Shares in Domino’s Pizza franchisor DP Eurasia (DPEU:AIM) rose 7% to 34.7p after delivering a big jump in revenue and like-for-like growth.
In its results for the year to 31 December 2019, the company reported a 14.4% rise in revenue to 980m Turkish lira (£125m), and like-for-like growth of 10.7%.
INCREASING ONLINE PENETRATION
Overall online delivery penetration continued to increase at a similar clip to 2018, (+9%) to reach almost 70% of group system sales.
Turkish system sales (62% of the business) increased by 15% and online now represents 64% of sales.
Russian system sales increased by 35% (17.5% based in rubles) which took online penetration to 82% of delivered sales.
According to broker Liberum, both markets still have huge room for growth when compared to more developed markets such as the UK and Australia where online penetration is over 80%.
The company opened 41 sites over the year to take the total estate to 765 with 15 new stores in Turkey (550 in total) and 24 new stores in Russia, taking its estate to 203. Two sites were added in Azerbaijan.
Management believe that there is potential to almost double the estate in Turkey to around 900 stores while in Russia the goal is to operate around 1,500 sites, representing a seven-fold increase on the current footprint.
Turkish revenues grew by 15.4% to 559.3m lira, while Russian revenues grew by 13.1% to reach 420.9m lira.
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were 12.6% higher at 124.5m lira, representing a reduced margin on system sales of 9.1% compared with 9.8% last year.
Russia’s margins fell to 4.9% from 6.4% and Turkey’s fell from 12.8% to 12.5%.
The group’s adjusted net debt (gross debts minus cash) increased to 226.5m lira (154.6m lira) giving a leverage ratio, defined as net debt to EBITDA of 1.8 times compared with 1.4 for 2018.
Debts increased because of higher service charges on the Turkish debt and higher capital expenditure to acquire the regional franchisees in Russia.
There were additional costs incurred due to the appreciation of the ruble against the lira.
While management is comfortable with its medium-term guidance, given the current uncertainties around the impact and duration of the coronavirus, the board said it is not in a position to provide any financial guidance for the current year.
So far in 2020 the pandemic has had a relatively small impact on the business, limited to a reduction in the dine-in trade in Turkish restaurants with no impact on take-away and delivery which is operating as normal.