DPEU.L Regulatory News (DPEU)

DP Eurasia N.V.

("DP Eurasia" or the "Company", and together with its subsidiaries, the "Group")

Interim Results for the Period Ended 30 June 2020

Accelerating trend to online drives resilient performance

Highlights

Financial Highlights

· Strong liquidity position with TRY 256 million of cash at hand and additional available bank lines of TRY 82 million as at 30 June 2020

· Adjusted net debt (excl. IFRS 16) of TRY 237.3 million as at 30 June 2020 (2019: TRY 226.5 million)

· Group system sales up 3.0% and revenue down 5.4%, due to Covid-19 related operational constraints and increased competition in Russia due to aggregators

o Turkish systems sales growth of 13.6%

o Russian system sales decrease of 14.6% (21.2% based on RUB)

· Adjusted EBITDA (excl. IFRS 16) of TRY 12.1 million, including TRY 8.6 million of Covid-19 related costs

· Adjusted net loss (excl. IFRS 16) of TRY 57.4 million

Operational Highlights

· Enhanced health and safety procedures rolled out in line with local regulations and best practice to protect colleagues and build trust with customers

· Turkey and Russia continue to leverage online ordering - share of delivery system sales surpassed 75% for the period (H1 2019: 67.5%)

· Group online system sales(7) growth of 27.7%

o Turkish online system sales growth of 38.2%

o Russian online system sales growth of 14.2% (5.3% based on RUB)

· 11 net store closures in H1 2020 due to Covid

· Andrew Rennie joins the Group as Board Advisor

Commenting on the results, Chief Executive Officer, Aslan Saranga said:

"On behalf of the Board, I am pleased to report a set of resilient results for the first half of 2020. The on-going Covid-19 pandemic has resulted in unprecedented trading conditions and I am proud of the way our business has reacted so positively to the challenges. We took immediate measures at the outset to ensure that we were able to continue our operations, albeit with some heavy constraints due to the government restrictions imposed. I am happy to report that almost all our stores are now open for business for delivery, take-away and dine-in services. I would like to thank all our employees and franchisees for their sacrifice, hard work and determination.

"Our Turkish business performed well, indeed broadly in line with our start of year pre Covid-19 expectations whilst the performance in Russia reflected the heavier operational constraints imposed on us along with the increased competition due to the aggregators. While delivery system sales in Russia were flat in the post-Covid period (16 Mar-30 Jun) compared to the same period in 2019, our dine-in/take-away system sales were down in excess of 75%. This drop in sales had a significant impact on our Russian profitability; however, we are seeing an improved like-for-like growth of -10.9% in July/August (as compared to the same months in 2019) and coupled with the cost cutting measures that we have taken, we are experiencing a reduction in EBITDA losses. Trading continues to remain strong in Turkey at a like-for-like growth of 27.5% in July/August on the back of the delivery channel.

"We have continued to make operational progress during the period with the launch of a new wrap and additional chicken products in Turkey that are performing well in the early days. We also started trialling our loyalty programme in Russia, following its success in Turkey. Our technology and product innovation pipeline remains strong with new pizzas to be launched in the second half of 2020 in both countries.

"Digital continues to drive our business forward with significant growth achieved in both of our markets. Online ordering as a percentage of delivery has surpassed 75% across the Group, an increase of 7.6 percentage points from last year, with the Russian and Turkish businesses reaching approximately 90% and 70%, respectively.

"I am pleased to announce that Mr. Andrew Rennie has joined the Group as Board Advisor. Andrew is a 25-year veteran of the Domino's system, who last served as Domino's Pizza Enterprises Limited's ("DMP") CEO of European Operations and was responsible for six markets. Under his leadership, DMP's European Operations achieved a 10-fold increase over a 13-year period."

"Assuming that we are not faced with significantly worse operational constraints, with the strong liquidity of TRY 256 million of cash at hand and additional available bank lines, the Board remains confident in the Group's near-term plans for business continuity and cash flow as well as its overall prospects in the longer term. However, given the considerable uncertainty ahead, including the risk of additional lockdowns and a possible decline in consumer spending in the countries in which the Group operates, the Board is not in a position to provide meaningful guidance on the likely financial and operating results for 2020 and will continue to update the financial market in due course."

Enquiries

A conference call will be held at 9.30am on 8 September 2020 for analysts and investors via the following dial-in details:

DP Eurasia N.V.'s 2020 interim results and corporate presentation are available at www.dpeurasia.com. A conference call replay will be available on the website in due course.

Notes

(1) System sales are sales generated by the Group's corporate and franchised stores to external customers and do not represent revenue of the Group.

 (2) Like-for-like growth is a comparison of sales between two periods that compares system sales of existing system stores. The Group's system stores that are included in like-for-like system sales comparisons are those that have operated for at least 52 weeks preceding the beginning of the first month of the period used in the like-for-like comparisons for a certain reporting period, assuming the relevant system store has not subsequently closed or been "split" (which involves the Group opening an additional store within the same map of an existing store or in an overlapping area).

(3) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS. These items are determined by the principles defined by the Group management and comprise income/expenses which are assumed by the Group management to not be part of the normal course of business and are non-trading items. These items which are not defined by IFRS are disclosed by the Group management separately for a better understanding and measurement of the sustainable performance of the Group. Please refer to Note 3 in the Consolidated Financial statements for a reconciliation of these items with IFRS.

(4) Adjusted net income is not defined by IFRS. Adjusted net income excludes income and expenses which are not part of the normal course of business and are non-recurring items. Management uses this measurement basis to focus on core trading activities of the business segments and to assist it in evaluating underlying business performance. Please refer to Note 3 in the Consolidated Financial statements for a reconciliation of this item with IFRS.

(5) Net debt and adjusted net debt are not defined by IFRS. Adjusted net debt includes cash deposits used as a loan guarantee and cash paid, but not collected during the non-working day at the year end. Management uses these numbers to focus on net debt including deposits not otherwise considered cash and cash equivalents under IFRS.

(6) Delivery system sales are system sales of the Group generated through the Group's delivery distribution channel.

(7) Online system sales are system sales of the Group generated through its online ordering channel.

(8) Group like-for-like growth is a weighted average of the country like-for-like growths based on store numbers as described in Note (2).

Notes to Editors

DP Eurasia N.V. is the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia. The Company was admitted to the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the main market for listed securities of the London Stock Exchange plc on 3 July 2017. The Company (together with its subsidiaries, the "Group") is the largest pizza delivery company in Turkey and the third largest in Russia. The Group offers pizza delivery and takeaway/ eat-in facilities at its 754 stores (542 in Turkey, 199 in Russia, nine in Azerbaijan and four in Georgia as at 30 June 2020), and operates through its owned corporate stores (32%) and franchised stores (68%). The Group maintains a strategic balance between corporate and franchised stores, establishing networks of corporate stores in its most densely populated areas to provide a development platform upon which to promote best practice and maximise profitability. The Group has adapted the Domino's Pizza globally proven business model to its local markets.  

Performance Review

DP Eurasia's store count grew by 18 stores year-on-year, but performance was affected by the Covid-19 pandemic as a result of which the Group reported a decrease of 11 stores since the end of 2019. The Group increased its system sales by 3.0% year-on-year, where the effect of the increase in store count was off-set by negative like-for-like performance in Russia, primarily due to the operational constraints imposed as a result of Covid and increased competition from the aggregators. DP Eurasia had started 2020 with a strong performance, driven by its Turkish business and system sales increased by 20.0% year-on-year in the pre-Covid period (1 Jan - 15 Mar). However, the impact of the pandemic in the post-Covid period (16 Mar - 30 Jun) resulted in an 8.7% contraction in system sales.

The Turkish operations' system sales, representing 66% of Group system sales, increased by 13.6%. The Group achieved 13.5% like-for-like growth in Turkey despite the negative effects of the operational constraints levied on it due to the pandemic, especially in the dine-in and take-away channels. The Group countered the negative effect of the pandemic with its strong performance in the delivery channel. As a result of the volatile backdrop, the Company's Turkish store count (including Azerbaijan and Georgia) increased by six over the last twelve months, while decreasing by seven since the end of 2019.

The Russian operations' system sales, representing 32% of Group system sales, decreased by 14.6% (21.2% based on RUB). The Group reported -20.1% like-for-like growth in Russia during the period. The main reasons for the contraction of the Russian business were the operational constraints levied on it due to the pandemic where Moscow was under strict curfew measures for a period of 72 days until 9 June 2020, alongside increased competition from aggregators and fast food players supported by them. Following the appointment of the Russian management team, the Group had just started executing the Russia plan when the pandemic hit Russia, which makes it very difficult to assess the effect of the plan on the business. The Group added twelve stores over the last twelve months, while it closed four stores since the end of 2019.

Delivery Channel Mix and Online like-for-like growth

The following table shows the Group's delivery system sales, analysed by ordering channel and by the Group's two largest countries in which it operates, as a percentage of delivery system sales:

The following table shows the Group's online like-for-like growth(2), analysed by the Group's two largest countries in which it operates:

The Group's like-for-like growth continues to be driven by the performance of its online ordering platforms. Online delivery system sales as a share of delivery system sales surpassed 75% for the period, which represents a 7.6 percentage point increase on a year-on-year basis.

In Turkey, online system sales like-for-like growth for the period was 32.3%, as a result of which online delivery system sales as a share of delivery system sales reached 69.5% for the period, a 7.5 percentage point increase from a year ago, aided also by an increase in volumes through the aggregator.

In Russia, online system sales like-for-like growth for the period was 8.9%, as a result of which online delivery system sales as a share of delivery system sales reached 89.1% for the period, a 9.9 percentage point increase from a year ago, aided by the Group's participation in an aggregator for the first time.

Online system sales continued to outpace the overall system sales growth at 27.7% for the Group. Turkish online system sales grew by 38.2%, while Russian online system sales grew by 14.2% (5.3% based on RUB).

Financial Review

Revenue

Group revenue contracted by 5.4% to TRY 437.7 million. Turkish segment revenue grew by 8.7% to TRY 283.8 million, while Russian segment revenue contracted by 23.6% to TRY 154.0 million.

Adjusted EBITDA

The Board maintains that adjusted EBITDA is the most relevant indicator of the Group's profitability at this stage of its development. The Group has adopted IFRS 16 from 1 January 2019 and provides figures above both under IFRS 16 and prior to the adoption of IFRS 16 to assist comparability between periods.

The Group's adjusted EBITDA (excluding IFRS 16) contracted by 73.9% to TRY 12.1 million. Adjusted EBITDA (excluding IFRS 16) for the Turkish segment, which includes the Azerbaijani and Georgian businesses, was TRY 39.1 million, a year-on-year decrease of 5.3%, and adjusted EBITDA (excluding IFRS 16) for the Russian segment was TRY -22.3 million. The Group's adjusted EBITDA figure includes TRY 8.6 million of Covid-19 related costs of which TRY 7.7 million are considered to be of non-recurring nature. The breakdown of these costs between Turkey and Russia was TRY 5.8 million and TRY 2.8 million, respectively. Additionally, costs relating to our Dutch corporate expenses reduced adjusted EBITDA by TRY 4.7 million in the first half of 2020. The comparable adverse effect of this item was TRY 3.5 million for the same period in 2019, with the increase in 2020 primarily due to the devaluation of the TRY against the EUR and the GBP.

For the period ended 30 June 2020, the Group's adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales was 1.8% compared to 7.2% over the same period in 2019. The main reasons for the decrease were the contraction in the Russian business due to the operational constraints levied for Covid-19 and the Covid-19 related costs.

Adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales for the Turkish segment (including Azerbaijan and Georgia) recorded a decrease to 8.7% from 10.4% mainly due to Covid-19 related costs.

The Russian segment margin decreased to -10.5% from 4.9%. The main reason for the decrease is the system sales contraction caused by the pandemic and increased competition from the aggregators. Management has started to take actions to address the issues in line with the plan laid out at the Company's 2019 results announcement, such as making long term improvements to product, service and technology and further investment in the brand; adopting a new marketing strategy making use of celebrity endorsement, cluster-based pricing, different channel mix, and simpler, price-led advertisements; expanding the use of the aggregator platform; and cost cutting measures. The Board continues to remain confident in the medium- and long-term potential of the Russian market for DP Eurasia.

Adjusted Net Income

For the period ended 30 June 2020, adjusted net loss (excluding IFRS 16) was TRY 57.4 million. The decreases in revenue and adjusted EBITDA (excluding IFRS 16) were the main reasons for the increase in this loss compared to the same period in 2019. While the Group's bank facilities are TRY and RUB denominated, the Group recorded a foreign exchange loss of TRY 8.6 million due to the intragroup loans made between group companies in different jurisdictions versus a foreign exchange gain of TRY 2.8 million in the same period of the previous year.

Capital expenditure and Cash conversion

The Group incurred TRY 24.6 million of capital expenditure in the period ended 30 June 2020. The Turkish segment capital expenditure was TRY 16.5 million and the Russian segment capital expenditures amounted to TRY 8.1 million (RUB 87.1 million).

Cash conversion, defined as (adjusted EBITDA (excluding IFRS 16)- capital expenditure)/adjusted EBITDA (excluding IFRS 16)) for the period decreased to -103.3% (H1 2019: 36.3%) for the Group as a result of the pandemic and increased competition in Russia. The Turkish segment improved its cash conversion to 57.8% (H1 2019: 53.6%) as a result of its resilient performance and prudent capital expenditure management. The Russian segment had negative cash conversion due to its negative adjusted EBITDA.

Adjusted net debt and leverage

Excluding the impact of IFRS 16, the Group's adjusted net debt at 30 June 2020 was TRY 237.3 million, representing an increase of 5.5% from 30 June 2019 and an increase of 4.8% from 31 December 2019. The Group's bank borrowings continue to be denominated in its operational currencies of TRY and RUB. As at 30 June 2020, 68% of the Group's bank borrowings were denominated in TRY, compared to 52% as at 31 December 2019, while the remainder is denominated in RUB.

The Group's leverage ratio (defined as adjusted net debt (excluding IFRS 16)/adjusted EBITDA excluding IFRS 16)) increased to 2.6x as at 30 June 2020 (H1 2019: 1.9x) as a result of the depressed EBITDA performance.

The Group's treasury has succeeded in extending the duration of its Turkish bank borrowings in the face of interest rate uncertainty in the market. As at 30 June 2020, long term bank borrowings made up 48% of the Group's total Turkish bank borrowings, whereas the Group previously relied on short term revolver facilities.

The Group's Russian loan facility carries financial covenants, which the Group was unable to meet in the first two quarters of 2020, due to the impact of Covid-19, and the Group was granted waivers. As of 31 August 2020, the Group has obtained a new waiver letter from Sberbank which covers the quarters ending 30 September 2020 and 31 December 2020. The bank confirmed that it will not penalize the Group for violation of covenants for any period through to 31 December 2020 following the Group's agreement to reset the covenants based on a mutually agreed upon business plan by 1 October 2020. In July 2020, DP Eurasia made a prepayment of RUB 0.6 billion under its Russian loan, reducing the principal outstanding to RUB 1.0 billion of which RUB 0.2 billion is supported by a cash collateral deposit. The Group's strong liquidity position enables it to repay its bank borrowings in Russia if required, and still maintain a strong liquidity position. As at 30 June 2020, DP Eurasia had TRY 256 million of cash at hand and additional available bank lines of TRY 82 million.

New Appointment

Mr. Andrew Rennie has joined the Group as Board Advisor. Andrew is a 25-year veteran of the Domino's system, who last served as Domino's Pizza Enterprises Limited's ("DMP") CEO of European Operations and was responsible for six markets. Under his leadership, DMP's European Operations achieved a 10-fold increase over a 13-year period. He will provide professional and technical advice for the strategic direction as well as operational and tactical business decisions of the DPEU Board. Andrew has been granted a call option from our largest shareholder to acquire four million DPEU shares at a strike price of GBP 1.05 that expires on 30 September 2022 and will receive a retainer fee from the Company.

Board compliance statement

The Board of DP Eurasia N.V. declares that, to the best of their knowledge, the attached condensed combined and consolidated financial statements give a true and fair view of the assets, liabilities, financial position and the result of DP Eurasia N.V. and its subsidiaries included in the attached condensed combined and consolidated financial statements and the interim report includes a fair review of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

Amsterdam, 8 September 2020

The Directors of DP Eurasia N.V. as at the date of this announcement are as set out below:

Peter Williams*

Aslan Saranga, Chief Executive Officer

Frederieke Slot, Company Secretary

Seymur Tarı*

Izzet Talu*

Aksel Şahin*

Thomas Singer*

* Non-Executive Directors

Auditor's Involvement

This Interim Report for the six months ended 30 June 2020, and the attached condensed consolidated financial statements included herein have been reviewed but not audited by an external auditor.

Forward looking statements

This press release includes forward-looking statements which involve known and unknown risks and uncertainties, many of which are beyond the Group's control and all of which are based on the Directors' current beliefs and expectations about future events. They appear in a number of places throughout this press release and include all matters that are not historical facts and include predictions, statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the results of operations, financial condition, prospects, growth and strategies of the Group and the industry in which it operates.

No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements.

Forward-looking statements contained in this press release speak only as of the date of this press release. The Company and the Directors expressly disclaim any obligation or undertaking to update these forward-looking statements contained in this press release to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based.

Appendices

Exchange Rates

Delivery - Take away / Eat in mix

DP EURASIA N.V.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE PERIOD ENDED 30 JUNE 2020 AND 30 JUNE 2019

The accompanying notes on pages 17 till 41 form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

The accompanying notes on pages 17 till 41 form an integral part of these condensed consolidated interim financial statements. 

DP EURASIA N.V.

The accompanying notes on pages 17 till 41 form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD ENDED 30 JUNE 2020 30 JUNE 2019

The accompanying notes on pages 17 till 41 form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

The accompanying notes on pages 17 till 41 form an integral part of these condensed consolidated interim financial statements.

DP EURASIA N.V.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL

STATEMENTS AS AT 30 JUNE 2020

NOTE 1 - GROUP'S ORGANIZATION AND NATURE OF ACTIVITIES

DP Eurasia N.V. (the "Company"), public limited company, having its statutory seat in Amsterdam, the Netherlands, was incorporated under the law of the Netherlands on 18 October 2016. The Company has been incorporated by integrating shares of Fides Food Systems Coöperatief U.A. and Vision Lovemark Coöperatief U.A. in Fidesrus B.V. and Fides Food Systems B.V. Acquisitions occurred on18 October 2016 when the Company acquired Fidesrus and Fides Foods and their subsidiaries and from this point forward consolidated Group was formed. This was a transaction under common control.

The Company's registered address is: Herikerbergweg 238, Amsterdam, the Netherlands.

The Company and its subsidiaries (together referred as the "Group") operate corporate-owned and franchise-owned stores in Turkey and the Russian Federation, including providing technical support, control and consultancy services to the franchisees.

As at 30 June 2020, the Group hold franchise operating and sub-franchising right in 754 stores (513 franchise stores, 241 corporate-owned stores) (31 December 2019: 765 stores (521 franchise stores, 244 corporate-owned stores).

Subsidiaries

The Company has a total of four fully-owned subsidiaries. The entities included in the scope of the condensed consolidated financial interim information and nature of their business is as follows:

Pizza Restaurants LLC is established in the Russian Federation. Domino's Russia is operating a pizza delivery network of company and franchise-owned stores in Russian Federation. Domino's Russia has a Master Franchise Agreement (the "MFA Russia") with Domino's Pizza International for the pizza delivery network in Russia until 2030.  

NOTE 1 - GROUP'S ORGANIZATION AND NATURE OF ACTIVITIES (Continued)

Pizza Restaurantları A.Ş. ("Domino's Turkey") is established in Turkey. Domino's Turkey is operating a pizza delivery network of corporate and franchised stores in Turkey. Domino's Turkey is a food delivery company, which has a Master Franchise Agreement (the "MFA Turkey") with Domino's Pizza International pizza delivery network in Turkey until 2032. The Group expects the terms of the MFAs to be extended.

Fides Food and Fidesrus are established in the Netherlands. Both Fides Food Systems and Fidesrus are acting as investment companies.

Significant changes in the current reporting period

The condensed interim consolidated financial statements have been prepared assuming that the Group will continue as a going concern and be able to realise its assets and discharge its liabilities in the normal course of business. The Group currently utilizes internally generated cash flow and bank borrowings in Turkey and Russia to meet its financing needs. The Group's Turkish operations are well established and cash generative and act as a source of liquidity for the wider Group. The Group's Russian business is still in the early stages of growth and does not yet generate cash, so is funded by local bank borrowings and intra-group cash injections, and loan guarantees from its Turkish affiliate. The Group's Russian loan facility carries financial covenants, which the Group was unable to meet in the first two quarters of 2020, mainly due to the impact of Covid-19. The Group is currently in discussions with its Russian loan provider to reset the covenants for the remainder of the year. The Group's strong liquidity position enables it to repay its bank borrowings in Russia if required, and still maintain a strong liquidity position.

The Board has been closely monitoring the Group's strategy as well as the financial and operational performance throughout the Covid-19 pandemic. There remains considerable uncertainty ahead, including the risk of additional lockdowns and a decline in consumer spending, which could result in the potential for a prolonged period of uncertainty following the Covid-19 pandemic and related market volatility. Even though this uncertainty remains, based on the Group's experience with the operational constraints during the March-June period and the resources available in the form of TRY 256 million of cash at hand and additional available bank lines of TRY 82 million, the Group has formed a judgement on a reasonable basis, that the Company will be able to continue as a going concern and, therefore, will be able to realise its assets and discharge its liabilities in the normal course of business.

The Group took certain measures to optimise its and its franchisees' liquidity during the uncertainty surrounding the pandemic, such as extending the payment terms to its suppliers, extending payment terms for its franchisees and waiving certain commissions from its franchisees.

The Group also took certain actions to minimise infection risk for both its customers and employees, such as heightened hygienic standards at its stores, commissaries and headquarters and the launch of contactless delivery, take-away and payment services.

In preparation of the condensed interim consolidated financial statements as of 30 June 2020, the Group has assessed the possible impacts of Covid-19 pandemic on the financial statements and reviewed the critical estimates and assumptions. Within this scope, the Group has tested the tangible and intangible assets, goodwill, deferred tax assets and trade receivables for possible impairment. As a result of these tests, TRY 5.3 million of impairments were recognised for tangible and intangible assets in the 30 June 2020 consolidated financials. No impairments were identified for other assets and receivables. 

NOTE 2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS

2.1 Basis of preparation

These condensed consolidated interim financial statements for the six months period ended 30 June 2020 have been prepared in accordance with International Accounting Standard 34 ("IAS 34") Interim Financial Reporting.

The interim report does not include all the notes of the type normally included in the annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended31 December 2019 and any public announcements made by the Company during the interim reporting period.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

Seasonality of operations

There is no significant seasonality effect on the Group's revenue. According to financial year ended31 December 2019, 47% of revenues accumulated in the first half year, with 53% accumulating in the second half.

2.1 Basis of preparation (Continued)

Consolidation of foreign subsidiaries

Financial statements of subsidiaries operating in foreign countries are prepared in the currency of the primary economic environment in which they operate. Assets and liabilities in financial statements prepared according to the Group's accounting policies are translated into the Group's presentation currency, Turkish Liras ('TRY'), from the foreign exchange rate at the statement of financial position date whereas income and expenses are translated into TRY at the average foreign exchange rate. Exchange differences arising from the translation are included in the "currency translation differences" under shareholders' equity.

The foreign currency exchange rates used in the translation of the foreign operations within the scope of consolidation are as follows:

NOTE 2 - BASIS OF PRESENTATION OF INTERIM FINANCIAL STATEMENTS (Continued)

2.2 New and amended international financial reporting standards as adopted by European Union

New and amended standards adopted by the Group, which are effective for the interim financial statements as at 30 June 2020

A number of new or amended standards became applicable for the current reporting period:

- Amendments to IAS 1 and IAS 8 on the definition of material

- Amendments to IFRS 3 - definition of a business

- Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform

- Amendment to IFRS 16, 'Leases' - Covid-19 related rent concessions

These standards did not have any impact on the Group's accounting policies and did not require retrospective adjustments.

The new standards, amendments and interpretations, which are issued but not effective for the interim financial statements as at 30 June 2020

- IFRS 17, 'Insurance contracts'

- Amendments to IAS 1, Presentation of financial statements' on classification of liabilities

- A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 17 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16

NOTE 3 - SEGMENT REPORTING

The business operations of the Group are organised and managed with respect to geographical positions of its operations. The information regarding the business activities of the Group as of 30 June 2020 and 2019 comprise the performance and the management of its Turkish and Russian operations and head office.

The Group has two business segments, determined by management according to the information used for the evaluation of performance and the allocation of resources, the Turkish and Russian operations. Other operations are composed of corporate expenses of Dutch companies. These segments are managed separately because they are affected by the economic conditions and geographical positions in terms of risks and returns.

NOTE 3 - SEGMENT REPORTING (Continued)

The segment analysis for the periods ended 30 June 2020 and 2019 are as follows:

NOTE 3 - SEGMENT REPORTING (Continued)

EBITDA, adjusted EBITDA, net debt, adjusted net debt, adjusted net income and non-recurring and non-trade income/expenses are not defined by IFRS. The amounts provided with respect to operating segments are measured in a manner consistent with that of the financial statements. These items determined by the principles defined by Group management comprise income/expenses which are assumed by the Group management to not be part of the normal course of business and are non-recurring items. These items which are not defined by IFRS are disclosed by Group management separately for a better understanding and measurement of the sustainable performance of the Group.

.

NOTE 3 - SEGMENT REPORTING (Continued)

The reconciliation of adjusted EBITDAs as of 30 June 2020 and June 2019 is as follows:

Dominos Turkey EBITDA was TRY 55.547 in 2019 and down 9.3% in 2020. This decline was primarily due to Covid-19 related costs amounting to TRY 5.825 to ensure that operations were carried out safely.

Dominos Russia EBİTDA includes TRY 2.737 Covid-19 related costs. These Covid-19 related costs and the negative impact of Covid-19 on sales of Dominos Russia are the primary reasons of EBITDA down from the prior year.

(**) The reason for the significant increase in one-off non-trading costs is mainly impairments of tangible and intangible assets.

NOTE 3 - SEGMENT REPORTING (Continued)

(*) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS. These items are determined by the principles defined by the Group management and comprise income/expenses which are assumed by Group management to not be part of the normal course of business and are non-trading items. These items, which are not defined by IFRS, are disclosed by Group management separately for a better understanding and measurement of the sustainable performance of the Group.

The reconciliation of adjusted net income as of 30 June 2020 and 2019 is as follows:

(*) Adjusted net income and non-recurring and non-trade income/expenses are not defined by IFRS. Adjusted net income excludes income and expenses which are not part of the normal course of business and are non-recurring items. Management uses this measurement basis to focus on core trading activities of the business segments, and to assist it in evaluating underlying business performance. 

NOTE 4 - REVENUE AND COST OF SALES

NOTE 5 - EXPENSES BY NATURE

NOTE 6 - FOREIGN EXCHANGE LOSSES, FINANCIAL INCOME AND EXPENSES

NOTE 7 - LOSS PER SHARE

The reconciliation of adjusted loss per share as of 30 June 2020 and 2019 is as follows:

The reconciliation of adjusted loss per share as of 30 June 2020 and 2019 is as follows:

(*) Adjusted earnings per share non-recurring and non-trade income/expenses are not defined by IFRS. The amounts provided with respect to operating segments are measured in a manner consistent with that of the financial statements. These items determined by the principles defined by the Group management comprises incomes/expenses which are assumed by the Group management that are not part of the normal course of business and are non-recurring items. These items which are not defined by IFRS are disclosed by the Group management separately for a better understanding and measurement of the sustainable performance of the Group.

There are no shares or options with a dilutive effect and hence the basic and diluted earnings per share are the same.

The loss per share presented for the period ended 30 June 2020 is based on the issued share capital of DP Eurasia N.V. at the date of its incorporation.

NOTE 8 - PROPERTY AND EQUIPMENT

For the period ended 30 June 2020, depreciation expense of TRY17,789 has been charged in cost of sales and TRY4,788 has been charged in general administrative expenses.

NOTE 8 - PROPERTY AND EQUIPMENT (Continued)

For the period ended 30 June 2019, depreciation expense of TRY16,722 has been charged in cost of sales and TRY3,666 has been charged in general administrative expenses.

NOTE 9 - INTANGIBLE ASSETS