DP Poland LON:DPP, the AIM-listed, Birmingham-based Polish food company behind the American Domino’s Pizza brand in Poland and Croatia published a trading update for the group for the nine-moths to the end of September earlier this week. DPP has been the master franchise operator for Domino’s in Poland since 2011 and entered the Croatian market in 2020.
The company maintains: “Poles love Pizza”, something that comes through in DPP’s latest numbers.
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DPP reported like-for-like sales in Poland increase year-on-year for the nine-months to end-September 2023 by 21.8% to PLN188.7m (GBP36.6m). The company reported its delivery channel in Poland contributing an increasing share of its business, by the end of September, accounting for two-thirds of the firm’s total system sales.
This was on the back of an average weekly order count in Poland expanding to 800 per store year-to-date.
Croatia experiencing significant sales growth
In Croatia total system sales were up 65.4% to EUR2.7m (GBP2.3m), driven by new store openings. However, DPP did note that since the start to 2Q24 the businesses has been experiencing an upward pressure on food costs, especially dairy products, but, said management: “we have continued to grow orders and market share without sacrificing store level profitability.”
The Polish food retailer said that it expected that it will have opened 12 new outlets by the close of the year and relocate four of its existing stores, to have 122 locations across its network by the end of 2024.
DPP Is transitioning towards a sub-franchisee model, and during the year to end-September sold five corporate stores to new franchisees.
DPP Poland building a sub-franchisee business
Nils Gornall, chief executive of DPP said: “[…] we have begun to implement another strategic initiative – building up our franchisee department. The first four stores have been sold to franchisee in July and in August. I am personally excited to see that these stores were sold to a very experienced and successful franchisee who relocated from Australia to Poland with his family, helping validate the potential we see in the country. We remain committed to our strategy of transforming the business to a franchised model. Franchisee performance is already accelerating, with an EBITDA margin of 13% to July YTD, and we will continue to focus on this strategy.”
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In its last set of results, to end-June, published in September, DPP reported group revenues of around GBP26.4m, up 25.9% year-on-year, with earnings of GBP2.1m, up 95.2% y-o-y. However, given its rollout of new stores, DPP was still in loss-making territory, posting a loss of GBP496,000, 69% better than losses a year ago, so progress in the right direction.
Gornall said: “We have made a strong start to the second half of the year and expect to see a continued improvement in profitability in 2024, which is the priority for the entire team. By delivering high quality product, in high volumes and to delighted customers, we have built the foundation for a material increase in scale of the business. This will be driven in part by new store openings, and in part by sale of existing or new stores to sub-franchisees. The group’s ongoing exceptional performance, and its strong balance sheet, should allow us to demonstrate material progress in both these avenues to expansion across 2H24 and beyond.”
“I remain very optimistic about the outlook. We are on the right track to further solidify the strong position of Domino’s in Poland and Croatia.”
The company’s shares opened the week (4th November) at 11.2p and by lunchtime on Monday was up to 11.5p. Over one-year DPP’s shares are up 43.75% and over the year-to-date up 4.5%. The company has a market capitalisation of GBP101m.
Although still growing, DPP has secured a strategic position as a franchisee of a significant global brand in Eastern Europe, and as the company expands its brand in both Poland and Croatia (with an eye to move into the more touristic coastal regions of Croatia) its move towards break-even and profitability is edging ever-closer, as Polish and Croatian appetites for American pizza grow.
