Domino's franchisee, DP Eurasia (DPEU), releases a strong trading update for the six months ended 30 June, with total sales up 26.4% to 645m Turkish Lira, (TRY), nudging its shares up 0.7% to 88p.

Standout performances from Russia, where sales rose 63% and Azerbaijan and Georgia, up 64% from a small base, were the main drivers of growth, although Turkey was no slouch and saw a 10% growth rate.

Despite tough comparisons from the World Cup last year, the company achieved 7.7% like-for-like growth in Turkey and 4.7% in Russia. The return to mid-single digit growth in Turkey represents a significant improvement from the 2.5% growth in the first two months of 2019, implying double-digit growth in the last three months.

However the growth in Russia slowed from a 7.7% rate in the first two months of the year, impacted by investment in digital channels and the introduction of a simplified menu, in response to increased competition in Moscow. The company is expected to appoint a new chief executive for the Russian business by year end.

The shift to online sales channels continues apace and now represents 67.5% of total sales compared with 59.3% last year.

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Aslan Saranga, chief executive says: 'We are pleased with our performance for the first half of 2019 amidst challenging trading conditions.

'Following pro-active steps at the start of the year, we have been able to put the slow start in Turkey behind us, posting 7.7% like-for-like growth in the period.  Our 4.7% like-for-like growth in Russia reflects the strong comparatives due to the 2018 FIFA World Cup.

‘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’.

Broker Liberum sees a ‘huge growth opportunity’ and reckons there is scope for 1,500 stores in Russia compared with 187 today and a further 50% of new stores in Turkey, taking the footprint there from 538 to 900 in the medium term.

The broker expects DP Eurasia to achieve a three-year annualized growth rate (CAGR) in revenues of 20%, and pre-tax profit CAGR of 79%, which if achieved, would put the shares on a rating of 10.8 times 2021 earnings per share.

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Issue Date: 15 Jul 2019