REG - DP Poland PLC - Trading Update

DP PolandAnnouncement

17/01/2023 07:00

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RNS Number : 9073M  DP Poland PLC  17 January 2023

This announcement contains inside information for the purposes of the UK
Market Abuse Regulation and the Directors of the Company are responsible for
the release of this announcement.

 

DP Poland PLC

("DP Poland", the "Company" or the "Group")

 

Full year unaudited trading update for 2022

 

DP Poland, the operator of pizza stores and restaurants across Poland and
Croatia, is pleased to announce a trading update for the full year ended 31
December 2022.

 

DP Poland's Chief Executive Officer, Nils Gornall, said:

"2022 was another year of transformation for DP Poland, entering a new
territory in Poland, completing the rebrand of all Dominion stores and
strengthening both the Board and the Executive management team.

 

Since personally joining the business in June 2022, I have been consistently
impressed with the energy and enthusiasm shown by our staff and their
commitment to making the necessary changes to maximize the potential of our
business.

 

Average delivery times in H2 2022 were five minutes lower than in H2 2021,
delivering a higher quality experience to our customers and helping to drive
higher customer retention rates. Three stores also averaged less than 10
minute delivery times over a week, setting new records for our business.

 

These efforts have resulted in consecutive record sales weeks being achieved
in 8 weeks in H2 2022. Like for like sales increased in Poland by 21%, whilst
total system sales were up 20%.

 

In Croatia, operations continue to go from strength to strength, with total
system sales increasing 93% in 2022. This was supported by 1 store opening
through the year and 2 planned in 2023.

 

However, 2022 has not been without challenges. High inflation and tight labor
markets may persist in 2023 but we are focused on further optimization
projects and expect performance to continue improving. In January 2023 we are
also launching a TV campaign, which is expected to significantly drive further
revenue growth. "

 

Strategic highlights

 

 

·   Full conversion of all Dominium stores to Domino's branding was
completed by the end of 2022

 

·  Portfolio review completed, with 8 stores closed as part of our
post-merger relocation plan to optimize store locations and improve
profitability

 

·   The first TV marketing campaign for 5 years is due to launch in
mid-January 2023

 

·  David Wild, ex-CEO of Dominos Pizza Group announced as proposed Chairman
on 30 December 2022. David is expected to be appointed to the Board in early
2023, subject to customary due diligence

 

Financial & operating highlights

 

· Cash at bank of £4.0 million as at 31 December 2022 (2021: £2.7 million)
following a successful fundraising to raise gross proceeds of £4.8 million.
The fundraising has enabled investment in the business including in store
development (openings, store conversions & post-merger adaptations in
Poland and Croatia), funding the TV campaign, working capital optimization
(i.e. stock purchases to protect against inflation), upgrading of the scooter
fleet and IT system enhancements.

 

Poland

 

·  Like for like System Sales(1) increased in 2022 by 21.0% compared to 2021
and up 13.4% in Q4 2022 compared to Q4 2021

 

·   Total System Sales(2) increased in 2022 by 20.2% compared to 2021 and
up 11.8% in Q4 2022 compared to Q4 2021

 

 2022 vs 2021        Q1     Q2     Q3     Q4     FY
 LFL System Sales    21.8%  25.6%  24.4%  13.4%  21.0%
 Total System Sales  23.2%  23.9%  23.4%  11.8%  20.2%

 

·   Dine-in business recovered strongly as COVID-19 restrictions were
lifted in Poland, driving a 55.3% uplift in sales compared to 2021

 

·   Carry-out business performed strongly, up 85% on 2021, benefitting from
increased focus and a strong customer value proposition

 

·   Delivery business increased 5.2% in 2022 compared to 2021, despite
consumers returning to the dine-in business post COVID-19 restrictions lifting

 

Croatia

 

The Croatian business was acquired by DP Poland in June 2022.

 

·  Like for like System Sales(1) increased in 2022 by 8.7% compared to 2021
and up 20.4% in Q4 2022 compared to Q4 2021

 

·   Total System Sales(2) increased in 2022 by 92.7% compared to 2021 and
up 81.7% in Q4 2022 compared to Q4 2021

 

 2022 Vs 2021        Q1      Q2     Q3      Q4     2022
 LFL system sales    -10.9%  8.7%   13.4%   20.4%  8.7%
 Total system sales  44.2%   93.9%  163.7%  81.7%  92.7%

 

(1)( )( )( )Like-for-like System Sales growth in Polish Złoty and Croatian
Kuna respectively, matching trading periods for the same stores between 1
January and 31 December 2022 and 1 January and 31 December 2021

(2)( )( )( )System Sales - total retail sales including sales from
corporate and sub-franchised stores, unaudited

 

Review of 2022 and Outlook for 2023

 

2022 saw the operational completion of the merger with Dominium, with all
stores rebranded to Domino's by the end of 2022. We continue to strive for the
best customer value proposition to our consumers whilst delivering a High
Volume Mentality across all stores.

 

Strong inflation and a tight labor market was a headwind through the year but
despite this, strong sales growth was reported in all quarters. This trend is
expected to be maintained with the support of a new TV campaign starting on
16(th) January.

 

Despite inflationary pressures on food costs, energy and increasing wages
across Poland, business profitability stayed on a positive trend over the last
six months and is expected to be close to market estimates for 2022. The Board
will update the market as soon as the outcome is known. The expected recovery
of tourism and stabilization of inflationary pressures in 2023 should provide
a positive impact on sales and profitability.

 

The Group expects to continue store openings in 2023 and to increase its share
of sub-franchised business vs corporate stores.

 

Trading performance - Poland

 PLNm                  FY2020                              FY2021                      FY2022                      % change vs. 2020  % change vs. 2021
 Total System sales    157.8                               164.9                       198.2                       25.5%              20.2%

 LFL System sales      152.7                               158.3                       191.4                       25.4%              21,0%
 Dine-in               21.4                                19.6                        30.4                        42.0%              55.3%
 Carry-out              14.0                               19.1                        35.3                        152.3%             84.7%
 Delivery              117.5                               119.6                       125.8                       7.1%               5.2%

 Non-LFL System sales                  5.1                             6.6                         6.7             31.1%              1.4%

 

 PLNm                  4Q2020                                  4Q2021                      4Q2022                      % change vs. 2020  % change vs. 2021
 Total System sales    39.8                                              47.0                        52.6              32.0%              11.8%

 LFL System sales                      38.5                              45.2                        51.2              32.9%              13.4%
 Dine-in                                 2.1                               6.5                         7.2             240.9%             9.6%
 Carry-out                               3.9                               5.8                       10.7              177.3%             85.7%
 Delivery                              32.6                              32.8                        33.3              2.3%               1.5%

 Non-LFL System sales                    1.3                               1.9                         1.4             3.5%               -27.4%

 

The 11,8% Total System Sales growth, and 13.4% Like for Like growth, in Q4
2022 versus Q4 2021 demonstrate the organic sales growth potential of the
Group, which may be doubled with the support of TV commercial whose launch is
planned for mid-January 2023. Sales growth versus last year has been fueled by
a recovery of the dine-in business, as well as a development of the carry-out
business, which demonstrate stable 80%+ growth rate over the year.  It is
notable that delivery sales have been maintained despite the boost of dine-in,
and customers gradually returning to the restaurants.

 

At the end of 2022, all Dominium stores had been fully converted to Domino's
branding. Further optimization projects, in particular focused on accounting
and labor costs management, will be completed in 2023.

 

The Group has undertaken measures to address the inflationary cost pressures.
For example, raising the minimum order size eligible for free delivery (in
direct delivery sales), reviewing its promotions scheme based on consumer
surveys, menu simplification and the development of the higher margin
carry-out channel. These mitigation steps have brought positive trends from
the beginning of H2 2022.

 

The Group expects to announce its final results for the year ended 31 December
2022 in early June 2023, including a webinar for investors.

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Nils Gornall, CEO.

 

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 120
stores and restaurants throughout cities and towns in Poland and Croatia.

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