TIDMDPP
RNS Number : 6967O
DP Poland PLC
24 September 2013
DP Poland PLC
("DP Poland" or the "Company")
Interim results for the half year to 30 June 2013
Strong like-for-like store performance, first sub-franchisee in
place, development of more efficient store format and imminent move
outside of Warsaw
DP Poland has the exclusive right to develop, operate and to
sub-franchise Domino's Pizza stores in Poland. It currently has 15
corporate stores operating in Warsaw.
Highlights
-- Like-for-like sales (pln) up 72.8%**
-- Like-for-like order count up 73.0%**
-- Gross profit (pln) in like-for-like stores up 77.7%**
-- Store EBITDA (pln) in like-for-like stores improved 59.4%**
-- First sub-franchised store to open in Warsaw, in October
-- First store to open outside of Warsaw in October
-- Maintaining target of 20 store openings in 2013-14, corporate and sub-franchised
-- Innovative new S2 Store format developed to deliver
significant economies in both capital and operational
expenditure
Peter Shaw, Chief Executive of DP Poland said:
"As well as a very encouraging like-for-like financial
performance, the first half of the year has seen significant
developments for the business. I am particularly delighted to
welcome our first sub-franchisee who will be opening his first
store in Warsaw this October. In addition to this we will be
opening our first store outside of Warsaw in October, with more to
follow this year, in Warsaw and beyond. We are still targeting 20
new store openings in 2013-14.
With regard to store openings I am excited by the prospect of
our new S2 Store format that we have developed, and are rolling
out, to deliver significant economies in both capital and
operational expenditure, facilitating the drive to store
profitability."
24 September 2013
Enquiries:
DP Poland PLC c/o College Hill: 020 7457 2020
Peter Shaw, Chief Executive
www.dppoland.com
Peel Hunt LLP
Dan Webster/Matthew Armitt/Richard
Brown 020 7418 8900
College Hill
Matthew Smallwood/Jamie Ramsay 020 7457 2020
sales minus food costs
*4.9246 pln:GBP1 exchange rate, average rate for period Jan to
June 2013
** Like-for-like growth in pln, matching trading periods for the
same 13 stores between 1 January and 30 June, 2012 and 1 January
and 30 June 2013
Chief Executive's Statement
I am pleased to present our results for the first six months of
the year.
Strong like for like growth
The 13 stores that were open in the first half of 2012 saw sales
and gross profit grow significantly in the first half of 2013.
Investment in marketing and promotions at the local store level,
and in advertising across Warsaw, appear to have had a significant
impact. The use of targeted price promotions to drive top line
sales was balanced with carefully managed menu pricing to deliver
like-for-like growth in gross profit of 77.7%**, marginally higher
than the like-for-like growth in sales of 72.8%**. Order count in
like-for-like stores was up 73.0%** and like-for-like Store EBITDA
improved by 59.4%**.
Store EBITDA for the six months ended 30 June 2013 was
-GBP284,881* with 15 stores open. By comparison, for the six months
ended 30 June 2012 Store EBITDA was -GBP557,862* with 13 stores
open, at constant exchange rates.
Group EBITDA* remained largely unchanged, -1.7% at constant
exchange rates, reflecting the virtual doubling of investment in
city wide brand building marketing in 2013, compared to 2012, and
two further stores having been added to the estate since June
2012.
Performance against store model
The store model in our operating plan is to reach breakeven in
18 months and sales maturity in 36 months. However, we have a
contingency in our plan for the first 13 stores to be slower as we
establish ourselves in the market. Some of our stores hit initial
breakeven before 18 months and some after, with all those stores
dipping in and out as demand built. We fully expect that our new S2
Store concept, introduced with store 15, will hit the '18-36' month
timings.
The lag in average time to breakeven across the first 13 stores
resulted in an operating cash position at the end of the first half
marginally adverse to plan, with a shortfall to plan of c.GBP100k*.
It is anticipated that we will recover this shortfall and be back
on operating cash plan by the end of the year through cost
management, notwithstanding any contingency. The new S2 format is
expected to positively impact on-going costs such as rent.
Capital expenditure pro-rata to opened stores is well within
budget. We anticipate that significant savings will continue to be
made on future capital expenditure thanks to the new S2 Store
concept.
Results
The loss before taxation and share based payments for the six
months ended 30 June 2013 was GBP1,610,204 (2012: GBP1,546,401).
The revenue for this period was GBP1,543,375 (2012:
GBP744,656).
The loss in the first half of this year was impacted by the
anticipated increased in marketing investment to secure long term
brand building at GBP480,747* in 2013, compared to GBP246,542* in
2012.
Sub-franchised stores
I am delighted to announce that our first sub-franchisee will be
opening his first store in Warsaw this October. Jakub Stepien has
been part of the team in Poland for the last three years, prior to
which he was a highly successful franchised-store manager in both
the UK and Ireland. His store will be located in the north west of
the city in a densely populated residential area. Jakub brings
hands on experience of the Domino's system, deep understanding of
the Warsaw market and the ambition and resourcefulness recognisable
in the best of Domino's franchisees worldwide.
S2 Store concept
In the first half we introduced a new store format that delivers
considerable cost savings in store fit-out and operational
expenditure, while meeting operational guidelines and delivering
the production capacity required of a mature store. Working closely
with our franchisor Domino's Pizza International and the local food
and safety authority we have created a store format on a footprint
that is 20-30% smaller than that of the typical Domino's store.
Additionally, we have taken the opportunity to evolve the look and
feel of the stores with a design that enhances customer perceptions
of the quality of our brand offer, especially when compared to the
local competition. Our growing knowledge of the ideal store
location is helping to ensure that the best locations are found for
new stores.
Our new, more efficient store format means that the rents for
the five stores signed so far in 2013 are on average 35% lower than
the average rent of the first 13 stores and we are seeing CAPEX
savings of at least 15-20% of plan.
While our first 13 stores are taking longer on average to reach
breakeven than we initially planned, the growth in sales and gross
margin achieved so far this year demonstrates their potential to
form a profitable base of corporate stores in Warsaw.
The move out of Warsaw
In October 2013 we will open our first store outside of Warsaw.
Our operational team designated for this expansion moved in the
summer and are recruiting and training the first store crew. A
second store is signed in the same city and we are currently in
negotiations over 2 further stores. All commissary needs for these
sites will be fulfilled from our site in Warsaw. While we do not
underestimate the challenge of moving outside of Warsaw, where
awareness of the Domino's brand will be minimal, we believe that
the new S2 Store format will enhance the chances of those stores
hitting profitability in a reasonable time frame.
Store openings
At the November 2012 fundraising we committed to opening 10
stores in both 2013 and 2014. While a sustained pace of store
opening might be viewed as a critical success factor, the board
considers the selection of good sites and the opening of stores
that will hit breakeven and sustained profitability in as short a
time as possible to be higher priorities and the best approach to
deploying capital.
In this context, while we remain committed to opening 20 stores
across 2013-14, the development of our new S2 Store format and our
more selective approach to new sites means that planned 2013 store
openings will be loaded to the second half of this year and some of
the planned 10 new stores for 2013 will open in the first half of
2014. This will have a positive impact on our operational cash flow
for the full year as the opening of new stores negatively impacts
EBITDA in the months before they reach breakeven.
By the end of this year we anticipate having 18 stores in Warsaw
and 3 outside Warsaw.
Innovation and marketing
In the first quarter we launched a new range of pizzas, The
Italian Range. The star product in this range has been the Parma
pizza, with Parma ham and Rocket added post-bake, after the pizza
has come out of the oven. The Parma pizza has proved very popular.
During the period of the promotion of The Italian Range, the Parma
was our best seller, usurping the perennial favourite Domino's
Pepperoni.
Online marketing continues to build significantly with the
percentage of delivery sales ordered online now exceeding 35%, as
of September 2013. Our online apps for Android and iPhone are being
soft launched this Autumn, development of which coinciding with a
completely revamped website that was successfully launched in
August. The average value of online transactions is higher than
those made over the phone or in store. We expect online to be an
increasingly important delivery channel for us.
The number of Facebook fans registered on our fan page grew from
3,238 in June 2012 to 30,474 in June 2013. Facebook is an important
marketing channel for us; we run various promotional competitions
through our Facebook fan page, encouraging trial and strengthening
customer loyalty.
Advertising in the first half was spread across outdoor posters,
subway digital posters, radio, internet and cinema. We also
substantially increased local store marketing in terms of leaflet
distribution. The highest weighting of the first half campaign was
in March, with our pizza of the day promotion.
Operating standards
Our store and commissary operating standards continue to be
assessed by our franchisor, Domino's Pizza International, as among
the highest in Europe. Our commissary continues to be operated in
partnership with a third party, giving us the flexibility to boost
production without significantly increased overheads or capital
outlay. In testimony to the quality of our commissary operation we
are now procuring for other Domino's markets, including pizza
boxes, kitchen hardware and pizza ingredients.
Outlook
DP Poland has been trading for a little over two and a half
years. While we have experienced the inevitable challenges of
launching a new concept in a new market, I believe that we now have
the store formats and the trading and operational experience in
place to make this business a continued success in the coming
years.
Having been witness to the drive, resourcefulness and ambition
of our first franchisee as he prepares to open his first store, I
am convinced more than ever that the Domino's franchise model will
deliver the same success in Poland as it has done, so convincingly,
in other markets around the world.
Viewing our prospects in the macro-economic context, the Polish
economy continues to grow faster than its substantial European
neighbours. Growth in the Polish GDP rate is forecast at 1.1% for
the full year 2013, 2.3% in 2014 and 3.9% in 2015 . We look forward
to the potential impact of an increasingly buoyant economy on
consumer spending and on demand for Domino's Pizza.
PWC Global Economy Watch Projections, September 2013
Peter Shaw,
Chief Executive
Group Income Statement
for the six months ended
30 June 2013
Unaudited Unaudited Audited
6 months 6 months
to to Year to
30.06.13 30.06.12 31.12.12
Notes GBP GBP GBP
Revenue 1,543,375 744,656 1,775,368
Cost of sales (926,593) (612,126) (1,224,813)
------------------------------------------------ ------ ------------ ------------ ------------
Gross profit 616,782 132,530 550,555
Distribution costs (142,604) (72,895) (271,143)
Administrative expenses - excluding depreciation,
amortisation and share based payments (1,920,559) (1,427,448) (2,952,606)
-------------------------------------------------------- ------------ ------------ ------------
GROUP EBITDA (1,446,381) (1,367,813) (2,673,194)
------------------------------------------------ ------ ------------ ------------ ------------
Finance income 49,952 7,830 26,079
Finance costs - - -
Foreign exchange gains
/ (losses) 193 (2,150) 18,486
50,145 5,680 44,565
----------------------------------------------- ------ ------------ ------------ ------------
Depreciation and amortisation (213,968) (184,268) (378,024)
Loss before taxation and share based
payments (1,610,204) (1,546,401) (3,006,653)
------------------------------------------------ ------ ------------ ------------ ------------
Share based payments (79,201) (42,748) (127,298)
Loss before taxation (1,689,405) (1,589,149) (3,133,951)
------------------------------------------------ ------ ------------ ------------ ------------
Taxation 2 - - -
------------------------------------ ---------- ------ ------------ ------------ ------------
Loss for the period (1,689,405) (1,589,149) (3,133,951)
------------------------------------------------ ------ ------------ ------------ ------------
(1.83 (7.33 (11.10
Loss per share Basic 3 p) p) p)
(1.83 (7.33 (11.10
Diluted 3 p) p) p)
Group Statement
of comprehensive income
for the six months ended 30 June
2013
Unaudited Unaudited Audited
6 months 6 months
to to Year to
30.06.13 30.06.12 31.12.12
GBP GBP GBP
---------------------------------- ------------ ------------ ------------
Loss for the period (1,689,405) (1,589,149) (3,133,951)
Currency translation differences (28,647) 37,314 137,083
Total comprehensive income for
the period (1,718,052) (1,551,835) (2,996,868)
---------------------------------- ------------ ------------ ------------
Group Balance Sheet
at 30 June 2013
Unaudited Unaudited Audited
30.06.13 30.06.12 31.12.12
------------------------------- ------------ ------------ ------------
GBP GBP GBP
------------------------------- ------------ ------------ ------------
Non-current assets
Intangible assets 308,409 328,165 322,557
Property, plant and equipment 2,561,666 2,430,775 2,527,836
Deferred tax asset 85,635 82,641 86,200
------------------------------- ------------ ------------ ------------
2,955,710 2,841,581 2,936,593
Current assets
Inventories 107,165 68,432 87,857
Trade and other receivables 432,920 401,370 441,193
Cash and cash equivalents 9,178,630 2,300,587 10,929,753
------------------------------- ------------ ------------ ------------
9,718,715 2,770,389 11,458,803
Total assets 12,674,425 5,611,970 14,395,396
------------------------------- ------------ ------------ ------------
Current liabilities
Trade and other
payables (492,277) (433,664) (572,289)
Total liabilities (492,277) (433,664) (572,289)
------------------------------- ------------ ------------ ------------
Net assets 12,182,148 5,178,306 13,823,107
------------------------------- ------------ ------------ ------------
Equity
Called up share
capital 477,190 127,190 477,190
Share premium
account 18,825,667 9,172,491 18,827,775
Capital reserve - own
shares (56,361) (56,361) (56,361)
Retained earnings (6,789,985) (3,719,529) (5,179,781)
Currency translation reserve (274,363) (345,485) (245,716)
------------------------------- ------------ ------------ ------------
Total equity 12,182,148 5,178,306 13,823,107
------------------------------- ------------ ------------ ------------
Group Statement of Cash Flows
for the six months ended 30 June
2013
Unaudited Unaudited Audited
6 months 6 months
to to Year to
30.06.13 30.06.12 31.12.12
GBP GBP GBP
---------------------------------------- ------------ ------------ ------------
Cash flows from operating
activities
Loss before taxation for the
period (1,689,405) (1,589,149) (3,133,951)
Adjustments for:
Finance income (49,952) (7,830) (26,079)
Finance costs - - -
Depreciation and amortisation 213,968 184,268 378,024
Share based payments expense 79,201 42,748 127,298
---------------------------------------- ------------ ------------ ------------
Operating cash flows before movement
in working capital (1,446,188) (1,369,963) (2,654,708)
Increase / (decrease) in inventories (20,399) 3,867 (12,168)
Decrease in trade and other
receivables 29,875 194,425 223,231
(Decrease) / increase in trade
and other payables (16,483) (287,021) 136,957
---------------------------------------- ------------ ------------ ------------
Cash generated from operations (1,453,195) (1,458,692) (2,306,688)
Taxation paid - - -
Net cash from operating activities (1,453,195) (1,458,692) (2,306,688)
Cash flows from investing
activities
Payments to acquire software (3,594) - (890)
Payments to acquire property, plant
and equipment (295,789) (249,097) (773,032)
Payments to acquire intangible fixed
assets (16,913) (11,538) (21,562)
Lease deposits advanced (23,878) (10,641) 4,422
Interest received 49,953 7,830 26,079
---------------------------------------- ------------ ------------ ------------
Net cash used in investing
activities (290,221) (263,446) (764,983)
Cash flows from financing
activities
Issue of ordinary share capital - 3,156,302 13,161,586
Interest paid - - -
---------------------------------------- ------------ ------------ ------------
Net cash from financing activities - 3,156,302 13,161,586
Net increase / (decrease) in cash and
cash equivalents (1,743,416) 1,434,164 10,089,915
Exchange differences on cash
balances (7,707) (7,249) (33,834)
Cash and cash equivalents at beginning
of period 10,929,753 873,672 873,672
Cash and cash equivalents at end of
period 9,178,630 2,300,587 10,929,753
---------------------------------------- ------------ ------------ ------------
Group Statement of Changes in Equity
for the six months ended 30 June
2013
.
Share Currency Capital
reserve
Share premium Retained translation -
capital account earnings reserve own shares Total
GBP GBP GBP GBP GBP GBP
------------------------ -------- ----------- ------------ ------------ ----------- ------------
At 31 December
2011 102,968 6,504,961 (2,173,128) (382,799) (56,361) 3,995,641
Shares issued 24,222 2,882,426 - - - 2,906,648
Expenses of share
issue - (214,896) - - - (214,896)
Share based payments - - 42,748 - - 42,748
Translation difference - - - 37,314 - 37,314
Loss for the period - - (1,589,149) - - (1,589,149)
------------------------ -------- ----------- ------------ ------------ ----------- ------------
At 30 June 2012 127,190 9,172,491 (3,719,529) (345,485) (56,361) 5,178,306
Shares issued 350,000 10,150,001 - - - 10,500,001
Expenses of share
issue - (494,717) - - - (494,717)
Share based payments - - 84,550 - - 84,550
Translation difference - - - 99,769 - 99,769
Loss for the period - - (1,544,802) - - (1,544,802)
------------------------ -------- ----------- ------------ ------------ ----------- ------------
At 31 December
2012 477,190 18,827,775 (5,179,781) (245,716) (56,361) 13,823,107
Shares issued - - - - - -
Expenses of share
issue - adjustment - (2,108) - - - (2,108)
Share based payments - - 79,201 - - 79,201
Translation difference - - - (28,647) - (28,647)
Loss for the period - - (1,689,405) - - (1,689,405)
------------------------ -------- ----------- ------------ ------------ ----------- ------------
At 30 June 2013 477,190 18,825,667 (6,789,985) (274,363) (56,361) 12,182,148
------------------------ -------- ----------- ------------ ------------ ----------- ------------
Notes to the Interim Financial Statements
for the six months ended 30 June 2013
1. Basis of preparation
These condensed interim financial statements are unaudited and
do not constitute statutory accounts within the meaning of the
Companies Act 2006. These condensed interim financial statements
have been prepared in accordance with IAS 34 'Interim Financial
Reporting' and were approved on behalf of the Board by the Chief
Executive Officer Peter Shaw on 23 September 2013.
The accounting policies and methods of computation applied in
these condensed interim financial statements are consistent with
those applied in the Group's most recent annual financial
statements for the year ended 31 December 2012.
The financial statements for the year ended 31 December 2012,
which were prepared in accordance with International Financial
Reporting Standards, as endorsed by the European Union ('IFRS'),
and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS, have been delivered to the
Registrar of Companies. The auditors' opinion on those financial
statements was unqualified and did not contain a statement made
under s498(2) or (3) of the Companies Act 2006.
Copies of these condensed interim financial statements and the
Group's most recent annual financial statements are available on
request by writing to the Company Secretary at our registered
office DP Poland plc 2nd Floor Ibex House, 42-47 Minories, London
EC3N 1DX, or from our website www.dppoland.com.
2. Taxation
Unaudited Unaudited Audited
6 months 6 months
to to Year to
30.06.13 30.06.12 31.12.12
GBP GBP GBP
------------------------------------- ------------ ------------ ------------
Current tax - - -
Deferred tax credit relating
to the origination and reversal
of temporary differences - - -
------------------------------------- ------------ ------------ ------------
Total tax charge in income
statement - - -
------------------------------------- ------------ ------------ ------------
3. Earnings per ordinary share
The loss per ordinary share has been calculated as follows:
Unaudited Unaudited Audited
6 months 6 months
to to Year to
30.06.13 30.06.12 31.12.12
------------------------------------- ------------ ------------ ------------
Profit / (loss)
after tax (GBP) (1,689,405) (1,589,149) (3,133,951)
Weighted average number of shares
in issue 92,382,142 21,693,746 28,229,602
Basic and diluted earnings per (1.83 (7.33 (11.10
share (pence) p) p) p)
------------------------------------- ------------ ------------ ------------
The weighted average number of shares for the period excludes
those shares in the Company held by the employee benefit trust. At
30 June 2013 the basic and diluted loss per share is the same,
because the vesting of share awards would reduce the loss per share
and is, therefore, anti-dilutive.
4. Principal risks and uncertainties
The principal risks and uncertainties facing the Group are
disclosed in the Group's financial statements for the year ended 31
December 2012, available from www.dppoland.com and remain
unchanged.
This information is provided by RNS
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