viewDP Poland PLC

DP Poland reports double-digit growth in first half of 2018 with rival's exit expected to shake up market

The group, which holds the exclusive right to operate the Domino's brand in Poland, reported double-digit growth in both retail sales and like-for-likes in the first half of 2018

Domino's Pizza branch
Online business is booming, with 77% of all DP Poland's delivery sales now made online

DP Poland Plc (LON:DDP), which operates the master franchise for Domino’s Pizza in Poland, has come a long way since it opened its first store in Warsaw in 2011.

The AIM-listed firm currently has 59 stores in total: 33 stores are corporate, 2 are under management contracts, and 24 are sub-franchised. These branches cover 26 towns and cities in the country, over half of the 42 areas considered to be major population centres.

WATCH: World Cup adds spice to bumper first half for DP Poland

And the expansion is set to continue into the second half of 2018, with 6 further leases already signed and a number of stores already under construction.

At the end of this financial year, the company is targeting 10+ store openings, representing around 20% growth in its total store estate year-on-year.

The goal is to have 70 stores by the end of 2018 and 100 by 2020, chief executive Peter Shaw told Proactive.

Pizza delivery businesses tend to have high fixed costs initially when the store roll-out is at its height but then profitability improves rapidly.

That seems to be happening at DPP.

Latest numbers for the first half of 2018 showed total retail sales are up 38% compared to the first half of 2017, with like-for-like growth of 13%.

The group has also seen an uptick in its online orders, with 77% if all delivery sales now ordered online with the percentage as high as 90% in some of its more mature branches. 

Shaw said that the growth in online ordering has been helped by innovations across different ordering channels, with a key development being the "Domino's bot", an artificial intelligence which allows customers to order pizza via Facebook Messanger.   

Favourable macro conditions

Shaw has also said that the macroeconomic climate in Poland bodes well for the business, with Polish GDP growth forecasts of around 3%-4% over the next year being driven primarily by consumer spending in addition to a larger amount of Polish consumers ordering convenience food.

"The macro conditions are positive," Shaw said, adding that despite an uptick in competitors the market was also expanding and the company "was growing well alongside that".

More competitors but one key discounter exits

Speaking of competitors, the group is now expecting a boost after one of its cut-price rivals, Telepizza, said it would exit the Polish market.

Telepizza has 107 stores and is one of DP Poland’s larger competitors, but these are being sold to Amrest, which runs Pizza Hut Poland.

Amrest is a Warsaw-listed international restaurant and café business and the broker expects it to close some Telepizza stores and convert the others to Pizza Hut or one of its other brands.

Shaw said he hoped DP Poland's offering and expansion may have influenced Telepizza's decision to exit, adding that there was a possibility the company could pick up some former sub-franchisees as the consumer offer shifted.

Despite the exit of the discounter, Shaw said there we no plans to increase prices; saying the firm would "continue to offer great value".

DP Poland currently holds a market cap of around £45mln.

Quick facts: DP Poland PLC

Price: 5.9 GBX

Market: AIM
Market Cap: £14.96 m

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