Shares in Domino’s Pizza franchise company DP Eurasia (DPEU:AIM) gained 6.5% to 85.4p after reporting exceptional first half revenue growth of 50.3% and upgrading full year profit expectations.
While weak prior year comparatives were helpful the company said it benefitted from ‘unprecedented demand’ in Turkey (representing 75% of revenues) with system sales up 72% year-on-year driven by online growth of 106.7%.
Good cost control and operating leverage resulted in first half adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) growth of 130%.
INCREASED GUIDANCE
The strong showing prompted management to upgrade full year EBITDA guidance to be ‘slightly’ ahead of current market expectations, which are pegged at £200 million according to Refinitiv data.
In addition, the company increased guidance for like-for-like system sales growth in Turkey to be between 35%-and-40%, up from 21%-to-25% previously.
Turkish like-for-like system sales grew 65% in the first half while Russia saw 18% growth, under new management. Guidance for full year like-for-like Russian system sales growth remained at between 12%-to-15%.
Turkish EBITDA increased by 82% year-on-year to TRY 91.9 million while Russia got back into the black with TRY 12.9 million compared with a TRY 3 million loss a year earlier.
Management told Shares that it expected the pandemic related shift to the online channel to be a permanent feature of its business going forward which was a positive because online customers were more loyal.
The company put its success down to investment in digital infrastructure and digital branding, as well as developing strong franchisee economics aimed at driving new store expansion.
BROKER UPGRADE
On the back of today’s report Liberum increased its EBITDA forecasts for 2021 and 2022 by 7% and 6% respectively, adding: ‘ liquidity is strong, the group has a very strong leadership team, we see a period of positive news that should drive continued share price momentum.’
