Domino’s pizza franchisee DP Eurasia (DPEU:AIM) saw earnings smashed as the company’s high fixed costs hurt profitability during the Covid lockdown, despite the firm's relatively small fall in sales. The largely Turkey and Russia-based operator reported a 5.4% fall in interim revenues to 30 June of 437.7 million Turkish lira.

But this led to a 74% drop in earnings before interest, tax, depreciation and amortisation (EBITDA) to 12.1 million lira. Gross cost of sales actually rose modestly to 309.3 million lira, largely because of increased marketing spend.

The shares dipped 0.3% to 36.4p.


Turkey delivered like-for-like system sales growth of 13.5% driven by online which grew 39% compared with 24% last half-year. During July and August online was 27.5% higher year-on-year as aide by price/mix and volumes. Turkey represents two-thirds of total system sales.

Despite the growth being virtually all online, dine-in and takeaways are almost back to prior year levels following 26 days of curfew in Ankara, Izmir and Istanbul. Online sales have now surpassed 70%, up from 62% in 2019. Eight stores were closed due to Covid-19.

The growth was driven by the aggregators’ platforms where the company began advertising last year in return for a lower commission.

Adjusted EBITDA declined 5% to 39.1 million lira as margins were impacted by Covid-19 related costs of 5.8 million lira.


System sales in Russia were impacted by a more stringent lockdown with 72 days of lockdown in Moscow, where around 80% of stores are located, resulting in a 20% fall in like-for-like sales.

The Russian market has also been impacted again by aggressive marketing and promotion by aggregators and other fast food providers.

After June system sales were flat year-on-year but a 75% drop in dine-in and delivery sales significantly hit profitability with EBITDA losses of 22.3 million lira compared with 8.6 million lira of profit in 2019. Four sites were closed taking the total Russian estate to 199 stores.


Net debt was 237.3 million lira at the end of June, up 4,8% over the prior year, representing 2.6-times EBITDA, up from 1.9 times, due to weaker profitability.

The company has extended the duration of its lira borrowing in Turkey while a waiver on its Russian debt has been extended to the end of December. Covenants are expected to be reset based on a business plan presented to the banks by the end of September 2020.

Given the uncertainty around Covid-19 the firm hasn’t provided any guidance for full-year performance. Broker Liberum commented, ‘we assume the pace of store openings to remain slow in the second half of 2020 with only 10 store openings each in Russia and Turkey during the period, but assume a return to more normal patterns next year with 30 stores openings in Turkey and 45 in Russia’.


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Issue Date: 08 Sep 2020