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 six months ended 30 June 2023 (1)  

Highlights (2)

* Including nine temporarily closed stores as a result of the earthquake in early 2023.

Financial Highlights (from continuing operations)

· Strong overall performance with Group revenue up 24.7% (pre-IAS 29: 88%) and system sales up 32.7% (pre-IAS 29: 96%). LfL Group system sales for continuing operations were up 25.9%.

· Excellent LfL growth in Turkey of 26.5% amid a sustained inflationary environment, reflecting the ongoing focus on maintaining franchisee profitability, network expansion, strategic pricing, and product and service innovation.

· Azerbaijan and Georgian operations delivered LfL growth of 5.2% and 4.3% respectively (in local currencies).

· Adjusted EBITDA increased 34.4% to TRY 265 million while the EBITDA margin improved to 16.8% from 15.6% year on year thanks to better operational leverage with increases sales performance.

· Adjusted net income (from continuing operations) increased 50.2% to TRY 229 million (1H 2022: TRY 153 million).

· The Group maintained a strong liquidity position with TRY 372 million cash and an undrawn bank facility of TRY 515 million as of 30 June 2023.

· Adjusted net debt was TRY 618 million as of 30 June 2023 vs. TRY 849 million at the end of 2022. Net debt / EBITDA improved sharply to 1.3x from the 2.3x reported for the end of end-2022 (and vs. 2.8x year on year).

· Leverage is expected to further improve by year-end given the enhanced profitability of the Group.

Operational Highlights (from continuing operations)

· Online delivery system sales in Turkey increased to 83.9% (2022: 81.2%) as a share of delivery system sales(6), reflecting our robust positioning for the online ordering channel. Strong Turkish online system sales growth of 30.7% (pre-IAS 29: 93.0%).

· Net new store opening momentum has been maintained:

o  The Turkish Domino's Pizza network has increased by 47 stores year on year, supported by 20 new store openings in H1. This reflects the strong demand profile, and the Group is therefore confident in its ability to comfortably reach the 35-40 net new store opening guidance for the full year. 

o  The COFFY network has now exceeded the 50-store milestone, having increased by 22 in the current financial year (or by 36 year-on-year) to 51. We are on track with our guidance of 50-60 net COFFY openings in FY23.

o  Georgia now has six Domino's Pizza stores, an increase of one.

· The growth opportunity for COFFY remains significant, with excellent market dynamics in Turkey for the coffee sub-segment. COFFY delivered TRY 95 million to Group system sales, up 339%.

· As announced on 21 August 2023, the Group has initiated bankruptcy proceedings for its Russian subsidiary. No sales process has occurred since this announcement, and bankruptcy proceedings are currently underway. The Group will continue to provide updates, particularly with regards to the financial impact of these proceedings, as necessary. The Russian segment continues to be classified as discontinued operations within the Company's audited financial statements.

2023 Outlook

· The Group is mindful that 2023 has so far been another year of volatile macro-economic circumstance and uncertainty. The inflation risk persists, and while the Group has an excellent track record of managing and negating the impact of inflation, it may affect overall growth levels. Nevertheless, strong trading momentum has been sustained into the second half of the financial year. The Board is therefore confident that LfL inflation adjusted growth will be in the high teens for the full year 2023, better than low teens figure previously guided.

· The Group anticipates that it will maintain organic and LfL sales momentum in 2023. This momentum will be driven by sustained network expansion, volume growth and targeted price adjustments. New customer acquisition and increased order frequency levels are expected to contribute to growing volumes.

· The strong store openings momentum seen in Turkey is anticipated to continue for both Domino's and COFFY, driven by solid franchisee demand. Our commitment to maintaining franchisee profitability continues to be front and centre of this demand. The Group anticipates that FY23 will be another year of strong network expansion as the it seeks to broaden its coverage to cater to demand.

· Capital expenditure expectations have increased to TRY 200 million (from TRY 160 million), owing to higher corporate store investments for new COFFY openings predominantly driven by currency depreciation impact.

· Guidance for store openings, LfL growth rates and capital expenditure in Turkey for 2023 is as follows: 

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

"I am very pleased to be delivering very solid operational and financial results in the first half of 2023, which is a clear result of our targeted plans to mitigate the ongoing macro challenges. Strong trading momentum has been maintained; thanks to the healthy dynamics of the sub-sectors the Group operates within. Management's expertise in navigating inflation and the Group's resilience and agility in execution enabled strong store expansion dynamics and have resulted in a solid financial performance, from top to bottom line. 

"We have an innovative and customer-centric mindset, helping us to grow in a healthy manner as we pursue long-term and sustainable profitability. Our targeted strategy focuses on three areas - strategic pricing and product innovation, continued digital innovation, and operational excellence for everyday efficiency. This approach enabled us to combat the high volatility levels with the positive impact visible in terms of volume generation and customer acquisition. Despite ongoing cost pressures, adjusted EBITDA and net income grew significantly and our margins expanded pleasingly.

"Our focus on product innovation remains integral. We continue to broaden our entry price product range and launched a new mushroom pizza in January which has reached good volumes. Following the successful Pizzetta launch last year, we added new varieties to further enhance the potential of this product line. In addition, our new 'snacks from the oven' range was launched in February presenting a broad choice of attractively priced products to customers who increasingly seek value and affordability. The latest addition to our product range, Pizza XL, has contributed well and in line with our internal expectations. With a Turkish nationwide advertising campaign being rolled out in July, we expect the contribution from Pizza XL to continue to improve.

"We continue to improve the online proportion of our sales, and digital innovation remains an important enabler for us to enhance the customer experience and further solidify our robust positioning for the online ordering channel.

"We retain a fundamental commitment to ensuring franchisees remain profitable. As a result, franchisee demand for both Domino's Pizza and COFFY continues to be very healthy. We have a strong pipeline of new sites and are confident that 2023 will be another solid year for network expansion.

"Consumer demand for COFFY stands very strong thanks to its unique value proposition. Having developed multiple store concepts to fit in with local circumstances, the COFFY network exceeded the 50-store milestone, having increased by 22 in the current financial year. Franchisee demand stands very strong owing to COFFY's proven sales performance. This demand, alongside our ambitious targets for 2023, will enable us to add further scale in a sub-sector that is of increasing popularity.

"Overall, we are very pleased with the strong first half performance and will continue to deliver on our targeted strategy to make the most of what continues to be a significant growth opportunity."

Enquiries

Analyst Briefing and Conference Call

A remote briefing will be held at 9.00am UK time via a conference call facility. The call will be accessible via the below details and will be accompanied with a presentation, which will be made available on the morning of results and accessed at www.dpeurasia.com. Please contact Buchanan on dp@buchanan.uk.com to register your attendance.

Notes

(1) Financial statements as of 30 June 2023 are subjected to limited review and non-IFRS measures are not audited.

(2) All Group figures exclude Russian business which is now a discontinued operation. COFFY numbers are included in all Turkey and Group figures, unless presented separately. Like-for-like figures exclude COFFY

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

 (4) 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). This is a non-IFRS measure and non-IFRS measures are not audited.

(5) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS and non-IFRS measures are not audited. 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. Reconciliation of EBITDA, adjusted EBITDA with consolidated financial statements will be presented in Note 3 of Group financial statements section of our annual report.

(6) Adjusted net income is not defined by IFRS and non-IFRS measures are not audited. 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. Reconciliation of EBITDA, adjusted EBITDA with consolidated financial statements will be presented in Note 3 of Group financial statements section of our annual report.

(7) Net debt and adjusted net debt are not defined by IFRS and non-IFRS measures are not audited. 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. Net debt figure includes the external debt of DP Russia which was guaranteed by the Group and its Turkish subsidiary.

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

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

Notes to Editors

DP Eurasia N.V. is the exclusive master franchisee of the Domino's Pizza brand in Turkey, 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. The Group offers pizza delivery and takeaway/ eat-in facilities at its 691 stores (675 in Turkey, 10 in Azerbaijan and 6 in Georgia) as of 30 June 2023 and operates through its owned corporate stores (12%) and franchised stores (88%). In addition to its pizza delivery business, the Group also has its own coffee brand, COFFY, which trades from 51 stores at period-end, 38 of which are franchised. 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.

In line with the announcement on 21 August 2023, the Company has initiated the steps to file for DP Russia's bankruptcy. This was preceded by the announcement on 28 December 2022, which confirmed that the Company was evaluating its presence in Russia, the impact of sanctions and its continuing ability to serve its customers in Russia. In this connection, the Russian segment was classified as discontinued operations within the Company's audited financial statements for the year ended 31 December 2022.

Performance Review

DP Eurasia's store count for continuing operations increased by 84 year-on-year, or by 42 stores during the first six months of the year. The Group increased its system sales by 32.7% year-on-year. Growth on a pre-inflation adjustment basis would have been 95.6%.

System sales of our Domino's Pizza operations in Turkey grew by 30% year-on-year and by 91.7% on a pre-inflation adjustment. The Group experienced robust franchisee demand in Turkey resulting in a strong store pipeline, laying solid foundations for ongoing network expansion and growth. The Domino's Pizza net store count in Turkey increased by 8% over the last twelve months, with 20 net additions in first half, on track with the guided range of 35-40 for full year and building on the strong growth year of 2022.

The COFFY network has now exceeded the 50-store milestone, having increased by 22 in the current financial year (or by 36 year-on-year) to 51. We are on track with guidance of 50-60 net COFFY openings in the full year 2023. 

Delivery Channel Mix

Online delivery system sales in Turkey increased to 83.9% (2022: 81.2%) as a share of delivery system sales, reflecting our robust positioning for the online ordering channel. Strong Turkish online system sales growth of 30.7% (pre-IAS 29: 93.0%). This performance was aided also by an increase in volumes through the aggregators.

The following table shows the Group's delivery system sales as a percentage of delivery system sales:

Financial Review

Revenue

Group revenue grew by 24.7% to TRY 1,581 million on inflation adjusted basis. 

Adjusted EBITDA

Adjusted EBITDA, which includes the Azerbaijani and Georgian businesses along with COFFY, was TRY 265 million and demonstrated a year-on-year increase of 34.4%. For the six-month period ended 30 June 2023, the adjusted EBITDA margin as a percentage of revenues was 16.8% compared to 15.6% over the same period in 2022. Strong sales performance created operating leverage through the system despite the ongoing cost pressures across the board. The Group took the advantage of its robust purchasing power and agile cost management capabilities during the period to combat elevated food costs.

Adjusted Net Income

For the six-month period ended 30 June 2023, adjusted net income from continuing operations was TRY 229 million. The growth in revenue and adjusted EBITDA were the main drivers whereas a one-off tax advantage also contributed to the improved bottom line. The profit for the period was TRY 24 million, driven by non-cash write-offs related with Russian business.

Capital expenditure and Cash conversion

The Group incurred TRY 63 million of capital expenditure for continuing operations in the six months ended 30 June 2023. Cash conversion* was 73% (1H 2022: 67%) for continuing operations. 

Adjusted net debt and leverage

The Group's adjusted net debt as of 30 June 2023, including the external debt of DP Russia as it was guaranteed by the Group's Turkish subsidiary, was TRY 618 million, declining from TRY 849 million of end-2022. Note that that external debt of DP Russia with an amount of 159 million TRY was paid in the third quarter out of existing cash resources. Hence, net debt position could be expected to remain at around same levels by the end of the year. Total borrowings for the Group stood at TRY 1.1 billion as of 30 June 2023. 

The Group's leverage ratio (defined as adjusted net debt/adjusted EBITDA), based on continued operations, stood at 1.3x as of 30 June 2023, dropping sharply from 2.3x at the end of 2022 (and vs 2.8x at the end of H1 2022). Leverage ratio is expected to improve further by the end of the year thanks to improving operational profitability.

The Group had TRY 372 million cash and cash equivalents and an undrawn bank facility of TRY 515 million as of 30 June 2023.

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.

*Cash conversion defined as (Adj EBITDA - lease payment - capital expenditure)/ Adj EBITDA)

Appendices

Exchange Rates

Delivery - Take away / Eat in mix

DP EURASIA N.V.

(UNAUDITED) CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

AS AT 30 JUNE 2023

(UNAUDITED) CONDENSED CONSOLIDATED

STATEMENT OF COMPREHENSIVE INCOME.................................................................. 1

(UNAUDITED) CONDENSED CONSOLIDATED

STATEMENT OF FINANCIAL POSITION........................................................................... 2-3

(UNAUDITED) CONDENSED CONSOLIDATED

STATEMENT OF CHANGES IN EQUITY............................................................................ 4

(UNAUDITED) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS............. 5

(UNAUDITED) NOTES TO THE CONDENSED CONSOLIDATED INTERIM

FINANCIAL STATEMENTS................................................................................................. 6 - 31

INDEPENDENT AUDITOR'S REVIEW REPORT................................................................. 32

The accompanying notes on pages 6 till 32 form an integral part of these condensed consolidated interim financial statements.

The accompanying notes form on pages 6 till 32 an integral part of these condensed consolidated interim financial statements.

The accompanying notes form on pages 6 till 32 an integral part of these condensed consolidated interim financial statements.

The accompanying notes form on pages 6 till 32 an integral part of these condensed consolidated interim financial statements.

The accompanying notes on pages 6 till 32 form an integral part of these condensed consolidated interim financial statements.

NOTES TO THE (UNAUDITED) CONDENSED CONSOLIDATED INTERIM FINANCIALSTATEMENTS AS AT 30 JUNE 2023

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 2023, the Group, including Coffy, hold franchise operating and sub-franchising right in 884 stores (789 franchise stores, 95 corporate-owned stores) (31 December 2022: 859 stores(697 franchise stores, 162 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. As of 30 June 2023, the Company only has franchise- owned stores. 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. Please refer to Note 21 and Note 22 for the details of the discontinued operations.

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 and has corporate and franchised coffee stores under the brand of Coffy. 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 recorded a net gain from continued operations of TL 202,517 for the first half of 2023. The Group's current liabilities exceed its current assets by TL 386,524 as of 30 June 2023, The Group realized operating profit of TL 151,517 for the first half of 2023.

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

Fidesrus BV has applied to the court for OOO Pizza LLC's bankruptcy on 12 September 2023. With the increasingly challenging environment, DP Russia's parent holding company is now compelled to take this step, which will bring about the termination of the attempted sale process of DP Russia as a going concern and, inevitably, the Group's presence in Russia.

The Group currently utilises internally generated cash flow and bank borrowings in Turkey 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 has additional borrowing capacity available from Turkish banks, which it can draw down for liquidity needs. The Group enters into general loan agreements with a range of Turkish banks. Based on the general practice in Turkey, events of default, seizure of assets held by the bank as securities for company loans, regular disclosure of financials and change of control clauses and which are rolled over at the end of the term. Nearly most of the Turkish bank borrowings are short term. The banks make periodic revisions to determine the risk limits they are willing to make available to the Group and regularly assess the Group's financial position. The Group has not received any call requests nor have the Turkish banks that lend to it under these facilities declined any drawdown requests during the period under review. As at 30 June 2023 the limits available under these types of facilities amount to TRY517 million. The average maturity period for bank loans is1,2 years as of today. Additionally, The Company declare that the external debt of the Russian segment is an amount of Ruble 520 million, which was guaranteed by, inter alia, the Group's Turkish subsidiary, has been fully and finally settled by the Turkish subsidiary out of existing cash resources on 21 August 2023.

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 ended30 June 2023 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 statements. Accordingly, this report is to be read in conjunction with the annual report for the year ended

31 December 2022. These condensed interim financial statements were approved for issue on

19 September 2023. The financial statements have been reviewed, not audited.

The Turkish economy has been designated as a hyperinflationary economy in the first half of 2022 and, as a result, IAS 29 "Financial Reporting in Hyperinflationary Economies" ("IAS 29") has become applicable to the Group's subsidiaries whose functional currency is the Turkish Lira (Domino's Turkey), IAS 29 requires companies to report the results of the operations in Turkey, as if these had always been highly inflationary. Specifically, IAS 29 requires:

− Adjustment of historical cost of the non-monetary assets and liabilities for the change in purchasing power caused by inflation from the date of initial recognition to the end of the reporting date,

− Non-adjustment of the monetary assets and liabilities, as they are already expressed in the measuring unit current at the end of the reporting period,

− Adjustment of the statement of comprehensive income for inflation and its translation with the average index rate,

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

2.1 Basis of preparation (Continued)

− Recognition of gain or loss on net monetary position in profit or loss in order to reflect the impact of inflation rate movement on holding monetary assets and liabilities in local currency,

− There are no items measured at current cost,

− All items in the statement of cash flows are expressed in terms of the measuring unit current at the end of the reporting period,

− The restatement of financial statements in accordance with this Standard may give rise to differences between the carrying amount of individual assets and liabilities in the statement of financial position and their tax bases. These differences are accounted for in accordance with IAS 12 Income Taxes,

− Total cumulative effect of restating non-monetary items in accordance with IAS 29 on opening balance sheet of 1 January 2021 are recognised in retained earnings.

IAS 29 requires that financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date, and that corresponding figures for previous periods be restated in the same terms. The restatement of the comparative amounts was calculated by means of conversion factors derived from the Turkish nationwide consumer price index ("CPI") published by the State Institute of Statistics ("SIS"), Indices and conversion factors used to restate the comparative amounts until 30 June 2023 are given below:

The financial statements of Group's subsidiaries, whose functional currency is the currency of a hyperinflationary economy, are adjusted for inflation and prior year comparatives have been restated for hyperinflation in the consolidated financial statements.

In the consolidated income statement for the six months period on 30 June 2023, the Group recognized a total gain on net monetary position of TRY 139,546 thousands (30 June 2022:TRY 102,682).

The Group used the conversion coefficient derived from the consumer price index published by Turkish Statistics Institute ("TUIK") The conversion coefficient was 1187.07 and 991.02 on 30 June 2023 and 31 December 2022, respectively. One conversion coefficient per period has been determined and calculated as purchases and sales are relatively fairly divided over the year.

Seasonality of operations

There is no significant seasonality effect on the Group's revenue. According to financial year ended31 December 2022, 51% of revenues accumulated in the first half year, with 49 % accumulating in the second half.

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

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:

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 2023

● A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37 and some annual improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16; effective from annual periods beginning on or after 1 January 2022,

● Amendments to IAS 16, 'Property, plant and equipment' prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use, Instead, a company will recognise such sales proceeds and related cost in profit or loss,

● Amendments to IAS 37, 'Provisions, contingent liabilities and contingent assets' specify which costs a company includes when assessing whether a contract will be loss-making,

Annual improvements make minor amendments to IFRS 1, 'First-time Adoption of IFRS', IFRS 9, 'Financial Instruments', IAS 41, 'Agriculture' and the Illustrative Examples accompanying IFRS 16, 'Leases'.

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

Standards, amendments, and interpretations that are issued but not effective as of 30 June 2023:

● Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8; effective from annual periods beginning on or after 1 January 2023. The amendments aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in accounting estimates and changes in accounting policies,

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

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

● Amendment to IAS 12 - Deferred tax related to assets and liabilities arising from a single transaction; effective from annual periods beginning on or after 1 January 2023. These amendments require companies to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deductible temporary differences,

● Amendment to IFRS 16 - Leases on sale and leaseback; effective from annual periods beginning on or after 1 January 2024. These amendments include requirements for sale and leaseback transactions in IFRS 16 to explain how an entity accounts for a sale and leaseback after the date of the transaction. Sale and leaseback transactions where some or all the lease payments are variable lease payments that do not depend on an index or rate are most likely to be impacted,

● Amendment to IAS 1 - Non current liabilities with covenants; effective from annual periods beginning on or after 1 January 2024. These amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability,

● Amendment to IAS 12 - International tax reform - pillar two model rules; The deferred tax exemption and disclosure of the fact that the exception has been applied, is effective immediately, The other disclosure requirements are effective annual periods beginning on or after 1 January 2023. These amendments give companies temporary relief from accounting for deferred taxes arising from the Organisation for Economic Co-operation and Development's (OECD) international tax reform. The amendments also introduce targeted disclosure requirements for affected companies,

● Amendments to IAS 7 and IFRS 7 on Supplier finance arrangements; effective from annual periods beginning on or after 1 January 2024. These amendments require disclosures to enhance the transparency of supplier finance arrangements and their effects on a company's liabilities, cash flows and exposure to liquidity risk. The disclosure requirements are the IASB's response to investors' concerns that some companies' supplier finance arrangements are not sufficiently visible, hindering investors' analysis,

● IFRS S1, 'General requirements for disclosure of sustainability-related financial information; effective from annual periods beginning on or after 1 January 2024. This is subject to endorsement of the standards by local jurisdictions. This standard includes the core framework for the disclosure of material information about sustainability-related risks and opportunities across an entity's value chain,

● IFRS S2, 'Climate-related disclosures'; effective from annual periods beginning on or after 1 January 2024. This is subject to endorsement of the standards by local jurisdictions. This is the first thematic standard issued that sets out requirements for entities to disclose information about climate-related risks and opportunities.

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 at 30 June 2023 and 2022 comprise the performance and the management of its Turkish and headquarter.

As of 31 December 2022, due to the intention to sales of Russian operation, the Group has reclassified the results of Russian operation as discontinued operations in the comprehensive income. As of 30 June 2023, 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 other operations. Other operations are composed of corporate expenses of Dutch companies. These segments are managed separately because they are affected by economic conditions and geographical positions in terms of risks and returns,

Due to initial application of IAS 29 and its impact on the comparative periods, management information presented in segment reporting have been restated in accordance with IAS 29 application.

The segment analysis for the periods ended 30 June 2023 and 2022 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 EBITDA as of 30 June 2023 and June 2022 is as follows:

(*) 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 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 reason for the significant increase in one-off non-trading costs is mainly related to consultancy expenses due to the services related to the top management decisions.

(*) 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.

NOTE 3 - SEGMENT REPORTING (Continued)

The reconciliation of adjusted net income as of 30 June 2023 and 2022 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

(*) Other revenue mainly includes handover income, IT income and other income from franchisee.

NOTE 5 - EXPENSES BY NATURE