REG - DP Poland PLC - Final Results
30/06/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230630:nRSd4674Ea&default-theme=true
RNS Number : 4674E DP Poland PLC 30 June 2023
DP Poland plc
("DP Poland", the "Group" or the "Company")
Final Results 2022 and Investor Presentation
DP Poland, operator of pizza stores and restaurants across Poland,
announces its audited results for the year ended 31 December 2022.
Financial highlights
· Revenue increased by 19.5% to £35.7m (2021: £29.9m)
o Strong LFL revenue growth of 21.0% in 2022 compared to 2021 driven by
increased average ticket price and order count
o Growth of dine-in, carry-out and delivery LFL System Sales of 55.3%, 84.7%
and 5.2% respectively compared to prior year
· System Sales were up 18.2% to £36.8m (2021: £31.2m)
· Group EBITDA increased from £1.1m to £1.7m
· Group loss for the period was broadly stable compared to prior period
£(4.4)m in 2022 and 2021
· Cash at bank of £4.1m as at 31 December 2022 (£2.7m as at 31
December 2021)
Operational highlights
· 87% of delivery sales were ordered online (2021: 85%)
· LFL system order count increased by 10.0% in 2022 compared to 2021
· Delivery times reduced by 14.5% in H2 2022 (vs H2 2021)
· The Group operated 116 stores at the end of 2022, including 113
Domino's Pizza stores across Poland and 3 across Croatia
· Operational completion of the merger with Dominium, with all stores
rebranded to Domino's by the end of 2022
· Acquisition of All About Pizza d.o.o. ("AAP") in July 2022 together
with exclusive rights of the Master Franchise Agreement concluded in July 2019
with Domino's Pizza International Franchising Inc
· Strengthened board with the appointments of Nils Gornall (CEO),
Edward Kacyrz (CFO), Andrew Rennie (Non-Executive Director) and David Wild
(Non-Executive Chair)
· 2022 inflation rates were 14.4% for Poland and 10.7% for Croatia,
driven mainly by energy prices, food and labour costs. Careful cost
management has mitigated these pressures
Outlook
· Food price rises beginning to abate, with some food costs dropping
throughout Q2 2023, which should support profitability in the coming quarters
of 2023
· Aim to use competitive strength to drive market share, grow our brand
awareness and further consolidate the market
· On track to further solidify the strong position of Domino's in
Poland.
Summary Financial Information
Currency: £000 2022 2021 % change
System Sales 36,816 31,160 18.2%
Revenue 35,694 29,866 19.5%
EBITDA* 1,693 1,137 48.9%
EBITDA* (Pre-IFRS 16) (1,423) (2,094) (32.0)%
margin % 4.7% 3.8%
Loss for the period (4,360) (4,361) 0.0%
*excluding non-cash items, non-recurring items and store pre-opening expenses
Nils Gornall, CEO, commented:
"Strong double digit growth in System sales and LFL sales leveraged by
considerable order count growth in the second half of 2022 demonstrated the
Company's transformation strategy is working.
The efforts put on coding High Volume Mentality into the Company's culture,
improving delivery times, portfolio consolidation, system upgrades, execution
of standards as well as focus on crucial processes starts bringing results and
this is visible both in top line growth and EBITDA improvement.
The positive growth trends continue in 2023. Energy and enthusiasm of our
staff and their commitment to making necessary changes are high and I look
with optimism to the future."
Investor Presentation
The Company is pleased to announce that Nils Gornall and Edward
Kacyrz will provide a live presentation via Investor Meet Company on 4th Jul
2023 at 12:30pm BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet DP
POLAND PLC via:
https://www.investormeetcompany.com/dp-poland-plc/register-investor
(https://www.investormeetcompany.com/dp-poland-plc/register-investor)
Investors who already follow DP POLAND PLC on the Investor Meet Company
platform will automatically be invited.
H1 2023 trading update
Q2 sales growth for both Polish and Croatian markets have been broadly in line
with April's previously announced results. A trading update for H1'2023 is
expected to be released in July.
Enquiries:
DP Poland plc
Nils Gornall , CEO
Tel: +44 (0) 20 3393 6954
Email: ir@dppoland.com
Singer Capital Markets (Nominated Adviser and Broker)
Shaun Dobson
Tel: +44 (0) 20 7496 3000
Notes for editors
About DP Poland plc
DP Poland, has the exclusive right to develop, operate and sub-franchise
Domino's Pizza stores in Poland and Croatia. The group operates over 116
stores and restaurants throughout cities and towns in Poland and Croatia.
Company Profile
DP Poland PLC ("DPP" or "the Company"), through its wholly owned subsidiary DP
Polska S.A. ("DPPSA"), has the exclusive right to develop, operate and
sub-franchise Domino's Pizza stores in Poland. DPP is a UK based company
listed on the AIM Market on the London Stock Exchange.
The first Domino's Pizza store was opened in Warsaw in February 2011. In
January 2021 the Group acquired the entire share capital of Dominium S.A.
("Dominium") which operated a total of 57 pizza restaurants in various
locations across Poland. The exclusive rights of the Master Franchise
Agreement have been granted to DPPSA for an initial period of 15 years with an
option to renew for a further 10 years, subject to certain conditions. At the
2022 year-end there were 113 Domino's Pizza stores across Poland.
In July 2022 the Group acquired the entire share capital of All About Pizza
d.o.o. ("AAP") together with exclusive rights of the Master Franchise
Agreement concluded in July 2019 with Domino's Pizza International Franchising
Inc. At the 2022 year-end APP operated 3 pizza restaurants in Croatia.
Poland has a population of 38 million people and has the potential to become a
significant pizza delivery market. Croatia with the population of 4 million
people is perceived by the directors to have strategic expansion opportunities
given the current lack of chained sectoral competition.
DPP's objective is to establish Domino's Pizza as the leading pizza brand in
Poland and Croatia.
Chairman's Statement
2022 was another transformational year for DP Poland PLC, having strengthened
the Board with an enthusiastic "Dominoids" team, conducted the fund raising
for further expansion, finalised rebranding of all Dominium stores to
"Dominos" brand and expanded operations outside Poland thanks to the
acquisition of Croatian All about Pizza d.o.o. ("AAP") in June 2022. This is
the first DP Poland PLC Annual Report to be published since the Polish and
Croatian businesses came together.
Against the background of unprecedented challenges presented by inflationary
pressures on energy, food costs and labour as a result of the war in
Ukraine, much has been achieved by the management team. Nils, our CEO, will
provide more detail about this in his statement.
Our board believes that consistent execution of goals and use of critical
mass achieved by the acquisition of Dominium in Poland at the beginning of
2021 eventually led to entering the path of improving adjusted EBITDA in the
second half of 2022 and management expects this trend to continue over 2023.
Take-over of the Croatian business with considerable growth opportunities has
been the first step for the Company to expand outside Poland with the
ambition to become an important player in the Food & Beverage sector in
Eastern Europe . At the end of 2022, the Group operated 113 stores across
Poland, and 3 in Croatia, providing an opportunity to leverage economies of
scale in operations, procurement and marketing. I am truly excited about the
future for DP Poland PLC - we see a long and exciting roadmap ahead, driven by
both organic and M&A opportunities. I am confident that our management
team will have all necessary capabilities to perform well. Despite the
headwinds of current inflationary pressures, we look forward to the day when
these headwinds become tailwinds.
Several important changes in the composition of the Board have taken place
since June 2022. In June 2022, the CEO and Executive-Director role has been
taken over by well experienced - 28 years in Dominos and post-franchisee -
Nils Gornall, substituting Piotr Dzierżek in that role. At the same time,
Andrew Rennie - post-DPE European CEO - joined the Board as a Non-Executive
Director, bringing a wealth of sectoral experience. In August 2022, Malgorzata
Potkanska stepped down from the role of CFO and Executive-Director, being
replaced in December 2022 by Edward Kacyrz - a Chartered Accountant with 18
years of experience in a number of financial, strategy and management roles.
At the end of March 2023, Peter Furlong stepped down from the Board as a
Non-Executive Director.
Further to the above changes, effective as of 31st December 2022, after 12
years of chairing the DPP Board, Nick Donaldson decided to retire and stand
down from the role of Non-Executive Chairman. I would like to thank Nick for
all of his engagement over that time. I am honoured to be nominated to the
role of Non-Executive Chairman effective January 2023 and will put all of my
efforts in to serving the Group with all of my experience.
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.
I would like to end my first Chairman's Statement for DPP by thanking our
management team and all employees for their superb efforts and outstanding
achievements in a year of transformational change for the business. Building
sales and customer loyalty in this environment is a big challenge, but the
results tell their own story. I would like to also thank our Board Members for
their wisdom and strategic leadership to execute the programme successfully.
Finally, our Shareholders continue to support the Board as we strive to grow
and evolve, creating value. I am excited by our prospects.
With best my wishes.
David Wild
Non-Executive Chairman
29 June 2023
Chief Executive's Review
In 2022, the end of the COVID-19 pandemic and start of the war in Ukraine
brought a challenge to the restaurant sector and a need to adapt very
quickly to a "new-normal" business environment, full of inflationary pressures
on energy, food costs and labour, changing consumer habits and strengthened
household budget control. Despite this, DPP have continued to focus on
consumer proposition improvement, cost control, network optimisation and
business expansion to continue with its strategy.
It was a year of hard work for the Polish team who carried out transformation
of the business from restaurant dine-in mode towards speed and quality driven
High Volume Mentality via improving product, service and image to address
changed consumer habits in the post-COVID-19 economy. For that reason, in
order to boost sales, DPP simplified their product portfolio, concentrated on
the product quality and consistency as well as simplified pricing schemes as
per consumer surveys.
DPP also invested in our people and revamped the training department. We
introduced the store managers' bonus schemes, focusing on our most important
KPI's and created competitiveness amongst managers, with ranking our stores'
performances. This overall improved operations and service offered to
consumers significantly.
Furthermore, DPP focused on creating a compelling value proposition in
carry-out business and recovery of dine-in business after the cease of
COVID-19 restrictions, with no disruption to the development of our dominant
delivery channel amounting to £22.9m in 2022 (LFL system sales) and £22.5m
in 2021. We still take every occasion to improve our delivery times further
to build on this to our competitive advantage, although we already offer one
of the most compelling delivery services in Poland.
High Volume Mentality in combination with reduced delivery times (by 14.5% in
the second half 2022 vs 2021) visibly improved consumer offering and, thus,
consumers awarded us with a considerable 21.0% Like-For-Like (LFL) sales
increase for the year 2022 driven by both average ticket price as well as
order count. Q1 2023 Like-For-Like saw sales increase by 19.4%
Quarter-To-Quarter giving us the privilege to look with optimism to the
future.
Observed volume growth in 2022 drove commissary capacity coverage rates up to
their highest levels ever recorded, however, further Company growth is not at
risk as the capacity can easily be scaled up via introduction of work in
shifts or light capital investments. At the same time, growing business scale
created the opportunity to renegotiate distribution costs, whilst still
maintaining the highest quality standards.
In 2022, DPP looked very closely at cost management. Inflationary pressures
were a trigger to speed up IT projects covering the accounting system upgrade,
cash and labour management, review energy contracts and reengineer a few basic
processes, results of which in overall overbalanced the pressures and the
caused adjusted EBITDA trend reversal that we expect to continue over 2023.
At the end of 2022 the Company was at the final stage of network optimisation
in Poland (after Dominium S.A. reverse take-over in 2021) delivering three
store refurbishments, opening two new locations and eliminating eight
loss-making stores in poor locations, ending up the year with 113 points of
sales. Such optimisation was a sound decision driving adjusted EBITDA
improvement and creating a base for further expansion.
The capital for last year investments as well as further expansion has been
secured by the fund raising held in the summer 2022. Simultaneously, DPP's
cash position visibly improved. The capital obtained will serve in 2023 for
further store network development in Poland and Croatia, store refurbishments,
appropriate marketing campaigns reflecting growing brand awareness and
additional IT system upgrades.
In July 2022, DPP expanded its operations outside Poland by acquiring All
About Pizza d.o.o. (APP) - a company established in Croatia in 2020 with three
corporate stores at the date of transaction. The highly fragmented Croatian
market gives a well performing APP the chance to take a dominant market
position with a good forecast for further network expansion. The take-over
transaction was executed via exchange of shares.
We continued to work on the Digital Experience Platform improving content and
user experience in all of our points of contacts - webpage, mobile and apps.
Additionally, Ukrainian language was added to the Platform answering the needs
of the growing number of Ukrainian citizens in Poland and Croatia.
We want to exploit every digital order and delivery opportunity, and for that
reason we added Wolt to the current list of aggregators - Pyszne.pl (known in
Europe as 'Just take away'), Glovo and UberEats. Additionally, we are
reviewing other sales opportunities, as our objective is to generate new
orders incrementally, with a higher average spend.
The strong foundation for the DPP business has been built in the last two
years. This is the first financial statements which presents the consolidated
business of Polish and Croatian entities, and the first year where a clear
pivot in business performance is visible, showing the company's hidden
potential. The numbers reflect the true financial performance, but include
one-off items related to the transformation to High Volume Mentality.
We have seen improvement in adjusted EBITDA, but we aspire for more. Since Q2
2022, we have faced an unprecedented inflationary environment that had an
impact on our 2022 profitability, however, food price rises are beginning to
abate, with some food costs dropping throughout Q2 2023, which should support
profitability in the coming quarters of 2023.
As announced to the market, we are seeking to reduce the inflationary impact
through various cost-efficiency initiatives and price increases whilst
ensuring we continue to offer the best consumer value. 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 competitive strength to drive market share, grow
our brand awareness and consolidate the market further. The board is fully
behind this stated strategy of growing market share.
I remain very optimistic about the outlook. We are on the right track to
further solidify the strong position of Domino's in Poland.
Nils Gornall
Chief Executive Officer
29 June 2023
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.
2022 was expected to be a pivot year for many industries worldwide as the
COVID-19 pandemic was coming to an end. Unfortunately, the war in Ukraine has
had a significant impact on the global economy and severely impacted energy
prices, food costs and the labour market in Central Eastern Europe where DPP
is operating. These inflationary pressures have, inevitably, negatively
impacted the whole restaurant sector, however, in particular independent
players who could not benefit from the effect of scale, purchase power nor
differentiated channels of distribution. At the same time, damaged sector
condition created an opportunity for growth for the chained and better
organised businesses.
Consistent execution of the strategy over 2022 positioned DPP well in the new
economic environment. Thanks to implemented High Volume Mentality, increased
focus on operations excellence, stringent cost management and digital platform
development, DPP delivered a strong 21.0% LFL top line growth and reversed
EBITDA trend, building a solid base for further business development and
market shares growth.
Acquisition of All About Pizza d.o.o. (APP)
On 29 July 2022 the Company completed an acquisition with All About Pizza
d.o.o. (APP), a company registered in Croatia. Further information about the
transaction is disclosed in Note 21. The transaction resulted in APP becoming
a wholly owned subsidiary of the Company in accordance with IFRS 3 'Business
Combinations' and was concluded via exchange of 100% APP shares for 5% shares
of the Company. The APP shareholders - Nils Gornall and Andrew Rennie - were
nominated to the Company's board. The fair value of the identifiable assets
and liabilities acquired as at acquisition date amounted to £988,751 and the
fair value of the consideration transferred amounted to £2,264,362. An excess
of consideration paid over the net assets was attributed to MFA intangible
asset.
Financial Performance
2022 2021
Notes £ £
System sales* 36,816,825 31,159,781
Revenue 2 35,694,098 29,866,189
Direct Costs (28,312,921) (24,427,738)
Selling, general and administrative expenses - excluding: 3 (5,687,720) (4,301,176)
store pre-opening expenses, depreciation, amortisation and share based
payments
Group adjusted EBITDA - excluding non-cash items, non-recurring items and 1,693,457 1,137,275
store pre-opening expenses
Store pre-opening expenses (37,584) (3,429)
Other non-cash and non-recurring items 6 (500,971) 59,278
Depreciation and amortisation (4,336,210) (4,867,679)
Share based payments 31 (137,748) (51,301)
Foreign exchange gains / (losses) 17,406 (61,911)
Finance income 8 257,984 1,155,806
Finance costs 9 (1,258,850) (1,669,527)
Loss before taxation 5 (4,302,516) (4,301,488)
Taxation 10 (57,429) (58,983)
Loss for the period (4,359,945) (4,360,471)
* System Sales - total retail sales including sales
from corporate and sub-franchised stores
Revenue
The Group System sales increase by 18.2% was driven by Polish system sales
growth by 16.1% (20.2% in Local currency) and Croatian sales after acquisition
which comprises 2.1% of the Group System sales.
The Group revenue increased by 19.5% Year-over-Year ("YoY") (23.7% in Local
currency) and 21.0% Like-For-Like was primarily driven by the launch of the
High Volume Mentality approach and repositioning of distribution channels
after the COVID-19 pandemic - the development of carry-out offerings adjusting
to consumer habits, and the recovery of the dine-in business, with the Company
growing their delivery operations with the main focus being to reduce
delivery times.
The growth was satisfactorily divided between average ticket price increase
and order count improvement. From a phasing perspective, as profiled later in
the Key Performance Indicators section, DPP performance in 2022 consistently
improved from quarter to quarter, despite growing inflationary pressures and
falling consumer sentiment since the beginning of the war in Ukraine.
Direct costs
Although the Polish economy was subject to one of the highest inflation rates
in Europe during 2022, with particular pressure on energy prices (88.3% YoY),
food costs (22.1% YoY) and labour market (7.5% minimal wage increase in 2022),
the Group managed to improve its cost position and keep direct costs increase
(15.9.% YoY) visibly below the revenue growth (19.5% YoY).
Such results were delivered by implementing cost management projects,
including the standardisation of production processes, partial exchange of
scooters fleet impacting reduction of maintenance costs, delivery times'
improvement, labour management and reduction of energy consumption.
Review of current contract terms and performing an active search of new
vendors have allowed the Group to achieve savings on food cost and decrease
these costs (as % of revenue) in comparison to 2021.
Selling, general and administrative expenses ("SG&A")
SG&A were equivalent to 15.9% of revenue, which is 1.5 percentage points
("p.p.") higher than in 2021, driven in majority by the higher than minimal
wage salary growth ( 8.7%), higher energy costs in commissary, increased
marketing costs supporting volume growth, employee benefits and professional
fees.
Other non-cash and non-recurring items
The Group recognised non-cash and non-recurring items in 2022, mainly
referring to an IFRS16 adjustment representing right of use assets write-off
due to potential store closures in 2023 related to network optimisation in
Poland (amounting to £542,488). The other non-cash and non-recurring items
include advisors and other fees related to AAP acquisition, VAT refund as well
as gains and losses from the sale and liquidation of fixed assets.
Depreciation and amortisation
Depreciation and amortisation expenses consist mainly of right of use assets
depreciation charges amounted to £2,272,151 in 2022 (2021: £2,427,823),
leasehold improvements depreciation amounted to £804,578 (2021: £924,736)
and intangible assets amortisation amounted to £626,252 in 2022 (2021:
£674,030).
Finance costs
Finance costs of the Group mainly include interest expense on lease
liabilities amounted to £665,084 (2021: £742,862) and interest payable
according to loan note issued to Malaccan Holdings Ltd amounted to £333,418
(2021: £420,544).
Taxation
The Group paid no corporation tax in 2022 due to brought forward losses. As
the Group has unused tax losses of £17,702,039 available for offset against
future profits, it does not expect to pay any corporation tax in 2023.
Group loss for the period
Group loss for the period is broadly stable compared to 2021. This is mainly
due to increased inflationary pressures on food and labour costs as well as
enhanced selling and administrative costs as a result of higher investment
into marketing, followed by three stores refurbishments and two new stores
openings.
For the purpose of achieving profits in the future, the board has prepared a
twelve month' roadmap for a number of different strategic and operational
projects aiming at better consumer proposition (i.e. consumer surveys)
reduction of direct costs (review and renegotiation of trading terms within
the major cost groups) and fundamental operational costs reduction, covering
such areas as the Group structure, commissary setup, processes' optimisation
(i.e. new accounting system), automation of processes and labour management
(i.e. new labour scheduling system roll-out).
Group Loss for the period* 2022 2021 Change %
Group loss for the period (4,359,945) (4,360,471) +0.01%
* Actual exchange rates for 2022 and 2021
Store Count Poland
Dominos Polska S.A. & Dominium S.A. 1 Jan 2022 M&A Opened Closed 31 Dec 2022
Corporate 113 0 2 10* 105
Sub-Franchised 8 0 0 0 8
Total 121 0 2 10* 113
* The number of closed stores includes two seasonal stores being opened only
during summer
Store Count Croatia
All About Pizza d.o.o. 1 Jan 2022 M&A Opened Closed 31 Dec 2022
29(th) July 2022
Corporate 0 3 0 0 3
Sub-Franchised 0 0 0 0 0
Total 0 3 0 0 3
Enlarged Group
Store count 1 Jan 2022 M&A Opened Closed 31 Dec 2022
Corporate 113 3 2 10 108
Sub-Franchised 8 0 0 0 8
Total 121 3 2 10 116
In 2022 DP Poland opened 2 new corporate stores and closed 10 stores
(including 2 seasonal stores). 3 stores were fully refurbished. The
acquisition of APP added an additional 3 stores in Croatia to the DPP store
network. The chain managed to shorten delivery times by 14.5% in the second
half 2022 vs 2021, approaching very close to the European average.
Sales Key Performance Indicators (KPIs)
System sales* were up 18.2% YoY, whereas LFL system sales** were up 21.0% YoY.
2022 2021 Change %
Group System Sales* £ 36,816,825 31,159,781 18.2%
Poland LFL system sales**, % growth 21% 7% n/a
Poland LFL system order count***, % growth 10% 0% n/a
Poland Delivery System Sales**** ordered online, % growth 87% 85% n/a
* System Sales - total retail sales including sales
from corporate and sub-franchised stores. Sales from sub-franchised stores are
not included in revenue
** Like-for-like System Sales - matching trading periods for
the same stores between 1 January and 31 December 2022 and 1 January and 31
December 2021. The Group's system stores that are included in like-for-like
System Sales comparisons are those that have operated for at least 1 year
preceding the beginning of the first month of the period used in like-for-like
comparisons for a certain reporting period, assuming the relevant system store
has not been subsequently closed
*** System order count - total retail orders from corporate and
sub-franchised stores
**** Delivery System Sales stand for the turnover generated in delivery
channel by both corporate and franchisee stores
Like-for-like System Sales growth 2022 vs 2021 per quarter were as follows:
Q1 Q2 Q3 Q4
LFL system sales growth by quarter 21.8% 25.6% 24.4% 13.4%
Exchange rates
PLN : £1 2022 2021 Change %
Profit & Loss Account 5.4965 5.3108 +3.5%
Balance Sheet 5.2827 5.4702 -3.4%
HRK : £1 2022 2021 Change %
Profit & Loss Account 8.7079 n/a -
Balance Sheet 8.4950 n/a -
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"). Financial Statements for our Croatian subsidiary All About Pizza
d.o.o. are denominated in Croatian Kuna ("HRK") and translated to Pound
Sterling ("GBP"). Under UK adopted international accounting standards the
Income Statement for the Group has been converted from PLN and HRK at the
average annual exchange rate applicable. The balance sheet has been converted
from PLN and HRK to GBP as at the exchange rate at 31 December 2022.
Cash position
1(st) January 2022 Cash movement 31(st) December 2022
Cash in bank 2,701,646 1,408,676 4,110,322
The large cash movement is a result of fundraising completed in August 2022
and cash outflows for a number of different strategic and operational
projects.
Inventories
1(st) January 2022 Movement 31(st) December 2022
Raw materials and consumables 667,898 314,212 982,110
An increase of inventory is mainly due to increased purchases of cheese in
2022 due to expected future price increases as well as acquisition of AAP in
July 2022.
Trade and other receivables
1(st) January 2022 Movement 31(st) December 2022
Current trade and other receivables 1,219,447 747,540 1,966,987
An increase of trade and other receivables balance is mainly due to
prepayments for TV marketing campaign started in the beginning of 2023 and VAT
receivables increase.
Cash flows from investing activities
Cash flows from investing activities amounted to £(3,555,378) in 2022 (2021:
£357,170) comprise mainly acquisition of property, plant and equipment,
software and other intangible assets due to AAP acquisition.
Macro-economic conditions in Poland and Croatia
Polish GDP increased in 2022 by 4.9% YoY. The country is expected to face
further inflationary pressures in 2023, although less aggressive than in 2022.
The board is constantly monitoring purchase prices to ensure the Group can
react to any price increases from its suppliers.
The unemployment rate has stayed at the rates below 3% since 2020, with no
signs to grow.
Macro-economic conditions - Poland 2022 2021
Real GDP growth (% growth) 4.9* 6.8
Inflation (% growth) 14.4 5.1
Unemployment Rate (% of economically active population) 2.9 2.9
* First estimate of Polish Statistics Office for the year 2022
Croatian GDP increased in 2022 by 6.3%. The country is still facing
inflationary pressures in result of world macroeconomic situation, however,
currency change from HRK to EUR effective 1st January 2023 additionally
strengthened this pressure in short-term. For that reason, APP has been
assigned to supply contracts of the Group to reduce pressure on APP
profitability.
Macro-economic conditions - Croatia* 2022 2021
Real GDP growth (% growth) 6.3 13.1
Inflation (% growth) 10.7 2.7
Unemployment Rate (% of economically active population) 7.1 7.6
* Data based on macroeconomic indicators published 27th March 2023 by Croatian
National Bank
Sub-franchised stores
There are 8 sub-franchised stores as at 31st December 2022. Sales of
sub-franchised stores for 2022 amounted to £2,351,560 (2021: £2,632,464).
Going concern
The board considered the Group's forecasts, in particular those relating to
the growing sales volume and improved cost management, to satisfy itself
that the Group has sufficient resources to continue in operation for the
foreseeable future. The Group sales and costs forecasts are based on
market-available data with regard to country GDP growth rates, inflation,
price trends of main cost items, as well as on historical level of sales
volumes and incurred costs as a percentage of sales, taking into account
implemented High Volume Mentality, digital platform development and increased
focus on operations excellence. The board also considered the Group's cash
flow forecasts and successfully concluded stress-test for drop in net sales by
5% versus initial forecast taking into consideration possible changes in
inflation and commodity prices. Sensitivity analysis has been completed, and
inflation rate would need to increase from 15.1% to 30.0% with no change in
revenue to pass these costs increases to customers for there to be an issue
with going concern based on future forecasts.
Over the past quarters in 2022, the board of DP Poland has given a
considerable thought as to how the Group might define, quantify and minimise
the risks related to inflationary pressures in result of the war in Ukraine.
As the highest inflation rates were recorded between July and November 2022
with following months to abate, the board considers that the major risks
connected with inflation are vanishing, which has already been reflected in
the decreasing commodity prices offered by suppliers in Q1 2023, with the
forecast for further price reductions.
On the other hand, the board has prepared a twelve month roadmap for a number
of different strategic and operational projects aiming at better consumer
proposition (i.e. consumer surveys), and fundamental operational costs
reduction, covering such areas as the Group structure, commissary setup,
processes optimisation (i.e. new accounting system), automation of processes
and labour management (i.e. new labour scheduling system roll-out).
The Company's recent equity fundraise made in August 2022, which provided an
additional £4.8m (before expenses) of resource, has 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 benefits coming
to the business in result of strategy change and High Volume Mentality
approach in the near future.
Having considered the Group's cash flows and its liquidity position, and after
reviewing the forecast for the next twelve months and beyond, taking into
account reasonably possible changes in trading performance, the Directors
believe that the Group has 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 commodity prices and inflationary pressures, which
remain the most pronounced risks to our going concern assumptions.
Edward Kacyrz
Chief Financial Officer
29 June 2023
FINANCIAL STATEMENTS
Group Income Statement
2022 2021
Notes £ £
Revenue 2 35,694,098 29,866,189
Direct Costs (28,312,921) (24,427,738)
Selling, general and administrative expenses - excluding: 3 (5,687,720) (4,301,176)
store pre-opening expenses, depreciation, amortisation and share based
payments
Group adjusted EBITDA - excluding non-cash items, non-recurring items and 1,693,457 1,137,275
store pre-opening expenses
Store pre-opening expenses (37,584) (3,429)
Other non-cash and non-recurring items 6 (500,971) 59,278
Depreciation and amortisation (4,336,210) (4,867,679)
Share based payments 31 (137,748) (51,301)
Foreign exchange gains / (losses) 17,406 (61,911)
Finance income 8 257,984 1,155,806
Finance costs 9 (1,258,850) (1,669,527)
Loss before taxation 5 (4,302,516) (4,301,488)
Taxation 10 (57,429) (58,983)
Loss for the period (4,359,945) (4,360,471)
Loss per share Basic 12 (0.67 p) (0.75 p)
Diluted 12 (0.67 p) (0.75 p)
All of the loss for the year is attributable to the owners of the Parent
Company.
Group Statement of comprehensive income
2022 2021
£ £
Loss for the period (4,359,945) (4,360,471)
Currency translation differences (333,785) 24,798
Other comprehensive expense for the period, net of tax to be reclassified to (333,785) 24,798
profit or loss in subsequent periods
Total comprehensive income for the period (4,693,730) (4,335,673)
All of the comprehensive expense for the year is attributable to the owners of
the Parent Company.
Group Balance Sheet
2022 2021
Notes £ £
Non-current assets
Goodwill 13 15,111,002 15,008,736
Intangible assets 14 3,714,479 2,207,448
Property, plant and equipment 15 6,645,301 6,135,097
Leases - right of use assets 22 6,472,965 8,237,471
Trade and other receivables 19 822,042 820,871
32,765,789 32,409,623
Current assets
Inventories 20 982,110 667,898
Trade and other receivables 19 1,966,987 1,219,447
Cash and cash equivalents 25 4,110,322 2,701,646
7,059,419 4,588,991
Total assets 39,825,208 36,998,614
Current liabilities
Trade and other payables 26 (5,343,028) (4,983,665)
Lease liabilities 23 (2,834,336) (2,667,159)
(8,177,364) (7,650,824)
Non-current liabilities
Lease liabilities 23 (5,666,835) (7,038,279)
Deferred tax 18 (276,099) (213,797)
Borrowings 27 (6,763,297) (5,829,461)
(12,706,231) (13,081,537)
Total liabilities (20,883,595) (20,732,361)
Net assets 18,941,613 16,266,253
Equity 24
Called up share capital 30 3,561,969 3,097,933
Share premium account 46,925,141 42,551,453
Capital reserve - own shares (48,163) (48,163)
Retained earnings (21,450,212) (17,228,015)
Merger relief reserve 23,676,117 21,282,500
Reverse Takeover reserve (33,460,406) (33,460,406)
Currency translation reserve (262,834) 70,951
Total equity 18,941,613 16 266253
The financial statements were approved by the Board of Directors and
authorised for issue on 29 June 2023 and were signed on its behalf by:
Nils
Gornall
Edward Kacyrz
Chief Executive
Officer
Chief Financial Officer
Company Balance Sheet
2022 2021
Notes £ £
Non-current assets
Investments 16 32,966,376 51,790,168
Loans granted to subsidiary undertakings 17 171,341 -
33,137,717 51,790,168
Current assets
Trade and other receivables 19 146,981 421,594
Cash and cash equivalents 25 65,293 302,509
212,274 724,103
Total assets 33,349,991 52,514,271
Current liabilities
Trade and other payables 26 (94,078) (130,669)
Non Current liabilities
Borrowings 27 (6,734,149) (5,829,461)
Net assets 26,521,764 46,554,141
Equity 24
Called up share capital 30 3,561,969 3,097,933
Share premium account 46,925,141 42,551,453
Retained earnings (47,641,463) (20,377,745)
Merger relief reserve 23,676,117 21,282,500
Shareholders' Equity 26,521,764 46,554,141
The financial statements were approved by the Board of Directors and
authorised for issue on 29 June 2023 and were signed on its behalf by:
Nils
Gornall
Edward Kacyrz
Chief Executive
Officer
Chief Financial Officer
The loss relating to transactions in the financial statements of the parent
company was £27,401,465 (2021: £11,557,307).
DP Poland plc's company registration number is 07278725
Group Statement of Cash Flows
2022 2021
Notes £ £
Cash flows from operating activities
Loss before taxation for the period (4,302,516) (4,301,488)
Adjustments for:
Finance income 8 (257,984) (1,155,806)
Finance costs 9 1,258,850 1,669,527
Foreign exchange movements (144,025) 1,180,246
Depreciation, amortisation and impairment 4,336,210 4,867,679
Loss on fixed asset disposal 136,974 267,866
VAT refund - interests 8 231,476 -
Dismantling provision 20,466 -
Share based payments expense 31 137,748 51,301
Operating cash flows before movement in working capital 1,417,199 2,579,325
(Increase) in inventories 20 (314,212) (32,569)
(Increase) / decrease in trade and other receivables 19 (748,711) 144,647
Increase / (decrease) in trade and other payables 26 359,363 (2,276,572)
Cash generated from operations 713,639 414,831
Taxation payable - -
Net cash generated from operations 713,639 414,831
Cash flows from investing activities
Payments to acquire software (241,032) (170,637)
Payments to acquire property, plant and equipment (1,072,811) (720,381)
Payments to acquire intangible fixed assets (62,831) (208,004)
Proceeds from disposal of property plant and equipment 46,063 90,892
Interest received on sub-franchisee loans 8 16,767 25,233
Interest received on short-term deposits - 3,811
Cash flows from acquiring a subsidiary 21 (2,241,534) 1,336,256
Net cash (used in) / generated from investing activities (3,555,378) 357,170
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 7,231,341 6,121,561
Repayment of lease liabilities (2,068,948) (3,474,856)
Repayment of borrowings (163,539) -
Interest paid on lease liabilities 9 (665,084) (751,711)
Net cash from/(used in) financing activities 4,333,770 1,894,994
Net increase in cash 1,492,031 2,666,995
Exchange differences on cash balances (83,355) -
Cash and cash equivalents at beginning of period 2,701,646 34,651
Cash and cash equivalents at end of period 25 4,110,322 2,701,646
Company Statement of Cash Flows
2022 2021
Notes £ £
Cash flows from operating activities
Loss before taxation (27,401,466) (11,557,307)
Adjustments for:
Finance income (818,128) (35)
Finance expense 576,416 420,544
Foreign exchange movements 389,243 (409,904)
Impairment charge 26,781,124 11,130,429
Share based payments expense 72,315 32,034
Operating cash flows before movement in working capital (400,496) (384,239)
Decrease in trade and other receivables 19 274,613 50,598
(Decrease) in trade and other payables 26 (36,591) (771,917)
Cash used in operating activities (162,474) (1,105,558)
Cash flows from investing activities
Equity investment in subsidiary company (7,891,899) (5,710,536)
Loans granted to subsidiary undertakings 17 (170,867) -
Interest received 818,128 35
Net cash (used in) investing activities (7,244,638) (5,710,501)
Cash flows from financing activities
Interest paid - (10,640)
Net proceeds from issue of ordinary share capital 7,231,341 6,121,561
Net cash from financing activities 7,231,341 6,110,921
Net decrease in cash (175,772) (705,138)
Exchange differences (61,444) 409,904
Cash and cash equivalents at beginning of period 302,509 1,007,647
Cash and cash equivalents at end of period 25 65,293 302,509
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 2021 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
Translation difference - - - (333,785) - - - (333,785)
Loss for the period - - (4,359,945) - - - - (4,359,945)
Total comprehensive income for the year - - (4,359,945) (333,785) - - - (4,693,730)
Shares issued (net of expenses) 464,036 4,373,688 - - - - 2,393,617 7,231,341
Share based payments - - 137,748 - - - - 137,748
Transactions with owners in their capacity as owners 464,036 4,373,688 137,748 - - - 2,393,617 7,369,089
At 31 December 2022 3,561,969 46,925,141 (21,450,212) (262,834) (48,163) (33,460,406) 23,676,117 18,941,613
Company Statement of Changes in Equity
Share
Share premium Retained Relief
capital account earnings reserve Total
£ £ £ £ £
At 31 December 2020 1,270,542 36,838,450 (8,871,739) - 29,237,253
Loss for the year - - (11,557,307) - (11,557,307)
Total comprehensive income for the year - - (11,557,307) - (11,557,307)
Shares issued 408,558 5,713,003 - - 6,121,561
Merger relief reserve 1,418,833 - - 21,282,500 22,701,333
Share based payments - - 51,301 - 51,301
Transactions with owners in their capacity as owners 1,827,391 5,713,003 51,301 21,282,500 28,874,195
At 31 December 2021 3,097,933 42,551,453 (20,377,745) 21,282,500 46,554,141
Loss for the year - - (27,401,465) - (27,401,465)
Total comprehensive income for the year - - (27,401,465) - (27,401,465)
Shares issued) 464,036 4,373,688 - - 4,837,724
Merger relief reserve - - - 2,393,617 2,393,617
Share based payments - - 137,748 - 137,748
Transactions with owners in their capacity as owners 464,036 4,373,688 137,748 2,393,617 7,369,089
At 31 December 2022 3,561,969 46,925,141 (47,641,462) 23,676,117 26,521,764
Notes to the Financial Statements
1. ACCOUNTING POLICIES
Authorisation of financial statements and statement of compliance with IFRSs
The DP Poland plc Group and Company financial statements for the year ended
31 December 2022 were authorised for issue by the Board of the Directors on 29
June 2023 and the balance sheets were signed on the Board's behalf by Nils
Gornall and Edward Kacyrz. 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 adjusted 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. 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 2022.
The Group and Company financial statements are presented in Sterling. The
assets and liabilities of the foreign subsidiaries, whose functional currency
is Polish Zloty and Croatian Kuna, 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.
With effect from 29 July 2022, the Company became the legal parent of All
About Pizza d. o.o. Further information about the transaction is disclosed in
note 21. The transaction resulted in APP becoming a wholly owned subsidiary of
the Company in accordance with IFRS 3 'Business Combinations'.
Adoption of new and revised standards
The accounting policies adopted in the preparation of the Group financial
statements are consistent with those followed in the preparation of the
Group's financial statements for the year ended 31 December 2021, except for
the adoption of new standard, interpretations, and amendments to standards
effective as of 1 January 2022.
The amendments and interpretations below were applied in 2022 and had no
significant impact on the accounting policies applied:
- Amendments to IFRS 3 - Reference to the Conceptual Framework
- Amendments to IAS 16 - Property, Plant and Equipment: Proceeds
before Intended Use
- Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a
Contract
New standards and interpretations not applied
Below amendments to standards are effective for annual periods beginning after
1 January 2023 and earlier application is permitted. The Group has not early
adopted the new or amended standards in preparing these consolidated financial
statements:
- IFRS 17 Insurance Contracts
- Amendments to IFRS 17 Insurance contracts: Initial Application
of IFRS 17 and IFRS 9 - Comparative Information
- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
- Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
- Amendments to IAS 12 Income taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction
It is expected that the standards will not have a material impact on the
Group.
Below are standards and amendments that are issued but not yet approved by
the UK. The Group will apply the standard once approved by the UK:
- Amendments to IAS 1: Classification of liabilities as current or
non-current and Non-current Liabilities with Covenants
- Amendment to IFRS 16 - Leases on sale and leaseback
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:
- Franchise fees and intellectual property rights: over the duration of the
legal agreement;
- Computer software: 2 years from the date when the software is brought
into use; and
- Capitalised loan discounts: the life of sub-franchise agreements of 10
years.
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 it's 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
2022. For further details on the impairment review please refer to note 13.
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 fair value less costs to sell , the
estimated future cash flows are discounted to their present value using a
post-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.
Trade and other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest
method.
Borrowings
Borrowings are recognised initially at fair value net of directly attributable
transaction costs.
After initial recognition, interest-bearing borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as
through the EIR amortisation process. Amortised cost is calculated by taking
into account any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss.
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.
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 recognised in other comprehensive income.
When a foreign operation is partially disposed of or sold, exchange
differences are reclassified from equity to profit or loss on disposal of the
net investment.
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 116 stores, one office, three
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 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
The Group recognises revenue from the following major sources:
- Corporate store sales;
- Royalties, franchise fees and sales to franchisees; and
- Rental income on leasehold property.
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. The Group recognises revenue when it transfers
control of a product or service to a customer. The criteria for recognising
revenues are set out in note 2.
Direct Costs
Direct costs comprises foods costs and direct store expenses.
Finance income
Income 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 UK-adopted
international accounting standards 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.
Judgements
Purchase price allocation of the acquisition of AAP
Applying IFRS 3 for accounting of acquisition required Group's judgement. The
Directors have assessed the key nature and attributes of the assets of the
businesses acquired and in particular the value of the separable intangible
assets. The Directors have concluded that materially, the value is all
attributable to the Master Franchise Agreement and are satisfied that it is
appropriate to attribute the full value of the intangible asset acquired to
brand value. Further details are shown in note 21.
Assessment of indefinite useful life of the Master Franchise Agreement
intangible asset
Identification of Master Franchise Agreement's useful life recognised as at
acquisition date of All About Pizza d.o.o. also required judgement. As there
is no foreseeable limit to the period over which Master Franchise Agreement is
expected to generate net cash inflows for the entity, the Group identified
Master Franchise Agreement to have an indefinite useful life.
Estimation uncertainties
Impairment
The Group's determination of whether intangibles and investments in subsidiary
undertaking are impaired requires an estimation of the fair value less costs
of disposal 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 the fair value less costs of
disposal 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 fair
value is most sensitive to the following assumptions: store performance;
discount rates; store openings in Poland and Croatia; 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 Polish subsidiaries,
i.e., DP Polska S.A. and Dominium S.A., had a historical cost of £57.4m. With
effect from 29 July 2022, the Company became the legal parent of All About
Pizza d.o.o. The parent company's investment in Croatian subsidiary had a
historical cost of £ 2.4m. Further details are shown in note 16. The Group
has determined that an impairment of £26.8m in the investment value should be
recognised in the accounts of DP Poland plc.
Amortised cost of sub-franchisee loan receivables and loan notes
The Group's determination of the amortised cost of sub-franchisee loan
receivables at initial recognition requires the estimation of the initial fair
value of the below-market rate loans provided to the franchisees.
Recoverability of such loans is an ongoing estimation uncertainty and is
sensitive to changes in circumstances and of forecast economic conditions. The
Group's historical credit loss experience and forecast of economic conditions
may also not be representative of sub-franchisees' actual default in the
future.
The Group has also determined the amortised cost of borrowings, which requires
the estimation of the initial fair value of the below-market rate loans
provided by Malaccan Holdings. The loans have been discounted to a market rate
of 5.3% calculated based on EURIBOR and additional margin, which required
accounting estimates to be done. Further details are shown in note 27.
Lease liability - estimating an incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease,
therefore, it uses its incremental borrowing rate (IBR) to measure lease
liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the Group 'would
have to pay', which requires estimation when no observable rates are available
or when they need to be adjusted to reflect the terms and conditions of the
lease. The Group estimates the IBR using observable inputs (such as market
interest rates) when available and is required to make certain entity-specific
estimates (such as estimation of a credit margin).
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 and Croatia.
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.
Sales of materials and services to sub-franchisees: Contracts with franchisees
for the sale of products include one performance obligation, being the
delivery of products to the end franchisee. 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.
Royalties received from sub-franchisees: 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: 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:
2022 2021
£ £
Core revenue 35,693,133 29,782,191
Other revenue 965 83,998
35,694,098 29,866,189
Revenue is further analysed as follows:
2022 2021
£ £
Corporate store sales 34,299,189 28 204,421
Royalties received from sub-franchisees 220,185 1,064,338
Sales or materials and services to sub-franchises 933,038 267,017
Rental income on leasehold property 240,721 246,415
Fixtures and equipment sales to sub-franchisees 965 83,998
35,694,098 29,866,189
Revenue by country:
2022 2021
£ £
Poland 34,930,108 29,866,189
Croatia 763,990 -
35,694,098 29,866,189
3. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
2022 2021
£ £
Selling expenses 1,350,333 1,014,155
General and administrative expenses 4,337,387 3,287,021
5,687,720 4,301,176
4. 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
2022 2022 2022 2021 2021 2021
£ £ £ £ £ £
Corporate stores Commissary Group Corporate stores Commissary Group
Revenues from external customers 34,299,189 1,394,909 35,694,098 28,204,421 1,661,768 29,866,189
Direct Costs - corporate stores (27,893,400) (23,791 549)
Direct Costs - commissary (variable cost only) (419,521) (743,105)
Store EBITDA 6,405,789 4,412,872
Commissary gross profit 975,388 918,663
Total segment profit 7,381,177 5,331,535
Unallocated expenses (5,687,720) (4,194,260)
GROUP EBITDA - excluding non-cash items, non-recurring items and store 1,693,457 1,137,275
pre-opening expenses
Store pre-opening expenses (37,584) (3,429)
Other non-cash and non-recurring items (500,971) 59,278
Depreciation and amortisation (4,336,210) (4,867,679)
Share based payments (137,748) (51,301)
Foreign exchange gains 17,406 (61,911)
Finance income 257,984 1,155,806
Finance costs (1,258,850) (1,669,527)
Loss before taxation (4,302,516) (4,301,488)
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.
The Group does not have reliance on any major customers.
5. LOSS BEFORE TAXATION
This is stated after charging
2022 2021
£ £
Auditors and their associates' remuneration 124,524 80,407
Directors' emoluments 273,092 188,521
Amortisation of intangible fixed assets 626,252 674,030
Depreciation of property, plant and equipment 3,709,958 2,027,915
Piotr Dzierzek was the highest paid director in 2022 with total emoluments of
£72,562. 3,500,000 share options have been granted to Piotr Dzierzek in
November 2022 in accordance with Share Option Plan announced in June 2022.
There are no pension contributions or defined benefit pensions attributable to
Piotr Dzierzek.
6. OTHER NON-CASH AND NON-RECURRING ITEMS
2022 2021
£ £
Acquisition - advisors and other expenses (61,225) (70,320)
Leasehold overtaken - 122,905
IFRS 16 adjustment - impairment (609,320) -
IFRS 16 adjustment - other 33,416 220,014
Discount settlements on supplier agreement termination - 252,004
VAT refund 182,535 -
Other non-cash and non-recurring items (46,377) (465,325)
(500,971) 59,278
Other non-cash and non-recurring Items
Other non-cash and 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.
IFRS 16 adjustment - impairment refers to right of use assets write-off due to
potential store closures in 2023. IFRS 16 adjustment - other refers to
movements in right of use assets due to changes in lease agreement periods
in 2022 and 2021 as well as discounts received in 2021 for the COVID-19
lockdown periods. The other non-cash and non-recurring items position in 2022
includes gains and losses from the sale and liquidation of fixed assets,
provision for dismantling of stores and other items. The other non-cash and
non-recurring items in 2021 include conversion costs results from reverse
acquisition, losses from the liquidation of fixed assets and other items.
7. STAFF COSTS
Details of directors' remuneration, which is included in the amounts below,
are given in the remuneration report.
2022 2021
£ £
Zero hours contracts in stores 9,412,583 6,902,503
Wages and salaries and directors' fees 2,452,567 2,359,144
Social security costs 371,871 500,177
Share based payments 137,748 51,301
12,374,769 9,813,125
The average monthly number of employees during the year was as follows:
2022 2021
Number Number
Operational 179 243
Administration 35 44
Total 214 287
8. FINANCE INCOME
2022 2021
£ £
VAT refund - interests 231,476 -
Unwinding of discount on loans to sub-franchisees 9,417 13,059
Finance income on loans to sub-franchisees 16,767 26,131
Interest on short-term deposits - 3,811
Other finance income 324 1,112,805
257,984 1,155,806
Other finance income in 2021 mainly comprises loans written off in Dominium
S.A. as a result of the refinancing for the reverse acquisition.
9. FINANCE COSTS
2022 2021
£ £
Interest expense on lease liabilities 665,084 742,862
Other interest 593,766 926,665
1,258,850 1,669,527
Other interest in 2022 mainly comprises interest payable according to loan
note issued to Malaccan Holdings Ltd.
10. TAXATION
2022 2021
£ £
Current tax - -
Deferred tax expense relating to recognition of deferred tax liability 57,429 58,983
Other taxes - -
Total tax charge in income statement 57,429 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:
2022 2021
£ £
Loss before tax (4,302,516) (4,301,488)
Tax credit calculated at applicable rate of 19% (817,478) (817,283)
Income taxable but not recognised in financial statements 97,402 312,041
Income not subject to tax (570,648) (647,083)
Expenses not deductible for tax purposes 2,234,215 1,196,148
Tax losses for which no deferred income tax asset was recognised (886,062) 15,160
Total tax charge in income statement 57,429 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.
11. LOSS ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY
The loss relating to transactions in the financial statements of the parent
company was £27,401,465 (2021: £11,557,307).
12. LOSS PER SHARE
The loss per ordinary share has been calculated as follows:
2022 2022 2021 2021
£ £ £ £
Weighted average number of shares Profit / (loss) after tax Weighted average number of shares Profit / (loss) after tax
Basic 653,776,085 (4,359,945) 578,123,216 (4,360,471)
Diluted 653,776,085 (4,359,945) 578,123,216 (4,360,471)
The weighted average number of shares for the year excludes those shares in
the Company held by the employee benefit trust. At 31st December 2022 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.
13. GOODWILL
Cost Group
£
At 31 December 2020 2,881,283
Additions 12,127,453
At 31 December 2021 15,008,736
Additions -
Foreign exchange movements 102,266
At 31 December 2022 15,111,002
Carrying amount Group
£
At 31 December 2022 15,111,002
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 goodwill recognised is allocated to Polish entities
cash generating unit and is made up by the expected synergies of the enlarged
business and management expertise brought by new Chief Executive Officer and
Non-Executive Director to DP Poland PLC's business.
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 less costs of
disposal. 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.
Prospective sales and costs forecasts are made for the following five years
(i.e., FY23-FY27) and are based on market-available data with regard to
country GDP growth rates, inflation, price trends of main cost items, as well
as on historical level of sales volumes and incurred costs as a percentage of
sales, taking into account implemented High Volume Mentality, digital platform
development and increased focus on operations excellence. 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 fair value is
declining from 13.6% in FY23 to 10.6% in FY27 (i.e., 13.6% in FY23, 12.9% in
FY24, 12.1% in FY25, 11.3% in FY26 and 10.6% in FY27 and beyond). 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.
The following sensitivities have been performed:
- Poland: a 0.5% decrease in the growth rate would result in the carrying
amount of the goodwill value being greater than the recoverable amount. A
0.5% increase in discount rate would result in the carrying amount of goodwill
value being greater than the recoverable amount.
- Croatia: The recoverable amount is not deemed to be sensitive to a
decrease in growth rate, as decreasing by 1% would still leave headroom
between the carrying value of the goodwill and the recoverable amount. A 1%
increase in discount rate would result in the carrying amount of goodwill
value being greater than the recoverable amount.
14. INTANGIBLE ASSETS
Franchise fees Capitalised
and intellectual Software loan Total
property rights discount
Group £ £ £ £
Cost:
At 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 21,512 378,641
Disposals (42,717) (89,294) (132,011)
At 31 December 2021 5,194,420 562,528 (25,793) 5,731,155
Acquisition of business - AAP 1,471,428 282,589 - 1,754,017
Foreign exchange movements 195,567 142,990 5,542 344,519
Additions 62,831 241,032 - 303,863
Disposals - - - -
At 31 December 2022 6,924,665 1,229,139 (20,250) 8,133,555
Amortisation
At 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 (79,217) 3,523,706
Foreign exchange movements 171,673 93,436 4,009 269,118
Amortisation charged for the year 527,030 90,278 8,944 626,252
Disposals - - - -
At 31 December 2022 3,902,848 582,493 (66,264) 4,419,077
Net book value:
At 31 December 2022 3,021,817 646,646 46,014 3,714,479
At 31 December 2021 1,990,275 163,749 53,424 2,207,448
Franchise fees consisting of the cost of purchasing the Master Franchise
Agreement (MFA) from Domino's Pizza Overseas Franchising B.V. have been
capitalised in 2021 and are written off over the term of the MFA. As at
31.12.2022 net book value of MFA amounted to £492,267 with remaining
amortization period of 13 years. Master Franchise Agreement between AAP and
Domino's Pizza International Franchising Inc. have been capitalized in 2022
and is measured at cost less any accumulated impairment losses. As there is no
foreseeable limit to the period over which Master Franchise Agreement is
expected to generate net cash inflows for the entity, the Group identified
Master Franchise Agreement to have an indefinite useful life. MFA is allocated
to AAP cash generating unit. Net book value of AAP MFA amounted to £1,275,612
as at 31.12.2022. 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 sub-franchise agreements
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 Polish and Croatian cash generating units have been
determined based on fair value calculated using discounted future cash flows
based on the business plan, and incorporating the Directors' estimated
discount rate (10.6% in FY27 and beyond for Polish CGU and 12.5% in FY27 and
beyond for AAP CGU), future store openings and the average Polish Zloty and
Croatian Kunas exchange rate for the year ended 31 December 2022. The fair
value calculation indicates that no impairment is required. As at 31 December
2022, no reasonably anticipated change in the assumptions would give rise to a
material impairment charge.
15. PROPERTY, PLANT AND EQUIPMENT
Fixtures Assets
Leasehold fittings and under
improvements equipment construction Total
Group £ £ £ £
Cost:
At 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) (1,397,782)
Additions 766,548 392,046 392,169 1,550,763
Disposals (781,849) (222,194) - (1,004,043)
Transfers 27,912 380,569 (408,481) -
At 31 December 2021 8,724,986 4,409,517 19,573 13,154,076
Acquisition of business - AAP 341,007 270,218 - 611,225
Foreign exchange movements 413,953 388,155 8,324 810,432
Additions 196,617 272,251 603,943 1,072,811
Disposals (813,019) (278,656) - (1,091,675)
Transfers 158,339 243,548 (401,887) -
At 31 December 2022 9,021,883 5,305,033 229,953 14,556,869
Depreciation:
At December 2020 4,779,361 2,157,479 - 6,936,840
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 2,414,867 - 7,018,979
Foreign exchange movements 265,301 307,049 - 572,350
Depreciation charged for the year 800,829 636,978 - 1,437,807
Other adjustments (99,303) - - (99,303)
Disposals (747,750) (270,517) - (1,018,267)
At 31 December 2022 4,823,189 3,088,377 - 7,911,566
Net book value:
At 31 December 2022 4,198,693 2,216,655 229,953 6,645,301
At 31 December 2021 4,120,874 1,994,650 19,573 6,135,097
The depreciation of property, plant and equipment is included within direct
and administrative expenses in the Income Statement.
16. NON CURRENT ASSET INVESTMENTS
Group Company
£ £
Investments in Group undertakings
At 31 December 2020 - 28,660,000
Investment in subsidiary company - shares subscribed - Dominium S.A. - 34,241,330
Investment in subsidiary company - capital contribution - 19,267
Impairment charge - (11,130,429)
At 31 December 2021 - 51,790,168
Investment in subsidiary company - shares subscribed - DP Polska S.A. - 4,703,100
Investment in subsidiary company - shares subscribed - All About Pizza d.o.o. - 2,382,979
Investment in subsidiary company - shares subscribed - Dominium S.A. - 805,820
Investment in subsidiary company - capital contribution - 65,433
Impairment charge - (26,781,124)
At 31 December 2022 - 32,966,376
Investments in Group undertakings are recorded at cost, which is the fair
value of the consideration paid.
The parent company's investment in Polish subsidiaries, i.e., DP Polska S.A.
and Dominium S.A., have a historical cost of £57.4m prior to the impairment
review. The impairment test carried out showed that the investment was
impaired and the carrying value after impairment was £30.6m. With effect from
29 July 2022, the Company became the legal parent of All About Pizza d.o.o.
The parent company's investment in Croatian subsidiary had a historical cost
of £2.4m. The Group has determined that an impairment of £26.8m in the
investment value should be recognised in the accounts of DP Poland plc. The
impairment assessment brought investments in subsidiary down to £33.0m and
was arrived at by fair value calculated using discounted future cash flows.
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 and dine-in restaurants Poland Ordinary 100
Dominium S.A. Operation of Pizza delivery and dine-in restaurants Poland Ordinary 100
All About Pizza d.o.o. Operation of Pizza delivery and dine-in restaurants Croatia Ordinary 100
The registered office of DP Polska S.A. and Dominium S.A. is: 30 Dabrowiecka
Street, 03-932 Warsaw, Poland.
The registered office of All About Pizza d.o.o. is: 1 Kneza Mislava Street,
Zagreb, Croatia.
The acquisition of Dominium S.A. was completed on 8th January 2021. The
acquisition of All About Pizza d.o.o. was completed on 29th July 2022 -
further details are given in note . All About Pizza's business is the
operation of delivery and dine-in pizza restaurants.
17. LOANS GRANTED TO SUBSIDIARY UNDERTAKINGS
The Company has provided €200k loan to AAP in August 2022 following the
acquisition. The loan is repayable by 31.12.2024, is unsecured with 3%
interest payable and have been discounted to a market rate of 5.3% in
accordance with IFRS 9.
18. DEFERRED TAX
The Group has unused tax losses of £17,702,039 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: £3,719,946 in 2023;
£32,888,786 in 2024; £2,166,198 in 2025; £1,142,536 in 2026 and £419,892
in 2027. UK tax losses carried forward at the balance sheet date were
£6,596,996. AAP tax losses carried forward at the balance sheet date were
£767,685.
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Deferred tax liability
Deferred tax liability
Property, plant and equipment (120,226) (56,200) - -
Intangible assets (149,651) (150,049) - -
Interest on loans (5,826) (7,548)
Accruals (396) -
(276,099) (213,797) - -
Movements in deferred tax
Property, plant and equipment Intangible assets Interest on loans Accruals
Total
£ £ £ £ £
At 31 December 2021 (56,200) (150,049) (7,548) - (213,797)
Credited to equity (4,368) (299) (191) (15) (4,873)
Credited to profit and loss (59,658) 697 1 913 (381) (57,429)
At 31 December 2022 (120,226) (149,651) (5,826) (396) (276,099)
19. TRADE AND OTHER
RECEIVABLES
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Current
Trade receivables 482,382 362,407 - -
Trade receivables from subsidiaries - - 67,246 396,000
Other receivables 903,114 635,420 11,295 25,594
Prepayments and accrued income 581,491 221,620 68,440 -
1,966,987 1,219,447 146,981 421,594
Non-current
Other receivables 822,042 820,871 - -
At 31 December 2022 2,789,029 2,040,318 146,981 421,594
Other non-current receivables include loans to sub-franchisees which are
repayable over between four and nine years. Other current receivables include
loans to sub-franchisees repayable over less than one year. 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 current receivables also includes
Polish and Croatian 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 and Croatian
Kuna. Trade receivables are non - interest bearing and are generally on 0 - 30
days terms.
20. INVENTORIES
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Raw materials and consumables 982,110 667,898 - -
At 31 December 982,110 667,898 - -
The cost of inventories recognised as an expense and included in cost of sales
amounted to £9,703,447 (2021: £7,573,606).
21. ACQUISITION OF ALL ABOUT PIZZA D. O. O.
With effect from 29 July 2022, the Company became the legal parent of All
About Pizza d. o.o. All About Pizza d.o.o signed a Franchise Agreement with
Domino's Pizza International Franchising Inc. in July 2019 to operate Domino's
stores in Croatia and operated three corporate stores in Zagreb at the date of
transaction.
The Company has entered into a Share Purchase Agreement to acquire All About
Pizza d.o.o for approximately £2.4 million satisfied by the issue of
29,787,234 Consideration Shares at 8 pence per share. In addition, Andrew
Rennie, has subscribed for 2,127,660 First Subscription Shares, at a price of
8 pence per share, and will subscribe for a further 3,191,489 Second
Subscription Shares, at a price of 8 pence per share, within 12 months
following completion of the Transaction.
Further to the completion of the acquisition of All About Pizza d.o.o. Nils
Gornal, Chief Executive Officer of All About Pizza d.o.o., and Andrew Rennie,
ex-CEO of Domino's Pizza Enterprises in Europe, were appointed as Chief
Executive Officer and Non-Executive Director of DP Poland PLC, respectively.
The fair value of the assets and liabilities acquired by the accounting
acquirer are as follows:
Note 29 July 2022
£
Intangible assets 478,406
Tangible fixed assets 611,225
Leases - right of use assets 267,877
Inventories 41,303
Trade and other receivables 65,180
Cash and cash equivalents 22,828
Trade and other payables (37,504)
Borrowings (192,687)
Lease liabilities (267,877)
Total identifiable net assets 988,751
14
Master Franchise Agreement 1,275,611
Consideration paid by the accounting acquirer 2,264,362
AAP revenue post-acquisition 763,990
AAP PBT post-acquisition (267,973)
Acquisition expenses
The advisors' and other costs incurred by DP Poland PLC in acquiring All About
Pizza d.o.o. amounted to £57,564 in 2022.
Intangible assets
Intangible assets acquired relate to: software and entry fee for lease
agreement for one of the stores of AAP.
Tangible fixed assets
Tangible fixed assets include: leasehold improvements, equipment (i.e.,
restaurant, computer and office equipment) and e-bikes.
Trade and other receivables
The Directors consider that the gross contractual amounts of trade and other
receivables are not materially different to the fair values.
Borrowings
Borrowings of All About Pizza represent liabilities for financial loans to
previous shareholders, which has been repaid after the completion of
transaction.
Master Franchise Agreement
An excess of consideration (as determined under IFRS 3) which was paid by the
accounting acquirer over the fair value of the assets and liabilities acquired
was attributed to Master Franchise Agreement (MFA). The Group has performed
impairment review of MFA at the reporting period end. The review included
discounted cash flow projections to determine the recoverability of MFA and
the intangible assets. We compared the carrying amount of the assets,
inclusive of MFA, to its respective fair value calculated as the recoverable
amount of Croatian cash generating unit using discounted future cash flows
based on the business plan and future store openings. Significant assumptions
inherent in the valuation methodologies are employed and include, but are not
limited to, prospective financial information, 2.5% growth rate, terminal
value and discount rates declining from 13.7% in FY23 to 12.5% in FY27
(i.e., 13.7% in FY23, 13.4% in FY24, 13.1% in FY25, 12.8% in FY26 and 12.5% in
FY27 and beyond). Based on this quantitative test, we determined that the fair
value of assets exceeded its carrying amount. After completing our annual
impairment reviews we concluded that MFA was not impaired.
22. LEASES
GROUP AS A LESSEE
Right of Use Assets
Leasehold
property Total
Cost: £ £
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
Disposals (244,793) (244,793)
At 31 December 2021 14,331,223 14,331,223
Acquisition of business 267,877 267,877
Foreign exchange movements 654,739 654,739
Additions 655,352 655,352
Adjustment to right-of-use asset lease term (51,773) (51,773)
Disposal (666,255) (666,255)
At 31 December 2022 15,191,163 15,191,163
Accumulated depreciation
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 6,093,752 6,093,752
Foreign exchange movements 430,854 430,854
Adjustment to right-of-use asset lease term 524,131 524,131
Disposal (602,689) (602,689)
Charge for the year 2,272,151 2,272,151
At 31 December 2022 8,718,199 8,718,199
Carrying amount
At 31 December 2022 6,472,965 6,472,965
At 31 December 2021 8,237,471 8,237,471
At the Balance sheet date, the Group's portfolio of leases consisted of 119
leases over 116 store premises, one office and three 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. The depreciation of Right of Use
Assets is included within direct and administrative expenses in the Income
Statement. Rents payable are generally reviewed at five year intervals. The
adjustment to right-of-use asset lease term is related to the review of the
terms of lease agreements and represents right of use assets write-off due to
potential store closures in 2023. Please also refer to note 6.
2022 2021
Amounts recognised in profit and loss £ £
Depreciation expense on right-of-use assets 2,272,151 2,427,823
Interest expense on lease liabilities 665,084 742,863
2022 2021
£ £
The total cash outflow for leases amounted to 3,116,715 3,231,486
GROUP AS A LESSOR
The Group enters into lease agreements as an intermediate lessor with respect
to stores operated by sub-franchisees. These leases have terms of between 1
and 5 years with a 5 year extension option, but no longer than the term of the
main lease agreement. The lessee does not have an option to purchase the
property at the expiry of the lease period. Rental income recognised by the
Group during the year is £240,721 (2021: £246,415).
Future minimum rentals receivable under non-cancellable operating leases as at
31 December are, as follows:
2022 2021
Maturity analysis £ £
Within one year 102,047 100,339
1 - 2 years 92,781 98,550
2 - 3 years 92,781 89,601
3 - 4 years 46,308 89,601
4 - 5 years 15,390 44,720
Onwards - 14,863
At 31 December 349,307 437,674
23. LEASE LIABILITIES
2022 2021
£ £
Total lease liabilities 8,501,171 9,705,438
Analysed as:
Non-current 5,666,835 7,038,279
Current 2,834,336 2,667,159
2022 2021
Maturity analysis £ £
Within one year 2,834,336 2,678,292
1 - 2 years 2,199,312 2,310,187
2 - 3 years 1,802,235 1,787,291
3 - 4 years 1,056,548 1,506,870
4 - 5 years 363,632 1,061,573
5 - 6 years 125,686 259,627
Onwards 119,422 101,598
For the year ended 31 December 2022, the average effective borrowing rate was
8.63 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 or Euros.
The fair value of the Group's lease obligations as at 31 December 2022 is
estimated to be £8,501,171 using 8.63% discount rate. This is based on 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.
24. EQUITY
"Called up share capital" represents the nominal value of equity shares
issued. An increase in share capital in 2022 is due to the increase in share
capital for Dominium S.A., the increase in share capital for DP Polska S.A.
and the increase in share capital for the acquisition of All About Pizza
d.o.o.
"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 and
acquisition of All About Pizza d. o.o. 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.
25. CASH AND CASH EQUIVALENTS
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Cash at bank and in hand 4,110,322 2,701,646 65,293 302,509
At 31 December 4,110,322 2,701,646 65,293 302,509
26. TRADE AND OTHER PAYABLES
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Current
Trade payables 3,032,651 3,248,333 14,189 54,669
Other payables 335,729 546,734 - 6,667
Accrued expenses 1,974,648 1,188,598 79,889 69,333
At 31 December 5,343,028 4,983,665 94,078 130,669
Dismantling provision for the stores closed in 2022 amounting to £21,294 is
included within Accrued expenses and provisions as 31 December 2022.
27. BORROWINGS
Group Group Company Company
2022 2021 2022 2021
£ £ £ £
Non current interest bearing loans and borrowings
Borrowing 6,763,297 5,829,461 6,734,149 5,829,461
At 31 December 6,763,297 5,829,461 6,734,149 5,829,461
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 as at 31.12.2024, is unsecured with
3% interest payable and have been discounted to a market rate of 5.3% in
accordance with IFRS 9.
28. ANALYSIS OF MOVEMENTS IN NET FUNDS
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 (5,966,881) (1,107,409) - 834,925 409,904 (5,829,461)
Lease liabilities - current (1,515,523) (1,027,332) 273,023 (397,327) - (2,667,159)
Lease liabilities - non-current (3,313,908) (5,377.057) 3,201,833 (1,549,147) - (7,038,279)
Net debt (10,761,661) (6,175,542) 4,805,595 (1,111,549) 409,904 (12,833,253)
01 January Acquisition Cash Non Foreign 31 December
2022 flows cash exchange 2022
movements movements
£ £ £ £ £ £
Cash and cash equivalents 2,701,646 22,828 1,469,203 - (83,355) 4,110,322
Borrowings (5,829,461) (192,687) 163,539 (565,567) (339,121) (6,763,297)
Lease liabilities - current (2,667,159) (66,604) 11,068 (111,641) - (2,834,336)
Lease liabilities - non-current (7,038,279) (152,249) 2,057,880 (534,187) - (5,666,835)
Net debt (12,833,253) (388,712) 3,701,690 (1,211,395) (422,476) (11,154,146)
29. FINANCIAL INSTRUMENTS
Categories of financial instruments
2022 2022 2021 2021
Financial assets at amortised cost Financial liabilities at amortised cost Financial assets at amortised cost Financial liabilities at amortised cost
£ £ £ £
GROUP
Financial Assets
Cash and cash equivalents 4,110,322 2,701,646
Trade receivables 482,382 362,407
Other receivables - current 903,114 635,420
Other receivables - non current 452,125 463,800
Total 5,947,943 4,163,273
Financial Liabilities
Trade payables (3,032,651) (3,248,333)
Borrowing (6,763,297) (5,829,461)
Other liabilities - current (335,729) (546,734)
Lease liabilities - current (2,834,336) (2,667,159)
Lease liabilities - non current (5,666,835) (7,038,279)
Accruals - current (1,974,648) (1,188,598)
Total (20,607,496) (20,518,564)
Net (14,659,553) (16,355,291)
COMPANY
Financial Assets
Cash and cash equivalents 65,293 302,509
Trade receivables 67,246 396,000
Other receivables 79,735 25,894
Total 212,274 724,403
Financial Liabilities
Trade payables (14,189) (54,669)
Other liabilities - current - -
Accruals (79,889) (69,333)
Borrowings (6,734,149) (5,829,461)
Total (6,828,227) (5,953,463)
Net (6,615,953) (5,229,060)
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
2022 2022 2022 2022 2021 2021 2021 2021
Finance Trade and other payables Borrowings Total Finance Trade and other payables Borrowings Total
leases
leases
£ £ £ £ £ £ £ £
Due within one year 2,834,336 5,343,028 - 8,177,364 2,678,292 4,983,665 - 7,661,957
Due within two to five years 5,421,727 - 7,055,733 12,477,460 6,665,921 - 6,365,306 13,031,227
Due after five years 245,108 - - 245,108 361,225 - - 361,225
8,501,171 5,343,028 7,055,733 20,899,932 9,705,438 4,983,665 6,365,306 21,054,409
Capital Risk Management
The Company and the Group aim 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 Company's and the Group's capital structure represent the equity
attributable to shareholders of the company together with borrowings and cash
and cash equivalents.
Market risk
Market risk is the risk that arises from movements in stock prices, interest
rates, exchange rates, and commodity prices. Market risk for the 31 December
2022 year end is reflected within the currency risk and interest rate risk
which are discussed further below.
Currency Risk
The foreign currency risk stems from the Company and the Group's foreign
subsidiary which trades in Poland and Croatia and whose revenues and expenses
are mainly denominated in local currencies. Additionally, some Company and
Group transactions are also denominated in US Dollar and Euro currencies. The
Company and the Group are therefore subject to foreign currency risk due to
exchange rate movements that will affect the Company and the Group's operating
activities and the Company 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:
2022 2021
Assets £ £
Polish Zlotys 3,341,882 4,092,403
Euro 567,265 -
Sterling 2,915,432 -
US dollar - -
Croatian Kuna 74,772 -
Liabilities
Polish Zlotys 12,818,897 15,572,709
Euro 7,246,190 5,840,594
Sterling 173,967 -
US dollar 206,392 -
Croatian Kuna 162,050 -
Sensitivity analysis
The potential impact on Group net loss and equity reserves from a 20%
weakening of the Polish Zloty, Euro, US dollar and Croatian Kuna against
sterling affecting the reported value of financial assets and liabilities
would be an increased net loss and reduction in Group reserves of
£3,289,922.
2022
£
20% weakening of Polish Zloty (1,895,403)
20% weakening of Euro (1,335,785)
20% weakening of US dollar (41,278)
20% weakening of Croatian Kuna (17,456)
(3,289,922)
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
The Company and the Group do not possess any financial instruments with
floating interest rates, hence interest rate risk is not applicable to the
Group.
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 sub franchisees.
The Company and the Group manage 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 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 Group
considers that there has been a significant increase in credit risk when
contractual payments are more than 30 days past due. The Group considers a
financial asset in default when contractual payments are 180 days past due.
However, in certain cases, the Group may also consider a financial asset to be
in default when internal or external information indicates that the Group is
unlikely to receive the outstanding contractual amounts in full before taking
into account any credit enhancements held by the Group. A financial asset is
written off when there is no reasonable expectation of recovering the
contractual cash flows.
The movement in the allowance for doubtful debts during the year is as
follows:
2022 2021
£ £
Balance at 01 January 485,916 -
Acquisition of business - 934,132
Impairment loss made during the year 984 222,528
Reversal of previously recognised impairment loss (206,680) (670,744)
Balance at 31 December 280,220 485,916
Set out below is the information about the credit risk exposure on the Group's
trade receivables as at 31 December:
Current <30 days 30-60 days 61-90 days >91 days Total
£ £ £ £ £ £
31 December 2022 392,291 85,312 3,087 108 1,584 482,382
31 December 2021 342,776 8,868 988 77 9,698 362,407
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.
30. SHARE CAPITAL
2022 2021
£ £
Called up, allotted and fully paid:
712,393,662 (2021: 619,586,515) Ordinary shares of 0.5 pence each 3,561,969 3,097,933
Movement in share capital during the period
Nominal
Number value Consideration
£ £
At 31 December 2020 254,108,324 1,270,542 40,695,667
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 3,097,933 69,899,308
Placing August 2022 91,414,894 457,074 7,313,192
Share options exercised 2022 829,753 4,149 4,149
Management share award 562,500 2,813 45,000
Transaction costs - - (131,000)
At 31 December 2022 712,393,662 3,561,969 77,130,649
The Company does not have an authorised share capital. The ordinary shares
carry one voting right per share and no right to fixed income.
DP Poland Employee Benefit Trust ("EBT")
The trustee of the EBT holds 1,765,872 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 £147,450 at 31 December
2022.
31. SHARE BASED PAYMENTS
Group Group
2022 2021
£ £
Share based payments expense 137,748 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
Share Option Plan 1-4 years Time-vest and detailed company performance indicators
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, the Long Term Incentive Share Option Plan on 19th December 2014 and
the Share Option Plan on 13 June 2022. 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
28 February 2022 8 pence 50% 1,20% - 3 Years £0.0228
14 June 2022 8 pence 50% 2,30% - 1 Year £0.0183
14 June 2022 8 pence 50% 2,30% - 4 Years £0.0217
08 November 2022 8 pence 50% 3,50% - 1 Year £0.0336
08 November 2022 8 pence 50% 3,50% - 4 Years £0.0380
01 December 2022 8 pence 50% 3,20% - 1 Year £0.0422
01 December 2022 8 pence 50% 3,10% - 4 Years £0.0468
The share based payments charge for the year by scheme was as follows:
2022 2021
Share Incentive Plan - -
Other Share Options 137,748 51,301
Long Term Incentive Share Option Plan - -
137,748 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
31.12.21
in period
in period
in period
31.12.22
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 - - - - -
Share options 22 May 2017 0.5 pence 164,804 - - - 164,804
Share options 11 January 2018 0.5 pence 24,000 - - - 24,000
Share options 01 June 2018 0.5 pence 88,238 - - - 88,238
Share options 11 October 2018 0.5 pence 355,469 - 226,563 - 128,906
Stock option plan 28 February 2022 8 pence - 750,000 - - 750,000
Stock option plan 14 June 2022 8 pence - 24,640,175 - - 24,640,175
Stock option plan 08 November 2022 8 pence - 10,333,333 - - 10,333,333
Stock option plan 01 December 2022 8 pence - 3,520,025 - 3,520,025
The weighted average remaining contractual life of outstanding share options
is 3.55 years (2021: 1.34 years). The number of share options exercisable at
31 December 2022 was 39,484,677 with a weighted average exercise price of 8
pence (2021: 633,122 shares with a weighted average exercise price of 0.5
pence).
32. CAPITAL COMMITMENTS
At 31 December 2022 there were no amounts contracted for but not provided in
the financial statements (2021: £nil for the Group.
33. 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 and Croatia) are disclosed below:
Group Group
2022 2021
£ £
Short-term employee benefits 387,337 271,005
Share-based payments 137,748 -
At 31 December 525,085 271,005
The Company made a charge of £75,000 to DP Polska S.A. and £75,000 to
Dominium S.A. for management services provided in 2022. The balance owed by DP
Polska S.A. to DP Poland plc as at 31 December 2022 was £67,246 (2021:
£396,000).
The Company also has a borrowing from Malaccan Holdings Ltd. a significant
shareholder which totalled £6,734,149 (2021: £5,829,461).
34. EVENTS AFTER THE BALANCE SHEET DATE
Board changes
On 20 January 2023, David Wild was appointed as an Independent Non-Executive
Director and Chair of the Company.
On 31 March 2023, Peter Furlong has resigned from the Board as a Non-executive
Director.
35. 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 disputes
regarding 2011 and 2012 years have been resolved in favour of Dominium. In
2022 Dominium has received the VAT refund for the year 2011 in the amount PLN
2,275,615 (approximately £414,011. In March 2023 Dominium has received the
VAT refund for the year 2012 in the amount of PLN 1,542,405 (approximately
£280,616). The whole dispute has not been resolved yet, the period 2013-2016
is still under investigation.
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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DBGDLDBDDGXCRecent news on DP Poland
See all newsREG - DP Poland PLC - Trading Update
AnnouncementREG - DP Poland PLC - Holding(s) in Company
AnnouncementREG - DP Poland PLC - Change of Registered Office
AnnouncementREG - DP Poland PLC - Strategic Acquisition
AnnouncementREG - AIM - AIM Notice - 03/03/2025
Announcement