REG - DP Poland PLC - Final Results
31/05/2024 07:00
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RNS Number : 5373Q DP Poland PLC 31 May 2024
DP Poland plc
("DP Poland", the "Group" or the "Company")
Final Results 2023, Trading Update and Investor Presentation
DP Poland, the operator of pizza stores and restaurants across Poland and
Croatia, announces its audited results for the year ended 31 December 2023.
DP Poland's Chief Executive Officer, Nils Gornall, said:
"In 2023, we upheld our High Volume Mentality strategy, driving a 20.7% growth
in delivery sales and enhancing efficiency. Our focus on innovation and swift
service reduced delivery times by 4% and boosted weekly orders to 731 on
average.
We launched new products like 'everyday pizza' and KitKat Calzone and raised
our Net Promoter Score by 30.1%. We also revamped training programs and
incentives, achieving double-digit sales growth and a 25.3% increase in group
like-for-like system sales. Our digital platform thrived, with 89% of delivery
orders placed online.
Looking to 2024, our strong growth has continued, with LFL sales up 19.9% year
to end of April. Supported by our recent fundraise, we aim to open 45-50 new
stores, upgrade 25-30 stores, and transition to a franchise model. I'm excited
about our future and our team's potential to continue delivering."
Financial highlights
· Group Revenue increased by 25.0% to £44.6m (2022: £35.7m)
o Strong LFL system sales growth of 19.7% in 2023 compared to 2022 in Poland
o Growth of non-delivery and delivery LFL System Sales of 17.8% and 20.7%,
respectively, compared to prior year
· Group System Sales were up 25.1% to £46.1m (2022: £36.8m)
· Group EBITDA increased from £1.7m to £3.5m
· Group loss for the period was £(3.5)m vs. £(4.3)m in 2022
Operational highlights
· LFL system order count increased by 16.4% in 2023 compared to 2022
· The Group operated 116 stores at the end of 2023, including 111
Domino's Pizza stores across Poland and 5 across Croatia
· 2023 inflation rates are 11.4% for Poland and 8.4% for Croatia,
driven mainly by energy prices, food and labour costs
· 89 of delivery sales were ordered online (2022: 87%)
Summary Financial Information
Currency: £000 2023 2022 % change
System Sales 46,056 36,818 25.1%
Revenue 44,623 35,694 25.0%
EBITDA* 3,529 1,693 108.4%
Margin % 7.9% 4.7%
Loss for the period (3,542) (4,360) 18,8%
*excluding non-cash items, non-recurring items and store pre-opening expenses
YTD 2024 April Trading Update
· Positive performance in Poland with LFL System Sales growth and LFL
Order Count growth of 19.9% YoY and 17.0% respectively
· LFL System Sales growth of 9.9% YoY in Croatia
· Group EBITDA in line with expectations
· Deployment of proceeds of fundraise:
o 35 new stores in Poland and 2 in Croatia currently in review, of which 7
rent contracts have already been signed and 5 locations earmarked for 2025
o 6 store refurbishments already planned before the year end
o Investment into commissary capacity, with the installation of siloes in
Lodz commissary to be finalized by the end of July 2024
o Rolling-out of automated aggregators' order placing
Investor Presentation
The Company is pleased to announce that Nils Gornall and Edward Kacyrz will
provide a live presentation relating to the 2023 FY results via Investor Meet
Company on 03 June 2024, 15:30 BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
02 June 2024, 09:00 BST, or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet DP
Poland via:
https://www.investormeetcompany.com/dp-poland-plc/register-investor
(https://www.investormeetcompany.com/dp-poland-plc/register-investor)
Investors who already follow DP POLAND PLC on the Investor Meet Company
platform will automatically be invited.
Enquiries:
DP Poland plc
Nils Gornall, CEO
Tel: +44 (0) 20 3393 6954
Email: ir@dppoland.com
Singer Capital Markets (Nominated Adviser and Broker)
Shaun Dobson
Tel: +44 (0) 20 7496 3000
Notes for editors
About DP Poland plc
DP Poland, has the exclusive right to develop, operate and sub-franchise
Domino's Pizza stores in Poland and Croatia. The group operates over 115
stores and restaurants throughout cities and towns in Poland and Croatia.
Chairman's Statement
I am very proud of the positive progress made by Domino's Pizza Poland over
the past year. The year has been categorised by strong sales growth, full
integration of Dominium and Domino's Croatia, settling down of a new
Management Structure, Strengthening of the Board and continued improvement in
Technology. The business changes which have been made are consistent with a
High Volume Mentality offering customers quality food, efficiently delivered
at good value pricing and thereby enhancing Store Economics.
There has been a highly successful Fundraise at the start of 2024 which is a
clear indication of support for both the plan and execution capability by the
team as well as the confidence felt by investors in the opportunity ahead.
Our Board has seen change during 2023 with a focus on Domino's experience in
recruitment starting with my appointment as Chairman at the start of the year.
I would like to thank Peter Furlong and Andrew Rennie for their contributions
and welcome Stoffel Thijs who joined as a Director at the start of 2024. We
aim to strengthen the Independent Directorate during the year and begin to
address the gender balance.
At the end of 2023, we operated 111 stores in Poland and 5 in Croatia. Over
the past year, the Store Optimization Plan led to the opening of 4 new stores,
closure of 4 and major re-models/up-grades in 4 stores. We see room for many
more stores and will deploy the new financial resources to complete the
up-grades and initiate an organic Opening Programme. We shall consider M&A
opportunities on their merits as they arise.
The improved store economics enable us to move to a Sub Franchise model and we
shall develop appropriate head office resource to support this transition.
This will accelerate growth and ultimately improve returns.
In summary, we have built a very solid foundation to take advantage of the
exciting opportunities that lie ahead and have a clear plan and strong team to
exploit them. These are exciting times for DPP.
I would like to end by paying tribute to our outstanding Executive Team, led
by Nils Gornall, our CEO. The Board appreciate their commitment and hard work
which has been essential to delivering strong results. We also thank each
employee who plays a significant part in satisfying our loyal Customers.
David Wild
Non-Executive Chairman
30 May 2024
Chief Executive's Review
In 2023, we continued our commitment to the High Volume Mentality strategy,
emphasising swift service and exceptional product quality at good value, to
significantly boost our order volumes and operational efficiency. This
strategy, now in its second year, has enabled us to achieve a remarkable 20.7%
growth in delivery sales, which represents two thirds of our Polish Like for
Like (LFL) System Sales.
Our focus on enhancing delivery services saw average delivery times cut by 4%,
bringing us closer to our ambitious 20-minute target. Reduced delivery times
not only boosts customer satisfaction but also drives our profitability
upwards. Impressively, our stores are now regularly exceeding 800 orders per
store weekly, averaging 731 in 2023 (a 19% increase compared to 2022).
Innovation has been at the forefront of our operations. Over the last year, we
introduced a range of new products, including the 'everyday pizza' and Polish
Heroes, alongside unique offerings like sweet rolls desserts and the Kitkat
Calzone in collaboration with Nestle. These initiatives have significantly
enhanced customer engagement, as reflected by a 30.1% increase in our Net
Promoter Score, solidifying the strength of the Domino's brand.
Investment in our people remains a priority. We overhauled our training
programs and introduced new incentive schemes for store managers, aligning
with key performance indicators to uplift service standards further. The
results have been hugely positive, contributing to double-digit growth in both
delivery and non-delivery sales, with a like-for-like group system sales
increase of 25.3% compared to 2022.
Our commitment to cost control and efficiency continued through strategic IT
enhancements, with a focus on cash and labour management. Looking ahead to
2024, we are excited to expand our digital transformation efforts, including
the development of self-service kiosks, enhancements to our app, and the
integration of communication bots with service providers.
The store network optimisation plan has been another cornerstone of our
strategy. This past year, we completed significant refurbishments at four
locations, opened four new stores, and closed four underperforming ones,
refining our store footprint to 116 outlets. These changes have not only
enhanced our brand image and customer traffic but also fortified our store
profitability and set a strong foundation for future expansion.
Our digital platform has seen substantial growth, with 89% of our delivery
orders now placed online, thanks in large part to advancements in our mobile
app. This tool has become a critical component of our digital strategy, with
app-generated orders quadrupling over the year to 31.9% of total digital
orders. As we continue to enhance our digital offerings, we anticipate further
growth in online engagements and sales.
The outlook for 2024 is exceedingly positive, supported by easing inflationary
pressures and a supportive economic environment following recent political
developments. We are committed to continuing our growth trajectory, focusing
on delivering exceptional value to our customers and expanding our market
presence.
In conclusion, the transformations implemented across our operations have not
only strengthened our market position but have also set the stage for
sustained growth and profitability. Our strategy for the next 24-30 months
includes an aggressive store expansion plan and transitioning towards a
franchisee model, ensuring that Domino's remains a leader in the quick-service
restaurant sector in Poland and Croatia. The Group is preparing to open c.
45-50 stores and upgrade c.25-30 stores from our current network.
The Group has made a considerable progress on deployment of the proceeds from
Fundraise at the start of 2024, i.e., twelve locations are already nominated
for opening in 2024, from which four rent contracts for new stores has been
signed and three rent contracts are in the process of signing. Also, the Group
has nominated five locations for full refurbishments and has started a set of
investments into commissary to double the capacity by the end of 2024.
I am enthusiastic about our future and confident in our team's ability to
capitalise on the opportunities ahead.
Nils Gornall
Chief Executive Officer
30 May 2024
Chief Financial Officer's Review
Overview
I am pleased to report a record financial year for our Group in 2023, marked
by the effective implementation of our High Volume Mentality strategy and
significant strides in cost optimisation and network revision. This strategy
led to a robust double-digit sales increase across both delivery and
non-delivery segments, driven by a substantial rise in order counts.
We saw inflationary pressures ease from March 2023, which bolstered our
profitability as input costs fell, particularly from Q2 onwards. The
Like-for-Like (LFL) Group System Sales saw a remarkable increase of 25.3% over
2022 and 50.8% over 2021, amounting to £46.1 million. This growth was driven
by a 15.4% increase in LFL Group order counts over the previous year. Notably,
Poland was a significant growth driver, where we achieved a 19.7% increase in
system sales.
In Croatia, the expansion was also impressive, with System Sales surging by
44.2% due to the opening of two new stores, alongside a 3.2% growth in LFL
System Sales.
By year-end, our portfolio included 116 stores (108 corporate and 8 franchised
stores), with a dominant delivery business contributing two thirds of sales
and 89% of delivery orders were placed online. Our existing footprint
positions us strongly for sustained growth in both corporate-owned and
franchised stores into 2024 and beyond.
Financial Performance*
2023 2022
£ £
System sales** 46,056,212 36,817,825
Revenue 44,622,983 35,694,098
Cost of goods sold (13,431,506) (11,396,902)
Materials and energy (2,580,342) (1,932,568)
External services (7,776,912) (7,473,059)
Payroll and social charges (17,086,986) (12,893,338)
Other operating costs (218,327) (304,774)
Group adjusted EBITDA***- excluding non-cash items, non-recurring items and 3,528,910 1,693,457
store pre-opening expenses
Store pre-opening expenses (64,018) (37,584)
Other non-cash and non-recurring items (1,439,723) (500,971)
Depreciation and amortisation (4,732,001) (4,336,210)
Share based payments (323,602) (137,748)
Foreign exchange gains / (losses) 448,522 17,406
Finance income 205,683 257,984
Finance costs (1,122,883) (1,258,850)
Loss before taxation (3,499,112) (4,302,516)
Taxation (43,155) (57,429)
Loss for the period (3,542,267) (4,359,945)
* Average exchange rates for 2023 and 2022
** System Sales - total retail sales including sales from corporate and
sub-franchised stores
*** Group adjusted EBITDA - earnings before interest, taxes, depreciation and
amortization excluding non-cash items, non-recurring items and store
pre-opening expenses
Revenue and System sales
The Group's System sales saw a robust increase of 25.1%, primarily driven by a
21.4% growth in Polish system sales (15.4% in local currency). Group revenue
rose by 25.0% year-over-year, with Like-for-Like (LFL) growth reaching 25.3%,
largely due to a significant 19.0% increase in the average weekly order count
in Poland. This improvement was largely driven by the implementation of the
High Volume Mentality strategy, the introduction of new products, enhanced
ingredient quality, and quicker delivery times, all contributing to higher
customer satisfaction and repeat business.
Performance in 2023 showed consistent quarter-over-quarter improvement,
culminating in the highest growth during Q4, as detailed in the Key
Performance Indicators section later in this report.
Expenses
Despite Poland facing one of Europe's highest inflation rates in 2023, our
Group successfully managed to keep the increase in cost of goods sold (17.9%
YoY) below our revenue growth (25.0% YoY). This achievement was facilitated
through various cost optimization projects, including the standardisation of
production processes, enhanced delivery speeds, improved labour management,
and the implementation of a new labour scheduling system. Additionally,
renegotiated vendor contracts and diminishing inflationary pressures helped us
reduce food costs as a percentage of revenue compared to the previous year.
While inflation eased starting March 2023, wage inflation remained high,
leading to a 19.6% minimum wage increase and a consequent 32.5% rise in
payroll and social charges costs YoY.
Other non-cash and non-recurring items
In 2023, the Group recorded non-cash and non-recurring items, notably an
adjustment related to the write-off of right-of-use assets. This adjustment,
totalling £892,171, was primarily due to anticipated store closures in 2024
as part of our network optimization strategy in Poland. Other non-cash and
non-recurring items included adjustments for IFRS 16, a VAT refund, provisions
for dismantling, and various other components.
Depreciation and amortisation
Depreciation and amortisation expenses consist mainly of right of use assets
depreciation charges amounting to £2,412,155 in 2023 (2022: £2,272,151),
leasehold improvements depreciation which amounted to £1,487,837 (2022:
£1,437,807) and intangible assets amortisation which amounted to £832,009 in
2023 (2022: £626,252).
Finance costs
Finance costs of the Group mainly comprise interest expense on lease
liabilities of £611,477 (2022: £665,084) and interest payable on the loan
note issued to Malaccan Holdings Ltd of £460,554 (2022: £333,418).
Taxation
The Group paid no corporation tax in 2023 and 2022 due to brought forward
losses. As the Group has unused tax losses available for offset against future
profits, it does not expect to pay any corporation tax in 2024.
Group loss for the period
Group loss for the period decreased by 18.8% compared to 2022 mainly due to
improved adjusted EBITDA partially offset by increased other non-cash and
non-recuring items and depreciation and amortisation costs.
The Board has devised an accelerated growth strategy focusing on expanding
store rollout and transitioning to a franchise model to drive future profit
growth. The robust performance in 2023, especially the momentum gained in the
latter half, lays a solid foundation for our next growth phase. Our objective
is to scale operations and expand market share, aiming to position ourselves
as a major competitor or market leader in Poland and Croatia within three
years.
To facilitate this, we plan to streamline internal processes in the supply
chain and back office, including the merger of Dominium S.A. and DP Polska
S.A., expected by the end of 2024 (for further details please refer to Note
32), and further investments in digital transformation such as mobile app
enhancements, kiosk launches, and full integration with suppliers.
Currency: £ 2023 2022 Change %
Group loss for the period* (3,542,267) (4,359,945) -18.8%
* Average exchange rates for 2023 and 2022
Store Count Poland
Dominos Polska S.A. & Dominium S.A. 1 Jan 2023 Opened* Closed 31 Dec 2023
Corporate 105 2 4 103
Sub-Franchised 8 0 0 8
Total 113 2 4 111
* The number of opened stores includes the store opened after capital
reconstruction
Store Count Croatia
All About Pizza d.o.o. 1 Jan 2023 Opened Closed 31 Dec 2023
Corporate 3 2 0 5
Sub-Franchised 0 0 0 0
Total 3 2 0 5
Enlarged Group
Store count 1 Jan 2023 Opened Closed 31 Dec 2023
Corporate 108 4 4 108
Sub-Franchised 8 0 0 8
Total 116 4 4 116
In 2023 DP Poland opened 4 corporate stores, 4 stores were closed and 4 stores
were fully refurbished.
Sales Key Performance Indicators (KPIs)
System sales* were up 25.1% YoY, whereas LFL system sales** were up 25.3% YoY.
2023 2022 Change %
Group System Sales*, £'000 46,056 36,817 25.1%
LFL system sales**, % growth 25.3% 21.0% n/a
LFL system order count***, % growth 15.4% 10.0% n/a
Poland Delivery System Sales**** ordered online 89% 87% n/a
* System Sales - total retail sales including sales from corporate
and sub-franchised stores. Sales from sub-franchised stores are not included
in revenue
** Like-for-like System Sales - matching trading periods for the same
stores between 1 January and 31 December 2023 and 1 January and 31 December
2022. The Group's system stores that are included in like-for-like System
Sales comparisons are those that have operated for at least 1 year preceding
the beginning of the first month of the period used in like-for-like
comparisons for a certain reporting period, assuming the relevant system store
has not been subsequently closed
*** System order count - total retail orders from corporate and sub-franchised
stores
**** Delivery System Sales stand for the turnover
generated in delivery channel by both corporate and franchisee stores
Like-for-like Poland System Sales growth 2023 vs 2022 per quarter were as
follows:
Q1 Q2 Q3 Q4
LFL system sales growth by quarter 19.4% 16.8% 14.1% 27.5%
Exchange rates
PLN : £1 2023 2022 Change %
Profit & Loss Account 5.2218 5.4965 -5.0%
Balance Sheet 5.0117 5.2827 -5.1%
EUR : £1 2023 2022 Change %
Profit & Loss Account 1.1500 1.1732 -2.0%
Balance Sheet 1.1539 1.1277 2.3%
Financial Statements for Polish subsidiaries DP Polska S.A. and Dominium S.A.
are denominated in Polish Zloty ("PLN") and translated to Pound Sterling
("GBP"). Financial Statements for Croatian subsidiary All About Pizza d.o.o.
are denominated in EUR ("EUR") and translated to Pound Sterling ("GBP"). Under
UK adopted international accounting standards the Income Statement of
subsidiaries has been converted from PLN and EUR into sterling at the average
annual exchange rate applicable. The balance sheet has been converted from PLN
and EUR to GBP as at the exchange rate at 31 December 2023.
Cash position
Currency: £ 1(st) January 2023 Cash movement 31(st) December 2023
Cash in bank 3,728,177 (1,839,712) 1,888,465
Cash movement is mainly due to cash outflows for a number of different
strategic and operational projects.
Inventories
Currency: £ 1(st) January 2023 Movement 31(st) December 2023
Raw materials and consumables 982,110 52,077 1,034,187
An increase of inventory is mainly due to increased purchases of products in
2023 supporting increased sales.
Trade and other receivables
Currency: £ 1(st) January 2023 Movement 31(st) December 2023
Current trade and other receivables 2,719,050 1,157,382 3,876,432
An increase of trade and other receivables balance is mainly due to VAT
receivables increase of Dominium S.A.
Macro-economic conditions in Poland and Croatia
Polish GDP increased in 2023 by 0.2% YoY. The country has faced further
inflationary pressures in 2023, although less aggressive than in 2022. The
Board is constantly monitoring purchase prices to ensure the Group can react
to any price increases from its suppliers.
Macro-economic conditions - Poland 2023 2022
Real GDP growth (% growth) 0.2* 5.3
Inflation (% growth) 11.4 14.4
Unemployment Rate (% of economically active population) 3.1 2.9
* First estimate of Polish Statistics Office for the year 2023
Croatian GDP increased in 2023 by 2.8%. The country is still facing
inflationary pressures in result of world macroeconomic situation, however,
currency change from HRK to EUR effective 1(st) January 2023 additionally
strengthened inflationary pressure in short-term. For that reason, AAP
established cooperation with the Group's suppliers to reduce pressure on
AAP profitability.
Macro-economic conditions - Croatia* 2023 2022
Real GDP growth (% growth) 2.8 6.3
Inflation (% growth) 8.4 10.7
Unemployment Rate** (% of economically active population) 6.4 7.1
* Data based on macroeconomic indicators published 14(th) March 2024 by
Croatian National Bank
** November 2023 data
Sub-franchised stores
There are 8 sub-franchised stores as at 31(st) December 2023. Sales of
sub-franchised stores for 2023 amounted to £2,793,080 (2022: £2,351,560) and
included in the System sales figure.
Going concern
The Board considered the Group's forecasts, in particular those relating to
the growing sales volume and improved cost management, to satisfy itself
that the Group has sufficient resources to continue in operation for the
foreseeable future. The Group sales and costs forecasts are based on
market-available data with regard to country inflation and GDP growth rates as
well as historical level of sales volumes and incurred costs as a percentage
of sales taking into account implemented High Volume Mentality, accelerated
growth strategy through the store rollout, increased focus on internal
processes optimisation and digital transformation. The Board also considered
the Group's cash flow forecasts and successfully concluded stress-tests for
lower price increase from 7.0% in all channels to 5.6% in delivery, 5.0% in
carry-out and 3.0% in dine-in, and higher discounts in delivery by 2.0%.
Sensitivity analysis has been completed, there is no issue with going concern
based on future forecasts.
Over the first quarters in 2023, the Board of DP Poland has given a
considerable thought as to how the Group might define, quantify and minimise
the risks related to inflationary pressures. As inflationary pressure began to
abate from March 2023, the Board considers that the major risks connected with
inflation are vanishing, which has already been reflected in the decreasing
commodity prices starting from Q2 2023, with the forecast for further price
reductions. On the other hand, the Board has prepared a roadmap for a number
of different strategic and operational projects aiming at optimization of
internal processes in supply chain, change in the Group structure, as well as
further investments into digital transformation.
The Board takes into account the uncertainty related to the future dynamics of
the commodity prices and inflationary pressures, which remain the most
pronounced risks to our going concern assumptions.
In April 2024 the Group has raised gross proceeds of approximately £20.5
million through the subscription by Domino's Pizza Group plc, the placing of
shares through an accelerated bookbuild process and the placing of retail
offer. The net proceeds of the fundraising receivable by the Group will be
mainly used to accelerate its growth strategy through the roll out of stores
in Poland and Croatia, upgrade of stores in Poland, shift to a franchise model
and through possible targeted acquisitions to reach 200 stores within three
years.
The Group has agreed an extension to the maturity date of its loan facilities
provided by Malaccan Holdings Ltd. by six months to 30 June 2025. During the
extension period of 1 January 2025 to 30 June 2025 the Loan Notes will carry
an interest rate of EURIBOR plus 2.5 per cent., compared to EURIBOR plus 1.0
per cent. for 2024. In April 2024 the Group made a partial repayment (£4.0
million) of outstanding Loan Notes from Malaccan Holdings Ltd. from the
proceeds raised as a result of the fundraising.
Having considered the Group's cash flows and its liquidity position, and after
reviewing the forecast for the next twelve months and beyond, taking into
account reasonable possible changes in trading performance, the Directors
believe that the Group has adequate resources to continue operations for the
foreseeable future and for this reason they continue to adopt the going
concern basis in preparing the financial statements.
Edward Kacyrz
Chief Financial Officer
30 May 2024
FINANCIAL STATEMENTS
Group Income Statement
for the year ended 31 December 2023
2023 2022
Restated
Notes £ £
Revenue 2 44,622,983 35,694,098
Cost of goods sold (13,431,506) (11,396,902)
Materials and energy (2,580,342) (1,932,568)
External services (7,776,912) (7,473,059)
Payroll and social charges (17,086,986) (12,893,338)
Other operating costs (218,327) (304,774)
Group adjusted EBITDA* - excluding non-cash items, non-recurring items and 3,528,910 1,693,457
store pre-opening expenses
Store pre-opening expenses (64,018) (37,584)
Other non-cash and non-recurring items 5 (1,439,723) (500,971)
Depreciation and amortisation (4,732,001) (4,336,210)
Share based payments 29 (323,602) (137,748)
Foreign exchange gains 448,522 17,406
Finance income 7 205,683 257,984
Finance costs 8 (1,122,883) (1,258,850)
Loss before taxation 4 (3,499,112) (4,302,516)
Taxation 9 (43,155) (57,429)
Loss for the period (3,542,267) (4,359,945)
Loss per share Basic 11 (0.50 p) (0.67 p)
Diluted 11 (0.50 p) (0.67 p)
All of the loss for the year is attributable to the owners of the Parent
Company.
* Group adjusted EBITDA - earnings before interest, taxes, depreciation and
amortization excluding non-cash items, non-recurring items and store
pre-opening expenses
Group Statement of comprehensive income
for the year ended 31 December 2023
2023 2022
Restated
£ £
Loss for the period (3,542,267) (4,359,945)
Currency translation differences (164,880) (138,074)
Other comprehensive expense for the period, net of tax to be reclassified to (164,880) (138,074)
profit or loss in subsequent periods
Total comprehensive income for the period (3,707,147) (4,498,019)
All of the comprehensive expense for the year is attributable to the owners of
the Parent Company.
Group Balance Sheet
at 31 December 2023
2023 2022
Restated
Notes £ £
Non-current assets
Goodwill 12 15,532,023 15,375,840
Intangible assets 13 3,263,346 3,910,188
Property, plant and equipment 14 6,941,009 6,645,301
Leases - right of use assets 20 6,013,057 6,472,965
Trade and other receivables 18 422,064 452,125
32,171,499 32,856,419
Current assets
Inventories 19 1,034,187 982,110
Trade and other receivables 18 3,876,432 2,719,050
Cash and cash equivalents 23 1,888,465 3,728,177
6,799,084 7,429,337
Total assets 38,970,583 40,285,756
Current liabilities
Trade and other payables 24 (6,655,591) (5,343,028)
Lease liabilities 21 (2,901,716) (2,834,336)
Borrowings 25 (7,065,605) -
(16,622,912) (8,177,364)
Non-current liabilities
Lease liabilities 21 (6,005,449) (5,666,835)
Deferred tax 17 (588,003) (540,937)
Borrowings 25 - (6,763,297)
(6,593,452) (12,971,069)
Total liabilities (23,216,364) (21,148,433)
Net assets 15,754,219 19,137,323
Equity 22
Called up share capital 28 3,562,409 3,561,969
Share premium account 47,084,716 47,084,716
Capital reserve - own shares (48,163) (48,163)
Retained earnings (24,668,877) (21,450,212)
Merger relief reserve 23,516,542 23,516,542
Reverse Takeover reserve (33,460,406) (33,460,406)
Currency translation reserve (232,003) (67,123)
Total equity 15,754,219 19,137,323
The financial statements were approved by the Board of Directors and
authorised for issue on 30 May 2024 and were signed on its behalf by:
Nils
Gornall
Edward Kacyrz
Chief Executive
Officer
Chief Financial Officer
Company Balance Sheet
at 31 December 2023
2023 2022
Restated
Notes £ £
Non-current assets
Investments 15 33,281,643 32,966,376
Loans granted to subsidiary undertakings 16 177,578 171,341
33,459,221 33,137,717
Current assets
Trade and other receivables 18 68,631 146,981
Cash and cash equivalents 23 134,185 65,293
202,816 212,274
Total assets 33,662,037 33,349,991
Current liabilities
Trade and other payables 24 (100,180) (94,078)
Borrowings 25 (7,040,576) -
(7,140,756) (94,078)
Non Current liabilities
Borrowings 25 - (6,734,149)
Net assets 26,521,281 26,521,764
Equity 22
Called up share capital 28 3,562,409 3,561,969
Share premium account 47,084,716 47,084,716
Retained earnings (47,642,386) (47,641,462)
Merger relief reserve 23,516,542 23,516,542
Shareholders' Equity 26,521,281 26,521,764
The financial statements were approved by the Board of Directors and
authorised for issue on 30 May 2024 and were signed on its behalf by:
Nils
Gornall
Edward Kacyrz
Chief Executive
Officer
Chief Financial Officer
The Company has taken advantage of the exemption provided under section 408 of
the Companies Act 2006 not to publish its individual income statement and
related notes.
Loss relating to transactions in the financial statements of the parent
company was £324,525 (2022: £27,401,465).
DP Poland plc's company registration number is 07278725
Group Statement of Cash Flows
for the year ended 31 December 2023
2023 2022
Restated
Note £ £
Cash flows from operating activities
Loss before taxation for the period (3,499,112) (4,302,516)
Adjustments for:
Finance income 7 (205,683) (257,984)
Finance costs 8 1,122,883 1,258,850
Foreign exchange movements (814,216) (280,539)
Depreciation, amortisation and impairment 4,732,001 4,336,210
Loss on fixed asset disposal 78,585 136,974
VAT refund - interests 7 181,792 231,476
Dismantling provision 120,706 20,466
Share based payments expense 29 323,602 137,748
Operating cash flows before movement in working capital 2,040,558 1,280,685
(Increase) in inventories 19 (52,076) (314,212)
(Increase) in trade and other receivables 18 (1,127,321) (1,130,856)
Increase in trade and other payables 24 1,312,563 359,363
Cash generated from operations 2,173,724 194,980
Taxation payable - -
Net cash generated from operations 2,173,724 194,980
Cash flows from investing activities
Payments to acquire intangible assets (206,556) (116,501)
Payments to acquire property, plant and equipment (1,395,053) (955,893)
Proceeds from disposal of property plant and equipment 1,355 46,063
Interest received on sub-franchisee loans 7 14,402 16,767
Cash flows of acquiring a subsidiary 22,828
Net cash generated from/(used in) investing activities (1,585,852) (986,736)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 441 4,799,213
Repayment of lease liabilities (1,795,817) (2,068,948)
Repayment of borrowings - (163,539)
Interest paid on lease liabilities 8 (611,477) (665,084)
Net cash from/(used in) financing activities (2,406,853) 1,901,642
Net increase/(decrease) in cash (1,818,981) 1,350,291
Exchange differences on cash balances (20,731) (83,355)
Cash and cash equivalents at beginning of period 3,728,177 2,461,241
Cash and cash equivalents at end of period 23 1,888,465 3,728,177
Company Statement of Cash Flows
Company Statement of Cash Flows
for the year ended 31 December 2023
2023 2022
Restated
Note £ £
Cash flows from operating activities
Profit/(loss) before taxation (324,525) (27,401,466)
Adjustments for:
Finance income (535,459) (818,128)
Finance expense 460,554 576,416
Foreign exchange movements (22,756) 389,243
Impairment charge - 26,781,124
Share based payments expense 56,185 72,315
Operating cash flows before movement in working capital (366,001) (400,496)
Decrease in trade and other receivables 18 78,350 274,613
Increase/(decrease) in trade and other payables 24 6,102 (36,591)
Cash used in operating activities (281,549) (162,474)
Cash flows from investing activities
Partial return of equity investment/(Equity investment) in subsidiary company 350,000 (4,703,100)
Loans granted to subsidiary undertakings 16 - (170,867)
Interest received - 12
Net cash generated from/(used in) investing activities 350,000 (4,873,955)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital 441 4,799,213
Net cash from/(used in) financing activities 441 4,799,213
Net increase/(decrease) in cash 68,892 (237,216)
Cash and cash equivalents at beginning of period 65,293 302,509
Cash and cash equivalents at end of period 23 134,185 65,293
Group Statement of Changes in Equity
for the year ended 31 December 2023
Share Currency Capital Reverse Merger
Share premium Retained translation reserve - Takeover Relief
capital account earnings reserve own shares reserve reserve Total
£ £ £ £ £ £ £ £
At 1 January 2022 3,097,933 42,551,453 (17,228,015) 70,951 (48,163) (33,460,406) 21,282,500 16,266,253
Translation difference - - - (138,074) - - - (138,074)
Loss for the period - - (4,359,945) - - - - (4,359,945)
Total comprehensive income for the year - - (4,359,945) (138,074) - - - (4,498,019)
Shares issued (net of expenses) 464,036 4,533,263 - - - - 2,234,042 7,231,341
Share based payments - - 137,748 - - - - 137,748
Transactions with owners in their capacity as owners 464,036 4,533,263 137,748 - - - 2,234,042 7,369,089
At 31 December 2022 3,561,969 47,084,716 (21,450,212) (67,123) (48,163) (33,460,406) 23,516,542 19,137,323
Translation difference - - - (164,880) - - - (164,880)
Loss for the period - - (3,542,267) - - - - (3,542,267)
Total comprehensive income for the year - - (3,542,267) (164,880) - - - (3,707,147)
Shares issued (net of expenses) 441 - - - - - - 441
Share based payments - - 323,602 - - - - 323,602
Transactions with owners in their capacity as owners 441 - 323,602 - - - - 324,043
At 31 December 2023 3,562,410 47,084,716 (24,668,877) (232,003) (48,163) (33,460,406) 23,516,542 15,754,219
Company Statement of Changes inquity
Company Statement of Changes in Equity
for the year ended 31 December 2023
Share
Share premium Retained Relief
capital account earnings reserve Total
£ £ £ £ £
At 31 December 2021 3,097,933 42,551,453 (20,377,745) 21,282,500 46,554,141
Loss for the year - - (27,401,465) - (27,401,465)
Total comprehensive income for the year - - (27,401,465) - (27,401,465)
Shares issued (net of expenses) 464,036 4,533,263 - 2,234,042 7,231,341
Share based payments - - 137,748 - 137,748
Transactions with owners in their capacity as owners 464,036 4,533,263 137,748 2,234,042 7,369,089
At 31 December 2022 3,561,969 47,084,716 (47,641,462) 23,516,542 26,521,764
Loss for the year - - (324,525) - (324,525)
Total comprehensive income for the year - - (324,525) - (324,525)
Shares issued (net of expenses) 441 - - - 441
Share based payments - - 323,602 - 323,602
Transactions with owners in their capacity as owners 441 - 323,602 - 324,043
At 31 December 2023 3,562,410 47,084,716 (47,642,385) 23,516,542 (26,521,281)
Notes to the Financial Statements
for the year ended 31 December 2023
1. ACCOUNTING POLICIES
Authorisation of financial statements and statement of compliance with
IFRSs
The DP Poland plc Group and Company financial statements for the year ended 31
December 2023 were authorised for issue by the Board of the Directors on 30
May 2024 and the balance sheets were signed on the Board's behalf by Nils
Gornall and Edward Kacyrz. DP Poland plc is a public limited company
incorporated and domiciled in England & Wales. The Company's ordinary
shares are traded on the Alternative Investment Market of the London Stock
Exchange.
Basis of
preparation
Both the Group financial statements and the Company financial statements have
been prepared and approved by the directors in accordance with UK-adopted
international accounting standards, IFRIC Interpretations and the Companies
Act 2006. The preparation of financial statements in accordance with
UK-adopted international accounting standards requires the use of certain
critical accounting estimates. It also requires management to exercise
judgement in the process of applying the Company's accounting
policies.
An additional line item for 'Group adjusted EBITDA - excluding non-cash items,
non-recurring items and store pre-opening expenses' has been presented on the
face of the income statement as the Board believes this presentation is
relevant to the understanding of the Group's financial performance and is a
useful indicator for the underlying cash generated from operations.
The Company has taken advantage of the exemption provided under section 408 of
the Companies Act 2006 not to publish its individual income statement and
related
notes.
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 December
2023.
The Group and Company financial statements are presented in Sterling. The
assets and liabilities of the foreign subsidiaries, whose functional currency
is Polish Zloty and Euro, are translated into sterling at the rate of exchange
ruling at the balance sheet date and their income statements are translated at
the average rate for the year. Differences arising from the translation of the
opening net investment in the subsidiary are taken to reserves and reported in
the Group statement of comprehensive
income.
Basis of
consolidation
The Group financial statements comprise the financial statements of DP Poland
plc, its subsidiary undertakings and the Employee Benefit Trust ("EBT") drawn
up to 31 December of each year, using consistent accounting policies.
Subsidiary undertakings have been included in the Group financial statements
using the purchase method of accounting. Accordingly the Group Income
Statement and Group Statement of Cash Flows include the results and cash flows
of subsidiaries from the date of acquisition.
Subsidiaries are consolidated from the date of their acquisition, being the
date on which the Group obtains control, and continue to be consolidated until
the date such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from
its activities and is achieved through direct or indirect ownership of voting
rights; currently exercisable or convertible potential voting rights; or by
way of contractual agreement. The financial statements of subsidiaries are
prepared for the same reporting year as the parent Company, using consistent
accounting policies. All inter-company balances and transactions, including
unrealised profits arising from them, are eliminated on consolidation.
The Group accounts for business combinations using the acquisition method when
control is transferred to the Group. The consideration transferred in the
acquisition is generally measured at fair value, as are the identifiable net
assets acquired. Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to the issue of
debt or equity
securities.
Restatements of comparative period financial
information
The following changes have been made to the comparative period presented
within these financial
statements:
Adjustments to the Group and Company Statements of Cash
Flows
# Description Amount Group/Company
1 Equity consideration issued upon the acquisition of AAP (non-cash) £
Reduction in cash outflows from acquiring a subsidiary 2,264,362 Group
Reduction in cash inflows from issue of ordinary share capital (2,382,979) Group
Increase in foreign exchange movements (Operating cash flows) 118,617 Group
2 Exercise of share options at nil cost to employees (non-cash) £
Reduction in cash inflows from issue of ordinary share capital (49,149) Group
Increase in foreign exchange movements (Operating cash flows) 49,149 Group
3 Payments for capital expenditure (non-cash) £
Reduction in cash outflow payment to acquire software 187,362 Group
Reduction in cash outflow payment to acquire property, plant and equipment 116,918 Group
Reduction in foreign exchange movements (Operating cash flows) (304,280) Group
4 Equity consideration issued upon the acquisition of AAP (non-cash) £
Reduction in cash inflows from issue of ordinary share capital (2,432,128) Company
Reduction in cash outflow from equity investment in subsidiary company 3,188,799 Company
Reduction in cash inflows from interest received (818,116) Company
Increase in exchange differences on cash at end of period 61,444 Company
Adjustments to the Group and Company Balance Sheets and the Group Statement of
Comprehensive Income
# Description Amount Group/Company
5 Remeasurement of MFA £
Increase in MFA (intangible assets) 118,616 Group
Increase in currency translation reserve (SOCI) (118,616) Group
6 Merger relief restatement £
Decrease in merger relief reserve 159,575 Group and Company
Increase in share premium account (159,575) Group and Company
7 Deferred tax on MFA £
Increase in goodwill 250,961 Group
Increase in deferred tax liability (250,961) Group
8 Retranslation of foreign operation £
Increase in MFA 77,093 Group
Increase in goodwill 13,877 Group
Increase of deferred tax liability (13,877) Group
Increase in currency translation reserve (SOCI) (77,093) Group
Adjustments to the Group and Company Statements of Cash
Flows
Adjustments 1 to 4 are made to restate amounts relating to non-cash items that
should not therefore be included as part of the Statements of Cash flows.
These adjustments relate to the non-cash equity consideration issued upon the
acquisition of All About Pizza (AAP) (adjustments 1 and 4), the exercise of
share options at nil cost to employees (adjustment 2) and the non-cash
additions of software and property, plant and equipment (adjustment
3).
There is no impact on net assets, equity or profit or loss from these
restatements. Total cash and cash equivalents presented within the Statements
of Cash Flows has been changed due to reclassification between trade and other
receivables and cash and cash equivalents described below. Overall, within the
Group Statement of Cash flows, cash inflows from financing activities have
decreased by £2,432,128, cash outflows from investing activities have
increased by £2,568,642, cash inflows from operating activities have
decreased by £278,254 and total cash and cash equivalents have decreased by
£382,145, which is explained in the below reclassification note. Overall,
within the Company Statement of Cash Flows, cash inflows from financing
activities have decreased by £2,432,128, cash outflows from investing
activities have decreased by £2,370,683 and exchange differences on cash
balances has increased by
£61,444.
Adjustments to the Group and Company Balance Sheets and the Group Statement of
Comprehensive Income
Adjustments 5 to 8 are made to restate amounts relating to the acquisition of
AAP. The Master Franchise Agreement (MFA) on AAP has been revised to exclude a
cash-settled transaction identified as a consequence of the point above, which
does not form part of the consideration paid for AAP (adjustment 5). A
consequential reclassification between share premium and the merger relief
reserve has been made by an equal and opposite amount impacting both the Group
and Company Balance Sheets (adjustment 6). Deferred tax has been recognised on
the fair value adjustment uplift on the MFA with the resulting deferred tax
liability affecting goodwill (adjustment 7).To reflect the appropriate
acquisition accounting and the foreign exchange arising on the acquired
foreign operation (AAP), the MFA carrying amount has been restated with a
corresponding increase to the foreign currency translation reserve, through
other comprehensive income (adjustment
8).
There is no impact on the profit or loss nor the earnings per share (EPS) of
either the Company or the Group. Overall, within the Group Balance Sheet, this
has resulted in an increase to total assets of £460,547, an increase to total
liabilities of £246,838 and total net assets of £195,709, with a
corresponding increase to total equity recognised through other comprehensive
income. Overall, within the Company Balance Sheet, there is no impact on net
assets nor total
equity.
There is no impact of the restatements for either the Company or the Group as
at 1 January 2022.
The above changes were prompted by an inquiry from the Corporate Reporting
Review team of the Financial Reporting Council (FRC) as part of its regular
review and assessment of the quality of corporate reporting in the UK. The
FRC's review is limited to the published 2022 annual report and accounts and
does not benefit from detailed knowledge of the business or understanding of
underlying transactions and provides no assurance that the annual report and
accounts are correct in all material respects.
Reclassifications of comparative period financial information
The following reclassifications have been made to comparative period financial
information:
· Reclassification of receivables from aggregators from cash and
cash equivalents to trade and other receivables amounted to £382,145 as at 31
December 2022. Receivables from aggregators were previously disclosed as cash
in transit within cash and cash equivalents, however after review more
transparently reclassified as trade and other receivables within current
assets.
· Allocation of direct and selling, general and administrative
costs to cost of goods sold, materials and energy, external services, payroll
and social charges and other operating costs in order to enhance transparency
and understandability of the presentation by reclassifying the nature of the
expense. For details of reclassification please refer to the table below:
Direct Costs Selling, general and administrative expenses Total
£ £ £
Cost of goods sold (11,396,511) (391) (11,396,902)
Materials and energy (1,872,692) (59,876) (1,932,568)
External services (2,809,758) (4,663,301) (7,473,059)
Payroll and social charges (12,233,960) (659,378) (12,893,338)
Other operating costs - (304,774) (304,774)
Total (28,312,921) (5,687,720) (34,000,641)
Adoption of new and revised standards
The accounting policies adopted in the preparation of the Group financial
statements are consistent with those followed in the preparation of the
Group's financial statements for the year ended 31 December 2022, except for
the adoption of new standard,
interpretations, and amendments to standards effective as of 1 January 2023.
The amendments and interpretations below were applied in 2023 and had no
significant impact on the accounting policies applied:
· Amendments to IAS 8: Definition of accounting estimates
· Amendments to IAS 1: Disclosure of accounting policies
· Amendments to IAS 12: Deferred tax related to assets and
liabilities arising from a single transaction.
New standards and interpretations not
applied
Below amendments to standards are effective for annual periods beginning after
1 January 2024 and earlier application is permitted. The Group has not early
adopted the new or amended standards in preparing these consolidated financial
statements:
· Amendments to IAS 1: Classification of liabilities as current or
non-current
· Amendments to IAS 1: Non-current liabilities with covenants
· Amendments to IFRS 16: Lease liability in a sale and leaseback
· Amendments to IAS 7 and IFRS 7: Supplier finance arrangements.
It is expected that the standards will not have a material impact on the
Group.
Intangible
assets
Intangible assets are carried at cost less accumulated amortisation and
accumulated impairment losses. Intangible assets acquired separately from a
business are carried initially at cost. An intangible asset acquired as part
of a business combination is recognised outside goodwill if the asset is
separable or arises from contractual or other legal rights and its fair value
can be measured reliably. Intangible assets with a finite life are amortised
and charged to administrative expenses on a straight line basis over their
expected useful lives, as
follows:
· Franchise fees and intellectual property rights: over the
duration of the legal
agreement;
· Computer software: 2 to 5 years from the date when the software
is brought into use;
and
· Capitalised loan discounts: the life of sub-franchise agreements
of 10
years.
The carrying value of intangible assets is reviewed for impairment whenever
events or changes in circumstances indicate the carrying value may not be
recoverable.
Goodwill
Goodwill is initially measured at cost and any previous interest held over the
net identifiable assets acquired and liabilities assumed. If the fair value of
the net assets acquired is in excess of the aggregate consideration
transferred, the Group re-assesses whether it has correctly identified all of
the assets acquired and all of the liabilities assumed and reviews the
procedures used to measure the amounts to be recognised at the acquisition
date.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. For the purposes of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to benefit
from the synergies of the combination. Cash-generating units to which goodwill
has been allocated are tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired.
The Group performs impairment reviews at the reporting period end to identify
any goodwill or intangible assets that have a carrying value that is in excess
of it's recoverable amount. Determining the recoverability of goodwill and the
intangible assets requires judgement in both the methodology applied and the
key variables within that methodology. Where it is determined that an asset is
impaired, the carrying value of the asset will be reduced to its recoverable
amount with the difference recorded as an impairment charge in the income
statement.
In accordance with IAS 36, the Group has tested goodwill for impairment at the
reporting date. No goodwill impairment was deemed necessary as at 31 December
2023. For further details on the impairment review please refer to note
12.
Fixtures, fittings and
equipment
Fixtures, fittings and equipment are stated at cost less accumulated
depreciation and any impairment in value. Leasehold property comprises
leasehold improvements including shopfitting and associated
costs.
Depreciation
Depreciation is provided on all tangible non-current assets at rates
calculated to write off the cost, less estimated residual value based on
prices prevailing at the balance sheet date, of each asset on a straight line
basis over its expected useful life, as follows:
Leasehold property -
over the expected lease
term
Fixtures, fittings and equipment
- 3 to 10
years
The carrying values of tangible non-current assets are reviewed for impairment
if events or changes in circumstances indicate the carrying value may not be
recoverable.
The asset's residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each financial year end.
Assets Under
Construction
Assets under construction comprise the cost of tangible fixed assets in
respect of stores that have not yet opened and therefore no depreciation has
yet been charged. Depreciation will be charged on the assets from the date
that they are available for use.
Impairment
The Group assesses at each reporting date whether there is an indication that
an asset may be impaired. If any such indication exists, or when annual
impairment testing for an asset is required, the Group makes an estimate of
the asset's recoverable amount. An asset's recoverable amount is the higher of
an asset's or cash-generating unit's fair value less costs to sell and its
value in use and is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other
assets or groups of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written down to
its recoverable amount. In assessing fair value less costs to sell, the
estimated future cash flows are discounted to their present value using a
post-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Impairment losses of
continuing operations are recognised in the income statement under the expense
category: Depreciation, amortisation and
impairment.
An assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or
may have decreased. If such indication exists, the recoverable amount is
estimated. A previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in the income statement
unless the asset is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal the depreciation
charge is adjusted in future periods to allocate the asset's revised carrying
amount, less any residual value, on a systematic basis over its remaining
useful
life.
Financial
instruments
Financial instruments are measured initially at cost, which is the fair value
of whatever was paid or received to acquire or incur them.
Financial
assets
All of the Group's financial assets are held within a business model whose
objective is to collect contractual cash flows which are solely payments of
principals and interest and therefore classified as subsequently measured at
amortised cost.
Financial assets at amortised cost are included in current assets, except for
maturities greater than 12 months after the balance sheet date. These are
classified as non-current assets. The Group's financial assets at amortised
cost comprise trade and other receivables, loans to sub-franchisees and cash
and cash equivalents in the balance sheet. Loans to sub-franchisees are
provided at below market interest rates. The difference between the present
value of loans recognised and the cash advanced has been capitalised as an
intangible asset in recognition of the future value that will be generated via
the royalty income and Commissary sales that will be generated. These assets
are amortised over the life of a new franchise agreement of 10
years.
The Group recognises an allowance for expected credit losses ('ECLs') for all
financial assets. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the
Group expects to receive, discounted at an approximation of the original
effective interest
rate.
Financial
liabilities
Financial liabilities are classified as either financial liabilities at fair
value through profit or loss or as financial liabilities measured at amortised
cost. Financial liabilities at amortised cost comprise
loans..
Borrowings
Borrowings are recognised initially at fair value net of directly attributable
transaction
costs.
After initial recognition, interest-bearing borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised as well as
through the EIR amortisation process. Amortised cost is calculated by taking
into account any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as finance costs
in the statement of profit or loss.
Cash and cash
equivalents
Cash and short-term deposits in the balance sheet comprise cash at banks and
in hand. For the purpose of the consolidated and company cash flow statement,
cash and cash equivalents consist of cash and cash equivalents as defined
above.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Inventories comprise food and packaging goods for resale. The Group applies a
first in first out basis of inventory
valuation.
Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
Foreign Currency
Translation
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the income
statement.
The results and financial position of all the group entities (none of which
has the currency of a hyper-inflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
a) assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
b) income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the
transactions);
and
c) all resulting exchange differences are recognised within other
comprehensive income as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net
investment in foreign operations are recognised in other comprehensive
income..
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing
rate.
Employee share incentive
plans
The Group issues equity-settled share-based payments to certain employees
(including Directors). These payments are measured at fair value at the date
of grant by use of a Black-Scholes model. Vesting is dependent on performance
conditions other than conditions linked to the price of the shares of DP
Poland plc (market conditions). In valuing equity-settled transactions, no
account is taken of these performance conditions. This fair value cost of
equity-settled awards is recognised on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest. No
cost is recognised for awards that do not ultimately
vest.
Leases
The Group as a
lessee
At the balance sheet date, the Group leased 116 stores, one office, two
commissaries and a number of vehicles. Leases for land and buildings are
normally for an initial term of 5 years with an option to renew thereafter.
Lease payments are subject to regular rent reviews to reflect market rates.
The Group assesses whether a contract is or contains a lease, at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short-term leases (defined as leases with a lease term of
12 months or less) and leases of low value assets (such as tablets and
personal computers). For these leases, the Group recognises the lease payments
as an operating expense on a straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using
incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
· Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date;
· The amount expected to be payable by the lessee under residual
value guarantees.
The lease liability is presented as a separate line in the consolidated
balance sheet.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses. Whenever the Group incurs an obligation for costs to dismantle and
remove a leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the underlying asset. The depreciation starts at the
commencement date of the lease. The right-of-use assets are presented as a
separate line in the consolidated balance sheet. The Group applies IAS 36 to
determine whether a right-of-use asset is impaired and accounts for any
identified impairment loss as described in the 'Property, Plant and Equipment'
policy. Variable rents that do not depend on an index or rate are not included
in the measurement of the lease liability and the right-of-use asset. The
related payments are recognised as an expense in the period in which the event
or condition that triggers those payments occurs and are included in
operating expenses in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Group has not used this practical
expedient. For a contracts that contain a lease component and one or more
additional lease or non-lease components, the Group allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
The Group as
lessor
The Group enters into lease agreements as an intermediate lessor with respect
to stores operated by sub-franchisees.
Leases for which the Group is a lessor are classified as finance or operating
leases. Whenever the terms of the lease transfer substantially all the risks
and rewards of ownership to the lessee, the contract is classified as a
finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for the head lease and
the sublease as two separate contracts. The Group evaluated and classified
these subleases as operating leases. The sublease does not transfer
substantially all of the risks and rewards arising from right-of-use asset
from the head lease, the sublease is classified as an operating lease and rent
received is recognised in the income statement on a straight line basis over
the lease term. Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the leased asset and
recognised on a straight-line basis over the lease term.
Current
tax
Current tax is the amount of income tax payable on the taxable profit for the
period. Current tax assets and liabilities for the current and prior periods
are measured at the amounts expected to be recovered from or paid to the tax
authorities. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the balance sheet
date.
Deferred
tax
Deferred tax is provided on all temporary differences at the balance sheet
date between the tax bases of assets and liabilities and their carrying
amounts with the exception of:
- Where the initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
- For taxable temporary differences associated with investments in
subsidiaries, associates and interest in joint ventures and where the timing
of the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable
future.
Deferred tax liabilities are measured at the tax rates that are expected to
apply to the period when the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the balance sheet
date. Deferred tax balances are not discounted.
Capital
instruments
Ordinary shares are classified as equity instruments. The finance costs
recognised in the Income Statement in respect of capital instruments other
than equity shares are allocated to periods over the term of the instrument at
a constant rate on the carrying amount applying the effective interest
method.
Capital reserve - own
shares
DP Poland plc shares which are held within the Company's employee benefit
trust, for the purpose of providing share based incentives to Group employees
are classified as shareholders' equity as 'Capital reserve - own shares' and
are recognised at cost. No gain or loss is recognised in the income statement
on the purchase or sale of such
shares.
Revenue
recognition
The Group recognises revenue from the following major sources:
· Corporate store sales;
· Royalties, franchise fees and sales to franchisees; and
· Rental income on leasehold property.
Revenue is measured based on the consideration to which the Group expects to
be entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. The Group recognises revenue when it transfers
control of a product or service to a customer. The criteria for recognising
revenues are set out in note
2.
Finance
income
Revenue is recognised as interest accrues applying the effective interest
method.
Going
concern
The Directors must make an assessment as to whether the Group is a going
concern. In forming their views, the Directors have prepared cash flow
forecasts for a 12 month period following the date of signing the balance
sheet and beyond. As part of the preparation of these forecasts, the Directors
have estimated the likely outcome for the number of new stores opened. Before
entering into a contract to acquire a new site, the Directors ensure that the
Group has sufficient working capital available to allow the completion of the
outlet. Based on these forecasts, the Directors have confirmed that there are
sufficient cash reserves to fund the business for the period under review.
After reviewing these forecasts, consideration of the Group's cash resources
and other appropriate enquiries, the Directors have a reasonable expectation
that the Company and Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason they continue to adopt
the going concern basis in preparing the financial
statements.
Accounting estimates and
judgements
The preparation of financial statements in conformity with UK-adopted
international accounting standards requires the use of certain critical
accounting estimates and judgements. It also requires management to exercise
judgement in the process of applying the Company's accounting policies.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Judgements
Purchase price allocation of the acquisition of AAP in
2022
Applying IFRS 3 for accounting of acquisition required Group's judgement. The
Directors have assessed the key nature and attributes of the assets of the
businesses acquired and in particular the value of the separable intangible
assets. The Directors have concluded that materially, the value is all
attributable to the Master Franchise Agreement and are satisfied that it is
appropriate to attribute the full value of the intangible asset acquired to
brand value.
When assessing whether it was reasonable for the excess to all be attributable
to the MFA, management inter-alia considered the following factors:
- Separately identifiable intangible assets acquired - Consideration was given
at the time as to whether the AAP business contained identifiable intangible
assets, such as customer relationships, a brand (represented by the Domino's
Pizza brand), intellectual property and software. The Master Franchise
Agreement (MFA) provides AAP with an on-going right to use the Domino's Pizza
franchise exclusively within Croatia. Under the terms of the MFA, whilst AAP
has the right to use the Domino's Pizza brand and other intellectual property
in Croatia, the ownership of these assets remains with the franchisor. In the
event of the loss or transfer of the MFA, all other intangible assets,
including any customer relationships, would also be lost or transferred such
that these intangible assets are considered to be included, and not separable
from, the MFA itself.
- Value attributed to the MFA - the MFA provides AAP with an on-going
extension right to use the Domino's Pizza franchise exclusively within
Croatia, the extension option of which is under the control of the Group. As
the renewal is expected to continue for the foreseeable future, this indicates
that substantially all the acquired value of the business can be attributable
to the expected future cash flows associated from the operation of the
business (which is fully dependent upon the MFA being in place).
- Assembled workforce and expected synergies - Whilst AAP was acquired with an
existing collection of employees, due to the nature of the workforce being
predominately short-term hire staff, any value attributable to the assembled
workforce was considered immaterial. Additionally, whilst the Group already
operates as a franchisee in Poland under the Domino's Pizza trademark, any
expected synergies were also considered minimal due to the strict conditions
and terms of operation under the MFA.
Assessment of indefinite useful life of the Master Franchise Agreement
intangible
asset
Identification of Master Franchise Agreement's useful life recognised as at
acquisition date of All About Pizza d.o.o. also required judgement. As there
is no foreseeable limit to the period over which Master Franchise Agreement is
expected to generate net cash inflows for the entity, the Group identified
Master Franchise Agreement to have an indefinite useful
life.
Management assessed the underlying contractual terms and conditions of the
MFA. The MFA in Croatia has been secured for an initial ten-year period, with
the right to extend the agreement by ten years, on every tenth anniversary.
The extension option is under the control of the Group. The agreement
commenced with AAP in July 2019. AAP cannot operate any store without the
Domino's Pizza trademark and hence the MFA is required in order for the
Croatian entity to operate. Management therefore determined that upon initial
recognition the MFA is inextricably linked to the Group's business model to
remain within the Croatian market for the foreseeable future and it is
management's current expectation to continue to do so, hence the renewal
option in the contract is currently expected to be renewed
indefinitely.
Determining the lease term
Leases are negotiated on an individual basis and contain a wide range of terms
and conditions, such as early termination clauses and renewal rights.
Termination clauses and renewal rights are used to maximise operational
flexibility in terms of managing the assets used in the Group's operations. In
determining the lease term, management considers all facts and circumstances
that create an economic incentive to exercise a renewal right, or not exercise
a termination clause. An adjustment to the lease term is only made if the
lease is reasonably certain to be extended or not terminated, i.e. when there
is a significant event of change in circumstances as per para 20 of IFRS 16.
Estimation
uncertainties
Impairment
The Group's determination of whether non-current assets and investments in
subsidiary undertaking are impaired requires an estimation of the fair value
less costs of disposal of the cash generating units to which the relevant
asset or investment is allocated. This requires estimation of future cash
flows and the selection of a suitable discount rate. The recoverable amount of
the cash generating unit has been determined based on the fair value less
costs of disposal calculated using discounted future cash flows, which are
subject to significant estimates due to the growth phase of the business.
Future cash flows are based on the Group's business plan. The calculation of
the fair value is most sensitive to the following assumptions: store
performance; discount rates; store openings in Poland and Croatia; foreign
exchange rates.
The discount rate reflects management's estimate of the return on capital
employed for the investment in Poland. The store openings are based on the
current business model being used by management, which is progressing in line
with expectations. The parent company's investment in Polish subsidiaries,
i.e., DP Polska S.A. and Dominium S.A., had a historical cost of £30.9m. With
effect from 29 July 2022, the Company became the legal parent of All About
Pizza d.o.o. The parent company's investment in Croatian subsidiary had a
historical cost of £ 2.4m. The Group has determined that no impairment in the
investment value should be recognised in the accounts of DP Poland plc as at
2023 year-end. Sensitivity analysis has been performed to highlight the impact
of assumptions on Polish and Croatian CGU. A 100bps increase in the discount
rate reduces headroom to £12.9m for Polish and £1.0 for Croatian CGU. A
100bps decrease in the perpetual growth rate reduces headroom to £14.2m for
Polish and £1.2m for Croatian CGU.
Amortised cost of sub-franchisee loan receivables and loan notes
The Group's determination of the amortised cost of sub-franchisee loan
receivables at initial recognition requires the estimation of the initial fair
value interest rate of the below-market rate loans provided to the
franchisees. Recoverability of such loans is an ongoing estimation uncertainty
and is sensitive to changes in circumstances and of forecast economic
conditions. The Group's historical credit loss experience and forecast of
economic conditions may also not be representative of sub-franchisees' actual
default in the
future.
The Group has also determined the amortised cost of borrowings, which requires
the estimation of the initial fair value of the below-market rate loans
provided by Malaccan Holdings. The loans have been discounted to a market rate
of 5.3% calculated based on EURIBOR and additional margin, which required
accounting estimates to be done. Further details are shown in note
25.
Lease liability - estimating an incremental borrowing
rate
The Group cannot readily determine the interest rate implicit in the lease,
therefore, it uses its incremental borrowing rate (IBR) to measure lease
liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the Group 'would
have to pay', which requires estimation when no observable rates are available
or when they need to be adjusted to reflect the terms and conditions of the
lease. The Group estimates the IBR using observable inputs (such as market
risk-free rates and country risk premium) and adds entity-specific
premiums.
2.
REVENUE
Revenue is measured based on the consideration to which the Group expects to
be entitled in a contract with a customer and excludes amounts collected on
behalf of third parties. All of the revenue is derived in Poland and Croatia.
Corporate store sales: Contracts with customers for the sale of products to
end consumers include one performance obligation. The Group has concluded that
revenue from the sale of products should be recognised at a point in time when
control of the goods is transferred to the consumer, which is the point of
delivery or collection.
Sales of materials and services to sub-franchisees: Contracts with franchisees
for the sale of products include one performance obligation, being the
delivery of products to the end franchisee. The Group has concluded that
revenue from the sale of products should be recognised at a point in time when
control of the goods are transferred to the franchisee, generally on delivery.
Revenue is recognised at the invoiced price less any estimated rebates.
Royalties received from sub-franchisees: The performance obligation relating
to royalties is the use of the Domino's brand. This represents a sales-based
royalty with revenue recognised at the point the franchisee makes a sale to an
end consumer.
Rental income on leasehold property: Rental income arising from leasehold
properties where the lease is an operating lease is recognised on a
straight-line basis in accordance with the lease terms. Rental payments are
recognised over the period to which they relate. Under IFRS 16 'leases' rents
received under finance leases are treated as capital repayments and interest
receipts and are excluded from revenues.
Core revenues are ongoing revenues including sales to the public from
corporate stores, sales of materials and services to subfranchisees, royalties
received from sub-franchisees and rents received from sub-franchisees. Other
revenues are non-recurring transactions such as the sale of stores, fittings
and equipment to sub-franchisees. Revenue recognised in the income statement
is analysed as follows:
Revenue is further analysed as follows:
2023 2022
£ £
Corporate store sales 43,132,392 34,299,189
Royalties received from sub-franchisees 255,376 220,185
Sales or materials and services to sub franchises 1,009,090 933,038
Rental income on leasehold property 226,125 240,721
Fixtures and equipment sales to sub-franchisees - 965
44,622,983 35,694,098
Revenue by country:
2023 2022
£ £
Poland 42,342,887 34,930,108
Croatia 2,280,096 763,990
44,622,983 35,694,098
3. SEGMENTAL
REPORTING
The Board monitors the performance of the corporate stores and the commissary
operations separately and therefore those are considered to be the Group's two
operating segments. Corporate store sales comprise sales to the public.
Corporate store sales include sales of Polish and Croatian cash-generating
units, which are presented in Note 2 above. Commissary operations comprise
sales to sub-franchisees of food, services and fixtures and equipment.
Commissary operations also include the receipt of royalty income from
sub-franchisees. The Board monitors the performance of the two segments based
on their contribution towards Group EBITDA - excluding non-cash items,
non-recurring items and store pre-opening expenses. In accordance with IFRS 8,
the segmental analysis presented reflects the information used by the Board.
No separate balance sheets are prepared for the two operating segments and
therefore no analysis of segment assets and liabilities is presented.
Operating Segment contribution - Poland CGU
2023 2023 2023 2022 2022 2022
Restated Restated Restated
£ £ £ £ £ £
Corporate stores Commissary Poland Corporate stores Commissary Poland
Revenues from external customers 40,852,296 1,490,591 42,342,887 33,535,199 1,394,909 34,930,108
Cost of goods sold (11,620,469) (1,093,756) (12,714,225) (10,109,863) (1,007,458) (11,117,321)
Gross profit 29,231,827 396,835 29,628,662 23,425,336 387,451 23,812,787
Unallocated expenses (25,990,253) (21,953,531)
Group adjusted EBITDA - excluding non-cash items, non-recurring items and 3,638,409 1,859,256
store pre-opening expenses
Store pre-opening expenses (21,467) (37,584)
Other non-cash and non-recurring items (1,430,463) (507,780)
Depreciation and amortisation (4,433,437) (4,224,124)
Share based payments (323,602) (137,748)
Foreign exchange gains 455,380 18,361
Finance income 205,682 257,984
Finance costs (1,076,739) (1,262,907)
Loss before taxation (2,986,237) (4,034,542)
Operating Segment contribution - Croatia CGU
2023 2023 2023 2022 2022 2022
Restated Restated Restated
£ £ £ £ £ £
Corporate stores Commissary Croatia Corporate stores Commissary Croatia
Revenues from external customers 2,280,096 - 2,280,096 763,990 - 763,990
Cost of goods sold (717,281) - (717,281) (279,581) - (279,581)
Gross profit 1,562,815 - 1,562,815 484,409 - 484,409
Unallocated expenses (1,672,314) (650,208)
Group adjusted EBITDA - excluding non-cash items, non-recurring items and (109,499) (165,799)
store pre-opening expenses
Store pre-opening expenses (42,551) -
Other non-cash and non-recurring items (9,260) 6,809
Depreciation and amortisation (298,564) (112,086)
Share based payments - -
Foreign exchange gains (6,858) (955)
Finance income 1 -
Finance costs (46,144) 4,057
Loss before taxation (512,875) (267,974)
The Group does not have reliance on any major
customers.
4. LOSS BEFORE TAXATION
This is stated after charging
2023 2022
£ £
Auditors and their associates' remuneration 165,496 124,524
Directors' emoluments 340,559 273,092
Amortisation of intangible fixed assets 832,009 626,252
Depreciation of property, plant and equipment 3,899,992 3,709,958
Nils Gornall was the highest paid director in 2023 with total emoluments of
£137,145 (2022: Piotr Dzierzek in 2022 with total emoluments of £72,562).
4,000,000 share options have been granted to Nils Gornall in July 2023 in
accordance with Share Option Plan announced in June 2022. There are no pension
contributions or defined benefit pensions attributable to Nils
Gornall.
5. OTHER NON-CASH AND NON-RECURRING ITEMS
2023 2022
Restated
£ £
Acquisition - advisors and other expenses - (61,225)
Adjustment to right-of-use asset lease term (892,171) (609,320
IFRS 16 adjustment (343,725) 33,416
VAT refund 174,989 182,535
Dismantling provision (120,706) (20,466)
Fixed assets adjustment - impairment (81,180) (69,434)
Written down balances with counterparties (115,968) -
Other non-cash and non-recurring items (60,962) 43,523
(1,439,723) (500,971)
Other non-cash and non-recurring items
Other non-cash and non-recurring items include items, which are not
sufficiently large to be classified as exceptional, but in the opinion of the
Directors, are not part of the underlying trading performance of the Group.
Adjustment to right-of-use asset lease term - refers to right of use assets
write-off due to potential store closures in 2024. IFRS 16 adjustment - refers
to movements in lease liabilities due to changes in lease agreement cash flows
mainly related to indexation. The other non-cash and non-recurring items
position includes gains and losses from the sale and liquidation of fixed
assets and other items.
6. STAFF COSTS
Details of directors' remuneration, which is included in the amounts below,
are given in the remuneration report.
2023 2022
Restated
£ £
Zero hours contract in stores 12,292,407 9,199,329
Wages and salaries and directors' fees 3,610,122 2,597,315
Social security costs 1,184,457 1,096,694
Share based payments 323,602 137,748
17,410,588 13,031,086
The average monthly number of employees during the year was as follows*:
2023 2022
Number Number
Restated
Zero-hours contracts 2,136 1,939
Operational 130 179
Administration 47 35
Total 2,313 2,153
* The employee number disclosure has been updated to include employees on
zero-hours contracts, which has been reflected both in the current and prior
year.
7. FINANCE INCOME
2023 2022
£ £
VAT refund - interests 181,792 231,476
Unwinding of discount on loans to sub-franchisees 8,899 9,417
Finance income on sub-franchisees loans 14,402 16,767
Other finance income 590 324
205,683 257,984
8. FINANCE COST
2023 2022
£ £
Interest expense on lease liabilities 611,477 665,084
Other interest 511,406 593,766
1,122,883 1,258,850
9. TAXATION
2023 2022
£ £
Current tax - -
Deferred tax expense relating to recognition of deferred tax liability 43,155 57,429
Total tax charge in income statement 43,155 57,429
2023 2022
£ £
Loss before tax (3,499,112) (4,302,516)
Tax credit calculated at applicable rate of 19% (664,831) (817,478)
Income taxable but not recognised in financial statements - 97,402
Income not subject to tax (3,724,190) (570,648)
Expenses not deductible for tax purposes 7,294,084 2,234,215
Tax losses for which no deferred income tax asset was recognised (2,861,908) (886,062)
Total tax charge in income statement 43,155 57,429,
10. LOSS ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY
Loss relating to transactions in the financial statements of the parent
company was £324,525 (2022: £27,401,465).
11. LOSS PER SHARE
The loss per ordinary share has been calculated as follows:
2023 2023 2022 2022
£ £
Weighted average number of shares Profit / (loss) after tax Weighted average number of shares Profit / (loss) after tax
Basic 710,680,973 (3,542,267) 653,776,085 (4,359,945)
Diluted 710,680,973 (3,542,267) 653,776,085 (4,359,945)
The weighted average number of shares for the year excludes those shares in
the Company held by the employee benefit trust. At 31st December 2023 the
basic and diluted loss per share is the same, as the vesting of JOSS, SIP or
share option awards would reduce the loss per share and is, therefore,
anti-dilutive.
12. GOODWILL
Cost (Restated) Group
£
At 1 January 2022 15,008,736
Additions 250,961
Foreign exchange movements 116,143
At 1 January 2023 15,375,840
Foreign exchange movements 156,183
At 31 December 2023 15,532,023
Carrying amount Group
£
At 31 December 2023 15,532,023
The goodwill recognised by the accounting acquirer is equal to the
consideration (as determined under IFRS 3) which was paid by the accounting
acquirer less the fair value of the assets and liabilities acquired with the
accounting acquiree. The goodwill recognised is allocated to Polish entities
cash generating unit and is made up by the expected synergies of the enlarged
business and management expertise brought by new Chief Executive Officer and
Non-Executive Director to DP Poland PLC's business.
In accordance with IAS 36 the Group has performed impairment review of
goodwill at the reporting period end. The impairment test has been undertaken
by assessment recoverable amount of the CGU to which the goodwill has been
allocated, against the carrying value of this CGU. The review included
discounted cash flow projections to determine the recoverability of goodwill
and the intangible assets. We compared the carrying amount of the assets,
inclusive of assigned goodwill, to its respective fair value less costs of
disposal. Significant assumptions inherent in the valuation methodologies for
goodwill are employed and include, but are not limited to, prospective
financial information, growth rates, terminal value and discount rates.
Prospective sales and costs forecasts are made for the following five years
(i.e., FY24-FY28) and are based on market-available data with regard to
country GDP growth rates, inflation, price trends of main cost items, as well
as on historical level of sales volumes and incurred costs as a percentage of
sales, taking into account implemented High Volume Mentality, digital platform
development and increased focus on operations excellence. The discount rate is
reviewed annually to take into account the current market assessment of the
time value of money and the risks specific to the CGU and rates used by
comparable companies. The discount rate used to calculate fair value is
declining from 12.6% in FY24 to 10.5% in FY28 (i.e., 12.6% in FY24, 12.1% in
FY25, 11.6% in FY26, 11.0% in FY27 and 10.5% in FY28 and beyond). Costs are
reviewed for inflation and other cost pressures. The long term growth rate
used was 2.5%. Based on this quantitative test, we determined that the fair
value of assets including goodwill exceeded its carrying amount. After
completing our annual impairment reviews we concluded that goodwill was not
impaired.
The recoverable amount is not deemed to be sensitive to a decrease in growth
rate and an increase in discount rate. Decreasing growth rate by 1% and
increasing discount rate by 1% would still leave headroom between the carrying
value of the goodwill and the recoverable amount.
13. INTANGIBLE ASSETS
Franchise fees Capitalised
and intellectual Software loan Total
property rights discount Restated
Restated Restated
Group £ £ £ £
Cost:
At 1 January 2022 5,194,420 562,528 245,474 6,002,422
Acquisition of business - AAP 1,590,045 282,589 - 1,872,634
Foreign exchange movements 273,079 142,990 8,713 424,782
Additions 62,831 241,032 - 303,863
Disposals - - - -
At 1 January 2023 7,120,375 1,229,139 254,187 8,603,701
Foreign exchange movements 218,520 53,189 13,745 285,454
Additions 110,259 96,297 - 206,556
Disposals - - - -
At 31 December 2023 7,449,154 1,378,625 267,932 9,095,711
Amortisation
At 1 January 2022 3,204,145 398,779 192,050 3,794,974
Foreign exchange movements 171,673 93,436 7,178 272,287
Amortisation charged for the year 527,030 90,278 8,944 626,252
Disposals - - -
At 1 January 2023 3,902,848 582,493 208,172 4,693,513
Foreign exchange movements 247,775 47,614 11,454 306,843
Amortisation charged for the year 598,127 229,175 4,707 832,009
Disposals - - - -
At 31 December 2023 4,748,750 859,282 224,333 5,832,365
Net book value:
At 31 December 2023 2,700,404 519,343 43,599 3,263,346
At 31 December 2022 3,217,527 646,646 46,015 3,910,188
Franchise fees consisting of the cost of purchasing the Master Franchise
Agreement (MFA) from Domino's Pizza Overseas Franchising B.V. have been
capitalised in 2021 as a result of reverse acquisition and are written off
over the term of the MFA. As at 31.12.2023 net book value of MFA amounted to
£454,400 with remaining amortization period of 12 years. Master Franchise
Agreement between AAP and Domino's Pizza International Franchising Inc. have
been capitalized in 2022 and is measured at cost less any accumulated
impairment losses. As there is no foreseeable limit to the period over which
Master Franchise Agreement is expected to generate net cash inflows for the
entity, the Group identified Master Franchise Agreement to have an indefinite
useful life. MFA is allocated to AAP cash generating unit. Net book value of
AAP MFA amounted to £1,442,723 as at 31.12.2023. The difference between the
present value of loans to sub-franchisees recognised and the cash advanced has
been capitalised as an intangible asset and are amortised over the life of
sub-franchise agreements of 10 years. The Group has performed an annual
impairment test and the recoverable amount of Polish and Croatian cash
generating units have been determined based on fair value calculated using
discounted future cash flows based on the business plan, and incorporating the
Directors' estimated discount rate (10.5% in FY28 and beyond for Polish CGU
and 12.2% in FY28 and beyond for AAP CGU), future store openings and the
average Polish Zloty and Euro exchange rate for the year ended 31 December
2023. The fair value calculation indicates that no impairment is required. As
at 31 December 2023, no reasonably anticipated change in the assumptions would
give rise to a material impairment charge. Sensitivity analysis has been
performed to highlight the impact of assumptions on Polish CGU:
- a 100bps increase in the discount rate reduces headroom to
£12.9m,
- a 100bps decrease in the perpetual growth rate reduces headroom
to £14.2m,
- a 100bps increase in the discount rate and a 1000bps decrease in
the perpetual growth rate reduces headroom to £9.3m.
Sensitivity analysis has been performed to highlight the impact of assumptions
on AAP CGU:
- a 100bps increase in the discount rate reduces headroom to
£1.0m,
- a 100bps decrease in the perpetual growth rate reduces headroom
to £1.2m,
- a 100bps increase in the discount rate and a 1000bps decrease in
the perpetual growth rate reduces headroom to £0.6m.
14. PROPERTY, PLANT AND EQUIPMENT
Fixtures Assets
Leasehold fittings and under
property equipment construction Total
Group £ £ £ £
Cost:
At 1 January 2022 8,724,986 4,409,517 19,573 13,154,076
Acquisition of business - AAP 341,007 270,218 - 611,225
Foreign exchange movements 413,953 388,155 8,324 810,432
Additions 196,617 272,251 603,943 1,072,811
Disposals (813,019) (278,656) - (1,091,675)
Transfers 158,339 243,548 (401,887) -
At 1 January 2023 9,021,883 5,305,033 229,953 14,556,869
Foreign exchange movements 571,460 423,795 79,626 1,074,881
Additions 462,825 594,552 428,233 1,485,610
Disposals (61) (237,372) - (237,433)
Transfers 64,030 346,260 (410,290) -
At 31 December 2023 10,120,137 6,432,268 327,522 16,879,927
Depreciation:
At 1 January 2022 4,604,112 2,414,867 - 7,018,979
Foreign exchange movements 265,301 307,049 - 572,350
Depreciation charged for the year 800,829 636,978 - 1,437,807
Other adjustments (99,303) - - (99,303)
Disposals (747,750) (270,517) - (1,018,267)
At 1 January 2023 4,823,189 3,088,377 - 7,911,566
Foreign exchange movements 393,838 334,133 - 727,971
Depreciation charged for the year 862,259 625,578 - 1,487,837
Other adjustments (29,610) - - (29,610)
Disposals - (158,848) - (158 848)
At 31 December 2023 (6,049,676) (3,889,240) - 9,938,916
Net book value:
At 31 December 2023 4,070,460 2,543,027 327,522 6,941,009
At 31 December 2022 4,198,693 2,216,655 229,953 6,645,301
15. NON CURRENT ASSET INVESTMENTS
Group Company
£ £
Investments in Group undertakings
At 31 December 2021 - 51,790,168
Investment in subsidiary company - shares subscribed - DP Polska S.A. - 4,703,100
Investment in subsidiary company - shares subscribed - All About Pizza - 2,382,979
Investment in subsidiary company - Dominium S.A. - 805,820
Investment in subsidiary company - capital contribution 65,433
Impairment charge (26,781,124)
At 31 December 2022 - 32,966,376
Investment in subsidiary company - Dominium S.A. 397,850
Investment in subsidiary company - DP Polska S.A. (partial return of shares (350,000)
subscribed)
Investment in subsidiary company - capital contribution 267,417
At 31 December 2023 - 33,281,643
Investments in Group undertakings are recorded at cost, which is the fair
value of the consideration paid.
The parent company's investment in Polish subsidiaries, i.e., DP Polska S.A.
and Dominium S.A., have a historical cost of £30.9m and investment in
Croatian subsidiary, i.e., All About Pizza d.o.o., has a historical cost of
£2.4m. The Group has performed an impairment review of Polish and Croatian
cash-generating units based on fair value less costs to sell estimates. The
impairment review concluded that the carrying value in Group undertakings were
not impaired.
The Company holds 20% or more of the share capital of the following companies,
which are included in the consolidation:
Company Nature of business Location Class % holding
DP Polska S.A. Operation of Pizza delivery restaurants Poland Ordinary 100
Dominium S.A. Operation of Pizza delivery restaurants Poland Ordinary 100
All About Pizza d.o.o. Operation of Pizza delivery restaurants Croatia Ordinary 100
The registered office of DP Polska S.A. and Dominium S.A. is: 30 Dabrowiecka
Street, 03-932 Warsaw, Poland.
The registered office of All About Pizza d.o.o. is: 1 Kneza Mislava Street,
Zagreb,
Croatia.
The acquisition of Dominium S.A. was completed on 8th January 2021. The
acquisition of All About Pizza d.o.o. was completed on 29th July 2022.
16. LOANS GRANTED TO SUBSIDIARY UNDERTAKINGS
The Company has provided €200k loan to AAP in August 2022 following the
acquisition. The loan is repayable by 31.12.2025, is unsecured with 3%
interest payable (EURIBOR (one year) plus a margin 1% from 1 January 2024) and
have been discounted to a market rate of 5.3% in accordance with IFRS
9.
17. DEFERRED TAX
The Group has unused tax losses of £17,554,402 available for offset against
future profits. Polish tax losses are only recognised for deferred tax
purposes to the extent that they are expected to be used to reduce tax payable
of future profits. Under Polish law, losses can only be carried forward for
five years and only 50% of the losses brought forward can be set off in any
one year. Polish tax losses expire as follows: £3,659,250 in 2024;
£2,897,590 in 2025; £1,818,575 in 2026; £1,056,855 in 2027 and £614,259
in 2028. UK tax losses carried forward at the balance sheet date were
£6,713,152. AAP tax losses carried forward at the balance sheet date were
£794,721.
Group Group Company Company
2023 2022 2023 2022
Restated
£ £ £ £
Deferred tax liability
Deferred tax liability
Property, plant and equipment (164,880) (120,226) - -
Intangible assets (415,291) (414,489) - -
Interest on loans (7,415) (5,826)
Accruals (417) (396)
(588,003) (540,937) - -
Movements in deferred tax
Property, plant and equipment Intangible assets Interest on loans Accruals Total
£ £ £ £ £
At 31 December 2022 (120,226) (414,489) (5,826) (396) (540,937)
Credited to equity (8,036) 4,555 (409) (21) (3,911)
Credited to profit and loss (36,618) (5,357) (1,180) - (43,155)
At 31 December 2023 (164,880) (415,291) (7,415) (417) (588,003)
18. TRADE AND OTHER
RECEIVABLES
Group Group Company Company
2023 2022 2023 2022
Restated
£ £ £ £
Current
Trade receivables 1,128,126 864,528 - -
Trade receivables from subsidiaries - - - 67,246
Other receivables 2,405,423 1,273,031 15,769 11,295
Prepayments and accrued income 342,883 581,491 52,862 68,440
3,876,432 2,719,050 68,631 146,981
Non-current
Other receivables 422,064 452,125 - -
At 31 December 4,298,496 3,171,175 68,631 146,981
Other non-current receivables include loans to sub-franchisees which are
repayable over between four and nine years. Other current receivables include
loans to sub-franchisees repayable over less than one year. Repayments may
be made earlier in the event that sub-franchised stores achieve certain
turnover targets earlier than expected. The loans are secured by a charge over
certain assets of the sub-franchisees. Other current receivables also includes
Polish and Croatian value added tax recoverable in future periods. No
receivables are materially past due date. Other than amounts held by the
Company, all trade and other receivables are in Polish Zloty and Croatian
Kuna. Trade receivables are non - interest bearing and are generally on 0 - 30
days terms.
19. INVENTORIES
Group Group Company Company
2023 2022 2023 2022
£ £ £ £
Raw materials and consumables 1,034,187 982,110 - -
At 31 December 1,034,187 982,110 - -
20. LEASES
Leasehold
property Total
Cost: £ £
At 1 January 2022 14,331,223 14,331,223
Acquisition of business 267,877 267,877
Foreign exchange movements 654,739 654,739
Additions 655,352 655,352
Adjustment to right-of-use asset lease term (51,773) (51,773)
Disposals (666,255) (666,255)
At 1 January 2023 15,191,163 15,191,163
Foreign exchange movements 902,896 902,896
Additions 2,671,971 2,671,971
Disposals (405,608) (405,608)
At 31 December 2023 18,360,422 18,360,422
Accumulated depreciation
At 1 January 2022 6,093,752 6,093,752
Foreign exchange movements 430,854 430,854
Adjustment to right-of-use asset lease term 524,131 524,131
Disposal (602,689) (602,689)
Charge for the year 2,272,151 2,272,151
At 1 January 2023 8,718,199 8,718,199
Foreign exchange movements 616,078 616,078
Adjustment to right-of-use asset lease term 892,171 892,171
Disposals (291,238) (291,238)
Charge for the year 2,412,155 2,412,155
At 31 December 2023 12,347,365 12,347,365
Carrying amount
At 31 December 2023 6,013,057 6,013,057
At 31 December 2022 6,472,965 6,472,965
At the Balance sheet date, the Group leased 116 stores, one office and two
commissaries. Leases generally have an initial term of 5 years, with an option
to extend for an additional period of between 5 and 10 years. The adjustment
to right-of-use asset lease term represents right of use assets write-off due
to potential store closures in 2024. Please also refer to note
5.
2023 2022
Amounts recognised in profit and loss £ £
Depreciation expense on right-of-use assets 2,412,155 2,272,151
Interest expense on lease liabilities 611,477 665,084
2023 2022
£ £
The total cash outflow for leases amounted to 1,795,817 2,068,948
£262,056 has been recognised in Income Statement in 2023 (2022: £47,677)
for short-term and low value lease assets.
GROUP AS A
LESSOR
The Group enters into lease agreements as an intermediate lessor with respect
to stores operated by sub-franchisees. These leases have terms of between 1
and 5 years with a 5 year extension option, but no longer than the term of the
main lease agreement. The lessee does not have an option to purchase the
property at the expiry of the lease period. Rental income recognised by the
Group during the year is £226,125 (2022: £240,721).
Future minimum rentals receivable under non-cancellable operating leases as at
31 December are, as
follows:
2023 2022
Maturity analysis £ £
Within one year 118,510 102,047
1 - 2 years 118,510 92,781
2 - 3 years 66,554 92,781
3 - 4 years 15,183 46,308
4 - 5 years 6,482 15,390
At 31 December 325,239 349,307
21. LEASE LIABILITIES
2023 2022
£ £
Total lease liabilities 8,907,165 8,501,171
Analysed as:
Non-current 6,005,449 5,666,835
Current 2,901,716 2,834,336
2023 2022
Maturity analysis £ £
Within one year 3,453,616 3,000,744
1 - 2 years 3,257,056 2,958,992
2 - 3 years 1,730,089 1,985,609
3 - 4 years 917,019 1,159,810
4 - 5 years 402,653 386,169
Onwards 664,461 259,149
For the year ended 31 December 2023, the average effective borrowing rate was
8.3 per cent. Interest rates are fixed at the contract date. All leases are on
a fixed repayment basis and no arrangements have been entered into for
contingent rental payments. All lease obligations are denominated in Polish
Zloty or Euros.
The fair value of the Group's lease obligations as at 31 December 2023 is
estimated to be £8,907,165 using 8.3% discount rate. This is based on the
rate for Polish Government bonds with a similar maturity to the lease terms
and adding a credit margin that reflects the secured nature of the lease
obligation.
The Group's obligations under leases are secured by the lessors' rights over
the leased assets.
22. EQUITY
"Called up share capital" represents the nominal value of equity shares
issued. An increase in share capital in 2022 is due to the increase in share
capital for Dominium S.A., the increase in share capital for DP Polska S.A.
and the increase in share capital for the acquisition of All About Pizza
d.o.o.
"Share premium account" represents the premium paid on the Company's 0.5p
Ordinary shares. Please refer to Note 28 for details.
"Capital reserve - own shares" represents the cost of shares repurchased and
held in the employee benefit trust (EBT).
"Retained earnings" represents retained losses of the Group.
"Merger relief reserve" represents the excess of the value of the
consideration shares issued to the shareholders upon the reverse takeover and
acquisition of All About Pizza d. o.o. over the fair value of the assets
acquired.
"Reverse Takeover reserve" represents the accounting adjustments required to
reflect the reverse takeover upon consolidation.
"Currency translation reserve" represents exchange differences arising from
the translation of the financial statements of the Group's foreign
subsidiaries.
23. CASH AND CASH EQUIVALENTS
Group Group Company Company
2023 2022 2023 2022
Restated
£ £ £ £
Cash at bank and in hand 1,888,465 3,728,177 134,185 65,293
At 31 December 1,888,465 3,728,177 134,185 65,293
24. TRADE AND OTHER PAYABLES
Group Group Company Company
2023 2022 2023 2022
£ £ £ £
Current
Trade payables 3,567,409 3,032,651 15,260 14,189
Other payables 543,317 335,729 - -
Accrued expenses and provisions 2,544,865 1,974,648 84,920 79,889
At 31 December 6,655,591 5,343,028 100,180 94,078
Dismantling provision for the stores to be closed in 2024 amounting to
£125,766 is included within Accrued expenses and provisions as 31 December
2023.
1st January 2023 Provisions made in the period Amounts used 31st December 2023
£ £ £ £
Dismantling provision 21,294 120,706 (21,542) 125,766
25. BORROWINGS
Group Group Company Company
2023 2022 2023 2022
£ £ £ £
Non current interest bearing loans and borrowings
Borrowing 7,065,605 6,763,297 7,040,576 6,734,149
At 31 December 7,065,605 6,763,297 7,040,576 6,734,149
As part of the reverse acquisition DP Poland PLC (the legal acquirer) issued a
€1.3million loan note in favour of Malaccan Holdings Ltd the former owner of
Dominium S.A.. In addition, outstanding debt of €6.2 million (approximately
£5.6 million) that was previously due from Dominium to Malaccan Holdings
under certain existing Shareholder Loans was converted into a further
unsecured loan note of €6.2 million being issued to Malaccan Holdings on the
same terms and in substitution for that outstanding debt. In aggregate,
therefore, €7.5 million Loan Notes were issued by DP Poland plc and remain
outstanding to Malaccan Holdings upon completion of the acquisition of
Dominium S.A.. The loans are repayable as at 30.06.2025, and are unsecured
with 3% interest payable (EURIBOR plus 1.0% for 2024 and EURIBOR plus 2.5% for
2025) and have been discounted to a market rate of 5.3% in accordance with
IFRS 9.
26. ANALYSIS OF MOVEMENTS IN NET FUNDS
01 January Acquisition Cash Non Foreign 31 December
2022 flows cash exchange 2022
Restated movements Movements Restated
£ £ £ £ £ £
Cash and cash equivalents 2,461,241 22,828 1,327,463 - (83,355) 3,728,177
Borrowings (5,829,461) (192,687) 163,539 (565,567) (339,121) (6,763,297)
Lease liabilities (current and non-current) (9,705,438) (218,853) 2,068,948 (645,828) - (8,501,171)
Net debt (13,073,658) (388,712) 3,559,950 (1,211,395) (422,476) (11,536,291)
01,January Acquisition Cash Non Foreign 31,December
2023 Flows cash exchange 2023
Restated movements movements
£ £ £ £ £ £
Cash and cash equivalents 3,728,177 - (1,818,981) - (20,731) 1,888,465
Borrowings (6,763,297) - - (460,554) 158,246 (7,065,605)
Lease liabilities (current and non-current) (8,501,171) - 1,795,817 (2,116,295) (85,516) (8,907,165)
Net debt (11,536,291) - (23,164) (2,576,849) 51,999 (14,084,305)
Non-cash movements mainly relate to interests accrued on loans and changes in
lease agreements periods and other terms.
27. FINANCIAL INSTRUMENTS
Categories of financial instruments
2023 2023 2022 2022
Financial assets at amortised cost Financial liabilities at amortised cost Financial assets at amortised cost Financial liabilities at amortised cost
Restated Restated
£ £ £ £
GROUP
Financial Assets
Cash and cash equivalents 1,888,465 - 3,728,177 -
Trade receivables 1,128,126 - 864,528 -
Other receivables - current 2,405,423 - 1,273,031 -
Other receivables - non current 422,064 - 452,125 -
Total 5,844,078 - 6,317,861 -
Financial Liabilities
Trade payables - (3,567,409) - (3,032,651)
Borrowing - (7,065,605) - (6,763,297)
Other liabilities - current - (543,317) - (335,729)
Lease liabilities - current - (2,901,716) - (2,834,336)
Lease liabilities - non current - (6,005,449) - (5,666,835)
Accruals - current - (2,544,865) - (1,974,648)
Total - (22,628,361) - (20,607,496)
Net (16,784,283) (14,289,636)
2023 2023 2022 2022
Financial assets at amortised cost Financial liabilities at amortised cost Financial assets at amortised cost Financial liabilities at amortised cost
£ £ £ £
COMPANY
Financial Assets
Cash at bank 134,185 - 65,293 -
Trade receivables - - 67,246 -
Other receivables 68,631 - 79,735 -
Total 202,816 - 212,274 -
Financial Liabilities
Trade payables - (15,260) - (14,189)
Accruals - (84,920) - (79,889)
Borrowings - (7,040,576) - (6,734,149)
Total - (7,140,756) - (6,828,227)
Net (6,937,940) (6,615,953)
The fair value of the Group's financial assets and liabilities is not
considered to be materially different from the carrying amount as set out
above. No financial assets are significantly past due or impaired.
Maturity of the Group's financial liabilities
2023 2023 2023 2023 2022 2022 2022 2022
Lease liabilities Trade and other payables Borrowings Total Lease liabilities Trade and other payables Borrowings Total
£ £ £ £ £ £ £ £
Due within one year 3,453,616 6,655,591 7,102,393 17,211,600 3,000,744 5,343,028 - 8,343,772
Due within two to five years 6,306,817 - 6,306,817 6,490,580 - 7,055,733 13,546,313
Due after five years 664,461 - - 664,461 259,149 - - 259,149
10,424,894 6,655,591 7,102,393 24,182,878 9,750,473 5,343,028 7,055,733 22,149,234
Capital Risk Management
The Company and the Group aim to manage its overall capital so as to ensure
that companies within the Group continue to operate as going concerns, whilst
maintaining an optimal capital structure to reduce the cost of
capital.
The Company's and the Group's capital structure represent the equity
attributable to shareholders of the company together with borrowings and cash
and cash equivalents.
Market risk
Market risk is the risk that arises from movements in stock prices, interest
rates, exchange rates, and commodity prices. Market risk for the 31 December
2023 year end is reflected within the currency risk and interest rate risk
which are discussed further
below.
Currency Risk
The foreign currency risk stems from the Company and the Group's foreign
subsidiary which trades in Poland and Croatia and whose revenues and expenses
are mainly denominated in local currencies. Additionally, some Company and
Group transactions are also denominated in US Dollar and Euro currencies. The
Company and the Group are therefore subject to foreign currency risk due to
exchange rate movements that will affect the Company and the Group's operating
activities and the Company and the Group's net investment in its foreign
subsidiary. In each case where revenues of the Group are in a foreign
currency, there is a material match between the currency of each operating
company's revenue stream, primary assets, debt and debt servicing (if
applicable). The Group does not currently use derivatives to hedge balance
sheet and income statement translation exposures arising on the consolidation
of overseas subsidiaries.
The carrying amount in Sterling, of the Group's foreign currency denominated
monetary assets and liabilities at the reporting dates is as follows:
2023 2022
Assets £ £
Polish Zlotys 5,010,961 3,618,600
Euro 727,248 567,265
Sterling 449,113 2,915,432
US dollar 384 -
Croatian Kuna - 74,772
Liabilities
Polish Zlotys 14,371,684 12,818,897
Euro 8,049,241 7,246,190
Sterling 94,764 173,967
US dollar 112,673 206,392
Croatian Kuna - 162,050
Sensitivity analysis
The potential impact on Group net loss and equity reserves from a 20%
weakening of the Polish Zloty, Euro and US dollar against sterling affecting
the reported value of financial assets and liabilities would be an increased
net loss and reduction in Group reserves of
£3,359,151.
2023 2022
£ £
20% weakening of Polish Zloty (1,872,294) (1,895,403)
20% weakening of Euro (1,464,399) (1,335,785)
20% weakening of US dollar (22,458) (41,278)
20% weakening of Croatian Kuna - (17,456)
(3,359,151) (3,289,922)
A depreciation of 20% has been selected for the analysis as an illustration on
the basis that it is a reasonable estimate of a likely market fluctuation.
An appreciation of 20% against Sterling would produce an equal and opposite
effect.
Interest Rate Risk
The Company and the Group do not possess any financial instruments with
floating interest rates in 2023, hence interest rate risk is not applicable to
the Group.
Credit Risk
Exposure to credit risk is limited to the carrying amount of financial assets
recognised at the balance sheet date, namely cash and cash equivalents, trade
and other receivables and loans to sub franchisees.
The Company and the Group manage its exposure to this risk by applying
Board-approved limits to the amount of credit exposure to any one counterparty
and employs minimum credit worthiness criteria as to the choice of
counterparty, thereby ensuring that there are no significant concentrations of
credit risk.
All sub-franchisees who are provided with loans from the Group have been
through the franchisee selection process, which is considered to be
sufficiently robust to ensure an appropriate credit verification procedure.
The credit risk for liquid funds and other short-term financial assets is
considered negligible, since the counterparties are reputable banks with high
quality external credit ratings.
Impairment of financial assets
The Group recognises an allowance for expected credit losses ('ECLs') for all
debt instruments not held at fair value through profit or loss. ECLs are based
on the difference between the contractual cash flows due in accordance with
the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The
expected cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual terms. ECLs
are recognised in two stages. For credit exposures for which there has not
been a significant increase in credit risk since initial recognition, ECLs are
provided for credit losses that result from default events that are possible
within the next 12-months (a 12-month ECL). For those credit exposures for
which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a
lifetime ECL). For trade receivables the Group applies a simplified approach
in calculating ECLs and recognises a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a provision procedure that is
based on the percentage cost if insuring its receivables against loss from
default. Historic credit loss experience, adjusted for forward-looking factors
specific to the debtors, the economic environment and relevant security and
guarantees from sub-franchisees are also taken into account. The Group
considers that there has been a significant increase in credit risk when
contractual payments are more than 30 days past due. The Group considers a
financial asset in default when contractual payments are 180 days past due.
However, in certain cases, the Group may also consider a financial asset to be
in default when internal or external information indicates that the Group is
unlikely to receive the outstanding contractual amounts in full before taking
into account any credit enhancements held by the Group. A financial asset is
written off when there is no reasonable expectation of recovering the
contractual cash flows.
The movement in the allowance for doubtful debts during the year is as
follows:
2023 2022
£ £
Balance at 01 January 280,220 485,916
Impairment loss made during the year - 984
Reversal of previously recognised impairment loss (3,542) (206,680)
Foreign exchange movements 15,002 -
Balance at 31 December 291,680 280,220
Set out below is the information about the credit risk exposure on the Group's
trade receivables as at 31 December:
Current <30 days 30-60 days 61-90 days >91 days Total
£ £ £ £ £ £
31 December 2023 1,125,735 0 2,077 314 0 1,128,126
31 December 2022 774,437 85,312 3,087 108 1,584 864,527
The Group seeks to manage financial risk by ensuring sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. Surplus funds are invested on a short term basis at money market
rates and therefore such funds are available at short notice.
28. SHARE CAPITAL
2023 2022
£ £
Called up, allotted and fully paid:
712,481,898 (2022: 712,393,662) Ordinary shares of 0.5 pence each 3,562,409 3,561,969
Movement in share capital during the period
Nominal
Number value Consideration
£ £
At 31 December 2021 619,586,515 3,097,933 69,899,308
Shares issued for AAP acquisition 29,787,234 148,936 2,382,979
Additional subscription made 61,627,660 308,138 4,930,213
Share options exercised 2022 829,753 4,149 4,149
Management share award 562,500 2,813 45,000
Transaction costs - - -131,000
At 31 December 2022 712,393,662 3,561,969 77,130,649
Share options exercised 2023 88,236 441 -
At 31 December 2023 712,481,898 3,562,410 77,130,649
The ordinary shares carry one voting right per share and no right to fixed
income.
DP Poland Employee Benefit Trust ("EBT")
The trustee of the EBT holds 1,765,872 ordinary shares in the Company for the
purposes of satisfying outstanding and potential awards under the Company's
Joint Ownership Share Scheme, Share Option Scheme and the Share Incentive
Plans. The historic cost of these shares was £51,565 with a net contribution
of £6,115 made by the JOSS award holders to acquire their joint interests.
The shares held by the EBT had a market value of £189,831 at 31 December
2023.
29. SHARE BASED PAYMENTS
Group Group
2023 2022
£ £
Share based payments expense 323,602 137,748
The Company has provided the following types of share-based incentive
arrangements.
Type of arrangement Vesting period Vesting conditions
Joint Ownership Share Scheme 2.5 - 3.5 years Achievement of store growth and financial targets
Employee Share Incentive Plan 2 years Two years service
Non-Executive Directors' Share Incentive Plan 2 years Two years service
Employee Share Option Plan Variable Detailed individual performance targets
Long Term Incentive Option Plan 2-3 years Detailed company performance targets
Share Option Plan 1-4 years Time-vest and detailed company performance indicators
The Company established the Joint Ownership Share Scheme ("JOSS") and the
Share Incentive Plans on 25 June 2010, the Employee Share Option Plan on 06
May 2011, the Long Term Incentive Share Option Plan on 19th December 2014 and
the Share Option Plan on 13 June 2022. The Group has calculated charges using
a Black-Scholes model. Volatility and risk free rates have been calculated for
each grant pack based on expected volatility over the vesting period and
current risk free rates at the time of each award. Volatility assumptions are
estimates of future volatility based on historic volatility and current market
conditions.
Assumptions used in the valuation of share option awards were as follows:
Award date Exercise price Expected volatility Risk free rate Expected dividends Option life in years IFRS2 fair value per share option
28 February 2022 8 pence 50% 1,20% - 3 Years £0.0228
14 June 2022 8 pence 50% 2,30% - 1 Year £0.0183
14 June 2022 8 pence 50% 2,30% - 4 Years £0.0217
08 November 2022 8 pence 50% 3,50% - 1 Year £0.0336
08 November 2022 8 pence 50% 3,50% - 4 Years £0.0380
01 December 2022 8 pence 50% 3,20% - 1 Year £0.0422
01 December 2022 8 pence 50% 3,10% - 4 Years £0.0468
03 July 2023 8 pence 50% 4,65% - 1 Year £0.0341
03 July 2023 8 pence 50% 4,47% - 4 Years £0.0384
The share based payments charge for the year by scheme was as follows:
2023 2022
Share Incentive Plan - -
Other Share Options 323,602 137,748
Long Term Incentive Share Option Plan - -
323,602 137,748
All of the above amounts related to equity-settled share based payment
transactions.
Share scheme awards outstanding
Scheme and date of award Hurdle or Outstanding Awarded Exercised Lapsed Outstanding
exercise
31.12.22
in period
in period
in period
31.12.23
price
No.
No.
No.
No.
No.
Restated
SIP 18 June 2014 n/a 413,604 - - - 413,604
SIP 17 April 2015 n/a 486,486 - - - 486,486
SIP 24 May 2017 n/a 191,490 - - - 191,490
Share options 22 May 2017 0.5 pence 164,804 - - - 164,804
Share options 11 January 2018 0.5 pence 24,000 - - - 24,000
Share options 01 June 2018 0.5 pence 88,236 - 88,236 - -
Share options 11 October 2018 0.5 pence 128,906 - - - 128,906
Stock option plan 28 February 2022 8 pence 750,000 - - - 750,000
Stock option plan 14 June 2022 8 pence 38,493,533 6,500,000 - - 44,993,533
The weighted average remaining contractual life of outstanding share options
is 8.66 years (2022: 9.30 years). The number share options exercisable at 31
December 2023 was 47,673,053 with a weighted average exercise price of 8 pence
(2022: 41,261,289 shares with a weighted average exercise price of 8
pence).
30. CAPITAL COMMITMENTS
At 31 December 2023 there were no amounts contracted for but not provided in
the financial statements (2022: £0) for the
Group.
31. RELATED PARTY TRANSACTIONS
During the period the Group and Company entered into transactions, in the
ordinary course of business, with other related parties. The transactions with
directors of the Company are disclosed in the Directors' Remuneration Report.
Transactions with key management personnel (comprising the Directors and key
members of management in Poland and Croatia) are disclosed
below:
Group Group
2023 2022
£ £
Short-term employee benefits 450,394 387,337
Share-based payments 323,602 137,748
At 31 December 773,996 525,085
The Company made a charge of £75,000 to DP Polska S.A. and £75,000 to
Dominium S.A. for management services provided in 2023. The balance owed by DP
Polska S.A. to DP Poland plc as at 31 December 2023 was £nil (2022:
£67,246).
The Company also has a borrowing from Malaccan Holdings Ltd. a significant
shareholder which totalled £7,063,001 (2022: £6,734,149). In April 2024 the
Company has partially repaid £4.0 million of outstanding Loan Notes from
Malaccan Holdings Ltd. from the proceeds raised as a result of
fundraising.
32. EVENTS AFTER THE BALANCE SHEET DATE
Board changes
On 1 January 2024, Derk ("Stoffell") Thijs was appointed as an Independent
Non-Executive Director of the Company.
Fundraising
On 27 March 2024 DP Poland PLC has announced fundraising via Subscription,
Placing & Retail Offer. The admission of the Subscription Shares, Placing
Shares and Retail Offer Shares took place on 19 April 2024.
The Company has raised gross proceeds of approximately £20.5 million through:
· the Subscription by Domino's Pizza Group plc for 110,887,096
Subscription Shares, raising £11.0 million at the Placing Price;
· the Placing of 85,685,483 Placing Shares through an accelerated
bookbuild process, raising £8.5 million at the Placing Price; and
· the Placing of Retail Offer for 10,080,645 Retail Shares, raising
£1.0 million at the Placing Price.
The Placing was significantly oversubscribed with the Company receiving orders
of c.2.5 times the size of the proposed Placing. Accordingly, the Company has
sought to protect the interests of existing shareholders by honoring their
soft pre-emption rights in connection with the Placing and Subscription.
The net proceeds of the Fundraising receivable by the Company will be used to
accelerate its growth strategy through the roll out of stores in Poland and
Croatia, upgrade of stores in Poland, shift to a franchise model and through
possible targeted acquisitions to reach 200 stores within three years, an
important milestone on the way to approximately 500 stores by 2030 in Poland.
Merger of DP Poland S.A. and Dominium S.A.
On 29 February 2024 the Polish subsidiaries of DP Poland PLC, i.e., DP Poland
S.A. and Dominium S.A., have submitted a merger plan to the court in Poland.
Merger of DP Poland S.A. and Dominium S.A. is expected to be finalized at the
end of 2024.
Merger of Dominium S.A. and DP Polska S.A. will help to simplify the
organizational structure of the Group and conduct business activities in
Poland within one entity, which should reduce operating costs and ensure
better cooperation with external counterparties. Conducting further operations
within one company will also limit transactions and settlements between the
companies, and will allow for increased transparency of the capital group.
Loan extension and partial
repayment
In April 2024 the Company has agreed an extension to the maturity date of its
loan facilities provided by Malaccan Holdings Ltd. by six months to 30 June
2025. The Company has also partially repaid (£4.0 million) of outstanding
Loan Notes from Malaccan Holdings Ltd. from the proceeds raised in April 2024.
Loan extension and partial repayment represent a related party transactions
pursuant to Rule 13 of the AIM Rules.
Grant of options
On 29 April 2024 the Company granted 4,750,000 share options to certain Board
members under the employee share option plan at an exercise price of 8 pence
per share option.
33. VAT
Dominium is a party to a number of court and administrative proceedings, the
subject of which is to determine the amount of VAT paid by the company for the
period 2011-2016. The disputes relate to the rate at which VAT is applied on
sales made by Dominium, which is something that is affecting a number of
companies operating in the fast food sector in Poland (including DP Polska).
Dominium were applying a lower (5 per cent) rate of VAT on sales, whereas the
tax authorities in Poland were of the opinion that a higher (8 per cent) rate
should have been applied instead. As a result, Dominium have retrospectively
applied the higher (8 per cent) rate for this period and have made additional
VAT payments to cover the shortfall to the tax authorities in Poland.
Accordingly, Dominium started to apply the higher 8 per cent rate and have
sought recovery of the additional amounts paid due to the application of the
higher rate. Some of the proceedings that Dominium brought have been suspended
due to certain questions affecting major food service operators in Poland,
which have been resolved by the European Court of Justice in favour of food
service operators. In other proceedings, applications for a suspension of
payment of the VAT liability arising from the increased VAT rate have been
filed due to these issues and these have been approved for suspension.
The liabilities resulting from the decisions made to-date, totalling
approximately PLN 7.0 million, have been paid by Dominium. The disputes
regarding 2011 and 2012 years have been resolved in favour of Dominium. In
2022 Dominium has received the VAT refund for the year 2011 in the amount PLN
2,275,615 (approximately £414,011). In 2023 Dominium has received the VAT
refund for the year 2012 in the amount of PLN 1,863,040 (approximately
£356,781). The whole dispute has not been resolved yet, the period 2013-2016
is still under investigation.
Under the terms of the Acquisition Agreement, one half of any amounts that
have been overpaid in respect of the application of the higher VAT rate and
which may be refunded by the Polish tax authorities to Dominium shall be paid
by the Group to Malaccan Holdings
Ltd.
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