TIDMDPP
RNS Number : 4674E
DP Poland PLC
30 June 2023
DP Poland plc
("DP Poland", the "Group" or the "Company")
Final Results 2022 and Investor Presentation
DP Poland, operator of pizza stores and restaurants across
Poland, announces its audited results for the year ended 31
December 2022.
Financial highlights
-- Revenue increased by 19.5% to GBP35.7m (2021: GBP29.9m)
o Strong LFL revenue growth of 21.0% in 2022 compared to 2021
driven by increased average ticket price and order count
o Growth of dine-in, carry-out and delivery LFL System Sales of
55.3%, 84.7% and 5.2% respectively compared to prior year
-- System Sales were up 18.2% to GBP36.8m (2021: GBP31.2m)
-- Group EBITDA increased from GBP1.1m to GBP1.7m
-- Group loss for the period was broadly stable compared to
prior period GBP(4.4)m in 2022 and 2021
-- Cash at bank of GBP4.1m as at 31 December 2022 (GBP2.7m as at 31 December 2021)
Operational highlights
-- 87% of delivery sales were ordered online (2021: 85%)
-- LFL system order count increased by 10.0% in 2022 compared to 2021
-- Delivery times reduced by 14.5% in H2 2022 (vs H2 2021)
-- The Group operated 116 stores at the end of 2022, including
113 Domino's Pizza stores across Poland and 3 across Croatia
-- Operational completion of the merger with Dominium, with all
stores rebranded to Domino's by the end of 2022
-- Acquisition of All About Pizza d.o.o. ("AAP") in July 2022
together with exclusive rights of the Master Franchise Agreement
concluded in July 2019 with Domino's Pizza International
Franchising Inc
-- Strengthened board with the appointments of Nils Gornall
(CEO), Edward Kacyrz (CFO), Andrew Rennie (Non-Executive Director)
and David Wild (Non-Executive Chair)
-- 2022 inflation rates were 14.4% for Poland and 10.7% for
Croatia, driven mainly by energy prices, food and labour costs.
Careful cost management has mitigated these pressures
Outlook
-- Food price rises beginning to abate, with some food costs
dropping throughout Q2 2023, which should support profitability in
the coming quarters of 2023
-- Aim to use competitive strength to drive market share, grow
our brand awareness and further consolidate the market
-- On track to further solidify the strong position of Domino's in Poland.
Summary Financial Information
Currency: GBP000 2022 2021 % change
System Sales 36,816 31,160 18.2%
-------- -------- ---------
Revenue 35,694 29,866 19.5%
-------- -------- ---------
EBITDA* 1,693 1,137 48.9%
-------- -------- ---------
EBITDA* (Pre-IFRS
16) (1,423) (2,094) (32.0)%
-------- -------- ---------
margin % 4.7% 3.8%
-------- -------- ---------
Loss for the
period (4,360) (4,361) 0.0%
-------- -------- ---------
*excluding non-cash items, non-recurring items and store
pre-opening expenses
Nils Gornall, CEO, commented:
"Strong double digit growth in System sales and LFL sales
leveraged by considerable order count growth in the second half of
2022 demonstrated the Company's transformation strategy is
working.
The efforts put on coding High Volume Mentality into the
Company's culture, improving delivery times, portfolio
consolidation, system upgrades, execution of standards as well as
focus on crucial processes starts bringing results and this is
visible both in top line growth and EBITDA improvement.
The positive growth trends continue in 2023. Energy and
enthusiasm of our staff and their commitment to making necessary
changes are high and I look with optimism to the future."
Investor Presentation
The Company is pleased to announce that Nils Gornall and Edward
Kacyrz will provide a live presentation via Investor Meet Company
on 4th Jul 2023 at 12:30pm BST.
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.
H1 2023 trading update
Q2 sales growth for both Polish and Croatian markets have been
broadly in line with April's previously announced results. A
trading update for H1'2023 is expected to be released in July.
Enquiries:
DP Poland plc
Nils Gornall , CEO
Tel: +44 (0) 20 3393 6954
Email: ir@dppoland.com
Singer Capital Markets (Nominated Adviser and Broker)
Shaun Dobson
Tel: +44 (0) 20 7496 3000
Notes for editors
About DP Poland plc
DP Poland, has the exclusive right to develop, operate and
sub-franchise Domino's Pizza stores in Poland and Croatia. The
group operates over 116 stores and restaurants throughout cities
and towns in Poland and Croatia.
Company Profile
DP Poland PLC ("DPP" or "the Company"), through its wholly owned
subsidiary DP Polska S.A. ("DPPSA"), has the exclusive right to
develop, operate and sub-franchise Domino's Pizza stores in Poland.
DPP is a UK based company listed on the AIM Market on the London
Stock Exchange.
The first Domino's Pizza store was opened in Warsaw in February
2011. In January 2021 the Group acquired the entire share capital
of Dominium S.A. ("Dominium") which operated a total of 57 pizza
restaurants in various locations across Poland. The exclusive
rights of the Master Franchise Agreement have been granted to DPPSA
for an initial period of 15 years with an option to renew for a
further 10 years, subject to certain conditions. At the 2022
year-end there were 113 Domino's Pizza stores across Poland.
In July 2022 the Group acquired the entire share capital of All
About Pizza d.o.o. ("AAP") together with exclusive rights of the
Master Franchise Agreement concluded in July 2019 with Domino's
Pizza International Franchising Inc. At the 2022 year-end APP
operated 3 pizza restaurants in Croatia.
Poland has a population of 38 million people and has the
potential to become a significant pizza delivery market. Croatia
with the population of 4 million people is perceived by the
directors to have strategic expansion opportunities given the
current lack of chained sectoral competition.
DPP's objective is to establish Domino's Pizza as the leading
pizza brand in Poland and Croatia.
Chairman's Statement
2022 was another transformational year for DP Poland PLC, having
strengthened the Board with an enthusiastic "Dominoids" team,
conducted the fund raising for further expansion, finalised
rebranding of all Dominium stores to "Dominos" brand and expanded
operations outside Poland thanks to the acquisition of Croatian All
about Pizza d.o.o. ("AAP") in June 2022. This is the first DP
Poland PLC Annual Report to be published since the Polish and
Croatian businesses came together.
Against the background of unprecedented challenges presented by
inflationary pressures on energy, food costs and labour as a result
of the war in Ukraine, much has been achieved by the management
team. Nils, our CEO, will provide more detail about this in his
statement.
Our board believes that consistent execution of goals and use of
critical mass achieved by the acquisition of Dominium in Poland at
the beginning of 2021 eventually led to entering the path of
improving adjusted EBITDA in the second half of 2022 and management
expects this trend to continue over 2023. Take-over of the Croatian
business with considerable growth opportunities has been the first
step for the Company to expand outside Poland with the ambition to
become an important player in the Food & Beverage sector in
Eastern Europe . At the end of 2022, the Group operated 113 stores
across Poland, and 3 in Croatia, providing an opportunity to
leverage economies of scale in operations, procurement and
marketing. I am truly excited about the future for DP Poland PLC -
we see a long and exciting roadmap ahead, driven by both organic
and M&A opportunities. I am confident that our management team
will have all necessary capabilities to perform well. Despite the
headwinds of current inflationary pressures, we look forward to the
day when these headwinds become tailwinds.
Several important changes in the composition of the Board have
taken place since June 2022. In June 2022, the CEO and
Executive-Director role has been taken over by well experienced -
28 years in Dominos and post-franchisee - Nils Gornall,
substituting Piotr Dzier ek in that role. At the same time, Andrew
Rennie - post-DPE European CEO - joined the Board as a
Non-Executive Director, bringing a wealth of sectoral experience.
In August 2022, Malgorzata Potkanska stepped down from the role of
CFO and Executive-Director, being replaced in December 2022 by
Edward Kacyrz - a Chartered Accountant with 18 years of experience
in a number of financial, strategy and management roles. At the end
of March 2023, Peter Furlong stepped down from the Board as a
Non-Executive Director.
Further to the above changes, effective as of 31st December
2022, after 12 years of chairing the DPP Board, Nick Donaldson
decided to retire and stand down from the role of Non-Executive
Chairman. I would like to thank Nick for all of his engagement over
that time. I am honoured to be nominated to the role of
Non-Executive Chairman effective January 2023 and will put all of
my efforts in to serving the Group with all of my experience.
Following these changes, I believe that the composition of the
Board provides a strong and diverse range of know-how and
experience, well suited to the business and the challenges ahead.
We have a strong team of highly skilled Executives and
Non-Executives, whose interests are 100% focused on creating
shareholder value.
I would like to end my first Chairman's Statement for DPP by
thanking our management team and all employees for their superb
efforts and outstanding achievements in a year of transformational
change for the business. Building sales and customer loyalty in
this environment is a big challenge, but the results tell their own
story. I would like to also thank our Board Members for their
wisdom and strategic leadership to execute the programme
successfully. Finally, our Shareholders continue to support the
Board as we strive to grow and evolve, creating value. I am excited
by our prospects.
With best my wishes.
David Wild
Non-Executive Chairman
29 June 2023
Chief Executive's Review
In 2022, the end of the COVID-19 pandemic and start of the war
in Ukraine brought a challenge to the restaurant sector and a need
to adapt very quickly to a "new-normal" business environment, full
of inflationary pressures on energy, food costs and labour,
changing consumer habits and strengthened household budget control.
Despite this, DPP have continued to focus on consumer proposition
improvement, cost control, network optimisation and business
expansion to continue with its strategy.
It was a year of hard work for the Polish team who carried out
transformation of the business from restaurant dine-in mode towards
speed and quality driven High Volume Mentality via improving
product, service and image to address changed consumer habits in
the post-COVID-19 economy. For that reason, in order to boost
sales, DPP simplified their product portfolio, concentrated on the
product quality and consistency as well as simplified pricing
schemes as per consumer surveys.
DPP also invested in our people and revamped the training
department. We introduced the store managers' bonus schemes,
focusing on our most important KPI's and created competitiveness
amongst managers, with ranking our stores' performances. This
overall improved operations and service offered to consumers
significantly.
Furthermore, DPP focused on creating a compelling value
proposition in carry-out business and recovery of dine-in business
after the cease of COVID-19 restrictions, with no disruption to the
development of our dominant delivery channel amounting to GBP22.9m
in 2022 (LFL system sales) and GBP22.5m in 2021. We still take
every occasion to improve our delivery times further to build on
this to our competitive advantage, although we already offer one of
the most compelling delivery services in Poland.
High Volume Mentality in combination with reduced delivery times
(by 14.5% in the second half 2022 vs 2021) visibly improved
consumer offering and, thus, consumers awarded us with a
considerable 21.0% Like-For-Like (LFL) sales increase for the year
2022 driven by both average ticket price as well as order count. Q1
2023 Like-For-Like saw sales increase by 19.4% Quarter-To-Quarter
giving us the privilege to look with optimism to the future.
Observed volume growth in 2022 drove commissary capacity
coverage rates up to their highest levels ever recorded, however,
further Company growth is not at risk as the capacity can easily be
scaled up via introduction of work in shifts or light capital
investments. At the same time, growing business scale created the
opportunity to renegotiate distribution costs, whilst still
maintaining the highest quality standards.
In 2022, DPP looked very closely at cost management.
Inflationary pressures were a trigger to speed up IT projects
covering the accounting system upgrade, cash and labour management,
review energy contracts and reengineer a few basic processes,
results of which in overall overbalanced the pressures and the
caused adjusted EBITDA trend reversal that we expect to continue
over 2023.
At the end of 2022 the Company was at the final stage of network
optimisation in Poland (after Dominium S.A. reverse take-over in
2021) delivering three store refurbishments, opening two new
locations and eliminating eight loss-making stores in poor
locations, ending up the year with 113 points of sales. Such
optimisation was a sound decision driving adjusted EBITDA
improvement and creating a base for further expansion.
The capital for last year investments as well as further
expansion has been secured by the fund raising held in the summer
2022. Simultaneously, DPP's cash position visibly improved. The
capital obtained will serve in 2023 for further store network
development in Poland and Croatia, store refurbishments,
appropriate marketing campaigns reflecting growing brand awareness
and additional IT system upgrades.
In July 2022, DPP expanded its operations outside Poland by
acquiring All About Pizza d.o.o. (APP) - a company established in
Croatia in 2020 with three corporate stores at the date of
transaction. The highly fragmented Croatian market gives a well
performing APP the chance to take a dominant market position with a
good forecast for further network expansion. The take-over
transaction was executed via exchange of shares.
We continued to work on the Digital Experience Platform
improving content and user experience in all of our points of
contacts - webpage, mobile and apps. Additionally, Ukrainian
language was added to the Platform answering the needs of the
growing number of Ukrainian citizens in Poland and Croatia.
We want to exploit every digital order and delivery opportunity,
and for that reason we added Wolt to the current list of
aggregators - Pyszne.pl (known in Europe as 'Just take away'),
Glovo and UberEats. Additionally, we are reviewing other sales
opportunities, as our objective is to generate new orders
incrementally, with a higher average spend.
The strong foundation for the DPP business has been built in the
last two years. This is the first financial statements which
presents the consolidated business of Polish and Croatian entities,
and the first year where a clear pivot in business performance is
visible, showing the company's hidden potential. The numbers
reflect the true financial performance, but include one-off items
related to the transformation to High Volume Mentality.
We have seen improvement in adjusted EBITDA, but we aspire for
more. Since Q2 2022, we have faced an unprecedented inflationary
environment that had an impact on our 2022 profitability, however,
food price rises are beginning to abate, with some food costs
dropping throughout Q2 2023, which should support profitability in
the coming quarters of 2023.
As announced to the market, we are seeking to reduce the
inflationary impact through various cost-efficiency initiatives and
price increases whilst ensuring we continue to offer the best
consumer value. Due to the scale of our business, we believe we are
in a much better position than other small players in Poland. We
want to use our competitive strength to drive market share, grow
our brand awareness and consolidate the market further. The board
is fully behind this stated strategy of growing market share.
I remain very optimistic about the outlook. We are on the right
track to further solidify the strong position of Domino's in
Poland.
Nils Gornall
Chief Executive Officer
29 June 2023
Chief Financial Officer's Review
Overview
It is a great pleasure for me to comment on the financial
performance of the enlarged Group for the first time as the
Company's Chief Financial Officer.
2022 was expected to be a pivot year for many industries
worldwide as the COVID-19 pandemic was coming to an end.
Unfortunately, the war in Ukraine has had a significant impact on
the global economy and severely impacted energy prices, food costs
and the labour market in Central Eastern Europe where DPP is
operating. These inflationary pressures have, inevitably,
negatively impacted the whole restaurant sector, however, in
particular independent players who could not benefit from the
effect of scale, purchase power nor differentiated channels of
distribution. At the same time, damaged sector condition created an
opportunity for growth for the chained and better organised
businesses.
Consistent execution of the strategy over 2022 positioned DPP
well in the new economic environment. Thanks to implemented High
Volume Mentality, increased focus on operations excellence,
stringent cost management and digital platform development, DPP
delivered a strong 21.0% LFL top line growth and reversed EBITDA
trend, building a solid base for further business development and
market shares growth.
Acquisition of All About Pizza d.o.o. (APP)
On 29 July 2022 the Company completed an acquisition with All
About Pizza d.o.o. (APP), a company registered in Croatia. Further
information about the transaction is disclosed in Note 21. The
transaction resulted in APP becoming a wholly owned subsidiary of
the Company in accordance with IFRS 3 'Business Combinations' and
was concluded via exchange of 100% APP shares for 5% shares of the
Company. The APP shareholders - Nils Gornall and Andrew Rennie -
were nominated to the Company's board. The fair value of the
identifiable assets and liabilities acquired as at acquisition date
amounted to GBP988,751 and the fair value of the consideration
transferred amounted to GBP2,264,362. An excess of consideration
paid over the net assets was attributed to MFA intangible
asset.
Financial Performance
2022 2021
Notes GBP GBP
System sales* 36,816,825 31,159,781
Revenue 2 35,694,098 29,866,189
Direct Costs (28,312,921) (24,427,738)
Selling, general and administrative
expenses - excluding:
store pre-opening expenses,
depreciation, amortisation
and share based payments 3 (5,687,720) (4,301,176)
Group adjusted EBITDA - excluding
non-cash items, non-recurring
items and store pre-opening
expenses 1,693,457 1,137,275
===================================== ====== ============= =============
Store pre-opening expenses (37,584) (3,429)
Other non-cash and non-recurring
items 6 (500,971) 59,278
Depreciation and amortisation (4,336,210) (4,867,679)
Share based payments 31 (137,748) (51,301)
Foreign exchange gains /
(losses) 17,406 (61,911)
Finance income 8 257,984 1,155,806
Finance costs 9 (1,258,850) (1,669,527)
Loss before taxation 5 (4,302,516) (4,301,488)
------------------------------------- ------ ------------- -------------
Taxation 10 (57,429) (58,983)
Loss for the period (4,359,945) (4,360,471)
------ -------------
* System Sales - total retail sales including sales from
corporate and sub-franchised stores
Revenue
The Group System sales increase by 18.2% was driven by Polish
system sales growth by 16.1% (20.2% in Local currency) and Croatian
sales after acquisition which comprises 2.1% of the Group System
sales.
The Group revenue increased by 19.5% Year-over-Year ("YoY")
(23.7% in Local currency) and 21.0% Like-For-Like was primarily
driven by the launch of the High Volume Mentality approach and
repositioning of distribution channels after the COVID-19 pandemic
- the development of carry-out offerings adjusting to consumer
habits, and the recovery of the dine-in business, with the Company
growing their delivery operations with the main focus being to
reduce delivery times.
The growth was satisfactorily divided between average ticket
price increase and order count improvement. From a phasing
perspective, as profiled later in the Key Performance Indicators
section, DPP performance in 2022 consistently improved from quarter
to quarter, despite growing inflationary pressures and falling
consumer sentiment since the beginning of the war in Ukraine.
Direct costs
Although the Polish economy was subject to one of the highest
inflation rates in Europe during 2022, with particular pressure on
energy prices (88.3% YoY), food costs (22.1% YoY) and labour market
(7.5% minimal wage increase in 2022), the Group managed to improve
its cost position and keep direct costs increase (15.9.% YoY)
visibly below the revenue growth (19.5% YoY).
Such results were delivered by implementing cost management
projects, including the standardisation of production processes,
partial exchange of scooters fleet impacting reduction of
maintenance costs, delivery times' improvement, labour management
and reduction of energy consumption.
Review of current contract terms and performing an active search
of new vendors have allowed the Group to achieve savings on food
cost and decrease these costs (as % of revenue) in comparison to
2021.
Selling, general and administrative expenses ("SG&A")
SG&A were equivalent to 15.9% of revenue, which is 1.5
percentage points ("p.p.") higher than in 2021, driven in majority
by the higher than minimal wage salary growth ( 8.7%), higher
energy costs in commissary, increased marketing costs supporting
volume growth, employee benefits and professional fees.
Other non-cash and non-recurring items
The Group recognised non-cash and non-recurring items in 2022,
mainly referring to an IFRS16 adjustment representing right of use
assets write-off due to potential store closures in 2023 related to
network optimisation in Poland (amounting to GBP542,488). The other
non-cash and non-recurring items include advisors and other fees
related to AAP acquisition, VAT refund as well as gains and losses
from the sale and liquidation of fixed assets.
Depreciation and amortisation
Depreciation and amortisation expenses consist mainly of right
of use assets depreciation charges amounted to GBP2,272,151 in 2022
(2021: GBP2,427,823), leasehold improvements depreciation amounted
to GBP804,578 (2021: GBP924,736) and intangible assets amortisation
amounted to GBP626,252 in 2022 (2021: GBP674,030).
Finance costs
Finance costs of the Group mainly include interest expense on
lease liabilities amounted to GBP665,084 (2021: GBP742,862) and
interest payable according to loan note issued to Malaccan Holdings
Ltd amounted to GBP333,418 (2021: GBP420,544).
Taxation
The Group paid no corporation tax in 2022 due to brought forward
losses. As the Group has unused tax losses of GBP17,702,039
available for offset against future profits, it does not expect to
pay any corporation tax in 2023.
Group loss for the period
Group loss for the period is broadly stable compared to 2021.
This is mainly due to increased inflationary pressures on food and
labour costs as well as enhanced selling and administrative costs
as a result of higher investment into marketing, followed by three
stores refurbishments and two new stores openings.
For the purpose of achieving profits in the future, the board
has prepared a twelve month' roadmap for a number of different
strategic and operational projects aiming at better consumer
proposition (i.e. consumer surveys) reduction of direct costs
(review and renegotiation of trading terms within the major cost
groups) and fundamental operational costs reduction, covering such
areas as the Group structure, commissary setup, processes'
optimisation (i.e. new accounting system), automation of processes
and labour management (i.e. new labour scheduling system
roll-out).
Change
Group Loss for the period* 2022 2021 %
Group loss for the period (4,359,945) (4,360,471) +0.01%
------------ ------------ -------
* Actual exchange rates for 2022 and 2021
Store Count Poland
Dominos Polska 1 Jan 2022 M&A Opened Closed 31 Dec 2022
S.A. & Dominium
S.A.
Corporate 113 0 2 10* 105
----------- ---- ------- ------- ------------
Sub-Franchised 8 0 0 0 8
----------- ---- ------- ------- ------------
Total 121 0 2 10* 113
----------- ---- ------- ------- ------------
* The number of closed stores includes two seasonal stores being
opened only during summer
Store Count Croatia
All About 1 Jan 2022 M&A Opened Closed 31 Dec 2022
Pizza d.o.o. 29(th) July
2022
Corporate 0 3 0 0 3
----------- ------------- ------- ------- ------------
Sub-Franchised 0 0 0 0 0
----------- ------------- ------- ------- ------------
Total 0 3 0 0 3
----------- ------------- ------- ------- ------------
Enlarged Group
Store count 1 Jan 2022 M&A Opened Closed 31 Dec 2022
Corporate 113 3 2 10 108
----------- ---- ------- ------- ------------
Sub-Franchised 8 0 0 0 8
----------- ---- ------- ------- ------------
Total 121 3 2 10 116
----------- ---- ------- ------- ------------
In 2022 DP Poland opened 2 new corporate stores and closed 10
stores (including 2 seasonal stores). 3 stores were fully
refurbished. The acquisition of APP added an additional 3 stores in
Croatia to the DPP store network. The chain managed to shorten
delivery times by 14.5% in the second half 2022 vs 2021,
approaching very close to the European average.
Sales Key Performance Indicators (KPIs)
System sales* were up 18.2% YoY, whereas LFL system sales** were
up 21.0% YoY.
2022 2021 Change %
Group System Sales* GBP 36,816,825 31,159,781 18.2%
----------- ----------- ---------
Poland LFL system sales**,
% growth 21% 7% n/a
----------- ----------- ---------
Poland LFL system order count***,
% growth 10% 0% n/a
----------- ----------- ---------
Poland Delivery System Sales****
ordered online, % growth 87% 85% n/a
----------- ----------- ---------
* System Sales - total retail sales including sales from
corporate and sub-franchised stores. Sales from sub-franchised
stores are not included in revenue
** Like-for-like System Sales - matching trading periods for the
same stores between 1 January and 31 December 2022 and 1 January
and 31 December 2021. The Group's system stores that are included
in like-for-like System Sales comparisons are those that have
operated for at least 1 year preceding the beginning of the first
month of the period used in like-for-like comparisons for a certain
reporting period, assuming the relevant system store has not been
subsequently closed
*** System order count - total retail orders from corporate and sub-franchised stores
**** Delivery System Sales stand for the turnover generated in
delivery channel by both corporate and franchisee stores
Like-for-like System Sales growth 2022 vs 2021 per quarter were
as follows:
Q1 Q2 Q3 Q4
LFL system
sales growth
by quarter 21.8% 25.6% 24.4% 13.4%
------ ----- ----- -----
Exchange rates
PLN : GBP1 2022 2021 Change %
Profit & Loss Account 5.4965 5.3108 +3.5%
------- ------- ---------
Balance Sheet 5.2827 5.4702 -3.4%
------- ------- ---------
HRK : GBP1 2022 2021 Change %
Profit & Loss Account 8.7079 n/a -
------- ----- ---------
Balance Sheet 8.4950 n/a -
------- ----- ---------
Financial Statements for our Polish subsidiaries DP Polska S.A.
and Dominium S.A. are denominated in Polish Zloty ("PLN") and
translated to Pound Sterling ("GBP"). Financial Statements for our
Croatian subsidiary All About Pizza d.o.o. are denominated in
Croatian Kuna ("HRK") and translated to Pound Sterling ("GBP").
Under UK adopted international accounting standards the Income
Statement for the Group has been converted from PLN and HRK at the
average annual exchange rate applicable. The balance sheet has been
converted from PLN and HRK to GBP as at the exchange rate at 31
December 2022.
Cash position
1(st) January Cash movement 31(st) December
2022 2022
Cash in bank 2,701,646 1,408,676 4,110,322
-------------- -------------- ----------------
The large cash movement is a result of fundraising completed in
August 2022 and cash outflows for a number of different strategic
and operational projects.
Inventories
1(st) January Movement 31(st) December
2022 2022
Raw materials and
consumables 667,898 314,212 982,110
-------------- --------- ----------------
An increase of inventory is mainly due to increased purchases of
cheese in 2022 due to expected future price increases as well as
acquisition of AAP in July 2022.
Trade and other receivables
1(st) January Movement 31(st) December
2022 2022
Current trade and
other receivables 1,219,447 747,540 1,966,987
-------------- --------- ----------------
An increase of trade and other receivables balance is mainly due
to prepayments for TV marketing campaign started in the beginning
of 2023 and VAT receivables increase.
Cash flows from investing activities
Cash flows from investing activities amounted to GBP(3,555,378)
in 2022 (2021: GBP357,170) comprise mainly acquisition of property,
plant and equipment, software and other intangible assets due to
AAP acquisition.
Macro-economic conditions in Poland and Croatia
Polish GDP increased in 2022 by 4.9% YoY. The country is
expected to face further inflationary pressures in 2023, although
less aggressive than in 2022. The board is constantly monitoring
purchase prices to ensure the Group can react to any price
increases from its suppliers.
The unemployment rate has stayed at the rates below 3% since
2020, with no signs to grow.
Macro-economic conditions - Poland 2022 2021
Real GDP growth (% growth) 4.9* 6.8
----- ----
Inflation (% growth) 14.4 5.1
----- ----
Unemployment Rate (% of economically
active population) 2.9 2.9
----- ----
* First estimate of Polish Statistics Office for the year
2022
Croatian GDP increased in 2022 by 6.3%. The country is still
facing inflationary pressures in result of world macroeconomic
situation, however, currency change from HRK to EUR effective 1st
January 2023 additionally strengthened this pressure in short-term.
For that reason, APP has been assigned to supply contracts of the
Group to reduce pressure on APP profitability.
Macro-economic conditions - Croatia* 2022 2021
Real GDP growth (% growth) 6.3 13.1
----- ----
Inflation (% growth) 10.7 2.7
----- ----
Unemployment Rate (% of economically
active population) 7.1 7.6
----- ----
* Data based on macroeconomic indicators published 27th March
2023 by Croatian National Bank
Sub-franchised stores
There are 8 sub-franchised stores as at 31st December 2022.
Sales of sub-franchised stores for 2022 amounted to GBP2,351,560
(2021: GBP2,632,464).
Going concern
The board considered the Group's forecasts, in particular those
relating to the growing sales volume and improved cost management,
to satisfy itself that the Group has sufficient resources to
continue in operation for the foreseeable future. The Group sales
and costs forecasts are based on market-available data with regard
to country GDP growth rates, inflation, price trends of main cost
items, as well as on historical level of sales volumes and incurred
costs as a percentage of sales, taking into account implemented
High Volume Mentality, digital platform development and increased
focus on operations excellence. The board also considered the
Group's cash flow forecasts and successfully concluded stress-test
for drop in net sales by 5% versus initial forecast taking into
consideration possible changes in inflation and commodity prices.
Sensitivity analysis has been completed, and inflation rate would
need to increase from 15.1% to 30.0% with no change in revenue to
pass these costs increases to customers for there to be an issue
with going concern based on future forecasts.
Over the past quarters in 2022, the board of DP Poland has given
a considerable thought as to how the Group might define, quantify
and minimise the risks related to inflationary pressures in result
of the war in Ukraine. As the highest inflation rates were recorded
between July and November 2022 with following months to abate, the
board considers that the major risks connected with inflation are
vanishing, which has already been reflected in the decreasing
commodity prices offered by suppliers in Q1 2023, with the forecast
for further price reductions.
On the other hand, the board has prepared a twelve month roadmap
for a number of different strategic and operational projects aiming
at better consumer proposition (i.e. consumer surveys), and
fundamental operational costs reduction, covering such areas as the
Group structure, commissary setup, processes optimisation (i.e. new
accounting system), automation of processes and labour management
(i.e. new labour scheduling system roll-out).
The Company's recent equity fundraise made in August 2022, which
provided an additional GBP4.8m (before expenses) of resource, has
improved the Company's cash balances and its ability to settle the
substantial transactions, capital expenditure as well as operating
losses, in expectation of the benefits coming to the business in
result of strategy change and High Volume Mentality approach in the
near future.
Having considered the Group's cash flows and its liquidity
position, and after reviewing the forecast for the next twelve
months and beyond, taking into account reasonably possible changes
in trading performance, the Directors believe that the Group has
adequate resources to continue operations for the foreseeable
future and for this reason they continue to adopt the going concern
basis in preparing the financial statements.
That said, the board does take into account the uncertainty
related to the future dynamics of the commodity prices and
inflationary pressures, which remain the most pronounced risks to
our going concern assumptions.
Edward Kacyrz
Chief Financial Officer
29 June 2023
FINANCIAL STATEMENTS
Group Income Statement
2022 2021
Notes GBP GBP
Revenue 2 35,694,098 29,866,189
Direct Costs (28,312,921) (24,427,738)
Selling, general and administrative
expenses - excluding:
store pre-opening expenses,
depreciation, amortisation and
share based payments 3 (5,687,720) (4,301,176)
Group adjusted EBITDA - excluding
non-cash items, non-recurring
items and store pre-opening expenses 1,693,457 1,137,275
============================================ ====== ============= =============
Store pre-opening
expenses (37,584) (3,429)
Other non-cash and
non-recurring items 6 (500,971) 59,278
Depreciation and amortisation (4,336,210) (4,867,679)
Share based payments 31 (137,748) (51,301)
Foreign exchange gains
/ (losses) 17,406 (61,911)
Finance income 8 257,984 1,155,806
Finance costs 9 (1,258,850) (1,669,527)
Loss before taxation 5 (4,302,516) (4,301,488)
-------------------------------------------- ------ ------------- -------------
Taxation 10 (57,429) (58,983)
Loss for the
period (4,359,945) (4,360,471)
------ -------------
(0.75
Loss per share Basic 12 (0.67 p) p)
(0.75
Diluted 12 (0.67 p) p)
All of the loss for the year is attributable to the owners of
the Parent Company.
Group Statement of comprehensive income
2022 2021
GBP GBP
------------------------------------------ ------------ ------------
Loss for the period (4,359,945) (4,360,471)
Currency translation
differences (333,785) 24,798
--------------------------------------------
Other comprehensive expense for the
period, net of tax to be reclassified
to profit or loss in subsequent periods (333,785) 24,798
---------------------------------------------- ------------
Total comprehensive
income for the period (4,693,730) (4,335,673)
-------------------------------------------- ------------ ------------
All of the comprehensive expense for the year is attributable to
the owners of the Parent Company.
Group Balance Sheet
2022 2021
Notes GBP GBP
----------------------------- ------ ------------- -------------
Non-current assets
Goodwill 13 15,111,002 15,008,736
Intangible assets 14 3,714,479 2,207,448
Property, plant and
equipment 15 6,645,301 6,135,097
Leases - right of
use assets 22 6,472,965 8,237,471
Trade and other receivables 19 822,042 820,871
------------------------------ ------ ------------- -------------
32,765,789 32,409,623
Current assets
Inventories 20 982,110 667,898
Trade and other receivables 19 1,966,987 1,219,447
Cash and cash equivalents 25 4,110,322 2,701,646
------------------------------- ------ ------------- -------------
7,059,419 4,588,991
Total assets 39,825,208 36,998,614
-------------------------------- ------ ------------- -------------
Current liabilities
Trade and other payables 26 (5,343,028) (4,983,665)
Lease liabilities 23 (2,834,336) (2,667,159)
-------------------------------- ------ ------------- -------------
(8,177,364) (7,650,824)
Non-current liabilities
Lease liabilities 23 (5,666,835) (7,038,279)
Deferred tax 18 (276,099) (213,797)
Borrowings 27 (6,763,297) (5,829,461)
-------------------------------- ------ ------------- -------------
(12,706,231) (13,081,537)
Total liabilities (20,883,595) (20,732,361)
-------------------------------- ------ ------------- -------------
Net assets 18,941,613 16,266,253
-------------------------------- ------ ------------- -------------
Equity 24
Called up share capital 30 3,561,969 3,097,933
Share premium account 46,925,141 42,551,453
Capital reserve -
own shares (48,163) (48,163)
Retained earnings (21,450,212) (17,228,015)
Merger relief reserve 23,676,117 21,282,500
Reverse Takeover
reserve (33,460,406) (33,460,406)
Currency translation
reserve (262,834) 70,951
------------------------------ ------ ------------- -------------
Total equity 18,941,613 16 266253
-------------------------------- ------ ------------- -------------
The financial statements were approved by the Board of Directors
and authorised for issue on 29 June 2023 and were signed on its
behalf by:
Nils Gornall Edward Kacyrz
Chief Executive Officer Chief Financial Officer
Company Balance Sheet
2022 2021
Notes GBP GBP
----------------------------- ------ ------------- -------------
Non-current assets
Investments 16 32,966,376 51,790,168
Loans granted to subsidiary
undertakings 17 171,341 -
33,137,717 51,790,168
----------------------------- ------ ------------- -------------
Current assets
Trade and other receivables 19 146,981 421,594
Cash and cash
equivalents 25 65,293 302,509
-------------------------------- ------ ------------- -------------
212,274 724,103
----------------------------- ------ ------------- -------------
Total assets 33,349,991 52,514,271
-------------------------------- ------ ------------- -------------
Current liabilities
Trade and other
payables 26 (94,078) (130,669)
Non Current liabilities
Borrowings 27 (6,734,149) (5,829,461)
Net assets 26,521,764 46,554,141
-------------------------------- ------ ------------- -------------
Equity 24
Called up share
capital 30 3,561,969 3,097,933
Share premium
account 46,925,141 42,551,453
Retained earnings (47,641,463) (20,377,745)
Merger relief
reserve 23,676,117 21,282,500
Shareholders'
Equity 26,521,764 46,554,141
-------------------------------- ------ ------------- -------------
The financial statements were approved by the Board of Directors
and authorised for issue on 29 June 2023 and were signed on its
behalf by:
Nils Gornall Edward Kacyrz
Chief Executive Officer Chief Financial Officer
The loss relating to transactions in the financial statements of
the parent company was GBP27,401,465 (2021: GBP11,557,307).
DP Poland plc's company registration number is 07278725
Group Statement of Cash Flows
2022 2021
Notes GBP GBP
---------------------------------------- ------ ------------ ------------
Cash flows from operating
activities
Loss before taxation for the
period (4,302,516) (4,301,488)
Adjustments for:
Finance income 8 (257,984) (1,155,806)
Finance costs 9 1,258,850 1,669,527
Foreign exchange movements (144,025) 1,180,246
Depreciation, amortisation
and impairment 4,336,210 4,867,679
Loss on fixed asset disposal 136,974 267,866
VAT refund - interests 8 231,476 -
Dismantling provision 20,466 -
Share based payments expense 31 137,748 51,301
------------------------------------------ ------ ------------ ------------
Operating cash flows before movement
in working capital 1,417,199 2,579,325
(Increase) in inventories 20 (314,212) (32,569)
(Increase) / decrease in trade
and other receivables 19 (748,711) 144,647
Increase / (decrease) in trade
and other payables 26 359,363 (2,276,572)
Cash generated from operations 713,639 414,831
Taxation payable - -
Net cash generated from operations 713,639 414,831
Cash flows from investing
activities
Payments to acquire software (241,032) (170,637)
Payments to acquire property, plant
and equipment (1,072,811) (720,381)
Payments to acquire intangible
fixed assets (62,831) (208,004)
Proceeds from disposal of property
plant and equipment 46,063 90,892
Interest received on sub-franchisee
loans 8 16,767 25,233
Interest received on short-term
deposits - 3,811
Cash flows from acquiring
a subsidiary 21 (2,241,534) 1,336,256
Net cash (used in) / generated
from investing activities (3,555,378) 357,170
Cash flows from financing
activities
Net proceeds from issue of ordinary
share capital 7,231,341 6,121,561
Repayment of lease liabilities (2,068,948) (3,474,856)
Repayment of borrowings (163,539) -
Interest paid on lease liabilities 9 (665,084) (751,711)
------------------------------------------- ------ ------------ ------------
Net cash from/(used in) financing
activities 4,333,770 1,894,994
Net increase in cash 1,492,031 2,666,995
Exchange differences on cash
balances (83,355) -
Cash and cash equivalents at beginning
of period 2,701,646 34,651
Cash and cash equivalents at end
of period 25 4,110,322 2,701,646
------------------------------------------- ------ ------------ ------------
Company Statement of Cash Flows
2022 2021
Notes GBP GBP
------------------------------------------ ------ ------------- -------------
Cash flows from operating
activities
Loss before taxation (27,401,466) (11,557,307)
Adjustments for:
Finance income (818,128) (35)
Finance expense 576,416 420,544
Foreign exchange movements 389,243 (409,904)
Impairment charge 26,781,124 11,130,429
Share based payments
expense 72,315 32,034
------------------------------------------- ------ ------------- -------------
Operating cash flows before
movement in working capital (400,496) (384,239)
Decrease in trade and other
receivables 19 274,613 50,598
(Decrease) in trade and
other payables 26 (36,591) (771,917)
-------------------------------------------- ------ ------------- -------------
Cash used in operating
activities (162,474) (1,105,558)
------------------------------------------- ------ ------------- -------------
Cash flows from investing
activities
Equity investment in subsidiary
company (7,891,899) (5,710,536)
Loans granted to subsidiary undertakings 17 (170,867) -
Interest received 818,128 35
Net cash (used in) investing
activities (7,244,638) (5,710,501)
--------------------------------------------- ------ ------------- -------------
Cash flows from financing
activities
Interest paid - (10,640)
Net proceeds from issue
of ordinary share capital 7,231,341 6,121,561
-------------------------------------------- ------ -------------
Net cash from financing
activities 7,231,341 6,110,921
-------------------------------------------- ------ ------------- -------------
Net decrease in cash (175,772) (705,138)
Exchange differences (61,444) 409,904
Cash and cash equivalents at
beginning of period 302,509 1,007,647
Cash and cash equivalents
at end of period 25 65,293 302,509
-------------------------------------------- ------ ------------- -------------
Group Statement of Changes in Equity
Share Currency Capital Reverse Merger
reserve
Share premium Retained translation - Takeover Relief
own
capital account earnings reserve shares reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP GBP
------------------- ------------ ------------ ------------- ------------ --------- ------------- ----------- ------------
At 1 January
2021 1,648,700 8,124,915 (12,918,845) 46,153 - - - (3,099,077)
Translation
difference - - - 24,798 - - - 24,798
Loss for the
period - - (4,360,471) - - - - (4,360,471)
Total
comprehensive
income for the
year - - (4,360,471) 24,798 - - - (4,335,673)
Transfer to
reverse takeover
reserve (1,648,700) (8,124,915) - - - 9,773,615 - -
Recognition
of DP Poland
Plc equity 1,270,543 36,838,450 - - (48,163) (20,532,689) - 17,528,141
Reverse takeover
of Dominium 1,418,832 - - - - (22,701,332) 21,282,500 -
Shares issued
(net of expenses) 408,558 5,713,003 - - - - - 6,121,561
Share based
payments - - 51,301 - - - - 51,301
Transactions
with owners
in their capacity 23,701
as owners 1,449,233 34,426,538 51,301 - (48,163) (33,460,406) 21,282,500 ,003
At 31 December
2021 3,097,933 42,551,453 (17,228,015) 70,951 (48,163) (33,460,406) 21,282,500 16,266,253
------------------- ------------ ------------ ------------- ------------ --------- ------------- ----------- ------------
Translation
difference - - - (333,785) - - - (333,785)
Loss for the
period - - (4,359,945) - - - - (4,359,945)
Total
comprehensive
income for the
year - - (4,359,945) (333,785) - - - (4,693,730)
Shares issued
(net of expenses) 464,036 4,373,688 - - - - 2,393,617 7,231,341
Share based
payments - - 137,748 - - - - 137,748
Transactions
with owners
in their capacity
as owners 464,036 4,373,688 137,748 - - - 2,393,617 7,369,089
At 31 December
2022 3,561,969 46,925,141 (21,450,212) (262,834) (48,163) (33,460,406) 23,676,117 18,941,613
------------------- ------------ ------------ ------------- ------------ --------- ------------- ----------- ------------
Company Statement of Changes in Equity
Share
Share premium Retained Relief
capital account earnings reserve Total
GBP GBP GBP GBP GBP
----------------------- ---------- ----------- ------------- ----------- -------------
At 31 December
2020 1,270,542 36,838,450 (8,871,739) - 29,237,253
Loss for the year - - (11,557,307) - (11,557,307)
Total comprehensive
income for the
year - - (11,557,307) - (11,557,307)
Shares issued 408,558 5,713,003 - - 6,121,561
Merger relief reserve 1,418,833 - - 21,282,500 22,701,333
Share based payments - - 51,301 - 51,301
Transactions with
owners in their
capacity as owners 1,827,391 5,713,003 51,301 21,282,500 28,874,195
At 31 December
2021 3,097,933 42,551,453 (20,377,745) 21,282,500 46,554,141
------------------------ ---------- ----------- ------------- ----------- -------------
Loss for the year - - (27,401,465) - (27,401,465)
Total comprehensive
income for the
year - - (27,401,465) - (27,401,465)
Shares issued) 464,036 4,373,688 - - 4,837,724
Merger relief reserve - - - 2,393,617 2,393,617
Share based payments - - 137,748 - 137,748
Transactions with
owners in their
capacity as owners 464,036 4,373,688 137,748 2,393,617 7,369,089
At 31 December
2022 3,561,969 46,925,141 (47,641,462) 23,676,117 26,521,764
------------------------ ---------- ----------- ------------- ----------- -------------
Notes to the Financial Statements
1. ACCOUNTING POLICIES
Authorisation of financial statements and statement of
compliance with IFRSs
The DP Poland plc Group and Company financial statements for the
year ended 31 December 2022 were authorised for issue by the Board
of the Directors on 29 June 2023 and the balance sheets were signed
on the Board's behalf by Nils Gornall and Edward Kacyrz. DP Poland
plc is a public limited company incorporated and domiciled in
England & Wales. The Company's ordinary shares are traded on
the Alternative Investment Market of the London Stock Exchange.
Basis of preparation
Both the Group financial statements and the Company financial
statements have been prepared and approved by the directors in
accordance with UK-adopted international accounting standards,
IFRIC Interpretations and the Companies Act 2006. The preparation
of financial statements in accordance with UK-adopted international
accounting standards 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.
An additional line item for 'Group adjusted EBITDA - excluding
non-cash items, non-recurring items and store pre-opening expenses'
has been presented on the face of the income statement as the Board
believes this presentation is relevant to the understanding of the
Group's financial performance and is a useful indicator for the
underlying cash generated from operations. Other non-GAAP
performance measures used are:
- System sales (the sum of all sales made by both sub-franchised
and corporate stores to consumers)
- Like-for-like sales (same store sales for those stores which
traded throughout the current and comparative period).
The non-GAAP performance measures may not be comparable with
similarly described items reported by other entities.
The Company has taken advantage of the exemption provided under
section 408 of the Companies Act 2006 not to publish its individual
income statement and related notes.
The accounting policies which follow set out those policies
which apply in preparing the financial statements for the year
ended 31 December 2022.
The Group and Company financial statements are presented in
Sterling. The assets and liabilities of the foreign subsidiaries,
whose functional currency is Polish Zloty and Croatian Kuna, are
translated into sterling at the rate of exchange ruling at the
balance sheet date and their income statements are translated at
the average rate for the year. Differences arising from the
translation of the opening net investment in the subsidiary are
taken to reserves and reported in the Group statement of
comprehensive income.
Basis of consolidation
The Group financial statements comprise the financial statements
of DP Poland plc, its subsidiary undertakings and the Employee
Benefit Trust ("EBT") drawn up to 31 December of each year, using
consistent accounting policies. Subsidiary undertakings have been
included in the Group financial statements using the purchase
method of accounting. Accordingly the Group Income Statement and
Group Statement of Cash Flows include the results and cash flows of
subsidiaries from the date of acquisition.
Subsidiaries are consolidated from the date of their
acquisition, being the date on which the Group obtains control, and
continue to be consolidated until the date such control ceases.
Control comprises the power to govern the financial and operating
policies of the investee so as to obtain benefit from its
activities and is achieved through direct or indirect ownership of
voting rights; currently exercisable or convertible potential
voting rights; or by way of contractual agreement. The financial
statements of subsidiaries are prepared for the same reporting year
as the parent Company, using consistent accounting policies. All
inter-company balances and transactions, including unrealised
profits arising from them, are eliminated on consolidation.
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group. The
consideration transferred in the acquisition is generally measured
at fair value, as are the identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment. Any gain on
a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to
the issue of debt or equity securities.
With effect from 29 July 2022, the Company became the legal
parent of All About Pizza d. o.o. Further information about the
transaction is disclosed in note 21. The transaction resulted in
APP becoming a wholly owned subsidiary of the Company in accordance
with IFRS 3 'Business Combinations'.
Adoption of new and revised standards
The accounting policies adopted in the preparation of the Group
financial statements are consistent with those followed in the
preparation of the Group's financial statements for the year ended
31 December 2021, except for the adoption of new standard,
interpretations, and amendments to standards effective as of 1
January 2022.
The amendments and interpretations below were applied in 2022
and had no significant impact on the accounting policies
applied:
- Amendments to IFRS 3 - Reference to the Conceptual Framework
- Amendments to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use
- Amendments to IAS 37 - Onerous Contracts - Costs of Fulfilling a Contract
New standards and interpretations not applied
Below amendments to standards are effective for annual periods
beginning after 1 January 2023 and earlier application is
permitted. The Group has not early adopted the new or amended
standards in preparing these consolidated financial statements:
- IFRS 17 Insurance Contracts
- Amendments to IFRS 17 Insurance contracts: Initial Application
of IFRS 17 and IFRS 9 - Comparative Information
- Amendments to IAS 1 Presentation of Financial Statements and
IFRS Practice Statement 2: Disclosure of Accounting policies
- Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
- Amendments to IAS 12 Income taxes: Deferred Tax related to
Assets and Liabilities arising from a Single Transaction
It is expected that the standards will not have a material
impact on the Group.
Below are standards and amendments that are issued but not yet
approved by the UK. The Group will apply the standard once approved
by the UK:
- Amendments to IAS 1: Classification of liabilities as current
or non-current and Non-current Liabilities with Covenants
- Amendment to IFRS 16 - Leases on sale and leaseback
Intangible assets
Intangible assets are carried at cost less accumulated
amortisation and accumulated impairment losses. Intangible assets
acquired separately from a business are carried initially at cost.
An intangible asset acquired as part of a business combination is
recognised outside goodwill if the asset is separable or arises
from contractual or other legal rights and its fair value can be
measured reliably. Intangible assets with a finite life are
amortised and charged to administrative expenses on a straight line
basis over their expected useful lives, as follows:
- Franchise fees and intellectual property rights: over the
duration of the legal agreement;
- Computer software: 2 years from the date when the software is
brought into use; and
- Capitalised loan discounts: the life of sub-franchise
agreements of 10 years.
The carrying value of intangible assets is reviewed for
impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable.
Goodwill
Goodwill is initially measured at cost and any previous interest
held over the net identifiable assets acquired and liabilities
assumed. If the fair value of the net assets acquired is in excess
of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to
measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of the fair value of
net assets acquired over the aggregate consideration transferred,
then the gain is recognised in the income statement.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purposes of impairment
testing, goodwill is allocated to each of the Group's
cash-generating units expected to benefit from the synergies of the
combination. Cash-generating units to which goodwill has been
allocated are tested for impairment annually, or more frequently
when there is an indication that the unit may be impaired.
The Group performs impairment reviews at the reporting period
end to identify any goodwill or intangible assets that have a
carrying value that is in excess of it's recoverable amount.
Determining the recoverability of goodwill and the intangible
assets requires judgement in both the methodology applied and the
key variables within that methodology. Where it is determined that
an asset is impaired, the carrying value of the asset will be
reduced to its recoverable amount with the difference recorded as
an impairment charge in the income statement.
In accordance with IAS 36, the Group has tested goodwill for
impairment at the reporting date. No goodwill impairment was deemed
necessary as at 31 December 2022. For further details on the
impairment review please refer to note 13.
Fixtures, fittings and equipment
Fixtures, fittings and equipment are stated at cost less
accumulated depreciation and any impairment in value. Leasehold
property comprises leasehold improvements including shopfitting and
associated costs.
Depreciation
Depreciation is provided on all tangible non-current assets at
rates calculated to write off the cost, less estimated residual
value based on prices prevailing at the balance sheet date, of each
asset on a straight line basis over its expected useful life, as
follows:
Leasehold property - over the expected lease term
Fixtures, fittings and equipment - 3 to 10 years
The carrying values of tangible non-current assets are reviewed
for impairment if events or changes in circumstances indicate the
carrying value may not be recoverable.
The asset's residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate, at each
financial year end.
Assets Under Construction
Assets under construction comprise the cost of tangible fixed
assets in respect of stores that have not yet opened and therefore
no depreciation has yet been charged. Depreciation will be charged
on the assets from the date that they are available for use.
Impairment
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of an asset's or
cash-generating unit's fair value less costs to sell and its value
in use and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent of
those from other assets or groups of assets. Where the carrying
amount of an asset exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
In assessing fair value less costs to sell , the estimated future
cash flows are discounted to their present value using a post-tax
discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Impairment
losses of continuing operations are recognised in the income
statement under the expense category: Depreciation, amortisation
and impairment.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the
estimates used to determine the asset's recoverable amount since
the last impairment loss was recognised. If that is the case the
carrying amount of the asset is increased to its recoverable
amount. That increased amount cannot exceed the carrying amount
that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such
reversal is recognised in the income statement unless the asset is
carried at revalued amount, in which case the reversal is treated
as a revaluation increase. After such a reversal the depreciation
charge is adjusted in future periods to allocate the asset's
revised carrying amount, less any residual value, on a systematic
basis over its remaining useful life.
Financial instruments
Financial instruments are measured initially at cost, which is
the fair value of whatever was paid or received to acquire or incur
them.
Financial assets
All of the Group's financial assets are held within a business
model whose objective is to collect contractual cash flows which
are solely payments of principals and interest and therefore
classified as subsequently measured at amortised cost.
Financial assets at amortised cost are included in current
assets, except for maturities greater than 12 months after the
balance sheet date. These are classified as non-current assets. The
Group's financial assets at amortised cost comprise trade and other
receivables, loans to sub-franchisees and cash and cash equivalents
in the balance sheet. Loans to sub-franchisees are provided at
below market interest rates. The difference between the present
value of loans recognised and the cash advanced has been
capitalised as an intangible asset in recognition of the future
value that will be generated via the royalty income and Commissary
sales that will be generated. These assets are amortised over the
life of a new franchise agreement of 10 years.
The Group recognises an allowance for expected credit losses
('ECLs') for all financial assets. ECLs are based on the difference
between the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest
rate.
Financial liabilities
Financial liabilities are classified as either financial
liabilities at fair value through profit or loss or as financial
liabilities measured at amortised cost. Financial liabilities at
amortised cost comprise trade and other payables, loans and
accruals.
Trade and other payables are recognised initially at fair value
and subsequently measured at amortised cost using the effective
interest method.
Borrowings
Borrowings are recognised initially at fair value net of
directly attributable transaction costs.
After initial recognition, interest-bearing borrowings are
subsequently measured at amortised cost using the EIR method. Gains
and losses are recognised in profit or loss when the liabilities
are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part
of the EIR. The EIR amortisation is included as finance costs in
the statement of profit or loss.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash
at banks and in hand and short-term deposits with an original
maturity of three months or less. For the purpose of the
consolidated and company cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above,
net of outstanding bank overdrafts.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Inventories comprise food and packaging goods for resale.
The Group applies a first in first out basis of inventory
valuation.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Foreign Currency Translation
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement.
The results and financial position of all the group entities
(none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
a) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
b) income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
c) all resulting exchange differences are recognised within
other comprehensive income as a separate component of equity.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations are
recognised in other comprehensive income. When a foreign operation
is partially disposed of or sold, exchange differences are
reclassified from equity to profit or loss on disposal of the net
investment.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
Employee share incentive plans
The Group issues equity-settled share-based payments to certain
employees (including Directors). These payments are measured at
fair value at the date of grant by use of a Black-Scholes model.
Vesting is dependent on performance conditions other than
conditions linked to the price of the shares of DP Poland plc
(market conditions). In valuing equity-settled transactions, no
account is taken of these performance conditions. This fair value
cost of equity-settled awards is recognised on a straight-line
basis over the vesting period, based on the Group's estimate of
shares that will eventually vest. No cost is recognised for awards
that do not ultimately vest.
Leases
The Group as a lessee
At the balance sheet date, the Group leased 116 stores, one
office, three commissaries and a number of vehicles. Leases for
land and buildings are normally for an initial term of 5 years with
an option to renew thereafter. Lease payments are subject to
regular rent reviews to reflect market rates. The Group assesses
whether a contract is or contains a lease, at inception of the
contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets (such as tablets and personal
computers). For these leases, the Group recognises the lease
payments as an operating expense on a straight-line basis over the
term of the lease. The lease liability is initially measured at the
present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the
lease. If this rate cannot be readily determined, the lessee uses
its incremental borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
-- Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable;
-- Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- The amount expected to be payable by the lessee under
residual value guarantees;
-- The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
-- Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the
consolidated balance sheet.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
Extension and termination options
In determining the lease liability, the Group considers the
extension and termination options. For the majority of leases the
Group has the right to extend the contract unilaterally, which does
not need the consent of the landlord. Periods covered by an option
to extend the lease term are included in the lease term if the
lessee is reasonably certain to exercise that option. The same
rationale applies to termination options. The term covered by a
termination option is not included in the lease term if the lessee
is reasonably certain not to exercise the option.
Critical judgements in determining the lease term
Leases are negotiated on an individual basis and contain a wide
range of terms and conditions, such as early termination clauses
and renewal rights. Termination clauses and renewal rights are used
to maximise operational flexibility in terms of managing the assets
used in the Group's operations. In determining the lease term,
management considers all facts and circumstances that create an
economic incentive to exercise a renewal right, or not exercise a
termination clause. An adjustment to the lease term is only made if
the lease is reasonably certain to be extended or not
terminated.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any
initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses. Whenever the Group
incurs an obligation for costs to dismantle and remove a leased
asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and
conditions of the lease, a provision is recognised and measured
under IAS 37. To the extent that the costs relate to a right-of-use
asset, the costs are included in the related right-of-use asset,
unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease. The right-of-use assets are
presented as a separate line in the consolidated balance sheet. The
Group applies IAS 36 to determine whether a right-of-use asset is
impaired and accounts for any identified impairment loss as
described in the 'Property, Plant and Equipment' policy. Variable
rents that do not depend on an index or rate are not included in
the measurement of the lease liability and the right-of-use asset.
The related payments are recognised as an expense in the period in
which the event or condition that triggers those payments occurs
and are included in 'Other expenses' in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to
separate non-lease components, and instead account for any lease
and associated non-lease components as a single arrangement. The
Group has not used this practical expedient. For contracts that
contain a lease component and one or more additional lease or
non-lease components, the Group allocates the consideration in the
contract to each lease component on the basis of the relative
stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
The Group as lessor
The Group enters into lease agreements as an intermediate lessor
with respect to stores operated by sub-franchisees.
Leases for which the Group is a lessor are classified as finance
or operating leases. Whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee,
the contract is classified as a finance lease. All other leases are
classified as operating leases.
When the Group is an intermediate lessor, it accounts for the
head lease and the sublease as two separate contracts. The Group
evaluates and classifies these subleases as either operating leases
or finance leases. Where the sublease transfers substantially all
of the risks and rewards arising from right-of-use asset from the
head lease, the right-of-use asset from head lease is derecognised
and a lease receivable equal to the net investment in the sublease
is recognised. Where the sublease does not transfer substantially
all of the risks and rewards arising from right-of-use asset from
the head lease, the sublease is classified as an operating lease
and rent received is recognised in the income statement on a
straight line basis over the lease term. Initial direct costs
incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognised on a
straight-line basis over the lease term.
Amounts due from lessees under finance leases are recognised as
receivables at the amount of the Group's net investment in the
leases. Finance lease income is allocated to accounting periods so
as to reflect a constant periodic rate of return on the Group's net
investment outstanding in respect of the leases.
When a contract includes lease and non-lease components, the
Group applies IFRS 15 to allocate the consideration under the
contract to each component.
Current tax
Current tax is the amount of income tax payable on the taxable
profit for the period. Current tax assets and liabilities for the
current and prior periods are measured at the amounts expected to
be recovered from or paid to the tax authorities. The tax rates and
tax laws used to compute the amount are those that are enacted or
substantively enacted by the balance sheet date.
Deferred tax
Deferred tax is provided on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities
and their carrying amounts with the exception of:
- Where the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of
the transaction, affects neither the accounting profit nor taxable
profit or loss.
- For taxable temporary differences associated with investments
in subsidiaries, associates and interest in joint ventures and
where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences, carry-forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences,
carry-forward of unused tax assets and unused tax losses can be
utilised. The carrying amount of deferred tax assets is reviewed at
each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the period when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at the balance sheet
date. Deferred tax balances are not discounted.
Capital instruments
Ordinary shares are classified as equity instruments. Other
instruments are classified as liabilities if they contain an
obligation to transfer economic benefits and if not they are
included in equity. The finance costs recognised in the Income
Statement in respect of capital instruments other than equity
shares are allocated to periods over the term of the instrument at
a constant rate on the carrying amount applying the effective
interest method.
Capital reserve - own shares
DP Poland plc shares which are held within the Company's
employee benefit trust, for the purpose of providing share based
incentives to Group employees are classified as shareholders'
equity as 'Capital reserve - own shares' and are recognised at
cost. No gain or loss is recognised in the income statement on the
purchase or sale of such shares.
Revenue recognition
The Group recognises revenue from the following major
sources:
- Corporate store sales;
- Royalties, franchise fees and sales to franchisees; and
- Rental income on leasehold property.
Revenue is measured based on the consideration to which the
Group expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. The Group
recognises revenue when it transfers control of a product or
service to a customer. The criteria for recognising revenues are
set out in note 2.
Direct Costs
Direct costs comprises foods costs and direct store
expenses.
Finance income
Income is recognised as interest accrues applying the effective
interest method.
Going concern
The Directors must make an assessment as to whether the Group is
a going concern. In forming their views, the Directors have
prepared cash flow forecasts for a 12 month period following the
date of signing the balance sheet. As part of the preparation of
these forecasts, the Directors have estimated the likely outcome
for the number of new stores opened. Before entering into a
contract to acquire a new site, the Directors ensure that the Group
has sufficient working capital available to allow the completion of
the outlet. Based on these forecasts, the Directors have confirmed
that there are sufficient cash reserves to fund the business for
the period under review. After reviewing these forecasts,
consideration of the Group's cash resources and other appropriate
enquiries, the Directors have a reasonable expectation that the
Company and Group have adequate resources to continue in
operational existence for the foreseeable future. For this reason
they continue to adopt the going concern basis in preparing the
financial statements.
Accounting estimates and judgements
The preparation of financial statements in conformity with
UK-adopted international accounting standards requires the use of
certain critical accounting estimates and judgements. It also
requires management to exercise judgement in the process of
applying the Company's accounting policies. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the
circumstances.
Judgements
Purchase price allocation of the acquisition of AAP
Applying IFRS 3 for accounting of acquisition required Group's
judgement. The Directors have assessed the key nature and
attributes of the assets of the businesses acquired and in
particular the value of the separable intangible assets. The
Directors have concluded that materially, the value is all
attributable to the Master Franchise Agreement and are satisfied
that it is appropriate to attribute the full value of the
intangible asset acquired to brand value. Further details are shown
in note 21.
Assessment of indefinite useful life of the Master Franchise
Agreement intangible asset
Identification of Master Franchise Agreement's useful life
recognised as at acquisition date of All About Pizza d.o.o. also
required judgement. As there is no foreseeable limit to the period
over which Master Franchise Agreement is expected to generate net
cash inflows for the entity, the Group identified Master Franchise
Agreement to have an indefinite useful life.
Estimation uncertainties
Impairment
The Group's determination of whether intangibles and investments
in subsidiary undertaking are impaired requires an estimation of
the fair value less costs of disposal of the cash generating units
to which the relevant asset or investment is allocated. This
requires estimation of future cash flows and the selection of a
suitable discount rate. The recoverable amount of the cash
generating unit has been determined based on the fair value less
costs of disposal calculated using discounted future cash flows,
which are subject to significant estimates due to the growth phase
of the business. Future cash flows are based on the Group's
business plan. The calculation of the fair value is most sensitive
to the following assumptions: store performance; discount rates;
store openings in Poland and Croatia; foreign exchange rates.
The discount rate reflects management's estimate of the return
on capital employed for the investment in Poland. The store
openings are based on the current business model being used by
management, which is progressing in line with expectations. The
parent company's investment in Polish subsidiaries, i.e., DP Polska
S.A. and Dominium S.A., had a historical cost of GBP57.4m. With
effect from 29 July 2022, the Company became the legal parent of
All About Pizza d.o.o. The parent company's investment in Croatian
subsidiary had a historical cost of GBP 2.4m. Further details are
shown in note 16. The Group has determined that an impairment of
GBP26.8m in the investment value should be recognised in the
accounts of DP Poland plc.
Amortised cost of sub-franchisee loan receivables and loan
notes
The Group's determination of the amortised cost of
sub-franchisee loan receivables at initial recognition requires the
estimation of the initial fair value of the below-market rate loans
provided to the franchisees. Recoverability of such loans is an
ongoing estimation uncertainty and is sensitive to changes in
circumstances and of forecast economic conditions. The Group's
historical credit loss experience and forecast of economic
conditions may also not be representative of sub-franchisees'
actual default in the future.
The Group has also determined the amortised cost of borrowings,
which requires the estimation of the initial fair value of the
below-market rate loans provided by Malaccan Holdings. The loans
have been discounted to a market rate of 5.3% calculated based on
EURIBOR and additional margin, which required accounting estimates
to be done. Further details are shown in note 27.
Lease liability - estimating an incremental borrowing rate
The Group cannot readily determine the interest rate implicit in
the lease, therefore, it uses its incremental borrowing rate (IBR)
to measure lease liabilities. The IBR is the rate of interest that
the Group would have to pay to borrow over a similar term, and with
a similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic
environment. The IBR therefore reflects what the Group 'would have
to pay', which requires estimation when no observable rates are
available or when they need to be adjusted to reflect the terms and
conditions of the lease. The Group estimates the IBR using
observable inputs (such as market interest rates) when available
and is required to make certain entity-specific estimates (such as
estimation of a credit margin).
2. REVENUE
Revenue is measured based on the consideration to which the
Group expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. All of the
revenue is derived in Poland and Croatia.
Corporate store sales : Contracts with customers for the sale of
products to end consumers include one performance obligation. The
Group has concluded that revenue from the sale of products should
be recognised at a point in time when control of the goods is
transferred to the consumer, which is the point of delivery or
collection. Sales are recorded approximately 30 minutes before
delivery or collection.
Sales of materials and services to sub-franchisees : Contracts
with franchisees for the sale of products include one performance
obligation, being the delivery of products to the end franchisee.
The Group has concluded that revenue from the sale of products
should be recognised at a point in time when control of the goods
are transferred to the franchisee, generally on delivery. Revenue
is recognised at the invoiced price less any estimated rebates.
Royalties received from sub-franchisees : The performance
obligation relating to royalties is the use of the Domino's brand.
This represents a sales-based royalty with revenue recognised at
the point the franchisee makes a sale to an end consumer.
Revenue from franchisee fees : Revenue from franchisee fees is
recognised when a franchisee opens a store for trading or on
completion of sale of one or more stores to a third party, as this
is the point at which all performance obligations have been
satisfied.
Rental income on leasehold property : Rental income arising from
leasehold properties where the lease is an operating lease is
recognised on a straight-line basis in accordance with the lease
terms. Rental payments are recognised over the period to which they
relate. Under IFRS 16 'leases' rents received under finance leases
are treated as capital repayments and interest receipts and are
excluded from revenues.
Core revenues are ongoing revenues including sales to the public
from corporate stores, sales of materials and services to
sub-franchisees, royalties received from sub-franchisees and rents
received from sub-franchisees. Other revenues are non-recurring
transactions such as the sale of stores, fittings and equipment to
sub-franchisees. Revenue recognised in the income statement is
analysed as follows:
Revenue is divided into 'core revenues' and 'other revenues' as
follows:
2022 2021
GBP GBP
--------------- ----------- -----------
Core revenue 35,693,133 29,782,191
Other revenue 965 83,998
35,694,098 29,866,189
--------------- ----------- -----------
Revenue is further analysed as follows:
2022 2021
GBP GBP
----------------------------------------- ----------- -----------
Corporate store
sales 34,299,189 28 204,421
Royalties received from sub-franchisees 220,185 1,064,338
Sales or materials and services
to sub-franchises 933,038 267,017
Rental income on leasehold property 240,721 246,415
Fixtures and equipment sales to
sub-franchisees 965 83,998
35,694,098 29,866,189
----------------------------------------- ----------- -----------
Revenue by country:
2022 2021
GBP GBP
--------- ----------- -----------
Poland 34,930,108 29,866,189
Croatia 763,990 -
35,694,098 29,866,189
--------- ----------- -----------
3. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
2022 2021
GBP GBP
------------------------------------- ---------- ----------
Selling expenses 1,350,333 1,014,155
General and administrative expenses 4,337,387 3,287,021
5,687,720 4,301,176
------------------------------------- ---------- ----------
4. SEGMENTAL REPORTING
The Board monitors the performance of the corporate stores and
the commissary operations separately and therefore those are
considered to be the Group's two operating segments. Corporate
store sales comprise sales to the public. Commissary operations
comprise sales to sub-franchisees of food, services and fixtures
and equipment. Commissary operations also include the receipt of
royalty income from sub-franchisees. The Board monitors the
performance of the two segments based on their contribution towards
Group EBITDA - excluding non-cash items, non-recurring items and
store pre-opening expenses. In accordance with IFRS 8, the
segmental analysis presented reflects the information used by the
Board. No separate balance sheets are prepared for the two
operating segments and therefore no analysis of segment assets and
liabilities is presented.
Operating Segment
contribution
2022 2022 2022 2021 2021 2021
GBP GBP GBP GBP GBP GBP
--------------- --- ---------------- --------------- ------------- ------------- -------------- -------------
Corporate Commissary Group Corporate Commissary Group
stores stores
Revenues from external
customers 34,299,189 1,394,909 35,694,098 28,204,421 1,661,768 29,866,189
Direct Costs (23,791
- corporate stores (27,893,400) 549)
Direct Costs -
commissary
(variable cost
only) (419,521) (743,105)
Store EBITDA 6,405,789 4,412,872
Commissary gross
profit 975,388 918,663
Total segment
profit 7,381,177 5,331,535
Unallocated expenses (5,687,720) (4,194,260)
------------------------ ---------------- ------------- ------------- -------------
GROUP EBITDA - excluding non-cash
items, non-recurring items
and store pre-opening expenses 1,693,457 1,137,275
------------------------------------------ --------------- ------------- ------------- -------------- -------------
Store pre-opening
expenses (37,584) (3,429)
Other non-cash and
non-recurring
items (500,971) 59,278
Depreciation
and amortisation (4,336,210) (4,867,679)
Share based payments (137,748) (51,301)
Foreign exchange
gains 17,406 (61,911)
Finance income 257,984 1,155,806
Finance costs (1,258,850) (1,669,527)
------------------------ ---------------- --------------- ------------- ------------- -------------- -------------
Loss before taxation (4,302,516) (4,301,488)
------------------------------------------ --------------- ------------- ------------- -------------- -------------
Commissary direct costs shown above do not include labour and
occupancy costs. These costs are shared across both segments as the
commissary supplies corporate stores as well as supplying
sub-franchisees. Corporate store direct costs include all costs
directly attributable to operating the stores. Store EBITDA
represents corporate store sales less store food costs and direct
store expenses.
The Group does not have reliance on any major customers.
5. LOSS BEFORE TAXATION
This is stated after charging
2022 2021
GBP GBP
------------------------------------------------ ---------- ----------
Auditors and their associates' remuneration 124,524 80,407
Directors' emoluments 273,092 188,521
Amortisation of intangible
fixed assets 626,252 674,030
Depreciation of property, plant
and equipment 3,709,958 2,027,915
Piotr Dzierzek was the highest paid director in 2022 with total
emoluments of GBP72,562. 3,500,000 share options have been granted
to Piotr Dzierzek in November 2022 in accordance with Share Option
Plan announced in June 2022. There are no pension contributions or
defined benefit pensions attributable to Piotr Dzierzek.
6. OTHER NON-CASH AND NON-RECURRING ITEMS
2022 2021
GBP GBP
-------------------------------------------- ---------- ----------
Acquisition - advisors and other expenses (61,225) (70,320)
Leasehold overtaken - 122,905
IFRS 16 adjustment
- impairment (609,320) -
IFRS 16 adjustment
- other 33,416 220,014
Discount settlements on supplier agreement
termination - 252,004
VAT refund 182,535 -
Other non-cash and non-recurring items (46,377) (465,325)
(500,971) 59,278
-------------------------------------------- ---------- ----------
Other non-cash and non-recurring Items
Other non-cash and non-recurring items include items, which are
not sufficiently large to be classified as exceptional, but in the
opinion of the Directors, are not part of the underlying trading
performance of the Group.
IFRS 16 adjustment - impairment refers to right of use assets
write-off due to potential store closures in 2023. IFRS 16
adjustment - other refers to movements in right of use assets due
to changes in lease agreement periods in 2022 and 2021 as well as
discounts received in 2021 for the COVID-19 lockdown periods. The
other non-cash and non-recurring items position in 2022 includes
gains and losses from the sale and liquidation of fixed assets,
provision for dismantling of stores and other items. The other
non-cash and non-recurring items in 2021 include conversion costs
results from reverse acquisition, losses from the liquidation of
fixed assets and other items.
7. STAFF COSTS
Details of directors' remuneration, which is included in the
amounts below, are given in the remuneration report.
2022 2021
GBP GBP
----------------------------------- ----------- ----------
Zero hours contracts in stores 9,412,583 6,902,503
Wages and salaries and directors'
fees 2,452,567 2,359,144
Social security
costs 371,871 500,177
Share based payments 137,748 51,301
-------------------------------------
12,374,769 9,813,125
----------------------------------- ----------- ----------
The average monthly number of employees during the year was as
follows:
2022 2021
Number Number
---------------- ------- -------
Operational 179 243
Administration 35 44
------------------
Total 214 287
------------------ ------- -------
8. FINANCE INCOME
2022 2021
GBP GBP
--------------------------------------------------- -------- ----------
VAT refund - interests 231,476 -
Unwinding of discount on loans to sub-franchisees 9,417 13,059
Finance income on loans to sub-franchisees 16,767 26,131
Interest on short-term deposits - 3,811
Other finance
income 324 1,112,805
257,984 1,155,806
--------------------------------------------------- -------- ----------
Other finance income in 2021 mainly comprises loans written off
in Dominium S.A. as a result of the refinancing for the reverse
acquisition.
9. FINANCE COSTS
2022 2021
GBP GBP
--------------------------------------- ---------- ----------
Interest expense on lease liabilities 665,084 742,862
Other interest 593,766 926,665
1,258,850 1,669,527
--------------------------------------- ---------- ----------
Other interest in 2022 mainly comprises interest payable
according to loan note issued to Malaccan Holdings Ltd.
10. TAXATION
2022 2021
GBP GBP
---------------------------------------------- ------- -------
Current tax - -
Deferred tax expense relating to recognition
of deferred tax liability 57,429 58,983
Other taxes - -
Total tax charge in
income statement 57,429 58,983
----------------------------------------------- ------- -------
The tax on the Group's loss before tax differs from the
theoretical amount that would arise using the tax rate applicable
to profits of the consolidated entities as follows:
2022 2021
GBP GBP
------------------------------------------ ------------ ------------
Loss before tax (4,302,516) (4,301,488)
Tax credit calculated at applicable
rate of 19% (817,478) (817,283)
Income taxable but not recognised
in financial statements 97,402 312,041
Income not subject to tax (570,648) (647,083)
Expenses not deductible for tax purposes 2,234,215 1,196,148
Tax losses for which no deferred income
tax asset was recognised (886,062) 15,160
Total tax charge in income
statement 57,429 58,983
------------------------------------------- ------------ ------------
The Directors have reviewed the tax rates applicable in the
different tax jurisdictions in which the Group operates. They have
concluded that a tax rate of 19% represents the overall tax rate
applicable to the Group.
11. LOSS ATTRIBUTABLE TO MEMBERS OF PARENT COMPANY
The loss relating to transactions in the financial statements of
the parent company was GBP27,401,465 (2021: GBP11,557,307).
12. LOSS PER SHARE
The loss per ordinary share has been calculated as follows:
2022 2022 2021 2021
GBP GBP GBP GBP
Profit Weighted Profit
Weighted average / (loss) average number / (loss)
number of shares after tax of shares after tax
--------- ------------------ ------------ ---------------- ------------
Basic 653,776,085 (4,359,945) 578,123,216 (4,360,471)
Diluted 653,776,085 (4,359,945) 578,123,216 (4,360,471)
--------- ------------------ ------------ ---------------- ------------
The weighted average number of shares for the year excludes
those shares in the Company held by the employee benefit trust. At
31st December 2022 the basic and diluted loss per share is the
same, as the vesting of JOSS, SIP or share option awards would
reduce the loss per share and is, therefore, anti-dilutive.
13. GOODWILL
Cost Group
GBP
At 31 December
2020 2,881,283
Additions 12,127,453
At 31 December
2021 15,008,736
-------------------------------- -------------
Additions -
Foreign exchange movements 102,266
At 31 December
2022 15,111,002
-------------------------------- -------------
Carrying amount Group
GBP
At 31 December
2022 15,111,002
-------------------------------- -------------
The goodwill recognised by the accounting acquirer is equal to
the consideration (as determined under IFRS 3) which was paid by
the accounting acquirer less the fair value of the assets and
liabilities acquired with the accounting acquiree. The goodwill
recognised is allocated to Polish entities cash generating unit and
is made up by the expected synergies of the enlarged business and
management expertise brought by new Chief Executive Officer and
Non-Executive Director to DP Poland PLC's business.
In accordance with IAS 36 the Group has performed impairment
review of goodwill at the reporting period end. The impairment test
has been undertaken by assessment recoverable amount of the CGU to
which the goodwill has been allocated, against the carrying value
of this CGU. The review included discounted cash flow projections
to determine the recoverability of goodwill and the intangible
assets. We compared the carrying amount of the assets, inclusive of
assigned goodwill, to its respective fair value less costs of
disposal. Significant assumptions inherent in the valuation
methodologies for goodwill are employed and include, but are not
limited to, prospective financial information, growth rates,
terminal value and discount rates. Prospective sales and costs
forecasts are made for the following five years (i.e., FY23-FY27)
and are based on market-available data with regard to country GDP
growth rates, inflation, price trends of main cost items, as well
as on historical level of sales volumes and incurred costs as a
percentage of sales, taking into account implemented High Volume
Mentality, digital platform development and increased focus on
operations excellence. The discount rate is reviewed annually to
take into account the current market assessment of the time value
of money and the risks specific to the CGU and rates used by
comparable companies. The discount rate used to calculate fair
value is declining from 13.6% in FY23 to 10.6% in FY27 (i.e., 13.6%
in FY23, 12.9% in FY24, 12.1% in FY25, 11.3% in FY26 and 10.6% in
FY27 and beyond). Costs are reviewed for inflation and other cost
pressures. The long term growth rate used was 3%. Based on this
quantitative test, we determined that the fair value of assets
including goodwill exceeded its carrying amount. After completing
our annual impairment reviews we concluded that goodwill was not
impaired.
The following sensitivities have been performed:
- Poland: a 0.5% decrease in the growth rate would result in the
carrying amount of the goodwill value being greater than the
recoverable amount. A 0.5% increase in discount rate would result
in the carrying amount of goodwill value being greater than the
recoverable amount.
- Croatia: The recoverable amount is not deemed to be sensitive
to a decrease in growth rate, as decreasing by 1% would still leave
headroom between the carrying value of the goodwill and the
recoverable amount. A 1% increase in discount rate would result in
the carrying amount of goodwill value being greater than the
recoverable amount.
14. INTANGIBLE ASSETS
Franchise
fees Capitalised
and intellectual Software loan Total
property
rights discount
Group GBP GBP GBP GBP
------------------------- ----------------- ---------- ------------ ----------
Cost:
At December 2020 4,595,235 323,956 - 4,919,191
Acquisition of
business 883,853 85,957 59,854 1,029,664
Foreign exchange
movements (391,076) (55,389) (17,865) (464,330)
Additions 149,125 208,004 21,512 378,641
Disposals (42,717) (89,294) (132,011)
At 31 December
2021 5,194,420 562,528 (25,793) 5,731,155
Acquisition of business
- AAP 1,471,428 282,589 - 1,754,017
Foreign exchange
movements 195,567 142,990 5,542 344,519
Additions 62,831 241,032 - 303,863
Disposals - - - -
At 31 December
2022 6,924,665 1,229,139 (20,250) 8,133,555
-------------------------- ----------------- ---------- ------------ ----------
Amortisation
At December 2020 2,945,787 322,357 - 3,268,144
Foreign exchange
movements (250,900) (61,675) (11,468) (324,043)
Amortisation charged
for the year 524,397 138,097 11,536 674,030
Disposals (15,139) - (79,285) (94,423)
At 31 December
2021 3,204,145 398,779 (79,217) 3,523,706
Foreign exchange
movements 171,673 93,436 4,009 269,118
Amortisation charged
for the year 527,030 90,278 8,944 626,252
Disposals - - - -
========================= ================= ========== ============ ==========
At 31 December
2022 3,902,848 582,493 (66,264) 4,419,077
-------------------------- ----------------- ---------- ------------ ----------
Net book value:
At 31 December
2022 3,021,817 646,646 46,014 3,714,479
-------------------------- ----------------- ---------- ------------ ----------
At 31 December
2021 1,990,275 163,749 53,424 2,207,448
Franchise fees consisting of the cost of purchasing the Master
Franchise Agreement (MFA) from Domino's Pizza Overseas Franchising
B.V. have been capitalised in 2021 and are written off over the
term of the MFA. As at 31.12.2022 net book value of MFA amounted to
GBP492,267 with remaining amortization period of 13 years. Master
Franchise Agreement between AAP and Domino's Pizza International
Franchising Inc. have been capitalized in 2022 and is measured at
cost less any accumulated impairment losses. As there is no
foreseeable limit to the period over which Master Franchise
Agreement is expected to generate net cash inflows for the entity,
the Group identified Master Franchise Agreement to have an
indefinite useful life. MFA is allocated to AAP cash generating
unit. Net book value of AAP MFA amounted to GBP1,275,612 as at
31.12.2022. The difference between the present value of loans to
sub-franchisees recognised and the cash advanced has been
capitalised as an intangible asset and are amortised over the life
of sub-franchise agreements of 10 years. The amortisation of
intangible fixed assets is included within administrative expenses
in the Income Statement. The Group has performed an annual
impairment test for the franchise fees and loan discounts and the
recoverable amount of Polish and Croatian cash generating units
have been determined based on fair value calculated using
discounted future cash flows based on the business plan, and
incorporating the Directors' estimated discount rate (10.6% in FY27
and beyond for Polish CGU and 12.5% in FY27 and beyond for AAP
CGU), future store openings and the average Polish Zloty and
Croatian Kunas exchange rate for the year ended 31 December 2022.
The fair value calculation indicates that no impairment is
required. As at 31 December 2022, no reasonably anticipated change
in the assumptions would give rise to a material impairment
charge.
15. PROPERTY, PLANT AND EQUIPMENT
Fixtures Assets
fittings
Leasehold and under
improvements equipment construction Total
Group GBP GBP GBP GBP
---------------------------- ------------- ---------- ------------- ------------
Cost:
At December 2020 5,926,817 2,280,324 19,089 8,226,230
Acquisition of
business 3,634,600 2,124,650 19,658 5,778,908
Foreign exchange movements (849,042) (545,878) (2,862) (1,397,782)
Additions 766,548 392,046 392,169 1,550,763
Disposals (781,849) (222,194) - (1,004,043)
Transfers 27,912 380,569 (408,481) -
At 31 December
2021 8,724,986 4,409,517 19,573 13,154,076
Acquisition of business
- AAP 341,007 270,218 - 611,225
Foreign exchange movements 413,953 388,155 8,324 810,432
Additions 196,617 272,251 603,943 1,072,811
Disposals (813,019) (278,656) - (1,091,675)
Transfers 158,339 243,548 (401,887) -
At 31 December
2022 9,021,883 5,305,033 229,953 14,556,869
----------------------------- ------------- ---------- ------------- ------------
Depreciation:
At December 2020 4,779,361 2,157,479 - 6,936,840
Foreign exchange movements (509,507) (398,978) - (908,485)
Depreciation charged
for the year 924,736 1,103,179 - 2,027,915
Impairment - (262,089) - (262,089)
Disposals (590,478) (184,724) - (775,202)
At 31 December
2021 4,604,112 2,414,867 - 7,018,979
Foreign exchange movements 265,301 307,049 - 572,350
Depreciation charged
for the year 800,829 636,978 - 1,437,807
Other adjustments (99,303) - - (99,303)
Disposals (747,750) (270,517) - (1,018,267)
At 31 December
2022 4,823,189 3,088,377 - 7,911,566
----------------------------- ------------- ---------- ------------- ------------
Net book value:
At 31 December
2022 4,198,693 2,216,655 229,953 6,645,301
----------------------------- ------------- ---------- ------------- ------------
At 31 December
2021 4,120,874 1,994,650 19,573 6,135,097
The depreciation of property, plant and equipment is included
within direct and administrative expenses in the Income
Statement.
16. NON CURRENT ASSET INVESTMENTS
Group Company
GBP GBP
Investments in Group
undertakings
--------------------------------------------- ------- -------------
At 31 December
2020 - 28,660,000
Investment in subsidiary company - shares
subscribed - Dominium S.A. - 34,241,330
Investment in subsidiary company - capital
contribution - 19,267
Impairment charge - (11,130,429)
At 31 December
2021 - 51,790,168
----------------------------------------------- ---- -------------
Investment in subsidiary company - shares
subscribed - DP Polska S.A. - 4,703,100
Investment in subsidiary company - shares
subscribed - All About Pizza d.o.o. - 2,382,979
Investment in subsidiary company - shares
subscribed - Dominium S.A. - 805,820
Investment in subsidiary company - capital
contribution - 65,433
Impairment charge - (26,781,124)
At 31 December
2022 - 32,966,376
----------------------------------------------- ---- -------------
Investments in Group undertakings are recorded at cost, which is
the fair value of the consideration paid.
The parent company's investment in Polish subsidiaries, i.e., DP
Polska S.A. and Dominium S.A., have a historical cost of GBP57.4m
prior to the impairment review. The impairment test carried out
showed that the investment was impaired and the carrying value
after impairment was GBP30.6m. With effect from 29 July 2022, the
Company became the legal parent of All About Pizza d.o.o. The
parent company's investment in Croatian subsidiary had a historical
cost of GBP2.4m. The Group has determined that an impairment of
GBP26.8m in the investment value should be recognised in the
accounts of DP Poland plc. The impairment assessment brought
investments in subsidiary down to GBP33.0m and was arrived at by
fair value calculated using discounted future cash flows.
The Company holds 20% or more of the share capital of the
following companies, which are included in the consolidation:
Company Nature of business Location Class % holding
----------------- ----------------------------- ---------- ---------- ----------
Operation of Pizza delivery
DP Polska S.A. and dine-in restaurants Poland Ordinary 100
Operation of Pizza delivery
Dominium S.A. and dine-in restaurants Poland Ordinary 100
All About Pizza Operation of Pizza delivery
d.o.o. and dine-in restaurants Croatia Ordinary 100
The registered office of DP Polska S.A. and Dominium S.A. is: 30
Dabrowiecka Street, 03-932 Warsaw, Poland.
The registered office of All About Pizza d.o.o. is: 1 Kneza
Mislava Street, Zagreb, Croatia.
The acquisition of Dominium S.A. was completed on 8th January
2021. The acquisition of All About Pizza d.o.o. was completed on
29th July 2022 - further details are given in note . All About
Pizza's business is the operation of delivery and dine-in pizza
restaurants.
17. LOANS GRANTED TO SUBSIDIARY UNDERTAKINGS
The Company has provided EUR200k loan to AAP in August 2022
following the acquisition. The loan is repayable by 31.12.2024, is
unsecured with 3% interest payable and have been discounted to a
market rate of 5.3% in accordance with IFRS 9.
18. DEFERRED TAX
The Group has unused tax losses of GBP17,702,039 available for
offset against future profits. Polish tax losses are only
recognised for deferred tax purposes to the extent that they are
expected to be used to reduce tax payable of future profits. Under
Polish law, losses can only be carried forward for five years and
only 50% of the losses brought forward can be set off in any one
year. Polish tax losses expire as follows: GBP3,719,946 in 2023;
GBP32,888,786 in 2024; GBP2,166,198 in 2025; GBP1,142,536 in 2026
and GBP419,892 in 2027. UK tax losses carried forward at the
balance sheet date were GBP6,596,996. AAP tax losses carried
forward at the balance sheet date were GBP767,685.
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
------------------------ ---------- ---------- -------- --------
Deferred tax liability
Deferred tax liability
Property, plant and
equipment (120,226) (56,200) - -
Intangible assets (149,651) (150,049) - -
Interest on loans (5,826) (7,548)
Accruals (396) -
(276,099) (213,797) - -
Movements in deferred tax
Property,
plant and Intangible Interest
equipment assets on loans Accruals Total
GBP GBP GBP GBP GBP
------------------ ----------- ----------- ---------- --------- ----------
At 31 December
2021 (56,200) (150,049) (7,548) - (213,797)
Credited to
equity (4,368) (299) (191) (15) (4,873)
Credited to
profit and loss (59,658) 697 1 913 (381) (57,429)
At 31 December
2022 (120,226) (149,651) (5,826) (396) (276,099)
-------------------- ----------- ----------- ---------- --------- ----------
19. TRADE AND OTHER RECEIVABLES
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
------------------------- ---------- ---------- -------- --------
Current
Trade receivables 482,382 362,407 - -
Trade receivables from
subsidiaries - - 67,246 396,000
Other receivables 903,114 635,420 11,295 25,594
Prepayments and accrued
income 581,491 221,620 68,440 -
1,966,987 1,219,447 146,981 421,594
Non-current
Other receivables 822,042 820,871 - -
At 31 December 2022 2,789,029 2,040,318 146,981 421,594
--------------------------- ---------- ---------- -------- --------
Other non-current receivables include loans to sub-franchisees
which are repayable over between four and nine years. Other current
receivables include loans to sub-franchisees repayable over less
than one year. Repayments may be made earlier in the event that
sub-franchised stores achieve certain turnover targets earlier than
expected. The loans are secured by a charge over certain assets of
the sub-franchisees. Other current receivables also includes Polish
and Croatian value added tax recoverable in future periods. No
receivables are materially past due date. Other than amounts held
by the Company, all trade and other receivables are in Polish Zloty
and Croatian Kuna. Trade receivables are non - interest bearing and
are generally on 0 - 30 days terms.
20. INVENTORIES
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
------------------------------- -------- -------- -------- --------
Raw materials and consumables 982,110 667,898 - -
At 31 December 982,110 667,898 - -
--------------------------------- -------- -------- -------- --------
The cost of inventories recognised as an expense and included in
cost of sales amounted to GBP9,703,447 (2021: GBP7,573,606).
21. ACQUISITION OF ALL ABOUT PIZZA D. O. O.
With effect from 29 July 2022, the Company became the legal
parent of All About Pizza d. o.o. All About Pizza d.o.o signed a
Franchise Agreement with Domino's Pizza International Franchising
Inc. in July 2019 to operate Domino's stores in Croatia and
operated three corporate stores in Zagreb at the date of
transaction.
The Company has entered into a Share Purchase Agreement to
acquire All About Pizza d.o.o for approximately GBP2.4 million
satisfied by the issue of 29,787,234 Consideration Shares at 8
pence per share. In addition, Andrew Rennie, has subscribed for
2,127,660 First Subscription Shares, at a price of 8 pence per
share, and will subscribe for a further 3,191,489 Second
Subscription Shares, at a price of 8 pence per share, within 12
months following completion of the Transaction.
Further to the completion of the acquisition of All About Pizza
d.o.o. Nils Gornal, Chief Executive Officer of All About Pizza
d.o.o., and Andrew Rennie, ex-CEO of Domino's Pizza Enterprises in
Europe, were appointed as Chief Executive Officer and Non-Executive
Director of DP Poland PLC, respectively.
The fair value of the assets and liabilities acquired by the
accounting acquirer are as follows:
Note 29 July 2022
GBP
Intangible assets 478,406
Tangible fixed
assets 611,225
Leases - right
of use assets 267,877
Inventories 41,303
Trade and other
receivables 65,180
Cash and cash equivalents 22,828
Trade and other
payables (37,504)
Borrowings (192,687)
Lease liabilities (267,877)
================================ ===== =============
Total identifiable
net assets 988,751
Master Franchise
Agreement 14 1,275,611
================================ ===== =============
Consideration paid by the
accounting acquirer 2,264,362
=============================== ===== =============
AAP revenue post-acquisition 763,990
AAP PBT post-acquisition (267,973)
Acquisition expenses
The advisors' and other costs incurred by DP Poland PLC in
acquiring All About Pizza d.o.o. amounted to GBP57,564 in 2022.
Intangible assets
Intangible assets acquired relate to: software and entry fee for
lease agreement for one of the stores of AAP.
Tangible fixed assets
Tangible fixed assets include: leasehold improvements, equipment
(i.e., restaurant, computer and office equipment) and e-bikes.
Trade and other receivables
The Directors consider that the gross contractual amounts of
trade and other receivables are not materially different to the
fair values.
Borrowings
Borrowings of All About Pizza represent liabilities for
financial loans to previous shareholders, which has been repaid
after the completion of transaction.
Master Franchise Agreement
An excess of consideration (as determined under IFRS 3) which
was paid by the accounting acquirer over the fair value of the
assets and liabilities acquired was attributed to Master Franchise
Agreement (MFA). The Group has performed impairment review of MFA
at the reporting period end. The review included discounted cash
flow projections to determine the recoverability of MFA and the
intangible assets. We compared the carrying amount of the assets,
inclusive of MFA, to its respective fair value calculated as the
recoverable amount of Croatian cash generating unit using
discounted future cash flows based on the business plan and future
store openings. Significant assumptions inherent in the valuation
methodologies are employed and include, but are not limited to,
prospective financial information, 2.5% growth rate, terminal value
and discount rates declining from 13.7% in FY23 to 12.5% in FY27
(i.e., 13.7% in FY23, 13.4% in FY24, 13.1% in FY25, 12.8% in FY26
and 12.5% in FY27 and beyond). Based on this quantitative test, we
determined that the fair value of assets exceeded its carrying
amount. After completing our annual impairment reviews we concluded
that MFA was not impaired.
22. LEASES
GROUP AS A LESSEE
Right of Use Assets
Leasehold
property Total
Cost: GBP GBP
------------ ------------
At 31 December
2020 7,182,238 7,182,238
Acquisition of
business 5,173,815 5,173,815
Foreign exchange movements (1,190,615) (1,190,615)
Additions 2,811,295 2,811,295
Adjustment to right-of-use asset
lease term 599,283 599,283
Disposals (244,793) (244,793)
At 31 December
2021 14,331,223 14,331,223
Acquisition of
business 267,877 267,877
Foreign exchange movements 654,739 654,739
Additions 655,352 655,352
Adjustment to right-of-use asset
lease term (51,773) (51,773)
Disposal (666,255) (666,255)
At 31 December
2022 15,191,163 15,191,163
------------------------------------- ------------ ------------
Accumulated depreciation
At 31 December
2020 2,959,736 2,959,736
Foreign exchange movements (605,447) (605,447)
Adjustment to right-of-use asset
lease term 1,464,104 1,464,104
Disposal (152,464) (152,464)
Charge for the
year 2,427,823 2,427,823
At 31 December
2021 6,093,752 6,093,752
Foreign exchange movements 430,854 430,854
Adjustment to right-of-use asset
lease term 524,131 524,131
Disposal (602,689) (602,689)
Charge for the
year 2,272,151 2,272,151
At 31 December
2022 8,718,199 8,718,199
------------------------------------- ------------ ------------
Carrying amount
At 31 December
2022 6,472,965 6,472,965
------------------------------------- ------------ ------------
At 31 December
2021 8,237,471 8,237,471
At the Balance sheet date, the Group's portfolio of leases
consisted of 119 leases over 116 store premises, one office and
three commissaries. Leases generally have an initial term of 10
years, with an option to extend for an additional period of between
5 and 10 years. The depreciation of Right of Use Assets is included
within direct and administrative expenses in the Income Statement.
Rents payable are generally reviewed at five year intervals. The
adjustment to right-of-use asset lease term is related to the
review of the terms of lease agreements and represents right of use
assets write-off due to potential store closures in 2023. Please
also refer to note 6.
2022 2021
Amounts recognised in
profit and loss GBP GBP
--------------------------------------- ---------- ----------
Depreciation expense on right-of-use
assets 2,272,151 2,427,823
Interest expense on lease
liabilities 665,084 742,863
2022 2021
GBP GBP
-------------------------------------- ---------- ----------
The total cash outflow for leases
amounted to 3,116,715 3,231,486
GROUP AS A LESSOR
The Group enters into lease agreements as an intermediate lessor
with respect to stores operated by sub-franchisees. These leases
have terms of between 1 and 5 years with a 5 year extension option,
but no longer than the term of the main lease agreement. The lessee
does not have an option to purchase the property at the expiry of
the lease period. Rental income recognised by the Group during the
year is GBP240,721 (2021: GBP246,415).
Future minimum rentals receivable under non-cancellable
operating leases as at 31 December are, as follows:
2022 2021
Maturity analysis GBP GBP
---------------------- -------- --------
Within one year 102,047 100,339
1 - 2 years 92,781 98,550
2 - 3 years 92,781 89,601
3 - 4 years 46,308 89,601
4 - 5 years 15,390 44,720
Onwards - 14,863
---------------------- -------- --------
At 31 December 349,307 437,674
---------------------- -------- --------
23. LEASE LIABILITIES
2022 2021
GBP GBP
------------------------- ---------- ----------
Total lease liabilities 8,501,171 9,705,438
Analysed as:
-------------------------- ---------- ----------
Non-current 5,666,835 7,038,279
Current 2,834,336 2,667,159
-------------------------- ---------- ----------
2022 2021
Maturity analysis GBP GBP
-------------------------- ---------- ----------
Within one year 2,834,336 2,678,292
1 - 2 years 2,199,312 2,310,187
2 - 3 years 1,802,235 1,787,291
3 - 4 years 1,056,548 1,506,870
4 - 5 years 363,632 1,061,573
5 - 6 years 125,686 259,627
Onwards 119,422 101,598
-------------------------- ---------- ----------
For the year ended 31 December 2022, the average effective
borrowing rate was 8.63 per cent. Interest rates are fixed at the
contract date. All leases are on a fixed repayment basis and no
arrangements have been entered into for contingent rental payments.
All lease obligations are denominated in Polish Zloty or Euros.
The fair value of the Group's lease obligations as at 31
December 2022 is estimated to be GBP8,501,171 using 8.63% discount
rate. This is based on the rate for Polish Government bonds with a
similar maturity to the lease terms and adding a credit margin that
reflects the secured nature of the lease obligation.
The Group's obligations under leases are secured by the lessors'
rights over the leased assets.
24. EQUITY
"Called up share capital" represents the nominal value of equity
shares issued. An increase in share capital in 2022 is due to the
increase in share capital for Dominium S.A., the increase in share
capital for DP Polska S.A. and the increase in share capital for
the acquisition of All About Pizza d.o.o.
"Share premium account" represents the premium paid on the
Company's 0.5p Ordinary shares.
"Capital reserve - own shares" represents the cost of shares
repurchased and held in the employee benefit trust (EBT).
"Retained earnings" represents retained losses of the Group.
"Merger relief reserve" represents the excess of the value of
the consideration shares issued to the shareholders upon the
reverse takeover and acquisition of All About Pizza d. o.o. over
the fair value of the assets acquired.
"Reverse Takeover reserve" represents the accounting adjustments
required to reflect the reverse takeover upon consolidation.
"Currency translation reserve" represents exchange differences
arising from the translation of the financial statements of the
Group's foreign subsidiaries.
25. CASH AND CASH EQUIVALENTS
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
------------------ ---------- ---------- -------- --------
Cash at bank and
in hand 4,110,322 2,701,646 65,293 302,509
At 31 December 4,110,322 2,701,646 65,293 302,509
-------------------- ---------- ---------- -------- --------
26. TRADE AND OTHER PAYABLES
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
------------------ ---------- ---------- -------- --------
Current
Trade payables 3,032,651 3,248,333 14,189 54,669
Other payables 335,729 546,734 - 6,667
Accrued expenses 1,974,648 1,188,598 79,889 69,333
At 31 December 5,343,028 4,983,665 94,078 130,669
-------------------- ---------- ---------- -------- --------
Dismantling provision for the stores closed in 2022 amounting to
GBP21,294 is included within Accrued expenses and provisions as 31
December 2022.
27. BORROWINGS
Group Group Company Company
2022 2021 2022 2021
GBP GBP GBP GBP
------------------- ----------- ---------- ---------- ----------
Non current interest bearing
loans and borrowings
Borrowing 6,763,297 5,829,461 6,734,149 5,829,461
At 31 December 6,763,297 5,829,461 6,734,149 5,829,461
--------------------- ----------- ---------- ---------- ----------
As part of the reverse acquisition DP Poland PLC (the legal
acquirer) issued a EUR1.3million loan note in favour of Malaccan
Holdings Ltd the former owner of Dominium S.A.. In addition,
outstanding debt of EUR6.2 million (approximately GBP5.6 million)
that was previously due from Dominium to Malaccan Holdings under
certain existing Shareholder Loans was converted into a further
unsecured loan note of EUR6.2 million being issued to Malaccan
Holdings on the same terms and in substitution for that outstanding
debt. In aggregate, therefore, EUR7.5 million Loan Notes were
issued by DP Poland plc and remain outstanding to Malaccan Holdings
upon completion of the acquisition of Dominium S.A.. The loans are
repayable as at 31.12.2024, is unsecured with 3% interest payable
and have been discounted to a market rate of 5.3% in accordance
with IFRS 9.
28. ANALYSIS OF MOVEMENTS IN NET FUNDS
01 January Acquisition Cash Non Foreign 31 December
2021 flows cash exchange 2021
movements movements
GBP GBP GBP GBP GBP GBP
------------------- ------------- ------------ ---------- ------------ ---------- -------------
Cash and cash
equivalents 34,651 1,336,256 1,330,739 - - 2,701,646
Borrowings (5,966,881) (1,107,409) - 834,925 409,904 (5,829,461)
Lease liabilities
- current (1,515,523) (1,027,332) 273,023 (397,327) - (2,667,159)
Lease liabilities
- non-current (3,313,908) (5,377.057) 3,201,833 (1,549,147) - (7,038,279)
Net debt (10,761,661) (6,175,542) 4,805,595 (1,111,549) 409,904 (12,833,253)
--------------------- ------------- ------------ ---------- ------------ ---------- -------------
01 January Acquisition Cash Non Foreign 31 December
2022 flows cash exchange 2022
movements movements
GBP GBP GBP GBP GBP GBP
------------------- ------------- ------------ ---------- ------------ ---------- -------------
Cash and cash
equivalents 2,701,646 22,828 1,469,203 - (83,355) 4,110,322
Borrowings (5,829,461) (192,687) 163,539 (565,567) (339,121) (6,763,297)
Lease liabilities
- current (2,667,159) (66,604) 11,068 (111,641) - (2,834,336)
Lease liabilities
- non-current (7,038,279) (152,249) 2,057,880 (534,187) - (5,666,835)
Net debt (12,833,253) (388,712) 3,701,690 (1,211,395) (422,476) (11,154,146)
--------------------- ------------- ------------ ---------- ------------ ---------- -------------
29. FINANCIAL INSTRUMENTS
Categories of financial instruments
2022 2022 2021 2021
Financial Financial Financial Financial
assets at liabilities assets at amortised liabilities
amortised at amortised cost at amortised
cost cost cost
GBP GBP GBP GBP
----------------------- ----------- -------------- --------------------- --------------
GROUP
Financial Assets
Cash and cash
equivalents 4,110,322 2,701,646
Trade receivables 482,382 362,407
Other receivables
- current 903,114 635,420
Other receivables
- non current 452,125 463,800
Total 5,947,943 4,163,273
------------------------- ----------- -------------- --------------------- --------------
Financial Liabilities
Trade payables (3,032,651) (3,248,333)
Borrowing (6,763,297) (5,829,461)
Other liabilities
- current (335,729) (546,734)
Lease liabilities
- current (2,834,336) (2,667,159)
Lease liabilities
- non current (5,666,835) (7,038,279)
Accruals - current (1,974,648) (1,188,598)
Total (20,607,496) (20,518,564)
------------------------- ----------- -------------- --------------------- --------------
Net (14,659,553) (16,355,291)
------------------------- ----------- -------------- --------------------- --------------
COMPANY
Financial Assets
Cash and cash
equivalents 65,293 302,509
Trade receivables 67,246 396,000
Other receivables 79,735 25,894
Total 212,274 724,403
------------------------- -------- ------------ -------- ------------
Financial Liabilities
Trade payables (14,189) (54,669)
Other liabilities
- current - -
Accruals (79,889) (69,333)
Borrowings (6,734,149) (5,829,461)
Total (6,828,227) (5,953,463)
------------------------- -------- ------------ -------- ------------
Net (6,615,953) (5,229,060)
------------------------- -------- ------------ -------- ------------
The fair value of the Group's financial assets and liabilities
is not considered to be materially different from the carrying
amount as set out above. No financial assets are significantly past
due or impaired.
Maturity of the Group's financial liabilities
2022 2022 2022 2022 2021 2021 2021 2021
Trade Trade
Finance and other Finance and other
leases payables Borrowings Total leases payables Borrowings Total
GBP GBP GBP GBP GBP GBP GBP GBP
---------------- ---------- ----------- ----------- ----------- ---------- ----------- ----------- -----------
Due within
one year 2,834,336 5,343,028 - 8,177,364 2,678,292 4,983,665 - 7,661,957
Due within
two to five
years 5,421,727 - 7,055,733 12,477,460 6,665,921 - 6,365,306 13,031,227
Due after five
years 245,108 - - 245,108 361,225 - - 361,225
---------------- ---------- ----------- -----------
8,501,171 5,343,028 7,055,733 20,899,932 9,705,438 4,983,665 6,365,306 21,054,409
---------------- ---------- ----------- ----------- ----------- ---------- ----------- ----------- -----------
Capital Risk Management
The Company and the Group aim to manage its overall capital so
as to ensure that companies within the Group continue to operate as
going concerns, whilst maintaining an optimal capital structure to
reduce the cost of capital.
The Company's and the Group's capital structure represent the
equity attributable to shareholders of the company together with
borrowings and cash and cash equivalents.
Market risk
Market risk is the risk that arises from movements in stock
prices, interest rates, exchange rates, and commodity prices.
Market risk for the 31 December 2022 year end is reflected within
the currency risk and interest rate risk which are discussed
further below.
Currency Risk
The foreign currency risk stems from the Company and the Group's
foreign subsidiary which trades in Poland and Croatia and whose
revenues and expenses are mainly denominated in local currencies.
Additionally, some Company and Group transactions are also
denominated in US Dollar and Euro currencies. The Company and the
Group are therefore subject to foreign currency risk due to
exchange rate movements that will affect the Company and the
Group's operating activities and the Company and the Group's net
investment in its foreign subsidiary. In each case where revenues
of the Group are in a foreign currency, there is a material match
between the currency of each operating company's revenue stream,
primary assets, debt and debt servicing (if applicable).
The carrying amount in Sterling, of the Group's foreign currency
denominated monetary assets and liabilities at the reporting dates
is as follows:
2022 2021
Assets GBP GBP
Polish Zlotys 3,341,882 4,092,403
Euro 567,265 -
Sterling 2,915,432 -
US dollar - -
Croatian Kuna 74,772 -
Liabilities
Polish Zlotys 12,818,897 15,572,709
Euro 7,246,190 5,840,594
Sterling 173,967 -
US dollar 206,392 -
Croatian Kuna 162,050 -
Sensitivity analysis
The potential impact on Group net loss and equity reserves from
a 20% weakening of the Polish Zloty, Euro, US dollar and Croatian
Kuna against sterling affecting the reported value of financial
assets and liabilities would be an increased net loss and reduction
in Group reserves of GBP3,289,922.
2022
GBP
------------------------------- ------------
20% weakening of Polish Zloty (1,895,403)
20% weakening of Euro (1,335,785)
20% weakening of US dollar (41,278)
20% weakening of Croatian
Kuna (17,456)
-----------------------------------
(3,289,922)
------------------------------- ------------
A depreciation of 20% has been selected for the analysis as an
illustration on the basis that it is a reasonable estimate of a
likely market fluctuation.
An appreciation of 20% against Sterling would produce an equal
and opposite effect.
Interest Rate Risk
The Company and the Group do not possess any financial
instruments with floating interest rates, hence interest rate risk
is not applicable to the Group.
Credit Risk
Exposure to credit risk is limited to the carrying amount of
financial assets recognised at the balance sheet date, namely cash
and cash equivalents, trade and other receivables and loans to sub
franchisees.
The Company and the Group manage its exposure to this risk by
applying Board-approved limits to the amount of credit exposure to
any one counterparty and employs minimum credit worthiness criteria
as to the choice of counterparty, thereby ensuring that there are
no significant concentrations of credit risk.
All sub-franchisees who are provided with loans from the Group
have been through the franchisee selection process, which is
considered to be sufficiently robust to ensure an appropriate
credit verification procedure.
The credit risk for liquid funds and other short-term financial
assets is considered negligible, since the counterparties are
reputable banks with high quality external credit ratings.
Impairment of financial assets
The Group recognises an allowance for expected credit losses
('ECLs') for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the
contractual cash flows due in accordance with the contract and all
the cash flows that the Group expects to receive, discounted at an
approximation of the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held
or other credit enhancements that are integral to the contractual
terms. ECLs are recognised in two stages. For credit exposures for
which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which
there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of
the timing of the default (a lifetime ECL). For trade receivables
the Group applies a simplified approach in calculating ECLs and
recognises a loss allowance based on lifetime ECLs at each
reporting date. The Group has established a provision procedure
that is based on the percentage cost if insuring its receivables
against loss from default. Historic credit loss experience,
adjusted for forward-looking factors specific to the debtors, the
economic environment and relevant security and guarantees from
sub-franchisees are also taken into account. The Group considers
that there has been a significant increase in credit risk when
contractual payments are more than 30 days past due. The Group
considers a financial asset in default when contractual payments
are 180 days past due. However, in certain cases, the Group may
also consider a financial asset to be in default when internal or
external information indicates that the Group is unlikely to
receive the outstanding contractual amounts in full before taking
into account any credit enhancements held by the Group. A financial
asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
The movement in the allowance for doubtful debts during the year
is as follows:
2022 2021
GBP GBP
Balance at 01 January 485,916 -
Acquisition of business - 934,132
Impairment loss made during
the year 984 222,528
Reversal of previously
recognised impairment
loss (206,680) (670,744)
Balance at 31 December 280,220 485,916
------------------------------ ---------- ----------
Set out below is the information about the credit risk exposure
on the Group's trade receivables as at 31 December:
30-60 61-90 >91
Current <30 days days days days Total
GBP GBP GBP GBP GBP GBP
31 December 2022 392,291 85,312 3,087 108 1,584 482,382
------------------ -------- --------- ------ ------ ------ --------
31 December 2021 342,776 8,868 988 77 9,698 362,407
------------------ -------- --------- ------ ------ ------ --------
The Group seeks to manage financial risk by ensuring sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. Surplus funds are invested on a short
term basis at money market rates and therefore such funds are
available at short notice.
30. SHARE CAPITAL
2022 2021
GBP GBP
-------------------------- ----------------------- ---------- --------------
Called up, allotted
and fully paid:
712,393,662 (2021: Ordinary shares of 0.5
619,586,515) pence each 3,561,969 3,097,933
---------------------------- --------------------------- ---------- --------------
Movement in share capital
during the period
Nominal
Number value Consideration
GBP GBP
-------------------------- ----------------------- ---------- --------------
At 31 December
2020 254,108,324 1,270,542 40,695,667
Placing January
2021 327,516,661 1,637,583 26,201,333
Placing November
2021 37,500,000 187,500 3,000,000
Share options
exercised 2021 461,530 2,308 2,308
At 31 December
2021 619,586,515 3,097,933 69,899,308
Placing August
2022 91,414,894 457,074 7,313,192
Share options
exercised 2022 829,753 4,149 4,149
Management share
award 562,500 2,813 45,000
Transaction costs - - (131,000)
At 31 December
2022 712,393,662 3,561,969 77,130,649
-------------------------- ----------------------- ---------- --------------
The Company does not have an authorised share capital. The
ordinary shares carry one voting right per share and no right to
fixed income.
DP Poland Employee Benefit Trust ("EBT")
The trustee of the EBT holds 1,765,872 ordinary shares in the
Company for the purposes of satisfying outstanding and potential
awards under the Company's Joint Ownership Share Scheme, Share
Option Scheme and the Share Incentive Plans. The historic cost of
these shares was GBP51,565 with a net contribution of GBP6,115 made
by the JOSS award holders to acquire their joint interests. The
shares held by the EBT had a market value of GBP147,450 at 31
December 2022.
31. SHARE BASED PAYMENTS
Group Group
2022 2021
GBP GBP
Share based payments
expense 137,748 51,301
----------------------------- ------------------------- -------------- ----- ---------------
The Company has provided four types of share-based incentive
arrangements.
Type of arrangement Vesting period Vesting conditions
Joint Ownership Share 2.5 - 3.5 Achievement of store growth
Scheme years and financial targets
Employee Share Incentive
Plan 2 years Two years service
Non-Executive Directors' 2 years Two years service
Share Incentive Plan
Employee Share Option Detailed individual performance
Plan Variable targets
Long Term Incentive 2-3 years Detailed company performance
Option Plan targets
Share Option Plan 1-4 years Time-vest and detailed
company performance indicators
The Company established the Joint Ownership Share Scheme
("JOSS") and the Share Incentive Plans on 25 June 2010, the
Employee Share Option Plan on 06 May 2011, the Long Term Incentive
Share Option Plan on 19th December 2014 and the Share Option Plan
on 13 June 2022. The Group has calculated charges for the JOSS and
share option awards using a Black-Scholes model. Volatility and
risk free rates have been calculated for each JOSS grant based on
expected volatility over the vesting period and current risk free
rates at the time of each award. Volatility assumptions are
estimates of future volatility based on historic volatility and
current market conditions .
Assumptions used in the valuation of share option awards were as
follows:
Risk Option IFRS2 fair
Exercise Expected free Expected life value per
Award date price volatility rate dividends in years share option
-------------- ---------- ------------ ------ ----------- ---------- --------------
28 February
2022 8 pence 50% 1,20% - 3 Years GBP0.0228
14 June 2022 8 pence 50% 2,30% - 1 Year GBP0.0183
14 June 2022 8 pence 50% 2,30% - 4 Years GBP0.0217
08 November
2022 8 pence 50% 3,50% - 1 Year GBP0.0336
08 November
2022 8 pence 50% 3,50% - 4 Years GBP0.0380
01 December
2022 8 pence 50% 3,20% - 1 Year GBP0.0422
01 December
2022 8 pence 50% 3,10% - 4 Years GBP0.0468
The share based payments charge for the year by scheme was as
follows:
2022 2021
---------------------------------- -------- -------
Share Incentive Plan - -
Other Share Options 137,748 51,301
Long Term Incentive Share Option - -
Plan
------------------------------------ -------- -------
137,748 51,301
All of the above amounts related to equity-settled share based
payment transactions.
Share scheme awards outstanding
Scheme and date Hurdle Outstanding Awarded Exercised Lapsed Outstanding
of award or 31.12.21 in period in period in 31.12.22
exercise No. No. No. period No.
price No.
-------------------- ----------- ------------ ----------- ----------- -------- ------------
23.08
pence
+ 3% per
JOSS 25 June 2010 annum 283,936 - - - 283,936
SIP 27 July 2010 n/a 100,000 - - - 100,000
SIP 30 May 2012 n/a 75,000 - - - 75,000
SIP 19 June 2013 n/a 279,221 - - - 279,221
SIP 18 June 2014 n/a 413,604 - - - 413,604
SIP 17 April 2015 n/a 486,486 - - - 486,486
SIP 03 May 2016 n/a 346,154 - 346,154 - -
SIP 24 May 2017 n/a 191,490 - - - 191,490
SIP 24 May 2018 n/a 173,913 - 173,913 - -
Share options 03 0.5 pence - - - - -
May 2016
Share options 22
May 2017 0.5 pence 164,804 - - - 164,804
Share options 11
January 2018 0.5 pence 24,000 - - - 24,000
Share options 01
June 2018 0.5 pence 88,238 - - - 88,238
Share options 11
October 2018 0.5 pence 355,469 - 226,563 - 128,906
Stock option plan
28 February 2022 8 pence - 750,000 - - 750,000
Stock option plan
14 June 2022 8 pence - 24,640,175 - - 24,640,175
Stock option plan
08 November 2022 8 pence - 10,333,333 - - 10,333,333
Stock option plan
01 December 2022 8 pence - 3,520,025 - 3,520,025
The weighted average remaining contractual life of outstanding
share options is 3.55 years (2021: 1.34 years). The number of share
options exercisable at 31 December 2022 was 39,484,677 with a
weighted average exercise price of 8 pence (2021: 633,122 shares
with a weighted average exercise price of 0.5 pence).
32. CAPITAL COMMITMENTS
At 31 December 2022 there were no amounts contracted for but not
provided in the financial statements (2021: GBPnil for the
Group.
33. RELATED PARTY TRANSACTIONS
During the period the group and company entered into
transactions, in the ordinary course of business, with other
related parties. The transactions with directors of the company are
disclosed in the Directors' Remuneration Report. Transactions with
key management personnel (comprising the Directors and key members
of management in Poland and Croatia) are disclosed below:
Group Group
2022 2021
GBP GBP
Short-term employee benefits 387,337 271,005
Share-based payments 137,748 -
At 31 December 525,085 271,005
------------------------------- ------------- -------------
The Company made a charge of GBP75,000 to DP Polska S.A. and
GBP75,000 to Dominium S.A. for management services provided in
2022. The balance owed by DP Polska S.A. to DP Poland plc as at 31
December 2022 was GBP67,246 (2021: GBP396,000).
The Company also has a borrowing from Malaccan Holdings Ltd. a
significant shareholder which totalled GBP6,734,149 (2021:
GBP5,829,461).
34. EVENTS AFTER THE BALANCE SHEET DATE
Board changes
On 20 January 2023, David Wild was appointed as an Independent
Non-Executive Director and Chair of the Company.
On 31 March 2023, Peter Furlong has resigned from the Board as a
Non-executive Director.
35. VAT
Dominium is a party to a number of court and administrative
proceedings, the subject of which is to determine the amount of VAT
paid by the company for the period 2011-2016. The disputes relate
to the rate at which VAT is applied on sales made by Dominium,
which is something that is affecting a number of companies
operating in the fast food sector in Poland (including DP Polska).
Dominium were applying a lower (5 per cent) rate of VAT on sales,
whereas the tax authorities in Poland were of the opinion that a
higher (8 per cent) rate should have been applied instead. As a
result, Dominium have retrospectively applied the higher (8 per
cent) rate for this period and have made additional VAT payments to
cover the shortfall to the tax authorities in Poland. Accordingly,
Dominium started to apply the higher 8 per cent rate and have
sought recovery of the additional amounts paid due to the
application of the higher rate. Some of the proceedings that
Dominium brought have been suspended due to certain questions
affecting major food service operators in Poland, which have been
resolved by the European Court of Justice in favour of food service
operators. In other proceedings, applications for a suspension of
payment of the VAT liability arising from the increased VAT rate
have been filed due to these issues and these have been approved
for suspension.
The liabilities resulting from the decisions made to-date,
totalling approximately PLN 7.0 million, have been paid by
Dominium. The disputes regarding 2011 and 2012 years have been
resolved in favour of Dominium. In 2022 Dominium has received the
VAT refund for the year 2011 in the amount PLN 2,275,615
(approximately GBP414,011. In March 2023 Dominium has received the
VAT refund for the year 2012 in the amount of PLN 1,542,405
(approximately GBP280,616). The whole dispute has not been resolved
yet, the period 2013-2016 is still under investigation.
Under the terms of the Acquisition Agreement, one half of any
amounts that have been overpaid in respect of the application of
the higher VAT rate and which may be refunded by the Polish tax
authorities to Dominium shall be paid by the Group to Malaccan
Holdings Ltd.
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END
FR DBGDLDBDDGXC
(END) Dow Jones Newswires
June 30, 2023 02:00 ET (06:00 GMT)
Dp Poland (LSE:DPP)
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Dp Poland (LSE:DPP)
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