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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Dp Poland Plc | LSE:DPP | London | Ordinary Share | GB00B3Q74M51 | ORD 0.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.55 | -4.89% | 10.70 | 10.00 | 11.00 | 11.25 | 10.50 | 11.25 | 376,021 | 16:35:29 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Eating Places | 35.69M | -4.36M | -0.0061 | -17.21 | 74.81M |
From Apr 2019 to Apr 2024
TIDMDPP
RNS Number : 9669I
DP Poland PLC
27 March 2018
DP Poland plc
("DP Poland" or the "Company")
Final results for the full year to 31 December 2017
Momentum continuing to build. Record number of store openings. 51% growth in System Sales.
DP Poland, through its wholly owned subsidiary DP Polska S.A, has the exclusive right to develop, operate and sub-franchise Domino's Pizza stores in Poland. There are currently 56 Domino's Pizza stores, 32 corporate, of which 2 are managed under management contract, and 24 sub-franchised.
-- 19 stores opened in 2017, from 35 to 54 stores -- 56 stores open to-date 2018 -- Total System Sales(1) up 51% to 58m PLN 2017 (39m PLN 2016) -- 17% like-for-like(2) growth in System Sales 2017 on 2016 -- 21(st) consecutive quarter of double digit like-for-likes, Q4 2017 -- Mature stores are outperforming original expectations in both sales and EBITDA
-- Group EBITDA(3) losses increased (GBP1.78m(4) ) 2017 vs (GBP1.58m(5) ) 2016 at actual exchange rates
-- 75% of delivery sales ordered online -- Robust growth in commissary gross profit(6) -- First national television advertising campaign in Q1 2018, results are encouraging -- Like for-like growth in System Sales 2018: January 24%, February 18%
Peter Shaw, Chief Executive of DP Poland said:
"Momentum is continuing to build, with a record number of store openings and 51% growth in System Sales in 2017. The Group EBITDA loss increased, 2017 on 2016, impacted by the high number of new corporate store openings in 2017 (stores are initially loss making), margin pressures from inflation in food and labour costs and more aggressive price promotion as we responded to competitive marketing activity.
The greatest volume of System Sales growth over the last 2 years has come from the opening of 31 stores, 2016-17, corporate and sub-franchised. These 31 stores, the majority of the estate, are still immature and as such have significantly lower sales than the more mature stores. The key focus for new stores is to generate sales and acquire customers, EBITDA should follow as the customer count builds. Our most mature corporate stores of 6+ years delivered significantly higher sales and EBITDA in 2017 than our original mature store model predicted.
Our commissary delivered robust growth in gross profit from royalties on sub-franchised store sales and margin on food sales to stores. However we are very mindful of sub-franchisee profitability and, in the context of cost inflation, manage our margins on food sales carefully.
The buoyant Polish consumer economy continues to provide positive conditions for growth, but also brings challenges through greater competition and wage inflation. Looking forward, European cheese prices began to fall in Q1 2018 and are predicted to fall further this year as supply increases.
As the profile of the store estate matures we can expect to see improvement in Group EBITDA on the back of continuing robust growth in System Sales."
(1) System Sales - total retail sales including sales from corporate and sub-franchised stores
(2) Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 31 December 2016 and 1 January and 31 December 2017
(3) Excluding non-cash items, non-recurring items and store pre-opening expenses
(4) Exchange rate average for 2017 GBP1: 4.8590 PLN
(5) Exchange rate average for 2016 GBP1: 5.3391 PLN
(6) Sales minus variable costs
Enquiries:
DP Poland PLC Peter Shaw, Chief Executive www.dppoland.com 020 3393 6954 Peel Hunt LLP Adrian Trimmings / George Sellar 020 7418 8900
Chairman's Statement
Double digit like-for-likes(2) and a record number of store openings delivered robust growth in both System Sales(1) and Revenue for YE 2017 on the back of a strong performance in 2016. We finished 2017 with a store estate more than 50% larger than it was at the beginning of the year and an expanded commissary capacity to service our growing store estate over the next 5+ years.
Group EBITDA(3) performance for the full year was impacted by inflation in both food and labour costs in the second half, coupled with strong price promotion in support of sales, resulting in a greater loss than we had anticipated, marginally greater than the loss for 2016. While frustrating we have experienced an easing of those inflationary pressures in the first months of 2018.
Our most mature stores are now performing more strongly than we had originally anticipated, in both sales and EBITDA. Mature store performance and the growth of our younger stores give us confidence in maintaining momentum in store roll-out and providing the requisite support that that roll-out requires, including the expansion of our commissary capacity and continued marketing investment. Growing sales bring greater economies of scale in procurement and greater efficiencies in marketing, our trial of national television advertising in Q1 2018 demonstrated the potential of that marketing channel.
Our commissary revenue stream delivered robust growth in gross profit(6) in 2017, from both sales royalties and food sales to sub-franchisees, albeit that our margin was impacted by inflation in food costs. We are very mindful of the profitability of our sub-franchise partners and the importance of sharing in both the impact of food cost rises and the benefits when food costs fall. Our second commissary came on stream at the end of the summer, expanding our capacity to supply up to 150 stores with fresh dough and ingredients.
The majority of our 19 store openings in 2017 were corporate and as previously reported we expect that to continue to be the case over the next few years as we drive expansion. 4 of the 19 store openings in 2017 were sub-franchised. While the investment case in corporate stores is increasingly compelling we continue actively to market and encourage sub-franchising, convinced of the advantages of a mixed corporate/sub-franchised system, evidenced by most Domino's markets. We expect the number of sub-franchise openings to grow as confidence in the Domino's sub-franchise model builds.
Store roll-out was further supported by our latest fund raising in June 2017 of GBP5.2m before expenses.
We look to maintain the momentum of expansion as we drive towards critical mass. In the short term our Group EBITDA is impacted by the costs of a high proportion of immature corporate stores and the costs of running a well-resourced store opening team and an expanded commissary capacity. As the estate matures and store openings become a smaller proportion of the total store estate and commissary capacity is utilised we should see improvement in Group EBITDA.
I would like to thank our team and our sub-franchisees for another record year of expansion and for maintaining that momentum into 2018.
Chief Executive's Review
Group performance
Group EBITDA(3) losses increased by 13% (GBP1.78m) in 2017 versus (GBP1.58m) in 2016, at average exchange rates for 2017(4) and 2016(5) , impacted mainly by inflationary pressures on food and labour costs in the second half of the year.
At constant exchange rates(4) Group EBITDA losses increased by 6% 2017 on 2016.
The Group loss for the period of (GBP2.63 m(4) ) was an increase of 6% on 2016.
Store performance
System Sales(1) were up 51%, 2017 on 2016, as a result of 17% like-for-like(2) store System Sales growth 2017 on 2016, healthy growth from non-like-for-like(7) stores and the opening of 19 new stores during the year.
The 2017 like-for-like performance of 17% was on the back of 27% like-for-like growth in 2016, representing 49% compound like-for-like growth over 2 years 2016-17. Q4 2017 was our 21(st) consecutive quarter of double digit like-for-like System Sales growth.
We took the decision towards the end of 2015 to accelerate store roll-out, based on the encouraging performance of our most mature stores and that of stores opened in new cities in 2015. 12 new stores were opened in 2016 and 19 new stores in 2017. As a result, by YE 2017 57% of our store estate was less than 2 years old and 35% less than 1 year old. Over 24 months, 1(st) January 2016 to 31(st) December 2017 we expanded our geographic presence from 4 to 24 towns and cities. By the same token our most mature corporate stores continued to grow year-on-year and by YE 2017 had outperformed our original expectations, in both average weekly unit sales (AWUS) and store EBITDA. We have started to split(8) the delivery areas of some of these mature stores.
Achieving this momentum in store roll-out, underpinned by the facts of mature store performance, has taken investment. Effective customer acquisition is vital in the early months of a store's opening and we support our stores through a range of sales and marketing initiatives to build initial sales and acquire customers. The costs of marketing in those early months are paid back as the customer base of each store grows and the brand becomes established in each new location.
Since Q4 2016 we have seen an increase in the cost of sales, due to inflation in food costs, notably the price of cheese, plus wage inflation due to increased general employment and greater competition for delivery drivers. While managing these increases through Q4 2016 - Q3 2017 by careful control of pricing and promotion, Q4 2017 saw a sharper uplift in cost inflation, compounded by greater competitive marketing activity, requiring more aggressive price promotion on our part. While the economics of our mature stores are robust enough to weather these impacts on costs our immature stores are less so and as such total store EBITDA was impacted in 2017.
In Q1 2018 we have started to see a softening in food cost inflation. The price of cheese is determined by the European dairy market and is a function of milk supply, which is forecast to increase through 2018. As such we expect the price of cheese to fall further during 2018. As our procurement volumes grow we will further benefit from growing economies of scale. Wage inflation is a function of the health of the Polish economy and demand for delivery drivers. While the competition for drivers remains we are seeing an improvement in recruitment and retention in Q1 2018, perhaps due to the recognition of the benefits of working for Domino's over other employers.
Store roll-out
We crossed the 50-store mark in October 2017, finishing the year with 54 stores. 19 openings, 15 corporate and 4 sub-franchised. 2017 was our biggest year of openings to-date.
Hot Features
Premium
Stores 1 Jan Opened Corporate/sub-franchised Sold Closed 31 Dec
2017 movement to 2017
sub-franchisees
---------------- ------- -------- ------------------------- ----------------- -------- --------
Corporate 13 15 2 0 0 30*
---------------- ------- -------- ------------------------- ----------------- -------- --------
Sub-franchised 22 4 -2 0 0 24
---------------- ------- -------- ------------------------- ----------------- -------- --------
Total 35 19 0 0 0 54
---------------- ------- -------- ------------------------- ----------------- -------- --------
* 2 corporate stores are run by sub-franchisees under management contract, with the option to acquire and sub-franchise in the future.
At YE 2017 we were operating stores in 24 towns and cities. To-date in 2018 we have 56 stores in 25 towns and cities.
Store splits will increase in 2018, meaning improved service delivery times, happier and more loyal customers and more efficient deployment of store labour. It is worth noting that store splits impact like-for-likes, with a proportion of the split store's customers reallocated to the new store. The sales of the original store are expected to re-build over time, as evidenced in other Domino's markets.
We saw an increase in store CAPEX costs, driven by increased demand for building and services, reflective of the buoyant Polish economy.
We are planning to have up to 70 stores open by YE 2018.
Sub-franchisees
In 2017 4 stores were opened by sub-franchisees and 2 were acquired from sub-franchisees, 1 of which we expect to be sub-franchised again in the near future.
There is no doubt that the established success model worldwide for recruiting Domino's sub-franchisees is converting existing Domino's store managers and area managers, they understand how to operate successful stores and are convinced of the opportunity. At the same time we continue to market to and encourage third parties to consider franchising the Domino's system. One of our most successful sub-franchisees joined us without any previous Domino's experience and they are now operating 3 stores, 2 sub-franchised and 1 under management contract.
Commissary
To support our store roll-out we opened a second commissary in August 2017, increasing our supply capacity from 50 to 150 stores, including our Warsaw facility. Located in ód , in the centre of the country, the new commissary is very well placed on the Polish motorway network, giving us the benefit of improved distribution costs to our stores in the north, west and south. While the investment in such a facility might be viewed as 'capital light' in comparison to commissary expansion in other Domino's markets, the new commissary represents the biggest investment project in our history. Expanding commissary capacity has added to Direct Costs, balanced in part by the savings in distribution costs.
Commissary gross profit(6) , derived from sub-franchised store sales royalties and margin on food sales, grew in 2017, although the opportunity to add margin was tempered by inflation in food costs. We are mindful of supporting our sub-franchisees when costs rise, as well as sharing in the margin benefits when costs fall. As well as food cost pressures our sub-franchisees faced the same wage pressures as our corporate stores. We work in close partnership with our sub-franchisees, looking at how to manage costs more effectively and how to drive and sustain sales growth.
Marketing and Innovation
In Q4 we introduced a new ordering channel, the Domino's Bot. Domino's Bot operates on Facebook Messenger using artificial intelligence (AI). Facebook made this AI platform available in late summer 2017 and Domino's Poland was the first Domino's market in the world to develop a Domino's ordering channel on it. The Domino's Bot ordering experience is very user friendly and is particularly popular among our customers aged 18-24. It was launched with a competition hosted by 3 of Poland's most popular YouTube bloggers, each with hundreds of thousands of followers. We saw a rapid uptake of Domino's Bot and a significant proportion of sales is now ordered via this new channel.
75% of all delivery sales were ordered online in 2017, compared to 71% in 2016, positioning Poland among the top Domino's markets in the world for online ordering. We anticipate that this proportion of delivery sales ordered on line will continue to increase.
Through the year we introduced a number of new pizza recipes including Buffalo Chicken, Pulled Pork and Greek Style.
We have seen an increase in competitive marketing activity as the market responds to increased consumer spending, as reflected in the GDP measure of internal consumption. 2 delivery aggregators have been particularly active in marketing, including television and poster campaigns.
June fund raising
In June 2017 we raised GBP5.2m before expenses. The new placing of shares represented approximately 8.2% of the Company's enlarged share capital post placing. The funds were raised to maintain the roll-out of new stores with a mix of corporate store openings and loans to sub-franchisees to open stores. An element of the fundraising was earmarked for additional marketing investment plus investment in technology to further improve interaction with customers.
Outlook and current trading
We tested national television advertising for the first time in January and February 2018 with 2x 2-week campaigns; the sales response was strong with like-for-like growth in System Sales ranging between 30-40% during each of those television advertised fortnights. Overall January like-for-like System Sales were 24% and February 18%. This test has convinced us that television will become an important medium for us when we reach the critical mass to justify it on a regular basis.
We have opened 2 stores so far in 2018 with 56 stores open to-date. We will continue to maintain the momentum of store roll-out through 2018, targeting 70 stores by YE 2018. We maintain our target of 100 stores by YE 2020.
The pressures on margins that we experienced in the second half of 2017, and in particular Q4, have been easing through Q1 2018. The price of cheese is softening and the fight for talent is becoming less intense as the attraction of working for Domino's versus other employers becomes clearer.
I am delighted that we are to be awarded a Gold Franny by our franchisor Domino's Pizza International (DPI) in recognition of our performance in 2017. Gold Frannies are awarded each year to a small proportion of Domino's franchisees in recognition of operational excellence, product quality, brand stewardship and growth. This is our second consecutive award, having received a Gold Franny for our 2016 performance.
As well as our own efforts our performance has been supported by the continuing growth of the Polish economy, providing helpful conditions for expansion through healthy consumer demand. These positive macro conditions are forecast to continue through 2018 and we look forward to another year of robust growth.
Finance Director's review
Overview
2017 was a record year for store opening as we crossed the 50-store mark, to reach 54 stores open by YE 2017.
Sales from new stores and 17% like-for-like(2) System Sales(1) growth delivered 51% growth in overall System Sales. In Q4 2017 we achieved our 21(st) consecutive quarter of double digit like-for-like System Sales growth.
17% like-for-like growth in System Sales was diluted by c. 1 percentage point due to store splitting in Warsaw. We expect more splitting in 2018, in Warsaw and in non-Warsaw stores. Store splits improve labour and delivery efficiency and customer service, resulting in happier customers and repeat purchases.
During Q1-Q3 2016 we experienced deflation in food costs. In Q4 2016 we saw food prices start to rise and continue in 2017. At the same time we also experienced wage inflation, underpinned by increases in the minimum wage, the introduction of more generous social benefits, reduction in the retirement age and growth in GDP. From the broader macro-economic viewpoint wage inflation translates to an increase in internal consumption, which should in-turn stimulate demand and sales growth. We have been managing these inflationary pressures through menu pricing and efficiencies in procurement, however in Q4 2017 inflation was above our expectations and impacted margin. Our most mature corporate stores were able to withstand the impact of these margin pressures better than our younger stores, with those less than 2 years old most impacted. We are very aware of our sub-franchisees' margins and we look to absorb at least some of those inflationary pressure through sensitive management of our commissary margins.
The outlook for 2018 is looking more positive with regard to cost inflation, with an easing in the price of cheese and a levelling off in wage rates.
In 2017 we continued to accelerate store expansion, opening 19 stores and adding 14 towns/cities. In the period January-March 2018 we added 2 stores and 1 more town. To-date in 2018 there are 56 Domino's Pizza stores in 25 towns and cities.
We are targeting up to 70 stores open by the year end.
To support store openings and the continuing growth in System Sales we expanded our commissary capacity in 2017 with the construction of a new facility on the outskirts of ód , a large city in the centre of the country. We have approached this investment with the same capital light model that we applied to our Warsaw facility. The combined capacity of both commissaries is c. 150 stores.
Selling, General and Administrative expenses (S,G&A)
In 2017 Selling, General and Administrative expenses (S,G&A) were 21% of System Sales an 8 percentage point improvement on 2016 (2016 29%), measured using the actual average exchange rates for 2017 and 2016.
The opening of new stores in new towns and cities requires investment in the store expansion team and additional area managers to oversee both corporate and sub-franchised store performance. As we open more stores these additional costs will become proportionately less significant and the overall impact of S,G&A on Group EBITDA will reduce.
As our national coverage of stores grows the prospect of regular national television advertising becomes more realistic, both in terms of the efficiency of media spend and the availability of Domino's Pizza to potential consumers. We trialled our first TV campaign in January and February 2018 with strong sales results.
Direct costs
In preparation for many more store openings and continuing growth in System Sales we extended our commissary capacity in 2017 with the construction of a new commissary facility in ód . This additional commissary capacity impacted our Direct Costs through additional rent and operating costs, production labour and warehousing labour. As System Sales grow the impact on Direct Costs will become less marked and the benefits of lower production costs and warehouse product handling costs will be seen in further improved corporate store EBITDA and commissary gross profit. The opening of new stores in new towns and cities results in higher distribution costs, which in turn will become proportionally less significant as those costs are spread across still more stores. The opening of this second commissary in the centre of Poland, reduces distribution expenses for stores located in the north, south and west of Poland.
Store count
Stores 1 Jan Opened Corporate/sub-franchised Sold Closed 31 Dec
2017 movement to 2017
sub-franchisees
---------------- ------- -------- ------------------------- ----------------- -------- --------
Corporate 13 15 2 0 0 30*
---------------- ------- -------- ------------------------- ----------------- -------- --------
Sub-franchised 22 4 -2 0 0 24
---------------- ------- -------- ------------------------- ----------------- -------- --------
Total 35 19 0 0 0 54
---------------- ------- -------- ------------------------- ----------------- -------- --------
* 2 corporate stores are run by sub-franchisees under management contract, with the option to acquire and sub-franchise in the future.
We have acquired 2 sub-franchised stores, with the expectation that 1 store will be sub-franchised again in the near future, the second acquisition fitted our corporate store estate requirements and we expect the sub-franchisee who sold it to us to open another store this year.
At the year-end 35% of our stores were less than 1 year old and 57% of our stores were less than 2 years old. In 2020 we expect to have c. 15% of stores less than 1 year old and c. 30% of stores less than 2 years old.
We saw inflation in the cost of fitting out stores in 2017 which we do not expect to ease in 2018 as the Polish economy continues to grow, fueling demand for building and related services.
2 new stores have been opened since 1 January 2018, totaling 56 stores to-date.
Sales Key Performance Indicators
51% growth in System Sales (PLN) was supported by 17% like-for-like System Sales and the opening of 19 new stores in 2017. 17% like-for-like System Sales growth constitutes a mix of 16% like-for-like System Sales order count growth and a 1% growth in average net check. Delivery System Sales ordered online are growing, however newly opened stores need time to build online customers, which dilutes the System average. In certain weeks we have seen some mature stores hit 90%+ of orders placed online. We see the potential of digital marketing and digital order fulfilment continuing to grow, better meeting the needs of our consumers and adding to our operational efficiencies. In the near future we expect to see up to 100% of delivery orders placed online in mature stores.
2017 2016 Change
%
----------------------- ----------- ----------- -------
System Sales PLN 58,082,060 38,531,225 +51%
----------------------- ----------- ----------- -------
System Sales GBP(4) 11,953,501 7,929,867 +51%
----------------------- ----------- ----------- -------
L-F-L system sales +17% +27%
----------------------- ----------- ----------- -------
L-F-L system order
count +16% +24%
----------------------- ----------- ----------- -------
Delivery System Sales
ordered online +75% +71%
----------------------- ----------- ----------- -------
(4) Constant exchange rate of GBP1: 4.8590 PLN
Group Performance
25% growth of Group Revenue at a constant exchange rate of GBP1: 4.8590 PLN is derivative of 51% growth of System Sales and selling 4 new stores to sub-franchisees. In 2017 we did not sell any corporate stores to sub-franchisees.
Group Revenue & 2017 2016 Change %
EBITDA
----------------- --------------- --------------- ---------
Revenue PLN 50,425,616 40,346,077 +25%
----------------- --------------- --------------- ---------
Revenue GBP 10,377,777(4) 8,303,370(4) +25%
----------------- --------------- --------------- ---------
Group EBITDA(3)
GBP (1,784,677)(4) (1,680,364)(4) -6%
----------------- --------------- --------------- ---------
Constant exchange rate of GBP1: 4.8590 PLN
The Group Income statement at the actual average exchange rate for 2017 and 2016 was impacted by sterling weakening against the zloty by 9% in 2017.
Group Revenue & 2017 2016 Change %
EBITDA
----------------- --------------- --------------- ---------
Revenue PLN 50,425,616 40,346,077 +25%
----------------- --------------- --------------- ---------
Revenue GBP 10,377,777(4) 7,556,718(5) +37%
----------------- --------------- --------------- ---------
Group EBITDA(3)
GBP (1,784,677)(4) (1,579,565)(5) -13%
----------------- --------------- --------------- ---------
Actual average exchange rates for 2017 and 2016
Group Loss for the period
The Group EBITDA loss, excluding non-cash items, non-recurring items and store pre-opening expenses, at actual average exchange rates for 2017 and 2016, increased by GBP205,112 (GBP104,313 increase at a constant exchange rate of GBP1: 4.8590 PLN) against the prior year.
The Group loss for the year at actual average exchange rates for 2017 and 2016 increased by GBP141,118 against 2016, mainly due to the effect of an increase of store pre-opening expenses, an increase of depreciation and amortization, a decrease of other non-cash and non-recurring items, an increase of foreign exchange gains and a decrease of share-based payments
Group Loss for 2017 2016 Change %
the period
--------------------- --------------- --------------- ---------
Loss for the period (2,634,519)(4) (2,493,401)(5) -6%
--------------------- --------------- --------------- ---------
Actual average exchange rates for 2017 and 2016
Exchange rates
PLN: GBP1 2017 2016 Change % ------------------ ------- ------- --------- Income Statement 4.8590 5.3391 -9% ------------------ ------- ------- --------- Balance Sheet 4.7048 5.1437 -9% ------------------ ------- ------- ---------
Financial Statements for our Polish subsidiary DP Polska S.A. are denominated in PLN and translated to GBP. Under IFRS accounting standards the Income Statement for the Group has been converted from PLN at the average annual exchange rate applicable to PLN against GBP. The balance sheet has been converted from PLN to GBP at the 31 December 2017 exchange rate applicable to PLN against GBP. In 2017 the PLN strengthened against GBP and impacted numbers presented at 2017 and 2016 rates accordingly.
Cash position
Cash reduced by 29% from 1 January 2017, with net cash at 31(st) December 2017 of GBP4.5m. Cash of
GBP7.0m was deployed to cover:
- Group losses
- store CAPEX (including CAPEX to be deployed in stores to be opened in 2018)
- new commissary CAPEX
- part of 2018 TV and radio campaign
- share placing expenses.
Some 2018 costs and investments were paid in 2017.
On 6 June 2017 the Group completed a placing of 12,200,000 new ordinary shares at the price of 43 pence per share, to raise a total of GBP5,246,000.
1(st) January Cash movement 31(st) December
2017 2017
-------------- -------------- -------------- ----------------
Cash in bank 6,308,260 (1,802,349) 4,505,911
-------------- -------------- -------------- ----------------
Actual exchange rates for 2017 and 2016
Macro situation in Poland
In 2017 we saw strong GDP growth combined with inflation. The inflation that we experienced in food and wages was higher than the general rise in prices of goods and services. GDP growth was supported by growth in Internal Consumption and by Investments (Investments since Q4 of 2017). The 3 Month Warsaw Interbank Offered Rate is virtually unchanged.
Macro KPI 2017 2016
-------------------------- ------- -------
Real GDP growth
(% growth)(9) 4.5 2.9
-------------------------- ------- -------
Inflation (% growth)(10) 2.1 -0.7
-------------------------- ------- -------
31 Dec 31 Dec
2017 2016
-------------------------- ------- -------
Interest rate(11)
(%) 1.7200 1.7300
-------------------------- ------- -------
(1) System Sales - total retail sales including sales from corporate and sub-franchised stores
(2) Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 31 December
2016 and 1 January and 31 December 2017
(3) Excluding non-cash items, non-recurring items and store pre-opening expenses
(4) Exchange rate average for 2017 GBP1: 4.8590 PLN
(5) Exchange rate average for 2016 GBP1: 5.3391 PLN
6 Sales minus variable costs
7 Stores up to 12 months old with no matching trading periods in 2016
(8) When a second store is opened in an existing store's delivery area and the delivery area is split between the original store and the second store
9 source: http://www.euromonitor.com/poland/country-factfile#
1(0) source: http://www.euromonitor.com/poland/country-factfile#
1(1) 3M WIBOR at 30(th) of December; source: www.money.pl
Group Income Statement
for the year ended 31
December 2017
2017 2016
Notes GBP GBP
Revenue 2 10,377,777 7,556,718
Direct Costs (9,658,691) (7,022,673)
Selling, general and administrative
expenses - excluding:
store pre-opening expenses, depreciation,
amortisation and share based payments (2,503,763) (2,113,610)
GROUP EBITDA - excluding non-cash
items, non-recurring items and store
pre-opening expenses (1,784,677) (1,579,565)
--------------------------------------------------- ------------ ------------
Store pre-opening
expenses (143,220) (47,850)
Other non-cash and non-recurring
items 5 (12,271) (99,302)
Finance income 92,638 65,116
Finance costs (24,364) (12,478)
Foreign exchange
gains / (losses) 148,032 (7,915)
Depreciation, amortisation
and impairment (656,942) (458,722)
Share based
payments (253,715) (352,685)
Loss before
taxation 4 (2,634,519) (2,493,401)
------------------------------------------- ------ ------------ ------------
Taxation 6 - -
Loss for the
period (2,634,519) (2,493,401)
------------------------------------------- ------ ------------ ------------
(1.85 (1.93
Loss per share Basic 7 p) p)
(1.85 (1.93
Diluted 7 p) p)
All of the loss for the year is attributable
to the owners of the Parent Company.
Group Statement
of comprehensive income
for the year ended 31
December 2017
2017 2016
GBP GBP
-------------------------------------------- ------------ ------------
Loss for the
period (2,634,519) (2,493,401)
Currency translation
differences 639,428 618,614
---------------------------------------------
Other comprehensive expense for
the period, net of tax to be reclassified
to profit or loss in subsequent
periods 639,428 618,614
------------------------------------------------ ------------ ------------
Total comprehensive income
for the period (1,995,091) (1,874,787)
---------------------------------------------- ------------ ------------
All of the comprehensive expense for the year
is attributable to the owners of the Parent
Company.
Group Balance Sheet
at 31 December
2017
2017 2016
Notes GBP GBP
--------------------------- --------- ------------- -------------
Non-current
assets
Intangible
assets 8 558,438 442,764
Property, plant
and equipment 9 6,617,788 2,765,748
Deferred tax - -
asset
Trade and other
receivables 1,767,289 1,217,231
--------- ------------- -------------
8,943,515 4,425,743
Current assets
Inventories 525,870 271,525
Trade and other
receivables 2,580,994 1,818,425
Cash and cash equivalents 4,505,911 6,308,260
---------------------------- --------- ------------- -------------
7,612,775 8,398,210
Total assets 16,556,290 12,823,953
------------------------------ --------- ------------- -------------
Current liabilities
Trade and other
payables (1,648,960) (1,218,991)
Borrowings (129,613) (73,007)
Provisions (37,289) (37,294)
------------------------------ --------- ------------- -------------
(1,815,862) (1,329,292)
--------------------------- --------- ------------- -------------
Non-current
liabilities
Provisions - (50,532)
Borrowings (243,197) (234,276)
------------------------------ --------- ------------- -------------
(243,197) (284,808)
Total liabilities (2,059,059) (1,614,100)
------------------------------ --------- ------------- -------------
Net assets 14,497,231 11,209,853
------------------------------ --------- ------------- -------------
Equity
Called up
share capital 10 762,754 684,576
Share premium
account 10 31,829,463 26,878,887
Capital reserve
- own shares (48,163) (50,463)
Retained earnings (18,499,828) (16,116,724)
Currency translation
reserve 453,005 (186,423)
---------------------------- --------- ------------- -------------
Total equity 14,497,231 11,209,853
------------------------------ --------- ------------- -------------
The financial statements were approved by the
Board of Directors and authorised for issue
on 26 March 2018 and were signed on its behalf
by:
Peter Shaw Maciej Jania
Director Director
Group Statement of Cash Flows
for the year ended 31 December
2017
2017 2016
Note GBP GBP
------------------------------------ ----- ------------ ------------
Cash flows from operating
activities
Loss before taxation
for the period (2,634,519) (2,493,401)
Adjustments
for:
Finance income 7 (92,638) (65,116)
Finance costs 8 24,364 12,478
Depreciation, amortisation
and impairment 656,942 458,722
Share based payments
expense 23 253,715 352,685
------------------------------------- ----- ------------ ------------
Operating cash flows before movement
in working capital (1,792,136) (1,734,632)
(Increase)
in inventories (221,747) (134,825)
(Increase) in trade and
other receivables 16 (728,558) (254,038)
Increase in trade
and other payables 555,994 461,664
(Decrease) / increase
in provisions (50,532) 50,532
------------------------------------- ----- ------------ ------------
Cash used
in operations (2,236,979) (1,611,299)
Taxation paid - -
Net cash used in
operations (2,236,979) (1,611,299)
Cash flows from
investing activities
Payments to acquire
software (23,833) (25,114)
Payments to acquire property,
plant and equipment (4,131,753) (1,714,215)
Payments to acquire intangible
fixed assets (26,039) (23,699)
Lease deposits net amount
(advanced) (50,396) (62,052)
Proceeds from disposal of property
plant and equipment - 698,882
(Increase) in loans to
sub-franchisees 16 (501,731) (1,214,743)
Interest received 7 92,638 36,745
Net cash used in
investing activities (4,641,114) (2,304,196)
Cash flows from
financing activities
Net proceeds from issue of
ordinary share capital 5,028,754 3,055,426
Interest paid 8 (24,364) (12,478)
--------------------------------------- ----- ------------ ------------
Net cash from financing
activities 5,004,390 3,042,948
Net (decrease) in cash
and cash equivalents (1,873,703) (872,547)
Exchange differences
on cash balances 71,354 193,304
Cash and cash equivalents at
beginning of period 6,308,260 6,987,503
Cash and cash equivalents
at end of period 18 4,505,911 6,308,260
-------------------------------------- ----- ------------ ------------
Group Statement of Changes in Equity
for the year ended 31 December
2017
Share Currency Capital
Share premium Retained translation reserve
-
capital account earnings reserve own Total
shares
GBP GBP GBP GBP GBP GBP
-------------------- -------- ----------- ------------- ------------ --------- ------------
At 31 December
2015 651,241 23,856,796 (13,970,110) (805,037) (56,361) 9,676,529
Shares issued 33,335 3,166,825 - - - 3,200,160
Expenses of
share issue - (144,734) - - - (144,734)
Share based
payments - - 352,685 - - 352,685
Shares transferred
out
of EBT - - (5,898) - 5,898 -
Translation
difference - - - 618,614 - 618,614
Loss for the
period - - (2,493,401) - - (2,493,401)
-------------------- -------- ----------- ------------- ------------ --------- ------------
At 31 December
2016 684,576 26,878,887 (16,116,724) (186,423) (50,463) 11,209,853
Shares issued 78,178 5,185,000 - - - 5,263,178
Expenses of
share issue - (234,424) - - - (234,424)
Share based
payments - - 253,715 - - 253,715
Shares transferred
out
of EBT - - (2,300) - 2,300 -
Translation
difference - - - 639,428 - 639,428
Loss for the
period - - (2,634,519) - - (2,634,519)
At 31 December
2017 762,754 31,829,463 (18,499,828) 453,005 (48,163) 14,497,231
-------------------- -------- ----------- ------------- ------------ --------- ------------
1. ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared
on the historical cost basis, with the exception
of certain financial instruments and share based
payments. The consolidated and Company financial
statements of DP Poland plc have been prepared
in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European
Union, IFRIC Interpretations and the Companies
Act 2006 applicable to Companies reporting under
IFRS. The financial statements have been prepared
in accordance with IFRS and IFRIC interpretations
issued and effective or issued and early adopted
as at the time of preparing these statements
(March 2018). The preparation of financial statements
in accordance with IFRS 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.
2. REVENUE
Revenue represents amounts received from the
sale of goods from the Group's principal continuing
activity, being the operation and sub-franchising
of Domino's Pizza stores. All of the revenue
is derived in Poland. Revenue is measured at
fair value of consideration net of returns and
value added taxes. Revenue from pizza delivery,
commissary and equipment sales is recognised
on delivery to customers and sub-franchisees.
Royalties are based on sub-franchised store
sales to customers and are recognised as the
income is earned by our sub-franchisees. 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:
2017 2016
GBP GBP
--------------------------- ------------------- -----------
Core revenue 9,663,088 6,030,869
Other revenue 714,689 1,525,849
10,377,777 7,556,718
--------------------------- ------------------- -----------
3. SEGMENTAL REPORTING
The Board monitors the performance of the corporate
stores and the commissary operations separately
and therefore those are considered to be the
Group's two operating segments. Corporate store
sales comprise sales to the public. Commissary
operations comprise sales to sub-franchisees
of food, services and fixtures and equipment.
Commissary operations also include the receipt
of royalty income from sub-franchisees. The
Board monitors the performance of the two segments
based on their contribution towards Group EBITDA
- excluding non-cash items, non-recurring items
and store pre-opening expenses. In accordance
with IFRS 8, the segmental analysis presented
reflects the information used by the Board.
No separate balance sheets are prepared for
the two operating segments and therefore no
analysis of segment assets and liabilities is
presented.
Operating Segment EBITDA
contribution
2017 2016
GBP GBP
--------------------------------------- ------------ ------------
Corporate
stores 345,667 328,906
Commissary gross
profit 599,196 321,171
Unallocated
expenses (2,729,540) (2,229,642)
------------------------------------------- ------------ ------------
GROUP EBITDA - excluding non-cash
items, non-recurring items and store
pre-opening expenses (1,784,677) (1,579,565)
------------------------------------------- ------------ ------------
4. LOSS BEFORE TAXATION
This is stated after
charging
2017 2016
GBP GBP
---------------------------- ----------------------------- -------- --------
Auditors and
their associates' - audit of company and
remuneration group financial statements 37,445 30,400
- tax compliance
services 1,400 1,400
Directors' - remuneration
emoluments and fees 325,966 352,974
Amortisation of intangible
fixed assets 86,057 64,173
Depreciation of property,
plant and equipment 570,885 394,549
Operating - land and
lease rentals buildings 616,415 476,928
and after
crediting
Operating lease income
from sub-franchisees 478,538 263,191
Foreign exchange
gains /(losses) 148,032 (7,915)
5. OTHER NON-CASH AND NON-RECURRING ITEMS
2017 2016
GBP GBP
-------------------------------------- ---------- ----------
Provision for additional
VAT payable 50,532 (50,532)
Other non-cash and non-recurring
items (62,803) (48,770)
(12,271) (99,302)
-------------------------------------- ---------- ----------
Non-recurring
Items
Non-recurring items include items which are
not sufficiently large to be classified as exceptional,
but in the opinion of the Directors, are not
part of the underlying trading performance of
the Group. The provision for additional VAT
payable has been reversed following changes
to a previous ruling by the Polish VAT authorities.
6. TAXATION
2017 2016
GBP GBP
----------------------------------- ------------ ------------
Current tax - -
Total tax charge in income - -
statement
------------------------------------- ------------ ------------
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:
2017 2016
GBP GBP
----------------------------------- ------------ ------------
Loss before
tax (2,634,519) (2,493,401)
Tax credit calculated
at applicable rate of
19% (500,559) (473,746)
Income taxable but not recognised
in financial statements 13,444 20,536
Income not subject
to tax (24,137) (2,487)
Expenses not deductible
for tax purposes 84,750 74,338
Tax losses for which no deferred
income tax asset was recognised 426,502 381,359
Total tax charge in income - -
statement
------------------------------------- ------------ ------------
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.
7. LOSS PER SHARE
The loss per ordinary share has
been calculated as follows:
2017 2017 2016 2016
GBP GBP
Weighted Profit Weighted Profit
average / (loss) average / (loss)
number after number after
of shares tax of shares tax
--------- ------------ ------------ ------------ ------------
Basic 142,164,031 (2,634,519) 128,931,485 (2,493,401)
Diluted 142,164,031 (2,634,519) 128,931,485 (2,493,401)
---------- ------------ ------------ ------------ ------------
The weighted average number of shares for the
year excludes those shares in the Company held
by the employee benefit trust. At 31st December
2017 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.
8. INTANGIBLE ASSETS
Franchise Software Capitalised Total
fees loan
and discount
intellectual
property
rights
Group GBP GBP GBP GBP
---------------------- -------------- --------- ------------ ----------
Cost:
At 31 December
2015 333,166 183,706 - 516,872
Foreign currency
difference 43,480 24,255 - 67,735
Additions 23,699 25,114 178,269 227,082
Disposals - (4,668) - (4,668)
At 31 December
2016 400,345 228,407 178,269 807,021
Foreign currency
difference 38,202 81,912 - 120,114
Additions 26,039 23,833 67,281 117,153
Disposals - - - -
At 31 December
2017 464,586 334,152 245,550 1,044,288
------------------------ -------------- --------- ------------ ----------
Amortisation
At 31 December
2015 145,746 119,429 - 265,175
Foreign currency
difference 19,850 16,236 - 36,086
Amortisation charged
for the year 32,192 26,756 5,225 64,173
Disposals - (1,177) (1,177)
At 31 December
2016 197,788 161,244 5,225 364,257
Foreign currency
difference 19,551 15,985 - 35,536
Amortisation charged
for the year 33,548 28,733 23,776 86,057
Disposals - - -
At 31 December
2017 250,887 205,962 29,001 485,850
------------------------ -------------- --------- ------------ ----------
Net book value:
At 31 December
2017 213,699 128,190 216,549 558,438
------------------------ -------------- --------- ------------ ----------
At 31 December
2016 202,557 67,163 173,044 442,764
9. PROPERTY, PLANT AND EQUIPMENT
Fixtures Assets
Leasehold fittings under
and
property equipment construction Total
Group GBP GBP GBP GBP
--------------------- --------- --------- ------------ -----------
Cost:
At 31 December
2015 1,574,988 1,370,096 185,768 3,130,852
Foreign currency
difference 226,639 349,204 (158,605) 417,238
Additions 581,957 336,619 605,016 1,523,592
Disposals (679,424) (394,242) - (1,073,666)
Transfers 78,037 496,304 (574,341) -
At 31 December
2016 1,782,197 2,157,981 57,838 3,998,016
Foreign currency
difference 336,090 584,555 (491,241) 429,404
Additions 2,074,716 440,698 1,616,339 4,131,753
Disposals - (87,457) - (87,457)
Transfers 55,487 1,041,695 (1,097,182) -
At 31 December
2017 4,248,490 4,137,472 85,754 8,471,716
----------------------- --------- --------- ------------ -----------
Depreciation:
At 31 December
2015 521,625 556,020 - 1,077,645
Foreign currency
difference (26,465) 164,815 - 138,350
Depreciation charged
for the year 178,035 216,514 - 394,549
Disposals (248,843) (129,433) - (378,276)
At 31 December
2016 424,352 807,916 - 1,232,268
Foreign currency
difference 46,716 107,034 - 153,750
Depreciation charged
for the year 217,535 353,350 - 570,885
Disposals - (102,975) - (102,975)
At 31 December
2017 688,603 1,165,325 - 1,853,928
----------------------- --------- --------- ------------ -----------
Net book value:
At 31 December
2017 3,559,887 2,972,147 85,754 6,617,788
----------------------- --------- --------- ------------ -----------
At 31 December
2016 1,357,845 1,350,065 57,838 2,765,748
10. SHARE CAPITAL
2017 2016
GBP GBP
------------------------- ----------- ------- ------- -------------
Called up, allotted
and fully paid:
152,550,704 (2016: Ordinary shares
136,915,112) of 0.5 pence each 762,754 684,576
--------------------------- ---------------------- ------- -------------
Movement in share capital
during the period
Nominal
Number value Consideration
GBP GBP
------------------------- ----------- ------- ------- -------------
At 31 December
2015 130,248,112 651,241 26,407,874
Placing 05 October
2016 6,667,000 33,335 3,200,160
At 31 December
2016 136,915,112 684,576 29,608,034
Placing 06
June 2017 12,200,000 61,000 5,246,000
Option exercises
2017 3,435,592 17,178 17,178
At 31 December
2017 152,550,704 762,754 34,871,212
------------------------- ----------- ------- ------- -------------
The Company does not have an
authorised share capital.
11. ANNUAL GENERAL MEETING
The Annual General Meeting of DP Poland plc will be held at the Offices of Peel Hunt, 120 London Wall, London EC2Y 5ET on 4 May 2018 at 10.00 a.m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BSGDXIDDBGIL
(END) Dow Jones Newswires
March 27, 2018 02:00 ET (06:00 GMT)
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