DPEU.L Regulatory News (DPEU)

DP Eurasia N.V.

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

Preliminary Results for the Year Ended 31 December 2020

Growth in online and product innovation drive resilient performance; strong momentum into 2021

Highlights

Financial Highlights

· Group revenue up 4.0% and system sales up 14.6%, driven by like-for-like growth and store openings

o Turkish systems sales growth of 26.4%

o Russian system sales decrease of 6.3% (15.3% based on RUB)

· Adjusted EBITDA (excl. IFRS 16) down 44.1% to TRY 69.6 million (2019: TRY 124.5 million)

· Adjusted net loss (excl. IFRS 16) of TRY 87.1 million versus an adjusted net income of TRY 2.9 million in 2019

· Strong liquidity position - TRY 128 million of cash on hand and additional available bank lines of TRY 142 million as at 31 December 2020

· Post-period end, Turkish Private Equity Fund II L.P. sold its remaining 32.81% stake to Jubilant Foodworks Netherlands B.V., wholly-owned subsidiary of Jubilant Foodworks Limited

Operational Highlights

· Six net stores were added in the year, bringing the total number to 771; robust franchisee demand in Turkey more than offset the store closures in Turkey and Russia due to Covid-19 - 33 new store openings vs. 27 store closures in 2020

· Online delivery system sales(6) as a share of delivery system sales surpassed 75% (2019: 70%), reflecting our strong online offering and positioning

· Group online system sales(7) growth of 40.3%

o Turkish online system sales(7) growth of 55.2%

o Russian online system sales(7) growth of 20.3% (8.8% based on RUB)

· Appointment of Mr. Daniel Rubinowski, ex-Marketing Director of KFC for Russia and CIS, as CEO of Russian Operations to further strengthen the team

Current Trading

System sales growth and like-for-like growth for the first two months of 2021 compared to the same period in 2020 were as follows:

2021 Outlook

The Group is reinstating guidance for 2021. The management guidance for store openings, like-for-like growth rates and capital expenditure for 2021 is as follows:

* Subject to H1'2021 performance

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

"On behalf of the Board, I am pleased to report resilient results for the year in the face of unprecedented trading conditions, which saw operational constraints such as curfews and the suspension of dine-in service resulting from the Covid-19 pandemic. We were able to increase our system sales by 14.6% on the back of our strong Turkish performance. Despite 27 store closures in Turkey and Russia due to Covid-19, we were also able to increase our store portfolio by six during 2020, reaching a total of 771 stores across our four countries of operation.

"The Turkish business performed very strongly from a top line point of view, especially with record-breaking like-for-like growth rates in the second half of the year. New product introductions, such as the extension of the oven-baked sandwich line, new chicken offerings and Döner (chawarma) suite products along with celebrity-endorsed advertising campaigns, and brand-building Euroleague and Eurocup sponsorships contributed significantly to the increase in system sales. Furthermore, as mentioned in our latest trading update, there has also been a Covid-19 inspired shift to home delivery across all consumer sectors. The strong trading in Turkey is continuing in 2021 with like-for-like growth rate of 49.0% in January/February.

"After a slow start to 2020 and further depressed sales performance due to 72 days' curfew in Moscow during the second quarter, the Russian business saw an improving top line performance in the second half of the year. While we recorded a like-for-like growth rate of -12.6% for 2020, we are encouraged by the steady improvement to -1.9% like-for-like growth rate during the last two months of 2020 which gives us momentum going into 2021, as evidenced by the 6.4% like-for-like growth rate in January/February. In line with the Russian Plan outlined in our 2019 results announcement, we began a TV advertising campaign in October and introduced our "New and Improved" Pizza with a new dough formulation and new meat toppings, based on the feedback from our market research. We also introduced two new pizzas and garlic bread in October. These initiatives have been well received and, alongside our Moscow-targeted TV advertising campaigns, have contributed to the improvement in the like-for-like growth rates.

"2020 also saw us surpass the 75% milestone for Group online delivery system sales as a percentage of total delivery system sales. The steady increase of this mix over the last few years is important for the Group as online customers have a higher ordering frequency, customers can be analysed by our CRM systems to come up with different offerings for different segments, and we can provide more targeted advertising to them.

"I would like to welcome Mr. Daniel Rubinowski as our newly appointed CEO of Russian Operations, who brings with him a wealth of QSR experience in the Russian and CIS markets. I would also like to thank our outgoing CEO of Russian Operations, Mr. Mustafa Özgül, for his dedicated service to the company over the years and wish him success in his future endeavours.

"I would also like to thank our outgoing shareholder, Turkish Private Equity Fund II L.P., for its continuous contribution and support to the business since 2010, whilst welcoming Jubilant Foodworks Limited as a new and substantial shareholder.

"2021 has seen the start of the vaccination programmes in Turkey and Russia, and whilst this brings some relief, the Covid-19 pandemic continues to create uncertainty in our markets. However, the resilience shown by the Group in 2020 and the trading momentum carried over to the first two months of 2021 give the Board confidence regarding our market positioning and the prospects for our business in the long term."

Enquiries

A conference call will be held at 9.30am (GMT) on 23 March 2021 for analysts and investors via the following dial-in details:

DP Eurasia N.V.'s preliminary 2020 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. Please refer to Note 16 in the Consolidated Financial statements for a reconciliation of these items with 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) above.

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 771 stores (568 in Turkey, 190 in Russia, nine in Azerbaijan and four in Georgia as at 31 December 2020), and operates through its owned corporate stores (29%) and franchised stores (71%). 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

Although 27 stores were closed due to the pandemic, DP Eurasia was able to finish the year with six net stores added compared to 2019. The Group increased its system sales by 14.6% year-on-year, driven by the strong like-for-like sales growth in Turkey.

The Turkish operations' system sales, representing 68% of Group system sales, increased by 26.4%. The start to the year was strong; however, due to the effects of Covid-19, the second quarter's like-for-like growth lagged the first quarter. In the second half of the year, the Turkish business recorded very strong like-for-like growth rates, partially aided by the tail effect of the reduction of the VAT rate from 8% to 1%. Despite periodical operational constraints due to curfews that hurt the take-away and eat-in channels, the Group achieved a robust 26.0% like-for-like growth in Turkey, mainly attributable to the strategies that were undertaken in sales and marketing. The new product launches, continued celebrity-endorsed marketing and increased delivery focus and demand due to the pandemic were key to the strong like-for-like growth rates. As a result of the pandemic, a total of 14 stores were closed in Turkey; however, on the back of strong like-for-like growth in Turkey in the second half of the year and franchisee demand, a total of 33 stores were opened in the Turkish segment. Active management and optimisation of the Turkish estate, which is ordinary course of business for the Group, continued in 2020. 14 stores were transferred from corporate to franchisee ownership, and one transfer in the opposite direction.

The Russian operations' system sales, representing 30% of Group system sales, decreased by 6.3% (15.3% based on RUB). The Russian operations had like-for-like sales growth of -12.6% for the year, with growth affected by the increased competition, especially in terms of aggregators and fast-food players that are supported by them, as well as the 72-day strict Moscow curfew due to Covid-19 in the second quarter, where like-for-like growth recorded rates of 35% in some weeks. The Group embarked on the execution of its Russia plan at the beginning of 2020 and saw a recovery in its like-for-like growth rates to -1.9% in November/December. The Group had 13 store closures due to Covid-19 in Russia. Refranchising activity was low, with one store transferred from corporate to franchisee ownership, and two store transfers in the opposite direction. Russian franchised stores amounted to 75, representing 39% of the Russian store portfolio.

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 mainly by the performance of its online ordering platforms. Online delivery system sales as a share of delivery system sales reached 75.3% for the year, which represents a 5.4 percentage point increase on a year-on-year basis.

In Turkey, online system sales like-for-like growth for the period was 54.4%, as a result of which online delivery system sales as a share of delivery system sales reached 70.2% for the period, a 6.0 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 13.1%, as a result of which online delivery system sales as a share of delivery system sales reached 89.7% for the period, a 7.7 percentage point increase from a year ago, which was also boosted by the Group's inclusion in an aggregator platform in May after a six-month trial period.

Online system sales continued to outpace the overall system sales growth at 40.3% for the Group. Turkish online system sales grew by 55.2%, while Russian online system sales grew by 20.3% (8.8% based on RUB).

Financial Review

Revenue

Group revenue grew by 4.0% to TRY 1,019.2 million. Turkish segment revenue grew by 20.4% to TRY 673.6 million, while Russian segment revenue decreased by 17.9% to TRY 345.6 million.

Adjusted EBITDA

The Group's adjusted EBITDA (excluding IFRS 16) contracted by 44.1% to TRY 69.6 million. Adjusted EBITDA (excluding IFRS 16) for the Turkish segment, which includes the Azerbaijani and Georgian businesses, was TRY 118.6 million, a year-on-year increase of 9.1%, and adjusted EBITDA (excluding IFRS 16) for the Russian segment was TRY -37.3 million, a decrease from the TRY 24.5 million figure of a year ago. The Group's adjusted EBITDA figure includes TRY 11.9 million of Covid‐19 related costs, of which TRY 9.1 million are considered to be of non‐recurring nature. The breakdown of these costs between Turkey and Russia was TRY 6.6 million and TRY 5.3 million, respectively. Additionally, costs relating to our Dutch corporate expenses reduced adjusted EBITDA by TRY 11.7 million in 2020. The comparable adverse effect of this item was TRY 8.7 million in 2019, with the increase in 2020 primarily due to the devaluation of the TRY against the EUR and the GBP.

In 2020, the Group's adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales was 4.4% compared to 9.1% in 2019. The main reasons for the decrease were the contraction in the Russian business due to the operational constraints levied for Covid-19, increased competition, especially due to the aggregators, 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 10.8% from 12.5%, mainly due to Covid-19 related costs and an increase in marketing.

The Russian segment margin decreased to -7.9% 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 continued with the execution of the plan announced at last year's results announcement and has recorded an improvement on the 2020 adjusted EBITDA margin compared to the H1'2020 adjusted EBITDA margin. 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 year ended 31 December 2020, adjusted net loss (excluding IFRS 16) was TRY 87.1 million. The main reasons for the deterioration in adjusted net income were the contraction in EBITDA as explained previously and the switch to a foreign exchange loss in 2020 from a foreign exchange gain in 2019. The Group does not have any hard currency denominated bank borrowings; however, the Group recorded a foreign exchange loss of TRY 16.5 million due to the intragroup loans made between different jurisdictions versus a foreign exchange gain of TRY 6.8 million in the previous year.

Capital expenditure and Cash conversion

The Group invested TRY 49.0 million of capital expenditure in 2020. The Turkish segment capital expenditure was TRY 32.5 million and the Russian segment capital expenditures amounted to TRY 16.4 million (RUB 171 million).

Cash conversion, defined as (adjusted EBITDA (excluding IFRS 16) - capital expenditure)/adjusted EBITDA (excluding IFRS 16)) for the period was 29.7% (2019: 14.2%) for the Group as a result of prudent capital expenditure management and 72.6% (2019: 65.8%) for the Turkish segment as a result of its strong performance. 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 31 December 2020 was TRY 242.0 million, representing an increase of 2.0% from 30 June 2020 and an increase of 6.8% from 31 December 2019. The Group's bank borrowings continue to be denominated in its operational currencies of TRY and RUB. As at 31 December 2020, 73% 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 continues its prudent and conservative approach to debt and its absolute net debt position has stayed materially constant as compared to a year ago. However, as a result of the reduced EBITDA performance during the year ended 31 December 2020, its leverage ratio (defined as adjusted net debt (excluding IFRS 16)/adjusted EBITDA (excluding IFRS 16)) was 3.5x as at 31 December 2020 (2019: 1.8x).

The Group's Russian loan facility carries financial covenants, which the Group was unable to meet in 2020 and for which the Group was granted waivers. The Group was also granted waivers for the first two quarters of 2021. 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 31 December 2020, DP Eurasia had TRY 128 million of cash at hand (including the TRY 19 million deposit amount in Sberbank) and additional available bank lines of TRY 142 million.

Shareholder Update

On 19 February 2021, Jubilant Foodworks Limited ("JFL"), the largest foodservice company in India, and Fides Food Systems Coöperatief U.A. announced that Jubilant Foodworks Limited and its wholly owned subsidiary, Jubilant Foodworks Netherlands B.V., have entered into a purchase agreement with Turkish Private Equity Fund II L.P. to fully acquire Fides Food Systems Coöperatief U.A., which holds 32.81% of the ordinary share capital of DP Eurasia, for a price of approximately GBP 24.80 million. The transaction was closed on 9 March 2021.

Jubilant Foodworks Limited is India's largest foodservice company. Its Domino's Pizza franchise extends across a network of 1,314 restaurants in 285 cities (as of 31 December 2020). JFL has the exclusive rights to develop and operate Domino's Pizza brand in India, Sri Lanka, Bangladesh and Nepal. At present, it operates in India, and through its subsidiary companies in Sri Lanka and Bangladesh. JFL also has the exclusive rights to develop and operate Dunkin' Donuts restaurants in India and has 27 restaurants in operation across eight cities in India (as of 31 December 2020). JFL also operates its owned restaurant brands: 'Hong's Kitchen', which serves two cities with seven restaurants in India (as of 31 December 2020) and Ekdum! with three restaurants. JFL is also offering ready-to-cook range of sauces, gravies and pastes under the brand 'ChefBoss'.

The takeover regimes of both the UK and the Netherlands no longer apply to DPEU, including in relation to the recent share acquisition and any further stake-building by a controlling shareholder

As a result of Brexit, companies which formerly had their registered office in one EEA member state and their shares admitted to trading on a regulated market in the UK have now fallen outside the "shared jurisdiction" regime. The shared jurisdiction regime provided that, for such companies, certain rules from the UK Takeover Code and certain rules of the state in which the company is registered apply to takeover activity. Following the end of the transition period at midnight on 31 December 2020, this regime no longer applies such that neither the UK Takeover Code regime nor the home state regime applies since the Dutch mandatory public offer rules only apply to Dutch companies that are listed on a regulated market in the EU/EEA and the London Stock Exchange is no longer an EU/EEA regulated market.

New Appointment

Mr. Daniel Rubinowski has been appointed as the CEO of Russian Operations and is expected to start his role in April. Prior to this, he was Marketing Director of KFC for Russia & CIS for over four years at Yum!. Previously, he spent more than ten years in Beiersdorf AG working in its headquarters in Germany and affiliates in Poland and Russia. Mr. Rubinowski has a degree in Economics from Poznan University of Economics.

Consideration of additional listing

As previously announced, the Board is considering an additional listing on a major stock exchange to complement its current listing on the Main Market of the London Stock Exchange. Upon its initial review, the Board has taken the decision to further investigate the dual listing of DP Eurasia at the Borsa Istanbul. This process remains ongoing and the Company will provide a further update in due course.

Amsterdam, 22 March 2021

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*

Neil Harper*

Aksel Şahin*

Thomas Singer*

* Non-Executive Directors

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the years ended 31 December 2020 and 2019

1. Amounts represent the basic and diluted earnings per share.

The accompanying notes form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 31 December 2020

The accompanying notes form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

The accompanying notes form an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2020

The accompanying notes form an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the year ended 31 December 2020

NOTE 1 - THE GROUP'S ORGANISATION AND NATURE OF ACTIVITIES

DP Eurasia N.V. (the "Company"), a public limited company, having its statutory seat in Amsterdam, the Netherlands, was incorporated under the law of the Netherlands on 18 October 2016. Upon incorporation Fides Food Systems Coöperatief U.A. and Vision Lovemark Coöperatief U.A. contributed and transferred all shares in Fidesrus B.V. and Fides Food Systems B.V. and their subsidiaries to the Company. From this point forward, the consolidated Group was formed. This was a transaction under common control.

The consolidated financial statements of DP Eurasia N.V. have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The consolidated financial statements also comply with the financial reporting requirements included in Title 9 of Book 2 of the Dutch Civil Code, as far as applicable.

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

The management report within the meaning of Article 391 of Book 2 of the Dutch Civil Code consists of the following parts of the Annual Report:

The management report within the meaning of Article 391 of Book 2 of the Dutch Civil Code consists of the following parts of the Annual Report:

· Overview: At a glance, Highlights and Key financial figures;

· Management report: Chairman's statement, Competitive advantages, Vision and strategy, Message from the CEO, Key events, Business model, People, Product, Digital, Strategic review, Group Structure and Markets, Remuneration report, Directors' remuneration policy, Annual remuneration report, Board, Leadership team, Board attendance and composition, Corporate governance report, How we manage risk, Board declaration and Shares and shareholders;

· Group financial statements; Consolidated statement of comprehensive income, Consolidated statement of financial position, Consolidated statement of changes in equity, Consolidated statement of cash flows and Notes to the consolidated financial statement;

· Company financial statements: Company income statement, Company balance sheet and Notes to the Company financial statements; and

· Additional information: Independent auditor's report, Contacts and Glossary.

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

As at 31 December 2020, the Group holds franchise operating and sub-franchising rights in 771 stores (550 franchised stores, 221 corporate-owned stores) (31 December 2019: 765 stores (521 franchised stores, 244 corporate-owned stores)).

The consolidated financial statements as at and for the period ended 31 December 2020 have been approved and authorised for issue on 22 March 2021 by authorisation of the Board. The financial statements are subject to adoption by the Annual General Meeting.

Subsidiaries

The Company has a total of four fully owned subsidiaries. These entities and the nature of their businesses are as follows:

Domino's Russia is established in the Russian Federation. Domino's Russia is operating a pizza delivery network of corporate and franchised stores in the 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.

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.

NOTE 2 - BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

2.1 Principles of consolidation

The consolidated financial statements include the parent company, DP Eurasia N.V. and its subsidiaries for the year ended at 31 December 2020. Subsidiaries are fully consolidated from the date on which control is transferred to the Company (the "acquisition date").

Basis of consolidation

The consolidated financial statements include the accounts of the Group on the basis set out in sections below. The financial results of the subsidiaries are fully consolidated from the date on which control is transferred to the Group or deconsolidated from the date that control ceases.

Subsidiaries are all companies over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

The subsidiaries fully consolidated, the proportion of ownership interest and the effective interest of the Group in these subsidiaries as of 31 December 2020 are disclosed in Note 1.

The result of operations of subsidiaries acquired or sold during the year are included in the consolidated statement of comprehensive income from the acquisition date or until the date of sale. 

The statements of financial position and statements of comprehensive income of the subsidiaries are consolidated on a line-by-line basis and the carrying value of the investment held by the Company and its subsidiaries are eliminated against the related shareholders' equity. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

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, 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 Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the "functional currency").

The consolidated financial statements are presented in TRY, which is the Group's presentation currency.

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 31 December 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 economic conditions and geographical positions in terms of risks and returns.

The segment analysis for the periods ended 31 December 2020 and 2019 are as follows:

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. 

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

Domino's Turkey EBITDA includes TRY 6,629 COVID-19 related costs.

Domino's Russia EBITDA includes TRY 5,279 COVID-19 related costs.

1. 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.

2. The reason for the significant increase in one-off non-trading costs is mainly related to impairment expenses of the tangible and intangible assets.

The reconciliation of adjusted net income as of 31 December 2020 and 2019 is as follows:

1. 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.

2. As of 31 December 2020, the one-off expenses include TRY 11,118 impairment expense of tangible and intangible assets and TRY 1,878 severance payment expenses.

The average headcount for the Group is as follows:

NOTE 4 - REVENUE AND COST OF SALES

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

Revenue recognised in relation to contract liabilities

The movements of performance obligations and revenue recognised in relation to contract liabilities for the years ended 31 December 2020 and 2019 are as follows:

Unsatisfied long-term franchisee contracts

The Group recognised net sales amounting to TRY 5,170 with respect to the performance obligations satisfied at a point in time for the year ended 31 December 2020 (31 December 2019: TRY 4,668).

The amount of performance obligations relating to ongoing contracts of the Group that will be recognised in the future is TRY 43,983 (31 December 2019: TRY 37,572). The Group expects that this amount will be recorded as revenue within 10 to15 years. 

NOTE 5 - EXPENSES BY NATURE

(1) These expenses are accounted in cost of sales, general administration expenses and marketing expenses.

NOTE 6 - OTHER OPERATING INCOME AND EXPENSES

1. The marketing income mainly includes cross-promotion income.

2. Impairment expenses includes write- offs related to long term assets of low performing stores.

NOTE 7 - FINANCIAL INCOME AND EXPENSES

NOTE 8 - EARNINGS/(LOSS) PER SHARE

The reconciliation of adjusted earnings per share as of 31 December 2020 and 2019 is as follows:

1. Adjusted earnings per share 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 comprises income/expenses which are assumed by 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.

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

NOTE 9 - PROPERTY AND EQUIPMENT

(1) As of 31 December 2020, disposals include an impairment charge of TRY 5,279 (31 December 2019: None).

Depreciation expense of TRY 37,079 has been charged in cost of sales and TRY 8,253 has been charged in general administrative expenses.

Depreciation expense of TRY 33,705 has been charged in cost of sales and TRY 8,295 has been charged in general administrative expenses.

NOTE 10 - INTANGIBLE ASSETS

(1) As of 31 December 2020, disposals include an impairment charge of TRY 5,109 (31 December 2019: None).

Amortisation expense of TRY 14,520 has been charged in cost of sales and TRY 14,717 has been charged in general administrative expenses.

The Group does not have any intangible assets with an indefinite useful life.

Amortisation expense of TRY 12,994 has been charged in cost of sales and TRY 8,966 has been charged in general administrative expenses.

Franchise contracts

The Group has recognised franchise contracts resulting from a business combination on 26 January 2011 amounting to TRY 48,485 and accounted for them as intangible assets in its consolidated financial statements.

NOTE 11 - RIGHT-OF-USE ASSETS

Details of right-of-use assets as of 31 December 2020 and 2019 are as follows:

Details of lease receivable as of 31 December 2020 and 2019 are as follows: