Final Results

RNS Number : 1017D

DP Poland PLC

17 March 2011

DP Poland PLC

("DP Poland" or the "Company")

Final results for the year to 31 December 2010

Roll out on track

DP Poland is the owner of the exclusive rights to develop and operate Domino's Pizza stores in Poland. The development and roll out plan is to open 27 stores by the end of December 2012 in Warsaw.

· £6.5m (before expenses) raised and the Company quoted on AIM in July 2010

· Trading subsidiary in Poland established, core management team put in place and first eight store managers recruited

· Commissary for first 25 stores set up

· First store opened, on schedule, on 28 February 2011

· Target to open 12 stores in Warsaw by end 2011 and a further 15 stores targeted for 2012

· Loss before tax of £411k for the period to 31 December 2010 in line with the board's expectations. Net cash balance of £5m at 31 December 2010

Peter Shaw, Chief Executive of DP Poland, said:

"We have made good progress in establishing the team and infrastructure for the development of the Company and are delighted to have opened our first store in Warsaw on time. We aim to offer the highest quality pizza of any delivered pizza in Warsaw and have an extensive marketing plan to ensure that the customer understands our proposition. We are on track to hit our stated expansion targets for 2011 and beyond."

17 March 2011

Enquiries:

DP Poland PLC	c/o College Hill: 020 7457 2020
Peter Shaw, Chief Executive

College Hill	020 7457 2020
Matthew Smallwood
Justine Warren

Seymour Pierce	020 7107 8000
Jeremy Porter / Catherine Leftley - Corporate Finance
David Banks / Jacqui Briscoe - Corporate Broking

Chairman's Statement

As more fully described in the Chief Executive's statement below, in July 2010 the Company floated successfully on the AIM market of the London Stock Exchange, raising approximately £6.5 million (before expenses) to secure the master franchise to develop the Domino's Pizza brand in Poland and to finance the roll out of stores.

I was involved in the launch of DP Poland from the outset as a non-executive director, but I was appointed to the position of Non-Executive Chairman of the Company following the sudden death of Richard Worthington in October 2010. Richard was central to the development of the DP Poland idea: a true entrepreneur, in recent years he established and built up the coffeeheaven group in Eastern Europe, which was taken over by the Whitbread group in 2010. This success of coffeeheaven was the background to DP Poland. A great tribute is therefore due to Richard in the successful launch of the Company.

Peter Shaw, DP Poland's Chief Executive, worked closely with Richard in the development of coffeeheaven and in the launch of DP Poland. Peter has already achieved considerable progress in the development of the Company. In the 7 months since work started in earnest much has been achieved for the Company to be in a position to open its first store, which took place on 28 February 2011. We have built the infrastructure and systems of the business, established our core management team, recruited and started training our store managers and put in place our marketing strategy for each store opening. We are on track to achieve our target of 12 stores open by the end of 2011.

Your board is confident that the development of the Domino's Pizza brand in Poland represents an exciting opportunity. We look forward to reporting on our progress to you in the months and years to come.

Nicholas Donaldson

Non-Executive Chairman

16 March 2011

Chief Executive's Review

Overview

The Company has secured the master franchise from Domino's Pizza Overseas Franchising BV, the international franchising subsidiary of Domino's Pizza, Inc. of the USA, giving us exclusive rights to manage and develop the Domino's Pizza system and concept in Poland. The initial franchise term is 15 years.

The Company successfully raised £6.5m (before expenses) on the AIM market on 28th July 2010, in line with our AIM admission document. Shares in DP Poland were placed at 50p per share and have to date remained above that level.

We have established a trading subsidiary in Poland called DP Polska SA to operate the franchise. Funds were transferred to DP Polska SA in order for it to commence operations, including building a team, investing in production equipment, IT infrastructure and leasehold interests.

Our first store opened on Bukowińska Street in Warsaw on 28th February 2011, in accordance with our planned opening schedule. This followed intensive training of our staff both in the USA and Poland. The Bukowińska Street store is located in the affluent Mokotów (mo-ko-tov) district of Warsaw, an area south of the city centre with a high density of apartments and a vibrant business district.

Strategy

Our strategy is all about focus and quality. We are the only branded pizza chain in Warsaw whose sole focus is pizza delivery; our stores will not offer eat-in facilities or a broad range of non-pizza dishes. We believe that this level of specialisation will enable us to avoid the confused offerings and operational limitations that are inherent in our competitors' business models.

Our aim is to offer a quality of delivered pizza which is superior to any other in the Polish marketplace. Our pricing reflects our belief that our food offer and delivery service are truly superior to that of our competitors, while still offering great value to our customers.

To achieve this superiority of product we source only top quality ingredients which we believe outstrip the quality of the ingredients used by our competitors, including the high quality fresh dough that is made and delivered to the store by our central commissary.

On the people front we have an HR function focused on recruiting and training the best managers and store teams. Our delivery team members are trained to drive safely and to deliver great service to our customers, using highly durable Yamaha scooters and Mercedes Smart cars.

Store operations and marketing

We have recruited a core management team that has proved committed and resourceful in pulling this project together and in opening the first store on schedule. This core team includes specialists in operations, marketing, HR, IT and finance. We have also recruited our first 8 store managers who, together with our operations manager and trainer, have spent 5 weeks training at Domino's Pizza in the USA.

We are receiving extensive support from our franchisor across store operations, commissary and marketing. The experience gained by our store managers in their training in the USA and in our first store will cascade down as the store managers move on to their own stores. Your board would like to thank the whole team for their hard work and enthusiasm.

We are undertaking an intensive marketing programme to ensure that our local target audience is fully aware of our first store in Mokotów. A series of pre launch leaflet drops were followed by door hangers and then menus to encourage customers to order. We are also active in 'street marketing', using 'wobble boards' to attract passers-by. This tried and tested approach to local store marketing is fundamental to Domino's Pizza's success worldwide and will be our core ongoing marketing activity for all of our future stores.

While local store marketing will be fundamental to our success, we do believe that our customer website will become increasingly important in driving sales, as it has become for many other Domino's Pizza markets. We have taken the decision to launch a full online ordering facility on our website very soon after our first store opening, because of the high penetration of internet usage across our core target audience. We believe that online sales have great potential in our market and we will be promoting this channel strongly to our customers.

To manage the sales and production process we are using the Domino's Pizza PULSE point of sale system, which gives us touch screen ordering for phone orders, superior administration and reporting capabilities and a customer recognition tool. PULSE also connects to our online ordering system. Customers who have ordered online will be able to track the status of their pizzas from preparation to delivery.

Commissary

Our commissary, which produces our fresh dough and handles all pizza ingredients and other Domino's Pizza products, has been established and fitted out in partnership with a highly reputable third party food service supplier. Our management team has many years' experience of working with this partner supplier. We have our own full time commissary manager based in the commissary, overseeing operations.

Located in Warsaw, where all our initial stores will be located, this commissary facility has the capacity to service at least 25 stores. The quality of the dough produced by our commissary meets the high standards of the Domino's Pizza brand.

Our AIM admission document suggested that we would establish back-of-store commissaries for every 5 stores. Our decision to partner with a third party as described above removes the need for back-of-store commissaries and will over time result in a considerable saving in capital expenditure earmarked for commissary operations.

Financial Review

Cash Position

The utilisation of the cash which we raised at flotation is in line with our internal forecasts. Our accounts show that, at 31st December 2010, we held approximately £5 million of cash. We will be saving on forecast commissary related capital costs on account of our revised strategy described above. Store build costs have proved to be higher than were originally estimated, however, your board believes that increasing efficiencies in store roll out will reduce these store related capital costs over time.

Planned store roll out

We are targeting 12 store openings in Warsaw in 2011 and 15 next year, resulting in a total of 27 stores by the end of 2012. The majority of our 2011 store launches are planned to take place in the second half of the year as we build our operational capabilities.

Current trading and outlook

Poland has pursued a policy of economic liberalisation since 1990 and today stands out as a success story among transition economies. Since 2004, EC membership and access to EC structural funds have provided a major boost to the Polish economy. Polish GDP has grown consistently over recent years, based on rising private consumption, an increase in corporate investment, and the inflow of EC funds. GDP growth was 5% in 2009 and is estimated to have been 3.3% in 2010, evidence that Poland was the only major economy in Europe not to be hit by recession during the credit crunch. The country's economic performance should improve over the longer term as the country benefits from significant EC investment in its road network and other infrastructure projects.

Our development plans are focused on large cities, where there are significantly higher levels of disposable income per head than the national average. Our research shows that our target consumers are increasingly turning to higher quality convenience foods and are willing to pay for what they perceive to be superior offers.

We are working hard to become the leading pizza delivery brand in Poland, by store, sales and reputation.

Peter Shaw

Chief Executive

16 March 2011

Group Income Statement

for the period ended 31 December 2010

			2010
		Notes	£
Administrative expenses			(551,928)
Finance income			37,529
Finance costs			(500)
Other operating income			125,298

Total			162,327

Loss before taxation and share based payments			(389,601)

Share based payments			(21,666)

Loss before taxation		2	(411,267)

Taxation		3	28,319

Loss for the period			(382,948)

Loss per share	Basic	4	(2.62p)
	Diluted	4	(2.62p)

Group Statement of comprehensive income

for the period ended 31 December 2010

	2010
	£
Loss for the period	(382,948)
Currency translation differences	(22,671)

Total comprehensive income for the period	(405,619)

Group Balance Sheet

at 31 December 2010

		2010
	Notes	£
Non-current assets
Intangible assets	5	294,705
Property, plant and equipment		380,477
Deferred tax asset		28,845
		704,027

Current assets
Inventories		32,970
Trade and other receivables		193,308
Cash and cash equivalents		5,059,523
		5,285,801

Total assets		5,989,828

Current liabilities
Trade and other payables		(286,763)

Total liabilities		(286,763)

Net assets		5,703,065

Equity
Called up share capital	6	98,893
Share premium account		6,044,486
Capital reserve - own shares		(56,361)
Retained earnings		(361,282)
Currency translation reserve		(22,671)
Total equity		5,703,065

The financial statements were approved by the Board of Directors and authorised for issue on 16 March 2011 and were signed on its behalf by:

Peter Shaw Robert Morrish

Director Director

Group Statement of Cash Flows

for the period ended 31 December 2010

		2010
		£
Cash flows from operating activities
Loss before taxation for the period		(382,948)

Adjustments for:
Finance income		(37,529)
Finance costs		500
Depreciation and amortisation		784
Share based payments expense		21,666
Operating cash flows before movement in working capital		(397,527)

Increase in inventories		(32,368)
Increase in trade and other receivables		(218,461)
Increase in trade and other payables		283,037
Cash generated from operations		(365,319)

Taxation paid		-

Net cash from operating activities		(365,319)

Cash flows from investing activities
Payments to acquire software		(12,693)
Payments to acquire property, plant and equipment		(374,317)
Payments to acquire intangible fixed assets		(276,633)
Purchase of own shares		(50,250)
Interest received		37,529
Net cash used in investing activities		(676,364)

Cash flows from financing activities		6,137,268
Interest paid		(500)
Net cash from financing activities		6,136,768

Net increase / decrease in cash and cash equivalents		5,095,085

Exchange differences on cash balances		(35,562)
Cash and cash equivalents at beginning of period		-

Cash and cash equivalents at end of period		5,059,523

Group Statement of Changes in Equity

for the period ended 31 December 2010

Changes in equity		Share		Currency	Capital
	Share	premium	Retained	translation	reserve -
	capital	account	earnings	reserve	own shares	Total
	£	£	£	£	£	£
At 9 June 2010	16,792	258,208	-	-	-	275,000
Shares issued	82,101	6,655,125	-	-	-	6,737,226
Expenses of share issue	-	(868,847)	-	-	-	(868,847)
Share based payments	-	-	21,666	-	-	21,666
Shares acquired by EBT	-	-	-	-	(56,361)	(56,361)
Translation difference	-	-	-	(22,671)	-	(22,671)
Loss for the period	-	-	(382,948)	-	-	(382,948)
At 31 December 2010	98,893	6,044,486	(361,282)	(22,671)	(56,361)	5,703,065

Notes to the Financial Statements

for the period ended 31 December 2010

1. BASIS OFPREPARATION

The financial information set out above does not constitute the company's accounts for the year ended 31 December 2010 but is derived from those accounts. Statutory accounts for 2010 will be delivered in due course. The auditor has reported on those accounts, their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act

The financial statements have been prepared on the historical cost basis, with the exception of certain financial instruments and share based payments. The consolidated and Company financial statements of D P Poland plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC Interpretations and the Companies Act 2006 applicable to Companies reporting under IFRS. The financial statements have been prepared in accordance with IFRS and IFRIC interpretations issued and effective or issued and early adopted as at the time of preparing these statements (March 2011). The preparation of financial statements in accordance with IFRS 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.

2. LOSS BEFORE TAXATION

This is stated after charging

	2010
	£
Auditors' remuneration - audit of company and group financial statements	17,500
- non audit services	750
Directors' emoluments - remuneration and fees	67,917
Depreciation of property, plant and equipment	784
Operating lease rentals - land and buildings	15,926
and after crediting
Other operating income - foreign exchange gains	125,298

3. TAXATION

	2010
	£
Current tax	-
Deferred tax credit relating to the origination and reversal
of temporary differences	28,319
Total tax expense in income statement	28,319

The tax on the Group's profit before tax differs from the theoretical amount that would arise using the tax rate applicable to profits of the consolidated entities as follows:

	2010
	£
Loss before tax	(411,267)
Tax credit calculated at applicable rate of 19%	(78,141)
Expenses not deductible for tax purposes	6,616
Tax losses for which no deferred income tax asset was recognised	43,206
Tax credit	(28,319)

4. LOSS PER SHARE

The loss per ordinary share has been calculated as follows:

	2010	2010
		£
	Weighted average number of shares	Profit / (loss) after tax
Basic	14,605,284	(382,948)
Diluted	14,605,284	(382,948)

5. INTANGIBLE ASSETS

	Licences	Software	Total
Group	£	£	£

Cost:
At 9 June 2010	-	-	-
Foreign currency difference	5,143	236	5,379
Additions	276,633	12,693	289,326
At 31 December 2010	281,776	12,929	294,705

Amortisation and impairment:
At 9 June 2010	-	-	-
Amortisation charged for the period	-	-	-
At 31 December 2010	-	-	-

Net book value:
At 31 December 2010	281,776	12,929	294,705
At 9 June 2010	-	-	-

6. SHARE CAPITAL

		2010
		£
Called up, allotted and fully paid:
19,778,572 Ordinary shares of 0.5 pence each		98,893

Movement in share capital during the period

		Nominal
	Number	value	Consideration
		£	£
Ordinary 1p shares:

Initial subscription on 9 June 2010	1,679,167	16,792	250,000
Share issue on 25 June 2010	487,500	4,875	225,000
Share issue to Employee Benefit Trust on 25
June 2010	1,222,619	12,226	12,226

	3,389,286	33,893	487,226

Ordinary 0.5p shares:
Subdivision of each ordinary share of 1 pence
into two shares of 0.5 pence	6,778,572	33,893	487,226
Placing 21 July 2010	13,000,000	65,000	6,500,000

At 31 December 2010	19,778,572	98,893	6,987,226