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DP Poland chief says Poland is Europe's last major growth market

First-half results revealed significant progress was made both financially and operationally
pizza being forked
The company is gaining a bigger pizza action in Poland where it is expanding rapidly

Poland is one of the last large high-growth takeaway markets left in Europe, according to Peter Shaw, chief executive of DP Poland PLC (LON:DPP), which operates the Domino’s Pizza master franchise in the country.

His comment was borne out by first-half results, which mark some significant progress in the six months ended June 30 – both operationally and financially.

In the period, revenues from its 60 stores in 27 towns grew by 38% to £7.74mln.

While the fast-growing business posted a loss, underlying earnings (EBITDA) at company-owned outlets grew by 61%.

It opened five new stores in the first six months of 2018 and expects to expand at the same rate for the remainder of the year.

WATCH: DP Poland walks investors through interims

Financially, growth is well underpinned with the company sitting on cash of around £4.5mln at the period-end.

Going forward, CEO Shaw expects to attract an increasing number of sub-franchise partners – entrepreneurs who share the cost and risk of developing individual outlets.

Current trading has been affected by the heatwave and, latterly, tough year-earlier comparatives.

So, like-for-like sales, which grew 15% in the first-half, decelerated to 6% in July and 1% in August.

"When it’s really hot weather what do you do? You pray for rain," Shaw told Proactive Investors' Andrew Scott.

"That’s slightly tongue-in-cheek, but it’s important to know we are impacted by weather like a lot of businesses are."

Deflation in the first-half 

That said, food costs have eased with deflation seen through the initial period of the year. But inflation is coming back, DP Poland added.

Boss Shaw gave an upbeat assessment of prospects, saying: “Poland is arguably the last large high growth market opportunity in Europe, a substantial and stable country of 38mln people that is maturing into a sophisticated consumer economy.

“The food delivery sector is growing strongly and we are confident that Domino's will continue to outperform, underpinned by the strength of our consumer proposition and the investments we have made in our expansion.

“We are confident of the long-term sales and profit growth prospects for Domino's Pizza in Poland.”    

Share price nudges higher

The shares nudged 2.7% higher to 30.3p – though that’s some way off the 75p price target set by Peel Hunt, the company’s corporate broker.

“We believe the key KPI for DP Poland is the rate of store roll out and this is being maintained at a healthy level,” said analyst Ivor Jones in a note to clients.

“The growing participation of sub-franchisees is particularly encouraging as it implies that there may be more third-party capital available to drive future growth. Profitability remains some way off but the underlying business continues to grow.”

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