Source - RNS
RNS Number : 8865L
DP Eurasia N.V
11 September 2019
 

 

 

 

For Immediate Release

11 September 2019

 

DP Eurasia N.V.

("DP Eurasia" or the "Company", and together with its subsidiaries, the "Group")

Interim Results for the Period Ended 30 June 2019

Strong top-line and network growth

Highlights

 

For the period ended

30 June

 

 

2019

2018

Change

 

 

(in millions of TRY, unless otherwise indicated)

 

 

 

Number of stores

736

672

64

 

 

 

 

 

 

Group system sales (1)

 

 

 

 

Turkey

386.4

351.6

9.9%

 

Russia

249.0

152.7

63.0%

 

Azerbaijan & Georgia

10.0

6.1

63.6%

 

Total

645.4

510.4

26.4%

 

 

 

 

 

 

Group system sales like-for-like growth(2)

 

 

Turkey

7.7%

10.9%

 

 

Russia (based on RUB)

4.7%

18.0%

 

 

 

 

 

 

 

Revenue

462.5

380.2

21.6%

 

Turkey adjusted EBITDA(3)

55.5

36.5

n.m.

 

Turkey adjusted EBITDA(3) (excl. IFRS 16)

41.3

36.5

13.3%

 

Russia adjusted EBITDA(3)

27.5

7.4

n.m.

 

Russia adjusted EBITDA(3) (excl. IFRS 16)

8.6

7.4

16.6%

 

Adjusted EBITDA(3)

79.6

40.3

n.m.

 

Adjusted EBITDA(3)(excl. IFRS 16)

46.4

40.3

15.1%

 

Adjusted net income (4)

(12.1)

(9.1)

n.m.

 

Adjusted net income (4) (excl. IFRS 16)

(7.4)

(9.1)

n.m.

 

Adjusted net debt(5) (excl. IFRS 16)

224.9

 

 

 

 

 

 

 

 

             

Operational Highlights

·     64 new stores were added over the last 12 months, bringing the total number to 736

·     Turkey and Russia continue to leverage the  online ordering platforms - online delivery system sales as a share of delivery system sales reached 67.5% for the period (2018 H1: 59.3%)

·     Group online system sales(7) growth of 42.5%

Turkish online system sales(7) growth of 24.9%

Russian online system sales(7) growth of 72.7% (37.9% based on RUB)

 

Financial Highlights

·     Group revenue up 21.6% and system sales up 26.4%, driven by both like-for-like growth and store openings

Turkish systems sales growth of 9.9%

Russian system sales growth of 63.0% (30.1% based on RUB)

·     Adjusted EBITDA (excl. IFRS 16) up 15.1% to TRY 46.4 million (2018 H1: TRY 40.3 million)

·     Adjusted net loss (excl. IFRS 16) of TRY 7.4 million - slight improvement against the same period for the prior year

·     The Board expects the full year Adjusted EBITDA(3) (excluding IFRS 16) for 2019 to be in line with expectations

 

Commenting on the results, Chief Executive Officer, Aslan Saranga said:

 

"We are pleased to report another strong set of results for the first half of 2019.  Both Turkey and Russia recorded solid top-line growth accompanied by increased adjusted EBITDA.  We've continued to grow our store portfolio, adding 64 stores over the last twelve months and reaching a total of 736 stores.

"Innovation, related to both our products and technology, continues to be the main driver of our strong performance.  We have recently introduced a new wrap called Dürümos in Turkey which performed very well in terms of mix and creating incremental sales during the market tests.  We have also initiated segmental pricing by store in take away in Turkey and will follow up with delivery.  GPS Tracker, launched at the beginning of the year, is adding value to the business by enabling us to focus on improving delivery times for better service as well as increasing deliveries per driver. In Russia, we have introduced a dessert pizza with pineapple, which has been received enthusiastically by our customers.

"Digital continues to drive our business forward. Online ordering as a percentage of delivery has reached 67.5% - an increase of 8.2 percentage points from twelve months ago with significant increases in both markets.

"In Russia, like-for-like growth for the period was at mid-single digits, reflecting the strong comparables from the FIFA World Cup in 2018.  We remain confident in delivering high single digit like-for-like growth in Russia as we moved to a simplified menu, increased investment in our digital channels and refocused local store marketing activities as of July.

"We remain on target for store openings for the full year in our markets and the Board expects the full year Adjusted EBITDA(3) (excluding the impact of IFRS 16) for 2019 to be in line with expectations."

Enquiries

DP Eurasia N.V.

 

Selim Kender, Chief Strategy Officer & Head of Investor Relations

+90 212 280 9636

 

 

Buchanan (Financial Communications)      

 

Richard Oldworth / Victoria Hayns / Tilly Abraham

+44 20 7466 5000

[email protected]

 

 

A meeting for analysts will be held at 9.30am, 11 September 2019 at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN. A conference call dial-in will be available via the details below.

 

 

Conference call:

UK Toll: +44 3333000804

UK Toll Free: 08003589473

Participant PIN code: 67082946#

URL for international dial in numbers: http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

 

For additional details and registration for the analyst briefing, please contact Buchanan on +44 20 7466 5000 / [email protected]

 

DP Eurasia N.V.'s interim 2019 results and corporate presentation are available at www.dpeurasia.com.  A conference call replay will be available on the website in due course.

Notes

(1) System sales are sales generated by the Group's corporate and franchised stores to external customers and do not represent revenue of the Group.

 (2) Like-for-like growth is a comparison of sales between two periods that compares system sales of existing system stores. The Group's system stores that are included in like-for-like system sales comparisons are those that have operated for at least 52 weeks preceding the beginning of the first month of the period used in the like-for-like comparisons for a certain reporting period, assuming the relevant system store has not subsequently closed or been "split" (which involves the Group opening an additional store within the same map of an existing store or in an overlapping area).

(3) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS. These items are determined by the principles defined by the Group management and comprise income/expenses which are assumed by the Group management to not be part of the normal course of business and are non-trading items. These items which are not defined by IFRS are disclosed by the Group management separately for a better understanding and measurement of the sustainable performance of the Group.  Please refer to Note 3 in the Condensed Consolidated Financial statements for a reconciliation of these items with IFRS.

(4) Adjusted net income is not defined by IFRS.  Adjusted net income excludes income and expenses which are not part of the normal course of business and are non-recurring items. Management uses this measurement basis to focus on core trading activities of the business segments and to assist it in evaluating underlying business performance.  Please refer to Note 3 in the Condensed Consolidated Financial statements for a reconciliation of this item with IFRS.

(5) Net debt and adjusted net debt are not defined by IFRS. Adjusted net debt includes cash deposits used as a loan guarantee and cash paid, but not collected during the non-working day at the year end. Management uses these numbers to focus on net debt including deposits not otherwise considered cash and cash equivalents under IFRS.  Please refer to Note 15 in the Condensed Consolidated Financial statements for a reconciliation of these items with IFRS.

(6) Delivery system sales are system sales of the Group generated through the Group's delivery distribution channel.

(7) Online system sales are system sales of the Group generated through its online ordering channel.

Notes to Editors

 

DP Eurasia N.V. is the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia. The Company was admitted to the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the main market for listed securities of the London Stock Exchange plc on 3 July 2017. The Company (together with its subsidiaries, the "Group") is the largest pizza delivery company in Turkey and the third largest in Russia. The Group offers pizza delivery and takeaway/ eat-in facilities at its 736 stores (538 in Turkey, 187 in Russia, seven in Azerbaijan and four in Georgia as at 30 June 2019), and operates through its owned corporate stores (32%) and franchised stores (68%). The Group maintains a strategic balance between corporate and franchised stores, establishing networks of corporate stores in its most densely populated areas to provide a development platform upon which to promote best practice and maximise profitability. The Group has adapted the Domino's Pizza globally proven business model to its local markets.
 

Performance Review

 

System Sales

For the period ended

30 June

 

 

2019

2018

Change

 

(in millions of TRY, unless otherwise indicated)

 

 

 

Group system sales(1)

 

 

 

Turkey

386.4

351.6

9.9%

Russia

249.0

152.7

63.0%

Azerbaijan & Georgia

10.0

6.1

63.6%

Total

645.4

510.4

26.4%

 

 

 

 

Group system sales like-for-like growth(2)

 

 

Turkey

7.7%

10.9%

 

Russia (based on RUB)

4.7%

18.0%

 

 

Store Count

As at 30 June

 

2019

 

2018

 

Corporate

Franchised

Total

 

Corporate

Franchised

Total

Turkey

136

402

538

 

145

376

521

Russia

101

86

187

 

101

41

142

Azerbaijan

-

7

7

 

-

6

6

Georgia

-

4

4

 

-

3

3

Total

237

499

736

 

246

426

672

 

DP Eurasia achieved solid operational growth in the period, with 64 stores added to the store portfolio over the last twelve months. The Group increased its system sales by 26.4% year-on-year, driven by a combination of like-for-like sales growth and store openings.

The Turkish operations successfully overcame the slow start to the year, posting 7.7% like-for-like growth for the first half of 2019 versus 2.5% like-for-like growth over the first two months of the year, despite less than favourable macroeconomic conditions prevailing in the country.  Our main strategy in response to increased inflation in Turkey has been to continue to increase our prices to preserve margins, which has not had a material effect on order volumes.  Including Azerbaijan and Georgia, the Turkish segment added 19 stores over the last twelve months (four in the first half of 2019) through splits and opening stores in previously unpenetrated areas.

The Russian operations' system sales, which represent 39% of Group system sales, increased by 63.0% (30.1% based on RUB).  This increase was driven primarily by store openings.  The Russian operations achieved like-for-like sales growth of 4.7% for the period.  The Group opened 45 stores in Russia over the last twelve months (eight in the first half of 2019).  The Group also added its second dough production facility in Rostov to serve the southern cities of Rostov, Krasnodar and Voronezh.  Russian franchise stores reached 86, representing 46% of the Russian store portfolio.

 

 

Delivery Channel Mix and Online like-for-like growth

The following table shows the Group's delivery system sales, analysed by ordering channel and by the Group's two largest countries in which it operates, as a percentage of delivery system sales:

 

 

For the period ended 30 June

 

 

2019

2018

 

 

Turkey

Russia

Total

Turkey

Russia

Total

Store

 

34.0%

20.8%

30.0%

43.2%

25.7%

38.6%

Online

Group's online platform

30.1%

79.2%

48.0%

29.6%

74.3%

42.5%

Aggregator

31.9%

-

19.5%

24.1%

-

16.8%

Total online

62.0%

79.2%

67.5%

53.7%

74.3%

59.3%

Call centre

 

4.0%

-

2.5%

3.0%

-

2.1%

Total(6)

 

100%

100%

100%

100%

100%

100%

 

The following table shows the Group's online like-for-like growth(2), analysed by the Group's two largest countries in which it operates:

 

For the period ended

30 June

 

2019

2018

Group online system sales like-for-like growth(2)(7)

Turkey

24.1%

42.8%

Russia (based on RUB)

16.9%

52.5%

 

The Group's like-for-like growth has been driven mainly by the performance of its online ordering platforms. Online delivery system sales as a share of delivery system sales was 67.5% for the period.  This represented an 8.2 percentage point increase on a year-on-year basis.

In Turkey, online system sales like-for-like growth for the period was 24.1%, as a result of which online delivery system sales as a share of delivery system sales reached 62.0% for the period, an 8.3 percentage point increase from a year ago, surpassing the 60% threshold for the first time, aided also by an increase in volumes through the aggregator.

In Russia, online system sales like-for-like growth for the period was 6.9%, as a result of which online delivery system sales as a share of delivery system sales reached 79.2% for the period, a 4.9 percentage point increase from a year ago.

Online system sales continued to outpace the overall system sales growth at 42.5% for the Group.  Turkish online system sales grew by 24.9%, while Russian online system sales grew by 72.7% (37.9% based on RUB).

 

Financial Review

 

For the period ended

30 June

 

 

2019

2018

Change

 

(in millions of TRY)

 

 

 

Revenue

462.5

380.2

21.6%

Cost of sales (excl. IFRS 16)

(314.5)

(251.8)

24.9%

Gross Profit (excl. IFRS 16)

148.0

128.5

15.2%

General administrative expenses (excl. IFRS 16)

(72.1)

(63.0)

14.4%

Marketing and selling expenses

(63.8)

(50.0)

27.5%

Other operating expenses, net (excl. IFRS 16)

3.3

(0.6)

n.m.

Operating profit (excl. IFRS 16)

15.5

14.9

4.1%

Foreign exchange (losses)/gains (excl. IFRS 16)

2.8

(8.6)

n.m.

Financial income (excl. IFRS 16)

3.2

0.5

494.7%

Financial expense (excl. IFRS 16)

(25.1)

(16.8)

48.8%

(Loss)/Profit before income tax (excl. IFRS 16)

(3.5)

(10.0)

(64.7)%

Tax expense (excl. IFRS 16)

(5.3)

(0.3)

n.m.

(Loss)/Profit after tax (excl. IFRS 16)

(8.9)

(10.3)

n.m.

 

 

 

 

Turkey adjusted EBITDA(3)

55.5

36.5

n.m.

Turkey adjusted EBITDA(3) (excl. IFRS 16)

41.3

36.5

13.3%

Russia adjusted EBITDA(3)

27.5

7.4

n.m.

Russia adjusted EBITDA(3) (excl. IFRS 16)

8.6

7.4

16.6%

Adjusted EBITDA(3)

79.6

40.3

n.m.

Adjusted EBITDA(3) (excl. IFRS 16)

46.4

40.3

15.1%

Adjusted net income (4)

(12.1)

(9.1)

n.m.

Adjusted net income (4) (excl. IFRS 16)

(7.4)

(9.1)

(18.7%)

Adjusted net debt(5) (excl. IFRS 16)

224.9

 

 

 

Revenue

Group revenue grew by 21.6% to TRY 462.5 million.  Turkish segment revenue grew by 14.3% to TRY 261.0 million, while Russian segment revenue grew by 32.6% to reach TRY 201.5 million.

Adjusted EBITDA

The Board maintains that adjusted EBITDA is the most relevant indicator of the Group's profitability at this stage of its development.  The Group has adopted IFRS 16 from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard, the Group has applied the modified retrospective method for adoption.  As such, the Board believes that analysing the adjusted EBITDA (excluding IFRS 16) serves as a better comparative for the prior period.

The Group's adjusted EBITDA (excluding IFRS 16) grew by 15.1% to TRY 46.4 million.  Adjusted EBITDA (excluding IFRS 16) for the Turkish segment, which includes the Azerbaijani and Georgian businesses, was TRY 41.3 million, a year-on-year increase of 13.3%, and adjusted EBITDA (excluding IFRS 16) for the Russian segment was TRY 8.6 million, a year-on-year increase of 16.6% (a decrease of 7.8% based on RUB).  Additionally, costs relating to our Dutch corporate expenses (excluding those that relate to our initial public offering) reduced adjusted EBITDA by TRY 3.5 million in the first half of 2019.  The comparable adverse effect of this item was also TRY 3.5 million for the same period in 2018.

For the period ended 30 June 2019, the Group's adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales was 7.2% compared to 7.9% over the same period in 2018.  The main reasons for the decrease were the reduction in the Russian segment margin and the mix effect associated with the Russia segment becoming a larger part of the business.

Adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales for the Turkish segment (including Azerbaijan and Georgia as the revenues from these franchisees are booked at the Turkish subsidiaries) increased to 10.4% from 10.2% as the Group was successful in preserving margins.

The Russian segment margin decreased to 3.4% from 4.8%.  The main reason for the decrease is the lower like-for-like growth in Russia due to like-for-like growth rates averaging over 30% for the last four years and increased competition in Moscow.  The Group will acquire approximately fifteen regional stores from the franchisees to establish the store economics before looking to refranchise them in the future as done in the Greater Moscow expansion.  Going forward, the Group will deploy a three-pronged approach for further growth in the regions: i) through corporate stores, ii) incentivising successful Greater Moscow franchisees to open stores, and iii) continue with local franchisees one store at a time.  The Group is also reviewing its aggregator strategy and beverage agreement in addition to switching to a more efficient supply chain and introducing tailored local store marketing in the regions.  The Group's search for a CEO of its Russian Operations is continuing.  The Board remains confident on the medium- and long-term potential of the Russian market for DP Eurasia.

Adjusted Net Income

For the period ended 30 June 2019, adjusted net loss (excluding IFRS 16) was TRY 7.4 million.  Financial expense (excluding IFRS 16) recorded an increase due to interest rates in both countries. In Turkey, due to the macroeconomic volatility, interest rates varied between 23% - 26.75%.  In Russia, while denominated in Euros the Group's bank borrowings had lower interest rates in the first half of 2018 compared to the same period in 2019 when bank borrowings were denominated in Roubles.  The Group also recorded a higher tax expense.  However, both these increases were more than offset in the foreign exchange result and financial income resulting in a slightly improved adjusted net loss (excluding IFRS 16) compared to the previous period.  Despite not having any hard currency denominated loans, the Group recorded a foreign exchange gain of TRY 2.3 million due to the intragroup loans made from Turkey to Russia.

Capital expenditure and Cash conversion

The Group incurred TRY 29.6 million of capital expenditure in the period ended 30 June 2019.  The Turkish segment capital expenditure amounted to TRY 19.2 million and the Russian segment capital expenditures amounted to TRY 10.4 million (RUB 121 million).

Cash conversion (defined as (adjusted EBITDA (excluding IFRS 16)- capital expenditure)/adjusted EBITDA (excluding IFRS 16)) for the period was 36.3% for the Group and 53.6% for the Turkish segment. The Russian segment had negative cash conversion as it is in a period of rapid expansion relative to its size.

Adjusted net debt and Leverage

Excluding the impact of IFRS 16, the Group's adjusted net debt as at 30 June 2019 was TRY 224.9 million.  Following the refinancing of its Euro denominated loans in Russia with a Rouble denominated bank facility the Group does not carry any hard currency denominated loans on its balance sheet; 32.8% of the Group's bank borrowings is denominated in Turkish Liras and 67.2% is denominated in Roubles.  The increase in the net debt was mainly due to the translation effect of the appreciation of the Russian Rouble against the Turkish Lira and capital expenditure.

The Group continues its prudent and conservative approach to debt and its leverage ratio (defined as adjusted net debt (excluding IFRS 16)/adjusted EBITDA excluding IFRS 16)) was 1.9x as of 30 June 2019.

Board compliance statement

The Board of DP Eurasia N.V. declares that, to the best of their knowledge, the attached condensed combined and consolidated financial statements give a true and fair view of the assets, liabilities, financial position and the result of DP Eurasia N.V. and its subsidiaries included in the attached condensed combined and consolidated financial statements and the interim report includes a fair review of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

 

Amsterdam, 11 September 2019

 

The Directors of DP Eurasia N.V. as at the date of this announcement are as set out below:

 

Peter Williams*

Aslan Saranga, Chief Executive Officer

Frederieke Slot, Company Secretary

Seymur Tarı*

Izzet Talu*

Aksel Şahin*

Thomas Singer*

* Non-executive Directors

Auditor's Involvement

This Interim Report for the six months ended 30 June 2019, and the attached condensed consolidated financial statements included herein have been reviewed but not audited by an external auditor.

Forward looking statements

This press release includes forward-looking statements which involve known and unknown risks and uncertainties, many of which are beyond the Group's control and all of which are based on the Directors' current beliefs and expectations about future events. They appear in a number of places throughout this press release and include all matters that are not historical facts and include predictions, statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the results of operations, financial condition, prospects, growth and strategies of the Group and the industry in which it operates.

No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements.

Forward-looking statements contained in this press release speak only as of the date of this press release. The Company and the Directors expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this press release to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based.

 

 

Appendices

 

Exchange Rates

 

Period ended 30 June

 

2019

 

2018

Currency

Period End

Period Average

 

Period End

Period Average

EUR/TRY

6.557

6.343

 

5.309

4.942

RUB/TRY

0.091

0.086

 

0.072

0.068

EUR/RUB

71.820

73.840

 

72.992

71.822

 

Delivery - Take away / Eat in mix

 

For the period ended 30 June

 

2019

2018

 

Turkey

Russia

Total

Turkey

Russia

Total

Delivery

63.9%

60.3%

62.5%

63.9%

62.3%

63.3%

Take away / Eat in

36.1%

39.7%

37.5%

36.1%

37.7%

36.7%

Total(2)

100%

100%

100%

100%

100%

100%

 

DP EURASIA N.V.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

FOR THE PERIODS ENDED 30 JUNE 2019 AND 30 JUNE 2018

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

 

 

 

 

 

 

Notes

30 June

2019

30 June 2018

INCOME OR LOSS

 

 

 

 

 

 

 

Revenue

4

462,484

380,215

Cost of sales

 

(305,377)

(251,751)

 

 

 

 

GROSS PROFIT

 

157,107

128,464

 

 

 

 

General administrative expenses

 

(71,327)

(62,986)

Marketing and selling expenses

 

(63,751)

(50,002)

Other operating income/(expense)

 

1,585

(612)

 

 

 

 

OPERATING PROFIT

 

23,614

14,864

 

 

 

 

Foreign exchange gains/(losses)

6

2,277

(8,601)

Financial income

6

1,396

540

Financial expense

6

(37,761)

(16,849)

 

 

 

 

LOSS BEFORE INCOME TAX

 

(10,474)

(10,046)

 

 

 

 

Tax expense

 

(3,110)

(337)

Income tax expense

 

(3,712)

(3,297)

Deferred tax income

 

602

2,960

 

 

 

 

LOSS FOR THE PERIOD

 

(13,584)

(10,383)

 

 

 

 

OTHER COMPREHENSIVE (EXPENSE)/ INCOME

 

(13,948)

3,244

Items that will not be reclassified

 

 

 

to profit or loss

 

 

 

- Remeasurements of post-employment

 

 

 

   benefit obligations, net of tax

 

274

197

 

 

 

 

Items that may be reclassified

 

 

 

to profit or loss

 

 

 

- Currency translation differences

 

(14,222)

3,047

 

 

 

 

TOTAL COMPREHENSIVE LOSS

 

(27,532)

(7,139)

 

 

 

 

Loss per share

7

(0.09)

(0.07)

 

 

 

 

The accompanying notes on form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AT 30 JUNE 2019 AND 31 DECEMBER 2018

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

 

 

 

 

ASSETS

Notes

30 June 2019

31 December 2018

 

 

 

 

Property and equipment

8

148,359

136,041

Intangible assets

9

50,415

48,514

Right-of-use assets

     10

166,463

-

Goodwill

11

46,696

45,195

Trade receivables

13

20,011

20,761

Lease receivables

13

43,220

-

Deferred tax assets

20

14,727

12,187

Other non-current assets

16

40,498

25,389

 

 

 

 

Non-current assets

 

530,389

288,087

 

 

 

 

Cash and cash equivalents

12

21,542

28,444

Trade receivables

13

106,782

69,959

Lease receivables

13

13,640

-

Due from related parties

13

20

20

Inventories

15

81,124

77,619

Other current assets

16

59,353

45,584

 

 

 

 

Current assets

 

282,461

221,626

 

 

 

 

TOTAL ASSETS

 

812,850

509,713

 

 

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

 


 

 

 

 

 

LIABILITIES

Notes

30 June 2019

31 December 2018

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Paid in share capital

19

36,353

36,353

Share premium

 

119,286

119,286

Contribution from shareholders

21

19,346

20,697

Other comprehensive income/expense

 

 

 

   that will not be reclassified to profit or loss

 

 

 

     - Remeasurements of post-employment

 

 

 

       benefit obligations

 

(2,210)

(2,484)

Other comprehensive expense that may

 

 

 

   be reclassified to profit or loss

 

 

 

     - Currency translation differences

 

(14,911)

(689)

Retained earnings

 

(46,106)

(34,714)

 

 

 

 

Total Equity

 

111,758

138,449

 

 

 

 

Financial liabilities

17

187,008

171,276

Lease liabilities

17

193,868

-

Deferred tax liability

20

-

565

Other non-current liabilities

16

32,777

30,038

 

 

 

 

Non - current liabilities

 

413,653

201,879

 

 

 

 

Financial liabilities

17

99,388

44,330

Lease liabilities

17

51,067

-

Trade payables

      13

85,106

74,148

Due to related parties

 

146

-

Current income tax liabilities

 

2,172

6,971

Provisions

 

2,432

9,224

Other current liabilities

16

47,128

34,712

 

 

 

 

Current liabilities

 

287,439

169,385

 

 

 

 

Liabilities

 

701,092

371,264

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

812,850

509,713

 

 

 

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE PERIODS ENDED 30 JUNE 2019 AND 30 JUNE 2018

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

 

Share capital

Share premium

Contribution from shareholders

Remeasurement of post-employment benefit obligations

Currency translation differences

Retained earnings

Total Equity

 

 

 

 

 

 

 

 

Balances at 1 January 2018

36,353

119,286

18,183

(2,193)

(10,993)

(23,623)

137,013

 

 

 

 

 

 

 

 

Remeasurements of post-employment benefit obligations, net

-

-

-

197

-

-

197

Total loss for the period

-

-

-

-

-

(10,383)

(10,383)

Currency translation adjustments

-

-

-

-

3,047

-

3,047

Total comprehensive loss

-

-

-

197

3,047

(10,383)

(7,139)

Share-based incentive plans (Note 21)

-

-

1,068

-

-

-

1,068

 

 

 

 

 

 

 

 

Balances at 30 June 2018

36,353

119,286

19,251

(1,996)

(7,946)

(34,006)

130,942

 

 

 

 

 

 

 

 

Balances at 1 January 2019

36,353

119,286

20,697

(2,484)

(689)

(34,714)

138,449

 

 

 

 

 

 

 

 

Remeasurements of post-employment benefit obligations, net

-

-

-

274

-

-

274

Currency translation adjustments

-

-

-

-

(14,222)

-

(14,222)

Total loss for the period

-

-

-

-

-

(13,584)

(13,584)

Total comprehensive loss

-

-

-

274

(14,222)

(13,584)

(27,532)

Transfers (Note 21)

-

-

(2,192)

-

-

2,192

-

Share-based incentive plans (Note 21)

-

-

841

-

-

-

841

 

Balances at 30 June 2019

36,353

119,286

19,346

(2,210)

(14,911)

(46,106)

111,758

 

 

 

 

 

 

 

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE PERIODS ENDED 30 JUNE 2019 AND 30 JUNE 2018

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

 

Notes

30 June 2019

30 June 2018

 

 

 

 

Loss before income tax

 

(10,474)

(10,046)

 

 

 

 

Adjustments for

 

 

 

Depreciation

8

20,388

16,749

Amortisation

9,10

34,103

7,422

Losses on sale of property and equipment

 

(1,097)

(170)

Provision for performance bonus

 

-

4,456

Non-cash employee benefits expense -

 

 

 

  share based payments

21

841

1,068

Interest income

6

(1,396)

(540)

Interest expense

6

37,676

16,087

Unrealised foreign exchange gains

 

 

 

  on borrowings

 

-

7,884

 

 

 

 

Changes in operating assets and liabilities

 

 

 

Changes in trade receivables

 

(92,933)

(3,015)

Changes in other receivables and assets

 

(19,339)

(14,093)

Changes in inventories

 

(3,505)

(9,746)

Changes in contract assets

 

1,750

1,321

Changes in contract liabilities

 

3,798

4,064

Changes in trade payables

 

10,958

(2,427)

Changes in other payables and liabilities

 

(5,015)

2,342

Taxes paid

 

(3,372)

(3,342)

Performance bonuses paid

 

(7,010)

(5,576)

 

 

 

 

Cash flows generated (used in) / from

 

 

 

  operating activities

 

(34,627)

12,438

 

Payments for property and equipment

8

(20,184)

(18,330)

Payments for intangible assets

9

(9,051)

(12,385)

Proceeds from sale of tangible and intangible assets

 

5,543

4,562

 

 

 

 

Cash flows used in investing activities

 

(23,692)

(26,153)

Interest paid

 

(28,484)

(14,460)

Interest received

 

1,396

540

Loans obtained

 

612,918

529,270

Loans paid

 

(491,846)

(497,889)

Lease payments

 

(39,604)

(5,063)

Cash flows generated

 

 

 

  from financing activities

 

54,380

12,398

Effect of currency translation differences

 

(2,963)

12,241

Net (decrease)/increase in cash and cash equivalents

 

(6,902)

10,924

Cash and cash equivalents at the

 

 

 

  beginning of the period

12

28,444

76,128

Cash and cash equivalents at the

 

 

 

  end of the period

12

21,542

87,052

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

 

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL

INFORMATION AS AT 30 JUNE 2019 AND 31 DECEMBER 2018

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

NOTE 1 - GROUP'S ORGANIZATION AND NATURE OF ACTIVITIES

 

DP Eurasia N.V. (the "Company"), public limited company, having its statutory seat in Amsterdam, the Netherlands, was incorporated under the law of the Netherlands on 18 October 2016. The Company has been incorporated by incorporating shares of Fides Food Systems Coöperatief U.A. and Vision Lovemark Coöperatief U.A. in Fidesrus B.V. and Fides Food Systems B.V. Acquisition occurred on 18 October 2016 when the Company acquired Fidesrus and Fides Foods and their subsidiaries and from this point forward consolidated Group was formed. This was a transaction under common control.

 

The Company's registered address is: Herikerbergweg 238, Amsterdam, the Netherlands.

 

The Company and its subsidiaries (together referred as the "Group") operate company and franchise-owned stores in Turkey and the Russian Federation, including providing technical support, control and consultancy services to the franchisees.

 

As at 30 June 2019, the Group operates in 736 stores (499 franchise stores, 237 company-owned stores) (31 December 2018: 724 stores (486 franchise stores, 238 company-owned stores). Split of stores based on operating countries are as follows:

 

Turkey

 

Russia

 

30 June 2019

31 December 2018

 

30 June 2019

31 December 2018

 

 

 

 

 

 

Corporate

136

137

 

101

101

Franchisee

413

408

 

86

78

 

 

 

 

 

 

Total

549

545

 

187

179

 

Subsidiaries

 

The Company has a total of four fully-owned subsidiaries. The entities included in the scope of the condensed consolidated financial interim information and nature of their business is as follows:

 

 

30 June

2019

30 June

2018

 

 

 

Effective

Effective

 

 

Subsidiaries

ownership (%)

ownership (%)

Registered country

Nature of business

 

 

 

 

 

Fides Grup Gıda Restaurant

 

 

 

 

İşletmeciliği A.Ş. ("Fides Turkey")

-

100

Turkey

Food delivery

Pizza Restaurantları A.Ş. ("Domino's Turkey")

100

100

Turkey

Food delivery

Pizza Restaurants LLC ("Domino's Russia")

100

100

Russia

Food delivery

Fidesrus B.V. ("Fidesrus")

100

100

the Netherlands

Investment company

Fides Food Systems B.V. ("Fides Food")

100

100

the Netherlands

Investment company

           

 

Pizza Restaurants LLC is established in the Russian Federation. Domino's Russia is operating a pizza delivery network of company and franchise-owned stores in Russian Federation. Domino's Russia has a Master Franchise Agreement (the "MFA Russia") with Domino's Pizza International for the pizza delivery network in Russia until 2030.
 

 

 

Fides Grup Gıda Restaurant İşletmeciliği A.Ş. and Pizza Restaurantları A.Ş. ("Fides Turkey" and "Domino's Turkey", respectively) are established in Turkey. Domino's Turkey is operating a pizza delivery network of company and franchise-owned stores in Turkey. Fides Turkey is an investment company, which has a Master Franchise Agreement (the "MFA Turkey") with Domino's Pizza International pizza delivery network in Turkey until 2032. The rights obtained under the MFA have been reassigned from Fides Turkey to Domino's Turkey in order for it to operate the pizza delivery network. Fides Turkey was merged with Domino's Turkey with all of its assets and liabilities as of 12 December 2018 through a tax-free legal merger.

 

Fides Food Systems BV and Fidesrus BV ("Fides Food Systems" and "Fidesrus", respectively) are established in the Netherlands. Both Fides Food Systems and Fidesrus are acting as investment companies.

 

Significant changes in the current reporting period

 

In spite of the challenging trading conditions in the first half of 2019, the Group remains well placed to grow revenues through a simplified menu, opening new stores, increased investment in our digital channels and refocused local store marketing activities. The Group has not identified any risks that could impact the financial performance or position of the Group as at 30 June 2019. It has sufficient headroom to enable it to conform to covenants on its existing borrowings and sufficient working capital and undrawn financing facilities to service its operating activities and ongoing investments.

 

NOTE 2 -     BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

 

2.1       Basis of preparation

 

These condensed consolidated interim financial statements for the six months ended 30 June 2019 have been prepared in accordance with International Accounting Standard 34 ("IAS 34") Interim Financial Reporting.

 

The interim report does not include all the notes of the type normally included in annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended
31 December 2018 and any public announcements made by the Company during the interim reporting period.

 

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards as set out at Note 2.3.

 

Seasonality of operations

 

There is no significant seasonality effect on the Group's revenue. According to financial year ended
31 December 2018, 48% of revenues accumulated in the first half year, with 52% accumulating in the second half.

 

 

Consolidation of foreign subsidiaries

 

Financial statements of subsidiaries operating in foreign countries are prepared in the currency of the primary economic environment in which they operate. Assets and liabilities in financial statements prepared according to the Group's accounting policies are translated into the Group's presentation currency, Turkish Liras, from the foreign exchange rate at the statement of financial position date whereas income and expenses are translated into TRY at the average foreign exchange rate. Exchange differences arising from the translation are included in the "currency translation differences" under shareholders' equity.

 

The foreign currency exchange rates used in the translation of the foreign operations within the scope of consolidation are as follows:

 

 

30 June 2019

 

31 December 2018

 

30 June 2018

 

Period

Period

 

Period

Period

 

Period

Period

Currency

End

Average

 

End

Average

 

End

Average

 

 

 

 

 

 

 

 

 

Euros

  6.5571

  6.3429

 

  6.0280

     5.6751

 

  5.3092

  4.9417

Russian Rubles

  0.0910

  0.0860

 

  0.0753

     0.0760

 

  0.0723

  0.0683

 

2.2       New and amended international financial reporting standards as adopted by European Union

 

New and amended standards adopted by the Group, which are effective for the financial statements as at 30 June 2019

 

A number of new or amended standards became applicable for the current reporting period:

 

- Amendment to IFRS 9, 'Financial instruments'

- IFRS 16, 'Leases'

- IFRIC 23, 'Uncertainty over income tax treatments'

- Annual improvements 2015-2017

- Amendments to IAS 19, 'Employee benefits' on plan amendment, curtailment or settlement'

 

The impact of the adoption of the leasing standard IFRS 16 and the new related accounting policies are disclosed in note 2.3 below. The other standards did not have any impact on the Group's accounting policies and did not require retrospective adjustments.

 

The new standards, amendments and interpretations, which are issued but not effective for the financial statements as at 30 June 2019

 

- Amendments to IAS 1 and IAS 8 on the definition of material

- Amendments to IFRS 3 - definition of a business

  

 

This note explains the impact of the adoption of IFRS 16 Leases on the Group's financial statements and disclose the new accounting policies that have been applied as from 1 January 2019.

 

The Group has adopted IFRS 16 from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard, the Group has applied the modified retrospective method for adoption. The reclassifications and the adjustments arising from the new lease accounting rules are therefore recognised in the opening balance sheet on 1 January 2019.

 

(a)        Adjustments recognised on adoption of IFRS 16

 

On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 23.12% for TRY and 9.7% for RUB.

 

For leases previously classified as finance leases, the Group recognised the carrying amount of lease assets and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date. Any remeasurement in a lease contract is recognised as an adjustment to the related right-of-use of assets.

 

Definition of a lease

 

In accordance with IFRS 16, the Group recognises a lease liability reflecting future lease payments and a 'right of use asset' for all of its lease contracts. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group assesses whether a contract is, or contains, a lease at the inception date. The inception date is the earlier of the date of a lease agreement and the date of commitment by the parties to the principal terms and conditions of the lease.

 

Subleases

 

The Group operates as intermediate lessor for a significant proportion of its leases. The Group has evaluated its rent agreements and classified its sub-leases as financial lease as required in IFRS 16.

 

Where the Group recognised a leasing agreement form a sublease transaction, which are classified as financial leasing, the right of use asset from head-lease is derecognised and a lease receivable equal to the lease receivables in the sub-lease is recognised.

 

Lease term

 

The lease term includes the non-cancellable period for which the lessee has the right to use an underlying asset. Periods covered by an option to extend the lease term are included in the lease term if the lessee is reasonably certain to exercise that option. The same rationale applies to termination options. The term covered by a termination option is included in the lease term if the lessee is reasonably certain not to exercise the option. Otherwise, the lease term ends at the point in time when the lessee can exercise the termination option.
 

 

 

Measurement

 

The lease liability is initially measured at the present value of the future lease payments that are not paid at the commencement date, discounting using an incremental borrowing rate. The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate or the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain

to be exercised or a termination option is reasonably certain not to be exercised. The Group recognizes in the right-of-use asset an estimate of the costs to be incurred for dismantling, removal and/or restoration to the conditions required by the terms of the lease.

 

Impact on transition

 

The impact on transition to IFRS 16 is summarized in the table below. Accounts that were not affected by the changes have not been included. As a result, the sub-totals and the totals disclosed can not be recalculated from the numbers provided.

 

 

Impact

 

 

31 December 2018

IFRS 16

1 January 2019

Non-current assets

 

 

 

Property and equipment

136,041

 

136,041

Intangible assets

48,514

 

48,514

Right-of-use assets

-

162,446

162,446

Lease receivables

-

44,569

44,569

Current assets

 

 

 

Lease receivables

-

13,857

13,857

 

 

 

 

Non-current liabilities

 

 

 

Lease liabilities

44,330

162,879

207,209

Current liabilities

 

 

 

Lease liabilities

171,276

57,993

229,269

 

 

 

2019

 

 

 

Operating lease commitments disclosed as at 31 December 2018

 

34,624

Discounted using the lessee's incremental borrowing rate

    of at the date of initial application

 

23,825

Add/(Less): finance lease liabilities recognised as at 31 December 2018

 

57,270

Add/(Less): adjustments as a result of a different treatment of extension options

 

139,777

Lease liability recognised as at 1 January 2019

 

220,872

 

The changes in the accounting the policy affected the following items in balance sheet on
1 January 2019:

 

 

 

Current lease liabilities

 

57,993

Non-current lease liabilities

 

162,879

 

 

220,872

 

 

 

 

The associated right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

 

The recognised net investment and right-of use of assets are as follows:

 

Lease receivables

 

58,426

Right of use of assets

 

162,446

 

 

220,872

 

The recognised right-of-use assets relate to the following types of assets:

 

 

30 June 2019

1 January 2019

 

 

 

Properties

150,933

145,624

Motor vehicles

15,530

16,822

 

 

 

Total right-of-use assets

166,463

162,446

 

(i)         Impact on segment disclosures and earnings per share

 

Adjusted EBITDA, segment assets and segment liabilities for June 2019 all increased as a result of the change in accounting policy.

 

 

 

 

Impact for the period

 

without IFRS 16

 

with IFRS 16

 

30 June 2019

IFRS 16 effect

30 June 2019

 

 

 

 

Revenue

462,484

-

462,484

Cost of sales (-)

(314,485)

9,108

(305,377)

Gross profit

147,999

9,108

157,107

General administrative expenses (-)

(72,081)

754

(71,327)

Marketing and selling expenses (-)

(63,751)

-

(63,751)

Other operating expense, net

3,301

(1,716)

1,585

Operating profit

15,468

8,146

23,614

Foreign exchange gains/(losses)

2,846

(569)

2,277

Financial income

3,212

(1,816)

1,396

Financial expense (-)

(25,070)

(12,691)

(37,761)

 

 

 

 

Profit before income tax

(3,544)

(6,930)

(10,474)

 

 

 

 

Tax expense (-)

(5,311)

2,201

(3,110)

 

 

 

 

Profit for the year

(8,855)

(4,729)

(13,584)

Adjusted EBITDA

46,420

33,145

79,565

 

 

 

 

 

 

 

without IFRS 16

 

with IFRS 16

Liabilities

30 June 2019

IFRS 16 effect

30 June 2019

 

 

 

 

 

Non - current liabilities

 

 

 

Financial liabilities

194,443

-

194,443

Lease liabilities

-

186,433

186,433

Other non-current liabilities

30,631

259

30,890

 

 

 

 

Current liabilities

 

 

 

Financial liabilities

107,729

-

107,729

Lease liabilities

-

42,725

42,725

Other current liabilities

47,002

127

47,129

 

 

 

 

 

 

 

 

 

 

without IFRS 16

 

with IFRS 16

Assets

30 June 2019

IFRS 16 effect

30 June 2019

 

 

 

 

Non-current assets

 

 

 

Property and equipment

148,359

-

148,359

Intangible assets

50,415

-

50,415

Right-of-use assets

-

166,463

166,463

Net investment in lease

-

43,220

43,220

Deferred tax assets

13,235

1,492

14,727

 

 

 

 

Current assets

319,214

211,175

530,389

Net investment in lease

-

13,640

13,640

 

 

-

 

(ii)        Practical expedients applied 

 

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

 

-           The use of a various discount rates to a portfolio of leases with reasonably similar characteristics

-           Reliance on previous assessments on whether leases are onerous

-           The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and

-           The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

 

The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application.  Instead, contracts entered into before the transition date the Group relied on its assessment made appliying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

 

 

 

(b)       The group's leasing activities and how these are accounted for

 

The group leases various offices, warehouses, retail stores and cars. Rental contracts are typically made for fixed periods of 3 to 5 years but may have extension options as described in (i) below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

 

Until the 2018 financial year, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases were charged to profit or loss on a
straight-line basis over the period of the lease.

 

From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

-           Fixed payments (including in-substance fixed payments),

-           Variable lease payment that are based on an index or a rate

-           The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and

-           Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

 

Right-of-use assets are measured at cost comprising the following:

 

-           The amount of the initial measurement of lease liability

-           Any lease payments made at or before the commencement date less any lease incentives received

-           Any initial direct costs, and

-           Restoration costs.

 

Payments associated with the leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low value assets comprise small office furniture. There are no residual value guarantees and the initial direct costs are negligible.
 

 

 

 

(i)         Extension, termination options

 

The lease term includes the non-cancellable period for which the lessee has the right to use an underlying asset. Periods covered by an option to extend the lease term are included in the lease term if the lessee is reasonably certain to exercise that option. The same rationale applies to termination options. The term covered by a termination option is included in the lease term if the lessee is reasonably certain not to exercise the option. Otherwise, the lease term ends at the point in time when the lessee can exercise the termination option.

 

Extension options are available for all contracts. In more than 90% of the contracts, DP Eurasia has the right to extend the contract unilaterally, which does not need the consent of the landlord.

 

Critical judgements in determining the lease term

 

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). Potential future cash outflows have not been included in the lease liability because it is not reasonably certain that the leases will be extended (or not terminated).

 

The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. During the current financial year, there were no revisions related to the lease liabilities.

 

(ii)        Discount rates used

 

Incremental borrowing rate is used - rates that the Group would borrow if they wanted to purchase an asset for the relative periods.

 

(iii)       Variable elements used

 

Variable element is the rent increase rate and its calculated based on Consumer Price Index ("CPI"), Producer Price Index ("PPI") or an average of both. Variable lease payments based on an index or a rate are initially measured using the index or the rate at the commencement date.

 

Estimation uncertainty arising from variable lease payments

 

The Group does not forecast future changes of the index/rate; these changes are considered when the lease payments change. Variable lease payments that are not based on an index or a rate are not part of the lease liability, but they are recognised in the income statement when the event or condition that triggers those payments occurs.

 

Nearly 90% of future lease payments for stores are linked to consumer price index, producer price index or an average of both. Variable payment terms are mostly used to make up for the volatile inflation rates in a country. An average of 5% increase in the consumer price index and producer price index indices would increase total lease payments by approximately TRY12,247.

 

 

NOTE 3 - SEGMENT REPORTING

 

The business operations of the Group are organized and managed with respect to geographical positions of its operations. The information regarding the business activities of the Group as of 30 June 2019,
31 December 2018 and 30 June 2018 comprise the performance and the management of Turkish and Russian operations and Head Office.

 

The Group has two business segments, determined by management according to the information used for the evaluation of performance and the allocation of resources, the Turkish and Russian operations. Other operations are composed of corporate expenses of Dutch companies. These segments are managed separately because they are affected by the economic conditions and geographical positions in terms of risks and returns.

 

The segment analysis for the period ended 30 June 2019 and June 2018 are as follows:

 

1 January - 30 June 2019

Turkey

Russia

Other

Elimination

Total

 

 

 

 

 

 

Corporate revenue

99,232

144,538

-

-

243,770

Franchise revenue and royalty

 

 

-

-

 

     revenue obtained from franchisees

143,069

43,920

-

-

186,989

Other revenue

18,730

12,995

-

-

31,725

Total revenue

261,031

201,453

-

-

462,484

             -    At a point in time

258,632

200,615

-

-

459,247

             -   Over time

2,399

838

-

-

3,237

Operating profit

31,487

(4,417)

(3,456)

-

23,614

Capital expenditures

19,178

10,392

-

-

29,570

Tangible and intangible disposals

(1,840)

(2,602)

-

-

(4,442)

Depreciation and amortization

 

 

 

 

 

   Expenses

(23,356)

(31,135)

-

-

(54,491)

Adjusted EBITDA

55,547

27,474

(3,456)

-

79,565

 

30 June 2019

Turkey

Russia

Other

Elimination

Total

Borrowings

 

 

 

 

 

TRY

94,000

-

-

-

94,000

RUB

-

192,396

-

-

192,396

 

94,000

192,396

-

-

286,396

Lease liabilities

 

 

 

 

 

TRY

94,958

-

-

-

94,958

RUB

-

149,977

-

-

149,977

 

94,958

149,977

-

-

244,935

Total

188,958

342,373

-

-

531,331

 

 

 

 

 

1 January - 30 June 2018

Turkey

Russia

Other

Elimination

Total

 

 

 

 

 

 

Corporate revenue

99,190

123,076

-

-

222,266

Franchise revenue and royalty

 

 

-

-

 

     revenue obtained from franchisees

121,462

13,503

-

-

134,965

Other revenue

7,637

15,347

-

-

22,984

Total revenue

228,289

151,926

-

-

380,215

             -    At a point in time

227,176

150,342

-

-

377,518

             -   Over time

1,113

1,584

-

-

2,697

Operating profit

22,061

(3,599)

(3,598)

-

14,864

Capital expenditures

20,956

12,538

-

-

33,494

Tangible and intangible disposals

(1,413)

(2,979)

 

-

(4,392)

Depreciation and amortization

 

 

 

 

 

   expenses

(14,040)

(10,131)

 

-

(24,171)

Adjusted EBITDA

36,456

7,350

(3,488)

-

40,318

 

 

 

 

 

 

30 June 2018

Turkey

Russia

Other

Elimination

Total

 

 

 

 

 

 

Borrowings

 

 

 

 

 

TRY

86,689

-

-

-

86,689

EUR

27,420

154,988

-

-

182,408

RUB

-

14,712

-

-

14,712

 

 

 

 

 

 

Total

114,109

169,700

-

-

283,809

 

EBITDA, adjusted EBITDA, net debt, adjusted net debt, adjusted net income and non-recurring and non-trade income/expenses are not defined by IFRS. The amounts provided with respect to operating segments are measured in a manner consistent with that of the financial statements. These items determined by the principles defined by the Group management comprises incomes/expenses which are assumed by the Group management that are not part of the normal course of business and are non-recurring items. These items which are not defined by IFRS are disclosed by the Group management separately for a better understanding and measurement of the sustainable performance of the Group.

 

 

 

 

The reconciliation of adjusted EBITDAs as of 30 June 2019 and June 2018 is as follows:

 

TURKEY

30 June 2019

30 June 2018

 

 

 

Adjusted EBITDA

55,547

36,456

 

 

 

Non-recurring and non-trade

 

 

   (income)/expenses per Group

 

 

   Management

 

 

 

 

 

One off non-trading costs 

129

105

Share-based incentives

575

250

EBITDA

54,843

36,101

 

 

 

Depreciation and amortization

23,356

14,040

 

 

 

Operating profit

31,487

22,061

 

RUSSIA

30 June 2019

30 June 2018

 

 

 

Adjusted EBITDA

27,474

7,350

 

 

 

Non-recurring and non-trade

 

 

   (income)/expenses per Group

 

 

   Management

 

 

 

 

 

One off non-trading costs 

489

-

Share-based incentives

267

818

EBITDA

26,718

6,532

 

 

 

Depreciation and amortization

31,135

10,131

 

 

 

Operating loss

(4,417)

(3,599)

 

OTHER

30 June 2019

30 June 2018

 

 

 

Adjusted EBITDA

(3,456)

(3,488)

 

 

 

Non-recurring and non-trade

 

 

   (income)/expenses per Group

 

 

   Management

 

 

One off non-trading costs 

-

110

 

 

 

EBITDA

(3,456)

(3,598)

Depreciation and amortization

-

-

Operating loss

(3,456)

(3,598)

 

 

 

 

The reconciliation of adjusted net debt as of 30 June 2019 and 31 December 2018 is as follows:

 

 

2019

2018

 

 

 

Short term bank borrowings

94,000

24,820

Short-term lease liabilities

51,067

7,789

Short-term portions of

 

 

   long-term borrowings

5,388

11,721

Long-term bank borrowings

187,008

161,600

Long-term financial lease borrowings

193,868

9,676

 

 

 

Total borrowings

531,331

215,606

 

 

 

Cash and cash equivalents (-)

(21,542)

(28,444)

 

 

 

Net debt

509,789

187,162

 

 

 

Non-recurring items

 

 

    per Group Management

 

 

Long term deposit for loan guarantee

(41,334)

(32,537)

Adjusting delay in collection/payment

 

 

    day coinciding on a weekend

(14,424)

-

 

 

 

 

 

 

Adjusted net debt

454,031

154,625

 

The reconciliation of adjusted net income as of 30 June 2019 and 2018 is as follows:

 

 

30 June 2019

30 June 2018

 

 

 

Loss for the period as reported

(13,584)

(10,383)

 

 

 

Non-recurring and non-trade (income)/expenses

 

 

   per Group Management

 

 

 

 

 

Share-based incentives

841

1,068

One-off expenses

618

215

 

 

 

Adjusted net loss for the period

(12,125)

(9,100)

 

 

 

NOTE 4 - REVENUE AND COST OF SALES

 

 

 

 

30 June 2019

30 June 2018

 

 

 

Corporate revenue

243,770

222,266

Franchise revenue and royalty   

 

 

revenue obtained from franchisees

186,989

134,965

Other revenue

31,725

22,984

 

 

 

Revenue

462,484

380,215

 

 

 

Cost of sales

(305,377)

(251,751)

 

 

 

Gross profit

157,107

128,464

 

 

 

NOTE 5 - EXPENSES BY NATURE

 

 

30 June 2019

30 June 2018

 

 

 

Personnel expenses

(96,681)

(90,643)

Depreciation and amortization expenses

(54,491)

(24,171)

 

 

 

 

(151,172)

(114,814)

 

 

NOTE 6 - FOREIGN EXCHANGE LOSSES, FINANCIAL INCOME AND EXPENSES

 

 

30 June 2019

30 June 2018

 

 

 

Foreign exchange gains/(losses)

2,277

(8,601)

 

 

 

2,277

(8,601)

 

 

 

 

30 June 2019

30 June 2018

 

 

 

Interest income

1,396

540

 

 

 

1,396

540

 

 

 

 

 

 

 

30 June 2019

30 June 2018

 

 

 

Interest expense

(22,587)

(16,087)

Interest expense on lease liabilities

(15,089)

-

Other

(85)

(762)

 

 

 

(37,761)

(16,849)

 

  

 

 

NOTE 7 - EARNINGS PER SHARE

 

The reconciliation of adjusted earnings per share as of 30 June 2019 and 2018 is as follows:

 

 

30 June 2019

30 June 2018

 

 

 

Average number of shares existing during the period

145,372,414

145,372,414

Net loss for the period attributable to

 

 

   equity holders of the parent

(13,584)

(10,383)

 

 

 

Earnings per share

(0.09)

(0.07)

 

 

 

 

The reconciliation of adjusted earnings per share as of 30 June 2019 and 2018 is as follows:

 

 

 

 

 

 

 

30 June 2019

30 June 2018

 

 

 

Average number of shares existing during the period

145,372,414

145,372,414

Net loss for the period attributable to equity

 

 

   holders of the parent

(13,584)

(10,383)

 

 

 

Non-recurring and non-trade expenses

 

 

   per Group Management (*)

 

 

Share-based incentives

841

1,068

One-off expenses

618

215

 

 

 

Adjusted net loss for the period

 

 

   attributable to equity holders of the parent

(12,125)

(9,100)

 

 

 

Adjusted Earnings per share (*)

(0.09)

(0.06)

 

(*)         Adjusted earnings per share non-recurring and non-trade income/expenses are not defined by IFRS. The amounts provided with respect to operating segments are measured in a manner consistent with that of the financial statements. These items determined by the principles defined by the Group management comprises incomes/expenses which are assumed by the Group management that are not part of the normal course of business and are non-recurring items. These items which are not defined by IFRS are disclosed by the Group management separately for a better understanding and measurement of the sustainable performance of the Group.

 

There are no shares or options with a dilutive effect and hence the basic and diluted earnings per share are the same.

 

The earning per share presented for the period ended 30 June 2019 is based on the issued share capital of DP Eurasia N.V. at the date of its incorporation.

NOTE 8 - PROPERTY AND EQUIPMENT

 

 

1 January 2019

Additions

Disposals

Transfers

Currency translation adjustments

30 June 2019

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

Machinery and equipment

55,668

2,960

(3,290)

1,738

9,822

66,898

Motor vehicles

32,963

334

(8,023)

-

4,843

30,117

Furniture and fixtures

62,109

3,858

(2,018)

-

523

64,472

Leasehold improvements

91,207

5,957

(3,416)

-

9,621

103,369

Construction in progress

3,024

7,409

-

(1,738)

635

9,330

 

 

 

 

 

 

 

 

244,971

20,518

(16,747)

-

25,444

274,186

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

Machinery and equipment

(17,975)

(5,113)

2,091

-

(3,110)

(24,107)

Motor vehicles

(18,218)

(4,287)

7,038

-

(2,354)

(17,821)

Furniture and fixtures

(27,848)

(3,694)

1,040

-

(187)

(30,689)

Leasehold improvements

(44,889)

(7,294)

2,260

-

(3,287)

(53,210)

 

 

 

 

 

 

 

 

(108,930)

(20,388)

12,429

-

(8,938)

(125,827)

 

 

 

 

 

 

 

Net book value

136,041

 

 

 

 

148,359

 

For the period ended 30 June 2019, depreciation expense of TRY16,722 has been charged in cost of sales and TRY3,666 has been charged in general administrative expenses. 

 

 

1 January 2018

Additions

Disposals

Transfers

Currency translation adjustments

30 June 2018

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

Machinery and equipment

42,094

5,147

(2,589)

96

3,998

48,746

 

Motor vehicles

26,277

2,779

(405)

-

2,063

30,714

 

Furniture and fixtures

58,646

3,209

(4,744)

1,475

204

58,790

 

Leasehold improvements

77,499

5,157

(4,186)

183

4,079

82,732

 

Construction in progress

10,211

4,817

(8)

(2,137)

453

13,336

 

 

 

 

 

 

 

 

 

 

214,727

21,109

(11,932)

(383)

10,797

234,318

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

 

 

 

Machinery and equipment

(11,494)

(3,480)

938

-

(1,070)

(15,106)

 

Motor vehicles

(11,042)

(3,676)

393

-

(728)

(15,053)

 

Furniture and fixtures

(26,953)

(3,374)

3,812

-

(58)

(26,573)

 

Leasehold improvements

(36,842)

(6,219)

2,497

-

(1,090)

(41,654)

 

 

 

 

 

 

 

 

 

 

(86,331)

(16,749)

7,640

-

(2,946)

(98,386)

 

 

 

 

 

 

 

 

 

Net book value

128,396

 

 

 

 

135,932

 

                           

 

For the period ended 30 June 2018, depreciation expense of TRY13,746 has been charged in cost of sales and TRY3,003 has been charged in general administrative expenses.

NOTE 9 - INTANGIBLE ASSETS

 

1 January

 2019

Additions

Disposals

Currency translation adjustments

Transfers

30 June 2019

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

Key money

17,456

3,519

(503)

1,948

-

22,420

Computer software

45,573

5,532

(136)

741

-

51,710

Franchise contracts

48,485

-

-

-

-

48,485

 

 

111,514

9,051

(639)

2,689

-

122,615

 

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

 

Key money

(5,342)

(3,126)

503

(582)

-

(8,547)

Computer software

(17,178)

(3,363)

8

-

-

(20,533)

Franchise contracts

(40,480)

(2,614)

-

(26)

-

(43,120)

 

 

(63,000)

(9,103)

511

(608)

-

(72,200)

 

 

 

 

 

 

 

Net book value

48,514

 

 

 

 

50,415

 

For the period ended 30 June 2019, amortisation expense of TRY4,507 has been charged in cost of sales and TRY4,596 has been charged in general administrative expenses.

 

 

1 January 2018

Additions

Disposals

Currency translation adjustments

Transfers

30 June 2018

 

 

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

Key money

8,755

6,291

(45)

97

-

15,098

 

Computer software

31,502

6,094

(146)

678

383

38,511

 

Franchise contracts

48,485

-

-

-

-

48,485

 

 

 

88,742

12,385

(191)

775

383

102,094

 

 

 

 

 

 

 

 

 

Accumulated amortization

 

 

 

 

 

 

Key money

(2,001)

(1,124)

45

-

-

(3,080)

 

Computer software

(10,855)

(3,874)

46

(188)

-

(14,871)

 

Franchise contracts

(35,555)

(2,424)

-

-

-

(37,979)

 

 

 

(48,411)

(7,422)

91

(188)

-

(55,930)

 

 

Net book value

40,331

 

 

 

 

46,164

 

                                       

 

For the period ended 30 June 2018, amortisation expense of TRY4,229 has been charged in cost of sales and TRY3,193 has been charged in general administrative expenses.

 

 

NOTE 10 - RIGHT OF USE ASSETS

 

The movement of right-of-use assets as of 30 June 2019 is as follows:

 

2019

Opening - 1 January (Note 2.3)

162,446

Amortization

(25,000)

Current year additions

15,438

Current year disposals

(8,640)

Currency translation adjustments

22,219

Closing - 30 June

166,463

 

For the period ended 30 June 2019, amortisation expense of TRY24,229 has been charged in cost of sales and TRY771 has been charged in general administrative expenses.

 

 

NOTE 11 - GOODWILL

 

The goodwill balance amounts to TRY 46,696 (including the currency translation adjustment amounting to TRY1,501) in the condensed consolidated financial information as of 30 June 2019
(31 December 2018: TRY45,195).

 

Acquisition of Pizza Restaurantları A.Ş.

 

On 1 September 2010, the Group acquired the shares of Pizza Restaurantları A.Ş., which operates in pizza delivery business with a network of company and franchise-owned stores in Turkey. Following the acquisition, goodwill amounting to TRY37,961 was recognized in the condensed consolidated financial information-based acquisition accounting applied under IFRS 3 "Business Combinations".

 

Acquisition of Russian Operations

 

On 15 February 2013, the Group acquired the fixed assets of a pizza network operating in Moscow, Russia. Although the Group did not acquire shares of a company, the acquisition is treated as a business combination in accordance with IFRS 3 "Business Combinations" as the inputs and operational processes that have the ability to create outputs, have been transferred to the Group.

 

TRY8,735 (including currency translation adjustment amounting to TRY1,501) of the goodwill recognised in the condensed consolidated financial information has arisen from acquisition of the Russian pizza delivery network. The access to the related market and creation of synergy with the wider Group are the main reasons behind the recognised goodwill.

 

As there were no indicators for impairment, the management of the Group has not updated any of the impairment testing calculations performed as at 31 December 2018.

 

 

 

NOTE 12 - CASH AND CASH EQUIVALENTS

 

The details of cash and cash equivalents as of 30 June 2019 and 31 December 2018 are as follows:

 

 

30 June 2019

31 December 2018

 

 

 

Cash

1,459

818

Banks

7,554

16,367

Credit card receivables

12,529

11,259

 

 

21,542

28,444

 

 

 

 

Maturity term of credit card receivables are 30 days on average (31 December 2018: 30 days).

 

 

NOTE 13 - TRADE RECEIVABLES    AND PAYABLES

 

a)         Short-term trade receivables

 

 

30 June 2019

31 December 2018

 

 

 

Trade receivables

81,366

50,903

Lease receivables

13,640

-

Cheques received

25,503

19,148

Receivables from related parties

20

20

 

 

 

 

120,529

 

 

 

Less: Doubtful trade receivable

(87)

(92)

 

Short-term trade and other receivables, net

120,442

69,979

 

The average collection period for trade receivables is between 30 and 60 days (2018: 30 and 60 days).

 

b)        Long-term trade receivables

 

 

30 June 2019

31 December 2018

 

 

 

Lease receivables

43,220

-

Trade receivables

9,287

10,729

Cheques received

10,724

10,032

 

 

 

 

63,231

20,761

 

 

c)         Short-term trade and other payables

 

 

30 June 2019

31 December 2018

 

 

 

Payables to suppliers

82,592

70,635

Other payables

2,514

3,513

 

 

 

 

85,106

74,148

 

The weighted average term of trade payables is less than three months. Short-term payables with no stated interest are measured at original invoice amount unless the effect of imputing interest is significant

 

 

NOTE 14 - TRANSACTIONS WITH RELATED PARTIES

 

Key management compensation

 

 

30 June 2019

30 June 2018

 

 

 

Short-term employee benefits

9,780

8,111

Share-based incentives (Note 21)

841

1,068

 

 

 

 

10,621

9,179

 

There are no loans, advance payments or guarantees given to key management.

 

 

NOTE 15 - INVENTORIES

 

 

30 June 2019

31 December 2018

 

 

 

Raw materials

77,624

75,248

Other inventory

3,500

2,371

 

 

 

 

81,124

77,619

 

 

 

NOTE 16 - OTHER ASSETS AND LIABILITIES

 

Other current assets

 

 

 

30 June 2019

31 December 2018

 

 

 

Advance payments

22,506

9,687

Deposits for loan guarantees (*)

19,278

24,195

Prepaid rent expenses

3,427

3,912

Prepaid taxes and VAT receivable

3,374

3,177

Prepaid consultancy expenses

2,614

-

Prepaid insurance expenses

1,493

945

Prepaid marketing expenses

1,236

2,018

Contract assets related to

 

 

    franchising contracts (**)

257

438

Other

5,168

1,212

 

 

 

 

59,353

45,584

 

(*)        In July 2018, the Group refinanced its Euro denominated loans in Russia with a Rouble denominated loan. The RUB 2.2 billion facility has a 76-month term with a 12-month grace period and carries an interest rate of 9.7%. The loan carries a 31,643 TRY (RUB 420 million) cash deposit condition that was made as collateral by the Russian operating company. Annual interest rate is 6%. The principal of 31,643 TRY is repayable in accordance with the schedule specified in the agreement.

 

(**)     The Group incurs certain costs with DP International related to set up of each franchise contract and IT systems used for recording of franchise revenue.

 

Other non-current assets

 

 

 

30 June 2019

31 December 2018

 

 

 

Deposits for loan guarantees (*)

21,146

8,342

Deposits given

8,810

5,909

Prepaid marketing expenses  

8,175

7,173

Contract assets related to

 

 

   franchising contracts (**)

2,367

3,936

Other

-

29

 

 

 

Total

40,498

25,389

 

(*)        In July 2018, the Group refinanced its Euro denominated loans in Russia with a Rouble denominated loan. The RUB 2.2 billion facility has a 76-month term with a 12-month grace period and carries an interest rate of 9.7%. The loan carries a 31,643 TRY (RUB 420 million) cash deposit condition that was made as collateral by the Russian operating company. Annual interest rate is 6%. The principal of 31,643 TRY is repayable in accordance with the schedule specified in the agreement.

 

(**)     The Group incurs certain costs with DP International related to set up of each franchise contract and IT systems used for recording of franchise revenue.

 

 

 

 

Other current liabilities

 

 

 

30 June 2019

31 December 2018

 

 

 

Unused vacation liabilities

8,015

6,404

Contract liabilities from

 

 

   franchising contracts (*)  

8,022

5,727

Taxes and funds payable

6,373

6,047

Social security premiums payable

6,223

3,588

Payable to personnel

5,885

6,970

Advances received from franchisees

4,816

2,243

Volume rebate advances

1,388

942

Other expense accruals

6,406

2,791

 

 

 

Total

47,128

34,712

 

(*)        The Group incurs certain revenue with set up of each franchise contract and these franchise fee revenues are deferred over the period of the franchise agreement.

 

Other non-current liabilities

 

 

 

30 June 2019

31 December 2018

 

 

 

Contract liabilities from

29,102

27,599

   franchising contracts (*)

Long term provisions for employee benefits

1,885

1,665

Other

1,790

774

 

 

 

Total  

32,777

30,038

 

(*)        The Group incurs certain revenue with set up of each franchise contract and these franchise fee revenues are deferred over the period of the franchise agreement.

 

 

NOTE 17 - FINANCIAL LIABILITIES

 

30 June 2019

31 December 2018

 

 

 

Short term bank borrowings

94,000

24,820

 

 

 

Short-term financial liabilities

94,000

24,820

 

 

 

Lease liabilities

51,067

7,789

Short-term portions of long-term borrowings

5,388

11,721

 

 

 

Current portion of long-term financial liabilities

56,455

19,510

 

 

 

Short term financial liabilities

150,455

44,330

 

 

 

Long-term lease liabilities

193,868

9,676

Long-term bank borrowings

187,008

161,600

 

 

 

Long-term financial liabilities

380,876

171,276

 

 

 

Total financial liabilities

531,331

215,606

 

30 June 2019

 

Currency

Maturity

Interest rate (%)

Short-term

Long-term

 

 

 

 

 

RUB borrowings

2024

9.7

5,388

187,008

TRY borrowings

Revolving

23.00-26.75

94,000

-

 

 

 

 

 

 

 

 

99,388

187,008

 

31 December 2018

 

Currency

Maturity

Interest rate (%)

Short-term

Long-term

 

 

 

 

 

RUB borrowings

2024

9.7

11,721

161,600

TRY borrowings

Revolving

24.71

24,820

-

 

 

 

 

 

 

 

 

36,541

161,600

 

The loan agreement between Sberbank Moscow and Domino's Russia is subject to covenant clauses whereby Group, Turkish and Russian Divisions are required to meet certain ratios.

 

 

 

Throughout the period the Group, Domino's Russia and Domino`s Turkey have met covenant clauses of Sberbank Moscow.

 

Details of the short- and long-term financial lease liabilities according to is as follows;

 

Currency

Maturity

Interest rate (%)

Short-term

Long-term

 

 

 

 

 

RUB financial lease liabilities

2019-2029

9.7

38,955

111,022

TRY financial lease liabilities

2019-2029

21.50-24.50

12,112

82,846

 

 

 

 

 

 

 

 

51,067

193,868

 

The redemption schedule of the borrowings as of 30 June 2019 and 31 December 2018 is as follows:

 

 

30 June 2019

31 December 2018

 

 

 

To be paid in 1 year

99,388

36,541

To be paid between 1-2 years

45,138

19,044

To be paid between 2-3 years

42,525

25,404

To be paid between 3 years and more

99,344

117,152

 

 

 

 

286,395

198,141

 

The details of the finance lease liabilities as of 31 December 2018 and 2017 are as follows:

 

 

30 June 2019

31 December 2018

 

 

 

Total financial lease payments

299,589

25,209

Interest to be paid in upcoming years

(54,654)

(7,744)

 

 

 

 

244,935

17,465

 

 

 

Financial lease liabilities to be paid in 1 year

51,067

7,789

Financial lease liabilities to be paid between 1-2 years

54,234

6,128

Financial lease liabilities to be paid between 2-3 years

65,324

3,548

Financial lease liabilities to be paid between 3 years and more

74,310

-

 

 

 

 

244,935

17,465

 

 

 

NOTE 18 - COMMITMENTS, CONTINGENT ASSETS AND LIABILITIES

 

a)         Guarantees given to third parties as of 30 June 2019 and December 2018 are as follows;

 

 

30 June 2019

31 December 2018

 

 

 

Guarantee letters given

4,327

3,671

 

 

 

 

4,327

3,671

 

b)         Guarantees received for trade receivables are as follows:

 

 

30 June 2019

31 December 2018

 

 

 

Guarantee notes received

36,164

34,008

Guarantee letters received

33,290

23,295

 

 

 

 

69,454

57,303

 

c)         Tax contingencies

 

Russian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be challenged by tax authorities. The Russian tax administration is gradually strengthening, including the fact that there is a higher risk of review of tax transactions without a clear business purpose or with tax incompliant counterparties.

 

The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development (OECD) but has specific characteristics. This legislation provides the possibility for tax authorities to make transfer pricing adjustments and impose additional tax liabilities in respect of controlled transactions (transactions with related parties and some types of transactions with unrelated parties), provided that the transaction price is not arm's length.

 

Tax liabilities arising from transactions between companies within the Group are determined using actual transaction prices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that such transfer prices could be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.

 

The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on the assumption that these companies are not subject to Russian profits tax, because they do not have a permanent establishment in Russia. This interpretation of relevant legislation may be challenged but the impact of any such challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the overall operations of the Group.

 

 

As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible risk that an outflow of resources will be required should such tax positions and interpretations be challenged by the tax authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the financial position and/or the overall operations of the Group.

 

Domino's Russia is in the process of undergoing a tax audit for 2015-2017. No reasonable estimate of the impact can be made yet as the outcome is currently uncertain.

 

Management will vigorously defend the Group's positions and interpretations that were applied in determining taxes recognised in these consolidated financial statements if these are challenged by the authorities.

 

 

NOTE 19 - EQUITY

 

The shareholders and the shareholding structure of the Group at 30 June 2019 and 31 December 2018 are as follows:

 

 

 

30 June 2019

31 December 2018

 

 

Share (%)

Amount

Share (%)

Amount

Fides Food Systems Coöperatief U.A.

 

32.8

11,928

42.8

15,562

Public shares

 

62.1

22,591

52.1

18,944

Vision Lovemark Coöperatief U.A.

 

4.9

1,777

4.9

1,774

Other

 

0.2

57

0.2

73

 

 

 

36,353

 

36,353

 

As of 30 June 2019, the Group's 145,372,414 shares are issued and fully paid for.

 

The nominal value of each share is EUR0.12 (2018: EUR0.12). There is no preference stock.

 

As of 30 June 2019, the Group's 145,372,414 (30 June 2018: 145,372,414) shares are issued and fully paid for.

 

On 3 July 2017, just prior to Admission, the Company issued (i) 13,046,726 ordinary shares, with a nominal value of EUR 0.12 each, in the capital of the Company to Vision Lovemark Coöperatief U.A. and (ii) 138,037,219 ordinary shares, with a nominal value of EUR 0.12 each, in the capital of the Company to Fides Food Systems Coöperatief U.A., which was paid up by debiting the Company's share premium reserve by TRY 31,239. Also, on 3 July 2017, as part of its IPO, the Company issued 10,372,414 new ordinary shares with a nominal value of EUR 0.12 each. As a result, the Company's issued and outstanding share capital, increased to TRY 36,353 (divided into 145,372,414 ordinary shares). After IPO 52,1% of the shares become public. The net proceeds received by the Company from the IPO is TRY 94,132              (TRY 9,075 per share). DP Eurasia's authorized share capital is EUR 60,000,000.

 

 

Share premium

 

Share premium represents differences resulting from the incorporation of Fides Food by Fides Food Systems Coöperatief U.A. at a price exceeding the face value of those shares and differences between the face value and the fair value of shares issued at the IPO.

 

Ultimate controlling party

 

The ultimate controlling party of the Company is Turkish Private Equity Fund II L.P. There is no individual ultimately controlling the Group.

 

 

NOTE 20 - INCOME TAX

 

The Group is subject to taxation in accordance with the tax regulations and the legislation effective in the countries in which the Group companies operate. Therefore, provision for taxes, as reflected in the condensed consolidated financial information, has been calculated on a separate-entity basis. The tax rate used for the period to 30 June 2019 is 25% (31 December 2018: 25%).

 

The breakdown of cumulative temporary differences and the resulting deferred income tax assets/liabilities at 30 June 2019 and 31 December 2018 using statutory tax rates are as follows:

 

 

30 June 2019

31 December 2018

 

 

Deferred tax

 

Deferred tax

 

Temporary

assets/

Temporary

assets/

 

differences

(liabilities)

differences

(liabilities)

 

 

 

 

 

Carry forward tax losses (*)

45,885

9,177

38,001

7,600

Property, equipment and intangible assets

(34,377)

(7,635)

(39,727)

(7,861)

Deferred revenue

28,942

6,220

28,943

6,367

Expense accruals

13,965

2,793

9,515

2,093

Unused vacation liabilities

3,288

723

2,663

586

Provision for employee termination benefit

1,885

415

1,665

366

Financial leases (IFRS 16)

9,554

1,970

-

-

Other

5,067

1,064

12,204

2,471

 

 

 

 

 

Deferred income tax assets, net

 

14,727

 

11,622

 

(*)        Based on the change in the tax code in the Russian Federation after 31 December 2015, previously applied limitation on carry forward tax losses for a 10-year period has been abolished and any losses incurred since 2007 will be carried forward until fully recognised.

 

 

 

NOTE 21 - SHARE BASED PAYMENTS

 

The Phantom Option Scheme

 

The Phantom Option Scheme was put in place to incentivise senior members of management. The incentive plan entitles the employees to a cash payment at the date of an exit by shareholders. The amount payable will be determined based on the difference between the equity value of the entities at the time of exit and their grant dates. Granted options will only vest if certain conditions are met, including continued employment with the Group, and if there is an event of 100% exit by Fides Food Systems Coöperatief UA. and Vision Lovemark Coöperatief UA. However, shareholders have the right to exercise these plans even if they do not exit 100% of their stake and may determine the amount payable to employee's pro rata their exited shareholding.

 

Based on this scheme, the difference between the grant equity value and the exit value of the entities have been allocated for Pizza Restaurantları A.Ş. and Pizza Restaurants LLC separately and multiplied by the respective option amount of each individual.

 

Options are granted under the plan for no consideration and carry no dividend or voting rights.

 

When exercised, the whole pay-out will be made by the ultimate shareholders of the Group in cash and any taxes, fees or any other costs related to the incentive will be borne by employees within the incentive plan. As a result, the phantom options are accounted for as equity-settled share-based payment awards.

 

The Company uses the Black-Scholes option valuation model to calculate the fair value of the Phantom Option at the date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. The fair value at grant date is determined using an adjusted form of the Black Scholes Model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free interest rate for the term of the option. The expected price volatility is based on the historic volatility of the peer group companies. The fair value of the options is then recognized over the vesting period of the options granted.

 

The fair value of the options granted in 2010, 2012 and 2015 have been estimated using the Black Scholes option pricing model based on the following weighted-average assumptions:

 

Expected average option term in years: 8.8 years

Expected volatility: 42.6%

Expected dividend yield: 0%

Risk-free interest rate: 2.6%

 

In relation with the IPO, the shareholders used their right to partly settle the options outstanding under these plans, and 48.6% of the outstanding phantom options were settled in August 2017. As a result, this portion of the outstanding share-based incentives is fully expensed as at 31 December 2017. Subsequently, in relation with the stake sale by Fides Food Systems Coöperatief UA in February 2019, Fides Food Systems Coöperatief UA. used its right to partly settle the options outstanding pro-rata their stake sold and additional 10.8% of the outstanding phantom options were settled in the first half of 2019. The unrecognised portion of the total grant date fair value for the remaining 40.6% of the options amounts to TRY 114 and will be expensed over the remainder of the estimated vesting period.

 

 

 

Russian CEO Share Incentive Scheme

 

A share incentive scheme was put in place at the time of the IPO on 3 July 2017. According to the incentive scheme an employee was granted an option to acquire 2,700,000 shares. The price payable per share on exercise of the option is GBP 2.00. The shares under the option will vest in equal instalments on each anniversary of the award, with the final instalment vesting on the fifth anniversary of Admission. The option will only vest if he has not ceased to be an employee of the Group and is not under notice to terminate his employment with the Group. On 4 June 2019 an employee terminated his employment contract. He retained his vested awards for 2018 totalling 540,000 shares, however, the remaining unvested awards were lapsed due to cessation of employment prior to vesting. TRY2,192 corresponding to the unvested part of the accrued share-based incentive has been transferred to retained earnings as of 30 June 2019.

 

New LTIP Scheme

 

New share incentive scheme as put in place on 7 May 2018. According to the incentive scheme employees was granted an option to acquire shares, based on performance targets of the Group for the upcoming three years, and continuing employment till the vesting time. The shares under the option will vest at the end of scheme period.

 

The weighted-average fair value of the options granted under the LTIP Scheme in 2018 amounted to TRY 349 per option, which has been estimated using the Black-Scholes option pricing model based on the following weighted-average assumptions. Abovementioned share options are still outstanding.

 

Share price on the grant date: GBP 1.85;

Expected average option term in years: three years;

Expected volatility: 36.6%;

Expected dividend yield: 0%; and

Risk-free interest rate: 0.9%.

 

The expected volatility for each of the vesting installments has been determined based on the annualized volatility of historical data for a group of relevant comparator companies, measured over the expected life of the installments.

 

Under these two existing plans, amounting to TRY841 has been charged for 30 June 2019, whereas TRY2,514 for 2018 and the cumulative charge is TRY19,346 as at 31 December 2018
(31 December 2018: TRY20,697).

 

 

 

 

 

 

 

Review report

To: the board of directors of DP Eurasia N.V.

 

Introduction

We have reviewed the accompanying condensed consolidated interim financial statements for the six-months period ended 30 June 2019 of DP Eurasia N.V., Amsterdam, which comprises the condensed consolidated statement of financial position as at 30 June 2019, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows for the period then ended and the selected explanatory notes. The board of directors is responsible for the preparation and presentation of the (condensed) consolidated interim financial statements in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. Our responsibility is to express a conclusion on the interim financial statements based on our review.

Scope

We conducted our review in accordance with Dutch law including standard 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the entity'. A review of interim financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying (condensed) consolidated interim financial statements for the six-month period ended 30 June 2019 are not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the European Union.

Amsterdam, 10 September 2019

PricewaterhouseCoopers Accountants N.V.

Original has been signed by R.P.R. Jagbandhan RA

 

 


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