DP Poland : Interim Results-2021

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announcement.

DP Poland plc

("DP Poland" or the "Group")

Interim Results, Trading Update and Investor Presentation

DP Poland, the operator of pizza stores and restaurants across Poland, announces its unaudited results for the six months ended 30 June 2021. Extracts from the Group's Interim Report are included at the end of this announcement.

Financial Highlights

• Like for like System Sales in H1 increased by 0.1% year on year to £14.6m (being H1 2021 and H1 2020 on a consolidated basis)
  o Like for like decrease of 1.6% in Q1 o Like for like increase of 9.3% in Q2 o Like for like increase of 0.7% in Q3
• EBITDA decreased to a loss of £14k
• Cash at bank of £1.4m as at 30 June 2021 (£0.3m as at 30 June 2020)

Operational Highlights

• The integration with Dominium was completed in July 2021
• A new integrated website was launched, followed by launch of the Android and iOS app
• Commissaries have been expanded and currently supply the entire network
• The new menu, built on best-selling items, was introduced during Summer 2021

Unaudited Pro Forma Information

The Group sets out below unaudited, consolidated pro forma financial information for illustrative purposes only, to provide information about how the acquisition of Dominium S.A., which completed on 8 January 2021, has affected the trading results of the Group for the six months ended 30 June 2021.

£'000		H1 2020		H1 2021	% change
System Sales		14,507		14,576	0.1%
Revenue		13,687		13,813	0.9%
EBITDA*		189	-	14	-107.5%
margin %		1.4%		-0.1%
Loss for the period	-	2,928	-	1,904	34.9%

*excluding non-cash items, non-recurring items and store pre-opening expenses

Trading Update and Investor Presentation

DP Poland also provides an unaudited trading update for the 9 month period to 30 September 2021 ("YTD21") and an insight into trading for the start of October 2021.

The Group has started to see a positive trend in EBITDA performance as the Group adjusts following completion of the integration and a period of substantial one-off integration costs and operating efficiencies incurred over January to August 2021. The Group's performance does not yet fully reflect synergies arising from the acquisition of Dominium.

PLNm	9m2019	9m2020	9m2021	% change vs.	% change vs.
				2019	2020
System Sales	124.0	118.0	117.9	-5%	0%
LFL System	115.9	114.5	116.9	1%	2%
Sales

Dine-in	42.3	29.5	27.2	-36%	-8%
Delivery	73.5	85.0	89.8	22%	6%
Non-LFL	8.1	3.5	0.9	-89%	-73%
System Sales
PLNm	3Q2019	3Q2020	3Q2021	% change vs.	% change vs.
				2019	2020
System Sales	41.7	41.4	41.6	0%	0%
LFL System	39.8	41.2	41.1	3%	0%
Sales
Dine-in	16.7	12.9	14.5	-13%	13%
Delivery	23.2	28.3	26.6	15%	-6%
Non-LFL	1.8	0.3	0.5	-75%	58%
System Sales

During H1, the Group still had two brands predominantly operating in parallel which limited operating benefits and higher costs as a result of largely separate marketing efforts. In addition, inefficiencies remained from overlapping delivery areas with the two brands still delivering in parallel.

Key takeaways from the change in sales mix:

• Proves loyalty of customers, as customers are migrating from delivery to dine-in and back, depending on the circumstances
• Dine-inis in principle more profitable than delivery, due to lack of the delivery cost
• The business is heading towards COVID-19 neutrality, as customers switch from dine-in to delivery during lockdown periods and vice versa (from delivery to dine-in) as restrictions were eased

Integration synergies extracted over time:

• There is some lead time of restructuring efforts, since the cost benefits can materialise only after the passing of contractual notice periods
• The conversion of Dominium restaurants was spread over three months and was completed on 8 July 2021 (delayed by integration with DPI's IT systems) this included signages being replaced, fresh dough implemented across the network and all staff trained
• Furthermore, after the integration was completed, some synergies have been materialising over a period of time. There is a learning curve for customers as well as the Group itself, as it adjusts to new operational processes

Sales mix affects the margin:

• Dine-inbusiness was loss making during lockdown periods as a result of the restaurants being closed (with February to April 2021 being a period of tighter lockdown in Poland than in many other countries)

Q2 2021 started to see a gradual softening of COVID-19 measures:

• Dine-inrestrictions gradually eased starting from mid-May
• No state support for mid-sized businesses in 2021

Following completion of the integration in July 2021, Q3 proved to be a period of learning and adjustment.

• Some of the customers visiting Dominium website, while being redirected to the Domino's website, were confused by the new look and menu and did not progress to order. This has been addressed in September with the introduction of a special promotion for migrating Dominium customers
• The poorest performing menu items from both brands have been discontinued to simplify the combined menu. This may temporarily impact the sales performance, as customers of the discontinued items need to find their new favorite items
• Delivery times may have increased in the initial months, as the delivery areas for individual stores were redesigned. Stores had to adjust to the revised delivery volumes, while the drivers to their new delivery areas

Trading performance for the first 17 days of October has been strong showing double digit percentage LFL revenue growth compared to 2020 as well as 2019:

• 1.2% LFL dine-in revenue growth compared to 2019 pre-COVID-19 performance
• 41% LFL delivery revenue growth compared to 2019 pre-COVID-19 performance
• 39.4% LFL dine-in revenue growth compared to 2020's pandemic-ridden results
• 5.5% LFL delivery revenue growth compared to 2020's pandemic-ridden results

The Directors believe that the improving performance in October is predominantly a result of students returning to schools and universities, marketing campaigns launched in Warsaw, the Group's strong e-commerce platform (launched in March 2021) and tailored marketing activity and a new online application launched over July to September 2021.

The Directors further believe that continued LFL revenue growth will be driven by an improved market backdrop as customers return to cites and dine-in, a better value proposition to customers as a result of faster delivery times and convenience and through the Group's further enhancement of digital marketing. In addition, the Group expects to be cash generative during Q4 2021 and plans to open new stores during 2022 either through new store openings or network acquisitions

As noted in the Admission Document published on 21 December 2020, prior to the acquisition of Dominium by DP Poland, the Group has paid £1.4 million of VAT payables disputed with the Polish tax authorities (referring to sales for the period 2011-2016). In October 2021, the Group received a supportive ruling by the Supreme Administrative Court in Poland. Whilst there is no guarantee of payment, in the event the guidelines of the Supreme Court as provided in its verdict are not successfully challenged, the Board anticipates the sum to be repaid to the Group with additional interest. As noted in the Admission Document, the disputed VAT was paid prior to the acquisition of Dominium and DPP and it was agreed that half of the amounts received shall be refunded by the Group to Malaccan Holdings. The Group will update shareholders as soon as practicable.

A presentation has been published in relation to the Group's unaudited trading update for the YTD21. The presentation will be made available on the Company's website at www.dppoland.com.

Webinar

The Company is pleased to announce that Piotr Dzierzek, Chief Executive Officer, Malgorzata Potkańska, Chief Financial Officer and Przemyslaw Glebocki, Non-Executive Director will provide a live presentation relating to the Company's results for the six months ended 30 June 2021, and the trading update, via the Investor Meet Company platform on 2 November 2021 at 10.30 a.m. GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet DP POLAND PLC via:

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.

Nick Donaldson, Chairman of the Group, commented:

"We believe in the acquisition of Dominium and are starting to see the fruits of our labour, despite the challenging environment. We have a strong position in the market place and see the roadmap for a much larger network of profitable stores across Poland. We are at an exciting crossroads operationally for the enlarged DP Poland business."

Enquiries:

DP Poland PLC

[phone]

Nick Donaldson, Non-Executive Chairman / Piotr Dzierzek, CEO

Singer Capital Markets

[phone] - NOMAD and Broker

Shaun Dobson / Will Goode / Amanda Gray

Notes for editors

About DP Poland plc

DP Poland, through its wholly owned subsidiary DP Polska S.A., has the exclusive right to develop, operate and sub- franchise Domino's Pizza stores in Poland. Following its acquisition of Dominium S.A., which constituted a reverse takeover under the AIM Rules for Companies, the group now operates over 100 stores and restaurants across a number of cities and towns in Poland.

Chief Executive's Review

Group performance

On January 8, 2021 the acquisition of Dominium S.A. by DPP was formally completed. Consequently, the interim results for the six month period ending 30 June 2021 are the first results relating to the Enlarged Group.

The first half of the year was a challenging period, both internally, as a result of the integration of the two businesses, and externally due to the ongoing impact of COVID-19, low unemployment and poor access to workforce, and an increase in the average cost of raw ingredients towards the end of H1. I am pleased with management's navigation through the period and, while the financial results are reflective of the challenges we have faced, I am happy report that we have achieved our desired outcome - an integrated business well placed for profitable growth trajectory.

Store performance

System Sales in the H1 2021 period increased by 0.1% year on year to £14.6m.

As a result of the COVID-19 outbreak early in the year and the consequent lockdown in Poland, like-for-like System Sales in the first half of the year decreased by 1.6% compared to the prior period. However, we recovered quickly from the initial lockdown, achieving positive like-for-like sales in Q2 and better like-for-like sales in Q3. System Sales growth continues in October to date.

Like-for-like System Sales growth per quarter were as follows:

Q1	-1.6%
Q2	+9.3%
Q3	+0.7%

We are delighted to observe strong performance in a number of cities, notwithstanding the COVID-19 impact, with double digit revenue growth. However, commercial areas such as shopping malls have remained quiet following the COVID-19 lockdown earlier in the year, and this has been reflected in the performance of stores in these areas, such as Warsaw where DPP has a dominant presence over its competitors. We have begun to see recovery during October, due to the start of the academic year.

Marketing and product innovation

Our focus following the merger was to identify synergies and drive maximum value through the integration of two marketing departments.

We have implemented a Digital Experience Platform for sustainable growth and industry leadership, launching our new DPP website and an Android/iOS app, operated by Dominium S.A.. This will become the ultimate app for both companies. We have merged many marketing functions and areas, including Google Analytics and Google Ads. We have also overcome many challenges, including GDPR.

In the summer of 2021, we introduced a new menu in all stores, which includes a selection of bestsellers from Domino's and Dominium to provide the best customer experience. In addition, as a result of inflation in Poland, price increases were implemented effective from June 2021. The Group will continue to monitor the impact of inflation and will review prices on an ongoing basis. The Group also increased the minimum order value to qualify for free delivery.

Our stores are now fully integrated with the website, Android and iOS as well as with the central data warehouse, leveraging the opportunity to take Big Data-driven decisions, applying descriptive, predictive and prescriptive analytics. As a result, we have been designing and testing customer segmentation models to drive marketing activities, developing and testing channel strategies to increase the effectiveness of sales channels, including food aggregators. We have also been optimising promotional activities, using personalised information to tailor promotions, and applying Marketing Automation - using the embedded functionality of the new Digital Experience Platform.

Food aggregators

Aggregators are 'search engines' for food and we want to be visible in those search engines. Our interaction with the food aggregators Pyszne.pl (takeaway.com), Glovo and UberEats has been positive. We have improved our business terms with aggregators and have merged the accounts of DP Polska S.A. and Dominium S.A.

Our objective is to generate incremental orders with a higher average spend; we are broadly satisfied with the early results.

Integration completion

Despite the effects of COVID-19 throughout 2021, we have successfully integrated with Dominium S.A.. The integration plan ran smoothly in the following areas:

• Operations

We have adapted the technical equipment of Dominium stores to the requirements of DPI. We have developed food safety procedures and trained staff.

In regions where both brands are present, we have optimised our delivery strategy. Consequently, we have the largest network of pizzerias in areas such as: Warsaw, Wrocław, Kraków, and Silesia.

• Franchise

At the time of the preliminary analysis of the two companies which took place before the merger, we decided to buy-out the sub-franchise stores which overlapped with corporate stores, in terms of their delivery zones. As a result, we took over 7 stores from franchisees at the end of last year. This year, we have taken over another 10 stores.

We currently cooperate with 4 sub-franchisees, who operate 8 stores in total.

Our primary focus for the coming months is on improving the performance of all franchised stores.

Once the stores reach satisfactory KPIs, we will offer some of the locations to existing or new sub-franchisees.

• Commissaries

Commissaries in DPP were expanded to a larger scale than before the transaction, and both commissaries can now work at the capacity for which they were built.

The Commissary will now form a separate business unit, which buys ingredients from third party suppliers, and sells to all stores, at market prices. This approach helps us to better assess the Commissary's contribution to profitability and to better manage its performance.

We have concluded that it is economical to outsource logistics to an external company, Berto which has allowed the Group to exceed their expected synergies

• HQ integration

We have successfully integrated both teams using the best talent from both organisations. We had to unify the remuneration policy, which resulted in a small number of staff in headquarters leaving the organisation over the last 6 months. However, we believe we now have a stable and dedicated team.

We have terminated the lease of the DPP headquarters and moved staff to the Dominium head office, which has decreased rental and other operative costs.

Our initial plans assumed full integration at the beginning of March this year. However, due to complex technical issues with the integration of the PULSE system, which completed in June, we reached full integration in July.

Our vision is to make Domino's Pizza Poland the largest and most efficiently-run pizza operator in Poland and to emulate the success of major Domino's Pizza franchises across the globe, delivering attractive returns to our shareholders and the best-in-class value for our customers.