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DP Poland PLC Final Results

22/05/2020 7:00am

UK Regulatory (RNS & others)


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DP Poland PLC

22 May 2020

DP Poland plc

("DP Poland" or the "Group")

Final results for the full year to 31 December 2019

System Sales up 13%. Pre-IFRS 16 Revenue up 16%. Like-for-like System Sales up 3% for the year, up 6% in H2. Delivery sales ordered online up 6%. Number of stores up 10%.

Financial highlights:

   --    Cash at bank of GBP3.6m as at 31 December 2019 (GBP2.0m as at 31 December 2018) 
   --     Pre-IFRS Revenue up 16% to 69m PLN 2019 (60m PLN 2018) 
   --    System Sales (1) up 13% to 81m PLN 2019 (72m PLN 2018) 
   --     Including 6 highest monthly levels of System Sales for the Group to date 
   --     +3% like-for-like (2) growth in System Sales 2019 on 2018 

-- -1% like-for-like growth in System Sales H1 2019 on H1 2018, reflecting the strong comparatives driven by TV advertising in January and February 2018

   --     +6% like-for-like growth in System Sales H2 2019 on H2 2018 
   --    Pre-IFRS 16 Group EBITDA(3) losses improved by 5% (GBP1.8m) in 2019 vs (GBP1.9m) in 2018 
   --    Pre-IFRS 16 Group loss for the period improved by 10% (GBP3.4m) in 2019 vs (GBP3.8m) in 2018 
   --    Group performance in line with management expectations for 2019 

Operational highlights:

   --     82% of delivery sales ordered online (77% 2018) 

-- Store numbers in 2019 increased from 63 to 69 stores, satisfying the Domino's Pizza Master Franchise Agreement requirement

   --     6 new corporate stores opened 
   --     3 corporate stores acquired by 2 new sub-franchisees across Poland 
   --     2 corporate stores taken under management contract 
   --     Positive interaction with food aggregator Pyszne.pl (takeaway.com) 

Iwona Olbryś, Chief Executive of DP Poland said:

"2019 delivered continued expansion and growth in System Sales during the year, notwithstanding the strong comparatives driven by our TV advertising in January and February 2018.

The Coronavirus crisis presents our industry - and business in general in Poland and around the world - with some major obstacles. Nevertheless, I believe that the Domino's brand, and its reputation for quality of product and service, put us in a good position. While dine-in restaurants in Poland are permitted to reopen this week, we continue to deliver to our customers delicious, hot pizzas, typically within 25 minutes from order. Our focus on delivery/collection and online ordering positions DP Poland well in the current environment. However, with so much uncertainty prevailing, at the present time we can give no guidance on the outlook for DP Poland in the current financial year.

Our customers order their pizzas increasingly on our digital platforms, and pay for their orders on that platform too. In Poland we believe we are 'best in class' on this front.

In light of the Coronavirus concerns, we now offer contact free delivery and contact free carry out. We continue to create new initiatives and seek to adapt to the 'new world'. Meanwhile, one consequence of the crisis has been to bring about some reduction in our food and labour costs.

Whilst the macro outlook remains uncertain, in this new world I believe that DP Poland holds an important position in the Polish F&B industry and good prospects."

Enquiries:

   DP Poland PLC                                   020 3393 6954 

Nick Donaldson, Non-Executive Chairman

Iwona Olbryś, CEO

   Peel Hunt LLP                                    020 7418 8900 

Adrian Trimmings

Andrew Clark

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

(2) Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 31 December 2018 and 1 January and 31 December 2019.

(3) Excluding non-cash items, non-recurring items and store pre-opening expenses

Notes to editor

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 69 Domino's Pizza stores, 46 corporately managed, (2 of which are under management contract) and 23 sub-franchised.

Chairman's Statement

DP Poland delivered a satisfactory performance in 2019 with System Sales(1) growth of 13% and Pre-IFRS 16 Revenue growth of 16%, in line with management expectations for the year.

Like-for-like(2) System Sales in the first half of the year were negative at -1%, reflecting the strong comparatives driven by our TV advertising trial in January and February 2018. However, like-for-like System Sales growth resumed in the second half of the year at 6%, resulting in 3% like-for-like System Sales growth for the year overall.

2019 saw the 6 highest monthly levels of System Sales for the Group to date.

During the year we opened 6 new corporate stores, satisfying the Domino's Pizza Master Franchise Agreement of 69 stores. 3 of our corporate stores were acquired by 2 new sub-franchisees across Poland, and 2 further stores were taken under management contract. Building our team of sub-franchisees continues to be a key focus for the business.

The Group's stores continue to perform to a high standard. All 14 recently audited stores were scored at an average of 95%, with 1 store scoring 98% - under the new Food Safety Audit Procedure implemented by our Master Franchisor, Domino's Pizza Inc. DP Poland's stores rank amongst the best Domino's stores in the world with regard to digital ordering - 82% of delivery sales in 2019, up from 77% in 2018.

In our 2019 Interim Report released in September 2019 we announced the appointment of Iwona Olbryś, an experienced Food & Beverage executive, as our new General Manager, based in Warsaw. In December 2019 we were delighted to announce Iwona's appointment to the board of DP Poland as our new Chief Executive. Iwona's first Chief Executive's Review follows this Statement.

As I have noted before, DP Poland is fundamentally a Polish company, operating in what was a pre COVID buoyant economy. Bloomberg has suggested today that the Polish economy is perceived as the most resilient to the pandemic crisis in the European Union. Bloomberg also quotes the head of the Polish Development Fund as saying that Poland has already experienced its biggest decline and the economy is starting to recover from the crisis. According to EU forecasts, Polish GDP will shrink by 4.3 percent this year and this will be the smallest expected drop among all EU countries.

We have established a strong platform in the Polish market, and I am confident that we now have in place a first-rate operational team. Competition and labour inflation in particular have been continuing challenges, but the strength of our executive team, the Domino's brand and our reputation for quality and service should ensure that DP Poland is well-placed to participate in Poland's food delivery market.

Since the outbreak of the Coronavirus global crisis we have been following the advice of the Polish government and health authorities to ensure that our stores can continue to operate safely and deliver pizza to our customers. We believe that we have stabilized our operations, including our supply chain, to address this new environment, and we continue to work hard adapting to a 'new normal'. At the time of writing this statement DP Poland is busy making pizzas for delivery and collection, while dine-in restaurants in Poland have this week been permitted to reopen. We hope that the progressive 'unlocking' of the Polish economy works well, however, the ultimate impact of the Coronavirus crisis on the Polish economy is not possible to predict.

Nevertheless, we continue to have great confidence in the Domino's brand and the demand of our customers for our great food and service offer.

Nicholas Donaldson

Non-Executive Chairman

21 May 2020

Chief Executive's Review

Group performance

Pre-IFRS 16 Revenue in the year ended 31 December 2019 increased by 16% to 69m PLN (60m PLN 2018).

Pre-IFRS 16 Group(3) EBITDA losses decreased by 5% to (GBP1.8m) in 2019 versus (GBP1.9m) in 2018, at average exchange rates for 2019(6) and 2018(7) .

At constant exchange rates(6) Pre-IFRS 16 Group EBITDA losses decreased by 4% 2019 on 2018.

Pre-IFRS 16 Group loss decreased by 10% (GBP3.4m) in 2019 versus (GBP3.8m) in 2018.

Store performance

System Sales were up 13% 2019 on 2018 as a result of 3% like-for-like System Sales growth 2019 on 2018, growth from non-like-for-like(4) stores and the opening of 6 new corporate stores during the year.

Like-for-like System Sales in the first half of the year were negative at -1%, reflecting the strong comparatives driven by our TV advertising trial in January and February 2018. However, like-for-like System Sales growth resumed in the second half of the year at 6%, resulting in 3% like-for-like System Sales growth for the year overall.

Like-for-like System Sales growth per quarter were as follows:

 
 Q1    -5% 
 Q2    +5% 
 Q3    +6% 
 Q4    +5% 
 

Sustained robust growth in the Polish economy in 2019 continued to add inflationary pressure to labour rates, particularly in Warsaw and the other major cities. Although staff recruitment and retention pressures continued in 2019, we believe that the fact that we are perceived to be an attractive employer continues to be helpful to us.

Since the onset of the Coronavirus crisis in early 2020 we have seen some deflation in labour rates and some improvement in staff recruitment and retention.

Store roll-out

We finished the year with 69 stores (23 sub-franchised and 46 corporately managed) , satisfying the Domino's Pizza Master Franchise Agreement of 69 stores . During the year we opened 6 corporate stores.

 
   Store count     1 Jan 2019   Opened   Closed   Transferred   31 Dec 2019 
   Corporate*          39         6        0           1            46 
                  -----------  -------  -------  ------------  ------------ 
 Sub-Franchised        24         0        0          -1            23 
                  -----------  -------  -------  ------------  ------------ 
      Total            63         6        0           0            69 
                  -----------  -------  -------  ------------  ------------ 
 

* 3 corporate stores were run by sub-franchisees under management contract, with the option to acquire and sub-franchise in the future

During the period we acquired 4 corporate stores from one sub-franchisee and we sold 3 corporate stores to 2 new sub-franchisees. 2 further corporate stores were taken under management contract.

Sub-franchising

The performance of sub-franchised stores in 2019 was mixed, with some strong performers and some weaker. We engaged 2 new sub-franchisees across Poland and sold them 3 corporate stores. We also entered into 2 management contracts, 1 contract with an existing sub-franchisee and 1 contract with a prospective sub-franchisee. By mutual agreement we let 1 sub-franchisee leave Domino's Poland. We are currently in discussions with a number of potential new sub-franchisees; this will continue to be a key focus in the development of our business. In March 2020 we hired a new Operations Director with over 20 years' experience in McDonald's Poland and BNI Poland, including extensive experience in cooperation with sub-franchisees.

Marketing and product innovation

In mid-January 2019 we launched an innovative campaign featuring Damian Kordas, the winner of Polish Master Chef 2018, creating unique Domino's video content, distributed through digital channels. This content, including video and imagery featuring Damian discussing and making pizzas and delivery, has met with a strong sales response. We introduced 4 new pizzas created by Damian over the year. We continue to invest in improving our digital presence, including the effectiveness of our existing interfaces and the creation of new ones. Our aim is to delight customers and engage employees to obtain customer satisfaction and loyalty.

Food aggregators

Our interaction with the food aggregator Pyszne.pl (takeaway.com) has been positive. Approximately one half of our customers shopping through Pyszne.pl are new customers for us, generating for DP Poland incremental orders with higher average tickets. We have started a test with a second food aggregator, Glovo. Aggregators are 'search engines' for food and we want to be in those search engines!

Fundraising February 2019

On 28 February 2019 we completed a fundraising of c.GBP5.8m before expenses, by means of a share placing, including a fully subscribed broker option of GBP0.5m. This resulted in net funds raised for the Group of c.GBP5.5m.

Current trading and outlook

We believe that we have identified some key areas in which to stimulate revenue growth and boost pricing power in our market. We are currently upgrading our point of sales system which should help us to align better our labour costs with our ambitions to focus on revenue growth and, of course, our focus on customer service by delivering delicious pizzas in less than 25 minutes from order.

In 2020 we will stay focused on food delivery online by re-platforming our website and implementing a new ordering channel, online voice ordering. Our new website is designed to have far greater functionality than our existing digital platform, and will support our strategy of further digitising our business operations, delivering connected customer experiences, while gathering valuable customer insight with the ultimate goal of providing better customer experiences.

We are analysing our supply chain structure. The aim is to simplify and refocus this aspect of our operations with a view to better enabling the DP Poland team to pursue revenue growth and to provide a better customer experience.

Coronavirus

We have appointed a senior, fully dedicated COVID-19 team, which is focused on this crisis. We have been following the advice of government and health authorities to ensure that our stores can continue to operate safely and deliver delicious pizzas to our customers. Dine-in restaurants in Poland have this week been permitted to reopen, while carry out and delivery sales continue. The safety of our team members and customers is our priority. We have implemented Zero Contact delivery and Zero Contact carry out to respond to the requirements of our customers and the best interests of our employees. As noted above, we believe we have stabilized our operations in order to address as effectively as possible the new environment in which we now operate. At the time of writing this review all of our 69 stores, our 2 commissaries and our head office are open and operating effectively.

Conclusions

2019 delivered continued expansion and growth in System Sales during the year, notwithstanding the strong comparatives driven by our TV advertising in January and February 2018.

The Coronavirus crisis presents our industry and business in general in Poland with some major obstacles. Nevertheless, I believe that the Domino's brand, and its reputation for quality of product and service, put us in a good position. While dine-in restaurants in Poland are permitted to reopen this week, we continue to deliver to our customers delicious, hot pizzas, typically within 25 minutes from order. Our focus on delivery/collection and online ordering positions DP Poland well in the current environment. However, with so much uncertainty prevailing, at the present time we can give no guidance on the outlook for DP Poland in the current financial year.

Our customers order their pizzas increasingly on our digital platforms, and pay for their orders on that platform too. In Poland we believe we are 'best in class' on this front.

In light of the Coronavirus concerns, we now offer contact free delivery and contact free carry out. We continue to create new initiatives and seek to adapt to the 'new world'. Meanwhile, one consequence of the crisis has been to bring about some reduction in our food and labour costs.

Whilst the macro outlook remains uncertain, in this new world I believe that DP Poland holds an important position in the Polish F&B industry and good prospects."

Iwona Olbryś

Chief Executive

21 May 2020

Finance Director's review

In accordance with new accounting requirements, these results are presented in accordance with IFRS 16, the new lease accounting standard. On 1 January 2019 the Group adopted a new accounting standard, IFRS 16 'Leases'. The Group has used the modified retrospective transition approach as permitted by the standard, which means that comparative figures in the financial statements have not been restated. The adoption of IFRS 16 has had a significant impact on the Group's financial statements, including the important measure of Group EBITDA, which under IFRS 16 excludes the rental cost of the Group's stores, commissaries and offices. The Directors believe that a clearer picture of trading performance compared to prior periods is given by looking at Group EBITDA excluding the effect of IFRS 16 and therefore the figures for Group EBITDA shown in the reviews of the Chairman, Chief Executive and the Finance Director are shown excluding the effect of IFRS 16 ('Pre-IFRS 16').

 
                                                                       Pro-forma 
                                                                        Pre-IFRS 
                                                          IFRS 16             16 
                                                             2019           2019 
                                                              GBP            GBP 
 
 Revenue                                               14,006,659     14,126,658 
 
 Direct Costs                                        (11,820,235)   (13,197,170) 
 
 Selling, general and administrative expenses 
  - excluding: 
  store pre-opening expenses, depreciation, 
  amortisation and share based payments               (2,605,692)    (2,757,840) 
 
 GROUP EBITDA - excluding non-cash items, 
  non-recurring items and store pre-opening 
  expenses                                              (419,268)    (1,828,352) 
                                                    -------------  ------------- 
 
 Store pre-opening expenses                              (53,633)       (53,633) 
 Other non-cash and non-recurring items                 (189,518)      (199,114) 
 Finance income                                           160,186        109,534 
 Finance costs                                          (600,343)       (25,858) 
 Foreign exchange losses                                 (10,825)       (10,825) 
 Depreciation, amortisation and impairment            (2,246,949)    (1,268,696) 
 Share based payments                                   (151,418)      (151,418) 
 
 Loss before taxation                                 (3,511,768)    (3,428,362) 
                                                    -------------  ------------- 
 

Overview

During 2019 the food delivery market in Poland continued to grow at an impressive rate, in part driven by Poland's current strong economy and a step change in investment by the delivery aggregators, alongside the expansion of food service offers.

In response to the delivery aggregators' marketing investment we have commenced partnership with the leading delivery aggregator, Pyszne.pl (Takeaway.com). We believe that we benefit from their sales and marketing platform, while retaining control of our offer, service and delivery. We have recently started a test with a second food aggregator, Glovo.

Although the Polish consumer economy has been broadly beneficial to the Group, the related reduction in unemployment and the introduction of a minimum wage has seen labour rates double since we opened our first store in February 2011. We continue to work hard to manage these costs, including the introduction of menu price increases, a move that has been mirrored across the food service sector. Poland can no longer be described as a low cost labour market.

The overall impact of Coronavirus on the Polish economy is unlikely to be positive and any attempt to forecast the consequences would be guesswork. Nevertheless, the Group should derive some benefit from these unfortunate circumstances. We believe we have a quality product with one of the best delivery services in Poland, and an operating system which provides contactless payment and contactless delivery/collection. With dine-in restaurants only recently permitted to reopen in Poland, we are currently seeing ingredient prices easing and the ability to hire staff becoming easier.

Selling, general and administrative expenses (S, G&A)

In 2019 Pre-IFRS 16 Selling, general and administrative expenses (S, G&A) were 17% of System Sales, a 2 percentage points improvement against 2018 (2018 19%); both measured using the actual average exchange rates for 2019 and 2018.

Direct costs

In 2019 we continued to experience inflation in food costs. We work hard to control these cost increases as well as possible, and we are careful to share the benefits of any reduction in food costs with our sub-franchisees. Since the onset of the Coronavirus crisis we have seen some reduction in these costs.

Throughout 2019 labour cost inflation continued in Poland's robust economy representing a challenge for the Group, particularly for our younger stores which in their early days can have insufficient sales to absorb the fixed element of labour. The National Minimum Wage in Poland in 2019 has been increased by 7% (year-on-year) on top of a 5% (year-on-year) increase in 2018. The National Minimum Wage has been increased in 2020 by 16% (year-on-year).

Store count

 
   Store count     1 Jan 2019   Opened   Closed   Transferred   31 Dec 2019 
   Corporate*          39         6        0           1            46 
                  -----------  -------  -------  ------------  ------------ 
 Sub-Franchised        24         0        0          -1            23 
                  -----------  -------  -------  ------------  ------------ 
      Total            63         6        0           0            69 
                  -----------  -------  -------  ------------  ------------ 
 

* 3 corporate stores were run by sub-franchisees under management contract, with the option to acquire and sub-franchise in the future

In 2019 we (i) opened 6 new corporate stores, (ii) acquired 4 corporate stores from one sub-franchisee, and (iii) sold 3 corporate stores to two new sub-franchisees. 1 store was sold for cash to a new sub-franchisee and 2 stores were sold to one of our Area Managers; we granted a loan to him in this connection. In summary, we financed the acquisition of 10 stores and received cash for 1 store we sold. As noted above, we granted a loan for the 2 stores we sold to our Area Manager. We have not opened any new stores since the year end.

Sales Key Performance Indicators

System Sales were up 13% 2019 on 2018 as a result of 3% like-for-like System Sales growth 2019 on 2018, growth from non-like-for-like stores and the opening of 6 new corporate stores during the year.

Delivery online sales continue to grow, a more cost-efficient means of making sales, however, newly opened stores need time to build online customers.

 
                                     2019         2018      Change 
                                                               % 
 System Sales PLN                 81,401,417   71,873,155    13% 
                                 -----------  -----------  ------- 
 System Sales GBP*                16,613,212   14,668,590    13% 
                                 -----------  -----------  ------- 
 L-F-L system sales                   3%           4%         - 
                                 -----------  -----------  ------- 
 L-F-L system sales pre-split 
  (5)                                 3%           6%         - 
                                 -----------  -----------  ------- 
 L-F-L system order count             2%          -2%         - 
                                 -----------  -----------  ------- 
 L-F-L system order count 
  pre-split                           3%           0%         - 
                                 -----------  -----------  ------- 
 Delivery System Sales ordered 
  online                             82%          77%         - 
                                 -----------  -----------  ------- 
 

*Constant exchange rate of PLN 4.8998:GBP1

Like-for-like System Sales growth per quarter were as follow:

 
 Q1    -5% 
 Q2    +5% 
 Q3    +6% 
 Q4    +5% 
 

Group performance

16% growth of Pre-IFRS 16 Group Revenue in PLN is derivative of 13% growth in System Sales and sales of 3 corporate stores.

 
 Group Revenue & EBITDA*           2019          2018   Change % 
       (Pre IFRS 16) 
 
 Revenue PLN                 69,217,807    59,584,167       +16% 
                           ------------  ------------  --------- 
 Revenue GBP *               14,126,660    12,160,530       +16% 
                           ------------  ------------  --------- 
 Group EBITDA GBP           (1,828,352)   (1,897,862)        +4% 
                           ------------  ------------  --------- 
 

*Constant exchange rate of PLN 4.8998:GBP1

 
 Group Revenue & EBITDA*           2019          2018   Change 
       (Pre IFRS 16)                                         % 
 
 Revenue PLN                 69,217,807    59,584,167     +16% 
                           ------------  ------------  ------- 
 Revenue GBP *               14,126,658    12,369,815     +14% 
                           ------------  ------------  ------- 
 Group EBITDA GBP           (1,828,352)   (1,920,448)      +5% 
                           ------------  ------------  ------- 
 

*Actual exchange rates for 2019 and 2018

Group loss for the period

Pre-IFRS 16 Group EBITDA loss (at actual exchange rates) decreased by 5% against the comparative period in 2018, whereas Pre-IFRS 16 Group loss before tax (at actual exchange rates) decreased by 10%.

 
 Group Loss for the period*           2019          2018   Change % 
        (Pre IFRS 16) 
 Group loss for the period     (3,428,362)   (3,793,272)       +10% 
                              ------------  ------------  --------- 
 

* Actual exchange rates for 2019 and 2018

Exchange rates

 
       PLN : GBP1           2019     2018   Change % 
 Profit & Loss Account    4.8998   4.8169        +2% 
                         -------  -------  --------- 
 Balance Sheet            5.0118   4.7921        +5% 
                         -------  -------  --------- 
 

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 2019 exchange rate applicable to PLN against GBP. In 2019 the PLN is virtually unchanged against GBP and that almost had no impact on numbers presented at 2019 and 2018 rates.

Cash position

On 28 February 2019 the Group completed a placing of 96,666,666 new ordinary shares at the price

of 6 pence per share, raising a net total (after expenses) of c. GBP5.5m.

Cash of GBP4.2m was deployed in 2019 to cover Group losses, store CAPEX, working capital and fundraising expenses.

 
                 1(st) January   Cash movement   31(st) December 
                  2019                            2019 
 Cash in bank        1,957,916       1,634,486         3,592,402 
                --------------  --------------  ---------------- 
 

Actual exchange rates for 2019 and 2018

Macro situation in Poland

In 2019 we saw strong GDP growth combined with inflation and the lowest recorded unemployment rate. The 3 Month Warsaw Interbank Offered Rate is virtually unchanged.

 
               Macro KPI                    2019          2018 
 Real GDP growth (% growth)(8)               4.1           5.1 
                                        ------------  ------------ 
 Inflation (% growth)(8)                     2.2           1.8 
                                        ------------  ------------ 
 Unemployment Rate (% of economically 
  active population)(8)                      3.3           3.8 
                                        ------------  ------------ 
                                         31 Dec 2019   31 Dec 2018 
                                        ------------  ------------ 
 Interest rate (%)(9)                      1.7100        1.7200 
                                        ------------  ------------ 
 

Going concern

The board is very aware of the potential impact of COVID -19 on the fortunes of the Group. So far it has had relatively little impact as, under Polish government guidance, we have been able to keep all our stores open and sales have held up robustly. In addition, we provide our customers with a product which they can pay for contactlessly and either collect or have delivered to their front doors without contact. We believe that there will be a reticence on the part of consumers to return to eating in restaurants for a period, and that we can well address our customers' demand for quality, pre-prepared food, delivered or collected without contact. That also applies to consumers who are wary of food shopping in retail outlets.

The safety of our employees, our customers and our suppliers is of paramount importance to us and all of our decisions relating to the COVID - 19 pandemic have been taken with that as the overreaching consideration.

The DPP board has given considerable thought as to how the Group might minimise the risks of the pandemic and what those risks might be. Amongst those risks could be a complete lock down of all movement within Poland, an inability of one or some of our key suppliers to deliver, and/or the closure of some of the Group's stores due to COVID-19 illness amongst the staff. We believe that those risks are less prevalent than, say, one month ago. At the time of finalising this Annual Report Poland is slowly easing its pandemic restrictions, so a complete lock down seems unlikely. With one exception all our key suppliers are based in Poland, which makes supply continuity easier to control and maintain. If we have to close stores, in the major cities where our higher turnover stores are located, we believe that we can service the catchment areas of closed stores from our other stores in that city. It is possible that a second outbreak could weaken the Polish economy or that we do have to close a material number of key stores or that sub franchisees decide to close stores for personal reasons.

That said, the board does not have a crystal ball and cannot anticipate the final outcome of the present COVID-19 situation. We believe that we have enough cash to last us for at least another year, based on the slowly improving outlook that we are seeing today. Should, for any of the above reasons that not prove to be the case, we would explore alternative financing arrangements including new equity, bank borrowing, asset financing and factoring. Therefore, we have no hesitation in adopting the going concern principle. We do not believe there needs to be any impairment of our assets. Our inventory is all useable and, indeed, we are seeing some welcome price reductions in key ingredients. We believe that our debtors will be able to fulfil their payment obligations and no goodwill write downs are required.

Nevertheless the above scenarios suggest that our going concern assumptions could be incorrect. Auditors have drawn our attention to the material uncertainty with respect to this assumption in their audit report. Should there be any material change to the present position the board will, of course, release a relevant update.

On a brighter note the Chairman has already pointed out in his report that the Polish economy is perceived as being the most resilient in the EU to the pandemic crisis and is already starting to recover.

Robert Morrish

Non-Executive Finance Director

21 May 2020

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

(2) Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 31 December 2018 and 1 January and 31 December 2019.

(3) Excluding non-cash items, non-recurring items and store pre-opening expenses.

(4) Non-like-for-like stores that are less than 12 months old, with no matching trading periods year on year.

(5) When a store's delivery area is split, by opening a second store in its original delivery area, a significant portion of the original store's customer database is allocated to the new store, resulting in the original store losing sales. Calculating pre-split like-for-likes allows us to see sales growth by matched delivery areas, irrespective of the opening of new stores. Pre-split like-for-likes are a standard measure adopted by many major Domino's Pizza master franchisees

(6) Exchange rate average for 2019 GBP1: 4.8998

(7) Exchange rate average for 2018 GBP1: 4.8169

(8) Source: http://www.euromonitor/poland/country-factfile#

(9) 3M WIBOR at 31 December; source www.money.pl

 
 Group Income Statement 
 for the year ended 31 December 
  2019 
 
 
 
 
                                                                    2019           2018 
                                                    Notes            GBP            GBP 
 
 Revenue                                              3       14,006,659     12,369,815 
 
 Direct Costs                                               (11,820,235)   (11,426,271) 
 
 Selling, general and administrative 
  expenses - excluding: 
  store pre-opening expenses, depreciation, 
  amortisation and share based payments                      (2,605,692)    (2,863,992) 
 
 GROUP EBITDA - excluding non-cash items, 
  non-recurring items and store pre-opening 
  expenses*                                                    (419,268)    (1,920,448) 
                                                   ------  ------------- 
 
 Store pre-opening expenses                                     (53,633)       (72,900) 
 Other non-cash and non-recurring 
  items                                               6        (189,518)        131,054 
 Finance income                                                  160,186        129,315 
 Finance costs                                                 (600,343)       (21,254) 
 Foreign exchange losses                                        (10,825)        (6,513) 
 Depreciation, amortisation and 
  impairment                                                 (2,246,949)    (1,793,258) 
 Share based payments                                          (151,418)      (239,268) 
 
 Loss before taxation                                 5      (3,511,768)    (3,793,272) 
                                                   ------  ------------- 
 
 Taxation                                            10                -              - 
 
 Loss for the period                                         (3,511,768)    (3,793,272) 
                                                   ------  ------------- 
 
 
 Loss per share                     Basic            12         (1.51 p)       (2.53 p) 
  Diluted                                            12         (1.51 p)       (2.53 p) 
 
 All of the loss for the year is attributable to the owners of the 
  Parent Company. 
 
 
 PRE-IFRS 16 GROUP EBITDA - excluding 
  non-cash items, non-recurring items 
  and store pre-opening expenses*                            (1,828,352)    (1,920,448) 
                                                   ------  ------------- 
 
 * The Group has adopted IFRS 16 'Leases' on 1 January 2019 and 
  applied the modified retrospective method on adoption. Comparatives 
  for 2018 have not been restated and therefore Group EBITDA for 
  the comparative year includes the cash cost of rent on stores, 
  commissaries and head office, whereas under IFRS 16 the current 
  year does not. For comparability 'Pre-IFRS 16 Group EBITDA' is 
  presented above. 
 
 
 Group Statement 
 of comprehensive income 
 for the year ended 31 December 2019 
 
 
                                                               2019          2018 
 
                                                                GBP           GBP 
-------------------------------------------------      ------------  ------------ 
 
 Loss for the period                                    (3,511,768)   (3,793,272) 
 Currency translation differences                         (213,974)     (253,668) 
--------------------------------------------------- 
 Other comprehensive expense for the period, net 
  of tax to be reclassified to profit or loss in 
  subsequent periods                                      (213,974)     (253,668) 
-----------------------------------------------------  ------------ 
 
 Total comprehensive income for the period              (3,725,742)   (4,046,940) 
---------------------------------------------------    ------------  ------------ 
 
 All of the comprehensive expense for the year is attributable to 
  the owners of the Parent Company. 
 
 
 Group Balance Sheet 
 at 31 December 2019 
 
                                                             2019            2018 
 
                                          Notes               GBP             GBP 
----------------------------------     ----------  --------------  -------------- 
 Non-current assets 
 Intangible assets                          9             520,376         604,392 
 Property, plant and equipment             10           6,018,901       6,437,717 
 Leases - right of use assets                           5,807,783               - 
 Trade and other receivables                            1,651,358       1,730,633 
 Finance lease receivables                                538,988               - 
----------------------------------     ----------  --------------  -------------- 
                                                       14,537,406       8,772,742 
 Current assets 
 Inventories                                              383,287         464,102 
 Trade and other receivables                            2,288,085       1,931,434 
 Finance lease receivables                                 73,549               - 
 Cash and cash equivalents                              3,592,402       1,957,916 
------------------------------------   ----------  --------------  -------------- 
                                                        6,337,323       4,353,452 
 
 Total assets                                          20,874,729      13,126,194 
-------------------------------------  ----------  --------------  -------------- 
 
 Current liabilities 
 Trade and other payables                             (1,776,117)     (2,132,199) 
 Borrowings                                              (58,258)       (143,820) 
 Lease liabilities                                    (1,005,525)               - 
 Provisions                                              (16,717)        (27,296) 
-------------------------------------  ----------  --------------  -------------- 
                                                      (2,856,617)     (2,303,315) 
   ----------------------------------  ----------  --------------  -------------- 
 
 Non-current liabilities 
 Lease liabilities                                    (6,315,270)               - 
 Borrowings                                              (80,803)       (131,963) 
-------------------------------------  ----------  --------------  -------------- 
                                                      (6,396,073)       (131,963) 
 
 Total liabilities                                    (9,252,690)     (2,435,278) 
-------------------------------------  ----------  --------------  -------------- 
 
 Net assets                                            11,622,039      10,690,916 
-------------------------------------  ----------  --------------  -------------- 
 
 Equity 
 Called up share capital                   11           1,267,779         764,111 
 Share premium account                                 36,838,450      31,829,463 
 Capital reserve - own shares                            (48,163)        (48,163) 
 Retained earnings                                   (26,421,390)    (22,053,832) 
 Currency translation reserve                            (14,637)         199,337 
-----------------------------------    ----------  --------------  -------------- 
 Total equity                                          11,622,039      10,690,916 
-------------------------------------  ----------  --------------  -------------- 
 
 The financial statements were approved by the Board of Directors 
  and authorised for issue on 21 May 2020 and were signed on its behalf 
  by: 
 
 
 Iwona Olbryś                      Robert Morrish 
 Director                               Director 
 
 
 Group Statement of Cash Flows 
 for the year ended 31 December 2019 
 
                                                               2019          2018 
 
                                                                GBP           GBP 
-------------------------------------------------      ------------  ------------ 
 Cash flows from operating activities 
 Loss before taxation for the period                    (3,511,768)   (3,793,272) 
 
 Adjustments for: 
 Finance income                                           (160,186)     (129,315) 
 Finance costs                                              600,343        21,254 
 Depreciation, amortisation and 
  impairment                                              2,246,949     1,793,258 
 Share based payments expense                               151,418       239,268 
---------------------------------------------------    ------------  ------------ 
 Operating cash flows before movement in 
  working capital                                         (673,244)   (1,868,807) 
 
 Decrease in inventories                                     60,368       142,777 
 (Increase) / decrease in trade 
  and other receivables                                   (763,323)       313,459 
 Increase in trade and other payables                     (282,634)       556,875 
 Cash used in operations                                (1,658,833)     (855,696) 
 
 Taxation paid                                                    -             - 
 
 Net cash used in operations                            (1,658,833)     (855,696) 
 
 Cash flows from investing 
  activities 
 Payments to acquire software                               (9,685)     (109,307) 
 Payments to acquire property, plant and 
  equipment                                             (1,264,315)   (1,534,529) 
 Payments to acquire intangible fixed assets               (43,794)      (93,468) 
 Proceeds from disposal of property plant 
  and equipment                                               6,641           714 
 Decrease/(increase) in loans to sub-franchisees            167,925       239,949 
 Interest received                                           24,501        20,544 
 
 Net cash used in investing 
  activities                                            (1,118,727)   (1,476,097) 
 
 Cash flows from financing 
  activities 
 Net proceeds from issue of ordinary share 
  capital                                                 5,512,655         1,357 
 Repayment of lease liabilities                           (355,208)             - 
 Repayment of borrowings                                  (142,240)     (126,425) 
 Interest paid                                            (586,396)      (18,805) 
----------------------------------------------------   ------------  ------------ 
 Net cash from financing activities                       4,428,811     (143,873) 
 
 
 Net increase / (decrease) in cash and cash 
  equivalents                                             1,651,251   (2,475,666) 
 
 Exchange differences on cash balances                     (16,765)      (72,329) 
 Cash and cash equivalents at beginning of 
  period                                                  1,957,916     4,505,911 
 
 Cash and cash equivalents at end of period               3,592,402     1,957,916 
----------------------------------------------------   ------------  ------------ 
 
 
 Group Statement of Changes in Equity 
 for the year ended 31 December 
  2019 
 
                                                Share                     Currency      Capital 
                                                                                        reserve 
                                   Share      premium       Retained   translation            - 
                                 capital      account       earnings       reserve   own shares         Total 
                                     GBP          GBP            GBP           GBP          GBP           GBP 
----------------------------  ----------  -----------  -------------  ------------  -----------  ------------ 
 At 31 December 2017             762,754   31,829,463   (18,499,828)       453,005     (48,163)    14,497,231 
 Shares issued                     1,357            -              -             -            -         1,357 
 Share based payments                  -            -        239,268             -            -       239,268 
 Translation difference                -            -              -     (253,668)            -     (253,668) 
 Loss for the period                   -            -    (3,793,272)             -            -   (3,793,272) 
----------------------------  ----------  -----------  -------------  ------------  -----------  ------------ 
 At 31 December 2018 
   (as previously reported)      764,111   31,829,463   (22,053,832)       199,337     (48,163)    10,690,916 
 
 Effect of change 
  in accounting policy 
  for initial application 
  of IFRS 16                           -            -    (1,007,208)             -            -   (1,007,208) 
----------------------------  ----------  -----------  -------------  ------------  -----------  ------------ 
 
 At 1 January 2019 
  - as restated                  764,111   31,829,463   (23,061,040)       199,337     (48,163)     9,683,708 
 Shares issued                   503,668    5,316,667              -             -            -     5,820,335 
 Expenses of share 
  issue                                -    (307,680)              -             -            -     (307,680) 
 Share based payments                  -            -        151,418             -            -       151,418 
 Translation difference                -            -              -     (213,974)            -     (213,974) 
 Loss for the period                   -            -    (3,511,768)             -            -   (3,511,768) 
 At 31 December 2019           1,267,779   36,838,450   (26,421,390)      (14,637)     (48,163)    11,622,039 
----------------------------  ----------  -----------  -------------  ------------  -----------  ------------ 
 
   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 (May 2020). 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.   IMPACT OF INITIAL APPLICATION OF IFRS 16: LEASES 

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. Details of these new requirements are described in Note 1. The impact of the adoption of IFRS 16 on the Group's consolidated financial statements is described below.

The date of initial application of IFRS 16 for the Group is 1 January 2019. The Group has applied IFRS 16 using the modified retrospective approach which:

-- Requires the Group to recognise the cumulative effect of initially applying IFRS 16 on a retrospective basis to all leases in existence on 1 January 2019 as an adjustment to the opening balance of retained earnings at the date of initial application.

-- Does not permit restatement of comparatives, which continue to be presented under IAS 17 and IFRIC 4.

(a) Impact of the new definition of a lease

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those leases entered or changed before 1 January 2019.

The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on 'risks and rewards' in IAS 17 and IFRIC 4.The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or changed on or after 1 January 2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the definition of a lease for the Group."

(b) Impact on Lessee Accounting

(i) Former operating leases

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off balance sheet.

Applying IFRS 16, for all leases (except as noted below), the Group:

a) Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments (including options to extend when they are expected to be used), with the right-of-use asset adjusted by the amount of any prepaid or accrued lease payments in accordance with IFRS 16 requirements.

b) Recognises depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;

c) Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.

Lease incentives (e.g. rent free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses on a straight line basis."

Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.

For short-term leases (lease term of 12 months or less) and leases of low-value assets (which includes tablets and personal computers, small items of office furniture and telephones), the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within 'administrative expenses' in profit or loss.

The Group has used the following practical expedients when applying the cumulative catch-up approach to leases previously classified as operating leases applying IAS 17.

-- The Group has applied a single discount rate to a portfolio of leases with reasonably similar characteristics.

-- The Group has adjusted the right-of-use asset at the date of initial application by the amount of provision for onerous leases recognised under IAS 37 in the statement of financial position immediately before the date of initial application as an alternative to performing an impairment review.

-- The Group has elected not to recognise right-of-use assets and lease liabilities to leases for which the lease term ends within 12 months of the date of initial application.

-- The Group has excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application.

-- The Group has used hindsight when determining the lease term when the contract contains options to extend or terminate the lease. "

(ii) Former finance leases

For leases that were classified as finance leases applying IAS 17, the carrying amount of the leased assets and obligations under finance leases measured applying IAS 17 immediately before the date of initial application is reclassified to right-of-use assets and lease liabilities respectively without any adjustments, except in cases where the Group has elected to apply the low-value lease recognition exemption.

The right-of-use asset and the lease liability are accounted for applying IFRS 16 from 1 January 2019.

(c) Impact on Lessor Accounting

IFRS 16 does not change substantially how a lessor accounts for leases. Under IFRS 16, a lessor continues to classify leases as either finance leases or operating leases and account for those two types of leases differently. However, IFRS 16 has changed and expanded the disclosures required, in particular regarding how a lessor manages the risks arising from its residual interest in leased assets. Under IFRS 16, an intermediate lessor accounts for the head lease and the sublease as two separate contracts. The intermediate lessor is required to classify the sublease as a finance or operating lease by reference to the right-of-use asset arising from the head lease (and not by reference to the underlying asset as was the case under IAS 17). Because of this change, the Group has reclassified certain of its operating sublease agreements as finance leases and accounted for them as new finance leases entered into at the date of initial application. Where it is reasonably certain that a sub-franchisee will operate in a store for the remainder of the head lease term, including any extensions, then the sublease for that store is classified as a finance lease. For subleases where the Group considers that it retains a substantial interest in the risks and rewards associated with the right-of-use asset arising from the head lease, the accounting treatment has not changed. As required by IFRS 9, an allowance for expected credit losses has been recognised on the finance lease receivables.

(d) Financial impact of initial application of IFRS 16

The weighted average lessees incremental borrowing rate applied to lease liabilities recognised in the statement of financial position on 1 January 2019 is 7.72%.

The following table shows the operating lease commitments disclosed applying IAS 17 at 31 December 2018, discounted using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement of financial position at the date of initial application.

(d) Financial impact of initial application of IFRS 16

The weighted average lessees incremental borrowing rate applied to lease liabilities recognised in the statement of financial position on 1 January 2019 is 7.72%.

The following table shows the operating lease commitments disclosed applying IAS 17 at 31 December 2018, discounted using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement of financial position at the date of initial application.

 
                                                                            GBP 
 Operating lease commitments at 31 December 2018                          3,379,263 
 Effect of discounting the above amounts                                  (310,246) 
 Finance lease liabilities recognised under IAS 17 at 
  31 December 2018                                                        3,069,017 
 Present value of the lease payments due in periods covered 
  by extension options that are 
  included in the lease term and not previously included 
  in operating lease commitments                                          4,950,600 
---------------------------------------------------------------------  ------------ 
 Lease liabilities recognised at 1 January 2019 on transition 
  to IFRS 16                                                              8,019,617 
 Right-of use assets recognised at 1 January 2019 on transition 
  to IFRS 16                                                              7,012,409 
---------------------------------------------------------------------  ------------ 
 Impact on retained earnings as at 1 
 January 2019                                                           (1,007,208) 
-------------------------------------------------------------------    ------------ 
 
 
 

The right-of-use assets, lease liabilities and corresponding adjustment to retained earnings recognised on 1 January 2019 as shown above are higher than those shown in the interim report to 30 June 2019. This is due to an increase in the Group's estimate of lease durations and an increase in the discount rate used in the calculations.

   3.   REVENUE 

The Group's revenue arises from the sale of goods to consumers from corporate stores, from the sale of products and services to franchisees and the charging of royalties, fees and rent to franchisees. All of the revenue is derived in Poland.

Corporate store sales: Contracts with customers for the sale of products to end consumers include one performance obligation. The Group has concluded that revenue from the sale of products should be recognised at a point in time when control of the goods is transferred to the consumer, which is the point of delivery or collection. Sales are recorded approximately 30 minutes before delivery. Revenue is measured at the menu price less any discounts offered.

Royalties, franchise fees and sales to franchisees: Contracts with customers for the sale of products include one performance obligation, being the delivery of products to the end customer. The Group has concluded that revenue from the sale of products should be recognised at a point in time when control of the goods are transferred to the franchisee, generally on delivery. Revenue is recognised at the invoiced price less any estimated rebates. The performance obligation relating to royalties is the use of the Domino's brand. This represents a sales-based royalty with revenue recognised at the point the franchisee makes a sale to an end consumer. Revenue from franchisee fees is recognised when a franchisee opens a store for trading or on completion of sale of one or more stores to a third party, as this is the point at which all performance obligations have been satisfied.

Rental income on leasehold property: Rental income arising from leasehold properties where the lease is an operating lease is recognised on a straight-line basis in accordance with the lease terms. Rental payments are recognised over the period to which they relate. Under IFRS 16 'leases' rents received under finance leases are treated as capital repayments and interest receipts and are excluded from revenues.

 
 Revenue is divided into 'core revenues' and 'other 
  revenues' as follows: 
                                                                 2019         2018 
                                                                  GBP          GBP 
----------------------------------------------------      -----------  ----------- 
 Core revenue                                              13,753,544   12,325,147 
 Other revenue                                                253,115       44,668 
                                                           14,006,659   12,369,815 
    ----------------------------------------------------  -----------  ----------- 
 
 Revenue is further analysed as follows: 
                                                                 2019         2018 
                                                                  GBP          GBP 
----------------------------------------------------      -----------  ----------- 
 Corporate store sales                                      9,928,348    8,326,906 
 Fixtures and equipment sales to sub-franchisees              253,115       44,668 
 Royalties and other sales to sub-franchisees               3,414,966    3,488,196 
 Rental income on leasehold property                          410,230      510,045 
 
                                                           14,006,659   12,369,815 
    ----------------------------------------------------  -----------  ----------- 
 
   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 
                                                 2019          2019          2018          2018 
                                                  GBP           GBP           GBP           GBP 
-------------------------------------    ------------  ------------  ------------  ------------ 
                                            Corporate    Commissary     Corporate    Commissary 
                                               stores                      stores 
 Revenues from external customers           9,928,348     4,078,311     8,326,906     4,042,909 
 Direct Costs - corporate 
  stores                                  (8,505,697)                 (7,706,068) 
 Direct Costs - commissary (variable 
  cost only)                                            (3,000,260)                 (3,316,049) 
 Store EBITDA                               1,422,651                     620,838 
 Commissary gross 
  profit                                                  1,078,051                     726,860 
 Total segment profit                                     2,500,702                   1,347,698 
 Unallocated expenses                                   (2,919,970)                 (3,268,146) 
---------------------------------------  ------------                ------------ 
 GROUP EBITDA - excluding non-cash items, 
  non-recurring items and store pre-opening 
  expenses                                                (419,268)                 (1,920,448) 
-----------------------------------------------------  ------------  ------------  ------------ 
 
 

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.

   5.   LOSS BEFORE TAXATION 
 
 This is stated after charging 
 
                                                                                        2019        2018 
                                                                                         GBP         GBP 
---------------------------------------------   ------------------------------    ----------  ---------- 
 
 Auditors and their                             - audit of company and group 
  associates' remuneration                       financial statements                 38,393      36,767 
  - tax compliance 
  services                                                                             1,540       1,450 
                                                - remuneration 
 Directors' emoluments                           and fees                            344,633     295,817 
 Amortisation of intangible 
  fixed assets                                                                       129,906     136,734 
 Depreciation of property, plant 
  and equipment                                                                    2,163,164   1,025,406 
 Impairment of property, plant 
  and equipment                                                                     (46,121)     631,118 
                                                - land and 
 Operating lease rentals                         buildings                                 -     874,494 
 
 and after crediting 
 Operating lease income from sub-franchisees                                         410,230     510,045 
 Foreign exchange gains 
  /(losses)                                                                         (10,825)     (6,513) 
 
   6.   OTHER NON-CASH AND NON-RECURRING ITEMS 
 
                                                           2019        2018 
                                                            GBP         GBP 
  -----------------------------------------------    ----------  ---------- 
 
 Director's redundancy costs                          (155,087)           - 
 VAT repayment received                                       -     378,427 
 Costs associated with VAT repayment claim                    -    (73,005) 
 Bad orders                                            (53,063)    (42,011) 
 Exceptional sub-franchisee bad debt provision          103,172   (104,947) 
 Unrealised store projects                             (10,204)    (20,162) 
 Loss on disposal of property, 
 plant and equipment                                   (55,104)           - 
 Other non-cash and non-recurring items                (19,232)     (7,248) 
 
                                                      (189,518)     131,054 
    -----------------------------------------------  ----------  ---------- 
 

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.

   7.     TAXATION 
 
                                                                 2019          2018 
                                                                  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: 
 
                                                                 2019          2018 
                                                                  GBP           GBP 
---------------------------------------------------      ------------  ------------ 
 Loss before tax                                          (3,511,768)   (3,793,272) 
 
 Tax credit calculated at applicable 
  rate of 19%                                               (667,236)     (720,722) 
 Income taxable but not recognised in 
  financial statements                                         78,813        88,861 
 Income not subject to tax                                   (60,497)      (91,395) 
 Expenses not deductible for tax purposes                     456,901     1,092,933 
 Tax losses for which no deferred income tax asset 
  was recognised                                              192,019     (369,677) 
=======================================================  ============  ============ 
 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.

   8.   LOSS PER SHARE 
 
 The loss per ordinary share has been calculated as follows: 
 
                         2019            2019            2018            2018 
                                          GBP                             GBP 
                     Weighted          Profit        Weighted          Profit 
                      average        / (loss)         average        / (loss) 
                       number           after          number           after 
                    of shares             tax       of shares             tax 
  -----------  --------------  --------------  --------------  -------------- 
   Basic          232,432,469     (3,511,768)     150,185,274     (3,793,272) 
   Diluted        232,432,469     (3,511,768)     150,185,274     (3,793,272) 
  -----------  --------------  --------------  --------------  -------------- 
 
 The weighted average number of shares for the year excludes those 
  shares in the Company held by the employee benefit trust. At 
  31st December 2019 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. 
 
   9.     INTANGIBLE ASSETS 
 
                                         Franchise 
                                              fees              Capitalised 
                                  and intellectual   Software          loan       Total 
                                          property 
                                            rights                 discount 
 Group                                         GBP        GBP           GBP         GBP 
-----------------------------    -----------------  ---------  ------------  ---------- 
 
 Cost: 
 At 31 December 
  2017                                     464,586    334,152       245,550   1,044,288 
 Foreign currency difference               (7,979)    (4,017)       (4,457)    (16,453) 
 Additions                                  93,468     32,835         2,987     129,290 
 Disposals                                       -   (21,528)             -    (21,528) 
 Transfers                                       -     75,115             -      75,115 
 At 31 December 
  2018                                     550,075    416,557       244,080   1,210,712 
 Foreign currency difference              (24,623)   (18,453)       (5,783)    (48,859) 
 Additions                                  24,344     13,018        35,831      73,193 
 Disposals                                 (1,545)    (4,445)       (5,349)    (11,339) 
 At 31 December 
  2019                                     548,251    406,677       268,779   1,223,707 
-------------------------------  -----------------  ---------  ------------  ---------- 
 
 Amortisation 
 At 31 December 
  2017                                     250,887    205,962        29,001     485,850 
 Foreign currency difference               (4,294)    (3,493)         (138)     (7,925) 
 Amortisation charged for 
  the year                                  53,320     58,330        25,084     136,734 
 Disposals                                       -    (8,339)             -     (8,339) 
 At 31 December 
  2018                                     299,913    252,460        53,947     606,320 
 Foreign currency difference              (14,170)   (12,303)       (2,931)    (29,404) 
 Amortisation charged for 
  the year                                  45,756     56,852        27,298     129,906 
 Disposals                                       -    (1,547)       (1,944)     (3,491) 
 At 31 December 
  2019                                     331,499    295,462        76,370     703,331 
-------------------------------  -----------------  ---------  ------------  ---------- 
 
 Net book value: 
 At 31 December 
  2019                                     216,752    111,215       192,409     520,376 
-------------------------------  -----------------  ---------  ------------  ---------- 
 At 31 December 
  2018                                     202,557     67,163       173,044     604,392 
 

10. PROPERTY, PLANT AND EQUIPMENT

 
                                                Fixtures         Assets 
                                                fittings 
                                   Leasehold         and          under 
                                    property   equipment   construction         Total 
 Group                                   GBP         GBP            GBP           GBP 
-----------------------------    -----------  ----------  -------------  ------------ 
 
 Cost: 
 At 31 December 
  2017                             4,248,490   4,137,472         85,754     8,471,716 
 Foreign currency difference        (72,520)    (71,948)        (1,850)     (146,318) 
 Additions                           888,497     520,025        255,268     1,663,790 
 Disposals                                 -    (40,253)              -      (40,253) 
 Transfers                            53,332     182,354      (310,801)      (75,115) 
 At 31 December 
  2018                             5,117,799   4,727,650         28,371     9,873,820 
 Adjustment on adoption 
  of IFRS 16                       9,388,181           -              -     9,388,181 
 Foreign currency difference       (643,491)   (209,355)        (1,429)     (854,275) 
 Additions                         1,044,966     184,734        333,412     1,563,112 
 Disposals                         (733,446)   (386,868)              -   (1,120,314) 
 Transfers                            28,539     296,587      (325,126)             - 
 At 31 December 
  2019                            14,202,548   4,612,748         35,228    18,850,524 
-------------------------------  -----------  ----------  -------------  ------------ 
 
 Depreciation: 
 
 At 31 December 
  2017                               688,603   1,165,325              -     1,853,928 
 Foreign currency difference         (7,522)    (17,930)              -      (25,452) 
 Depreciation charged for 
  the year                           417,434     607,972              -     1,025,406 
 Impairment                          552,910      78,208              -       631,118 
 Disposals                                 -    (48,897)              -      (48,897) 
 At 31 December 
  2018                             1,651,425   1,784,678              -     3,436,103 
 Adjustment on adoption 
  of IFRS 16                       2,375,771           -                    2,375,771 
 Foreign currency difference       (422,896)    (85,026)              -     (507,922) 
 Depreciation charged for 
  the year                         1,415,927     747,237              -     2,163,164 
 Impairment                                -    (46,121)              -      (46,121) 
 Disposals                                 -   (397,155)              -     (397,155) 
 At 31 December 
  2019                             5,020,227   2,003,613              -     7,023,840 
-------------------------------  -----------  ----------  -------------  ------------ 
 
 Net book value: 
 At 31 December 
  2019                             9,182,321   2,609,135         35,228    11,826,684 
-------------------------------  -----------  ----------  -------------  ------------ 
 At 31 December 
  2018                             3,466,374   2,942,972         28,371     6,437,717 
 

The prior year impairment charge of GBP631,118 relating to eight poorly performing corporate stores has been partially reversed in respect of 3 stores, resulting in a credit to the income statement of GBP46,121 in the current year.

Included in the net book value of leasehold property at 31 December 2019 are Right-of-Use assets relating to leases totalling GBP5,807,783 (2018: nil).

11. SHARE CAPITAL

 
                                                                        2019            2018 
                                                                         GBP             GBP 
---------------------------------      -------------  ----------  ----------  -------------- 
 Called up, allotted and 
  fully paid: 
                                      Ordinary shares of 0.5 
 253,555,798 (2018: 152,822,131)       pence each                  1,267,779         764,111 
-----------------------------------  ---------------------------  ----------  -------------- 
 
 Movement in share capital during 
  the period 
                                                         Nominal 
                                              Number       value               Consideration 
                                                             GBP                         GBP 
---------------------------------      -------------  ----------  ----------  -------------- 
 At 31 December 
  2017                                   152,550,704     762,754                  34,871,212 
 
 Management share awards 
  2018                                       271,427       1,357                       1,357 
 
 
 At 31 December 
  2018                                   152,822,131     764,111                  34,872,569 
 
 Placing February 
  2019                                    96,666,666     483,333                   5,800,000 
 
 Management share awards 
  2019                                       557,261       2,786                       2,786 
 Share options exercised 
  2019                                     3,509,740      17,549                      17,549 
 
 At 31 December 
  2019                                   253,555,798   1,267,779                  40,692,904 
---------------------------------      -------------  ----------  ----------  -------------- 
 
 The Company does not have an authorised 
  share capital. 
 

12. ANNUAL GENERAL MEETING

The Annual General Meeting of DP Poland plc will be held at Shafts Farm, West Meon, Hampshire GU32 1LU on 26 June 2020 at 9.00 a.m.

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 or visit www.rns.com.

END

FR BLGDUDBDDGGB

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May 22, 2020 02:00 ET (06:00 GMT)

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