statement of comprehensive income.
Basis of consolidation
The Group financial statements comprise the financial statements of DP Poland
plc, its subsidiary undertakings and the Employee Benefit Trust ("EBT") drawn
up to 31 December of each year, using consistent accounting policies.
Subsidiary undertakings have been included in the Group financial statements
using the purchase method of accounting. Accordingly the Group Income
Statement and Group Statement of Cash Flows include the results and cash flows
of subsidiaries from the date of acquisition.
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from
its activities and is achieved through direct or indirect ownership of voting
rights; currently exercisable or convertible potential voting rights; or by
way of contractual agreement. The financial statements of subsidiaries are
prepared for the same reporting year as the parent Company, using consistent
accounting policies. All inter-company balances and transactions, including
unrealised profits arising from them, are eliminated on consolidation.
The Group accounts for business combinations using the acquisition method when
control is transferred to the Group. The consideration transferred in the
acquisition is generally measured at fair value, as are the identifiable net
assets acquired. Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to the issue of
debt or equity securities.
On 8 January 2021 the Company completed a reverse acquisition of Dominium S.A.
a company registered in Poland. Further information about the transaction is
disclosed in note 18. Although the transaction resulted in Dominium S.A.
becoming a wholly owned subsidiary of the Company in accordance with IFRS 3
'Business Combinations' the transaction constitutes a reverse acquisition as
the previous shareholders of Dominium S.A. own the majority of the shares of
the Company and the directors of Dominium S.A. make up the majority of the
Company's board. In substance, the shareholders of Dominium S.A. acquired a
controlling interest in the Company and therefore the transaction has been
accounted for as a reverse acquisition.
In accordance with IFRS 3 'Business Combinations' Dominium S.A. has been
identified as the accounting acquirer (although it is the legal subsidiary)
and therefore the comparative consolidated data presented in these financial
statements represents the results for and the position of Dominium S.A. only.
Adoption of new and revised standards
The Group has applied the following standards and amendments for the first
time for their annual reporting period commencing 1 January 2021
- Definition of Material - Amendments to IAS 1 and IAS 8 and
- Revised Conceptual Framework for Financial Reporting
The Group has also decided to adopt the following amendment
early:
-Annual Improvements to IFRS Standards 2018-2020
Cycle.
The
amendments listed above did not have any impact on the amounts recognised in
prior periods and are not expected to significantly affect the current or
future periods.
New standards and interpretations not applied
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2021 reporting periods and have not been
early adopted by the Group. None of these are expected to have a material
impact on the Group in the current or future reporting periods and on
foreseeable future transactions.
Intangible assets
Intangible assets are carried at cost less accumulated amortisation and
accumulated impairment losses. Intangible assets acquired separately from a
business are carried initially at cost. An intangible asset acquired as part
of a business combination is recognised outside goodwill if the asset is
separable or arises from contractual or other legal rights and its fair value
can be measured reliably. Intangible assets with a finite life are amortised
and charged to administrative expenses on a straight line basis over their
expected useful lives, as follows:
- Licences: over the duration of the legal agreement;
- Computer software: 2 years from the date when the software is brought into
use
- Capitalised loan discounts: over the remaining term of the sub-franchise
agreement
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable.
Goodwill
Goodwill is initially measured at cost and any previous interest held over the
net identifiable assets acquired and liabilities assumed. If the fair value of
the net assets acquired is in excess of the aggregate consideration
transferred, the Group re-assesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed and reviews the
procedures used to measure the amounts to be recognised at the acquisition
date. If the reassessment still results in an excess of the fair value of net
assets acquired over the aggregate consideration transferred, then the gain is
recognised in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purposes of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to benefit
from the synergies of the combination. Cash-generating units to which goodwill
has been allocated are tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired.
The Group performs impairment reviews at the reporting period end to identify
any goodwill or intangible assets that have a carrying value that is in excess
of its recoverable amount. Determining the recoverability of goodwill and the
intangible assets requires judgement in both the methodology applied and the
key variables within that methodology. Where it is determined that an asset is
impaired, the carrying value of the asset will be reduced to its recoverable
amount with the difference recorded as an impairment charge in the income
statement.
In accordance with IAS 36, the Group has tested goodwill for impairment at the
reporting date. No goodwill impairment was deemed necessary as at 31 December
2021. For further details on the impairment review please refer to note 32.
Fixtures, fittings and equipment
Fixtures, fittings and equipment are stated at cost less accumulated
depreciation and any impairment in value. Leasehold property comprises
leasehold improvements including shopfitting and associated costs.
Depreciation
Depreciation is provided on all tangible non-current assets at rates
calculated to write off the cost, less estimated residual value based on
prices prevailing at the balance sheet date, of each asset on a straight line
basis over its expected useful life, as follows:
Leasehold property - over the expected lease term
Fixtures, fittings and equipment - 3 to 10 years
The carrying values of tangible non-current assets are reviewed for impairment
if events or changes in circumstances indicate the carrying value may not be
recoverable.
The asset's residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each financial year end.
Assets Under Construction
Assets under construction comprise the cost of tangible fixed assets in
respect of stores that have not yet opened and therefore no depreciation has
yet been charged. Depreciation will be charged on the assets from the date
that they are available for use.
Impairment
The Group assesses at each reporting date whether there is an indication that
an asset may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an estimate of
the asset's recoverable amount. An asset's recoverable amount is the higher of
an asset's or cash-generating unit's fair value less costs to sell and its
value in use and is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other
assets or groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to
its recoverable amount. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. Impairment losses of continuing operations are
recognised in the income statement under the expense category: Depreciation,
amortisation and impairment.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in the income statement
unless the asset is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal the depreciation
charge is adjusted in future periods to allocate the asset's revised carrying
amount, less any residual value, on a systematic basis over its remaining
useful life.
Financial instruments
Financial instruments are measured initially at cost, which is the fair value
of whatever was paid or received to acquire or incur them.
Financial assets
All of the Group's financial assets are held within a business model whose
objective is to collect contractual cash flows which are solely payments of
principals and interest and therefore classified as subsequently measured at
amortised cost
Financial assets at amortised cost are included in current assets, except for
maturities greater than 12 months after the balance sheet date. These are
classified as non-current assets. The Group's financial assets at amortised
cost comprise trade and other receivables, loans to sub-franchisees and cash
and cash equivalents in the balance sheet. Loans to sub-franchisees are
provided at below market interest rates. The difference between the present
value of loans recognised and the cash advanced has been capitalised as an
intangible asset in recognition of the future value that will be generated via
the royalty income and Commissary sales that will be generated. These assets
are amortised over the life of a new franchise agreement of 10 years.
The Group recognises an allowance for expected credit losses ('ECLs') for all
financial assets. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the
Group expects to receive, discounted at an approximation of the original
effective interest rate.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair
value through profit or loss or as financial liabilities measured at
amortised cost. Financial liabilities at amortised cost comprise trade and
other payables, loans and accruals.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and
in hand and short-term deposits with an original maturity of three months or
less. For the purpose of the consolidated and company cash flow statement,
cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
Trade and other payables
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
Store pre-opening costs
Operating costs incurred by stores prior to opening are written off to the
income statement in the period in which they are incurred and disclosed
separately on the face of the income statement.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Inventories comprise food and packaging goods for resale. The Group applies a
first in first out basis of inventory valuation.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Foreign Currency Translation
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
The results and financial position of all the group entities (none of which
has the currency of a hyper-inflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
a) assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
b) income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the
transactions); and
c) all resulting exchange differences are recognised within other
comprehensive income as a separate component of equity
On consolidation, exchange differences arising from the translation of the net
investment in foreign operations are taken to shareholders' equity. When a
foreign operation is partially disposed of or sold, exchange differences that
were recorded in equity are recognised in the income statement as part of the
gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
Employee share incentive plans
The Group issues equity-settled share-based payments to certain employees
(including Directors). These payments are measured at fair value at the date
of grant by use of a Black-Scholes model. Vesting is dependent on performance
conditions other than conditions linked to the price of the shares of DP
Poland plc (market conditions). In valuing equity-settled transactions, no
account is taken of these performance conditions. This fair value cost of
equity-settled awards is recognised on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest. No
cost is recognised for awards that do not ultimately vest.
Leases
The Group as a lessee
At the balance sheet date, the Group leased hundred and twenty one stores, one
office, two commissaries and a number of vehicles. Leases for land and
buildings are normally for an initial term of 5 years with an option to renew
thereafter. Lease payments are subject to regular rent reviews to reflect
market rates. The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which
it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets (such as tablets and
personal computers). For these leases, the Group recognises the lease payments
as an operating expense on a straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
lessee uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
• Fixed lease payments (including in-substance fixed payments), less any
lease incentives receivable;
• Variable lease payments that depend on an index or rate, initially
measured using the index or rate at the commencement date;
• The amount expected to be payable by the lessee under residual value
guarantees;
• The exercise price of purchase options, if the lessee is reasonably
certain to exercise the options; and
• Payments of penalties for terminating the lease, if the lease term
reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated
balance sheet.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
Extension and termination options
In determining the lease liability, the Group considers the extension and
termination options. For the majority of leases the Group has the right to
extend the contract unilaterally, which does not need the consent of the
landlord. Periods covered by an option to extend the lease term are included
in the lease term if the lessee is reasonably certain to exercise that option.
The same rationale applies to termination options. The term covered by a
termination option is not included in the lease term if the lessee is
reasonably certain not to exercise the option.
Critical judgements in determining the lease term
Leases are negotiated on an individual basis and contain a wide range of
terms and conditions, such as early termination clauses and renewal rights.
Termination clauses and renewal rights are used to maximise operational
flexibility in terms of managing the assets used in the Group's operations. In
determining the lease term, management considers all facts and circumstances
that create an economic incentive to exercise a renewal right, or
not exercise a termination clause. An adjustment to the lease term is only
made if the lease is reasonably certain to be extended or not terminated.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses. Whenever the Group incurs an obligation for costs to dismantle and
remove a leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the
related right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the underlying asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the Group
expects to exercise a purchase option, the related right-of-use asset is
depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease. The right-of-use assets are
presented as a separate line in the consolidated balance sheet. The Group
applies IAS 36 to determine whether a right-of-use asset is impaired and
accounts for any identified impairment loss as described in the 'Property,
Plant and Equipment' policy. Variable rents that do not depend on an index or
rate are not included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an expense in the
period in which the event or condition that triggers those payments occurs and
are included in 'Other expenses' in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical
expedient. For a contracts that contain a lease component and one or more
additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
The Group as lessor
The Group enters into lease agreements as an intermediate lessor with respect
to stores operated by sub-franchisees.
Leases for which the Group is a lessor are classified as finance or operating
leases. Whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and
the sublease as two separate contracts. The Group evaluates and classifies
these subleases as either operating leases or finance leases. Where the
sublease transfers substantially all of the risks and rewards arising from
right-of-use asset from the head lease, the right-of-use asset from head lease
is derecognised and a lease receivable equal to the net investment in the
sublease is recognised. Where the sublease does not transfer substantially
all of the risks and rewards arising from right-of-use asset from the head
lease, the sublease is classified as an operating lease and rent received is
recognised in the income statement on a straight line basis over the lease
term. Initial direct costs incurred in negotiating and arranging an operating
lease are added to the carrying amount of the leased asset and recognised on a
straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as receivables at
the amount of the Group's net investment in the leases. Finance lease income
is allocated to accounting periods so as to reflect a constant periodic rate
of return on the Group's net investment outstanding in respect of the leases.
When a contract includes lease and non-lease components, the Group applies
IFRS 15 to allocate the consideration under the contract to each component.
Current tax
Current tax is the amount of income tax payable on the taxable profit for the
period. Current tax assets and liabilities for the current and prior periods
are measured at the amounts expected to be recovered from or paid to the tax
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is provided on all temporary differences at the balance sheet
date between the tax bases of assets and liabilities and their carrying
amounts with the exception of:
- Where the initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
- For taxable temporary differences associated with investments in
subsidiaries, associates and interest in joint ventures and where the timing
of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable
future.
Deferred tax assets are recognised for all deductible temporary differences,
carry-forward of unused tax assets and unused tax losses, to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, carry-forward of unused tax assets and
unused tax losses can be utilised. The carrying amount of deferred tax assets
is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised. Deferred tax assets
and liabilities are measured at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled, based on
tax rates (and tax laws) that have been enacted or substantively enacted at
the balance sheet date. Deferred tax balances are not discounted.
Capital instruments
Ordinary shares are classified as equity instruments. Other instruments are
classified as liabilities if they contain an obligation to transfer economic
benefits and if not they are included in equity. The finance costs recognised
in the Income Statement in respect of capital instruments other than equity
shares are allocated to periods over the term of the instrument at a constant
rate on the carrying amount applying the effective interest method.
Capital reserve - own shares
DP Poland plc shares which are held within the Company's employee benefit
trust, for the purpose of providing share based incentives to Group employees
are classified as shareholders' equity as 'Capital reserve - own shares' and
are recognised at cost. No gain or loss is recognised in the income statement
on the purchase or sale of such shares.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured at the fair value of consideration net of returns and
value-added taxes. The criteria for recognising revenues are set out in note
2.
Direct Costs
Direct costs comprises foods costs and direct store expenses.
Finance income
Revenue is recognised as interest accrues applying the effective interest
method.
Going concern
The Directors must make an assessment as to whether the Group is a going
concern. In forming their views, the Directors have prepared cash flow
forecasts for a 12 month period following the date of signing the balance
sheet. As part of the preparation of these forecasts, the Directors have
estimated the likely outcome for the number of new stores opened. Before
entering into a contract to acquire a new site, the Directors ensure that the
Group has sufficient working capital available to allow the completion of the
outlet. Based on these forecasts, the Directors have confirmed that there are
sufficient cash reserves to fund the business for the period under review.
After reviewing these forecasts, consideration of the Group's cash resources
and other appropriate enquiries, the Directors have a reasonable expectation
that the Company and Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue to adopt
the going concern basis in preparing the financial statements.
Accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates and judgements. It also requires
management to exercise judgement in the process of applying the Company's
accounting policies. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
The Group's determination of whether intangibles and investments in subsidiary
undertaking are impaired requires an estimation of the value in use of the
cash generating units to which the relevant asset or investment is allocated.
This requires estimation of future cash flows and the selection of a suitable
discount rate. The recoverable amount of the cash generating unit has been
determined based on fair value calculated using discounted future cash flows,
which are subject to significant estimates due to the growth phase of the
business. Future cash flows are based on the Group's business plan. The
calculation of the value in use is most sensitive to the following
assumptions: store performance; discount rates; store openings in Poland;
foreign exchange rates.
The discount rate reflects management's estimate of the return on capital
employed for the investment in Poland. The store openings are based on the
current business model being used by management, which is progressing in line
with expectations. The parent company's investment in DP Polska S.A. had a
historical cost of £31.9m prior to the impairment review. The impairment test
carried out showed that the investment was impaired and the carrying value
after impairment was £28.66m. With effect from 8 January 2021, the Company
became the legal parent of Dominium S.A.. As a result of the reverse
acquisition the investment value was raised by the amount of £34,26m.The
Group has considered its market capitalisation from April 2022 as part of the
impairment review. The Group has determined that an impairment of £11.1m in
the investment value should be recognised in the accounts of DP Poland plc.
The Group's determination of the amortised cost of sub-franchisee loan
receivables also requires an estimation of future cash flows and the selection
of a appropriate market rate of interest. The calculation of the Group's total
tax charge involves a degree of estimation and judgement in respect of the
recoverability of tax losses. Further details of the treatment of deferred tax
can be found in note 15.
In applying IFRS 16 'leases' the Group uses estimates and judgement in
determining the term of the lease (including extensions), the incremental
borrowing rate to be used and the classification of sub-leases between
operating leases and finance leases. Further details are shown in the Leases
accounting policy above and in note 19.
The Group has also determined a market rate for the loan note presented as
borrowing in balance sheet using judgement. Further details are shown in note
24.
Applying IFRS 3 for accounting of reverse acquisition also required Group's
judgement. Further details are shown in note 18.
2. REVENUE
Revenue is measured based on the consideration to which the Group expects to
be entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. All of the revenue is derived in Poland.
Corporate store sales: Contracts with customers for the sale of products to
end consumers include one performance obligation. The Group has concluded that
revenue from the sale of products should be recognised at a point in time when
control of the goods is transferred to the consumer, which is the point of
delivery or collection. Sales are recorded approximately 30 minutes before
delivery or collection. Revenue is measured at the menu price less any
discounts offered.
Royalties, franchise fees and sales to franchisees: Contracts with customers
for the sale of products include one performance obligation, being the
delivery of products to the end customer. The Group has concluded that revenue
from the sale of products should be recognised at a point in time when control
of the goods are transferred to the franchisee, generally on delivery. Revenue
is recognised at the invoiced price less any estimated rebates. The
performance obligation relating to royalties is the use of the Domino's brand.
This represents a sales-based royalty with revenue recognised at the point the
franchisee makes a sale to an end consumer. Revenue from franchisee fees is
recognised when a franchisee opens a store for trading or on completion of
sale of one or more stores to a third party, as this is the point at which all
performance obligations have been satisfied.
Rental income on leasehold property: Rental income arising from leasehold
properties where the lease is an operating lease is recognised on a
straight-line basis in accordance with the lease terms. Rental payments are
recognised over the period to which they relate. Under IFRS 16 'leases'
rents received under finance leases are treated as capital repayments and
interest receipts and are excluded from revenues.
Core revenues are ongoing revenues including sales to the public from
corporate stores, sales of materials and services to sub-franchisees,
royalties received from sub-franchisees and rents received from
sub-franchisees. Other revenues are non-recurring transactions such as the
sale of stores, fittings and equipment to sub-franchisees. Revenue recognised
in the income statement is analysed as follows:
Revenue is divided into 'core revenues' and 'other revenues' as follows:
2021 2020
£ £
Core revenue 29,782,191 13,982,764
Other revenue 83,998 -
29,866,189 13,982,764
Revenue is further analysed as follows:
2021 2020
£ £
Corporate store sales 28,204,421 13,982,764
Fixtures and equipment sales to sub-franchisees 83,998 -
Royalties and other sales to sub-franchisees 1,331,355 -
Rental income on leasehold property 246,415 -
29,866,189 13,982,764
3. SEGMENTAL REPORTING
The Board monitors the performance of the corporate stores and the commissary
operations separately and therefore those are considered to be the Group's two
operating segments. Corporate store sales comprise sales to the public.
Commissary operations comprise sales to sub-franchisees of food, services and
fixtures and equipment. Commissary operations also include the receipt of
royalty income from sub-franchisees. The Board monitors the performance of the
two segments based on their contribution towards Group EBITDA - excluding
non-cash items, non-recurring items and store pre-opening expenses. In
accordance with IFRS 8, the segmental analysis presented reflects the
information used by the Board. No separate balance sheets are prepared for
the two operating segments and therefore no analysis of segment assets and
liabilities is presented.
Operating Segment contribution
2021 2021 2020
£ £ £
Corporate stores Commissary Corporate stores
Revenues from external customers 28,204,421 1,661,768 13,982,764
Direct Costs - corporate stores (23,791,549) (10,998,475)
Direct Costs - commissary (variable cost only) (743,105)
Store EBITDA 4,412,872 2,984,289
Commissary gross profit 918,663
Total segment profit 5,331,535 2,984,289
Unallocated expenses (4,194,260) (2,314,333)
GROUP EBITDA - excluding non-cash items, non-recurring items and store 1,137,275 669,956
pre-opening expenses
Commissary direct costs shown above do not include labour and occupancy costs.
These costs are shared across both segments as the commissary supplies
corporate stores as well as supplying sub-franchisees. Corporate store direct
costs include all costs directly attributable to operating the stores. Store
EBITDA represents corporate store sales less store food costs and direct store
expenses.
4. LOSS BEFORE TAXATION
This is stated after charging
2021 2020
£ £
Auditors and their associates' remuneration 80,407 12,609
2,345 -
Directors' emoluments 188,521 -
Amortisation of intangible fixed assets 674,030 437,815
Depreciation of property, plant and equipment 2,027,915 684,964
and after crediting - -
Operating lease income from sub-franchisees 246,415 -
Foreign exchange gains /(losses) (61,911) (195,381)
5. OTHER NON-CASH AND NON-RECURRING ITEMS
2021 2020
£ £
Acquisition - advisors and other expenses (70,320) -
Leasehold overtaken 122,905 -
IFRS 16 adjustment 220,014 294,419
Bonus received 252,004 -
Other non-cash and non-recurring items (465,325) 185,482
59,278 479,901
Non-recurring Items
Non-recurring items include items, which are not sufficiently large to be
classified as exceptional, but in the opinion of the Directors, are not part
of the underlying trading performance of the Group.
Leasehold overtaken refers to take over of franchise assets as per signed
agreement following the termination of the sub-franchise agreement and IFRS 16
adjustment refers to changes in lease agreement periods and discounts received
for the Covid-19 lockdown periods. The other non-cash and non-recurring items
position includes the amount of £280,918 of transformation cost.
6. STAFF COSTS
Details of directors' remuneration, which is included in the amounts below,
are given in the remuneration report.
2021 2020
£ £
Wages and salaries and directors' fees 2,359,144 1,558,449
Social security costs 500,177 296,105
Share based payments 51,301 -
2,910,622 1,854,554
The average monthly number of employees during the year was as follows:
2021 2020
Number Number
Operational 243 216
Administration 44 26
Total 287 242
The cost of employees on zero hours contract in stores amounted to 2021
£6,902,503 (2020: £2,030,904).
7. FINANCE INCOME
2021 2020
£ £
Interest on short-term deposits 3,811 -
Unwinding of discount on loans to sub-franchisees 13,059 -
Finance income on sublease loans 26,131 -
Other finance income 1,112,805 4,017
1,155,806 4,017
Other finance income comprises mainly of loans written off in Dominium S.A. as
a result of the refinancing for the reverse acquisition.
8. FINANCE COSTS
2021 2020
£ £
Interest expense on lease liabilities 742,862 536,563
Other interest 926,665 776,432
1,669,527 1,312,995
9. TAXATION
2021 2020
£ £
Current tax - -
Deferred tax expense relating to write down of deferred tax asset 58,983
Other taxes - -
Total tax charge in income statement 58,983 -
The tax on the Group's loss before tax differs from the theoretical amount
that would arise using the tax rate applicable to profits of the consolidated
entities as follows:
2021 2020
£ £
Loss before tax (4,301,488) (3,007,364)
Tax credit calculated at applicable rate of 19% (817,283) (571,399)
Income taxable but not recognised in financial statements 312,041 426,091
Income not subject to tax (647,083) (404,481)
Expenses not deductible for tax purposes 1,196,148 161,592
Deferred tax 58,983
Tax losses for which no deferred income tax asset was recognised (43,823) 388,197
Total tax charge in income statement 58,983 -
The Directors have reviewed the tax rates applicable in the different tax
jurisdictions in which the Group operates. They have concluded that a tax rate
of 19% represents the overall tax rate applicable to the Group.
10. LOSS ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY
The loss relating to transactions in the financial statements of the parent
company was £11,557,307 (2020: £3,007,364).
11. LOSS PER SHARE
The loss per ordinary share has been calculated as follows:
2021 2021 2020 2020
£ £
Weighted average number of shares Profit / (loss) after tax Weighted average number of shares Profit / (loss) after tax
Basic 578,123,216 (4,360,471) 283,766,661 (3,007,363)
Diluted 578,123,216 (4,360,471) 283,766,661 (3,007,363)
The weighted average number of shares for the year excludes those shares in
the Company held by the employee benefit trust. At 31st December 2021 the
basic and diluted loss per share is the same, as the vesting of JOSS, SIP or
share option awards would reduce the loss per share and is, therefore,
anti-dilutive.
12. INTANGIBLE ASSETS
Franchise fees Capitalised
and intellectual Software loan Total
property rights discount
Group £ £ £ £
Cost:
At 31 December 2019 4,614,842 324,354 - 4,939,196
Foreign exchange movements (49,462) (3,477) - (52,939)
Additions 29,855 3,079 - 32,934
At 31 December 2020 4,595,235 323,956 - 4,919,191
Acquisition of business 883,853 85,957 59,854 1,029,664
Foreign exchange movements (391,076) (55,389) (17,865) (464,330)
Additions 149,125 208,004 21,512 378,640
Disposals (42,717) (89,294) (132,011)
At 31 December 2021 5,194,420 562,528 (25,793) 5,731,155
Amortisation
At 31 December 2019 2,544,338 322,737 - 2,867,075
Foreign exchange movements (33,244) (3,502) - (36,746)
Amortisation charged for the year 434,693 3,122 - 437,815
At 31 December 2020 2,945,787 322,357 - 3,268,144
Foreign exchange movements (250,900) (61,675) (11,468) (324,043)
Amortisation charged for the year 524,397 138,097 11,536 674,030
Disposals (15,139) - (79,285) (94,423)
At 31 December 2021 3,204,145 398,779 (79,216) 3,523,708
Net book value:
At 31 December 2021 1,990,274 163,749 53,424 2,207,447
At 31 December 2020 1,649,448 1,599 - 1,651,047
Franchise fees consisting of the cost of purchasing the Master Franchise
Agreement (MFA) from Domino's Pizza Overseas Franchising B.V. have been
capitalised and are written off over the term of the MFA. The difference
between the present value of loans to sub-franchisees recognised and the cash
advanced has been capitalised as an intangible asset and are amortised over
the life of a new franchise agreement of 10 years. The amortisation of
intangible fixed assets is included within administrative expenses in the
Income Statement. The Group has performed an annual impairment test for the
franchise fees and loan discounts and the recoverable amount of the cash
generating unit has been determined based on fair value calculated using
discounted future cash flows based on the Group's business plan, and
incorporating the Directors' estimated 11% discount rate, future store
openings and the average Polish Zloty exchange rate for the year ended 31
December 2021. The fair value calculation indicates that no impairment is
required. As at 31 December 2021, no reasonably anticipated change in the
assumptions would give rise to a material impairment charge.
.
13. PROPERTY, PLANT AND EQUIPMENT
Fixtures Assets
Leasehold fittings and under
property equipment construction Total
Group £ £ £ £
Cost:
At 31 December 2019 6,228,563 2,238,326 7,975 8,474,864
Foreign exchange movements (66,760) (23,991) (85) (90,836)
Additions 8,891 83,448 51,583 143,922
Disposals (246,532) (25,333) - (271,865)
Transfers 2,655 7,874 (40,384) (29,855)
At 31 December 2020 5,926,817 2,280,324 19,089 8,226,230
Acquisition of business 3,634,600 2,124,650 19,658 5,778,908
Foreign exchange movements (849,042) (545,878) (2,862) (1,397,783)
Additions 766,548 392,046 392,169 1,550,762
Disposals (781,849) (222,194) - (1,004,043)
Transfers 27,912 380,569 (408,481) 0
At 31 December 2021 8,724,986 4,409,517 19,572 13,154,075
Depreciation:
At 31 December 2019 4,463,156 2,057,409 - 6,520,565
Foreign exchange movements (52,910) (23,755) - (76,665)
Depreciation charged for the year 535,418 149,546 - 684,964
Disposals (166,303) (25,722) - (192,025)
At 31 December 2020 4,779,361 2,157,478 - 6,936,839
Foreign exchange movements (509,507) (398,978) - (908,485)
Depreciation charged for the year 924,736 1,103,179 - 2,027,915
Impairment - (262,089) - (262,089)
Disposals (590,478) (184,724) - (775,202)
At 31 December 2021 4,604,112 2,414,866 - 7,018,978
Net book value:
At 31 December 2021 4,120,874 1,994,650 19,572 6,135,097
At 31 December 2020 1,147,456 122,845 19,089 1,289,390
14. NON CURRENT ASSET INVESTMENTS
Group Company
£ £
Investments in Group undertakings
At 31 December 2019 - 30,273,155
Investment in subsidiary company - shares subscribed - 1,600,000
Investment in subsidiary company - capital contribution - 62,477
Impairment charge - (3,275,632)
At 31 December 2020 - 28,660,000
Investment in subsidiary company - shares subscribed - 34,241,330
Investment in subsidiary company - capital contribution - 19,267
Impairment charge - (11,130,429)
At 31 December 2021 - 51,790,168
Investments in Group undertakings are recorded at cost, which is the fair
value of the consideration paid.
The parent company's investment in DP Polska S.A. had a historical cost of
£31.9m prior to the impairment review. The impairment test carried out showed
that the investment was impaired and the carrying value after impairment was
£28.7m. With effect from 8 January 2021, the Company became the legal
parent of Dominium S.A.. As a result of the reverse acquisition the investment
value was raised by the amount of £34.3m. The Group has determined that an
impairment of £11.1m in the investment value should be recognised in the
accounts of DP Poland plc. The impairment assessment brought the figure down
to £51.8m and was arrived at by looking at the most recent share issue in
November 2021 of 8p.
The Company holds 20% or more of the share capital of the following companies,
which are included in the consolidation:
Company Nature of business Location Class % holding
DP Polska S.A. Operation of Pizza delivery restaurants Poland Ordinary 100
Dominium S.A. Operation of Pizza delivery restaurants Poland Ordinary 100
The registered office of DP Polska S.A. and Dominium S.A. is: 30 Dabrowiecka
Street, 03-932 Warsaw, Poland.
The acquisition of Dominium S.A. was completed on 8th January 2021 - further
details are given in note 18. Dominium's business is the operation of delivery
and dine-in pizza restaurants.
15. DEFERRED TAX
The Group has unused tax losses of £18,651,179 available for offset against
future profits. Polish tax losses are only recognised for deferred tax
purposes to the extent that they are expected to be used to reduce tax payable
of future profits. Under Polish law, losses can only be carried forward for
five years and only 50% of the losses brought forward can be set off in any
one year. Polish tax losses expire as follows: £3,891,430 in 2022;
£3,186,939 in 2023; £2,384,268 in 2024; £1,686,448 in 2025 and
£697,874 in 2026. UK tax losses carried forward at the balance sheet date
were £6,136,991.
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Deferred tax liability
Deferred tax liability
Property, plant and equipment (46,622) (9,261) - -
Intangible assets (167,175) - - -
(213,797) (9,261) - -
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Deferred tax asset
Deferred tax asset
Short term timing differences - 30,645 - -
- 30,645 - -
Movements in deferred tax
Property, plant and equipment Intangible assets Short term timing differences Total
£ £ £ £
At 31 December 2020 (9,261) - 30,645 21,384
Acquisition of a business (164,319) (12,018) - (176,337)
Credited to equity - - - -
Credited to profit and loss (28,099) - (30,645) (58,744)
At 31 December 2021 (201,679) (12,018) - (213,697)
16. TRADE AND OTHER RECEIVABLES
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Current
Trade receivables 362,407 258,256 - -
Trade receivables from subsidiaries - - 396,000 346,000
Other receivables 635,420 161,943 25,594 49,214
Prepayments and accrued income 221,620 90,208 - 76,978
Rent and supplier deposits 46,405 - -
1,219,447 556,812 421,594 472,192
Non-current
Other receivables 820,871 - - -
At 31 December 2,040,318 556,812 421,594 472,192
Other receivables includes loans to sub-franchisees which are repayable over
between three and seven years. Repayments may be made earlier in the event
that sub-franchised stores achieve certain turnover targets earlier than
expected. The loans are secured by a charge over certain assets of the
sub-franchisees. Other receivables also includes Polish value added tax
recoverable in future periods. No receivables are materially past due date.
Other than amounts held by the Company, all trade and other receivables are in
Polish Zloty. Trade receivables are non - interest bearing and are generally
on 30 - 60 days terms.
17. INVENTORIES
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Raw materials and consumables 667,898 193,660 - -
At 31 December 667,898 193,660 - -
The cost of inventories recognised as an expense and included in cost of sales
amounted to £7,573,606 (2020: £3,363,802).
18. REVERSE ACQUISITION
With effect from 8 January 2021, the Company became the legal parent of
Dominium S.A.. The aggregate consideration paid by the legal acquirer was
£23,871,998 satisfied by the issue of 283,766,661 new ordinary shares of the
Company issued at 8p per ordinary share and £1,170,665 by way of a 1.3m EUR
loan note issued in favour of Malaccan Holdings Ltd the former owner of
Dominium S.A..
Under IFRS 3, due to the relative values of the companies, the transaction is
treated as a reverse acquisition with Dominium S.A. as the accounting acquirer
and the pre-acquisition DP Poland Group as the accounting acquiree. As a
result of preparing these financial statements in accordance with IFRS 3
comparative data represents Dominium S.A. only.
The loss of the acquiree since the acquisition date amounted to £1,747,861.
Malaccan Holdings Ltd became the majority shareholder with approximately 52.8%
of the share capital of the enlarged Group at the time of the transaction.
Malaccan Holdings Ltd has subsequently reduced its holding to 45% of the
issued share capital.
The Directors believe that the combination of the two businesses will place
the Company within the top three pizza chains in Poland in terms of stores and
restaurants. The acquisition has almost doubled the number of stores within
the Company's portfolio and will provide a basis for further expansion and
market penetration into new cities and towns. There are a number of cost
savings and synergies which have arisen from the acquisition.
The fair value of the assets and liabilities acquired by the accounting
acquirer are as follows:
Note 8 January 2021 Fair value adjustment Total
£'000 £'000 £'000
Intangible assets 461,665 568,000 1,029,665
Property, plant and equipment 5,778,908 - 5,778,908
Leases - right of use assets 5,173,815 - 5,173,815
Inventories 441,669 - 441,669
Trade and other receivables 2,494,340 - 2,494,340
Cash and cash equivalents 1,336,256 - 1,336,256
Trade and other payables (3,412,865) - (3,412,865)
Income tax payables - - -
Borrowings (92,000) - (92,000)
Lease liabilities (6,312,464) - (6,312,464)
Deferred tax - (142,000) (142,000)
Total identifiable net assets 5,869,324 426,000 6,295,324
32
Goodwill on acquisition of the DP Poland Group 12,127,453
Consideration paid by the accounting acquirer - - 18,422,777
Acquisition expenses
The advisors' and other costs incurred by DP Poland plc (the legal acquirer)
in acquiring Dominium S.A. amounted to £1,129,643 of which £1,085,573 was
incurred during 2020.
Intangible assets
The intangible assets acquired by the accounting acquirer relate to: Franchise
fees, intellectual property rights, software and the capitalised loan discount
relating to sub-franchisee loans
Trade and other receivables
The Directors consider that the gross contractual amounts of trade receivables
and loan receivables are not materially different to the fair values
Borrowings
As part of the reverse acquisition DP Poland plc (the legal acquirer) issued a
€1.3million loan note in favour of Malaccan Holdings Ltd the former owner
of Dominium S.A.. In addition, outstanding debt of €6.2 million
(approximately £5.6 million) that was previously due from Dominium to
Malaccan Holdings under certain existing Shareholder Loans was converted into
a further unsecured loan note of €6.2 million being issued to Malaccan
Holdings on the same terms and in substitution for that outstanding debt. In
aggregate, therefore, €7.5 million Loan Notes were issued by DP Poland plc
and remain outstanding to Malaccan Holdings upon completion of the acquisition
of Dominium S.A.. The Loan Notes are not convertible.
Goodwill
The goodwill recognised by the accounting acquirer is equal to the
consideration (as determined under IFRS 3) which was paid by the accounting
acquirer less the fair value of the assets and liabilities acquired with the
accounting acquiree. The fair value adjustment amounted to £0.6 million and
is presented in Intangible Assets as Master Franchise Agreement asset. The
asset will be amortised over the franchise period. The goodwill recognised is
made up by the expected synergies of the enlarged business and it is expected
that the improved scale of the enlarged business will help the Company to
achieve its objective of becoming a market leader in Poland.
In accordance with IAS 36 the Group has performed impairment review of
goodwill at the reporting period end. The review included discounted cash flow
projections to determine the recoverability of goodwill and the intangible
assets. We compared the carrying amount of the assets, inclusive of assigned
goodwill, to its respective fair value. Significant assumptions inherent in
the valuation methodologies for goodwill are employed and include, but are not
limited to, prospective financial information, growth rates, terminal value
and discount rates. Based on this quantitative test, we determined that the
fair value of assets including goodwill exceeded its carrying amount. After
completing our annual impairment reviews we concluded that goodwill was not
impaired.
19. LEASES - GROUP AS A LESSEE
Right of Use Assets
Leasehold
property Total
Cost: £ £
At 1 January 2020 6,539,393 6,539,393
Foreign exchange movements (70,091) (70,091)
Additions 905,282 905,282
Disposals (192,346) (192,346)
At 31 December 2020 7,182,238 7,182,238
Acquisition of business 5,173,815 5,173,815
Foreign exchange movements (1,190,615) (1,190,615)
Additions 2,811,295 2,811,295
Adjustment to right-of-use asset lease term 599,283 599,283
Disposal (244,793) (244,793)
At 31 December 2021 14,331,222 14,331,222
Accumulated depreciation
At 1 January 2020 1,656,318 1,656,318
Foreign exchange movements (36,161) (36,161)
Charge for the year 1,339,579 1,339,579
At 31 December 2020 2,959,736 2,959,736
Foreign exchange movements (605,447) (605,447)
Adjustment to right-of-use asset lease term 1,464,104 1,464,104
Disposal (152,464) (152,464)
Charge for the year 2,427,823 2,427,823
At 31 December 2021 6,093,751 6,093,751
Carrying amount
At 31 December 2021 8,237,471 8,237,471
At 31 December 2020 4,222,502 4,222,502
At the Balance sheet date, the Group's portfolio of leases consisted of 124
leases over 121 store premises, one office and two commissaries. Leases
generally have an initial term of 10 years, with an option to extend for an
additional period of between 5 and 10 years. Rents payable are generally
reviewed at five year intervals. The adjustment to right-of-use asset lease
term refers to change in presentation to gross amount and depreciation.
2021 2020
Amounts recognised in profit and loss £ £
Depreciation expense on right-of-use assets 2,427,823 1,339,579
Interest expense on lease liabilities 742,863 536,563
2021 2020
£ £
The total cash outflow for leases amounted to 3,120,050 1,627,884
20. LEASE LIABILITIES
2021 2020
£ £
Total lease liabilities 9,683,237 4,829,431
Analysed as:
Non-current 7,027,146 3,313,908
Current 2,656,091 1,515,523
2021 2020
Maturity analysis £ £
Within one year 2,656,091 1,515,523
1 - 2 years 2,310,187 1,040,855
2 - 3 years 1,787,291 941,882
3 - 4 years 1,506,870 507,577
4 - 5 years 1,061,573 567,515
5 - 6 years 259,627 143,618
Onwards 101,599 91,727
It is the Group's policy to lease certain of its fixtures and equipment under
leases. The average lease term is 10 years. For the year ended 31 December
2021, the average effective borrowing rate was 7.72 per cent. Interest rates
are fixed at the contract date. All leases are on a fixed repayment basis and
no arrangements have been entered into for contingent rental payments. All
lease obligations are denominated in Polish Zloty, Euros or US Dollars
The fair value of the Group's lease obligations as at 31 December 2021 is
estimated to be £9,683,237 using 7.72% discount rate. This is based on a
the rate for Polish Government bonds with a similar maturity to the lease
terms and adding a credit margin that reflects the secured nature of the lease
obligation.
The Group's obligations under leases are secured by the lessors' rights over
the leased assets.
21. EQUITY
"Called up share capital" represents the nominal value of equity shares
issued.
"Share premium account" represents the premium paid on the Company's 0.5p
Ordinary shares.
"Capital reserve - own shares" represents the cost of shares repurchased and
held in the employee benefit trust (EBT).
"Retained earnings" represents retained losses of the Group.
"Merger relief reserve" represents the excess of the value of the
consideration shares issued to the shareholders upon the reverse takeover over
the fair value of the assets acquired.
"Reverse Takeover reserve" represents the accounting adjustments required to
reflect the reverse takeover upon consolidation.
"Currency translation reserve" represents exchange differences arising from
the translation of the financial statements of the Group's foreign
subsidiaries.
22. CASH AND CASH EQUIVALENTS
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Cash at bank and in hand 2,701,646 34,651 302,509 1,007,647
At 31 December 2,701,646 34,651 302,509 1,007,647
23. TRADE AND OTHER PAYABLES
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Current
Trade payables 3,248,333 1,821,157 54,669 361,086
Other payables 546,734 612,799 6,667 5,603
Accrued expenses 1,188,598 950,352 69,333 535,897
At 31 December 4,983,665 3,384,308 130,669 902,586
24. BORROWINGS
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Current interest bearing borrowings
Finance lease liabilities 11,068 - - -
At 31 December 11,068 - - -
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
Non current interest bearing loans and borrowings
Finance lease liabilities 11,133 - - -
Borrowing 5,829,461 5,966,881 5,829,461 -
At 31 December 5,840,594 5,966,881 5,829,461 -
Finance lease liabilities are effectively secured as the rights to the leased
asset revert to the lessor in the event of default. As part of the reverse
acquisition DP Poland plc (the legal acquirer) issued a €1.3million loan
note in favour of Malaccan Holdings Ltd the former owner of Dominium S.A.. In
addition, outstanding debt of €6.2 million (approximately £5.6 million)
that was previously due from Dominium to Malaccan Holdings under certain
existing Shareholder Loans was converted into a further unsecured loan note of
€6.2 million being issued to Malaccan Holdings on the same terms and in
substitution for that outstanding debt. In aggregate, therefore, €7.5
million Loan Notes were issued by DP Poland plc and remain outstanding to
Malaccan Holdings upon completion of the acquisition of Dominium S.A.. The
loans are repayable in 2024, is unsecured with 3% interest payable and have
been discounted to a market rate of 8% in accordance with IAS 39.
Gross finance lease liabilities - minimum lease payments:
Group Group Company Company
2021 2020 2021 2020
£ £ £ £
No later than 1 year 11,068 - - -
Later than 1 year and no later than 5 years 11,133 - - -
Later than 5 years - - - -
Future finance charges on finance leases - -
- -
Present value of finance lease liabilities 22,201 - - -
25. ANALYSIS OF MOVEMENTS IN NET FUNDS
01 January Acquisition Cash Non Foreign 31 December
2020 flows cash exchange 2020
movements movements
£ £ £ £ £ £
Cash and cash equivalents 218,219 - (186,125) - 2,557 34,651
Borrowings (5,042,710) - (234,725) (635,397) (54,049) (5,966,881)
Lease liabilities - current (1,380,043) - 53,618 (174,306) (14,792) (1,515,523)
Lease liabilities - non-current (3,812,181) - 1,361,360 (822,227) (40,860) (3,313,908)
Net debt (10,016,715) - 994,128 (1,631,930) (107,144) (10,761,661)
01 January Acquisition Cash Non Foreign 31 December
2021 flows cash exchange 2021
movements movements
£ £ £ £ £ £
Cash and cash equivalents 34,651 1,336,256 1,330,739 - - 2,701,646
Borrowings: finance leases - current - (55,740) 44,672 - - (11,068)
Borrowings: finance leases - non-current - (36,185) 25,052 - - (11,133)
Borrowings (5,966,881) (1,107,409) 834,925 409,904 (5,829,461)
Lease liabilities - current (1,515,523) (971,592) 228,351 (397,327) - (2,656,091)
Lease liabilities - non-current (3,313,908) (5,340,872) 3,176,781 (1,549,147) - (7,027,146)
Net debt (10,761,661) (6,175,542) 4,805,595 (1,111,549) 409,904 (12,833,253)
26. FINANCIAL INSTRUMENTS
Categories of financial instruments
2021 2021 2021 2020 2020
Financial assets at amortised cost Financial liabilities at amortised cost Financial liabilities at fair value Financial assets at amortised cost Financial liabilities at amortised cost
£ £ £ £ £
GROUP
Financial Assets
Cash at bank 2,701,646 34,651
Trade receivables 362,407 258,256
Other receivables - current 635,420 161,943
Other receivables - non current 463,800 -
Sublease receivables - -
Total 4,163,273 454,850
Financial Liabilities
Trade payables (3,248,333) (1,821,157)
Borrowing (5,829,461) -
Finance leases - current (11,068) -
Finance leases - non current (11,133) -
Other liabilities - current (546,734) (612,799)
Lease liabilities - current (2,656,091) (1,515,523)
Lease liabilities - non current (7,027,146) (3,313,908)
Accruals - current (1,188,598) (950,352)
Total (20,518,564) (8,213,739)
Net (16,355,291) (7,758,889)
2021 2021 2020 2020
Financial assets at amortised cost Financial liabilities at amortised cost Financial assets at amortised cost Financial liabilities at amortised cost
£ £ £ £
COMPANY
Financial Assets
Cash at bank 302,509 1,007,647
Trade receivables 396,000 346,000
Other receivables 25,894 49,214
Total 724,403 1,402,861
Financial Liabilities
Trade payables (54,669) (361,086)
Other liabilities - current - (5,187)
Accruals (69,333) (535,897)
Total (124,002) (902,170)
Net 600,401 500,691
The fair value of the Group's financial assets and liabilities is not
considered to be materially different from the carrying amount as set out
above. No financial assets are significantly past due or impaired.
Maturity of the Group's financial liabilities
2021 2021 2021 2021 2020 2020 2020 2020
Finance Trade and other payables Borrowings Total Finance Trade and other payables Borrowings Total
leases
leases
£ £ £ £ £ £ £ £
Due within one year 11,068 4,983,665 - 4,994,733 - 3,384,308 - 3,384,308
Due within two to five years 11,133 - 5,829,461 5,840,594 - - 5,966,881 5,966,881
Due after five years - - - - - - - -
22,201 4,983,665 5,829,461 10,835,327 - 3,384,308 5,966,881 9,351,189
Capital Risk Management
The Group aims to manage its overall capital so as to ensure that companies
within the Group continue to operate as going concerns, whilst maintaining an
optimal capital structure to reduce the cost of capital.
The Group's capital structure represents the equity attributable to
shareholders of the company together with borrowings and cash and cash
equivalents.
Currency Risk
The foreign currency risk stems from the Group's foreign subsidiary which
trades in Poland and whose revenues and expenses are mainly denominated in
local currencies. Additionally, some Group transactions are also denominated
in US Dollar and Euro currencies. The Group is therefore subject to foreign
currency risk due to exchange rate movements that will affect the Group's
operating activities and the Group's net investment in its foreign subsidiary.
In each case where revenues of the Group are in a foreign currency, there is a
material match between the currency of each operating company's revenue
stream, primary assets, debt and debt servicing (if applicable).
The carrying amount in Sterling, of the Group's foreign currency denominated
monetary assets and liabilities at the reporting dates is as follows:
2021 2020
Assets £ £
Polish Zlotys 4,092,403 1,422,838
Liabilities
Polish Zlotys 15,572,709 9,223,592
Euro 5,840,594 5,966,881
Sensitivity analysis
The potential impact on Group net loss and equity reserves from a 20%
weakening of the Polish Zloty against sterling affecting the reported value of
financial assets and liabilities would be an increased net loss and reduction
in Group reserves of £2,265,973. A depreciation of 20% has been selected for
the analysis as an illustration on the basis that it is a reasonable estimate
of a likely market fluctuation.
An appreciation of 20% against Sterling would produce an equal and opposite
effect.
Interest Rate Risk
Interest rate risk arises on the Group's cash and cash equivalents. All of
the Group's cash and cash equivalents earn interest at variable rates.
Sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to
interest on the financial instrument balances at the reporting date and the
stipulated change taking place at the beginning of the financial period and
held constant throughout the reporting period.
At the reporting date, if interest rates had been 1% higher and all other
variables were held constant, the effect on the Group's net result and equity
reserves would have been an increase of £27,016. If exchange rates had been
changed by 1% and all other variables were held constant, the effect on the
Group's financial result would have been an amount of £10,0640.
Credit Risk
Exposure to credit risk is limited to the carrying amount of financial assets
recognised at the balance sheet date, namely cash and cash equivalents, trade
and other receivables and loans to subfranchisees.
The Group manages its exposure to this risk by applying Board-approved limits
to the amount of credit exposure to any one counterparty and employs minimum
credit worthiness criteria as to the choice of counterparty, thereby ensuring
that there are no significant concentrations of credit risk.
All sub-franchisees who are provided with loans from the Group have been
through the franchisee selection process, which is considered to be
sufficiently robust to ensure an appropriate credit verification procedure.
The credit risk for liquid funds and other short-term financial assets is
considered negligible, since the counterparties are reputable banks with high
quality external credit ratings.
Impairment of financial assets
The Group recognises an allowance for expected credit losses ('ECLs') for all
debt instruments not held at fair value through profit or loss. ECLs are based
on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual terms. ECLs
are recognised in two stages. For credit exposures for which there has not
been a significant increase in credit risk since initial recognition, ECLs are
provided for credit losses that result from default events that are possible
within the next 12-months (a 12-month ECL). For those credit exposures for
which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a
lifetime ECL). For trade receivables and contract assets, the Group applies a
simplified approach in calculating ECLs and recognises a loss allowance based
on lifetime ECLs at each reporting date. The Group has established a provision
procedure that is based on the percentage cost if insuring its receivables
against loss from default. Historic credit loss experience, adjusted for
forward-looking factors specific to the debtors, the economic environment and
relevant security and guarantees from sub-franchisees are also taken into
account. The movement in the allowance for doubtful debts during the year is
as follows:
2021 2020
£ £
Balance at 01 January - -
Acquisition of business 934,132 -
Impairment loss made during the year 222,528 -
Reversal of previously recognised impairment loss (670,744) -
Balance at 31 December 485,916 -
The Group seeks to manage financial risk by ensuring sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. Surplus funds are invested on a short term basis at money market
rates and therefore such funds are available at short notice.
27. SHARE CAPITAL
2021 2020
£ £
Called up, allotted and fully paid:
254,108,324 (2020: 254,108,324) Ordinary shares of 0.5 pence each 3,097,933 1,270,542
Movement in share capital during the period
Nominal
Number value Consideration
£ £
At 31 December 2019 253,555,798 1,267,779 40,692,904
Management share awards 2020 413,295 2,067 2,067
Share options exercised 2020 139,231 696 696
At 31 December 2020 254,108,324 1,270,543 40,695,668
Placing January 2021 327,516,661 1,637,583 26,201,333
Placing November 2021 37,500,000 187,500 3,000,000
Share options exercised 2021 461,530 2,308 2,308
At 31 December 2021 619,586,515 3,097,934 69,899,308
The Company does not have an authorised share capital.
DP Poland Employee Benefit Trust ("EBT")
The trustee of the EBT holds 2,482,928 ordinary shares in the Company for the
purposes of satisfying outstanding and potential awards under the Company's
Joint Ownership Share Scheme, Share Option Scheme and the Share Incentive
Plans. The historic cost of these shares was £51,565 with a net contribution
of £6,115 made by the JOSS award holders to acquire their joint interests.
The shares held by the EBT had a market value of £155,181 at 31 December
2021.
28. SHARE BASED PAYMENTS
Group Group
2021 2020
£ £
Share based payments expense 51,301 -
The Company has provided four types of share-based incentive arrangements.
Type of arrangement Vesting period Vesting conditions
Joint Ownership Share Scheme 2.5 - 3.5 years Achievement of store growth and financial targets
Employee Share Incentive Plan 2 years Two years service
Non-Executive Directors' Share Incentive Plan 2 years Two years service
Employee Share Option Plan Variable* Detailed individual
performance targets
Long Term Incentive Option Plan 2.3 years Detailed company performance targets
The Company established the Joint Ownership Share Scheme ("JOSS") and the
Share Incentive Plans on 25 June 2010, the Employee Share Option Plan on 06
May 2011 and the Long Term Incentive Share Option Plan on 19th December 2014.
The Group has calculated charges for the JOSS and share option awards using
a Black-Scholes model. Volatility and risk free rates have been calculated for
each JOSS grant based on expected volatility over the vesting period and
current risk free rates at the time of each award. Volatility assumptions are
estimates of future volatility based on historic volatility and current market
conditions .
Assumptions used in the valuation of share option awards were as follows:
Award date Exercise price Expected volatility Risk free rate Expected dividends Option life in years IFRS2 fair value per share option
11 January 2018 0.5 pence 50% 0.50% - 3 Years £0.4115
01 June 2018 0.5 pence 50% 0.50% - 2 Years £0.3331
11 October 2018 0.5 pence 50% 0.50% - 3 Years £0.3062
14 May 2019 0.5 pence 50% 0.50% - 3 Years £0.0865
The share based payments charge for the year by scheme was as follows:
2021 2020
Share Incentive Plan - -
Other Share Options 51,301 -
Long Term Incentive Share Option Plan - -
51,301 -
All of the above amounts related to equity-settled share based payment
transactions.
Share scheme awards outstanding
Scheme and date of award Hurdle or Outstanding Awarded Exercised Lapsed Outstanding
exercise
31.12.20
in period
in period
in period
31.12.21
price
No.
No.
No.
No.
No.
JOSS 25 June 2010 23.08 pence + 3% per annum 283,936 - - - 283,936
SIP 27 July 2010 n/a 100,000 - - - 100,000
SIP 30 May 2012 n/a 75,000 - - - 75,000
SIP 19 June 2013 n/a 279,221 - - - 279,221
SIP 18 June 2014 n/a 413,604 - - - 413,604
SIP 17 April 2015 n/a 486,486 - - - 486,486
SIP 03 May 2016 n/a 346,154 - - - 346,154
SIP 24 May 2017 n/a 191,490 - - - 191,490
SIP 24 May 2018 n/a 173,913 - - - 173,913
Share options 03 May 2016 0.5 pence 383,158 - 249,834 133,324 -
Share options 22 May 2017 0.5 pence 206,770 - 41,354 - 165,416
Share options 11 January 2018 0.5 pence 96,000 - 72,000 - 24,000
Share options 01 June 2018 0.5 pence 88,236 - - - 88,236
Share options 11 October 2018 0.5 pence 355,469 - - - 355,469
2020 performance bonus share awards 0.5 pence - 82,959 82,959 - -
The weighted average remaining contractual life of outstanding share options
is 1.34 years (2020: 1.36 years). The number share options exercisable at 31
December 2021 was 633,122 with a weighted average exercise price of 0.5 pence
(2020: 1,129,633 shares with a weighted average exercise price of 0.5 pence).
29. CAPITAL COMMITMENTS
At 31 December 2021 there were no amounts contracted for but not provided in
the financial statements (2020: £0) for the Group.
30. RELATED PARTY TRANSACTIONS
During the period the group and company entered into transactions, in the
ordinary course of business, with other related parties. The transactions with
directors of the company are disclosed in the Directors' Remuneration Report.
Transactions with key management personnel (comprising the Directors and key
members of management in Poland) are disclosed below:
Group Group
2021 2020
£ £
Short-term employee benefits 271,005 91,865
Share-based payments - -
At 31 December 271,005 91,865
The Company made a charge of £50,000 to DP Polska S.A. for management
services provided in 2021. The balance owed by DP Polska S.A. to DP Poland plc
as at 31 December 2021 was £396,000 (2020: £346,000).
The Company also has a borrowing from Malaccan Holdings Ltd. a significant
shareholder which totalled £5,840,594 (2020:£5,966,881)
31. EVENTS AFTER THE BALANCE SHEET DATE
Issue of ordinary shares
On 18 January 2022, 226,563 ordinary shares of 0.5 pence each in the capital
of the Company were issued to satisfy the exercise of options granted to some
employees of the
Company.
On 7 March 2022 Gerald Ford and Christopher Moore, previous Non-Executive
Directors of the Company, were issued 187,500 and 375,000 ordinary shares of
0.5 pence each in the capital of the Company respectively.
On 29 March 2022, 82,959 ordinary shares of 0.5 pence each in the share
capital of the Company were issued at a price of 7.25 pence to satisfy the
payment of a bonus for the H2 2020 period, payable in shares, to a former
employee.
The number of ordinary shares in issue at the date of this report is
620,458,537 ordinary shares of 0.5 pence each.
The war in Ukraine started in February 2022 and as of the date of publishing
this financial statement it has not impacted the profitability of the Group.
32. GOODWILL
Cost Group
£
At 1 January 2020 2,881,283
Additions -
At 31 December 2020 2,881,283
Additions 12,127,453
At 31 December 2021 15,008,736
Carrying amount Group
£
At 31 December 2021 15,008,736
The goodwill recognised by the accounting acquirer is equal to the
consideration (as determined under IFRS 3) which was paid by the accounting
acquirer less the fair value of the assets and liabilities acquired with the
accounting acquiree. The fair value adjustment amounted to £0.6 million and
is presented in Intangible Assets as Master Franchise Agreement asset. The
asset will be amortised over the franchise period. The goodwill recognised is
made up by the expected synergies of the enlarged business and it is expected
that the improved scale of the enlarged business will help the Company to
achieve its objective of becoming a market leader in Poland.
In accordance with IAS 36 the Group has performed impairment review of
goodwill at the reporting period end. The impairment test has been undertaken
by assessment recoverable amount of the CGU to which the goodwill has been
allocated, against the carrying value of this CGU. The review included
discounted cash flow projections to determine the recoverability of goodwill
and the intangible assets. We compared the carrying amount of the assets,
inclusive of assigned goodwill, to its respective fair value. Significant
assumptions inherent in the valuation methodologies for goodwill are employed
and include, but are not limited to, prospective financial information, growth
rates, terminal value and discount rates. The discount rate is reviewed
annually to take into account the current market assessment of the time value
of money and the risks specific to the CGU and rates used by comparable
companies. The discount rate used to calculate value-in-use is 8%. Costs are
reviewed for inflation and other cost pressures. The long term growth rate
used was 3%. Based on this quantitative test, we determined that the fair
value of assets including goodwill exceeded its carrying amount. After
completing our annual impairment reviews we concluded that goodwill was not
impaired.
33. VAT
Dominium is a party to a number of court and administrative proceedings, the
subject of which is to determine the amount of VAT paid by the company for the
period 2011-2016. The disputes relate to the rate at which VAT is applied on
sales made by Dominium, which is something that is affecting a number of
companies operating in the fast food sector in Poland (including DP Polska).
Dominium were applying a lower (5 per cent.) rate of VAT on sales, whereas the
tax authorities in Poland were of the opinion that a higher (8 per cent.) rate
should have been applied instead. As a result, Dominium have retrospectively
applied the higher (8 per cent.) rate for this period and have made additional
VAT payments to cover the shortfall to the tax authorities in Poland.
Accordingly, Dominium started to apply the higher 8 per cent. rate and have
sought recovery of the additional amounts paid due to the application of the
higher rate. Some of the proceedings that Dominium brought have been suspended
due to certain questions affecting major food service operators in Poland,
which have been resolved by the European Court of Justice in favour of food
service operators. In other proceedings, applications for a suspension of
payment of the VAT liability arising from the increased VAT rate have been
filed due to these issues and these have been approved for suspension.
The liabilities resulting from the decisions made to-date, totalling
approximately PLN 7.0 million, have been paid by Dominium. The dispute has
been resolved in favour of Dominium with reference to VAT for the year 2014
and Dominium is entitled to refund the VAT paid to Polish tax authorities in
the amount of approximately PLN 2.0 million. The dispute is separated for all
of the years mentioned above but Polish courts should follow the favourable
decision given by Supreme Administrative Administrative Court for year 2014.
Under the terms of the Acquisition Agreement, one half of any amounts that
have been overpaid in respect of the application of the higher VAT rate and
which may be refunded by the Polish tax authorities to Dominium shall be paid
by the Group to Malaccan Holdings Ltd..
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. END FR DXGDLRSBDGDSRecent news on DP Poland
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